Outbound

Overview

In order to merge the car rental business of Adreca, a private Delaware corporation, with the car rental business of FSNA, a TSXV-listed CBCA corporation, Adreca will be merged into a subsidiary of FSNA with Adreca as the survivor, and FSNA, following its continuance from Canada to Delaware ("New FSNA"), will then be merged with Adreca, with New FSNA as the survivor.

FSNA

FSNA and its subsidiaries carry on one of North America's largest franchise car rental operations through over 1,100 U.S. locations. It has 62.8M shares outstanding, of which 26.57% are owned by Sanford Miller (a former co-CEO) and 35.87% by Thomas McDonnell (the current CEO). FSNA had a net loss of $2.1M for its year ending September 30, 2012, and as at that date had issued share capital of $15M and an accumulated deficit of $12.6M.

Adreca/Boketo

Hertz wished to quickly dispose of the "Advantage" car rental business, which it acquired as a result of completing a tender offer for Dollar Thrifty Automotive Group, Inc. Rather than disposing of the business directly, a wholly-owned indirect subsidiary of Macquarie Holdings (USA) Inc. ("Boketo") formed Adreca on June 14, 2012 (in order for the Macquarie group to provide equity financing for the subsequent FSNA acquisition.) Adreca then acquired the Advantage business from Hertz in December 2012 (for a relative modest purchase price, as Hertz leased the automobiles to Adreca, and provided partial fleet financing). FSNA was fully involved with Boketo in this acquisition process.

Reorganization

To effect the merger, the following steps will occur:

• under a CBCA Plan of Arrangement, FSNA will be continued (as New FSNA) from Canada to Delaware, and the common shares of FSNA will be "converted" on a one-for-one basis into common shares of New FSNA
• dissenters will be entitled to be paid the fair value of their shares
• a wholly-owned Delaware subsidiary of FSNA ("Advantage Holdings") will merge into Adreca, with Adreca as the survivor, so that Adreca will be a wholly-owned subsidiary of New FSNA, and with all Adreca shares being converted into preferred shares of New FSNA
• Adreca will be merged into New FSNA, with New FSNA as the survivor

The issued share capital of New FSNA is expected to consist of 62.8M common shares (held by the former FSNA shareholders, so that they hold 50.2% of the FSNA shares) and 62.2M convertible voting preferred shares (held by Boketo, for 49.8%).

U.S. securities laws

To the extent that the issuance of the common shares of New FSNA otherwise would require registration, reliance will be placed on the s. 3(a)(10) exemption. New FSNA will not qualify as a foreign private issuer and will be a domestic issuer.

Canadian tax consequences

Continuance. Upon the continuance, FSNA will be deemed (by s. 128.1(4)(b)) to have disposed of each of its properties for their fair market value, which "may" cause FSNA to incur a Canadian income tax liability. Furthermore, an emigration tax will be imposed (under s. 219.1) on the amount by which the fair market value of all of the properties of FSNA exceeds the aggregate of the paid-up capital of its shares and the amount of most debts owing by it. "The emigration tax will be imposed at a rate of 5%, unless it can reasonably be concluded that one of the main reasons that FSNA became resident in the U.S. was to reduce the emigration tax or Canadian withholding tax payable by FSNA, in which case the rate of emigration tax would be 25%" (s. 219.3).

Shareholders

A Canadian resident holder should not be deemed to have disposed of its FSNA shares as a result of the continuance. Cautionary disclosure re offshore investment fund property rules. Standard taxable Canadian property rule disclosure for non-residents.

U.S. tax consequences

The continuance and Merger (defined as the two mergers together) is each expected to be treated for Code purposes as a reorganization under Code s. 368. On this basis, no gain or loss will be recognized by FSNA, New FSNA or Adreca. In addition, holders of FSNA shares generally will not recognize any gain or loss for Code purposes upon the conversion of their shares into shares of New FSNA pursuant to the continuance.

Overview

Telesat Canada, a Canadian corporation and global satellite operator that was mostly owned by Loral Space & Communications Inc. (a US public corporation) and Public Sector Pension Investment Board effected a sort of merger transaction in which both Telesat and Loral became subsidiaries of an Ontario LP (Telesat Partnership) whose general partner (Telesat Corporation) became a TSX and NASDAQ-listed corporation. The transaction was largely accomplished through a merger of Loral with a Loral Delaware subsidiary (with Loral as the survivor) on which the public Loral shareholders were given the choice of receiving units of Telesat Partnership that are exchangeable into the (listed) shares of Telesat Corporation, or such shares of Telesat Corporation itself.

US tax counsel opined that Telesat Corporation should not be deemed to be a US corporation under Code s. 7874 and that Telesat Partnership should not be treated as a publicly traded partnership or a US corporation. The exchanges by the Loral shareholders for shares of Telesat Corporation or units of Telesat Partnership were considered to be non-recognition transactions under Code s. 351 or s. 721.

The merger did not qualify as a foreign merger, so that no Canadian rollover treatment applied. The resulting sandwich structure entailed a non-Canadian partnership (Telesat Partnership – held by a B.C. corporation, Telesat Corporation) holding shares of a controlled foreign affiliate (Loral) which, in turn, received FAPI income in the form of Canadian-source dividends. The disclosure states that, assuming a full current distribution of dividends at the various levels:

Telesat Corporation may deduct in computing its taxable income a prescribed portion of such dividends received by it through Telesat Partnership. In determining the amount of such dividends from Loral that may be deducted in computing its taxable income, Telesat Corporation intends not to take into account any deduction claimed by Telesat Partnership pursuant to subsection 91(5) of the Tax Act. Telesat Corporation believes that such interpretation is consistent with the rationale expressed by the CRA for its published administrative position in this regard, so that there would be no net income inclusion to the partnership, and it was considered appropriate that there also should be no net inclusion to Telesat Corporation.

These deductions would also address Telesat Partnership being a SIFT partnership.

Telesat

Telesat, a Canadian corporation and a leading global satellite operator, providing its customers with communications services.

Telesat Corporation

Telesat Corporation, a newly-formed B.C. corporation, anticipated to be the new Canadian-controlled publicly traded entity in which Telesat Canada’s current direct and indirect shareholders may elect to receive Telesat Corporation Shares, and the general partner of Telesat Partnership.

Loral

Loral Space & Communications Inc., a Delaware public corporation holding a 62.6% economic interest and 32.6% voting interest in Telesat.

Telesat Partnership

Telesat Partnership LP, an Ontario limited partnership formed under the laws of Ontario, Canada in which Telesat’s current direct and indirect shareholders may elect to receive Telesat Partnership Units.

Telesat CanHoldco

Telesat CanHold Corporation, a B.C. corporation, and a wholly-owned subsidiary of Telesat Partnership. It is anticipated to hold approximately 37% of Telesat following consummation of the Transaction.

Merger Sub

Lion Combination Sub Corporation, a Delaware corporation and wholly owned subsidiary of Loral formed by Loral for the purpose of engaging in the Transaction pursuant to the terms of the Transaction Agreement and that will merge with and into Loral, with Loral surviving the Merger.

PSP Investments

Public Sector Pension Investment Board, a Canadian Crown corporation that holds its 36.7% equity interest, 67.4% voting interest on all matters except for the election of directors, and 29.4% voting interest for the election of directors in Telesat through a wholly owned subsidiary, Red Isle, a corporation organized under the CBCA.

Red Isle

Red Isle Private Investments Inc., a Canadian corporation and a wholly-owned subsidiary of PSP Investments.

MHR

MHR Fund Management LLC, a New York-based private equity firm and a major stockholder of Loral. Various funds affiliated with MHR and Dr. Rachesky held, as of September 30, 2021, approximately 39.9% of the outstanding voting common stock and 58.4% of the combined outstanding voting and non-voting common stock of Loral.

Transaction Agreement

The Transaction Agreement and Plan of Merger dated as of November 23, 2020 between Telesat, , Loral,Telesat CanHoldco), Merger Sub, PSP Investments, and Red Isle.

