2003 Ruling 2003-0184493 - PHANTOM STOCK PLANS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Will the proposed DSU plans be excluded from the SDA rules

Position: Yes

Reasons: They comply with provisions of 6801(d) of the Regulations.

XXXXXXXXXX 2003-018449

XXXXXXXXXX, 2003

Dear XXXXXXXXXX:

Re: XXXXXXXXXX (the "Company")
Advance Income Tax Ruling Request - Deferred Share
Unit Plans for Directors and Executives

This is in reply to your letters of XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the Company.

We understand that, to the best of your knowledge and that of the XXXXXXXXXX (collectively the "Subsidiaries"), none of the issues in the ruling request is:

(a) in an earlier return of the Company, any of the Subsidiaries or a person related to the Company or any of the Subsidiaries,

(b) being considered by a tax services office or tax centre in connection with a previously filed tax return of the Company, any of the Subsidiaries, or a person related to the Company or any of the Subsidiaries,

(c) under objection by the Company, any of the Subsidiaries, or a person related to the Company or any of the Subsidiaries,

(d) before the courts, or

(e) the subject of a ruling previously issued by the Directorate to the Company, any of the Subsidiaries or a person related to the Company or any of the Subsidiaries.

Unless otherwise stated, all references to a statute are to the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th Supp.), as amended to the date of this letter, (the "Act"), and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.

Our understanding of the facts, proposed plans and the purpose of the proposed plans is as follows:

Facts

1. The Company is incorporated under the laws of XXXXXXXXXX. It is a public corporation and a taxable Canadian corporation as those terms are defined in subsection 89(1) of the Act. XXXXXXXXXX shares of the Company are traded on the XXXXXXXXXX Stock Exchange. The Company has a fiscal year-end of XXXXXXXXXX.

2. The Company and Subsidiaries are served by the XXXXXXXXXX Tax Services Office and file their returns with the XXXXXXXXXX Tax Services Office. Their account numbers are as follows:

Company							CCRA Account #

XXXXXXXXXX

3. The Company's mailing address is:

XXXXXXXXXX.

Attention: XXXXXXXXXX

4. XXXXXXXXXX.

5. The Company established the XXXXXXXXXX (the "STP"). The STP is a cash-based annual incentive plan pursuant to which an employee of the Company or an employee of a subsidiary of the Company may receive a cash award based on corporate and individual performance over the course of a month or a calendar year (i.e., the STP Performance Period). Under the STP, amounts are paid before the end of the following month in the case of monthly awards and before the end of XXXXXXXXXX of the following year in the case of annual awards. XXXXXXXXXX.

6. The Company established the XXXXXXXXXX (the "MTP"). The MTP is a cash-based medium term incentive plan pursuant to which an employee of the Company or an employee of a subsidiary of the Company may receive incentive compensation based on operating results over the course of a XXXXXXXXXX calendar year period (i.e., the MTP Performance Period). Under the MTP, amounts will be paid after the end of the MTP Performance Period. XXXXXXXXXX. Where employment of a participant in the MTP is terminated for any reason other than death, disability or retirement, he or she will not receive any incentive compensation for that MTP Performance Period under the MTP. If employment is terminated as a result of death, disability or retirement, incentive compensation under the MTP will be paid after the end of the MTP Performance Period.

7. Director's Cash Remuneration, as defined in 10(i) below, is payable by the Company on a quarterly basis at the end of each Quarter, as defined in 10(z) below.

Proposed Plans

8. The Company will establish the XXXXXXXXXX (the "Directors' Plan") for eligible directors (the "Eligible Directors" as defined in 10(n) below). The Directors' Plan will comprise a plan text and written agreements between the Company and each Eligible Director setting out the terms of the Eligible Director's participation in the Directors' Plan.

9. The Company will also establish the XXXXXXXXXX (the "Executives' Plan") for eligible executives (the "Eligible Executives" as defined in 10(o) below). The Executives' Plan will comprise a plan text and written agreements between the Company and each Eligible Executive setting out the terms of the Eligible Executive's participation in the Executives' Plan.

