30 November 1996 Ruling 9707003 - BUTTERFLY REORGANIZATION

Unedited CRA Tags

55(3)(b) 55(3.1)(b) 55(3.2)(b)

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Text of Severed Letter

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.

Definitions

FACTS

OTHER INFORMATION

PROPOSED TRANSACTIONS

PURPOSES OF THE PROPOSED TRANSACTIONS

RULINGS

COMMENTS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Butterfly - Spinoff

Position: (See issue sheet)

Reasons: (See issue sheet)

XXXXXXXXXX							3-970700
XXXXXXXXXX

Attention: XXXXXXXXXX

July 17, 1997

Dear Sirs:

Re: XXXXXXXXXX

This is in reply to your letter of XXXXXXXXXX in which you requested various advance income tax rulings. We also acknowledge your letter 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 tax 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)"adjusted cost basis" has the meaning assigned by section 54;

(c)"arm's length" has the meaning assigned by subsection 251(1);

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

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

(f)"cost amount" has the meaning assigned by subsection 248(1);

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

(h)"distributing corporation" has the meaning assigned by the definition of "distribution" in subsection 55(1);

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

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

(k)"insider" has the meaning assigned by section 89 of the Securities Act L.R.Q.,/R.S.Q., c. V-1.11;

(l)"permitted exchange" has the meaning assigned by subsection 55(1);

(m)"permitted redemption" has the meaning assigned by subsection 55(1);

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

(o)"prescribed stock exchange" has the meaning assigned by Regulations 3200 and 3201;

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

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

(r)XXXXXXXXXX;

(s)"Regulations" means Income Tax Regulations;

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

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

(v)"specified financial institution" has the meaning assigned by subsection 248(1);

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

(x)"specified shareholder" has the meaning assigned by subsection 248(1) as extended by paragraph 55(3.2)(a) for the purpose of paragraph 55(3.1)(b);

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

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

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

(ab)"transferee corporation" has the meaning assigned by the definition of distribution in subsection 55(1).

FACTS

1.XXXXXXXXXX is governed by the XXXXXXXXXX and is a public corporation, a taxable Canadian corporation and a subject corporation. The Class XXXXXXXXXX shares of XXXXXXXXXX ("XXXXXXXXXX Shares") are listed on the XXXXXXXXXX stock exchanges and its Class XXXXXXXXXX Shares ("XXXXXXXXXX shares") are listed on the XXXXXXXXXX stock exchanges.

XXXXXXXXXX is a management holding corporation which forms, with its subsidiaries and affiliated corporations, a XXXXXXXXXX.

XXXXXXXXXX carries out it businesses through the following corporations or partnerships:

XXXXXXXXXX

In addition, XXXXXXXXXX owns interests in the following companies:

XXXXXXXXXX

The fiscal period of XXXXXXXXXX, its subsidiaries and affiliated corporations ends on XXXXXXXXXX.

2.The authorized share capital of XXXXXXXXXX consists of an unlimited number of no par value XXXXXXXXXX Shares and an unlimited number of no par value XXXXXXXXXX Shares.

3.The XXXXXXXXXX Shares and XXXXXXXXXX Shares rank equally except that each XXXXXXXXXX Share carries ten votes and each XXXXXXXXXX Class XXXXXXXXXX Share carries one vote. The XXXXXXXXXX Shares are convertible at any time at the option of the holder into XXXXXXXXXX Shares on a one-for-one basis. The XXXXXXXXXX Shares are convertible into XXXXXXXXXX Shares on a one-for-one basis in the event a takeover bid is made to purchase XXXXXXXXXX Shares which must, by reason of a stock exchange or legal requirement, be made to all or substantially all of the holders of XXXXXXXXXX Shares which is not concurrently made to the holders of XXXXXXXXXX Shares. The holders of XXXXXXXXXX Shares voting separately as a class are entitled to elect XXXXXXXXXX% of the board of directors of XXXXXXXXXX. The holders of XXXXXXXXXX Shares voting separately as a class elect the remaining members of the board of directors of XXXXXXXXXX.

4.As at XXXXXXXXXX, the issued and outstanding share capital of XXXXXXXXXX consisted of XXXXXXXXXX Shares. As of XXXXXXXXXX, the paid-up capital of each XXXXXXXXXX Share and each XXXXXXXXXX Share was approximately $XXXXXXXXXX respectively.

5. XXXXXXXXXX

6. XXXXXXXXXX

7. XXXXXXXXXX

8.There is no person or partnership other than:

(a) XXXXXXXXXX who owns, alone or together with other non-arm's-length persons, at least 10% of the issued shares of any class of the capital stock of XXXXXXXXXX; or

(b) XXXXXXXXXX, who exercises control or direction over at least 10% of the issued XXXXXXXXXX Shares otherwise than as a beneficial owner.

9.XXXXXXXXXX has adopted a stock option plan (the "XXXXXXXXXX Stock Option Plan") which confers a right on certain officers and key employees of XXXXXXXXXX and its subsidiaries to purchase XXXXXXXXXX Shares from treasury. The criteria used to determine eligibility for the granting of options, the number of shares covered by each option and the term of each option is determined at the discretion of the board of directors of XXXXXXXXXX. No optionee may hold options covering more than XXXXXXXXXX% of the outstanding shares of the company. An optionee may request that XXXXXXXXXX pay, at the time of exercise and in lieu thereof, to the optionee an amount equal to the excess of the market value of the shares over the exercise price. As at XXXXXXXXXX, there were XXXXXXXXXX options outstanding and an additional XXXXXXXXXX Subordinate Voting Shares have been reserved under the plan. The purchase price of each XXXXXXXXXX Subordinate Voting Share covered by an option pursuant to the plan is equal to the market value of the shares at the time of the grant and varies from $XXXXXXXXXX. The issued options will expire at various dates between XXXXXXXXXX.

10.The XXXXXXXXXX Stock Option Plan provides that the number of XXXXXXXXXX Subordinate Voting Shares subject to the plan shall be increased or decreased proportionately in the event of the subdivision or consolidation of the Multiple and Subordinate Voting Shares of XXXXXXXXXX. In such an event, a corresponding adjustment shall be made changing the number of shares deliverable upon the exercise of any option granted without change in the total price applicable to the unexercised portion of the option, but with a corresponding adjustment in the price for each share covered by the option. In the event that XXXXXXXXXX is otherwise reorganized or merged or consolidated or amalgamated with another corporation, appropriate provisions shall be made for the continuance of the options outstanding under the plan and to prevent their dilution or enlargement or to adjust the exercise price of the options.

11.XXXXXXXXXX is a taxable Canadian corporation, a subject corporation and a public corporation incorporated under the XXXXXXXXXX. XXXXXXXXXX together with its subsidiaries and affiliated corporations carries on XXXXXXXXXX. XXXXXXXXXX, XXXXXXXXXX owned directly and indirectly the following subsidiaries and equity in corporations over which it had significant influence:

XXXXXXXXXX

XXXXXXXXXX owned the following interests:

XXXXXXXXXX

12.On XXXXXXXXXX, XXXXXXXXXX acquired all the outstanding shares of XXXXXXXXXX, through an amalgamation arrangement under which XXXXXXXXXX, a wholly-owned subsidiary of XXXXXXXXXX, amalgamated with XXXXXXXXXX to form XXXXXXXXXX. Immediately after the amalgamation, XXXXXXXXXX transferred all of its shares of XXXXXXXXXX, to its wholly-owned subsidiary, XXXXXXXXXX.

XXXXXXXXXX

As of the date hereof, XXXXXXXXXX has sold its shareholding in XXXXXXXXXX to an arm's-length party. Such disposition was not in any manner connected with or undertaken as part of the same series of transactions as the proposed transactions described herein.

13.At the end of XXXXXXXXXX, XXXXXXXXXX implemented an internal reorganization of corporations to simplify its corporate structure which is consistent with its practice of consolidation. In this regard, XXXXXXXXXX merged with XXXXXXXXXX and the excess cash of XXXXXXXXXX was used to reduce the indebtedness of XXXXXXXXXX. The above reorganization and the reduction of XXXXXXXXXX indebtedness is not part of the same series of transactions or events which includes the Proposed Transactions described herein.

14.The authorized share capital of XXXXXXXXXX consists of the following:

(a) XXXXXXXXXX preferred shares, XXXXXXXXXX, with a cumulative dividend equal to XXXXXXXXXX% of the value of $XXXXXXXXXX of each share;

(b) XXXXXXXXXX preferred shares, XXXXXXXXXX, with a cumulative dividend equal to XXXXXXXXXX% of the value of $XXXXXXXXXX of each share;

(d) an unlimited number of Class XXXXXXXXXX voting shares ("XXXXXXXXXX Voting Shares") with no par value; and

(e) an unlimited number of Class XXXXXXXXXX voting shares ("XXXXXXXXXX Voting Shares") with no par value.

15.The XXXXXXXXXX Voting Shares and XXXXXXXXXX Voting Shares rank equally except that each XXXXXXXXXX Voting Share carries XXXXXXXXXX votes and each XXXXXXXXXX Voting Share carries one vote. If XXXXXXXXXX or an acceptable successor ceases to own sufficient shares to enable it to exercise more than XXXXXXXXXX% of the voting rights outstanding, the XXXXXXXXXX Voting Shares shall thereafter carry one vote per share. The XXXXXXXXXX Voting Shares are convertible at any time at the option of the holder into XXXXXXXXXX Voting Shares on a one-for-one basis. The XXXXXXXXXX Voting Shares are convertible into XXXXXXXXXX Voting Shares on a one-for-one basis in the event a takeover bid is made to purchase XXXXXXXXXX Voting Shares which must, by reason of a stock exchange or legal requirement, be made to all or substantially all of the holders of XXXXXXXXXX Voting Shares and which offer is not concurrently made to the holders of XXXXXXXXXX Voting Shares.