Transaction Steps

On November 18 and 19, 2021 and November 19, 2021, the Transaction Agreement was implemented, including:

• on November 18, 2021, Red Isle contributing 272,827 Telesat Non-Voting Participating Preferred Shares to Telesat in exchange for Class C fully voting shares of Telesat Corporation (“Class C Shares”) and the balance of its equity interest in Telesat to Telesat Partnership in exchange for class C units of Telesat Partnership (“Class C Units”);
• on November 18, 2021 and pursuant to stockholder contribution agreements, the contribution by current and former members of management of Telesat of their Telesat Non-Voting Participating Preferred Shares to Telesat Corporation in exchange for newly issued Class A common shares of Telesat (the “Class A common shares”) if such contributing shareholder is Canadian (as defined in the Investment Canada Act) or newly issued Class B variable voting shares of Telesat Corporation (the “Class B variable voting shares”) if such contributing shareholder is not Canadian;
• on November 18, 2021 and pursuant to the director contribution agreement, the contribution by John Cashman and Clare Copeland of their Telesat Director Voting Preferred Shares to Telesat Partnership in exchange for interests in Telesat Partnership, which were subsequently redeemed by Telesat Partnership for cash on November 19, 2021;
• on November 18, 2021 and pursuant to optionholder exchange agreements, the exchange of options, tandem stock appreciation rights and restricted stock units in respect of Telesat for corresponding instruments in Telesat Corporation with the same vesting terms and conditions; and
• on November 19, 2021, the merger of Merger Sub with and into Loral (the “Merger”), with Loral surviving the Merger as a wholly owned subsidiary of Telesat Partnership and the other Loral stockholders receiving shares of Telesat Corporation or units of Telesat Partnership as described below.
• Under the terms of the Transaction Agreement, at the effective time of the Merger (the “Effective Time”), each share of Loral common stock outstanding immediately prior to the Effective Time was converted into the right to receive:

(a) if the Loral stockholder validly made an election to receive units of Telesat Partnership pursuant to the Merger (a “Unit Election”), one newly issued Class A unit of Telesat Partnership if such Loral stockholder was Canadian (as defined above), and otherwise one newly issued Class B unit of Telesat Partnership,

(b) if the Loral stockholder validly made an election to receive shares of Telesat Corporation (a “Shares Election”), one newly issued Class A common share if such Loral stockholder was Canadian, or

(c) if the Loral stockholder validly made a Shares Election and was not Canadian, or did not validly make a Unit Election or a Shares Election, one newly issued Class B variable voting share. Following the Transaction, Telesat became an indirect wholly owned subsidiary of Telesat Corporation.

• In addition, on November 18, 2021, Telesat Corporation entered into the trust agreement and trust voting agreement with Telesat Partnership, TSX Trust Company as the trustee of Telesat Corporation Trust and, in the case of the trust agreement, Christopher DiFrancesco, effectuating the voting trust relating to the voting rights of units of Telesat Partnership.

Result of Transaction

The Transaction will result in the current stockholders of Loral, PSP Investments (through Red Isle) and other shareholders in Telesat (principally current or former management) owning approximately the same percentage of equity in Telesat indirectly through Telesat Corporation and/or Telesat Partnership as they currently hold (indirectly in the case of Loral stockholders and PSP Investments) in Telesat, Telesat Corporation becoming the publicly traded general partner of Telesat Partnership and Telesat Partnership indirectly owning all of the economic interests in Telesat, except to the extent that the other shareholders in Telesat elect to retain their direct interest in Telesat.

Investor Rights Agreements

Telesat Corporation and MHR, on the one hand, and Telesat Corporation and PSP Investments, on the other hand, entered into the Investor Rights Agreements dated as of November 23, 2020, pursuant to which, among other things, each of PSP Investments and MHR are entitled to designate three directors to the board of directors of Telesat Corporation and have the exclusive right to fill vacancies of any directorship for which it has the right to designate a director.

Voting rights and Telesat Corporation share structure

The Class A Shares and Class C Fully Voting Shares of Telesat Corporation carry 1 vote per share, and the Class B Variable Voting Shares (together, with the Class A Shares, the “Public Shares”) carry 1 vote per share; provided that any voting power of a single holder in excess of one-third of the outstanding voting power of the Telesat Corporation Shares and Telesat Partnership Units (via the Special Voting Shares) and the Golden Share Canadian Votes (see below) will effectively be transferred to the Golden Share. An issued and outstanding Class A Share will automatically be converted into a Class B Variable Voting Share if such Class A Share becomes beneficially owned or controlled, directly or indirectly, by a person who is not a Canadian (as defined in the Investment Canada Act).

The Special Voting Shares and the Golden Share have no material economic rights. The Class B and C Units of Telesat Partnership are effectively accorded 1 vote per share via the Special Voting Shares of Telesat Corporation. The Special Voting Shares are held by the trustee of a trust, entitling the Trustee to that number of votes on applicable matters on which holders of Telesat Public Shares are entitled to vote that is equal to the number of Telesat Corporation Shares into which the Telesat Partnership Units held by the holders of such Telesat Partnership Units on the applicable record date are convertible. Pursuant to the Partnership Agreement, each holder of Telesat Partnership Units has the right to direct Telesat Corporation as to how to instruct the Trustee to vote the voting power of the Special Voting Shares corresponding to such holder’s Telesat Partnership Units.

Voting power is attributed to the Golden Share in two ways. First, the Golden Share will be attributed with the number of votes required in order to ensure that the votes cast by the holders of Class A Shares and Class A Units, Class C Shares and Class C Units and the Golden Share, together, represent a simple majority of the votes cast and entitled to vote (such voting power, the “Golden Share Canadian Votes”). Second, the Golden Share will be attributed with the number of votes in excess of a Non-Canadian voting limitation.

Resulting MHR and PSP ownership and investments approvals

PSP Investments (through Red Isle) and MHR will own 36.8% and 36.4% (on a fully exchanged and converted basis) of the Telesat Corporation shares. Investor Rights Agreements generally provide that Telesat Corporation shall not propose or consent to and shall cause Telesat Partnership and Telesat Corporation’s other subsidiaries not to propose or consent to certain actions without obtaining the consent of MHR or PSP Investments, as applicable, so long as such principal shareholder and its affiliates own more than 5% of Telesat Corporation shares on a fully-diluted basis.

US tax considerations

S. 7874 inversion rules

Rules under code s. 7874 could cause Telesat Corporation or Telesat Partnership to be taxed as a U.S. corporation for U.S. federal income tax purposes (i) Telesat Corporation or Telesat Partnership acquired substantially all of the stock or assets of Loral (the “Acquisition Requirement”), (ii) following the acquisition, former shareholders of Loral own at least 80% of Telesat Corporation or Telesat Partnership by reason of their ownership of stock of Loral (the “80% Ownership Test”), (iii) the level of business activities conducted by Telesat Corporation or Telesat Partnership and its affiliates in Canada did not satisfy a certain minimum threshold level of activity (“Substantial Business Activities”), and (iv) in the case of Telesat Partnership, it is treated as a publicly traded partnership.

Opinion re non-US corporation status

Loral has received an opinion from special tax counsel that upon consummation of the Transaction, neither Telesat Corporation nor Telesat Partnership should be taxed as a U.S. corporation in light inter alia of the tests under Code s. 7874. However, such opinion does not consider current legislative proposals to lower the threshold for the 80% ownership test to 50% (or some other percentage). While Loral entered into the Transaction Agreement on November 23, 2020, it is possible that such legislative proposals, if enacted, might be applied on a retroactive basis, with no grandfather clause for transactions executed pursuant to a binding commitment entered into prior to such legislation’s enactment or in a prior tax year.

Surrogate foreign corp rules

Even if neither Telesat Corporation nor Telesat Partnership is treated as a U.S. corporation as referred to above, s. 7874 and the associated regulations contain an alternative set of rules that could result in Telesat Corporation or Telesat Partnership being treated as a “surrogate foreign corporation,” and Loral being treated as an expatriated entity, if (i) the Acquisition Requirement is satisfied, (ii) following the acquisition, former shareholders of Loral own at least 60% of Telesat Corporation or Telesat Partnership by reason of their ownership of Loral stock (the “60% Ownership Test”), (iii) Telesat Corporation or Telesat Partnership does not have Substantial Business Activities in Canada, and (iv), in the case of Telesat Partnership, it is treated as a publicly traded partnership.

Loral has received an opinion from special tax counsel that Telesat Corporation should not be treated as a surrogate foreign (and also that Telesat Partnership should neither be treated as a publicly traded partnership, nor, accordingly, a surrogate foreign corporation.) If Telesat Partnership were treated as a publicly traded partnership, it would be treated as a surrogate foreign corporation effective as of the consummation of the Transaction.