10. For the purposes of the Directors' Plan and the Executives' Plan (collectively referred to as the "Plans"), the relevant definitions are as follows:

a) "Account" means the notional account maintained, or caused to be maintained, by the Company in respect of the Directors' Plan or the Executives' Plan, as applicable, recording at all times the number of DSUs standing to the credit of a Participant.

b) "Affiliate" means an affiliate of the Company as that term is defined in paragraph 3 of the Canada Customs and Revenue Agency's Interpretation Bulletin IT-337R3, Retiring Allowances.

c) "Beneficiary" means the individual who, on the date of a Participant's death, is the person who has been designated as the Participant's beneficiary under the applicable Plan. Where no such individual has been validly designated or where the individual designated does not survive the Participant, "Beneficiary" shall mean the Participant's legal representative.

d) "Board" means those individuals who serve from time to time as the Board of Directors of the Company.

e) "Committee" means, with respect to the Directors' Plan, the Company's XXXXXXXXXX Committee and with respect to the Executives' Plan, the Chief Financial Officer and the Chief Executive Officer of the Company.

f) "Company Executive Group" means the group of senior executives of the Company and certain of its Affiliates as designated by the Chief Executive Officer of the Company from time to time.

g) "Conversion Date" means, with respect to any calendar year or Quarter as applicable, the date used to determine the DSU Value for purposes of determining the number of DSUs to be credited to a Participant's Account. With respect to the Executives' Plan, such date shall generally be the last day of the STP Performance Period or MTP Performance Period, as applicable. With respect to the Directors' Plan, such date shall be the date recommended by the Committee and confirmed by the Board and which shall for the Quarter including the effective date of the Plan be the last day of that Quarter and thereafter shall generally be the last day of each Quarter and, in any event, shall not be earlier than the first business day, or later than December 31, of the year in respect of which the DSUs are being provided.

h) "Deferred Share Unit", or "DSU" means a bookkeeping entry on the books of the Company, the value of which on any particular date shall be equal to the DSU Value at that date.

i) "Directors' Cash Remuneration" means all amounts payable to an Eligible Director by the Company in respect of the services provided to the Company by the Eligible Director in a calendar year, including without limitation (i) the annual base retainer fee for serving as a director, (ii) the annual retainer fee for serving as a member of a Board committee, (iii) the annual retainer fee for chairing a Board committee, (iv) the fees for attending meetings of the Board or Board committees, but, for greater certainty, excluding the Directors' DSU Remuneration and amounts received by an Eligible Director as a reimbursement for expenses incurred in attending meetings.

j) "Directors' DSU Remuneration" means the portion of the Directors' Cash Remuneration that is payable to an Eligible Director in the form of DSUs and not in the form of cash.

k) "Directors' Plan" has the meaning ascribed thereto in 8 above.

l) "DSU Value" means, with respect to any particular date, the closing price for all sales of Shares on the XXXXXXXXXX Stock Exchange on the particular date, or if the Shares are not listed on the XXXXXXXXXX Stock Exchange, on such other stock exchange in Canada on which the Shares are listed, or if the Shares are not listed on any stock exchange, then on the over-the-counter market, on the last day immediately prior to that date on which at least one board lot of the Shares was traded.

m) "Effective Date" means, with respect to each of the Plans, the date that an advance tax ruling is received from CCRA advising that each of the Plans is a "prescribed plan or arrangement" as described in paragraph 6801(d) of the Income Tax Regulations (the "Regulations").

n) "Eligible Director" means any director of the Company who is not otherwise an employee of the Company or any Affiliate of the Company.

o) "Eligible Executive" means such executive employees of the Company or a Related Company as the Company may designate from time to time as eligible to participate in the Executives' Plan.

p) "Employer" means, with respect to an Eligible Executive, a company that is any of the Company or a Related Company and that employs such Eligible Executive or that employed such Eligible Executive prior to his/her Termination Date and, for greater certainty, includes the "Final Employer", as defined in 13(k) below, of the Eligible Executive.

q) "Entitlement Date" has the meaning ascribed thereto in section 11(f) below.

r) "Executives' Plan" has the meaning ascribed thereto in 9 above.

s) "Incentive Compensation" means cash awards that may be payable to an Eligible Executive under the MTP and/or under the STP.

