2005 Ruling 2004-0106481R3 - Employee benefit plan-Shares

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.

Principal Issues: Will the plan be an EBP, SDA, RCA or section 7 arrangement?

Position: We ruled that the plan will be an EBP to the extent the provisions of the plan provide for the employer to make contributions to a trust which then acquires shares on the open market to be distributed to the employees. The plan will not be an EBP to the extent it provides for the distribution of shares directly to employees. The plan will not be an SDA.

Reasons: The plan provides that it is for the purpose of providing shares to employees and that employers may provide these shares directly to the employees. However, the ruling request sets out that the employer will not follow these rules for employees that are subject to Canadian taxation and will instead contribute an amount to a trust which will use the funds to acquire shares on the open market. We accepted that the plan represents a complex arrangement and that the Canadian trust provisions constituted an EBP that is a distinct part of that arrangement. The EBP and the plan as a whole are both designed to allow employees to acquire shares of the employer with cash incentives/assistance provided by the employer and not to allow the deferral of taxation of a deferred amount. Hence neither the arrangement as a whole nor the EBP is an SDA.

XXXXXXXXXX 						2004-010648

XXXXXXXXXX, 2005

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling
Participants' Share Purchase Plan
XXXXXXXXXX

This is in reply to your letters of XXXXXXXXXX, in respect of your request for an advance income tax ruling on behalf of the above-noted corporation.

This letter is based solely on the facts and proposed transactions described below. The documentation submitted with your request does not form part of the facts and proposed transactions and any references thereto are provided solely for the convenience of the reader.

Definitions and Abbreviations

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

(a) "Act" means: the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1, as amended to the date hereof;

(b) "Acquisition Date" means: with respect to a Participant Share, the date on which the share is acquired by a Participant as described in 7(g) below;

(c) "Base Salary" means: regular base salary excluding, for greater certainty, bonuses, overtime and other variable pay;

(d) "Board" means: the board of directors of the Parent;

(e) "Cause" means: with respect to a specific Participant, the same as is set forth in that Participant's written contract of employment with an Employer, if any, and otherwise means:

(i) the failure of the Participant to perform, in a material respect, his duties and responsibilities, or to follow, in a material respect, the lawful policies, procedures, instructions or directions of the Employer, except as may result from the disability of the Participant, which failure is not cured by the Participant within 10 days of being advised of that failure in writing by the Employer;

(ii) any fraudulent activity on the part of the Participant;

(iii) the conviction of the Participant for any crime involving fraud, misrepresentation or breach of trust;

(iv) any financial impropriety, intentional dishonesty, breach of duty of loyalty or any intentional act on the part of the Participant in discharging his duties and responsibilities of employment that has the effect of materially injuring the reputation, business or business relationships of the Parent or any Subsidiary; or

(v) any other act constituting cause under the laws of the Participant's Relevant Employment;

(f) "Committee" means: the XXXXXXXXXX of the Board or such other committee as may be designated by the Board to carry out all or some of the functions assigned to the XXXXXXXXXX Committee with respect to the Plan;

(g) "Corporation" means: XXXXXXXXXX,

BIN: XXXXXXXXXX,
XXXXXXXXXX Tax Services Office,
XXXXXXXXXX Tax Centre;

(h) "CRA" means: the Canada Revenue Agency;

(i) "Direction" means: a written direction or instruction given in accordance with the terms of the Trust Agreement to the Trustee by the Committee or a party authorized by the Corporation;

(j) "Eligible Leaver" means: a Participant who ceases to be in Relevant Employment by reason of death, involuntary termination without Cause, retirement at or after the earliest retirement age under an applicable pension plan sponsored by the Participant's Employer, or who ceases to be in Relevant Employment because the Participant's Employer ceases to be a Participating Company;

(k) "Eligible Employee" means an Employee who has completed at least XXXXXXXXXX months of continuous service and is not an active member of a share incentive plan provided by the Parent;

(l) "Employee" means: a permanent full-time or permanent part-time employee of any Participating Company who is employed in North America;

(m) "Employee Benefit Plan" means: for the purposes of this Ruling, the terms of the Plan and the Trust Agreement as described in 7 and 8 below to the extent they apply in respect to Trust Contributions and the payment of benefits out of the Trust to Participants and the term "Trust governed by the Employee Benefit Plan" means the Trust;

(n) "Employer" means: for any particular Employee, the Participating Company that employs the Employee;

(o) "Holding Period" means: with respect to a Participant Share, the period of XXXXXXXXXX years beginning with the Acquisition Date of the Share;

(p) "Parent" means: XXXXXXXXXX;

