Exchangeable Share Acquisitions

Overview

Vail Resorts is proposing to acquire Whistler under a B.C. Plan of Arrangement for a combination of shares and cash, paid by a B.C. subsidiary of Vail (Exchangeco). Resident Whistler shareholders who so elect will receive the share consideration in the form of exchangeable shares of Exchangeco under a largely conventional exchangeable share structure, with those shares being listed on the TSX and having a sunset date seven years out. The cash component of the consideration is nominally in Canadian dollars, except that it is based on an exchange rate of 0.7765 so that, for example, if the exchange rate is less than this six days before the Arrangement implementation date, the Whistler shareholders will receive a correspondingly lower amount. The Vail shares currently have a dividend yield of around 2%. If (contrary to expectations) the exchangeable shares were issued after 2016, any dividends paid by Exchangeco would be subject to U.S. withholding tax under Code s. 871(m).

Whistler

A TSX-listed BCBCA corporation with its principal business office located in Whistler, British Columbia. Whistler is a four season mountain resort. There are 38,159,729 Whistler Shares outstanding of which 23.83% are held by KSL Capital Partners III GP, LLC (through Monroe CA BC (Alternative), LP, Monroe CA BC Investment, SARL and Monroe CA BC Investment II SARL.).

Vail

A NYSE-listed Delaware corporation headquartered in Broomfield, Colorado. Vail Resorts' operations are grouped into three business segments: Mountain, Lodging and Real Estate, which represented approximately 79%, 18% and 3%, respectively, of Vail Resorts' net revenue for the fiscal year ended July 31, 2015.

Exchangeco

1068877 B.C. Ltd., a direct or indirect wholly-owned subsidiary of Vail incorporated under the BCBCA on March 17, 2016. Exchangeco currently has no material assets other than 170,900 Whistler Shares.

Callco

A direct or indirect wholly-owned subsidiary of Vail to be incorporated under the BCBCA prior to the Effective Time of the Arrangement.

Eligible Holder

A Whistler Shareholder that is: (a) a resident of Canada for purposes of the Tax Act and not exempt from tax under Part I of the Tax Act, or (b) a partnership, any member of which is a resident of Canada for purposes of the Tax Act and not exempt from tax under Part I of the Tax Act.

Consideration

Means, (i) in the case of a Whistler Shareholder who is an Eligible Holder who validly elects to receive Exchangeable Shares prior to the Election Deadline in accordance with this Plan of Arrangement, for each Whistler Share, such fraction of an Exchangeable Share as is equal to the product, rounded to six decimal places, of 0.0998 multiplied by the Exchange Rate Adjustment (the ratio of the spot rate to 0.7765), and $17.50 in cash, and (ii) in the case of each other Whistler Shareholder, for each Whistler Share, such fraction of a Vail Share as is equal to the product, rounded to six decimal places, of 0.0998 multiplied by the Exchange Rate Adjustment, and $17.50 in cash. Only such an Eligible Holder who validly elects (or for whom the registered holder validly elects) to receive Exchangeable Shares as part of the Consideration, prior to the election deadline will also be entitled to make a joint election (with Exchangeco) pursuant to section 85 of the Tax Act with respect to its transfer of its Whistler Shares to Exchangeco and receipt of the Consideration in respect thereof.

Plan of Arrangement

1. Each Whistler RSU and Performance Award shall be deemed to vest.
2. Each Whistler Option shall be deemed to be fully vested and surrendered to Whistler in consideration for that number of Whistler Shares equal to (i) the number of Whistler Shares subject to such Whistler Option immediately prior to the Effective Time minus (ii) the number of whole and partial (computed to the nearest four decimal places) Whistler Shares that, when multiplied by the Fair Market Value of a Whistler Share is equal to the aggregate exercise price of such Whistler Option.
3. Each Dissent Share shall be transferred to Exchangeco.
4. Each Whistler Share shall be transferred to Exchangeco in exchange for the Consideration.
5. Whistler shall file the prescribed form of election to cease being a public corporation.

Vail Resorts and Exchangeco intend to apply to list the Exchangeable Shares on the TSX.

Exchangeable Shares

The Exchangeable Shares will carry, as nearly as reasonably practicable, equivalent economic entitlements to those of the Vail Shares, for which they are exchangeable.

Dividend rights

A holder of an Exchangeable Share shall be entitled to receive on each date, on which the Vail Board declares any dividend or other distribution on the Vail Shares:

(a) in case of a cash dividend or other distribution declared on the Vail Shares, in an amount in cash for each Exchangeable Share equal to the Canadian Dollar Equivalent of the cash dividend or other distribution declared on each Vail Share;

(b) in the case of a dividend or other distribution declared on the Vail Shares in property other than cash or Vail Shares, in such type and amount of property for each Exchangeable Share as is the same as or economically equivalent (as determined by the board of directors of Exchangeco) to the type and amount of property declared as a dividend or other distribution on each Vail Share.

Exchangeable Share Price

Means the aggregate of the current market price of one Vail Share, plus the full amount of all cash and non-cash dividends declared, payable and unpaid, at such time, on the Exchangeable Share, plus the full amount of all dividends declared and payable or paid in respect of each Vail Share which have not, at such time, been declared or paid on such Exchangeable Share in accordance herewith.

