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:
1. Distress Preferred Share Ruling
2. Limited Partnership incorporating prior to issue of DPS
3. Non-arms length debt financed with DPS
Position: All OK
Reasons:
1. Financial difficulty established.
2. GAAR referral - OK primarily because majority historical limited partner would be majority shareholder of new corp.
3. Debt was refinanced by an arm`s length party prior to issuance of DPS and DPS similarly held by an arm`s length third party.
XXXXXXXXXX
XXXXXXXXXX 982061
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 1999
Re: XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
We are writing in response to your correspondence of XXXXXXXXXX wherein you had requested an advance income tax ruling on behalf of the above-noted corporations. We also acknowledge your additional submissions and our (XXXXXXXXXX) telephone conversations in furtherance of this matter.
You have noted that, to the best of the knowledge of yourselves and that of each of the taxpayers involved, none of the issues raised in this letter are being considered by a Tax Service Office or a Taxation Centre of Revenue Canada in connection with any tax return already filed by the taxpayers, nor are any of these issues under objection or appeal.
FACTS
1. XXXXXXXXXX Canadian chartered bank. It is a “taxable Canadian corporation”, as that term is defined in subsection 89(1) of the Income Tax Act (the “Act”), and a “specified financial institution” as that term is defined in subsection 248(1) of the Act. The Revenue Canada account number of XXXXXXXXXX is XXXXXXXXXX and it deals with the XXXXXXXXXX Taxation Services Office.
2. XXXXXXXXXX Canadian chartered bank. It is a “taxable Canadian corporation”, as that term is defined in subsection 89(1) of the Act, and a “specified financial institution” as that term is defined in subsection
248(1) of the Act. The Revenue Canada account number of XXXXXXXXXX is XXXXXXXXXX and it deals with the XXXXXXXXXX Taxation Services Office.
3. XXXXXXXXXX.
4. “Subsequent Purchasers” will be “taxable Canadian corporations” and “specified financial institutions” as those terms are defined in subsections 89(1) and 248(1) of the Act, respectively.
5. All Purchasers, with the exception of XXXXXXXXXX (as defined in paragraph 12, below), deal at “arm’s length”, within the meaning of that term in subsection 251(1) of the Act, with XXXXXXXXXX (as defined in paragraph 7, below) and the other members of the XXXXXXXXXX Group (as defined in paragraph 17, below). Collectively, XXXXXXXXXX and Subsequent Purchasers are referred to herein as the “Arm’s Length Purchasers”. Collectively, XXXXXXXXXX and Subsequent Purchasers are referred to herein as “Purchasers”.
6.
XXXXXXXXXX
is a “taxable Canadian corporation” and a “Canadian-controlled private corporation” as those terms are defined in subsections 89(1) and 125(7) of the Act, respectively.
7. XXXXXXXXXX is a limited partnership established on XXXXXXXXXX and registered under the Limited Partnerships Act (XXXXXXXXXX). The principal business activity of XXXXXXXXXX.
The ownership of the limited partnership units is as follows:
XXXXXXXXXX
a) XXXXXXXXXX is a wholly-owned subsidiary of XXXXXXXXXX, which is a wholly-owned subsidiary of XXXXXXXXXX.
b) XXXXXXXXXX and all of the other limited partners of the Partnership (XXXXXXXXXX) are referred to herein as the “Arm’s Length Limited Partners”.
c)
XXXXXXXXXX
8. XXXXXXXXXX was incorporated on XXXXXXXXXX under the laws of XXXXXXXXXX is a holding company used by XXXXXXXXXX. The authorized share capital of XXXXXXXXXX consists of an unlimited number of common shares and an unlimited number of preference shares, issuable in series. There are XXXXXXXXXX common shares issued and outstanding all of which are owned by XXXXXXXXXX. There are no other shares of XXXXXXXXXX outstanding. XXXXXXXXXX is a “taxable Canadian corporation” and a “Canadian-controlled private corporation”, as those terms are defined in subsections 89(1) and 125(7) of the Act, respectively.
9. XXXXXXXXXX was incorporated on XXXXXXXXXX under the laws of XXXXXXXXXX is wholly-owned by XXXXXXXXXX. It has no other assets or business. XXXXXXXXXX is a “taxable Canadian corporation” and a “Canadian-controlled private corporation”, as those terms are defined in subsections 89(1) and 125(7) of the Act, respectively.
10. XXXXXXXXXX was incorporated on XXXXXXXXXX under the laws of XXXXXXXXXX is an inactive holding company. XXXXXXXXXX owns all of the XXXXXXXXXX common shares issued and outstanding. XXXXXXXXXX is a “taxable Canadian corporation” and a “Canadian-controlled private corporation”, as those terms are defined in subsections 89(1) and 125(7) of the Act, respectively.
11. XXXXXXXXXX was incorporated on XXXXXXXXXX under the laws of XXXXXXXXXX is a holding company XXXXXXXXXX.
XXXXXXXXXX is a “taxable Canadian corporation” and a “Canadian-controlled private corporation”, as those terms are defined in subsections 89(1) and 125(7) of the Act, respectively.
12. XXXXXXXXXX was incorporated on XXXXXXXXXX under the laws of XXXXXXXXXX is a holding company wholly owned by XXXXXXXXXX.
XXXXXXXXXX is a “taxable Canadian corporation” and a “Canadian-controlled private corporation”, as those terms are defined in subsections 89(1) and 125(7) of the Act, respectively.
XXXXXXXXXX is indirectly controlled by XXXXXXXXXX through a series of corporations owned directly or indirectly by XXXXXXXXXX as described as follows:
a) XXXXXXXXXX owns all of the issued and outstanding shares of XXXXXXXXXX (see paragraph 8, above);
b)
XXXXXXXXXX
and
c) XXXXXXXXXX owns all of the issued and outstanding shares of XXXXXXXXXX.
XXXXXXXXXX
d)
XXXXXXXXXX
13. XXXXXXXXXX was incorporated on XXXXXXXXXX under the laws of the Province of XXXXXXXXXX and was inactive until XXXXXXXXXX. The principal business activity of XXXXXXXXXX is wholly-owned by XXXXXXXXXX and is a “taxable Canadian corporation” and a “Canadian-controlled private corporation”, as those terms are defined in subsections 89(1) and 125(7) of the Act, respectively.
XXXXXXXXXX has XXXXXXXXXX subsidiary corporations, XXXXXXXXXX, each of which is a sole purpose corporation used to assist in a “distress preferred share” refinancing of XXXXXXXXXX, which refinancing was the subject of advance income tax ruling 964033, dated XXXXXXXXXX, 1997, ruling 972932, dated XXXXXXXXXX, 1997, supplemental ruling 972932(sup) dated XXXXXXXXXX, 1997, ruling 980088, dated XXXXXXXXXX, 1998 and supplemental ruling 980088(sup) dated XXXXXXXXXX, 1998, (collectively the “XXXXXXXXXX Ruling”). The common shares of these XXXXXXXXXX corporations are owned by XXXXXXXXXX, while the preferred shares are owned as set out in the XXXXXXXXXX Ruling.
14.
XXXXXXXXXX
The principal business of XXXXXXXXXX is to manage the affairs of the other corporations and entities that are owned directly or indirectly by XXXXXXXXXX, for which it charges a management fee. XXXXXXXXXX is a “taxable Canadian corporation” and a “Canadian-controlled private corporation”, as those terms are defined in subsections 89(1) and 125(7) of the Act, respectively.
15. XXXXXXXXXX is a “taxable Canadian corporation” and a “public corporation”, as those terms are defined in subsection 89(1) of the Act, whose shares are listed for trading on the XXXXXXXXXX. A total number of XXXXXXXXXX shares are issued and outstanding. The sole business of XXXXXXXXXX.
16. XXXXXXXXXX also owns all of the issued and outstanding shares of XXXXXXXXXX a corporation incorporated under the laws of the province of XXXXXXXXXX does not carry on active business.
XXXXXXXXXX
17.
XXXXXXXXXX
18. The taxation services office (“TSO”), taxation centre (“TC”) and the Revenue Canada account number (“RCT#”) of the various members of the XXXXXXXXXX Group (other than XXXXXXXXXX) are as follows:
Corporation TSO\TC RCT#
i) XXXXXXXXXX
ii) XXXXXXXXXX
iii) XXXXXXXXXX
iv) XXXXXXXXXX
v) XXXXXXXXXX
vi) XXXXXXXXXX
vii) XXXXXXXXXX
viii) XXXXXXXXXX
ix) XXXXXXXXXX
x) XXXXXXXXXX
xi) XXXXXXXXXX
19. XXXXXXXXXX is a U.S. resident corporation with its corporate head office based in XXXXXXXXXX. The shares of XXXXXXXXXX are listed for trading on the XXXXXXXXXX Stock Exchange. The business of XXXXXXXXXX includes the provision of
XXXXXXXXXX
20. XXXXXXXXXX is a “taxable Canadian corporation” within the meaning of that term in subsection 89(1) of the Act. All of the issued and outstanding shares of XXXXXXXXXX are owned byXXXXXXXXXX which is wholly-owned by XXXXXXXXXX.
The sole business operation of XXXXXXXXXX. The Revenue Canada account number of XXXXXXXXXX and it deals with the XXXXXXXXXX Taxation Services Office.
The business of XXXXXXXXXX. The Revenue Canada account number of XXXXXXXXXX and it deals with the XXXXXXXXXX Taxation Services Office.
21. XXXXXXXXXX is a U.S. resident limited partnership organized under the laws of the State of XXXXXXXXXX.
22. XXXXXXXXXX deal at “arm’s length”, within the meaning of that term in subsection 251(1) of the Act, with XXXXXXXXXX and the other members of the XXXXXXXXXX Group.
23. XXXXXXXXXX deals at “arm’s length”, within the meaning of that term in subsection 251(1) of the Act, with XXXXXXXXXX and the other members of the XXXXXXXXXX Group.
24. XXXXXXXXXX. was incorporated on XXXXXXXXXX under the laws of XXXXXXXXXX with authorized share capital of an unlimited number of common shares, an unlimited number of Class XXXXXXXXXX Preferred Shares, an unlimited number of Class XXXXXXXXXX Preferred Shares and an unlimited number of Class XXXXXXXXXX Preferred Shares. No shares were issued upon incorporation. XXXXXXXXXX is a “taxable Canadian corporation” and a “Canadian-controlled private corporation”, as those terms are defined in subsections 89(1) and 125(7) of the Act, respectively. The Revenue Canada business number of XXXXXXXXXX.
25. The attributes of the preference shares of XXXXXXXXXX are as follows:
a) The Class XXXXXXXXXX preferred shares of XXXXXXXXXX have a cumulative annual dividend of XXXXXXXXXX%, based on the redemption price of $XXXXXXXXXX per share, and rank in first position on liquidation, dissolution or winding-up.
b) The Class XXXXXXXXXX preferred shares of XXXXXXXXXX have a cumulative annual second priority dividend of XXXXXXXXXX%, based on the redemption price of $XXXXXXXXXX per share, and rank in second position after the Class XXXXXXXXXX preferred shares on liquidation, dissolution or winding-up.
c) The Class XXXXXXXXXX preferred shares of XXXXXXXXXX have a cumulative annual third priority dividend of XXXXXXXXXX%, and rank in third position after the Class XXXXXXXXXX and Class XXXXXXXXXX preferred shares on liquidation, dissolution or winding-up.