S. 351 exchange for Telesat Corporation Public Shares

The Merger, with respect to Loralstockholders who make a Telesat Corporation Election, should qualify as a non-recognition transaction described in Code s. 351 of the Code. Assuming that (as discussed above) Telesat Corporation is not treated as a U.S. corporation. s, 367(a) should apply to the exchange of Loral Common Shares for Telesat Public Shares by U.S. Holders.

S. 721 non-recognition treatment of exchange for Telesat Partnership Units

If Loral stockholders who make a Telesat Partnership Election, then the Merger, with respect to such stockholders, should qualify as a non-recognition transaction described in s. 721. In such event, a U.S. Holder that exchanges its Loral Common Shares for Telesat Partnership Units in the Merger generally should not recognize any gain or loss on such exchange, except that gain or loss would be recognized, in an amount equal to the difference, if any, between (i) the fair market value of the non-economic voting rights received in the exchange, over (ii) a pro rata portion (based on the relative values of the interests in the non-economic voting rights and Telesat Partnership Units received by such holder) of the holder’s adjusted tax basis in a pro-rata portion of each Loral Common Share exchanged for Telesat Partnership Units. The value of the non-economic voting rights established pursuant to the Trust Agreement is expected to be nominal.

Exchange of Units for Public Shares following Lock-up Period

After the expiration of the (six-month) Lock-Up Period, holders of Telesat Partnership Units may elect to exchange (and may be required to exchange) their Telesat Partnership Units for Telesat Public Shares. Such an exchange will result in the recognition of gain or loss in an amount equal to the difference, if any, between (i) the fair market value of Telesat Public Shares received, as applicable, plus the amount of the U.S. Holder’s share of Telesat Partnership’s liabilities, if any, and (ii) the U.S. Holder’s adjusted tax basis in the Telesat Partnership Units exchanged.

Canadian tax considerations

Merger

The Merger will not be a “foreign merger” for the purposes of the Tax Act. Accordingly, a Canadian holder who holds Loral Common Shares will generally realize a capital gain (or capital loss) equal to the amount by which the Canadian holder’s proceeds of disposition of the Loral Common Shares on the Merger exceed (or are less than) the aggregate of the holder’s adjusted cost base of the Loral Common Shares and any reasonable costs of disposition. The proceeds of disposition of the Loral Common Shares to a Canadian holder who receives Telesat Public Shares will be equal to the fair market value of the Telesat Public Shares received by such Canadian holder. The proceeds of disposition of the Loral Common Shares to a Canadian holder who receives Telesat Partnership Units will be equal to the aggregate of the fair market value of the Telesat Partnership Units and the non-economic voting rights received by such Canadian holder, whose value is expected to be nominal.

FAPI treatment of dividends paid by Can ULC to Loral Holdings.

Loral Holdings will be a controlled foreign affiliate of Telesat Partnership. Telesat Partnership will be required to include in its income for a year its share of the foreign accrual property income (“FAPI”) of Loral Holdings for such year, including its proportionate share of any dividends paid by Can ULC to Loral Holdings in such year. In turn, Telesat Corporation must include in income its share of the FAPI (including such dividends paid by Can ULC to Loral Holdings) of Telesat Partnership. However, if Loral Holdings and Loral each pay corresponding dividends in the same taxation year (and provided that Loral is a “foreign affiliate” of Telesat Corporation), Telesat Corporation may deduct in computing its taxable income a prescribed portion of such dividends received by it through Telesat Partnership. In determining the amount of such dividends from Loral that may be deducted in computing its taxable income, Telesat Corporation intends not to take into account any deduction claimed by Telesat Partnership pursuant to s. 91(5). Telesat Corporation believes that such interpretation is consistent with the rationale expressed by the CRA for its published administrative position in this regard.

SIFT tax rules

Telesat Partnership will be a SIFT partnership and, therefore, will be subject to SIFT tax on its “taxable non-portfolio earnings” including income, other than taxable dividends, from “non-portfolio property.” In particular, it would generally be required to pay SIFT tax if its Loral stock were non-portfolio property and the unlimited liability company (“Can ULC”) formed by Loral Holdings Corporation (“Loral Holdings”) and Telesat CanHoldco paid a dividend to Loral Holdings - but subject to any deductions that may be available to Telesat Partnership in computing the income from its Loral stock. As discussed above, provided Loral Holdings and Loral each pay corresponding dividends in the same taxation year as any dividend paid by Can ULC, it is anticipated the Telesat Partnership will be able to claim sufficient deductions so that it does not have net income from non-portfolio property.

Canadian withholding on Telesat CanHoldco dividends

Telesat Partnership will not be a “Canadian partnership.” However, in determining the rate of Canadian federal withholding tax applicable to dividends paid by Telesat CanHoldco to Telesat Partnership, Telesat Corporation, as general partner, expects Telesat CanHoldco to look through Telesat Partnership to its partners and, having regard to the CRA’s administrative practice in similar circumstances, not to withhold on that portion of a dividend attributable to Canadian resident partners of Telesat Partnership (including Telesat Corporation) and to take into account any reduced rates of Canadian federal withholding tax to which non-Canadian limited partners may be entitled under an applicable treaty.

FTCG rules

The foreign tax credit generator rules are not expected to apply to Telesat Partnership.

Overview

Americas Silver, an Ontario corporation listed on inter alia the TSX and NYSE American exchanges, is proposing to acquire Pershing Gold, a listed Nevada corporation, in exchange for Americas Silver shares. The acquisition would entail the merger of Pershing Gold with a newly-formed Nevada subsidiary of Americas Silver, with Pershing Gold being the survivor and with the Americas Silver shares being issued on the merger. The former Pershing Gold common shareholders will thereby become holders of approximately 36.5% of the Americas Silver common shares.

The U.S. tax disclosure indicates that as a result of the removal, in the recently enacted Tax Cut and Jobs Act, of an exception to the application of Code s. 367(a) for the transfer of property by a U.S. person to a foreign corporation for use by such foreign corporation in the active conduct of a trade or business outside the U.S., it is unclear whether resident U.S. shareholders of Pershing Gold will receive rollover treatment for Code purposes on the merger. The anti-inversion rules in Code s. 7874 are not expected to apply given that the Pershing Gold Stockholders are expected to own less than 60% by votes and value of the Americas Silver common shares.

Pershing Gold

Pershing Gold is a Nevada corporation whose Common Stock trades on the NASDAQ, TSX and the Frankfurt Stock Exchange. It is a gold and precious metals exploration company pursuing exploration, development and mining opportunities primarily in Nevada. Barry Honig holds or controls shares of Pershing Gold Common Stock and of Series E Preferred Stock representing approximately 31% of the outstanding shares of Pershing Gold Common Stock and approximately 87% of the outstanding shares of Series E Preferred Stock (or approximately 35.7% of the aggregate voting power of the Pershing Gold Stockholders).

Americas Silver

On December 23, 2014, a merger transaction under s. 182 of Business Corporations Act (Ontario) between Scorpio Mining Corporation and U.S. Silver & Gold Inc. (“U.S. Silver”) was completed to combine their respective businesses. Following this merger, the combined company changed its name to “Americas Silver Corporation”. Americas Silver’s principal and registered office is located in Toronto. The Americas Silver Common Shares are listed on the TSX, NYSE American and Frankfurt Stock Exchanges.

Merger Sub

Merger Sub is a Nevada corporation and a wholly-owned subsidiary of Americas Silver. Merger Sub was formed solely for the purpose of effecting the proposed merger with Pershing Gold.

The merger

Americas Silver Corporation (“Americas Silver”) will acquire all of the issued and outstanding shares of Pershing Gold (the “Pershing Gold Common Stock”) and preferred stock through a transaction (the “Transaction”) pursuant to which R Merger Sub, Inc. (“Merger Sub”), a wholly-owned subsidiary of Americas Silver, will merge with Pershing Gold, with Pershing Gold being the surviving corporation and a wholly-owned subsidiary of Americas Silver. On the merger, Americas Silver will issue 0.715 common shares (“Americas Silver Common Shares”) in exchange for each share of Pershing Gold Common Stock and, at the election of the holder, will issue Americas Silver Common Shares or non-voting convertible preferred shares (the “Americas Silver Preferred Shares”) in exchange for all of the issued and outstanding shares of Pershing Gold’s Series E convertible preferred stock (“Series E Preferred Stock”). It is expected that the former holders of Pershing Gold Common Stock will own, by virtue of the exchange of their shares of Pershing Gold Common Stock for Americas Silver Common Shares, approximately 36.5% of the Americas Silver Common Shares.

