2000 Ruling 9927533 - TAKE-OVER, BUMP AND SALE

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: Various 88(1)(c) "bump" issues.

Position: Bump is available.

Reasons: Technical requirements are satisfied.

XXXXXXXXXX 							1999-001104

Attention: XXXXXXXXXX

XXXXXXXXXX , 2000

Dear Sirs:

Re:

XXXXXXXXXX ("XXXXXXXXXX/A")
XXXXXXXXXX
Advance Income Tax Ruling Request

This is in reply to your letter of XXXXXXXXXX in which you requested various advance income tax rulings on behalf of the above-noted taxpayers. We also acknowledge the additional information in your letters of XXXXXXXXXX as well as your earlier correspondence dated XXXXXXXXXX

We understand that, to the best of your knowledge and that of the directors and officers of XXXXXXXXXX/A, none of the issues raised in this ruling request is (i) in an earlier return of the taxpayer or a related person, (ii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer or a related person, (iii) under objection by the taxpayer or a related person, (iv) before the courts or, if a judgement has been issued, the time limit for appeal to a higher court has not expired, or (v) the subject of a ruling previously issued by us.

DEFINITIONS

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

(a) "Act" means the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended; all statutory references herein are to provisions of the Act unless otherwise specified;

(b) "adjusted cost base" ("ACB") and "capital property" have the meanings assigned to those expressions in section 54;

(c) "Amalco 1" means the corporation formed as a result of the XXXXXXXXXX/B Amalgamation;

(d) "Amalco 2" means the corporation formed as a result of the Bidco Amalgamation;

(e) "Bidco" means XXXXXXXXXX;

(f) "Bidco Amalgamation" means the amalgamation of Bidco and Amalco 1 as described in paragraph 37(f) hereof;

(g) "CBCA" means the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as amended;

(h) "Consideration" means a fixed amount of cash consideration specified in the terms and conditions of the Special Shares to be provided by Bidco for the acquisition of each Special Share by Bidco pursuant to the XXXXXXXXXX Transaction;

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

(j) "XXXXXXXXXX/C" means XXXXXXXXXX;

(k) "XXXXXXXXXX/C Shares" means the common shares of XXXXXXXXXX /C;

(l) "XXXXXXXXXX /D Business" means the business described in paragraph 6(d) below;

(m) "XXXXXXXXXX Transaction" means the transfer to, and acquisition by, Bidco of the Special Shares pursuant to the terms of such shares as described in paragraphs 23(a) and 37(c) hereof;

(n) "XXXXXXXXXX/E" means XXXXXXXXXX;

(o) "XXXXXXXXXX/F" means XXXXXXXXXX;

(p) "XXXXXXXXXX/G" means XXXXXXXXXX;

(q) "XXXXXXXXXX/B" means XXXXXXXXXX;

(r) "XXXXXXXXXX/B Amalgamation" means the amalgamation of XXXXXXXXXX/B and certain subsidiaries of XXXXXXXXXX/B as described in paragraph 35(d) hereof;

(s) "XXXXXXXXXX/B Common Shares" means the common shares of XXXXXXXXXX/B;

(t) "XXXXXXXXXX/B Preferred Shares" means the XXXXXXXXXX Preference Shares, XXXXXXXXXX of XXXXXXXXXX/B as described in paragraph 9 hereof;

(u) "XXXXXXXXXX/B Shareholders" means all holders of XXXXXXXXXX/B Common Shares;

(v) "Internal Reorganization" means the transactions to be undertaken by XXXXXXXXXX/B and its subsidiaries as described in paragraph 35 hereof;

(w) "XXXXXXXXXX/H" means XXXXXXXXXX;

(x) "XXXXXXXXXX/I" means XXXXXXXXXX;

(y) "XXXXXXXXXX/J" means XXXXXXXXXX;

(z) "New Common Shares" has the meaning set forth in paragraph 37(a)(i) hereof;

(aa) "New XXXXXXXXXX/I" means the corporation referred to in paragraph 35(c) hereof which will acquire assets from XXXXXXXXXX/I;

(bb) "New XXXXXXXXXX/K" means the corporation referred to in paragraph 35(b) hereof which will acquire assets from XXXXXXXXXX/K;

(cc) "Offer" means the take-over bid to be made by XXXXXXXXXX/M for all of the XXXXXXXXXX/C Shares as described in paragraph 38 hereof;

(dd) "Offer Expiry Date" means the date on which the Offer expires;

(ee) "paid-up capital" means paid-up capital as defined in subsection 89(1);