16.As at XXXXXXXXXX, the issued and outstanding share capital of XXXXXXXXXX consisted of:

(a) XXXXXXXXXX preferred shares, XXXXXXXXXX, with par value of $XXXXXXXXXX each;

(b) XXXXXXXXXX preferred shares, XXXXXXXXXX series, with par value of $XXXXXXXXXX each;

(d) XXXXXXXXXX Voting Shares.

The XXXXXXXXXX preferred shares, XXXXXXXXXX and the XXXXXXXXXX preferred shares, XXXXXXXXXX of the capital stock of XXXXXXXXXX are held by the public (excluding any person related to XXXXXXXXXX). These shares are retractable at any time on the demand of the holder for a price equal to their fair market value at that time, which value fluctuates with market conditions. As of the date hereof, XXXXXXXXXX has purchased all the shares of holders who have exercised their retraction right and will continue to do so in the future.

17.At the end of XXXXXXXXXX, XXXXXXXXXX completed a reorganization of its capital through an issuer bid pursuant to an advance income tax ruling (our file 3-922164) under which

XXXXXXXXXX

18.XXXXXXXXXX is a wholly-owned subsidiary of XXXXXXXXXX formed under the XXXXXXXXXX, and is a taxable Canadian corporation and a subject corporation.

XXXXXXXXXX

At the end of its XXXXXXXXXX taxation year, XXXXXXXXXX had net capital losses of approximately $XXXXXXXXXX.

19.There is no person or partnership other than XXXXXXXXXX who beneficially owns or exercises control or direction over more than 10% of the issued shares of any class of the capital stock of XXXXXXXXXX.

20.XXXXXXXXXX has adopted a stock option plan ("XXXXXXXXXX Stock Option Plan") which confers a right on certain officers, directors and key employees of XXXXXXXXXX and its subsidiaries to purchase XXXXXXXXXX Voting Shares from treasury. The criteria used to determine eligibility for the granting of options, the number of shares covered by each option and the term of each option is at the discretion of the board of directors of XXXXXXXXXX. As at XXXXXXXXXX, there were XXXXXXXXXX options outstanding and an additional XXXXXXXXXX Voting shares have been reserved under the plan. Each option gives the right to its holder to acquire one XXXXXXXXXX Voting Share at a price equal to the market price of the shares at the time of the grant which varied from $XXXXXXXXXX. The issued options will expire at various dates between the years XXXXXXXXXX.

21.The XXXXXXXXXX Stock Option Plan provides that the number of XXXXXXXXXX Voting Shares subject to the plan shall be increased or decreased proportionately in the event of the subdivision or consolidation of the XXXXXXXXXX Voting Shares of XXXXXXXXXX. In any such event, there will be a corresponding adjustment in the price for each share covered by the option. In the event that XXXXXXXXXX is otherwise reorganized, merged, consolidated or amalgamated with another corporation, appropriate provisions shall be made to ensure the continuance of the options outstanding under the plan and to prevent their dilution, enlargement or the adjustment of the exercise price of the options.

22.XXXXXXXXXX is a taxable Canadian corporation, a subject corporation and a public corporation incorporated under the CBCA. XXXXXXXXXX and its subsidiaries and affiliated corporations form a XXXXXXXXXX. XXXXXXXXXX owns directly and indirectly the following subsidiaries and affiliated corporations over which it has significant influence:

XXXXXXXXXX

23.An internal reorganization was implemented XXXXXXXXXX, in order to simplify the corporate structure, make it more efficient and consistent, by the structuring of these subsidiaries XXXXXXXXXX. This reorganization had not been carried out in connection with the Proposed Transactions described herein nor is it part of the same series of transactions as the Proposed Transactions.

24.On XXXXXXXXXX, XXXXXXXXXX, a wholly-owned subsidiary of XXXXXXXXXX, issued U.S. $XXXXXXXXXX of debentures in the United States. The net proceeds from this issuance have been used to repay a portion of outstanding indebtedness under existing bank credit facilities. This issuance is consistent with XXXXXXXXXX practice of structuring its debt portfolio to contain a higher percentage of long-term fixed rate financing.

25.XXXXXXXXXX, directly or indirectly, through its subsidiaries has completed the following acquisitions since XXXXXXXXXX:

XXXXXXXXXX

26.At the end of XXXXXXXXXX, XXXXXXXXXX announced its intention to sell its interest in the XXXXXXXXXX business which represents approximately XXXXXXXXXX% of the fair market value of all the assets of XXXXXXXXXX. As of the date hereof, there has been no offer made by any purchaser or agreement concluded between XXXXXXXXXX and a purchaser.

27.The authorized share capital of XXXXXXXXXX consists of the following:

(a) an unlimited number of preferred shares with no par value issuable in series;

(b) an unlimited number of XXXXXXXXXX voting shares ("XXXXXXXXXX Voting Shares") with no par value; and

28.The XXXXXXXXXX Voting Shares and XXXXXXXXXX Voting Shares rank equally except that each XXXXXXXXXX Voting Share carries XXXXXXXXXX votes and each XXXXXXXXXX Voting Share carries one vote. The XXXXXXXXXX Voting Shares are convertible at any time at the option of the holder into XXXXXXXXXX Voting Shares on a one-for-one basis. The XXXXXXXXXX Voting Shares confer subscription rights (preemptive rights) on their holders in the event that XXXXXXXXXX issues voting shares. The rights entitle holders of XXXXXXXXXX Voting Shares to acquire a number of XXXXXXXXXX Voting Shares which carry, in the aggregate, a number of voting rights equivalent to the voting rights attached to the voting shares to be issued thereby enabling them to maintain their proportionate voting participation. XXXXXXXXXX, as controlling shareholders of XXXXXXXXXX, have executed a trust agreement in favour of XXXXXXXXXX as trustee whereby they have agreed not to transfer any of their shares of XXXXXXXXXX where the sale would require that an offer be made to all of the holders of XXXXXXXXXX Voting Shares. This trust agreement, which is also executed by XXXXXXXXXX, is a requirement of The XXXXXXXXXX Exchange and The XXXXXXXXXX Exchange and is intended to ensure the participation of holders of XXXXXXXXXX Voting Shares in a take-over bid.

29.As at XXXXXXXXXX, the issued and outstanding share capital of XXXXXXXXXX consisted of XXXXXXXXXX Voting Shares and XXXXXXXXXX Voting Shares.

30.XXXXXXXXXX is a wholly-owned subsidiary of XXXXXXXXXX formed under the CBCA and is a taxable Canadian corporation and a subject corporation. XXXXXXXXXX own XXXXXXXXXX Voting Shares, respectively, representing approximately XXXXXXXXXX% of the outstanding voting shares of XXXXXXXXXX and approximately XXXXXXXXXX% of the voting rights conferred by the outstanding voting shares of XXXXXXXXXX. XXXXXXXXXX are specified shareholders of XXXXXXXXXX.

31. XXXXXXXXXX.

32.On XXXXXXXXXX, XXXXXXXXXX entered into an amended shareholders' agreement (the "Shareholders Agreement") which provides, inter alia, the following:

(a) a reciprocal right of first refusal with respect to XXXXXXXXXX shares held by XXXXXXXXXX;

(b) in the event that XXXXXXXXXX proposes to sell all or a part of the equity shares it holds and XXXXXXXXXX ceases as a result to be a subsidiary of XXXXXXXXXX or to be under de facto control of XXXXXXXXXX, XXXXXXXXXX shall obtain on behalf of XXXXXXXXXX an irrevocable offer from a third-party purchaser to purchase all the shares of XXXXXXXXXX held by XXXXXXXXXX upon the same terms and conditions as those offered to XXXXXXXXXX;

(c) in the event of a change of control of XXXXXXXXXX (excluding any change of control resulting from a transfer or alienation, at any time whatsoever, in favour of the descendants of XXXXXXXXXX born or to be born) prior to XXXXXXXXXX, XXXXXXXXXX shall have, at its option, for a period of XXXXXXXXXX days following written notification of the change of control, the right to require that a stock brokerage firm be commissioned for a period of XXXXXXXXXX months by XXXXXXXXXX jointly to act as financial intermediary for purposes of the sale by XXXXXXXXXX of the shares it holds in XXXXXXXXXX capital and XXXXXXXXXX shall have the right in such circumstances (i) to purchase or cause a nominee to purchase the shares held by XXXXXXXXXX at the price offered therefor by a third party, (ii) to sell its equity shares of XXXXXXXXXX to such third party or (iii) in the event there is no offer, to sell to XXXXXXXXXX all of its equity shares at the fair market value thereof or to purchase from XXXXXXXXXX all of its shares;

(d) the parties have agreed to vote their shares so as to designate as their representatives on the board of directors and the committees of the board of directors of XXXXXXXXXX and its major subsidiaries, a number of members of XXXXXXXXXX board of directors proportional to their equity participation and, as long as XXXXXXXXXX holds at least 5% of the equity shares, it will be entitled to at least XXXXXXXXXX representatives on XXXXXXXXXX board of directors; and

(e)certain acts of XXXXXXXXXX require the approval of XXXXXXXXXX, as long as XXXXXXXXXX together own shares carrying XXXXXXXXXX% or more of the voting rights attached to all voting shares of XXXXXXXXXX. These include: substantial changes in the nature of the business of XXXXXXXXXX and its subsidiaries, taken as a whole, or an amendment to their articles or by-laws; the amalgamation of XXXXXXXXXX or any of its subsidiaries with a corporation with which it is not affiliated or the winding-up or dissolution of XXXXXXXXXX or any of its subsidiaries which is not a wholly-owned subsidiary; subject to certain exceptions, the issuance by XXXXXXXXXX or any of its major subsidiaries of shares or convertible securities; the distribution of assets by XXXXXXXXXX or any of its major subsidiaries other than by way of a dividend; any transaction out of the ordinary course of business involving consideration exceeding CDN $XXXXXXXXXX; the disposal by XXXXXXXXXX or any of its subsidiaries of shares which it holds in any of its major subsidiaries; the declaration, setting aside or payment by XXXXXXXXXX, during any fiscal year, of dividends on any share of its capital if the total amount of the dividends so declared, set aside or paid during such year were to exceed XXXXXXXXXX% of the consolidated net income of the previous fiscal year; transactions with shareholders or their affiliates; subject to certain exceptions, the listing on any stock exchange of any shares and the acquisition of a business in an unrelated sector. The by-laws of XXXXXXXXXX have been amended to reflect that the assent of XXXXXXXXXX is required for such acts, in addition to usual requirements of the law. These provisions of the bylaws will cease to be in force when XXXXXXXXXX are no longer beneficial owners of the shares of XXXXXXXXXX carrying at least XXXXXXXXXX% of the voting rights outstanding or if either XXXXXXXXXX ceases to hold equity shares representing XXXXXXXXXX% or more of the outstanding equity shares on a fully-diluted basis. If XXXXXXXXXX cease to be beneficial owners of shares of XXXXXXXXXX carrying at least XXXXXXXXXX% of the voting rights outstanding, they have agreed to act jointly with respect to such acts.

