Whiting/Kodiak -- summary under Canadian Buyco

Overview

Kodiak, after being continued from the Yukon to B.C., will be acquired by Whiting Canadian Sub under a B.C. Plan of Arrangement and amalgamated with Whiting Canadian Sub with Kodiak as the survivor (a reverse triangular merger). On the acquisition of Kodiak, its shareholders will receive Whiting common shares from Whiting Canadian Sub with Whiting Canadian Sub simultaneously issuing common shares to Whiting in consideration for such Whiting common shares.

Whiting

Whiting is an independent oil and gas Delaware corporation whose common shares are listed on the NYSE.

Kodiak

Kodiak is a NYSE-listed company incorporated in the Yukon with a post-announcement market cap of U.S.$2.9B and offices in Denver, Colorado. It holds its (U.S. oil and gas) business through wholly-owned U.S. subsidiaries.

Whiting Canadian Sub

Whiting Canadian Sub, a wholly-owned subsidiary of Whiting, was incorporated under the BCBCA for the purpose of effecting the arrangement and has not conducted any non-arrangement related activities.

Continuance

Kodiak will continue from the Yukon to B.C.

Plan of Arrangement

1. Each share of a Kodiak dissenting shareholder will be transferred to Whiting Canadian Sub with the payment therefor to be funded by a cash subscription for common shares of Whiting Canadian Sub by Whiting.
2. Whiting Canadian Sub will acquire all of the outstanding shares of Kodiak in consideration for Whiting common shares (0.177 Whiting common shares for each Kodiak common share), with Whiting Canadian Sub concurrently issuing common shares to Whiting in consideration for such Whiting common shares.
3. Each RSU, option and restricted stock award relating to Kodiak common stock that is outstanding immediately prior to the completion of the arrangement (whether vested or unvested) will be assumed by Whiting and converted automatically at the effective time of the arrangement into an RSU, option, or restricted stock award, as applicable (an "assumed award"), denominated in shares of Whiting common stock based on the exchange ratio and with corresponding adjustments to the per share exercise or purchase price of each assumed award.
4. The aggregate stated capital of the outstanding shares of Kodiak will be reduced to $100.
5. Whiting Canadian Sub will amalgamate with Kodiak to form one corporate entity, with Kodiak surviving the amalgamation as a direct wholly-owned subsidiary of Whiting and with the separate legal existence of Whiting Canadian Sub ceasing.

Canadian tax consequences

The continuance will not result in a disposition of Kodiak shares. The exchange of Kodiak for Whiting shares will occur on a taxable basis for residents.

U.S. tax consequences

Continuance/PFIC. The continuance will qualify as an F reorg. A U.S. holder that is deemed to dispose of Kodiak common shares pursuant to the continuance may be subject to adverse consequences if Kodiak were classified as a PFIC. Kodiak does not believe it has been a PFIC at least since 2005.

Arrangement

It is a condition to the obligation of both Whiting and Kodiak to complete the arrangement that Whiting receive a written opinion from Foley & Lardner LLP, counsel to Whiting that for Code purposes the arrangement transactions should (i) be treated as a single integrated transaction for such purposes and (ii) qualify as a "reorganization" under ss. 368(1)(1)(A) and 368(1)(2)(E). Kodiak agreed to use commercially reasonable efforts to cause Dorsey & Whitney LLP, counsel to Kodiak, to deliver a similar opinion. If Kodiak were a PFIC, and if Code s. 1291(f) were self-executing, a U.S. PFIC holder generally would be required to recognize a taxable gain as a result of the arrangement even if it qualified as such a reorganization, unless it has made certain elections.