t) "Maximum DSU Limit" means the number of DSUs that have a DSU Value, as of the date of the calculation, equal to: (A) XXXXXXXXXX times the annual base salary of the applicable Eligible Executive, if the Eligible Executive is a member of the Company Executive Group; (B) XXXXXXXXXX times the annual base salary of the applicable Eligible Executive, if the Eligible Executive is a XXXXXXXXXX; and (C) XXXXXXXXXX times the annual base salary of the applicable Eligible Executive, for all other Eligible Executives.

u) "Minimum Share Ownership Requirement" means the requirement, applicable to Eligible Directors under the Directors' Plan, that each member of the Board own at least XXXXXXXXXX Shares, XXXXXXXXXX DSUs, or a combination of Shares and DSUs that totals at least XXXXXXXXXX in the aggregate.

v) "MTP" means the XXXXXXXXXX as described in 6 above.

w) "Participant" means, with respect to the Directors' Plan, an Eligible Director who has been credited with Deferred Share Units under the Director's Plan; and with respect to the Executives' Plan, an Eligible Executive who has been credited with Deferred Share Units under the Executives' Plan.

x) "Performance Period" means a month or calendar year (in respect of the STP) or a XXXXXXXXXX calendar year period (in respect of the MTP) in respect of which an Eligible Executive may be or become entitled to an award of DSUs in lieu of a cash payment of Incentive Compensation.

y) "Plan" means either the Directors' Plan or the Executives' Plan, as applicable, and "Plans" means both the Directors' Plan and the Executives' Plan.

z) "Quarter" means a fiscal quarter of the Company, which, until changed by the Company, shall be the three month period ending March 31, June 30, September 30 or December 31 in any calendar year.

aa) "Related Company" means a corporation related to the Company for purposes of the Act.

bb) "Share" means a Class B non-voting share of the Company and any other share that may be substituted therefor.

cc) "STP" means the XXXXXXXXXX as described in 5 above.

dd) "Termination Date" means the earliest date on which both of the following conditions are met by a Participant: (1) the Participant has ceased to be employed by the Company or any Affiliate of the Company for any reason whatsoever; and (2) the Participant is not a member of the Board nor a director of an Affiliate of the Company.

ee) "Trading Day" means any date on which a stock exchange as described in 10(l) above is open for the trading of Shares and on which one or more Shares actually traded.

11. The relevant common features of the Plans are as follows:

a) The Plans will be administered by the applicable Committee effective as and from the date on which the Company receives an advance income tax ruling that each of the Directors' Plan and the Executives' Plan is a "prescribed plan or arrangement" as described in paragraph 6801(d) of the Regulations.

b) Under both Plans, Participants may elect to receive DSUs in lieu of cash compensation. Under the Executives' Plan, the grant of DSUs will relate to Executives' potential Incentive Compensation under either or both of the MTP and the STP. Under the Directors' Plan, an Eligible Director may elect to receive all or a portion of his/her future Director's Cash Remuneration in DSUs. The provisions of the Directors' Plan relating to the election to receive DSUs under that Plan is described in more detail in 12 below. The provisions of the Executives' Plan relating to the election to receive DSUs under that Plan is described in more detail in 13 below.

c) In the event that any cash dividend is declared and paid by the Company on its Shares, a Participant's Account in either Plan shall be credited with additional DSUs. The number of such additional DSUs will be calculated by dividing the dividends that would have been paid to a Participant if the DSUs recorded in the Participant's Account as at the record date for the cash dividend had been Shares, by the DSU Value on the date on which the dividends are paid on the Shares.

d) In the event of any stock dividend, stock split, combination or exchange of Shares, merger, consolidation, spin-off or other distribution (other than normal cash dividends) of the Company's assets to shareholders, or any other change in the capital of the Company affecting the Shares, such proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change, shall be made with respect to the number of DSUs outstanding under the Plans. Notwithstanding any other provision of the Plans, the value of a DSU shall always depend on the fair market value of the Shares of the Company or the shares of a Related Company and no additional DSUs, other benefit, or amount will be granted to a Participant to compensate for a downward fluctuation in the price of Shares.

