30 November 1996 Administrative Letter 972932A - DPS AMENDMENT

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

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

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

Principal Issues:

Change in facts - minor amendments to the DPS Ruling letter.

Position: Granted

Reasons:

To more properly and clearly reflect the proposed transactions and their effect.

XXXXXXXXXX
XXXXXXXXXX                                      972932(sup)

Attention: XXXXXXXXXX

XXXXXXXXXX, 1997

Dear Sirs:

Re: XXXXXXXXXX
Our Ruling letter #972932 dated
XXXXXXXXXX, 1997 (the "Ruling")

This is in reply to your letter dated XXXXXXXXXX, and our meeting with you (XXXXXXXXXX) on that date in which you set forth a number of changes that you advised should be made to the Ruling to more clearly reflect the proposed transactions to be undertaken by the above noted parties. While this letter does not set forth all of the suggested changes noted in your letter, or that were otherwise noted by you on the "mark-up" copy of the Ruling that you provided us (such mark-up will be retained by us for our file), it is our opinion that none of the recommended changes, including those enumerated below, will have an effect on the specific rulings given in the Ruling (except as described below).

Clause (iv) of 51(b) is replaced with:

(iv) notwithstanding any other provision hereof but subject to the provisions of XXXXXXXXXX, Holders shall be entitled to receive, and XXXXXXXXXX shall pay, as and when declared by the directors, special dividends on Class XXXXXXXXXX Special Shares in such amounts as the directors may in their discretion determine as are necessary under Support Agreement XXXXXXXXXX;

Clause (iv) of 52(b) is replaced with:

(iv) notwithstanding any other provision hereof but subject to the provisions of XXXXXXXXXX, Holders shall be entitled to receive, and XXXXXXXXXX shall pay, as and when declared by the directors, special dividends on Class XXXXXXXXXX Special Shares in such amounts as the directors may in their discretion determine as are necessary under Support Agreement XXXXXXXXXX;

Clause (iv) of 53(b) is replaced with:

(iv) notwithstanding any other provision hereof but subject to the provisions of XXXXXXXXXX, Holders shall be entitled to receive, and XXXXXXXXXX shall pay, as and when declared by the directors, special dividends on Class XXXXXXXXXX Special Shares in such amounts as the directors may in their discretion determine as are necessary under Support Agreement XXXXXXXXXX;

The reference to "54(m)" in the definition of "Dividend Period" in 55(e) is replaced with "55(m)".

Paragraph 67 is replaced with:

XXXXXXXXXX will enter into an agreement (the "Assignment Agreement XXXXXXXXXX") with XXXXXXXXXX under which XXXXXXXXXX shall agree to sell and XXXXXXXXXX shall agree to purchase the full amount of $XXXXXXXXXX owing under the XXXXXXXXXX along with the related security.

However, before XXXXXXXXXX purchases the XXXXXXXXXX pursuant to Assignment Agreement XXXXXXXXXX the terms and conditions of the XXXXXXXXXX will be revised as follows:

(a)on or following the date which is the completion of the XXXXXXXXXX term of the Class XXXXXXXXXX Special Shares or such earlier date on which the Class XXXXXXXXXX Special Shares or the XXXXXXXXXX and related security are put to XXXXXXXXXX or called by XXXXXXXXXX, XXXXXXXXXX may cause the assignment of the XXXXXXXXXX and security without the consent of XXXXXXXXXX;

(b)effective as of the XXXXXXXXXX, XXXXXXXXXX shall pay the holder of the XXXXXXXXXX equal XXXXXXXXXX payments of principal and interest based upon an amortization period commencing on the XXXXXXXXXX and ending XXXXXXXXXX; and

(c) effective as of the XXXXXXXXXX the rate of interest on the XXXXXXXXXX shall be XXXXXXXXXX.

The other terms and conditions of the XXXXXXXXXX will remain in force and in effect.

Paragraph 68 is replaced with:

Subject to credit approval being obtained by XXXXXXXXXX will borrow $XXXXXXXXXX and use the aggregate proceeds from such loans to purchase the $XXXXXXXXXX owing by XXXXXXXXXX under the XXXXXXXXXX and related security from XXXXXXXXXX as described above. The demand loans will bear interest at the prime rate of XXXXXXXXXX, be repayable on demand, be secured by a security interest in all property and assets of XXXXXXXXXX, and be evidenced by demand promissory note issued by XXXXXXXXXX on behalf of XXXXXXXXXX shall each make the demand loans by XXXXXXXXXX delivering a bank draft XXXXXXXXXX, payable to XXXXXXXXXX in the amount of $XXXXXXXXXX. XXXXXXXXXX shall satisfy the purchase price for the XXXXXXXXXX by endorsing the XXXXXXXXXX in favour of XXXXXXXXXX and delivering the endorsed XXXXXXXXXX to XXXXXXXXXX.