26. The primary assets of XXXXXXXXXX (collectively referred to herein as the “Assets”) consist of:
a) XXXXXXXXXX;
b) XXXXXXXXXX;
c) XXXXXXXXXX;
d) XXXXXXXXXX;
e) XXXXXXXXXX;
f) XXXXXXXXXX;
g) XXXXXXXXXX;
h) XXXXXXXXXX;
i) accounts receivable, prepaid expenses, equipment, leasehold improvements and assets under capital lease; and
j) goodwill.
27. The primary liabilities of XXXXXXXXXX, totalling approximately $XXXXXXXXXX using rates of exchange of $XXXXXXXXXX (collectively referred to herein as the “Liabilities”) are:
a) XXXXXXXXXX
XXXXXXXXXX
The above credits are referred to herein collectively as the “XXXXXXXXXX”. As at XXXXXXXXXX, the credits were fully advanced and outstanding and interest was current.
The Senior Lenders have a first ranking security interest in the Assets. The subordinated charges over the Assets referred to in subparagraphs (b), (c), (d) and (e), and paragraphs 28 and 29, below, are subordinated to the interests of the Senior Lenders pursuant to the subordination and postponement agreement among the Senior Lenders, XXXXXXXXXX, and others, which establishes the priority of the various obligations described therein.
The term of the XXXXXXXXXX would have expired on XXXXXXXXXX but has been extended to XXXXXXXXXX to allow for completion of the transactions contemplated herein. Under the terms of the lending agreements, XXXXXXXXXX was required to have, on or before XXXXXXXXXX.
XXXXXXXXXX is in default of each of the XXXXXXXXXX requirement and the
XXXXXXXXXX requirement.
b) A loan owing to XXXXXXXXXX as evidenced by a loan agreement dated
XXXXXXXXXX, in the amount of approximately $XXXXXXXXXX as at
XXXXXXXXXX. Interest accrues on this loan at XXXXXXXXXX % per annum plus a gross-up for withholding tax and principal and interest is payable on demand, subject to the subordination and postponement agreement referred to in subparagraph (a) above.
The XXXXXXXXXX is secured by a subordinated charge over the Assets.
c) A loan owing to XXXXXXXXXX, as evidenced by a loan agreement dated as of
XXXXXXXXXX. Interest accrues on this loan at XXXXXXXXXX % per annum.
The XXXXXXXXXX is secured by a subordinated charge over the Assets.
d) XXXXXXXXXX
XXXXXXXXXX
Both the XXXXXXXXXX bear interest at the rate of XXXXXXXXXX % per annum.
The XXXXXXXXXX will be repaid by the further advances to be received from XXXXXXXXXX as described in paragraph 50, below.
e) XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
f) Accounts payable, accrued charges, sales and other taxes and capital lease obligations owing in the amount of approximately $XXXXXXXXXX and XXXXXXXXXX and other contract deposits outstanding of approximately $XXXXXXXXXX.
28. XXXXXXXXXX has guaranteed certain of the obligations of the Partnership under the XXXXXXXXXX:
a) XXXXXXXXXX has guaranteed the payment of interest on all of the XXXXXXXXXX.
b) XXXXXXXXXX has also guaranteed payment to XXXXXXXXXX.
29. The Partnership has entered into an acknowledgement and agreement with XXXXXXXXXX (the “Acknowledgement and Agreement”) pursuant to which the Partnership has or may have certain obligations owing to each of XXXXXXXXXX. As general and continuing collateral security for the payment and performance of the Partnership’s obligations under the Acknowledgement and Agreement, the Partnership has executed in favour of XXXXXXXXXX a general security agreement made as of XXXXXXXXXX (the “Acknowledgement and Agreement GSA”). This security interest over the Assets is subordinated as referred to in subparagraph 27(a), above.
30. XXXXXXXXXX.
31. Profit and losses of the Partnership are allocated in accordance with the Partnership agreement as follows:
a) the profit and losses of the Partnership are allocated firstly as to XXXXXXXXXX % to the General Partner;
b) the remaining profit and losses of the Partnership are allocated to holders of Class XXXXXXXXXX, Class XXXXXXXXXX, Class XXXXXXXXXX and Class XXXXXXXXXX units in the same manner as they would have been entitled to cash available for distribution if cash available for distribution were equal to profit, as described in paragraph 33, below, except that each allocation of the profit and losses to the limited partners shall be solely to the Class XXXXXXXXXX units until such time as the losses allocated to the Class XXXXXXXXXX units are equal to the amount of capital contributed thereon; and
c) remaining losses are allocated to the holders of the participating limited partnership units in the proportion that the initial capital contribution of each holder of a participating unit bears to the initial capital contribution of all holders of participating units.
32. Class XXXXXXXXXX, Class XXXXXXXXXX and Class XXXXXXXXXX units of the Partnership are fully participating units. Class XXXXXXXXXX units of the Partnership may be converted to fully participating units provided certain financial performance targets are met. All Class XXXXXXXXXX units that do not become participating units by XXXXXXXXXX will be redeemed on that day for $XXXXXXXXXX in the aggregate. As of XXXXXXXXXX, no Class XXXXXXXXXX units of the Partnership are participating units.
33. Cash available for distribution from the Partnership in any year, defined to be net income plus non-cash charges less debt principal repayments, capital expenditures and reserve requirements, is payable to the limited partners in the subsequent year as follows:
a) Class XXXXXXXXXX units are entitled, in priority to any distribution to Class XXXXXXXXXX, Class XXXXXXXXXX or Class XXXXXXXXXX units, to a cumulative return of cash available for distribution of XXXXXXXXXX% per annum calculated on the capital contribution in respect of each Class XXXXXXXXXX unit;
b) Class XXXXXXXXXX units are entitled, subject to the priority distribution to Class XXXXXXXXXX units, and in priority to any distribution to Class XXXXXXXXXX or Class XXXXXXXXXX units, to a cumulative, priority distribution equal to XXXXXXXXXX% of the capital contribution in respect of each Class XXXXXXXXXX unit;
c) Class XXXXXXXXXX units and participating Class XXXXXXXXXX units are entitled, subject to the priority distributions to Class XXXXXXXXXX and Class XXXXXXXXXX units, to a cumulative, priority distribution equal to XXXXXXXXXX% of the capital contribution in respect of each Class XXXXXXXXXX unit and participating Class XXXXXXXXXX unit, to be distributed pro-rata among the holders of the Class XXXXXXXXXX units and participating Class XXXXXXXXXX units in accordance with the number of participating units owned by each of them; and
d) Class XXXXXXXXXX, Class XXXXXXXXXX, Class XXXXXXXXXX and participating Class XXXXXXXXXX units participate, pro-rata, in cash available for distribution in excess of the above distributions; provided that, until a pre-determined amount ($XXXXXXXXXX) has been distributed to the Class XXXXXXXXXX units, the excess cash available for distribution shall be distributed pro-rata among the Class XXXXXXXXXX, Class XXXXXXXXXX, Class XXXXXXXXXX and participating Class XXXXXXXXXX units, and if such pre-determined amount is then paid in respect of the Class XXXXXXXXXX units, the balance, if any, of the excess cash available for distribution is paid to the holders of the Class XXXXXXXXXX units, whether or not they are participating units.
34. The holders of Class XXXXXXXXXX units have certain rights attached to their units, including XXXXXXXXXX.
35. XXXXXXXXXX has, since its inception in XXXXXXXXXX, been unable to meet its financial operating targets, resulting in a higher level of debt than is sustainable by operating cash flow and requiring significant additional financial support in the form of additional equity, additional loans, and third party guarantees of its operating debt (provided by XXXXXXXXXX).
XXXXXXXXXX
The losses sustained by XXXXXXXXXX for the fiscal years ended XXXXXXXXXX are as follows:
XXXXXXXXXX
36. This shortfall in actual operating results from expectations has arisen from:
a) XXXXXXXXXX;
b) XXXXXXXXXX;
c) XXXXXXXXXX;
d) XXXXXXXXXX
e) XXXXXXXXXX.
37. In XXXXXXXXXX, based on historical operating results, projected results for the then current year to date, and expected results for the future, the Senior Lenders required, as a condition to extending the XXXXXXXXXX take steps to either:
a) XXXXXXXXXX; or
b) refinance all of the XXXXXXXXXX,
prior to XXXXXXXXXX to be evidenced by signed term sheets on or prior to XXXXXXXXXX or lending agreements by XXXXXXXXXX. As noted in subparagraph 27(a) above, XXXXXXXXXX is in default of each of the XXXXXXXXXX requirement and the XXXXXXXXXX requirement.
38.
XXXXXXXXXX
39.
XXXXXXXXXX
As indicated in the cash flow projections attached as Appendix “A”, there is little or no probability that XXXXXXXXXX will be able to reduce its debt in the foreseeable future.
40. As noted in subparagraph 27(a) above, XXXXXXXXXX is in default of both the XXXXXXXXXX and XXXXXXXXXX refinancing requirements of the XXXXXXXXXX and will be in default of the XXXXXXXXXX requirement should the proposed transactions contemplated herein not be completed prior to that time.
41. Similarly, the XXXXXXXXXX are all currently in default and were due and payable on XXXXXXXXXX.
42. Other than pursuant to the proposed transactions as contemplated herein, the XXXXXXXXXX was not in a position to repay the aforementioned debt obligations on XXXXXXXXXX. The existing credit facilities have been extended to allow for the completion of the transactions contemplated herein.
43. In the event that the proposed transactions as contemplated herein are not completed within a reasonable period of time after XXXXXXXXXX, it is expected by XXXXXXXXXX that the lenders to the XXXXXXXXXX will take such actions as are available to them in order to realize on the security pledged, including the sale of the assets of the partnership.
44. In the opinion of the management of XXXXXXXXXX, there is no realistic prospect for XXXXXXXXXX to raise new equity at this time.
PROPOSED TRANSACTIONS
45. XXXXXXXXXX will subscribe for and XXXXXXXXXX will issue to XXXXXXXXXX common shares at a price of $XXXXXXXXXX per share.
46. XXXXXXXXXX will subscribe for and XXXXXXXXXX will issue to XXXXXXXXXX a certain number of Class XXXXXXXXXX preferred shares for nominal consideration. The number of shares subscribed for and issued will be equal to XXXXXXXXXX less that number of Class XXXXXXXXXX preferred shares issued to the Partnership as partial consideration for the purchase of the assets of the Partnership, as described in paragraph 51, below.
47. XXXXXXXXXX, or a corporation owned by him, will subscribe for up to XXXXXXXXXX Class XXXXXXXXXX preferred shares of XXXXXXXXXX at a price of $XXXXXXXXXX per share. The subscription price will be payable on or about XXXXXXXXXX, in accordance with the requirements of the XXXXXXXXXX (as described in paragraph 48, below).
48. As a condition of the participation of XXXXXXXXXX in the proposed restructuring, XXXXXXXXXX will be required to guarantee the “operating cash loss” of XXXXXXXXXX (except to the extent that such loss relates to amounts paid or payable to XXXXXXXXXX) for the XXXXXXXXXX fiscal year ended XXXXXXXXXX to a maximum of $XXXXXXXXXX (the “XXXXXXXXXX”).
The “operating cash loss” will be funded during the year advances under the Revolving Credit, as described in subparagraph 65(d), below, and payment under the XXXXXXXXXX will be required at the end of the year.
The XXXXXXXXXX will be satisfied by payment of the required funds to XXXXXXXXXX. (the “Guarantee Payment”). The Guarantee Payment will be made as a subscription for up to XXXXXXXXXX Class XXXXXXXXXX preferred shares of XXXXXXXXXX. The precise number of XXXXXXXXXX Preferred shares to be subscribed for will be dependant upon the ultimate amount of the XXXXXXXXXX.
