7 July 1996 Income Tax Severed Letter 9604323 - Reorganization

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

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

XXXXXXXXXX 3-960432

Attention: XXXXXXXXXX

XXXXXXXXXX, 1996

Dear Sirs:

Re: XXXXXXXXXX Advance Income Tax Ruling

This is in reply to your letter of XXXXXXXXXX in which you requested various advance income tax rulings. We also acknowledge your letters of XXXXXXXXXX and our various telephone conversations.

We understand that to the best of your knowledge and that of the taxpayers involved none of the issues involved in the requested rulings is being considered by a taxation services office or a taxation centre in connection with a tax return already filed, or is under objection or appeal.

Definitions

In this letter unless otherwise expressly stated:

(a) "Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1, as amended to the date hereof, and unless otherwise stated, every reference herein to a part, section, subsection, paragraph or subparagraph is a reference to the relevant provision of the Act;

(b) "ACB" means "adjusted cost base" as that expression is defined in section 54;

(c) "CBCA" means Canada Business Corporation Act;

(d) "Canadian corporation" has the meaning assigned by subsection 89(1);

(e) "capital property" has the meaning assigned by section 54;

(f) "controlled foreign affiliate" has the meaning assigned under subsection 95(1);

(g) "cost amount" has the meaning assigned under subsection 248(1);

(h) "distribution" has the meaning assigned by subsection 55(1);

(i) "dividend rental arrangement" has the meaning assigned by subsection 248(1);

(j) "eligible capital property" has the meaning assigned by section 54;

(k) "eligible property" has the meaning assigned by subsection 85(1.1);

(l) "financial intermediary corporation" has the meaning assigned by subsection 191(1);

(m) "forgiven amount" has the meaning assigned by subsections 80(1) or 80.01(1);

(n) "guarantee agreement" has the meaning assigned by subsection 112(2.2);

(o) "ITAR" means the Income Tax Application Rules;

(p) "paid-up capital" has the meaning assigned by subsection 89(1);

(q) "predecessor corporation" has the meaning assigned by subsection 87(1);

(r) "principal amount" has the meaning assigned by subsection 248(1) except that where the debt or obligation was outstanding at January 1, 1972, for the purposes of section 80, has the meaning assigned by subsection 26(1.1) of the ITAR;

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

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

(u) "series of transactions or events" has the meaning assigned by subsection 248(10);

(v) "specified class" has the meaning assigned by subsection 55(1);

(w) "specified financial institution" and "restricted financial institution" have the meanings assigned under subsection 248(1);

(x) "stated capital account" has the meaning assigned by section 26 of the CBCA;

(y) "specified investment business" has the meaning assigned by subsection 125(7);

(z) "taxable Canadian corporation" has the meaning assigned by subsection 89(1); and

(aa) "taxable dividend" has the meaning assigned by subsection 89(1).

FACTS

1. XXXXXXXXXX is a taxable Canadian corporation and a public corporation.

XXXXXXXXXX All companies in the XXXXXXXXXX group are specified financial institutions XXXXXXXXXX

2. XXXXXXXXXX has approximately XXXXXXXXXX Shares issued and outstanding. XXXXXXXXXX is summarized below.

XXXXXXXXXX

3. XXXXXXXXXX is authorized to issue approximately XXXXXXXXXX preferred shares without nominal or par value. No shares of this class are outstanding.

4. XXXXXXXXXX

5. XXXXXXXXXX

6. XXXXXXXXXX

7. XXXXXXXXXX

8. XXXXXXXXXX is a taxable Canadian corporation and a public corporation. XXXXXXXXXX holds XXXXXXXXXX issued and outstanding common shares of XXXXXXXXXX

9. The ACB of the XXXXXXXXXX is estimated to be approximately $XXXXXXXXXX The paid-up capital of the XXXXXXXXXX common shares is $XXXXXXXXXX and the fair market value is approximately $XXXXXXXXXX No valuation of the XXXXXXXXXX shares has been made.

10. XXXXXXXXXX has issued XXXXXXXXXX shares having a paid-up capital equal to their fair market value of $XXXXXXXXXX per share. These XXXXXXXXXX shares are owned by XXXXXXXXXX a wholly-owned subsidiary of XXXXXXXXXX

11. XXXXXXXXXX

12. XXXXXXXXXX is a taxable Canadian corporation and a public corporation. XXXXXXXXXX is incorporated under the CBCA and at XXXXXXXXXX had XXXXXXXXXX common shares issued and outstanding. XXXXXXXXXX owns XXXXXXXXXX shares representing approximately XXXXXXXXXX

No valuation of the XXXXXXXXXX shares has been done.

13. XXXXXXXXXX

14. XXXXXXXXXX is a taxable Canadian corporation incorporated under the CBCA. XXXXXXXXXX directly and indirectly owns the XXXXXXXXXX

XXXXXXXXXX is a taxable Canadian corporation. XXXXXXXXXX is incorporated under XXXXXXXXXX and is a wholly-owned subsidiary of XXXXXXXXXX As at

XXXXXXXXXX

15. XXXXXXXXXX holds all XXXXXXXXXX issued and outstanding common shares of XXXXXXXXXX which have an ACB of $XXXXXXXXXX No valuation of the XXXXXXXXXX shares has been done.

16. XXXXXXXXXX is a taxable Canadian corporation incorporated under the CBCA. XXXXXXXXXX owns all XXXXXXXXXX issued and outstanding common shares of XXXXXXXXXX

XXXXXXXXXX

17. The ACB of the XXXXXXXXXX shares to XXXXXXXXXX is estimated to be approximately $XXXXXXXXXX The fair market value of the XXXXXXXXXX shares is estimated to be approximately $XXXXXXXXXX No valuation of the XXXXXXXXXX shares has been done.

18. XXXXXXXXXX is a taxable Canadian corporation incorporated under the CBCA. XXXXXXXXXX

19. All of the XXXXXXXXXX issued and outstanding common shares of XXXXXXXXXX are held by XXXXXXXXXX The ACB of the XXXXXXXXXX common shares is estimated to be approximately $XXXXXXXXXX No valuation of the XXXXXXXXXX shares has been done.

20. XXXXXXXXXX has in its authorized capital XXXXXXXXXX shares which may be issued in series. There are

XXXXXXXXXX

21. XXXXXXXXXX is a taxable Canadian corporation incorporated under XXXXXXXXXX

22. All of the XXXXXXXXXX issued and outstanding common shares of XXXXXXXXXX are held by XXXXXXXXXX The ACB of the XXXXXXXXXX common shares is estimated to be approximately $XXXXXXXXXX No valuation of the XXXXXXXXXX shares has been done.

23. XXXXXXXXXX has issued XXXXXXXXXX Shares having a paid-up capital of $XXXXXXXXXX which have a fair market value and redemption price equal to the paid-up capital. All of the XXXXXXXXXX Shares are owned by XXXXXXXXXX has also issued XXXXXXXXXX Shares having a paid-up capital of $XXXXXXXXXX which have a fair market value and redemption price equal to the paid-up capital. All of the XXXXXXXXXX Shares are owned by XXXXXXXXXX

XXXXXXXXXX

24. XXXXXXXXXX is a taxable Canadian corporation incorporated under the CBCA. XXXXXXXXXX holds all the issued and outstanding shares of XXXXXXXXXX The shares of XXXXXXXXXX have an estimated ACB of $XXXXXXXXXX No valuation of the XXXXXXXXXX shares has been done.

