S. 86 spin-offs

Overview

Intergeo, a BVI subsidiary of a BVI holding company (Daselina) of a Russian billionaire, which unsuccessfully attempted to go public two years ago, is effecting a reverse (share-for-share exchange) takeover of TSX-listed Mercator pursuant to a BCBCA Plan of Arrangement, with Daselina also subscribing U.S.$100M for Mercator shares, so that Daselina will own approximately 85% of the post-reorganization Mercator (a.k.a., the Resulting Issuer) and the Resulting Issuer will own 100% of Intergeo. One Special Share will be issued to each of Daselina and another BVI company with a minor common share holding in the Resulting Issuer (Kirkland), which will provide that they have the right to nominate only three of the nine board members (but with the other six being nominated by the board itself) – but also give them veto rights on major decisions. In order to maintain the public float, Daselina presumably does not wish to buy out the existing shareholders. However, to placate them, they are to be issued (under a s. 86 reorganization) the right to put their Common Shares to the Resulting Issuer for $5.00 per share (the equivalent of $0.10 per share before giving effect to a proposed 50-for-1 share consolidation) during an exercise window of 18 to 30 months following the Effective Date of the Plan of Arrangement, with $31.7M being placed into an escrow account to secure this contingent obligation.

For full summary, see under Mergers & Acquisitions - Cross-Border Acquisitions - Inbound - Reverse takeovers.

Overview

Following the spin-off of SpinCo on a s. 86 reorg of Sulliden on the basis of 0.10 of a SpinCo Share for each (common) Sulliden Share, all of the outstanding Sulliden Shares will be exchanged for (common) Rio Alto Shares on the basis of 0.525 of one Rio Alto share for each Sulliden Share. Sulliden, upon amalgamation with Rio Alto NewCo, will become a wholly-owned subsidiary of Rio Alto. Rio Alto expects to issue Rio Alto Shares, equal in number to 86.5% of the non-diluted Rio Alto Shares outstanding immediately prior to the Circular date, thereby requiring Rio Alto shareholder approval. The reorganization may qualify as a Code s. 368(a) reorg in light inter alia of SpinCo representing less than 10% of Sulliden's net assets.

See full summary under Mergers & Acquisitions – Mergers – Share-for-share.

Overview

Under a CBCA Plan of Arrangement, each Osisko common share will be exchanged under s. 86 for one new (Class A) common share of Osisko and a common share of a newly-formed subsidiary (New Osisko). Each Class A share will then be transferred to Acquisitionco (an Ontario Newco owned on a 50-50 basis by Agnico and Yamana or their subsidiaries) in consideration for the "Transaction Consideration," comprising $2.09 of cash, 0.07264 of an Agnico common share and 0.26471 of a Yamana common share. Non-resident shareholders will receive New Osisko shares instead as consideration for the transfer of their Osisko shares to Acquisitionco. Holders of out-of-the-money Osisko options will be paid their Black Scholes value.

See full summary under Mergers & Acquisitions - Mergers - Shares for Shares & Cash.

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.

Overview

Alpha and Fission (both TSXV-listed, and ABCA and CBCA corporations, respectively) will be transferring various (mostly uranium) exploration assets to Alpha Spinco and Fission Spinco and spinning-them off (per the s. 86 rules) under ABCA and CBCA Plans of Arrangement (the Alpha Arrangement and Fission Arrangement), with each Alpha share then being transferred to Fission under the Alpha Arrangement for 5.725 Fission common shares and nominal cash (so that no rollover treatment obtains unless a s. 85 election is filed).

Post-merger picture

The Spincos are expected to be listed on the TSXV. Alpha shareholders will hold approximately 50.7% of the new Fission common shares (or 49.3% after giving effect to the private placement referred to in 10 below). The merger will consolidate ownership of the Patterson Lake South uranium property in Saskatchewan, a core asset for both companies.

For a more detailed summary

, see under Mergers & Acquisitions - Mergers – Shares for Shares and Nominal Cash.