33. XXXXXXXXXX

XXXXXXXXXX is not the beneficial owner of the XXXXXXXXXX Voting Shares but, as investment manager, declared that it maintains exclusive power to exercise investment control or direction over such shares for its client accounts.

34. XXXXXXXXXX

XXXXXXXXXX is not the beneficial owner of the XXXXXXXXXX Voting Shares but, as investment manager, it maintains exclusive power to exercise investment control or direction over such shares for its client accounts.

35.There is no person or partnership other than:

(a) XXXXXXXXXX who owns, alone or together with other non-arm's-length persons, at least 10% of the issued shares of any class of the capital stock of XXXXXXXXXX; or

(b) XXXXXXXXXX who individually exercises control or direction over at least 10% of the issued shares of any class of the capital stock of XXXXXXXXXX otherwise than as a beneficial owner.

36.XXXXXXXXXX has adopted a stock option plan (the "XXXXXXXXXX Stock Option Plan") which confers a right on certain officers, directors and key employees of XXXXXXXXXX and its subsidiaries to purchase XXXXXXXXXX Voting Shares from treasury. The criteria used to determine eligibility for the granting of options, the number of shares covered by each option and the term of each option is determined at the discretion of the board of directors of XXXXXXXXXX. Under the XXXXXXXXXX Stock Option Plan, a total of XXXXXXXXXX Voting Shares have been reserved for senior executives and other managers. The options can be exercised during a period not exceeding XXXXXXXXXX years from the date they have been granted at a price equal to the market value of the shares at the time of the grant except for XXXXXXXXXX outstanding options granted to a senior officer. As at XXXXXXXXXX, there were XXXXXXXXXX options outstanding and an additional XXXXXXXXXX Voting Shares have been reserved under the plan.

37.The XXXXXXXXXX Stock Option Plan provides that the number of XXXXXXXXXX Voting Shares subject to the plan shall be increased or decreased proportionately in the event of the subdivision or consolidation of the XXXXXXXXXX Voting Shares of XXXXXXXXXX. In any such event, there will be a corresponding adjustment in the price for each share covered by the option.

38.XXXXXXXXXX is a wholly-owned subsidiary of XXXXXXXXXX formed under the XXXXXXXXXX, and is a taxable Canadian corporation and a subject corporation. On XXXXXXXXXX, its name was changed XXXXXXXXXX. XXXXXXXXXX, together with its subsidiaries and affiliated corporations, carries on XXXXXXXXXX. XXXXXXXXXX owns all the shares of

XXXXXXXXXX

39.XXXXXXXXXX also owns the following interest in subsidiaries and non- subsidiaries over which it has a significant influence:

XXXXXXXXXX

40.XXXXXXXXXX owns a XXXXXXXXXX% limited partnership interest in XXXXXXXXXX which carries on the XXXXXXXXXX business. Consistent with its practice of consolidation to the extent possible and to ensure that one company is not taxable while the other has tax losses, XXXXXXXXXX acquired its XXXXXXXXXX% limited partnership interest in XXXXXXXXXX indirectly from XXXXXXXXXX. This acquisition is not in any manner connected with or is part of the same series of transactions as the Proposed Transaction described herein.

41.On XXXXXXXXXX sold its shareholding in XXXXXXXXXX to an arm's-length party. This disposition is not in any manner connected with or is part of the same series of transactions as the Proposed Transactions described herein.

OTHER INFORMATION

42.None of the shares of any of the corporations referred to in this letter has been or will be subject to a guarantee agreement, within the meaning referred to in subsection 112(2.2), that is given by a person or partnership that is a specified financial institution, or a specified person in relation to any such institution, for any of the purposes described in that subsection.

43.None of the shares of any of the corporations referred to in this letter will be subject to a dividend rental arrangement.

44.None of the shares of any of the corporations referred to in this letter 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).

45.Other than specifically described in this letter, neither XXXXXXXXXX nor any corporation over which XXXXXXXXXX has significant influence has acquired or will acquire any property or have incurred or will incur any debts in contemplation of the proposed transactions described in this letter.

46.Neither XXXXXXXXXX nor any corporation controlled by XXXXXXXXXX is a specified financial institution.

PROPOSED TRANSACTIONS

47.Following the satisfaction of all conditions precedent, the Proposed Transactions will be implemented in accordance with the terms of a Master Agreement as follows:

(a) XXXXXXXXXX pre-arrangement transactions described in paragraphs 49 to 52 below;

(b) New XXXXXXXXXX (a corporation formed on the amalgamation of XXXXXXXXXX as described in paragraph 50 below) arrangement transactions described in paragraphs 53 to 55 below;

(d) XXXXXXXXXX arrangement transactions described in paragraphs 69 to 71 below; and

(e) XXXXXXXXXX amalgamation described in paragraphs 72 to 74 below.

48.The arrangement transactions referred to in subparagraphs 47(b) and (d) above will be carried out as a plan of arrangement (the "Arrangements") pursuant to the provisions of the XXXXXXXXXX. Each of the transactions described below will be carried out in the sequence described below and will become effective only after, among other things:

(a) the Courts have issued a final order approving the Arrangements (which would include the New XXXXXXXXXX Arrangement and the XXXXXXXXXX Arrangement);

(b) the certificates in respect of the articles of arrangement and amalgamation are issued pursuant to the provisions of the CBCA or XXXXXXXXXX;

(d) the shareholders of XXXXXXXXXX approve the reorganization;

(e) the appropriate stock exchanges have given conditional approval for the listing of shares of each of XXXXXXXXXX (each of the companies is defined below) and have approved the reorganization;

(f) on the basis of a review of the share register of each of

XXXXXXXXXX

it is reasonable to conclude that no shareholder other than XXXXXXXXXX beneficially owns 10% or more of the issued shares of any class of XXXXXXXXXX at the time of the implementation of the proposed transactions or will beneficially own 10% or more of the issued shares of any class of the capital stock of the distributing corporation or a transferee corporation immediately after the proposed reorganization;

(g) XXXXXXXXXX enter into a new shareholders' agreement; and

(h) XXXXXXXXXX have provided the appropriate representations and commitments.

The shareholders of XXXXXXXXXX who will dissent from the amalgamation will cease to be shareholders of the corporation on the effective date of the amalgamation and the shares of such shareholders on which the right to dissent was exercised will no longer be considered to be outstanding as shares of the corporation for corporate law purposes. After completion of the proposed transactions each such dissenting shareholder will be entitled to be paid by the new corporation formed by the amalgamation with XXXXXXXXXX an amount equal to the fair market value of the shares in respect of which the right to dissent is exercised.

49. XXXXXXXXXX

A resolution of the shareholder, XXXXXXXXXX, authorizing and requiring that XXXXXXXXXX be wound up will be passed after the transfer of assets and assumption of liabilities, if any, of XXXXXXXXXX. XXXXXXXXXX will make no designation pursuant to paragraph 88(1)(d) in respect of any property received from XXXXXXXXXX.

50.XXXXXXXXXX (each of which corporations is referred to as a predecessor corporation) will amalgamate to form one new corporation ("New XXXXXXXXXX") in such a manner that:

(a)all of the property (except the shares of XXXXXXXXXX) of the predecessor corporations immediately before the merger will become property of New XXXXXXXXXX by virtue of the merger;

(b) all of the liabilities of the predecessor corporations immediately before the merger will become liabilities of New XXXXXXXXXX by virtue of the merger; and

(c) all of the shares of the predecessor corporations (except those of XXXXXXXXXX) will be cancelled on the merger. The shares of XXXXXXXXXX owned by its shareholders immediately before the merger will become shares of New XXXXXXXXXX to those shareholders immediately after the merger. The XXXXXXXXXX Voting Shares and XXXXXXXXXX Voting Shares owned by the shareholders immediately before the amalgamation will become New XXXXXXXXXX Voting Shares and New XXXXXXXXXX Voting Shares.

51.XXXXXXXXXX will incorporate two new corporations, one under the CBCA ("New XXXXXXXXXX") and one under the XXXXXXXXXX ("New XXXXXXXXXX"). Each of New XXXXXXXXXX and New XXXXXXXXXX will be a taxable Canadian corporation and a subject corporation. Neither New XXXXXXXXXX nor New XXXXXXXXXX will be a public corporation. The authorized capital of each of New XXXXXXXXXX and New XXXXXXXXXX will consist of XXXXXXXXXX voting shares carrying XXXXXXXXXX votes per share in the case of New XXXXXXXXXX ("New XXXXXXXXXX Voting Shares") and XXXXXXXXXX votes per share in the case of New XXXXXXXXXX ("New XXXXXXXXXX voting Shares"); subordinate voting shares carrying one vote per share ("New XXXXXXXXXX Voting Shares" or "New XXXXXXXXXX Voting Shares") and one special share ("New XXXXXXXXXX Share" or "New XXXXXXXXXX Share").