49. The Partnership agreement will be amended as required to:
a) provide for the implementation of the proposed transactions to the extent that they affect the Partnership;
b) provide that a disposition of substantially all of the assets of the Partnership will not result in a dissolution of the Partnership;
c) restate the business activities of the Partnership;
d) to allow for the distribution of the Class XXXXXXXXXX preferred shares of XXXXXXXXXX to XXXXXXXXXX in partial settlement of its accumulated priority return as the holder of all of the Class XXXXXXXXXX Units of the Partnership;
e) to allow for a change in the name of the Partnership to XXXXXXXXXX; and
f) to make any other necessary changes to the Partnership agreement as required by the proposed transactions.
50. Subsequent to the acquisition of the assets of XXXXXXXXXX by XXXXXXXXXX, as described in paragraph 51, below, XXXXXXXXXX will arrange a new $XXXXXXXXXX financing facility (the “Subordinated Term Loan II”) with XXXXXXXXXX which facility will have a XXXXXXXXXX year term. The proceeds from this facility will be applied as follows:
a) $XXXXXXXXXX to repay a portion the XXXXXXXXXX, as described in subparagraph 27(b), above. This portion of the facility will bear interest at XXXXXXXXXX% per annum.
b) $XXXXXXXXXX to repay the Overdraft Credits portion of the XXXXXXXXXX as detailed in subparagraph 27(a), above. This portion of the facility will bear interest at the prime rate plus XXXXXXXXXX% per annum.
c) $XXXXXXXXXX to repay a portion of the XXXXXXXXXX, as described in subparagraph 27(d), above. This portion of the facility will bear interest at XXXXXXXXXX% per annum.
d) $XXXXXXXXXX to repay a portion of the XXXXXXXXXX Term Credit, as described in subparagraph 27(a), above. This portion of the facility will bear interest at prime rate plus XXXXXXXXXX% per annum.
51. XXXXXXXXXX will acquire all of the assets of XXXXXXXXXX, including the XXXXXXXXXX, current assets and fixed assets at fair market value (estimated to be approximately $XXXXXXXXXX). The fair market value for XXXXXXXXXX. The fair market value of other tangible assets ($XXXXXXXXXX) is assumed to be book value.
Consideration for the purchase of the assets of XXXXXXXXXX will be:
a) by way of assumption by XXXXXXXXXX of the outstanding debts and obligations of the Partnership, excluding all accrued distribution rights and capital amounts attaching to Partnership Units; and
b) the issuance by XXXXXXXXXX to the Partnership of that number of Class XXXXXXXXXX preference shares as is equal to the number obtained when the excess of the purchase price for the assets of the Partnership over the debts and obligations assumed by XXXXXXXXXX is divided by $XXXXXXXXXX. The amount added to the stated capital in respect of such issuance will be the excess of the purchase price for the assets of the Partnership over the debts and obligations assumed by XXXXXXXXXX.
52. The Partnership will distribute the Class XXXXXXXXXX preferred shares of XXXXXXXXXX that it owns to XXXXXXXXXX, after a time that is XXXXXXXXXX after the date of the issuance of such shares by XXXXXXXXXX to XXXXXXXXXX, as partial settlement of a certain amount of the accumulated priority return of the Class XXXXXXXXXX Partnership Units, such amount being the product of the number of Class XXXXXXXXXX preferred shares distributed multiplied by $XXXXXXXXXX.
53. Prior to XXXXXXXXXX will acquire all of the Class XXXXXXXXXX and Class XXXXXXXXXX Units of the Partnership owned by XXXXXXXXXX from XXXXXXXXXX at fair market value.
54. XXXXXXXXXX and the Partnership will enter into a XXXXXXXXXX which will provide to the Partnership the rights set out in the agreement.
55. The name of the Partnership will be changed to XXXXXXXXXX at some time following the completion of the transactions contemplated herein.
56. The current general partner of XXXXXXXXXX will remain as such until XXXXXXXXXX. At that time, the limited partners of XXXXXXXXXX will decide whether or not to continue with such general partner.
57. XXXXXXXXXX will incorporate, under the laws of XXXXXXXXXX, two subsidiary corporations: XXXXXXXXXX. The XXXXXXXXXX subsidiary corporations are referred to herein collectively as the “XXXXXXXXXX” and individually as a “XXXXXXXXXX”.
58. Each of the XXXXXXXXXX will be a wholly-owned subsidiary of and will be a single-purpose corporation used only to facilitate the refinancing of the debts of XXXXXXXXXX. As such, the activities of each XXXXXXXXXX will be limited to acquiring, holding and realizing upon certain indebtedness as described below, and activities ancillary thereto and issuing its special shares and activities ancillary thereto. Each XXXXXXXXXX will be a “taxable Canadian corporation”, as that term is defined in subsection 89(1) of the Act.
59. The authorized share capital of XXXXXXXXXX. On incorporation XXXXXXXXXX will issue XXXXXXXXXX common shares to XXXXXXXXXX for $XXXXXXXXXX and such amount will be added to the stated capital of the common shares.
60. The authorized share capital of XXXXXXXXXX. On incorporation XXXXXXXXXX will issue XXXXXXXXXX common shares to XXXXXXXXXX for $XXXXXXXXXX and such amount will be added to the stated capital of the common shares.
61. The principal attributes of the common shares of each XXXXXXXXXX will be as follows:
a) the holders of the common shares shall be entitled, subject to the rights, privileges, restrictions and conditions attaching to the applicable Special Shares, to receive any dividend declared by the directors on the common shares;
b) in the event of a distribution of the property and assets of the XXXXXXXXXX among its shareholders in connection with the liquidation, dissolution or winding-up of the XXXXXXXXXX, whether voluntary or involuntary, or any other distribution of the property and assets of the XXXXXXXXXX among its shareholders for the purpose of winding up its affairs, the holders of the common shares shall be entitled, subject to the rights, privileges, restrictions and conditions attaching to the applicable Special Shares, to receive the Remaining Property (as defined in subparagraph 63(i), below); and
c) each holder of common shares shall be entitled to receive notice of, and to attend, all meetings of shareholders of the XXXXXXXXXX and to vote at such meetings, except meetings at which only holders of a specified class of shares (other than common shares) are entitled to vote. At all meetings at which the holders of common shares are entitled to vote, each holder of common shares shall be entitled to one vote in respect of each common share held by such holder.
62. The principal attributes of the Special Shares (as defined in subparagraph 63(a), below) will be as follows:
a) an issue price of XXXXXXXXXX per Class XXXXXXXXXX or Class XXXXXXXXXX share.
b) rank ahead of the common shares of the respective XXXXXXXXXX with respect to dividends and distributions of the Remaining Property (as defined in subparagraph 63(i), below);
c) pay cumulative preferential quarterly dividends, as and when declared by the directors, in equal amounts per share determined as follows:
i) dividends on the Special Shares shall accrue and accumulate on a day-to-day basis from and including the date of issue of such Special Shares and shall be payable in respect of each Dividend Period (as defined in subparagraph 63(e), below) on the Dividend Payment Date (as defined in subparagraph 63(f), below) applicable to such Dividend Period to the Holders (as defined in subparagraph 63(b), below) at the close of business on the XXXXXXXXXX preceding such Dividend Payment Date. Subject to the terms and conditions hereinafter provided, the amount of the dividends payable on any such Dividend Payment Date on each Special Share then outstanding shall be equal to the amount calculated by multiplying the Dividend Rate (as defined in subparagraph 63(h), below) in respect of such Special Share for the particular Dividend Period to which such Dividend Payment Date applies by the Redemption Price (as defined in subparagraph 63(k), below),
ii) in the event (including for any reason under clause (iii), below) that any dividends accrued in respect of a Dividend Period on a Special Share (including any dividends accrued in accordance with this clause) are not declared, or are declared but not paid in full, on the Dividend Payment Date applicable to such Dividend Period (any such dividends hereinafter referred to as an “Unpaid Amount”), then, from and including such Dividend Payment Date until declaration and payment in full of such Unpaid Amount, dividends on such Special Share shall accrue at the Dividend Rate on, and shall be calculated by reference to, such Unpaid Amount plus the Redemption Price;
iii) subject to the provisions of XXXXXXXXXX shall pay (to the extent not already paid pursuant to clause (e) (ii) or clause (f) (ii), below) on each Dividend Payment Date referred to in this clause, dividends on the Special Shares outstanding on such Dividend Payment Date equal to the aggregate amount of the dividends accrued on Special Shares in accordance with this clause during the Dividend Period to which such Dividend Payment Date applies; and
iv) notwithstanding any other provision hereof, but subject to the provisions of XXXXXXXXXX Holders shall be entitled to receive, and the XXXXXXXXXX shall pay, as and when declared by the directors, special dividends on Special Shares in such amounts as the directors may in their discretion determine as are necessary under XXXXXXXXXX, each as defined in paragraph 88, below), as the case may be.
d) In the event of a distribution of the property and assets of either of the XXXXXXXXXX among its shareholders in connection with the liquidation, dissolution or winding-up of either of the XXXXXXXXXX, whether voluntary or involuntary, or any other distribution of the property and assets of either of the XXXXXXXXXX among its shareholders for the purpose of winding up its affairs, a Holder shall be entitled to receive out of the Remaining Property, (as defined in paragraph 63(i), below) before any amount is paid or distributed to the holders of the common shares, an amount equal to the Aggregate Redemption Price (as defined in subparagraph 63(j), below) of the Special Shares held by such Holder on the date of distribution. After payment to a Holder of the amounts payable to such Holder, as such, under this paragraph, such Holder shall not be entitled, as such, to share in any further distribution of Remaining Property. The Class XXXXXXXXXX Special Shares and the Class XXXXXXXXXX Special Shares of XXXXXXXXXX will rank pari passu with respect to the entitlements out of the Remaining Property and will rank ahead of the Class XXXXXXXXXX Special Shares. The Class XXXXXXXXXX Special Shares and the Class XXXXXXXXXX Special Shares will rank pari passu with respect to the entitlements out of the Remaining Property.
e) Subject to XXXXXXXXXX, a Holder may:
i) require the XXXXXXXXXX to redeem all of the Special Shares held by such Holder (collectively, the “Retracted Shares”) for an amount equal to the Aggregate Redemption Price of such Special Shares:
a) upon the occurrence of an Event of Retraction, as that term is defined in paragraph 64, below, and from time-to-time thereafter for so long as such Event of Retraction is continuing and whether or not such Holder has previously exercised its withdrawal rights in respect of such Event of Retraction;
b) on, and from time-to-time after, the XXXXXXXXXX date of the issuance of the Special Shares; and
c) as and when permitted in any unanimous shareholder agreement respecting the applicable XXXXXXXXXX;
ii) notwithstanding clause (e)(i), immediately prior to the redemption of any Retracted Shares pursuant to clause (e)(i), the applicable XXXXXXXXXX shall pay to the Holders of its Special Shares all dividends (whether or not declared) that have accrued prior to the date of such redemption pursuant to clauses (c)(i) and (ii) on such Retracted Shares and all dividends that have been declared at or before such time in accordance with (c)(iv) on such Retracted Shares but which remain unpaid as at such time; provided, however that no failure by, or inability on the part of, a XXXXXXXXXX to pay any such dividends prior to any such redemption shall preclude such XXXXXXXXXX from redeeming such Retracted Shares pursuant to clause (e)(i).