25. XXXXXXXXXX is a taxable Canadian corporation incorporated under the CBCA. XXXXXXXXXX owns all of the

XXXXXXXXXX

26. The ACB of the XXXXXXXXXX shares to XXXXXXXXXX is estimated to be approximately $XXXXXXXXXX The fair market value of the XXXXXXXXXX shares is estimated to be approximately $XXXXXXXXXX No valuation of the XXXXXXXXXX shares has been done.

27. XXXXXXXXXX is a taxable Canadian corporation incorporated under the CBCA. XXXXXXXXXX holds XXXXXXXXXX issued and outstanding common shares of

XXXXXXXXXX

The ACB of the XXXXXXXXXX is estimated to be approximately $XXXXXXXXXX The fair market value of the XXXXXXXXXX shares is estimated XXXXXXXXXX No valuation of the XXXXXXXXXX shares has been done.

28. XXXXXXXXXX is incorporated under XXXXXXXXXX and is wholly-owned XXXXXXXXXX . XXXXXXXXXX directly holds approximately XXXXXXXXXX% of the issued and outstanding common shares XXXXXXXXXX (a taxable Canadian corporation wholly-owned by XXXXXXXXXX holds the remaining XXXXXXXXXX%.

XXXXXXXXXX

The ACB and estimated fair market value of the XXXXXXXXXX shares are outlined below. No valuation of the XXXXXXXXXX shares has been done.

XXXXXXXXXX is a controlled foreign affiliate of XXXXXXXXXX

XXXXXXXXXX

29. XXXXXXXXXX is a taxable Canadian corporation incorporated under XXXXXXXXXX issued and outstanding common shares of XXXXXXXXXX are owned by XXXXXXXXXX The ACB of the XXXXXXXXXX is approximately $XXXXXXXXXX and the fair market value is approximately $XXXXXXXXXX No valuation of the XXXXXXXXXX shares has been done.

30. XXXXXXXXXX is a taxable Canadian corporation and a public corporation. XXXXXXXXXX owns XXXXXXXXXX issued and outstanding Class XXXXXXXXXX common shares and XXXXXXXXXX issued and outstanding Class XXXXXXXXXX common shares.

XXXXXXXXXX

The Class XXXXXXXXXX shares have an ACB of $XXXXXXXXXX and the Class XXXXXXXXXX shares have an ACB of $XXXXXXXXXX No valuation of the XXXXXXXXXX shares has been done.

31. XXXXXXXXXX is a taxable Canadian corporation incorporated under the CBCA. XXXXXXXXXX owns all of the issued and outstanding common shares of XXXXXXXXXX

32. XXXXXXXXXX had entered into a loss utilization scheme to use losses in XXXXXXXXXX currently owns XXXXXXXXXX having a paid-up capital equal to redemption price and fair market value of $XXXXXXXXXX per share. XXXXXXXXXX holds an interest-bearing note receivable from XXXXXXXXXX having an aggregate principal amount of $XXXXXXXXXX

33. The types of property for the purposes of a distribution pursuant to subsection 55(1), of XXXXXXXXXX immediately before the transfers of property described in paragraphs 45, 53, 61, 69 and 77 below (the "Butterfly Transfers"), will be determined on a consolidated look-through basis by including the appropriate pro-rata share of the assets of any corporation over which XXXXXXXXXX has the ability to exercise significant influence and will be properties of the following types:

(a)cash or near-cash property comprising of all of the current assets of each corporation including any cash, deposits, accounts receivable, inventory, and rights arising from prepaid expenses (hereinafter referred to as "prepaid expenses");

(b)business property, comprising of all of the assets of each corporation, other than cash or near-cash property, any income from which would, for the purposes of the Act, be income from a business other than a specified investment business; and

(c)investment property, comprising of all of the assets of each corporation, other than cash or near-cash property, any income from which would, for the purposes of the Act, be income from property or from a specified investment business.

For this purpose, XXXXXXXXXX will be considered to have significant influence over a corporation if it has the ability to exercise significant influence, within the guidelines provided by section 3050 of the CICA Handbook, over that corporation or over any corporation which has significant influence over that corporation.

34. In determining, on a consolidated basis, the net fair market value of its cash or near-cash property, business property and investment property immediately before the Butterfly Transfers for the purposes of a distribution pursuant to subsection 55(1), liabilities of XXXXXXXXXX also determined on a consolidated basis by including the appropriate pro rata share of the liabilities of each corporation over which XXXXXXXXXX has significant influence, will be deducted in the calculation of the net fair market value of each such type of property of XXXXXXXXXX in the following manner:

(a)current liabilities of XXXXXXXXXX determined on a consolidated basis, will be allocated to cash or near-cash property (including cash, accounts receivable, inventory and prepaid expenses) in the proportion that the fair market value of each such property is of the fair market value of all cash or near-cash property. The allocation of current liabilities as described herein will not exceed the aggregate fair market value of all near-cash property of XXXXXXXXXX

(b)any accounts receivable, inventory and prepaid expenses initially classified in accordance with (a) herein as cash or near-cash property, that will relate to a business that will be carried on by XXXXXXXXXX or a transferee corporation (described in the Butterfly Transfers) and that will be collected, sold or consumed by XXXXXXXXXX or a transferee corporation (described in the Butterfly Transfers), in the ordinary course of their business, will then be reclassified as a business property, and the net fair market value thereof, determined after the allocation of current liabilities described in (a) herein, will be included in the net fair market value of business property and will not be included in the net fair market value of cash or near-cash property;

(c)liabilities of XXXXXXXXXX determined on a consolidated basis, other than current liabilities, that relate, to a particular property, will then be allocated to the particular property (and effectively to the type to which the particular property belongs) to the extent of its fair market value. Liabilities that pertain to a type of property, but not to a particular property, will then be allocated to that type of property, but not in excess of the net fair market value of such type of property after the allocation of liabilities to a particular property, as described herein; and

(d)any liabilities ("excess unallocated liabilities"), determined on a consolidated basis, that remain after the allocations described in steps (a) and (c) are made (including excess current liabilities, if any), will then be allocated to the cash or near-cash property, business property, and investment property of XXXXXXXXXX on a consolidated basis based on the relative net fair market value of each type of property prior to the allocation of such excess unallocated liabilities.

Following the allocation of liabilities as described herein, XXXXXXXXXX will, on a consolidated basis, have only business property for the purpose of a distribution.

35. Except as described herein, no debts have been or will be incurred or paid, and no property has been or will be acquired by XXXXXXXXXX in contemplation of the proposed transactions described below, other than in a transaction described in paragraph 55(3.1)(a).

36. None of the issued shares referred to herein (including the shares to be issued as described in the proposed transactions) is or will be subject to a guarantee agreement, within the meaning referred to in subsection 112(2.2).

37. None of the issued shares referred to herein (including the shares to be issued as described in the proposed transactions) 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).

38. None of the issued shares referred to herein (including the shares to be issued as described in the proposed transactions) is or will be subject to a dividend rental arrangement.

