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Court of Queen’s Bench of Alberta Approves Amended Plan of Arrangement

CALGARY, AB / ACCESSWIRE / July 21, 2021 / Tenth Avenue Petroleum Corp (TSXV:TPC)("TAPC") had announced on May 25, 2021, that Court of Queen's Bench of Alberta Justice D.R. Mah had granted an order ("Mah May 25-21 Plan of Arrangement Order") which approved the Plan of Arrangement dated March 24, 2021 (along with Amendment #1 dated May 21, 2021 and Amendment #2 dated May 21, 2021). The purpose of the Plan of Arrangement was to allow TAPC to recapitalize itself by spinning out its oil and gas assets (other than tax losses and tax pools) to its subsidiary Waskahigan Oil & Gas Corp ("WOGC") and to permit TAPC to enter into a reverse takeover ("TAPCRTO") or business combination with another entity which meets minimum listing requirements ("TAPC RTO Target"). The Mah May 25-21 Plan of Arrangement Order approved the mechanism to do so (details of which are contained in Section 2.4 of the Plan of Arrangement and are set out below). TAPC approached the TSX Venture Exchange ("TSXV") and the Canadian Stock Exchange ("CSE") to see if, on a policy basis, they would accept the distribution of TAPC and WOGC post reorganization. The CSE advised they would accept both. The TSXV advised they would accept the distribution of TAPC provided the RTO target could utilize or monetize the tax losses and tax pools of TAPC. TAPC devised a plan to monetize the tax losses and tax pools to seek to maintain its TSXV listing post implementation of the plan. As at December 31, 2020, TAPC had $16,671,359 of available non-capital loss carry forwards in Canada to reduce taxable income for income tax purposes expiring between 2026 and 2033. TAPC had the following tax pool balances: CEE $24,858; ICDE $151,603; COGPE $1,561,890 and UCC $153,686. At a 40% marginal tax rate these non-capital losses could be worth $6MM to a profitable oil co. It may be possible to sell the losses and tax pools for cash for a percentage of the actual tax refunds of a profitable oil company. To accomplish this task, TAPC will isolate the losses in TAPC and conclude the RTO with a newly incorporated subsidiary, 2361990 Alberta Ltd. ("#ABCo"). Prior to concluding the RTO with #ABCo, TAPC proposes to dividend the common shares of #ABCo to the shareholders of TAPC. Upon the sale of the tax losses and tax pools, TAPC would delist from TSXV and amalgamate with a profitable oil and gas company. The #ABCo and the #ABCo RTO Target would then enter into a business combination. TAPC asked the CSE and TSXV, from a policy perspective, whether they would recognize the distribution of #ABCo in lieu of the distribution of TAPC (provided TAPC delisted from TSXV and amalgamated with an oil and gas company and the #ABCo RTO Target met minimum listing requirements). The CSE has advised that it would recognize the distribution of #ABCo in lieu of the distribution of TAPC. The TSXV has not advised TAPC of their position. To accomplish this monetization, TAPC needed to amend the Plan of Arrangement. On July 15, 2021, TAPC amended the Plan of Arrangement (Amendment #3 - by adding Section 2.5 - details of which are set out below)("Amended Plan of Arrangement"). On July 19, 2021, Justice D. Shelley granted a supplemental order ("Supplemental Plan of Arrangement Order") to approve the Amended Plan of Arrangement.

On July 15, 2021, TAPC had two subsidiaries: (a) WOGC; and (b) #ABCo. WOGC has two subsidiaries: Odaat Oil Corp ("Odaat") and Jadela Oil (US) Operating LLC ("Jadela US"). Effective January 1, 2021, TAPC had transferred all of its oil and gas assets to Odaat (other than the tax losses and tax pools). WOGC and Odaat assumed the debt of TAPC. WOGC and Odaat executed a general security agreement in favour of the existing TAPC secured lender, Smoky Oil & Gas Corp ("Smoky"). Gregory J. Leia, indirectly through a company owned by his children, is the major shareholder and creditor of Smoky. TAPC has not signed a definitive agreement with a RTO Target. TAPC has not signed a definitive agreement with an oil company for sale of the losses or tax pools. If the tax losses and tax pools could be sold, TAPC would no longer be a public reporting issuer and would be amalgamated with an oil and gas company. TAPC shareholders would have no further interest in TAPC. The proceeds from the sale of the tax losses and tax pools would be used to reduce the debt of TAPC or be applied as security for abandonment and remediation liabilities of TAPC (which are being assumed by WOGC). This would result in an indirect benefit to the shareholders of TAPC because they would be shareholders of WOGC. Upon closing of any RTO or business combination, the secured lender of TAPC would discharge its security against TAPC after payment of the tax loss sale proceeds.