f) Subject to XXXXXXXXXX may, at any time:
i) redeem all, or from time-to-time any part, of its then outstanding Special Shares on payment for the Special Shares to be redeemed of the Aggregate Redemption Price of such shares, provided that each XXXXXXXXXX shall redeem all of its outstanding Special Shares on the XXXXXXXXXX date of the issuance of its Special Shares; and
ii) notwithstanding clause(f)(i), immediately prior to the redemption of any Special Shares pursuant to clause (f)(i), the applicable XXXXXXXXXX shall pay to the Holders of its Special Shares all dividends (whether or not declared) that have accrued prior to the date of such redemption pursuant to clauses (c)(i) and (ii) on its Special Shares and all dividends that have been declared at or before such time in accordance with clause (c)(iv) on its Special Shares but which remain unpaid as at such time; provided, however, that no failure by, or inability on the part of, a XXXXXXXXXX to pay any such dividends prior to any such redemption shall prohibit such XXXXXXXXXX from redeeming the Special Shares to be redeemed pursuant to clause (f)(i).
g) Except as otherwise provided in XXXXXXXXXX:
i) a Holder shall be entitled to receive notice of, and to attend, all meetings of shareholders of the applicable XXXXXXXXXX but shall not be entitled to vote at such meetings unless an Event of Retraction shall have occurred and shall be continuing, in which case, forthwith upon the occurrence of such Event of Retraction and for so long as such Event of Retraction shall be continuing, a Holder shall:
a) be entitled to vote at all meetings of shareholders of the applicable XXXXXXXXXX; and
b) have one vote for each Special Share held by such Holder; and
ii) the XXXXXXXXXX shall not take any of the following actions without the prior unanimous approval of the Holders of its Special Shares:
a) any amendment of the articles or confirmation of an amendment to the by-laws of the XXXXXXXXXX;
b) any voluntary dissolution, liquidation, bankruptcy or winding-up of the XXXXXXXXXX;
c) any amalgamation, consolidation, reorganization or merger of the XXXXXXXXXX with any other corporation;
d) any action (including without limitation, the giving of any notice required or permitted to be given under any applicable law or the commencement of, consenting to, or participating in, any proceedings) with respect to any general assignment for the benefit of the XXXXXXXXXX creditors or any proceedings seeking relief on the XXXXXXXXXX behalf as a debtor or to adjudicate the XXXXXXXXXX a bankrupt or insolvent, or seeking liquidation, winding-up, dissolution, reorganization, arrangement, proposal, adjustment, composition or restructuring of, or relating to, the XXXXXXXXXX, the debts of the XXXXXXXXXX or the XXXXXXXXXX business or affairs under any law (federal, provincial or any other jurisdiction) relating to bankruptcy, insolvency, reorganization or relief of debtors or seeking the appointment of a receiver, manager, receiver and manager, liquidator, trustee, custodian, administrator or other similar official (with similar power) for the XXXXXXXXXX or for any part of the XXXXXXXXXX property or assets;
e) any continuance of the XXXXXXXXXX under the laws of another jurisdiction; or
f) any sale, lease or exchange of all or a material part of the property, assets or undertaking of the XXXXXXXXXX.
63. For the purpose of the proposed transactions, the following terms are defined as follows:
a) “DPS” or “Special Shares” means, individually, or collectively, the XXXXXXXXXX as described in paragraphs 69, 70, 71, 72, and 77, below;
b) “Holder” means the owner of a Class XXXXXXXXXX Special Share or a Class XXXXXXXXXX Special Share, as the case may be, as registered on the share register of XXXXXXXXXX, respectively, at the relevant time; and “Beneficial Holder” means a Class XXXXXXXXXX Purchaser or a Class XXXXXXXXXX Purchaser, as defined in subparagraph (o), below, as the case may be, or a permitted transferee of such a Beneficial Holder as beneficial owner of such DPS;
c) “Transactions” means, collectively, the transactions contemplated herein as it applies to XXXXXXXXXX and the Beneficial Holders;
d) “Transaction Documents” means the documentation required to effect, or otherwise delivered in connection with, the Transactions;
e) “Dividend Period” means, with respect to any particular DPS:
i) in the case of the first Dividend Period, the period commencing on the date of issue of the DPS and ending on the XXXXXXXXXX, as that term is defined in subparagraph (n), below, in which the DPS are issued, provided, however, that if the date of issue of the DPS is after the XXXXXXXXXX in which the DPS are issued, the first Dividend Period shall end on XXXXXXXXXX immediately following the Fiscal Period in which the DPS were issued; and
ii) in the case of every subsequent Dividend Period, the period commencing on the day immediately following the last day of the preceding Dividend Period and ending on XXXXXXXXXX immediately following the Fiscal Period in which the particular subsequent Dividend Period commences;
f) “Dividend Payment Date” means:
i) with respect to a particular Dividend Period or with respect to the dividends accruing during such Dividend Period, the XXXXXXXXXX in which such Dividend Period ends; and
ii) with respect to any other dividends declared, the date upon which such dividends are to be paid;
g) “Business Day” means any day on which banks are open for business in XXXXXXXXXX, other than a Saturday, Sunday, or statutory holiday;
h) “Dividend Rate” means:
i) in the case of the Class XXXXXXXXXX Special Shares, with respect to any particular Dividend Period, the product expressed as a percentage and determined by the formula:
XXXXXXXXXX
where
A is the XXXXXXXXXX Rate, as defined in subparagraph (l), below;
B is the number of days in such Dividend Period; and
C is the number of days in the calendar year in which such Dividend Period ends.
ii) in the case of the Class XXXXXXXXXX Special Shares, with respect to any particular Dividend Period, the product expressed as a percentage and determined by the formula:
XXXXXXXXXX
where
A is the XXXXXXXXXX Rate, as defined in subparagraph (l), below;
B is the number of days in such Dividend Period; and
C is the number of days in the calendar year in which such Dividend Period ends.
iii) in the case of the Class XXXXXXXXXX Special Shares, with respect to any particular Dividend Period, the product expressed as a percentage and determined by the formula:
XXXXXXXXXX
where
A is the XXXXXXXXXX Rate, as defined in subparagraph (l), below;
B is the number of days in such Dividend Period; and
C is the number of days in the calendar year in which such Dividend Period ends.
iv) in the case of the Class XXXXXXXXXX Special Shares, with respect to any particular Dividend Period, the product expressed as a percentage and determined by the formula:
XXXXXXXXXX
where
A is the XXXXXXXXXX Rate, as defined in subparagraph (l), below;
B is the number of days in such Dividend Period; and
C is the number of days in the calendar year in which such Dividend Period ends.
v) in the case of the Class XXXXXXXXXX Special Shares, with respect to any particular Dividend Period, the product expressed as a percentage and determined by the formula:
XXXXXXXXXX
where
A is the XXXXXXXXXX Rate, as defined in subparagraph (l), below;
B is the number of days in such Dividend Period; and
C is the number of days in the calendar year in which such Dividend Period ends.
i) “Remaining Property” means the property and assets of XXXXXXXXXX, as the case may be, available for distribution to the shareholders of such corporation on a liquidation, dissolution, or winding-up of such corporation, whether voluntary or involuntary, or any other distribution of the property and assets of XXXXXXXXXX, as the case may be, among its shareholders for the purpose of winding up its affairs;
j) “Aggregate Redemption Price” means
i) with respect to Class XXXXXXXXXX Special Shares, the aggregate of the Redemption Prices for such Class XXXXXXXXXX Special Shares; and
ii) with respect to Class XXXXXXXXXX Special Shares, the aggregate of the Redemption Prices for such Class XXXXXXXXXX Special Shares;
k) “Redemption Price” means, with respect to each Class XXXXXXXXXXor Class XXXXXXXXXX Special Share, Cdn. $XXXXXXXXXX;
l) “XXXXXXXXXX Rate”, with respect to any particular Dividend Period, means the rate determined by XXXXXXXXXX, as that term is defined in subparagraph (m), below, on the first Business Day of such Dividend Period, determined as follows:
on the first Business Day of the applicable Dividend Period, XXXXXXXXXX, shall determine the average of the annual rate for Canadian Dollar bankers’ acceptances having a XXXXXXXXXX term (or a term as closely as possible comparable to a XXXXXXXXXX term) XXXXXXXXXX;
m) “XXXXXXXXXX” or the “XXXXXXXXXX” means XXXXXXXXXX for the beneficial owners from time to time of the Class XXXXXXXXXX Special Shares and the Class XXXXXXXXXX Special Shares;
n) “Fiscal Period” means the fiscal quarters commencing XXXXXXXXXX;
o) "Class XXXXXXXXXX Purchaser", "Class XXXXXXXXXX Purchaser", "Class XXXXXXXXXX Purchaser", Class XXXXXXXXXX Purchaser and Class XXXXXXXXXX Purchaser means the financial institutions and corporations who will be the beneficial owners of the Class XXXXXXXXXX Special Shares, the Class XXXXXXXXXX Special Shares, the Class XXXXXXXXXX Special Shares and the Class XXXXXXXXXX Special Shares of XXXXXXXXXX and the Class XXXXXXXXXX Special Shares of XXXXXXXXXX, as the case may be, when those shares are issued by each respective XXXXXXXXXX as described in paragraphs 69, 70 71, 72 and 77, below. Collectively, the Class XXXXXXXXXX Purchasers and the Class XXXXXXXXXX Purchasers are referred to herein as to the "Class XXXXXXXXXX Purchasers". Collectively, the Class XXXXXXXXXX Purchasers and the Class XXXXXXXXXX Purchasers are referred to herein as the “Class XXXXXXXXXX Purchasers”. Collectively, the Class XXXXXXXXXX Purchasers and the Class XXXXXXXXXX Purchasers are referred to herein as the “Class XXXXXXXXXX Purchasers”. Collectively, the Class XXXXXXXXXX Purchasers and the Class XXXXXXXXXX Purchasers are referred to herein as the “Class XXXXXXXXXX Purchasers”. Collectively, the Class XXXXXXXXXX purchasers and the Class XXXXXXXXXX Purchasers are referred to herein as the "Purchasers";
p) “Fiscal Year” means 12 consecutive months commencing XXXXXXXXXX.
q) "U.S. Dollars" or "US$" means lawful currency of the United States of America.
r) "XXXXXXXXXX Rate”, with respect to any particular Dividend Period, means, the rate determined by XXXXXXXXXX, as that term is defined in subparagraph (m) above, to be the average rate per annum for XXXXXXXXXX.