Pershing preferred shares

Each share of Series E Preferred Stock will, at the election of the holder, either (i) be converted into the right to receive 461.440 Americas Silver Preferred Shares, or (ii) be converted into the right to receive such number of Americas Silver Common Shares to which the holder would be entitled if the share of Series E Preferred Stock were converted into Pershing Gold Common Stock and then exchanged for Americas Silver Common Shares using the 0.715 exchange ratio described above. The Americas Silver Preferred Shares will not be listed on any stock exchange.

Pershing options

Options to purchase shares of Pershing Gold Common Stock will be cancelled at the effective time of the merger (the “Effective Time”) and converted into the right to receive that number of Americas Silver Common Shares that they would have been entitled to in the Transaction in respect of each share of Pershing Gold Common Stock that would have been issued on a “net exercise” of such options.

Pershing RSUs

Pershing Gold restricted stock units, including performance-vested restricted stock units, will be cancelled at the Effective Time and converted into the right to receive that number of Americas Silver Common Shares that they would have been entitled to in the Transaction in respect of each share of Pershing Gold Common Stock underlying such RSUs.

Pershing warrants

Outstanding warrants to purchase shares of Pershing Gold Common Stock will (i) if allowed under the terms of the applicable warrant, be required to be exercised and, if not exercised, terminated at the Effective Time, or (ii) if such treatment is not allowed under the terms of the applicable warrant, be replaced with warrants to purchase Americas Silver Common Shares on economically equivalent terms.

Canadian tax consequences

The exchange by a resident shareholder of Pershing Gold Common Stock for Americas Silver Common Shares will occur on a taxable basis. S. 51 will apply to the conversion of Americas Silver Preferred Shares into Americas Silver Common Shares in accordance with their terms.

U.S. tax consequences

Potential applicability of Code s. 367(a)

The Transaction is intended to qualify as a reorganization under Code s. 368(a), which generally would result in no recognition of any gain or loss by holders of Pershing Gold Common Stock or Series E Preferred Stock as a result of the Transaction. However, as a result of changes made under the 2018 Tax Cuts and Jobs Act, it is uncertain whether s. 367(a) of the Code will apply to the Transaction, which, if applicable, would require a U.S. holder of shares of Pershing Gold Common Stock or Series E Preferred Stock to recognize gain (but not loss) equal to the difference between (i) the fair market value of Americas Silver Common Shares and/or Americas Silver Preferred Shares received by such U.S. holder in the Transaction, and (ii) the adjusted tax basis of such U.S. holder in such shares of Pershing Gold Common Stock or Series E Preferred Stock exchanged therefor.

Section 367(a) of the Code generally requires U.S. shareholders to recognize gain (but not loss) when stock of a U.S. corporation is exchanged for stock of a non-U.S. corporation in an exchange that would otherwise qualify for non-recognition treatment. Current U.S. Treasury regulations provide that Section 367(a) would apply if either (i) the U.S. shareholders of the acquired U.S. corporation receive more than 50% (by vote or value) of the stock of the non-U.S. corporation, or (ii) the non-U.S. corporation fails to meet the “active trade or business test”. The “active trade or business test” generally requires (I) the non-U.S. corporation to be engaged in an “active trade or business” outside of the U.S. for the 36 month period immediately before the exchange and neither the U.S. nor the non-U.S. corporation have an intention to substantially dispose of or discontinue such trade or business, and (II) the fair market value of the non-U.S. corporation to be at least equal to the fair market value of the U.S. corporation, as specifically determined for purposes of s. 367, as of the closing of the Transaction. The Transaction should not satisfy either of the requirements of the current U.S. Treasury regulations, described above, for the application of s. 367(a) to a U.S. holder’s transfer of shares of Pershing Gold Common Stock or Series E Preferred Stock to Americas Silver in exchange for Americas Silver Common Shares or Americas Silver Preferred Shares.

However, the recently enacted Tax Cut and Jobs Act removed an exception to the application of Section 367 (a) for the transfer of property by a U.S. person to a foreign corporation for use by such foreign corporation in the active conduct of a trade or business outside the United States. It is uncertain whether the repeal of this exception to Section 367(a) for the transfer of property used in the active conduct of a trade or business outside the United States has, or will have, any impact on the exception to s. 367(a) currently provided in the U.S. Treasury regulations for the transfer of stock in a U.S. corporation to a foreign corporation described above.

FIRPTA

Pershing Gold is characterized for U.S. federal income tax purposes as a United States Real Property Holding Corporation. Accordingly, non-U.S. holders of Pershing Gold Common Stock or Series E Preferred Stock may recognize gain for U.S. income tax purposes even if the Transaction qualifies as a reorganization and is not subject to Section 367(a).

Inversion rules

Code s.7874 may limit the ability of a U.S. corporation acquired by a foreign corporation, and U.S. persons related to the acquired U.S. corporation, to utilize certain U.S. tax attributes (including net operating losses and certain tax credits) to offset certain U.S. taxable income. The Pershing Gold Stockholders are expected to own less than 60% of the vote and value of Americas Silver Common Shares after the Transaction. As a result, under current law, Pershing Gold and U.S. persons related to Pershing Gold, are not expected to be subject to such limitations on the use of U.S. tax attributes.

Americas Silver PFIC status

Americas Silver believes it was not classified as a passive foreign investment company (“PFIC”) for its tax year ended December 31, 2017, and based on current business plans and financial expectations, Americas Silver expects that it will not be a PFIC for the current tax year….

Pershing Gold NOLs

As of December 31, 2017, Pershing Gold had approximately $75.7 million of net operating loss (“NOL”) carryforwards available to reduce U.S. federal taxable income in future years. The Transaction is expected to result in an ownership change under Section 382 of the Code for Pershing Gold, potentially limiting the use of Pershing Gold’s NOL carryforwards in future taxable years.

Overview

The acquisition of Polycom, a NASDAQ-listed U.S. corporation by Mitel (a TSX and NASDAQ-listed Canadian corporation) in a Delaware merger (in which an indirect Delaware sub of Mitel (“Merger Sub”) is merged into Polycom, with Polycom as the survivor) is structured so that it will be treated for accounting purposes as a purchase by Mitel and as not causing Mitel to be deemed to be a U.S. corporation under Code s. 7874 – even though the market cap of Polycom is almost 50% greater than that of Mitel. This is being accomplished by a portion of the cash consideration for the public’s shares of Polycom being paid in cash (with much of the cash coming from Polycom itself.) Mitel and Polycom intend to treat the merger as divided for Code purposes into two transactions: (1) the redemption of a portion of the shares of Polycom stock held by each Polycom stockholder for the portion of the cash consideration that is funded by Polycom (including any borrowing by Merger Sub and Polycom and any cash distributions from subsidiaries of Polycom (collectively, the "redemption cash")), and (2) the exchange of a portion of the shares of Polycom stock held by each Polycom stockholder for Mitel common shares and the cash which is funded by Mitel (the "merger cash.") The shares of Polycom stock held by each Polycom stockholder will be divided between these transactions based on the relative fair market values of these two merger consideration categories. The payment of the redemption cash will be treated as a distribution in redemption of shares of Polycom stock. The receipt of the merger cash (but not the Mitel common shares) by U.S. Polycom shareholders is expected to be subject to Code s. 304 so that the Polycom stockholders will be treated as if they received additional Mitel common shares in the merger equal in value to the merger cash, and then Mitel redeemed such shares for such merger cash. The merger agreement provides for the issuance, on the merger, of shares by Polycom to Mitel (or Merger Sub’s immediate Delaware parent) in consideration for Mitel's payment of the aggregate consideration to the Polycom shareholders.

Mitel

A Canadian corporation listed on the NASDAQ and TSX which is a global provider of cloud, mobile and enterprise communications and collaboration solutions.

Polycom

A California-based corporation listed on the NASDAQ providing productivity solutions for organizations.

Merger Sub

An indirect wholly-owned subsidiary of Mitel, a direct wholly-owned subsidiary of Merger Sub Parent and a Delaware limited liability company that was formed on April 12, 2016 (originally as a Delaware corporation) for the purpose of effecting the merger.

Merger Sub Parent

A Delaware corporation that is wholly-owned by Mitel and wholly-owns Merger Sub.