(ff) "Proposed Transactions" means the transactions described in paragraphs 31 to 43;

(gg) "Reorganization" means the amendment to the articles of Amalco 1 as described in paragraph 37(a) hereof;

(hh) "XXXXXXXXXX/K" means XXXXXXXXXX

(ii) "XXXXXXXXXX/K Business Assets" has the meaning set forth in paragraph 35(b);

(jj) "XXXXXXXXXX/K Business" means the business described in paragraph 6(c) below;

(jj.1) "XXXXXXXXXX/L" means XXXXXXXXXX;

(kk) "Special Shares" means the Special Shares of Amalco 1, the terms and conditions of which are as described in paragraph 37(a)(ii) hereof;

(ll) "Support Agreement" means the agreement between XXXXXXXXXX/A and XXXXXXXXXX/M as described in paragraph 27 hereof;

(mm) "taxable Canadian corporation" has the meaning assigned in subsection 89(1);

(nn) "XXXXXXXXXX/M" means XXXXXXXXXX;

(oo) "XXXXXXXXXX Agreement" means the agreement between XXXXXXXXXX/A, Bidco and XXXXXXXXXX/B as described in paragraph 23 hereof;

(pp) "XXXXXXXXXX Notice" has the meaning set forth in paragraph 23(a) hereof; and

(qq) "XXXXXXXXXX /N" means XXXXXXXXXX.

FACTS

FACTS RELATING TO XXXXXXXXXX/A

2. XXXXXXXXXX/A is a public XXXXXXXXXX company incorporated in XXXXXXXXXX and is not a resident of Canada for purposes of the Act. The head office of XXXXXXXXXX/A is in XXXXXXXXXX/A is the holding company of a group of companies located in numerous jurisdictions XXXXXXXXXX.

3. As at XXXXXXXXXX/A had outstanding XXXXXXXXXX shares of XXXXXXXXXX per share. The XXXXXXXXXX/A XXXXXXXXXX shares are listed on the XXXXXXXXXX Stock Exchange and are widely held.

4. XXXXXXXXXX.

5. No XXXXXXXXXX/A shares will be issued by XXXXXXXXXX/A in connection with the Proposed Transactions.

FACTS RELATING TO XXXXXXXXXX B

6. XXXXXXXXXX/B is a public corporation as defined in subsection 89(1), a taxable Canadian corporation and is governed by the XXXXXXXXXX. The head office of XXXXXXXXXX/B is in XXXXXXXXXX/B has XXXXXXXXXX businesses described in more detail below.

XXXXXXXXXX

7. As at XXXXXXXXXX/B had outstanding XXXXXXXXXX/B Common Shares and no XXXXXXXXXX B Preferred Shares. The XXXXXXXXXX/B Common Shares are listed on XXXXXXXXXX Stock Exchange. As at XXXXXXXXXX, the aggregate stated capital of the XXXXXXXXXX /B Common Shares was approximately $XXXXXXXXXX and the aggregate paid-up capital of the XXXXXXXXXX /B Common Shares was approximately $XXXXXXXXXX.

8. XXXXXXXXXX.

9. XXXXXXXXXX.

10. XXXXXXXXXX.

11. XXXXXXXXXX.

12. The corporate structure of XXXXXXXXXX/B and its subsidiaries is substantially as set out in the chart attached as Schedule B to your XXXXXXXXXX letter. In particular, the following facts with respect to the corporate structure are relevant to the Proposed Transactions.

(a) XXXXXXXXXX/K is a taxable Canadian corporation, governed by the XXXXXXXXXX, all of the shares of which are held directly by XXXXXXXXXX/B. XXXXXXXXXX/B has held the shares of XXXXXXXXXX/K or a predecessor thereto since XXXXXXXXXX . As indicated on the chart, XXXXXXXXXX/K has XXXXXXXXXX operating divisions each of which comprises a distinct part of the XXXXXXXXXX business and holds directly or indirectly the shares of various corporations whose businesses are, or are related to, the XXXXXXXXXX business. In addition, XXXXXXXXXX/K owns XXXXXXXXXX% of the outstanding common shares of XXXXXXXXXX/F.

(b) XXXXXXXXXX/H is a taxable Canadian corporation governed by the XXXXXXXXXX, all of the shares of which are held directly by XXXXXXXXXX/B. XXXXXXXXXX/B has held the shares of XXXXXXXXXX/H since XXXXXXXXXX.