Pursuant to Section 2.4 of the Amended Plan of Arrangement, upon the filing of the Mah May 25-21 Plan of Arrangement Order as an attachment to Articles of Arrangement of TAPC and WOGC ("TAPC/WOGC Articles of Arrangement") with the Registrar of Corporations for the Province of Alberta ("Registrar") pursuant to section 193 of the Business Corporations Act (Alberta)("ABCA"), WOGC shall effect a share split of its 100 common shares issued and outstanding such that there are 10,512,668 common shares of WOGC owned by TAPC immediately prior to effecting the Amended Plan of Arrangement as it relates to WOGC. TAPC shall exchange the TAPC/WOGC/Odaat debt for 10,512,668 WOGC Shares ("WOGC Distribution Shares"). TAPC shall transfer the WOGC Distribution Shares to the TAPC shareholders as a stock dividend. WOGC shall become a reporting issuer in Alberta. The common shares of WOGC shall not trade on the TSXV. TAPC shall transfer the WOGC Distribution Shares to each TAPC shareholder on the basis of 1 WOGC Distribution Share for every 1 TAPC common share held as of the Share Distribution Record Date (April 9, 2021). Each holder of WOGC Distribution Shares shall be added to the central securities register of WOGC. WOGC shall not issue any warrants for TAPC warrants and WOGC shall not issue any options for TAPC options. The shares issued by WOGC to the shareholders of TAPC shall be valued at $0.0001 per share (aggregate value $100) and TAPC shall reduce its stated capital or paid up capital by $100. Upon the filing of the TAPC/WOGC Articles of Arrangement, WOGC (through Odaat) shall carry on the oil and gas business which had been carried on by TAPC as a standalone reporting issuer.

Pursuant to Section 2.5 of the Amended Plan of Arrangement, upon the filing of the Supplemental Plan of Arrangement Order as an attachment to Articles of Arrangement of TAPC and #ABCo ("TAPC/#ABCo Articles of Arrangement") with the Registrar, #ABCo shall effect a share split of its 100 common shares issued and outstanding such that there are 10,512,668 common shares of #ABCo owned by TAPC. TAPC shall exchange the TAPC/#ABCo debt for 10,512,668 #ABCo Shares ("#ABCo Distribution Shares"). TAPC shall transfer the #ABCo Distribution Shares to the TAPC shareholders as a stock dividend. #ABCo shall become a reporting issuer in Alberta. The common shares of #ABCo would not be eligible to trade on the CSE unless the CSE approves the #ABCo RTO concurrently with the filing of the TAPC/#ABCo Articles of Arrangement and implementation of the Supplemental Plan of Arrangement Order. TAPC/#ABCo have not signed a binding definitive agreement with an RTO target. If and when signed, and if and when a RTO business combination is completed, #ABCo will change its controlling shareholder, officers, directors, name and nature of business. TAPC shall transfer the #ABCo Distribution Shares to each TAPC common shareholder on the basis of 1 #ABCo Distribution Share for every 1 TAPC common share held as of the #ABCo Share Distribution Record Date (September 30, 2021). Each holder of #ABCo Distribution Shares shall be added to the central securities register of #ABCo. #ABCo shall not issue any warrants for TAPC warrants and #ABCo shall not issue any options for TAPC options. The shares issued by #ABCo to the shareholders of TAPC shall be valued at $0.0001 per share (aggregate value $100) and TAPC shall reduce its stated capital or paid up capital by $100.

There are no representations or guarantees by TAPC that: (a) TAPC/#ABCo can close a business combination with a RTO target; (b) that the tax losses and tax pools can be sold; (c) that such RTO target will meet minimum listing requirements of TSXV or CSE; (d) TSXV will approve the distribution of TAPC/#ABCo for the purposes of the RTO; and/or (e) that TAPC, WOGC or #ABCo will be listed on any stock exchange post reorganization. If TAPC files the TAPC/WOGC Articles of Arrangement without the TSXV approval of the TAPC plan for monetization of the tax losses and tax pools it is likely that TAPC will be delisted from TSXV.

If all steps can be accomplished, TAPC shareholders will: (a) own a share of WOGC (which has the same business as TAPC today); (b) own a share in the RTO Target; and (c) have an indirect benefit of reduced debt in WOGC by reason of the tax loss sale. It is anticipated that the #ABCo RTO will require a shareholder meeting and that TAPC shareholders who receive #ABCo common shares will receive rights of dissent.

Implementation of the Amended Plan of Arrangement is subject to a number of conditions. It is expected that the conditions will be satisfied in the next 90 days. Even if all of the conditions are satisfied or waived, the Board of Directors of TAPC have the right to choose not to implement all or parts of the Amended Plan of Arrangement. TAPC may choose to file the TAPC/WOGC Articles of Arrangement (implementing Section 2.4) but not the TAPC/#ABCo Articles of Arrangement (implementing Section 2.5).

About Tenth Avenue Petroleum Corp

Tenth Avenue Petroleum Corp. is a junior oil and gas exploration and production company. For further information, please contact:

Gregory J. Leia, President and CEO
Tenth Avenue Petroleum Corp.
Suite 203 - 221 - 10th Avenue SE
Calgary Alberta T2G 0V9
T: (403) 265 4122
Email: gleia@tenthavenuepetroleum.com
Website: www.tenthavenuepetroleum.com

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SOURCE: Tenth Avenue Petroleum Corp.



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