XXXXXXXXXX will subscribe on incorporation for one New XXXXXXXXXX Voting Share of New XXXXXXXXXX and one New XXXXXXXXXX Voting Share of New XXXXXXXXXX for a nominal amount. No other share of New XXXXXXXXXX and New XXXXXXXXXX will be issued until share issues as described in paragraphs 54, 55, 58 and 63 below are effected.

Contemporaneously with the exchanges described in paragraphs 54 and 55 below, New XXXXXXXXXX and New XXXXXXXXXX will purchase for a nominal amount the XXXXXXXXXX voting shares issued to XXXXXXXXXX on incorporation described herein.

52.The terms and conditions of the New XXXXXXXXXX Share and the New XXXXXXXXXX Share will be as follows:

(a) redeemable at the option of the issuer for a redemption amount equal to the consideration received in respect of the issuance of the share (the consideration will be the net fair market value of property of New XXXXXXXXXX, determined immediately before the transfer described in paragraphs 58 and 63 below, that will be transferred to New XXXXXXXXXX and New XXXXXXXXXX, as described in those paragraphs respectively);

(b) retractable at any time on the demand of the holder at a retraction amount equal to the redemption amount described in (a);

(c) entitles the holder to dividends not exceeding XXXXXXXXXX% of the redemption amount annually as and when declared by the Board of Directors of the issuer.

(d) entitles the holder, upon dissolution, to a payment in priority to the holders of the common shares of an amount equal to the redemption amount; and

(e) non-voting.

53.Pursuant to the New XXXXXXXXXX Arrangement, New XXXXXXXXXX articles of incorporation will be amended to provide for the following:

(a) the authorized share capital of New XXXXXXXXXX will be amended to create:

(i) an unlimited number of new XXXXXXXXXX voting shares (the "New XXXXXXXXXX Voting Shares of New XXXXXXXXXX") having substantially the same attributes as the then existing New XXXXXXXXXX Voting Shares;

(ii) an unlimited number of new XXXXXXXXXX voting shares (the "New XXXXXXXXXX Voting Shares of New XXXXXXXXXX") having substantially the same attributes as the then existing New XXXXXXXXXX Voting Shares;

(iii) an unlimited number of class XXXXXXXXXX reorganization shares ("Class XXXXXXXXXX Reorganization Shares") and an unlimited number of class XXXXXXXXXX reorganization shares ("Class XXXXXXXXXX Reorganization Shares") having the following attributes:

(A) redeemable at the option of New XXXXXXXXXX for an aggregate redemption amount as determined by the formula set out below;

(B) retractable on the demand of the holder at a retraction amount equal to the redemption amount;

(C) entitling the holder to dividends not exceeding XXXXXXXXXX% of the redemption amount annually as and when declared by the Board of Directors. No dividend may be paid on the Class XXXXXXXXXX Reorganization Shares unless a dividend of an equal amount is paid contemporaneously on the Class XXXXXXXXXX Reorganization Shares and vice versa;

(D) entitling the holder, upon dissolution, to a payment, in priority to the New XXXXXXXXXX Voting Shares and New XXXXXXXXXX Voting Shares and all other classes of shares of New XXXXXXXXXX except that the Class XXXXXXXXXX Reorganization Shares rank equally with the Class XXXXXXXXXX Reorganization Shares, in an amount equal to the redemption amount;

(E) non-voting; and

(F) exchangeable at the option of New XXXXXXXXXX on the basis of one Class XXXXXXXXXX Reorganization Share for a fraction of one New XXXXXXXXXX Voting Share and one Class XXXXXXXXXX Reorganization Share for a fraction of one New XXXXXXXXXX Share. The fraction will be calculated so as to ensure that the total number of outstanding shares of New XXXXXXXXXX, following the exchanges described in paragraphs 54 and 55 below, will be equal to the total number of all outstanding shares of XXXXXXXXXX owned by New XXXXXXXXXX before the exchange less a number equal to XXXXXXXXXX% of the total number of outstanding XXXXXXXXXX Voting Shares (that are not owned by New XXXXXXXXXX) immediately before the amalgamation of XXXXXXXXXX and New XXXXXXXXXX described in paragraphs 69 to 71 below.

The redemption amount of each Class XXXXXXXXXX or Class XXXXXXXXXX Reorganization Share will be equal to the amount determined when the fair market value of an issued and outstanding New XXXXXXXXXX Voting Share or a New XXXXXXXXXX Voting Share, as the case may be, immediately before the conversions described in paragraphs (b) and (c) below is multiplied by a fraction, the numerator of which is the net fair market value of the business property of XXXXXXXXXX, calculated in the manner described in paragraphs 56 and 57 below, determined immediately before the transfer described in paragraph 58 below, that will be transferred to New XXXXXXXXXX as described in that paragraph and the denominator of which is the net fair market value of all business property of New XXXXXXXXXX, calculated in the manner described in paragraphs 56 and 57 below, immediately before such transfer of property;

(iv) an unlimited number of class XXXXXXXXXX reorganization shares ("Class XXXXXXXXXX Reorganization Shares") and an unlimited number of class XXXXXXXXXX reorganization shares ("Class XXXXXXXXXX Reorganization Shares") having the following attributes:

(A) redeemable at the option of New XXXXXXXXXX for an aggregate redemption amount as determined by the formula set out below;

(B) retractable on the demand of the holder at a retraction amount equal to the redemption amount;

(E) non-voting; and

(F) exchangeable at the option of New XXXXXXXXXX on the basis of one Class XXXXXXXXXX Reorganization Share for a fraction of one New XXXXXXXXXX Voting Shares and one Class XXXXXXXXXX Reorganization Share for a fraction of one New XXXXXXXXXX Voting Share. The fraction will be calculated so as to ensure that the total number of outstanding shares of New XXXXXXXXXX, following the exchanges described in paragraphs 54 and 55 below, will be equal to the number of outstanding shares of XXXXXXXXXX owned by New XXXXXXXXXX at that time.

The redemption amount of each Class XXXXXXXXXX and Class XXXXXXXXXX Reorganization Share will be equal to the amount determined when the fair market value of an issued and outstanding New XXXXXXXXXX Voting Share or a New XXXXXXXXXX Voting Share, as the case may be, immediately before the conversions described in paragraphs (b) and (c) below is multiplied by a fraction, the numerator of which is the net fair market value of the business property of XXXXXXXXXX, calculated in the manner described in paragraphs 56 and 57 below, determined immediately before the transfer described in paragraph 63 below, that will be transferred to New XXXXXXXXXX as described in that paragraph and the denominator of which is the net fair market value of all business property of New XXXXXXXXXX, calculated in the manner described in paragraphs 56 and 57 below, immediately before such transfer of property;

(b) upon the filing of articles of amendment by New XXXXXXXXXX giving effect to the Court approved arrangement, all New XXXXXXXXXX Voting Shares owned by XXXXXXXXXX will be converted into an equal number of Class XXXXXXXXXX Reorganization Shares, an equal number of Class XXXXXXXXXX Reorganization Shares and an equal number of New XXXXXXXXXX Voting Shares of New XXXXXXXXXX having an aggregate fair market value equal to the fair market value of all such shares so converted;

(c) upon the filing of articles of amendment by New XXXXXXXXXX giving effect to the Court approved arrangement, all New XXXXXXXXXX Voting Shares owned by the remaining shareholders and all New XXXXXXXXXX Voting Shares will be converted into an equal number of Class XXXXXXXXXX Reorganization Shares, an equal number of Class XXXXXXXXXX Reorganization Shares and an equal number of New XXXXXXXXXX Voting Shares of New XXXXXXXXXX having an aggregate fair market value equal to the fair market value of all such shares so converted; and

(d) immediately following the conversion, all existing New XXXXXXXXXX Voting Shares and New XXXXXXXXXX Voting Shares will be cancelled.

With respect to the conversion of the New XXXXXXXXXX Voting Shares into New XXXXXXXXXX Voting Shares of New XXXXXXXXXX, Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares as described in (b) above, the aggregate stated capital of the New XXXXXXXXXX Voting Shares of New XXXXXXXXXX, the Class XXXXXXXXXX Reorganization Shares and the Class XXXXXXXXXX Reorganization Shares will be equal to the paid-up capital of the shares so converted in (b) above and will be allocated to each such class of shares based on their respective fair market values. With respect to the conversion of the existing New XXXXXXXXXX Voting Shares and New XXXXXXXXXX Voting Shares into New XXXXXXXXXX Voting Shares of New XXXXXXXXXX, Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares described in (c) above, the aggregate stated capital of the New XXXXXXXXXX Voting Shares of New XXXXXXXXXX, the Class XXXXXXXXXX Reorganization Shares and the Class XXXXXXXXXX Reorganization Shares will be equal to the paid-up capital of the existing shares so converted in (c) above and will be allocated to each such class of shares based on their respective fair market values.

New XXXXXXXXXX will issue the new shares to, and register such new shares in the name of, an exchange agent ("Exchange Agent") on behalf of the shareholders of New XXXXXXXXXX.