Liquidation rights

A holder of Exchangeable Shares shall be entitled to receive from the assets of Exchangeco in respect of each Exchangeable Share held by such holder on the Liquidation Date and amount per share equal to the Exchangeable Share Price on the last Business Day prior to the Liquidation Date.

Liquidation Call Right

Vail Resorts and Callco will each have the overriding right (the "Liquidation Call Right"), in the event of the proposed liquidation of Exchangeco, to purchase from all but not less than all of the holders, all but not less than all of the Exchangeable Shares held by each such holder on payment by Vail Resorts or Callco, as the case may be, to each such holder of an amount per share equal to the Exchangeable Share Price.

Retraction right

A holder of Exchangeable Shares shall be entitled at any time to require Exchangeco to redeem any or all Exchangeable Shares for an amount per share equal to the Exchangeable Share Price.

Retraction Call Right

Vail Resorts and Callco shall have the overriding right to purchase from such holder on the Retraction Date all but not less than all of the Retracted Shares held by such holder on payment by Vail Resorts or Callco of an amount per share equal to the Exchangeable Share Price.

Redemption Right

Subject to applicable laws and the due exercise by Vail Resorts or Callco of the Redemption Call Right, Exchangeco shall on the Redemption Date redeem all but not less than all of the then outstanding Exchangeable Shares (other than Exchangeable Shares held by Vail Resorts and its affiliates.

Redemption Call Right

Similar to Retraction Call Right

Redemption Date

The date which is no earlier than the seventh anniversary of the Effective Date, unless (a) the aggregate number of Exchangeable Shares issued and outstanding (other than Exchangeable Shares held by Vail Resorts and its subsidiaries) is less than 5% of the number of Exchangeable Shares issued on the Effective Date; or (b) a Vail Control Transaction is proposed.

Special Voting Shares

Vail Resorts will issue to and deposit with the Voting and Exchange Trustee the Special Voting Share to be held of record by the Voting and Exchange Trustee as trustee for and on behalf of, and for the use and benefit of, the “Beneficiaries” (the Exchangeable Shareholders) and in accordance with the provisions of the Voting and Exchange Trust Agreement.

Exchangeable Share Support Agreement

To be executed by Vail Resorts, Callco and Exchangeco.

Canadian tax consequences

Ancillary rights and call rights

A Resident Holder who receives Exchangeable Shares as part of the Consideration will also receive the ancillary rights, connected to such shares (being the voting rights and other rights. Whistler is of the view that the ancillary rights have nominal fair market value. Whistler is of the view that the Call Rights have only a nominal fair market value. Based on the view of Whistler, the granting of the Call Rights by a Resident Holder who acquires the Exchangeable Shares will not result in any material adverse income, tax consequences to such Resident Holder.

Taxable exchange

The exchange of Whistler Shares for Consideration consisting of Vail Shares and cash will generally be a taxable event to a Resident Holder.

S. 85 elections

In order to make an election under s. 85(1) or (2), an Eligible Holder must provide two signed copies of the election forms at the address specified in the tax election package within 90 days following the Effective Date, duly completed with the details of the number of Whistler Shares transferred and the applicable elected amounts for the purposes of such election. Thereafter, subject to the election forms being correct and complete and complying with the provisions of the Tax Act the forms will be signed by Exchangeco and returned to such former beneficial owner of Whistler Shares within 90 days after the receipt thereof for filing with the CRA.

U.S. tax consequences

Taxable exchange

The exchange by a U.S. Holder of Whistler Shares for cash and Vail Shares pursuant to the Arrangement is expected to be a taxable transaction.

PFIC rules

Whistler does not believe that it is a PFIC during its current taxable year or that it was a PFIC during any prior taxable year.

Exchangeable Shares

Whistler, Exchangeco and Vail Resorts currently intend to take the position that the Exchangeable Shares constitute stock of Exchangeco and not shares of Vail Resorts for U.S. federal income tax purposes. Regardless of whether the Exchangeable Shares are treated as Vail Shares for U.S. federal income tax purposes, if the Arrangement is completed after December 31, 2016, under Treasury Regulations issued under s. 871(m), dividends paid on Exchangeable Shares to Non-U.S. Holders are likely to be subject to U.S. withholding tax in the same manner as if the Exchangeable Shares were Vail Shares. However, assuming that (i) the Exchangeable Shares are treated as shares of Exchangeco for U.S. federal income tax purposes, rather than shares of Vail Resorts, (ii) dividends paid on the Exchangeable Shares do not constitute U.S. source income, and (iii) the Arrangement is completed prior to January 1, 2017, then neither Exchangeco nor Vail Resorts currently intends to withhold any U.S. tax from any dividends paid with respect to the Exchangeable Shares.