e) The Company shall maintain in its books an Account for each Participant under the applicable Plan recording at all times the number of DSUs standing to the credit of the Participant in that Plan. Upon payment in satisfaction of DSUs credited to a Participant in the manner described in 11(f) below, such DSUs shall be cancelled. A written confirmation of the balance in a Participant's Account shall be mailed by the Company to the Participant at least annually.

f) A Participant may elect up to XXXXXXXXXX separate dates as of which either a portion (specified in whole percentages or number of DSUs) or all of the DSUs credited to a Participant's Account in the Directors' Plan or in the Executives' Plan, as applicable, shall be redeemed by filing one or more (but not more than XXXXXXXXXX) irrevocable written elections. Such elections shall be filed with the Company's Chief Financial Officer following the Participant's Termination Date (each such date being an "Entitlement Date"). No Entitlement Date elected by a Participant shall be earlier than the Participant's Termination Date or later than December 15 of the calendar year commencing immediately after the Participant's Termination Date and no Entitlement Date may be earlier than the date on which the election is filed as described herein. Where a Participant does not elect a particular date or dates within the permissible period set out above as his/her Entitlement Date or Entitlement Dates, as the case may be, prior to December 15 of the calendar year commencing immediately after his/her Termination Date, there shall be a single Entitlement Date for the Participant which shall be December 15 of the calendar year commencing immediately after the Participant's Termination Date, subject to the mechanisms described in 11(i) and (j) below. The portion specified in the applicable written election or as otherwise determined in accordance with this 11(f) of the value of the DSUs credited to the Participant's Account under the Plans as at an Entitlement Date shall be redeemable by the Participant and shall be paid to the Participant as a lump sum in cash, after deduction of any applicable taxes and other source deductions required to be withheld, as soon as practicable after the applicable Entitlement Date.

g) In the event of a Participant's death, any and all DSUs then credited to the Participant's Account under the Plans shall become payable to the Participant's Beneficiary on the dates the DSUs would otherwise have been redeemed and payable to the Participant. In the event the Participant failed to make the election with respect to the redemption of his/her DSUs before his/her death, the Participant's Beneficiary shall be entitled to make such election, subject always to the time limits specified with respect to a Participant for such election. In addition, notwithstanding any election made by the Participant prior to his/her death, the Participant's Beneficiary shall be entitled to make an additional election to shorten the applicable time period, subject always to the time limits for such elections described in 11(f) above.

h) If, in the opinion of the Committee, a Participant is in possession of material undisclosed information regarding either or both of the Company and the Shares on his/her Entitlement Date such Participant's Entitlement Date shall be postponed until the earlier of the date on which, (i) the Committee is satisfied that the Participant is no longer in possession of any such material undisclosed information, or (ii) December 15 of the calendar year commencing immediately after the Participant's Termination Date.

i) In the event that, at the time contemplated for the calculation of the DSU Value under a Plan in respect of an Entitlement Date, there is no public market for the Shares, the obligations of the Company and any Related Company under the Plan shall be met by a payment in cash in such amount as is reasonably determined by the Committee to be equitable in the circumstances based on the value of the Shares at the time of payment, less applicable withholdings, such determination to be final and binding for all purposes.

j) In the event that the Committee is unable, by a Participant's Entitlement Date, to compute the final value of the DSUs recorded in such Participant's Account under the Plans by reason of the fact that any data required in order to compute the market value of a Share has not been made available to the Committee, then the Entitlement Date shall be the next following Trading Day on which such data is made available to the Committee.

k) Notwithstanding any other provision of a Plan, all amounts payable to, or in respect of, a Participant shall be paid on or before December 31 of the calendar year commencing immediately after the Participant's Termination Date.

l) The Plans may be amended or terminated in whole or in part at any time by the Board, but no amendment or termination of a Plan shall, without the consent of a Participant or unless required by law, adversely affect the rights of a Participant with respect to the DSUs to which the Participant is then entitled under that Plan. Notwithstanding the foregoing, any amendment or termination of a Plan shall be such that the Plan continuously meets the requirements of paragraph 6801(d) of the Regulations or any successor provision thereto.