54.Upon the exercise of the exchange option by New XXXXXXXXXX, each of XXXXXXXXXX will have:

(a) their Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX transferred by the Exchange Agent to New XXXXXXXXXX. As sole consideration for the transfer, New XXXXXXXXXX will issue the appropriate fraction of a New XXXXXXXXXX Voting Share for each Class XXXXXXXXXX Reorganization Share of New XXXXXXXXXX so transferred and the appropriate fraction of a New XXXXXXXXXX Voting Share for each Class XXXXXXXXXX Reorganization Share of New XXXXXXXXXX so transferred. The New XXXXXXXXXX Voting Shares and New XXXXXXXXXX Voting Shares issued to the Exchange Agent on behalf of each transferor will have a fair market value equal to the fair market value of the Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX so transferred to New XXXXXXXXXX; and

(b) their Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX transferred by the Exchange Agent to New XXXXXXXXXX. As sole consideration for the transfer, New XXXXXXXXXX will issue the appropriate fraction of one New XXXXXXXXXX Voting Share for each Class XXXXXXXXXX Reorganization Share of New XXXXXXXXXX so transferred and the appropriate fraction of one New XXXXXXXXXX Voting Share for each Class XXXXXXXXXX Reorganization Share of New XXXXXXXXXX so transferred. The New XXXXXXXXXX Voting Shares and New XXXXXXXXXX Voting Shares issued to the Exchange Agent on behalf of each transferor will have a fair market value equal to the fair market value of the Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX so transferred to New XXXXXXXXXX.

An amount equal to the paid-up capital of the Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares, respectively, will be added to the stated capital account of the New XXXXXXXXXX Voting Shares and New XXXXXXXXXX Voting Shares, respectively, that will be issued as a result of the transfers described herein. The paid-up capital of the Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX will not exceed the adjusted cost base of such shares to their respective holder.

In respect of the transfers described in subparagraph (a) and (b) above, each transferor 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. The agreed amount in respect of the shares so transferred will, in each case, be equal to the adjusted cost base to the particular transferor, immediately before the transfer, which amount will be less than the fair market value of such shares.

55.Upon the exercise of the exchange option by New XXXXXXXXXX, all the remaining shareholders of New XXXXXXXXXX, other than XXXXXXXXXX, will have:

(a) their Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX transferred by the Exchange Agent to New XXXXXXXXXX. As sole consideration for the transfer, New XXXXXXXXXX will issue the appropriate fraction of a New XXXXXXXXXX Voting Share for each Class XXXXXXXXXX Reorganization Share of New XXXXXXXXXX so transferred. The New XXXXXXXXXX Voting Shares issued to the Exchange Agent on behalf of each transferor will have a fair market value equal to the fair market value of the Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX so transferred to New XXXXXXXXXX; and

(b)their Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX transferred by the Exchange Agent to New XXXXXXXXXX. As sole consideration for the transfer, New XXXXXXXXXX will issue the appropriate fraction of a New XXXXXXXXXX Voting Share for each Class XXXXXXXXXX Reorganization Share of New XXXXXXXXXX so transferred. The New XXXXXXXXXX Voting Shares issued to the Exchange Agent on behalf of each transferor will have a fair market value equal to the fair market value of the Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX so transferred to New XXXXXXXXXX.

An amount equal to the paid-up capital of the Class XXXXXXXXXX Reorganization Shares will be added to the stated capital account of New XXXXXXXXXX Voting Shares that will be issued as a result of the transfers described herein.

As a result of the exchanges described in paragraphs 54 and 55 above, New XXXXXXXXXX will own all Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX and New XXXXXXXXXX will own all Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX.

56.Immediately before the transfers of property described in paragraphs 58 and 63 below, the property of New XXXXXXXXXX will be determined on a consolidated basis by including the appropriate pro rata share of the assets of any corporation over which New XXXXXXXXXX has the ability to exercise significant influence (New XXXXXXXXXX and such corporations will hereinafter be referred to as the "New XXXXXXXXXX Group"), and will be classified into three types of property for the purposes of paragraph 55(3)(b) of the Act, as follows:

(a) cash or near cash property, comprising all of the current assets of the New XXXXXXXXXX Group, including any cash, deposits, marketable securities, accounts receivable, inventories and rights arising in respect of prepaid expenses (hereinafter referred to as "prepaid expenses");

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

(c) business property, comprising all of the assets of the New XXXXXXXXXX Group, 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).

For greater certainty, any tax accounts, such as the balance of any capital losses or non-capital losses of the New XXXXXXXXXX Group, will not be considered to be property for the purposes of the proposed transactions described herein.

In particular, in determining the type of property of New XXXXXXXXXX Group:

the assets used in the security business that XXXXXXXXXX intends to sell as mentioned in paragraph 26 above will be classified as business property;

(ii) business property will also include the XXXXXXXXXX% interest in

XXXXXXXXXX

and

(iii)any member of the New XXXXXXXXXX Group which owns a partnership interest in a partnership will be considered to own its respective partnership share of each property owned by the partnership.

Immediately before the transfers described in the paragraphs 58 and 63 below, no member of the New XXXXXXXXXX Group will have any investment property within the meaning described in (b) herein.

For the purposes of this paragraph, New XXXXXXXXXX will be considered to have significant influence over a corporation if it has significant influence, within the meaning of section 3050 of the CICA Handbook, over that corporation or over any other corporation which has significant influence over that corporation.

57.In determining, on a consolidated basis, the net fair market value of its cash or near cash property, investment property and business property immediately before the transfers described in the paragraphs below, liabilities of New XXXXXXXXXX, also determined on a consolidated basis by including the appropriate pro rata share of the liabilities of each corporation over which New XXXXXXXXXX has significant influence, will be allocated to, and be deducted in the calculation of, the net fair market value of each such type of property of New XXXXXXXXXX in the following manner:

(a) current liabilities of New XXXXXXXXXX determined on a consolidated basis will be allocated to cash or near cash property (including any 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 cash or near cash property of New XXXXXXXXXX.

(b) any accounts receivable, inventory and prepaid expenses of New XXXXXXXXXX, determined on a consolidated basis, that is initially classified in accordance with paragraph (a) herein as cash or near cash property, that will relate to a business that will be carried on by New XXXXXXXXXX or each corporation over which New XXXXXXXXXX has significant influence and that will be collected, sold or consumed by such corporation in the ordinary course of that business (including such current assets used by XXXXXXXXXX in its XXXXXXXXXX business), will then be reclassified as 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 or cash or near cash property;

(c) liabilities of New 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;

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

The amount of any deferred income tax will not be considered to be a liability for the purposes of the proposed transactions described herein.

For greater certainty and for the purposes of paragraph (a) hereof, the amount to be paid to any dissenting shareholder of XXXXXXXXXX for his interest in the shares of XXXXXXXXXX will represent a current liability of New XXXXXXXXXX Group.

58.New XXXXXXXXXX will transfer, at fair market value, to New XXXXXXXXXX all the shares of XXXXXXXXXX and certain cash and near cash property. As a result of such transfer, the net fair market value of the cash and near-cash property and business property received by New XXXXXXXXXX, determined in the manner described in paragraph 56 above (after allocating and deducting liabilities, in the manner described in paragraph 57 above), will be equal to the proportion of the net fair market value of each type of property of New XXXXXXXXXX, determined in the manner described in paragraph 56 above (after allocating and deducting liabilities, in the manner described in paragraph 57 above), immediately before the transfer, that:

(a)the aggregate fair market value, immediately before the transfer, of all of the Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX owned by New XXXXXXXXXX at that time

is of

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

The cash and near-cash property of New XXXXXXXXXX will be transferred to New XXXXXXXXXX as part of the distribution which will take place on a day that is no later than 45 days after the day of the transfer of the shares of XXXXXXXXXX described herein.

In consideration for the transfers of the property described herein, New XXXXXXXXXX will satisfy the purchase price by:

(a) assuming certain liabilities of New XXXXXXXXXX; and

(b) issuing one New XXXXXXXXXX Share to New XXXXXXXXXX having a redemption amount equal to the amount by which the fair market value of the transferred property exceeds the liabilities assumed.

The liabilities assumed will not exceed the cost amount of such property.

New XXXXXXXXXX will add a nominal amount to the stated capital account maintained for its New XXXXXXXXXX Share that will be issued to New XXXXXXXXXX in respect to the transfers described in paragraph 59 below.

59.New XXXXXXXXXX and New 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 each property of New XXXXXXXXXX that is an eligible property transferred to New XXXXXXXXXX. The agreed amount in respect of such property so transferred will, in each case, be equal to the cost amount to New XXXXXXXXXX of the property at the time of the transfer. The fair market value of each property will equal or exceed the agreed amount.

60.New XXXXXXXXXX will redeem the Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares for their redemption amount by issuing to New XXXXXXXXXX a demand non-interest-bearing promissory note (the "New XXXXXXXXXX Note A") having a principal amount and fair market value equal to the aggregate redemption amounts of Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX so redeemed. New XXXXXXXXXX will accept the New XXXXXXXXXX Note as full payment for the redemption amounts of the shares so redeemed.

61.New XXXXXXXXXX will redeem the New XXXXXXXXXX Share owned by New XXXXXXXXXX for its redemption amount by issuing to New XXXXXXXXXX a demand non-interest-bearing note ("New XXXXXXXXXX Note") having a principal amount and fair market value equal to the redemption amount of the New XXXXXXXXXX Share, so redeemed. New XXXXXXXXXX will accept the New XXXXXXXXXX Note as full payment for the redemption amount of the share so redeemed.

62.The New XXXXXXXXXX Note A will be set off against the New XXXXXXXXXX Note and the two notes will be cancelled.