Overview

Intertain, which is an OBCA holding company listed on the TSX, holds most of its assets in non-resident subsidiaries and generates substantially all of its (on-line gaming) revenues in Europe through such subsidiaries. In order to effectively move its residence to the U.K., it has caused the formation of a U.K. plc (“Jackpotjoy”) which (except for those Canadian shareholders who have elected for rollover treatment) will issue its shares to the Intertain shareholders under an OBCA Plan of Arrangement in consideration for the transferring all but one of their shares to a grandchild Canadian subsidiary of Jackpotjoy (“ExchangeCo”) and for transferring the remaining common share to Jackpotjoy, for contribution down the chain to ExchangeCo. Those electing for rollover treatment instead will have their Intertain shares exchanged for Class B shares of the amalgamated corporation resulting from the amalgamation of ExchangeCo and Intertain (“AmalCo”), and then exchange those Class B shares under a s. 86 reorg for exchangeable shares. On the issuance of these exchangeable shares, Jackpotjoy will issue a corresponding number of shares to a Jersey company owned by a charitable trust, with the voting rights on those shares thereafter exercised as directed collectively by the exchangeable shareholders. When an exchangeable shareholder retracts (or AmalCo gives notice of redemption), the immediate parent of AmalCo (“CallCo”) will exercise its overriding call right, so that the exchangeable shareholder will transfer its exchangeable shares to CallCo, CallCo will issue shares to Jackpotjoy and in consideration therefor Jackpotjoy will direct the Jersey company to deliver the relevant number of Jackpotjoy Shares to the former exchangeable shareholder. The exchangeable shares are slated to mature no later than the 5th anniversary of their issuance and, in the meantime, are expected to be listed on the TSX.

Intertain

A TSX-listed online gaming holding company existing under the OBCA. With the exception of Intertain Holdings, it holds its non-resident subsidiaries through a Malta and Bahamas hoding company.

Jackpotjoy

A public limited company incorporated under the Companies Act in England and Wales. At the date of the Circular, the sole issued and outstanding Jackpotjoy Share was held by Intertain ListCo Holdings Ltd, which was resident in Canada.

CallCo

CallCo was incorporated as a Nova Scotia unlimited liability company on August 16, 2016 for the purpose of implementing the Arrangement. CallCo will hold call rights on the Exchangeable Shares. Jackpotjoy currently holds 100% of its issued and outstanding shares.

ExchangeCo

ExchangeCo is a company incorporated under the OBCA on August 16, 2016 for the purpose of implementing the Arrangement. It is a wholly-owned subsidiary of CallCo.

Intertain Holdings

Intertain Holdings Inc., an Ontario corporation and a wholly-owned subsidiary of Intertain.

JerseyCo

A Jersey company incorporated on August 15, 2016 for the purpose of implementing the Arrangement. The entire issued and outstanding share capital of JerseyCo is held by MO Nominees Jersey (One) Limited, acting in its capacity as trustee of Intertain JerseyCo Charitable Trust. Under the Voting and Exchange Trust Agreement, JerseyCo will irrevocably waive its rights to receive Distributions attaching to the Underlying Jackpotjoy Shares from time to time for as long as it holds such shares.

Voting Trustee

The Voting Trustee under the Voting and Exchange Trust Agreement is expected to be Computershare Trust Company of Canada.

AmalCo

As a step of the Arrangement, ExchangeCo, Intertain and Intertain Holdings will amalgamate to form AmalCo and Jackpotjoy will become the ultimate holding company of CallCo, AmalCo and Intertain's operating Subsidiaries which, collectively, will form the Jackpotjoy UK Group.

Exchangeable Share exchange right

Pursuant to the Exchangeable Share Provisions, at its option, a holder of Exchangeable Shares may exchange its Exchangeable Shares at any time before the Redemption Date for the Exchangeable Share Retraction Price, subject to CallCo's Retraction Call Right.

Call Rights Agreement

As part of the Arrangement, Jackpotjoy, AmalCo and CallCo will enter into the Call Rights Agreement, under which CallCo will agree to exercise its overriding Retraction Call Right, Redemption Call Right and/or Liquidation Call Right whenever it is possible for it to do so.

Exchangeable Share Redemption Date

The Exchangeable Shares will be redeemed on the fifth anniversary of the Effective Date of the Arrangement and may or will be redeemed in specified circumstances prior to such fifth anniversary, including (a) if the number of Exchangeable Shares outstanding (and not held by Jackpotjoy and its affiliates) is fewer than 10% of the number of Exchangeable Shares issued on the Effective Date, (b) a Jackpotjoy Control Transaction occurs (generally respecting an acquisition of Jackpotjoy that is recommended by the Jackpotjoy board); (c) in circumstances relating to the liquidation or insolvency of Jackpotjoy and/or AmalCo; and (d) on or after January 1, 2019, if Jackpotjoy has determined to migrate to the premium listing segment of the Official List of the Financial Services Authority and Jackpotjoy requests such redemption. Upon such a redemption, holders of the outstanding Exchangeable Shares will receive the Exchangeable Share Redemption/Liquidation Price (defined similarly to the Exchangeable Share Retraction Price.)

Exchangeable Share distributions

There is no current intention for distributions to be paid on the Exchangeable Shares. However, to maintain substantial economic equivalence of the Exchangeable Shares with the Jackpotjoy Shares, Exchangeable Shareholders will be entitled to receive the “Economic Equivalence Payment” to match distributions (including, in-kind distributions) declared and paid on the Jackpotjoy Shares.

Underlying Jackpotjoy Shares

To enable Exchangeable Shareholders to direct the exercise under the Voting and Exchange Trust Agreement of the exercise of voting rights to Jackpotjoy Shares, Jackpotjoy Shares equal in number to the number of Exchangeable Shares issued under the Arrangement will be issued to JerseyCo (the “Underlying Jackpotjoy Shares.”)