(c) XXXXXXXXXX/G is a taxable Canadian corporation governed by the XXXXXXXXXX, all of the shares of which are owned by XXXXXXXXXX/F. XXXXXXXXXX/F acquired the shares of XXXXXXXXXX/G in XXXXXXXXXX. The only substantial asset of XXXXXXXXXX/G is XXXXXXXXXX% of the issued XXXXXXXXXX/C Shares XXXXXXXXXX.

(d) XXXXXXXXXX/F is a taxable Canadian corporation governed by the XXXXXXXXX . XXXXXXXXXX/B has held the shares of XXXXXXXXXX/F or a predecessor thereto since XXXXXXXXXX. The common shares of XXXXXXXXXX/F are owned as to XXXXXXXXXX% directly by XXXXXXXXXX/B, as to XXXXXXXXXX% by XXXXXXXXXX/K and as to XXXXXXXXXX% by XXXXXXXXXX /I. XXXXXXXXXX/F has two types of assets. It holds all of the shares of XXXXXXXXXX/G as described in (c) above, and holds directly, and indirectly XXXXXXXXX.

(e) XXXXXXXXXX/I is a taxable Canadian corporation, governed by the XXXXXXXXXX, all of the shares of which are held directly by XXXXXXXXXX/B. XXXXXXXXXX/B has held the shares of XXXXXXXXXX/I since XXXXXXXXXX/I carries on the business of XXXXXXXXXX in Canada. In addition, XXXXXXXXXX/I owns XXXXXXXXXX% of the outstanding common shares of XXXXXXXXXX/F.

(f) XXXXXXXXXX/E is a taxable Canadian corporation, governed by the XXXXXXXXXX, all of the shares of which are held directly by XXXXXXXXXX/B. XXXXXXXXXX/B has held the shares of XXXXXXXXX /E since XXXXXXXXXX. The principal asset of XXXXXXXXXX/E is a XXXXXXXXXX% shareholding in XXXXXXXXXX/B directly holds all of the other outstanding shares of XXXXXXXXXX.

(g) XXXXXXXXXX/N is a taxable Canadian corporation, governed by the XXXXXXXXXX, all of the shares of which are held directly by XXXXXXXXXX B. The only significant asset of XXXXXXXXXX/N is all of the shares of XXXXXXXXXX a Canadian corporation which holds XXXXXXXXXX business.

FACTS RELATING TO XXXXXXXXXX/C

13. XXXXXXXXXX/C is a public corporation, as defined in subsection 89(1), a taxable Canadian corporation and is governed by the XXXXXXXXXX/C is an indirect subsidiary of XXXXXXXXXX/B with its head office in XXXXXXXXXX/C is engaged in the XXXXXXXXXX business through direct and indirect subsidiary corporations.

14. As at XXXXXXXXXX /C's issued and outstanding share capital consisted of XXXXXXXXXX As at the date hereof, XXXXXXXXXX/B indirectly owns XXXXXXXXXX% of the outstanding XXXXXXXXXX/C Shares. The balance of the XXXXXXXXXX/C Shares are held by the public. The XXXXXXXXXX/C Shares are listed on XXXXXXXXXX Stock Exchange. The XXXXXXXXXX shares of XXXXXXXXXX/C are listed on XXXXXXXXXX Stock Exchange.

15. As indicated in the corporate structure chart of XXXXXXXXXX/B, XXXXXXXXXX% of the XXXXXXXXXX/C Shares are directly owned by XXXXXXXXXX/G. All of the issued shares of XXXXXXXXXX/G are owned directly by XXXXXXXXXX/F.

FACTS RELATING TO XXXXXXXXX /M

16. XXXXXXXXXX/M XXXXXXXXXX is a public corporation as defined in subsection 89(1) and a taxable Canadian corporation.

17. As at XXXXXXXXXX/M's issued and outstanding share capital consisted of XXXXXXXXXX the XXXXXXXXXX/M XXXXXXXXXX shares are widely held and, to the best of the knowledge of XXXXXXXXX /M, no person has, during the two year period ending on the date hereof, been a specified shareholder (as defined for the purpose of subparagraph 88(1)(c)(vi)) of XXXXXXXXXX/M.

18. XXXXXXXXXX.

FACTS RELATING TO BIDCO

19. Bidco was incorporated under the XXXXXXXXXX on XXXXXXXXXX and is a taxable Canadian corporation. The authorized capital of Bidco consists of an unlimited number of common shares. One common share of Bidco was issued on XXXXXXXXXX to XXXXXXXXXX/J for $XXXXXXXXXX and prior to the transactions described below, Bidco will have no other assets and no other outstanding shares.