(q) "Participant" means: an Eligible Employee who has elected to participate in the Plan in accordance with 7(b) below and who is a resident of Canada for the purposes of the Act or is otherwise subject to tax under the Act with respect to the Eligible Employee's employment income received from an Employer, and, for greater certainty, includes any Employee who ceases to be a Participant with respect to any amounts receivable under the Plan as a result of the Employee's participation in the Plan at any time;

(r) "Participant Contribution" means: a Participant's contribution made under the Plan as described in 7(b), 7(c) and 7(d) below;

(s) "Participating Company" means: the Parent or a Subsidiary of the Parent that participates in the Plan as described in 7(a) below;

(t) "Pay Period" means: the pay period of the Participant;

(u) "Personal Account" means: the custodial account in respect of each Participant established by the Plan Administrator as described in 7(f) below;

(v) "Plan" means: the Participants' Share Purchase Plan as described herein;

(w) "Plan Administrator" means: a company or other entity appointed from time to time by the Committee to establish and administer the Personal Accounts and to purchase, hold or distribute Shares under, or from, the Personal Accounts in accordance with the terms and provisions of the Plan;

(x) "Plan Currency" means: the currency in which the Shares are traded on the Stock Exchange;

(y) "Plan Year" means: any period starting January 1 and ending December 31 during which the Plan is in force;

(z) "Regulations" means: The Income Tax Regulations;

(aa) "Relevant Employment" means: employment by a Participating Company;

(bb) "Ruling" means: this advance income tax ruling;

(cc) "Share" means: an ordinary common share of the Parent and includes a fraction thereof, and any share or other security received in exchange therefor; and

(i) "Dividend Share" means a Share acquired by a Participant through the distribution of stock dividends, or through the re-investment of cash dividends, paid on Shares that were previously acquired under the Plan as described in 7(l) below or a Share acquired from the Trust in relation to the distribution of dividends received by the Trust as described in 8(h) and 8(i) below if the Trustee is directed by the Committee to distribute the Shares as Dividend Shares;

(ii) "Participant Share" means a Share purchased with Participant Contributions as described in 7(g) below;

(iii) "Matching Share" means a Share awarded as described in 7(k) below; and

(iv) "Plan Share" means a Participant Share, a Dividend Share or a Matching Share, as the case may be;

(dd) "Stock Exchange" means: the XXXXXXXXXX Stock Exchange XXXXXXXXXX or such other stock exchange on which the Shares are listed, as the Board shall prescribe from time to time;

(ee) "Subsidiary" means: a person or company that is controlled by the Parent and operates in North America (including a person or company that has employees employed in North America) and for the purposes of this definition, "control" has the meaning ascribed thereto in Multilateral Instrument 45-105 Trades to Employees, Senior Officers, Directors and Consultants and "person" and "company" have the meanings defined in XXXXXXXXXX;

(ff) "Trust" means: the trust established by the Corporation, that is:

(i) at all times resident in Canada,

(ii) established to fund the payment of awards of Matching Shares to Participants under the Plan, and

(iii) comprised of all Trust Contributions and all Shares acquired by the Trustee as described in 8(b) below, together with any earnings, profits and increments thereon and any property or assets from time to time substituted therefore;

(gg) "Trustee" means: XXXXXXXXXX or such person or persons that are resident in Canada as may from time to time be appointed as trustee of the Trust pursuant to the Trust Agreement;

(hh) "Trust Agreement" means: the agreement described in 4 and 8 below; and

(ii) "Trust Contributions" means: all amounts paid to the Trust by the Corporation, the Parent, or any Employer and, for greater certainty, includes:

(i) all amounts paid to the Trustee excluding all amounts paid to the Trustee in respect of expenses incurred by the Trust;

(ii) all amounts paid to the Trustee in respect of expenses incurred by the Trust that are made in respect of the acquisition, holding and disposition of any property held within the Trust; and

(iii) all amounts that are not included in (ii) that are paid to the Trustee for expenses incurred by the Trustee where they are charged to the Trust in accordance with 8(p) below.

In addition, in this letter

(jj) the term "taxable Canadian corporation" has the meaning assigned by subsection 89(1) of the Act, the terms "employee" and "officer" have the meanings assigned to them by subsection 248(1) of the Act, and the terms "arm's length" and "related persons" have the meaning assigned by subsection 251(1) of the Act.

Facts

1. The Parent is incorporated under the laws of the XXXXXXXXXX. The Shares are principally traded on the Stock Exchange. The Parent through itself and its subsidiaries is in the business of XXXXXXXXXX.

2. The Corporation is incorporated under the laws of XXXXXXXXXX. It is a taxable Canadian corporation. The Corporation is an indirectly wholly-owned Subsidiary of the Parent. The Corporation is in the business of XXXXXXXXXX and related services in Canada.