PROPOSED TRANSACTIONS

39. XXXXXXXXXX will redeem its Class XXXXXXXXXX at a redemption price equal to the paid-up capital and ACB of those shares of $XXXXXXXXXX The redemption price will be paid by XXXXXXXXXX

40. XXXXXXXXXX will utilize the $XXXXXXXXXX received on the redemption of the XXXXXXXXXX Shares described in paragraph 39 above and $XXXXXXXXXX of cash on hand to declare and pay a dividend of $XXXXXXXXXX on its common shares held by XXXXXXXXXX

XXXXXXXXXX

The receipt of $XXXXXXXXXX in dividends from XXXXXXXXXX will allow XXXXXXXXXX to earn interest income which will be sheltered from tax by XXXXXXXXXX losses. This dividend payment is part of the normal practice to utilize losses XXXXXXXXXX and would be paid whether the proposed transactions described herein are carried out.

Neither XXXXXXXXXX nor any other corporation XXXXXXXXXX will be recapitalized to replace the $XXXXXXXXXX on the redemption of its XXXXXXXXXX Shares described in paragraph 39 above as part of the series of transactions described herein.

41. XXXXXXXXXX will redeem the XXXXXXXXXX for a note equal to the redemption price which is equal to the paid-up capital and ACB of the Preference Shares to XXXXXXXXXX

42. The note received by XXXXXXXXXX on the redemption of preferred shares will be used to offset the note receivable from XXXXXXXXXX in a like amount and the notes will be cancelled.

43. XXXXXXXXXX will transfer to XXXXXXXXXX a number of XXXXXXXXXX common shares. The number of XXXXXXXXXX common shares to be transferred to XXXXXXXXXX will be equal to that proportion of the common shares of XXXXXXXXXX immediately before the Butterfly Transfers, that the net fair market value of the shares of XXXXXXXXXX is of the net fair market value of all the property of XXXXXXXXXX As sole consideration for the transfer of the XXXXXXXXXX common shares, XXXXXXXXXX will issue XXXXXXXXXX common shares to XXXXXXXXXX

XXXXXXXXXX will add to the stated capital account maintained for its common shares an amount not to exceed the amount of the paid-up capital of the XXXXXXXXXX common shares transferred from XXXXXXXXXX

44. XXXXXXXXXX will jointly elect with XXXXXXXXXX in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the XXXXXXXXXX common shares. The agreed amount in respect of the shares transferred will be equal to the cost amount of the XXXXXXXXXX common shares immediately before the transfer.

45. Contemporaneously with the transfers described in paragraphs 53, 61, 69 and 77 below, XXXXXXXXXX will sell, at fair market value, to XXXXXXXXXX business property (which will consist of the shares of XXXXXXXXXX). In consideration for such transfer XXXXXXXXXX will issue to XXXXXXXXXX preferred shares, having an aggregate redemption and retraction amount and fair market value equal to the fair market value of the XXXXXXXXXX shares transferred.

As a result of such transfer, the net fair market value of the business property received by XXXXXXXXXX (after allocating and deducting, in the manner described in paragraph 34 above, the liabilities of XXXXXXXXXX) will be equal to the proportion of the net fair market value of the business property of XXXXXXXXXX, immediately before the transfer that:

(i)the aggregate of the fair market value, immediately before the transfer, of all shares of the capital stock of XXXXXXXXXX owned by XXXXXXXXXX at that time

is of

(ii)the fair market value immediately before the transfer of all of the issued shares of the capital stock of XXXXXXXXXX at that time.

46. XXXXXXXXXX will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the shares of XXXXXXXXXX The agreed amount in respect of the shares transferred will be equal to the cost amount to XXXXXXXXXX immediately before the transfer, of those shares. The fair market value of the XXXXXXXXXX shares transferred will exceed the agreed amount.

XXXXXXXXXX will add an amount of $XXXXXXXXXX to its stated capital account maintained in respect of the XXXXXXXXXX preferred shares issued to XXXXXXXXXX

47. XXXXXXXXXX will redeem the preferred shares issued to XXXXXXXXXX by issuing to XXXXXXXXXX a demand non-interest-bearing promissory note (the "XXXXXXXXXX Note") having a principal amount and fair market value equal to the redemption price of the XXXXXXXXXX preferred shares.

48. XXXXXXXXXX will purchase for cancellation its common shares owned by XXXXXXXXXX by issuing to XXXXXXXXXX a demand non-interest-bearing promissory note (the "XXXXXXXXXX Note A") having a principal amount equal to the fair market value of the XXXXXXXXXX common shares purchased.

49. The XXXXXXXXXX will be set off against one another and both notes will be cancelled.

50. XXXXXXXXXX will incorporate a new corporation ("XXXXXXXXXX-Newco") under the CBCA. XXXXXXXXXX- Newco will be a taxable Canadian corporation.

XXXXXXXXXX-Newco's authorized capital will consist of an unlimited number of voting common shares and an unlimited number of preference shares which may be issued in series.

XXXXXXXXXX will subscribe for one common share of XXXXXXXXXX-Newco for $XXXXXXXXXX on incorporation.

51. XXXXXXXXXX will transfer, at fair market value, to XXXXXXXXXX-Newco a number of XXXXXXXXXX common shares. The number of XXXXXXXXXX common shares to be transferred to XXXXXXXXXX-Newco will be equal to that proportion of the common shares of XXXXXXXXXX immediately before the Butterfly Transfers, that the net fair market value of the shares of XXXXXXXXXX is of the net fair market value of all the property of XXXXXXXXXX

As sole consideration for the transfer of the XXXXXXXXXX common shares, XXXXXXXXXX-Newco will issue XXXXXXXXXX common shares to XXXXXXXXXX-Newco common shares issued to XXXXXXXXXX will have a fair market value equal to the fair market value of the XXXXXXXXXX common shares, immediately before the transfer.

XXXXXXXXXX-Newco will add to the stated capital account maintained for its common shares an amount not to exceed the amount of the paid-up capital of the XXXXXXXXXX common shares transferred from XXXXXXXXXX

52. XXXXXXXXXX will jointly elect with XXXXXXXXXX-Newco in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the XXXXXXXXXX common shares. The agreed amount in respect of the shares transferred will be equal to the cost amount of the XXXXXXXXXX common shares immediately before the transfer.

53. Contemporaneously with the transfers described in paragraph 45 above and paragraphs 61, 69 and 77 below, XXXXXXXXXX will sell, at fair market value, to XXXXXXXXXX-Newco business property (which will consist of the shares of XXXXXXXXXX). In consideration for such transfer XXXXXXXXXX-Newco will issue to XXXXXXXXXX preferred shares, having an aggregate redemption and retraction amount and fair market value equal to the fair market value of the XXXXXXXXXX shares transferred.

As a result of such transfer, the net fair market value of the business property received by XXXXXXXXXX-Newco (after allocating and deducting, in the manner described in paragraph 34 above, the liabilities of XXXXXXXXXX will be equal to the proportion of the net fair market value of the business property of XXXXXXXXXX, immediately before the transfer that:

(i)the aggregate of the fair market value, immediately before the transfer, of all shares of the capital stock of XXXXXXXXXX owned by XXXXXXXXXX-Newco at that time

is of

(ii)the fair market value immediately before the transfer of all of the issued shares of the capital stock of XXXXXXXXXX at that time.