19.1 XXXXXXXXXX/L was recently incorporated under the Business Corporations Act (XXXXXXXXXX) and is a taxable Canadian corporation. Prior to the Proposed Transactions, XXXXXXXXXX /L will not have substantial assets. XXXXXXXXXX/L has not, during the two year period ending on the date hereof, been a specified shareholder (as defined for the purpose of subparagraph 88(1)(c)(vi)) of XXXXXXXXXX/B or XXXXXXXXXX/A.

OTHER FACTS

Background to the Proposed Transactions

20. XXXXXXXXXX.

21. XXXXXXXXXX.

22. XXXXXXXXXX.

XXXXXXXXXX Agreement

23. On XXXXXXXXXX/A, Bidco and XXXXXXXXXX/B entered into an agreement (the "XXXXXXXXXX Agreement") pursuant to which, among other things, and subject to certain conditions:

(a) XXXXXXXXXX/B has agreed to call a meeting of XXXXXXXXXX/B Shareholders for the purpose of considering and voting to approve an amendment to the articles of XXXXXXXXXX/B (the "Reorganization") pursuant to which, among other things, the XXXXXXXXXX/B Common Shares will be redesignated as "Special Shares" and the terms and conditions of such shares will be changed to provide that, if Amalco 1 (the successor to XXXXXXXXXX/B) issues the notice under the terms of the Special Shares (the "XXXXXXXXXX Notice"), the Special Shares will be transferred to, and acquired by Bidco, for the Consideration in the manner set out therein (such transfer and acquisition referred to as the "XXXXXXXXXX Transaction"),

(b) XXXXXXXXXX/B has agreed, if the meeting is called, to mail to XXXXXXXXXX/B Shareholders a proxy circular describing the Reorganization and the XXXXXXXXXX Transaction,

(c) XXXXXXXXXX/B has agreed, if the requisite shareholder approval is obtained at the XXXXXXXXXX/B Shareholders meeting with respect to the Reorganization, to (i) file articles of amendment to effect the Reorganization, and (ii) exchange the Special Shares held by Bidco for common shares of Amalco 1,

(d) provided the Internal Reorganization and the exchange of Special Shares by Bidco for common shares of Amalco 1 referred to in paragraph (c) hereof have been completed, Amalco 1 may issue the XXXXXXXXXX Notice but will have no obligation to do so, and

(e) Bidco has agreed, in the event that Amalco 1 issues the XXXXXXXXXX Notice, to acquire all of the Special Shares in accordance with their terms.

If Amalco 1 does not issue the XXXXXXXXXX Notice, no amount will be payable to XXXXXXXXXX/A or Bidco under the XXXXXXXXXX Agreement or otherwise. XXXXXXXXXX.

24. XXXXXXXXXX.

25. XXXXXXXXXX.

26. XXXXXXXXXX.

Support Agreement and XXXXXXXXXX/M's Financing

27. Concurrently with entering into the XXXXXXXXXX Agreement, on XXXXXXXXXX/A entered into an agreement with XXXXXXXXXX/M (the "Support Agreement") pursuant to which, among other things,

(a) XXXXXXXXXX/M has agreed, subject to certain conditions, to make the Offer to holders of XXXXXXXXXX/C Shares; and

(b) XXXXXXXXXX/A has agreed, in the following order, to (i) cause Amalco 1 to effect a consolidation of the Special Shares, (ii) cause Amalco 1 to amalgamate with Bidco to form Amalco 2 and (iii) cause Amalco 2 to enter into an agreement to deposit to the Offer, and not withdraw, the XXXXXXXXXX/C Shares held by Amalco 2.

XXXXXXXXXX.

28. The amount and nature of XXXXXXXXXX/M's financing of funds to acquire the XXXXXXXXXX/C Shares is being determined solely by XXXXXXXXXX/M,

XXXXXXXXXX.

29. XXXXXXXXXX.

XXXXXXXXXX

29.1 XXXXXXXXXX.

Offer for Shares of New XXXXXXXXXX/K

29.2 On XXXXXXXXXX immediately after the execution of the agreement referred to in paragraph 29.1 hereof, XXXXXXXXXX/A accepted an offer from XXXXXXXXXX/L pursuant to which XXXXXXXXXX/A agreed, subject to certain conditions including the completion of the XXXXXXXXXX Transaction and the Bidco Amalgamation, to cause Amalco 2 (which will then own the shares of New XXXXXXXXXX/K) to enter into an agreement with XXXXXXXXXX/L with respect to the sale to it of the shares of New XXXXXXXXXX/K.