The last paragraph in 79 is replaced with:

XXXXXXXXXX will also have the right to call all of the Class XXXXXXXXXX Shares registered in the name of XXXXXXXXXX on behalf of the Beneficial Holders or all of the XXXXXXXXXX and related security then held by XXXXXXXXXX or that is the subject of a call or put notice under Debt Put/Call Agreement XXXXXXXXXX in certain circumstances for an amount, in the case of the Class XXXXXXXXXX Special Shares equal to their Aggregate Redemption Price, plus accrued and unpaid dividends and plus such additional amounts as may be necessary to place the Beneficial Holders of such shares in the same after tax position as each would have been in had the purchase price for the shares (plus accrued and unpaid dividends) been received as a tax free intercorporate dividend and, in the case of the XXXXXXXXXX and related security, equal to the aggregate purchase price that would have applied to the Class XXXXXXXXXX Special Shares which were exchanged for, or redeemed by the assignment of, such XXXXXXXXXX and related security had such Class XXXXXXXXXX Special Shares been put to XXXXXXXXXX. Put Agreement XXXXXXXXXX will be secured by XXXXXXXXXX providing security satisfactory to XXXXXXXXXX.

The pre-amble to paragraph 81 is replaced with:

XXXXXXXXXX, will enter into an agreement, (the "Debt Put/Call Agreement XXXXXXXXXX"), pursuant to which:

The last paragraph in 83 is replaced with:

XXXXXXXXXX will also have the right to call all of the Class XXXXXXXXXX Special Shares registered in the name of the XXXXXXXXXX on behalf of the Beneficial Holders or all of the XXXXXXXXXX and related security then held by XXXXXXXXXX or that is the subject of a call or put notice under Debt Put/Call Agreement XXXXXXXXXX in certain circumstances for an amount, in the case of the Class XXXXXXXXXX Special Shares equal to their Aggregate Redemption Price, plus accrued and unpaid dividends and plus such additional amounts as may be necessary to place the Beneficial Holders of such shares in the same after tax position as each would have been in had the purchase price for the shares (plus accrued and unpaid dividends) been received as a tax free intercorporate dividend and, in the case of the XXXXXXXXXX and related security, equal to the aggregate purchase price that would have applied to the Class XXXXXXXXXX Special Shares which were exchanged for, or redeemed by the assignment of, such XXXXXXXXXX and related security had such Class XXXXXXXXXX Special Shares been put to XXXXXXXXXX. Put Agreement XXXXXXXXXX will be secured by XXXXXXXXXX providing security satisfactory to XXXXXXXXXX.

The pre-amble to 85 is replaced with:

XXXXXXXXXX, will enter into an agreement, (the "Debt Put/Call Agreement XXXXXXXXXX"), pursuant to which:

The second paragraph in 87 is replaced with:

In the event XXXXXXXXXX puts the XXXXXXXXXX and related security to the Beneficial Holders of the Class XXXXXXXXXX Special Shares, Put Agreement XXXXXXXXXX will enable XXXXXXXXXX to put the XXXXXXXXXX and related security to XXXXXXXXXX, or XXXXXXXXXX to call the XXXXXXXXXX and related security for the same purchase price as would have applied on the applicable closing date if the Class XXXXXXXXXX Special Shares redeemed by the assignment of the XXXXXXXXXX and related security to the Beneficial Holders of the Class XXXXXXXXXX Special Shares had been put to XXXXXXXXXX on such closing date.

The last paragraph in 87 is replaced with:

If XXXXXXXXXX is required to acquire all of the Class XXXXXXXXXX Special Shares or the XXXXXXXXXX and related security as a result of the put described above, or as a result of exercising its call, XXXXXXXXXX undertakes to pay such amount (the "tax gross-up") as is necessary to place the Beneficial Holders of such shares in the same after-tax position as each would have been in had the amount paid in respect of accrued dividends been received as a tax-free intercorporate dividend.