54. XXXXXXXXXX-Newco will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the shares of XXXXXXXXXX The agreed amount in respect of the shares transferred will be equal to the cost amount to XXXXXXXXXX, immediately before the transfer, of those shares. The fair market value of the XXXXXXXXXX shares transferred will exceed the agreed amount.

XXXXXXXXXX-Newco will add an amount of $XXXXXXXXXX to its stated capital account maintained in respect of the XXXXXXXXXX-Newco preferred shares issued to XXXXXXXXXX

55. XXXXXXXXXX-Newco will redeem the preferred shares issued to XXXXXXXXXX by issuing to XXXXXXXXXX a demand non-interest-bearing promissory note (the "XXXXXXXXXX-Newco Note") having a principal amount and fair market value equal to the redemption price of the XXXXXXXXXX-Newco preferred shares.

56. XXXXXXXXXX will purchase for cancellation its common shares owned by XXXXXXXXXX-Newco by issuing to XXXXXXXXXX-Newco a demand non-interest-bearing promissory note (the "XXXXXXXXXX Note B") having a principal amount equal to the fair market value of the XXXXXXXXXX common shares purchased.

57. The XXXXXXXXXX-Newco Note and the XXXXXXXXXX Note B will be set off against one another and both notes will be cancelled.

58. XXXXXXXXXX will incorporate a new corporation ("XXXXXXXXXX-Newco") under the CBCA. XXXXXXXXXX- Newco will be a taxable Canadian corporation.

XXXXXXXXXX-Newco's authorized capital will consist of an unlimited number of voting common shares and an unlimited number of preference shares which may be issued in series.

XXXXXXXXXX will subscribe for one common share of XXXXXXXXXX-Newco for $XXXXXXXXXX on incorporation.

59. XXXXXXXXXX will transfer, at fair market value, to XXXXXXXXXX-Newco a number of XXXXXXXXXX common shares. The number of XXXXXXXXXX common shares to be transferred to XXXXXXXXXX-Newco will be equal to that proportion of the common shares of XXXXXXXXXX immediately before the Butterfly Transfers, that the net fair market value of the shares of XXXXXXXXXX is of the net fair market value of all the property of XXXXXXXXXX As sole consideration for the transfer of the XXXXXXXXXX common shares, XXXXXXXXXX-Newco will issue XXXXXXXXXX common shares to XXXXXXXXXX-Newco common shares issued to XXXXXXXXXX will have a fair market value equal to the fair market value of the XXXXXXXXXX common shares, immediately before the transfer.

XXXXXXXXXX-Newco will add to the stated capital account maintained for its common shares an amount not to exceed the amount of the paid-up capital of the XXXXXXXXXX common shares transferred from XXXXXXXXXX

60. XXXXXXXXXX will jointly elect with XXXXXXXXXX-Newco in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the XXXXXXXXXX common shares. The agreed amount in respect of the shares transferred will be equal to the cost amount of the XXXXXXXXXX common shares immediately before the transfer.

61. Contemporaneously with the transfers described in paragraphs 45 and 53 above and paragraphs 69 and 77 below, XXXXXXXXXX will sell, at fair market value, to XXXXXXXXXX-Newco business property (which will consist of the shares of XXXXXXXXXX). In consideration for such transfer XXXXXXXXXX-Newco will issue to XXXXXXXXXX preferred shares, having an aggregate redemption and retraction amount and fair market value equal to the fair market value of the XXXXXXXXXX shares transferred.

As a result of such transfer, the net fair market value of the business property received by XXXXXXXXXX-Newco (after allocating and deducting, in the manner described in paragraph 34 above, the liabilities of XXXXXXXXXX) will be equal to the proportion of the net fair market value of the business property of XXXXXXXXXX, immediately before the transfer that:

(i)the aggregate of the fair market value, immediately before the transfer, of all shares of the capital stock of XXXXXXXXXX owned by XXXXXXXXXX-Newco at that time

is of

(ii)the fair market value immediately before the transfer of all of the issued shares of the capital stock of XXXXXXXXXX at that time.

62. XXXXXXXXXX-Newco will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the shares of XXXXXXXXXX The agreed amount in respect of the shares transferred will be equal to the cost amount to XXXXXXXXXX, immediately before the transfer, of those shares. The fair market value of the XXXXXXXXXX shares transferred will exceed the agreed amount.

XXXXXXXXXX-Newco will add an amount of $XXXXXXXXXX to its stated capital account maintained in respect of the XXXXXXXXXX-Newco preferred shares issued to XXXXXXXXXX

63. XXXXXXXXXX-Newco will redeem the preferred shares issued to XXXXXXXXXX by issuing to XXXXXXXXXX a demand non-interest-bearing promissory note (the "XXXXXXXXXX-Newco Note") having a principal amount and fair market value equal to the redemption price of the XXXXXXXXXX-Newco preferred shares.

64. XXXXXXXXXX will purchase for cancellation its common shares owned by XXXXXXXXXX-Newco by issuing to XXXXXXXXXX-Newco a demand non-interest-bearing promissory note (the "XXXXXXXXXX Note C") having a principal amount equal to the fair market value of the XXXXXXXXXX common shares purchased.

65. The XXXXXXXXXX-Newco Note and the XXXXXXXXXX Note C will be set off against one another and both notes will be cancelled.

66. XXXXXXXXXX will incorporate a new corporation ("XXXXXXXXXX-Newco") under the CBCA. XXXXXXXXXX- Newco will be a taxable Canadian corporation.

XXXXXXXXXX-Newco's authorized capital will consist of an unlimited number of voting common shares and an unlimited number of preference shares which may be issued in series.

XXXXXXXXXX will subscribe for one common share of XXXXXXXXXX-Newco for $XXXXXXXXXX on incorporation.

67. XXXXXXXXXX will transfer, at fair market value, to XXXXXXXXXX-Newco a number of XXXXXXXXXX common shares. The number of XXXXXXXXXX common shares to be transferred to XXXXXXXXXX-Newco will be equal to that proportion of the common shares of XXXXXXXXXX immediately before the Butterfly Transfers, that the net fair market value of the shares of XXXXXXXXXX is of the net fair market value of all the property of XXXXXXXXXX As sole consideration for the transfer of the XXXXXXXXXX common shares, XXXXXXXXXX-Newco will issue XXXXXXXXXX common shares to XXXXXXXXXX-Newco common shares issued to XXXXXXXXXX will have a fair market value equal to the fair market value of the XXXXXXXXXX common shares, immediately before the transfer.

XXXXXXXXXX-Newco will add to the stated capital account maintained for its common shares an amount not to exceed the amount of the paid-up capital of the XXXXXXXXXX common shares transferred from XXXXXXXXXX

68. XXXXXXXXXX will jointly elect with XXXXXXXXXX-Newco in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the XXXXXXXXXX common shares. The agreed amount in respect of the shares transferred will be equal to the cost amount of the XXXXXXXXXX common shares immediately before the transfer.

69. Contemporaneously with the transfers described in paragraphs 45, 53 and 61 above and paragraph 77 below, XXXXXXXXXX will sell, at fair market value, to XXXXXXXXXX-Newco business property (which will consist of the shares of XXXXXXXXXX). In consideration for such transfer XXXXXXXXXX-Newco will issue to XXXXXXXXXX preferred shares, having an aggregate redemption and retraction amount and fair market value equal to the fair market value of the XXXXXXXXXX shares transferred.

