Proposed transactions
Holdco A and Holdco X (which are holding companies of the CEO and executive vice-president, respectively, of ACO, which is a Canadian public company) will enter into the Term Contract (having a maximum term of X years) with a Canadian financial institution (“FI”) under which they each will have an obligation to make a payment to FI if the closing price of referenced Class A (subordinated voting common) Shares of ACO is higher than the benchmark price on the settlement date, and with a correlative obligation of FI to make a payment on the settlement date if such closing price is lower. Concurrently with signing the Term Contract, Holdco A and Holdco X will secure their obligations thereunder by granting a hypothec to FI on their Class B (multiple voting common) Shares of ACO (but with the continued right to vote those shares and receive dividends thereon). They also will receive an interest-bearing loan from IF (to be used by them to make investments yielding interest or dividends higher than the loan interest) and will grant a second-ranking hypothec to FI on their Class B Shares and a first-ranking hypothec on their interest in the Term Contract to secure these loans. On the settlement of the Term Contract, Holdco A and Holdco X have the option of settling their obligations by delivering the subject Class A Shares (through converting their Class B Shares into Class A Shares) or by settling in cash.
Rulings
Include that the amounts which are paid or received by Holdco A and Holdco X on the settlement of the Term Contract will be on capital account.