Overview

HOC, which is listed in the U.K. and headquartered in Peru, is interested in the 40% minority interest of IMZ in their Peruvian mining and development joint venture company, but not in IMZ's Nevada and Ecuadorian development properties (held through non-resident subsidiaries). IMZ, a Yukon corporation, with 118M common shares outstanding, is listed on the TSX and the Swiss Stock Exchange. IMZ will transfer its non-Peruvian assets and $58M of cash to a newly-incorporated Yukon subsidiary Chaparral Gold. Pursuant to a Yukon Plan of Arrangement, the shares of Chaparral Gold (which are expected to be listed on the TSX and are anticipated by Paradigm Capital Inc. to become worth between $0.58 and $0.85 each) will then be distributed to the IMZ common shareholders on a s. 86 reorganization, and the IMZ shares will be transferred to HOC Canada for $2.38 per share in cash.

Plan of Arrangement

1. The IMZ option plan will be cancelled.
2. Common shares of IMZ held by dissenting shareholders will be transferred to HOC Canada.
3. Under a s. 86 reorganization, each IMZ common share will be exchanged for one Class A share (i.e., a common share bearing two votes) and one Chaparral Gold share, with the stated capital of the Class A shares being equal to the paid-up capital of the IMZ common shares minus the fair market value of the Chaparral Gold shares.
4. HOC will cause its indirect wholly-owned Peruvian subsidiary, Inmaculada Holdings S.A.C. ("Inmaculada"), to transfer the Class A shares which it received in 3. to HOC Canada in consideration for the issuance of HOC Canada common shares having full stated capital (i.e., valued based on the cash consideration in 5. below).
5. All Class A shares not already held by HOC Canada will be transferred to it in exchange for $2.38 per share in cash.

Securities law

The Class A and Chaparral Gold share issuances and distributions will be exempted under the 3(a)(10) rule. Shareholder approval is required by a 2/3 majority together with simple majority approval by the shareholders other than HOC/HOC Canada and the CEO (holding in total approx. 5M IMZ common shares).

Canadian tax consequences

S. 86 exchange. The fair market value of the distributed Chaparral Gold shares is not expected to exceed the paid-up capital of the IMZ common shares, so that no deemed dividend should arise on the exchange of the IMZ common shares for Class A shares and Chaparral Gold shares. S. 86 will apply to such exchange so that a holder of IMZ 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 Chaparral Gold shares received on the exchange.

Exchange of IMZ Class A shares for cash

Occurs on non-rollover basis.

Dissenters

Disposition give rise to proceeds except re any interest award.

Qualified Investments

The Class A shares of IMZ will be qualified investments notwithstanding they will not be listed. Although the Chaparral Gold shares are anticipated to be listed, they nonetheless could retroactively become qualified investments if Chaparral Gold satisfies the public corporation conditions by the filing due date for its first taxation year and makes a retroactive election under the postamble to the s. 89(1) "public corporation" definition.

Non-residents

Although the IMZ Class A shares will not be listed on a designated stock exchange, IMZ believes they will not constitute taxable Canadian property given the foreign asset base. As per above, no deemed dividend anticipated.

U.S. tax consequences

Exchange. The exchange by a U.S. holder of IMZ common shares for IMZ Class A shares and Chaparral Gold shares (the "Spin-off") is not anticipated to qualify as a tax free spin-off under Code s. 355. The Spin-off and the exchange of Class A shares for cash should be treated as steps of a single integrated transaction in which U.S. holders will be treated as having disposed of their IMZ common shares (and their indirect interest in IMZ subsidiaries if special PFIC rules apply) in exchange for Chaparral Gold shares and the cash consideration (with the acquisition and disposition of their Class A shares being disregarded). On this basis, the Chaparral Gold shares and the cash will be treated as an amount received in exchange for the holder's IMZ common shares, and the holder will realize a gain based or loss equal to the difference between the aggregate fair market value of such consideration and the holder's adjusted basis in the IMZ common shares. Consequences would be modified if IMZ was a PFIC for any holding period for its shares.

PFIC status

IMZ believes that it was not a PFIC for its 2008 to 2012 (calendar) tax years, and does not expect to be a PFIC for its 2013 tax year. It believes it was a PFIC for its 2005 to 2007 tax years. It expects Chaparral Gold to be a PFIC for its current tax year and that it may be a PFIC for subsequent years.