Merger

At the effective time of the merger:

• Merger Sub will merge with and into Polycom, with Polycom continuing as the surviving corporation and a wholly owned subsidiary of Mitel.
• Each outstanding Polycom share (other than those held by Polycom, Mitel or their respective subsidiaries and shares of Polycom stock with respect to which appraisal rights are properly demanded and not withdrawn under the Delaware General Corporate Law) will be cancelled and converted into the right to receive the “Merger Consideration,” consisting of cash of $3.12 and 1.31 Mitel common shares.
• All other outstanding shares of Polycom will be cancelled.
• Each outstanding share of Merger Sub will be converted into one common share of the surviving corporation (Polycom).
• The surviving corporation (Polycom) will issue 100,000 common to Merger Sub Parent or Parent in consideration for the Merger Consideration.
• Each outstanding Polycom stock option award will be cancelled in exchange for cash, without interest (less applicable tax withholdings), based on valuing the merger consideration using the sum of $3.12 plus the product of 1.31 multiplied by the average of the volume weighted average price of a Mitel common share on the NASDAQ on each of the five consecutive trading days ending with the complete trading day immediately prior to the closing date of the merger.
• Each outstanding Polycom RSU award and Polycom performance share award that is vested immediately prior to the effective time, vests as a result of the consummation of the merger or is held by any non-employee member of the Polycom Board will be cancelled in exchange for an amount in cash (less applicable tax withholdings) based on the same per share cash value.

Purchase accounting

The merger will be accounted for as an acquisition of Polycom by Mitel under the acquisition method of accounting in accordance with accounting principles generally accepted in the U.S. The following is a preliminary estimate of the purchase price for the Polycom acquisition:

Mitel cash funding

Mitel expects to fund the cash portion of the consideration in the merger, and the refinancing of its existing credit facilities and those of Polycom, using a combination of cash on hand from the combined businesses and proceeds from new financing and has received debt commitments from Bank of America, N.A. in an aggregate principal amount of $1.085 billion.

Canadian tax consequences

Provided the shares of Polycom exchanged pursuant to the merger are not "taxable Canadian property" to a Non-Canadian Holder for purposes of the Canadian Tax Act at the time of the merger, a Non-Canadian Holder will not be subject to tax under the Canadian Tax Act solely as a result of acquiring Mitel common shares pursuant to the merger.

U.S. tax considerations

Merger conditions

The merger agreement provides that neither (1) a change or proposed change in Code s. 7874 nor (2) a decline in the trading price of a Mitel common share that would result in Mitel being treated as a domestic corporation for U.S. federal income tax purposes as of the effective time of the merger will give Mitel or Polycom any right to avoid or delay closing of the merger or terminate the merger agreement. In any such case, however, the parties have agreed to consider in good faith changes to the structure of the transaction that would avoid or materially reduce the adverse consequences of such event.

Bifurcation of transaction

Mitel and Polycom intend to treat the merger as divided for U.S. federal income tax purposes into two transactions: (1) the redemption of a portion of the shares of Polycom stock held by each Polycom stockholder for the portion of the cash consideration that in funded by Polycom (including any borrowing by Merger Sub and Polycom and any cash distributions from subsidiaries of Polycom (collectively, the "redemption cash"), and (2) the exchange of a portion of the shares of Polycom stock held by each Polycom stockholder for Mitel common shares and the cash which is funded by Mitel (the "merger cash.") The shares of Polycom stock held by each Polycom stockholder will be divided between these transactions based on the relative fair market values of the merger consideration exchanged for such shares.

Redemption cash

The payment of the redemption cash will be treated as a distribution in redemption of shares of Polycom stock, which will be subject to the s. 302 tests described below. Under such tests, Mitel and Polycom intend to treat such payment as a sale or exchange of the shares so redeemed. In such case, each U.S. Holder will recognize capital gain or loss equal to the difference between the amount of redemption cash received and the U.S. Holder's adjusted tax basis in its shares of Polycom stock treated as surrendered in the redemption. A redemption will be treated as a sale or exchange pursuant to s. 302 if the exchange (1) results in a "complete termination" of the U.S. Holder's stock interest in the redeeming corporation; (2) is a "substantially disproportionate" redemption with respect to the U.S. Holder; or (3) is "not essentially equivalent to a dividend" with respect to the U.S. Holder. Specifically, for purposes of applying the S. 302 tests to the receipt of redemption cash, a U.S. Holder generally will not be treated as owning shares of Polycom stock owned by Mitel after the merger. Accordingly, such U.S. Holder generally would be treated as having completely terminated its interest in Polycom and would treat the distribution of redemption cash as a sale or exchange under the s. 302 tests.

Treatment of exchange.

The exchange of shares of Polycom stock for Mitel common shares and the merger cash in the merger will generally be taxable to U.S. Holders for U.S. federal income tax purposes. Gain realized by a Non-U.S. Holder on an exchange of shares of Polycom stock for the Mitel common shares and the merger cash generally is not expected to be subject to U.S. federal income tax.

Merger cash

The receipt of the merger cash (but not the Mitel common shares) by U.S. Holders is expected to be subject to Code s. 304. Under that provision, the Polycom stockholders will be treated as if they received additional Mitel common shares in the merger equal in value to the merger cash, and then Mitel redeemed such shares for such merger cash. This deemed redemption will be subject to the s. 302 tests described above.

80% inversion rules

Mitel is, and after the merger generally would be, classified as a non-U.S. corporation (and, therefore, as a non-U.S. tax resident) under general rules of U.S. federal income taxation. Section 7874, however, contains rules that can cause a non-U.S. corporation to be taxed as a U.S. corporation for U.S. federal income tax purposes. After the merger, the former stockholders of Polycom should own, in the aggregate, less than 80% (by vote and value) of the stock of Mitel by reason of their ownership of Polycom stock based on the rules for determining share ownership under s. 7874 and certain factual assumptions. These rules include the proposed and temporary regulations released on April 4, 2016 by the IRS and the U.S. Department of the Treasury. The application of the pre-combination distribution rule and the look-back rule will increase the percentage of Mitel deemed to be owned by former stockholders of Polycom by reason of their ownership of Polycom stock, but this percentage is still expected not to equal or exceed 80%, based on current law and facts (including the current trading price of Mitel common shares). However, because the cash portion of the consideration payable to Polycom stockholders in connection with the merger is fixed, based on the operation of these rules, a substantial decline in the trading price of Mitel common shares could cause the Section 7874 ownership percentage to equal or exceed 80%, in which case Mitel would be treated as a U.S. corporation for U.S. federal income tax purposes, unless the transaction is restructured as described below.

Regardless of the application of s. 7874, Mitel will be a Canadian resident company for Canadian tax purposes.

60% inversion rule

For purposes of s. 7874, after the merger, the former stockholders of Polycom should be treated as owning more than 60% (by vote and value) of Mitel by reason of their ownership of Polycom stock (based on the rules, including the Inversion Regulations, for determining share ownership under s. 7874 and certain factual assumptions). Accordingly, the limitations on the utilization of certain tax attributes, and the adverse consequences under the Inversion Regulations, are expected to apply to Polycom and its U.S. affiliates. Neither Polycom nor its U.S. affiliates expects to recognize any inversion gain as part of the merger, nor do they currently intend to engage in any transaction in the near future that would generate a material amount of inversion gain.

Overview

OnCore, a private Delaware company with a controlling Bermuda sharehholder, will be merged into a Delaware subsidiary of Tekmira, a BC public company, with OnCore shareholders receiving Tekmira common shares on the merger. Post-merger the OnCore shareholders will hold an estimated 51.7% of the common shares Tekmira – or 50% on a fully diluted basis. (i.e., taking into account the in-the-money value of Tekmira options). Although the Code s. 7874 inversion rules should not apply, the Code s. 382 ownership change rules may restrict the use of Tekmira's NOLs.

Tekmira

Tekmira is a biopharmaceutical company governed by the BCBCA which is focused on advancing novel RNAi therapeutics and providing its lipid nanoparticle delivery technology to pharmaceutical and biotechnology partners. Tekmira's common shares are listed on the NASDAQ Global Market and on the TSX, but it has applied to delist from the TSX.

OnCore

OnCore Biopharma, Inc. is a private biopharmaceutical Delaware company dedicated to discovering, developing and commercializing an all oral cure for patients suffering from chronic hepatitis B infections.