64. Except as otherwise specifically provided below, an “Event of Retraction” with respect to any XXXXXXXXXX DPS shall include any of the following events:
a) if the applicable XXXXXXXXXX shall have failed to declare and pay in full the regular dividend payable on its DPS as and when the same is payable in accordance with the terms and conditions of such DPS, without regard to the provisions of the XXXXXXXXXX, and such failure continues unremedied for a period equal to the lesser of XXXXXXXXXX;
b) if the applicable XXXXXXXXXX fails to redeem all or any part of its DPS at the time and in the manner required by the terms and conditions of such DPS or the terms and conditions of any of the Transaction Documents applicable to such DPS, without regard to the provisions of the XXXXXXXXXX, and such failure continues unremedied for a period equal to the lesser of XXXXXXXXXX;
c) if XXXXXXXXXX defaults in the payment of any other amount payable in respect of the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares, as the case may be, or under the applicable Transaction Documents or any of the documents relating to the XXXXXXXXXX, as the case may be, when the same becomes due and such default continues unremedied for a period equal to the lesser of XXXXXXXXXX;
d) if XXXXXXXXXX ceases to beneficially own, directly or indirectly, all of the issued common shares of the applicable XXXXXXXXXX;
e) if there occurs any change in control of XXXXXXXXXX without the written consent of the Holders of the applicable DPS;
f) if XXXXXXXXXX or the applicable XXXXXXXXXX ceases to maintain its corporate existence, or an order or agreement is made or any resolution is passed for the winding-up, dissolution, or liquidation of XXXXXXXXXX;
g) if XXXXXXXXXX makes a general assignment for the benefit of its creditors, or institutes or consents to proceedings or files a proposal under any law relating to bankruptcy, insolvency or reorganization, or shall be declared bankrupt or insolvent, or a custodian or sequestrator or receiver/manager or any other officer with similar power shall be appointed for such XXXXXXXXXX or for the property of such XXXXXXXXXX or any part thereof;
h) if XXXXXXXXXX (with respect to the Class XXXXXXXXXX Special Shares) defaults in the payment of any amount payable by it under any of the Transaction Documents pertaining to the DPS and such failure continues unremedied for a period equal to the lesser of XXXXXXXXXX;
i) if XXXXXXXXXX (with respect to the Class XXXXXXXXXX Special Shares) fails to observe or perform any non-payment term, covenant, or agreement contained in any of the Transaction Documents pertaining to the DPS and such failure continues unremedied for a period of XXXXXXXXXX days;
j) if any Adverse Yield Event (as defined in paragraph 86, below) occurs and either an Event of Retraction under subparagraph (c) above occurs in respect of any payment due as a result thereof or the Holders of the applicable DPS have determined that such Adverse Yield Event or the effect thereof is likely to materially adversely affect the intended purpose or effect of the Transactions;
k) if the payment by the applicable XXXXXXXXXX of any dividend on its DPS or the purchase for cancellation or redemption of any of its DPS is made, or is subsequently determined to have been made, contrary to law, requiring the Holder or former Holder thereof to refund or pay out moneys or assets previously received by it from such XXXXXXXXXX in respect of any such dividend or on such purchase or redemption;
l) if XXXXXXXXXX fails to comply with or otherwise breaches any term or provision of the advance tax ruling and XXXXXXXXXX, (on the instructions of the Required Holders of the applicable DPS) notifies the respective XXXXXXXXXX that such Required Holders have determined, in their discretion, that such failure or breach or the effect thereof is likely to materially adversely affect the intended purpose or effect of the Transactions;
m) if an Event of Default occurs and is continuing XXXXXXXXXX (as defined in paragraph 30, above);
n) if any Transaction Document pertaining to the applicable DPS or any material provision thereof shall be terminated or shall cease to be a legal, valid and binding obligation of any party thereto (other than any of the Holders), provided that no Event of Retraction shall occur under this clause if the parties to such Transaction Document promptly execute and deliver an agreement substantially identical to the Transaction Document which was terminated or which ceased to be a legal, valid and binding obligation so that the Holders, either directly or through the XXXXXXXXXX, are able to avail themselves of the benefits of such agreement;
o) if XXXXXXXXXX sells, or enters into an agreement to sell, all or a material part of its assets;
p) if XXXXXXXXXX exercises its right to call the Class XXXXXXXXXX Special Shares or the
XXXXXXXXXX pursuant to the XXXXXXXXXX Put Agreement, as described in paragraph 83, below, it will constitute an Event of Retraction with respect to the Class XXXXXXXXXX Special Shares;
q) if an “Event of Retraction” occurs under the share provisions relating to any DPS of XXXXXXXXXX;
r) if XXXXXXXXXX fails to observe or perform any non-payment term, condition, covenant or agreement contained in any of the Transaction Documents or any of the documents relating to the XXXXXXXXXX;
s) if any material representation, warranty or statement contained in any of the Transaction Documents or any of the documents relating to the XXXXXXXXXX or in the submissions made to Revenue Canada in the application for this advance income tax ruling proves to be untrue or incorrect in any material respect when made; or
t) if the letter of credit security required to be provided by XXXXXXXXXX pursuant to the XXXXXXXXXX Put Agreement is not provided or renewed within the time and on terms required by the XXXXXXXXXX Put Agreement or if any such letter of credit is terminated or if any such letter of credit is subject to termination pursuant to any notice that has actually been delivered by the issuer thereof.
65. Immediately prior to the issuance of the Special Shares, the outstanding debt XXXXXXXXXX will be restructured to provide for the following:
a) XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
b) The XXXXXXXXXX will be established as described in paragraph 50, above, having a total principal amount of $XXXXXXXXXX. References to the “XXXXXXXXXX” means XXXXXXXXXX.
c) XXXXXXXXXX has agreed to leave the XXXXXXXXXX, as described in subparagraph 27(e), above, and that will be assumed by XXXXXXXXXX, outstanding during the term of the XXXXXXXXXX DPS. There will be no changes to the underlying debt instrument, however XXXXXXXXXX will agree to annually waive a portion of the interest payable on the XXXXXXXXXX such that the interest charge to XXXXXXXXXX will be equivalent to
XXXXXXXXXX
where
A is the XXXXXXXXXX Rate, as defined in subparagraph 63(r), above;
B is the number of days in such Dividend Period;
C is the number of days in the calendar year in which such Dividend Period ends.
This will result in reduced debt costs to XXXXXXXXXX for the term of the DPS. This waiver will be terminated on the earliest of the following times:
i) When the XXXXXXXXXX, as described in subparagraph (a), above, is acquired by the Beneficial Holders of the Class XXXXXXXXXX Special Shares pursuant to the Debt Put\Call Agreement I, as described in paragraph 84, below;
ii) When the Class XXXXXXXXXX Special Shares are purchased by XXXXXXXXXX pursuant to the Share Put Agreement I, as described in paragraph 85, below:
iii) When the Class XXXXXXXXXX Special Shares are purchased by XXXXXXXXXX from the XXXXXXXXXX Purchasers or the XXXXXXXXXX purchasers in the circumstances described in paragraph 73, below: and
iv) When the Holders of the Class XXXXXXXXXX Special Shares provide notice to XXXXXXXXXX of their intention to retract the Class XXXXXXXXXX Special Shares in the circumstances as described in paragraph 85, below.
Additionally, XXXXXXXXXX will agree with XXXXXXXXXX that XXXXXXXXXX will not enforce any defaults under the XXXXXXXXXX except as permitted in the subordination agreement to which they are all parties.
d) A new XXXXXXXXXX term revolving credit facility (the “Revolving Credit”) in the amount of $XXXXXXXXXX, will be established by a lender to be determined, ranking in third position with respect to XXXXXXXXXX asset security. Payment of principal and interest on the Revolving Credit will be guaranteed by XXXXXXXXXX. This facility is to be used to fund cyclical cash requirements within operating years and is forecast to be drawn to a maximum amount at the end of the XXXXXXXXXX of each year (i.e. around XXXXXXXXXX) and be repaid at or shortly following the end of the Fiscal Year (i.e. around June 30).
e) The "XXXXXXXXXX" will be established. This facility will be in place to reflect the reimbursement obligations of XXXXXXXXXX in respect of any required payments by XXXXXXXXXX under the XXXXXXXXXX, as that term is defined in paragraph 83,below. This facility will rank in XXXXXXXXXX position with respect to XXXXXXXXXX asset security.
The XXXXXXXXXX will together form the “XXXXXXXXXX”.
f)
XXXXXXXXXX
66. XXXXXXXXXX will enter into an agreement (the “XXXXXXXXXX”) with the XXXXXXXXXX under which the XXXXXXXXXX shall agree to sell and XXXXXXXXXX shall agree to purchase the full amount owing under the XXXXXXXXXX and an undivided interest in the related security.
67. XXXXXXXXXX will then borrow the XXXXXXXXXX as a daylight demand loan from XXXXXXXXXX (and perhaps other lenders) and XXXXXXXXXX will use the proceeds of that loan to purchase the XXXXXXXXXX from the XXXXXXXXXX. The demand loan will bear interest at the prime rate of XXXXXXXXXX, be secured by a security interest in all property and assets of XXXXXXXXXX and be evidenced by a demand promissory note issued by XXXXXXXXXX to XXXXXXXXXX shall make the demand loan by delivering a bank draft (the “XXXXXXXXXX”) payable to XXXXXXXXXX in the amount of the XXXXXXXXXX shall satisfy the purchase price for the XXXXXXXXXX by endorsing the XXXXXXXXXX in favour of XXXXXXXXXX for the XXXXXXXXXX.
68. Effective immediately after XXXXXXXXXX purchases the XXXXXXXXXX and an undivided interest in the related security from the XXXXXXXXXX and while the XXXXXXXXXX is owned by XXXXXXXXXX and XXXXXXXXXX shall agree that no interest will accrue or be payable on the XXXXXXXXXX and, subject only to available Excess Cash Flow (as defined in paragraph 87, below), if any, XXXXXXXXXX will not be otherwise required to make any principal payments required under the existing conditions of the XXXXXXXXXX. All other terms and conditions of the XXXXXXXXXX will remain in force and in effect.
69. Each Class XXXXXXXXXX Purchaser will then subscribe for that number of Class XXXXXXXXXX Special Shares of XXXXXXXXXX as set out opposite its name below under the heading Number of Class XXXXXXXXXX Special Shares. The aggregate subscription price for the Class XXXXXXXXXX Special Shares will be paid by each Class XXXXXXXXXX Purchaser delivering funds to XXXXXXXXXX, in the amount set out opposite its name below under the heading "Purchaser's Aggregate Class XXXXXXXXXX Special Share Subscription Price" and XXXXXXXXXX, delivering to XXXXXXXXXX a bank draft (the "XXXXXXXXXX") in an amount equal to the total amount paid for Class XXXXXXXXXX Special Shares. The entire amount of the subscription proceeds received by XXXXXXXXXX from the issuance of the Class XXXXXXXXXX Special Shares will be added to the stated capital account of XXXXXXXXXX in respect of the ClassXXXXXXXXXX Special Shares issued. The Class XXXXXXXXXX Special Shares will be issued to XXXXXXXXXX
Purchaser’s Aggregate
Number of Class XXXXXXXXXX
Purchaser Class XXXXXXXXXX Special Shares
Special Shares Subscription PriceXXXXXXXXXX
XXXXXXXXXX
70. Each Class XXXXXXXXXX Purchaser will then subscribe for that number of Class XXXXXXXXXX Special Shares of XXXXXXXXXX as set out opposite its name below under the heading XXXXXXXXXX. The subscription price for the Class XXXXXXXXXX Special Shares will be paid by each Class XXXXXXXXXX Purchaser delivering funds to XXXXXXXXXX, in the amount set out opposite its name below under the heading "XXXXXXXXXX" and XXXXXXXXXX, delivering to XXXXXXXXXX a bank draft (the "XXXXXXXXXX") in an amount equal to the total amount paid for Class XXXXXXXXXX Special Shares. The entire amount of the subscription proceeds received by XXXXXXXXXX from the issuance of the Class XXXXXXXXXX Special Shares will be added to the stated capital account of XXXXXXXXXX in respect of the Class XXXXXXXXXX Special Shares issued. The Class XXXXXXXXXX Special Shares will be issued toXXXXXXXXXX
Purchaser’s Aggregate
Number of Class XXXXXXXXXX
Purchaser Class XXXXXXXXXX Special Shares
Special Shares Subscription PriceXXXXXXXXXX
XXXXXXXXXX
71. Each Class XXXXXXXXXX Purchaser will then subscribe for that number of Class XXXXXXXXXX Special Shares of XXXXXXXXXX as set out opposite its name below under the heading XXXXXXXXXX. The subscription price for the XXXXXXXXXX Special Shares will be paid by each Class XXXXXXXXXX Purchaser delivering funds to XXXXXXXXXX, in the amount set out opposite its name below under the heading "XXXXXXXXXX" and XXXXXXXXXX, delivering to XXXXXXXXXX a bank draft (the "XXXXXXXXXX") in an amount equal to the total amount paid for Class XXXXXXXXXX Special Shares. The entire amount of the subscription proceeds received by XXXXXXXXXX from the issuance of the Class XXXXXXXXXX Special Shares will be added to the stated capital account of XXXXXXXXXX in respect of the Class XXXXXXXXXX Special Shares issued. The Class XXXXXXXXXX Special Shares will be issued to XXXXXXXXXX
Purchaser’s Aggregate
Number of Class XXXXXXXXXX
Purchaser Class XXXXXXXXXX Special Shares
Special Shares Subscription PriceXXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
72. Each Class XXXXXXXXXX Purchaser will then subscribe for that number of Class XXXXXXXXXX Special Shares of XXXXXXXXXX as set out opposite its name below under the heading XXXXXXXXXX. The subscription price for the Class XXXXXXXXXX Special Shares will be paid by each Class XXXXXXXXXX Purchaser delivering funds to XXXXXXXXXX, in the amount set out opposite its name below under the heading "XXXXXXXXXX" and XXXXXXXXXX, delivering to XXXXXXXXXX a bank draft (the "XXXXXXXXXX") in an amount equal to the total amount paid for Class XXXXXXXXXX Special Shares. The entire amount of the subscription proceeds received by XXXXXXXXXX from the issuance of the Class XXXXXXXXXX Special Shares will be added to the stated capital account of XXXXXXXXXX in respect of the Class XXXXXXXXXX Special Shares issued. The Class XXXXXXXXXX Special Shares will be issued to XXXXXXXXXX
Purchaser’s Aggregate
Number of Class XXXXXXXXXX
Purchaser Class XXXXXXXXXX Special Shares
Special Shares Subscription PriceXXXXXXXXXX
XXXXXXXXXX
73. Immediately after it acquires its ClassXXXXXXXXXX Special Shares and its Class XXXXXXXXXX Special Shares, XXXXXXXXXX will sell such shares to certain Subsequent Purchasers (referred to herein as the "XXXXXXXXXX" and the “XXXXXXXXXX”, respectively) in proportions to be determined for a purchase price equal to the subscription price paid for such Class XXXXXXXXXX Special Shares or such Class XXXXXXXXXX Special Shares, respectively, by XXXXXXXXXX.