Overview

Pursuant to an Alberta Plan of Arrangement, Resverlogix is effectively spinning-off Newco to its shareholders. Newco will hold Therapeutics as well as Royalty Preferred shares of Resverlogix, which will participate in a percentage of licensing revenue generated by Resverlogix from a particular pharmaceutical product in development (but with a reduction for the Part VI.1 tax of Resverlogix). In order to accommodate these Royalty preferred shares in the final structure, the spin-off is done in a somewhat similar manner to a butterfly, although it is not a butterfly reorganization. Newco will not be listed "in view of the early stages of development of the Spin-Off Assets."

Resverlogix

Resverlogix is a TSX-listed clinical stage cardiovascular Alberta company which is developing RVX-208, a small molecule for the treatment of atherosclerosis. RVX-208 is in clinical trials. Resverlogix will continue this focus following the Arrangement. It owns all the shares of Therapeutics, also an Alberta company.

Plan of Arrangement

Under the Plan of Arrangement:

• Common shares of Resverlogix held by dissenting shareholders are surrendered to Resverlogix
• Resverlogix New Common Shares (common shares with one vote per share), Resverlogix Class A Preferred Shares and Resverlogix Royalty Preferred Shares are added to the capital of Resverlogix and the existing common shares are given two votes per share
• each existing common share of Resverlogix is exchanged for a Resverlogix New Common Share, a Resverlogix Class A Preferred Shares and a Resverlogix Royalty Preferred Share – with the stated capital of the Resverlogix common shares be allocated 1^st to the Resverlogix Class A Preferrred Shares (as to their fair market value), 2^nd as to a nominal amount to the Resverlogix Royalty Preferred Share and as to the balance to the Resverlogix New Common Shares
• Newco (whose one common share is held by Resverlogix) acquires the "Therapeutics Assets" (cash, and debt and shares of Therapeutics) in consideration for a promissory note
• each Resverlogix Class A Preferred Share and Resverlogix Royalty Preferred Share is acquired by Newco in exchange for one Newco share
• Resverlogix redeems all the outstanding Resverlogix Class A Preferred Shares for a promissory note
• each promissory note is repaid by the transfer of the other
• the incorporator's share of Newco is cancelled for no consideration

Related steps

Concurrently with the (s. 86) share exchange under the Plan of Arrangement, existing options and warrants will be replaced with new options on Resverlogix and Newco; and RSUs also will be exchanged. Due Bill trading procedures will be used in connection with the distribution of the Newco shares. A Resverlogix officer will specify a dollar amount for the Resverlogix Class A Preferred Shares for purposes of s. 191(4) effective concurrently with their issuance

Attributes of Resverlogix Royalty Preferred Shares

• non-voting
• entitled to semi-annual dividends based on a sliding percentage of revenues from the ApoA-1 pharmaceutical agent multiplied by a tax factor intended to ensure that Newco bears the burden of Resverlogix's Part VI.1 tax on such dividends
• the sliding royalty percentage increases from 6% of annual net revenues of less than US$1 billion to 12% of annual revenues greater than US$5 billion

US securities laws

Reliance on the s. 3(a)(10) exemption.

Canadian tax consequences

S. 86 exchange. S. 86 will apply to the exchange of the old Resverlogix common shares for Resverlogix New Common Shares, Resverlogix Class A Preferred Shares and Resverlogix Royalty Preferred Shares. The adjusted cost base of an old Resverlogix common share will be allocated among the three new shares in proportion to their relative fair market values, it being assumed that the fair market value of the Resverlogix Class A Preferred Shares will be equal to the fair market value of the Therapeutics assets transferred to Newco. Resverlogix will post its estimate of the proportionate allocation.

Exchange of Resverlogix Class A and Roylaty shares

The exchange of Resverlogix Class A shares and Resverlogix Royalty Preferred Shares for Newco shares will occur on a rollover basis under s. 85.1 unless a shareholder chooses to recognize a capital gain or loss on the exchange.

Dissenters

Will (subject to s. 55(2)) be deemed to receive a dividend to the extent that the amount received (excluding an award of interest) exceeds the paid up capital of the Resverlogix common shares of the dissenter.

Qualified investments

It is not anticipated that Newco will be listed following the Arrangement. "Newco should be a public corporation at the Effective Time provided the The Resverlogix Class A shares (which will not be listed) will be qualified investments provided that the Resverlogix common shares are listed on the TSX or other designated stock exchange.