63.Contemporaneously with the transfer of property described in paragraphs 58 above, New XXXXXXXXXX will transfer, at fair market value, to New XXXXXXXXXX all the shares of XXXXXXXXXX and certain cash and near cash property. As a result of such transfer, the net fair market value of the cash and near-cash property and business property received by New XXXXXXXXXX, determined in the manner described in paragraph 56 above (after allocating and deducting liabilities, in the manner described in paragraph 57 above), will be equal to the proportion of the net fair market value of each type of property of New XXXXXXXXXX, determined in the manner described in paragraph 56 above (after allocating and deducting liabilities, in the manner described in paragraph 57 above), immediately before the transfer, that:

is of

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

In consideration for the transfers of the property described herein, New XXXXXXXXXX will satisfy the purchase price by:

(a) assuming certain liabilities of New XXXXXXXXXX; and

(b) issuing one New XXXXXXXXXX Share to New XXXXXXXXXX having a redemption amount equal to the amount by which the fair market value of the transferred property exceeds the liabilities assumed.

The liabilities assumed will not exceed the cost amount of such property.

64.New XXXXXXXXXX and New 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 each property of New XXXXXXXXXX that is an eligible property transferred to New XXXXXXXXXX. The agreed amount in respect of such property so transferred will, in each case, be equal to the cost amount to New XXXXXXXXXX of the property at the time of the transfer. The fair market value of each property will equal or exceed the agreed amount.

65.New XXXXXXXXXX will redeem the Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares for their redemption amount by issuing to New XXXXXXXXXX a demand non-interest-bearing promissory note (the "New XXXXXXXXXX Note B") having a principal amount and fair market value equal to the aggregate redemption amounts of Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX so redeemed. New XXXXXXXXXX will accept the New XXXXXXXXXX Note as full payment for the redemption amounts of the shares so redeemed.

66.New XXXXXXXXXX will redeem the New XXXXXXXXXX Share owned by New XXXXXXXXXX for its redemption amount by issuing to New XXXXXXXXXX a demand non-interest- bearing note ("New XXXXXXXXXX Note") having a principal amount and fair market value equal to the redemption amount of the New XXXXXXXXXX Share, so redeemed. New XXXXXXXXXX will accept the New XXXXXXXXXX Note as full payment for the redemption amounts of the shares so redeemed.

67.The New XXXXXXXXXX Note B will be set off against the New XXXXXXXXXX Note and the two Notes will be cancelled.

68.Immediately after the proposed transactions described in paragraphs 58 to 67 above, the net fair market value of each type of property of New XXXXXXXXXX, determined in the manner described in paragraph 56 above (after allocating and deducting liabilities, in the manner described in paragraph 57 above), that will be retained by New XXXXXXXXXX will be equal to the proportion of the net fair market value of that type of property of New XXXXXXXXXX, determined in the manner described in paragraph 56 above (after allocating and deducting liabilities, in the manner described in paragraph 57 above), immediately before the proposed transactions described in paragraphs 58 to 63 above, that:

(a) the fair market value, immediately before the proposed transactions described in paragraphs 58 to 63 above, of all of the New XXXXXXXXXX Voting Shares and New XXXXXXXXXX Voting Shares,

is of

(b) the fair market value, immediately before such transfers, of all of the issued and outstanding shares of New XXXXXXXXXX.

69.Pursuant to the XXXXXXXXXX Arrangement, and following the transactions described in paragraphs 49 to 67 above, New XXXXXXXXXX (each of which corporation will be referred to as a predecessor corporation) will be amalgamated pursuant to the XXXXXXXXXX to form a new corporation ("Amalgamated XXXXXXXXXX") in such manner that:

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

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

(c) all of the shareholders (except any predecessor corporation) who owned shares of the capital stock of any predecessor corporation immediately before the merger, will receive shares of the capital stock of Amalgamated XXXXXXXXXX because of the merger;

otherwise than as a result of the acquisition of property of one corporation by another corporation, pursuant to the purchase of that property by the other corporation or as result of the distribution of that property to the other corporation upon the winding-up of the corporation.

70.The authorized share capital of Amalgamated XXXXXXXXXX will consist of the following:

(a) XXXXXXXXXX preferred shares, XXXXXXXXXX, with a cumulative dividend equal to XXXXXXXXXX% of the value of $XXXXXXXXXX of each share;

(b) XXXXXXXXXX preferred shares, XXXXXXXXXX, with a cumulative dividend equal to XXXXXXXXXX% of the value of $XXXXXXXXXX of each share;

(d) an unlimited number of XXXXXXXXXX voting shares ("Amalgamated XXXXXXXXXX Voting Shares") with no par value; and

(e) an unlimited number of XXXXXXXXXX voting shares ("Amalgamated XXXXXXXXXX Voting Shares") with no par value.

The Amalgamated XXXXXXXXXX Voting Shares and Amalgamated XXXXXXXXXX Voting Shares will rank equally except that each Amalgamated XXXXXXXXXX Voting Share will carry XXXXXXXXXX votes and each Amalgamated XXXXXXXXXX Voting Share will carry one vote. The Amalgamated XXXXXXXXXX Voting Shares will be convertible at any time at the option of the holder into Amalgamated XXXXXXXXXX Voting Shares.

71.Upon the amalgamation of XXXXXXXXXX, each shareholder (except any predecessor) will have disposed of:

(a) his XXXXXXXXXX Voting Shares, XXXXXXXXXX Voting Shares and New XXXXXXXXXX Voting Shares and received no consideration other than Amalgamated XXXXXXXXXX Voting Shares of the capital stock of Amalgamated XXXXXXXXXX and an amount in cash not to exceed $XXXXXXXXXX in lieu of a fraction of a share;

(b) his New XXXXXXXXXX Voting Shares and received no consideration other than his Amalgamated XXXXXXXXXX Voting Shares of the capital stock of Amalgamated XXXXXXXXXX and an amount in cash not to exceed $XXXXXXXXXX in lieu of a fraction of a share; and

(c) his XXXXXXXXXX preferred shares, XXXXXXXXXX and XXXXXXXXXX preferred shares, XXXXXXXXXX and received no consideration other than preferred shares, XXXXXXXXXX, or preferred shares, XXXXXXXXXX, as the case may be, of the capital stock of Amalgamated XXXXXXXXXX.

The fair market value, immediately before the amalgamation, of the shares of XXXXXXXXXX and New XXXXXXXXXX owned by each shareholder will be equal to the fair market value, immediately after the amalgamation, of the Amalgamated XXXXXXXXXX Voting Shares, Amalgamated XXXXXXXXXX Voting Shares and cash received by each shareholder upon the amalgamation. XXXXXXXXXX will be the controlling shareholder of Amalgamated XXXXXXXXXX immediately after the amalgamation of XXXXXXXXXX and New XXXXXXXXXX.

A taxpayer, who, in lieu of a fraction of a share, receives an amount in cash not to exceed $200 will reduce the adjusted cost base of the shares received on the amalgamation by the amount of the cash so received.

The minority holders (shareholders other than New XXXXXXXXXX) of XXXXXXXXXX Voting Shares will exchange their XXXXXXXXXX Voting Shares for a number of Amalgamated XXXXXXXXXX Voting Shares which will include a premium of approximately XXXXXXXXXX% to reflect the fair market value of such shares.

72.Pursuant to the XXXXXXXXXX amalgamation, and contemporaneously with the amalgamation described in paragraphs 69 to 71 above, New XXXXXXXXXX and XXXXXXXXXX (each of which corporation will be referred to as a predecessor corporation) will be amalgamated pursuant to CBCA to form a new corporation ("Amalgamated XXXXXXXXXX") in such a manner that:

The shareholders who are entitled to dissent from the XXXXXXXXXX Amalgamation will cease to be a shareholder of XXXXXXXXXX or New XXXXXXXXXX, as the case may be, on the effective date of the amalgamation and the XXXXXXXXXX or New XXXXXXXXXX shares held by such a shareholder will no longer be considered to be outstanding as shares of XXXXXXXXXX or New XXXXXXXXXX for the purpose of the corporate law transactions comprising the XXXXXXXXXX Amalgamation. After completion of the proposed transactions comprising the XXXXXXXXXX Amalgamation, each such dissenting shareholder will be entitled to be paid by Amalgamated XXXXXXXXXX the fair value of the existing shares in respect of which the right to dissent is exercised.

73.The authorized share capital of Amalgamated XXXXXXXXXX will consist of the following:

(a) an unlimited number of preferred shares with no par value issuable in series;

(d) an unlimited number of XXXXXXXXXX voting shares ("Amalgamated XXXXXXXXXX Voting Shares") with no par value; and

(e) an unlimited number of XXXXXXXXXX voting shares ("Amalgamated XXXXXXXXXX Voting Shares") with no par value.

The Amalgamated XXXXXXXXXX Voting Shares and Amalgamated XXXXXXXXXX Voting Shares will rank equally except that each Amalgamated XXXXXXXXXX Voting Share will carry ten votes and each Amalgamated XXXXXXXXXX Voting Share will carry one vote. The Amalgamated XXXXXXXXXX Voting Shares will be convertible at any time at the option of the holder into Amalgamated XXXXXXXXXX Voting Shares.

74.Upon the amalgamation of XXXXXXXXXX and New XXXXXXXXXX, each shareholder (other than a dissenting shareholder and any predecessor) will have disposed of:

(a) his New XXXXXXXXXX Voting Shares and received no consideration other than Amalgamated XXXXXXXXXX Voting Shares and an amount in cash not to exceed $200 in lieu of a fraction of a share;

(b)his New XXXXXXXXXX Voting Shares and received no consideration other than Amalgamated XXXXXXXXXX Voting Shares and an amount in cash not to exceed $200 in lieu of a fraction of a share;

(c) his XXXXXXXXXX Voting Shares and received no consideration other than Amalgamated XXXXXXXXXX Voting Shares or Amalgamated XXXXXXXXXX Voting Shares and an amount in cash not to exceed $200 in lieu of a fraction of a share; and

(d)his XXXXXXXXXX Voting Shares and received no consideration other than Amalgamated XXXXXXXXXX Voting Shares and an amount in cash not to exceed $200 in lieu of a fraction of a share.

