UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM T-3

 

 

FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES

UNDER THE TRUST INDENTURE ACT OF 1939

 

 

Emerald Plantation Holdings Limited

(Name of Applicant)

 

 

Cricket Square, Hutchins Drive, P.O. Box 2681

Grand Cayman KY1-1111

Cayman Islands

(Address of principal executive office)

SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED

 

 

 

TITLE OF CLASS

 

AMOUNT

6.00% Guaranteed Senior Notes due 2020   $300,000,000 aggregate principal amount plus amounts paid-in-kind

Approximate date of proposed issuance:

January 23, 2013

Paul J. Brough

Room 3815-29, 38/F, Sun Hung Kai Centre

30 Harbour Road

Wanchai

Hong Kong

(852) 2877-0078

Name and address of agent for service:

Gregory Hafkin, Esq.

J. Christopher Winckler, Esq.

Hogan Lovells US LLP

875 Third Avenue

New York, New York 10022

(212) 918-3000

 

 

 

Form T-3    Page 2 of 15

 

GENERAL

ITEM 1. GENERAL INFORMATION.

 

(a) Emerald Plantation Holdings Limited (the “ Applicant ”) is an exempted company limited by shares.

 

(b) The Applicant is organized under the laws of the Cayman Islands.

ITEM 2. SECURITIES ACT EXEMPTION APPLICABLE.

Pursuant to the terms and subject to the conditions set forth in the Plan of Compromise and Reorganization, dated December 3, 2012 (as amended, the “ Plan ”), the Applicant will issue shares and notes (the “ Notes ”) and a specially-created litigation trust will issue litigation trust interests to current noteholders and affected creditors of Sino-Forest Corporation in exchange for the cancellation of the existing shares of Sino-Forest Corporation and the full, final and irrevocable compromise, release, discharge, cancellation and bar of all affected claims (as defined in the Plan).

The Notes will be issued under an indenture between the Applicant and Computershare Trust Company, N.A., as trustee (the “ Indenture ”) (See Exhibit T3C) to be qualified by this Application for Qualification (this “ Application ”) and will contain the following terms, among others: the Notes will bear interest at 6% per annum plus amounts paid-in-kind, payable semi-annually, will mature on January 15, 2020 and will be guaranteed by the Subsidiary Guarantors (as defined in the Indenture).

The Plan was approved by the Ontario Superior Court of Justice (Commercial List) (the “ Court ”) on December 10, 2012, at which time the Court found, among other things, that the Plan, and all the terms and conditions thereof, and matters and transactions contemplated thereby, are fair and reasonable.

The Notes will be issued by the Applicant in reliance on the exemption from registration provided in Section 3(a)(10) of the U.S. Securities Act of 1933, as amended (the “ Securities Act ”), which provides, in relevant part:

“…any security which is issued in exchange for one or more bona fide outstanding securities, claims or property interests…where the terms and conditions of such issuance are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court…”

The three main elements of the Section 3(a)(10) exemption are (a) an exchange of outstanding securities, claims or property interests, (b) a fairness hearing and (c) court approval of the issuance and exchange. As described in the notice of meeting (see Exhibit T3E1) and below, each of these elements will be satisfied in connection with the issuance of the Notes.

(a) Exchange of Securities:  Pursuant to the Plan, the Notes will be issued in exchange for the cancellation of the existing shares of Sino-Forest Corporation and the full, final and irrevocable compromise, release, discharge, cancellation and bar of all affected claims, including existing indebtedness.

(b) Fairness Hearing:  The Court held a hearing (“ Plan Fairness Hearing ”) on the fairness of the Plan for the purpose of obtaining a sanction order (the “ Plan Sanction Order ”) of the Court approving the Plan. Notice of the date and time of the fairness hearing was provided to all participants pursuant to a notice of hearing. At the Plan Fairness Hearing, the Court considered, among other things, the fairness and reasonableness of the Plan, including the issuance of the Notes as consideration for the cancellation of Sino-Forest Corporation shares and release of claims. Any affected party who wished to participate, or to be represented, or to present evidence or argument, had the opportunity to do so, subject to filing with the Court the written documentation and to following the other procedures all as set forth in the notice of hearing.

( c) Court Approval:  The Plan was approved by the Court on December 10, 2012. The Court ruled that the Plan, and all the terms and conditions thereof, and matters and transactions contemplated thereby, is fair and reasonable. The Court was advised that its Plan Sanction Order approving the Plan would be the basis for claiming an exemption from registration under the Securities Act by reason of the exemption afforded by Section 3(a)(10) thereof. The Plan Sanction Order will become final when the time for appeal has expired and no appeal has been taken; or if there has been an appeal, when a decision has been rendered that upholds or does not materially change the Plan.

The Applicant hereby acknowledges that under Section 306(c) of the Trust Indenture Act of 1939, it shall be unlawful for any person, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer or sell through the use or medium of any prospectus

Form T-3    Page 3 of 15

 

or otherwise any security which is not registered under the Securities Act of 1933 and to which this subsection is applicable notwithstanding the provisions of Section 304 of the Trust Indenture Act of 1939, unless such security has been or is to be issued under an indenture and an application for qualification has been filed as to such indenture, or while the application is the subject of a refusal order or stop order or (prior to qualification) any public proceeding or examination under Section 307(c) of the Trust Indenture Act. The failure to file an application on a timely basis could result in an enforcement or other action by the Securities and Exchange Commission.

The Applicant acknowledges that this application (the “ Application ”) was not filed until after the Plan Sanction Order was approved. The Applicant represents that none of the notes under the indenture to be qualified by the Application have been issued and covenants that none of such notes will be issued prior to the Application being filed.

AFFILIATIONS

ITEM 3. AFFILIATES.

For purposes of this Application only, the Applicant’s directors and executive officers may be deemed to be “affiliates” of the Applicant. See Item 4 “Directors and Executive Officers” for a list of the directors and executive officers of the Applicant, which list is incorporated herein by reference.

The following is a list of affiliates of the Applicant as of January 23, 2013, each expected to be owned 100% directly or indirectly by Applicant. The following list is expected to correspond to the list of affiliates of the Applicant immediately following the effective date as a result of the Plan.

 

Affiliate

  

Jurisdiction of Incorporation

Sino-Capital Global Inc. (BVI)    British Virgin Islands
Sino-Panel Holdings Limited (BVI)    British Virgin Islands
Sino-Panel (Asia) Inc. (BVI)    British Virgin Islands
Sino-Panel (Gaoyao) Ltd. (BVI)    British Virgin Islands
SFR (China) Inc. (BVI)    British Virgin Islands
Sino-Wood Partners, Limited (H.K.)    Hong Kong
Sino-Forest Resources Inc. (BVI)    British Virgin Islands
Suri-Wood Inc. (BVI)    British Virgin Islands
Sino-Plantation Limited (H.K.)    Hong Kong
Sino-Wood (Guangxi) Limited (H.K.)    Hong Kong
Sino-Wood (Jiangxi) Limited (H.K.)    Hong Kong
Sino-Wood (Guangdong) Limited (H.K.)    Hong Kong
Sino-Global Holdings Inc. (BVI)    British Virgin Islands
Sinowin Investments Limited (BVI)    British Virgin Islands
Sino-Panel (North East China) Limited (BVI)    British Virgin Islands
Sino-Panel [Hunan] Limited (BVI) (formerly known as Comtech Universal Limited)    British Virgin Islands
Sino-Panel [Xiangxi] Limited (BVI) (formerly known as Rich Base Worldwide Limited)    British Virgin Islands
Sino-Forest Bio-Science Limited (BVI) (formerly known as Sino-Two Limited)    British Virgin Islands

Form T-3    Page 4 of 15

 

Sino-Panel (Guangzhou) Limited (BVI)    British Virgin Islands
Sino-Panel [Suzhou] Limited (BVI) (formerly known as Pacific Harvest Holdings Limited)    British Virgin Islands
Sino-Panel (Yunnan) Limited (BVI)    British Virgin Islands
Sino-Panel (Guangxi) Limited (BVI)    British Virgin Islands
Sino-Panel (Guizhou) Limited (BVI)    British Virgin Islands
Sino-Panel (Qinzhou) Limited (BVI) (formerly known as Sino-Panel (Jiayu) Ltd.)    British Virgin Islands
Sino-Panel (Shaoyang) Limited (BVI)    British Virgin Islands
Sino-Panel (Yongzhou) Limited (BVI)    British Virgin Islands
Sino-Panel (Fujian) Limited (BVI)    British Virgin Islands
Grandeur Winway Limited (BVI)    British Virgin Islands
Sinowood Limited (Cayman Islands)    Cayman Islands
Sino-Forest Investments Limited (BVI)    British Virgin Islands
Sino-Wood (Fujian) Limited (H.K.)    Hong Kong
Sino-Panel (North Sea) Limited (BVI)    British Virgin Islands
Sino-Panel (Huaihua) Limited (BVI)    British Virgin Islands
Amplemax Worldwide Limited (BVI)    British Virgin Islands
Ace Supreme International Limited (BVI)    British Virgin Islands
Express Point Holdings Limited (BVI)    British Virgin Islands
Glory Billion International Limited (BVI)    British Virgin Islands
Smart Sure Enterprises Limited (BVI)    British Virgin Islands
Expert Bonus Investment Limited (BVI)    British Virgin Islands
Dynamic Profit Holdings Limited (BVI)    British Virgin Islands
Alliance Max Limited (BVI)    British Virgin Islands
Brain Force Limited (BVI)    British Virgin Islands
Cheer Gold Worldwide Limited (BVI)    British Virgin Islands
General Excel Limited (BVI)    British Virgin Islands
Harvest Wonder Worldwide Limited (BVI)    British Virgin Islands
Homix Limited (BVI)    British Virgin Islands
Poly Market Limited (BVI)    British Virgin Islands
Prime Kinetic Limited (BVI)    British Virgin Islands
Regal Win Capital Limited (BVI)    British Virgin Islands
Rich Choice Worldwide Limited (BVI)    British Virgin Islands
Sino-Forest International (Barbados) Corporation (Barbados)    Barbados
Sino-Global Management Consulting Inc. (BVI)    British Virgin Islands
Sino-Panel (China) Nursery Limited (BVI)    British Virgin Islands
Sino-Panel (Russia) Limited (BVI)    British Virgin Islands
Sino-Wood Trading Limited (BVI)    British Virgin Islands

Form T-3    Page 5 of 15

 

Sino-Panel Trading Limited (BVI)    British Virgin Islands
Trillion Edge Limited (BVI)    British Virgin Islands
Value Quest International Limited (BVI)    British Virgin Islands
Well Keen Worldwide Limited (BVI)    British Virgin Islands
Mandra Forestry Holdings Limited (BVI)    British Virgin Islands
Mandra Forestry Finance Limited (BVI)    British Virgin Islands
Mandra Forestry Anhui Limited (BVI)    British Virgin Islands
Mandra Forestry Hubei Limited (H.K.)    Hong Kong
Elite Legacy Limited (BVI)    British Virgin Islands
Emerald Plantation Group Limited (Cayman Islands)    Cayman Islands

MANAGEMENT AND CONTROL

ITEM 4. DIRECTORS AND EXECUTIVE OFFICERS.

The following table sets forth the names of, and all offices held by, all directors and executive officers (as defined in Sections 303(5) and 303(6) of the Trust Indenture Act of 1939), respectively, of the Applicant. The mailing address for each executive officer and director listed below is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111 Cayman Islands.

 

Name

  

Position

Paul Jeremy Brough    Executive director
Eugene Irwin Davis    Non-executive director
Colin Denis Keogh    Non-executive director
Tong Sai Wang    Non-executive director
Barry John Field    Non-executive director
Codan Trust Company (Cayman) Limited    Secretary

ITEM 5. PRINCIPAL OWNERS OF VOTING SECURITIES.

The following sets forth information as to each person expected to own 10% or more of the voting securities of the Applicant as of January 23, 2013 after giving effect to the exchange set forth in the Plan. The information is provided on an aggregate basis on behalf of the funds managed by each person and does not reflect proprietary positions held by each person. Each person listed below is the discretionary investment manager (or affiliate thereof) of various investments funds that own the positions in their own names and not in the name of the person listed below.

Form T-3    Page 6 of 15

 

Name and Complete Mailing Address

   Title of
Class
Owned 		   Amount Owned      Percentage of
Voting  Securities
Owned 		 

Ashmore Investment Management Limited, 5th Floor, 61 Aldwych, London WC2B 4AE, United Kingdom

   Common
Shares 		     53,681,216         17.9 % 

Centerbridge Partners, L.P. 375 Park Avenue, 12 th Floor, New York, NY 10152

   Common
Shares 		     43,979,626         14.7 % 

ITEM 6. UNDERWRITERS.

 

(a) No person has, within the three years prior to the date of filing of this Application, acted as an underwriter of any securities of any of the Applicant that are outstanding as of the filing of this Application.

 

(b) The Applicant does not propose to make use of an underwriter for the issuance of the Notes.

ITEM 7. CAPITALIZATION.

(a) Set forth below is certain information as to each authorized class of securities of the Applicant as of January 23, 2013 after giving effect to the exchange set forth in the Plan.

 

Title of Class

   Amount
Authorized
(Number of
Securities) 		     Amount
Outstanding
(Number of
Securities) 		 

Common Stock, $.01 par value

     500,000,000         299,999,975   

(b) Each share of Common Stock is entitled to one vote per share on any matter presented to the holders of the Common Stock.

INDENTURE SECURITIES

ITEM 8. ANALYSIS OF INDENTURE PROVISIONS.

The Notes will be issued under the Indenture to be entered into between the Applicant and Computershare Trust Company, N.A., as trustee (the “ Trustee ”). The following is a general description of certain provisions of the Indenture. This description is qualified in its entirety by reference to the form of Indenture filed as Exhibit T3C hereto and incorporated herein by reference. Capitalized terms used in this Item 8 and not defined herein have the meanings assigned to them in the Indenture.

(a)  Events of Default; Withholding of Notice

The following events will be defined as “Events of Default” in the Indenture:

 

  (1) default in the payment of principal of (or premium, if any, on) the Notes when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise;

 

  (2) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days;

 

  (3)

default in the performance or breach of the provisions of the covenants described under Sections 4.06, 4.07, 4.08 or 5.01 of the Indenture, the failure by the Company to make or consummate an Offer to

Form T-3    Page 7 of 15

 

  Purchase in the manner described under Section 4.13 or Section 4.15 of the Indenture, the failure by the Company to redeem the Notes in the manner described in Section 3.04 of the Indenture or the failure by the Company to create, or cause its Restricted Subsidiaries to create, a First Priority Lien on the Collateral (subject to any Permitted Lien) in accordance or otherwise comply with the covenant described under Article 10 of the Indenture;

 

  (4) the Company or any Restricted Subsidiary defaults in the performance of or breaches any other covenant or agreement in the Indenture or under the Notes (other than a default specified in clause (1), (2) or (3) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes;

 

  (5) there occurs with respect to any Indebtedness of the Company or any Restricted Subsidiary having an outstanding principal amount of US$50,000,000 (or the Dollar Equivalent thereof) or more in the aggregate for all such Indebtedness of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (i) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and/or (ii) the failure to make a principal payment when due;

 

  (6) any final judgment or order for the payment of money in excess of US$50,000,000 (or the Dollar Equivalent thereof) in the aggregate for all such final judgments or orders shall be rendered against the Company or any Restricted Subsidiary and shall not be paid or discharged for a period of 60 days during which a stay of enforcement of such final judgment or order shall not be in effect;

 

  (7) a court having jurisdiction in the premises enters a decree or order for (i) relief in respect of the Company or any Restricted Subsidiary in an involuntary case or proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (including any proceeding under any corporate law seeking an arrangement of, or stay of proceedings to enforce, some or all of its debts), (ii) appointment of a receiver, liquidator, assignee, custodian, monitor, trustee, sequestrator or similar official of the Company or any Restricted Subsidiary or for all or substantially all of the property and assets of the Company or any Restricted Subsidiary or (iii) the winding up or liquidation of the affairs of the Company or any Restricted Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; provided, however, that any filing or the commencement of any proceedings by any Person pursuant to paragraph 61 of the Plan Sanction Order to recognize or enforce such Plan Sanction Order shall not constitute an Event of Default for the purposes of subparagraphs (i) or (ii) above.

 

  (8) the Company or any Restricted Subsidiary (i) commences a voluntary case or proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (including any proceeding under any corporate law seeking an arrangement of, or stay of proceedings to enforce, some or all of its debts), or consents to the entry of an order for relief in an involuntary case or proceeding under any such law, (ii) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, monitor, trustee, sequestrator or similar official of the Company or any Restricted Subsidiary or for all or substantially all of the property and assets of the Company or any Restricted Subsidiary or (iii) effects any general assignment for the benefit of creditors; provided, however, that any filing or the commencement of any proceedings by any Person pursuant to paragraph 61 of the Plan Sanction Order to recognize or enforce such Sanction Order shall not constitute an Event of Default for the purposes of subparagraphs (i) or (ii) above;

 

  (9) any Subsidiary Guarantor repudiates its obligations under its Subsidiary Guarantee or, except as permitted by the Indenture, any Subsidiary Guarantee is determined to be unenforceable or invalid or shall for any reason cease to be in full force and effect;

 

  (10) any default by the Company or any Subsidiary Guarantor in the performance of any of its obligations under the Security Documents or the Indenture, which adversely affects the enforceability, validity, perfection or priority of the applicable Lien on the Collateral or which adversely affects the condition or value of the Collateral, taken as a whole, in any material respect; or

 

  (11) the Company or any Subsidiary Guarantor repudiates its obligations under any Security Document or, other than in accordance with the Indenture and the Security Documents, any Security Document ceases to be or is not in full force and effect or the Trustee ceases to have a first priority Lien in the Collateral (subject to any Permitted Liens).

Form T-3    Page 8 of 15

 

If any Default occurs and is continuing and is known to the Trustee, the Trustee will send notice of the Default to each Holder within 90 days after it occurs, or, if later, within 15 days after it is known to the Trustee unless the Default has been cured; provided that, except in the case of a default in the payment of the principal of or interest on any Note, the Trustee may withhold the notice if and so long as the board of directors, the executive committee or a trust committee of directors of the Trustee in good faith determines that withholding the notice is in the interest of the Holders.

(b)  Authentication and Delivery of the Notes; Use of Proceeds

Upon the execution and delivery of the Indenture, or from time to time thereafter, Notes may be executed and delivered by the Company, with the Subsidiary Guarantees endorsed thereon by the Subsidiary Guarantors, in an aggregate principal amount Outstanding of not more than US$300,000,000 (other than Notes issued pursuant to Section 2.09 and Section 2.10 of the Indenture) to the Trustee for authentication, accompanied by an Officer’s Certificate of the Company directing such authentication (an “Authentication Certificate”) and specifying the amount and form of Notes (with the Subsidiary Guarantees endorsed thereon) to be authenticated, the applicable rate at which interest will accrue on such Notes, the date on which the original issuance of such Notes (with the Subsidiary Guarantees endorsed thereon) is to be authenticated, the date from which interest will begin to accrue, the date or dates on which interest on such Notes will be payable and the date on which the principal of such Notes will be payable and other terms relating to such Notes and Subsidiary Guarantees. The Trustee shall thereupon authenticate and deliver said Notes (with the Subsidiary Guarantees endorsed thereon) to or upon the written order of the Company (as set forth in such Officer’s Certificate) signed by two Authorized Officers (or, in the event the Company has one Authorized Officer only, by such Authorized Officer).

There will be no proceeds from the issuance of the Notes because the Notes are being issued in exchange for the cancellation of the existing shares of Sino-Forest Corporation and the full, final and irrevocable compromise, release, discharge, cancellation and bar of all affected claims.

(c)  Release and Substitution of Property Subject to Lien of the Indenture

 

  (1) The security interest in respect of the Collateral granted by the Indenture shall be fully released, subject to the terms of the Security Documents, (i) upon the repayment in full of the Notes or (ii) upon defeasance or discharge of the Notes as provided under Section 8.01 and Section 8.02 of the Indenture; and may be partially or fully released, as the case may be, (iii) upon certain dispositions of Collateral in compliance with Section 4.11, Section 4.15 or Section 5.01 of the Indenture; (iv) with respect to security granted by a Subsidiary Guarantor, upon the release of the Subsidiary Guarantee of such Subsidiary Guarantor in accordance with the terms of the Indenture; or (v) with respect all or any part of the Collateral, by the Security Trustee in connection with any enforcement of its Liens pursuant to the terms of the Security Documents.

 

  (2) Upon request of the Company or any Subsidiary Guarantor, in connection with any sale, lease, assignment, conveyance, transfer or other disposition of assets or property permitted by this Indenture (including Section 4.11, Section 4.15 or Section 5.01 of the Indenture), the Security Trustee shall (without notice to, or vote or consent of, any Holder), subject to the terms of the Security Documents and subject to its receiving the documents required by Sections 10.03 and 12.03 of the Indenture, take such actions as shall be required to release its security interest in any Collateral being disposed in such disposition, to the extent necessary to permit consummation of such disposition in accordance with this Indenture and the Security Documents and the Security Trustee shall receive full payment therefor from the Company for any costs incurred thereby.

 

  (3) Any release of Collateral made in compliance with Section 10.06 of the Indenture shall not be deemed to impair the Lien under the Security Documents or the Collateral thereunder in contravention of the provisions of this Indenture or the Security Documents.

 

  (4) No purchaser or grantee of any property or rights purporting to be released herefrom shall be bound to ascertain the authority of the Security Trustee to execute the release or to inquire as to the existence of any conditions herein prescribed for the exercise of such authority; nor shall any purchaser or grantee of any property or rights permitted by this Indenture to be sold or otherwise disposed of by the Company and the Subsidiary Guarantors be under any obligation to ascertain or inquire into the authority of the Company or any Subsidiary Guarantor to make such sale or other disposition.

Form T-3    Page 9 of 15

 

New Subsidiary Guarantors may be added via a supplemental indenture.

(d)  Satisfaction and Discharge of the Indenture

 

(1) The Company shall be deemed to have paid and shall be discharged from any and all obligations in respect of the Notes on the 365th day after the deposit referred to in clause (1) of Section 8.01 of the Indenture, and the provisions of this Indenture and the Security Documents will no longer be in effect with respect to the Notes (except for, among other matters, certain obligations to register the transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes, to maintain paying agencies and to hold monies for payment in trust, and certain obligations owed to the Trustee and the Security Trustee) if, among other things:

(a) the Company has deposited with the Trustee, in trust, money and/or U.S. Government Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient (in the case of U.S. Government Obligations, in the opinion of a reputable firm of certified public accountants) to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of this Indenture and the Notes,

(b) the Company has delivered to the Trustee (A) either (x) an Opinion of Counsel to the effect that, as a result of a change occurring after the Original Issue Date in applicable U.S. federal income tax law, Holders will not recognize income, gain or loss for United States federal income tax purposes as a result of the Company’s exercise of its option under Section 8.01 of the Indenture and will be subject to United States federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred or (y) a ruling directed to the Trustee received from the U.S. Internal Revenue Service to the same effect as the aforementioned Opinion of Counsel and (B) an Opinion of Counsel to the effect that the creation of the defeasance trust does not violate the U.S. Investment Company Act of 1940, as amended, and after the passage of 365 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law,

(c) immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both would become an Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 365th day after the date of such deposit, and such defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound, and

(d) the Company shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel each stating that all conditions precedent relating to the discharge or defeasance of the Notes provided for in this Section 8.01 of the Indenture have been complied with.

 

(2) In the case of either discharge or defeasance of the Notes pursuant to Section 8.01 of the Indenture, the Subsidiary Guarantees shall terminate.

(e)  Evidence of Compliance with Conditions and Covenants of the Indenture

Officers of the Company, one of whom must be the Company’s principal executive officer, principal financial officer or principal accounting officer, must certify in an Officer’s Certificate, on or before a date not more than 120 days after the end of each fiscal year, that a review has been conducted of the activities of the Company and its

Form T-3    Page 10 of 15

 

Restricted Subsidiaries and the Company’s and its Restricted Subsidiaries’ performance under the Indenture and that the Company has fulfilled all obligations hereunder, or, if there has been a default in the fulfillment of any such obligations, specifying each such default and the nature and status thereof. The Company will also be obligated to notify the Trustee of any default or defaults in the performance of any covenants or agreements under this Indenture.

ITEM 9. OTHER OBLIGORS.

The following table sets forth the names of all Subsidiary Guarantors under the Indenture. The mailing address for each entity is:

Room 3815-29, 38/F, Sun Hung Kai Centre

30 Harbour Road

Wanchai

Hong Kong

 

Name

Sino-Capital Global Inc.
Sino-Panel Holdings Limited (BVI)
Sino-Panel (Asia) Inc. (BVI)
Sino-Panel (Gaoyao) Ltd. (BVI)
SFR (China) Inc. (BVI)
Sino-Wood Partners, Limited (H.K.)
Sino-Forest Resources Inc. (BVI)
Suri-Wood Inc. (BVI)
Sino-Plantation Limited (H.K.)
Sino-Wood (Guangxi) Limited (H.K.)
Sino-Wood (Jiangxi) Limited (H.K.)
Sino-Wood (Guangdong) Limited (H.K.)
Sino-Global Holdings Inc. (BVI)
Sinowin Investments Limited (BVI)
Sino-Panel (North East China) Limited (BVI)
Sino-Panel [Hunan] Limited (BVI) (formerly known as Comtech Universal Limited)
Sino-Panel [Xiangxi] Limited (BVI) (formerly known as Rich Base Worldwide Limited)
Sino-Forest Bio-Science Limited (BVI) (formerly known as Sino-Two Limited)

Form T-3    Page 11 of 15

 

Sino-Panel (Guangzhou) Limited (BVI)
Sino-Panel [Suzhou] Limited (BVI) (formerly known as Pacific Harvest Holdings Limited)
Sino-Panel (Yunnan) Limited (BVI)
Sino-Panel (Guangxi) Limited (BVI)
Sino-Panel (Guizhou) Limited (BVI)
Sino-Panel (Qinzhou) Limited (BVI) (formerly known as Sino-Panel (Jiayu) Ltd.)
Sino-Panel (Shaoyang) Limited (BVI)
Sino-Panel (Yongzhou) Limited (BVI)
Sino-Panel (Fujian) Limited (BVI)
Grandeur Winway Limited (BVI)
Sinowood Limited (Cayman Islands)
Sino-Forest Investments Limited (BVI)
Sino-Wood (Fujian) Limited (H.K.)
Sino-Panel (North Sea) Limited (BVI)
Sino-Panel (Huaihua) Limited (BVI)
Amplemax Worldwide Limited (BVI)
Ace Supreme International Limited (BVI)
Express Point Holdings Limited (BVI)
Glory Billion International Limited (BVI)
Smart Sure Enterprises Limited (BVI)
Expert Bonus Investment Limited (BVI)
Dynamic Profit Holdings Limited (BVI)
Alliance Max Limited (BVI)
Brain Force Limited (BVI)
Cheer Gold Worldwide Limited (BVI)
General Excel Limited (BVI)

Form T-3    Page 12 of 15

 

Harvest Wonder Worldwide Limited (BVI)
Homix Limited (BVI)
Poly Market Limited (BVI)
Prime Kinetic Limited (BVI)
Regal Win Capital Limited (BVI)
Rich Choice Worldwide Limited (BVI)
Sino-Forest International (Barbados) Corporation (Barbados)
Sino-Global Management Consulting Inc. (BVI)
Sino-Panel (China) Nursery Limited (BVI)
Sino-Panel (Russia) Limited (BVI)
Sino-Wood Trading Limited (BVI)
Sino-Panel Trading Limited (BVI)
Trillion Edge Limited (BVI)
Value Quest International Limited (BVI)
Well Keen Worldwide Limited (BVI)
Mandra Forestry Holdings Limited (BVI)
Mandra Forestry Finance Limited (BVI)
Mandra Forestry Anhui Limited (BVI)
Mandra Forestry Hubei Limited (H.K.)
Elite Legacy Limited (BVI)
Emerald Plantation Group Limited (Cayman Islands)

Form T-3    Page 13 of 15

 

CONTENTS OF APPLICATION FOR QUALIFICATION

This Application for qualification comprises:

(a) Pages numbered 1 to 15, consecutively.

(b) The following exhibits in addition to those filed as part of the statement of eligibility and qualification of the Trustee:

 

Exhibit Number

  

Document

Exhibit T3A    Amended and Restated Memorandum of Association of Emerald Plantation Holdings Limited
Exhibit T3B    See Exhibit T3A
Exhibit T3C    Draft of Indenture between Emerald Plantation Holdings Limited, as Issuer, Computershare Trust Company, N.A., as Trustee and as Security Trustee, and the entities listed on Schedule I thereto as Initial Subsidiary Guarantors
Exhibit T3D    Plan Sanction Order of the Ontario Superior Court of Justice (Commercial List) approving the Plan and, among other things, finding that the Plan is fair to the affected parties.
Exhibit T3E1    Notice of Meeting and Meeting Information Statement Relating to a Proposed Plan of Compromise and Reorganization under the Companies’ Creditors Arrangement Act (Canada) and the Canada Business Corporations Act Concerning, Affecting and Involving Sino-Forest Corporation, dated October 20, 2012
Exhibit T3E2    Plan Supplement to the Plan of Compromise and Reorganization dated October 19, 2012 pursuant to the Companies’ Creditors Arrangement Act and the Canada Business Corporations Act Concerning, Affecting and Involving Sino-Forest Corporation, dated November 21, 2012
Exhibit T3F    TIA Cross Reference Sheet
Exhibit 25.1    Statement of eligibility and qualification on Form T-1 of Computershare Trust Company, National Association , as Trustee under the Indenture to be qualified.

Form T-3    Page 14 of 15

 

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939, Emerald Plantation Holdings Limited, an exempted company limited by shares organized and existing under the laws of the Cayman Islands, has duly caused this Application to be signed on its behalf by the undersigned, thereunto duly authorized, and attested, all in Hong Kong, People’s Republic of China, on the 9th day of January, 2013.

 

  EMERALD PLANTATION HOLDINGS LIMITED
By:  

/s/ Paul J. Brough

  Director

 

Attest:    
  By:  

/s/ Kitty Lam

  Title:   Solicitor, Hogan Lovells, Hong Kong SAR

Form T-3    Page 15 of 15

 

EXHIBIT INDEX

 

Exhibit Number

  

Document

Exhibit T3A    Amended and Restated Memorandum of Association of Emerald Plantation Holdings Limited
Exhibit T3B    See Exhibit T3A
Exhibit T3C    Draft of Indenture between Emerald Plantation Holdings Limited, as Issuer, Computershare Trust Company, N.A., as Trustee and as Security Trustee, and the entities listed on Schedule I thereto as Initial Subsidiary Guarantors
Exhibit T3D    Plan Sanction Order of the Ontario Superior Court of Justice (Commercial List) approving the Plan and, among other things, finding that the Plan is fair to the affected parties.
Exhibit T3E1    Notice of Meeting and Meeting Information Statement Relating to a Proposed Plan of Compromise and Reorganization under the Companies’ Creditors Arrangement Act (Canada) and the Canada Business Corporations Act Concerning, Affecting and Involving Sino-Forest Corporation, dated October 20, 2012
Exhibit T3E2    Plan Supplement to the Plan of Compromise and Reorganization dated October 19, 2012 pursuant to the Companies’ Creditors Arrangement Act and the Canada Business Corporations Act Concerning, Affecting and Involving Sino-Forest Corporation, dated November 21, 2012
Exhibit T3F    TIA Cross Reference Sheet
Exhibit 25.1
   Statement of eligibility and qualification on Form T-1 of Computershare Trust Company, National Association , as Trustee under the Indenture to be qualified.

Exhibit T3A

THE COMPANIES LAW

EXEMPTED COMPANY LIMITED BY SHARES

AMENDED AND RESTATED

MEMORANDUM OF ASSOCIATION

OF

EMERALD PLANTATION HOLDINGS LIMITED

(adopted by Special Resolution of the members on 7th January, 2013)

 

1. The name of the Company is Emerald Plantation Holdings Limited.

 

2. The registered office of the Company shall be at the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

 

3. Subject to the following provisions of this Memorandum, the objects for which the Company is established are unrestricted.

 

4. Subject to the following provisions of this Memorandum, the Company shall have and be capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate benefit, as provided by Section 27(2) of the Companies Law.

 

5. Nothing in this Memorandum shall permit the Company to carry on a business for which a licence is required under the laws of the Cayman Islands unless duly licensed.

 

6. The Company shall not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands; provided that nothing in this clause shall be construed as to prevent the Company effecting and concluding contracts in the Cayman Islands, and exercising in the Cayman Islands all of its powers necessary for the carrying on of its business outside the Cayman Islands.

 

7. The liability of each member is limited to the amount from time to time unpaid on such member’s shares.

 

8. The share capital of the Company is US$5,000,000 divided into 500,000,000 shares of a nominal or par value of US$0.01 each.

 

9. The Company may exercise the power contained in the Companies Law to deregister in the Cayman Islands and be registered by way of continuation in another jurisdiction.

AMENDED AND RESTATED

ARTICLES OF ASSOCIATION

OF

EMERALD PLANTATION HOLDINGS LIMITED

(adopted by Special Resolution of the Members on 7th January, 2013)

AMENDED AND RESTATED

ARTICLES OF ASSOCIATION

OF

EMERALD PLANTATION HOLDINGS LIMITED

(adopted by Special Resolution of the Members on 7th January, 2013 )

Table A

The regulations in Table A in the First Schedule to the Law (as defined below) do not apply to the Company.

INTERPRETATION

 

1. Definitions

 

1.1 In these Articles, the following words and expressions shall, where not inconsistent with the context, have the following meanings, respectively:

 

  10%+ Member    Any Member that (i) is an Initial Consenting Noteholder, and (ii) owns (individually or together with its Affiliates) a 10% Position and has either (A) owned (beneficially or as a registered Member) such 10% Position continuously since January 17, 2013 or (B) acquired such 10% Position from a prior 10%+ Member.
  10% Position    shares representing 10.0% or more of the shares then outstanding that carry the right to vote at general meetings (excluding for the purposes of such calculation any shares held at such time by SFC Escrow Co.);
  Affiliate    with respect to any person, any other person controlling, controlled by or under common control with such person; where “control” means, with respect to any person, the right to exercise, directly or indirectly, fifty percent (50%) or more of the voting rights attributable to the shares or other equity interest of the person, or, with respect to any person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such person or the right to receive the economic benefit of fifty percent (50%) or more of any income or capital in such person;

  Alternate Director    an alternate director appointed in accordance with these Articles;
  Articles    these Articles of Association as altered from time to time;
  Auditor    the person or firm for the time being appointed as Auditor of the Company and shall include an individual or partnership;
  Board    the board of directors (including, for the avoidance of doubt, a sole director) appointed or elected pursuant to these Articles and acting at a meeting of directors at which there is a quorum or by written resolution in accordance with these Articles;
  Company    the company for which these Articles are approved and confirmed;
  Defined Majority Resolution    (i) a resolution passed by a majority of at least two-thirds of the votes cast by such Members as, being entitled to do so, vote in person or by proxy at a general meeting of which notice specifying the intention to propose a resolution as a Defined Majority Resolution has been duly given (and for the avoidance of doubt, unanimity qualifies as a majority); or (ii) except in respect of matters where a written resolution is required to be approved by all the Members in order to be valid under the Law, a written resolution passed by Members owning at least two-thirds of the shares entitled to vote on such matter shall be required;
  Depositary    (i) The Depository Trust Company, or, if applicable, a successor entity to the Depository Trust Company that is a member of the U.S. Federal Reserve System and a registered clearing agency with the U.S. Securities and Exchange Commission, (ii) The Canadian Depository for Securities Limited and its corporate group (including CDS Clearing and Depository Services Inc.), or, if applicable, a successor entity to The Canadian Depository for Securities Limited, or (iii) any other depositary in Canada, the United States of America or elsewhere or any book-based transfer register in respect of the shares;
  Director    a director, including a sole director, for the time being of the Company and shall include an Alternate Director;
  Initial Consenting Noteholders    the former noteholders of Sino-Forest Corporation that signed a restructuring support agreement with Sino-Forest Corporation on March 30, 2012, as reflected on a list maintained by the Company, as provided by FTI Consulting Canada Inc., its capacity as the court-appointed monitor of Sino-Forest Corporation;

 

- 2 -

  Initial Public Offering    an initial public offering of shares, as a result of which the shares are listed and posted for trading, traded or quoted on a recognized stock exchange or market, whether pursuant to a treasury offering by the Company (or a successor person) or a secondary offering by one or more Members;
  Law    the Companies Law of the Cayman Islands;
  Member    the person registered in the Register of Members as the holder of shares in the Company and, when two or more persons are so registered as joint holders of shares, means the person whose name stands first in the Register of Members as one of such joint holders or all of such persons, as the context so requires;
  month    calendar month;
  notice    written notice as further provided in these Articles unless otherwise specifically stated;
  Officer    any person appointed by the Board to hold an office in the Company;
  ordinary resolution    a resolution passed at a general meeting (or, if so specified, a meeting of Members holding a class of shares) of the Company by a simple majority of the votes cast, or a written resolution passed by the unanimous consent of all Members entitled to vote;
  paid-up    paid-up or credited as paid-up;
  Proportionate Share    in respect of a Member, expressed as a percentage, the quotient obtained by dividing (i) the number of shares held by such Member divided by (ii) the aggregate number of issued and outstanding shares;
  Register of Directors and Officers    the register of directors and officers referred to in these Articles;
  Register of Members    the register of members maintained by the Company in accordance with the Law;
  Seal    the common seal or any official or duplicate seal of the Company;
  Secretary    the person appointed to perform any or all of the duties of secretary of the Company and includes any deputy or assistant secretary and any person appointed by the Board to perform any of the duties of the Secretary;
  Securities   

any:

 

(i) share; or

 

(ii) security (whether equity or debt) convertible into, or exchangeable for, shares,

 

in the Company;

 

- 3 -

  share    a share in the Company, which includes a fraction of a share;
  Special Resolution    (i) a resolution passed by a majority of at least two-thirds of the votes cast by such Members as, being entitled to do so, vote in person or by proxy at a general meeting of which notice specifying the intention to propose a resolution as a special resolution has been duly given (and for the avoidance of doubt, unanimity qualifies as a majority); or (ii) a written resolution passed by unanimous consent of all Members entitled to vote;
  written resolution    a resolution passed in accordance with Article 38 or 65; and
  year    calendar year.

 

1.2 In these Articles, where not inconsistent with the context:

 

  (a) words denoting the plural number include the singular number and vice versa;

 

  (b) words denoting the masculine gender include the feminine and neuter genders;

 

  (c) words importing persons include companies, associations or bodies of persons whether corporate or not;

 

  (d) the words:-

 

  (i) “may” shall be construed as permissive; and

 

  (ii) “shall” shall be construed as imperative;

 

  (e) a reference to statutory provision shall be deemed to include any amendment or re-enactment thereof;

 

  (f) the word “corporation” means corporation whether or not a company within the meaning of the Law; and

 

  (g) unless otherwise provided herein, words or expressions defined in the Law shall bear the same meaning in these Articles.

 

1.3 In these Articles expressions referring to writing or its cognates shall, unless the contrary intention appears, include facsimile, printing, lithography, photography, electronic mail and other modes of representing words in visible form.

 

1.4 Headings used in these Articles are for convenience only and are not to be used or relied upon in the construction hereof.

 

- 4 -

SHARES

 

2. Power to Issue Shares

 

2.1 Subject to these Articles and to any resolution of the Members to the contrary, and without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, the Board shall have the power to issue any unissued shares on such terms and conditions as it may determine and any shares or class of shares (including the issue or grant of options, warrants and other rights, renounceable or otherwise in respect of shares) may be issued with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting, return of capital, or otherwise, provided that no share shall be issued at a discount except in accordance with the Law.

 

3. Redemption, Purchase, Surrender and Treasury Shares

 

3.1 Subject to the Law, the Company is authorised to issue shares which are to be redeemed or are liable to be redeemed at the option of the Company or a Member and may make payments in respect of such redemption in accordance with the Law.

 

3.2 The Company is authorised to purchase any share in the Company (including a redeemable share) by agreement with the holder and may make payments in respect of such purchase in accordance with the Law.

 

3.3 The Company authorises the Board to determine the manner or any of the terms of any redemption or purchase; provided that the Company shall only redeem or purchase shares of any class if such redemption or purchase is made pro rata (or offered pro rata, in the case of a purchase) to all holders of such class of shares.

 

3.4 A delay in payment of the redemption price shall not affect the redemption but, in the case of a delay of more than thirty days, interest shall be paid for the period from the due date until actual payment at a rate which the Board, after due enquiry, estimates to be representative of the rates being offered by banks holding a Category A banking license issued by the Cayman Islands Monetary Authority for thirty day deposits in the same currency.

 

3.5 The Company authorises the Board pursuant to section 37(5) of the Law to make a payment in respect of the redemption or purchase of its own shares otherwise than out of its profits, share premium account, or the proceeds of a fresh issue of shares.

 

3.6 No share may be redeemed or purchased unless it is fully paid-up.

 

3.7 The Company may accept the surrender for no consideration of any fully paid share (including a redeemable share) unless, as a result of the surrender, there would no longer be any issued and outstanding shares of the Company other than shares held as treasury shares.

 

3.8 The Company is authorised to hold treasury shares in accordance with the Law.

 

- 5 -

3.9 The Board may designate as treasury shares any of its shares that it purchases or redeems, or any shares surrendered to it, in accordance with the Law.

 

3.10 Shares held by the Company as treasury shares shall continue to be classified as treasury shares until such shares are either cancelled or transferred in accordance with the Law.

 

4. Rights Attaching to Shares

Subject to these Articles and the Memorandum of Association, the share capital of the Company shall be divided into shares of a single class the holders of which shall, subject to these Articles:

 

  (a) be entitled to one vote per share;

 

  (b) be entitled to such dividends as the Board may from time to time declare;

 

  (c) in the event of a winding-up or dissolution of the Company, whether voluntary or involuntary or for the purpose of a reorganisation or otherwise or upon any distribution of capital, be entitled to the surplus assets of the Company; and

 

  (d) generally be entitled to enjoy all of the rights attaching to shares.

 

5. Calls on Shares

 

5.1 The Board may make such calls as it thinks fit upon the Members in respect of any monies (whether in respect of nominal value or premium) remaining unpaid (as at the date of any such calls) on the shares allotted to or held by such Members and, if a call is not paid on or before the day appointed for payment thereof, the Member may at the discretion of the Board be liable to pay the Company interest on the amount of such call at such rate as the Board may determine, from the date when such call was payable up to the actual date of payment. The Board may differentiate between the holders as to the amount of calls to be paid and the times of payment of such calls.

 

5.2 The Company may accept from any Member the whole or a part of the amount remaining unpaid on any shares held by him notwithstanding no part of that amount has been called up.

 

5.3 The terms of any issue of shares may include different provisions with respect to different Members in the amounts and times of payments of calls on their shares.

 

6. Joint and Several Liability to Pay Calls

The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof.

 

7. Forfeiture of Shares

 

7.1 If any Member fails to pay, on the day appointed for payment thereof, any call in respect of any share allotted to or held by such Member, the Board may, at any time thereafter during such time as the call remains unpaid, direct the Secretary to forward such Member a notice in writing in the form, or as near thereto as circumstances admit, of the following:

 

- 6 -

  

Notice of Liability to Forfeiture for Non-Payment of

Call Emerald Plantation Holdings Limited (the “ Company ”)

  
   You have failed to pay the call of [amount of call] made on [date] , in respect of the [number] share(s) [number in figures] standing in your name in the Register of Members of the Company, on [date] , the day appointed for payment of such call. You are hereby notified that unless you pay such call together with interest thereon at the rate of [ ] per annum computed from the said [date] at the registered office of the Company the share(s) will be liable to be forfeited.   
   Dated this [date]   
  

 

  
   [Signature of Secretary] By Order of the Board   

 

7.2 If the requirements of such notice are not complied with, any such share may at any time thereafter before the payment of such call and the interest due in respect thereof be forfeited by a resolution of the Board to that effect, and such share shall thereupon become the property of the Company and may be disposed of as the Board shall determine. Without limiting the generality of the foregoing, the disposal may take place by sale, repurchase, redemption or any other method of disposal permitted by and consistent with these Articles and the Law.

 

7.3 A Member whose share or shares have been so forfeited shall, notwithstanding such forfeiture, be liable to pay to the Company all calls owing on such share or shares at the time of the forfeiture, together with all interest due thereon and any costs and expenses incurred by the Company in connection therewith.

 

7.4 The Board may accept the surrender of any shares which it is in a position to forfeit on such terms and conditions as may be agreed. Subject to those terms and conditions, a surrendered share shall be treated as if it had been forfeited.

 

8. Share Certificates

All shares issued by the Company will be uncertificated unless otherwise determined by the Board in accordance with the Law. Whether a share is uncertificated or certificated, each share issued will be subject to the applicable restrictions contained in these Articles.

 

9. Fractional Shares

The Company may issue its shares in fractional denominations and deal with such fractions to the same extent as its whole shares and shares in fractional denominations shall have in proportion to the respective fractions represented thereby all of the rights of whole shares including (but without limiting the generality of the foregoing) the right to vote, to receive dividends and distributions and to participate in a winding-up.

 

- 7 -

10. Pre-Emptive Rights

 

10.1 If the Company wishes to issue Securities other than (i) pursuant to an Initial Public Offering, or (ii) in connection with the issuance of equity incentive awards, including share options, to directors, officers and/or employees of the Company or its subsidiaries, which awards represent in the aggregate less than 10.0% of the then outstanding shares (or such higher limit as may be approved by the Members pursuant to Article 32.1(b) of these Articles), or (iii) in respect of share splits, share dividends or similar capital reorganizations (together, the “ Excluded Securities ”), then the Company shall offer to each Member its Proportionate Share of such Securities in accordance with the provisions of this Article.