Non-residents

Will not be subject to income tax or s. 116 withholding as a result of the Arrangement.

US tax consequences

Classification of Arrangement. It is assumed that the Arrangement will be treated as a tax deferred exchange by Resverlogix shareholders of their Resverlogix common shares for Resverlogix New Common Shares either under Code s. 1036 or s. 368(a)(1)(e), and a distribution of the Newco shares under Code s. 301.

PFIC rules

Resverlogix believes that is was a PFIC for prior taxable years and expects that it and Newco will be a PFIC for the current taxable year. Detailed disclosure of consequences under PFIC rules of Arrangement.

See summary under Mergers

Current structure

Erdene is a TSX-listed corporation holding Cape Breton coal assets through its wholly-owned subsidiary, Erdene Resources Inc. ("ERI"), and also indirectly holding mineral exploration and development assets in Mongolia. Erdene also holds approximately 60% of APM, whose shares are listed on the TSXV.

Plan of Arrangement

A CBCA Plan of Arrangment is intended to result in two separately-held public companies, holding the Mongolian and coal assets, respectively:

• Erdene will transfer all its shares of ERI to APM in consideration for APM common shares
• APM and ERI will (vertically) amalgamate to continue as Morien Resources Corp. ("Amalco"), with each APM shareholder (including Erdene) receiving one Amalco common share for every 7.85 APM common shares
• Each outstanding Erdene common share (which previously was redesignated as an Erdene Class A common share) shall be exchanged for ½ of an Erdene New Share (being a common share) and ½ of one Amalco common share owned by Erdene
• Every 7.85 options to acquire APM common shares shall be exchanged for one option to acquire an Amalco common share, with the exercise price price multiplied by 7.85
• Each option to acquire an Erdene common share shall be exchanged for ½ of an option to acquire an Erdene New Common share and ½ of an option to acquire one Amalco common share. The aggregate exercise price of the replacement options equals that for the Erdene options which they replace; and the aggregate exercise price is allocated based on the VWAP of the Erdene and Amalco shares following the Arrangement, provided that the exercise price for the Amalco common shares will not be less than $0.265 per share.

Canadian tax consequences

No deemed dividend is expected to arise on the exchange of Erdene Class A common shares for Erdene New Shares and Amalco common shares based on the paid-up capital of the Erdene Class A common shares. The s. 86(1) rules generally will apply to this exchange. However:

Resident Holders who acquired their Erdene Common Shares as "flow-through shares" are deemed to have an adjusted cost base of nil in respect of such Erdene Common Shares. Unless the Resident Holder also owns Erdene Common Shares which are not "flow-through shares" with which the adjusted cost base is averaged, a Resident Holder whose Erdene Common Shares are "flow-through shares" is expected to realize a capital gain equal to the fair market value of the Amalco Shares.

Standard taxable Canadian property disclosure for non-residents.

Proposed acquisition of CTF (a BC company) by FleetCor (a Luxembourg subsidiary of a NYSE listed company, namely, FleetCor Technologies, Inc.) for a base purchase price of US$180 million plus adjustments payable over five years, including releases of holdbacks.

Under a BC Plan of Arrangement, the existing shares of CTF ("CTF Class A Shares") are exchanged for New CTF common shares and CTF Class C Shares, with the paid-up capital of CTF Class A Shares being allocated first to the CTF Class C Shares to the extent of the estimated value of FTC SpinCo as confirmed by the CTF board within one month of the effective date of the Plan. CTF redeems the CTF Class C Shares in consideration for the distribution of the shares of FTC SpinCo, a BC company which holds a Brazilian subsidiary. FleetCor then acquires the New CTF Shares, with a portion of the cash purchase price deemed to have been contributed on behalf of the vendor shareholders to FTC SpinCo as a contribution of capital.

Canadian taxation

The absence of a deemed dividend on the CTF Class C Share redemption is anticipated but "cannot be guaranteed" due inter aliato valuation issues. Although the s. 40(1)(a)(iii) reserve generally is available on the sale to FleetCor, there nonetheless may be recognition of capital gain faster than the receipt of proceeds due to the requirements of the rule, whose application also is uncertain in light of potential purchase price adjustments.