The fair market value, immediately before the amalgamation, of the shares of XXXXXXXXXX and New XXXXXXXXXX owned by each shareholder will be equal to the fair market value, immediately after the amalgamation, of the Amalgamated XXXXXXXXXX Voting Shares, Amalgamated XXXXXXXXXX Voting Shares and the cash received by each shareholder upon the amalgamation. XXXXXXXXXX will be the controlling shareholder of Amalgamated XXXXXXXXXX immediately after the amalgamation of XXXXXXXXXX and New XXXXXXXXXX.

75.XXXXXXXXXX, who are specified shareholders of New XXXXXXXXXX, Amalgamated XXXXXXXXXX and Amalgamated XXXXXXXXXX make the following representations and commitments:

(a) there is no agreement in place or discussions with an unrelated person or partnership to sell one or more of their shares as part of the same series of transactions or events as the Proposed Transactions described herein;

(b) there is no consultant retained for the sale of one or more of their shares; and

76.Before the amalgamation of XXXXXXXXXX described in paragraph 50 above, XXXXXXXXXX will cause all of the outstanding options granted under the XXXXXXXXXX Stock Option Plan to be vested which will allow the holders to exercise their options (the "Remaining Members") or to request that XXXXXXXXXX pay an amount equal to the excess of the market value of the shares over the exercise price. The Remaining Members of the XXXXXXXXXX Stock Option Plan and each holder of options issued under the XXXXXXXXXX Stock Option Plan or XXXXXXXXXX Stock Option Plan will dispose of their options ("Exchanged Option") and will therefore receive new stock options ("New Options") from:

(a) New XXXXXXXXXX in the case of the Remaining Members of XXXXXXXXXX Stock Option Plan;

(b) Amalgamated XXXXXXXXXX in the case of members of XXXXXXXXXX Stock Option Plan; and

allowing them to acquire XXXXXXXXXX voting shares from the treasury of the respective new corporation (the "New Shares"). The members of the XXXXXXXXXX family who hold Exchanged Option will dispose of their options and will receive New Options. They will not acquire or dispose of any shares of XXXXXXXXXX in contemplation of the proposed transactions or as part of the series of transactions or events.

77.The appropriate stock exchanges will list the shares of New XXXXXXXXXX, Amalgamated XXXXXXXXXX and Amalgamated XXXXXXXXXX.

78.XXXXXXXXXX will enter into a new shareholders' agreement in respect of their shareholding in Amalgamated XXXXXXXXXX.

PURPOSES OF THE PROPOSED TRANSACTIONS

79.The purposes of the spinoff of XXXXXXXXXX holdings in XXXXXXXXXX to its shareholders described in the Proposed Transactions are:

(a) to enhance XXXXXXXXXX shares' value by eliminating the "holding company discount" normally associated with such a corporate structure;

(b) to simplify the corporate structure of the group thereby making it better understood and easier for rating agencies and investors to analyze;

(c)to respond to the new demands and constraints of investors who prefer to invest in well-defined businesses and manage their own investment risk which will help each new company to be more competitive on international stock markets;

(d) to facilitate New XXXXXXXXXX (which will carry on the business of XXXXXXXXXX) access to capital markets as a stand-alone entity;

(e) to make the management of XXXXXXXXXX more concentrated on the XXXXXXXXXX business and to make a more direct relationship between the incentive compensation of the management of New XXXXXXXXXX and the performance of its business;

(f) to facilitate mergers, acquisitions and other corporate transactions by each of the XXXXXXXXXX public companies; and

(g) to increase the trading in the shares of XXXXXXXXXX on the market.

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.The provisions of subsection 88(1) will apply on the winding-up of XXXXXXXXXX as described in paragraph 49 above.

B.On the amalgamation of XXXXXXXXXX, as described in paragraph 50 above, the provisions of:

(i) subsection 87(1) will apply, by virtue of subsection 87(1.1);

(ii) paragraph 87(2)(a) will apply such that New XXXXXXXXXX will be deemed to be a new corporation the first taxation year of which will commence at the time of the amalgamation and XXXXXXXXXX will be deemed to have a taxation year-end immediately before the amalgamation;

(iii)paragraphs 87(4)(a) and (b), but for greater certainty not paragraphs (c), (d) or (e), will apply to each holder who, immediately before the amalgamation owned shares of the capital stock of XXXXXXXXXX that were capital property to the shareholder and that were not cancelled on the amalgamation; and

(iv) Regulation 1102(14)(d) will apply to deem each property of a prescribed class of the predecessor corporations that become property of New XXXXXXXXXX upon the amalgamation, to be property of the same prescribed class or separate class, as the case may be, of New XXXXXXXXXX.

C.Provided that the New XXXXXXXXXX Voting Shares and New XXXXXXXXXX Voting Shares constitute capital property to their holders and their holders do not make an election pursuant to subsection 85(1) with respect to the exchange described in subparagraphs 53(b) and 53(c)above, subsection 86(1) will apply to the exchange with the result that:

(i) the cost to each of XXXXXXXXXX of their New XXXXXXXXXX Voting Shares of New XXXXXXXXXX, Class XXXXXXXXXX Reorganization Shares or Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX, as the case may be, received on the exchange shall be deemed by paragraph 86(1)(b) to be that portion of the aggregate adjusted cost base to each such shareholder, immediately before the exchange, of the New XXXXXXXXXX Voting Share held by each such shareholder, that

(A) the fair market value, immediately after the share exchange, of the New XXXXXXXXXX Voting Shares of New XXXXXXXXXX, Class XXXXXXXXXX Reorganization Shares or Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX, as the case may be,

			is of

(B) the fair market value, immediately after the conversion, of all the New XXXXXXXXXX Voting Shares of New XXXXXXXXXX, Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX receivable by each such shareholder for the New XXXXXXXXXX Voting Shares.

(ii) the cost to XXXXXXXXXX and each of the remaining shareholders of New XXXXXXXXXX (shareholders other than XXXXXXXXXX) of their New XXXXXXXXXX Voting Shares of New XXXXXXXXXX, Class XXXXXXXXXX Reorganization Shares or Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX, as the case may be, received on the exchange shall be deemed by paragraph 86(1)(b) to be that portion of the aggregate adjusted cost basis to each such shareholder, immediately before the share exchange, of the New XXXXXXXXXX Voting Shares and New XXXXXXXXXX Voting Shares held by each such shareholder, that

(A) the fair market value, immediately after the share conversion, of the New XXXXXXXXXX Voting Shares of New XXXXXXXXXX, Class XXXXXXXXXX Reorganization Shares or Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX, as the case may be,

			is of

(iii)each shareholder referred to in (i) herein shall be deemed by paragraph 86(1)(c) to have disposed of their New XXXXXXXXXX Voting Shares for proceeds of disposition equal to the aggregate cost to each such shareholder of all New XXXXXXXXXX Voting Shares of New XXXXXXXXXX, Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX receivable by each such shareholder for their New XXXXXXXXXX Voting Shares as would be determined in (i) herein; and

(iv) each shareholder referred to in (ii) herein shall be deemed by paragraph 86(1)(c) to have disposed of their New XXXXXXXXXX voting shares or New XXXXXXXXXX Voting Shares, as the case may be, for proceeds of disposition equal to the aggregate cost to each such shareholder of all New XXXXXXXXXX Voting Shares of New XXXXXXXXXX, Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX receivable by each such shareholder for their New XXXXXXXXXX Voting Shares or New XXXXXXXXXX voting shares, as the case may be, as would be determined in (ii) herein.

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

D.The provisions of subsections 84(1) and (3) will not apply to deem a shareholder of New XXXXXXXXXX to have received a dividend as a result of the exchange, as described in subparagraphs 53(b) and 53(c) above, of his New XXXXXXXXXX Voting Shares or New XXXXXXXXXX Voting Shares, as the case may be, into New XXXXXXXXXX Voting Shares of New XXXXXXXXXX, Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares or New XXXXXXXXXX Voting Shares of New XXXXXXXXXX, Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX, as the case may be.

E.Provided that the shares of New XXXXXXXXXX transferred to New XXXXXXXXXX and New XXXXXXXXXX, as described in paragraph 54 above, constitute eligible property and provided that the transferor and New XXXXXXXXXX or New XXXXXXXXXX, as the case may be, jointly file an election pursuant to subsection 85(1), the provisions of subsection 85(1) will apply to such transfer such that the agreed amount in respect of that transfer will be deemed to be the proceeds of disposition thereof to the transferor and the cost thereof to New XXXXXXXXXX or New XXXXXXXXXX, as the case may be.

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

F.Provided that a shareholder of New XXXXXXXXXX who, immediately before the exchanges of shares described in paragraph 55 above, holds Class XXXXXXXXXX Reorganization Shares or Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX, as the case may be, as capital property:

(i) deals at arm's length (otherwise than because of a right referred to in paragraph 251(5)(b)) with New XXXXXXXXXX or New XXXXXXXXXX, as the case may be, immediately before such share exchanges;

(ii) does not include any portion of the gain or loss, otherwise determined, from the disposition of those shares, in computing his income for the taxation year in which the share exchanges take place;

(iii)does not file an election under subsection 85(1) or 85(2) with New XXXXXXXXXX or New XXXXXXXXXX with respect to those shares;

(iv) does not receive any consideration other than New XXXXXXXXXX Voting Shares of New XXXXXXXXXX or New XXXXXXXXXX Voting Shares of New XXXXXXXXXX, as the case may be, in exchange for those shares;

and further, provided that immediately after the exchanges,

(v) no such holder or persons with whom the holder does not deal at arm's length, or such holder together with persons with whom the holder does not deal at arm’s length, will

(A) control New XXXXXXXXXX or New XXXXXXXXXX, or

(B) will beneficially own shares of New XXXXXXXXXX or New XXXXXXXXXX having a fair market value of more than 50% of the fair market value of all the issued and outstanding shares of the capital stock of New XXXXXXXXXX or New XXXXXXXXXX, as the case may be

then, pursuant to paragraph 85.1(1)(a), such holder shall be deemed:

(vi) to have disposed of his Class XXXXXXXXXX Reorganization Shares or Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX, as the case may be, for proceeds of disposition equal to the adjusted cost base to him of those shares immediately before the share exchanges;

(vii)to have acquired the New XXXXXXXXXX Voting shares at a cost to him equal to the adjusted cost base to him of the Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX immediately before the share exchanges; and

(viii)to have acquired the New XXXXXXXXXX Voting Shares at a cost to him equal to the adjusted cost base to him of the Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX immediately before the share exchanges.