 

10.2 Every offer of Securities other than Excluded Securities shall be made by notice (“Notice of Pre-Emptive Right”) to each Member (other than SFC Escrow Co.) from the Company which shall set out:

 

  (a) a description of the Securities to be offered;

 

  (b) the subscription price for each Security (the “Subscription Price”); and

 

  (c) the aggregate number of Securities being offered.

 

10.3 Each Member (other than SFC Escrow Co.) may subscribe for up to its Proportionate Share of Securities by giving written notice of its subscription to the Company within 15 calendar days after receipt of the Notice of Pre-Emptive Right (the “Subscription Period”) agreeing to purchase at least its Proportionate Share of the offered Securities and, at its option, any number of Securities in excess of its Proportionate Share. If any Member does not deliver a notice within such 15-day period it will be deemed to have declined to purchase any of the Securities offered; provided that a Member may waive its rights under Article 10.2 prior to the expiry of such 15-day period by giving written notice to the Company. A Member (other than SFC Escrow Co.) wishing to subscribe for Securities in excess of its Proportionate Share shall, in its notice of subscription, specify the number of Securities in excess of its Proportionate Share that it wishes to purchase.

 

10.4 If a Member does not subscribe for its Proportionate Share within the Subscription Period, the unsubscribed Securities shall be used to satisfy the subscription of the other participating Members for Securities in excess of their Proportionate Share. The unsubscribed Securities shall be allocated to the other participating Members pro rata in proportion to the number of shares held by those Members respectively on the date of offer, provided no Member will be allocated a number of Securities greater than the number it has indicated it wishes to purchase. The provisions of this Article 10.4 will be applied, mutatis mutandis , until all of the offered Securities which the participating Members have agreed to purchase pursuant to Article 10.3 have been allocated among such Members. The Company shall provide notice in writing to each Member exercising rights under Article 10.3 of the number of Securities and the purchase price therefor.

 

- 8 -

10.5

The closing of the purchase of Securities subscribed for by Members under Article 10 shall be held at a place designated by the Company at 11:00 a.m., local time, (a) on the 25 th day after the giving of the Notice of Pre-Emptive Right pursuant to Article 10.2, if Members elect to purchase all of the Securities offered under Article 10.2, (b) the date of the closing of the sale to the person made pursuant to Article 10.6 if Members elect to purchase some, but not all, of the Securities under Article 10.2 or (c) at such other time and place as the Board may determine. Each Member purchasing Securities at such closing shall deliver at the closing payment in full in immediately available funds for the Securities purchased by it. At such closing, each Member purchasing Securities and the Company shall execute such additional documents as are otherwise necessary or appropriate.

 

10.6 The Company may sell to any person all of the Securities not purchased by Members pursuant to Article 10.2 on terms and conditions that are no more favourable to such person than those set forth in the Notice of Pre-Emptive Right; provided, however, that such sale is bona fide and made pursuant to a contract entered into within ninety (90) days following the earlier to occur of (i) the waiver by the Members of their option to purchase Securities pursuant to Article 10.3, and (ii) the expiration of the 15-day period referred to in Article 10.3. If such sale is not consummated within such 90-day period for any reason, then the restrictions provided for herein shall again become effective, and no issuance and sale of Securities may be made thereafter by the Company without again offering the same in accordance with this Article 10. The closing of any issuance and purchase pursuant to this Article 10.6 shall be held at a time and place as the parties to the transaction may agree within such 90-day period.

REGISTRATION OF SHARES

 

11. Register of Members

 

11.1 The Board shall cause to be kept in one or more books a Register of Members which may be kept in or outside the Cayman Islands at such place as the Board shall appoint and shall enter therein the following particulars:-

 

  (a) the name and address of each Member, the number, and (where appropriate) the class of shares held by such Member and the amount paid or agreed to be considered as paid on such shares;

 

  (b) the date on which each person was entered in the Register of Members; and

 

  (c) the date on which any person ceased to be a Member.

 

11.2 The Board may cause to be kept in any country or territory one or more branch registers of such category or categories of members as the Board may determine from time to time and any branch register shall be deemed to be part of the Company’s Register of Members.

 

11.3 Any register maintained by the Company in respect of listed shares may be kept by recording the particulars set out in Article 11.1 in a form otherwise than legible if such recording otherwise complies with the laws applicable to and the rules and regulations of the relevant approved stock exchange.

 

- 9 -

12. Registered Holder Absolute Owner

 

12.1 The Company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not be bound to recognise any equitable claim or other claim to, or interest in, such share on the part of any other person.

 

12.2 No person shall be entitled to recognition by the Company as holding any share upon any trust and the Company shall not be bound by, or be compelled in any way to recognise, (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any other right in respect of any share except an absolute right to the entirety of the share in the holder. If, notwithstanding this Article, notice of any trust is at the holder’s request entered in the Register of Members or on a share certificate in respect of a share, then, except as aforesaid:

 

  (a) such notice shall be deemed to be solely for the holder’s convenience;

 

  (b) the Company shall not be required in any way to recognise any beneficiary, or the beneficiary, of the trust as having an interest in the share or shares concerned;

 

  (c) the Company shall not be concerned with the trust in any way, as to the identity or powers of the trustees, the validity, purposes or terms of the trust, the question of whether anything done in relation to the shares may amount to a breach of trust or otherwise; and

 

  (d) the holder shall keep the Company fully indemnified against any liability or expense which may be incurred or suffered as a direct or indirect consequence of the Company entering notice of the trust in the Register of Members or on a share certificate and continuing to recognise the holder as having an absolute right to the entirety of the share or shares concerned.

 

13. Transfer of Registered Shares

 

13.1 An instrument of transfer shall be in writing in the form of the following, or as near thereto as circumstances admit, or in such other form as the Board may accept:

Transfer of a Share or Shares

Emerald Plantation Holdings Limited (the “Company”)

 

FOR VALUE RECEIVED             [amount] , I, [name of transferor] hereby sell, assign and transfer unto [transferee] of [address] , [number] shares of the Company.
DATED this [date]   
Signed by:    In the presence of:

 

  

 

Transferor    Witness

 

  

 

Transferor    Witness

 

- 10 -

13.2 Such instrument of transfer shall be signed by (or in the case of a party that is a corporation, on behalf of) the transferor and transferee, provided that, in the case of a fully paid share, the Board may accept the instrument signed by or on behalf of the transferor alone. The transferor shall be deemed to remain the holder of such share until the same has been transferred to the transferee in the Register of Members.

 

13.3 The Board may refuse to recognise any instrument of transfer unless it is accompanied by the certificate in respect of the shares to which it relates (to the extent such shares have been evidenced by a share certificate) and by such other evidence as the Board may reasonably require showing the right of the transferor to make the transfer.

 

13.4 The joint holders of any share may transfer such share to one or more of such joint holders, and the surviving holder or holders of any share previously held by them jointly with a deceased Member may transfer any such share to the executors or administrators of such deceased Member.

 

14. Transmission of Registered Shares

 

14.1 In the case of the death of a Member, the survivor or survivors where the deceased Member was a joint holder, and the legal personal representatives of the deceased Member where the deceased Member was a sole holder, shall be the only persons recognised by the Company as having any title to the deceased Member’s interest in the shares. Nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by such deceased Member with other persons. Subject to the provisions of Section 39 of the Law, for the purpose of this Article, legal personal representative means the executor or administrator of a deceased Member or such other person as the Board may, in its absolute discretion, decide as being properly authorised to deal with the shares of a deceased Member.

 

14.2 Any person becoming entitled to a share in consequence of the death or bankruptcy of any Member may be registered as a Member upon such evidence as the Board may deem sufficient or may elect to nominate some person to be registered as a transferee of such share, and in such case the person becoming entitled shall execute in favour of such nominee an instrument of transfer in writing in the form, or as near thereto as circumstances admit, of the following:

 

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Transfer by a Person Becoming Entitled on Death/Bankruptcy of a

Member

Emerald Plantation Holdings Limited (the “Company”)

I/We, having become entitled in consequence of the [death/bankruptcy] of [name and address of deceased Member] to [number] share(s) standing in the Register of Members of the Company in the name of the said [name of deceased/bankrupt Member] instead of being registered myself/ourselves, elect to have [name of transferee] (the “Transferee”) registered as a transferee of such share(s) and I/we do hereby accordingly transfer the said share(s) to the Transferee to hold the same unto the Transferee, his or her executors, administrators and assigns, subject to the conditions on which the same were held at the time of the execution hereof; and the Transferee does hereby agree to take the said share(s) subject to the same conditions.

 

DATED this [date]   
Signed by:    In the presence of:

 

  

 

Transferor    Witness

 

  

 

Transferor    Witness

 

14.3 On the presentation of the foregoing materials to the Board, accompanied by such evidence as the Board may require to prove the title of the transferor, the transferee shall be registered as a Member. Notwithstanding the foregoing, the Board shall, in any case, have the same right to decline or suspend registration as it would have had in the case of a transfer of the share by that Member before such Member’s death or bankruptcy, as the case may be.

 

14.4 Where two or more persons are registered as joint holders of a share or shares, then in the event of the death of any joint holder or holders the remaining joint holder or holders shall be absolutely entitled to the said share or shares and the Company shall recognise no claim in respect of the estate of any joint holder except in the case of the last survivor of such joint holders.

 

15. Drag-Along Right

 

15.1 If Members holding not less than 66 2/3% of the then outstanding shares (collectively, in either case, the “Prospective Selling Members”), propose a bona fide transfer of all of such holders’ shares to an arm’s length third party (a “Prospective Buyer”) and the Prospective Buyer desires to acquire all of the remaining shares (such transfer being a “Drag-Along Sale”), the Prospective Selling Members initiating the Drag-Along Sale, shall have the right to require all other Members (each a “Dragged Seller”) to transfer all of their shares to such Prospective Buyer, in the manner and on the terms set forth in these Articles.

 

15.2 In the event of a proposed Drag-Along Sale, the Prospective Selling Members shall furnish a written notice (the “Drag-Along Sale Notice”) to the Company at least 20 calendar days prior to the consummation of the proposed Drag-Along Sale and the Company shall promptly furnish such Drag-Along Sale Notice to each Dragged Seller by furnishing a copy of such Drag-Along Sale Notice to each Member at the respective address provided to the Company and stated on the Register of Members.

 

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15.3

The Drag-Along Sale Notice shall set forth the principal terms and conditions of the proposed Drag-Along Sale, including (a) the per share consideration to be received by the Prospective Selling Members pursuant to the proposed Drag-Along Sale for the shares, including the form of consideration (if other than cash), (b) the terms and conditions (including warranties) on which the Prospective Selling Members have agreed to sell the shares, (c) the name, address and brief summary of the Prospective Buyer, (d) the written commitment by the Prospective Buyer to acquire all of the outstanding shares, (e) the proposed closing date of the Drag-Along Sale (which shall be on or prior to the date that is 120 days after the delivery of such Drag-Along Sale Notice, or such longer period of time as may be required in order to obtain all material regulatory consents necessary to complete such Drag-Along Sale, up to a maximum of 365 days); and (f) an estimate of the anticipated costs and expenses to be incurred to complete the Drag-Along Sale. If the Prospective Selling Members agree to consummate the proposed Drag-Along Sale, each Dragged Seller shall: (x) be bound and obligated to deposit and sell all of the Dragged Sellers’ shares in the Drag-Along Sale on the same terms and conditions as the Prospective Selling Members shall sell, and the Prospective Buyer shall buy, the Prospective Selling Members’ shares; and (y) shall receive the same form and amount of consideration per share to be received by the Prospective Selling Members. If any Dragged Seller holding shares is given an option as to the form and amount of consideration to be received, all Members will be given the same option. Unless otherwise agreed by each Member, any non-cash consideration shall be allocated among the Members pro rata based upon the aggregate amount of consideration to be received by such Member. If at the end of the 120th day after the date of delivery of the Drag-Along Sale Notice (or the 365 th day after such date of delivery, in the event a longer period is required in order to obtain one or more material regulatory approvals necessary to complete the Drag-Along Sale), the Prospective Selling Members have not completed the proposed Drag-Along Sale, the Drag-Along Sale Notice shall be null and void, each Dragged Seller shall be released from its obligation under the Drag-Along Sale Notice and it shall be necessary for a new Drag-Along Sale Notice to be furnished and the terms and provisions of these Articles separately complied with, in order to consummate such proposed Drag-Along Sale pursuant to these Articles.

ALTERATION OF SHARE CAPITAL

 

16. Power to Alter Capital

 

16.1 Subject to the Law, the Company may from time to time by Defined Majority Resolution alter the conditions of its Memorandum of Association to:

 

  (a) increase its capital by such sum divided into shares of such amounts as the resolution shall prescribe or, if the Company has shares without par value, increase its share capital by such number of shares without nominal or par value, or increase the aggregate consideration for which its shares may be issued, as it thinks expedient;

 

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  (b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;

 

  (c) convert all or any of its paid-up shares into stock, and reconvert that stock into paid-up shares of any denomination;

 

  (d) subdivide its shares or any of them into shares of an amount smaller than that fixed by the Memorandum of Association; or

 

  (e) cancel shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled or, in the case of shares without par value, diminish the number of shares into which its capital is divided.

 

16.2 For the avoidance of doubt it is declared that paragraph 16.1(b), 16.1(c) and 16.1(d) do not apply if at any time the shares of the Company have no par value.

 

16.3 Subject to the Law, the Company may from time to time by Special Resolution reduce its share capital.

 

17. Variation of Rights Attaching to Shares

If, at any time, the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the Company is being wound-up, be varied with the consent in writing of the holders of at least 66 2/3% of the then issued and outstanding shares of that class or with the sanction of a resolution passed by at least 66 2/3% of the votes cast at a separate general meeting of the holders of the shares of the class at which meeting the necessary quorum shall be two persons at least holding or representing by proxy one-third of then issued and outstanding shares of the class. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

DIVIDENDS AND CAPITALISATION

 

18. Dividends

 

18.1 The Board may, subject to these Articles and in accordance with the Law, declare a dividend to be paid to the Members, in proportion to the number of shares held by them, and such dividend may be paid in cash or wholly or partly by the distribution of specific assets (which may consist of the shares or securities of any other company).

 

18.2 Where the Board determines that a dividend shall be paid wholly or partly by the distribution of specific assets, the Board may settle all questions concerning such distribution. Without limiting the generality of the foregoing, the Board may fix the value of such specific assets and vest any such specific assets in trustees on such terms as the Board thinks fit.

 

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18.3 Dividends may be declared and paid out of profits of the Company, realised or unrealised, or from any reserve set aside from profits which the Board determines is no longer needed, or not in the same amount. Dividends may also be declared and paid out of share premium account or any other fund or account which can be authorised for this purpose in accordance with the Law.

 

18.4 No unpaid dividend shall bear interest as against the Company.

 

18.5 The Company may pay dividends in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others.

 

18.6 The Board may declare and make such other distributions (in cash or in specie) to the Members as may be lawfully made out of the assets of the Company. No unpaid distribution shall bear interest as against the Company.

 

18.7 The Board may fix any date as the record date for determining the Members entitled to receive any dividend or other distribution, but, unless so fixed, the record date shall be the date of the Directors’ resolution declaring same.

 

19. Power to Set Aside Profits

 

19.1 The Board may, before declaring a dividend, set aside out of the surplus or profits of the Company, such amount as it thinks proper as a reserve to be used to meet contingencies or for equalising dividends or for any other purpose. Pending application, such sums may be employed in the business of the Company or invested, and need not be kept separate from other assets of the Company. The Board may also, without placing the same to reserve, carry forward any profit which it decides not to distribute.

 

19.2 Subject to any direction from the Company in general meeting, the Board may on behalf of the Company exercise all the powers and options conferred on the Company by the Law in regard to the Company’s share premium account.

 

20. Method of Payment

 

20.1 Any dividend, interest, or other monies payable in cash in respect of the shares may be paid by cheque or draft sent through the post directed to the Member at such Member’s address in the Register of Members, or to such person and to such address as the holder may in writing direct.

 

20.2 In the case of joint holders of shares, any dividend, interest or other monies payable in cash in respect of shares may be paid by cheque or draft sent through the post directed to the address of the holder first named in the Register of Members, or to such person and to such address as the joint holders may in writing direct. If two or more persons are registered as joint holders of any shares any one can give an effectual receipt for any dividend paid in respect of such shares.

 

20.3 The Board may deduct from the dividends or distributions payable to any Member all monies due from such Member to the Company on account of calls or otherwise.

 

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21. Capitalisation

 

21.1 The Board may capitalise any amount for the time being standing to the credit of any of the Company’s share premium or other reserve accounts or to the credit of the profit and loss account or otherwise available for distribution by applying such amount in paying up unissued shares to be allotted as fully paid bonus shares pro rata to the Members.

 

21.2 The Board may capitalise any amount for the time being standing to the credit of a reserve account or amounts otherwise available for dividend or distribution by applying such amounts in paying up in full, partly or nil paid shares of those Members who would have been entitled to such amounts if they were distributed by way of dividend or distribution.

MEETINGS OF MEMBERS

 

22. Annual General Meetings

The Company shall in each calendar year hold a general meeting as its annual general meeting; provided that the first annual general meeting shall not be held prior to January 17, 2014 . The annual general meeting of the Company may be held at such time and place as the Chairman of the Company (if there is one) (the “Chairman”) or any two Directors or any Director and the Secretary or the Board shall appoint.

 

23. Extraordinary General Meetings

 

23.1 General meetings other than annual general meetings shall be called extraordinary general meetings.

 

23.2 The Chairman or any two Directors or any Director and the Secretary or the Board may convene an extraordinary general meeting whenever in their judgment such a meeting is necessary.

 

24. Requisitioned General Meetings

 

24.1 At any time after January 17, 2014, the Board shall, on the requisition of Members holding at the date of the deposit of the requisition not less than 10% of the shares issued and outstanding as at the date of the deposit that carry the right to vote at general meetings, forthwith proceed to convene an extraordinary general meeting. To be effective the requisition shall state the objects of the meeting, shall be in writing, signed by the requisitionists, and shall be deposited at the registered office. The requisition may consist of several documents in like form each signed by one or more requisitionists.

 

24.2 If the Board does not, within twenty-one days from the date of the requisition, duly proceed to call an extraordinary general meeting, the requisitionists, or any of them representing more than one half of the total voting rights of all of the requisitionists, may themselves convene an extraordinary general meeting; but any meeting so called shall not be held more than ninety days after the requisition. An extraordinary general meeting called by requisitionists shall be called in the same manner, as nearly as possible, as that in which general meetings are to be called by the Board.

 

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25. Notice

 

25.1 At least five days’ notice of an annual general meeting shall be given to each Member entitled to attend and vote thereat, stating the date, place and time at which the meeting is to be held and if different, the record date for determining Members entitled to attend and vote at the general meeting, and, as far as practicable, the other business to be conducted at the meeting.

 

25.2 At least five days’ notice of an extraordinary general meeting shall be given to each Member entitled to attend and vote thereat, stating the date, time, place and the general nature of the business to be considered at the meeting in sufficient detail so as to permit the Members to make an informed decision thereon.

 

25.3 The Board may fix any date as the record date for determining the Members entitled to receive notice of and to vote at any general meeting of the Company but, unless so fixed, as regards the entitlement to receive notice of a meeting or notice of any other matter, the record date shall be the date of despatch of the notice and, as regards the entitlement to vote at a meeting, and any adjournment thereof, the record date shall be the date of the original meeting.

 

25.4 A general meeting shall, notwithstanding that it is called on shorter notice than that specified in these Articles, be deemed to have been properly called if it is so agreed by (i) all the Members entitled to attend and vote thereat in the case of an annual general meeting; and (ii) in the case of an extraordinary general meeting, by 66 2/3 percent of the Members entitled to attend and vote thereat.

 

25.5 The accidental omission to give notice of a general meeting to, or the non-receipt of a notice of a general meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting.

 

26. Giving Notice and Access

 

26.1 A notice may be given by the Company to a Member:

 

  (a) by delivering it to such Member in person, in which case the notice shall be deemed to have been served upon such delivery; or

 

  (b) by sending it by post to such Member’s address in the Register of Members, in which case the notice shall be deemed to have been served seven days after the date on which it is deposited, with postage prepaid, in the mail; or

 

  (c) by sending it by courier to such Member’s address in the Register of Members, in which case the notice shall be deemed to have been served two days after the date on which it is deposited, with courier fees paid, with the courier service; or

 

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  (d) by transmitting it by electronic means (including facsimile and electronic mail, but not telephone) in accordance with such directions as may be given by such Member to the Company for such purpose, in which case the notice shall be deemed to have been served at the time that it would in the ordinary course be transmitted; or

 

  (e) by publication of an electronic record of it on a website and notification of such publication (which shall include the address of the website, the place on the website where the document may be found, and how the document may be accessed on the website), such notification being given by any of the methods set out in paragraphs (a) through (d) hereof, in which case the notice shall be deemed to have been served at the time when the instructions for access and the posting on the website are complete.

 

26.2 Any notice required to be given to a Member shall, with respect to any shares held jointly by two or more persons, be given to whichever of such persons is named first in the Register of Members and notice so given shall be sufficient notice to all the holders of such shares.

 

26.3 In proving service under paragraphs 26.1(b), (c) and (d), it shall be sufficient to prove that the notice was properly addressed and prepaid, if posted or sent by courier, and the time when it was posted, deposited with the courier, or transmitted by electronic means.

 

27. Postponement of General Meeting

The Board may postpone any general meeting called in accordance with these Articles provided that notice of postponement is given to all Members before the time for such meeting. Fresh notice of the date, time and place for the postponed meeting shall be given to each Member in accordance with these Articles.

 

28. Electronic Participation in Meetings

Members may participate in any general meeting by such telephonic, electronic or other communication facilities or means as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting.

 

29. Quorum at General Meetings

 

29.1 At any general meeting two or more persons present in person and representing in person or by proxy in excess of 33 1/3% of the issued and outstanding shares entitled to vote at a general meeting throughout the meeting shall form a quorum for the transaction of business, provided that if the Company shall at any time have only one Member, one Member present in person or by proxy shall form a quorum for the transaction of business at any general meeting held during such time.

 

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29.2 If within half an hour from the time appointed for the meeting a quorum is not present, then, in the case of a meeting convened on a requisition, the meeting shall be deemed cancelled and, in any other case, the meeting shall stand adjourned to the same day one week later, at the same time and place or to such other day, time or place as the Board may determine. Unless the meeting is adjourned to a specific date, time and place announced at the meeting being adjourned, fresh notice of the resumption of the meeting shall be given to each Member entitled to attend and vote thereat in accordance with these Articles.

 

30. Chairman to Preside

Unless otherwise agreed by a majority of those attending and entitled to vote thereat, the chairman of the Company, if there be one, shall act as chairman at all meetings of the Members at which such person is present. In his absence or if there is not one appointed, the chairman of the meeting shall be appointed or elected by those present at the meeting and entitled to vote.

 

31. Voting on Resolutions

 

31.1 Subject to the Law and these Articles, any question proposed for the consideration of the Members at any general meeting shall be decided by the affirmative votes of a majority of the votes cast in accordance with these Articles and in the case of an equality of votes the resolution shall fail.

 

31.2 No Member shall be entitled to vote at a general meeting unless such Member has paid all the calls on all shares held by such Member.

 

31.3 At any general meeting a resolution (other than a Special Resolution or a Defined Majority Resolution) put to the vote of the meeting shall, in the first instance, be voted upon by a show of hands and, subject to any rights or restrictions for the time being lawfully attached to any class of shares and subject to these Articles, every Member present in person and every person holding a valid proxy at such meeting shall be entitled to one vote and shall cast such vote by raising his hand. Any Special Resolution or Defined Majority Resolution shall be conducted by way of poll pursuant to Article 33 of these Articles.

 

31.4 At any general meeting if an amendment is proposed to any resolution under consideration and the chairman of the meeting rules on whether or not the proposed amendment is out of order, the proceedings on the substantive resolution shall not be invalidated by any error in such ruling.

 

31.5 At any general meeting a declaration by the chairman of the meeting that a question proposed for consideration has, on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in a book containing the minutes of the proceedings of the Company shall, subject to these Articles, be conclusive evidence of that fact.

 

32. Special Approval Rights

 

32.1 Any decision or action taken by the Board with respect to any of the following matters shall be made or taken only when approved by Defined Majority Resolution:

 

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  (a) any reorganization, recapitalisation, amalgamation, merger or consolidation of or involving the Company, including any conversion (by merger or otherwise) of the Company from an exempted company incorporated in the Cayman Islands with limited liability to any other type of entity;

 

  (b) the issuance of (i) any Securities having a preference over the shares issued upon incorporation of the Company, or (ii) equity incentive awards to directors, officers or employees, which awards represent in the aggregate in excess of 10.0% of the shares outstanding at such time;

 

  (c) the sale of all or substantially all of the Company’s assets (on a consolidated basis);

 

  (d) any material change in the nature of the Company’s business, consisting of the ownership and management of forest plantation trees, the sale of standing timber, wood logs and wood products, and the complementary manufacturing of downstream engineered-wood products, and all activities ancillary thereto;

 

  (e) any affiliated or related party transactions (other than transactions between the Company and its wholly-owned subsidiaries); and

 

  (f) any voluntary liquidation, dissolution or winding up of the Company or any of its material subsidiaries (other than in connection with an internal reorganization).

 

33. Power to Demand a Vote on a Poll

 

33.1 Notwithstanding the foregoing, a poll may be demanded by the chairman of the meeting or at least one Member.

 

33.2 Where a poll is demanded, subject to any rights or restrictions for the time being lawfully attached to any class of shares, every person present at such meeting shall have one vote for each share of which such person is the holder or for which such person holds a proxy and such vote shall be counted by ballot as described herein, or in the case of a general meeting at which one or more Members are present by telephone, electronic or other communication facilities or means, in such manner as the chairman of the meeting may direct and the result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded and shall replace any previous resolution upon the same matter which has been the subject of a show of hands. A person entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.

 

33.3 A poll demanded for the purpose of electing a chairman of the meeting or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken at such time and in such manner during such meeting as the chairman of the meeting may direct. Any business other than that upon which a poll has been demanded may be conducted pending the taking of the poll.

 

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33.4 Where a vote is taken by poll, each person physically present and entitled to vote shall be furnished with a ballot paper on which such person shall record his vote in such manner as shall be determined at the meeting having regard to the nature of the question on which the vote is taken, and each ballot paper shall be signed or initialled or otherwise marked so as to identify the voter and the registered holder in the case of a proxy. Each person present by telephone, electronic or other communication facilities or means shall cast his vote in such manner as the chairman of the meeting shall direct. At the conclusion of the poll, the ballot papers and votes cast in accordance with such directions shall be examined and counted by a committee of not less than two Members or proxy holders appointed by the chairman of the meeting for the purpose and the result of the poll shall be declared by the chairman of the meeting.

 

34. Voting by Joint Holders of Shares

In the case of joint holders, the vote of the senior who tenders a vote (whether in person or by proxy) shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members.

 

35. Instrument of Proxy

 

35.1 An instrument appointing a proxy shall be in writing or transmitted by electronic mail in substantially the following form or such other form as the chairman of the meeting shall accept:

Proxy

Emerald Plantation Holdings Limited (the “Company”)

I/We, [insert names here] , being a Member of the Company with [number] shares, HEREBY APPOINT [name] of [address] or failing him, [name] of [address] to be my/our proxy to vote for me/us at the meeting of the Members to be held on [date] and at any adjournment thereof. [Any restrictions on voting to be inserted here] .

 

Signed this [date]   

 

  

Member(s)

  

 

35.2 The instrument of proxy shall be signed or, in the case of a transmission by electronic mail, electronically signed in a manner acceptable to the chairman of the meeting, by the appointor or by the appointor’s attorney duly authorised in writing, or if the appointor is a corporation, either under its seal or signed or, in the case of a transmission by electronic mail, electronically signed in a manner acceptable to the chairman of the meeting, by a duly authorised officer or attorney.

 

35.3 A Member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf in respect of different shares.

 

35.4 The decision of the chairman of any general meeting as to the validity of any appointment of a proxy shall be final.

 

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36. Representation of Corporate Member

 

36.1 A corporation or other similar entity which is a Member may, by written instrument, authorise such person or persons as it thinks fit to act as its representative at any meeting and any person so authorised shall be entitled to exercise the same powers on behalf of the corporation which such person represents as that corporation could exercise if it were an individual Member, and that Member shall be deemed to be present in person at any such meeting attended by its authorised representative or representatives.

 

36.2 Notwithstanding the foregoing, the chairman of the meeting may accept such assurances as he thinks fit as to the right of any person to attend and vote at general meetings on behalf of a corporation which is a Member.

 

37. Adjournment of General Meeting

The chairman of a general meeting may, with the consent of the Members at any general meeting at which a quorum is present, and shall if so directed by the meeting, adjourn the meeting. Unless the meeting is adjourned to a specific date, place and time announced at the meeting being adjourned, fresh notice of the date, place and time for the resumption of the adjourned meeting shall be given to each Member entitled to attend and vote thereat, in accordance with these Articles.

 

38. Written Resolutions

 

38.1 Subject to these Articles, anything which may be done by resolution of the Company in general meeting or by resolution of a meeting of any class of the Members may be done without a meeting by written resolution in accordance with this Article.

 

38.2 A written resolution (other than a written Defined Majority Resolution approving an action that does not require approval by special resolution under the Law) is passed when it is signed by (or in the case of a Member that is a corporation, on behalf of) all the Members, or all the Members of the relevant class thereof, entitled to vote thereon.

 

38.3 A resolution in writing made in accordance with this Article is as valid as if it had been passed by the Company in general meeting or by a meeting of the relevant class of Members, as the case may be, and any reference in any Article to a meeting at which a resolution is passed or to Members voting in favour of a resolution shall be construed accordingly.

 

38.4 A resolution in writing made in accordance with this Article shall constitute minutes for the purposes of the Law.

 

38.5 For the purposes of this Article, the date of the resolution is the date when the resolution is signed by (or in the case of a Member that is a corporation, on behalf of) the last Member to sign and any reference in any Article to the date of passing of a resolution is, in relation to a resolution made in accordance with this Article, a reference to such date.

 

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39. Directors Attendance at General Meetings

The Directors shall be entitled to receive notice of, attend and be heard at any general meeting.

DIRECTORS AND OFFICERS

 

40. Election and Appointment of Directors

 

40.1 The Directors shall be elected or appointed in writing in the first place by the subscribers to the Memorandum of Association or by a majority of them. There shall be no shareholding qualification for Directors.

 

40.2 The Board may from time to time appoint any person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors, subject to any upper limit on the number of Directors prescribed pursuant to these Articles and the appointment rights of 10%+ Members set out in these Articles.

 

40.3 Subject to these Articles, the Members may from time to time by ordinary resolution appoint any person to be a Director.

 

40.4 At and after the first annual general meeting of Members, each 10%+ Member shall be entitled to appoint one Director (each such Director, a “ 10% Designee ”) to the Board. Upon a 10% Designee vacating or otherwise being removed from office by the 10%+ Member that appointed him or her, the 10%+ Member shall be entitled to appoint a replacement 10% Designee.

 

40.5 The Board shall, following receipt by the Company of notice from the 10%+ Member that appointed such 10% Designee of its entitlement to appoint a 10% Designee to the Board so in accordance with these Articles, cause to be entered the name of the 10% Designee to the Register of Directors and Officers no more than three days following receipt of such notice.

 

41. Number of Directors

The Board shall consist of not less than: (i) prior to the first annual general meeting of Members, one Director; or (ii) at and following the first annual general meeting of Members, five Directors, or such number in excess thereof as the Board may determine, up to a maximum of 10. Any increase in the size of the Board to more than five Directors (other than by reason of the appointment of a new 10% Designee) shall require a Special Resolution.

 

42. Term of Office of Directors

 

42.1 An appointment of a Director may be on terms that the Director shall automatically retire from office (unless he has sooner vacated office) at the next or a subsequent annual general meeting or upon any specified event or after any specified period; but no such term shall be implied in the absence of express provision.

 

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42.2 A 10% Designee shall serve as a Director until he or she vacates office or his or her earlier removal by the 10%+ Member that appointed him or her to the Board or as otherwise provided in these Articles.

 

43. Alternate Directors

 

43.1 Unless a 10%+ Member otherwise resolves, a 10% Designee appointed by such 10%+ Member may appoint a person or persons (other than another existing Director or another Alternate Director) to act as a Director in the alternative to himself by notice deposited with the Secretary.

 

43.2 Any person elected or appointed pursuant to this Article shall have all the rights and powers of the Director or Directors for whom such person is elected or appointed in the alternative, provided that such person shall not be counted more than once in determining whether or not a quorum is present.

 

43.3 An Alternate Director shall be entitled to receive notice of all Board meetings and to attend and vote at any such meeting at which a 10% Designee for whom such Alternate 10% Designee was appointed in the alternative is not personally present and generally to perform at such meeting all the functions of such Director for whom such Alternate Director was appointed.

 

43.4 An Alternate Director’s office shall terminate:

 

  (a) on the occurrence in relation to the Alternate Director of any event which, if it occurred in relation to his appointor, would result in the termination of the appointor’s directorship; or

 

  (b) when the Alternate Director’s appointor revokes the appointment by notice to the Company in writing specifying when the appointment is to terminate; or

 

  (c) if the Alternate Director’s appointor ceases for any reason to be a Director.

 

43.5 Unless the Board determines otherwise, an Alternate Director may also represent his appointor at meetings of any committee of the Board on which his appointor serves; and the provisions of this Article shall apply equally to such committee meetings as to Board meetings.

 

43.6 Save as provided in these Articles an Alternate Director shall not, as such, have any power to act as a Director or to represent his appointor and shall not be deemed to be a Director for the purposes of these Articles.

 

44. Removal of Directors

 

44.1 Prior to January 17, 2014 , the Company may from time to time by a Special Resolution remove any Director from office, whether or not appointing another in his stead. Thereafter, the Company may from time to time by ordinary resolution remove any Director (other than a 10% Designee) from office, whether or not appointing another in his stead.

 

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44.2 A 10%+ Member shall be entitled to remove any 10% Designee appointed by it at any time by delivery of written notice to the Company and such 10% Designee.

 

44.1 In the event a 10%+ Member ceases to be a 10%+ Member, then: the 10% Designee appointed by such 10%+ Member shall immediately resign and such Member shall cease to have any rights in respect of appointment under Article 40. In the event that such 10% Designee does not immediately resign from the Board, the Board may remove such 10% Designee.

 

45. Vacancy in the Office of Director

The office of Director shall be vacated if the Director:

 

  (a) is removed from office pursuant to these Articles;

 

  (b) dies or becomes bankrupt, or makes any arrangement or composition with his creditors generally;

 

  (c) is or becomes of unsound mind or an order for his detention is made under the Mental Health Law of the Cayman Islands or any analogous law of a jurisdiction outside the Cayman Islands, or dies; or

 

  (d) resigns his office by notice to the Company.

46. Remuneration of Directors

The remuneration (if any) of the Directors shall, subject to any direction that may be given by the Company in general meeting, be determined by the Board as it may from time to time determine and shall be deemed to accrue from day to day. The Directors may also be paid all travel, hotel and other expenses properly incurred by them in attending and returning from Board meetings, any committee appointed by the Board, general meetings, or in connection with the business of the Company or their duties as Directors generally, all as may be determined by the Board from time to time.

 

47. Defect in Appointment

All acts done in good faith by the Board, any Director, a member of a committee appointed by the Board, any person to whom the Board may have delegated any of its powers, or any person acting as a Director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or person acting as aforesaid, or that he was, or any of them were, disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director or act in the relevant capacity.

 

- 25 -

48. Directors to Manage Business

The Board shall manage and conduct, or supervise the management and conduct of, the business of the Company. In managing the business of the Company, the Board may exercise all such powers of the Company as are not, by the Law or by these Articles, required to be exercised by the Company in general meeting subject, nevertheless, to these Articles and the provisions of the Law.

 

49. Powers of the Board of Directors

The Board may:

 

  (a) appoint, suspend, or remove any manager, secretary, clerk, agent or employee of the Company and may fix their remuneration and determine their duties;

 

  (b) exercise all the powers of the Company to borrow money and to mortgage or charge or otherwise grant a security interest in its undertaking, property and uncalled capital, or any part thereof, and may issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of the Company or any third party;

 

  (c) appoint one or more Directors to the office of managing director or chief executive officer of the Company, who shall, subject to the control of the Board, supervise and administer all of the general business and affairs of the Company;

 

  (d) appoint a person to act as manager of the Company’s day-to-day business and may entrust to and confer upon such manager such powers and duties as it deems appropriate for the transaction or conduct of such business;

 

  (e) by power of attorney, appoint any company, firm, person or body of persons, whether nominated directly or indirectly by the Board, to be an attorney of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board) and for such period and subject to such conditions as it may think fit and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Board may think fit and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions so vested in the attorney;

 

  (f) procure that the Company pays all expenses incurred in promoting and incorporating the Company;

 

  (g) delegate any of its powers (including the power to sub-delegate) to a committee of one or more persons appointed by the Board and every such committee shall conform to such directions as the Board shall impose on them. Subject to any directions or regulations made by the Board for this purpose, the meetings and proceedings of any such committee shall be governed by the provisions of these Articles regulating the meetings and proceedings of the Board, including provisions for written resolutions;

 

- 26 -

  (h) delegate any of its powers (including the power to sub-delegate) to any person on such terms and in such manner as the Board may see fit;

 

  (i) present any petition and make any application in connection with the liquidation or reorganisation of the Company;

 

  (j) in connection with the issue of any share, pay such commission and brokerage as may be permitted by law; and

 

  (k) authorise any company, firm, person or body of persons to act on behalf of the Company for any specific purpose and in connection therewith to execute any deed, agreement, document or instrument on behalf of the Company.

 

50. Right to Share Information

Subject to a 10% Designee’s obligations and duties to the Company under the Law and otherwise in his capacity as a Director, a 10% Designee may share with the 10%+ Member that appointed him to the Board information provided to such 10% Designee in his capacity as a Director .

 

51. Register of Directors and Officers

 

51.1 The Board shall cause to be kept in one or more books at the registered office of the Company a Register of Directors and Officers in accordance with the Law and shall enter therein the following particulars with respect to each Director and Officer:

 

  (a) first name and surname; and

 

  (b) address.

 

51.2 The Board shall, within the period of thirty days from the occurrence of:-

 

  (a) any change among its Directors and Officers; or

 

  (b) any change in the particulars contained in the Register of Directors and Officers,

cause to be entered on the Register of Directors and Officers the particulars of such change and the date on which such change occurred, and shall notify the Registrar of Companies of any such change that takes place.

 

52. Officers

The Officers shall consist of a Secretary and such additional Officers as the Board may determine all of whom shall be deemed to be Officers for the purposes of these Articles.

 

53. Appointment of Officers

The Secretary (and additional Officers, if any) shall be appointed by the Board from time to time.

 

- 27 -

54. Duties of Officers

The Officers shall have such powers and perform such duties in the management, business and affairs of the Company as may be delegated to them by the Board from time to time.

 

55. Remuneration of Officers

The Officers shall receive such remuneration as the Board may determine.

 

56. Conflicts of Interest

 

56.1 Any Director, or any Director’s firm, partner or any company with whom any Director is associated, may act in any capacity for, be employed by or render services to the Company on such terms, including with respect to remuneration, as may be agreed between the parties. Nothing herein contained shall authorise a Director or a Director’s firm, partner or company to act as Auditor to the Company.

 

56.2 A Director who is directly or indirectly interested in a contract or proposed contract with the Company (an “Interested Director”) shall declare the nature of such interest.

 

56.3 An Interested Director who has complied with the requirements of the foregoing Article may:

 

  (a) vote in respect of such contract or proposed contract; and/or

 

  (b) be counted in the quorum for the meeting at which the contract or proposed contract is to be voted on,

and no such contract or proposed contract shall be void or voidable by reason only that the Interested Director voted on it or was counted in the quorum of the relevant meeting and the Interested Director shall not be liable to account to the Company for any profit realised thereby.

 

57. Indemnification and Exculpation of Directors and Officers

 

57.1 The Directors, Secretary and other Officers (such term to include any person appointed to any committee by the Board) acting in relation to any of the affairs of the Company or any subsidiary thereof, and the liquidator or trustees (if any) acting in relation to any of the affairs of the Company or any subsidiary thereof and every one of them (whether for the time being or formerly) and their heirs, executors, administrators and personal representatives (each an “indemnified party”) shall be indemnified and secured harmless out of the assets of the Company from and against all actions, costs, charges, losses, damages and expenses which they or any of them shall or may incur or sustain by or by reason of any act done, concurred in or omitted in or about the execution of their duty, or supposed duty, or in their respective offices or trusts, and no indemnified party shall be answerable for the acts, receipts, neglects or defaults of the others of them or for joining in any receipts for the sake of conformity, or for any bankers or other persons with whom any monies or effects belonging to the Company shall or may be lodged or deposited for safe custody, or for insufficiency or deficiency of any security upon which any monies of

 

- 28 -

or belonging to the Company shall be placed out on or invested, or for any other loss, misfortune or damage which may happen in the execution of their respective offices or trusts, or in relation thereto, PROVIDED THAT this indemnity shall not extend to any matter in respect of any fraud or dishonesty in relation to the Company which may attach to any of the indemnified parties. Each Member agrees to waive any claim or right of action such Member might have, whether individually or by or in the right of the Company, against any Director or Officer on account of any action taken by such Director or Officer, or the failure of such Director or Officer to take any action in the performance of his duties with or for the Company or any subsidiary thereof, PROVIDED THAT such waiver shall not extend to any matter in respect of any fraud or dishonesty in relation to the Company which may attach to such Director or Officer.

 

57.2 The Company may purchase and maintain insurance for the benefit of any Director or Officer against any liability incurred by him in his capacity as a Director or Officer or indemnifying such Director or Officer in respect of any loss arising or liability attaching to him by virtue of any rule of law in respect of any negligence, default, breach of duty or breach of trust of which the Director or Officer may be guilty in relation to the Company or any subsidiary thereof.

MEETINGS OF THE BOARD OF DIRECTORS

 

58. Board Meetings

The Board may meet for the transaction of business, adjourn and otherwise regulate its meetings as it sees fit. Each Director shall be entitled to one vote. A resolution put to the vote at a Board meeting shall be carried by the affirmative votes of a majority of the votes cast and in the case of an equality of votes the resolution shall fail.

 

59. Notice of Board Meetings

A Director may, and the Secretary on the requisition of a Director shall, summon a Board meeting by notice to each Director: (a) not less than 5 days before the time when the meeting is to be held if the notice is mailed; or (b) not less than 24 hours before the time the meeting is to be held if the notice is given personally or is delivered or is sent by any means of transmitted or recorded communication or as an electronic document to such Director’s last known address or in accordance with any other instructions given by such Director to the Company for this purpose.

 

60. Electronic Participation in Meetings

Directors may participate in any meeting by such telephonic, electronic or other communication facilities or means as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting.

 

- 29 -

61. Representation of Director

 

61.1 A Director which is a corporation may, by written instrument, authorise such person or persons as it thinks fit to act as its representative at any meeting and any person so authorised shall be entitled to exercise the same powers on behalf of the corporation which such person represents as that corporation could exercise if it were an individual Director, and that Director shall be deemed to be present in person at any such meeting attended by its authorised representative or representatives.

 

61.2 Notwithstanding the foregoing, the chairman of the meeting may accept such assurances as he thinks fit as to the right of any person to attend and vote at Board meetings on behalf of a corporation which is a Director.

 

62. Quorum at Board Meetings

The quorum necessary for the transaction of business at a Board meeting shall be a majority of the Directors.

 

63. Board to Continue in the Event of Vacancy

The Board may act notwithstanding any vacancy in its number.

 

64. Chairman to Preside

Unless otherwise agreed by a majority of the Directors attending, the Chairman, if there be one, shall act as chairman at all Board meetings at which such person is present. In his absence a chairman of the meeting shall be appointed or elected by the Directors present at the meeting.

 

65. Written Resolutions

 

65.1 Anything which may be done by resolution of the Directors may, without a meeting and without any previous notice being required, be done by written resolution in accordance with this Article. For the purposes of this Article only, “the Directors” shall not include an Alternate Director.

 

65.2 A written resolution may be signed by (or in the case of a Director that is a corporation, on behalf of) all the Directors in as many counterparts as may be necessary.

 

65.3 A written resolution made in accordance with this Article is as valid as if it had been passed by the Directors in a directors’ meeting, and any reference in any Article to a meeting at which a resolution is passed or to Directors voting in favour of a resolution shall be construed accordingly.

 

65.4 A resolution in writing made in accordance with this Article shall constitute minutes for the purposes of the Law.

 

65.5 For the purposes of this Article, the date of the resolution is the date when the resolution is signed by (or in the case of a Director that is a corporation, on behalf of) the last Director to sign and any reference in any Article to the date of passing of a resolution is, in relation to a resolution made in accordance with this Article, a reference to such date.

 

- 30 -

66. Validity of Prior Acts of the Board

No regulation or alteration to these Articles made by the Company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation or alteration had not been made.

CORPORATE RECORDS

 

67. Minutes

The Board shall cause minutes to be duly entered in books provided for the purpose:

 

  (a) of all elections and appointments of Officers;

 

  (b) of the names of the Directors present at each Board meeting and of any committee appointed by the Board; and

 

  (c) of all resolutions and proceedings of general meetings of the Members, Board meetings and meetings of committees appointed by the Board.