As a result of such transfer, the net fair market value of the business property received by XXXXXXXXXX-Newco (after allocating and deducting, in the manner described in paragraph 34 above, the liabilities of XXXXXXXXXX will be equal to the proportion of the net fair market value of the business property of XXXXXXXXXX, immediately before the transfer that:

(i)the aggregate of the fair market value, immediately before the transfer, of all shares of the capital stock of XXXXXXXXXX owned by XXXXXXXXXX-Newco at that time

is of

(ii)the fair market value immediately before the transfer of all of the issued shares of the capital stock of XXXXXXXXXX at that time.

70. XXXXXXXXXX-Newco will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the shares of XXXXXXXXXX. The agreed amount in respect of the shares transferred will be equal to the cost amount to XXXXXXXXXX, immediately before the transfer, of those shares. The fair market value of the XXXXXXXXXX shares transferred will exceed the agreed amount.

XXXXXXXXXX-Newco will add an amount of $XXXXXXXXXX to its stated capital account maintained in respect of the XXXXXXXXXX-Newco preferred shares issued to XXXXXXXXXX

71. XXXXXXXXXX-Newco will redeem the preferred shares issued to XXXXXXXXXX by issuing to XXXXXXXXXX a demand non-interest-bearing promissory note (the "XXXXXXXXXX-Newco Note") having a principal amount and fair market value equal to the redemption price of the XXXXXXXXXX-Newco preferred shares.

72. XXXXXXXXXX will purchase for cancellation its common shares owned by XXXXXXXXXX-Newco by issuing to XXXXXXXXXX-Newco a demand non-interest-bearing promissory note (the "XXXXXXXXXX Note D") having a principal amount equal to the fair market value of the XXXXXXXXXX common shares purchased.

73. The XXXXXXXXXX-Newco Note and the XXXXXXXXXX Note D will be set off against one another and both notes will be cancelled.

74. XXXXXXXXXX will incorporate a new corporation ("XXXXXXXXXX-Newco") under the CBCA. XXXXXXXXXX- Newco will be a taxable Canadian corporation.

XXXXXXXXXX-Newco's authorized capital will consist of an unlimited number of voting common shares and an unlimited number of preference shares which may be issued in series.

XXXXXXXXXX will subscribe for one common share of XXXXXXXXXX-Newco for $XXXXXXXXXX on incorporation.

75. XXXXXXXXXX will transfer, at fair market value, to XXXXXXXXXX-Newco a number of XXXXXXXXXX common shares. The number of XXXXXXXXXX common shares to be transferred to XXXXXXXXXX-Newco will be equal to that proportion of the common shares of XXXXXXXXXX held by XXXXXXXXXX immediately before the Butterfly Transfers, that the net fair market value of the shares of XXXXXXXXXX is of the net fair market value of all the property of XXXXXXXXXX As sole consideration for the transfer of the XXXXXXXXXX common shares, XXXXXXXXXX-Newco will issue XXXXXXXXXX common shares to XXXXXXXXXX-Newco common shares issued to XXXXXXXXXX will have a fair market value equal to the fair market value of the XXXXXXXXXX common shares, immediately before the transfer.

XXXXXXXXXX-Newco will add to the stated capital account maintained for its common shares an amount not to exceed the amount of the paid-up capital of the XXXXXXXXXX common shares transferred from XXXXXXXXXX

76. XXXXXXXXXX will jointly elect with XXXXXXXXXX-Newco in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the XXXXXXXXXX common shares. The agreed amount in respect of the shares transferred will be equal to the cost amount of the XXXXXXXXXX common shares immediately before the transfer.

77. Contemporaneously with the transfers described in paragraphs 45, 53, 61 and 69 above, XXXXXXXXXX will sell, at fair market value, to XXXXXXXXXX-Newco business property (which will consist of the shares of XXXXXXXXXX. In consideration for such transfer XXXXXXXXXX-Newco will issue to XXXXXXXXXX preferred shares, having an aggregate redemption and retraction amount and fair market value equal to the fair market value of the XXXXXXXXXX shares transferred.

As a result of such transfer, the net fair market value of the business property received by XXXXXXXXXX-Newco (after allocating and deducting, in the manner described in paragraph 34 above, the liabilities of XXXXXXXXXX will be equal to the proportion of the net fair market value of the business property of XXXXXXXXXX, immediately before the transfer that:

(i)the aggregate of the fair market value, immediately before the transfer, of all shares of the capital stock of XXXXXXXXXX owned by XXXXXXXXXX-Newco at that time

is of

(ii)the fair market value immediately before the transfer of all of the issued shares of the capital stock of XXXXXXXXXX at that time.

78. XXXXXXXXXX-Newco will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the shares of XXXXXXXXXX The agreed amount in respect of the shares transferred will be equal to the cost amount to XXXXXXXXXX, immediately before the transfer, of those shares. The fair market value of the XXXXXXXXXX shares transferred will exceed the agreed amount.

XXXXXXXXXX-Newco will add an amount of $XXXXXXXXXX to its stated capital account maintained in respect of the XXXXXXXXXX-Newco preferred shares issued to XXXXXXXXXX

79. XXXXXXXXXX-Newco will redeem the preferred shares issued to XXXXXXXXXX by issuing to XXXXXXXXXX a demand non-interest-bearing promissory note (the "XXXXXXXXXX-Newco Note") having a principal amount and fair market value equal to the redemption price of the XXXXXXXXXX-Newco preferred shares.

80. XXXXXXXXXX will purchase for cancellation its common shares owned by XXXXXXXXXX-Newco by issuing to XXXXXXXXXX-Newco a demand non-interest-bearing promissory note (the "XXXXXXXXXX Note E") having a principal amount equal to the fair market value of the XXXXXXXXXX common shares purchased.

81. The XXXXXXXXXX-Newco Note and the XXXXXXXXXX Note E will be set off against one another and both notes will be cancelled.

82. XXXXXXXXXX(the "Arrangement") XXXXXXXXXX, the transactions described in paragraphs 83 to 103 will be carried out.

83. XXXXXXXXXX

XXXXXXXXXX

84. XXXXXXXXXX will add to the stated capital account maintained for its XXXXXXXXXX Shares an amount not to exceed the paid-up capital of the XXXXXXXXXX% Preference Shares immediately before the conversion less any amounts paid in lieu of fractional shares as described in paragraph 83 above.

85. XXXXXXXXXX

86. XXXXXXXXXX

87. XXXXXXXXXX will transfer, at fair market value, to XXXXXXXXXX certain of its assets, as described herein. In consideration for the transfer XXXXXXXXXX will issue preferred shares to XXXXXXXXXX and assume certain liabilities. The preferred shares of XXXXXXXXXX will have a redemption price and fair market value equal to the amount by which the fair market value of the property of XXXXXXXXXX to be transferred to XXXXXXXXXX exceeds the fair market value of the liabilities of XXXXXXXXXX assumed by XXXXXXXXXX at the time of the transfer.