XXXXXXXXXX will deliver to XXXXXXXXXX, as applicable, two letters of credit one of which may be drawn by or on behalf of the XXXXXXXXXX and the other may be drawn by or on behalf of the XXXXXXXXXX, upon the occurrence of an Event of Retraction, on delivery to XXXXXXXXXX of all of the outstanding Class XXXXXXXXXX Special Shares or Class XXXXXXXXXX Special Shares registered in the name of XXXXXXXXXX, as the particular case may be. Such letter of credit will be for an amount, in each case, equal to the Aggregate Redemption Price of the applicable shares (Class XXXXXXXXXX Special Shares or Class XXXXXXXXXX Special Shares) 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 inter-corporate dividend in each case.
In certain circumstances, XXXXXXXXXX will have the right to call all of the Class XXXXXXXXXX Special Shares and/or the Class XXXXXXXXXX Special Shares registered in the name of XXXXXXXXXX, as the case may be, for an amount, in each case, equal to the Aggregate Redemption Price of the applicable shares (the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares) 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 inter-corporate dividend.
XXXXXXXXXX will pay letter of credit fees to XXXXXXXXXX (the "XXXXXXXXXX"), quarterly in arrears, of XXXXXXXXXX% per annum on the amount of Class XXXXXXXXXX Special Shares which are the subject of the XXXXXXXXXX letter of credit as consideration for issuing letter of credit support for the Class XXXXXXXXXX Special Shares.
XXXXXXXXXX will pay letter of credit fees to XXXXXXXXXX (the "XXXXXXXXXX"), quarterly in arrears, of between XXXXXXXXXX% and XXXXXXXXXX% per annum on the amount of Class XXXXXXXXXX Special Shares which are the subject of the XXXXXXXXXX letter of credit as consideration for issuing letter of credit support for the Class XXXXXXXXXX Special Shares.
74. XXXXXXXXXX will enter into an agreement (the “XXXXXXXXXX”) with the XXXXXXXXXX under which the XXXXXXXXXX shall agree to sell and XXXXXXXXXX shall agree to purchase the full amount owing under the XXXXXXXXXX and an undivided interest in the related security.
75. XXXXXXXXXX will then borrow the XXXXXXXXXX as a daylight demand loan from XXXXXXXXXX (and perhaps other lenders) and XXXXXXXXXX will use the proceeds of that loan to purchase the XXXXXXXXXX from the XXXXXXXXXX. The demand loan will bear interest at the prime rate of XXXXXXXXXX, be secured by a security interest in all property and assets of XXXXXXXXXX and be evidenced by a demand promissory note issued by XXXXXXXXXX to XXXXXXXXXX shall make the demand loan by delivering a bank draft (the “XXXXXXXXXX”) payable to XXXXXXXXXX in the amount of the XXXXXXXXXX shall satisfy the purchase price for the XXXXXXXXXX by endorsing the XXXXXXXXXX in favour of XXXXXXXXXX for the XXXXXXXXXX.
76. Effective immediately after XXXXXXXXXX purchases the XXXXXXXXXX and an undivided interest in the related security from the XXXXXXXXXX and while the XXXXXXXXXX is owned by XXXXXXXXXX and XXXXXXXXXX shall agree that no interest will accrue or be payable on the XXXXXXXXXX and, subject only to available “Excess Cash Flow” (as defined in paragraph 87, below), if any, XXXXXXXXXX will not be otherwise required to make any principal payments required under the existing conditions of the XXXXXXXXXX. All other terms and conditions of the XXXXXXXXXX will remain in force and in effect.
77. Each Class XXXXXXXXXX Purchaser will then subscribe for that number of Class XXXXXXXXXX Special Shares of XXXXXXXXXX as set out opposite its name below under the heading “XXXXXXXXXX”. The aggregate subscription price for the Class XXXXXXXXXX Special Shares will be paid by each Class XXXXXXXXXX Purchaser delivering funds to XXXXXXXXXX, in the amount set out opposite its name below under the heading “XXXXXXXXXX” and XXXXXXXXXX, delivering to XXXXXXXXXX a bank draft (the “XXXXXXXXXX”) in an amount equal to the total amount paid for Class XXXXXXXXXX Special Shares. The entire amount of the subscription proceeds received by XXXXXXXXXX from the issuance of the Class XXXXXXXXXX Special Shares will be added to XXXXXXXXXX stated capital account in respect of the Class XXXXXXXXXX Special Shares issued. The Class XXXXXXXXXX Special Shares will be issued to XXXXXXXXXX
Purchaser’s Aggregate
Number of Class XXXXXXXXXX Class XXXXXXXXXX Special share
Purchaser Special Shares Subscription PriceXXXXXXXXXX
XXXXXXXXXX
78. Each of XXXXXXXXXX II will repay its respective daylight demand loan, as described in paragraphs 67 and 75, above, respectively, by endorsing the XXXXXXXXXX, as the case may be, in favour of XXXXXXXXXX.
79. XXXXXXXXXX agrees to pay all costs related to the restructuring of the XXXXXXXXXX and agrees to pay or cause to be paid to XXXXXXXXXX, as a contribution of capital, such amount as may be required to allow XXXXXXXXXX to pay the costs associated with the issuance of its shares.
80. XXXXXXXXXX agrees to pay all costs related to the restructuring of the XXXXXXXXXX and agrees to pay or cause to be paid to XXXXXXXXXX, as a contribution of capital, such amount as may be required to allow XXXXXXXXXX to pay the costs associated with the issuance of its shares.
81. XXXXXXXXXX will use a portion of the additional advances under the XXXXXXXXXX to pay the costs referred to in paragraphs 79 and 80, above.
82. XXXXXXXXXX, will enter into separate unanimous shareholder agreements with XXXXXXXXXX. Each XXXXXXXXXX will provide, among other things, that without the prior written consent of XXXXXXXXXX for the Beneficial Holders of the Special Shares of the applicable XXXXXXXXXX, or except as otherwise provided or required by the Transaction Documents:
a) XXXXXXXXXX shall not transfer or encumber the common shares of the applicable XXXXXXXXXX except to XXXXXXXXXX;
b) no additional shares of the applicable XXXXXXXXXX may be issued;
c) except as contemplated in clause (a), no transfer or encumbrance of, or security interest over, assets of the applicable XXXXXXXXXX will be effected, and
d) the business and activities that the applicable XXXXXXXXXX may carry on and the powers that it may exercise are only those permitted or required by the Transaction Documents or required by applicable law. The applicable XXXXXXXXXX will not incur any indebtedness or other liability, make any guarantee, amalgamate, merge or consolidate, or declare or pay any dividends other than on its Special Shares, or purchase or redeem any of its shares other than its Special Shares.
83. XXXXXXXXXX, and XXXXXXXXXX will enter into an agreement (the “XXXXXXXXXX Put Agreement”) under which XXXXXXXXXX may, upon the occurrence of an Event of Retraction and in certain other circumstances, require XXXXXXXXXX to acquire (i) all of the outstanding Class XXXXXXXXXX Special Shares registered in the name of XXXXXXXXXX on behalf of the Beneficial Holders, for an amount 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 inter-corporate dividend, or (ii) all of the XXXXXXXXXX and related security then held by XXXXXXXXXX, for an amount 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.
In certain circumstances, XXXXXXXXXX will have the right to call (i) all of the Class XXXXXXXXXX Special Shares registered in the name of XXXXXXXXXX on behalf of the Beneficial Holders, for an amount 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 inter-corporate dividend or (ii) all of the XXXXXXXXXX and related security then held by XXXXXXXXXX, for an amount 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.
The obligations of XXXXXXXXXX under the XXXXXXXXXX Put Agreement will be secured by a letter of credit issued by an issuer acceptable to the XXXXXXXXXX and on terms satisfactory to the XXXXXXXXXX.
XXXXXXXXXX will pay to XXXXXXXXXX an annual fee (the "XXXXXXXXXX Put Fee") in the amount of $XXXXXXXXXX, as consideration for entering into the XXXXXXXXXX Put Agreement. Such fee will accrue and the amount thereof is subject to approval by XXXXXXXXXX will provide a letter of credit from a bank acceptable to the Class XXXXXXXXXX Purchasers for the XXXXXXXXXX Put. XXXXXXXXXX will pay an annual fee of XXXXXXXXXX (depending upon the credit rating of XXXXXXXXXX) of the Aggregate Redemption Price of the then outstanding Class XXXXXXXXXX Special Shares to the financial institution providing letter of credit support for the XXXXXXXXXX Put.
84. XXXXXXXXXX, will enter into separate agreements with XXXXXXXXXX (the “Debt Put/Call Agreement XXXXXXXXXX” and the “Debt Put/Call Agreement XXXXXXXXXX”, respectively, and, collectively, the “Debt Put/Call Agreements”) pursuant to which:
a) the applicable XXXXXXXXXX will have the right at any time to require Beneficial Holders of its Special Shares to purchase all, but not less than all, of XXXXXXXXXX, as the case may be, and related security then outstanding; and
b) XXXXXXXXXX, will have the right in certain circumstances to require the applicable XXXXXXXXXX to sell to the Beneficial Holders of its Special Shares all, but not less than all, of the XXXXXXXXXX, as the case may be, then outstanding,
in each case for a purchase price equal to the principal amount of XXXXXXXXXX, as the case may be, then outstanding and owing to the applicable XXXXXXXXXX.