 

68. Register of Mortgages and Charges

 

68.1 The Board shall cause to be kept the Register of Mortgages and Charges required by the Law.

 

68.2 The Register of Mortgages and Charges shall be open to inspection in accordance with the Law, at the registered office of the Company on every business day in the Cayman Islands, subject to such reasonable restrictions as the Board may impose, so that not less than two hours in each such business day be allowed for inspection.

 

69. Form and Use of Seal

 

69.1 The Company may adopt a seal, which shall bear the name of the Company in legible characters, and which may, at the discretion of the Board, be followed with or preceded by its dual foreign name or translated name (if any), in such form as the Board may determine. The Board may adopt one or more duplicate seals for use in or outside Cayman and, if the Board thinks fit, a duplicate Seal may bear on its face the name of the country, territory, district or place where it is to be issued.

 

69.2 The Seal (if any) shall only be used by the authority of the Board or of a committee of the Board authorised by the Board in that behalf and, until otherwise determined by the Board, the Seal shall be affixed in the presence of a Director or the Secretary or an assistant secretary or some other person authorised for this purpose by the Board or the committee of the Board.

 

69.3 Notwithstanding the foregoing, the Seal (if any) may without further authority be affixed by way of authentication to any document required to be filed with the Registrar of Companies in the Cayman Islands, and may be so affixed by any Director, Secretary or assistant secretary of the Company or any other person or institution having authority to file the document as aforesaid.

 

- 31 -

ACCOUNTS

 

70. Books of Account

 

70.1 The Board shall cause to be kept proper books of account including, where applicable, material underlying documentation including contracts and invoices, and with respect to:-

 

  (a) all sums of money received and expended by the Company and the matters in respect of which the receipt and expenditure takes place;

 

  (b) all sales and purchases of goods by the Company; and

 

  (c) all assets and liabilities of the Company.

 

70.2 Such books of account shall be kept and proper books of account shall not be deemed to be kept with respect to the matters aforesaid if there are not kept, at such place as the Board thinks fit, such books as are necessary to give a true and fair view of the state of the Company’s affairs and to explain its transactions.

 

70.3 Such books of account shall be retained for a minimum period of five years from the date on which they are prepared.

 

70.4 No Member (not being a Director) shall have any right of inspecting any account or book or document of the Company.

 

71. Financial Year End

The financial year end of the Company shall be 31st December in each year but, subject to any direction of the Company in general meeting, the Board may from time to time prescribe some other period to be the financial year, provided that the Board may not without the sanction of an ordinary resolution prescribe or allow any financial year longer than eighteen months.

 

72. Financial Reporting

The Board will cause to be delivered to each Member: (i) as soon as available, but not later than 180 days after the end of each financial year of the Company, a copy of the consolidated balance sheet of the Company as of the end of such financial year and the related consolidated statements of income, changes in equity and cash flows for such financial year, setting forth in each case in comparative form the figures for the previous year, all in reasonable detail and accompanied by a management summary and analysis of the operations for the Company for such financial year; and (ii) as soon as available, but not later than 90 days after the end of each financial half-year of the Company, a copy of the consolidated balance sheet of the Company as of the end of such financial half-year and the related consolidated statements of income, changes in equity and cash flows for such financial half-year, and accompanied by a management summary and analysis of the operations for the Company for such financial half-year.

 

- 32 -

73. Member Tax Information Rights

For any taxable year, at the request of any Member, the Company will monitor its status to determine whether it believes it is classified as a passive foreign investment company (“PFIC”) or controlled foreign corporation (“CFC”) for U.S. federal income tax purposes. The Company agrees to take commercially reasonable efforts to provide each requesting Member with a PFIC Annual Information Statement that will permit the requesting Member (or a person having an interest in such Member) to timely make a qualified electing fund election with respect to the Company and each of its subsidiaries for such year (including on a protective basis). The Company agrees to take commercially reasonable efforts to timely provide information returns, documentation, certifications, statements, schedules and other information relating to the Company and its subsidiaries reasonably requested by any Member that is required for such Member (or a person having an interest in such Member) to comply with applicable tax rules.

AUDITS

 

74. Audit

Nothing in these Articles shall be construed as making it obligatory to appoint Auditors.

 

75. Appointment of Auditors

 

75.1 The Company may in general meeting appoint Auditors to hold office for such period as the Members may determine.

 

75.2 Whenever there are no Auditors appointed as aforesaid the Board may appoint Auditors to hold office for such period as the Board may determine or earlier removal from office by the Company in general meeting.

 

75.3 The Auditor may be a Member but no Director, Officer or employee of the Company shall, during his continuance in office, be eligible to act as an Auditor of the Company.

 

76. Remuneration of Auditors

 

76.1 The remuneration of an Auditor appointed by the Members shall be fixed by the Company in general meeting.

 

76.2 The remuneration of an Auditor appointed by the Board in accordance with these Articles shall be fixed by the Board.

 

77. Duties of Auditor

The Auditor shall make a report to the Members on the accounts examined by him and on every set of financial statements laid before the Company in general meeting, or circulated to Members, pursuant to this Article during the Auditor’s tenure of office.

 

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78. Access to Records

 

78.1 The Auditor shall at all reasonable times have access to the Company’s books, accounts and vouchers and shall be entitled to require from the Company’s Directors and Officers such information and explanations as the Auditor thinks necessary for the performance of the Auditor’s duties and, if the Auditor fails to obtain all the information and explanations which, to the best of his knowledge and belief, are necessary for the purposes of their audit, he shall state that fact in his report to the Members.

 

78.2 The Auditor shall be entitled to attend any general meeting at which any financial statements which have been examined or reported on by him are to be laid before the Company and to make any statement or explanation he may desire with respect to the financial statements.

VOLUNTARY WINDING-UP AND DISSOLUTION

 

79. Winding-Up

 

79.1 The Company may be voluntarily wound-up by a Special Resolution.

 

79.2 If the Company shall be wound up the liquidator may, with the sanction of a Special Resolution, divide amongst the Members in specie or in kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose, set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in the trustees upon such trusts for the benefit of the Members as the liquidator shall think fit, but so that no Member shall be compelled to accept any shares or other securities or assets whereon there is any liability.

CHANGES TO CONSTITUTION

 

80. Changes to Articles

Subject to the Law and to the conditions contained in its memorandum, the Company may, by Special Resolution, alter or add to its Articles.

 

81. Changes to the Memorandum of Association

Subject to the Law and these Articles, the Company may from time to time by Special Resolution alter its Memorandum of Association with respect to any objects, powers or other matters specified therein.

 

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82. Discontinuance

Subject to Article 32.1, the Board may exercise all the powers of the Company to transfer by way of continuation the Company to a named country or jurisdiction outside the Cayman Islands pursuant to the Law.

 

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Exhibit T3C

EMERALD PLANTATION HOLDINGS LIMITED

and

COMPUTERSHARE TRUST COMPANY, N.A.

as Trustee and as Security Trustee

and

The entities listed on Schedule I hereto

as Initial Subsidiary Guarantors

 

 

INDENTURE

Dated as of January 17, 2013

 

 

US$300,000,000

6.00% Guaranteed Senior Notes

Due 2020

TABLE OF CONTENTS

 

ARTICLE 1

 

DEFINITIONS AND INCORPORATION BY REFERENCE

     1   

Section 1.01

 

Definitions.

     1   

Section 1.02

 

Incorporation by Reference of Trust Indenture Act.

     25   

Section 1.03

 

Rules of Construction.

     26   

ARTICLE 2

 

ISSUE, EXECUTION, FORM AND REGISTRATION OF NOTES

     26   

Section 2.01

 

Authentication And Delivery of Notes and Subsidiary Guarantees.

     26   

Section 2.02

 

Execution of Notes and Subsidiary Guarantees.

     26   

Section 2.03

 

Certificate of Authentication.

     27   

Section 2.04

 

Form, Denomination and Date of Notes; Interest Payments.

     27   

Section 2.05

 

Registration, Transfer and Exchange.

     29   

Section 2.06

 

Book-entry Provisions For Global Notes.

     31   

Section 2.07

 

Holder Lists.

     32   

Section 2.08

 

Special Transfer Provisions.

     32   

Section 2.09

 

Mutilated, Defaced, Destroyed, Stolen and Lost Notes.

     33   

Section 2.10

 

Further Issues.

     34   

Section 2.11

 

Cancellation of Notes; Disposition Thereof.

     35   

Section 2.12

 

CUSIP Numbers.

     35   

ARTICLE 3

 

REDEMPTION

     35   

Section 3.01

 

Taxation Redemption.

     35   

Section 3.02

 

Optional Redemption.

     36   

Section 3.03

 

Method and Effect of Redemption.

     37   

Section 3.04

 

Mandatory Redemption of Notes upon an Entire Sale Transaction.

     38   

ARTICLE 4

 

COVENANTS

     39   

Section 4.01

 

Payment of Notes.

     39   

Section 4.02

 

Maintenance of Office or Agency.

     41   

Section 4.03

 

Governmental Approvals and Licenses; Compliance with Law.

     41   

Section 4.04

 

Payment of Taxes and other Claims.

     42   

Section 4.05

 

Maintenance of Properties and Insurance.

     42   

Section 4.06

 

Limitation On Indebtedness And Disqualified Or Preferred Stock.

     42   

Section 4.07

 

Limitation on Restricted Payments.

     45   

Section 4.08

 

Limitation on Liens.

     48   

Section 4.09

 

Limitation on Sale and Leaseback Transactions.

     48   

Section 4.10

 

Limitation on Dividend and other Payment Restrictions Affecting Restricted Subsidiaries.

     48   

Section 4.11

 

Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries.

     50   

Section 4.12

 

Limitation on Issuances of Guarantees by Restricted Subsidiaries.

     50   

Section 4.13

 

Repurchase of Notes Upon a Change of Control Triggering Event.

     51   

Section 4.14

 

Restriction on an Entire Sale Transaction.

     51   

Section 4.15

 

Limitation on Asset Sales.

     51   

Section 4.16

 

Limitation on Transactions with Shareholders and Affiliates.

     53   

Section 4.17

 

Limitation on the Company’s Business Activities.

     54   

Section 4.18

 

Designation of Restricted and Unrestricted Subsidiaries.

     54   

 

(i)

Section 4.19

 

Provision of Financial Statements, Reports and Compliance Certificate.

     56   

Section 4.20

 

Additional Amounts.

     57   

Section 4.21

 

Permitted Priority Secured Indebtedness.

     58   

Section 4.22

 

Holders to be Bound by Intercreditor Agreement.

     59   

ARTICLE 5

 

CONSOLIDATION, MERGER AND SALE OF ASSETS

     60   

Section 5.01

 

Consolidation, Merger and Sale of Assets.

     60   

ARTICLE 6

 

DEFAULT AND REMEDIES

     62   

Section 6.01

 

Events of Default.

     62   

Section 6.02

 

Acceleration.

     64   

Section 6.03

 

Other Remedies.

     64   

Section 6.04

 

Waiver of Past Defaults.

     64   

Section 6.05

 

Control by Majority.

     65   

Section 6.06

 

Limitation on Suits.

     65   

Section 6.07

 

Rights of Holders to Receive Payment.

     65   

Section 6.08

 

Collection Suit by Trustee.

     65   

Section 6.09

 

Trustee May File Proofs of Claim.

     65   

Section 6.10

 

Priorities.

     66   

Section 6.11

 

Restoration of Rights and Remedies.

     66   

Section 6.12

 

Undertaking for Costs.

     66   

Section 6.13

 

Rights and Remedies Cumulative.

     67   

Section 6.14

 

Delay or Omission Not Waiver.

     67   

Section 6.15

 

Waiver of Stay, Extension or Usury Laws.

     67   

Section 6.16

 

Compliance Certificate.

     67   

ARTICLE 7

 

THE TRUSTEE

     68   

Section 7.01

 

General.

     68   

Section 7.02

 

Certain Rights of Trustee.

     68   

Section 7.03

 

Individual Rights of Trustee.

     70   

Section 7.04

 

Trustee’s Disclaimer.

     70   

Section 7.05

 

Notice of Default.

     70   

Section 7.06

 

Reports by Trustee to Holders.

     70   

Section 7.07

 

Compensation And Indemnity.

     70   

Section 7.08

 

Replacement of Trustee.

     71   

Section 7.09

 

Successor Trustee by Consolidation, Merger, Conversion or Transfer.

     72   

Section 7.10

 

Money Held in Trust.

     72   

Section 7.11

 

Eligibility; Disqualification.

     72   

Section 7.12

 

Preferential Collection of Claims Against the Company.

     72   

Section 7.13

 

Requests for Documentation in Connection with Qualification of the Indenture.

     72   

Section 7.14

 

Appointment of Co-Trustee.

     72   

ARTICLE 8

 

DEFEASANCE AND DISCHARGE

     73   

Section 8.01

 

Defeasance and Discharge of Indenture.

     73   

Section 8.02

 

Covenant Defeasance.

     74   

Section 8.03

 

Application of Trust Money.

     75   

Section 8.04

 

Repayment to Company.

     75   

Section 8.05

 

Reinstatement.

     76   

 

(ii)

ARTICLE 9

 

AMENDMENTS, SUPPLEMENTS AND WAIVERS

     76   

Section 9.01

 

Amendments Without Consent of Holders.

     76   

Section 9.02

 

Amendments With Consent of Holders.

     77   

Section 9.03

 

Effect of Consent.

     78   

Section 9.04

 

Compliance with Trust Indenture Act.

     79   

Section 9.05

 

Trustee’s and Security Trustee’s Rights and Obligations.

     79   

Section 9.06

 

Payments for Consents.

     79   

ARTICLE 10

 

SECURITY

     79   

Section 10.01

 

Security; Security Documents.

     79   

Section 10.02

 

Future Restricted Subsidiaries.

     80   

Section 10.03

 

Certificates of the Company.

     81   

Section 10.04

 

Authorization of Actions to be Taken by the Trustee Under the Security Documents.

     81   

Section 10.05

 

Authorization of Receipt of Funds by the Security Trustee Under the Security Documents.

     82   

Section 10.06

 

Release of the Collateral.

     82   

Section 10.07

 

Additional Security Trustee Terms.

     83   

ARTICLE 11

 

SUBSIDIARY GUARANTEES

     84   

Section 11.01

 

The Subsidiary Guarantees.

     84   

Section 11.02

 

Guarantee Unconditional.

     84   

Section 11.03

 

Discharge; Reinstatement.

     85   

Section 11.04

 

Waiver by the Subsidiary Guarantors.

     85   

Section 11.05

 

Subrogation and Contribution.

     85   

Section 11.06

 

Stay of Acceleration.

     85   

Section 11.07

 

Limitation on Amount of Subsidiary Guarantee.

     85   

Section 11.08

 

Ranking of Subsidiary Guarantees.

     86   

Section 11.09

 

Further Subsidiary Guarantors.

     86   

Section 11.10

 

Execution and Delivery of Guarantee.

     86   

Section 11.11

 

Release of the Subsidiary Guarantees.

     87   

ARTICLE 12

 

MISCELLANEOUS

     87   

Section 12.01

 

Trust Indenture Act Controls.

     87   

Section 12.02

 

Communication by Holders with Other Holders.

     87   

Section 12.03

 

Ranking.

     88   

Section 12.04

 

Notices.

     88   

Section 12.05

 

Certificate and Opinion as to Conditions Precedent.

     89   

Section 12.06

 

Statements Required in Certificate or Opinion.

     89   

Section 12.07

 

Payment Date Other Than a Business Day.

     90   

Section 12.08

 

Governing Law, Consent to Jurisdiction; Waiver of Immunities.

     90   

Section 12.09

 

No Adverse Interpretation of Other Agreements.

     91   

Section 12.10

 

Successors.

     91   

Section 12.11

 

Counterparts.

     91   

Section 12.12

 

Separability.

     91   

 

(iii)

Section 12.13

 

Table of Contents and Headings.

     91   

Section 12.14

 

No Personal Liability of Incorporators, Stockholders, Members, Directors, Officers, Directors, or Employees.

     91   

Section 12.15

 

Force Majeure.

     92   

Section 12.16

 

U.S.A. Patriot Act.

     92   

Section 12.17

 

Waiver of Jury Trial.

     92   

EXHIBITS

EXHIBIT A FORM OF FACE OF CERTIFICATED NOTE

EXHIBIT B FORM OF GLOBAL NOTE

EXHIBIT C FORM OF AUTHORIZATION CERTIFICATE – SUBSIDIARY GUARANTOR

EXHIBIT D FORM OF PAYING AND TRANSFER AGENT AND REGISTRAR APPOINTMENT LETTER

EXHIBIT E FORM OF SUPPLEMENTAL INDENTURE

EXHIBIT F FORM OF SECURITY DOCUMENTS

EXHIBIT G FORM OF COMPLIANCE CERTIFICATE UNDER SECTION 10.03

EXHIBIT H FORM OF TRANSFER NOTICE TO CANADIAN PERSONS WITHIN THE CANADIAN RESTRICTED PERIOD

EXHIBIT I TRUSTEE, PAYING AGENT, TRANSFER AGENT AND REGISTRAR

EXHIBIT J PRE-AGREED INTERCREDITOR TERMS

SCHEDULES

Schedule I Initial Subsidiary Guarantors

Schedule II Initial Unrestricted Subsidiaries

 

(iv)

INDENTURE , dated as of January 17, 2013, among Emerald Plantation Holdings Limited, an exempted company limited by shares established under the laws of the Cayman Islands, as the Company, the Subsidiary Guarantors listed in Schedule I hereto, Computershare Trust Company, N.A., in its capacity as Trustee, and Computershare Trust Company, N.A., in its capacity as Security Trustee.

RECITALS

WHEREAS , the Company has duly authorized the execution and delivery of the Indenture to provide for the issuance of up to US$300,000,000 aggregate principal amount of the Company’s 6.00% Guaranteed Senior Notes Due 2020 and, if and when issued, any Additional Notes and PIK Notes as provided herein (collectively, the “ Notes ”). All things necessary to make the Indenture a valid agreement of the Company, in accordance with its terms, have been done, and the Company has done all things necessary to make the Notes (in the case of the Additional Notes, when duly authorized), when executed by the Company and authenticated and delivered by the Trustee and duly issued by the Company, the valid obligations of the Company as hereinafter provided.

WHEREAS , the Subsidiary Guarantors party hereto have duly authorized the execution and delivery of the Indenture as guarantors of the Notes. All things necessary to make the Indenture a valid agreement of each Subsidiary Guarantor, in accordance with its terms, have been done, and each Subsidiary Guarantor has done all things necessary to make the Subsidiary Guarantees, when the Notes are executed by the Company and authenticated and delivered by the Trustee and duly issued by the Company, the valid obligations of such Subsidiary Guarantor as hereinafter provided.

WHEREAS , pursuant to the Security Documents (as defined herein), the Company and the initial Subsidiary Guarantors have agreed to grant a security interest in the Collateral (as defined herein) to the Trustee and/or the Security Trustee (on behalf of the Trustee) in order to secure the obligations of the Company under the Notes and the Indenture and of such Subsidiary Guarantors under the Subsidiary Guarantees.

THIS INDENTURE WITNESSETH

For and in consideration of the premises and the purchase of the Notes by the Holders thereof, the parties hereto covenant and agree, for the equal and proportionate benefit of all Holders, as follows:

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01 Definitions.

“ Acquired Indebtedness ” means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or Indebtedness of a Restricted Subsidiary assumed in connection with an Asset Acquisition by such Restricted Subsidiary.

“ Additional Amounts ” has the meaning set forth in Section 4.20.

 

1

“ Additional Closing Date ” means the date on which the Additional Notes are issued pursuant to Section 2.10.

“ Additional Notes ” has the meaning set forth in Section 2.10.

“ Adjusted Treasury Rate ” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield in maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

“ Affiliate ” means, with respect to any Person, any other Person (i) directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person or (ii) who is a director or officer of such Person or any Subsidiary of such Person or of any Person referred to in clause (i) of this definition. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“ Affiliate Transaction ” has the meaning set forth in Section 4.16.

“ Agent ” means any Registrar, Paying Agent, Transfer Agent or Authenticating Agent.

“ Agent Members ” means members of, or participants in, the Depositary.

“ Applicable Premium ” means with respect to a Note at any redemption date, the greater of (1) 1.00% of the principal amount of such Note and (2) the excess of (A) the present value at such redemption date of (x) the redemption price of such Note at the fourth anniversary date of the Original Issue Date (such redemption price being set forth in the table appearing in Section 3.02(b)), plus (y) all required remaining scheduled interest payments due on such Note (but excluding accrued and unpaid interest to the redemption date) through the fourth anniversary date of the Original Issue Date, computed using a discount rate equal to the Adjusted Treasury Rate plus 50 basis points, over (B) the principal amount of such Note on such redemption date.

“ Asset Acquisition ” means

(1) an investment by the Company or any of its Restricted Subsidiaries in any other Person pursuant to which such Person shall become a Restricted Subsidiary or shall be merged into or consolidated with the Company or any of its Restricted Subsidiaries, or

(2) an acquisition by the Company or any of its Restricted Subsidiaries of the property and assets of any Person other than the Company or any of its Restricted Subsidiaries that constitute substantially all of a division or line of business of such Person.

“ Asset Disposition ” means the sale or other disposition by the Company or any of its Restricted Subsidiaries (other than to the Company or another Restricted Subsidiary) of

(1) all or substantially all of the Capital Stock of any Restricted Subsidiary or

(2) all or substantially all of the assets that constitute a division or line of business of the Company or any of its Restricted Subsidiaries.

 

2

“ Asset Sale ” means any sale, transfer or other disposition (including by way of merger, consolidation or Sale and Leaseback Transaction) of any of its property or assets (including Capital Stock of a Restricted Subsidiary) in one transaction or a series of related transactions by the Company or any of its Restricted Subsidiaries to any Person other than the Company or any Wholly-Owned Restricted Subsidiary; provided that “Asset Sale” shall not include:

(1) sales or other dispositions of inventory, receivables and other current assets (including wood chips, logs, lumber, and manufactured wood and wood panel products) or standing timber in the ordinary course of business,

(2) any disposition that constitutes a Change of Control or an Entire Sale Transaction,

(3) sales, transfers or other dispositions of assets constituting a Permitted Investment or Restricted Payment permitted to be made under Section 4.07,

(4) sales, transfers or other dispositions of assets with a Fair Market Value not in excess of US$5,000,000 (or the Dollar Equivalent thereof) in any transaction or series of related transactions,

(5) any sale, transfer, assignment or other disposition of any property, or equipment that has become damaged, worn out, obsolete or otherwise unsuitable for use in connection with the business of the Company or its Restricted Subsidiaries,

(6) any sale, transfer, assignment or other disposition deemed to occur in connection with creating or granting any Permitted Lien, or

(7) a transaction covered by the covenant under Section 5.01.

“ Attributable Indebtedness ” means, in respect of a Sale and Leaseback Transaction, the present value, discounted at the interest rate implicit in the Sale and Leaseback Transaction, of the total obligations of the lessee for rental payments during the remaining term of the lease in the Sale and Leaseback Transaction.

“ Authenticating Agent ” refers to a Person engaged to authenticate the Notes in the stead of the Trustee.

“ Authorization Certificate ” has the meaning set forth in Section 2.02.

“ Authorized Officer ” means, with respect to the Company or a Subsidiary Guarantor, any one officer or director, who, in each case, is authorized to represent the Company or a Subsidiary Guarantor, as the case may be.

“ Average Life ” means, at any date of determination with respect to any Indebtedness, the quotient obtained by dividing (1) the sum of the products of (a) the number of years from such date of determination to the dates of each successive scheduled principal payment of such Indebtedness and (b) the amount of such principal payment by (2) the sum of all such principal payments.

 

3

“ Board of Directors ” means the board of directors elected or appointed by the members of the Company to manage the business of the Company or any committee of such board duly authorized to take the action purported to be taken by such committee.

“ Board Resolution ” means any resolution of the Board of Directors taking an action which it is authorized to take and adopted at a meeting duly called and held at which a quorum of disinterested members (if so required) was present and acting throughout or adopted by written resolution executed by every member of the Board of Directors.

“ Business Day ” means any day which is not a Saturday, Sunday, legal holiday or other day on which banking institutions in the City of New York, United States, the city in which the Corporate Trust Office of the Trustee is located, Hong Kong or the Cayman Islands (or in any other place in which payments on the Notes are to be made) are authorized by law or governmental regulation to close.

“ Canadian Restricted Period ” means the period commencing on the Original Issue Date and ending on the date that is four months and one day after the later of (i) the Original Issue Date and (ii) the date the Company became a reporting issuer in any Province or Territory of Canada.

“ Capital Stock ” means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) in equity of such Person, whether outstanding on the Original Issue Date or issued thereafter, including all Common Stock and Preferred Stock, but excluding any debt securities convertible into such equity.

“ Capitalized Lease ” means, with respect to any Person, any lease of any property (whether real, personal or mixed) which, in conformity with IFRS, is required to be capitalized on the balance sheet of such Person.

“ Capitalized Lease Obligations ” means the discounted present value of the rental obligations under a Capitalized Lease.

“ Certificated Notes ” means the Notes (with the Subsidiary Guarantees endorsed thereon), in certificated, registered form, executed and delivered by the Company (and the Subsidiary Guarantors) substantially in the form of Exhibit A hereto and (i) presented to the Trustee for authentication by the Trustee pursuant to an Authentication Certificate in accordance with Section 2.01 of this Indenture and authenticated by the Trustee in accordance with Section 2.01, or (ii) authenticated by the Trustee in exchange for the Global Notes, in the event that (x) the Depositary is at any time unwilling or unable to act as depository for the Global Notes and a successor depository is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility or (y) an Event of Default has occurred and is continuing with respect to the Notes.

 

4

“ Change of Control ” means the occurrence of one or more of the following events:

(1) the merger, amalgamation, or consolidation of the Company with or into another Person or the merger or amalgamation of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person (other than an Entire Sale Transaction);

(2) any “person” or “group” (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as such term is used in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company;

(3) the majority of the directors of the Company are not Continuing Directors; or

(4) the adoption of a plan relating to the liquidation or dissolution of the Company.

“ Change of Control Offer ” has the meaning set forth in Section 4.13.

“ Change of Control Triggering Event ” means the occurrence of a Change of Control.

“ Collateral ” means all collateral securing, or purported to be securing, directly or indirectly, the Company’s obligations under the Indenture, the Security Documents and the Notes, any Subsidiary Guarantee, any Permitted Priority Secured Indebtedness or any Permitted Priority Subsidiary Guarantee pursuant to the Security Documents, and shall initially consist of all property and assets (including Capital Stock) of the Company and the initial Subsidiary Guarantors held by the Company or a Subsidiary Guarantor, and may include all property and assets (including any other Capital Stock of any Person) owned by the Company or any Subsidiary Guarantor that becomes a Restricted Subsidiary (other than those organized under the laws of the PRC or a Foreign Subsidiary) as may be pledged, mortgaged or charged by the Company or the Subsidiary Guarantors from time to time pursuant to the provisions of Section 10.02.

“ Commodity Agreement ” means any forward contract, commodity swap agreement, commodity option agreement or other similar agreement or arrangement.

“ Common Stock ” means, with respect to any Person, any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common stock or ordinary shares, whether or not outstanding at the date of the Indenture, and includes all series and classes of such common stock or ordinary shares.

“ Company ” means the party named as such in the first paragraph of the Indenture or any successor obligor under the Indenture and the Notes pursuant to this Indenture.

“ Comparable Treasury Issue ” means the U.S. Treasury security selected by a Reference Treasury Dealer having a comparable maturity to the fourth anniversary date of the Original Issue Date that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the fourth anniversary date of the Original Issue Date.

 

5

“ Comparable Treasury Price ” means, with respect to any redemption date, as calculated by a Reference Treasury Dealer:

(1) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities;” or

(2) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (a) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (b) if fewer than three such Reference Treasury Dealer Quotations are available, the average of all such quotations.

“ Consolidated EBITDA ” means, for any period, Consolidated Net Income for such period plus, to the extent such amount was deducted in calculating such Consolidated Net Income:

(1) Consolidated Interest Expense,

(2) income taxes (other than income taxes attributable to extraordinary and non-recurring gains (or losses) or sales of assets),

(3) depreciation expense, amortization expense and all other non-cash items reducing Consolidated Net Income (other than depletion of timber holdings or non-cash items in a period which reflect cash expenses paid or to be paid in another period), less all non-cash items increasing Consolidated Net Income,

all as determined on a consolidated basis for the Company and its Restricted Subsidiaries in conformity with IFRS, provided that if any Restricted Subsidiary is not a Wholly-Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in accordance with IFRS) by an amount equal to (A) the amount of the Consolidated Net Income attributable to such Restricted Subsidiary multiplied by (B) the percentage ownership interest in the income of such Restricted Subsidiary not owned on the last day of such period by the Company or any of its Restricted Subsidiaries.

“ Consolidated Fixed Charges ” means, for any period, the sum (without duplication) of (i) Consolidated Interest Expense for such period and (ii) all cash and non-cash dividends, accrued or accumulated during such period on any Disqualified Stock or Preferred Stock of the Company or any Restricted Subsidiary held by Persons other than the Company or any Wholly-Owned Restricted Subsidiary.

“ Consolidated Interest Expense ” means, for any period, the amount that would be included in gross interest expense on a consolidated income statement prepared in accordance with IFRS for such period of the Company and its Restricted Subsidiaries, plus, to the extent not

 

6

included in such gross interest expense, and to the extent incurred or paid during such period by the Company and its Restricted Subsidiaries, without duplication, (i) interest expense attributable to Capitalized Lease Obligations, (ii) amortization of debt issuance costs and original issue discount expense and non-cash interest payments in respect of any Indebtedness, (iii) the interest portion of any deferred payment obligation, (iv) all commissions, discounts and other fees and charges with respect to letters of credit or similar instruments issued for financing purposes or in respect of any Indebtedness, (v) the interest equivalent costs associated with Interest Rate Agreements, (vi) interest actually paid by the Company or any Restricted Subsidiary on Indebtedness of any other Person that is Guaranteed by the Company or any Restricted Subsidiary and (vii) any capitalized interest, provided that interest expense attributable to interest on any Indebtedness bearing a floating interest rate will be computed on a pro forma basis as if the rate in effect on the date of determination had been the applicable rate for the entire relevant period.

“ Consolidated Net Income ” means, with respect to any specified Person for any period, the aggregate of the net income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in conformity with IFRS; provided that the following items shall be excluded in computing Consolidated Net Income (without duplication):

(1) the net income (or loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting except to the extent of the amount of dividends or similar distributions actually paid in cash to the specified Person or a Restricted Subsidiary of the Person during such period;

(2) the net income (and loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any of its Restricted Subsidiaries or all or substantially all of the property and assets of such Person are acquired by the Company or any of its Restricted Subsidiaries;

(3) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary;

(4) the cumulative effect of a change in accounting principles;

(5) any net after tax gains (or losses) realized on the sale or other disposition of (A) any property or assets of the Company or any Restricted Subsidiary which is not sold in the ordinary course of its business or (B) any Capital Stock of any Person (including any gains by the Company realized on sales of Capital Stock of the Company or other Restricted Subsidiaries);

(6) any translation gains and losses due solely to fluctuations in currency values and related tax effects; and

(7) any net after-tax extraordinary or non-recurring gains (or losses).

 

7

“ Consolidated Net Worth ” means, at any date of determination, stockholders’ equity or members’ equity as set forth on the most recently available semi-annual or annual consolidated balance sheet of the Company and its Restricted Subsidiaries, plus, to the extent not included, any Preferred Stock of the Company, less any amounts attributable to Disqualified Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock or shares and the principal amount of any promissory notes receivable from the sale of the Capital Stock of the Company or any of its Restricted Subsidiaries, each item to be determined in conformity with IFRS.

“ Continuing Directors ” means, as of any date of determination, any member of the Board of Directors of the Company who:

 

  (1) was a member of such Board of Directors on the Original Issue Date;

 

  (2) was designated by any shareholder entitled to designate a director under the Company’s Memorandum and Articles of Association; or

 

  (3) was elected or appointed to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such director’s nomination or election.

“ Corporate Trust Office ” means the office of the Trustee at which the corporate trust business of the Trustee is principally administered, which at the date of the Indenture is located at 350 Indiana Street, Suite 750, Golden, Colorado, 80401.

“ Currency Agreement ” means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement.

“ Custodian ” means a custodian of the Global Notes for DTC.

“ Default ” means any event that is, or after notice or passage of time or both would be, an Event of Default.

“ Default Rate ” means 2% per annum.

“ Depositary ” means the depositary of each Global Note, which will initially be DTC.

“ Disqualified Stock ” means any class or series of Capital Stock of any Person that by its terms or otherwise is (1) required to be redeemed prior to the Stated Maturity of the Notes, (2) redeemable at the option of the holder of such class or series of Capital Stock at any time prior to the Stated Maturity of the Notes or (3) convertible into or exchangeable for Capital Stock referred to in clause (1) or (2) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an “asset sale”, an “entire sale” or “change of control” occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Stock if the “asset sale”, “entire sale” or “change of control” provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in Section 4.13, Section 4.14 and Section 4.15 and such Capital Stock

 

8

specifically provides that such Person will not repurchase or redeem any such Capital Stock pursuant to such provision prior to the Company’s repurchase of such Notes as are required to be repurchased pursuant to Section 4.13, Section 4.14 and Section 4.15.

“ Dollar Equivalent ” means, with respect to any monetary amount in a currency other than U.S. dollars, at any time for the determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the base rate for the purchase of U.S. dollars with the applicable foreign currency as quoted by the Federal Reserve Bank of New York on the date of determination.

“ DTC ” means The Depository Trust Company, a New York corporation, and its successors.

“ Entire Sale Transaction ” means an Asset Disposition by the Company (other than to a Restricted Subsidiary) of all or substantially all of the Capital Stock of each Subsidiary owned by the Company and/or of all or substantially all of the assets of the Company.

“ Entire Sale Transaction Mandatory Redemption ” has the meaning assigned to such term in Section 3.04.

“ Entire Sale Transaction Redemption Date ” has the meaning assigned to such term in Section 3.04.

“ Entire Sale Transaction Redemption Price ” has the meaning assigned to such term in Section 3.04.

“ Equity Offering ” means any primary private or public offering of Common Stock of the Company after the Original Issue Date.

“ Event of Default ” has the meaning assigned to such term in Section 6.01.

“ Excess Proceeds ” has the meaning assigned to such term in Section 4.15.

“ Exchange Act ” means the United States Securities Exchange Act of 1934.

“ Fair Market Value ” means the price that would be paid in an arm’s length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution; provided, however, that for purposes of clause (a)(4)(i) of Section 4.15, such determination may instead be made by the Company’s Chief Executive Officer or Chief Financial Officer.

“ First Priority Lien ” means the first priority Liens on the Collateral (subject to any Permitted Liens) granted to the Trustee for the benefit of the holders of the Notes pursuant to the Security Documents.

“ Fixed Charge Coverage Ratio ” means, on any Transaction Date, the ratio of (1) the aggregate amount of Consolidated EBITDA for the then most recent two fiscal half-years prior to such Transaction Date for which consolidated financial statements of the Company (which the

 

9

Company shall use its best efforts to compile in a timely manner) are available and have been provided to the Trustee (the “ Two Half-Year Period ”) to (2) the aggregate Consolidated Fixed Charges during such Two Half-Year Period. In making the foregoing calculation:

(A) pro forma effect shall be given to any Indebtedness, Disqualified Stock or Preferred Stock Incurred, repaid or redeemed during the period (the “ Reference Period ”) commencing on and including the first day of the Two-Half Year Period and ending on and including the Transaction Date (other than Indebtedness Incurred or repaid under a revolving credit or similar arrangement (or under any predecessor revolving credit or similar arrangement) in effect on the last day of such Two Half-Year Period), in each case as if such Indebtedness, Disqualified Stock or Preferred Stock had been Incurred, repaid or redeemed on the first day of such Reference Period;

(B) Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the Transaction Date (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period;

(C) pro forma effect shall be given to the creation, designation or redesignation of Restricted and Unrestricted Subsidiaries as if such creation, designation or redesignation had occurred on the first day of such Reference Period;

(D) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition) that occur during such Reference Period as if they had occurred and such proceeds had been applied on the first day of such Reference Period; and

(E) pro forma effect shall be given to asset dispositions and asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into the Company or any Restricted Subsidiary during such Reference Period and that would have constituted Asset Dispositions or Asset Acquisitions had such transactions occurred when such Person was a Restricted Subsidiary as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such Reference Period;

provided that to the extent that clause (D) or (E) of this sentence requires that pro forma effect be given to an Asset Acquisition or Asset Disposition (or asset acquisition or asset disposition), such pro forma calculation shall be based upon the two full fiscal half-years immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed for which financial information is available.

“ Foreign Subsidiary ” means any Restricted Subsidiary of the Company organized under the laws of a jurisdiction that prohibits such Subsidiary from guaranteeing payments under the Notes.

 

10

“ Global Notes ” has the meaning set forth in Section 2.04(c).

“ Guarantee ” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.

“ Guaranteed Indebtedness ” has the meaning set forth in Section 4.12.

“ Holder ” means the Person in whose name a Note is registered in the Note register.

“ IFRS ” means International Financial Reporting Standards as adopted by the International Accounting Standards Board, applied on a consistent basis. All ratios and computations contained or referred to in the Indenture shall be computed in conformity with IFRS applied on a consistent basis.

“ Incur ” means, with respect to any Indebtedness or Capital Stock, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness or Capital Stock; provided that (1) any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary will be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary and (2) the accretion of original issue discount shall not be considered an Incurrence of Indebtedness. The terms “Incurrence”, “Incurred” and “Incurring” have meanings correlative with the foregoing.

“ Indebtedness ” means, with respect to any Person at any date of determination (without duplication):

(1) all indebtedness of such Person for borrowed money;

(2) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(3) all obligations of such Person in respect of letters of credit, bankers’ acceptances or other similar instruments;

(4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except Trade Payables;

(5) all Capitalized Lease Obligations;

 

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(6) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (A) the Fair Market Value of such asset at such date of determination and (B) the amount of such Indebtedness;

(7) all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such Person; and

(8) to the extent not otherwise included in this definition, obligations under Commodity Agreements, Currency Agreements and Interest Rate Agreements.

The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided

(A) that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with IFRS,

(B) that money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be “Indebtedness” so long as such money is held to secure the payment of such interest, and

(C) that the amount of Indebtedness with respect to any Commodity Agreements, Currency Agreements and Interest Rate Agreements shall be equal to the net amount payable if such agreements terminated at that time due to default by such Person.

“ Indenture ” means this indenture, as amended or supplemented from time to time.

“Independent Financial Advisor” means an investment banking firm or accounting firm of national reputation in the United States of America or in Hong Kong (i) which does not, and whose directors, officers, employees and affiliates do not, have a direct or indirect financial interest in the Company or any of its Affiliates, and (ii) which, in the judgement of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged.

“ Information Circular ” means the information circular of Sino Forest Corporation, dated October 20, 2012.

“ Initial Subsidiary Guarantor ” means each of the Subsidiary Guarantors named in Schedule I herein.

“ Initial Unrestricted Subsidiary ” means each of the Unrestricted Subsidiaries named in Schedule II herein.

 

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“ Intercreditor Agreement ” means an intercreditor agreement, containing the Pre-Agreed Intercreditor Terms substantially in the form set forth as Exhibit J hereto, to be entered into prior to the first Incurrence of any Permitted Priority Secured Indebtedness after the Original Issue Date, in a form satisfactory to the Trustee, the Security Trustee and the holders of such Permitted Priority Secured Indebtedness (or the Permitted Priority Trustee as their representative).

“ Interest Payment Date ” means each June 30 and December 31 of each year, commencing June 30, 2013, and the Maturity Date.

“ Interest Rate Agreement ” means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement.

“ Investment ” means:

(1) any direct or indirect advance, loan or other extension of credit (other than Trade Payables that are, in conformity with IFRS, recorded as accounts receivable, prepaid expenses or deposits on the balance sheet of the Company or its Restricted Subsidiaries) to another Person,

(2) capital contribution to another Person (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others),

(3) any purchase or acquisition of Capital Stock, Indebtedness, bonds, notes, debentures or other similar instruments or securities issued by another Person, or

(4) any Guarantee of any obligation of another Person;

provided that an acquisition of assets, Capital Stock or other securities by the Company or a Subsidiary for consideration to the extent such consideration consists of common equity securities of the Company shall not be deemed to be an Investment.

For the purposes of Section 4.18, the Company will be deemed to have made an investment in an Unrestricted Subsidiary in an amount equal to the Fair Market Value of the assets (net of liabilities owed to any Person other than the Company or a Restricted Subsidiary and that are not Guaranteed by the Company or a Restricted Subsidiary) of a Restricted Subsidiary that is designated an Unrestricted Subsidiary at the time of such designation. For purposes of Section 4.07, any property transferred to or from any Person shall be valued at its Fair Market Value at the time of such transfer, as determined in good faith by the Board of Directors.

“ Issue Date ” of any Note means the date on which the Note was originally issued or deemed issued as set forth on the face of the Note.

 

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“ Joint Venture ” means any Person engaged in a Permitted Business of which the Company, together with its Restricted Subsidiaries, directly holds or, as a result of the respective Investment, will hold, at least 50.1% of its Capital Stock.

“ Leverage Ratio ” means, as at the time of determination, the aggregate principal amount of Indebtedness of the Company and the Restricted Subsidiaries outstanding at such time determined on a consolidated basis, divided by the Consolidated EBITDA of the Company for the two fiscal half-years immediately preceding the date of determination for which consolidated financial statements of the Company are available and have been provided to the Trustee.

“ Lien ” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to create any mortgage, pledge, security interest, lien, charge, easement or encumbrance of any kind).

“ Mandatory Prepayment Account ” means the deposit account to be specified by the Company pursuant to which proceeds from an Entire Sale Transaction or from an Asset Sale are to be deposited in accordance with the terms of Section 4.14(b) and Section 4.15(c) of this Indenture, respectively, which account shall be subject to a first priority Lien in favor of the Security Trustee and constitute additional Collateral for the benefit of the Holders, and which account shall not be subject to any other Lien whatsoever.

“ Maturity Date ” means January 17, 2020.

“ Measurement Date ” means the first day of the fiscal half-year period of the Company immediately preceding the Original Issue Date.

“ Moody’s ” means Moody’s Investors Service and its affiliates.

“ Net Cash Proceeds ” means:

(1) with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of

(A) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale;

(B) provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to the consolidated results of operations of the Company and its Restricted Subsidiaries, taken as a whole;

(C) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (x) is secured by a Lien on the property or assets sold or (y) is required to be paid as a result of such sale;

(D) appropriate amounts to be provided by the Company or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with IFRS; and

(2) with respect to any issuance or sale of Capital Stock, the proceeds of such issuance or sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of attorney’s fees, accountants’ fees, underwriters’ or placement agents’ fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof.

 

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“ Notes ” has the meaning assigned to such term in the Recitals, and for greater certainty, includes all Additional Notes and PIK Notes created and issued in accordance with the terms of the Indenture from time to time.

“ Offer to Purchase ” means an offer to purchase Notes by the Company from the Holders commenced by the Company mailing a notice by first class mail, postage prepaid, to the Trustee, the Paying Agent and each Holder at its last address appearing in the Note register stating:

(1) the covenant pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis;

(2) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the “ Offer to Purchase Payment Date ”);

(3) that any Note not tendered will continue to accrue interest pursuant to its terms;

(4) that, unless the Company defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Offer to Purchase Payment Date;

(5) that Holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled “Option of Holder to Elect Purchase” on the reverse side of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Offer to Purchase Payment Date;

(6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Offer to Purchase Payment Date, a facsimile transmission or letter setting

 

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forth the name of such Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased; and

(7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of US$2,000 or integral multiples of US$1,000.

On the Offer to Purchase Payment Date, the Company shall (a) accept for payment on a pro rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (b) deposit with the Paying Agent pursuant to the procedures described in Section 4.01 money sufficient to pay the purchase price of all Notes or portions thereof so accepted; and (c) deliver, or cause to be delivered, to the Trustee all Notes or portions thereof so accepted together with an Officer’s Certificate specifying the Notes or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail or wire to the Holders so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of US$2,000 or integral multiples of US$1,000. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Offer to Purchase Payment Date. The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Notes pursuant to an Offer to Purchase.

The offer is required to contain or incorporate by reference information concerning the business of the Company and its Subsidiaries which the Company in good faith believes will assist such Holders to make an informed decision with respect to the Offer to Purchase, including a brief description of the events requiring the Company to make the Offer to Purchase, and any other information required by applicable law to be included therein. The offer is required to contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Offer to Purchase.

“ Officer ” means one of the executive officers of the Company, or, in the case of a Subsidiary Guarantor, one of the directors or officers of such Subsidiary Guarantor.

“ Officer’s Certificate ” means (i) a certificate signed by two Officers or (ii) in the event the relevant entity has one appointed Officer only, a certificate signed by such Officer or (iii) in the event the relevant entity has no appointed Officer, a certificate signed by either its sole director or two directors if such entity has more than one director. Each Officer’s Certificate shall specify who is required to sign.

“ Opinion of Counsel ” means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Trustee.

“ Original Issue Date ” means the date on which the Notes are originally issued under the Indenture.

 

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“ Outstanding ” when used with respect to Notes means, as of the date of determination, all Notes theretofore authenticated and delivered under the Indenture, except:

(i) Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;

(ii) Notes for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Notes, provided that, if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture or provision therefor reasonably satisfactory to the Trustee has been made; and

(iii) Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to the Indenture.

A Note does not cease to be Outstanding because the Company or any Affiliate of the Company holds the Note, provided that in determining whether the Holders of the requisite amount of Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, Notes owned by the Company or any Affiliate of the Company shall be disregarded and deemed not to be Outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the reasonable satisfaction of the Trustee the pledgee’s right to act with respect to such Notes and that the pledgee is not the Company or an Affiliate of the Company.

