Yoho/Storm

Overview

A subsidiary partnership of Yoho (Yoho Partnership) sold natural gas acreage to Storm on January 31, 2014 in consideration for $30M cash and 13.6M common shares of Storm (valued at that time at $4.25 per share). The cash was applied to retire current indebtedness, and the Storm shares are to be distributed under an Alberta Plan of Arrangement on a s.86 exchange of old Yoho common shares for new Yoho common shares and Storm shares (approximately 0.2691 Storm shares for each Yoho share). Unlike the old common shares, the new Yoho common shares will not have an explicit right to requisition a shareholders' meeting.

Yoho

An Alberta oil and gas exploration company listed on the TSXV which holds substantially all its oil and gas properties through Yoho Partnership. Following the proposed transactions, it will continue to develop the Duvernay play in Kaybob, Alberta.

Storm

A natural gas and oil resource Alberta company listed on the TSXV.

Plan of Arrangement

1. Common shares of Yoho held by dissenting shareholders will be transferred to Yoho.
2. Yoho Partnership will transfer to Yoho all of the Storm shares held by it "by way of a distribution of capital of [Yoho's] equity interest in the Partnership."
3. Each Yoho common share will be exchanged for one new common share of Yoho and a proportionate number of Storm shares, with the stated capital of the new common shares being equal to that of the exchange common shares minus the fair market value of the distributed Storm shares, and with the exchanged common shares being cancelled.

Change in common share terms

The new Yoho common shares will be identical to the old common shares except that a requisitioning right (for holders of not less than 4% of the shares to requisition a shareholders' meeting) will have been deleted from the share terms (although there will be a substantially similar right under the Alberta Business Corporations Act for holders of not less than 5% of the shares).

Option plan

The Yoho board intends to reduce the exercise price of the Yoho options by an amount equal to the fair market price of the Storm shares at the effective time of the Plan of Arrangement.

Securities considerations

The new Yoho common shares and Storm common shares will be received in reliance on the s. 3(a)(10) rule. Shareholder approval is required by a 2/3 majority.

Canadian tax consequences

S. 86 exchange. The fair market value of the distributed Storm shares is not expected to exceed the paid-up capital of the (old) Yoho common shares, so that no deemed dividend should arise on the exchange of the Yoho common shares for new common shares and Storm shares. S. 86 will apply to such exchange so that a holder of Yoho common shares will be considered to have disposed of its shares for the greater of their adjusted cost base and the fair market value of the Storm shares received on the exchange.

Dissenters

Disposition will give rise to a deemed dividend to the extent that the amount received (excluding any interest award) exceeds the paid-up capital of the common shares.