Voting and Exchange Trust Agreement

Under this agreement, JerseyCo will grant an irrevocable power of attorney in respect of the voting rights attaching to the Underlying Jackpotjoy Shares held by it to the Voting Trustee. The “Beneficiaries” (i.e., Exchangeable Shareholders other than Jackpotjoy and its affiliates) will, in the aggregate, be entitled to direct the Voting Trustee as to the voting of a number of Underlying Jackpotjoy Shares equal to the then outstanding number of Exchangeable Shares held by all Beneficiaries. JerseyCo will irrevocably waive its rights to receive distributions attaching to the Underlying Jackpotjoy Shares from time to time for as long as it holds such shares.

Optional Retraction of Shares

Pursuant to the Exchangeable Share Provisions, a holder of Exchangeable Shares may at its option exchange its Exchangeable Shares at any time before the Redemption Date for the Exchangeable Share Retraction Price, subject to CallCo's Retraction Call Right. If Jackpotjoy Shares are to be delivered to the (former) Exchangeable Shareholders, it is currently expected that Jackpotjoy will direct JerseyCo to transfer the relevant number of Jackpotjoy Shares to such Exchangeable Shareholder.

Exchangeable Share Retraction Price

Means the “Jackpotjoy Share Consideration” (i.e., one Jackpotjoy Share – or, at the option of Jackpotjoy, AmalCo or CallCo, as the case may be, or in the case of a U.S. Holder - the cash equivalent based on the net cash proceeds realized from the sale of the relevant Jackpotjoy Share outside the U.S.) plus a cash payment (the Economic Equivalence Payment) plus any declared and unpaid distribution on the Exchangeable Share.

CallCo's Retraction Call Right (similar to Liquidation and Redemption Call Right)

In the event that a holder of Exchangeable Shares exercises its retraction right to require that AmalCo redeem any of its Exchangeable Shares, CallCo will have an overriding right (the "Retraction Call Right") pursuant to the Exchangeable Share Provisions to purchase all but not less than all of those Exchangeable Shares for a price per Exchangeable Share equal to the Exchangeable Share Purchase Price.

Mechanics of exchange

When an Exchangeable Shareholder retracts (or AmalCo gives notice of redemption), CallCo will exercise its overriding call right, so that the Exchangeable Shareholder will transfer its Exchangeable Shares to CallCo, CallCo will issue shares to Jackpotjoy and in consideration therefor Jackpotjoy will direct JersyCo to deliver the relevant number of Jackpotjoy Shares to the former Exchangeable Shareholder.

Exchangeable Share Support Agreement

As part of the Arrangement, Jackpotjoy, CallCo and AmalCo will enter into the Exchangeable Share Support Agreement to impose obligations on Jackpotjoy to provide support to AmalCo and CallCo of their respective obligations.

Plan of Arrangement

1. Each dissenting share will be acquired by ExchangeCo.
2. Each outstanding Intertain Share - other than a share (an “Exchangeable Elected Share”) respecting which its holder, provided it is a Canadian resident or a partnership of which there is a Canadian resident, had elected to receive an Exchangeable Share - will be transferred by its holder (the “Non-Electing Shareholders”) as follows: (a) as to one of the Intertain Shares held by each Non-Electing Shareholder, to Jackpotjoy (each a “Direct Transfer Share”); and (b) as to the remainder of the Intertain Shares held by each Non-Electing Shareholder, to ExchangeCo (each a “Non-Rollover Share”).
3. Jackpotjoy will issue one Jackpotjoy Share for each Intertain Share transferred to it or to ExchangeCo (pursuant to 2(a) or (b) above) as follows: (i) coincident with the transfer of the Non-Rollover Shares to ExchangeCo under 2(b) above, ExchangeCo will issue ExchangeCo Shares to CallCo (the number of ExchangeCo Shares to be equal to the number of Non-Rollover Shares acquired directly by ExchangeCo); (ii) coincident with the issuance of ExchangeCo Shares to CallCo under paragraph (i) above, CallCo will issue CallCo Shares to Jackpotjoy (the number of CallCo Shares to be issued to Jackpotjoy being equal to the number of ExchangeCo Shares issued to CallCo); and (iii) in consideration for the CallCo Shares acquired under 3(ii) above together with the Direct Transfer Shares acquired in 2(a) above, Jackpotjoy will issue Jackpotjoy Shares to the Non-Electing Shareholders (in an aggregate number equal to the number of Non-Rollover Shares and Direct Transfer Shares transferred to Jackpotjoy and ExchangeCo, respectively, pursuant to 2(a) and (b) above).
4. Jackpotjoy will transfer the Direct Transfer Shares to CallCo and CallCo will issue CallCo Shares to Jackpotjoy on the basis of one CallCo Share for each Direct Transfer Share.
5. CallCo will transfer the Direct Transfer Shares to ExchangeCo and ExchangeCo will issue ExchangeCo Shares to CallCo on the basis of one ExchangeCo Share for each Direct Transfer Share.
6. Each outstanding Intertain Option (granted under the Intertain stock option plan) will be exchanged for an option granted by Jackpotjoy to acquire a Jackpotjoy Share (a “Replacement Option”). Each Replacement Option will provide for an exercise price per Jackpotjoy Share in British pound sterling equal to the exercise price per Intertain Share of such Intertain Option immediately prior to the Effective Time (in Canadian dollars converted into British pound sterling using the rate of exchange quoted by the Bank of Canada for noon on the Effective Date for the exchange of Canadian dollars for British pound sterling), subject to adjustment upward, as needed, to ensure that: (a) the fair market value of the Jackpotjoy Shares to be issued on exercise of a Replacement Option less the exercise price of the Replacement Option (each as determined immediately after the exchange); does not exceed (b) the fair market value of the Intertain Shares that would have been issued on exercise of an Intertain Option less the exercise price of the Intertain Option (each as determined immediately before the exchange).
7. Intertain, Intertain Holdings and ExchangeCo will amalgamate and continue as one corporation (“AmalCo”). On the Amalgamation: (i) each Exchangeable Elected Share will become one AmalCo Class B Share (i.e., a non-voting common share); and (ii) each ExchangeCo Share (all of which are held by CallCo) will become one AmalCo Class A Share (i.e., a voting common share); and (iii) each Intertain Holding common share and each Intertain Share will be cancelled.
8. AmalCo will amend its share terms to create the Exchangeable Shares.
9. Each outstanding AmalCo Class B Share will be transferred by the holder thereof to AmalCo in exchange for one Exchangeable Share (and the Ancillary Rights).Coincident with the above share exchanges: (i) Jackpotjoy, JerseyCo, AmalCo and the Voting Trustee will execute the Voting and Exchange Trust Agreement; (ii) Jackpotjoy, CallCo and AmalCo will execute the Exchangeable Share Support Agreement; (iii) in accordance with the Voting and Exchange Trust Agreement, Jackpotjoy will issue to JerseyCo a number of Jackpotjoy Shares equal to the number of Exchangeable Shares referred to in and for the purposes described in such agreement; and (iv) Jackpotjoy, CallCo and AmalCo will execute the Call Rights Agreement.