“ Paying Agent ” means any paying agent and transfer agent with respect to the Notes appointed pursuant to a Paying and Transfer Agent and Registrar Appointment Letter in the form of Exhibit D.

“ Payment Date ” shall have the meaning set forth in Section 4.01.

“ Permitted Businesses ” means the Permitted Forestry Plantation Business and the manufacturing of wood and wood-based products and related businesses and activities incidental to such activities.

“ Permitted Forestry Plantation Business ” means the operation of forestry plantations and production and processing facilities, the processing, sale, distribution, transportation, cultivation and development of wood fibers and logs, and other similar wood and wood-based products, including bio-fuels, the operation of plantation nurseries, and the sale and distribution of seeds and saplings, inputs and similar products, or intermediate products and by-products used or produced in connection with such activities, the planting of saplings and trees in city greening and urban landscaping projects, including the design and implementation of such projects, the import and export of logs, lumber and other wood and wood-based products, trading agency activities related to the foregoing, and related businesses and activities incidental to any of the foregoing activities.

 

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“ Permitted Indebtedness ” has the meaning set forth in Section 4.06(b).

“ Permitted Investment ” means:

(1) any Investment in the Company or a Restricted Subsidiary that is primarily engaged in a Permitted Forestry Plantation Business or a Person which will, upon the making of such Investment, become a Restricted Subsidiary that is primarily engaged in a Permitted Forestry Plantation Business or be merged or consolidated with or into or transfer or convey all or substantially all its assets to, the Company or a Restricted Subsidiary that is primarily engaged in a Permitted Forestry Plantation Business;

(2) Temporary Cash Investments;

(3) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with IFRS;

(4) an Investment in an Unrestricted Subsidiary consisting solely of an Investment in another Unrestricted Subsidiary;

(5) Commodity Agreements, Interest Rate Agreements and Currency Agreements designed solely to protect the Company or any Restricted Subsidiary against fluctuations in commodity prices, interest rates or foreign currency exchange rates;

(6) receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms;

(7) any securities, non-cash consideration or other Investments received as consideration in, or retained in connection with, sales or other dispositions of property or assets, including Asset Dispositions made in compliance with Section 4.15;

(8) pledges or deposits (x) with respect to leases or utilities provided to third parties in the ordinary course of business or (y) otherwise described in the definition of “Permitted Liens” or made in connection with Liens permitted under Section 4.08;

(9) loans or advances to employees made in the ordinary course of business and consistent with past practices of the Company or past practices of a Restricted Subsidiary, as the case may be, in an aggregate amount outstanding not to exceed at any one time US$500,000 (or the Dollar Equivalent thereof); and

(10) loans to employees, directors and officers not exceeding the amount required to exercise an option to purchase the Company’s Capital Stock held by such individual, provided that the Capital Stock issued upon exercise of such option is pledged, mortgaged and/or charged to the Company as security for such loan.

“ Permitted Liens ” means:

(1) Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal or administrative proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with IFRS shall have been made;

 

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(2) statutory and common law Liens of landlords and carriers, warehousemen, mechanics, suppliers, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal or administrative proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with IFRS shall have been made;

(3) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers’ acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money);

(4) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company and its Restricted Subsidiaries, taken as a whole;

(5) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or its Restricted Subsidiaries relating to such property or assets;

(6) any interest or title of a lessor in the property subject to any operating lease;

(7) Liens on property of, or on shares of Capital Stock or Indebtedness of, any Person existing at the time such Person becomes, or becomes a part of, any Restricted Subsidiary; provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets acquired;

(8) Liens in favor of the Company or any Wholly-Owned Restricted Subsidiary;

(9) Liens arising from the rendering of a final judgment or order against the Company or any Restricted Subsidiary that does not give rise to an Event of Default;

(10) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof;

(11) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(12) Liens encumbering customary initial deposits and margin deposits, and other Liens that are within the general parameters customary in the industry and incurred in the ordinary course of business, in each case, securing Indebtedness under Commodity Agreements, Interest Rate Agreements and Currency Agreements designed solely to protect the Company or any of its Restricted Subsidiaries from fluctuations in interest rates, currencies or the price of commodities;

 

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(13) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business in accordance with the past practices of the Company and its Restricted Subsidiaries prior to the Original Issue Date;

(14) Liens existing on the Original Issue Date;

(15) Liens on real property, trees or current assets securing Indebtedness which is permitted to be Incurred under clause (6) of Section 4.06(b);

(16) Liens securing Indebtedness which is Incurred to refinance secured Indebtedness which is permitted to be Incurred under Section 4.06(b)(5); provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets securing the Indebtedness being refinanced;

(17) Liens under the Security Documents; and

(18) Liens securing any Permitted Priority Secured Indebtedness that complies with each of the requirements set forth under Section 4.21.

“ Permitted Priority Secured Indebtedness ” means Indebtedness of the Company which, in the instrument creating or evidencing the same, is expressly stated to be secured by a Lien over the Collateral ranking in priority to the Lien over the Collateral granted to the Holders of the Notes, and all guarantees thereof by any of the Subsidiary Guarantors provided that:

(1) on or before the date on which such Indebtedness is Incurred, the Company, in an Officer’s Certificate delivered to the Trustee and the Security Trustee, designates such Indebtedness as “Permitted Priority Secured Indebtedness” for the purposes of the Indenture, such Indebtedness is certified in such Officer’s Certificate as having been incurred in compliance with the terms of the Indenture and no Default or Event of Default under the Indenture has occurred and is continuing; and

(2) such additional Indebtedness, together with all other outstanding Permitted Priority Secured Indebtedness does not exceed the amount of the Permitted Priority Secured Indebtedness Cap.

“ Permitted Priority Secured Indebtedness Cap ” means $200,000,000, less any mandatory pre-payments or repurchases of any Permitted Priority Secured Indebtedness made pursuant to the terms of the instrument or agreement creating such Permitted Priority Secured Indebtedness or any agreements entered into in connection therewith.

“ Permitted Priority Subsidiary Guarantee ” means a guarantee by any Subsidiary Guarantor of any Permitted Priority Secured Indebtedness; provided that such guarantee ranks pari passu with any outstanding Subsidiary Guarantee of such Subsidiary Guarantor.

 

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“ Permitted Priority Subsidiary Guarantor ” means any Subsidiary Guarantor guaranteeing the obligations of the Company in respect of the Permitted Priority Secured Indebtedness.

“ Permitted Priority Trustee” means the Person appointed as the trustee, agent or representative for the holders of any Permitted Priority Secured Indebtedness pursuant to the instrument or agreement creating such Permitted Priority Secured Indebtedness, and its successors and assigns.

“ Person ” means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.

“ PIK Interest ” has the meaning set forth in Exhibit A hereto.

“ PIK Notes ” has the meaning set forth in Exhibit A hereto.

“ Plan Supplement ” means the plan supplement of Sino-Forest Corporation dated November 21, 2012 made in connection with the Information Circular.

“ Preferred Stock ” as applied to the Capital Stock of any Person means Capital Stock of any class or classes that by its term is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.

“ PRC ” means the People’s Republic of China.

“ principal ” of any Indebtedness means the principal amount of such Indebtedness, (or if such Indebtedness was issued with original issue discount, the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness), together with, unless the context otherwise indicates, any premium then payable on such Indebtedness.

“ Reference Treasury Dealer ” means each of any three investment banks of recognized standing that is a primary U.S. Government securities dealer in the City of New York, selected by the Company in good faith.

“ Reference Treasury Dealer Quotations ” means, with respect to each Reference Treasury Dealer and any redemption date, the average as determined by the Company, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Company by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date.

“ Register ” has the meaning assigned to such term in Section 2.05.

“ Registrar ” has the meaning assigned to such term in Section 2.05.

 

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“ Regular Record Date ” for the interest payable on any Interest Payment Date means June 16 or December 17 (whether or not a Business Day) immediately preceding such Interest Payment Date.

“ Relevant Jurisdiction ” has the meaning set forth in Section 4.20.

“ Replacement Assets ” means, on any date, property or assets (other than current assets) of a nature or type or that are used in a Permitted Business and shall include Capital Stock of any Person holding such property or assets, which is primarily engaged in a Permitted Business and will upon the acquisition by the Company or any of its Restricted Subsidiaries of such Capital Stock, become a Restricted Subsidiary.

“ Responsible Officer ”, when used with respect to the Trustee, means any officer of the Trustee with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer of the Trustee to whom such matter is referred because of his knowledge and familiarity with the particular subject.

“ Restricted Payment ” has the meaning assigned to such term in Section 4.07.

“ Restricted Subsidiary ” means any Subsidiary of the Company other than an Unrestricted Subsidiary.

“ S&P ” shall mean Standard & Poor’s Ratings Group and its affiliates.

“ Sale and Leaseback Transaction ” means any direct or indirect arrangement relating to property (whether real, personal or mixed), now owned or hereafter acquired whereby the Company or any Restricted Subsidiary transfers such property to another Person and the Company or any Restricted Subsidiary leases it from such Person.

“ Secured Party ” means (i) the Holders, including any holders of Additional Notes and PIK Notes, and the Trustee and the Security Trustee; and (ii) if and when any Permitted Priority Secured Indebtedness is Incurred, the holders of any Permitted Priority Secured Indebtedness Incurred in compliance with Section 4.06, or the Permitted Priority Trustee or Security Trustee on their behalf.

“ Securities Act ” means the United States Securities Act of 1933, as amended.

“ Security Documents ” means, collectively, the pledge agreements, equitable mortgages, charges over shares, and fixed and floating charges to be entered into in accordance with Section 10.01 substantially in the forms as set forth in Exhibit F hereto by and among the Company, the Subsidiary Guarantors and the Security Trustee, on behalf of the Trustee and the Holders, as such agreements may be amended, modified or supplemented from time to time in accordance to the terms thereof and hereof, the Intercreditor Agreement (if any) and any other agreements, equitable mortgages, charges over shares, fixed and floating charges or other agreements or instruments that may evidence or create any Lien in favor of the Security Trustee, the Trustee and/or any Holders in any or all of the Collateral.

“ Security Trustee ” means the party named as such in the first paragraph of the Indenture or any successor security trustee under the Indenture pursuant to Article 7.

 

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“ Senior Indebtedness ” of the Company or a Subsidiary Guarantor, as the case may be, means all Indebtedness of the Company or the Subsidiary Guarantor, as relevant, whether outstanding on the Original Issue Date or thereafter created, except for Indebtedness which, in the instrument creating or evidencing the same, is expressly stated to be not senior in right of payment to the Notes or, in respect of such Subsidiary Guarantor, its Subsidiary Guarantee; provided that Senior Indebtedness does not include (i) any obligation to the Company or any Restricted Subsidiary, (ii) trade payables or (iii) Indebtedness Incurred in violation of the Indenture.

“ Stated Maturity ” means, (1) with respect to any Indebtedness, the date specified in such debt security as the fixed date on which the final installment of principal of such Indebtedness is due and payable as set forth in the documentation governing such Indebtedness and (2) with respect to any scheduled installment of principal of or interest on any Indebtedness, the date specified as the fixed date on which such installment is due and payable as set forth in the documentation governing such Indebtedness.

“ Subordinated Indebtedness ” means any Indebtedness of the Company which is subordinated or junior in right of payment to the Notes pursuant to a written agreement to such effect.

“ Subsidiary ” means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person.

“ Subsidiary Guarantee ” means any Guarantee of the obligations of the Company under the Indenture and the Notes by any Subsidiary Guarantor.

“ Subsidiary Guarantor ” means each of the Initial Subsidiary Guarantors and any other Restricted Subsidiary which is required to guarantee the payment of the Notes pursuant to the Indenture and the Notes and which is required to pledge, mortgage or charge Collateral to secure the obligations of the Company under the Notes and the Indenture, and of such Subsidiary Guarantor under its Subsidiary Guarantee; provided that a Subsidiary Guarantor will not include any Person whose Subsidiary Guarantee has been released in accordance with the Indenture and the Notes and whose pledge, mortgage or charge under the Security Documents has been released in accordance with the Security Documents, the Indenture and the Notes.

“ Surviving Person ” shall have the meaning as set forth in Section 5.01.

“ Tax Redemption Date ” shall have the meaning as set forth in Section 3.01.

“ Temporary Cash Investment ” means any of the following:

(1) direct obligations of the United States of America or any agency thereof or obligations fully and unconditionally Guaranteed by the United States of America or any agency thereof, in each case maturing within 12 months;

(2) time deposit accounts, certificates of deposit and money market deposits maturing within 12 months of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state

 

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thereof or Hong Kong, and has outstanding debt which is rated “A” (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money market fund sponsored by a registered broker dealer or mutual fund distributor;

(3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank or trust company meeting the qualifications described in clause (2) above;

(4) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any state thereof, with a rating at the time as of which any investment therein is made of “P-3” (or higher) according to Moody’s or “A-3” (or higher) according to S&P;

(5) securities with maturities of 12 months or less from the date of acquisition issued or fully and unconditionally Guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least “A” by S&P or Moody’s;

(6) any money market fund that has at least 95% of its assets continuously invested in investments of the types described in clauses (1) through (5) above; and

(7) time deposit accounts, certificates of deposit and money market deposits with (i) Bank of China, Industrial Commercial Bank of China, Construction Bank of China, Shanghai Pudong Development Bank, Bank of Shanghai or (ii) any other bank or trust company organized under the laws of the PRC whose long-term debt is rated as high or higher than any of those banks or (iii) any other bank organized under the laws of the PRC, provided that, in the case of clause (iii), such deposits do not exceed US$2.500,000 (or the Dollar Equivalent thereof) with any single bank of US$5,000,000 (or the Dollar Equivalent thereof) in the aggregate, at any date of determination.

“ Trade Payables ” means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services.

“ Transaction Date ” means, with respect to the Incurrence of any Indebtedness, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made.

“ Trust Indenture Act ” or “ TIA ” means the Trust Indenture Act of 1939, as amended (15 U. S.C. Section 77aaa-77bbbb), as in effect on the date of the Indenture (except as otherwise provided in the Indenture), except that if the Trust Indenture Act of 1939 is amended after such date, “Trust Indenture Act” or “TIA” means, to the extent required by such amendment, the Trust Indenture Act of 1939 as so amended.

 

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“ Trustee ” means the party named as such in the first paragraph of the Indenture or any successor trustee under the Indenture pursuant to Article 7.

“ Unrestricted Subsidiary ” means (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided herein; (2) any Subsidiary of an Unrestricted Subsidiary and (3) any Initial Unrestricted Subsidiary.

“ UCC ” means the Uniform Commercial Code as in effect in the State of New York from time to time.

“ U.S. Government Obligations ” means securities that are (1) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally Guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the Company thereof at any time prior to the Stated Maturity of the Notes, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt.

“ Voting Stock ” means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.

“ Wholly-Owned ” means, with respect to any Subsidiary of any Person, the ownership of all of the outstanding Capital Stock of such Subsidiary (other than any director’s qualifying shares or Investments by foreign nationals mandated by applicable law) by such Person or one or more Wholly-Owned Subsidiaries of such Person.

Section 1.02 Incorporation by Reference of Trust Indenture Act. If any provision of the Indenture limits, qualifies or conflicts with the duties that would be imposed by any of Sections 310 to 317 of the TIA through operation of Section 318(c) thereof on any Person if this Indenture were qualified under the TIA, such imposed duties shall control.

Where used herein, the term “ obligor ” in respect of the Notes means the Company and any other obligor on the Notes.

All other TIA terms used in the Indenture that are defined by the TIA, defined in the TIA by reference to another statute or defined by Rules or Regulations of the U.S. Securities and Exchange Commission have the meanings assigned to them by such definitions.

 

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Section 1.03 Rules of Construction. Unless the context otherwise requires or except as otherwise expressly provided,

(1) an accounting term not otherwise defined has the meaning assigned to it in accordance with IFRS;

(2) “herein,” “hereof’ and other words of similar import refer to the Indenture as a whole and not to any particular Section, Article or other subdivision;

(3) all references to Sections or Articles or Exhibits refer to Sections or Articles or Exhibits of or to the Indenture unless otherwise indicated;

(4) references to agreements or instruments, or to statutes or regulations, are to such agreements or instruments, or statutes or regulations, as amended from time to time (or to successor statutes and regulations); and

(5) “including” or “includes” when used in the Indenture means “including without limitation” or “includes without limitation”.

ARTICLE 2

ISSUE, EXECUTION, FORM AND REGISTRATION OF NOTES

Section 2.01 Authentication And Delivery of Notes and Subsidiary Guarantees. Upon the execution and delivery of this Indenture, or from time to time thereafter, Notes in the form of Exhibit A or Exhibit B may be executed and delivered by the Company, with the Subsidiary Guarantees endorsed thereon by the Subsidiary Guarantors, in an aggregate principal amount Outstanding of not more than US$300,000,000 (other than Notes issued pursuant to Section 2.09 and Section 2.10) to the Trustee for authentication, accompanied by an Officer’s Certificate of the Company directing such authentication (an “ Authentication Certificate ”) and specifying the amount and form of Notes (with the Subsidiary Guarantees endorsed thereon) to be authenticated, the applicable rate at which interest will accrue on such Notes, the date on which the original issuance of such Notes (with the Subsidiary Guarantees endorsed thereon) is to be authenticated, the date from which interest will begin to accrue, the date or dates on which interest on such Notes will be payable and the date on which the principal of such Notes will be payable and other terms relating to such Notes and Subsidiary Guarantees. The Trustee shall thereupon authenticate and deliver said Notes (with the Subsidiary Guarantees endorsed thereon) to or upon the written order of the Company (as set forth in such Officer’s Certificate) signed by two Authorized Officers (or, in the event the Company has one Authorized Officer only, by such Authorized Officer).

Section 2.02 Execution of Notes and Subsidiary Guarantees.

(a) The Notes shall be executed by or on behalf of the Company by the signature of an Authorized Officer of the Company. Each of the Subsidiary Guarantors shall execute the Subsidiary Guarantees by the signature of an Authorized Officer of such Subsidiary Guarantor. Such signatures may be the manual or facsimile signature of the present or any future Authorized Officers. With the delivery of this Indenture, the Company and each of the Subsidiary Guarantors is furnishing, and from time to time thereafter may furnish, a certificate substantially

 

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in the form of Exhibit C (an “ Authorization Certificate ”) identifying and certifying the incumbency and specimen (or facsimile) signatures of the Authorized Officers. Until the Trustee receives a subsequent Authorization Certificate, the Trustee shall be entitled to conclusively rely on the last Authorization Certificate delivered to it for purposes of determining the Authorized Officers. Typographical and other minor errors or defects in any signature shall not affect the validity or enforceability of any Note which has been duly authenticated and delivered by the Trustee.

(b) In case Authorized Officers who shall have signed any of the Notes or any of the Subsidiary Guarantees thereon, as applicable, shall cease to be such Authorized Officers before the Note (with the Subsidiary Guarantees endorsed thereon) shall be authenticated and delivered by the Trustee or disposed of by or on behalf of the Company, such Note (with the Subsidiary Guarantees endorsed thereon) nevertheless may be authenticated and delivered or disposed of as though the Persons who signed such Note and the Subsidiary Guarantees had not ceased to be such Authorized Officers; and any Note may be signed on behalf of the Company and any Subsidiary Guarantee may be signed on behalf of the Subsidiary Guarantors by such Persons as, at the actual date of the execution of such Note and Subsidiary Guarantee, shall be Authorized Officers, although at the date of the execution and delivery of this Indenture any such Persons were not Authorized Officers.

Section 2.03 Certificate of Authentication. Only such Notes (with the Subsidiary Guarantees endorsed thereon) as shall bear thereon a certification of authentication substantially as set forth in the forms of the Notes and Subsidiary Guarantee in Exhibit A and Exhibit B hereto, executed by the Trustee by manual signature of one of its authorized signatories, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certification by the Trustee upon any Note executed by or on behalf of the Company and any Subsidiary Guarantee executed by or on behalf of the Subsidiary Guarantors shall be conclusive evidence that the Note (with the Subsidiary Guarantees endorsed thereon) so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture.

Section 2.04 Form, Denomination and Date of Notes; Interest Payments.

(a) The Notes, the Subsidiary Guarantees and the Trustee’s certificates of authentication shall be substantially in the form set forth in Exhibit A and Exhibit B hereof. On the Original Issue Date, the Notes shall be issued in the form provided in Section 2.04(c). The Notes shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the officers of the Company executing the same may determine with the approval of the Trustee.

The Notes (with the Subsidiary Guarantees endorsed thereon) may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, with the rules of any securities market in which the Notes are admitted to trading, or to conform to general usage.

(b) Each Note (with the Subsidiary Guarantees endorsed thereon) shall be dated the date of their authentication. Each Note shall bear interest as provided for therein from the date of

 

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issuance thereof or from the most recent Interest Payment Date to which interest has been paid or duly provided for and shall be payable on the dates specified on the face of, and in the manner provided for in, the form of Note set forth as Exhibit A and Exhibit B hereto. Interest on the Notes shall be calculated on the basis of a 360-day year consisting of twelve 30-day months.

(c) On the Original Issue Date, an appropriate Authorized Officer will execute and deliver to the Trustee one or more Certificated Notes or global Notes (each such global Note, a “ Global Note ”), with the Subsidiary Guarantees endorsed thereon, in definitive, fully registered form without interest coupons, in a minimum denomination of US$2,000 or any amount in excess thereof which is an integral multiple of US$1,000, substantially in the form of Exhibit A or Exhibit B hereto, as applicable; all such Notes so executed and delivered to the Trustee pursuant to this subsection (c) shall be in an aggregate principal amount that shall equal the aggregate principal amount of the Notes that are to be issued on the Original Issue Date. The aggregate principal amount of the Notes may from time to time be increased or decreased by adjustments to reflect exchanges and redemptions or as evidence of the obligation to pay PIK Interest made on the records of the Custodian for the Depositary or its nominee, as hereinafter provided. Each Note shall bear the following legend as set forth below:

LEGEND APPLICABLE TO CANADIAN HOLDERS:

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND ONE DAY AFTER THE LATER OF (i) THE ORIGINAL ISSUE DATE AND (ii) THE DATE THE COMPANY BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY OF CANADA.”

Each Certificated Note shall be delivered by the Trustee to the Person named as the Holder thereof. Each Global Note (i) shall be delivered by the Trustee to DTC acting as the Depositary or, pursuant to DTC’s instructions, shall be delivered by the Trustee on behalf of DTC to and deposited with the Custodian or shall be retained by the Trustee as custodian of DTC, and in either case shall be registered in the name of Cede & Co., or such other name as DTC shall specify, and (ii) shall also bear a legend substantially to the following effect:

“UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS A GLOBAL

 

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SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.”

Global Notes may be deposited with such other Depositary that is a clearing agency registered under the Exchange Act as the Company may from time to time designate in writing to the Trustee, and shall bear such legend as may be appropriate.

(d) If at any time the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Notes or if at any time the Depositary shall no longer be a clearing agency registered under the Exchange Act, the Company shall appoint a successor Depositary with respect to such Global Notes. If (i) a successor Depositary for such Global Notes is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, or (ii) an Event of Default has occurred and is continuing with respect to the Notes, the Company will execute, and the Trustee, upon receipt of an Officer’s Certificate of the Company directing the authentication and delivery thereof, will authenticate and deliver, Certificated Notes in any authorized denominations in an aggregate principal amount equal to the principal amount of such Global Notes in exchange for such Global Notes.

(e) Global Notes shall in all respects be entitled to the same benefits under this Indenture as Certificated Notes authenticated and delivered hereunder.

(f) The Person in whose name any Note is registered at the close of business on any Regular Record Date with respect to any Interest Payment Date shall be entitled to receive the interest, if any, payable on such Interest Payment Date notwithstanding any transfer or exchange of such Note subsequent to the Regular Record Date and prior to such Interest Payment Date.

Section 2.05 Registration, Transfer and Exchange. The Notes are issuable only in registered form. The Company will keep at the office or agency to be maintained for the purpose as provided in Section 4.02 (the “ Registrar ”), a register (the “ Register ”) in which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Notes as in this Article provided. The name and address of the registered holder of each Note and the amount of each Note will be recorded in the Register. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable time. Such Register shall be open for inspection by the Trustee at all reasonable times.

 

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The Registrar shall provide to the Company a duplicate of the Register to be maintained by the Company at its registered office in the Cayman Islands (in accordance with the Companies Law of the Cayman Islands). The Registrar agrees to provide to the Company updates to the Register within two (2) Business Days after any changes are made thereto.

Upon due presentation for registration of transfer of any Note, the Company shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Note or Notes in authorized denominations for a like aggregate principal amount.

A Holder may register the transfer of a Note only by written application to the Registrar stating the name of the proposed transferee and that the transfer otherwise complies with the terms of this Indenture. No such registration of transfer shall be effected until, and such transferee shall succeed to the rights of a Holder only upon, final acceptance and registration of the transfer by the Registrar in the Register. Prior to the registration of any transfer by a Holder as provided herein, the Company, the Trustee and any agent of any of them shall treat the Person in whose name the Note is registered as the owner thereof for all purposes whether or not the Note shall be overdue, and neither the Company, the Trustee, nor any such agent shall be affected by notice to the contrary. Furthermore, any Holder of a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Note may be effected only through a book entry system maintained by the Holder of such Global Note (or its agent) and that ownership of a beneficial interest in the Note shall be required to be reflected in a book entry. At the option of the Holder, Notes may be exchanged for other Notes of any authorized denomination and of a like aggregate principal amount, upon surrender of the Notes to be exchanged to the Registrar. When Notes are presented to the Registrar with a request to register the transfer or to exchange them for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if the requirements for such transactions set forth herein are met. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Notes at the Registrar’s request.

Every Note presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Registrar) be duly endorsed, or be accompanied by a written instrument of transfer duly executed, by the Holder thereof or his attorney duly authorized in writing in a form satisfactory to the Company and the Registrar.

The Company or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Notes (other than any such transfer taxes or other similar governmental charge payable upon exchanges). No service charge to any Holder shall be made for any such transaction.

The Company shall not be required to exchange or register a transfer of (a) any Notes for a period of 15 days next preceding the first mailing of notice of redemption of Notes to be redeemed or (b) any Notes called or being called for redemption.

 

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All Notes issued upon any transfer or exchange of Notes shall be valid obligations of the Company, evidencing the same debt and entitled to the same benefits under this Indenture, as the Notes surrendered upon such transfer or exchange.

Claims against the Company for the payment of principal of, premium, if any, or interest, on the Notes will become void unless presentation for payment is made as required in the Indenture within a period of six years.

Section 2.06 Book-entry Provisions For Global Notes.

(a) Each Global Note initially shall (i) be registered in the name of a nominee of the Depositary and (ii) be delivered to the Custodian on behalf of the Depositary or retained by the Trustee as custodian of DTC. Each Global Note initially shall (i) be registered in the name of a nominee for the Depositary, (ii) be delivered to the Custodian on behalf of the Depositary or retained by the Trustee as custodian of DTC.

Agent Members shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, or the Custodian, or under the Global Notes, and the Depositary may be treated by the Company, the Trustee and any agent of any of them as the absolute owner of such Global Note for all purposes whatsoever (including for purposes of receiving notices and payments). Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of any of them, from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Global Note. None of the Company, the Trustee, the paying agent and the Registrar shall have any responsibility or liability for any acts or omissions of the Depositary with respect to such Global Note, for the records of any such Depositary, including records in respect of the beneficial owners of any such Global Note, for any transactions between the Depositary and any agent member or between or among the Depositary, any such agent member and/or any Holder or beneficial owner of such Global Note, or for any transfers of beneficial interests in any such Global Note.

(b) Except as provided in Section 2.08, transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in a Global Note may be transferred, and transfers increasing or decreasing the aggregate principal amount of Global Notes may be conducted only in accordance with the rules and procedures of the Depositary and, to the extent relevant, the provisions of Section 2.08. In addition, Certificated Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in any Global Note under the circumstances set forth in Section 2.04(d).

(c) Any beneficial interest in one of the Global Notes that is transferred to a Person who takes delivery in the form of an interest in the other Global Note will, upon transfer, cease to be an interest in such Global Note and become an interest in the other Global Note and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest.

 

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(d) In connection with the transfer of an entire Global Note to beneficial owners pursuant to paragraph (b) of this Section, the Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in such Global Note, an equal aggregate principal amount of Certificated Notes of authorized denominations.

(e) The registered holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

Section 2.07 Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, or to the extent otherwise required under the TIA, the Company shall furnish to the Trustee, in writing at least three Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders.

Section 2.08 Special Transfer Provisions.

(a) Transfers to Canadian Persons . The following provisions shall apply with respect to registration of transfers of a Note (or interest in a Global Note) to a person that is resident in, or subject to, the securities legislation of any province or territory in Canada (a “ Canadian Person ”) if the transfer of a Note is effected at any time prior to the expiry of the Canadian Restricted Period:

(i) The Registrar shall register the transfer of any Certificated Note to a Canadian Person upon receipt by the Registrar from the transferor of a transfer notice provided for on the form of Note in substantially the form of Exhibit H and shall issue to the transferee a Certificated Note in a like amount containing the following form of legend:

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND ONE DAY AFTER THE LATER OF (i) THE ORIGINAL ISSUE DATE AND (ii) THE DATE THE COMPANY BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY OF CANADA.”

(ii) If the proposed transferor is holding a beneficial interest in a Global Note, the transferor may not transfer such interest to a Canadian Person within the Canadian Restricted Period unless the transferor provides evidence which is reasonably satisfactory to the Company that such transfer is being effected pursuant to and in accordance with exemptions from the prospectus and dealer registration requirements contained in the Canadian securities legislation applicable to the purchaser of such beneficial interest.

 

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(b) General . By its acceptance of any Note, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall not register a transfer of any Note unless such transfer complies with the restrictions on transfer of such Note set forth in this Indenture. In connection with any transfer of Notes, each Holder agrees by its acceptance of the Notes to furnish the Registrar or the Company such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine (but may rely on a determination made by the Company with respect to) the sufficiency of any such certifications, legal opinions or other information.

The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.06 or this Section 2.08 in accordance with its customary procedures. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar.

(c) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depositary participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

Section 2.09 Mutilated, Defaced, Destroyed, Stolen and Lost Notes.

(a) The Company shall execute and deliver to the Trustee Certificated Notes in such amounts and at such times as to enable the Trustee to fulfill its responsibilities under this Indenture and the Notes.

(b) In case any Note shall become mutilated, defaced or be apparently destroyed, lost or stolen, upon the request of the registered holder thereof, the Company in its discretion may execute, and, upon the written request of Authorized Officers of the Company, the Trustee shall authenticate and deliver, a new Note (with the Subsidiary Guarantee endorsed thereon), bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Note, or in lieu of and substitution for the Note so apparently destroyed, lost or stolen. In every case the applicant for a substitute Note shall furnish to the Company, the Subsidiary Guarantors and the Trustee and any agent of the Company, the Subsidiary Guarantors or the Trustee such security or indemnity as may be required by each of them to indemnify and defend and to save each of them harmless and, in every case of destruction, loss or theft evidence to their satisfaction of the apparent destruction, loss or theft of such Note and of the ownership thereof. Upon the issuance of any substitute Note, such Holder, if so requested by the Company, the Trustee or the Subsidiary Guarantors, will pay a sum sufficient to cover any stamp duty, tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected with the preparation and issuance of the substitute Note. The Trustee is hereby authorized, in accordance with and subject to the

 

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foregoing conditions in this clause (b), to authenticate and deliver from time to time, Notes (with the Subsidiary Guarantee endorsed thereon) in exchange for or in lieu of Notes (with the Subsidiary Guarantee endorsed thereon), respectively, which become mutilated, defaced, destroyed, stolen or lost. Each Note delivered in exchange for or in lieu of any Note shall carry all the rights to interest (including rights to accrued and unpaid interest and Additional Amounts) which were carried by such Note.

(c) All Notes surrendered for payment or exchange shall be delivered to the Trustee. The Trustee shall cancel and destroy all such Notes surrendered for payment or exchange, in accordance with its Note destruction policy, and upon the request of the Company shall deliver a certificate of destruction to the Company and the Subsidiary Guarantors.

(d) In the event any such mutilated, defaced, destroyed, lost or stolen certificate has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new certificate, pay such Notes.

Section 2.10 Further Issues.

(a) Additional Notes . The Company may, from time to time, without the consent of the Holders of the Notes, create and issue further debt securities in an aggregate principal amount Outstanding of not more than US$100,000,000 (“ Additional Notes ”) having the same terms and conditions as the Notes issued prior to the issuance of such Additional Notes (including the benefit of the Subsidiary Guarantees) in all respects (or in all respects except for issue date, issue price, and the first payment of interest thereon and, to the extent necessary, certain temporary securities law transfer restrictions) so that such subsequently issued debt securities may be consolidated and form a single series with the previously outstanding Notes; provided further that any Additional Notes must be treated as part of the same issue as the previously outstanding Notes for U.S. federal income tax purposes. Additional Notes issued in this manner will be consolidated and form a single series with the previously outstanding Notes in accordance with the requirements of the Depositary. In connection with any such issuance of Additional Notes, the Company shall deliver an Officer’s Certificate to the Trustee directing the Trustee to authenticate and deliver Additional Notes on the Additional Closing Date specified therein in an aggregate principal amount specified therein and the Trustee, in accordance with such Officer’s Certificate, shall authenticate and deliver such Additional Notes. The Additional Notes will be (i) represented by an increase in the aggregate principal amount of the Global Notes or (ii) issued in the form of Certificated Notes if the Notes are no longer represented by Global Notes.

(b) PIK Notes . The Company may, without the consent of the Holders of the Notes, in connection with the payment of PIK Interest in accordance with Section 2.04(c), create and issue PIK Notes having the same terms and conditions as the Notes issued prior to the issuance of such PIK Notes (including the benefit of the Subsidiary Guarantees) in all respects (or in all respects except for the issue date, issue price and the first payment of interest thereon and, to the extent necessary, certain temporary securities law transfer restrictions). Any such PIK Notes may be consolidated and form a single series with the previously outstanding Notes, provided that such PIK Notes must be treated as part of the same issue as the previously outstanding Notes for U.S. federal income tax purposes. PIK Notes issued in this manner will be consolidated and form a single series with the previously outstanding Notes in accordance with the requirements of the Depositary. In connection with any issuance of PIK Notes, the Company shall deliver an

 

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Authentication Certificate to the Trustee directing the Trustee to authenticate and deliver PIK Notes on the relevant Interest Payment Date that cash interest would otherwise have been payable and in the aggregate principal amount of such PIK Interest specified therein, and the Trustee in accordance with such Authentication Certificate, shall authenticate and deliver such PIK Notes. The PIK Notes will be (i) represented by an increase in the aggregate principal amount of the Global Notes where the PIK Interest is payable in respect of issued Global Notes, or (ii) issued in the form of Certificated Notes where the PIK Interest is payable in respect of issued Certificated Notes or if the Notes are no longer represented by Global Notes. All PIK Notes will rank pari passu in right of payment with the Notes, will be guaranteed on a pari passu basis by each Subsidiary Guarantor and will be secured equally and ratably with the Notes by Liens on the Collateral held by the Security Trustee for as long as the Notes and the Subsidiary Guarantees are secured by the Collateral, on and subject to the terms contained in the Indenture.

Section 2.11 Cancellation of Notes; Disposition Thereof. All Notes surrendered for payment, redemption, registration of transfer or exchange, if surrendered to the Company or any agent of the Company or the Trustee, shall be delivered to the Trustee for cancellation or, if surrendered to the Trustee, shall be canceled by it; and no Notes shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Trustee shall dispose of canceled Notes held by it in accordance with its customary procedures, and upon the request of the Company deliver a certificate of disposition to the Company. If the Company shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Notes unless and until the same are delivered to the Trustee for cancellation.

Section 2.12 CUSIP Numbers. The Company in issuing the Notes may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use for the Notes “CUSIP” numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the “CUSIP” numbers.

ARTICLE 3

REDEMPTION

Section 3.01 Taxation Redemption.

(a) The Notes may be redeemed, at the option of the Company or Surviving Person, as a whole but not in part, at any time, upon giving not less than 30 days nor more than 60 days’ notice to the Holders (which notice shall be irrevocable) and upon reasonable notice in advance of such notice to Holders to the Trustee and the Paying Agent, at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date fixed by the Company for redemption (the “ Tax Redemption Date ”) if, as a result of

(i) any change in, or amendment to, the laws (or any regulations or rulings promulgated thereunder) of a Relevant Jurisdiction affecting taxation; or

(ii) any change in the existing official position or the stating of an official position regarding the application or interpretation of such laws, regulations or rulings (including a holding, judgment, or order by a court of competent jurisdiction),

 

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which change, amendment, application or interpretation (x) in the case of the Company, Surviving Person and any initial Subsidiary Guarantor becomes effective on or after the Original Issue Date and (y) in the case of any successor to a Subsidiary Guarantor or a future Subsidiary Guarantor becomes effective after such Subsidiary Guarantor assumes the obligations under the Indenture or becomes a Subsidiary Guarantor, with respect to any payment due or to become due under the Notes or the Indenture, the Company, Surviving Person or a Subsidiary Guarantor, as the case may be, is, or on the next Interest Payment Date would be, required to withhold or deduct any tax, duty, assessment or other governmental charge imposed, levied, collected, withheld or assessed by a Relevant Jurisdiction and to pay Additional Amounts, and in each case, such requirement to withhold or deduct cannot be avoided by the taking of reasonable measures by the Company, Surviving Person or a Subsidiary Guarantor; provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Company, Surviving Person or a Subsidiary Guarantor, as the case may be, would be obligated to pay such Additional Amounts if a payment in respect of the Notes was then due.

(b) Prior to the mailing of any notice of redemption of the Notes pursuant to the foregoing, the Company or Surviving Person will deliver to the Trustee (x) a certificate signed by a duly authorized officer stating that the Company or Surviving Person is entitled to effect the redemption under this Indenture and stating that the conditions precedent to the right of redemption have occurred and (y) an Opinion of Counsel or tax consultant of recognized standing stating that the circumstances referred to in the prior paragraph exist. The Trustee shall accept such Opinion of Counsel as sufficient evidence of the satisfaction of the conditions precedent described above, in which event it shall be conclusive and binding on the Holders.

(c) Any Notes that are redeemed pursuant to this Section 3.01 will be cancelled.

Section 3.02 Optional Redemption.

(a) At any time prior to the fourth anniversary date of the Original Issue Date, the Company may at its option redeem the Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount of the Notes plus the Applicable Premium as of, and accrued and unpaid interest, if any, to the redemption date.

(b) At any time and from time to time on or after the fourth anniversary date of the Original Issue Date, the Company may redeem the Notes, in whole or in part, at a redemption price equal to the percentage of the principal amount set forth below plus accrued and unpaid interest to the redemption date if redeemed during the twelve-month period beginning on the anniversary date of the Original Issue Date of the years indicated below:

 

12- month period commencing in the year

   Redemption Price  

2017

     103.125 % 

2018

     101.563 % 

2019 and thereafter

     100.000 % 

 

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(c) At any time prior to the third anniversary date of the Original Issue Date, the Company may redeem up to 35% of the principal amount of the Notes with the Net Cash Proceeds of one or more sales of its Common Stock in an Equity Offering at a redemption price of 106.25% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to the redemption date; provided that at least 65% of the aggregate principal amount of the Notes originally issued on the Original Issue Date remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related sale of Capital Stock.

(d) The Company will give not less than 30 days’ nor more than 60 days’ notice of any such redemption to Holders, to the Trustee and the Paying Agent. If less than all of the Notes are to be redeemed, selection of the Notes for redemption will be made on a pro-rata basis, or if the Notes are issued in global form, in accordance with applicable DTC procedures (subject, in all cases, to compliance with the rules of any national securities exchange on which the Notes may be listed). However, no Note of US$2,000 in principal amount or less shall be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note will state the portion of the principal amount to be redeemed. A new Note in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note.

Section 3.03 Method and Effect of Redemption.

(a) The notice of redemption for any redemption of Notes pursuant to Section 3.01 or Section 3.02 will identify the Notes to be redeemed and will include or state the following:

(i) the redemption date;

(ii) the redemption price, including the portion thereof representing any accrued interest;

(iii) the place or places where Notes are to be surrendered for redemption;

(iv) Notes called for redemption must be so surrendered in order to collect the redemption price;

(v) on the redemption date the redemption price will become due and payable on Notes called for redemption, and, unless the Company and the Subsidiary Guarantors default in paying the redemption price on the redemption date, interest on Notes called for redemption will cease to accrue on and after the redemption date;

(vi) if the Company is redeeming only part of a Note, the notice that relates to that Note shall state that on and after the redemption date, upon surrender of that Note, the Holder will receive, without charge, a new Note or Notes of authorized denominations for the principal amount of the Note remaining unredeemed; and

(vii) if any Note contains a CUSIP or ISIN number, no representation is being made as to the correctness of the CUSIP or ISIN number either as printed on the Notes or as contained in the notice of redemption and that the Holder should rely only on the other identification numbers printed on the Notes.

(b) Once notice of redemption is sent to the Holders, Notes called for redemption become due and payable at the redemption price on the redemption date, and upon surrender of the Notes called for redemption, the Company shall redeem such Notes at the redemption price. Commencing on the redemption date, Notes redeemed will cease to accrue interest.

 

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Section 3.04 Mandatory Redemption of Notes upon an Entire Sale Transaction

(a) No later than 10 days after the occurrence of an Entire Sale Transaction, the Company shall issue (by publication and mail) a notice to all Holders to redeem all of the Notes then outstanding (an “ Entire Sale Transaction Mandatory Redemption ”) at a redemption price equal to 100% of their principal amount plus accrued and unpaid interest, if any, to the redemption date (the “ Entire Sale Transaction Redemption Price ”).

(b) The notice of the Entire Sale Transaction Mandatory Redemption will include or state the following:

(i) the redemption date (the “ Entire Sale Transaction Redemption Date ”);

(ii) the Entire Sale Transaction Redemption Price, including the portion thereof representing any accrued interest;

(iii) the place or places where Notes are to be surrendered for redemption;

(iv) Notes called for redemption must be so surrendered in order to collect the Entire Sale Transaction Redemption Price;

(v) On the Entire Sale Transaction Redemption Date, the Entire Sale Transaction Redemption Price will become due and payable on the Notes, and interest on the Notes will cease to accrue on and after the Entire Sale Transaction Redemption Date; and

(vi) If any note contains a CUSIP or ISIN number, no representation is being made as of the correctness of the CUSIP or ISIN number either as printed on the Notes or as contained in the notice of the Entire Sale Transaction Mandatory Redemption and that the Holder should rely only on the other identification numbers printed on the Notes.

(c) Once notice of an Entire Sale Transaction Mandatory Redemption is sent to the Holders, notes called for redemption become due and payable at the Entire Sale Transaction Redemption Price on the Entire Sale Transaction Redemption Date, and upon surrender of the Notes called for redemption, the Company shall redeem such Notes on the Entire Sale Transaction Redemption Date at the Entire Sale Transaction Redemption Price. Commencing on the Entire Sale Transaction Redemption Date, Notes redeemed will cease to accrue interest.

 

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ARTICLE 4

COVENANTS

Section 4.01 Payment of Notes.

(a) The Company agrees to pay the principal of and interest, and Additional Amounts, if any, on the Notes on the dates and in the manner provided in the Notes and the Indenture. Not later than 9:00 A.M. (New York City time) one Business Day prior to the Interest Payment Date, the due date of any principal on any Notes, the Tax Redemption Date pursuant to Section 3.01, the redemption date pursuant to Section 3.02, the Offer to Purchase Payment Date or the Entire Sale Transaction Redemption Date (each a “ Payment Date ”), the Company agrees to pay or cause to be paid to the account of the Trustee at the Corporate Trust Office (or principal Paying Agent), in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, in immediately available funds, an amount which shall be sufficient to pay the aggregate amount of interest (other than any PIK Interest, the payment of which shall be satisfied as provided for in the Notes and this Indenture) or principal or both, as the case may be, becoming due in respect of the Notes on such Payment Date; provided that if the Company or any Affiliate of the Company is acting as Paying Agent, it will, on or before each due date, segregate and hold in a separate trust fund for the benefit of the Holders a sum of money sufficient to pay such amounts until paid to such Holders or otherwise disposed of as provided in the Indenture. For purposes of this Indenture, PIK Interest shall be considered paid on the date due if the Trustee is directed by an Authentication Certificate received by it on or prior to such date to issue PIK Notes or to increase the principal amount of the applicable Global Notes in an amount equal to the amount of the PIK Interest, as evidence of the obligation to pay PIK Interest. In each case the Company will promptly notify the Trustee and the Paying Agent of its compliance with this paragraph. The Company shall procure that, before 9:00 A.M. (New York City time) on the third Business Day before each Payment Date, the bank effecting payment for it confirms by tested telex or authenticated SWIFT message to the principal Paying Agent the payment instructions relating to such payment. No Paying Agent shall be bound to make any payment until it is satisfied that the principal Paying Agent has received the full amount due to be paid to it pursuant to this Section 4.01.

(b) An installment of principal or interest (other than any PIK Interest, the payment of which shall be satisfied as provided for in the Notes and this Indenture) will be considered paid on the date due if the Trustee (or the principal Paying Agent, other than the Company or any Affiliate of the Company) holds on that date money designated for and sufficient to pay the installment. If the Company or any Affiliate of the Company acts as Paying Agent, an installment of principal or interest will be considered paid on the due date only if paid to the Holders.