Proxy Circular

30. XXXXXXXXXX/B has called a shareholders meeting and mailed to XXXXXXXXXX/B Shareholders a proxy circular describing the Reorganization and XXXXXXXXXX Transaction.

PROPOSED TRANSACTIONS

TRANSACTIONS RELATING TO XXXXXXXXXX/B AND ITS ACQUISITION BY BIDCO

31. XXXXXXXXXX.

32. The meeting of XXXXXXXXXX/B Common Shareholders will be held. In order to approve the resolution in respect of the Reorganization, the resolution must be approved by XXXXXXXXXX.

33. Provided that the requisite XXXXXXXXXX/B Shareholder approval is obtained, and provided certain other specified conditions precedent are met, including that XXXXXXXXXX/A, on behalf of Bidco, has obtained the advance income tax rulings herein, the Proposed Transactions described in paragraphs 34 to 43 hereof will be undertaken.

34. Each XXXXXXXXXX/B Common Share held by XXXXXXXXXX/J will be transferred to Bidco for one Bidco common share. The aggregate amount added to the stated capital of the Bidco common shares in respect of the transfer will equal the amount of the paid-up capital immediately before the transfer of the XXXXXXXXXX/B Common Shares so transferred. XXXXXXXXXX/J and Bidco will jointly elect under subsection 85(1), in prescribed form and within the time specified in subsection 85(6), in respect of the disposition of the XXXXXXXXXX/B Common Shares. The agreed amount in respect of each XXXXXXXXXX/B Common Share will be equal to the amount of Consideration to which a holder of a Special Share will be entitled on the transfer of the Special Share to Bidco and will not exceed the fair market value of each XXXXXXXXXX/B Common Share and will not be less than the lesser of the fair market value and the cost amount of each such share at the time of disposition.

35. On or prior to the Offer Expiry Date, but before the Reorganization, XXXXXXXXXX/B and certain subsidiaries of XXXXXXXXXX/B will undertake the following transactions:

(a) XXXXXXXXXX/B will transfer to XXXXXXXXXX/K all of the shares of XXXXXXXXXX/H. As consideration for such transfer, XXXXXXXXXX/K will issue a nominal number of common shares. XXXXXXXXXX/B and XXXXXXXXXX/K will jointly elect under subsection 85(1), in prescribed form and within the time specified in subsection 85(6), in respect of the transfer of each of the shares of XXXXXXXXXX/H. The agreed amount in respect of each such share will be the cost amount to XXXXXXXXXX/B of the share at the time of the transfer.

(b) XXXXXXXXXX/K will transfer to a newly incorporated Canadian subsidiary of XXXXXXXXXX/K ("New XXXXXXXXXX/K") (i) all or substantially all of the assets then owned by XXXXXXXXXX/K and used in active businesses carried on by it (the "XXXXXXXXXX/K Business Assets") and (ii) the shares of all corporations then owned by XXXXXXXXXX/K, other than the shares of XXXXXXXXXX/F and the shares of New XXXXXXXXXX/K. As consideration for such transfer, New XXXXXXXXXX/K will assume liabilities of XXXXXXXXXX/K related to the assets transferred and will issue common shares. XXXXXXXXXX/K and New XXXXXXXXXX/K will jointly elect under subsection 85(1), in prescribed form and within the time specified in subsection 85(6), in respect of the transfer of each of the assets transferred to New XXXXXXXXXX/K which qualifies as an eligible property within the meaning of subsection 85(1.1). The agreed amount in respect of each such asset will be within the parameters referred to in subsection 85(1).

(c) XXXXXXXXXX I will transfer to a newly incorporated Canadian subsidiary of XXXXXXXXXX/I ("New XXXXXXXXXX/I") certain of the assets then owned by XXXXXXXXXX/I, other than (among other things) the shares of XXXXXXXXXX/F and New XXXXXXXXXX/I. As consideration for such transfer, New XXXXXXXXXX/I will assume certain liabilities of XXXXXXXXXX/I and will issue common shares. XXXXXXXXXX/I and New XXXXXXXXXX/I will jointly elect under subsection 85(1), in prescribed form and within the time specified in subsection 85(6), in respect of the transfer of each of the assets transferred to New XXXXXXXXXX/I which qualifies as an eligible property within the meaning of subsection 85(1.1). The agreed amount in respect of each such asset will be within the parameters referred to in subsection 85(1).