XXXXXXXXXX will add to the stated capital account maintained for its preferred shares an amount of $XXXXXXXXXX

The assets and liabilities to be transferred from XXXXXXXXXX are as follows:

XXXXXXXXXX

88. XXXXXXXXXX will jointly elect with XXXXXXXXXX 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 transferred to XXXXXXXXXX as described in paragraph 87 above. The agreed amount in respect of each eligible property transferred will be as follows:

(i)in respect of non-depreciable capital property, an amount equal to the lesser of the ACB and the fair market value of the property immediately before the transfer;

(ii)in respect of depreciable property of a prescribed class, an amount equal to the least of the fair market value of the property at the time of the transfer, the cost to XXXXXXXXXX of such property and the undepreciated capital cost to XXXXXXXXXX of all property of the class immediately before the transfer;

(iii)in respect of eligible capital property, an amount equal to the least of the amounts referred to in paragraph 85(1)(d); and

(iv)in respect of other property, an amount equal to the lesser of its cost amount to XXXXXXXXXX immediately before the transfer and the fair market value of the property at that time.

The liabilities assumed will be allocated to specific properties transferred. The amount of liabilities to be allocated to a property transferred pursuant to subsection 85(1) will not exceed the elected amount in respect of that property. The amount of liabilities allocated to property other than a property transferred pursuant to subsection 85(1) will not exceed the fair market value in respect of that property.

89. Immediately following the transfer of property to XXXXXXXXXX and the assumption of liabilities by XXXXXXXXXX described in paragraph 87 above, XXXXXXXXXX will own the following property excluding the shares of XXXXXXXXXX received as partial consideration for the property transferred as described above:

XXXXXXXXXX

XXXXXXXXXX

90. XXXXXXXXXX

Elections under subsection 85(1) will not be filed with respect to the exchange of shares described herein.

91. XXXXXXXXXX

XXXXXXXXXX will agree to jointly file an election under subsection 85(1) or 85(2) in prescribed form and within the time limits set out in subsection 85(6) with any holder of shares of XXXXXXXXXX who wishes to file such an election. The agreed amount for any such election will be at the discretion of the holder and will not be less than the lesser of the holder's ACB and the fair market value of the transferred shares of XXXXXXXXXX and not greater than the fair market value of such shares.

The amount added to the stated capital account of the common shares of XXXXXXXXXX will be equal to the paid-up capital of the common shares of XXXXXXXXXX

92. XXXXXXXXXX

93. Immediately after the Exchange, XXXXXXXXXX will redeem the XXXXXXXXXX for their redemption price and will pay the entire amount by way of a demand non-interest-bearing note with a principal amount and fair market value equal to such redemption amount (the "XXXXXXXXXX Note").

94. XXXXXXXXXX will purchase for cancellation that portion of its XXXXXXXXXX Shares held by XXXXXXXXXX that have a fair market value equal to the fair market value of the XXXXXXXXXX Note. XXXXXXXXXX will pay for the purchase of its XXXXXXXXXX Shares with the XXXXXXXXXX Note.

95. At such time as the cost amount to XXXXXXXXXX of its XXXXXXXXXX is determined, XXXXXXXXXX will acquire additional XXXXXXXXXX Shares for cash such that the cost amount to XXXXXXXXXX of all of its XXXXXXXXXX Shares immediately after such acquisition will be equal to the lesser of:

(i)the cost amount to XXXXXXXXXX of its XXXXXXXXXX Shares immediately after the Exchange but before the purchase for cancellation described in paragraph 94 above, and

(ii)the aggregate cost amount to XXXXXXXXXX of all its property, other than its shares of XXXXXXXXXX immediately before the Exchange less the total amount of all liabilities of XXXXXXXXXX immediately before the Exchange and less the amount, if any, by which the cost amount to XXXXXXXXXX of its shares of XXXXXXXXXX exceeded their fair market value immediately before the Exchange.

XXXXXXXXXX will borrow the funds to acquire the XXXXXXXXXX Shares.

XXXXXXXXXX will add to the stated capital account maintained for its XXXXXXXXXX Shares an amount equal to the amount necessary to increase the paid- up capital of the XXXXXXXXXX Shares to the paid-up capital of the XXXXXXXXXX Shares immediately before the Exchange less the paid-up capital of any XXXXXXXXXX Shares acquired from dissenters.

96. Immediately following the acquisition of the additional XXXXXXXXXX Shares by XXXXXXXXXX will pay a dividend on its XXXXXXXXXX Shares equal to the amount of the cash received from XXXXXXXXXX on the acquisition by XXXXXXXXXX of the additional XXXXXXXXXX Shares. The proceeds of the dividend received from XXXXXXXXXX will be utilized to repay the borrowings incurred for the acquisition of the additional XXXXXXXXXX Shares.

No additional amount will be included in the contributed surplus of XXXXXXXXXX as a result of the transactions described herein.

97. XXXXXXXXXX has established a stock option plan

XXXXXXXXXX

participants are granted options to purchase Ordinary Shares XXXXXXXXXX

XXXXXXXXXX

In addition, XXXXXXXXXX established XXXXXXXXXX incentive plans

XXXXXXXXXX

98. XXXXXXXXXX

As the aggregate assets and liabilities of XXXXXXXXXX immediately before the reorganization on a consolidated basis will be identical to the aggregate assets and liabilities of XXXXXXXXXX on a consolidated basis immediately following the Arrangement, no adjustments to

XXXXXXXXXX

99. XXXXXXXXXX

a separate registered pension plan ("RPP") will be established for

XXXXXXXXXX

XXXXXXXXXX

100. XXXXXXXXXX will purchase for cancellation its XXXXXXXXXX common shares held by XXXXXXXXXX and common shares held by XXXXXXXXXX for a purchase price equal to the fair market value of the shares at the time of the purchase. The purchase price will be settled by a cash payment from XXXXXXXXXX

101. XXXXXXXXXX will incorporate a new corporation ("Newsub") under the CBCA. Newsub will be a taxable Canadian corporation.

Newsub's authorized capital will consist of an unlimited number of voting common shares and an unlimited number of preference shares which may be issued in series.

102. XXXXXXXXXX will sell at fair market value to Newsub assets which are used XXXXXXXXXX In consideration for such transfer, Newsub will assume certain liabilities of XXXXXXXXXX and will issue to XXXXXXXXXX common shares, having an aggregate fair market value equal to the fair market value at the time of the transfer of the assets less the liabilities assumed.

Newsub will add to the stated capital account maintained for its common shares an amount equal to the aggregate of the agreed amounts in respect of an eligible property and the fair market value in respect of any other property less the amount of liabilities assumed.

103. XXXXXXXXXX and Newsub will jointly elect in prescribed form within the time limit referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of each property of XXXXXXXXXX that is an eligible property transferred to Newsub. The agreed amount in respect of such property so transferred will, in each case, be equal to the lesser of the cost amount or fair market value of the property at the time of the transfer. The fair market value of each property will equal or exceed the agreed amount. The agreed amount in respect of a property will not exceed the amount of the liabilities assumed as consideration for such property.