(c) The Trustee (or the Paying Agent, which will include the Company or any Affiliate of the Company if it is acting as Paying Agent) will make payments in respect of the Notes (other than any PIK Interest, the payment of which shall be satisfied as provided for in the Notes and this Indenture) represented by the Global Notes by wire transfer of immediately available funds to the accounts specified by the Holders of the Global Notes. With respect to Certificated Notes, the Trustee (or Paying Agent) will make all payments (other than any PIK Interest, the payment of which shall be satisfied as provided for in the Notes and this Indenture)

 

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by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to each Holder’s registered address; provided that if the Company or any Affiliate of the Company is acting as Paying Agent, it will make such payment to the Holders as specified above.

(d) At least three Business Days prior to the first Payment Date and, if there has been any change with respect to the matters set forth in the below mentioned certificate, at least three Business Days prior to each Payment Date thereafter, the Company shall furnish the Trustee with an Officer’s Certificate instructing the Trustee as to any circumstances in which payments of principal of, or interest on, the Notes due on such date shall be subject to deduction or withholding for, or on account of, any Taxes described in Section 4.20 and the rate of any such deduction or withholding. If any such deduction or withholding shall be required and if the Company therefore becomes liable to pay Additional Amounts, if any, pursuant to Section 4.20 then at least three Business Days prior to each Payment Date, the Company will furnish the Trustee with a certificate which specifies the amount required to be withheld on such payment to Holders of the Notes, and the Additional Amounts, if any, due to the Holders of the Notes, and at least one Business Day prior to such Payment Date, will pay to the Trustee such Additional Amounts, if any, as shall be required to be paid to such Holders.

(e) Whenever the Company shall appoint a Paying Agent other than the Trustee for the purpose of paying amounts due in respect of the Notes, it will cause such Paying Agent to execute and deliver to the Trustee an instrument substantially in the form of Exhibit D hereto in which such agent shall agree with the Company, among other things, to be bound by and observe the provisions of this Indenture (including the Notes). The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee,

(i) that it will hold all sums received by it as such Paying Agent for the payment of the principal of, or interest on, the Notes (whether such sums have been paid to it by or on behalf of the Company or by any other obligor on the Notes or the Subsidiary Guarantee) in trust for the benefit of the holders of the Notes or of the Trustee;

(ii) that it will give the Trustee written notice of any failure by the Company (or by any other obligor on the Notes or the Subsidiary Guarantee) to make any payment of the principal, or interest on, the Notes and any other payments to be made by or on behalf of the Company under this Indenture, when the same shall be due and payable; and

(iii) that it will pay any such sums so held in trust by it to the Trustee upon the Trustee’s written request at any time during the continuance of a failure referred to in clause (ii) above.

Anything in this Section 4.01 to the contrary notwithstanding, the Company may at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by the Company or any Paying Agent hereunder, as required by this Section 4.01 and such sums shall be held by the Trustee upon the trusts herein contained. If the Paying Agent shall pay all sums held in trust to the Trustee as required under this Section 4.01, the Paying Agent shall have no further liability for the money so paid over to the Trustee.

 

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Anything in this Section 4.01 to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section 4.01 are subject to the provisions of Section 8.04.

Section 4.02 Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, the City of New York or at the Corporate Trust Office, an office or agency where Notes may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon the Company in respect of the Notes and the Indenture may be served. The Company hereby initially designates the Corporate Trust Office as such office of the Company. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served to the Trustee.

The Company may also from time to time designate one or more other offices or agencies where the Notes may be surrendered or presented for any of such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each place where principal of, and interest on, any Notes are payable. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

The Company has initially appointed the Paying and Transfer Agent and Registrar listed in Exhibit I, and each of the Paying and Transfer Agent and Registrar listed thereon has accepted such appointment.

So long as any of the Notes remain Outstanding, the Subsidiary Guarantors will maintain in the City of New York or the Corporate Trust Office, and each other place where principal of, and interest on, any Notes is payable an office or agency where notices and demands to or upon the Subsidiary Guarantors in respect of the Notes, the Subsidiary Guarantee or this Indenture may be served. The Subsidiary Guarantors hereby initially designates the Corporate Trust Office as the office or agency for each such purpose. In case the Subsidiary Guarantors shall fail to maintain any such office or agency or shall fail to give notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Corporate Trust Office.

Section 4.03 Governmental Approvals and Licenses; Compliance with Law. The Company will, and will cause each Restricted Subsidiary to, (i) obtain and maintain in full force and effect all governmental approvals, authorizations, consents, permits, concessions and licenses as are necessary to engage in the Permitted Businesses, (ii) preserve and maintain good and valid title to its properties and assets (including land use rights) free and clear of any Liens other than Permitted Liens and (iii) comply with all laws, regulations, orders, judgments and decrees of any governmental body, except to the extent that failure to so obtain, maintain, preserve and comply would not reasonably be expected to have a material adverse effect on (A) the business, results of operations or prospects of the Company and its Restricted Subsidiaries taken as a whole or (B) the ability of the Company or any Subsidiary Guarantor to perform its obligations under the Notes, the relevant Subsidiary Guarantee or the Indenture.

 

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Section 4.04 Payment of Taxes and other Claims. The Company will pay or discharge, and cause each of its Subsidiaries to pay or discharge before the same become delinquent (i) all material taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or its income or profits or property, and (ii) all material lawful claims for labor, materials and supplies that, if unpaid, might by law become a Lien upon the property of the Company or any Subsidiary, other than any such tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established.

Section 4.05 Maintenance of Properties and Insurance. The Company will cause all properties used or useful in the conduct of its business or the business of any of its Restricted Subsidiaries to be maintained and kept in good condition, repair and working order as in the judgment of the Company may be necessary so that the business of the Company and its Restricted Subsidiaries may be properly and advantageously conducted at all times; provided that nothing in this Section prevents the Company or any Restricted Subsidiary from discontinuing the use, operation or maintenance of any of such properties or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Company, desirable in the conduct of the business of the Company and its Restricted Subsidiaries taken as a whole. The Company will, and will cause each of its Restricted Subsidiaries to (i) keep their properties insured and maintain such general liability, automobile liability, workers’ compensation, property casualty insurance and any excess umbrella coverage related to any of the foregoing as is customary for companies in the same or similar businesses as the Permitted Businesses operating in the same or similar locations, and (ii) maintain such other insurance as may be required by law.

Section 4.06 Limitation On Indebtedness And Disqualified Or Preferred Stock

(a) The Company

(i) will not Incur any Indebtedness or Disqualified Stock, provided, that the Company may Incur Indebtedness if, after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, the Fixed Charge Coverage Ratio would be not less than 2.0 to 1.0; and

(ii) will not permit any Restricted Subsidiary to Incur any Indebtedness (including Acquired Indebtedness), Disqualified Stock or Preferred Stock (other than Disqualified Stock or Preferred Stock of Restricted Subsidiaries held by the Company or a Subsidiary Guarantor, so long as it is so held).

(b) Notwithstanding the foregoing, the Company and, to the extent provided below, any Restricted Subsidiary may Incur each and all of the following (“ Permitted Indebtedness ”):

 

  (1) Indebtedness under the Notes (including any PIK Notes and any Additional Notes) and each Subsidiary Guarantee;

 

42

  (2) any Permitted Priority Secured Indebtedness and any Permitted Priority Subsidiary Guarantees;

 

  (3) Indebtedness of the Company or any Restricted Subsidiary outstanding on the Original Issue Date excluding Indebtedness permitted under clause (4);

 

  (4) Indebtedness of the Company or any Restricted Subsidiary owed to the Company or any Wholly-Owned Restricted Subsidiary; provided that (x) any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or any Wholly-Owned Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (4) and (y) if the Company or any Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness must expressly be subordinated in right of payment to the Notes, in the case of the Company, or the Subsidiary Guarantee of such Subsidiary Guarantor, in the case of a Subsidiary Guarantor;

 

  (5) Indebtedness issued in exchange for, or the net proceeds of which are used to refinance or refund, then outstanding Indebtedness Incurred under Section 4.06(a) or clauses (1) or (2) of this covenant and any refinancing thereof in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that (A) Indebtedness the proceeds of which are used to refinance or refund the Notes or Indebtedness that is subordinated in right of payment to, the Notes or a Subsidiary Guarantee shall only be permitted under this clause (5) if (x) in case the Notes are refinanced in part, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining Notes or such Subsidiary Guarantee, or (y) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes or a Subsidiary Guarantee, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes or such Subsidiary Guarantee at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes or such Subsidiary Guarantee, (B) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded, (C) Indebtedness the proceeds of which are used to refinance or refund Permitted Priority Secured Indebtedness would otherwise be entitled to be Incurred as Permitted Priority Secured Indebtedness pursuant to the terms of this Indenture, and (D) in no event may Indebtedness of the Company or any Subsidiary Guarantor be refinanced pursuant to this clause (5) by means of any Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor;

 

43

  (6) the Incurrence by the Company or any Restricted Subsidiaries of Indebtedness under Commodity Agreements, Interest Rate Agreements and Currency Agreements entered into in the ordinary course of business and designed solely to protect the Company or any of its Restricted Subsidiaries from fluctuations in interest rates, currencies or the price of commodities and not for speculation;

 

  (7) Indebtedness Incurred by the Company or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit, trade guarantees or similar instruments issued in the ordinary course of business to the extent that such letters of credit or trade guarantees are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than 90 days following receipt by the Company or such Restricted Subsidiary of a demand for reimbursement;

 

  (8) (i) Guarantees by the Company or any Subsidiary Guarantor of Indebtedness of the Company or any Restricted Subsidiary that was permitted to be Incurred by another provision of this Section 4.06, or (ii) Guarantees by any Restricted Subsidiary of Indebtedness of another Restricted Subsidiary that was permitted to be Incurred under clause (6) or (6) above; and

 

  (9) Indebtedness Incurred after the Original Issue Date by any Restricted Subsidiary organized under the laws of the PRC which, when taken together with the total amount of all other Indebtedness Incurred pursuant to this Section 4.06(b)(9), will not exceed US$100,000,000.

(c) For purposes of determining compliance with this Section 4.06, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above (other than the Notes, Additional Notes or PIK Notes, which shall be treated as Incurred pursuant to Section 4.06(b)(1) above), including under the proviso in Section 4.06(a)(i) above, the Company, in its sole discretion, shall classify, and from time to time may reclassify one or more times, such item of Indebtedness in any manner that complies with this Section 4.06 and such item of Indebtedness will, upon such classification or reclassification, as the case may be, be treated as having been Incurred in accordance with only one of such classes or in accordance with the proviso in Section 4.06(a)(i).

(d) The Company will not Incur, and will not permit any Subsidiary Guarantor to Incur, any Indebtedness if such Indebtedness is subordinate in right of payment to any other Indebtedness of the Company or such Subsidiary Guarantor, as the case may be, unless such Indebtedness is also subordinate in right of payment to the Notes or the applicable Subsidiary Guarantee, on substantially identical terms. This does not apply to distinctions between categories of Indebtedness that exist by reason of any Liens or Guarantees securing or in favor of some but not all of such Indebtedness.

 

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Section 4.07 Limitation on Restricted Payments.

(a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly (the payments and other actions described in the clauses (i) through (iv) below being collectively referred to as “ Restricted Payments ”):

(i) declare or pay any dividend or make any distribution on or with respect to the Company’s or any of its Restricted Subsidiaries’ Capital Stock (other than dividends or distributions payable solely in shares of the Company’s or any of its Restricted Subsidiaries’ Capital Stock (other than Disqualified Stock or Preferred Stock) or in options, warrants or other rights to acquire shares of such Capital Stock) held by Persons other than the Company or any Wholly-Owned Restricted Subsidiary;

(ii) purchase, call for redemption or redeem, retire or otherwise acquire for value any shares of Capital Stock of the Company or any Restricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock, but excluding any Indebtedness of the Company or any Restricted Subsidiary that is not subordinated in right of payment to the Notes or any Subsidiary Guarantee that is convertible into Capital Stock of the Company) held by any Persons other than the Company or any Wholly-Owned Restricted Subsidiary;

(iii) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness that is subordinated in right of payment to the Notes or any of the Subsidiary Guarantees (excluding any intercompany Indebtedness between or among the Company and any of its Wholly-Owned Restricted Subsidiaries); or

(iv) make any Investment, other than a Permitted Investment, in any Person;

if, at the time of, and after giving effect to, the proposed Restricted Payment:

 

  (1) a Default shall have occurred and be continuing,

 

  (2) the Company could not Incur at least $1.00 of Indebtedness under the proviso in Section 4.06(a), or

 

  (3) such Restricted Payment, together with the aggregate amount of all Restricted Payments made by the Company and its Restricted Subsidiaries after the Measurement Date shall exceed the sum of

 

  (A)

50% of the aggregate amount of the Consolidated Net Income of the Company (or, if the Consolidated Net Income is a loss, minus 100% of the amount of such loss) accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the fiscal half-year immediately following the Measurement Date and ending on the last day of the Company’s most

 

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  recently ended fiscal half-year for which consolidated financial statements of the Company (which the Company shall use its best efforts to compile in a timely manner) are available and have been provided to the Trustee at the time of such Restricted Payment; plus

 

  (B) 100% of the aggregate Net Cash Proceeds received by the Company after the Measurement Date as a capital contribution or from the issuance and sale of its Capital Stock (other than Disqualified Stock) to a Person who is not a Restricted Subsidiary of the Company, including any such Net Cash Proceeds received upon (x) the conversion of any Indebtedness (other than Subordinated Indebtedness) of the Company into Capital Stock (other than Disqualified Stock) of the Company, or (y) the exercise by a Person who is not a Restricted Subsidiary of the Company of any options, warrants or other rights to acquire Capital Stock of the Company (other than Disqualified Stock) in each case after deducting the amount of any such Net Cash Proceeds used to redeem, repurchase, defease or otherwise acquire or retire for value any Subordinated Indebtedness or Capital Stock of the Company; plus

 

  (C) an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) that were made after the Measurement Date in any Person resulting from (i) payments of interest on Indebtedness, dividends or repayments of loans or advances, in each case to the Company or any Restricted Subsidiary (except, in each case, to the extent any such payment or proceeds are included in the calculation of Consolidated Net Income), or (ii) from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries, not to exceed, in each case, the amount of Investments made by the Company or a Restricted Subsidiary after the Measurement Date in any such Person.

(b) The foregoing shall not be violated by reason of:

 

  (1) the payment of any dividend or redemption of any Capital Stock within 60 days after the related date of declaration or call for redemption if, at said date of declaration or call for redemption, such payment or redemption would comply with paragraph (a);

 

  (2) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness of the Company or any of the Subsidiary Guarantors that is subordinated in right of payment to the Notes or to any Subsidiary Guarantee with the Net Cash Proceeds of, or in exchange for, Indebtedness Incurred under clause (5)(y) of Section 4.06(b);

 

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  (3) the redemption, repurchase or other acquisition of Capital Stock of the Company or any Subsidiary Guarantor (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the Net Cash Proceeds of a capital contribution or a substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, shares of Capital Stock (other than Disqualified Stock) of the Company or any Subsidiary Guarantor (or options, warrants or other rights to acquire such Capital Stock); provided that the amount of any such Net Cash Proceeds that are utilized for any such Restricted Payment will be excluded from clause (3)(B) of paragraph (a);

 

  (4) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness of the Company or any of the Subsidiary Guarantors that is subordinated in right of payment to the Notes or to any Subsidiary Guarantee in exchange for, or out of the Net Cash Proceeds of, a substantially concurrent offering of, shares of the Capital Stock (other than Disqualified Stock) of the Company or any of the Subsidiary Guarantors (or options, warrants or other rights to acquire such Capital Stock); provided that the amount of any such Net Cash Proceeds that are utilized for any such Restricted Payment will be excluded from clause (3)(B) of paragraph (a);

 

  (5) the payment of any dividends or distributions declared, paid or made by a Restricted Subsidiary payable on a pro rata basis to all holders of any class of Capital Stock of such Restricted Subsidiary, a majority of which is held, directly or indirectly, through Restricted Subsidiaries by the Company;

 

  (6) any Investment in Greenheart Group Limited and its Subsidiaries;

 

  (7) any Investment in an Unrestricted Subsidiary (other than Greenheart Group Limited and its Subsidiaries) that is engaged in a Permitted Business which, when taken together with the total amount of all other Investments made pursuant to this clause (7), will not exceed US$25,000,000 (or the Dollar Equivalent thereof);

 

  (8) any Investment in a Joint Venture (other than Greenheart Group Limited and its Subsidiaries) which, when taken together with the total amount of all other Investments made pursuant to this clause (8), will not exceed US$25,000,000 (or the Dollar Equivalent thereof); or

 

  (9) Restricted Payments, if, at the time of the making of such payments, and after giving effect thereto (including the incurrence of any Indebtedness to finance such payment) and giving effect to the pro forma adjustment set forth in clauses (A) through (E) of the definition of “Fixed Charge Coverage Ratio,” the Leverage Ratio would not exceed 2.0:1.0;

 

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provided that, no Default shall have occurred and be continuing or would occur as a consequence of the actions or payments set forth therein.

(c) Each Restricted Payment permitted pursuant to clauses (1), (5), (7), (8) and (9) of paragraph (b) shall be included in calculating whether the conditions of clause (3) of paragraph (a) have been met with respect to any subsequent Restricted Payments.

(d) The amount of any Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or the Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The value of any assets or securities that are required to be valued by this covenant will be the Fair Market Value. The Board of Directors’ determination of the Fair Market Value of a Restricted Payment or any such assets or securities must be based upon an opinion or appraisal issued by an appraisal or investment banking firm of international standing if the Fair Market Value exceeds US$5,000,000 (or the Dollar Equivalent thereof).

(e) Not later than the date of making any Restricted Payment in an amount in excess of US$5,000,000 (or the Dollar Equivalent thereof), the Company will deliver to the Trustee an Officer’s Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this covenant were computed, together with a copy of any fairness opinion or appraisal required by the Indenture.

Section 4.08 Limitation on Liens.

(a) The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist any Lien on the Collateral (other than Permitted Liens).

(b) The Company will not, and will not permit any of its Restricted Subsidiaries to create, incur, assume or suffer to exist any Lien on any of its assets or properties of any kind (other than the Collateral), now owned or hereafter acquired, except Permitted Liens, unless the Notes are equally and ratably secured by such Lien.

Section 4.09 Limitation on Sale and Leaseback Transactions. The Company will not, and will not permit any Restricted Subsidiary to, enter into any Sale and Leaseback Transaction.

Section 4.10 Limitation on Dividend and other Payment Restrictions Affecting Restricted Subsidiaries.

(a) Except as provided in paragraph (b), the Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to:

 

  (1) pay dividends or make any other distributions on any Capital Stock of such Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,

 

  (2) pay any Indebtedness owed to the Company or any other Restricted Subsidiary,

 

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  (3) make loans or advances to the Company or any other Restricted Subsidiary or

 

  (4) sell, lease or transfer any of its property or assets to the Company or any other Restricted Subsidiary.

(b) The provisions of paragraph (a) shall not restrict any encumbrances or restrictions:

 

  (1) in the Notes, the Subsidiary Guarantees, the Indenture, the Security Documents, or under any Permitted Priority Secured Indebtedness of the Company or any Subsidiary Guarantor or Permitted Priority Subsidiary Guarantee of any Subsidiary Guarantor, and any extensions, refinancings, renewals, supplements, amendments or replacements of any of the foregoing agreements; provided that the encumbrances and restrictions in any such extension, refinancing, renewal, supplement, amendment or replacement, taken as a whole, are no less favorable in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed, supplemented, amended or replaced;

 

  (2) existing under or by reason of applicable law;

 

  (3) existing with respect to any Person or the property or assets of such Person acquired by the Company or any Restricted Subsidiary, existing at the time of such acquisition and not incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired, and any extensions, refinancing, renewals or replacements thereof; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no less favorable in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced;

 

  (4) in the case of clause (4) of paragraph (a), that (i) restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract or similar property or asset, or (ii) exist by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by the Indenture or (iii) arise or are agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Company or any Restricted Subsidiary in any manner material to the Company or any Restricted Subsidiary; or

 

  (5) with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary that is permitted by Section 4.06, Section 4.11 and Section 4.15.

 

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Section 4.11 Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries. The Company will not sell, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell any shares of Capital Stock of a Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) except:

(1) to the Company or a Wholly-Owned Restricted Subsidiary;

(2) to the extent such Capital Stock represents director’s qualifying shares or is required by applicable law to be held by a Person other than the Company or a Wholly-Owned Restricted Subsidiary;

(3) the sale of shares of all the Capital Stock of a Restricted Subsidiary if permitted under, and in accordance with Section 4.15; and

(4) the issuance and sale of Capital Stock of a Restricted Subsidiary (which remains a Restricted Subsidiary after any such issuance or sale); provided that the Company or such Restricted Subsidiary applies the Net Cash Proceeds of such issuance or sale in accordance with Section 4.15.

Section 4.12 Limitation on Issuances of Guarantees by Restricted Subsidiaries.

(a) The Company will not permit any Restricted Subsidiary which is not a Subsidiary Guarantor, directly or indirectly, to Guarantee any Indebtedness (“ Guaranteed Indebtedness ”) of the Company or any other Restricted Subsidiary, unless (i) (x) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for an unsubordinated Subsidiary Guarantee of payment of the Notes by such Restricted Subsidiary and (y) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee until the Notes have been paid in full or (ii) such Guaranteed Indebtedness is permitted by clauses (2), (3), (4) or ((8))(ii) (other than, in the case of ((8))(ii), a Guarantee by a Restricted Subsidiary organized under the laws of the PRC of the Indebtedness of a non-PRC Restricted Subsidiary) under Section 4.06(b).

(b) If the Guaranteed Indebtedness (i) ranks pari passu in right of payment with the Notes or any Subsidiary Guarantee, then the Guarantee of such Guaranteed Indebtedness shall rank pari passu in right of payment with, or subordinated to, the Subsidiary Guarantee or (ii) is subordinated in right of payment to the Notes or any Subsidiary Guarantee, then the Guarantee of such Guaranteed Indebtedness shall be subordinated in right of payment to the Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated to the Notes or the Subsidiary Guarantee.

 

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Section 4.13 Repurchase of Notes Upon a Change of Control Triggering Event. The Company must commence, within 30 days of the occurrence of a Change of Control Triggering Event, and consummate an Offer to Purchase for all Notes then Outstanding (a “ Change of Control Offer ”), at a purchase price equal to 101% of their principal amount plus accrued and unpaid interest, if any, to the Payment Date.

Section 4.14 Restriction on an Entire Sale Transaction.

(a) The Company will not, and will not permit any Restricted Subsidiary to, enter into or consummate an Entire Sale Transaction unless, (i) as a condition thereof, the consideration received consists of net cash proceeds to the Company of not less than an amount sufficient to pay the Entire Sale Transaction Redemption Price in full and without restriction; and (ii) the Company complies with Section 3.04 of this Indenture.

(b) Pending the application of the proceeds from an Entire Sale Transaction to the payment of the Entire Sale Transaction Redemption Price, the Company shall deposit and invest such proceeds in the Mandatory Prepayment Account.

Section 4.15 Limitation on Asset Sales.

(a) The Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sales, unless:

 

  (1) no Default shall have occurred and be continuing or would occur as a result of such Asset Sale;

 

  (2) the consideration received by the Company or such Restricted Subsidiary, as the case may be, is at least equal to the Fair Market Value of the assets sold or disposed of;

 

  (3) in the case of an Asset Sale that constitutes an Asset Disposition, the Company could Incur at least US$1.00 of Indebtedness under Section 4.06(a) after giving pro forma effect to such Asset Disposition; and

 

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  (4) at least 75% of the consideration received consists of cash, Temporary Cash Investments or Replacement Assets; provided that in the case of an Asset Sale in which the Company or such Restricted Subsidiary receives Replacement Assets (i) the Company delivers to the Trustee an Officer’s Certificate stating that (a) the Company’s chief executive officer or chief financial officer has approved such Asset Sale, (b) such Asset Sale is on fair and reasonable terms on an arm’s length basis, and (c) the Fair Market Value of the Replacement Assets, together with any cash consideration is no less than the Fair Market Value of the assets subject to such Asset Sale, and (ii) with respect to any such Asset Sale involving an aggregate consideration with a Fair Market Value in excess of US$25,000,000 (or the Dollar Equivalent thereof), the Company shall deliver to the Trustee an opinion as to the fairness to the Company or such Restricted Subsidiary of such Asset Sale from a financial point of view issued by an Independent Financial Advisor. For purposes of this clause (4), each of the following will be deemed to be cash:

 

  (i) any liabilities, as shown on the Company’s most recent consolidated balance sheet prepared in accordance with IFRS, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are actually assumed by the transferee of any such assets pursuant to a customary, assumption, assignment, novation or similar agreement that fully and unconditionally releases the Company or such Restricted Subsidiary from further liability; and

 

  (ii) any securities, notes or other obligations received by the Company or any Restricted Subsidiary from such transferee that are contemporaneously, subject to ordinary settlement periods, converted by the Company or such Restricted Subsidiary into cash, to the extent of the cash received in that conversion.

(b) Within 360 days after the receipt of any Net Cash Proceeds from an Asset Sale, the Company (or the applicable Restricted Subsidiary, as the case may be) may apply such Net Cash Proceeds to:

 

  (1) permanently repay Senior Indebtedness of the Company or any Restricted Subsidiary (and, if such Senior Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto) in each case owing to a Person other than the Company or a Restricted Subsidiary; or

 

  (2) make an Investment in Replacement Assets, provided that such Investment occurs within 360 days following the receipt of such Net Cash Proceeds.

(c) Pending the final application of any Net Cash Proceeds from an Asset Sale in excess of US$10,000,000, the Company shall deposit and invest such Net Cash Proceeds in the Mandatory Prepayment Account.

(d) Any Net Cash Proceeds from Asset Sales that are not applied or invested as provided in paragraph (b) will constitute “ Excess Proceeds .” Excess Proceeds of less than US$5,000,000 (or the Dollar Equivalent thereof) will be carried forward and accumulated. When the aggregate amount of Excess Proceeds exceeds US$10,000,000 (or the Dollar Equivalent thereof), within 10 days thereof, the Company must make an Offer to Purchase to all Holders (and, with respect to Indebtedness of the Company, that ranks equally with, or senior to, the Notes, containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets, to the holders of such Indebtedness, including any Permitted Priority Secured Indebtedness) to purchase the maximum principal amount of Notes (and any such other pari passu Indebtedness) that may be purchased out of the Excess Proceeds. The offer price in any Offer to Purchase will be equal to 100% of the principal amount plus accrued and unpaid interest to the date of purchase, and will be payable in cash.

 

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(e) If any Excess Proceeds remain after consummation of an Offer to Purchase, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes (and any other pari passu or senior Indebtedness) tendered in such Offer to Purchase exceeds the amount of Excess Proceeds, the Trustee will select the Notes (and such other pari passu or senior Indebtedness) to be purchased on a pro rata basis or in accordance with applicable Depositary procedures. Upon completion of each Offer to Purchase, the amount of Excess Proceeds will be reset at zero.

(f) Notwithstanding the foregoing, the Company will not, and will not permit any Restricted Subsidiary to, sell, transfer or otherwise dispose of any shares of Capital Stock of Sino-Forest (China) Investments Limited or of any Restricted Subsidiary that owns directly or indirectly any shares of Capital Stock of Sino-Forest (China) Investments Limited.

Section 4.16 Limitation on Transactions with Shareholders and Affiliates.

(a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction or arrangement (including the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with (x) any holder (or any Affiliate of such holder) of 5% or more of any class of Capital Stock of the Company or (y) any Affiliate of the Company or any Restricted Subsidiary (each an “ Affiliate Transaction ”), unless:

 

  (1) the Affiliate Transaction is on fair and reasonable terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or the relevant Restricted Subsidiary with an unrelated Person; and

 

  (2) the Company delivers to the Trustee:

 

  (i) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of US$5,000,000 (or the Dollar Equivalent thereof), a Board Resolution set forth in an Officer’s Certificate certifying that such Affiliate Transaction complies with this covenant and such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and

 

  (ii) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of US$10,000,000 (or the Dollar Equivalent thereof), an opinion as to the fairness to the Company or such Restricted Subsidiary of such Affiliate Transaction from a financial point of view issued by an Independent Financial Advisor.

 

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(b) The foregoing paragraph does not apply to

 

  (1) the payment of reasonable and customary regular fees to directors of the Company who are not employees of the Company;

 

  (2) transactions between or among the Company and any of its Wholly-Owned Restricted Subsidiaries or between or among Wholly-Owned Restricted Subsidiaries;

 

  (3) issuances or sales of Capital Stock (other than Disqualified Stock) of the Company or options, warrants or other rights to acquire such Capital Stock;

 

  (4) transactions or payments pursuant to any employee, officer or director compensation or benefit plans or similar arrangements entered into in the ordinary course approved by a majority of the Board of Directors of the Company in good faith; or

 

  (5) any Restricted Payment of the type in clauses (i), (ii) or (iii) under Section 4.07(a) if permitted by Section 4.07.

In addition, the requirements of clause (2) of paragraph (a) shall not apply to (i) transactions between or among the Company and any of its Restricted Subsidiaries that is not a Wholly-Owned Restricted Subsidiary to the extent entered into in the ordinary course of business, (ii) Investments (other than Permitted Investments) not prohibited under Section 4.07, (iii) transactions pursuant to agreements in effect on the Original Issue Date and described in the Plan Supplement or in the Information Circular, or any amendment or modification or replacement thereof, so long as such amendment, modification or replacement is not more disadvantageous to the Company and its Restricted Subsidiaries than the original agreement in effect on the Original Issue Date; provided that, in the case of (iii), such transaction is entered into in the ordinary course of business.

Section 4.17 Limitation on the Company’s Business Activities. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, engage in any business other than Permitted Businesses; provided, however, that the Company or any Restricted Subsidiary may own Capital Stock of an Unrestricted Subsidiary or joint venture or other entity that is engaged in a business other than Permitted Businesses as long as any Investment therein was not prohibited when made by Section 4.07.

Section 4.18 Designation of Restricted and Unrestricted Subsidiaries.

(a) The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary, unless a Subsidiary of such Restricted Subsidiary is a Restricted Subsidiary (and is not concurrently being designated as an Unrestricted Subsidiary); provided that

 

  (1) Sino-Forest (China) Investments Limited shall always be a Restricted Subsidiary,

 

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  (2) such designation would not cause a Default,

 

  (3) a Restricted Subsidiary cannot be a Subsidiary of an Unrestricted Subsidiary and

 

  (4) the Investment deemed to have been made thereby in such newly-designated Unrestricted Subsidiary would be permitted to be made under Section 4.07.

(b) The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that:

 

  (1) such designation shall not cause a Default,

 

  (2) any Indebtedness of such Unrestricted Subsidiary outstanding at the time of such designation which will be deemed to have been Incurred by such newly-designated Restricted Subsidiary as a result of such designation would be permitted to be Incurred under Section 4.06;

 

  (3) any Lien on the property of such Unrestricted Subsidiary at the time of such designation which will be deemed to have been incurred by such newly-designated Restricted Subsidiary as a result of such designation would be permitted to be incurred under Section 4.08;

 

  (4) such Unrestricted Subsidiary is not a Subsidiary of another Unrestricted Subsidiary (that is not concurrently being designated as a Restricted Subsidiary);

 

  (5) if such Restricted Subsidiary is not organized under the laws of the PRC and is a not a Foreign Subsidiary, such Restricted Subsidiary shall upon such designation execute and deliver to the Trustee a supplemental indenture in the form of Exhibit E by which such Restricted Subsidiary shall become a Subsidiary Guarantor, and

 

  (6) if such Restricted Subsidiary is not organized under the laws of the PRC or any other jurisdiction that prohibits the property and assets (including the Capital Stock) of such Restricted Subsidiary from being pledged, mortgaged or charged to secure the obligations of the Company or a Subsidiary Guarantor, all property and assets (including the Capital Stock) of such Restricted Subsidiary owned by the Company or any other Restricted Subsidiary shall be mortgaged, charged or pledged as required under Article 10.

(c) Any designation by the Board of Directors of a Subsidiary as a Restricted Subsidiary or Unrestricted Subsidiary will be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to the designation and an Officer’s Certificate certifying that the designation complied with the foregoing provisions.

 

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Section 4.19 Provision of Financial Statements, Reports and Compliance Certificate.

(a) The Company will file with the Trustee and provide the holders of the Notes with copies of all financial statements or financial reports that are distributed by the Company to its members from time to time. As of the Original Issue Date, the Memorandum and Articles of Association of the Company provide that the Board of Directors will cause to be delivered to each member:

 

  (1) as soon as available, but not later than 180 days after the end of each financial year, a copy of the consolidated balance sheet of the Company as of the end of such financial year and the related consolidated statements of income, changes in equity and cash flows for such financial year, setting forth in each case in comparative form the figures for the previous year, all in reasonable detail and accompanied by a management summary and analysis of the operations for the Company for such financial year; and

 

  (2) as soon as available, but not later than 90 days after the end of each financial half-year of the Company, a copy of the consolidated balance sheet of the Company as of the end of such financial half-year and the related consolidated statements of income, changes in equity and cash flows for such financial half-year, and accompanied by a management summary and analysis of the operations for the Company for such financial half-year.

(b) In the event that the provisions of the Memorandum and Articles of Association of the Company referred to in Section 4.19(a) are amended after the Original Issue Date, the Company shall provide written notice of such amendment to the Trustee as soon as practicable following the enactment of such amendment.

(c) The Company will deliver to the Trustee, as soon as possible and in any event within 30 days after the Company becomes aware or should reasonably become aware of the occurrence of a Default, an Officer’s Certificate setting forth the details of the Default, and the action which the Company proposes to take with respect thereto.

(d) Delivery of such reports and information to the Trustee is for informational purposes only and the Trustee’s receipt of them will not constitute constructive notice of any information contained therein or determinable from information contained therein (other than information contained in Officer’s Certificates delivered under Section 4.19(c)), including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer’s Certificates).

(e) The Company and the Subsidiary Guarantors also shall comply with any other applicable requirements of TIA § 314(a)(4).

 

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Section 4.20 Additional Amounts.

(a) All payments of, or in respect of, principal of, and premium (if any) and interest (including PIK Interest) in respect of the Notes (including PIK Notes) or the Subsidiary Guarantees will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Company, a Surviving Person or the applicable Subsidiary Guarantor is organized or resident for tax purposes (or any political subdivision or taxing authority thereof or therein) (each a “ Relevant Jurisdiction ”), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction is so required, the Company, a Surviving Person or the applicable Subsidiary Guarantor, as the case may be, will pay such additional amounts (“ Additional Amounts ”) as will result in receipt by the Holder of each Note or the Subsidiary Guarantees, as the case may be, of such amounts as would have been received by such Holder had no such withholding or deduction been required, except that no Additional Amounts shall be payable:

 

  (1) for or on account of

 

  (A) any tax, duty, assessment or other governmental charge that would not have been imposed but for: (i) the existence of any present or former connection between the Holder of such Note and the Relevant Jurisdiction other than merely holding such Note, including such Holder being or having been a national, domiciliary or resident of or treated as a resident thereof or being or having been physically present or engaged in a trade or business therein or having or having had a permanent establishment therein; (ii) the presentation of such Note (in cases in which presentation is required) more than 30 days after the later of the date on which the payment of the principal of, premium, if any, and interest on, such Note became due and payable pursuant to the terms thereof or was made or duly provided for, except to the extent that the Holder thereof would have been entitled to such Additional Amounts if it had presented such Note for payment on any date within such 30 day period; (iii) the failure of the Holder, despite being required by law, to comply with a timely request of the Company addressed to the Holder or beneficial owner to provide information concerning such Holder’s nationality, residence, identity or connection with any Relevant Jurisdiction, if and to the extent that due and timely compliance with such request would have reduced or eliminated any taxes as to which Additional Amounts would have otherwise been payable to such Holder; or (iv) the presentation of such Note (where presentation is required) for payment in the Relevant Jurisdiction, unless such Note could not have been presented for payment elsewhere;

 

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  (B) any estate, inheritance, gift, sale, transfer, personal property or similar tax, assessment or other governmental charge;

 

  (C) any withholding or deduction that is imposed or levied on a payment to an individual and is required to be made pursuant to European Council Directive 2004/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of November 26-27, 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directives; or

 

  (D) any combination of taxes, duties, assessments or other governmental charges referred to in the preceding clauses (A), (B) and (C); or

 

  (2) with respect to any payment of the principal of, or any premium, if any, or interest on, such Note or any payment under any Subsidiary Guarantee to the Holder, if such Holder is a fiduciary, partnership or person other than the sole beneficial owner of any payment to the extent that such payment would be required to be included in the income under the laws of the Relevant Jurisdiction, for tax purposes, of a beneficiary or settlor, with respect to the fiduciary, or a member of that partnership or a beneficial owner who would not have been entitled to such Additional Amounts had that beneficiary, settlor, partner, person or beneficial owner been the registered Holder thereof.

(b) Whenever in this Indenture or in the Notes there is mentioned, in any context, the payment of principal, any premium or interest, in respect of any Note or Subsidiary Guarantee, such mention shall be deemed to include payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

Section 4.21 Permitted Priority Secured Indebtedness. The Company and each Subsidiary Guarantor may create Liens on the Collateral ranking senior to the Lien for the benefit of the Holders to secure Permitted Priority Secured Indebtedness of the Company and any Permitted Priority Subsidiary Guarantee of a Subsidiary Guarantor; provided that (i) the principal amount of such Permitted Priority Secured Indebtedness may not exceed the amount of the Permitted Priority Secured Indebtedness Cap, (ii) the Permitted Priority Trustee on behalf of the holders of such Indebtedness becomes party to an Intercreditor Agreement providing, among other things, (1) that the Liens in and to the Collateral securing the Notes shall rank second only to the Liens in and to the Collateral securing the Permitted Priority Secured Indebtedness granted in favor of the Permitted Priority Trustee, all to the extent and in the manner set forth in such Intercreditor Agreement and containing the Pre-Agreed Intercreditor Terms, (2) for the conditions under which the parties thereto will consent to the release of or granting of any Lien on such Collateral, and (3) for the conditions under which the parties thereto will enforce their rights with respect to

 

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such Collateral and the Indebtedness secured thereby, (iii) the instrument or agreement creating such Permitted Priority Secured Indebtedness contains provisions with respect to releases of Collateral and such Permitted Priority Subsidiary Guarantees substantially similar to and no more restrictive on the Company and the Subsidiary Guarantors than the provisions of the Indenture and the Security Documents and (iv) the Company and such Subsidiary Guarantor deliver to the Security Trustee an Opinion of Counsel and Officer’s Certificates with respect to corporate and collateral matters in connection with the Security Documents, stating that either (x) all necessary actions have been taken with respect to the recording, registering and filing of the Security Documents, financing statements or other instruments necessary to make effective the Liens intended to be created by the Security Documents, and reciting the details of such action, (y) no such action is necessary to make such Liens effective or (z) otherwise in the form and substance as set forth in the Security Documents. The Trustee and the Security Trustee are permitted and authorized, without the consent of any Holder, to enter into any amendments to the Security Documents or this Indenture and take any other action necessary to permit the creation and registration of Liens on the Collateral to secure Permitted Priority Secured Indebtedness in accordance with this paragraph (including the appointment of any collateral agent or trustee (including the Security Trustee) under the Intercreditor Agreement to hold the Collateral on behalf of the Holders and the holders of Permitted Priority Secured Indebtedness). The Collateral securing the obligations of the Company and the Subsidiary Guarantors in favour of the Holders of any Permitted Priority Secured Indebtedness shall in no event be comprised of any Collateral in addition to the Collateral securing the obligations of the Company and the Subsidiary Guarantors in respect of the Notes unless such additional collateral is also granted to the Trustee and the Security Trustee for the benefit of the Holders.

Except for certain Permitted Liens and the Permitted Priority Secured Indebtedness as described in this Indenture, the Company and its Restricted Subsidiaries will not be permitted to issue or Incur any other Indebtedness secured by all or any portion of the Collateral without the consent of each Holder of the Notes then outstanding.

In entering into any amendments to the Security Documents or the Indenture, or entering into any new Security Documents in connection with this Section 4.21, the Trustee and the Security Trustee shall be entitled to conclusively rely upon an Opinion of Counsel and an Officer’s Certificate, in addition to the documents required by Section 12.05 hereof, each stating that such amendments, or new Security Documents, are being entered into in accordance with, and are permitted by, the terms of the Indenture and the Security Documents and that the Permitted Priority Secured Indebtedness is permitted by the terms of the Indenture and the Security Documents.

Section 4.22 Holders to be Bound by Intercreditor Agreement Each Holder shall be bound by the provisions of any Intercreditor Agreement entered into by the Trustee and the Security Trustee which contains terms and conditions substantially the same as the Pre-Agreed Intercreditor Terms and the Trustee and the Security Trustee are hereby authorized and directed to enter into any such Intercreditor Agreement with the Permitted Priority Trustee for and on behalf of the Holders of any Permitted Priority Secured Indebtedness. The Intercreditor Agreement will also provide that when the property and assets (including the Capital Stock) of any Person that is or becomes a Restricted Subsidiary (other than Persons organized under the laws of the PRC or any other jurisdiction that prohibits such Restricted Subsidiaries from guaranteeing the payment of the Notes) is delivered as Security pursuant to Section 10.02 of the

 

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Indenture, such property and assets (including the Capital Stock) will be deemed to be Collateral, and subject to the sharing of interest in such Collateral under the terms of the Intercreditor Agreement.

ARTICLE 5

CONSOLIDATION, MERGER AND SALE OF ASSETS

Section 5.01 Consolidation, Merger and Sale of Assets.

(a) The Company will not consolidate with, merge with or into another Person, permit any Person to merge with or into it, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and its Restricted Subsidiaries’ properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions), unless:

 

  (1) the Company shall be the continuing Person, or the Person (if other than it) formed by such consolidation or merger or that acquired or leased such property and assets (the “ Surviving Person ”) shall be an exempted company limited by shares organized and validly existing under the laws of the Cayman Islands and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, all the obligations of the Company under the Indenture, the Notes and the Security Documents, as the case may be, and the Indenture, the Notes and the Security Documents, as the case may be, shall remain in full force and effect;

 

  (2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

 

  (3) immediately after giving effect to such transaction on a pro forma basis, the Company or the Surviving Person, as the case may be, shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction;

 

  (4) immediately after giving effect to such transaction on a pro forma basis the Company or the Surviving Person, as the case may be, could Incur at least US$1.00 of Indebtedness under Section 4.06(a);

 

  (5) the Company delivers to the Trustee (x) an Officer’s Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (3) and (4)) and (y) an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with; and

 

  (6) each Subsidiary Guarantor, unless such Subsidiary Guarantor is the Person with which the Company has entered into a transaction described under this Section 5.01(a), shall execute and deliver a supplemental indenture confirming that its Subsidiary Guarantee (as endorsed on the Notes) shall apply to the obligations of the Company or the Surviving Person in accordance with the Notes and the Indenture.

 

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(b) No Subsidiary Guarantor will consolidate with, merge with or into another Person, permit any Person to merge with or into it, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and its Restricted Subsidiaries’ properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions) to another Person (other than the Company or another Subsidiary Guarantor), unless:

 

  (1) such Subsidiary Guarantor shall be the continuing Person, or the Person (if other than it) formed by such consolidation or merger or that acquired or leased such property and assets shall be the Company, another Subsidiary Guarantor or shall become a Subsidiary Guarantor concurrently with the transaction;

 

  (2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

 

  (3) immediately after giving effect to such transaction on a pro forma basis, the Company shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction;

 

  (4) immediately after giving effect to such transaction on a pro forma basis, the Company could Incur at least US$1.00 of Indebtedness under Section 4.06(a);

 

  (5) the Company delivers to the Trustee (x) an Officer’s Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (3) and (4)) and (y) Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with;

provided that this paragraph (b) shall not apply to any Entire Sale Transaction, which transaction shall be subject to and governed by Section 3.04 and Section 4.14 and shall not otherwise apply to any sale or other disposition that complies with the Section 4.15 or any Subsidiary Guarantor whose Subsidiary Guarantee is unconditionally released in accordance with Section 11.11.