12. Specifically with respect to the Directors' Plan:

a) An Eligible Director shall be entitled to elect on an irrevocable basis the portion, if any, of his/her future Directors' Cash Remuneration to be received in the form of DSUs. The portion to be received in the form of DSUs may range from zero to 100% of the Directors' Cash Remuneration.

b) To elect to receive all or some portion of a Directors' Cash Remuneration in the form of DSUs in respect of the year in which this Plan becomes effective, the Eligible Director shall complete and deliver to the Company's Chief Financial Officer an initial written election by no later than the later of: (a) XXXXXXXXXX business days before the end of the Quarter that includes the Effective Date of this Plan; and (b) XXXXXXXXXX days after the Company receives a ruling advising that the Directors'Plan is a "prescribed plan or arrangement" as described in paragraph 6801(d) of the Regulations. An election described herein shall apply to the Directors' Cash Remuneration payable to the Eligible Director after the date such election is made.

c) To elect to receive all or some portion of a Directors' Cash Remuneration in the form of DSUs in respect of the year in which an individual becomes an Eligible Director (where the individual is not an Eligible Director on the effective date of the Plan), the Eligible Director shall complete and deliver to the Company's Chief Financial Officer an initial written election by no later than: (a) XXXXXXXXXX business days before the end of the Quarter that includes the effective date of becoming an Eligible Director; or (b) XXXXXXXXXX business days after the individual becomes an Eligible Director, as determined by the Committee. An election described herein shall apply to the Directors' Cash Remuneration payable to the Eligible Director after the date such election is made.

d) Where an Eligible Director does not initially participate in the Directors' Plan but decides to participate in a subsequent year, the Eligible Director will complete and deliver to the Company's Chief Financial Officer a written election before the last business day of the Quarter immediately preceding the Quarter in which the applicable Directors' Cash Remuneration will be payable.

e) An Eligible Director's latest election received by the Committee with respect to the percentage of the Directors' Cash Remuneration that is to be provided in the form of DSUs, and cash (if applicable) shall be irrevocable and shall continue to apply with respect to his/her Directors' Cash Remuneration for the Quarter commencing immediately following the date of the election and for any subsequent Quarter unless the Eligible Director wishes to change the portion of his/her Directors' Cash Remuneration to be provided in the form of DSUs for subsequent Quarters. In order to effect such a change, the Eligible Director shall complete and deliver to the Company's Chief Financial Officer a new written election which shall be effective for the Directors' Cash Remuneration payable in respect of all Quarters commencing after the date on which such new election is delivered (unless subsequently changed again as described herein).

f) On the Conversion Date applicable for each Quarter, subject to 12(g) below, the Company shall credit the appropriate number of DSUs, as computed in 12(i) below, to each Eligible Director that has elected to participate in the Directors' Plan.

g) The portion of the Directors' Cash Remuneration payable in respect of a Quarter or other period within the year to which such Directors' Cash Remuneration relates shall be paid in cash (net of applicable withholdings) or provided in the form of DSUs, depending on the election filed by the Eligible Director, as soon as practicable after the last day of each Quarter. However, notwithstanding any election by an Eligible Director under the Plan, the Committee may, in its sole discretion, decline to award DSUs on account of the Directors' Cash Remuneration payable to an Eligible Director and instead require the Eligible Director to receive such Directors' Cash Remuneration in cash.

h) If an Eligible Director has not met the Minimum Share Ownership Requirement, then such Eligible Director shall be required to elect to receive the annual base retainer fee portion of the Directors' Cash Remuneration in the form of DSUs until the Eligible Director has met the Minimum Share Ownership Requirement. The Eligible Director will not be entitled to receive the annual base retainer fee portion of the Directors' Cash Remuneration in cash until the Minimum Share Ownership Requirement has been met. This mandatory election requirement may be waived by the Committee with respect to specific Eligible Directors from time to time upon request, if deemed appropriate by the Committee.

i) DSUs elected by an Eligible Director pursuant to the Plan shall be credited to the Eligible Director's Account as of the Conversion Date applicable for the Quarter or other period to which the DSUs relate as computed by the Committee. The number of DSUs (including fractional DSUs) to be credited to an Eligible Director's Account as of a particular Conversion Date shall be computed by dividing (i) the portion of the Directors' Cash Remuneration for the applicable Quarter or other applicable period to be satisfied by DSUs as elected by the Eligible Director by (ii) the DSU Value on the particular Conversion Date. DSUs will be fully vested upon being credited to an Eligible Director's Account and the Eligible Director's entitlement to payment of such DSUs following his/her Termination Date shall not thereafter be subject to satisfaction of any requirements as to any minimum period of membership on the Board.

j) DSUs which are redeemed and payable as at an Entitlement Date as described in 11(f) above shall be paid by the Company as a lump sum in cash, after deduction of any applicable taxes and other source deductions required to be withheld.

13. Specifically with respect to the Executives' Plan:

a) An Eligible Executive may, with respect to any particular Performance Period, elect to participate in the Executives' Plan. Subject to the terms set out below, in order to elect to participate in the Executives' Plan with respect to a particular Performance Period, an Eligible Executive shall complete and deliver to the Company's Chief Financial Officer a written election before the last business day of the calendar year immediately preceding the Performance Period except that, in the case of a monthly STP Performance Period, the written election will be completed and delivered to the Company's Chief Financial Officer prior to the last business day of the immediately preceding month.

b) In order to elect to participate in the Executives' Plan with respect to the year in which this Plan becomes effective, the Eligible Executive shall complete and deliver to the Company's Chief Financial Officer an initial written election no later than the later of: (a) XXXXXXXXXX business days before the end of the calendar quarter that includes the effective date of this Plan; and (b) XXXXXXXXXX business days after the Company receives a ruling advising that the Executive Plan is a "prescribed plan or arrangement" under paragraph 6801(d) of the Regulations. An election described herein shall only apply to the Incentive Compensation payable to the Eligible Executive after the date on which such election is made i.e., payable in the following month or payable in XXXXXXXXXX in respect of the STP and XXXXXXXXXX with respect to the MTP.

c) An individual who becomes an Eligible Executive (where the individual is not an Eligible Executive on the effective date of the Plan), and who wishes to participate in the Executives' Plan shall complete and deliver to the Company's Chief Financial Officer an initial written election no later than: (a) XXXXXXXXXX business days before the end of the calendar quarter that includes the effective date of becoming an Eligible Executive; and (b) the date that is XXXXXXXXXX business days after the individual becomes an Eligible Executive, as determined by the Committee. An election described herein shall apply to the Incentive Compensation payable to the Eligible Executive after the date such election is made.

d) An Eligible Executive who elects to participate in the Plan with respect to a particular Performance Period shall be entitled to elect on an irrevocable basis to receive 25%, 50%, 75% or 100% of such Eligible Executive's (i) entire potential Incentive Compensation; (ii) potential Incentive Compensation over a threshold amount to be specified in the election; or (iii) potential Incentive Compensation up to an amount to be specified in the election in the form of DSUs, with respect to that Performance Period under the Plan, in lieu of payment under the STP and/or the MTP as amended from time to time. Notwithstanding any election by an Eligible Executive, the award of DSUs shall be at the discretion of the Committee.

e) Notwithstanding any election received from an Eligible Executive, no Eligible Executive shall be entitled to receive DSUs (except with respect to the payment of dividends as described in 11I above) if such Eligible Executive has reached the Maximum DSU Limit as of the date on which the Eligible Executive would otherwise be entitled to receive additional DSUs, or to the extent that the proposed award of DSUs would cause the Eligible Executive to exceed the Maximum DSU Limit. If the Eligible Executive exceeds the Maximum DSU Limit from time to time as a result of increases in the DSU Value, the Eligible Executive shall not be required to return or cancel any DSUs previously awarded but shall not be entitled to receive any additional DSUs during such time.

f) The Committee may, from time to time, credit DSUs to the Accounts of Eligible Executives who have elected to participate in the Plan for a particular Performance Period as described above in 13(d) above. The Committee shall specify the Conversion Date for the purposes of computing the number of DSUs to be credited to an Eligible Executive's Account and the date as of which DSUs will be credited to the Account of the applicable Eligible Executive.

g) Where the Committee chooses not to credit DSUs to an Eligible Executive in respect of a Performance Period, such Eligible Executive shall receive a payment of Incentive Compensation (if any) in respect of such Performance Period in accordance with the terms of the STP and/or the MTP applicable in respect of such Performance Period as if such Eligible Executive had not elected to participate in the Executives' Plan for such Performance Period. Notwithstanding the foregoing, where the Eligible Executive is a member of the Committee, any determination not to award DSUs to the Eligible Executive shall be made by the Company's XXXXXXXXXX.

h) For the purpose of determining the number of DSUs to be credited to an Eligible Executive's Account pursuant to the Eligible Executive's election described in section 13(d) above, the Committee shall compute the amount of STP and/or MTP Incentive Compensation that would have been awarded to the Eligible Executive had such employee not elected to participate in the Executives' Plan for the relevant Performance Period, less any threshold amount of potential Incentive Compensation specified in his or her election as described in clause (ii) of 13(d) or up to the amount of potential Incentive Compensation specified in his or her election as described in clause (iii) of 13(d) (hereinafter referred to as the "Bonus Amount"). The Committee shall then award a number of DSUs (including fractional DSUs) to the Eligible Executive equal to the quotient determined by dividing: (i) the product determined by multiplying (a) the percentage amount elected by the Eligible Executive and (b) the Bonus Amount, by (ii) the DSU Value on the particular Conversion Date.

i) DSUs shall be credited to the Account of an Eligible Executive as of the date specified by the Committee. DSUs shall be fully vested upon being credited to an Eligible Executive and the Eligible Executive's entitlement to payment of DSUs following his or her Termination Date shall not thereafter be subject to satisfaction of any requirements as to any minimum period of employment.

j) DSUs credited under this Plan shall be confirmed by an instrument in writing issued by the Company.

k) DSUs which are redeemed and payable as at an Entitlement Date of an Eligible Executive shall be paid to the Eligible Executive or his/her Beneficiary, as applicable, by the Employer that last employed the Eligible Executive prior to his or her Termination Date (the "Final Employer"). Where an Eligible Executive was employed by more than one Employer while he or she was a Participant in the Executives' Plan, the Committee shall determine the portion of the DSU payment attributable to the Eligible Executive's period of employment with each such Employer and the Final Employer shall be reimbursed by each such other Employer for an amount equal to the portion of the DSU payment payable to the Eligible Executive or his or her Beneficiary, as applicable, including any amount withheld in respect of taxes and other source deductions, that is attributable (as determined by the Committee) to the period of the Eligible Executive's employment with that Employer. Where an Eligible Executive was employed only by the Final Employer throughout his or her period of participation in the Executives' Plan, the Final Employer will not be entitled to any form of reimbursement in respect of the amounts paid to or in respect of the Eligible Employer under the Executives' Plan.

Purpose of the Proposed Plans

14. The purpose of the Plans is to promote a greater alignment of interests between the Eligible Directors and the Eligible Executives and the shareholders of the Company.

Rulings

Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, the proposed Plans and the purpose of the proposed Plans, and provided the wording of the proposed Plans are and continue to be substantially as described above, we rule as follows:

A. Each Plan will be a prescribed plan or arrangement set out in paragraph 6801(d) of the Regulations and thus will not be, for the purposes of the Act, a salary deferral arrangement as defined in subsection 248(1) of the Act.

B. Neither Plan will, for the purposes of the Act, constitute an "employee benefit plan" as that term is defined in subsection 248(1) of the Act.

C. Provided that the Plans remain unfunded, neither Plan will, for the purposes of the Act, constitute a "retirement compensation arrangement" as that term is defined in subsection 248(1) of the Act.

D. No amount will be included in the income of any Eligible Director pursuant to subsection 5(1), section 6, paragraph 56(1)(a) or subparagraph 115(1)(a)(i) of the Act, solely as a result of a grant of DSUs under the Directors' Plan to an Eligible Director.

E. Amounts received under the Directors' Plan, as described in 12(j) above, by or on behalf of an Eligible Director who is a resident of Canada, including any amount withheld in respect of taxes or other source deductions, will be included in the income of the Eligible Director pursuant to paragraph 6(1)(c) of the Act in the year of receipt.