PURPOSES OF PROPOSED TRANSACTIONS

104. The purposes of the proposed transactions are to simplify XXXXXXXXXX structure and

XXXXXXXXXX

XXXXXXXXXX

XXXXXXXXXX

RULINGS

Provided that the above statements are accurate and constitute complete disclosure of all of the relevant facts, proposed transactions and the purposes of the proposed transactions, we confirm the following:

A. By virtue of paragraph 55(3)(a), subsection 55(2) will not apply to deem any portion of the cash dividend paid by:

(i) XXXXXXXXXX to XXXXXXXXXX as described in paragraph 40 above and

(ii) XXXXXXXXXX to XXXXXXXXXX as described in paragraph 96 above

to be proceeds of disposition of the common shares of XXXXXXXXXX held by XXXXXXXXXX in the case of (i), or proceeds of disposition of the common shares of XXXXXXXXXX held by XXXXXXXXXX, in the case of (ii), provided that there is no:

(i) disposition of any property to a person to whom XXXXXXXXXX is not related, or

(ii) significant increase in the interest (whether by means of equity or debt) in any corporation of any person to whom XXXXXXXXXX is not related,

other than as described in paragraphs 39 to 103 above, which occurs as part of a series of transactions or events that includes the proposed transactions described herein.

B. The provisions of subsection 85(1) will apply to the transfers of shares referred to in paragraphs 43, 45, 51, 53, 59, 61, 67, 69, 75, and 77 above with the result that:

(i) the agreed amount in respect of a particular property transferred will be deemed pursuant to paragraph 85(1)(a) to be proceeds of disposition of that property to the transferor thereof and the cost of that property to the transferee thereof; and

(iv) the cost to the transferor of the shares received as consideration for the transfer will be deemed by paragraphs 85(1)(g) and (h) to be equal to the deemed proceeds of disposition to the transferee

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

C. On the redemption of the preferred shares, as described in paragraphs 47, 55, 63, 71 and 79 above and the purchase for cancellation of the XXXXXXXXXX shares, as described in paragraphs 48, 56, 64, 72 and 80 above the amount, if any, by which the amount paid to redeem or purchase the particular shares, as the case may be, exceeds the paid-up capital of the particular shares immediately before the redemption or the purchase for cancellation:

(i) will be deemed pursuant to paragraph 84(3)(a) to be a dividend paid by the issuer of such shares;

(ii) will be deemed pursuant to paragraph 84(3)(b) to be a dividend received by the holder of such shares;

(iii) to the extent that a dividend described in (i) and (ii) above is a taxable dividend, such dividend will, pursuant to subsection 112(1), be deductible in computing the taxable income of the recipient for the year in which the dividend is deemed to have been received, and, for greater certainty, such deduction will not be precluded by any of subsections 112(2.1), (2.2), (2.3) or (2.4);

(iv) by virtue of the application of paragraph (j) of the definition "proceeds of disposition" in section 54, the amount of a deemed dividend described in (i) and (ii) above will be excluded from the proceeds of disposition of the share, and any loss arising from the disposition of the share will be reduced by the amount of such dividends pursuant to subsection 112(3);

(v) Part IV.1 of the Act will not apply to the deemed dividends described in (i) and (ii) above because the dividends will be excepted dividends pursuant to paragraph (b) of the definition of "excepted dividend" in section 187.1;

(vi) Part VI.1 of the Act will not apply to the deemed dividends described in (i) and (ii) above because the dividends will be excluded dividends pursuant to paragraph (a) of the definition of 'excluded dividend' in subsection 191(1); and

(vii) no taxes under Part IV of the Act will be payable in respect of a dividend described in (i) and (ii) above.

D. By virtue of the provisions of paragraph 55(3)(b), the provisions of subsection 55(2) will not apply to the deemed dividends described in Ruling C above, provided that, as part of the series of transactions that includes the proposed transactions described herein, there is no:

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

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

(c) acquisition of property in the circumstances described in paragraph 55(3.1)(c); or

(d) acquisition of property in the circumstances described in paragraph 55(3.1)(d)

which has not been described herein.

E. The provisions of subsection 51(1) will apply to the conversion by the holders of the XXXXXXXXXX% Preference Shares of XXXXXXXXXX into XXXXXXXXXX Shares, as described in paragraph 83 above, with the result that:

(i) each holder will be deemed not to have disposed of its XXXXXXXXXX% Preference Shares of XXXXXXXXXX

(ii) the cost to each holder of the XXXXXXXXXX Shares received on the conversion will be equal to the adjusted cost base to each holder of its XXXXXXXXXX% Preference Shares of XXXXXXXXXX immediately before the conversion; and

(iii) the provisions of subsection 26(24) of the ITAR will apply to the conversion in respect of any holder who has owned, or is deemed by subsection 26(28) of the ITAR to have owned, his XXXXXXXXXX% Preference Shares of XXXXXXXXXX continuously from December 31, 1971.

For greater certainty, subsection 51(2) will not apply to the conversion.

F. A holder of the XXXXXXXXXX% Preference Shares of XXXXXXXXXX, referred to paragraph 83 above, who receives at least one XXXXXXXXXX Share and also receives cash instead of a fraction of a XXXXXXXXXX Share for the XXXXXXXXXX% Preference Shares of XXXXXXXXXX held by him as capital property, may either:

(i) include the cash as proceeds of a partial disposition of the XXXXXXXXXX% Preference Shares of XXXXXXXXXX held by him giving rise to a capital gain or loss; or

(ii) be considered to have acquired his XXXXXXXXXX Shares for an amount equal to the ACB of his XXXXXXXXXX Preference Shares of XXXXXXXXXX minus the amount of cash received.

G. A holder of XXXXXXXXXX% Preference Shares of XXXXXXXXXX Shares who exercises dissent rights, described in paragraph 92 above, and who receives a payment equal to the fair value of his XXXXXXXXXX% Preference Shares or XXXXXXXXXX Shares will, subject to subsection 55(2):

(i) be deemed by paragraph 84(3)(b) to have received a dividend equal to the amount by which such fair value exceeds the paid-up capital of his XXXXXXXXXX% Preference Shares or XXXXXXXXXX Shares, as the case may be; and

(ii) the amount of such dividend will be excluded by virtue of paragraph (j) of the definition of disposition in section 54 from the holder's proceeds of disposition for his XXXXXXXXXX% Preference Shares or XXXXXXXXXX Shares, as the case may be.

H. Subject to the application of subsection 85(5.1), the provisions of subsection 85(1) will apply to the transfers of assets and shares referred to in paragraph 87 above with the result that the agreed amount in respect of a particular property transferred will be deemed pursuant to paragraph 85(1)(a) to be proceeds of disposition of that property to the transferor thereof and the cost of that property to the transferee thereof, and the cost to XXXXXXXXXX of the preferred shares of XXXXXXXXXX received as consideration for the transfer will be deemed by paragraph 85(1)(g) to be equal to the aggregate of the agreed amounts in respect to the properties transferred less the fair market value of the liabilities assumed by XXXXXXXXXX on the transfer.

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

I. Provided that the interest paid or payable by XXXXXXXXXX on the liabilities assumed on the transfer of property, as described in paragraph 87 above, was deductible to XXXXXXXXXX under paragraph 20(1)(c), interest paid or payable in respect of a taxation year by XXXXXXXXXX (depending on the method regularly followed by XXXXXXXXXX in computing its income) on the liabilities assumed will be deductible in computing the income of XXXXXXXXXX for that taxation year pursuant to 20(1)(c) to the extent the amount thereof is reasonable and paid or payable pursuant to a legal obligation to pay interest.