 

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ARTICLE 6

DEFAULT AND REMEDIES

Section 6.01 Events of Default. The following events will be defined as “Events of Default” in the Indenture:

(1) default in the payment of principal of (or premium, if any, on) the Notes when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise;

(2) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days;

(3) default in the performance or breach of the provisions of the covenants described under Sections 4.06, 4.07, 4.08 or 5.01, the failure by the Company to make or consummate an Offer to Purchase in the manner described under Section 4.13 or Section 4.15, the failure by the Company to redeem the Notes in the manner described in Section 3.04 or the failure by the Company to create, or cause its Restricted Subsidiaries to create, a First Priority Lien on the Collateral (subject to any Permitted Lien) in accordance or otherwise comply with the covenant described under Article 10;

(4) the Company or any Restricted Subsidiary defaults in the performance of or breaches any other covenant or agreement in the Indenture or under the Notes (other than a default specified in clause (1), (2) or (3) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes;

(5) there occurs with respect to any Indebtedness of the Company or any Restricted Subsidiary having an outstanding principal amount of US$50,000,000 (or the Dollar Equivalent thereof) or more in the aggregate for all such Indebtedness of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (i) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and/or (ii) the failure to make a principal payment when due;

(6) any final judgment or order for the payment of money in excess of US$50,000,000 (or the Dollar Equivalent thereof) in the aggregate for all such final judgments or orders shall be rendered against the Company or any Restricted Subsidiary and shall not be paid or discharged for a period of 60 days during which a stay of enforcement of such final judgment or order shall not be in effect;

(7) a court having jurisdiction in the premises enters a decree or order for (i) relief in respect of the Company or any Restricted Subsidiary in an involuntary case or proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (including any proceeding under any corporate law seeking an arrangement of, or stay of proceedings to enforce, some or all of its debts), (ii) appointment of a receiver, liquidator, assignee, custodian, monitor, trustee, sequestrator or similar official of the Company or any Restricted Subsidiary or for all or

 

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substantially all of the property and assets of the Company or any Restricted Subsidiary or (iii) the winding up or liquidation of the affairs of the Company or any Restricted Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; provided, however, that any filing or the commencement of any proceedings by any Person pursuant to paragraph 61 of the Sanction Order to recognize or enforce such Sanction Order shall not constitute an Event of Default for the purposes of subparagraphs (i) or (ii) above. For the purposes of this Indenture, (x) “Plan” means the Plan of Compromise and Reorganization filed by Sino-Forest Corporation pursuant to the Companies’ Creditors Arrangement Act (Canada) and the Canada Business Corporations Act (Canada), dated December 3, 2012, as such Plan may be amended, supplemented or restated from time to time in accordance with the terms thereof or any order (the “ Order ”) of the Ontario Superior Court of Justice (Commercial List) (the “ Court ”) made in connection with such Plan, and (y) “Sanction Order” means the Order of the Court sanctioning and approving the Plan, dated December 10, 2012;

(8) the Company or any Restricted Subsidiary (i) commences a voluntary case or proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (including any proceeding under any corporate law seeking an arrangement of, or stay of proceedings to enforce, some or all of its debts), or consents to the entry of an order for relief in an involuntary case or proceeding under any such law, (ii) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, monitor, trustee, sequestrator or similar official of the Company or any Restricted Subsidiary or for all or substantially all of the property and assets of the Company or any Restricted Subsidiary or (iii) effects any general assignment for the benefit of creditors; provided, however, that any filing or the commencement of any proceedings by any Person pursuant to paragraph 61 of the Sanction Order to recognize or enforce such Sanction Order shall not constitute an Event of Default for the purposes of subparagraphs (i) or (ii) above;

(9) any Subsidiary Guarantor repudiates its obligations under its Subsidiary Guarantee or, except as permitted by the Indenture, any Subsidiary Guarantee is determined to be unenforceable or invalid or shall for any reason cease to be in full force and effect;

(10) any default by the Company or any Subsidiary Guarantor in the performance of any of its obligations under the Security Documents or the Indenture, which adversely affects the enforceability, validity, perfection or priority of the applicable Lien on the Collateral or which adversely affects the condition or value of the Collateral, taken as a whole, in any material respect; or

(11) the Company or any Subsidiary Guarantor repudiates its obligations under any Security Document or, other than in accordance with the Indenture and the Security Documents, any Security Document ceases to be or is not in full force and effect or the Trustee ceases to have a first priority Lien in the Collateral (subject to any Permitted Liens).

 

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Section 6.02 Acceleration.

(a) If an Event of Default (other than an Event of Default specified in clause (7) or (8) of Section 6.01) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then Outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the principal of, premium, if any, and accrued and unpaid interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium, if any, and accrued and unpaid interest shall be immediately due and payable. In the event of a declaration of acceleration because an Event of Default set forth in clause (5) above has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to clause (5) shall be remedied or cured by the Company or the relevant Restricted Subsidiary or waived by the holders of the relevant Indebtedness within 60 days after the declaration of acceleration with respect thereto.

(b) If an Event of Default specified in clause (7) or (8) above occurs with respect to the Company or any Restricted Subsidiary, the principal of, premium, if any, and accrued and unpaid interest on the Notes then outstanding shall automatically become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of at least a majority in principal amount of the outstanding Notes by written notice to the Company and to the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if (x) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived (y) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction, and (z) the Company has paid to the Trustee all fees, expenses and amounts owed to the Trustee in connection with such Event of Default.

Section 6.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue, in its own name or as trustee of an express trust, any available remedy by proceeding at law or in equity to collect the payment of principal of and interest on the Notes or to enforce the performance of any provision of the Notes or the Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. In addition, if an Event of Default occurs and is continuing, the Trustee may, and shall upon request of Holders of at least 25% in aggregate principal amount of outstanding Notes, instruct the Security Trustee to foreclose on the Collateral in accordance with the terms of the Security Documents and take such further action on behalf of the Holders of the Notes with respect to the Collateral as the Trustee deems appropriate or as instructed by such Holders.

Section 6.04 Waiver of Past Defaults. Except as otherwise provided in Sections 6.02, 6.07 and 9.02, the Holders of at least a majority in principal amount of the outstanding Notes may, by notice to the Company and the Trustee, waive all past Defaults and rescind and annul a declaration of the acceleration and its consequences. Upon such waiver, the Default will cease to exist, and any Event of Default arising therefrom will be deemed to have been cured, but no such waiver will extend to any subsequent or other Default or impair any right consequent thereon.

 

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Section 6.05 Control by Majority. The Holders of at least a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or the Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders of Notes not joining in the giving of such direction, and may take any other action it deems proper that is not inconsistent with any such direction received from Holders of Notes.

Section 6.06 Limitation on Suits. A Holder may not institute any proceeding, judicial or otherwise, with respect to the Indenture or the Notes, or for the appointment of a receiver or trustee, or for any other remedy under the Indenture or the Notes, unless:

(1) the Holder has previously given to the Trustee written notice of a continuing Event of Default;

(2) Holders of at least 25% in aggregate principal amount of Outstanding Notes have made written request to the Trustee to institute proceedings in respect of the Event of Default in its own name as Trustee under the Indenture;

(3) Holders have offered to the Trustee indemnity reasonably satisfactory to the Trustee against any costs, liabilities or expenses to be incurred in compliance with such request;

(4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

(5) during such 60-day period, the Holders of a majority in aggregate principal amount of the Outstanding Notes have not given the Trustee a direction that is inconsistent with such written request.

Section 6.07 Rights of Holders to Receive Payment. Notwithstanding anything to the contrary, the right of a Holder of a Note to receive payment of principal of or interest on its Note, or to bring suit for the enforcement of any such payment on or after the due date expressed in the Notes, shall not be impaired or affected without the consent of that Holder.

Section 6.08 Collection Suit by Trustee. If an Event of Default in payment of principal or interest specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name, as trustee of an express trust, for the whole amount of principal and accrued interest remaining unpaid, together with interest on overdue principal and, to the extent lawful, overdue installments of interest, in each case at the rate specified in the Notes, and such further amount as is sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, the Security Trustee or their respective agents and counsel, and any other amounts due the Trustee or the Security Trustee hereunder or under the Security Documents.

Section 6.09 Trustee May File Proofs of Claim. The Trustee may file proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the

 

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Trustee or the Security Trustee (including any claim for the compensation, expenses, disbursements and advances of the Trustee, the Security Trustee, or their respective agents and counsel, and any other amounts due the Trustee or the Security Trustee hereunder) and the Holders allowed in any judicial proceedings relating to the Company or any Subsidiary Guarantor or their respective creditors or property, and is entitled and empowered to collect, receive and distribute any money, securities or other property payable or deliverable upon conversion or exchange of the Notes or upon any such claims. Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee or the Security Trustee and, if the Trustee consents to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, the Security Trustee or their respective agents and counsel, and any other amounts due the Trustee or the Security Trustee hereunder or under the Security Document. Nothing in the Indenture will be deemed to empower the Trustee or the Security Trustee to authorize or consent to, or accept or adopt on behalf of any Holder, any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee or the Security Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10 Priorities. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order:

First : to the Trustee for all amounts due hereunder or owed to the Security Trustee;

Second : to Holders for amounts then due and unpaid for principal of and interest on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, and to the Paying Agent for any amounts then due and unpaid to it, ratably with the Holders; and

Third : to the Company or as a court of competent jurisdiction may direct.

The Trustee, upon written notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section.

Section 6.11 Restoration of Rights and Remedies. If the Trustee or any Holder has instituted a proceeding to enforce any right or remedy under the Indenture and the proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to the Holder, then, subject to any determination in the proceeding, the Company, any Subsidiary Guarantors, the Trustee and the Holders will be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Company, any Subsidiary Guarantors, the Trustee and the Holders will continue as though no such proceeding had been instituted.

Section 6.12 Undertaking for Costs. In any suit for the enforcement of any right or remedy under the Indenture or in any suit against the Trustee or the Security Trustee, as the case may be, for any action taken or omitted by it as Trustee or the Security Trustee, a court may require any party litigant in such suit (other than the Trustee or the Security Trustee) to file an undertaking to

 

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pay the costs of the suit, and the court may assess reasonable costs, including reasonable attorney’s fees and expenses, against any party litigant (other than the Trustee or the Security Trustee) in the suit having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit instituted by the Trustee or the Security Trustee, as the case may be, or by a Holder to enforce payment of principal of or interest on any Note on the respective due dates, or a suit instituted by Holders of more than 10% in principal amount of the Outstanding Notes.

Section 6.13 Rights and Remedies Cumulative. No right or remedy conferred or reserved to the Trustee or to the Holders under this Indenture is intended to be exclusive of any other right or remedy, and all such rights and remedies are, to the extent permitted by law, cumulative and in addition to every other right and remedy hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or exercise of any right or remedy hereunder, or otherwise, will not prevent the concurrent assertion or exercise of any other right or remedy.

Section 6.14 Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default will impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

Section 6.15 Waiver of Stay, Extension or Usury Laws. The Company and each Subsidiary Guarantor covenants, to the extent that it may lawfully do so, that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company or the Subsidiary Guarantor from paying all or any portion of the principal of, or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of the Indenture. The Company and each Subsidiary Guarantor hereby expressly waives, to the extent that it may lawfully do so, all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

Section 6.16 Compliance Certificate.

(a) Officers of the Company, one of whom must be the Company’s principal executive officer, principal financial officer or principal accounting officer, must certify in an Officer’s Certificate, on or before a date not more than 120 days after the end of each fiscal year, that a review has been conducted of the activities of the Company and its Restricted Subsidiaries and the Company’s and its Restricted Subsidiaries’ performance under this Indenture and that the Company has fulfilled all obligations hereunder, or, if there has been a default in the fulfillment of any such obligations, specifying each such default, the nature and status thereof and what action the Company is taking or proposes to take with respect thereto.

(b) If the Company shall become aware that (i) any Default or Event of Default has occurred and is continuing or (ii) any Holder seeks to exercise any remedy hereunder with respect to a claimed Default under this Indenture or the Notes, the Company shall immediately deliver to the Trustee an Officer’s Certificate specifying such event, notice or other action (including any action the Company is taking or proposes to take in respect thereof).

 

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ARTICLE 7

THE TRUSTEE

Section 7.01 General.

(a) The duties and responsibilities of the Trustee are as set forth herein. Whether or not expressly so provided, every provision of the Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee is subject to this Article.

(b) Except during the continuance of an Event of Default, the Trustee need perform only those duties that are specifically set forth in the Indenture and no others, and no implied covenants or obligations will be read into the Indenture against the Trustee. In case an Event of Default has occurred and is continuing, the Trustee shall exercise those rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

(c) No provision of the Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct or bad faith except that:

 

  (1) this paragraph does not limit the effect of clause (b) of this Section 7.01;

 

  (2) the Trustee will not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

 

  (3) the Trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.

(d) Every provision of the Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article 7 and to the provisions of the TIA.

Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01 as the context may apply.

Section 7.02 Certain Rights of Trustee. Subject to Section 7.01:

(1) In the absence of bad faith on its part, the Trustee may rely, and will be protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document (whether in original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the

 

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document, but, in the case of any document which is specifically required to be furnished to the Trustee pursuant to any provision hereof, the Trustee shall examine the document to determine whether it conforms to the requirements of the Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). The Trustee, in its discretion, may make further inquiry or investigation into such facts or matters as it sees fit.

(2) Before the Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel conforming to Section 12.05 and Section 12.06 and the Trustee will not be liable for any action it takes or omits to take in good faith in reliance on the certificate or opinion.

(3) The Trustee may act through its attorneys and agents and will not be responsible for the misconduct or negligence of any attorney or agent appointed with due care by it hereunder.

(4) The Trustee will not be under any obligation to exercise any of the rights or powers vested in it by the Indenture at the request or direction of any of the Holders, unless such Holders have offered to the Trustee, reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction.

(5) The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers or for any action it takes or omits to take in accordance with the direction of the Holders relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under the Indenture.

(6) The Trustee may consult with counsel or other professional advisors of its selection, and the written advice of such counsel or advisors or any Opinion of Counsel will be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

(7) No provision of the Indenture will require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties hereunder, or in the exercise of its rights or powers, unless it receives indemnity satisfactory to it against any loss, liability or expense.

(8) In no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(9) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by a Responsible Officer of the Trustee at the Corporate Trust Office of the Trustee and such notice references the Notes and this Indenture.

 

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(10) The rights, privileges, protections, immunities and benefits given to the Trustee, including its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

(11) The permissive rights, powers and authorizations of the Trustee hereunder shall not be construed as duties.

Section 7.03 Individual Rights of Trustee. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not the Trustee. Any Agent may do the same with like rights.

Section 7.04 Trustee’s Disclaimer. The Trustee (i) makes no representation as to the validity or adequacy of the Indenture or the Notes, (ii) is not accountable for the Company’s use or application of the proceeds from the Notes and (iii) is not responsible for any statement in the Notes other than its certificate of authentication.

Section 7.05 Notice of Default. If any Default occurs and is continuing and is known to the Trustee, the Trustee will send notice of the Default to each Holder within 90 days after it occurs, or, if later, within 15 days after it is known to the Trustee unless the Default has been cured; provided that, except in the case of a default in the payment of the principal of or interest on any Note, the Trustee may withhold the notice if and so long as the board of directors, the executive committee or a trust committee of directors of the Trustee in good faith determines that withholding the notice is in the interest of the Holders.

Section 7.06 Reports by Trustee to Holders. The Trustee shall comply with TIA § 313. The Company agrees to notify promptly the Trustee whenever the Notes become listed on any stock exchange and of any delisting thereof.

Section 7.07 Compensation And Indemnity

(a) The Company will pay the Trustee compensation as agreed upon in writing for its services. The compensation of the Trustee is not limited by any law on compensation of a trustee of an express trust. The Company will reimburse the Trustee upon request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Trustee including the reasonable compensation and expenses of the Trustee’s agents and counsel.

(b) The Company will indemnify the Trustee and its agents, affiliates, officers and directors or any predecessor Trustee for, and hold each of them harmless against, any loss or liability or expense incurred by them without negligence, willful misconduct or bad faith on their part arising out of or in connection with the acceptance or administration of the Indenture and their duties, powers and rights under the Indenture, the Security Documents and the Notes, including the costs and expenses of defending themselves against any claim or liability and of complying with any process served upon them or any of their respective officers in connection with the exercise or performance of any of its powers or duties under the Indenture, the Security Documents and the Notes.

 

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(c) To secure the Company’s payment obligations in this Section, the Trustee will have a lien prior to the Notes on all money or property held or collected by the Trustee in its capacity as Trustee except money or property held in trust to pay principal of, and interest on particular Notes.

(d) Notwithstanding the satisfaction or discharge of this Indenture, the obligations of the Company to the Trustee under this Section 7.07 and, if money shall have been deposited with the Trustee pursuant to subclause (1) of Section 8.01(a) and subclause (1) of Section 8.02(b), the obligations of the Trustee under Section 8.03 and Section 8.04, shall survive.

(e) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(7) or (8) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any applicable bankruptcy or insolvency law.

Section 7.08 Replacement of Trustee.

(a) (i) The Trustee may resign at any time by written notice to the other and to the Company.

(ii) The Holders of a majority in principal amount of the Outstanding Notes may remove the Trustee by written notice to it.

(iii) The Company may remove the Trustee if: (i) the Trustee is adjudged a bankrupt or an insolvent; (ii) a receiver or other public officer takes charge of the Trustee or its property; or (iii) the Trustee becomes incapable of acting.

A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor’s acceptance of appointment as provided in this Section.

(b) If the Trustee has been removed by the Holders, Holders of a majority in principal amount of the Notes may appoint a successor with the consent of the Company. Otherwise, if the Trustee resigns or is removed, or if a vacancy exists in the office of Trustee for any reason, the Company will promptly appoint a successor. If the successor does not deliver its written acceptance within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee (at the expense of the Company), the Company or the Holders of a majority in principal amount of the Outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor.

(c) Upon delivery by the successor Trustee of a written acceptance of its appointment to the retiring Trustee and to the Company, (i) the retiring Trustee will transfer all property held by it as Trustee to the successor, subject to the lien provided for in Section 7.07, (ii) the resignation or removal of the retiring Trustee will become effective, and (iii) the successor will have all the rights, powers and duties of the Trustee under the Indenture and/or Security Documents. Upon request of any successor Trustee, the Company will execute any and all instruments for fully and vesting in and confirming to the successor Trustee all such rights, powers and trusts. The Company will give notice of any resignation and any removal of the Trustee and each appointment of a successor to all Holders, and include in the notice the name of the successor Trustee and the address of its Corporate Trust Office.

(d) Notwithstanding replacement of the Trustee pursuant to this Section, the Company’s obligations under Section 7.07 will continue for the benefit of the retiring Trustee.

 

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Section 7.09 Successor Trustee by Consolidation, Merger, Conversion or Transfer. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business or assets (including the administration of the trust created by this Indenture) to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act will be the successor Trustee with the same effect as if the successor Trustee had been named as the Trustee in the Indenture.

Section 7.10 Money Held in Trust. The Trustee will not be liable for interest on any money received by it except as it may agree with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law and except for money held in trust by the Trustee under Article 8.

Section 7.11 Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA § 310(a). The Trustee shall have a combined capital and surplus of at least $10,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA § 310(b); provided, however, that there shall be excluded from the operation of TIA § 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA § 310(b)(1) are met.

Section 7.12 Preferential Collection of Claims Against the Company. The Trustee shall comply with TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated.

Section 7.13 Requests for Documentation in Connection with Qualification of the Indenture. The Trustee shall be entitled to receive from the Company and the Subsidiary Guarantors any such Officer’s Certificates, Opinions of Counsel or other documentation as it may reasonably request in connection with any qualification of this Indenture under the TIA.

Section 7.14 Appointment of Co-Trustee. It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as trustee or security trustee in such jurisdiction. It is recognized that in case of litigation under this Indenture, and in particular in case of the enforcement thereof on default, or in the case the Trustee or Security Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Trustee or Security Trustee or hold title to the properties, in trust, as herein granted or take any action which may be desirable or necessary in connection therewith, it may be necessary that the Trustee or Security Trustee appoint an individual or institution as a separate or co-trustee. The following provisions of this Section are adopted to these ends.

 

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In the event that the Trustee or Security Trustee appoints an additional individual or institution as a separate or co-trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised by or vested in or conveyed to the Trustee or Security Trustee, as applicable, with respect thereto shall be exercisable by and vest in such separate or co-trustee but only to the extent necessary to enable such separate or co-trustee to exercise such powers, rights and remedies, and only to the extent that the Trustee or Security Trustee by the laws of any jurisdiction is incapable of exercising such powers, rights and remedies and every covenant and obligation necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable by either of them.

Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:

 

  (1) all rights and powers, conferred or imposed upon the Trustee or Security Trustee, as applicable, shall be conferred or imposed upon and may be exercised or performed by such separate trustee or co-trustee; and

 

  (2) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder.

Any notice, request or other writing given to the Trustee or Security Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this Article. Any separate trustee or co-trustee may at any time appoint the Trustee or Security Trustee, as applicable, as its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee or Security Trustee, as applicable, to the extent permitted by law, without the appointment of a new or successor trustee.

ARTICLE 8

DEFEASANCE AND DISCHARGE

Section 8.01 Defeasance and Discharge of Indenture.

(a) The Company shall be deemed to have paid and shall be discharged from any and all obligations in respect of the Notes on the 365th day after the deposit referred to in clause (1) of this Section 8.01, and the provisions of this Indenture and the Security Documents will no longer be in effect with respect to the Notes (except for, among other matters, certain obligations to register the transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes, to maintain paying agencies and to hold monies for payment in trust, and certain obligations owed to the Trustee and the Security Trustee) if, among other things:

 

  (1)

the Company has deposited with the Trustee, in trust, money and/or U.S. Government Obligations that through the payment of interest and principal

 

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  in respect thereof in accordance with their terms will provide money in an amount sufficient (in the case of U.S. Government Obligations, in the opinion of a reputable firm of certified public accountants) to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of this Indenture and the Notes,

 

  (2) the Company has delivered to the Trustee (A) either (x) an Opinion of Counsel to the effect that, as a result of a change occurring after the Original Issue Date in applicable U.S. federal income tax law, Holders will not recognize income, gain or loss for United States federal income tax purposes as a result of the Company’s exercise of its option under this Section 8.01 and will be subject to United States federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred or (y) a ruling directed to the Trustee received from the U.S. Internal Revenue Service to the same effect as the aforementioned Opinion of Counsel and (B) an Opinion of Counsel to the effect that the creation of the defeasance trust does not violate the U.S. Investment Company Act of 1940, as amended, and after the passage of 365 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law,

 

  (3) immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both would become an Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 365th day after the date of such deposit, and such defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound, and

 

  (4) the Company shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel each stating that all conditions precedent relating to the discharge or defeasance of the Notes provided for in this Section 8.01 have been complied with.

(b) In the case of either discharge or defeasance of the Notes pursuant to this Section 8.01, the Subsidiary Guarantees shall terminate.

Section 8.02 Covenant Defeasance.

(a) The Company may omit to comply with any term, provision or condition set forth in, and this Indenture shall no longer be in effect with respect to, (A) clauses (3), (4) and (5)(x) of Section 5.01(a); (B) clauses (3), (3) and (4)(x) of Section 5.01(b); and (C) all the covenants in Article 4; and

 

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(b) the following shall not be deemed Events of Default: (A) clause (3) of Section 6.01 with respect to such clauses, clauses (3), (4) and (5)(x) of Section 5.01(a); (B) clauses (3), (3) and (4)(x) of Section 5.01(b); (C) clause (4) of Section 6.01 with respect to such other covenants; and (D) clauses (5), (6), (9), (10) and (11) of Section 6.01;

provided the following conditions have been satisfied:

 

  (1) the Company has deposited with the Trustee, in trust, money and/or U.S. Government Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient (in the case of U.S. Government Obligations, in the opinion of a reputable firm of certified public accountants) to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of this Indenture and the Notes,

 

  (2) the Company has delivered to the Trustee an Opinion of Counsel to the effect that the creation of the defeasance trust does not violate the U.S. Investment Company Act of 1940, as amended, and after the passage of 365 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law,

 

  (3) the Company has delivered to the Trustee of an Opinion of Counsel to the effect that, among other things, the Holders will not recognize income, gain or loss for United States federal income tax purposes as a result of such deposit and defeasance of certain covenants and Events of Default and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred, and

 

  (4) the Company shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel each stating that all conditions precedent relating to the covenant defeasance provided for in this Section 8.02 have been complied with.

Except as specifically stated above, none of the Company’s obligations under the Indenture will be discharged.

Section 8.03 Application of Trust Money. Subject to Section 8.04 the Trustee shall hold in trust the money or U.S. Government Obligations deposited with it pursuant to Section 8.01 or Section 8.02, and apply the deposited money and the proceeds from deposited U.S. Government Obligations to the payment of principal of and interest on the Notes in accordance with the Notes and this Indenture. Such money and U.S. Government Obligations shall be segregated from other funds of the Trustee.

Section 8.04 Repayment to Company. Subject to Section 7.07, Section 8.01 and Section 8.02, the Trustee shall promptly pay to the Company upon request any excess money held by the

 

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Trustee at any time and thereupon be relieved from all liability with respect to such money. The Trustee shall pay to the Company upon request any money held for payment with respect to the Notes that remains unclaimed for six years. After payment to the Company, Holders entitled to such money must look solely to the Company for payment, unless applicable law designates another Person, and all liability of the Trustee with respect to such money shall cease.

Section 8.05 Reinstatement. If and for so long as the Trustee is unable to apply any money or U.S. Government Obligations held in trust pursuant to Section 8.01 or Section 8.02 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under the Indenture and the Notes shall be reinstated as though no such deposit in trust had been made. If the Company makes any payment of principal of or interest on any Notes because of the reinstatement of its obligations, it shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held in trust.

ARTICLE 9

AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 9.01 Amendments Without Consent of Holders.

(a) The Company and the Trustee may amend or supplement the Indenture or any Security Documents without notice to or the consent of any Holder, to:

 

  (1) cure any ambiguity, defect or inconsistency in the Indenture, the Notes or any Security Document;

 

  (2) comply with Section 5.01;

 

  (3) evidence and provide for the acceptance of an appointment hereunder by a successor Trustee;

 

  (4) add any Subsidiary Guarantor or any Subsidiary Guarantee or release any Subsidiary Guarantor from any Subsidiary Guarantee as provided or permitted by the terms of the Indenture;

 

  (5) provide for the issuance of Additional Notes (including PIK Notes) in accordance with the limitations set forth in the Indenture;

 

  (6) add additional Collateral to secure the Notes or any Subsidiary Guarantee;

 

  (7) effect any change to this Indenture in a manner necessary to comply with the procedures of DTC;

 

  (8) permit Permitted Priority Secured Indebtedness (including permitting the Trustee to enter into any amendments to the Security Documents or the Indenture and take any other action necessary to permit the creation and registration of Liens on the Collateral to secure Permitted Priority Secured Indebtedness, in accordance with the Indenture);

 

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  (9) to comply with any requirements of the U.S. Securities and Exchange Commission in connection with qualifying the Indenture or maintaining its qualification under the TIA; or

 

  (10) make any other change that would provide additional rights or benefits to the Holders or that does not adversely affect the rights of any Holder.

Section 9.02 Amendments With Consent of Holders.

(a) Except as otherwise provided in Section 6.02, Section 6.04, Section 6.07, Section 9.01(a), or Section 9.02(b) or (c) below, the Company, the Subsidiary Guarantors and the Trustee may amend the Indenture, the Notes or any Security Documents with the written consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Notes (including PIK Notes), and the Holders of a majority in principal amount of the Outstanding Notes (including PIK Notes) by written notice to the Trustee may waive future compliance by the Company with any provision of the Indenture or the Notes.

(b) Notwithstanding the provisions of Section 9.02(a), without the consent of each Holder affected thereby, an amendment or waiver may not:

 

  (1) change the Stated Maturity of the principal of, or any installment of interest on, any Note;

 

  (2) reduce the principal amount of, or premium, if any, or interest on, any Note;

 

  (3) change the currency of payment of principal of, or premium, if any, or interest on, any Note;

 

  (4) impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the redemption date) of any Note;

 

  (5) reduce the above stated percentage of Outstanding Notes the consent of whose Holders is necessary to modify or amend the Indenture;

 

  (6) waive a default in the payment of principal of, premium, if any, or interest on the Notes;

 

  (7) reduce the percentage or aggregate principal amount of Outstanding Notes the consent of whose Holders is necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults;

 

  (8) amend, change or modify any provision of the Indenture or the related definition affecting the ranking of the Notes or any Subsidiary Guarantee in a manner which adversely affects the Holders;

 

  (9) change the redemption date or the redemption price of the Notes from that stated under Section 3.01 or Section 3.02; or

 

  (10) amend, change or modify the obligation of the Company or any Subsidiary Guarantor to pay Additional Amounts.

 

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(c) Notwithstanding the provisions of Section 9.02(a), without the consent of the Holders of not less than 80% in aggregate principal amount of the outstanding Notes affected thereby, an amendment or waiver may not:

 

  (1) release any Subsidiary Guarantor from its Subsidiary Guarantee, except as provided in the Indenture;

 

  (2) release any Collateral, except as provided in the Indenture and the Security Documents;

 

  (3) amend, change or modify any Subsidiary Guarantee in a manner that adversely affects the Holders; or

 

  (4) amend, change or modify any provision of any Security Document, or any provision of the Indenture relating to the Collateral, in a manner that adversely affects the Holders, except in accordance with the other provisions of the Indenture.

(d) It is not necessary for Holders to approve the particular form of any proposed amendment, supplement or waiver, but is sufficient if their consent approves the substance thereof.

(e) An amendment, supplement or waiver under this Section will become effective on receipt by the Trustee of written consents from the Holders of the requisite percentage in principal amount of the Outstanding Notes. After an amendment, supplement or waiver under this Section becomes effective, the Company will send to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. The Company will send supplemental indentures to Holders upon request. Any failure of the Company to send such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such supplemental indenture or waiver.

Section 9.03 Effect of Consent.

(a) After an amendment, supplement or waiver becomes effective, it will bind every Holder unless it is of the type requiring the consent of each Holder affected. If the amendment, supplement or waiver is of the type requiring the consent of each Holder affected, the amendment, supplement or waiver will bind each Holder that has consented to it and every subsequent Holder of a Note that evidences the same debt as the Note of the consenting Holder.

(b) If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder to deliver it to the Trustee so that the Trustee may place an appropriate notation of the changed terms on the Note and return it to the Holder, or exchange it for a new Note that reflects the changed terms. The Trustee may also place an appropriate notation on any Note thereafter authenticated. However, the effectiveness of the amendment, supplement or waiver is not affected by any failure to annotate or exchange Notes in this fashion.

 

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Section 9.04 Compliance with Trust Indenture Act. Every amendment to this Indenture or the Notes shall comply with the TIA as then in effect.

Section 9.05 Trustee’s and Security Trustee’s Rights and Obligations. The Trustee and the Security Trustee are entitled to receive, and will be fully protected in relying upon, in addition to the documents required by Section 12.05, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article is authorized or permitted by the Indenture. If the Trustee and the Security Trustee have received such documents, they shall sign the amendment, supplement or waiver so long as the same does not adversely affect the rights of the Trustee and Security Trustee, as applicable. The Trustee or the Security Trustee may, but are not obligated to, execute any amendment, supplement or waiver that affects the Trustee’s or the Security Trustee’s own respective rights, duties or immunities under the Indenture.

Section 9.06 Payments for Consents. Neither the Company nor any of its Subsidiaries or Affiliates may, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid or agreed to be paid to all Holders that consent, waive or agree to amend such term or provision within the time period set forth in the solicitation documents relating to such consent, waiver or amendment.

ARTICLE 10

SECURITY

Section 10.01 Security; Security Documents.

(a) (1) The Company hereby agrees, for the benefit of the Holders of the Notes, the Trustee and the Security Trustee to grant a mortgage, charge and/or pledge of, and security interest in, or cause the Subsidiary Guarantors to grant a mortgage, charge and/or pledge of, and security interest in, as the case may be, all Collateral owned by the Company and the Subsidiary Guarantors (including the Capital Stock of the Initial Subsidiary Guarantors) on a first priority basis (subject to Permitted Liens) on the Original Issue Date in order to secure the obligations of the Company to the Holders, the Trustee and the Security Trustee under the Notes, the Indenture and the Security Documents and of such Subsidiary Guarantors to the Holders, the Trustee and the Security Trustee under their respective Subsidiary Guarantees. Such Collateral may also secure, on a priority basis, the Company’s and the Subsidiary Guarantors’ respective obligations to the holders of any Permitted Priority Secured Indebtedness Incurred in compliance with Section 4.06, if and when issued.

(2) Each of the Company and each Subsidiary Guarantor hereby covenant (A) to perform and observe their obligations under the Security Documents and (B) take any and all commercially reasonable actions (including, without limitation, under the covenants set forth in the Security Documents and in this Article 10) required to cause the Security Documents to create and maintain, as security for the obligations contained in this Indenture, the Notes and the Security Documents, valid and enforceable Liens, on a first priority basis, and perfected (except as expressly provided herein or therein) Liens in and on, all of the Collateral, in favor of the Security Trustee, superior to and prior to the rights of all third Persons and subject to no other Liens (other than Permitted Liens), in each case, except as expressly permitted herein, therein or in any Intercreditor Agreement:

(b) So long as no Default has occurred and is continuing, and subject to the terms of the Security Documents, the Company and the Subsidiary Guarantors, as the case may be, will be entitled to exercise any and all voting rights and to receive and retain any and all cash dividends, stock dividends, liquidating dividends, non-cash dividends, shares or stock resulting from stock splits, divisions or reclassifications, rights issues, warrants, options and other distributions (whether similar or dissimilar to the foregoing) in respect of Capital Stock constituting Collateral.

 

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(c) Each Holder of the Notes, by its acceptance thereof, consents and agrees to the terms of the Security Documents (including the provisions providing for foreclosure, enforcement and release of Collateral) as the same may be in effect or may be amended from time to time in accordance with their terms and authorizes and directs the Trustee to perform its respective obligations and exercise its respective rights thereunder in accordance therewith.

(d) The Trustee and each Holder, by accepting the Notes and the Subsidiary Guarantees, acknowledges that the Collateral as now or hereafter constituted shall be held for the benefit of all the Secured Parties (including the Holders) under the Security Documents, and that the Lien of this Indenture and the Security Documents in respect of the Security Trustee, the Trustee and the Secured Parties (including the Holders) is subject to and qualified and limited in all respects by the Security Documents and actions that may be taken thereunder.

(e) Notwithstanding (i) anything to the contrary contained in this Indenture, the Security Documents, Notes, Subsidiary Guarantees or any other instrument governing, evidencing or relating to any Indebtedness, (ii) the time, order or method of attachment of any Liens, (iii) the time or order of filing or recording of financing statements or other documents filed or recorded to perfect any Lien upon any Collateral, (iv) the time of taking possession or control over any Collateral or (v) the rules for determining priority under the Uniform Commercial Code or any other law of any relevant jurisdiction governing relative priorities of secured creditors:

 

  (1) the Liens will rank at least equally and ratably with all valid, enforceable and perfected Liens (excluding any priority Liens permitted to be granted in respect of any Permitted Priority Secured Indebtedness), whenever granted upon any present or future Collateral, but only to the extent such Liens are permitted under this Indenture to exist and to rank equally and ratably with the Notes and the Subsidiary Guarantees; and

 

  (2) all proceeds of the Collateral applied under the Security Documents shall be allocated and distributed as set forth in the Security Documents.

Section 10.02 Future Restricted Subsidiaries. (a) The Company hereby agrees, for the benefit of the Holders of the Notes, to mortgage, charge and/or pledge, or cause each Subsidiary Guarantor to mortgage, charge and/or pledge all property and assets (including the Capital Stock owned by the Company or such Subsidiary Guarantor) of any Person that is a Restricted Subsidiary or becomes a Restricted Subsidiary (other than Persons organized under the laws of

 

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the PRC or any other jurisdiction that prohibits such property and assets of such Restricted Subsidiaries from being mortgaged, charged or pledged to secure the obligations of the Company or such Subsidiary Guarantor) after the Original Issue Date, promptly upon such Person becoming a Restricted Subsidiary, to secure the obligations of the Company under the Notes and the Indenture, and of such Subsidiary Guarantor under its Subsidiary Guarantee, in the manner described in Section 10.01. Such Collateral may also secure, on a priority basis, the Company’s and the Subsidiary Guarantors’ respective obligations to the holders of any Permitted Priority Secured Indebtedness, if and when issued.

Section 10.03 Certificates of the Company.

(1) On or prior to each anniversary of the Original Issue Date, the Company shall furnish to the Trustee and the Security Trustee a Compliance Certificate in the form of Exhibit G hereto; and

(2) The Company shall furnish to the Trustee and the Security Trustee, within three months after each anniversary of Original Issue Date, an Opinion of Counsel, dated as of such date, stating either that (i) in the opinion of such counsel, all action has been taken with respect to the recording, registering, filing, re-recording, re-registering and refiling of all supplemental indentures, financing statements, continuation statements or other instruments of further assurance as is necessary to maintain the Liens to the extent required by the Security Documents and reciting the details of such action or (ii) in the opinion of such counsel, no such action is necessary to maintain such Liens.

(3) The Company shall furnish to the Trustee and the Security Trustee on or prior to any proposed release of Collateral by the Company or any Subsidiary Guarantor an Opinion of Counsel and an Officer’s Certificate certifying that such release is permitted by the terms of this Indenture and the relevant Security Documents.

Section 10.04 Authorization of Actions to be Taken by the Trustee Under the Security Documents.

(a) The Security Trustee shall be the representative on behalf of the Secured Parties (including the Holders of the Notes) and shall act upon the written direction of the Secured Parties (including the Holders of the Notes (acting through the Trustee)) with regard to all voting, consent and other rights granted to the Secured Parties under the Security Documents, provided that the Trustee and the Security Trustee will be under no obligation to act upon the written direction of the Holders of the Notes should the Company fail to mortgage, charge or pledge, or fail to cause each initial Subsidiary Guarantor to mortgage, charge or pledge the Collateral in accordance with the terms of Section 10.01(a), unless such Holders have offered to the Trustee and Security Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that might be incurred by it in compliance with such direction.

(b) Subject to the terms of the Security Documents, the Security Trustee may (but shall not be obligated to), in its sole discretion and without the consent of the Holders of the Notes, on behalf of the Holders of the Notes, take all actions it deems necessary or appropriate in order to (x) enforce any of its rights or any of the rights of the Holders of the Notes under the Security Documents and (y) receive any and all amounts payable from the Collateral in respect of the obligations of the Company and the Subsidiary Guarantors hereunder.

 

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(c) Subject to the terms of the Security Documents, each of the Trustee and the Security Trustee shall have the power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts that may be unlawful or in violation of the Security Documents or this Indenture, and such suits and proceedings as it may deem expedient to preserve or protect its interest and the interests of the Secured Parties (including Holders of the Notes) in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of the Secured Parties (including Holders of the Notes) or the Trustee or the Security Trustee, as the case may be). The Security Trustee is hereby irrevocably authorized by each Holder of the Notes to effect any release of Liens or Collateral contemplated by Section 10.06 hereof or by the terms of the Security Documents.

Section 10.05 Authorization of Receipt of Funds by the Security Trustee Under the Security Documents. The Security Trustee is authorized to receive and distribute any funds for the benefit of the Holders of the Notes under the Security Documents, and to make further distributions of such funds to the Holders of the Notes, subject to the terms of any Intercreditor Agreement, in the following order:

First : To the Security Trustee to the extent necessary to reimburse the Security Trustee for any expenses incurred in connection with the collection or distribution of such funds held or realized in connection with expenses incurred in enforcing its remedies under the Security Documents and preserving the Collateral and all amounts for which the Security Trustee is entitled to indemnification or otherwise owed under the Indenture and/or the Security Documents;

Second : To the Trustee for its benefit and the benefit of the Holders, to the Paying Agent and Registrar, all to be distributed pursuant to Section 6.10 hereof; and

Third : Any surplus remaining after such payments, to the Company or the Subsidiary Guarantor or to whomever may be lawfully entitled thereto.

Section 10.06 Release of the Collateral.

(a) The security interest in respect of the Collateral granted hereby shall be fully released, subject to the terms of the Security Documents, (i) upon the repayment in full of the Notes or (ii) upon defeasance or discharge of the Notes as provided under Section 8.01 and Section 8.02; and may be partially or fully released, as the case may be, (iii) upon certain dispositions of Collateral in compliance with Section 4.11, Section 4.15 or Section 5.01; (iv) with respect to security granted by a Subsidiary Guarantor, upon the release of the Subsidiary Guarantee of such Subsidiary Guarantor in accordance with the terms of the Indenture; or (v) with respect all or any part of the Collateral, by the Security Trustee in connection with any enforcement of its Liens pursuant to the terms of the Security Documents

 

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(b) Upon request of the Company or any Subsidiary Guarantor, in connection with any sale, lease, assignment, conveyance, transfer or other disposition of assets or property permitted by this Indenture (including Section 4.11, Section 4.15 or Section 5.01 hereof), the Security Trustee shall (without notice to, or vote or consent of, any Holder), subject to the terms of the Security Documents and subject to its receiving the documents required by Sections 10.03 and 12.05 hereof, take such actions as shall be required to release its security interest in any Collateral being disposed in such disposition, to the extent necessary to permit consummation of such disposition in accordance with this Indenture and the Security Documents and the Security Trustee shall receive full payment therefor from the Company for any costs incurred thereby.

(c) Any release of Collateral made in compliance with this Section 10.06 shall not be deemed to impair the Lien under the Security Documents or the Collateral thereunder in contravention of the provisions of this Indenture or the Security Documents.

(d) No purchaser or grantee of any property or rights purporting to be released herefrom shall be bound to ascertain the authority of the Security Trustee to execute the release or to inquire as to the existence of any conditions herein prescribed for the exercise of such authority; nor shall any purchaser or grantee of any property or rights permitted by this Indenture to be sold or otherwise disposed of by the Company and the Subsidiary Guarantors be under any obligation to ascertain or inquire into the authority of the Company or any Subsidiary Guarantor to make such sale or other disposition.

Section 10.07 Additional Security Trustee Terms.

(a) The Company hereby appoints Computershare Trust Company, N.A. to act as Security Trustee, and the Security Trustee shall have the rights, indemnities, privileges, powers and immunities of the Security Trustee as set forth herein and in the Security Documents. The Security Trustee shall only have the duties explicitly set forth herein and in the Security Documents and no duties or responsibilities shall be implied against the Security Trustee. The Company and the Guarantors hereby agree that the Security Trustee shall hold the Collateral in trust for the benefit of all of the Secured Parties, in each case, pursuant to the terms of this Indenture and the Security Documents and the Security Trustee is hereby authorized to execute and deliver the Security Documents.

(b) Notwithstanding anything to the contrary contained herein, in the UCC or any other personal property security related legislation, neither the Trustee nor the Security Trustee shall have any responsibility for (i) preparing, recording, filing, re-recording, or re-filing any financing statement, perfection statement, continuation statement or other instrument in any public office or for otherwise ensuring the perfection or maintenance of any security interest granted pursuant to, or contemplated by, the Indenture or any Security Document (ii) taking any necessary steps to preserve rights against any parties with respect to any Collateral or (iii) taking any action to protect against any diminution in value of the Collateral.

(c) With regards to any action or refusal to act that involves discretion, whether in the exercise of its rights, powers, authorizations or otherwise hereunder or under the Security Documents, the Security Trustee shall be entitled to refrain from any act or the taking of any action hereunder or under any of the Security Documents or from the exercise of any power or authority vested in it hereunder or thereunder unless and until the Security Trustee shall have

 

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received written instructions from the Trustee and shall not be liable for any such delay in acting and shall be fully protected in, and shall incur no liability in connection with, acting (or failing to act) pursuant to such instructions. Subject to Section 7.01 and Section 7.02, in providing such written instructions, the Trustee shall act in accordance with the written direction of Holders (pursuant to and in accordance with the terms of this Indenture).

(d) The Security Trustee shall be accountable only for amounts that it actually receives as a result of the enforcement of the rights of the Holders under the Security Documents. Notwithstanding anything herein or in the Security Documents to the contrary, the Security Trustee shall not be deemed to be a fiduciary to any Secured Party or any other party.

(e) In acting as Security Trustee or co-Security Trustee, the Security Trustee and each co-Security Trustee may (i) rely upon and enforce for its own benefit each and all of the rights, powers, immunities, indemnities and benefits of the Trustee under Article 7 hereof, each of which shall also be deemed to be for the benefit of the Security Trustee; provided, however, any references to “negligence” shall be deemed to be references to “gross negligence” with respect to the rights, duties, liabilities, indemnities and immunities of the Security Trustee; and (ii) may resign or be replaced in the manner set out in Section 7.08 as though it were the Trustee.

ARTICLE 11

SUBSIDIARY GUARANTEES

Section 11.01 The Subsidiary Guarantees. Subject to the provisions of this Article, each of the Subsidiary Guarantors (whether originally a signatory hereto or added pursuant to a supplemental indenture) hereby, jointly and severally, Guarantees as principal obligor to each Holder of a Note authenticated by the Trustee or the Authenticating Agent and to the Trustee and the Security Trustee, and its successors and assigns the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the Notes, the Indenture and the Security Documents.

Section 11.02 Guarantee Unconditional. The obligations of each Subsidiary Guarantor hereunder are unconditional and absolute and, without limiting the generality of the foregoing, will not be released, discharged or otherwise affected by:

(1) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Company under the Indenture or any Note, by operation of law or otherwise;

(2) any modification or amendment of or supplement to the Indenture or any Note;

(3) any change in the corporate existence, structure or ownership of the Company, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company or its assets or any resulting release or discharge of any obligation of the Company contained in the Indenture or any Note;

(4) the existence of any claim, set-off or other rights which the Subsidiary Guarantor may have at any time against the Company, the Trustee or any other Person,

 

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whether in connection with the Indenture or any unrelated transactions, provided that nothing herein prevents the assertion of any such claim by separate suit or compulsory counterclaim;

(5) any invalidity, irregularity, or unenforceability relating to or against the Company for any reason of the Indenture or any Note; or

(6) any other act or omission to act or delay of any kind by the Company, the Trustee or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of or defense to such Subsidiary Guarantor’s obligations hereunder.

Section 11.03 Discharge; Reinstatement. Each Subsidiary Guarantor’s obligations hereunder will remain in full force and effect until the principal of, premium, if any, and interest on the Notes and all other amounts payable by the Company under the Indenture have been paid in full. If at any time any payment of the principal of, premium, if any, or interest on any Note or any other amount payable by the Company under the Indenture is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Company or otherwise, each Subsidiary Guarantor’s obligations hereunder with respect to such payment will be reinstated as though such payment had been due but not made at such time. All payments under the Subsidiary Guarantees will be made in U.S. dollars.

Section 11.04 Waiver by the Subsidiary Guarantors. Each Subsidiary Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Company or any other Person. In particular, each Subsidiary Guarantor irrevocably waives its right to require the Trustee to pursue or exhaust the Trustee’s legal or equitable remedies against the Company prior to exercising the Trustee’s rights under its Subsidiary Guarantee.

Section 11.05 Subrogation and Contribution. Upon making any payment with respect to any obligation of the Company under this Article, the Subsidiary Guarantor making such payment will be subrogated to the rights of the payee against the Company with respect to such obligation, provided that the Subsidiary Guarantor may not enforce either any right of subrogation, or any right to receive payment in the nature of contribution, or otherwise, from any other Subsidiary Guarantor, with respect to such payment so long as any amount payable by the Company hereunder or under the Notes remains unpaid.