The TSX has conditionally approved the listing of the Exchangeable Shares in substitution for the currently listed Intertain Shares effective as of the Effective Date.

Capital Reduction

It is proposed the share premium account of Jackpotjoy, 50,000 redeemable shares of £1.00 and 1 ordinary share of £0.10 in the capital of Jackpotjoy be cancelled shortly after completion of the Arrangement. The main purpose of the Capital Reduction is to: (a) create distributable reserves on the balance sheet of Jackpotjoy which will provide Jackpotjoy with flexibility to pay dividends in the future if appropriate and (b) to cancel the shares of Jackpotjoy issued in connection with its incorporation. The UK Court Hearing to confirm the Capital Reduction is expected to occur in October, 2016.

Canadian tax consequences

Exchange for Jackpotjoy Shares

An Intertain Shareholder who exchanges Intertain Shares for Jackpotjoy Shares will be considered to have disposed of such Intertain Shares for proceeds of disposition equal to the fair market value.

Amalgamation and s. 86 Exchange for AmalCo Class B Shares

An Intertain Shareholder who has elected to receive Exchangeable Shares (together with the related “Ancillary Rights”) will hold Intertain Shares at the time of the Amalgamation, and will be deemed to have disposed of its Intertain Shares for proceeds of disposition equal to their adjusted cost base.

S. 86 Exchange for AmalCo Class B Shares

An Intertain Shareholder who receives Exchangeable Shares and Ancillary Rights for AmalCo Class B Shares on the capital reorganization of AmalCo will not realize a capital gain provided the ACB of its AmalCo Class B Shares exceeds the fair market value of the Ancillary Rights received.

Grant of Retraction, Redemption and Liquidation Call Rights to CallCo

Intertain is of the view that such Call Rights have a nominal fair market value, so that the granting of the Call Rights by an Intertain Shareholder to CallCo will not result in any material adverse income tax consequences to an Intertain Shareholder.

Qualified investment

Provided the Jackpotjoy Shares and Exchangeable Shares are listed on a designated stock exchange (including the LSE and TSX, respectively), they would be qualified investments for RRSPs etc.

U.K. tax consequences

A disposal or deemed disposal of Jackpotjoy Shares by a holder who is not resident in the UK and is not is carrying on a trade in the UK through a branch or agency (or permanent establishment in the case of a corporate holder) in connection with which the Jackpotjoy Shares are used, held or acquired, will not generally be subject to UK taxation of capital gains unless the holder is an individual who has ceased to be resident for tax purposes in the UK for the purposes of double taxation arrangements ("treaty non-resident") for a period of less than five tax years of assessment and who disposes of all or part of his Jackpotjoy Shares during that period. A disposal or deemed disposal of Exchangeable Shares by a holder who is not resident in the UK for tax purposes should not generally be subject to UK taxation of capital gains subject to a similar exception.