Merger Sub

Merger Sub is a wholly owned subsidiary of Tekmira that was incorporated in Delaware on January 6, 2015

Merger

Merger Sub will merge with and into OnCore, with OnCore surviving the merger as a wholly-owned subsidiary of Tekmira. It is expected that all outstanding shares of OnCore preferred stock will be converted into shares of OnCore common stock on a one-for-one basis immediately prior to the Effective Time of the Merger, and that at the Effective Time, all outstanding OnCore common shares will be converted into Tekmira common shares based on the exchange ratio (estimated to be 1.066 Tekmira common shares for each OnCore common share). OnCore stock options and restricted stock awards will be converted automatically at the Effective Time into options on Tekmira common shares or Tekmira restricted stock awards.

Effect of Merger

Based on the closing price of Tekmira common shares on the NASDAQ and the number of outstanding securities of each of Tekmira and OnCore on January 28, 2015, Tekmira and OnCore security holders would own, following the closing of the merger, approximately (i) 48.3% and 51.7%, respectively, of the common shares of Tekmira on a non-diluted basis, and (ii) 50% and 50%, respectively, on a fully-diluted and as-converted basis using the "treasury stock method" (i.e., converting the in-the-money value of options and warrants into shares based on current market price). The 7-person board will comprise 3 designees of each of Tekmira and OnCore, with the final director to be agreed between Tekmira and OnCore. During a post-merger period, certain actions will require the approval of 70% of the directors. This period will last 3 years, assuming that 10% of its common shares continue to be held by Roivant Sciences Ltd. (a Bermuda exempt company and a shareholder of OnCore) which immediately post-merger will hold 34.8% of the common shares of Tekmira.

Anticipated accounting treatment

. Under ASC 805, the merger is expected to be accounted for using acquisition accounting pursuant to which Tekmira is considered the acquiring entity. As such, Tekmira expects to allocate the total purchase consideration to OnCore's tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values at the date of the completion of the merger.

Canadian tax consequences

Shareholders of Tekmira will not dispose of their common shares of Tekmira by virtue of the merger and will not receive any consideration as a consequence of the merger. Accordingly, they will not realize a capital gain (or incur a capital loss) in respect of their common shares in Tekmira as a result of the merger.

U.S. tax consequences

Tekmira/Tekmira shareholders. No gain or loss will be recognized by Tekmira. Shareholders of Tekmira will not exchange or surrender their common shares of Tekmira in the merger or receive any separate consideration. Accordingly, they will not recognize gain or loss as a result of the merger.

Merger

The merger is intended to qualify as a "reorganization" within the meaning of Code s. 368(a), and the Merger Agreement as a "plan of reorganization" within the meaning of ss. 1.368-2(g) and 1.368-3(a) of the Regulations. OnCore shareholders are expected to receive less than 60% of the vote and value of Tekmira common shares after the merger by reason of holding OnCore shares, so that under current law, OnCore is not expected to be subject to Code s. 7874 limitations on the use of U.S. tax attributes and Tekmira is not expected to be treated as a U.S. domestic corporation under those rules. It is not expected that the promulgation of any of the Treasury Regulations described in the Notice 2014-52 will have any material adverse impact.

Losses

OnCore may undergo an s. 382 ownership change as a result of the merger and as a result, the ability of OnCore to use NOLs and other tax attributes following the merger may be limited.

Overview

Intact, a Canadian public company insurer, and Tryg, a Danish public company insurer dealing at arm’s length with Intact, engaged in co-ordinated transactions to acquire a U.K. target (RSA, a U.K. public company multinational) under a scheme of arrangement pursuant to Part 26 of the UK Companies Act so that: Intact retained RSA’s Canadian business and certain other international businesses; Tryg acquired the RSA Scandinavian businesses; and Intact and Tryg initially jointly owned RSA’s Danish business and subsequently sold it to an arm’s length party (Alm. Brand A/S Group, or “Alm Group”). An indirect U.K. subsidiary of RSA held a Canadian subsidiary (RSA Canada), i.e., there was a sandwich structure.

RSA was acquired by a UK Bidco owned exclusively “beneath” Intact notwithstanding that over half of the funding was provided by Tryg. The Tryg portion of the funding was paid to the direct shareholder of the UK Bidco on account of the purchase price payable by Tryg for the Scandinavian companies that were transferred to it postclosing.

CRA ruled that s. 212.1(4) would not apply to the transfer of RSA Canada by its UK shareholder to Intact such that s. 212.1(1.1)(a) would not deem a dividend to be paid by RSA Canada to that shareholder. CRA accepted that, notwithstanding the funding by Tryg of more than 50% of the acquisition, Tryg did not control RSA and its subsidiaries (including the UK shareholder of RSA Canada) and dealt at arm’s length with Intact.

At the acquisition time, RSA indirectly held a “Danish Opco,” which indirectly held both “keeper” and “non-keeper” businesses, CRA gave detailed and favourable rulings on the application of the s. 15(1.5) demerger rules to a division of Danish Opco between a Demergerco 2 and Demergerco 1 (which was to be sold to Alm Group).

Intact

Intact Financial Corporation, the largest provider, through its subsidiaries, of property and casualty insurance in Canada, whose shares trade on the TSX.

Tryg

Tryg A/S, the largest non-life insurer in Scandinavia whose shares are listed and part of the Danish C25 index.

RSA

RSA Insurance Group plc, a British multinational general insurance company headquartered in London, England, whose shares were listed on the London Stock Exchange until acquired by Intact and Tryg in a transaction closing on June 1, 2021. At the time of the acquisition, RSA indirectly wholly-owned a Danish holding company (“Danish Holdco”), which wholly-owned an operating company (“Danish Opco”), which owned operating subsidiaries in Denmark, Sweden, and Norway. It also had major operations in the U.K., Ireland, and Canada,

Acquisition of RSA and transfer out of RSA Canada

A U.K. Bidco was incorporated as an indirect wholly-owned subsidiary of Intact. Under U.K. law, it had several days after the June 1, 2021 closing, to pay for the purchase of the RSA shares. The all cash purchase price of £7.2 billion was funded by Intact as to £3.0 billion after closing through a chain of holding companies. The contribution of the £4.2 billion balance by Tryg was effected by payment to the direct shareholder of UK Bidco on account of the purchase price payable by Tryg for the Swedish and Norwegian businesses, and its portion of the Danish business, that were transferred to it postclosing.

With a view to transferring RSA Canada out from a chain of U.K. corporations, the U.K. shareholder of RSA Canada (the “U.K. shareholder”) transferred the shares of RSA Canada to Intact in consideration for an interest-bearing demand promissory note (the “Intact note”) having a principal amount equaling the RSA Canada shares’ fair market value, and then Intact transferred those shares to a new Canadian holding company (“Canada Holdco”). (Subsequently, the Intact note was distributed to a Canadian subsidiary of Intact and repaid through a setoff against other indebtedness owing to Intact.)

Demerger transactions

With a view to indirectly transferring the Swedish and Norwegian businesses to Tryg, and the Danish business to a new Danish holding company jointly owned by Intact and Tryg, before its sale to an arm’s-length purchaser (Alm. Group), the parties effected a demerger under Danish law of assets held by Danish Opco pursuant to transactions occurring at the same time (“the demerger time”) as required under Danish law, and on a tax-deferred basis for Danish, Swedish, and Norwegian purposes. In particular:

• The Danish assets and subsidiaries of Danish Opco were transferred to a new Danish corporation (“Demergerco 1”), and Demergerco 1 issued additional shares to Danish Holdco (in respect of the shares of Danish Opco owned by Danish Holdco) having a value equal to the net value of such transferred assets and shares.
• In addition, Danish Opco transferred its Swedish and Norwegian assets and subsidiaries to another new Danish corporation (“Demergerco 2”), and Demergerco 2 issued shares to Danish Holdco (in respect of the shares of Danish Opco owned by Danish Holdco) having a FMV equal to the net value of such transferred assets and shares.
• At the demerger time, Danish Opco also was dissolved.

Various transactions were then effected so that:

• Demergerco 2 (now holding the Swedish and Norwegian businesses) became an indirect wholly owned subsidiary of Tryg; and
• Demergerco 1 (with the Danish business) was jointly owned by Intact and Tryg.
• The shares of Demergerco 1 were sold to Alm. Brand A/S Group for approximately DKK6.3 billion (or approximately Cdn.$1.26 billion).