Section 11.06 Stay of Acceleration. If acceleration of the time for payment of any amount payable by the Company under the Indenture or the Notes is stayed upon the insolvency, bankruptcy or reorganization of the Company, all such amounts otherwise subject to acceleration under the terms of the Indenture are nonetheless payable by the Subsidiary Guarantors hereunder forthwith on demand by the Trustee or the Holders.

Section 11.07 Limitation on Amount of Subsidiary Guarantee. Notwithstanding anything to the contrary in this Article, each Subsidiary Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Subsidiary Guarantee of such Subsidiary Guarantor not (i) constitute a fraudulent conveyance under applicable fraudulent conveyance provisions of the United States Bankruptcy Code or any comparable law

 

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of any other jurisdiction or (ii) extend to or include any liability or sum which would otherwise cause any such Subsidiary Guarantee to be unlawful or prohibited by any applicable law. To effectuate that intention, the Trustee, the Holders and the Subsidiary Guarantors hereby irrevocably agree that the obligations of each Subsidiary Guarantor under its Subsidiary Guarantee are limited in an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor without rendering the Subsidiary Guarantee, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to insolvency, fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally or the ability of related parties to provide guarantees.

Section 11.08 Ranking of Subsidiary Guarantees. The Subsidiary Guarantee of each Subsidiary Guarantor: (i) is a general obligation of such Subsidiary Guarantor; (ii) is senior in right of payment to all future obligations of such Subsidiary Guarantor expressly subordinated in right of payment to the Subsidiary Guarantee; and (iii) ranks at least pari passu in right of payment with all other unsecured, unsubordinated Indebtedness of such Subsidiary Guarantor (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law).

In addition, the Subsidiary Guarantee of each Subsidiary Guarantor, subject to the limitations described in Article 10 and this Section 11.08 and in the Security Documents: (i) will effectively rank, with respect and to the extent of the value of the Collateral owned by such Subsidiary Guarantor, subject to Permitted Liens, pari passu with any future Additional Notes issued in compliance with the Indenture; (ii) effectively rank with respect and to the extent of the value of the Collateral owned by such Subsidiary Guarantor, junior to all future obligations of the Company in respect of any Permitted Priority Secured Indebtedness of such Subsidiary Guarantor that is secured by Liens on the Collateral owned by such Subsidiary Guarantor in favor of the holders of the Permitted Priority Secured Indebtedness if and when Incurred; (iii) will be entitled to a first ranking security interest in the Collateral (subject to any Permitted Liens) mortgaged, charged or pledged by such Subsidiary Guarantor, as set forth in Section 10.01; and (iv) will rank effectively senior in right of payment to the unsecured obligations of such Subsidiary Guarantor with respect to the value of the Collateral securing such Subsidiary Guarantee (subject to priority rights of such unsecured obligations pursuant to applicable law).

Section 11.09 Further Subsidiary Guarantors.

(a) The Company will, for the benefit of the Holders of the Notes, cause each of its future Restricted Subsidiaries (other than Subsidiaries organized under the laws of the PRC or Foreign Subsidiaries) after the Issue Date, immediately upon becoming a Subsidiary, to execute and deliver to the Trustee a supplemental indenture to this Indenture pursuant to which such future Restricted Subsidiary will Guarantee the payment of the Notes.

(b) Each Subsidiary that Guarantees the Notes after the Issue Date is referred to as a “Future Subsidiary Guarantor” and, upon execution of the applicable supplemental indenture, will be a “Subsidiary Guarantor.”

Section 11.10 Execution and Delivery of Guarantee. The execution by each Subsidiary Guarantor of the Indenture (or a supplemental indenture in the form of Exhibit E) evidences the Subsidiary Guarantee of such Subsidiary Guarantor, whether or not the person signing as an officer of the Subsidiary Guarantor still holds that office at the time of authentication of any Note. The delivery of any Note by the Trustee after authentication constitutes due delivery of the Subsidiary Guarantee set forth in the Indenture on behalf of each Subsidiary Guarantor.

 

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Section 11.11 Release of the Subsidiary Guarantees.

(a) A Subsidiary Guarantee given by a Subsidiary Guarantor will be released upon,

 

  (1) repayment in full of the Notes;

 

  (2) a defeasance as provided in Section 8.01 and Section 8.02;

 

  (3) the designation by the Company of a Subsidiary Guarantor as an Unrestricted Subsidiary in compliance with terms of the Indenture; or

 

  (4) the sale of a Subsidiary Guarantor in compliance with the terms of the Indenture (including Section 4.11, Section 4.15 or Section 5.01) resulting in such Subsidiary Guarantor no longer being a Restricted Subsidiary, so long as (i) such Subsidiary Guarantor is simultaneously released from its obligations in respect of any of the Company’s other Indebtedness or any Indebtedness of any other Restricted Subsidiary and (ii) the proceeds from such sale or disposition are used for the purposes permitted or required by the Indenture.

(b) No release and discharge of the Subsidiary Guarantee will be effective against the Trustee, any Agent or the Holders of Notes (i) if a Default or Event of Default shall have occurred and be continuing under this Indenture as of the time of such proposed release and discharge until such time as such Default or Event of Default is cured or waived and (ii) until the Company shall have delivered to the Trustee an Officer’s Certificate stating that all conditions precedent provided for in this Indenture and the Security Documents relating to such release and discharge have been complied with and that such release and discharge is authorized and permitted under this Indenture and the Security Documents. Upon its receipt of the documents referenced above in this Section 11.11, at the request of the Company, the Trustee will execute and deliver an instrument evidencing such release and discharge.

ARTICLE 12

MISCELLANEOUS

Section 12.01 Trust Indenture Act Controls. If any provision of the Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the provision required by the TIA shall control. Until such time as this Indenture shall be qualified under the TIA, the Indenture, the Company, the Subsidiary Guarantors and the Trustee, shall as a matter of contract be deemed for all purposes hereof to be subject to and governed by the TIA to the same extent as would be the case if this Indenture were so qualified on the date hereof.

Section 12.02 Communication by Holders with Other Holders. Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their rights under this Indenture (including the Subsidiary Guarantees) or the Notes. The Company, the Subsidiary Guarantors, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

 

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Section 12.03 Ranking. The Notes are (i) general obligations of the Company, (ii) guaranteed by the Subsidiary Guarantors on a senior basis, subject to certain limitations set forth in Article 11, (iii) senior in right of payment to any existing and future obligations of the Company expressly subordinated in right of payment to the Notes; (iv) at least pari passu in right of payment with all other unsecured, unsubordinated Indebtedness of the Company (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law); and (v) effectively subordinated to all existing and future obligations of the Non-Guarantor Subsidiaries. In addition, on the Original Issue Date, subject to the limitations described in Article 10 and in the Security Documents, the Notes will be secured by a mortgage, charge and/or pledge of the Collateral and (i) rank effectively, with respect and to the extent of the value of the Collateral, subject to Permitted Liens, pari passu with any Additional Notes issued in compliance with the Indenture; (ii) rank effectively, with respect and to the extent of the value of the Collateral, junior to all future obligations of the Company in respect of any Permitted Priority Secured Indebtedness that are secured by Liens on the Collateral in favor of the holders of the Permitted Priority Secured Indebtedness if and when Incurred; (iii) be entitled to a first priority lien on the Collateral (subject to any Permitted Lien) and (iv) rank effectively senior in right of payment to unsecured obligations of the Company with respect to the value of the Collateral mortgaged, charged and/or pledged by the Company securing the Notes (subject to any priority rights of such unsecured obligations pursuant to applicable law).

Section 12.04 Notices.

(a) All notices or demands required or permitted by the terms of the Notes or the Indenture to be given to or by the Holders are required to be in writing (including facsimile) and may be given or served by being sent by prepaid courier or by being deposited, first-class postage prepaid, in the United States mail (if intended for the Company or any Subsidiary Guarantor) addressed to the Company or such Subsidiary Guarantor, as the case may be, at 3815-29, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong, fax: +852 2877 0062; (if intended for the Trustee) addressed to the Trustee at the corporate trust office of the Trustee at Computershare Trust Company, N.A., 350 Indiana Street, Suite 750, Golden, CO 80401, Attn: Corporate Trust, fax: 303-262-0608; with a copy to Computershare Trust Company, N.A., 480 Washington Blvd., Jersey City, NJ 07310, Attn: Legal Department, fax: 201-680-4610; and (if intended for any Holder) addressed to such Holder at such Holder’s last address as it appears in the Register. Any notice to the Trustee will be effective only upon receipt.

The Company (on behalf of itself or any Subsidiary Guarantor) or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

(b) Any such notice or demand will be deemed to have been sufficiently given or served when so sent or deposited and, if to the Holders, when delivered in accordance with the applicable rules and procedures of the Depositary if the Notes are in the form of Global Notes. Any such notice shall be deemed to have been delivered on the day such notice is delivered to the Depositary or if by mail, when so sent or deposited.

(c) Where the Indenture provides for notice, the notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and the waiver will be the equivalent of the notice. Waivers of notice by Holders must be filed with the Trustee, but such filing is not a condition precedent to the validity of any action taken in reliance upon such waivers.

 

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Section 12.05 Certificate and Opinion as to Conditions Precedent.

(a) Upon any request or application by the Company to the Trustee or the Security Trustee to take any action under the Indenture, the Company will furnish to the Trustee or the Security Trustee, as applicable:

 

  (1) an Officer’s Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in the Indenture relating to the proposed action have been complied with; and

 

  (2) an Opinion of Counsel stating that all such conditions precedent have been complied with.

(b) In any case where several matters are required to be certified by, or covered by an Opinion of Counsel of, any specified Person, it is not necessary that all such matters be certified by, or covered by the Opinion of Counsel of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an Opinion of Counsel with respect to some matters and one or more such Persons as to other matters, and any such Person may certify or give an Opinion of Counsel as to such matters in one or several documents.

(c) Any certificate of an Officer of the Company or any Subsidiary Guarantor may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, unless such Officer knows, or in the exercise of reasonable care should know, that such Opinion of Counsel with respect to the matters upon which his certificate is based are erroneous. Any Opinion of Counsel may be based, and may state that it is so based, insofar as it relates to factual matters, upon a certificate of, or representations by, an officer or officers of the Company or a Subsidiary Guarantor stating that the information with respect to such factual matters is in the possession of the Company or such Subsidiary Guarantor, as the case may be, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or representations with respect to such matters are erroneous.

(d) Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

Section 12.06 Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in the Indenture must include:

(1) a statement that each person signing the certificate or opinion has read the covenant or condition and the related definitions;

(2) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in the certificate or opinion is based;

 

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(3) a statement that, in the opinion of each such person, that person has made such examination or investigation as is necessary to enable the person to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(4) a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied with, provided that an Opinion of Counsel may rely on an Officer’s Certificate or certificates of public officials with respect to matters of fact.

Section 12.07 Payment Date Other Than a Business Day. If any payment with respect to a payment of any principal of, premium, if any, or interest on any Note (including any payment to be made on any date fixed for redemption or purchase of any Note) is due on a day which is not a Business Day, then the payment need not be made on such date, but may be made on the next Business Day with the same force and effect as if made on such date, and no interest will accrue for the intervening period.

Section 12.08 Governing Law, Consent to Jurisdiction; Waiver of Immunities.

(a) Each of the Notes, the Subsidiary Guarantees and the Indenture shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby.

(b) The Company and each of the Subsidiary Guarantors hereby irrevocably and unconditionally submits to the non-exclusive jurisdiction of any New York State or United States Federal court sitting in the Borough of Manhattan, New York City over any suit, action or proceeding arising out of or relating to this Indenture, any Note or any Subsidiary Guarantee. The Company and each of the Subsidiary Guarantors irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. To the extent that the Company or any Subsidiary Guarantor, as the case may be, has or hereafter may acquire any sovereign or other immunity from jurisdiction of any court or from any legal process with respect to itself or its property, Company or such Subsidiary Guarantor, as the case may be, irrevocably waives such immunity in respect of its obligations hereunder or under any Note, or any Subsidiary Guarantee, as applicable. The Company and each of the Subsidiary Guarantors agree that final judgment in any such suit, action or proceeding brought in such a court shall be conclusive and binding upon the Company or the Subsidiary Guarantor, as the case may be, and, to the extent permitted by applicable law, may be enforced in any court to the jurisdiction of which the Company or any of the Subsidiary Guarantors, as the case may be, is subject by a suit upon such judgment or in any manner provided by law, provided that service of process is effected upon the Company or any of the Subsidiary Guarantors, as the case may be, in the manner specified in the following subsection or as otherwise permitted by applicable law.

(c) As long as any of the Notes remain Outstanding, the Company and each of the Subsidiary Guarantors will at all times have an authorized agent in New York City, upon whom

 

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process may be served in any legal action or proceeding arising out of or relating to this Indenture, any Note or any Subsidiary Guarantee. Service of process upon such agent and written notice of such service mailed or delivered to the Company or any Subsidiary Guarantor, as the case may be, shall to the fullest extent permitted by applicable law be deemed in every respect effective service of process upon the Company or such Subsidiary Guarantor, as the case may be, in any such legal action or proceeding. The Company and each of the Subsidiary Guarantors hereby appoint Corporation Service Company as its agent for such purpose, and covenants and agrees that service of process in any suit, action or proceeding may be made upon it at the office of such agent at 1180 Avenue of the Americas, Suite 210, New York, New York 10036. Notwithstanding the foregoing, the Company or any Subsidiary Guarantor may, with prior written notice to the Trustee, terminate the appointment of Computershare Trust Company, N.A. and appoint another agent for the above purposes so that the Company and the Subsidiary Guarantors shall at all times have an agent for the above purposes in New York City.

(d) The Company and each of the Subsidiary Guarantors hereby irrevocably waives, to the fullest extent permitted by applicable law, any requirement or other provision of law, rule, regulation or practice which requires or otherwise establishes as a condition to the institution, prosecution or completion of any suit, action or proceeding (including appeals) arising out of or relating to this Indenture or any Note or any Subsidiary Guarantee, the posting of any bond or the furnishing, directly or indirectly, of any other security.

Section 12.09 No Adverse Interpretation of Other Agreements. The Indenture may not be used to interpret another indenture or loan or debt agreement of the Company or any Subsidiary of the Company, and no such indenture or loan or debt agreement may be used to interpret the Indenture.

Section 12.10 Successors. All agreements of the Company or any Subsidiary Guarantor in the Indenture and the Notes will bind its successors. All agreements of the Trustee in the Indenture will bind its successor.

Section 12.11 Counterparts. The parties may sign the Indenture in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement.

Section 12.12 Separability. In case any provision in the Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.

Section 12.13 Table of Contents and Headings. The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of the Indenture have been inserted for convenience of reference only, are not to be considered a part of the Indenture and in no way modify or restrict any of the terms and provisions of the Indenture.

Section 12.14 No Personal Liability of Incorporators, Stockholders, Members, Directors, Officers, Directors, or Employees. No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company or any of the Subsidiary Guarantors in the Indenture, or in any of the Notes or the Subsidiary

 

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Guarantees or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator, stockholder, member, officer, director, employee or controlling person of the Company or any of the Subsidiary Guarantors or of any successor Person thereof. Each Holder, by accepting the Notes, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes and the Subsidiary Guarantees.

Section 12.15 Force Majeure. In no event shall the Trustee or any Agent be responsible or liable for any failure or delay in the performance of its obligations under the Indenture arising out of or caused by, directly or indirectly, forces beyond its control, including strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee or such Agent shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

Section 12.16 U.S.A. Patriot Act. The parties hereto acknowledge that in accordance with Section 326 of the U.S.A. Patriot Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Trustee. The parties to this Indenture agree that they will provide the Trustee with such information upon its reasonable request in order for the Trustee to satisfy the requirements of the U.S.A. Patriot Act.

Section 12.17 Waiver of Jury Trial. EACH OF THE COMPANY, THE GUARANTORS, THE TRUSTEE AND THE SECURITY TRUSTEE IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES, THE SECURITY DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

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SIGNATURES

IN WITNESS WHEREOF , the parties hereto have caused the Indenture to be duly executed as of the date first written above.

 

EMERALD PLANTATION HOLDINGS LIMITED
By:  

 

  Name:
  Title:
SINO-CAPITAL GLOBAL INC. (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL HOLDINGS LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-GLOBAL HOLDINGS INC. (BVI)
By:  

 

  Name:
  Title:
SINO-WOOD PARTNERS, LIMITED (H.K.)
By:  

 

  Name:
  Title:

 

[Signature Page to the Indenture]

S-1

GRANDEUR WINWAY LIMITED (BVI)
By:  

 

  Name:
  Title:
SINOWIN INVESTMENTS LIMITED (BVI)
By:  

 

  Name:
  Title:
SINOWOOD LIMITED (CAYMAN ISLANDS)
By:  

 

  Name:
  Title:
SINO-FOREST BIO-SCIENCE LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-FOREST RESOURCES INC. (BVI)
By:  

 

  Name:
  Title:
SINO-PLANTATION LIMITED (H.K.)
By:  

 

  Name:
  Title:

 

[Signature Page to the Indenture]

S-2

SURI-WOOD INC. (BVI)
By:  

 

  Name:
  Title:
SINO-FOREST INVESTMENTS LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-WOOD (GUANGXI) LIMITED (H.K.)
By:  

 

  Name:
  Title:
SINO-WOOD (JIANGXI) LIMITED (H.K.)
By:  

 

  Name:
  Title:
SINO-WOOD (GUANGDONG) LIMITED (H.K.)
By:  

 

  Name:
  Title:
SINO-WOOD (FUJIAN) LIMITED (H.K.)
By:  

 

  Name:
  Title:

 

[Signature Page to the Indenture]

S-3

SINO-PANEL (ASIA) INC. (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (GUANGXI) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (YUNNAN) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (NORTH EAST CHINA) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL [XIANGXI] LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL [HUNAN] LIMITED (BVI)
By:  

 

  Name:
  Title:

 

[Signature Page to the Indenture]

S-4

SFR (CHINA) INC. (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL [SUZHOU] LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (GAOYAO) LTD. (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (GUANGZHOU) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (NORTH SEA) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (GUIZHOU) LIMITED (BVI)
By:  

 

  Name:
  Title:

 

[Signature Page to the Indenture]

S-5

SINO-PANEL (HUAIHUA) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (QINZHOU) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (YONGZHOU) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (FUJIAN) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (SHAOYANG) LIMITED (BVI)
By:  

 

  Name:
  Title:
AMPLEMAX WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:

 

[Signature Page to the Indenture]

S-6

ACE SUPREME INTERNATIONAL LIMITED (BVI)
By:  

 

  Name:
  Title:
EXPRESS POINT HOLDINGS LIMITED (BVI)
By:  

 

  Name:
  Title:
GLORY BILLION INTERNATIONAL LIMITED (BVI)
By:  

 

  Name:
  Title:
SMART SURE ENTERPRISES LIMITED (BVI)
By:  

 

  Name:
  Title:
EXPERT BONUS INVESTMENT LIMITED (BVI)
By:  

 

  Name:
  Title:
DYNAMIC PROFIT HOLDINGS LIMITED (BVI)
By:  

 

  Name:
  Title:

 

[Signature Page to the Indenture]

S-7

ALLIANCE MAX LIMITED (BVI)
By:  

 

  Name:
  Title:
BRAIN FORCE LIMITED (BVI)
By:  

 

  Name:
  Title:
CHEER GOLD WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:
GENERAL EXCEL LIMITED (BVI)
By:  

 

  Name:
  Title:
HARVEST WONDER WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:
HOMIX LIMITED (BVI)
By:  

 

  Name:
  Title:

 

[Signature Page to the Indenture]

S-8

POLY MARKET LIMITED (BVI)
By:  

 

  Name:
  Title:
PRIME KINETIC LIMITED (BVI)
By:  

 

  Name:
  Title:
REGAL WIN CAPITAL LIMITED (BVI)
By:  

 

  Name:
  Title:
RICH CHOICE WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-GLOBAL MANAGEMENT CONSULTING INC. (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (CHINA) NURSERY LIMITED (BVI)
By:  

 

  Name:
  Title:

 

[Signature Page to the Indenture]

S-9

SINO-PANEL (RUSSIA) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-WOOD TRADING LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL TRADING LIMITED (BVI)
By:  

 

  Name:
  Title:
TRILLION EDGE LIMITED (BVI)
By:  

 

  Name:
  Title:
VALUE QUEST INTERNATIONAL LIMITED (BVI)
By:  

 

  Name:
  Title:
WELL KEEN WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:

 

[Signature Page to the Indenture]

S-10

SINO-FOREST INTERNATIONAL (BARBADOS) CORPORATION (BARBADOS)
By:  

 

  Name:
  Title:
MANDRA FORESTRY HOLDINGS LIMITED (BVI)
By:  

 

  Name:
  Title:
MANDRA FORESTRY FINANCE LIMITED (BVI)
By:  

 

  Name:
  Title:
MANDRA FORESTRY ANHUI LIMITED (BVI)
By:  

 

  Name:
  Title:
MANDRA FORESTRY HUBEI LIMITED (H.K.)
By:  

 

  Name:
  Title:
ELITE LEGACY LIMITED (BVI)
By:  

 

  Name:
  Title:

 

[Signature Page to the Indenture]

S-11

EMERALD PLANTATION GROUP LIMITED (CAYMAN ISLANDS)
By:  

 

  Name:
  Title:
COMPUTERSHARE TRUST COMPANY, N.A. , as Trustee
By:  

 

  Name:
  Title:
COMPUTERSHARE TRUST COMPANY, N.A., as Security Trustee
By:  

 

  Name:
  Title:

 

[Signature Page to the Indenture]

S-12

EXHIBIT A

FORM OF FACE OF CERTIFICATED NOTE

EMERALD PLANTATION HOLDINGS LIMITED

LEGEND APPLICABLE TO CANADIAN HOLDERS:

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND ONE DAY AFTER THE LATER OF (i) THE ORIGINAL ISSUE DATE AND (ii) THE DATE THE COMPANY BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY OF CANADA.

 

A-1

U.S. $        

EMERALD PLANTATION HOLDINGS LIMITED

6.00% GUARANTEED SENIOR NOTES DUE 2020

Certificated Note

Unconditionally Guaranteed by

the Signatories listed in the Subsidiary Guarantee hereto

CUSIP No. 29101W AA4

ISIN No. US29101WAA45

Emerald Plantation Holdings Limited, a Cayman Islands exempted company limited by shares (the “Company”), for value received, hereby promises to pay to                                          or registered assigns, upon surrender hereof the principal sum of                      UNITED STATES DOLLARS (U.S. $        ) on January 17, 2020, or on such earlier date as the principal hereof may become due in accordance with the provisions hereof.

Cash Interest Rate: 6.00% per annum

PIK Interest Rate: 8.00% per annum

Interest Payment Dates: June 30 and December 31, commencing June 30, 2013.

Regular Record Dates: June 16 and December 17.

Reference is hereby made to the further provisions set forth on the reverse hereof. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

This Note shall not be valid or obligatory until the certificate of authentication hereon shall have been duly signed by the Trustee acting under the Indenture.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

Date:

 

EMERALD PLANTATION HOLDINGS LIMITED
By:  

 

  Name:
  Title:

 

A-2

SUBSIDIARY GUARANTEE

Each of the undersigned (the “ Subsidiary Guarantors ”) hereby, jointly and severally, Guarantees as principal obligor to each Holder of a Note authenticated by the Trustee or the Authenticating Agent and to the Trustee and its successors and assigns the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the Notes and the Indenture. The obligations of each Subsidiary Guarantor are unconditional and absolute and, without limiting the generality of the foregoing, will not be released, discharged or otherwise affected by (1) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Company under the Indenture or any Note, by operation of law or otherwise; (2) any modification or amendment of or supplement to the Indenture or any Note; (3) any change in the corporate existence, structure or ownership of the Company, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company or its assets or any resulting release or discharge of any obligation of the Company contained in the Indenture or any Note; (4) the existence of any claim, set-off or other rights which the Subsidiary Guarantor may have at any time against the Company, the Trustee or any other Person, whether in connection with the Indenture or any unrelated transactions, provided that nothing herein prevents the assertion of any such claim by separate suit or compulsory counterclaim; (5) any invalidity, irregularity, or unenforceability relating to or against the Company for any reason of the Indenture or any Note, or (6) any other act or omission to act or delay of any kind by the Company, the Trustee or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of or defense to such Subsidiary Guarantor’s obligations hereunder.

This Subsidiary Guarantee will not be discharged with respect to any Note except by payment in full of the principal of, premium, if any, thereof and interest on the Notes and all other amounts payable, in respect of any Subsidiary Guarantor, as otherwise contemplated in the Indenture. In case of the failure of the Company punctually to pay any such principal of, premium, if any, thereof and interest on the Notes and all such other amounts payable, each of the Subsidiary Guarantors hereby agrees to cause any such payment to be made punctually when and as the same shall become due and payable, whether at the stated maturity, by acceleration, call for redemption or otherwise, and as if such payment were made by the Company.

Subject to certain exceptions as set forth in the Indenture, each of the Subsidiary Guarantors hereby further agrees that all payments of, or in respect of, principal of, and premium (if any) and interest in respect of this Subsidiary Guarantee will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Company, the Surviving Person (as defined in the Indenture) or the applicable Subsidiary Guarantor is organized or resident for tax purposes (or any political subdivision or taxing authority thereof or therein), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction is so required, each Subsidiary Guarantor severally agrees to pay such additional amounts as will result in receipt by the holder of this Subsidiary Guarantee of such amounts as would have been received by such holder had no such withholding or deduction been required.

 

A-3

The obligations of the Subsidiary Guarantors to the holder of this Note and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture, and reference is hereby made to such Article and Indenture for the precise terms of the Subsidiary Guarantee.

This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is endorsed shall have been executed by the Trustee or an Authenticating Agent under the Indenture by manual signature of one of its authorized officers.

 

SINO-CAPITAL GLOBAL INC. (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL HOLDINGS LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-GLOBAL HOLDINGS INC. (BVI)
By:  

 

  Name:
  Title:
SINO-WOOD PARTNERS, LIMITED (H.K.)
By:  

 

  Name:
  Title:

 

A-4

GRANDEUR WINWAY LIMITED (BVI)
By:  

 

  Name:
  Title:
SINOWIN INVESTMENTS LIMITED (BVI)
By:  

 

  Name:
  Title:
SINOWOOD LIMITED (CAYMAN ISLANDS)
By:  

 

  Name:
  Title:
SINO-FOREST BIO-SCIENCE LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-FOREST RESOURCES INC. (BVI)
By:  

 

  Name:
  Title:
SINO-PLANTATION LIMITED (H.K.)
By:  

 

  Name:
  Title:

 

A-5

SURI-WOOD INC. (BVI)
By:  

 

  Name:
  Title:
SINO-FOREST INVESTMENTS LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-WOOD (GUANGXI) LIMITED (H.K.)
By:  

 

  Name:
  Title:
SINO-WOOD (JIANGXI) LIMITED (H.K.)
By:  

 

  Name:
  Title:
SINO-WOOD (GUANGDONG) LIMITED (H.K.)
By:  

 

  Name:
  Title:
SINO-WOOD (FUJIAN) LIMITED (H.K.)
By:  

 

  Name:
  Title:

 

A-6

SINO-PANEL (ASIA) INC. (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (GUANGXI) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (YUNNAN) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (NORTH EAST CHINA) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL [XIANGXI] LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL [HUNAN] LIMITED (BVI)
By:  

 

  Name:
  Title:

 

A-7

SFR (CHINA) INC. (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL [SUZHOU] LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (GAOYAO) LTD. (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (GUANGZHOU) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (NORTH SEA) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (GUIZHOU) LIMITED (BVI)
By:  

 

  Name:
  Title:

 

A-8

SINO-PANEL (HUAIHUA) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (QINZHOU) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (YONGZHOU) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (FUJIAN) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (SHAOYANG) LIMITED (BVI)
By:  

 

  Name:
  Title:
AMPLEMAX WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:

 

A-9

ACE SUPREME INTERNATIONAL LIMITED (BVI)
By:  

 

  Name:
  Title:
EXPRESS POINT HOLDINGS LIMITED (BVI)
By:  

 

  Name:
  Title:
GLORY BILLION INTERNATIONAL LIMITED (BVI)
By:  

 

  Name:
  Title:
SMART SURE ENTERPRISES LIMITED (BVI)
By:  

 

  Name:
  Title:
EXPERT BONUS INVESTMENT LIMITED (BVI)
By:  

 

  Name:
  Title:
DYNAMIC PROFIT HOLDINGS LIMITED (BVI)
By:  

 

  Name:
  Title:

 

A-10

ALLIANCE MAX LIMITED (BVI)
By:  

 

  Name:
  Title:
BRAIN FORCE LIMITED (BVI)
By:  

 

  Name:
  Title:
CHEER GOLD WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:
GENERAL EXCEL LIMITED (BVI)
By:  

 

  Name:
  Title:
HARVEST WONDER WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:
HOMIX LIMITED (BVI)
By:  

 

  Name:
  Title:

 

A-11

POLY MARKET LIMITED (BVI)
By:  

 

  Name:
  Title:
PRIME KINETIC LIMITED (BVI)
By:  

 

  Name:
  Title:
REGAL WIN CAPITAL LIMITED (BVI)
By:  

 

  Name:
  Title:
RICH CHOICE WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-FOREST INTERNATIONAL (BARBADOS) CORPORATION (BARBADOS)
By:  

 

  Name:
  Title:
SINO-GLOBAL MANAGEMENT CONSULTING INC. (BVI)
By:  

 

  Name:
  Title:

 

A-12

SINO-PANEL (CHINA) NURSERY LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (RUSSIA) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-WOOD TRADING LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL TRADING LIMITED (BVI)
By:  

 

  Name:
  Title:
TRILLION EDGE LIMITED (BVI)
By:  

 

  Name:
  Title:
VALUE QUEST INTERNATIONAL LIMITED (BVI)
By:  

 

  Name:
  Title:

 

A-13

WELL KEEN WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:
MANDRA FORESTRY HOLDINGS LIMITED (BVI)
By:  

 

  Name:
  Title:
MANDRA FORESTRY FINANCE LIMITED (BVI)
By:  

 

  Name:
  Title:
MANDRA FORESTRY ANHUI LIMITED (BVI)
By:  

 

  Name:
  Title:
MANDRA FORESTRY HUBEI LIMITED (H.K.)
By:  

 

  Name:
  Title:
ELITE LEGACY LIMITED (BVI)
By:  

 

  Name:
  Title:

 

A-14

EMERALD PLANTATION GROUP LIMITED (CAYMAN ISLANDS)
By:  

 

  Name:
  Title:

 

A-15

CERTIFICATE OF AUTHENTICATION

This is one of the 6.00% Guaranteed Senior Notes Due 2020 described in the Indenture referred to in this Note.

 

Computershare Trust Company, N.A.,

as Trustee

By:  

 

Authorized Signatory

 

A-16

[FORM OF REVERSE OF CERTIFICATED NOTE]

Emerald Plantation Holdings Limited

6.00% Guaranteed Senior Notes Due 2020

 

  1. Principal and Interest.

The Company promises to pay the principal of this Note on January 17, 2020.

The Company promises to pay interest on the principal amount of this Note on each Interest Payment Date, as set forth on the face of this Note, at the rate of (i) 6.00% per annum in cash for all interest paid in cash or (ii) of 8.00% per annum for interest paid in-kind (as provided for below) (“ PIK Interest ”), from the date of issuance of this Note until but not including, the date of maturity.

Subject to the next paragraph, interest will be payable semi-annually in arrears (to the holders of record of the Notes at the close of business on June 16 or December 17 immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing June 30, 2013. Interest on this Note will accrue from the most recent date to which interest has been paid on this Note (or, if there is no existing default in the payment of interest and if this Note is authenticated between a Regular Record Date and the next Interest Payment Date, from such Interest Payment Date) or, if no interest has been paid, from the Original Issue Date.

At the Company’s election, the Company may elect from time to time to pay interest on the principal amount of this Note in cash, partially in cash and partially in PIK Notes, or entirely in PIK Notes. In the event that the Company wishes to pay PIK Interest, the Company shall elect the form of interest payment with respect to each interest payment period by delivering a written notice (a “ PIK Election ”) to the Trustee on or prior to the Regular Record Date in respect of the relevant Interest Payment Date. In the absence of such an election for any interest payment period, interest on the Notes shall be payable according to the election for the previous interest payment period. Interest will accrue at a rate of 6% per annum if the interest for such period is paid fully in cash. In the event that the Company makes a PIK Election, the cash interest portion (if any) of interest payable will accrue and be paid for such interest period at a rate of 6% per annum and the PIK Interest, paid through the issuance of PIK Notes as described below, will accrue for such interest period at a rate of 8% per annum.

Any amount (whether principal, premium or interest) not paid when due hereunder (whether at the stated maturity, by acceleration or otherwise) shall bear interest (including after as well as before judgement, and including post-petition interest in any proceeding), to the extent permitted by law, at a rate of 6% per annum plus the Default Rate from and including the date of such non-payment to but excluding the date on which such amount is paid in full (all such default interest, “ Defaulted Interest ”). Defaulted Interest will be paid to the Persons that are Holders on a special record date fixed by the Company for the payment of such Defaulted Interest, whether or not such day is a Business Day, as follows. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee

 

A-17

an amount of money and/or PIK Notes equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money and/or PIK Notes when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as provided in this Note. The Company shall fix or cause to be fixed each special record date and payment date in such written notice; provided that no such special record date shall be less than 10 days prior to the related payment date for such Defaulted Interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail, or cause to be mailed to each Holder a notice that states the special record date, the related payment date and the amount of such Defaulted Interest to be paid.

Interest shall accrue on PIK Notes from and including the date of issuance of such PIK Notes. Any such PIK Notes shall be issued on the same terms as the Notes and shall constitute part of the same series of securities as the Notes and will vote together as one series on all matters with respect to the Notes. All references to Notes herein shall include any PIK Notes. The Company will evidence and satisfy its obligation to pay PIK Interest in respect of Notes represented by Global Notes by increasing the principal amount of such Global Notes for the benefit of the Persons with the beneficial interest in such Global Notes specified by the Depositary or its nominee. Any such increase in the principal amount of the Global Notes will be made by the Trustee or the Custodian (at the direction of the Trustee). The Company will evidence and satisfy its obligation to pay PIK Interest in respect of Notes represented by Certificated Notes by issuing additional notes (“ PIK Notes ”) in an aggregate principal amount equal to the PIK Interest then payable, rounded up to the nearest whole dollar, in the form of Certificated Notes and delivering them to Holders thereof.

 

  2. Indenture; Subsidiary Guarantee; Collateral.

This is one of the Notes issued under an Indenture, dated as of January 17, 2013, (as amended from time to time, the “Indenture”) between Emerald Plantation Holdings Limited, a Cayman Islands exempted company limited by shares, as the Company, the Subsidiary Guarantors listed in Schedule I thereto, Computershare Trust Company, N.A., as Trustee and Computershare Trust Company, N.A., as Security Trustee. Capitalized terms used herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture will control.

The Notes are general obligations of the Company. The Indenture limits the original aggregate principal amount of the Notes to US$300,000,000, but Additional Notes in an amount not to exceed US$100,000,000 and PIK Notes may be issued pursuant to the Indenture, and the originally issued Notes and all such Additional Notes and PIK Notes vote together for all purposes as a single class. This Note is guaranteed and is secured by mortgages, charges and/or pledges of the property and asset of the Company and of the Initial Subsidiary Guarantors, as set forth in the Indenture.

 

A-18

  3. Redemption and Repurchase; Discharge Prior to Redemption or Maturity.

This Note is subject to optional redemption, and may be the subject of an Offer to Purchase, as further described in the Indenture. This Note is also subject to mandatory redemption upon the occurrence of an Entire Sale Transaction as further described in the Indenture. There is no other mandatory redemption or sinking fund applicable to this Note.

If the Company deposits with the Trustee money or U.S. Government Obligations sufficient to pay the then Outstanding principal of, premium, if any, and accrued interest on the Notes to redemption or maturity, the Company may in certain circumstances be discharged from the Indenture and the Notes or may be discharged from certain of its obligations under certain provisions of the Indenture.

 

  4. Registered Form; Denominations; Transfer; Exchange.

The Notes are in registered form without coupons in minimum denominations of US$2,000 principal amount and any multiple of US$1,000 in excess thereof. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Trustee may require a Holder to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. Pursuant to the Indenture, there are certain periods during which the Trustee will not be required to issue, register the transfer of or exchange any Note or certain portions of a Note.

 

  5. Defaults and Remedies.

If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Notes may declare all the Notes to be due and payable. If a bankruptcy or insolvency default with respect to the Company occurs and is continuing, the Notes automatically become due and payable. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in principal amount of the Notes then Outstanding may direct the Trustee in its exercise of remedies.

 

  6. Amendment and Waiver.

Subject to certain exceptions, the Indenture and the Notes may be amended, or default may be waived, with the consent of the Holders of a majority in principal amount of the Outstanding Notes. Without notice to or the consent of any Holder, the Company and the Trustee may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency, comply with any request of the US Securities and Exchange Commission in connection with qualifying the Indenture under the TIA, or make any other change that does not adversely affect the rights of any Holder.

 

  7. Authentication.

This Note is not valid until the Trustee (or Authenticating Agent) signs the certificate of authentication on the other side of this Note.

 

A-19

  8. Governing Law.

This Note shall be governed by, and construed in accordance with, the laws of the State of New York.

 

  9. Abbreviations.

Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A/ (= Uniform Gifts to Minors Act).

The Company will furnish a copy of the Indenture to any Holder upon written request and without charge.

 

A-20

TRUSTEE, PAYING AGENTS, TRANSFER AGENTS AND REGISTRAR

Trustee, Paying Agent, Transfer Agent and Registrar

Computershare Trust Company, N.A.

350 Indiana Street, Suite 750

Golden, CO 80401

Attention: Corporate Trust

 

A-21

OPTION OF HOLDER TO ELECT PURCHASE

If you wish to have all of this Note purchased by the Company pursuant to Section 4.13 or Section 4.15 of the Indenture, check the box:   ¨

If you wish to have a portion of this Note purchased by the Company pursuant to Section 4.13 or Section 4.15 of the Indenture, state the amount (in original principal amount) below:

US$        

 

Date:  

 

 

Your Signature:  

 

(Sign exactly as your name appears on the other side of this Note)

 

Signature Guarantees 1 :  

 

 

1  

Signatures must be guaranteed by an “ eligible guarantor institution ” meeting the requirements of the Trustee, which requirements include membership or participation in the Securities Transfer Association Medallion Program (“ STAMP ”) or such other “ signature guarantee program ” as may be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

A-22

EXHIBIT B

FORM OF GLOBAL NOTE

EMERALD PLANTATION HOLDINGS LIMITED

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.

LEGEND APPLICABLE TO CANADIAN HOLDERS:

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND ONE DAY AFTER THE LATER OF (i) THE ORIGINAL ISSUE DATE AND (ii) THE DATE THE COMPANY BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY OF CANADA.

 

B-1

U.S. $         

6.00% GUARANTEED SENIOR NOTES DUE 2020

Global Note

Unconditionally Guaranteed by

the Signatories listed in the Subsidiary Guarantee hereto

No.         

CUSIP No. 29101W AA4

ISIN No. US29101WAA45

Emerald Plantation Holdings Limited, a Cayman Islands exempted company limited by shares (the “Company”), for value received, hereby promises to pay to Cede & Co., or registered assigns, upon surrender hereof the principal sum of THREE HUNDRED MILLION UNITED STATES DOLLARS (U.S. $300,000,000) on January 17, 2020, or on such earlier date as the principal hereof may become due in accordance with the provisions hereof.

Cash Interest Rate: 6.00% per annum

PIK Interest Rate: 8.00% per annum

Interest Payment Dates: June 30 and December 31, commencing June 30, 2013.

Regular Record Dates: June 16 and December 17.

Reference is hereby made to the further provisions set forth on the reverse hereof. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

This Note shall not be valid or obligatory until the certificate of authentication hereon shall have been duly signed by the Trustee acting under the Indenture.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

Date:         

 

EMERALD PLANTATION HOLDINGS LIMITED
By:  

 

  Name:
  Title:

 

B-2

SUBSIDIARY GUARANTEE

Each of the undersigned (the “ Subsidiary Guarantors ”) hereby, jointly and severally, Guarantees as principal obligor to each Holder of a Note authenticated by the Trustee or the Authenticating Agent and to the Trustee and its successors and assigns the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the Notes and the Indenture. The obligations of each Subsidiary Guarantor are unconditional and absolute and, without limiting the generality of the foregoing, will not be released, discharged or otherwise affected by (1) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Company under the Indenture or any Note, by operation of law or otherwise; (2) any modification or amendment of or supplement to the Indenture or any Note; (3) any change in the corporate existence, structure or ownership of the Company, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company or its assets or any resulting release or discharge of any obligation of the Company contained in the Indenture or any Note; (4) the existence of any claim, set-off or other rights which the Subsidiary Guarantor may have at any time against the Company, the Trustee or any other Person, whether in connection with the Indenture or any unrelated transactions, provided that nothing herein prevents the assertion of any such claim by separate suit or compulsory counterclaim; (5) any invalidity, irregularity, or unenforceability relating to or against the Company for any reason of the Indenture or any Note, or (6) any other act or omission to act or delay of any kind by the Company, the Trustee or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of or defense to such Subsidiary Guarantor’s obligations hereunder.

This Subsidiary Guarantee will not be discharged with respect to any Note except by payment in full of the principal of, premium, if any, thereof and interest on the Notes and all other amounts payable, in respect of any Subsidiary Guarantor, as otherwise contemplated in the Indenture. In case of the failure of the Company punctually to pay any such principal of, premium, if any, thereof and interest on the Notes and all such other amounts payable, each of the Subsidiary Guarantors hereby agrees to cause any such payment to be made punctually when and as the same shall become due and payable, whether at the stated maturity, by acceleration, call for redemption or otherwise, and as if such payment were made by the Company.

Subject to certain exceptions as set forth in the Indenture, each of the Subsidiary Guarantors hereby further agrees that all payments of, or in respect of, principal of, and premium (if any) and interest in respect of this Subsidiary Guarantee will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Company, the Surviving Person (as defined in the Indenture) or the applicable Subsidiary Guarantor is organized or resident for tax purposes (or any political subdivision or taxing authority thereof or therein), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction is so required, each Subsidiary Guarantor severally agrees to pay such additional amounts as will result in receipt by the holder of this Subsidiary Guarantee of such amounts as would have been received by such holder had no such withholding or deduction been required.

 

B-3

The obligations of the Subsidiary Guarantors to the holder of this Note and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture, and reference is hereby made to such Article and Indenture for the precise terms of the Subsidiary Guarantee.

This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is endorsed shall have been executed by the Trustee or an Authenticating Agent under the Indenture by manual signature of one of its authorized officers.

 

SINO-CAPITAL GLOBAL INC. (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL HOLDINGS LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-GLOBAL HOLDINGS INC. (BVI)
By:  

 

  Name:
  Title:
SINO-WOOD PARTNERS, LIMITED (H.K.)
By:  

 

  Name:
  Title:

 

B-4

GRANDEUR WINWAY LIMITED (BVI)
By:  

 

  Name:
  Title:
SINOWIN INVESTMENTS LIMITED (BVI)
By:  

 

  Name:
  Title:
SINOWOOD LIMITED (CAYMAN ISLANDS)
By:  

 

  Name:
  Title:
SINO-FOREST BIO-SCIENCE LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-FOREST RESOURCES INC. (BVI)
By:  

 

  Name:
  Title:
SINO-PLANTATION LIMITED (HK)
By:  

 

  Name:
  Title:

 

B-5

SURI-WOOD INC. (BVI)
By:  

 

  Name:
  Title:
SINO-FOREST INVESTMENTS LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-WOOD (GUANGXI) LIMITED (H.K.)
By:  

 

  Name:
  Title:
SINO-WOOD (JIANGXI) LIMITED (H.K.)
By:  

 

  Name:
  Title:
SINO-WOOD (GUANGDONG) LIMITED (H.K.)
By:  

 

  Name:
  Title:
SINO-WOOD (FUJIAN) LIMITED (H.K.)
By:  

 

  Name:
  Title:

 

B-6

SINO-PANEL (ASIA) INC. (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (GUANGXI) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (YUNNAN) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (NORTH EAST CHINA) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL [XIANGXI] LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL [HUNAN] LIMITED (BVI)
By:  

 

  Name:
  Title:

 

B-7

SFR (CHINA) INC. (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL [SUZHOU] LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (GAOYAO) LTD. (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (GUANGZHOU) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (NORTH SEA) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (GUIZHOU) LIMITED (BVI)
By:  

 

  Name:
  Title:

 

B-8

SINO-PANEL (HUAIHUA) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (QINZHOU) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (YONGZHOU) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (FUJIAN) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (SHAOYANG) LIMITED (BVI)
By:  

 

  Name:
  Title:
AMPLEMAX WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:

 

B-9

ACE SUPREME INTERNATIONAL LIMITED (BVI)
By:  

 

  Name:
  Title:
EXPRESS POINT HOLDINGS LIMITED (BVI)
By:  

 

  Name:
  Title:
GLORY BILLION INTERNATIONAL LIMITED (BVI)
By:  

 

  Name:
  Title:
SMART SURE ENTERPRISES LIMITED (BVI)
By:  

 

  Name:
  Title:
EXPERT BONUS INVESTMENT LIMITED (BVI)
By:  

 

  Name:
  Title:
DYNAMIC PROFIT HOLDINGS LIMITED (BVI)
By:  

 

  Name:
  Title:

 

B-10

ALLIANCE MAX LIMITED (BVI)
By:  

 

  Name:
  Title:
BRAIN FORCE LIMITED (BVI)
By:  

 

  Name:
  Title:
CHEER GOLD WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:
GENERAL EXCEL LIMITED (BVI)
By:  

 

  Name:
  Title:
HARVEST WONDER WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:
HOMIX LIMITED (BVI)
By:  

 

  Name:
  Title:

 

B-11

POLY MARKET LIMITED (BVI)
By:  

 

  Name:
  Title:
PRIME KINETIC LIMITED (BVI)
By:  

 

  Name:
  Title:
REGAL WIN CAPITAL LIMITED (BVI)
By:  

 

  Name:
  Title:
RICH CHOICE WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-FOREST INTERNATIONAL (BARBADOS) CORPORATION (BARBADOS)
By:  

 

  Name:
  Title:
SINO-GLOBAL MANAGEMENT CONSULTING INC. (BVI)
By:  

 

  Name:
  Title:

 

B-12

SINO-PANEL (CHINA) NURSERY LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL (RUSSIA) LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-WOOD TRADING LIMITED (BVI)
By:  

 

  Name:
  Title:
SINO-PANEL TRADING LIMITED (BVI)
By:  

 

  Name:
  Title:
TRILLION EDGE LIMITED (BVI)
By:  

 

  Name:
  Title:
VALUE QUEST INTERNATIONAL LIMITED (BVI)
By:  

 

  Name:
  Title:

 

B-13

WELL KEEN WORLDWIDE LIMITED (BVI)
By:  

 

  Name:
  Title:
MANDRA FORESTRY HOLDINGS LIMITED (BVI)
By:  

 

  Name:
  Title:
MANDRA FORESTRY FINANCE LIMITED (BVI)
By:  

 

  Name:
  Title:
MANDRA FORESTRY ANHUI LIMITED (BVI)
By:  

 

  Name:
  Title:
MANDRA FORESTRY HUBEI LIMITED (H.K.)
By:  

 

  Name:
  Title:
ELITE LEGACY LIMITED (BVI)
By:  

 

  Name:
  Title:

 

B-14

EMERALD PLANTATION GROUP LIMITED (CAYMAN ISLANDS)
By:  

 

  Name:
  Title:

 

B-15

CERTIFICATE OF AUTHENTICATION

This is one of the 6.00% Guaranteed Senior Notes Due 2020 described in the Indenture referred to in this Note.