U.S. tax consequences

Potential reorganization treatment

Assuming, as is contemplated, that certain Intertain Shareholders will receive Exchangeable Shares (and the Ancillary Rights) rather than Jackpotjoy Shares, qualification of the Arrangement as a reorganization will depend significantly upon the characterization of the Exchangeable Shares (and the Ancillary Rights) for U.S. federal income tax purposes. In particular, the Exchangeable Shares may be treated, for U.S. federal income tax purposes: (a) as shares of Jackpotjoy, on the basis that the Exchangeable Shares (and the Ancillary Rights) are in substance substantially equivalent to the Jackpotjoy Shares; or (b) as shares of AmalCo, in a manner consistent with their form. If the Exchangeable Shares are treated as shares of Jackpotjoy for U.S. federal income tax purposes, the Arrangement is expected to qualify as a reorganization.

PFIC rules

Intertain does not expect to be a PFIC for the current taxable year. Additionally, Intertain believes that it was not classified as a PFIC for the 2014 and 2015 taxable years. However, Intertain believes that it may have been a PFIC during prior years.

Overview

A Delaware subsidiary (the “Guarantor”) of SIRI holds approximately a 37% equity interest in the “Company (some of it in the form of non-voting shares to address CRTC non-resident control issues) and two Canadian corporations (Slaight and Obelysk), together have approximately a 22.4% equity interest in the Company. It is proposed that the Company shareholders (who also include the CBC, with a 10% equity interest, and the public) will transfer their shares under an OBCA Plan of Arrangement to the Purchaser. Slaight and Obelysk will together hold 67% of the voting interests and 30% of the equity of the Purchaser at the time of implementing the Plan, with the Guarantor holding the balance of the voting interests and equity. Public shareholders will be offered cash or shares of SIRI for their Company shares, subject to proration based on a maximum share consideration. Shareholders who wish rollover treatment are being offered exchangeable shares of the Purchaser, subject again to potential proration. The Purchaser’s obligations are guaranteed by the Guarantor. Slaight, Oblelysk and the Guarantor will receive only shares of the Purchaser as their sale consideration (much of it in the form of non-voting prefs in the case of the Guarantor.)

Consideration for Company Shares

Under an OBCA Arrangement, holders of Company Shares will be entitled to receive from the Purchaser at its election for each Class A Share: (i) $4.50 in cash ("Class A Cash Consideration"); (ii) 0.898 of a share of SIRI common share ("SIRI Share"); or (if the holder is an “Eligible Holder and so elects) (iii) 0.898 of an exchangeable share of the Purchaser (the "Exchangeable Share"), or a combination thereof (collectively, the "Class A Share Consideration"). In the case of a Class B Share of the Company, the corresponding consideration will be (i) $1.50 in cash ("Class B Cash Consideration"); (ii) 0.299 of a SIRI Share; or (iii) 0.299 of an Exchangeable Share (collectively, the "Class B Share Consideration." However, the maximum number of SIRI Shares and Exchangeable Shares that may be issued is 35,000,000, so that elections made by holders of Company Shares will be subject to proration. An Eligible Holder is a Canadian resident who is not exempt from tax (or a partnership with such a partner), or a non-resident whose shares are taxable Canadian property and not treaty-protected property.

Company

An Ontario corporation whose Class A Shares are listed on the TSX and which has no operations independent of its wholly-owned subsidiary Sirius XM Canada Inc., through which it holds the only broadcasting licence to provide subscription-based satellite radio services in Canada. Through such subsidiary, the Company offers satellite subscription digital audio radio services under the XM and Sirius brands pursuant to two exclusive licence agreements with the Guarantor. There is a significant likelihood that the royalty rates paid by the Company to SIRI under these licences will increase materially upon expiry and extension of such agreements. On April 25, 2016, the Company received a demand letter from the Guarantor for an additional US$33.9 million as "activation fees" under one of the licences owed from 2005 to the end of January, 2016. The Company disagrees with this demand.

SIRI

A NASDAQ-listed Delaware corporation.

Guarantor

A wholly-owned Delaware subsidiary of SIRI.

Purchaser

An Ontario incorporated company. As of the Effective Time (being 12:01 on the effective date of the Arrangement), Slaight and Obelysk will together hold 67% of the voting interests and 30% of the equity of the Purchaser, with the Guarantor holding the balance of the voting interests and equity. The holders of the Exchangeable Shares (if any) will also own non-voting shares in the capital of the Purchaser. As of the Effective Time, a majority of the directors of the Purchaser will be resident Canadians and the Purchaser will be eligible under the CRTC Direction (respecting non-eligibility of non-Canadians) to control the Company.

Obelysk

Obelysk Media Inc., which is controlled by John Bitove.

Slaight

Slaight Communications Inc.

Callco

2517836 Ontario Ltd., a direct or indirect subsidiary of SIRI.

Company Class A, B and C Shares

The Company had outstanding 104,813,543 Class A Shares, 30,729,510 Class B Shares and 13,638,527 Class C Shares. The percentage of aggregate voting rights attached to each class of shares as of the Record Date is approximately 77.3% in the case of the Class A Shares and approximately 22.7% in the case of the Class B Shares. There are no voting rights attached to the Class C Shares and the Class A and B Shares have one vote per share. A Class B Share is entitled to receive 1/3 of the dividends declared and paid on a Class A Share and is convertible into Class A Shares on a 3-for-1 basis. Class A and Class C Shares are inter-convertible on a 1-for-1 basis and particpate equally in dividends.