(d) XXXXXXXXXX/B, and certain of its subsidiaries, namely, XXXXXXXXXX/F, XXXXXXXXXX/G, XXXXXXXXXX/K, XXXXXXXXXX/I, XXXXXXXXXX/E and XXXXXXXXXX/N, will amalgamate under subsection 184(1) of the CBCA (the "XXXXXXXXXX/B Amalgamation") to form Amalco 1 in such a manner that:

(i) all of the property (except amounts receivable from any predecessor corporation or shares of any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become property of Amalco 1 by virtue of the amalgamation;

(ii) all of the liabilities (except any amounts payable to any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become liabilities of Amalco 1 by virtue of the amalgamation; and

(iii) no securities or other property will be issued and the XXXXXXXXXX/B Common Shares will remain outstanding following such amalgamation as Amalco 1 common shares with a stated capital equal to the stated capital of the XXXXXXXXXX/B Common Shares.

35.1 XXXXXXXXXX.

36. The funds required to pay the Consideration for the acquisition of the Special Shares, as described in paragraph 37(c), will be obtained as follows. Bidco will borrow a portion of the funds from XXXXXXXXXX. Another portion will be borrowed by Bidco, on an interest-bearing basis, from one or more companies in the XXXXXXXXXX/A group. XXXXXXXXXX.

37. On the Offer Expiry Date after the completion of the transactions in paragraphs 35 and 35.1 hereof but before the time at which the Offer expires, the following steps will occur in the following order:

(a) Amalco 1 will file articles of amendment with respect to the Reorganization that will amend the articles of Amalco 1 to provide that:

(i) the issued common shares of Amalco 1 (which before the XXXXXXXXXX/B Amalgamation were the XXXXXXXXXX/B Common Shares) will be redesignated as Special Shares having the terms described in (ii) below and a new class of common shares of Amalco 1 (the "New Common Shares") will be authorized;

(ii) the Special Shares of Amalco 1 will have the same rights as the New Common Shares of Amalco 1 except that the terms of the Special Shares will provide that, upon the issuance of the XXXXXXXXXX Notice by Amalco 1 in the manner provided in the share provisions to holders of the Special Shares, the Special Shares will be automatically transferred to Bidco for the Consideration per share to be paid in accordance with the share provisions and will thereupon lose all their voting rights.

(b) Bidco will exchange each Special Share held by it for one New Common Share of Amalco 1. The paid-up capital of the New Common Shares so issued will equal the paid-up capital immediately before the exchange of the Special Shares so exchanged.

(c) If Amalco 1 XXXXXXXXXX, it will issue the XXXXXXXXXX Notice in accordance with the terms of the Special Shares, upon the issuance of which the Special Shares held by the holders thereof will be automatically transferred to, and acquired by, Bidco. XXXXXXXXXX. If the XXXXXXXXXX Notice is issued by Amalco 1, the Special Shares will cease to be voting upon their transfer to Bidco. The Proposed Transactions that follow will only occur if Amalco 1 issues the XXXXXXXXXX Notice.

(d) The directors of Amalco 1 (the former directors of XXXXXXXXXX/B) will resign and will be replaced by nominees of Bidco.

(e) Articles of amendment for Amalco 1 will be filed by Amalco 1 providing for a consolidation of the Special Shares on a specified basis with fractional shares, if any, to be cancelled for the cash equivalent of the Consideration (pre-consolidation) that would have been paid by Bidco on the acquisition of the Special Shares. XXXXXXXXXX.

(f) Bidco and Amalco 1 will amalgamate under subsection 184(1) of the CBCA (the "Bidco Amalgamation") to form Amalco 2 in such a manner that:

(i) all of the property (except amounts receivable from any predecessor corporation or shares of any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become property of Amalco 2 by virtue of the amalgamation;

(ii) all of the liabilities (except any amounts payable to any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become liabilities of Amalco 2 by virtue of the amalgamation; and

(iii) no securities or other property will be issued on the Bidco Amalgamation and the Bidco Common Shares will remain outstanding following the Bidco Amalgamation as Amalco 2 common shares with a stated capital equal to the stated capital of the Bidco Common Shares.

(g) XXXXXXXXXX/A will cause Amalco 2 to enter into an agreement with XXXXXXXXXX/M providing for the deposit of the XXXXXXXXXX/C Shares owned by Amalco 2 under the Offer and agreeing not to withdraw such XXXXXXXXX /C Shares.

