Air Canada 2006 Annual Report Download - page 106

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Touram Limited Partnership (“Air Canada Vacations”) in consideration for the issuance to ACE of common
shares of Air Canada and special common shares, which were converted into common shares prior to the
Air Canada IPO. In addition, ACE exchanged all the preferred shares it held in Air Canada for common
shares of Air Canada at an exchange ratio equal to the price of shares sold in the Air Canada IPO resulting
in the issuance of additional common shares.
Common Shares
As at December 31, 2006, the common shares issuable by Air Canada consist of an unlimited number of
Class A Variable Voting Shares (“Variable Voting Shares”) and an unlimited number of Class B Voting
Shares (“Voting Shares”). The two classes of common shares have equivalent rights as common
shareholders except for voting rights. Holders of Variable Voting Shares are entitled to one vote per share
unless the aggregate number of Variable Voting Shares outstanding, as a percentage of the total number of
votes attaching to all issued and outstanding voting shares of Air Canada exceeds 25% or the total number
of votes cast by or on behalf of holders of Variable Voting Shares at any meeting exceeds 25% of the total
number of votes that may be cast at such meeting. If the 25% threshold would be surpassed, the votes
attaching to the Variable Voting Shares would be proportionately reduced. Variable Voting Shares will be
automatically converted to Voting Shares if the shares become held, beneficially owned and controlled,
directly or indirectly, by a Canadian. Voting Shares will be automatically converted to Variable Voting
Shares if the shares become held, beneficially owned or controlled, directly or indirectly, by a party that is
not a qualified Canadian.
The issued and outstanding common shares of Air Canada as at December 31, 2006, along with the
potential common shares, are as follows:
Outstanding common shares (in millions)
2006
Issued and outstanding
Class A variable voting shares 18
Class B voting shares 82
Total issued and outstanding 100
Potential common shares
Stock options 2
During 2005, a nominal number of common shares were issued to ACE in consideration for the acquisition
of the assets of Destina.
Special Common Shares and Special Preferred Shares
During the period from January 1, 2006 to the date of the Air Canada IPO:
- 1,000 special common shares were issued to ACE in consideration for the acquisition of ACGHS and
certain other general partners as described in Note 1.
- 50,001,101 special common shares and 50,000,000 special preferred shares were converted into
90,475,190 common shares. The carrying value of the special preferred share liability of $50 was
reclassified to share capital and the number of common shares deemed to be issued for the special
preferred shares is 2,380,952. ACE received a special common share in consideration for the accrued
interest on the special preferred share liability.
During 2005, all issued and outstanding common shares were cancelled in exchange for 50,000,000
special common shares and 50,000,000 special preferred shares. As at December 31, 2005, the share
capital of Air Canada consisted of 50 million special common shares held by ACE.
Based on the characteristics of the special preferred shares, the 50 million special preferred shares held by
a wholly owned subsidiary of ACE as at December 31, 2005 were classified as a liability in these combined
consolidated financial statements.
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