G.The provisions of subsection 85(1) will apply to the transfer of the properties of New XXXXXXXXXX that are eligible property by New XXXXXXXXXX to New XXXXXXXXXX and New XXXXXXXXXX, as described in paragraphs 58 and 63 above, respectively, such that, the agreed amount in respect of each transfer of eligible property will be deemed to be the transferor's proceeds of disposition and the transferee's cost thereof pursuant to paragraph 85(1)(a).

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

H.On the redemption of:

(i) the Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX described in paragraph 60 above;

(ii) the New XXXXXXXXXX Share of New XXXXXXXXXX described in paragraph 61 above;

(iii)the Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX described in paragraph 65 above; and

(iv) the New XXXXXXXXXX Share of New XXXXXXXXXX described in paragraph 66 above;

the amount, if any, by which the amount paid to redeem the particular shares exceeds the paid-up capital of the particular shares immediately before the redemption

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

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

(vii)to the extent that a dividend described in (vi) 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); and

(viii)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 (vi) above will be excluded from the proceeds of disposition of the share.

I.The taxable dividends described in Ruling H above will not be subject to tax under Part IV except as provided in paragraph 186(1)(b).

J.Part IV.1 of the Act will not apply to the deemed dividends described in Ruling H above because the dividends will be excepted dividends pursuant to paragraph (b) of the definition of "excepted dividend" in section 187.1.

K.Part VI.1 of the Act will not apply to the deemed dividends described in Ruling Request H above because the dividends will be excluded dividends pursuant to paragraph (a) of the definition of "excluded dividend" in subsection 191(1).

L.By virtue of the provisions of paragraph 55(3)(b), the provisions of subsection 55(2) will not apply to the deemed dividends in respect of the redemption of:

(i) the Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX described in paragraph 60 above;

(ii) the New XXXXXXXXXX Share of New XXXXXXXXXX described in paragraph 61 above;

(iii)the Class XXXXXXXXXX Reorganization Shares and Class XXXXXXXXXX Reorganization Shares of New XXXXXXXXXX described in paragraph 65 above; or

(iv) the New XXXXXXXXXX Share of New XXXXXXXXXX described in paragraph 66 above;

described in Ruling H above provided that, as part of the series of transactions that includes the Proposed Transactions described herein, there is no:

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

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

(vii)acquisition of shares in the circumstances described in subparagraph 55(3.1)(b)(iii)

which has not been described herein.

M.The provisions of section 80 will not apply to the settlement by way of set off of:

(i) New XXXXXXXXXX Note A and New XXXXXXXXXX Note described in paragraph 62 above; and

(ii) New XXXXXXXXXX Note B and New XXXXXXXXXX Note described in paragraph 67 above.

N.Upon the amalgamation of:

(i) New XXXXXXXXXX and XXXXXXXXXX described in paragraphs 69 to 71 above;

(ii) New XXXXXXXXXX and XXXXXXXXXX described in paragraphs 72 to 74 above;

the provisions of:

(iii)subsection 87(1) will apply;

(iv) paragraph 87(2)(a) will apply such that Amalgamated XXXXXXXXXX or Amalgamated XXXXXXXXXX, as the case may be, will be deemed to be a new corporation the first taxation year of which will commence at the time of the amalgamation and New XXXXXXXXXX and XXXXXXXXXX or New XXXXXXXXXX and XXXXXXXXXX will be deemed to have a taxation year-end immediately before the amalgamation;

(v) paragraphs 87(4)(a) and (b), but for greater certainty not paragraphs (c), (d) and (e), will apply to each holder (except any predecessor corporation) who, immediately before the amalgamation owned shares of the capital stock of the predecessor corporation that were capital property to the shareholder and who received no consideration for the disposition of those shares on the amalgamation, other than shares of the capital stock of Amalgamated XXXXXXXXXX or Amalgamated XXXXXXXXXX, as the case may be, and an amount in cash not to exceed $200 received in lieu of a fraction of a share; and

(vi) Regulation 1102(14)(d) will apply to deem each property of a prescribed class of the predecessor corporations that become property of Amalgamated XXXXXXXXXX or Amalgamated XXXXXXXXXX upon the amalgamation, to be property of the same prescribed class or separate class, as the case may be, of Amalgamated XXXXXXXXXX or Amalgamated XXXXXXXXXX.

O.Interest payable in respect of a year by Amalgamated XXXXXXXXXX on the portion of the debt assumed by New XXXXXXXXXX as described in paragraph 58 above will be deductible by Amalgamated XXXXXXXXXX in computing its income provided that the assets received by New XXXXXXXXXX as described in paragraph 58 above, or property substituted therefor, continue to be used by Amalgamated XXXXXXXXXX for the purposes of earning income from a business or property and to the extent that such interest payable:

(i)would have been deductible by New XXXXXXXXXX, New XXXXXXXXXX or a predecessor corporation to New XXXXXXXXXX which was liable for the portion of the debt assumed in computing its income pursuant to paragraph 20(1)(c) if the proposed transactions were not undertaken; and

(ii)does not exceed a reasonable amount.

P.Interest payable in respect of a year by Amalgamated XXXXXXXXXX on the portion of the debt assumed by New XXXXXXXXXX as described in paragraph 63 above will be deductible by Amalgamated XXXXXXXXXX in computing its income provided that the assets received by New XXXXXXXXXX as described in paragraph 63 above, or property substituted therefor, continue to be used by Amalgamated XXXXXXXXXX for the purposes of earning income from a business or property and to the extent that such interest payable:

(ii)does not exceed a reasonable amount.

Q.A holder of XXXXXXXXXX Voting Shares who dissents to the amalgamation of XXXXXXXXXX and New XXXXXXXXXX as described in paragraph 74 above, pursuant to the provisions of the CBCA, will include in the proceeds of disposition of the XXXXXXXXXX Voting Shares the consideration received in respect of such shares for the purposes of calculating the capital gain or loss on such shares.

For greater certainty, subsection 84(3) will not apply to such acquisition.

R.Provided that the amount, if any, by which

(i) the total value of all New Shares immediately after the disposition of the Exchanged Option

exceeds

(ii) the total amount payable by the holder of the New Option to acquire the New Shares

does not exceed the amount, if any, by which

(iii)the total value of the old shares immediately before the disposition

exceeds

(iv) the amount payable by the holder to acquire the old shares under the Exchanged Option

then for the purposes of section 7 and paragraph 110(1)(d), the provisions of subsection 7(1.4) will apply such that the holder of the Exchanged Option will be deemed not to have disposed of the Exchanged Option and not to have acquired the New Option, the New Option will be deemed to be a continuation of the Exchanged Option and each of the corporations that issue New Shares under the New Option will be deemed to be a continuation of the corporation that would have issued shares under the Exchanged Option.

S.The provisions of subsection 15(1), 56(2) and 246(1) will not apply to any of the proposed transactions described herein, in and by themselves.

T.Subsection 245(2) will not be applied to the proposed transactions, in and by themselves, to redetermine the tax consequences confirmed in the ruling given.

These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 30, 1996 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.

COMMENTS

1.Nothing in this letter should be construed as confirmation that Revenue Canada has reviewed or accepted

(a)that XXXXXXXXXX or any other investment manager or fund manager who holds shares of XXXXXXXXXX does not own such shares for purposes of determining whether it is a specified shareholder of any such corporation;

(b)the determination of the fair market value or adjusted cost base of any property referred to herein, or the paid-up capital of any shares; or

(c)any tax consequences arising from the facts or proposed transactions described herein other than those specifically confirmed in the rulings given.

2.Whether an acquisition or disposition of shares occurs in a series of transactions or events as part of which the dividends described in Ruling H above are received (the "Butterfly Series") for the purposes of paragraph 55(3.1)(b) is a question of fact which will depend on the circumstances. In general, an acquisition or disposition of shares of XXXXXXXXXX by a person who:

(i)is not a specified shareholder of XXXXXXXXXX before the public announcement of the Proposed Transactions, and

(ii)acquires or disposes of the share primarily for the purpose of realizing a trading profit that results from the current discount on the shares of XXXXXXXXXX

will not necessarily be considered to occur as part of the Butterfly Series.

3.A person or partnership who:

(i)does not at any time own directly or indirectly 10% or more of the issued shares of any class of the capital stock of Amalgamated XXXXXXXXXX or New XXXXXXXXXX;

(ii)owns directly or indirectly not less than 10% of the issued shares of any class of the capital stock of XXXXXXXXXX,

will be a specified shareholder of a transferee corporation as a result of the application of the definition of "specified shareholder" in subsection 248(1), but will not be deemed to be a specified shareholder of a transferee corporation solely as a result of the application of paragraph 55(3.2)(b).

Yours truly,

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

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30 November 1996 Ruling 9707003 - BUTTERFLY REORGANIZATION

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Definitions

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OTHER INFORMATION

PROPOSED TRANSACTIONS

PURPOSES OF THE PROPOSED TRANSACTIONS

RULINGS

COMMENTS