TRANSACTIONS RELATING TO THE OFFER FOR THE XXXXXXXXXX/C SHARES

38. Following the mailing by XXXXXXXXXX/B of the proxy circular, with respect to the Reorganization and XXXXXXXXXX Transaction, to the holders of XXXXXXXXXX/B Common Shares as described in paragraph 30, XXXXXXXXXX/M will prepare and mail to holders of XXXXXXXXXX/C Shares a take-over bid circular describing the Offer. The consideration payable by XXXXXXXXXX/M under the Offer for each XXXXXXXXXX/C Share will be a specified amount of cash. XXXXXXXXXX. The Offer will be subject to a number of conditions, including that at least 90% of the outstanding XXXXXXXXXX/C Shares be tendered to the Offer and not be withdrawn and that certain regulatory consents be obtained on satisfactory terms.

39. On the Offer Expiry Date but before the Offer expires, Amalco 2 will enter into an agreement with XXXXXXXXXX/M providing for the deposit of its XXXXXXXXXX/C Shares as described in paragraph 37(g) hereof and will tender its XXXXXXXXXX/C Shares to the Offer.

40. At the specified expiry time on the Offer Expiry Date, XXXXXXXXXX/M will take up and pay for all XXXXXXXXXX/C Shares deposited under the Offer. If required, XXXXXXXXXX/M will acquire any XXXXXXXXXX/C Shares not deposited to the Offer through the compulsory acquisition provisions of the CBCA.

TRANSACTIONS RELATING TO THE SALE OF NEW XXXXXXXXXX/K SHARES

41. XXXXXXXXXX/A will cause Amalco 2 to enter into an agreement with XXXXXXXXXX/L providing for the sale of the New XXXXXXXXXX/K shares to XXXXXXXXXX/L. XXXXXXXXXX/K. XXXXXXXXXX/L anticipates financing the acquisition of the shares of New XXXXXXXXXX/K.

XXXXXXXXXX.

41.1 The proceeds from the sale of the shares of New XXXXXXXXXX/K will be used by Amalco 2 to repay money previously borrowed by Bidco to acquire the Special Shares.

OTHER MATTERS

42. No dividends will be paid by Amalco 1 to Bidco before the Bidco Amalgamation, other than deemed dividends, if any, arising as a result of the cancellation of fractional Special Shares pursuant to the consolidation described in paragraph 37(e) hereof.

42.1 Amalco 1 will elect in its tax return for its taxation year ending immediately before the acquisition of control of it by Bidco not to have subsection 256(9) apply.

43. In its tax return for the taxation year commencing at the time of the Bidco Amalgamation, Amalco 2 will designate in respect of each of XXXXXXXXXX and other capital property (that is not depreciable property) acquired by it on the Bidco Amalgamation (and owned by Amalco 1 at the time that Bidco acquired control of Amalco 1), an amount pursuant to paragraph 88(1)(d) equal to the amount by which the fair market value of each such property at the time Bidco acquired control of Amalco 1 exceeds the cost amount of such property to Amalco 1 immediately before the Bidco Amalgamation. XXXXXXXXXX. The total of the amounts so designated by Amalco 2 will not exceed (i) the total of the adjusted cost base to Bidco of the common shares of Amalco 1 and of the Special Shares owned by Bidco immediately before the Bidco Amalgamation, less (ii) the amount by which (A) the total of the cost amounts to Amalco 1 of all property owned by it immediately before the Bidco Amalgamation plus any money of Amalco 1 on hand immediately before the Bidco Amalgamation, exceeds the total of (B) the total of the debts owing by Amalco 1, or of any other obligation of Amalco 1 to pay any amount, that was outstanding immediately before the Bidco Amalgamation, and (C) the amounts of any reserve (other than those excepted in subclause 88(1)(d)(i)(C)) deducted in computing the income of Amalco 1 for its taxation year ending immediately before the Bidco Amalgamation and (iii) the amount of any deemed dividends received by Bidco as a result of the cancellation of fractional Special Shares held by Bidco pursuant to the consolidation described in paragraph 37(e) hereof.

PURPOSE OF THE PROPOSED TRANSACTIONS

44. The predecessor company of XXXXXXXXXX/A held a diversified group of companies from

XXXXXXXXXX.

45. XXXXXXXXXX.

46. XXXXXXXXXX.

RULINGS

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

A. Provided the requisite election is made by XXXXXXXXXX/J and Bidco in the prescribed form and within the prescribed time, the provisions of subsection 85(1) will apply to the transfer by XXXXXXXXXX/J of the XXXXXXXXXX/B Common Shares, as described in paragraph 34 hereof, such that the aggregate agreed amount in respect of such transfer will be deemed to be the cost of the XXXXXXXXXX/B Common Shares to Bidco (which shares become common shares of Amalco 1 as a consequence of the XXXXXXXXXX/B Amalgamation).