Company ownership

Obelysk holds its interest in the form of 15,259,149 Class B Shares and 7,887,307 Class A Shares. Guarantor holds its interest in the form of 33,685,653 Class A Shares and 13,638,527 Class C Shares. CBC holds its interest in the form of 13,056,787 Class A Shares. Slaight holds its interest in the form of 10,700,000 Class A Shares and 15,470,361 Class B Shares.

Conditions for Exchangeable Share consideration

The payment of consideration in the form of Exchangeable Shares pursuant to the Plan of Arrangement is subject to obtaining an order from the applicable Canadian securities regulatory authority and Company Shares being exchanged for Exchangeable Shares having an aggregate equivalent value of at least $25,000,000.

CRTC approval

Prior approval of the CRTC is required for (i) the temporary insertion of the Purchaser as a controlling shareholder of the Company pending the amalgamation of the Purchaser with the Company to form Amalco; (ii) each of Obelysk and Slaight increasing their ownership interests to 33.5% of the voting interests of Amalco; and (iii) the Guarantor increasing its ownership interest to more than 50% of the common shares (i.e. those shares entitled to participate in the residual equity) of Amalco.

Exchangeable Shares

The Exchangeable Shares represent securities of a Canadian issuer having economic rights that are substantially equivalent to those of SIRI Shares, so that they have the same dividend and liquidation entitlement. The exchangeable shares are retractable by their holders on a one-for one basis for SIRI shares, subject to Callco exercising its "Retraction Call Right" to purchase the retracted shares in exchange for SIRI shares (which presumably would occur in order to avoid Part VI.1 tax to Company). Holders have no right to vote at SIRI (or, generally, Purchaser) meetings. On the 5^th anniversary of issue of the Exchangeable Shares (or earlier if fewer than 2,000,000 are outstanding or certain specified extraordinary events occur), the Company will redeem all such shares through the delivery of SIRI Shares, subject to SIRI exercising its call right. In a Support Agreement, SIRI agrees not to pays dividends on SIRI Shares without corresponding dividends being paid on Exchangeable Shares, and not to engage in potentially dilutive transactions without approval of the Exchangeable Shareholders.

Plan of Arrangement

1. Each Company Option shall be deemed to be unconditionally vested and shall be deemed to be transferred to the Company for a cash payment.
2. Each Company RSU shall be cancelled by the Company in exchange for a cash payment.
3. 1,666,667 Class A Shares held by each of Slaight and Obelysk shall be transferred to the Purchaser in exchange, in each case, for 1,666,667 Purchaser Class A Shares.
4. All Class A Shares and Class C Shares of the Guarantor shall be transferred to the Purchaser in exchange for 1,641,791 Purchaser Class A Shares, 6,135,987 Purchaser Class B Shares and 177,958,942 Purchaser Preferred Shares.
5. Each issued and outstanding Class A Share, other than a share (an “Exchangeable Elected Share” which has elected to receive Exchangeable Shares and other than Company Shares held by Dissenting Shareholders) held by a Company Shareholder will be exchanged with the Purchaser for: (i) Class A Cash Consideration; (ii) Class A SIRI Share Consideration; or (iii) a combination thereof in accordance with the election or deemed election of such Company Shareholder and subject, in each case, to proration.
6. Each Class A Exchangeable Elected Share shall be exchanged with the Purchaser for: (i) Cash Consideration; (ii) Class A Exchangeable Share Consideration; or (iii) a combination thereof; in accordance with the election or deemed election of such Company Shareholder and subject, in each case, to proration.
7. And similarly for the Class B Shares.
8. Each Class A Share held by a Dissenting Shareholder shall be transferred to the Purchaser.

The Purchaser and the Company will be amalgamated immediately following the Effective Time to form Amalco.

Guarantee

The Guarantor has unconditionally guaranteed in favour of the Company the due and punctual performance by the Purchaser of the Purchaser's obligations under the Arrangement Agreement.

Canadian tax consequences

Exchange and call rights

The Company is of the view that the exchange rights (“Ancillary Rights”) have a nominal fair market value. A Resident Holder who receives Exchangeable Shares and the Ancillary Rights under the Arrangement will grant the Call Rights to Callco. The Company is of the view that the Call Rights have only a nominal fair market value and accordingly no amount should be allocated to the Call Rights.

Taxable exchange

A transfer of Company Shares to the Purchaser for Cash Consideration or SIRI Shares will occur on a taxable basis.

Exchangeable Shares

A Resident Holder who is an Eligible Holder and who exchanges Company Shares ("Eligible Shares") with the Purchaser under the Arrangement for Exchangeable Shares or a combination of Exchangeable Shares and Cash Consideration may make a valid joint election with the Purchaser under s. 85(1) (or s. 85(2) in the case of a Canadian partnership). The election forms must be submitted to the Company within 90 days following the Effective Date. On a redemption (including a retraction) of an Exchangeable Share by the Purchaser, the holder will be deemed to have received a dividend equal to the amount, if any, by which the fair market value of the proceeds received on the redemption exceeds the paid-up capital of the Exchangeable Share, which will be determined by reference to the aggregate elected amounts under the elections. On the exchange of an Exchangeable Share by the Resident Holder with Callco for SIRI Shares, the holder will generally realize a capital gain (or a capital loss).