J. Subject to the provisions of subsection 26(26) of the ITAR and of paragraphs 85.1(2)(a), (b) and (c), and provided that the XXXXXXXXXX Shares represent capital property to the holder thereof, the provisions of subsection 85.1(1) will apply to the Exchange described in paragraph 91 above, such that:

(i) provided that the holder does not, in his return of income for the taxation year in which the Exchange will occur, include in computing his income for such year any portion of the gain or loss, otherwise determined, from the disposition of his XXXXXXXXXX Shares, the holder will be,

(a) deemed by subparagraph 85.1(1)(a)(i) to have disposed of his XXXXXXXXXX Shares for proceeds of disposition equal to his ACB of such share immediately before the Exchange, and

(b) deemed by subparagraph 85.1(1)(a)(ii) to have acquired his common shares of XXXXXXXXXX issued on the Exchange at a cost to him equal to his ACB of the XXXXXXXXXX Shares immediately before the Exchange;

(ii) the cost to XXXXXXXXXX of the XXXXXXXXXX Shares acquired by it will be deemed to be equal to the paid-up capital of such shares immediately before the Exchange; and

(iii) the provisions of subsection 26(26) of the ITAR will apply to the exchange in respect of any holder who has owned, or is deemed by subsection 26(28) of the ITAR to have owned, his XXXXXXXXXX Shares continuously from December 31, 1971.

K. The provisions of subsection 85(1) will apply to any transfers of XXXXXXXXXX Shares described in paragraph 91 above in respect of which the transferor and XXXXXXXXXX file a valid election with the result that the agreed amount in respect of the XXXXXXXXXX Shares transferred will be deemed pursuant to paragraph 85(1)(a) to be proceeds of disposition of that property to the transferor thereof and the cost of that property to the transferee thereof.

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

L. Each holder of XXXXXXXXXX Shares who does not hold such shares as capital property and who does not file a joint election with XXXXXXXXXX pursuant to subsection 85(1) will receive proceeds of disposition on the Exchange equal to the fair market value of such shares immediately before the transfer. The cost to XXXXXXXXXX of such shares will be equal to the fair market value thereof at the time of the Exchange.

M. On the redemption of the XXXXXXXXXX preferred shares described in paragraph 93 above, the purchase for cancellation of the XXXXXXXXXX Shares described in paragraph 94 above and the purchase for cancellation of the XXXXXXXXXX common shares described in paragraph 100 above the amount, if any, by which the amount paid to redeem or purchase the particular shares, as the case may be, exceeds the paid-up capital of the particular shares immediately before the redemption or the purchase for cancellation:

(i) will be deemed pursuant to paragraph 84(3)(a) to be a dividend paid by the issuer of such shares;

(ii) will be deemed pursuant to paragraph 84(3)(b) to be a dividend received by the holder of such shares;

(iii) to the extent that a dividend described in (i) and (ii) above is a taxable dividend, such dividend will, pursuant to subsection 112(1), be deductible in computing the taxable income of the recipient for the year in which the dividend is deemed to have been received, and, for greater certainty, such deduction will not be precluded by any of subsections 112(2.1), (2.2), (2.3) or (2.4);

(iv) by virtue of the application of paragraph (j) of the definition "proceeds of disposition" in section 54, the amount of a deemed dividend described in (i) and (ii) above will be excluded from the proceeds of disposition of the share, and any loss arising from the disposition of the share will be reduced by the amount of such dividends pursuant to subsection 112(3);

(v) Part IV.1 of the Act will not apply to the deemed dividends described in (i) and (ii) above because the dividends will be excepted dividends pursuant to paragraph (b) of the definition of "excepted dividend" in section 187.1;

(vi) Part VI.1 of the Act will not apply to the deemed dividends described in (i) and (ii) above because the dividends will be excluded dividends pursuant to paragraph (a) of the definition of 'excluded dividend' in subsection 191(1); and

(vii) no taxes under Part IV of the Act would be payable in respect of a dividend described in (i) and (ii) above;

N. By virtue of paragraph 55(3)(a), subsection 55(2) will not apply to deem any portion of the dividends described in Ruling M above to be proceeds of disposition, provided that there is no:

(i) disposition of any property to a person to whom XXXXXXXXXX is not related, or

(ii) significant increase in the interest (whether by means of equity or debt) in any corporation of any person to whom XXXXXXXXXX is not related,

other than as described in paragraphs 39 to 103 above, which occurs as part of a series of transactions or events that includes the proposed transactions described herein.

O. The set-off and cancellation of the notes described in paragraphs 42, 49, 57, 65, 73, 81 and 94 above will not give rise to a forgiven amount.

P. Provided that the common shares of XXXXXXXXXX constitute capital property to XXXXXXXXXX does not make an election pursuant to subsection 85(1) with respect to the exchange described in paragraph 90 above, subsection 86(1) will apply to the exchange, with the result that:

(i) XXXXXXXXXX will be deemed by paragraph 86(1)(c) to have disposed of its XXXXXXXXXX common shares of XXXXXXXXXX for proceeds of disposition equal to the cost to XXXXXXXXXX of such shares; and

(ii) XXXXXXXXXX will be deemed by paragraph 86(1)(b) to have acquired the XXXXXXXXXX new common shares of XXXXXXXXXX for a cost equal to XXXXXXXXXX ACB of its XXXXXXXXXX common shares of XXXXXXXXXX

For greater certainty, subsection 86(2) will not apply to such exchange.

Q. A participant under XXXXXXXXXX will not be deemed, by paragraph 7(1)(b) to have received a benefit by virtue of his employment as a result of the amendments to his rights under XXXXXXXXXX referred to in paragraph 98 above.

R. The provisions of subsection 7(1.4) will apply to the change of XXXXXXXXXX from XXXXXXXXXX to XXXXXXXXXX with the result that for purposes of section 7 and paragraph 110(1)(d):

(i) the participants of the XXXXXXXXXX shall be deemed not to have disposed of those options and not to have acquired XXXXXXXXXX options;

(ii) the XXXXXXXXXX options shall be deemed to be the same options as, and a continuation of, the XXXXXXXXXX options; and

(iii) XXXXXXXXXX shall be deemed to be the same corporation as, and a continuation of, XXXXXXXXXX

S. A participant under XXXXXXXXXX will not be considered to have received a benefit referred to in paragraph 6(1)(a) at the time and solely as a result of the amendments referred to in paragraph 98 above.

T. The transfer of the assets of the existing pension plan of XXXXXXXXXX, as described in paragraph 99 above, will be in accordance with subsection 147.3(3) and the new XXXXXXXXXX pension plan will be a "grandfathered plan" as defined in Regulation 8500(1).

U. Any exchange of the XXXXXXXXXX for cash or shares, as described in paragraph 86 above, will not give rise to a forgiven amount.

V. The provisions of subsection 39(2) will apply to XXXXXXXXXX with respect to any gain or loss arising on the exchange of the XXXXXXXXXX described in paragraph 86 above by virtue of the fluctuation after 1971 of a foreign currency.

W. The provisions of subsections 15(1), 56(2), 69(4), 69(11) and 246(1) will not be applied as a result of the proposed transactions, in and by themselves.

X. 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 70-6R2 dated September 28, 1990 issued by Revenue Canada and are binding provided that the proposed transactions are completed before XXXXXXXXXX

These rulings are based on the Act as it currently reads and do not take into account any future amendments, whether currently proposed or not, to the Act.

Yours truly,

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