Under each of the Debt Put/Call Agreements, the Beneficial Holders of Special Shares of the applicable XXXXXXXXXX will pay the purchase price for the XXXXXXXXXX, as the case may be, and related security by way of certified cheques or bank drafts and, upon delivery of such cheques or bank drafts, the applicable XXXXXXXXXX will redeem a number of its Special Shares the Aggregate Redemption Amount of which will equal the purchase price of the XXXXXXXXXX, as the case may be, and related security sold by the applicable XXXXXXXXXX to the Beneficial Holders of its Special Shares. The applicable XXXXXXXXXX will satisfy the Aggregate Redemption Amount for such Special Shares by endorsing such cheques or bank drafts in favour of XXXXXXXXXX, as registered Holder of the Special Shares being redeemed.
85. XXXXXXXXXX will enter into separate agreements with XXXXXXXXXX, in respect of Special Shares of XXXXXXXXXX (the “Share Put Agreement XXXXXXXXXX” and the “Share Put Agreement XXXXXXXXXX”, respectively, and collectively the “Share Put Agreements”), which will provide that XXXXXXXXXX, will have the right in certain circumstances to require XXXXXXXXXX to purchase all of the outstanding Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares, as the case may be, held by XXXXXXXXXX on behalf of the Beneficial Holders of such shares, for a purchase price per share equal to the Redemption Price of such a share plus accrued and unpaid dividends and plus such additional amounts as may be necessary to place the Beneficial Holder of such a share in the same after tax position as it would have been in had the amount paid in respect of accrued and unpaid dividends been received as a tax-free inter-corporate dividend.
XXXXXXXXXX will provide security acceptable to XXXXXXXXXX, to secure the obligations of XXXXXXXXXX under the Share Put Agreement XXXXXXXXXX and the Share Put Agreement XXXXXXXXXX and under the Support Agreement XXXXXXXXXX and the Support Agreement XXXXXXXXXX, as the case may be, and the other Transaction Documents. In each case, the above noted security will be essentially the same security as will exist for the XXXXXXXXXX plus a pledge of the shares of each of XXXXXXXXXX, as applicable.
86. “Adverse Yield Event” means:
a) any new legislation or any change in any applicable existing or new legislation (and for these purposes “legislation” shall include any order-in-council, regulation, rule, guideline, treaty or directive (whether or not having the force of law)) of Canada or any province of Canada (other than any such change which results in a change in any rate of tax, including surtax, applicable to financial institutions or corporations generally), any announcement by any governmental authority, entity or agency (including any central bank or other fiscal or monetary authority or agency) of Canada or any province of Canada regarding the enactment of such new legislation or the making of any such change, any change in the interpretation or administration of any applicable legislation by any governmental authority, entity or agency (including any central bank or other fiscal or monetary authority or agency) of Canada or any province of Canada, or any notice from Revenue Canada that the income tax ruling in respect of these transactions has ceased to be applicable in accordance with its terms for any reason whatsoever;
b) any judgement or order of a court of competent jurisdiction in Canada or any province of Canada in any matter or case, whether or not an appeal has been instituted and notwithstanding the existence of any right of appeal;
c) any change in the status of XXXXXXXXXX, as the case may be, (including without limitation, the loss of its status as a “taxable Canadian corporation”, as that term is defined in subsection 89(1) of the Act) under any applicable legislation of Canada or any province of Canada;
d) any request or direction (whether or not having the force of law) from any authority, entity or agency (including any central bank or other fiscal or monetary authority or agency) in Canada or any province of Canada; or
e) any assessment or reassessment of any person for any Canadian federal or provincial tax or both,
which, in the sole opinion of any Holder or Beneficial Holder of Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares, as the case may be, has, or may reasonably be expected to have, one or more of the following effects:
i) requiring such Holder, in computing its income subject to tax, to include the amount of any dividend or other distribution, or any part thereof, received or receivable or deemed to be received or receivable by such Holder, or accrued and unpaid (whether or not declared or set aside) on any of the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares, as the case may be, owned by such Holder, and precluding such Holder, in computing its income subject to tax, from deducting an amount equal to such amount;
ii) precluding such Holder, in computing its income subject to tax, from deducting any amount paid or payable on account of interest on any indebtedness or on account of costs and expenses incurred, or considered by the relevant taxing authority to have been incurred, by such Holder in connection with, or arising directly or indirectly as a result of, its acquisition and/or holding of any of the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares, as the case may be;
iii) imposing upon such Holder any tax (other than income tax on any amount described in clause (i) or (ii) above), or levying any penalty or other charge, on or in respect of any redemption proceeds, or any dividend or other distribution, or any part thereof, received or receivable or deemed to be received or receivable by such Holder, or accrued and unpaid (whether or not declared or set aside), on any of the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares, as the case may be, owned by such Holder or otherwise on or in respect of the acquisition, holding or disposition (excluding any income or capital gains tax in respect of an actual gain on disposition other than, in the case of any Holder other than XXXXXXXXXX or any affiliate, as that term is defined in the XXXXXXXXXX Business Corporations Act, of XXXXXXXXXX, any gain realized as a result of exercising rights under any Share Put Agreement, any Debt Put/Call Agreement, the XXXXXXXXXX Put Agreement any letter of credit delivered by XXXXXXXXXX) of any of the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares, as the case may be, or any combination of the foregoing;
iv) A. imposing, modifying, or deeming applicable any reserve, liquidity, cash margin, special deposit, deposit insurance or similar requirement against assets held by, or deposits in or for the account of, or in respect of any acquisition of funds or loan by, a Canadian office of such Holder; or
B. imposing on such Holder, or expecting there to be maintained by such Holder, any capital adequacy or additional capital requirement (including, without limitation, a requirements that affects such Holder’s allocation of capital resources to its obligations) in connection with the assets or obligations:
and the result of any of the foregoing is to increase the cost to such Holder, or reduce the income receivable or the effective return on capital or assets realizable by such Holder, with respect to or in connection with any of the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares, as the case may be, owned by such Holder, or to cause such Holder to make any payment or forego any interest, fees, dividends, distributions or other return on, or calculated by reference to, any sum received or receivable in connection with any of the Class XXXXXXXXXX Special Shares or the , Class XXXXXXXXXX Special Shares, as the case may be, held by such Holder;
v) increasing the after-tax cost by any amount to such Holder of holding any of the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares, as the case may be, or otherwise decreasing the after-tax return to such Holder on any of the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares, as the case may be, owned by such Holder by any amount;
vi) imposing upon such Holder any interest, penalty or other charge in respect of any amounts described in clauses (i) to(v), above; or
vii) making it unlawful or impossible for such Holder to continue to hold any of the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares, as the case may be, owned by such Holder or to give effect to its obligations under the transaction documents relating to the issuance and holding of the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares, as the case may be,
provided that
a) for the purpose of clauses (i) to (vii), above, it is to be assumed that:
(1) the Holder referred to therein is, at all relevant times and throughout all relevant periods, both taxable and paying tax at the highest Canadian federal corporate tax rate (including federal surtaxes) and the greatest of the maximum rates of provincial corporate tax applicable in any province of Canada (including provincial surtaxes) at such times and throughout such periods;
and
(2) each Holder has, as its sole asset, the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares, as the case may be, owned by it and has revenues, costs and expenses, relating only to such Class XXXXXXXXXX Special Shares or Class XXXXXXXXXX Special Shares, as the case may be; and
b) each event described in any of subparagraphs (a) to (e), above. shall be deemed to have occurred upon the date such event first has or may have any of the effects described in any of clauses (I) to (vii), above, notwithstanding that such date may precede the date of actual occurrence of such event and any reference to a Holder of Class XXXXXXXXXX Special Shares or Class XXXXXXXXXX Special Shares, as the case may be, shall be a reference to any beneficial and/or registered Holder thereof; and
c) any assessment or reassessment referred to in subparagraph (e), above, shall be deemed to include all other assessments or reassessments (for other taxation years and/or other jurisdictions) that may possibly be issued in respect of one or more of the issues contained in such assessment or reassessment.
87. Notwithstanding the terms and conditions of any of the Special Shares, or any mandatory redemption of any of the Special Shares that may be required by the Administrative Agent on behalf of the Beneficial Holders, an amount or amounts which, in aggregate, are equal to or greater than the Excess Cash Flow (as defined below) arising in any Fiscal Year shall be applied to redeem Special Shares (and to pay the dividends required in connection with such redemptions) within XXXXXXXXXX after the end of each Fiscal Year. For the purpose of determining Excess Cash Flow for the first Fiscal Year in which any of the Special Shares are first issued, the Excess Cash Flow shall not include any month, or part thereof, prior to the issue of such Special Shares.
“Excess Cash Flow” in respect of any Fiscal Year of XXXXXXXXXX is the increase in cash for that Fiscal Year from all sources, as would be reported on a Consolidated Statement of Changes in Financial Position prepared in accordance with generally accepted accounting principles if only directly and indirectly owned subsidiaries of XXXXXXXXXX were included, but before outlays for:
a) the payment of dividends other than dividends paid on the Special Shares of either of the XXXXXXXXXX;
b) capital expenditures or any payment on capital account other than in respect of:
i) the purchase or redemption of the Special Shares of XXXXXXXXXX, other than redemptions made in the period in respect of the prior Fiscal Year’s Excess Cash Flow;
ii) repayments of indebtedness incurred in the normal and ordinary course of business and in existence at the date the Special Shares of XXXXXXXXXX are issued;
iii) repayments of additional debt incurred for the specific purpose of funding current operating requirements;
iv) expenditures or payments between any of XXXXXXXXXX and its directly or indirectly owned subsidiaries;
v) reasonable capital expenditures or payments on capital account incurred in the normal and ordinary course of the existing business and repayments of additional debt incurred for the specific purpose of making such capital expenditures or payments on capital account; and
vi) repayments of additional debt incurred for the specific purpose of enabling XXXXXXXXXX to repay debt to any of the XXXXXXXXXX;
c) payments or repayments of loans from or amounts owing to shareholders of XXXXXXXXXX or to any other member of the XXXXXXXXXX or redemptions of any of the shares of XXXXXXXXXX other than payment of any reasonable operating expenditure or costs to XXXXXXXXXX that are incurred by XXXXXXXXXX in the normal and ordinary course of XXXXXXXXXX business, including payment of “Additional Rents” pursuant to the License Agreement (as defined in paragraph 30, above) if permitted by the Term Lenders; and
d) loans or other amounts advanced to any director, officer or shareholder of XXXXXXXXXX or any other member of the XXXXXXXXXX, or to any other person, firm, or corporation, and, for purposes of this definition of Excess Cash Flow, 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.
88. XXXXXXXXXX, will enter into separate agreements with each of XXXXXXXXXX pursuant to which XXXXXXXXXX will agree to:
a) pay or cause to be paid to XXXXXXXXXX, as the case may be, as a contribution of capital, such amounts as may be required from time-to-time to allow XXXXXXXXXX, as the case may be, to pay the ongoing costs and expenses of its operation and administration, including the amounts described in paragraphs 79 and 80, above, as the case may be;
b) pay to each of XXXXXXXXXX, as a contribution of capital, such amount, as may be required by that XXXXXXXXXX from time to time to pay any required dividends on its outstanding Special Shares;
c) make such repayments on the XXXXXXXXXX, as the case may be, as may be required to enable the applicable XXXXXXXXXX to satisfy all of the share redemption obligations relating to its Special Shares;
d) in the event that there is an Adverse Yield Event, XXXXXXXXXX will pay to XXXXXXXXXX on behalf of the applicable Beneficial Holder, such additional amount as is necessary so that, after taking into account the full effect of any Adverse Yield Event and income taxes payable by a Beneficial Holder on any such additional amount, such Beneficial Holder will be in receipt of the same after tax return from the acquisition, ownership and disposition of the Special Shares as such Beneficial Holder would have received in the absence of the applicable Adverse Yield Event.