B. XXXXXXXXXX provided that no property acquired by Amalco 2 on the Bidco Amalgamation or any other property acquired by any person in substitution therefor (within the meaning of that phrase for the purposes of clause 88(1)(c)(vi)(B)) is acquired by any person described in any of subclauses 88(1)(c)(vi)(B)(I), (II) or (III) (on the assumption that the "subsidiary" referred to in those subclauses is XXXXXXXXXX/B or Amalco 1 or any predecessor corporation and the "parent" is Bidco) as part of the series of transactions or events that includes the acquisition of control of Amalco 1 by Bidco and the Bidco Amalgamation, the cost to Amalco 2 of each property owned by Amalco 1 at the time Bidco acquired control of Amalco 1 and that became property of Amalco 2 by virtue of the Bidco Amalgamation would, by virtue of subsection 87(11), be deemed by paragraph 88(1)(c) to be the cost amount of such property plus, on the assumption that such property is capital, but not depreciable, property, the amount designated by Amalco 2 under paragraph 88(1)(d) in respect of the property as described in paragraph 43 hereof.

C. Provided that the XXXXXXXXXX/C Shares owned by XXXXXXXXXX/G are capital property to XXXXXXXXXX/G, none of the Proposed Transactions will cause such shares to cease to be capital property to Amalco 1.

D. Provided that the shares of the subsidiaries of XXXXXXXXXX K and the shares of XXXXXXXXXX/H are capital property to XXXXXXXXXX/K and XXXXXXXXXX/B, respectively, prior to the Proposed Transactions, (i) none of the Proposed Transactions described herein will cause such shares to cease to be capital property to XXXXXXXXXX/K or XXXXXXXXXX/B, respectively, and (ii) the common shares of New XXXXXXXXXX/K issued to XXXXXXXXXX/K as consideration for the transfer of the shares of such subsidiaries and of XXXXXXXXXX/H, as described in paragraph 35(b) hereof, will be considered to be capital property to XXXXXXXXXX/K and Amalco 1.

E. The common shares of New XXXXXXXXXX/K issued to XXXXXXXXXX/K in respect of the transfer of the XXXXXXXXXX/K Business Assets as described in paragraph 35(b) hereof will be deemed to be capital property of XXXXXXXXXX/K pursuant to section 54.2 and none of the transactions or events described herein will cause such shares to cease to be capital property to Amalco 1.

F. Subject to the application of subsection 18(4), a reasonable amount of interest payable in respect of a year by Amalco 2 on borrowed money used by Bidco to acquire the Special Shares as described in paragraphs 36 and 37(c) hereof will be deductible by Amalco 2 in computing its income provided that Amalco 2 continues to use the property acquired on the Bidco Amalgamation or property substituted therefor (except for XXXXXXXXXX property which is disposed of by Amalco 2 to a person with which Amalco deals at arm's length and the proceeds from the disposition of which are used by Amalco 2 to repay borrowed money) for the purpose of gaining or producing income.

G. Subsection 245(2) will not be applied, as a result of the Proposed Transactions, in and of themselves, to redetermine the tax consequences as described in the rulings given.

These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 30, 1996 and are binding provided that the Proposed Transactions are completed by XXXXXXXXXX.

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

Opinion

Provided subsection 88(1) is amended substantially in accordance with the draft technical amendments to the Act released by the Minister of Finance on November 30, 1999, and provided that no property acquired by Amalco 2 on the Bidco Amalgamation or any other property acquired by any person in substitution therefor (within the meaning of that phrase for the purposes of clause 88(1)(c)(vi)(B)) is acquired by any person described in any of subclauses 88(1)(c)(vi)(B)(I),(II) or (III) (on the assumption that the "subsidiary" referred to in those subclauses is XXXXXXXXXX/B or Amalco 1 or any predecessor corporation and the "parent" is Bidco) as part of the series of transactions or events that includes the acquisition of control of Amalco 1 by Bidco and the Bidco Amalgamation, the cost to Amalco 2 of each property owned by Amalco 1 at the time Bidco acquired control of Amalco 1 and that became property of Amalco 2 by virtue of the Bidco Amalgamation will, by virtue of subsection 87(11), be deemed by paragraph 88(1)(c) to be the cost amount of such property plus, on the assumption that such property is capital, but not depreciable, property, the amount designated by Amalco 2 under paragraph 88(1)(d) in respect of the property as described in paragraph 43 hereof.

The foregoing opinion is not a ruling and, in accordance with the practice described in Information Circular IC 70-6R3, is not binding.

Nothing in this letter should be construed as confirmation of the tax consequences of any of the transactions described in this letter other than as specifically described.

Yours truly,

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