F. Amounts received under the Directors' Plan, as described in 12(j) above, by or on behalf of an Eligible Director who is not a resident of Canada at the time of the receipt, to the extent the amount is attributable to services performed in Canada and, if the Eligible Director was resident in Canada at the time he or she performed the services, outside Canada, including any amount withheld in respect of taxes or other source deductions, will be included in the income of the Director pursuant to paragraph 6(1)(c) and subparagraph 115(1)(a)(i) of the Act in the year of receipt.

G. No amount will be included in the income of any Eligible Executive pursuant to subsection 5(1), section 6, paragraph 56(1)(a) or subparagraph 115(1)(a)(i) of the Act solely as a result of a grant of DSUs under the Executive's Plan to an Eligible Executive.

H. Amounts received under the Executives' Plan, as described in 13(k) above, by or on behalf of an Eligible Executive who is a resident of Canada, including any amount withheld in respect of taxes and other source deductions, will be included in the income of the Eligible Executive pursuant to subsection 5(1) of the Act in the year of receipt.

I. Amounts received under the Executives' Plan, as described in 13(k) above, by or on behalf of an Eligible Executive who is not a resident of Canada at the time of receipt, to the extent the amount is attributable to services performed in Canada and, if the Eligible Director was resident in Canada at the time he or she performed the services, outside Canada, including any amount withheld in respect of taxes or other source deductions will be included in the income of the Eligible Executive pursuant to paragraph 5(1) and subparagraph 115(1)(a)(i) of the Act in the year of receipt.

J. All amounts payable under the Plans to the Beneficiary or the estate of a Participant shall constitute a right or thing held by the deceased Participant at the time of death for purposes of subsection 70(2) of the Act.

K. Subject to paragraph 18(1)(a) and section 67 of the Act, where the Company makes a payment described in the above requested rulings to a Director or if the Director has died, the Director's beneficiary or estate, in satisfaction of all or any part of the Director's interest under the Directors' Plan, the Company will be entitled to deduct the amount paid including any amount withheld in respect of taxes and other source deductions in calculating its income for the year in which the payment is made in accordance with section 9 of the Act.

L. Subject to paragraph 18(1)(a) and section 67 of the Act, where the Final Employer makes a payment described in the above rulings to an Eligible Executive who was employed by that Employer throughout his or her entire period of participation in the Executives' Plan or to the Eligible Executive's Beneficiary where the Eligible Executive who was employed by that Employer throughout his or her entire period of participation in the Executives' Plan has died, in satisfaction of all or any part of the Eligible Executive's interest under the Executives' Plan, the Final Employer will be entitled to deduct the amount paid including any amount withheld in respect of taxes and other source deductions, in calculating its income for the year in which the payment is made in accordance with section 9 of the Act.

M. Subject to paragraph 18(1)(a) and section 67 of the Act, where the Final Employer makes a payment described in the above rulings to an Eligible Executive who was employed by one or more Employers in addition to the Final Employer during the period of participation in the Executives' Plan or to the Eligible Executive's Beneficiary where the Eligible Executive who was employed by one or more Employers in addition to the Final Employer during the period of participation in the Executives' Plan has died, in satisfaction of all or any part of the Eligible Executive's interest under the Executives' Plan, each Employer (including the Final Employer) will be entitled to deduct the amount allocated to it by the Committee, and paid to the Final Employer as described in 13(k) above, in calculating its income for the year in which the payment is made in accordance with section 9 of the Act.

N. No benefit will be considered to have been conferred by an Employer on a Final Employer under subsection 15(1) of the Act or under any other provision of the Act by reason only of the Employer making the payment of the reimbursement to the Final Employer described in 13(k) above.

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

Nothing in this ruling should be construed as implying that the CCRA has reviewed or is making a determination in respect of the fair market value of any share referred to herein or that the term Market Value means fair market value. However, in our opinion for the purposes of paragraph 6801(d) of the Regulations, the determination of the Market Value of a Share as described in the Plans, would depend on the fair market value of a Share.

Yours truly,

XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch