Reverse split (part 1) Another amendment was made to the 2010 DSUP by the Board of Directors on February 16, 2016 and has been approved
by the TSX, but is not subject to shareholder approval in accordance with the amending provisions of the 2010 DSUP.
Specifically, the Board approved an amendment to modify the eligibility for participation in the 2010 DSUP to include, in
addition to senior officers of the Corporation or its subsidiaries, senior officers of any other company, partnership or other
legal entity designated by the HRCC from time to time (wit
h necessary adaptations made as a consequence of such
amendment to the terms on which the DSUs may be granted, terminated, cancelled and adjusted).
See the information under the headings “A.1.5.1 Restricted
Share Unit Plan (RSU Plan), Performance Share Unit Plan
(PSU Plan), Deferred Share Unit Plan (DSU Plan) and 2010 Deferred Share Unit Plan (2010 DSUP)” and “A.1.5.4 Additional
Restrictions and Other Information in respect of the 2010 DSUP and the Stock Option Plan” in Section 5: “Remuneration of
the Executive Officers of Bombardier”, for a complete description of the 2010 DSUP.
AMENDMENT TO THE ARTICLES OF AMALGAMATION OF BOMBARDIER – SHARE
CONSOLIDATION
With the exception of the anticipated post-consolidation share numbers set forth in this proposal, share
numbers set forth in this Circular do not reflect the effect of the proposed Share Consolidation.
INTRODUCTION
The Corporation is asking shareholders to authorize the Board of Directors to effect, at such time as the Board of Directors
shall deem appropriate, but in any event no later than October 31, 2016, a share consolidation (or reverse stock split) of the
Class A shares, issued and unissued, and Class B subordinate voting shares, issued and unissued, at a Share Consolidation
ratio to be determined by the Board of Directors but within the range of one post-consolidation Class A share or Class B
subordinate voting share, as the case may be, for every 8 to 16 pre-consolidation Class A shares or Class B subordinate
voting shares, as the case may be, by filing articles of amendment to the Corporation’s Articles of Amalgamation, as
amended, subject to the Board of Directors’ authority to decide not to proceed with the filing of the articles of amendment
and the implementation of the Share Consolidation. The Board of Directors may, in its discretion, select any ratio for the
Share Consolidation falling within the aforementioned range of ratios upon receipt of shareholder approval and prior to the
filing of articles of amendment to the Corporation’s Articles of Amalgamation, as amended. Currently, the Board of Directors
believes that an initial post-consolidation share price in the range of $10 to $20 per Class A share or Class B subordinate
voting share, as the case may be, would be an appropriate initial price level for such shares. However, the Board of Directors
may, in its sole discretion, select a ratio from within the range
set forth in the Special Resolution/Share Consolidation that
would be expected to result in an initial post-consolidation share price that is above or below this range. The actual timing
for implementation, if any, of the Share Consolidation would be determined by the Board of Directors based upon its
evaluation as to when such action would be most advantageous to the Corporation and its shareholders. These
determinations would be made by the Board of Directors based upon prevailing market conditions at that time.
The Board of Directors will retain the authority, notwithstanding approval of the Share Consolidation by shareholders, to
determine in its discretion not to proceed with the Share Consolidation, without further approval or action by or prior notice
to shareholders. If the Share Consolidation is not implemented p
rior to October 31, 2016, the shareholder approval granted in
respect of the Share Consolidation will be deemed to have been revoked and the Board of Directors will be required to
obtain new shareholder approval if it wishes to implement a share consolidation.
The Board of Directors believes that the proposed range of Share Consolidation ratios (rather than a single ratio) will
provide it with the flexibility to implement the Share Consolidation in a manner designed to maximize the anticipated
benefits to the Corporation and its shareholders and because it is not possible to predict market conditions at the time the
Share Consolidation would be implemented. In determining which precise Share Consolidation ratio within the
aforementioned range of ratios to implement, if any, following the receipt of shareholder approval, the Board of Directors
may consider, among other things, factors such as:
–
the historical trading prices and trading volume of the Class A shares and Class B subordinate voting shares;
–
the then prevailing trading price and trading volume of the Class A shares and Class B subordinate voting shares and
the anticipated impact of the Share Consolidation on the trading market(s) for the Class A shares and Class B
subordinate voting shares;
–
the outlook for the trading price of the Class A shares and Class B subordinate voting shares;
–
threshold prices of brokerage houses or institutional investors that could impact their ability to invest or recommend
investments in the Class A shares and/or Class B subordinate voting shares;
–
the number of Class A shares and Class B subordinate voting shares that may be issued pursuant to outstanding
securities exercisable or exchangeable for, or convertible i
nto, Class A shares or Class B subordinate voting shares, and
pursuant to the exercise of the Warrants issued and to be issued as part of the recently announced Transactions
described above;
–
the greatest overall reduction of the Corporation’s administrative costs; and
–
prevailing general market and economic conditions.
18
BOMBARDIER 2016 MANAGEMENT PROXY CIRCULAR SECTION 2
At the close of business on March 7, 2016, the closing price of the Class A shares and Class B subordinate voting shares on
the TSX was $1.41 and $1.26, respectively, and there were
313,900,550 issued and outstanding Class A shares and
1,932,555,138 issued and outstanding Class B subordinate voting shares. Based on the numbers of Class A shares and Class B
subordinate voting shares issued and outstanding on March 7, 2016, immediately following the completion of the Share
Consolidation, for illustrative purposes only, (i) assuming a Share Consolidation ratio of 8-for-1, we would have
approximately 39,237,568 and 241,569,392 Class A shares and
Class B subordinate voting shares issued and outstanding,
respectively, (ii) assuming a Share Consolidation ratio of 12-for-1, we would have approximately 26,158,379 and 161,046,261
Class A shares and Class B subordinate voting shares issued
and outstanding, respectively, and (iii) assuming a Share
Consolidation ratio of 16-for-1, we would have approximat
ely 19,618,784 and 120,784,696 Class A shares and Class B
subordinate voting shares issued and outstanding, respectively (in each case without giving effect to the treatment of
fractional shares). The Corporation does not expect the Share Consolidation itself to have any economic effect on
shareholders or holders of securities exercisable or exch
angeable for, or convertible into, Class A shares or Class B
subordinate voting shares, except to the extent the Share Consolidation will result in fractional shares as discussed below.
BACKGROUND AND REASONS FOR THE SHARE CONSOLIDATION
The Board of Directors is seeking authority to implement the Share Consolidation for the following reasons.
POTENTIAL FOR INCREASED AND MORE ATTRACTIVE SHARE PRICE
The Corporation believes that it is desirable for its Class A shares and Class B subordinate voting shares to trade at a higher
price per share. An increase in trading price of the Class A shares and Class B subordinate voting shares that may result
from a share consolidation could heighten the interest of the financial community in the Corporation and potentially
broaden the pool of investors that may consider investing or may
be able to invest in the Corporation, potentially increasing
the trading volume and liquidity of the Class A shares and Class B subordinate voting shares. The Share Consolidation could
also help to attract institutional investors who have internal p
olicies that either prohibit them from purchasing stocks below
a certain minimum price or tend to discourage individual brokers from recommending such stocks to their customers.
REDUCED SHAREHOLDER TRANSACTION COSTS
Many investors pay commissions based on the number of shares traded when they buy or sell stock. If the stock prices of
the Corporation’s Class A shares and Class B subordinate voting shares were higher, these investors would pay lower
commissions to trade a fixed dollar amount of the Class A shares and/or Class B subordinate voting shares, as the case may
be, than they would if the stock prices were lower. In addition, current shareholders who hold only a few Class A shares or
Class B subordinate voting shares may not have an economic way to sell their shares. To the extent these shareholders are
left with fractional shares as a result of the Share Consolidation, they would receive cash for their shares without incurring
transaction costs.
IMPROVED TRADING LIQUIDITY
The combination of potentially lower transaction costs and incr
eased interest from institutional investors and investment
funds could ultimately improve the trading liquidity of the C
orporation’s Class A shares and Class B subordinate voting
shares.
EFFECTIVE DATE OF SHARE CONSOLIDATION
If shareholders approve the Share Consolidation, it is the inten
tion of the Corporation to file articles of amendment giving
effect thereto on the basis set out in the Special Resolution/Share Consolidation, the full text of which is reproduced in
Exhibit “E” to this Circular. The effective date of the Share C
onsolidation will be the date of issuance of the Certificate of
Amendment by the Director under the CBCA and such date is referred to as the “Share Consolidation Effective Date”. On
the Share Consolidation Effective Date, the Class A shares and
Class B subordinate voting shares will be consolidated on the
basis described above.
CERTAIN RISK FACTORS ASSOCIATED WITH THE SHARE CONSOLIDATION
–
Reducing the numbers of issued and outstanding Class A sh
ares and Class B subordinate voting shares through the
Share Consolidation is intended, absent other factors, to increase the per share market price of the Class A shares and
Class B subordinate voting shares; however, the market price of the Class A shares and Class B subordinate voting
shares will also be based on the Corporation’s financial and operational results, its available capital and liquidity
resources, the development of its product pipeline, the state of the market for the Class A shares and Class B
subordinate voting shares at the time, general economic, g
eopolitical, market and industry conditions, the market
perception of the Corporation’s business and other factors and contingencies, which are unrelated to the number of
shares outstanding. As a result, there can be no assurance that the market price of the Class A shares and Class B
subordinate voting shares will in fact increase following the S
hare Consolidation or will not decrease in the future. If the
BOMBARDIER 2016 MANAGEMENT PROXY CIRCULAR SECTION 2
19
market price of the Class A shares and/or Class B subordinate voting shares is lower than it was before the Share
Consolidation, the respective total market capitalization o
f the Corporation’s Class A shares and Class B subordinate
voting shares after the Share Consolidation may be lower than before the Share Consolidation. In addition, in the future,
the market price of the Class A shares and Class B subordinate voting shares following the Share Consolidation may not
exceed or remain higher than the market price prior to the Share Consolidation.
–
While the Board of Directors believes that a higher share p
rice could help to attract institutional investors who have
internal policies that either prohibit them from purchasing stocks below a certain minimum price or tend to discourage
individual brokers from recommending such stocks to their customers, the Share Consolidation may not result in a per
share market price that will attract institutional investors or investment funds and such share price may not satisfy the
investing guidelines of institutional investors or investment funds. As a result, the trading liquidity of the Class A shares
and Class B subordinate voting shares may not improve.
–
If the Share Consolidation is effected and the market price of the Class A shares and Class B subordinate voting shares
declines, the percentage decline as an absolute number and as a percentage of the Corporation’s overall market
capitalization may be greater than would occur in the absence of the Share Consolidation. In many cases, both the total
market capitalization of a company and the market price of such company’s shares following a share consolidation are
lower than they were before the share consolidation. Furthermore, the liquidity of the Corporation’s Class A shares and
Class B subordinate voting shares could be adversely affected by the reduced number of Class A shares and Class B
subordinate voting shares that would be outstanding after the Share Consolidation.
–
The Share Consolidation may also result in some shareholders owning “odd lots” of less than 100 Class A shares and
Class B subordinate voting shares. Odd lots may be more difficult to sell, or require greater transaction costs per share
to sell, than shares in ‘‘board lots’’ of even multiples of 100 shares.
EFFECTS OF THE SHARE CONSOLIDATION
GENERAL
If the Share Consolidation is approved and implemented, the principal effect will be to proportionately decrease the
numbers of issued and unissued Class A shares and Class B subordinate voting shares, based on the Share Consolidation
ratio chosen by the Board of Directors. The Share Consolidation will not affect the listing of the Class A shares and Class B
subordinate voting shares on the TSX. Following the Share Consolidation, except as described herein, the Class A shares and
Class B subordinate voting shares will continue to be listed on the TSX under the symbols “BBD.A” and “BBD.B”,
respectively, although the post-consolidation Class A shares and Class B subordinate voting shares will be considered a
substituted listing with new CUSIP and ISIN numbers.
Because the Share Consolidation would apply to all of the issued and outstanding Class A shares and Class B subordinate
voting shares, the proportionate voting and equity interests i
n the Corporation and other rights, preferences, privileges or
priorities of the holders of Class A shares and/or Class B subordinate voting shares will not be affected by the Share
Consolidation, other than as a result of the treatment of fractional shares as described below. For example, a holder of 2% of
the voting power attached to all of the outstanding Class A sha
res and Class B subordinate voting shares immediately prior
to the Share Consolidation Effective Date will generally continue to hold 2% of the voting power attached to all of the
outstanding Class A shares and Class B subordinate voting sha
res immediately after the Share Consolidation Effective Date.
The number of registered shareholders will not be affected by the Share Consolidation (except to the extent any are cashed
out as a result of holding fractional shares).
No fractional shares will be issued or delivered to registered holders of Class A shares and/or Class B subordinate voting
shares in connection with the Share Consolidation. If, as a result of the Share Consolidation, a shareholder becomes entitled
to a fractional share, the number of new post-consolidation Class A shares and/or Class B subordinate voting shares, as the
case may be, to which the registered shareholder is entitled, will be rounded down to the nearest whole number, and any
and all fractional Class A shares and Class B subordinate vo
ting shares to which registered holders would otherwise be
entitled as a result of the Share Consolidation shall be aggregated and sold by the Corporation’s transfer agent and registrar
on the market as described under “Payment for fractional shares” below.
Moreover, the rate of the priority dividend per share per annum carried by the Class B subordinate voting shares, currently
set at $0.0015625 per share per annum in the Articles of Amalgamation, will be, as a direct and necessary consequence of
the Share Consolidation, proportionately adjusted upon the im
plementation of the Share Consolidation, based on the Share
Consolidation ratio selected by the Board of Directors. However, shareholders will not be affected, as their entitlement with
respect to this priority dividend, subject to the Board of Directors’ discretion as to the declaration of dividends, will remain
unchanged.
If approved and implemented, the Share Consolidation may result in some shareholders owning “odd lots” of fewer than 100
Class A shares and/or Class B subordinate voting shares. Odd lot shares may be more difficult to sell, and brokerage
commissions and other costs of transactions in odd lots may be higher than the costs of transactions in “round lots” of even
multiples of 100 shares. The Board of Directors believes, however, that these potential effects are outweighed by the
anticipated benefits of the Share Consolidation.
20
BOMBARDIER 2016 MANAGEMENT PROXY CIRCULAR SECTION 2
Beneficial shareholders holding their Class A shares and/or Class B subordinate voting shares through a nominee should
note that such nominee may have different procedures for processing the Share Consolidation than those that will be put in
place for registered shareholders. If you hold your Class A shares and/or Class B subordinate voting shares with a nominee
and if you have questions in this regard, you are encouraged to contact your nominee.
EFFECT ON AUTHORIZED BUT UNISSUED CLASS A SHARES AND CLASS B SUBORDINATE VOTING SHARES
Currently, the Corporation is authorized to issue up t
o 2,742,000,000 Class A shares and 2,742,000,000 Class B
subordinate voting shares. Assuming approval by the shareholders of the Special Resolution/Amendment, the Corporation
will be authorized to issue up to 3,592,000,000 Class A shar
es and 3,592,000,000 Class B subordinate voting shares,
effective on or around April 28, 2016. The maximum numbers of
Class A shares and Class B subordinate voting shares that
the Corporation is authorized to issue, as set out in its Articles of Amalgamation, as amended by the Articles of Amendment
in the event the Special Resolution/Amendment is approved by sh
areholders, if applicable, will be proportionately adjusted
upon the implementation of the Share Consolidation based on the Share Consolidation ratio selected by the Board of
Directors. If, for illustrative purposes only, the Share Consolidation ratio is 12-for-1, the maximum numbers of Class A shares
and Class B subordinate voting shares that the Corporation is authorized to issue, as set out in its Articles of Amalgamation,
as amended by the Articles of Amendment in the event the Special Resolution/Amendment is approved by shareholders, if
applicable, will be divided by 12.
EFFECT ON CONVERTIBLE SECURITIES, STOCK OPTIONS AND OTHER ARRANGEMENTS
Subject to TSX approval, where required:
–
the exercise or conversion price and/or the number of shares of the Corporation issuable under any of the Corporation’s
outstanding convertible securities, stock options, share units, rights and any other similar securities, will be
proportionately adjusted upon the implementation of the Share Consolidation based on the Share Consolidation ratio
selected by the Board of Directors; and
–
the number of Class B subordinate voting shares reserved for issuance under each of the Corporation’s Stock Option
Plan and 2010 DSUP will be reduced proportionately based on the Share Consolidation ratio selected by the Board of
Directors.
Shareholder approval is not required in order for the Board of Directors to make the necessary adjustments mentioned
above in order to give effect to the Share Consolidation.
Similarly, the applicable exercise prices and the numbers of
Class B subordinate voting shares issuable pursuant to the
exercise of the Warrants issued and to be issued as part of the r
ecently announced Transactions will be proportionately
adjusted upon the implementation of the Share Consolidation, based on the Share Consolidation ratio selected by the Board
of Directors, subject to TSX approval.
MECHANICS OF THE SHARE CONSOLIDATION
BOOK-ENTRY SHARES (REGISTERED OR BENEFICIAL)
If the Share Consolidation is effected, the holders of Class A shares and Class B subordinate voting shares who hold
uncertificated shares (i.e., shares held in book-entry form and not represented by a physical share certificate), either as
registered holders or beneficial owners, will have their exi
sting book-entry account(s) electronically adjusted by the
Corporation’s transfer agent or, for beneficial owners, by their brokerage firms, banks, trusts or other nominees that hold in
“street name” for their benefit, as the case may be, to give effect to the Share Consolidation. Such holders do not need to
take any additional actions to exchange their pre-consolidat
ion book-entry shares, if any, for post-consolidation shares.
NON-REGISTERED SHAREHOLDERS
Non-registered shareholders holding their Class A shares a
nd/or Class B subordinate voting shares, as the case may be,
through a bank, broker or other nominee should note that such banks, brokers or other nominees may have different
procedures for processing the Share Consolidation than those that will be put in place by the Corporation for registered
shareholders, and their procedures may result, for example, in differences in the precise cash amounts being paid by such
nominees in lieu of fractional share interests. If you hold your shares with such a bank, broker or other nominee and if you
have questions in this regard, you are encouraged to contact your nominee.
If you are an employee of Bombardier and you own shares under Bombardier’s ESPP, your shares are registered in the name
of Computershare Trust Company of Canada, the administrator of the ESPP, until such time as the shares are withdrawn
from the ESPP pursuant to its terms and conditions, and you do not need to take any action to exchange such pre-
consolidation shares for post-consolidation shares.
REGISTERED SHAREHOLDERS HOLDING SHARE CERT
IFICATES—EXCHANGE OF SHARE CERTIFICATES
If the Share Consolidation is approved by shareholders and subsequently implemented, those registered shareholders who
will hold at least one (1) post-consolidation Class A share and/or one (1) post-consolidation Class B subordinate voting share
BOMBARDIER 2016 MANAGEMENT PROXY CIRCULAR SECTION 2
21
will be required to exchange their share certificates represe
nting their old Class A shares and Class B subordinate voting
shares for new share certificates representing the new post-consolidation Class A shares and Class B subordinate voting
shares.
In the event the Share Consolidation is approved and implemented, the Corporation (or its transfer agent) will mail to each
registered shareholder a letter of transmittal addressed to the Corporation and its transfer agent, which each registered
shareholder will need to sign and complete following the Corporation’s announcement of the Share Consolidation Effective
Date. The letter of transmittal will contain instructions on how to surrender to the transfer agent the certificate(s)
representing the registered shareholder’s Class A shares and/or Class B subordinate voting shares, as the case may be.
The transfer agent will send to each registered shareholder who has sent the required documents, including their share
certificates representing their old Class A shares and Class B subordinate voting shares, new share certificate(s)
representing the number of new post-consolidation Class A shares and/or Class B subordinate voting shares, as the case
may be, to which the registered shareholder is entitled, rounded down to the nearest whole number. Until surrendered to
the transfer agent, each share certificate representing pre-co
nsolidation Class A shares or Class B subordinate voting shares
will be deemed cancelled and, for all purposes, will be deemed to represent, respectively, only the number of post-
consolidation Class A shares or Class B subordinate voting shares, as the case may be, and the right to receive the amount
of cash for any fractional shares to which the registered shareholder is entitled as a result of the Share Consolidation, if any.
Until surrendered as contemplated herein, a registered shareholder’s old share certificate(s) shall be deemed as of and after
the Share Consolidation Effective Date to represent the number of full Class A shares and/or Class B subordinate voting
shares, as the case may be, resulting from the Share Consolidation, if any. However, until registered shareholders have
returned their properly completed and duly executed letter of
transmittal and surrendered their old share certificate(s) for
exchange, registered shareholders will not be entitled to receive any dividends or other distributions, if any, that may be
declared and payable to holders of record following the Share Consolidation.
The use of the mail to transmit certificates representing pre-consolidation Class A shares and/or Class B subordinate voting
shares, as the case may be, is at each shareholder’s option and risk and neither the Corporation nor its transfer agent will
have any liability in respect of share certificates and/or letters of transmittal which are not actually received by the transfer
agent. The Corporation recommends that such certificates and documents be delivered by hand to the transfer agent and a
receipt therefor be obtained or, if mailed, that registered mail with return receipt be used and that appropriate insurance be
obtained.
All questions as to form, validity and acceptance of any pre-consolidation Class A shares and Class B subordinate voting
shares deposited pursuant to the Share Consolidation will be determined by the Corporation in its sole discretion.
Shareholders depositing Class A shares and/or Class B subord
inate voting shares agree that such determination shall be
final and binding. The Corporation reserves the absolute right to reject any and all deposits which the Corporation
determines not to be in proper form or right to waive any defect or irregularity in the deposit of any pre-consolidation
Class A shares and/or Class B subordinate voting shares, as the case may be. There shall be no duty or obligation on the
Corporation, the transfer agent or any other person to give
notice of any defect or irregularity in any deposit of Class A
shares and/or Class B subordinate voting shares, as the case may be, and no liability shall be incurred by any of them for
failure to give such notice. The Corporation reserves the right to permit the procedure for the exchange of shares pursuant
to the Share Consolidation to be completed other than that as set out above.
Any registered shareholder whose old certificate(s) have b
een lost, destroyed or stolen will be entitled to a replacement
share certificate only after complying with the requirements that the Corporation and the transfer agent customarily apply
in connection with lost, destroyed or stolen certificates.
REGISTERED SHAREHOLDERS SHOULD NEITHER DESTROY NOR SUBMIT ANY SHARE CERTIFICATE(S) UNTIL
REQUESTEDTODOSO.
PAYMENT FOR FRACTIONAL SHARES
No certificates representing fractional shares will be issued or delivered if, as a result of the Share Consolidation, a registered
shareholder would otherwise become entitled to a fractional
Class A share or Class B subordinate voting share. Any and all
such fractional shares will be aggregated and sold by the Corporation’s transfer agent and registrar on the market, with the
proceeds therefrom, net of brokerage commissions and expenses, being proportionately distributed to registered
shareholders (without interest) in lieu of such fractional shares. After the Share Consolidation, then current registered
shareholders will have no further interest in the Corporation with respect to their fractional Class A shares or Class B
subordinate voting shares and such shareholders will not have any voting, dividend or other rights in respect of such
fractional Class A shares or Class B subordinate voting shares o
ther than the right to receive payment therefor as described
herein. The elimination of fractional interests will reduce th
e number of post-consolidation registered shareholders to the
extent that there are registered shareholders holding Class A shares or Class B subordinate voting shares that are not in a
multiple of 12, if, for illustrative purposes only, the Share Consolidation ratio is 12-for-1. This is not, however, the purpose for
which the Corporation is proposing to effect the Share Consolidation.
22
BOMBARDIER 2016 MANAGEMENT PROXY CIRCULAR SECTION 2
NO DISSENT RIGHTS
Under the CBCA, shareholders do not have dissent rights with respect to the proposed Share Consolidation.
ACCOUNTING CONSEQUENCES
Following the Share Consolidation, earnings (loss) per share, and other per share amounts, will be increased in absolute
terms because there will be fewer Class A shares and Class B subordinate voting shares issued and outstanding. In future
financial statements, earnings (loss) per share and other per share amounts for periods ending before the Share
Consolidation Effective Date would be recast to give retroactive effect to the Share Consolidation.
CERTAIN TAX CONSEQUENCES OF THE SHARE CONSOLIDATION
CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES OF THE SHARE CONSOLIDATION
The following summary describes the principal Canadian federal income tax considerations under the
Income Tax Act
(Canada) (the “Tax Act”) generally applicable to a holder of the
Corporation’s Class A shares and Class B subordinate voting
shares whose shares are consolidated pursuant to the Share Consolidation and who, for purposes of the Tax Act and any
applicable income tax treaty or convention, and at all relevant times, is a resident of Canada, holds its shares as capital
property and deals at arm’s length and is not affiliated with the Corporation (a “Canadian Holder”).
This summary is not applicable to: (i) a Canadian Holder that is a “financial institution” as defined in Tax Act for the purposes
of the mark-to-market rules; (ii) a Canadian Holder an interest in which would be a “tax shelter investment” as defined in the
Tax Act; (iii) a Canadian Holder that is a “specified financial institution” as defined in the Tax Act; (iv) a Canadian Holder that
is a corporation that has elected in the prescribed form and manner and has otherwise met the requirements to use
functional currency tax reporting as set out in the Tax Act; or (v) a Canadian Holder that is exempt from income tax under
the Tax Act. Any such Canadian Holder to which this summary does not apply should consult its own tax advisor.
This summary is based on the current provisions of the Tax Act, the regulations thereunder (the “Regulations”), and
Canadian counsel’s understanding of the current publishe
d administrative and assessing policies and practices of the
Canada Revenue Agency and takes into account all specific proposals to amend the Tax Act and the Regulations that have
been publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”),
and assumes that all such Tax Proposals will be enacted in the form proposed. No assurance can be given that the Tax
Proposals will be enacted in the form proposed or at all. This summary does not otherwise take into account or anticipate
any changes in law or administrative practices, whether by judic
ial, governmental, administrative or legislative action or
interpretation, nor does it take into account provincial, territorial or foreign income tax legislation or considerations.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED
TO BE, LEGAL OR TAX ADVICE TO ANY PARTICULAR HOLDER. HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE TAX CONSEQUENCES IN THEIR PARTICULAR CIRCUMSTANCES.
A Canadian Holder will not realize a capital gain or a capital l
oss as a result of the Share Consolidation, other than with
respect to the sale of a fractional share as discussed below. Immediately after the Share Consolidation but before the sale of
any fractional share as described under “Payment for Fractional Shares”, the aggregate adjusted cost base to a Canadian
Holder of all its Class A shares and Class B subordinate voting sh
ares (including any fractional share issued as a result of the
Share Consolidation) will be the same as it was immediately before the Share Consolidation.
A Canadian Holder on whose behalf a fractional share will be sold following the Share Consolidation as described under
“Payment for Fractional Shares” will be considered to have disposed of such fractional share at the time of such sale and will
realize a capital gain (or a capital loss) to the extent that the cash received for the fractional share, net of reasonable costs of
disposition, exceeds (or is less than) the adjusted cost base of such fractional share to the Canadian Holder. Generally,
one-half of any capital gain (taxable capital gain) realized
must be included in income and one-half of any capital loss
(allowable capital loss) realized may be deducted against taxabl
e capital gains, in accordance with the detailed provisions of
the Tax Act.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE SHARE CONSOLIDATION
The following discussion is a general summary of certain U.S. federal income tax consequences of the Share Consolidation
that may be relevant to holders of the Class A shares and Class B subordinate voting shares that hold such shares as a
capital asset within the meaning of Section 1221 of the Internal Revenue Code, as amended (the “IRC”). This summary is
based upon the provisions of the IRC, Treasury regulations pr
omulgated thereunder, administrative rulings and judicial
decisions as of the date hereof, all of which may change, possibly with retroactive effect, resulting in U.S. federal income tax
consequences that may differ from those discussed below. This discussion does not address all aspects of federal income
taxation that may be relevant to such holders in light of their particular circumstances or to holders that may be subject to
special tax rules, including, without limitation: (i) banks, insurance companies, or other financial institutions; (ii) tax-exempt
organizations; (iii) retirement plans, individual plans, individual retirement accounts and tax-deferred accounts; (iv) dealers in
securities, currency or commodities; (v) regulated investmen
t companies or real estate investment trusts and shareholders
BOMBARDIER 2016 MANAGEMENT PROXY CIRCULAR SECTION 2
23
of such corporations; (vi) partnerships (or other flow-through entities for U.S. federal income tax purposes) and their
partners or members; (vii) traders in securities; (viii) U.S. Ho
lders (as defined below) whose “functional currency” is not the
U.S. dollar; (ix) persons holding Class A shares and Class B subordinate voting shares as a position in a hedging transaction,
“straddle,” “conversion transaction”, “constructive sale”, “wash sa
le”, “synthetic security” or other integrated or risk reduction
transaction; (x) persons who acquire Class A shares and Class B
subordinate voting shares in connection with employment
or other performance of services; (xi) U.S. expatriates; and (xii) Non-U.S. Holders (as defined below) that are controlled
foreign corporations or passive foreign investment companies. In addition, this summary does not address the tax
consequences arising under the laws of any foreign, state or local jurisdiction and U.S. federal tax consequences other than
federal income taxation. This summary also does not address the 3.8% Medicare tax imposed on certain income.
If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds
Class A shares and Class B subordinate voting shares, the tax treatment of a holder that is a partner in the partnership
generally will depend upon the status of the partner and the activities of the partnership.
EACH HOLDER OF THE CLASS A SHARES AND CLASS B SUBORDINATE VOTING SHARES SHOULD CONSULT ITS TAX
ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE SHARE CONSOLIDATION TO SUCH
HOLDER.
For purposes of the discussion below, a “U.S. Holder” is a beneficial owner (other than a partnership) of Class A shares and
Class B subordinate voting shares that for U.S. federal income tax purposes is: (1) an individual citizen or resident of the
United States, including an alien individual who is a permanent resident in the U.S. or who meets the “substantial presence”
test under section 7701(b) of the IRC; (2) a corporation (including any entity treated as a corporation for U.S. federal income
tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
(3) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (4) a trust, the
administration of which is subject to the primary supervisio
n of a U.S. court and as to which one or more U.S. persons have
the authority to control all substantial decisions of the trust, or that has a valid election in effect to be treated as a
U.S. person. A “Non-U.S. Holder” is a beneficial owner of Class A shares and Class B subordinate voting shares that is an
individual, corporation, estate or trust that is not a U.S. Holder.
U.S. HOLDERS
The Share Consolidation should constitute a “recapitalization” for U.S. federal income tax purposes. As a result, a U.S. Holder
generally should not recognize gain or loss upon the Share Consolidation, except with respect to cash received in lieu of a
fractional Class A shares and Class B subordinate voting shares, as discussed below. A U.S. Holder’s aggregate tax basis in the
Class A shares and Class B subordinate voting shares receiv
ed pursuant to the Share Consolidation should equal the
aggregate tax basis of the Class A shares and Class B subordina
te voting shares surrendered (excluding any portion of such
basis that is allocated to any fractional Class A share and Class B subordinate voting share), and such U.S. Holder’s holding
period (i.e. acquired date) in the Class A shares and Class B su
bordinate voting shares received should include the holding
period in the Class A shares and Class B subordinate voting shares surrendered. Holders of the Class A shares and Class B
subordinate voting shares acquired on different dates and at different prices should consult their tax advisors regarding the
allocation of the tax basis and holding period of such shares. A U.S. Holder that receives cash in lieu of a fractional Class A
share and Class B subordinate voting share pursuant to the Sha
re Consolidation should recognize capital gain or loss in an
amount equal to the difference between the amount of cash received and the U.S. Holder’s tax basis in the Class A shares and
Class B subordinate voting shares surrendered that is alloca
ted to such fractional Class A share and Class B subordinate
voting share. Such capital gain or loss should be long term capital gain or loss if the U.S. Holder’s holding period for the Class A
shares and Class B subordinate voting shares surrendered ex
ceeded one year at the Share Consolidation effective time.
Information Reporting and Backup Withholding.
Information returns generally will be required to be filed with the Internal
Revenue Service (the “IRS”) with respect to the receipt of cash in lieu of a fractional Class A share and Class B subordinate
voting share pursuant to the Share Consolidation in the case of certain U.S. Holders. In addition, a U.S. Holder may be subject
to a backup withholding tax on the payment of such cash if the U.S. Holder is not otherwise exempt and it: (i) fails to furnish
a Taxpayer Identification Number (“TIN”) for use in reporting in
formation to the IRS; (ii) furnishes an incorrect TIN; (iii) is
notified by the IRS that it has failed to report properly payment of interest or dividends; or (iv) fails to certify, under penalties
of perjury, that it has furnished the correct TIN, that it is a U.S. person and that it is not subject to backup withholding. Under
current law, the backup withholding rate is 28%. Backup withholding is not an additional tax. Any amounts withheld from a
U.S. Holder under the backup withholding rules may be refunded or allowed as a credit against the U.S. Holder’s federal
income tax liability, if any, provided the required information is timely furnished to the IRS.
NON-U.S. HOLDERS
Non-U.S. Holders that exchange Class A shares and Class B subordinate voting shares pursuant to the Share Consolidation
generally should be subject to tax in the manner described above under “U.S. Holders,” except that any capital gain realized
by a Non-U.S. Holder as a result of receiving cash in lieu of a fractional Class A share and Class B subordinate voting share
generally should not be subject to U.S. federal income or withholding tax unless the gain is effectively connected with the
Non-U.S. Holder’s conduct of a trade or business in the U.S. (
and, if certain income tax treaties apply, is attributable to a
Non-U.S. Holder’s permanent establishment in the U.S.). Non-U.S. Holders subject to U.S. federal income tax with respect to
24
BOMBARDIER 2016 MANAGEMENT PROXY CIRCULAR SECTION 2
gain recognized as a result of receiving cash in lieu of a fractional Class A share and Class B subordinate voting share
generally will be taxed on such gain in the same manner as if they were U.S. Holders although, under certain circumstances,
foreign corporations may be subject to an additional branch profits tax at a 30% rate or such lower rate as may be specified
by an applicable income tax treaty.
Information Reporting and Backup Withholding.
In general, backup withholding and information reporting will not apply to
payment of cash in lieu of a fractional Class A share and Class B subordinate voting share to a Non-U.S. Holder pursuant to
the Share Consolidation if the Non-U.S. Holder certifies in the manner required that it is a Non-U.S. Holder and neither the
Corporation nor its transfer agent has actual knowledge to the contrary. Backup withholding is not an additional tax. Any
amounts withheld under the backup withholding rules may be refunded or allowed as a credit against the Non-U.S. Holder’s
U.S. federal income tax liability, if any, provided that certain re
quired information is timely furnished to the IRS. In certain
circumstances, the amount of cash paid to a Non-U.S. Holder in lieu of a fractional Class A share and Class B subordinate
voting share and certain other information may be reported to the IRS.
SPECIAL RESOLUTION
The CBCA requires that any change in the number of shares of any class of shares of a corporation into a different number
of shares of the same class must be approved by a special resolution of the shareholders of that corporation, being a
majority of not less than two-thirds (
2
⁄
3
) of the votes cast by the shareholders who voted in respect of that resolution.
As such, the Special Resolution/Share Consolidation must be approved by not less than two-thirds (
2
⁄
3
) of the votes cast,
by proxy or in person, by holders of Class A shares and holders of Class B subordinate voting shares, voting together.
The text of the Special Resolution/Share Consolidation to be voted on at the Meeting by the holders of Class A shares
and holders of Class B subordinate voting share
s is set forth in Exhibit “E” to this Circular.
The Board of Directors believes that the proposed Share Con
solidation is in the best interests of the Corporation and
therefore recommends that the holders of Class A shares and h
olders of Class B subordinate voting shares vote FOR the
Share Consolidation and the Special
Resolution/Share Consolidation.
In the absence of instruction to vote against the proposed Share Consolidation as described above, the proxyholders
whose names appear on the enclosed form of proxy intend to
vote, at the Meeting, FOR the Share Consolidation and the
Special Resolution/Share Consolidation set forth in Exhibit “E” to this Circular.