Overview

Under a proposed OBCA plan of arrangement, a wholly-owned Ontario subsidiary (Canco) of Mamba, an Australian corporation listed on the ASX, will acquire (directly, except as described below) all of the common shares of Champion, an Ontario TSX- and Frankfurt-listed corporation focusing on the exploration and development of iron deposits in Quebec and Labrador and implicitly valued on a fully-diluted basis at $Cdn.60M, in consideration for Mamba ordinary shares on the basis of an Exchange Ratio of 0.733333 (i.e., 11 Mamba ordinary shares for each 15 Champion common shares) - provided that Canadian-resident taxable shareholders who are not financial institutions may elect to receive their share consideration as exchangeable shares of Canco. The Mamba ordinary shares will be listed on the TSX.

Exchangeable shares

The exchangeable shares are retractable by their holders on a one-for one basis for Mamba shares, subject to Mamba exercising its "Retraction Call Right" to purchase the retracted shares in exchange for Mamba shares (which presumably would occur in order to avoid Part VI.1 tax to Canco). Mamba issues a special voting share to a voting trustee for the exchangeable holders, with the number of votes equaling the number of outstanding voting shares. On a date to be determined by the Canco directors which is between January 1, 2015 and the 3rd anniversary of issue of the exchangeable shares, Canco will redeem all such shares through the delivery of Mamba ordinary shares, subject to Mamba exercising its call right. In a Support Agreement, Mamba agrees not to pays dividends on Mamba ordinary shares without corresponding dividends being paid on exchangeable shares, and not to engage in potentially dilutive transactions without approval of the exchangeable holders.

Options/Warrants

As preliminary steps in the Plan of Arrangement, Champion warrants are amended to be exercisable for Mamba ordinary shares, and stock options are exchanged for options on Mamba shares, in each case based on the Exchange Ratio.

Canadian tax consequences

Champion considers the voting rights granted on the issue of the exchangeable shares, and the Mamba call rights, to have a nominal fair market value. Eligible Champion shareholders who wish a potential rollover under s. 85(1) (or 85(2) if a partnership) must provide a signed and completed election form (in duplicate) to Canco within 90 days of the effective date of the Arrangement. Retraction of the exchangeable shares, but not their acquisition by Mamba pursuant to the Retraction Call Right, will give rise to deemed dividend treatment. Standard taxable Canadian property disclosure.

Australian tax consequences

Champion shareholders who are not Australian residents and who do not hold their Champion (or exchangeable) shares as part of a business in Australia should not be subject to Australian tax in respect of the disposal of their Champion shares (and should not be subject to Australian tax in respect of distributions received on their exchangeable shares or on a disposal of those shares). Mamba shareholders who are not Australian residents and who do not hold their Mamba shares as part of a business in Australia should not be subject to Australian tax on a disposal of their Mamba shares provided that, in the case of ordinary income tax, any profit does not have an Australian source (a facts and circumstances test) and, in the case of capital gains tax, the holder and its associates do not at any time hold or have the right to acquire 10% or more of the voting rights in or rights to distribution of income or capital from Mamba.

Overview

Under a proposed CBCA plan of arrangement, a BC subsidiary (Exchangeco) of Molycorp, a Delaware NYSE-listed corporation, will acquire all of the common shares of NEM, a CBCA TSX-listed corporation producing rare earth products and valued under the Arrangement at $1.3 billion, in consideration for cash or Molycorp shares at the option of the NEM shareholder (but subject to proration adjustments to ensure that the total cash and share consideration are 71.24% and 28.76%, respectively, of the total) - provided that Canadian-resident taxable shareholders may elect to receive their share consideration in the form of exchangeable shares of Exchangeco. The exchange ratio is .4242 of a Molycorp share (or exchangeable share) for each NEM share.

Retraction right

The exchangeable shares are retractable by their holders on a one-for one basis for Molycorp shares, subject to Molycorp or a BC subsidiary of Molcorp ("Callco") exercising their "Retraction Call Right" to purchase the retracted shares in exchange for Molycorp shares (which they presumably would do in order to avoid Part VI.1 tax to Exchangeco). Molycorp issues special voting shares to a voting trustee for the exchangeable holders. There is a sunset date for the exchangeables of their 6th anniversary.

Options/break fee

Employee stock options are cash-surrendered as the first step in the plan of arrangement. Break fee of C$30 million.

Canadian tax consequences

NEM considers the voting rights granted on the issue of the exchangeable shares, and the Molcorp/Callco call rights, to have a nominal fair market value. Eligible NEM shareholders who wish a potential rollover under s. 85(1) (or 85(2) if a partnership) must provide a signed and completed election form (in duplicate) to Exchangeco within 90 days of the effective date of the Arrangement. Depending on the cash (or other boot) received and the shareholder's ACB, full rollover treatment will not be available. Retraction of the exchangeable shares, but not their acquisition by Molycorp or Callco pursuant to the Retraction Call Right, will give rise to deemed dividend treatment.

U.S. tax consequences

The exchange will occur on a taxable basis. NEM, Exchangeco and Molcorp intend to take the position that the exchangeable shares are stock of Exchangeco and not of Molycorp for purposes of the Code, so that no US withholding tax will be withheld on dividends on those shares.