XXXXXXXXXX will agree to hold any payment it receives from XXXXXXXXXX under its particular XXXXXXXXXX for the benefit of XXXXXXXXXX until such time as such XXXXXXXXXX requires the funds for the purpose described above.
89. XXXXXXXXXX will be wound-up, subject to the operation of any applicable law, without any undue delay after the time that is the earlier of:
a) sixty days after the time at which all of its Special Shares are redeemed or cancelled;
and
b) five years from the date when the Special Shares are issued by such XXXXXXX.
In the event all of the Special Shares issued by such XXXXXXXXXX have not been redeemed by the date referred to in subparagraph (b), above, and such XXXXXXXXXX is precluded by applicable law from redeeming such Special Shares, then such XXXXXXXXXX shall not be wound-up until all such Special Shares have been redeemed.
90. If the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares, as the case may be, are beneficially owned by a Canadian chartered bank listed under Schedule I of the Bank Act (Canada), such Schedule I bank beneficial owner will waive its right to a portion of each dividend to be paid on such shares. The waived amount will make the dividend that such Schedule I bank beneficial owner receives the same amount as if the Dividend Rate, as defined in subparagraph 63(h), above, excluded theXXXXXXXXXX 63(h)(i), (ii), (iii), (iv) and (v).
The purpose of waiving such portion of the dividends on the Special Shares by the Schedule I banks is to provide a non-Schedule I bank owner of such Special Shares with the higher return that is required because of their higher cost of capital, without having different classes of special shares set up for each XXXXXXXXXX which would complicate any subsequent syndication of Special Shares purchased at closing.
91. After the closing of the proposed transactions and prior to or on XXXXXXXXXX will subscribe for and XXXXXXXXXX will issue to XXXXXXXXXX common shares of XXXXXXXXXX for $XXXXXXXXXX per share. The shareholders of XXXXXXXXXX will enter into a shareholders' agreement which will include, among other things, a voting agreement in favour of XXXXXXXXXX, piggyback rights in the event of a sale by XXXXXXXXXX of common shares held by it, and a mandatory purchase by a member of the XXXXXXXXXX of the shares of XXXXXXXXXX held by XXXXXXXXXX in the event of a change of control of XXXXXXXXXX. The common shares issued to XXXXXXXXXX will represent an approximate XXXXXXXXXX % interest in the common share equity of XXXXXXXXXX.
92. After XXXXXXXXXX and also after the date that the Partnership distributes the Class XXXXXXXXXX Preferred Shares of XXXXXXXXXX that it owns to XXXXXXXXXX, as described in paragraph 52, above, XXXXXXXXXX will cancel the Class XXXXXXXXXX Units of XXXXXXXXXX (or of XXXXXXXXXX, if the name of the partnership has been changed at that time) then owned by XXXXXXXXXX. Upon cancellation of these units, the remaining XXXXXXXXXX Class XXXXXXXXXX Units of XXXXXXXXXX (or of XXXXXXXXXX, if the name of the partnership has been changed) owned by Arm's Length Limited Partners will represent a XXXXXXXXXX% ownership interest of XXXXXXXXXX (or of XXXXXXXXXX, if the name of the partnership has been changed), excluding the interest held by the General Partner.
Purpose of the Proposed Transactions
The Proposed Transactions are considered necessary to allow the debts of the Partnership to be restructured through the issuance of Distress Preferred Shares by XXXXXXXXXX in order to ensure the long-term viability the business currently carried on by the Partnership.
Rulings Provided
Provided that the preceding Statements of Fact are complete and accurate and that the Proposed Transactions are carried out as described above, the following rulings are provided:
A. The Class XXXXXXXXXX Special Shares of XXXXXXXXXX and the Class XXXXXXXXXX Special Shares of XXXXXXXXXX, as described in paragraph 62 of the Proposed Transactions, which are to be issued, as described in paragraphs 69, 70, 71, 72 and 77 of the Proposed Transactions, and where applicable, sold to a Subsequent Purchaser, will be:
i) shares described in subparagraph (e)(iii) of the definition of “term preferred share” in subparagraph 248(1) of the Act for a period not exceeding five years from the date of their issuance; and
ii) “exempt shares” pursuant to paragraph (c) of the definition thereof in subsection 112(2.6) of the Act for that same period;
and, accordingly, subsections 112(2.1), (2.2), (2.3) and (2.4) of the Act will not be applicable to deny to a Purchaser or a Subsequent Purchaser, as the particular case may be, a deduction pursuant to subsection 112(1) of the Act in respect of dividends received, or deemed to have been received, by it on such shares during such period.
B. Subject to paragraph 20(1)(e.1) of the Act, expenses incurred by XXXXXXXXXX in the course of borrowing money or issuing the Class XXXXXXXXXX Special Shares, as that term is defined in paragraph 59 of the Proposed Transactions, will, pursuant to paragraph 20(1)(e) of the Act, be deductible in computing the income of XXXXXXXXXX to the extent that such expenses are reasonable in the circumstances.
C. Subject to paragraph 20(1)(e.1) of the Act, expenses incurred by XXXXXXXXXX in the course of borrowing money or issuing the Class XXXXXXXXXX Special Shares will, pursuant to paragraph 20(1)(e) of the Act, be deductible in computing the income of XXXXXXXXXX to the extent that such expenses are reasonable in the circumstances.
D. Subject to paragraph 20(1)(e.1) of the Act, expenses incurred by XXXXXXXXXX in the course of restructuring its debt will, pursuant to paragraph 20(1)(e) of the Act, be deductible in computing the income of XXXXXXXXXX to the extent that such expenses are reasonable in the circumstances.
E. No amount will be included in the income of XXXXXXXXXX, as the particular case may be, pursuant to any of section 9, subsections 12(3) or (6), 16(1), 246(1), or paragraphs 12(1)(c) or (x) of the Act in respect of capital contributions made, or required to be made, by XXXXXXXXXX to XXXXXXXXXX, as described in paragraphs 79, 80 and 88 of the Proposed Transactions, nor will such amounts constitute proceeds of disposition, within the meaning of that term in section 54 of the Act, to XXXXXXXXXX, as the particular case may be, from the disposition of any property.
F. The cost amount, within the meaning of that term in subsection 248(1) of the Act, to XXXXXXXXXX of the XXXXXXXXXX, will, immediately after such debt is acquired by XXXXXXXXXX, be equal to the amount paid therefor.
G. The cost amount, within the meaning of that term in subsection 248(1) of the Act, to XXXXXXXXXX of the XXXXXXXXXX, will, immediately after such debt is acquired by XXXXXXXXXX, be equal to the amount paid therefor.
H. The cost amount, within the meaning of that term in subsection 248)(1) of the Act, to a Purchaser of a Class XXXXXXXXXX Special Share or a Class XXXXXXXXXX Special Share will, immediately after such share is issued, be equal to the amount paid therefor.
I. The cost amount, within the meaning of that term in subsection 248(1) of the Act, to a Subsequent Purchaser of a Class XXXXXXXXXX Special Share or a Class XXXXXXXXXX Special Share, will, immediately subsequent to the purchase thereof, as contemplated in paragraph 73 of the Proposed Transactions, be equal to the amount paid therefor.
J. No amount will be included in computing the income of any Purchaser of a Special Share pursuant to subsection 56(2) of the Act in respect of any contributions of capital made, or required to be made toXXXXXXXXXX by XXXXXXXXXX as described in paragraphs 79, 80 and 88 of the Proposed Transactions.
K. No amount will be included, pursuant to either of subsections 15(1) or 246(1) of the Act, in the income of XXXXXXXXXX solely by virtue of the fact that no interest will be paid or payable by XXXXXXXXXX to XXXXXXXXXX in respect of the XXXXXXXXXX or to XXXXXXXXXX in respect of the XXXXXXXXXX, as described in paragraphs 68 and 76 of the Proposed Transactions, or by virtue of the failure of either of XXXXXXXXXX to demand the repayment of the above mentioned debts owing to them by XXXXXXXXXX.
L. If the XXXXXXXXXX is acquired or reacquired, as the particular case may be, by the Beneficial Holders of the Class XXXXXXXXXX Special Shares, as contemplated in paragraph 84 of the Proposed Transactions, then the cost amount, within the meaning of that term in subsection 248(1) of the Act , of that loan to the Beneficial Holders of the Class XXXXXXXXXX Special Shares immediately subsequent to such acquisition or reacquisition, as the case may be, will be equal to the amount paid therefor.
M. If the XXXXXXXXXX is acquired or reacquired, as the particular case may be, by the Beneficial Holders of the Class XXXXXXXXXX Special Shares, as contemplated in paragraph 84 of the Proposed Transactions, then the cost amount, within the meaning of that term in subsection 248(1) of the Act, of that loan to the Beneficial Holders of the Class XXXXXXXXXX Special Shares immediately subsequent to such acquisition or reacquisition, as the case may be, will be equal to the amount paid therefor.
N. Subsection 112(4) of the Act will not be applicable to any loss realized by a Beneficial Holder of a Special Share on either of the XXXXXXXXXX, as the particular case may be, in respect of any dividends received, or deemed to have been received, by such Beneficial Holder on the Special Shares.
O. Section 80 of the Act will not be applicable to XXXXXXXXXX by virtue of the fact that a portion of the interest on theXXXXXXXXXX will be annually waived by XXXXXXXXXX or by virtue of the failure of XXXXXXXXXX to demand repayment of the XXXXXXXXXX as described in subparagraph 65(d) of the Proposed Transactions.
P. TheXXXXXXXXXX, as described in subparagraph 65(a) and in paragraphs 73 and 83, respectively, of the Proposed Transactions, and the annual fee payable to the financial institutions providing the letter of credit support for the XXXXXXXXXX Put, as described in paragraph 83 of the Proposed Transactions, payable by XXXXXXXXXX in respect of a taxation year will, pursuant to paragraph 20(1)(e.1) of the Act, be deductible by XXXXXXXXXX in that taxation year to the extent that such amounts payable are reasonable in the circumstances.
Q. If the Class XXXXXXXXXX Special Shares or the Class XXXXXXXXXX Special Shares are reacquired by XXXXXXXXXX in the circumstances described in paragraph 73 of the Proposed Transactions, then the cost amount, within the meaning of that term in subsection 248(1) of the Act, to XXXXXXXXXX of such reacquired shares immediately subsequent to such reacquisition will be equal to the amount paid therefor.
R. If the Class XXXXXXXXXX Special Shares are acquired by XXXXXXXXXX in the circumstances described in paragraph 83 of the Proposed Transactions, then the cost amount, within the meaning of that term in subsection 248(1) of the Act, to XXXXXXXXXX of such shares immediately subsequent to such acquisition will be equal to the amount paid therefor.
S. Subsection 56(2) of the Act will not be applicable to a Beneficial Holder of a Special Share which is a Canadian chartered bank listed in Schedule I of the Bank Act as a result of the waiver of a portion of the dividends otherwise receivable as described in paragraph 90 of the Proposed Transactions.
T. As a result of the Proposed Transactions, in and of themselves, subsection 245(2) of the Act will not be applicable to redetermine the tax consequences confirmed in the rulings provided herein.
These rulings are provided subject to the limitations and qualifications set out in Information Circular 70-6R3 issued by Revenue Canada on December 30, 1996 and are binding upon the Department provided that the proposed transactions contemplated herein are completed by XXXXXXXXXX. The rulings are based on the Act and the Income Tax Regulations in their present form and do not take into account the effects of any proposed amendments thereto.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
XXXXXXXXXX
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