Paragraph 90 is replaced with:

Under the Debt Put/Call Agreement XXXXXXXXXX, any call or put of the XXXXXXXXXX and related security, as set out in 89 above shall also constitute a retraction/redemption notice in accordance with the share conditions for the Class XXXXXXXXXX Special Shares then outstanding. If the Beneficial Holder of such shares is an entity other than XXXXXXXXXX on behalf of the Beneficial Holders will pay the purchase price for the XXXXXXXXXX and related security, by way of certified cheques or bank drafts and, upon delivery of such cheques or bank drafts, XXXXXXXXXX will redeem a number of its Class XXXXXXXXXX Special Shares, the Aggregate Redemption Price of which will equal the purchase price of the XXXXXXXXXX and related security sold by XXXXXXXXXX to the Beneficial Holders of Class XXXXXXXXXX Special Shares. XXXXXXXXXX will satisfy the Aggregate Redemption Price for such shares by endorsing such cheques or bank drafts in favour of XXXXXXXXXX on behalf of the Beneficial Holders of the Class XXXXXXXXXX Special Shares. If the Beneficial Holder of the Class XXXXXXXXXX Special Shares is XXXXXXXXXX will pay the purchase price by way of set-off against the obligation of XXXXXXXXXX to pay XXXXXXXXXX the Aggregate Redemption Price of the outstanding Class XXXXXXXXXX Special Shares being redeemed. The Aggregate Redemption Price of the Class XXXXXXXXXX Special Shares being redeemed will equal the purchase price of the XXXXXXXXXX and related security, or part thereof, sold by XXXXXXXXXX to the Beneficial Holders of the Class XXXXXXXXXX Special Shares or XXXXXXXXXX, as the case may be.

The post-amble appearing after (d) in 93 is replaced with:

For purposes of this definition of Excess Cash Flow:

(A)additional debt shall not include a debt which arose as a result of the use of cash or funds for a purpose that is not envisioned herein; and

(B)for any Fiscal Year in which any Class XXXXXXXXXX Special Shares are outstanding for any period (other than a Fiscal Year in which all of the outstanding Class XXXXXXXXXX Special Shares have been redeemed) Excess Cash Flow shall exclude amounts required to be set aside for the XXXXXXXXXX, as that term is defined in XXXXXXXXXX.

The reference to "XXXXXXXXXX" in 94(c) is replaced with "XXXXXXXXXX".

The pre-amble to 95 is replaced with:

XXXXXXXXXX will enter into separate agreements with each of XXXXXXXXXX (the "Support Agreement XXXXXXXXXX respectively), pursuant to which XXXXXXXXXX will agree to:

The last sentence of 100 starting with XXXXXXXXXX is deleted.

Paragraph 101 is added as follows:

Should the Canadian dollar equivalent of $XXXXXXXXXX exceed $XXXXXXXXXX, XXXXXXXXXX will make a principal payment on the XXXXXXXXXX in an amount such that the Canadian dollar equivalent of the remaining XXXXXXXXXX after such payment is $XXXXXXXXXX. XXXXXXXXXX will fund such principal payment on the XXXXXXXXXX with existing cash on hand, by XXXXXXXXXX, or a combination thereof.

Should the US/CDN $ exchange rate require the implementation of the above-noted transaction, those paragraphs relating to:

(a) the purchase of the XXXXXXXXXX (or a portion thereof) by XXXXXXXXXX, as described in 57;

(b) the sale of the XXXXXXXXXX by XXXXXXXXXX, as described in 58;

(c) the borrowing of funds as a daylight demand loan, as described in 59;

(d) the subscribing for, and issuance of, Class XXXXXXXXXX Special Shares, as described in 61; and

(e) the repayment of the daylight demand loans of XXXXXXXXXX, as described in 71;

should be read such that references to the XXXXXXXXXX principal, the aggregate daylight demand loans, the aggregate subscription price of the Class XXXXXXXXXX Special Shares are equal to an amount that aggregates $XXXXXXXXXX or the US dollar equivalent of $XXXXXXXXXX CDN.

As a result of the above noted changes to the proposed transactions Ruling F is replaced with:

F.The cost amount, within the meaning of subsection 248(1), to XXXXXXXXXX of XXXXXXXXXX of the XXXXXXXXXX and the XXXXXXXXXX will, immediately after such debt is acquired from XXXXXXXXXX by XXXXXXXXXX be equal to the purchase price paid by XXXXXXXXXX for XXXXXXXXXX of each such debt, as described in 57 and 62 above;

We confirm that the Ruling, as amended above, will continue to be binding on Revenue Canada in the manner set forth therein provided the proposed transactions are carried out by XXXXXXXXXX.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch