Air Canada 2006 Annual Report Download - page 64

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Risks Related to the Corporation's Relationship with ACE
Control of the Corporation and Related Party Relationship
ACE owns shares of Air Canada representing 75 percent of the voting interests in Air Canada. Voting control
will enable ACE to determine substantially all matters requiring security holder approval as a result of its voting
interest in Air Canada. ACE will exercise control over corporate transactions submitted to Air Canada's board of
directors and/or Air Canada's security holders for approval. ACE will effectively have sufficient voting power to
prevent a change in control of Air Canada. This voting control may discourage transactions involving a change
of control of Air Canada, including as a result, transactions in which the public shareholders of Air Canada might
otherwise receive a premium for their shares over the then-current market price.
The interests of ACE may conflict with those of other shareholders.
Future Sales of Shares by or for ACE
Sales of substantial amounts of Air Canada’s shares by ACE, or the possibility of those sales by ACE, could
adversely affect the market price of the shares and impede Air Canada’s ability to raise capital through the
issuance of equity securities.
ACE has no contractual obligation to retain any of the Air Canada shares, except for a period of 90 days ending
on February 22, 2007 during which ACE is restricted from selling any of the Air Canada shares without the
consent of RBC Dominion Securities Inc. This 90-day lock-up period was agreed to by ACE in connection with
the closing of the Offering. The registration rights agreement that Air Canada entered into with ACE grants
ACE the right to require Air Canada to file a prospectus and otherwise assist with a public offering of shares that
ACE holds in specified circumstances. In addition, after the expiration of this 90-day lock-up period, Air Canada
could issue and sell additional shares. Any sale by ACE or Air Canada of shares in the public market, or the
perception that sales could occur could adversely affect prevailing market prices of the shares.
Refer to Note 18 to Air Canada’s combined consolidated financial statements for additional information on
related party transactions.
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