New Holdco

Overview

In a proposed “merger of equals,” resident taxable shareholders of Agrium and PotashCorp who have validly elected for rollover treatment will transfer their shares under s. 85.1 to a Newco (New Parent – whose initial nominal capital will be owned on a 50-50 basis by Agrium and PotashCorp) in exchange for common shares of New Parent. The other shareholders will transfer their Agrium and PotashCorp shares to two new subsidiaries of New Parent (Agrium AcquisitionCo and PotashCorp AcquisitionCo) in exchange for the delivery to them of New Parent shares (with the two AcquisitionCos simultaneously issuing shares to New Parent as payment for the New Parent share consideration). As a result, the former Agrium and PotashCorp shareholders would hold 48% and 52%, respectively, of New Parent. All the Agrium and PotashCorp shares acquired by New Parent under the s. 85.1 exchange would be dropped down into Agrium AcquisitionCo and PotashCorp AcquisitionCo, also as part of the above CBCA Arrangement. It is intended that Agrium AcquisitionCo will be amalgamated with Agrium, and PotashCorp AcquisitionCo with PotashCorp.

Agrium

A NYSE and TSX listed CBCA corporation, which is the world's largest fertilizer producer by capacity producing the three primary crop nutrients: potash, nitrogen and phosphate.

PotashCorp

A NYSE and TSX listed CBCA corporation, which is the world's largest fertilizer producer by capacity producing the three primary crop nutrients: potash, nitrogen and phosphate.

New Parent

A CBCA corporation to be incorporated by PotashCorp and Agrium, who each will own 50% of the common voting equity before the Arrangement.

PotashCorp AcquisitionCo

A corporation to be incorporated by New Parent in a Canadian jurisdiction.

Agrium AcquisitionCo

A corporation to be incorporated by New Parent in a Canadian jurisdiction.

Elected Agrium share

Any Agrium Share that an Agrium Shareholder (other than New Parent) shall have validity elected to transfer directly to New Parent under the Arrangement, provided that such electing Agrium Shareholder is not (a) a person who does not hold its Agrium Shares as capital property, (b) a non-resident person (not holding the Agrium Share as part of a business carried on in Canada) (c) a partnership that is not a Canadian partnership, or (d) a person exempt under s. 149 including RRSPs etc.

Elected Potash share

Similar to Elected Agrium share definition.

Plan of Arrangement

1. The Agrium Shareholder Rights Plan shall be terminated.
2. Each PotashCorp Share help by PotashCorp Dissenting Shareholders each Agrium Share help by Agrium Dissenting Shareholders shall be transferred to PotashCorp. and Agrium, respectively.
3. Each Elected PotashCorp Share shall be acquired by New Parent solely in exchange for the issuance by New Parent to the holder thereof of New Parent Shares equal to the PotashCorp Exchange Ratio of 0.40 of a New Parent Share for each PotashCorp Share.
4. Concurrently with the transfer in 3 above, each PotashCorp Share (other than Elected PotashCorp Shares or PotashCorp Shares held by New Parent) shall be acquired by PotashCorp AcquisitionCo solely in exchange for the issuance by New Parent to the holder thereof of such number of New Parent Shares in accordance with the PotashCorp Exchange Ratio.
5. Concurrently with the transfers in 3 and 4 above, each Elected Agrium Share shall be acquired by New Parent solely in exchange for the issuance of New Parent to the holder thereof of New Parent Shares in accordance with the Agrium Exchange Ratio.
6. Concurrently with the transfers in 3 to 5 above, each Agrium Share (other than Elected Agrium Shares or Agrium Shares held by New Parent) shall be acquired by Agrium AcquisitionCo solely in exchange for the issuance by New Parent to the holder thereof of New Parent Shares in accordance with the Agrium Exchange Ratio.
7. Concurrently with 3 to 6, the New Parent shares initially issued to Agrium and PotashCorp shall be cancelled without any payment therfor.
8. PotashCorp AcquisitionCo will issue to New Parent as consideration for the New Parent Shares transferred to PotashCorp Shareholders pursuant to 4 above an equal number of Potash AquisitionCo Shares.
9. Agrium AcquisitionCo will issue to New Parent as consideration for the New Parent Shares transferred to Agrium Shareholders pursuant to 6 above an equal number of Agrium AquisitionCo Shares.
10. Each PotashCorp Share held by New Parent shall be acquired by PotashCorp AquisitionCo (on a tax-deferred basis) in consideration for treasury shares equal to the number of New Parent Shares issued in exchange for the PotashCorp Share.
11. Concurrently with 10, each Agrium Share help by New Parent shall be acquired by Agrium AcquisitionCo (on a tax-deferred basis) in consideration for treasury shares equal to the number of New Parent Shares issued in exchange for the Agrium Share.

Following the consummation of the Arrangement, it is intended that Agrium will amalgamate with Agrium AcquisitionCo and PotashCorp will amalgamate with PotashCorp AcquisitionCo. Former PotashCorp and Agrium Shareholders will own approximately 52% and 48%, respectively, of the issued and outstanding New Parent Shares.

Canadian tax consequences

Rollover exchange

A Shareholder will transfer its Elected Shares to New Parent in exchange for the number of New Parent Shares as determined pursuant to the PotashCorp Exchange Ratio or Agrium Exchange Ratio, as applicable. This transfer will be a tax-deferred exchange under section 85.1 of the Tax Act, unless the Shareholder includes any portion of the gain or loss, otherwise determined, in computing its income for the taxation year which includes the Arrangement.

Non-rollover exchange

The exchange of Shares with PotashCorp AcquisitionCo or Agrium AcquisitionCo for New Parent Shares will occur on a non-rollover basis.

U.S. tax consequences

PotashCorp, Agrium and New Parent intend that the Arrangement Transactions should be treated as a single integrated transaction and qualify as "reorganizations" within the meaning of Code s. 368(a). Among other requirements to so qualify, "substantially all" of the assets of PotashCorp and Agrium must be acquired pursuant to the Arrangement Transactions. Although PotashCorp and Agrium anticipate that "substantially all" of their respective assets will be acquired in the Arrangement Transactions, various payments or transactions required to be entered into by either PotashCorp or Agrium may impact whether this requirement will be satisfied. For example, if significant numbers of PotashCorp Shareholders or Agrium Shareholders exercise Dissent Rights and cash is delivered to such shareholders, such cash will not be treated as having been acquired in the transactions. Similarly, assets held prior to the Arrangement Transactions, and required to to be disposed of by regulatory authorities, or used to satisfy obligations of either PotashCorp or Agrium in connection with the Arrangement Transactions, will not be treated as acquired in the Arrangement Transactions.

A combination of U.S. Silver (TSX, US OTCQX and Fankfurt) and RX Gold (TSX-V) pursuant to a Combination Agreement originally dated June 7, 2012 is to be effected by (1) each outstanding common share of U.S. Silver being exchanged pursuant to a CBCA plan of arrangement for 0.67 of a common share of a newly-incorporated OBCA holding company (U.S. Silver & Gold Inc., or "Combined Company"), and (2) each outstanding common share of RX Gold being exchanged (at the same time as (a)) pursuant to an Ontario plan of arrangement for 0.109 of a common share of Combined Company. This will result in the former shareholders of U.S. Silver holding 70% of the shares of Combined Company, and receiving an implied premium of 45% based on the pre-announcement trading price. Combined Company will have been a subsidiary of RX Gold before the exchange.

Outstanding options on U.S. Silver and RX Gold common shares are exchanged for the same number of options on common shares of Combined Company, but with the number of optioned shares multiplied by the exchange ratio, and the exercise price divided by the exchange ratio. Warrants become exercisable against Combined Company common shares by their terms. A break fee is payable by each party of 3% of its implied equity value under a "Superior Proposal."

Those who have validly exercised dissent rights will be deemed to have transferred their U.S. Silver or RX Gold shares to Combined Company for an entitlement to be paid the fair value of their shares.

Canadian taxation

The s. 85.1(1) rollover will apply to exchanging shareholders holding their U.S. Silver or RX Gold shares as capital property (unless they elect to report a capital gain or loss). A foreign tax credit for any US tax on the exchange will not be available if there is no US-source income. Resident dissenting shareholders will be considered to have received proceeds of disposition equal to the cash compensation received by them (other than any interest award, which would be ordinary income).

Shares of non-residents may not be taxable Canadian property - and if they are (and are not Treaty-exempt), the s. 85.1(1) rollover generally would be available.

US taxation

Even though U.S. Silver is organized as a Canadian corporation, it should be treated as a US domestic corporation for purposes of s. 7874 of the Code. Combined Company should not be treated as a US domestic corporation because less than 80% of its shares will be held by the former shareholders of U.S. Silver. However, as such shareholders will hold at least 60% of the shares of Combined Company, U.S. Silver is required to recognize any "inversion gain" on the transaction. For a period of 10 years, U.S. Silver will not be able to use any deductions, net operating losses, or credits to offset any inversion gain.

The exchange of a US-resident holder of its U.S. Silver shares should qualify as a tax-deferred transaction under s. 368 or 351 of the Code. However, pursuant to special rules in s. 367(a), the US holder should recognize gain (but not loss) equal to any excess of the fair market value of the Combined Company shares received over the adjusted tax basis of the exchanged shares.

Although U.S. Silver is believed to be a U.S. real property holding corporation, its shares qualify as being traded on an "over-the-counter market," so that only a non-US shareholder with a greater than 5% interest (as defined) in U.S. Silver will be subject to 10% withholding on the gross fair market value of shares of the Combined Company received on the exchange.

RX Gold believes that it has been a PFIC for each year prior to its 2010 fiscal year, but does not expect to be a PFIC in the year of the transaction, and does not expect the Combined Company to be a PFIC. A US holder of RX Gold shares who acquired RX Gold shares when it was a PFIC will be subject to adverse consequences under s. 1291 on the exchange. The exchange of RX Gold by other US holders generally will be a non-recognition event.