3. Shares have been purchased by Eligible Employees since XXXXXXXXXX, and prior to the date of this Ruling, following the procedures described in 7(f), (g) and (h) below.

Proposed Plan

4. The Parent will establish the Employee Benefit Plan provisions of the Plan for Eligible Employees to which this Ruling applies, effective after the receipt of this Ruling. The Plan will consist of a Plan text as described in 7 below, and a Trust Agreement between the Corporation and the Trustee, providing for the establishment and administration of the Trust as described in 8 below.

5. Participant Shares will be purchased after the date of this ruling as described in 7(f), (g) and (h) below. Shares acquired as described in 3 above will be treated for purposes of the Plan as Participant Shares.

6. No Trust Contributions will be made and the Trustee will not purchase any Matching Shares until after the receipt of this Ruling.

7. The Plan consists of a number of provisions that are applicable to the Participants as well as a number of provisions that are only applicable to certain employees resident in the U.S. that elect to participate in the Plan. The provisions of the Plan that are relevant to the Participants are as follows:

General Provisions

(a) The Committee will administer the Plan. Any Subsidiary of the Parent, including the Corporation, may, with the agreement of the Committee, become a Participating Company by agreeing to be bound by the terms of the Plan. Any entity that ceases to be a Subsidiary shall automatically cease to be a Participating Company. A Participating Company will also cease to be a Participating Company upon written notice to that effect served by either the Participating Company or the Committee.

Participation, Personal Account and Participant's Share Provisions

(b) An Eligible Employee may elect to participate in the Plan by giving notice to the Eligible Employee's Employer or the Plan Administrator, in a manner prescribed by the Committee. The notice shall specify the full percentage of the Base Salary that the Eligible Employee elects to contribute under the Plan subject to the limitations set out in 7(c) and 7(d) below. Such Participant Contributions shall be made through payroll deductions (or by way of post-dated cheques remitted to the Employer in the event the Participant is on an unpaid leave of absence).

(c) Subject to the limits described in (d), the minimum amount to be deducted is XXXXXXXXXX% of Base Salary and the maximum amount to be deducted is not to exceed XXXXXXXXXX% of Base Salary (or such other percentage determined by the Committee from time to time) during any Pay Period.

(d) During any Plan Year, the amount of Participant Contributions that may be made by a Participant can not exceed $XXXXXXXXXX or such other amount determined by the Committee from time to time. However in no event shall the amount of the Participant Contributions in respect of a Participant during any Plan Year exceed the lesser of XXXXXXXXXX% of the Participant's Base Salary during the Plan Year and $XXXXXXXXXX.

(e) For greater certainty, a Participant's income from employment, as defined in the Act, for any year, will not be reduced by the amount of the Participant's Participant Contributions made in the year.

(f) Participant Contributions withheld through payroll deduction by a Participant's Employer, as well as Participant Contributions paid by way of post-dated cheques remitted to the Employer, shall be remitted by the Participant's Employer to the Plan Administrator as soon as practicable following the end of the month in which such withholding is effected. The Plan Administrator shall maintain, or cause to be maintained, one or more Personal Accounts in respect of each Participant. The Plan Administrator shall credit to a Participant's Personal Account all Participant Contributions made by such Participant, and all Plan Shares acquired by or awarded to the Participant under the Plan in any of the manners described in this paragraph, 7 or in 8 below.

(g) As soon as practicable following a month in which any Participant's Participant Contributions have been received by the Plan Administrator, the Plan Administrator will convert them into Plan Currency at the exchange rate prevailing at the time of receipt. The Plan Administrator shall then use these Participant Contributions to purchase Shares, including fractional Shares, on behalf of the Participants only on the open market through the facilities of the Stock Exchange. These Shares shall be referred to as "Participant Shares".

(h) The price of a Participant Share purchased in respect of a given month shall correspond to the market price at the time of purchase provided, however, that where the Plan Administrator has purchased in any given month Participant Shares at various prices, the purchase price of all such Shares for any Particular Participant shall correspond to the weighted average price paid for all purchases of Shares that are required to be made under the Plan in respect of such month.

(i) All of a Participant's Participant Shares and any Dividend Shares related thereto may be registered in the name of the Plan Administrator, on behalf of, and as agent for the Participant or may be registered in the name of the Participant. For greater certainty, Participant Contributions, Participant Shares and Dividend Shares acquired using dividends paid on Shares credited to a Participant's Personal Account (as described in 7(l) below) shall at no time be contributed to, or held in, the Trust.

(j) A Participant shall have full ownership of all Shares and any other property held in the Participant's Personal Account by the Plan Administrator on behalf of the Participant, including Shares distributed from the Trust to the Participant's Personal Account as described in 8 below. Shares held in a Participant's Personal Account cannot be forfeited. The Participant through the Plan Administrator shall exercise all rights and privileges with respect to such Shares, including voting rights.

(k) Matching Shares for a Participant will be acquired by the Plan Administrator from the Trust as more fully described in 8(g) below and will be held by the Plan Administrator in the Participant's Personal Account.

(l) Cash dividends on Participant Shares credited to, or held in, a Participant's Personal Account will be applied by the Plan Administrator to purchase additional Shares on behalf of the Participant on the open market through the facilities of the Stock Exchange. These Shares will also be held in the Participant's Personal Account. The Plan Administrator, on behalf of a Participant, will also hold in the Participant's Personal Account, any dividends on Participant Shares that are received in the form of Shares.

(m) A Participant may, at any time, give notice in writing to the Plan Administrator to sell or withdraw some or all of the Shares held in the Participant's Personal Account. In the first case, the Plan Administrator will sell the Shares, at the Participant's direction, and pay to the Participant an amount equal to the net proceeds of sale, less any brokerage fees. In the second case, the Plan Administrator will deliver to the Participant the Shares that have been withdrawn at the Participant's direction.

(n) In the event of a Participant's termination of Relevant Employment, retirement or death or in the event the Plan is terminated, as described in 7(z) below, the Plan Administrator shall, as directed by the Participant, the Participant's beneficiary or the legal representatives of the Participant's estate, as applicable, transfer and deliver the Shares held in the Participant's Personal Account to the Participant, the Participant's beneficiary or the legal representatives of the Participant's estate, as applicable, or sell all the Shares and deliver the net proceeds to the Participant, the Participant's beneficiary or the legal representatives of the Participant's estate, as applicable.

(o) In the event of the Participant's termination of Relevant Employment or retirement, if no direction is received by the Plan Administrator from the Participant within XXXXXXXXXX days of the termination or retirement, the Plan Administrator will sell all of the Shares held in the Participant's Personal Account on behalf of the Participant through the facilities of the Stock Exchange and will deliver the net proceeds to the Participant. In the event of the Participant's death, if no direction is received by the Plan Administrator within XXXXXXXXXX days of the death, from the Participant's beneficiary or the legal representatives of the Participant's estate, as applicable, subject to applicable law, the Committee shall issue instructions to the Plan Administrator requesting that the Shares held in the Participant's Personal Account be sold as soon as practicable following such XXXXXXXXXX -day period and stipulating the person or persons to whom the net proceeds shall be delivered. The Plan Administrator will act in accordance with instructions from the Committee. Any Participant Contributions held by the Plan Administrator in cash on behalf of the Participant shall be paid as soon as practicable following the date of a Participant's termination of Relevant Employment, retirement or death, to the Participant, the Participant's beneficiary, the legal representatives of the Participant's estate or such other person or persons as the Committee may specify, as applicable.

(p) The Trust, the Parent or a Participating Company (including the Corporation) will withhold or cause to be withheld from any amount payable to a Participant, by the Trust, the Parent or a Participating Company, either under the Plan or otherwise, such amounts as may be required by law to be withheld with respect to any tax or other required deductions and may, without limiting the generality of the foregoing, cause any of the Shares held in the Participant's Personal Account or in the Trust to be sold to the extent required in order to effect any such withholding or other required deduction. The Corporation shall as the agent of the Trustee perform the obligations of the Trustee imposed under the Act and the Regulations and any other applicable federal or provincial laws with respect to the distribution of amounts from the Trust.

Matching Share Provisions

(q) Subject to 7(s) through 7(x) below, on or as soon as practicable following the next business day that follows the end of the Holding Period applicable to a related Participant's Participant Share, and, in any event, on or before December 31 of the calendar year in which the Holding Period applicable to the related Participant Shares expires, a Participant's Employer may award one Matching Share to a Participant for every XXXXXXXXXX related Participant Shares held in the Participant's Personal Account. For this purpose, Matching Shares may include a fraction of a Share.

(r) Matching Shares shall be Shares of the same class and carrying the same rights as the Participant Shares to which they relate.

(s) Matching Shares may be awarded with respect to particular Participant Shares:

(i) only if the Participant is still in Relevant Employment at the time the Matching Shares are to be awarded at the end of the Holding Period applicable to the related Participant Shares; and

(ii) the related Participant Shares have not been sold or withdrawn from the Participant's Personal Account.

(t) For purposes of applying 7(q) above,

(i) a Participant who is on an approved leave of absence, paid or unpaid, shall be considered in Relevant Employment; and

(ii) any sale or withdrawal of Participant Shares from a Participant's Personal Account shall be deemed to be a sale or withdrawal of the earliest Participant Shares deposited in such account (i.e., first-in first-out basis), however, a Participant may elect to withdraw Dividend Shares or previously awarded Matching Shares from the Participant's Personal Account prior to withdrawing Participant Shares.

(u) If a Participant becomes an Eligible Leaver, Matching Shares may be awarded as soon as practicable, and in any event on or prior to the date they would otherwise have been awarded under 7(q) above, irrespective of how long the corresponding Participant Shares have been held. If a Participant leaves Relevant Employment during the Holding Period for any reason other than as set out in this paragraph and 7(v) below, no Matching Shares shall be awarded to the Participant.

(v) Notwithstanding any other provision of the Plan, if a Participant continues to be in Relevant Employment but ceases to be employed in North America, or if a Participant transfers to employment with a Subsidiary that is not a Participating Company, such Participant shall continue to be a Participant under the Plan, except that the Participant's Participant Contributions shall automatically stop. In these situations, Matching Shares may be awarded at the end of a holding period applicable to any related Participant Shares as provided under 7(q) through 7(t) above.

(w) If, through or as a result of any merger, consolidation, sale of all or substantially all of the assets of the Parent, reorganization, recapitalization, reclassification, stock split, reverse stock split or other similar transaction, the number of outstanding Participant Shares is increased or decreased, or the Participant Shares are exchanged for a different number or kind of shares or other securities of the Parent, then, at the discretion of the Committee, an appropriate and proportionate adjustment may be made in the number of Matching Shares that are awarded or held under the Plan. For the purposes of determining the Holding Period, the Acquisition Date of any such shares or other securities described in this paragraph in respect of Participant Shares shall be the Acquisition Date of the original Participant Shares.

(x) In the event of a formal tender offer or bid for any Shares held by the Trust, notwithstanding 7(q) through 7(w) above, such Shares shall be awarded as Matching Shares to Participants and with respect to such Participants' Participant Shares as the Committee deems appropriate, in its sole discretion. Such award of Matching Shares shall occur as soon as practicable, and in any event on or prior to the date they would otherwise have been awarded under 7(q) above, irrespective of how long the corresponding Participant Shares have been held.

(y) Matching Shares that are awarded to a Participant will be satisfied through the transfer of Shares from the Trust to the Plan Administrator on behalf of, and as agent for, the Participant to be held in the Participant's Personal Account as further described in 8 below.

Plan Administration and Termination Provisions

(z) The Committee may amend or suspend at any time, and from time to time, all or any of the provisions of the Plan at its sole and complete discretion except that no such amendment shall operate so as to deprive a Participant of Shares credited to the Participant's Personal Account prior to the date thereof. Notwithstanding the foregoing, if any provision of the Plan contravenes any applicable laws or regulations or any rules, regulations, by-laws or policies of any regulatory authority or stock exchange having jurisdiction or authority over the Parent, a Participating Company, or the Plan (including the Trust), then the Committee may amend such provision, retroactively or prospectively, to the extent required to bring such provision into compliance therewith. However, no amendment shall operate so as to cause the Employee Benefit Plan or the Trust governed by the Employee Benefit Plan as those terms are defined in (m) of the definitions above, to not be an "employee benefit plan" or a "trust governed by an employee benefit plan" as those terms are defined in the Act or to cause the Plan or any particular terms of the Plan to be a "salary deferral arrangement" as that term is defined in the Act.

The Committee also reserves the right, in its sole and complete discretion, to terminate the Plan, in whole or in part, at any time provided that no such termination shall operate so as to cause the Employee Benefit Plan or the Trust governed by the Employee Benefit Plan as those terms are defined in (m) of the definitions above, to not be an "employee benefit plan" or a "trust governed by an employee benefit plan" as those terms are defined in the Act or to cause the Plan or any particular terms of the Plan to be a "salary deferral arrangement" as that term is defined in the Act or to deprive a Participant of any Shares credited to the Participant's Personal Account to the date thereof. In the event that the Plan is terminated, in whole or in part, no further Matching Shares shall be awarded to Participants affected by such termination. Any Shares held in a Trust on the termination of the Plan shall be dealt with in accordance with the terms of the Trust Agreement applicable to the Trust.

(aa) The Committee shall have the power to interpret the provisions of the Plan from time to time provided that no such interpretation will operate to cause the Employee Benefit Plan or the Trust governed by the Employee Benefit Plan as those terms are defined in (m) of the definitions above, to not be an "employee benefit plan" or a "trust governed by an employee benefit plan" as those terms are defined in the Act or to cause the Plan or any particular terms of the Plan to be a "salary deferral arrangement" as that term is defined in the Act. All decisions and interpretations of the Committee respecting the Plan and all sections and regulations made from time to time pursuant hereto shall be binding and conclusive on all persons and entities, including all Employers and all Participants and Eligible Employees and their respective legal representatives.

(bb) Subject to 7(m) above, relating to disposition costs (including brokerage fees) for Shares held in a Participant's Personal Account, which are sold at the Participant's direction, and provided that all currency conversion costs relating to the acquisition of Shares by the Plan Administrator shall be paid by the relevant Participants, the costs of administering the Plan (other than the Trust), including the fees and expenses of the Plan Administrator that are applicable to Participants employed by an Employer and all brokerage fees and other transaction costs relating to the acquisition of Participant Shares and Dividend Shares on behalf of a Participant which are held in the Participant's Personal Account shall be paid directly by the particular Participant's Employer and such costs shall not be charged to or paid from the Participant's Personal Account. Costs relating to the administration and operation of the Trust, including brokerage fees and other transaction costs relating to the acquisition, disposition or distribution of Shares by the Trust shall be paid from the Trust provided that Trustee Fees may be paid by the Participant's Employer.

Trust Provisions

8. The provisions of the Plan that are relevant to Participants in respect of the provisions of the Plan that are related to the Trust are as follows:

(a) The Corporation and any other Participating Company approved by the Committee may make Trust Contributions to the Trust to be used by the Trustee to fund the purchase of Shares to be awarded as Matching Shares to Participants. Trust Contributions shall be made to the Trust on or as soon as practicable following the Acquisition Date of the Participant Shares to which such Matching Shares relate.

(b) Upon receipt of Trust Contributions, the Trustee will, through its designated broker, purchase the number of whole Shares on the open market through the facilities of the Stock Exchange as may be specified in a Direction from the Corporation, for the purpose of funding the payment of awards of Matching Shares to Participants under the Plan.

(c) Each Trust Contribution will be used to purchase Shares on the open market as soon as practicable following the date of the contribution to the Trust.

(d) Shares purchased by the Trustee as describe in 8(b) above will be held by the Trustee in the Trust until the Shares are distributed from the Trust as Matching Shares in the manner described in 8(f) below. Title to the Shares purchased by the Trustee, together with voting rights and the right to receive dividends shall remain with the Trustee while the Shares are held in the Trust.

(e) While the Trustee has the power to vote the Shares held in the Trust, the Trustee does not intend to exercise such voting rights.

(f) In accordance with a Direction, the Trustee will, distribute from the Trust and deliver, to the Plan Administrator, for credit of a Participant's Personal Account, the number of Matching Shares as is specified in the Direction as provided in 7(y) above. The number of Shares to be distributed will be equal to the number of Matching Shares determined in accordance with 7(q) through 7(x) above.

(g) The Matching Shares will be distributed from the Trust to the Personal Accounts of the eligible Participants on (or in limited circumstances, prior to) or, as soon as practicable, following the next business day following the second anniversary of the Acquisition Date of the Participant Shares to which such Matching Shares relate and in any event, on or before December 31 of the calendar year in which the Holding Period applicable to the related Participant Shares ends. If a Matching Share is not distributed to a Participant's Personal Account within the period described above, the Matching Share will not be distributed to the Participant. Shares that are not distributed from the Trust to a particular Participant's Personal Account under the terms of the Plan may be applied by the Trustee as directed by the Committee to satisfy awards of Matching Shares to other Participants, or may be used as provided in 8(m) below.

(h) The Trustee shall use any cash dividends received in respect of Shares held in the Trust in accordance with Directions received by the Trustee. The Committee may direct that cash dividends received in respect of Shares held by the Trustee, less applicable taxes, be applied at or prior to the end of the calendar year in which such dividends are received by the Trust, to:

(i) purchase additional Shares on the Stock Exchange to be used by the Trustee to satisfy awards of Matching Shares;

(ii) purchase additional Shares to be distributed from the Trust to Participants as Dividend Shares on a basis determined by the Committee;

(iii) pay cash to some or all Participants on a basis determined by the Committee; or

(iv) pay cash to a beneficiary of the Trust that is not a Participant, including, but not restricted to, one or more Participating Companies, on a basis determined by the Committee.

(i) The Trustee shall use any dividends received by the Trust in respect of Shares in the form of additional Shares in accordance with Directions received by the Trustee. The Committee may direct that dividends received by the Trust in the form of additional Shares be, at or prior to the end of the calendar year in which such dividends are received by the Trust:

(i) used by the Trustee to satisfy an award of Matching Shares;

(ii) distributed from the Trust to some or all Participants on a basis determined by the Committee;

(iii) sold by the Trustee and the proceeds of disposition distributed to some or all of the Participants on a basis determined by the Committee; or

(iv) sold by the Trustee and the proceeds distributed to a beneficiary of the Trust that is not a Participant, including, but not restricted to, one or more Participating Companies, on a basis determined by the Committee.

(j) Participating Companies will never be required to contribute any amounts to the Trust that were received from the Trust in respect of dividends on Shares or any other income of the Trust.

(k) The Committee may revoke or alter any Direction under 8(h) or 8(i) above. Unless the Committee directs otherwise, the Trustee shall sell any shares received as dividends and shall pay the proceeds and any cash dividends to the Corporation.

(l) When the Trustee makes cash payments or distributes Shares or any other property from the Trust to the Personal Accounts of the Participants in a year, the Trustee in its capacity as the trustee of the Employee Benefit Plan will, pursuant to subsection 32.1(2) of the Act and in accordance with Directions, allocate an amount to each Participating Company that has made a Trust Contribution.

Without restricting the generality of the above, the total of the allocations to all of the Participating Companies that have made Trust Contributions will, in general, be equal to the amount by which the total amount of all payments made in the year out of the Trust to or for the benefit of any Participant employed by a Participating Company that has made Trust Contributions, or to the beneficiary or legal representative of any such Participant formerly employed by the Participating Company, exceeds the income of the Trust for the year determined in accordance with subsection 32.1(3) of the Act.

(m) In the event of the termination of the Plan, if a Direction is received, the Trustee shall, in accordance with the Direction, and as soon as practicable, dispose of the Shares held in the Trust by:

(i) delivering all or a portion of the Shares to the Participants;

(ii) liquidating all or a portion of the Shares and promptly paying the proceeds of liquidation to the Corporation and/or to other Participating Companies; or

(iii) using a combination of (i) and (ii), as specified in the Direction.

(n) In the event of the termination of the Plan where the Trustee has not been provided with a Direction as described in 8(m) above, within 30 days following the receipt of notification of the termination of the Plan, the Trustee shall dispose of the Shares held in the Trust as soon as practicable and promptly pay the proceeds of liquidation to the Corporation.

(o) In the event of the termination of the Plan, if a Direction is received, the Trustee shall, in accordance with the Direction, dispose of any property of the Trust other than Shares by:

(i) transferring all or a portion of such property to the Corporation and/or to other Participating Companies;

(ii) transferring all or a portion of such property to the Participants; or

(iii) using a combination of (i) and (ii), as specified in the Direction.

Where such Direction is not provided to the Trustee within 30 days following the receipt of notification of the termination of the Plan, the Trustee shall transfer such property to the Corporation.

(p) The Trustee shall be entitled to such compensation as may from time to time be mutually agreed upon in writing by the Trustee and the Corporation. Such compensation and all other disbursements made and outlays and expenses properly incurred in the performance of the duties of the Trustee or arising out of the Trust shall constitute a charge upon the Trust and shall be paid out of the Trust unless such compensation, disbursements and expenses are paid by the Corporation within ninety days of the date the Trustee sends to the Corporation an invoice or account for same. The Trustee is authorized to pay out of the Trust, on Direction, the compensation, disbursements and expenses (including any applicable value added tax payable) of others appointed or engaged by the Trustee relating to the administration of the Plan and the Trust.

Purpose of the Proposed Proposed Plan

9. The purposes of the Plan are to:

(a) promote further alignment of interests between Eligible Employees and the shareholders of the Parent; and

(b) allow Eligible Employees to participate in the success of the Parent over the medium term.

Additional Information

10. To the best of your knowledge, none of the issues involved in this Ruling are:

(i) in an earlier tax return of the Corporation, a Participant or any person related to the Corporation or a Participant;

(ii) being considered by a tax services office or tax centre in connection with a previously filed tax return of the Corporation, a Participant or any person related to the Corporation or a Participant;

(iii) under objection by the Corporation, a Participant or any person related to the Corporation or a Participant;

(iv) before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has expired; nor

(v) the subject of a ruling previously issued by the Directorate to the Corporation, a Participant or any person related to the Corporation or a Participant.

Rulings

Provided that:

(i) the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, definitions, the proposed Plan, the proposed Trust and the purpose of the proposed Plan and the proposed Trust, and

(ii) the wording of the Plan and the Trust Agreement are and continues to be substantially as described above,

we rule as follows:

A. The provisions of the Plan and the Trust Agreement that constitute the "Employee Benefit Plan" as described in (m) of the Definitions above will constitute an employee benefit plan as that term is defined in subsection 248(1) of the Act, and the Trust will be a trust governed by an employee benefit plan.

B. The Plan and the related Trust will not constitute a salary deferral arrangement or a retirement compensation arrangement as those terms are defined in subsection 248(1) of the Act.

C. No amount will be included in the income of a Participant pursuant to subsection 5(1) or section 6 of the Act solely as a result of a Participant's participation in the Plan or solely as a consequence of Trust Contributions being made to the Trust or property being held in the Trust.

D. Paragraph 6(1)(g) of the Act will apply to include in the income for a year of a Participant, the estate of the Participant, or a Participant's beneficiary, as the case may be, who is a resident of Canada, the aggregate of the fair market value of any Shares, other property or cash that is received by the Participant, the Participant's legal representative or the Participant's beneficiary, as the case may be, that is distributed by the Trust in accordance with 7(k), 7(q) through 7(z) and 8(f) through 8(i) above, in the year in which the Shares, other property or cash is received.

E. Subsection 115(1) of the Act or subsection 114 of the Act, as the case may be, will apply to include in the income for a year of a Participant, the estate of the Participant, or a Participant's beneficiary, as the case may be, who is not a resident of Canada, or is a resident of Canada for only part of a year, as the case may be, the aggregate of the fair market value of any Shares, other property or cash that is received by the Participant, the Participant's legal representative or the Participant's beneficiary, as the case may be, that is distributed by the Trust in accordance with 7(k), 7(q) through 7(z) and 8(f) through 8(i) above, in the year in which the Shares, other property or cash is received.

F. With respect to the distribution of amounts to Participating Companies under 8(h), (i), (m), (n) or (o), provided a designation under subsection 104(19) or 104(20) of the Act, as the case may be, is not made, amounts received by the Trust as dividends on Shares, will be included in the particular Participating Company's income in accordance with subsection 12(1)(m) of the Act to the extent that it is reasonable to consider (having regard to all the circumstances including the terms and conditions of the Trust) that the amounts are part of the income of the Trust that, because of subsection 104(13) of the Act, are included in the income of the particular Participating Company.

G. With respect to the distribution of amounts to Participating Companies under 8(h), (i), (m), (n) or (o), for the purposes of subsections 104(22) and 104(22.1) and section 126 of the Act, where the Trust makes a valid designation under subsection 104(22) of the Act in respect of amounts received by the Trust as dividends on Shares of the Parent, the amounts so designated will be deemed to be the Participating Company's income from a source in a country other than Canada, to the extent that it is reasonable to consider (having regard to all the circumstances including the terms and conditions of the Trust) that the amounts are part of the income of the Trust that, because of subsection 104(13) of the Act, were included in the income of the Participating Company and the amount is not designated by the Trust in respect of any other beneficiary of the Trust.

H. An Employer's Trust Contributions will be deductible by the Employer in a year to the extent provided in subsections 32.1(1), (2) and (3) of the Act, and for the purposes of subparagraphs 32.1(1)(a)(iii) and 32.1(1)(b)(iii) of the Act, a return of amounts contributed to the EBP will not include amounts included in income under subsection 12(1)(m) of the Act as provided in Ruling F.

I. Provided the provisions of subsection 104(6) are satisfied, the Trust may deduct in computing its income for a year in accordance with paragraph 104(6)(a.1) of the Act, such part of the amount that would, but for subsection 104(6) of the Act, be its income for the year as is paid to a Participating Company as described in Ruling F.

The above rulings, which are based on the Act in its present form and do not take into account any proposed amendments thereto, are given subject to the general limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002, and are binding on the CRA provided that the Proposed Plan is implemented by XXXXXXXXXX.

Comments

1. The fair market value of a Share, at any particular time, is a question of fact and nothing in this ruling should be construed as implying our acceptance of any method for the determination of the fair market value of a Share for the purposes of the Plan.

2. Nothing in this ruling should be construed as implying that the CRA has agreed to or reviewed any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the ruling given above, and in particular, no rulings were requested and no rulings have been provided with respect to:

(a) the taxation to Participant's of amounts paid in respect of the payment of brokerage fees and other transaction costs relating to the acquisition of Participant Shares and Dividend Shares on behalf of a Participant which are held in the Participant's Personal Account as described in 7(bb) above;

(b) the taxation of employees employed in the United States that participate in the Plan and, in particular, the taxation of employees employed in the United States who become residents of Canada before Matching Shares are credited to their Participant Accounts; and

(c) the taxation of any former Participants who receive Shares under provisions of the Plan that do not apply to Participants.

Yours truly,

XXXXXXXXXX
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Policy and Planning Branch