Ruling regarding RSA Canada transfer (s. 212.1(4))

2020-0875391R3 ruled that s. 212.1(4) applied to the RSA Canada share transfer, so that such transfer did not result in a deemed dividend paid by RSA Canada to the UK shareholder pursuant to s. 212.1(1). S. 212.1 would have applied to such transfer unless Intact legally controlled the UK shareholder and there was no non-resident shareholder of Intact who did not deal at arm’s length with Intact.

In support of this ruling, Intact owned (indirectly) all of the shares of UK Bidco. In addition, the ruling letter stated that the reason Tryg did not acquire any shares of U.K. Bidco was to comply with various anti-trust and regulatory requirements. The ruling letter also stated that Intact was widely held, that no person or group controlled it, that no person held more than 15% of its shares (and no non-resident held more than 10%), and no group of six or fewer shareholders owned an aggregate of more than 50% of its shares. More generally, no non-resident person not dealing at arm’s length with Intact held or would hold at the closing or as part of the same series, directly or indirectly, shares of Intact. Tryg also dealt at arm’s length with Intact. CRA accepted that, notwithstanding the funding by Tryg of more than 50% of the acquisition, Tryg did not control RSA and its subsidiaries (including the UK shareholder) and dealt at arm’s length with Intact.

Rulings on demerger transactions

2020-0875391R3 ruled that ss. 15(1.5)(a)(i), (b) and (c) applied to the demerger transactions so that:

• Danish Opco and Danish Holdco were treated as if Danish Opco had distributed the shares of Demergerco 1 and Demergerco 2 to Danish Holdco as a dividend in kind.
• Any gain or loss realized by Danish Opco from this distribution was deemed to be nil, and the dividend would not be included in the FAPI of Danish Holdco or taxable as a s. 15(1) benefit.
• Each property transferred by Danish Opco to Demergerco 1 and Demergerco 2 was deemed to have been disposed of by Danish Opco immediately before the demerger time, for proceeds equal to its FMV (although the assets and shares owned by Danish Opco were excluded property, so that no FAPI resulted).

Regarding s. 92(2) (which reduces the ACB of shares of a foreign affiliate (FA) held by another FA by the portion of a dividend previously received by the FA shareholder that would have been deductible under s. 113(1)(d) if that shareholder had been a Canadian-resident corporation), CRA ruled that s. 92(2) applied in respect of the dividend paid to Danish Holdco, so that the ACB of the shares of Danish Opco was reduced at the demerger time (even though the dividend was deemed to be received by Danish Holdco only at the demerger time). Furthermore, if all amounts required by s. 53(2) to be deducted in computing the ACB of the Danish Opco shares at the demerger time (including under s. 92(2)) exceeded the cost of the Danish Opco shares (as increased by any s. 53(1) addition), then s. 40(3) would deem such excess to be a gain of Danish Holdco from the disposition of the Danish Opco shares. (Note that the reduction in ACB and the realization of a gain should occur after the time at which the dividend was received; this would be after the demerger time, when Danish Opco no longer existed.)

It appears that Danish Opco had no material surplus balances, as it had been a foreign affiliate of Intact for only a short time.

2020-0875391R3 also ruled that, provided that the shares of the Danish Opco were excluded property immediately before the time that the assets were deemed to be transferred, the gain realized by Danish Holdco under s, 40(3) would be treated as a gain from the disposition of excluded property.

Overview

TSX-listed B2Gold will acquire all the shares of ASX-listed CGA under an Australian Scheme of Arrangement. Accordingly, CGA will become a wholly-owned subsidiary of B2Gold. The Scheme of Arrangement values the equity of CGA at approximately Cdn.$1.1 billion, representing approximately a 26% premium.

Scheme of Arrangement

Under the Scheme of Arrangement, B2Gold will acquire all the outstanding CGA shares on the basis of 0.74 B2Gold common shares for each CGA ordinary share. However, CGA shareholders resident in an "Ineligible Jurisdiction" (such as the UK or Netherlands) instead will receive the net proceeds of disposition of B2Gold which are issued to a CGA Nominee. Moreover, B2Gold shares issuable to CGA shareholders resident in Australia who otherwise would receive 1,000 or fewer B2Gold shares and elect to have such shares sold ("Electing Small Scheme Participants") will have those B2Gold shares issued to the CGA Nominee and sold by it, with the net proceeds paid (in Australian dollars) to them.

CGA options

It is a condition precedent to the Scheme of Arrangement becoming effective that by the final (second) court approval, all (29) holders of (5.4M) CGA options have agreed, subject to the Scheme of Arrangement becoming effective, that their options will be cancelled for cash consideration equal to their in-the-money value two trading days before the announcement date.

Canadian tax consequences

A Canadian-resident CGA shareholder who does not make a valid s. 85 election with B2Gold will recognize fair market value proceeds (no s. 85.1 rollover). An eligible holder (i.e., resident and non-exempt) generally must have provided a completed s. 85 election to B2Gold by 90 days after the effective date of the Scheme of Arrangement in order for B2Gold to jointly elect.

US tax consequences

While not free from doubt, US-resident holders generally will receive rollover treatment under the Code. B2Gold believes that it is not a PFIC, and CGA believes that it has not been a PFIC for its taxation years subsequent to 2009.

Overview

Alignvest, which is a Canadian special purpose acquisition corporation listed on the TSX, is subject to a deadline of June 2017 to apply its 2015 IPO proceeds (mostly still held in escrow) to a qualifying acquisition. Although the prospectus for its IPO stated that it would target Canadian investments, it is now proposing to subscribe for what will be a 56% interest in a Washington State LLC (Trilogy) assuming that none of the shareholders of Alignvest exercise their redemption right to receive back their IPO subscription price. Essentially the only assets of Trilogy are two subsidiaries in New Zealand and Bolivia running wireless networks.

Overview of inversion consequences

Given that the existing Trilogy shareholders will continue to hold their units in Trilogy, which will now be exchangeable into common shares of Alignvest (to be renamed Trilogy International Partners Inc. on completion of the reorganization under an Ontario Plan of Arrangement), Alignvest will be treated under the inversion rules in Code s. 7874(b) as converting to a U.S. domestic corporation immediately before the Arrangement under an “F” reorg. The results include that Alignvest will be a dual tax resident subject to U.S. tax on its worldwide taxable income (with issues as to whether the IRS would grant foreign tax credits for the Canadian tax on the same income), and that Canadian shareholders will be subject to U.S. withholding tax on their dividends (for which no Canadian foreign tax credit may be available) – and that, conversely, U.S. shareholders will be subject to Canadian withholding tax on their dividends (for which no U.S. foreign tax credit may be available).

The Corporation/TIP Inc

A special purpose acquisition corporation (SPAC ) incorporated under the OBCA on May 11, 2015 which raised gross proceeds of C$258,750,000 on its June 24, 2015 initial public offering. Each subscriber for a Class A Unit of the Corporation received 1 Class A Restricted Voting Share and ½ of a warrant (an “Alignvest Warrant”) with a C$11.50 exercise price and a five-year term. In addition, Class B Units (with the Class B Shares included therein representing 20% of issued and outstanding shares) were issued to the “founders,”(including Alignvest Management Corporation (“AMC”) for C$4,700,000, but with 25% of the Class B Shares subject to forfeiture if the stock price does not exceed $13.00 in five years. As an SPAC, the Corporation’s objective is to execute a qualifying acquisition, the terms of which are determined by it to be favourable and provided that the target businesses or assets have a fair market value of at least 80% of the assets held in the escrow account holding most of the IPO proceeds. After the Arrangement, it will be named Trilogy International Partners Inc. (“TIP Inc.”).

Class A Restricted Voting Share redemption right

Holders of Class A Restricted Voting Shares can elect to redeem their shares, irrespective of whether they vote for or against the Arrangement, for an amount per share, payable in cash, equal to applicable amount on deposit in the escrow account, expected to be approximately C$10.05, net of the deferred underwriting commission.

Trilogy

Trilogy, which is a holding company formed under the laws of the State of Washington on November 21, 2005, currently provides communications services through its New Zealand and Bolivian operating subsidiaries, Two Degrees Mobile Limited (“2degrees”) and NuevaTel (PCS de Bolivia) S.A. (“NuevaTel”), held indirectly through LLC subsidiaries. 2degrees and NuevaTel provide a variety of wireless voice and data communications services, including local, international long distance, and roaming services for both customers and international visitors roaming on their networks. Trilogy will use the proceeds from the Class B Unit subscriptions (described below) from Alignvest to reduce leverage.

Post-Arrangement Trilogy structure/Trilogy LLC Agreement

The Trilogy LLC Agreement will govern, among other things, the business and affairs of Trilogy following the Arrangement. As of the Effective Date of the Arrangement, the interests in Trilogy will be divided into and represented by an unlimited number of each of three classes of units (the "Trilogy Units") as follows: (i) Trilogy Class A Units, all of which will be held by a wholly-owned Delaware subsidiary of TIP Inc. (the “Managing Member,” with complete authority to manage Trilogy), (ii) Trilogy Class B Units, all of which will be held at closing by TIP Inc. (in the same number as the number of outstanding Tip Inc. outstanding Common Shares) and will have the same economic entitlements as the Trilogy Class C Units and are expected to represent a 56.1% equity interest in Trilogy should there be no redemption of Class A Restricted Voting Shares), and (iii) Trilogy Class C Units, all of which will be held at closing by the pre-Arrangement members of Trilogy. The Trilogy Class A Units will have nominal economic rights but generally will be the only Units with voting rights. Their number will be that which ensures that the Trilogy Class A Units and the Trilogy Class B Units collectively represent more than 75% of all the outstanding Trilogy Units. Trilogy Class C Unit Holders will be entitled to exercise voting rights in TIP Inc. through a Special Voting Share to be held by TSX Trust Company under the terms of a Voting Trust Agreement.

Trilogy Class C Unit exchange right

Subsequently to the lock-up period (of up to 24 months), the Class C Units will be retractable for the equivalent number of TIP Inc. Common Shares or (at Trilogy’s option) the cash equivalent.

2degrees optionholders’ exchange right

It is expected that following the completion of the Arrangement, there will be two 2degrees minority holders and certain individuals also holding 2degrees Options. Under the Arrangement Agreement, Alignvest has agreed with Trilogy that, if requested by Trilogy, Alignvest will ensure that, following the Effective Time, an offer is made on terms and at a value acceptable to both Alignvest and Trilogy to holders of 2degrees Options to exchange any 2degrees Shares that may be issued upon exercise of 2degrees Options for TIP Inc. Common Shares.

Plan of Arrangement

Under the Ontario Plan of Arrangement:

(a) Class A Restricted Voting Shares for which AQX Shareholders have duly exercised their redemption rights will be redeemed;

(b) each Class A Restricted Voting Share of a Participating Shareholder will be converted into one Class B Share;

(c) the “Alignvest Additional Subscriptions” will become effective, pursuant to which investors will subscribe for Class B Shares at a subscription price of C$10 per share so as to result in subscription proceeds of up to an amount equal to the total of U.S.$75 million and the amounts paid to redeem shares in __ above;

(d) the “Alignvest Sponsor Equity Investment” will become effective; Alignvest Partners, which is managed by AMC (which currently holds 6,677,760 Class B Shares, representing 19.93% of all issued and outstanding AQX Shares), has agreed to subscribe for approximately US$21.2 million of new Class B shares at C$10.00 per Class B Share;

(e) the articles of Alignvest will be amended to inter alia re-designate the Class B Shares as "Common Shares", create the Special Voting Share and change the name of Alignvest from "Alignvest Acquisition Corporation" to "Trilogy International Partners Inc.";

(f) the terms of the Alignvest Warrants will be deemed to be amended to be share purchase warrants to acquire Common Shares at an exercise price of C$11.50 per share

(g) each of the Trilogy LLC Agreement, the Alignvest U.S. Subsidiary Subscription (for Trilogy Class A Units by the Managing Member owned by Alignvest at a subscription price of U.S.$10,000) and the Voting Trust Agreement will become effective and Alignvest will subscribe for, and Trilogy will issue to Alignvest, the Trilogy Class B Units and the Trilogy Warrant Rights (being the right of TIP Inc. to subscribe for Trilogy Class B Units equal in number to the TIP Inc. Common Shares issuable on exercise of the Alignvest Warrants);

(h) Alignvest will issue to, and deposit with, the Trustee the Special Voting Share;

(i) the “TINZ Participating Unit Holders Exchange” will become effective whereby minority unitholders in the LLC holding 2degrees will exchange their units for TIP Inc. Common Shares ;

(j) the “2degrees Participating Securityholder Exchange,” and described above under “2degrees optionholders’ exchange right,” will become effective;

(k) all of the directors of Alignvest will be removed as directors of Alignvest and specified individuals appointed as directors; and

(l) Alignvest will be authorized to apply for continuance from Ontario to B.C.

Canadian tax consequences

Redemption

Those whose Class A Restricted Voting Shares are redeemed by the Corporation will be deemed to have received a dividend equal to the amount, if any, by which the aggregate Class A Restricted Voting Share redemption price paid exceeds the shares’ paid-up capital, and will be considered to have disposed of such shares for proceeds of disposition equal to the aggregate redemption price paid to such Resident Holder, less the amount of any such deemed dividend.

Conversion

The automatic conversion of Class A Restricted Voting Shares into Class B Shares will be deemed not to constitute a disposition.

U.S. tax consequences

Conversion to U.S. corp

Pursuant to Code s. 7874(b), the Corporation will be treated as converting to a U.S. domestic corporation at the end of the day immediately preceding the Effective Date of the Arrangement under a Code s. 368(a)(1)(F) reorganization. The Corporation should not recognize any gain or loss as a result of this deemed conversion. As a result, the Corporation generally will be subject to U.S. federal income tax on its worldwide taxable income. It is unclear how the Code foreign tax credit rules will operate in certain circumstances, so that the Corporation may be subject to double taxation.

No significant all E&P Amount

Notwithstanding qualification of the Arrangement as an “F” tax-deferred reorganization, under Code s. 367(b). U.S. Holders who own, directly or indirectly under certain stock attribution rules, 10% or more of the combined voting power of the Corporation will be required to recognize as dividend income a proportionate share of the Corporation's "all earnings and profits amount" ("All E&P Amount"), if any, as determined under applicable Treasury Regulations. However, the Corporation anticipates that it will have a nominal all earnings and profits amount through to the Effective Date.

Treatment of Canadian withholding tax

Dividends received by on Common Shares by U.S. Holders will be subject to Canadian withholding tax. As the dividends paid by the Corporation will be characterized as U.S. source income for purposes of the foreign tax credit rules under the Code, U.S. Holders generally would not be able to claim a credit for any Canadian tax withheld unless they have other foreign source income that is subject to a low or zero rate of foreign tax and certain other conditions are met.

Dividend withholding to Canadian shareholders

Dividends received by holders of Common Shares who are residents of Canada for purposes of the Tax Act will be subject to U.S. withholding tax. A foreign tax credit under the Tax Act in respect of such U.S. withholding taxes may not be available to such holder.

PFIC rules

The Corporation believes that it was a PFIC during its initial tax year ended April 30, 2016, and based on its income, assets and activities during its current tax year, the Corporation expects that it should be a PFIC for its current tax year. Under proposed Treasury Regulations, if the Corporation was classified as a PFIC for any tax year during which a U.S. Holder held Class A Restricted Voting Shares, special rules, set forth in the proposed Treasury Regulations, may increase such U.S. Holder's U.S. federal income tax liability with respect to the Conversion. Such proposed Treasury Regulations generally would require gain recognition by “Non-Electing Shareholders” as a result of the conversion.

Conversion

The conversion of Class A Restricted Voting Shares into Class B Shares should qualify as a tax-deferred "recapitalization" under of s. 368(a)(1)(E) (a "Recapitalization") and/or a tax-deferred exchange under s. 1036(a).

Re-designation

The re-designation of Class B Shares as Common Shares should qualify as a tax-deferred Recapitalization and/or a tax-deferred exchange under Code Section 1036(a)….

Redemption

The treatment of U.S. Holders whose Class A Restricted Voting Shares are redeemed will depend on whether the redemption qualifies as a sale of the Class A Restricted Voting Shares under s. 302. If the redemption so qualifies, it will be treated as a disposition. If it does not so qualify, the U.S. Holder will be treated as receiving a corporate distribution. Whether the redemption qualifies for sale treatment will depend largely on the percentage of the shares of the Corporation's outstanding stock treated as held by the U.S. Holder (including any stock constructively owned by the U.S. Holder, for example, as a result of owning Alignvest Warrants) both before and after the redemption.