 

Computershare Trust Company, N.A.,
as Trustee
By:  

 

  Authorized Signatory

 

B-16

[FORM OF REVERSE OF GLOBAL NOTE]

Emerald Plantation Holdings Limited

6.00% Guaranteed Senior Notes Due 2020

 

  1. Principal and Interest.

The Company promises to pay the principal of this Note on January 17, 2020.

The Company promises to pay interest on the principal amount of this Note on each Interest Payment Date, as set forth on the face of this Note, at the rate of (i) 6.00% per annum in cash or (ii) of 8.00% per annum for interest paid in-kind (as provided for below) (“ PIK Interest ”), from the date of issuance of this Note until but not including, the date of maturity.

Subject to the next paragraph, interest will be payable semi-annually in arrears (to the holders of record of the Notes at the close of business on June 16 or December 17 immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing June 30, 2013. Interest on this Note will accrue from the most recent date to which interest has been paid on this Note (or, if there is no existing default in the payment of interest and if this Note is authenticated between a Regular Record Date and the next Interest Payment Date, from such Interest Payment Date) or, if no interest has been paid, from the Original Issue Date.

At the Company’s election, the Company may elect from time to time to pay interest on the principal amount of this Note in cash, partially in cash and partially in PIK Notes, or entirely in PIK Notes. In the event that the Company wishes to pay PIK Interest, the Company shall elect the form of interest payment with respect to each interest payment period by delivering a written notice (a “ PIK Election ”) to the Trustee on or prior to the Regular Record Date in respect of the relevant Interest Payment Date. In the absence of such an election for any interest payment period, interest on the Notes shall be payable according to the election for the previous interest payment period. Interest will accrue at a rate of 6% per annum if the interest for such period is paid fully in cash. In the event that the Company makes a PIK Election, the cash interest portion (if any) of interest payable will accrue and be paid for such interest period at a rate of 6% per annum and the PIK Interest, paid through the issuance of PIK Notes as described below, will accrue for such interest period at a rate of 8% per annum.

Any amount (whether principal, premium or interest) not paid when due hereunder (whether at the stated maturity, by acceleration or otherwise) shall bear interest (including after as well as before judgement and including post-petition interest in any proceeding), to the extent permitted by law, at a rate of 6% per annum plus the Default Rate from and including the date of such non-payment to but excluding the date on which such amount is paid in full (all such default interest, “ Defaulted Interest ”). Defaulted Interest will be paid to the Persons that are Holders on a special record date fixed by the Company for the payment of such Defaulted Interest, whether or not such day is a Business Day, as follows. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money and/or PIK Notes equal to the aggregate amount proposed to be paid in

 

B-17

respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money and/or PIK Notes when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as provided in this Note. The Company shall fix or cause to be fixed each special record date and payment date in such written notice; provided that no such special record date shall be less than 10 days prior to the related payment date for such Defaulted Interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail, or cause to be mailed to each Holder a notice that states the special record date, the related payment date and the amount of such Defaulted Interest to be paid.

Interest shall accrue on PIK Notes from and including the date of issuance of such PIK Notes. Any such PIK Notes shall be issued on the same terms as the Notes and shall constitute part of the same series of securities as the Notes and will vote together as one series on all matters with respect to the Notes. All references to Notes herein shall include any PIK Notes. The Company will evidence and satisfy its obligation to pay PIK Interest in respect of Notes represented by Global Notes by increasing the principal amount of such Global Notes for the benefit of the Persons with the beneficial interest in such Global Notes specified by the Depositary or its nominee. Any such increase in the principal amount of the Global Notes will be made by the Trustee or the Custodian (at the direction of the Trustee). The Company will evidence and satisfy its obligation to pay PIK Interest in respect of Notes represented by Certificated Notes by issuing additional notes (“ PIK Notes ”) in an aggregate principal amount equal to the PIK Interest then payable, rounded up to the nearest whole dollar, in the form of Certificated Notes and delivering them to Holders thereof.

 

  2. Indenture; Subsidiary Guarantee; Collateral.

This is one of the Notes issued under an Indenture, dated as of January 17, 2013, (as amended from time to time, the “ Indenture ”) between Emerald Plantation Holdings Limited, a Cayman Islands exempted company limited by shares, as the Company, the Subsidiary Guarantors listed in Schedule I thereto, Computershare Trust Company, N.A., as Trustee and Computershare Trust Company, N.A., as Security Trustee. Capitalized terms used herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture will control.

The Notes are general obligations of the Company. The Indenture limits the original aggregate principal amount of the Notes to US$300,000,000, but Additional Notes in an amount not to exceed US$100,000,000 and PIK Notes may be issued pursuant to the Indenture, and the originally issued Notes and all such Additional Notes and PIK Notes vote together for all purposes as a single class. This Note is guaranteed and is secured by mortgages, charges and/or pledges of the property and assets of the Company and of the Initial Subsidiary Guarantors, as set forth in the Indenture.

 

B-18

  3. Redemption and Repurchase; Discharge Prior to Redemption or Maturity.

This Note is subject to optional redemption, and may be the subject of an Offer to Purchase, as further described in the Indenture. This Note is also subject to mandatory redemption upon the occurrence of an Entire Sale Transaction as further described in the Indenture. There is no other mandatory redemption or sinking fund applicable to this Note.

If the Company deposits with the Trustee money or U.S. Government Obligations sufficient to pay the then Outstanding principal of, premium, if any, and accrued interest on the Notes to redemption or maturity, the Company may in certain circumstances be discharged from the Indenture and the Notes or may be discharged from certain of its obligations under certain provisions of the Indenture.

 

  4. Registered Form; Denominations; Transfer; Exchange.

The Notes are in registered form without coupons in minimum denominations of US$2,000 principal amount and any multiple of US$1,000 in excess thereof. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Trustee may require a Holder to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. Pursuant to the Indenture, there are certain periods during which the Trustee will not be required to issue, register the transfer of or exchange any Note or certain portions of a Note.

 

  5. Defaults and Remedies.

If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Notes may declare all the Notes to be due and payable. If a bankruptcy or insolvency default with respect to the Company occurs and is continuing, the Notes automatically become due and payable. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in principal amount of the Notes then Outstanding may direct the Trustee in its exercise of remedies.

 

  6. Amendment and Waiver.

Subject to certain exceptions, the Indenture and the Notes may be amended, or default may be waived, with the consent of the Holders of a majority in principal amount of the Outstanding Notes. Without notice to or the consent of any Holder, the Company and the Trustee may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency, comply with any request of the US Securities and Exchange Commission in connection with qualifying the Indenture under the TIA, or make any other change that does not adversely affect the rights of any Holder.

 

  7. Authentication.

This Note is not valid until the Trustee (or Authenticating Agent) signs the certificate of authentication on the other side of this Note.

 

B-19

  8. Governing Law.

This Note shall be governed by, and construed in accordance with, the laws of the State of New York.

 

  9. Abbreviations.

Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A/ (= Uniform Gifts to Minors Act).

The Company will furnish a copy of the Indenture to any Holder upon written request and without charge.

 

B-20

TRUSTEE, PAYING AGENT, TRANSFER AGENT AND REGISTRAR

Trustee, Paying Agent, Transfer Agent and Registrar

Computershare Trust Company, N.A.

350 Indiana Street, Suite 750

Golden, CO 80401

Attention: Corporate Trust

 

B-21

OPTION OF HOLDER TO ELECT PURCHASE

If you wish to have all of this Note purchased by the Company pursuant to Section 4.13 or Section 4.15 of the Indenture, check the box:   ¨

If you wish to have a portion of this Note purchased by the Company pursuant to Section 4.13 or Section 4.15 of the Indenture, state the amount (in original principal amount) below:

US$        

 

Date:  

 

Your Signature:  

 

(Sign exactly as your name appears on the other side of this Note)
Signature Guarantees 1 :  

 

 

1   Signatures must be guaranteed by an “ eligible guarantor institution ” meeting the requirements of the Trustee, which requirements include membership or participation in the Securities Transfer Association Medallion Program (“ STAMP ”) or such other “ signature guarantee program ” as may be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

B-22

SCHEDULE OF EXCHANGES OF NOTES

The following changes in the aggregate principal amount of Notes represented by this Global Note have been made:

 

Date

   Amount of
decrease in
aggregate
principal amount
of Notes 		   Amount of
increase in
aggregate
principal amount
of Notes 		   Outstanding
Balance 		   Signature
           
           

 

B-23

EXHIBIT C

FORM OF AUTHORIZATION CERTIFICATE – SUBSIDIARY GUARANTOR

EXHIBIT C-1

I, [Name], [Title], of [                    ], acting on behalf of the Subsidiary Guarantors listed in Schedule I hereto (the “ Subsidiary Guarantors ”), hereby certify that:

(A) the persons listed below are (i) Authorized Officers for purposes of the Indenture dated as of January 17, 2013 among Emerald Plantation Holdings Limited, a Cayman Islands exempted company limited by shares (the “ Company ”), the Subsidiary Guarantors listed in Schedule I thereto, Computershare Trust Company, N.A., as Trustee, and Computershare Trust Company, N.A., as Security Trustee (ii) duly elected or appointed, qualified and acting as the holder of the respective office or offices set forth opposite his name and (iii) the duly authorized person who executed or will execute the Subsidiary Guarantee endorsed on the Notes by his manual or facsimile signature and was at the time of such execution, duly elected or appointed, qualified and acting as the holder of the office set forth opposite his name;

(B) each signature appearing below is the person’s genuine signature; and

(C) attached hereto as Schedule II is a true, correct and complete specimen of the certificates representing the Notes.

Authorized Officers:

 

Name

  

Company

  

Title

  

Signature

        
        
        
        
        
        
        
        
        
        
        

 

C-1

IN WITNESS WHEREOF, I have hereunto signed my name.

Date:

 

—
By:  

 

  Name:
  Title:

 

C-2

Schedule I to Exhibit C-1

Subsidiary Guarantors

 

1. Sino-Capital Global Inc.

 

2. Sino-Panel Holdings Limited (BVI)

 

3. Sino-Panel (Asia) Inc. (BVI)

 

4. Sino-Panel (Gaoyao) Ltd. (BVI)

 

5. SFR (China) Inc. (BVI)

 

6. Sino-Wood Partners, Limited (H.K.)

 

7. Sino-Forest Resources Inc. (BVI)

 

8. Suri-Wood Inc. (BVI)

 

9. Sino-Plantation Limited (H.K.)

 

10. Sino-Wood (Guangxi) Limited (H.K.)

 

11. Sino-Wood (Jiangxi) Limited (H.K.)

 

12. Sino-Wood (Guangdong) Limited (H.K.)

 

13. Sino-Global Holdings Inc. (BVI)

 

14. Sinowin Investments Limited (BVI)

 

15. Sino-Panel (North East China) Limited (BVI)

 

16. Sino-Panel [Hunan] Limited (BVI) (formerly known as Comtech Universal Limited)

 

17. Sino-Panel [Xiangxi] Limited (BVI) (formerly known as Rich Base Worldwide Limited)

 

18. Sino-Forest Bio-Science Limited (BVI) (formerly known as Sino-Two Limited)

 

19. Sino-Panel (Guangzhou) Limited (BVI)

 

20. Sino-Panel [Suzhou] Limited (BVI) (formerly known as Pacific Harvest Holdings Limited)

 

21. Sino-Panel (Yunnan) Limited (BVI)

 

22. Sino-Panel (Guangxi) Limited (BVI)

 

23. Sino-Panel (Guizhou) Limited (BVI)

 

24. Sino-Panel (Qinzhou) Limited (BVI) (formerly known as Sino-Panel (Jiayu) Ltd.)

 

25. Sino-Panel (Shaoyang) Limited (BVI)

 

26. Sino-Panel (Yongzhou) Limited (BVI)

 

27. Sino-Panel (Fujian) Limited (BVI)

 

28. Grandeur Winway Limited. (BVI)

 

29. Sinowood Limited (Cayman Islands)

 

30. Sino-Forest Investments Limited (BVI)

 

31. Sino-Wood (Fujian) Limited (H.K.)

 

32. Sino-Panel (North Sea) Limited (BVI)

 

33. Sino-Panel (Huaihua) Limited (BVI)

 

34. Amplemax Worldwide Limited (BVI)

 

35. Ace Supreme International Limited (BVI)

 

36. Express Point Holdings Limited (BVI)

 

37. Glory Billion International Limited (BVI)

 

38. Smart Sure Enterprises Limited (BVI)

 

39. Expert Bonus Investment Limited (BVI)

 

40. Dynamic Profit Holdings Limited (BVI)

 

41. Alliance Max Limited (BVI)

 

C-3

42. Brain Force Limited (BVI)

 

43. Cheer Gold Worldwide Limited (BVI)

 

44. General Excel Limited (BVI)

 

45. Harvest Wonder Worldwide Limited (BVI)

 

46. Homix Limited (BVI)

 

47. Poly Market Limited (BVI)

 

48. Prime Kinetic Limited (BVI)

 

49. Regal Win Capital Limited (BVI)

 

50. Rich Choice Worldwide Limited (BVI)

 

51. Sino-Forest International (Barbados) Corporation (Barbados)

 

52. Sino-Global Management Consulting Inc. (BVI)

 

53. Sino-Panel (China) Nursery Limited (BVI)

 

54. Sino-Panel (Russia) Limited (BVI)

 

55. Sino-Wood Trading Limited (BVI)

 

56. Sino-Panel Trading Limited (BVI)

 

57. Trillion Edge Limited (BVI)

 

58. Value Quest International Limited (BVI)

 

59. Well Keen Worldwide Limited (BVI)

 

60. Mandra Forestry Holdings Limited (BVI)

 

61. Mandra Forestry Finance Limited (BVI)

 

62. Mandra Forestry Anhui Limited (BVI)

 

63. Mandra Forestry Hubei Limited (H.K.)

 

64. Elite Legacy Limited (BVI)

 

65. Emerald Plantation Group Limited (Cayman Islands)

 

C-4

EXHIBIT C-2

[FORM OF AUTHORIZATION CERTIFICATE – COMPANY]

I, [Name], [Title], acting on behalf of Emerald Plantation Holdings Limited (the “Company”), hereby certify that:

(A) the persons listed below are (i) Authorized Officers for purposes of the Indenture dated as of January 17, 2013 among Emerald Plantation Holdings Limited, a Cayman Islands exempted company limited by shares, the Subsidiary Guarantors listed in Schedule I thereto, Computershare Trust Company, N.A., as Trustee, and Computershare Trust Company, N.A., as Security Trustee (ii) duly elected or appointed, qualified and acting as the holder of the respective office or offices set forth opposite his name and (iii) the duly authorized person who executed or will execute the Notes by his manual or facsimile signature and was at the time of such execution, duly elected or appointed, qualified and acting as the holder of the office set forth opposite his name;

(B) each signature appearing below is the person’s genuine signature; and

(C) attached hereto as Schedule I is a true, correct and complete specimen of the certificates representing the Notes.

Authorized Officers:

 

Name

  

Title

  

Signature

     
     
     
     
     

IN WITNESS WHEREOF, I have hereunto signed my name.

Date:

 

—
By:  

 

  Name:
  Title:

 

C-5

EXHIBIT D

FORM OF PAYING AND TRANSFER AGENT AND

REGISTRAR APPOINTMENT LETTER

Computershare Trust Company, N.A.

as Paying and Transfer Agent and Registrar

Re: 6.00% Guaranteed Senior Notes due 2020 of Emerald Plantation Holdings Limited

Reference is hereby made to the Indenture dated as of January 17, 2013 (the “ Indenture ”) among Emerald Plantation Holdings Limited, a Cayman Islands exempted company limited by shares (the “ Company ”), the Subsidiary Guarantors listed in Schedule I thereto, Computershare Trust Company, N.A., as Trustee, and Computershare Trust Company, N.A., as Security Trustee. Terms used herein are used as defined in the Indenture.

The Company hereby appoints Computershare Trust Company, N.A. as the paying agent and transfer agent and registrar (the “ Paying and Transfer Agent and Registrar ”) with respect to the Notes and the Paying and Transfer Agent and Registrar hereby accepts such appointment. By accepting such appointment, the Paying and Transfer Agent and Registrar agrees to be bound by and to perform the services with respect to itself set forth in the terms and conditions set forth in the Indenture and the Notes, as well as the following terms and conditions to all of which the Company agrees and to all of which the rights of the holders from time to time of the Notes shall be subject:

(a) The Company, no later than 9:00 a.m. (New York City time) on the Business Day immediately preceding each date on which a payment in respect of the Notes becomes due, shall transfer (or cause to be transferred) to the Paying and Transfer Agent and Registrar in the currency of United States of America immediately available funds such amount as may be required for the purposes of such payment. The Company, no later than 9:00 a.m. (New York City time) on the third Business Day immediately preceding each date on which any payment in respect of the Notes becomes due, shall confirm such payment to the Paying and Transfer Agent and Registrar, who shall promptly notify the relevant agents upon such confirmation. The Paying and Transfer Agent and Registrar shall not be bound to make payment until funds in such amount as may be required for the purpose of such payment have been received from the Company.

(b) The Paying and Transfer Agent and Registrar shall be entitled to the compensation to be agreed upon with the Company and the Subsidiary Guarantors, jointly and severally, for all services rendered by it under the Indenture, and the Company and the Subsidiary Guarantors, jointly and severally, agree promptly to pay such compensation and to reimburse the Paying and Transfer Agent and Registrar for its out-of-pocket expenses (including fees and expenses of counsel) incurred by it in connection with the services rendered by it under the Indenture. The Company and each of the Subsidiary Guarantors jointly and severally hereby agree to indemnify the Paying and Transfer Agent and Registrar and its officers, directors, agents, employees and representatives for, and to hold it harmless against, any loss, liability or expense (including reasonable fees and expenses of counsel) incurred without negligence or bad faith on its part arising out of or in connection with its acting as Paying and Transfer Agent and Registrar hereunder. The obligations of the Company and the Subsidiary Guarantors under this

 

D-1

paragraph (a) shall survive the payment of the Notes, the termination or expiry of the Indenture or this letter and the resignation or removal of the Paying and Transfer Agent and Registrar. Under no circumstances will the Paying and Transfer Agent and Registrar be liable to the Company or any other party to this letter or the Indenture for any consequential loss (being loss of business, goodwill, opportunity or profit), even if advised of the possibility of such loss or damage.

(c) In acting under the Indenture and in connection with the Notes, the Paying and Transfer Agent and Registrar is acting solely as agent of the Company and does not assume any obligation towards or relationship of agency or trust for or with any of the owners or holders of the Notes, except that all funds held by the Paying and Transfer Agent and Registrar for the payment of principal interest or other amounts (including Additional Amounts) on, the Notes shall, subject to the provisions of the Indenture, be held in trust by the Paying and Transfer Agent and Registrar and applied as set forth in the Indenture and in the Notes, but need not be segregated from other funds held by the Paying and Transfer Agent and Registrar, except as required by law.

(d) The Paying and Transfer Agent and Registrar may consult with counsel satisfactory to it and any advice or written opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it under the Indenture in good faith and in accordance with such advice or opinion.

(e) The Paying and Transfer Agent and Registrar shall be fully protected and shall incur no liability for or in respect of any action taken or omitted to be taken or thing suffered by it in reliance upon any Note, notice, direction, consent, certificate, affidavit, statement or other paper or document reasonably believed by it to be genuine and to have been presented or signed by the proper party or parties.

(f) The Paying and Transfer Agent and Registrar and any of its Affiliates, in its individual capacity or any other capacity, may become the owner of, or acquire any interest in, any Notes or other obligations of the Company with the same rights that it would have if it were not the Paying and Transfer Agent and Registrar, and may engage or be interested in any financial or other transaction with the Company, and may act on, or as depository, Trustee or agent for, any committee or body of holders of Notes or other obligations of the Company, as freely as if it were not the Paying and Transfer Agent and Registrar.

(g) The Paying and Transfer Agent and Registrar shall not be under any liability for interest on any monies received by it pursuant to any of the provisions of the Indenture or the Notes.

(h) The Paying and Transfer Agent and Registrar shall be obligated to perform such duties and only such duties as are in the Indenture and the Notes specifically set forth, and no implied duties or obligation shall be read into the Indenture or the Notes against the Paying and Transfer Agent and Registrar. The Paying and Transfer Agent and Registrar shall not be under any obligation to take any action under the Indenture which may tend to involve it in any expense or liability, the payment of which within a reasonable time is not, in its reasonable opinion, assured to it.

 

D-2

(i) The Paying and Transfer Agent and Registrar may at any time resign by giving written notice of its resignation to the Company and the Trustee and specifying the date on which its resignation shall become effective; provided that such date shall be at least 90 days after the date on which such notice is given unless the Company agrees to accept shorter notice. Upon receiving such notice of resignation, if required by the Indenture the Company shall promptly appoint a successor paying agent by written instrument substantially in the form hereof in triplicate signed on behalf of the Company, one copy of which shall be delivered to the resigning Paying and Transfer Agent and Registrar, one copy to the successor paying agent and one copy to the Trustee.

Such resignation shall become effective upon the earlier of (i) the effective date of such resignation and (ii) the acceptance of appointment by the successor paying agent, as provided below. The Company may, at any time and for any reason, remove the Paying and Transfer Agent and Registrar and appoint a successor paying agent, by written instrument in triplicate signed on behalf of the Company, one copy of which shall be delivered to the Paying and Transfer Agent and Registrar being removed, one copy to the successor paying agent and one copy to the Trustee. Any removal of the Paying and Transfer Agent and Registrar and any appointment of a successor paying agent shall become effective upon acceptance of appointment by the successor paying agent as provided below. Upon its resignation or removal, the Paying and Transfer Agent and Registrar shall be entitled to the payment by the Company of its compensation for the services rendered hereunder and to the reimbursement of all reasonable out-of-pocket expenses incurred in connection with the services rendered by it hereunder.

The Company shall remove the Paying and Transfer Agent and Registrar and appoint a successor paying agent if the Paying and Transfer Agent and Registrar (i) shall become incapable of acting, (ii) shall be adjudged bankrupt or insolvent, (iii) shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a Trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, (iv) shall consent to, or shall have had entered against it a court order for, any such relief or to the appointment of or taking possession by any such official in any involuntary case or other proceedings commenced against it, (v) shall make a general assignment for the benefit of creditors or (vi) shall fail generally to pay its debts as they become due.

Any successor paying agent appointed as provided herein shall execute and deliver to its predecessor and to the Company and the Trustee an instrument accepting such appointment (which may be in the form of an acceptance signature to the letter of the Company appointing such agent) and thereupon such successor paying agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Paying and Transfer Agent and Registrar and such predecessor shall pay over to such successor agent all monies or other property at the time held by it hereunder.

Notwithstanding the above, the Company agrees with the Paying and Transfer Agent and Registrar that if, no successor to such Paying and Transfer Agent and Registrar has been appointed by the Company after 30 days from the applicable Agent’s notice to the Company, such Paying and Transfer Agent and Registrar may itself, following consultation with the

 

D-3

Company, appoint as its successor any reputable and experienced financial institution of good standing and give notice of such appointment to the Company or petition a court of competent jurisdiction for the appointment of a successor.

(j) The Paying and Transfer Agent and Registrar shall at all times be a responsible financial institution which is authorized by law to exercise its respective powers and duties hereunder and under the Indenture and the Notes.

(k) The Paying and Transfer Agent and Registrar shall comply with all applicable withholding, information reporting and backup withholding tax requirements under the U.S. Internal Revenue Code of 1986, as amended, and the Treasury regulations issued thereunder in respect of any payment on, or in respect of, a Note or under the Subsidiary Guarantee (including the collection of IRS Form W-8 ECI, IRS Form W-8 BEN and IRS Form W-9, as the case may be, and the filing of IRS Form 1099 and IRS Form 1096).

(l) The Paying and Transfer Agent and Registrar shall treat all information relating to the Company as confidential, but (unless consent is prohibited by law) the Company consents to the transfer and disclosure by such Paying and Transfer Agent and Registrar of any information relating to the Company to and between branches, subsidiaries, representative offices, affiliates of such Paying and Transfer Agent and Registrar, for confidential use (including in connection with the provision of any service and for data processing, statistical and risk analysis purposes). Each of the Paying and Transfer Agent and Registrar and any of its branch, subsidiary, representative office or affiliate may transfer and disclose any such information as required by any law, court regulator or legal process; provided that such Paying and Transfer Agent and Registrar shall give the Company prompt written notice of such request so that the Company may seek a protective order or other remedy protecting such confidential information from disclosure.

(m) The Company hereby irrevocably waives, in favor of the Paying and Transfer Agent and Registrar, any conflict of interest which may arise by virtue of the Paying and Transfer Agent and Registrar acting in various capacities under this Indenture and this letter or for other customers of the Paying and Transfer Agent and Registrar. The Company acknowledges that the Paying and Transfer Agent and Registrar and its affiliates (together, the “ Paying and Transfer Agent and Registrar Parties ”) may have interests in, or may be providing or may in the future provide financial or other services to other parties with interests which the Company may regard as conflicting with its interests and may possess information (whether or not material to the Company) other than as a result of the Paying and Transfer Agent and Registrar acting as Paying and Transfer Agent and Registrar hereunder, that the Paying and Transfer Agent and Registrar may not be entitled to share with the Company. Consistent with its long-standing policy to hold in confidence the affairs of its customers, the Paying and Transfer Agent and Registrar will not disclose confidential information obtained from the Company (without its consent) to any of the Paying and Transfer Agent and Registrar’s other customers nor will it use on the Company’s behalf any confidential information obtained from any other customer. Without prejudice to the foregoing, the Company agrees that the Paying and Transfer Agent and Registrar Parties may deal (whether for its own or its customers’ account) in, or advise on, securities of any party and that such dealing or giving of advice, will not constitute a conflict of interest for the purposes of the Indenture and this letter.

 

D-4

(n) The Paying and Transfer Agent and Registrar may act through its attorneys and agents and will not be responsible for the misconduct or negligence of any attorney or agent appointed with due care by it hereunder.

(o) In no event shall the Paying and Transfer Agent and Registrar be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Paying and Transfer Agent and Registrar shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

(p) The Paying and Transfer Agent and Registrar shall, on demand by the Trustee by notice in writing given to them and the Company at any time after an Event of Default has occurred, until notified by the Trustee to contrary, to the extent permitted by applicable law, deliver all monies, documents and records held by them in respect of the Notes to the Trustee or as the Trustees shall direct in such notice or subsequently, provided that this paragraph shall not apply to any documents or records which the Agent is obliged not to release by any law or regulation to which it is subject.

(q) The obligations hereunder of the Paying and Transfer Agent and Registrar with respect to its duties as paying agent, transfer agent and registrar shall be several, not joint.

(r) Any notice or communication to the Paying Agent will be deemed given when sent by facsimile transmission, with transmission confirmed. Any notice to the Paying Agent will be effective only upon receipt. The notice or communication should be addressed to the Paying Agent at:

Computershare Trust Company, N.A.

350 Indiana Street, Suite 750

Golden, Colorado 80401

Attn: Corporate Trust

Fax: (303) 262-0608

Any notice to the Company or the Trustee shall be given as set forth in the Indenture.

(s) Any corporation into which the Paying and Transfer Agent and Registrar may be merged or converted or any corporation with which the Paying and Transfer Agent and Registrar may be consolidated or any corporation resulting from any merger, conversion or consolidation to which the Paying and Transfer Agent and Registrar shall be a party or any corporation succeeding to the business of the Paying and Transfer Agent and Registrar shall be the successor to such Paying and Transfer Agent and Registrar hereunder (provided that such corporation shall be qualified as aforesaid) without the execution or filing of any document or any further act on the part of any of the parties hereto.

 

D-5

(t) Any amendment, supplement or waiver under Section 9.01 and Section 9.02 of the Indenture that adversely affects the Paying Agent shall not affect the Paying Agent’s rights, powers, obligations, duties or immunities, unless the Paying Agent has consented thereto.

(u) The Company and the Subsidiary Guarantors agree that (i) the provisions of Section 12.08 of the Indenture shall apply hereto, mutatis mutandis, and (ii) to the extent not already set forth herein, pursuant to Section 7.02(10) of the Indenture, the Paying and Transfer Agent and Registrar shall be entitled to the rights, privileges, protections, immunities and benefits afforded to the Trustee in the Indenture.

(v) This letter may be executed in counterparts, each of which shall be an original which together shall constitute one and same instrument.

The agreement set forth in this letter shall be construed in accordance with and governed by the laws of the State of New York.

 

EMERALD PLANTATION HOLDINGS LIMITED , for itself and on behalf of the Subsidiary Guarantors
By:  

 

  Name:
  Title:

Agreed and accepted:

 

Computershare Trust Company, N.A.

as Paying and Transfer Agent and Registrar

By:  

 

  Name:
  Title:

cc: Computershare Trust Company, N.A., as Trustee

 

D-6

EXHIBIT E

FORM OF SUPPLEMENTAL INDENTURE

SUPPLEMENTAL INDENTURE

dated as of

among

EMERALD PLANTATION HOLDINGS LIMITED

as the Company

COMPUTERSHARE TRUST COMPANY, N.A.

as Trustee

COMPUTERSHARE TRUST COMPANY, N.A.

as Security Trustee

and

The entities listed on Schedule I hereto

as Subsidiary Guarantors

6.00% Guaranteed Senior Notes Due 2020

 

E-1

THIS SUPPLEMENTAL INDENTURE (this “ Supplemental Indenture ”), entered into as of                     ,                     , among Emerald Plantation Holdings Limited, a Cayman Islands exempted company limited by shares (the “ Company ”), the initial Subsidiary Guarantors listed in the Indenture (as defined below) and [insert each new Guarantor executing this Supplemental Indenture and its jurisdiction of incorporation] (each an “ Undersigned ”), Computershare Trust Company, N.A., as trustee (the “ Trustee ”) and Computershare Trust Company, N.A., as security trustee (the “ Security Trustee ”). Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

RECITALS

WHEREAS, the Company, the Subsidiary Guarantors party thereto, the Trustee and the Security Trustee, entered into the Indenture, dated as of January 17, 2013 (the “ Indenture ”), relating to the Company’s 6.00% Guaranteed Senior Notes Due 2020 (the “ Notes ”);

WHEREAS, as a condition to the Trustee and the Security Trustee entering into the Indenture and the purchase of the Notes by the Holders, the Company agreed pursuant to the Indenture to cause any newly acquired or created Restricted Subsidiaries (other than those organized under the laws of the PRC or Foreign Subsidiaries) to provide Subsidiary Guarantees.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and intending to be legally bound, the parties to this Supplemental Indenture hereby agree as follows:

Section 1. Capitalized terms used herein and not otherwise defined herein are used as defined in the Indenture.

Section 2. Each Undersigned, by its execution of this Supplemental Indenture, agrees to be a Subsidiary Guarantor under the Indenture and to be bound by the terms of the Indenture applicable to Subsidiary Guarantors, including, but not limited to, Article 11 thereof.

Section 3. This Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles thereof.

Section 4. This Supplemental Indenture may be signed in various counterparts which together will constitute one and the same instrument.

Section 5. This Supplemental Indenture is an amendment supplemental to the Indenture and the Indenture and this Supplemental Indenture will henceforth be read together.

Section 6. Neither the Trustee nor the Security Trustee shall be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which are made solely by the Company.

 

E-2

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

 

EMERALD PLANTATION HOLDINGS LIMITED , for itself and on behalf of all the Subsidiary Guarantors) 1
By:  

 

  Name:
  Title:
COMPUTERSHARE TRUST COMPANY, N.A. , as Trustee
By:  

 

  Name:
  Title:
COMPUTERSHARE TRUST COMPANY, N.A. , as Security Trustee
By:  

 

  Name:
  Title:
[New Guarantor]
By:  

 

  Name:
  Title:

 

1   Pursuant to a power of attorney granting attorney in fact to execute the instruments contemplated.

 

E-3

SCHEDULE I

TO EXHIBIT E

List of Subsidiary Guarantors

 

1. Sino-Capital Global Inc.

 

2. Sino-Panel Holdings Limited (BVI)

 

3. Sino-Panel (Asia) Inc. (BVI)

 

4. Sino-Panel (Gaoyao) Ltd. (BVI)

 

5. SFR (China) Inc. (BVI)

 

6. Sino-Wood Partners, Limited (H.K.)

 

7. Sino-Forest Resources Inc. (BVI)

 

8. Suri-Wood Inc. (BVI)

 

9. Sino-Plantation Limited (H.K.)

 

10. Sino-Wood (Guangxi) Limited (H.K.)

 

11. Sino-Wood (Jiangxi) Limited (H.K.)

 

12. Sino-Wood (Guangdong) Limited (H.K.)

 

13. Sino-Global Holdings Inc. (BVI)

 

14. Sinowin Investments Limited (BVI)

 

15. Sino-Panel (North East China) Limited (BVI)

 

16. Sino-Panel [Hunan] Limited (BVI) (formerly known as Comtech Universal Limited)

 

17. Sino-Panel [Xiangxi] Limited (BVI) (formerly known as Rich Base Worldwide Limited)

 

18. Sino-Forest Bio-Science Limited (BVI) (formerly known as Sino-Two Limited)

 

19. Sino-Panel (Guangzhou) Limited (BVI)

 

20. Sino-Panel [Suzhou] Limited (BVI) (formerly known as Pacific Harvest Holdings Limited)

 

21. Sino-Panel (Yunnan) Limited (BVI)

 

22. Sino-Panel (Guangxi) Limited (BVI)

 

23. Sino-Panel (Guizhou) Limited (BVI)

 

24. Sino-Panel (Qinzhou) Limited (BVI) (formerly known as Sino-Panel (Jiayu) Ltd.)

 

25. Sino-Panel (Shaoyang) Limited (BVI)

 

26. Sino-Panel (Yongzhou) Limited (BVI)

 

27. Sino-Panel (Fujian) Limited (BVI)

 

28. Grandeur Winway Limited (BVI)

 

29. Sinowood Limited (Cayman Islands)

 

30. Sino-Forest Investments Limited (BVI)

 

31. Sino-Wood (Fujian) Limited (H.K.)

 

32. Sino-Panel (North Sea) Limited (BVI)

 

33. Sino-Panel (Huaihua) Limited (BVI)

 

34. Amplemax Worldwide Limited (BVI)

 

35. Ace Supreme International Limited (BVI)

 

36. Express Point Holdings Limited (BVI)

 

37. Glory Billion International Limited (BVI)

 

38. Smart Sure Enterprises Limited (BVI)

 

39. Expert Bonus Investment Limited (BVI)

 

40. Dynamic Profit Holdings Limited (BVI)

 

41. Alliance Max Limited (BVI)

 

E-4

42. Brain Force Limited (BVI)

 

43. Cheer Gold Worldwide Limited (BVI)

 

44. General Excel Limited (BVI)

 

45. Harvest Wonder Worldwide Limited (BVI)

 

46. Homix Limited (BVI)

 

47. Poly Market Limited (BVI)

 

48. Prime Kinetic Limited (BVI)

 

49. Regal Win Capital Limited (BVI)

 

50. Rich Choice Worldwide Limited (BVI)

 

51. Sino-Forest International (Barbados) Corporation (Barbados)

 

52. Sino-Global Management Consulting Inc. (BVI)

 

53. Sino-Panel (China) Nursery Limited (BVI)

 

54. Sino-Panel (Russia) Limited (BVI)

 

55. Sino-Wood Trading Limited (BVI)

 

56. Sino-Panel Trading Limited (BVI)

 

57. Trillion Edge Limited (BVI)

 

58. Value Quest International Limited (BVI)

 

59. Well Keen Worldwide Limited (BVI)

 

60. Mandra Forestry Holdings Limited (BVI)

 

61. Mandra Forestry Finance Limited (BVI)

 

62. Mandra Forestry Anhui Limited (BVI)

 

63. Mandra Forestry Hubei Limited (H.K.)

 

64. Elite Legacy Limited (BVI)

 

65. Emerald Plantation Group Limited (Cayman Islands)

 

E-5

EXHIBIT F

FORM OF SECURITY DOCUMENTS

D ATED    2013

 

T HE C OMPANIES NAMED IN S CHEDULE 1

(as Chargors)

T O

C OMPUTERSHARE T RUST C OMPANY , N.A.

(as Security Trustee)

S HARE C HARGE

 

LOGO

46749/00026

HKACSW/CHL/1008905

Hogan Lovells

11th Floor, One Pacific Place, 88 Queensway, Hong Kong

C O NTENTS

 

C LAUSE        P AGE  

1.

 

D EFINITIONS AND INTERPRETATION

     1   

2.

 

C OVENANT TO PAY

     4   

3.

 

C HARGING CLAUSE

     4   

4.

 

P OWER OF ATTORNEY

     6   

5.

 

V OTING RIGHTS AND DIVIDENDS

     6   

6.

 

C ONTINUING SECURITY

     7   

7.

 

R EPRESENTATIONS AND WARRANTIES

     7   

8.

 

C OVENANTS

     9   

9.

 

P OWERS OF THE S ECURITY T RUSTEE

     10   

10.

 

F URTHER ASSURANCE

     11   

11.

 

A DDITIONAL OR FUTURE S ECURITY

     12   

12.

 

W AIVER , FORBEARANCE , SEVERABILITY AND PARTIAL INVALIDITY

     12   

13.

 

V ARIATION OF TERMS

     13   

14.

 

E XPENSES AND INDEMNITY

     13   

15.

 

S TAMP DUTY

     14   

16.

 

T AX GROSS - UP

     14   

17.

 

I NTEREST ON OVERDUE AMOUNTS

     15   

18.

 

C URRENCY INDEMNITY

     15   

19.

 

I NFORMATION

     15   

20.

 

D ISCHARGE AND RELEASE

     15   

21.

 

C OUNTERPARTS

     16   

22.

 

T RANSFER AND DISCLOSURE

     16   

23.

 

N OTICES

     17   

24.

 

S ET - OFF

     17   

25.

 

A PPOINTMENT OF R ECEIVER

     18   

26.

 

S ECURITY T RUSTEE

     19   

27.

 

G OVERNING L AW

     19   

28.

 

E NFORCEMENT

     19   

S CHEDULE 1

     21   
 

Chargors

     21   

S CHEDULE 2

     22   
 

Particulars of the Companies and the Original Shares

     22   

S CHEDULE 3

     23   
 

Form of Nominee Undertaking

     23   

E XECUTION P AGE

     27   

T HIS C HARGE is made on              2013

B ETWEEN

 

(1) The Companies named in Schedule 1 ( The Chargors ) (each a “Chargor” and together the “Chargors” ); and

 

(2) C OMPUTERSHARE T RUST C OMPANY , N.A. as security trustee appointed under the Indenture (as defined below) acting for itself and for and on behalf of the Secured Parties (as defined in the Indenture) (the “ Security Trustee ”).

T HIS CHARGE W ITNESSES as follows:

 

1. D EFINITIONS AND INTERPRETATION

 

1.1 In this Charge, terms defined and expressions construed or interpreted in the Indenture and used but not redefined in this Charge shall have the meanings set out in the Indenture, as if the same are set out in full in this Charge. In addition, in this Charge:

“ Authorisation ” means:

 

  (a) an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation, lodgement or registration; or

 

  (b) in relation to anything which will be fully or partly prohibited or restricted by law if a Governmental Agency intervenes or acts in any way within a specified period after lodgement, filing, registration or notification, the expiry of that period without intervention or action.

“BC Act” means the BVI Business Companies Act 2004, as amended from time to time.

“BVI” means the British Virgin Islands.

“ Charged Assets ” means, in respect of each Chargor, all Shares and Derivative Assets owned or held by it, including all rights, benefits and sums now or in the future accruing to that Chargor as a result of or in connection with any of the Shares or Derivative Assets owned or held by it.

“ Company ” means each company listed in Schedule 2 ( Particulars of the Companies and the Original Shares ) under the column headed “Company”.

“ Derivative Assets ” includes, in respect of each Chargor:

 

  (a) allotments, rights, money or property arising at any time in relation to any Shares owned or held by it by way of conversion, exchange, redemption, bonus, preference, option, conversion, consolidation, subdivision or otherwise;

 

  (b) dividends, distributions, interest and other income paid or payable in relation to any Shares owned or held by it; and

 

  (c) stock, shares and securities offered in addition to or substitution for any Shares owned or held by it.

“ Document ” includes any transfer, renunciation, proxy, mandate, legal or other charge, mortgage, assignment, deed or other document.

“ Event of Default ” has the meaning given to that term in the Indenture.

“ Finance Documents ” means the Indenture, this Charge, each other Security Document, the Notes and each other document designated as such by the Security Trustee and the Issuer.

“ Governmental Agency ” means any government or any governmental agency, semi-governmental or judicial entity or authority (including, without limitation, any stock exchange, or any self-regulatory organisation established under statute, law or regulation).

“ Hong Kong ” means the Hong Kong Special Administrative Region of the People’s Republic of China.

“ Indenture ” means an indenture dated on or about the date of this Charge in relation to issuance of up to US$300,000,000 6.00% senior secured notes due 2020 and, if and when issued, any additional notes and/or PIK notes issued under the terms of such indenture from time to time.

“ Issuer ” means Emerald Plantation Holdings Limited, an exempted company incorporated in the Cayman Islands (with registration number CT-274117) whose registered address is the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

“ Liability ” means any liability, damage, loss, cost, claim or expense of any kind or nature, whether direct, indirect, special, consequential or otherwise.

“ Nominee Undertaking ” means a nominee undertaking in the form or substantially in the form set out in Schedule 6 ( Form of Nominee Undertaking ).

“ Notes ” has the meaning given to that term in the Indenture.

“ Original Shares ” means, in respect of each Company, the issued share capital of that Company beneficially owned by the relevant Chargor as at the date of this Charge, the particulars of which are set out in Schedule 2 (Particulars of the Companies and the Original Shares).

“ Party ” means a party to this Charge.

“ Receiver ” means a receiver and manager appointed under Clause 25 ( Appointment of Receiver) including (where the context requires or permits) any substituted receiver and manager.

“ Secured Obligations ” means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Issuer and each other Subsidiary Guarantor to all or any of the Secured Parties under each or any of the Finance Documents, in each case together with:

 

  (a) all costs, charges and expenses incurred by any Secured Party in connection with the protection, preservation or enforcement of its rights under any Finance Document; and

 

  (b) all money, obligations and liabilities due, owing or incurred in respect of any variations or increases in the amount or composition of the Notes provided under the Indenture or the obligations and liabilities imposed under the Indenture or the Notes.

“Secured Party” has the meaning given to that term in the Indenture.

“ Security ” means a mortgage, charge, pledge, lien, assignment or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

“ Shares ” means, in respect of each Company, the Original Shares and all other shares, stock and securities in that Company legally and/or beneficially owned by the relevant Chargor at any time while any Secured Obligations are outstanding and/or any substitute or additional shares, stock and securities.

“Subsidiary Guarantor” means each Subsidiary Guarantor under, and as such term is defined in, the Indenture.

“ Tax ” means any tax, levy, impost, duty or other charge of withholding or a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

 

1.2 Unless the context otherwise requires, the interpretative provisions set out in the paragraphs below shall apply in this Charge:

 

  (a) references to any Party shall be construed so as to include that Party’s respective successors in title, permitted assigns and permitted transferees;

 

  (b) “ including ” and “ in particular ” shall not be construed restrictively but shall mean respectively “including, without prejudice to the generality of the foregoing” and “in particular, but without prejudice to the generality of the foregoing”;

 

  (c) a “ person ” includes any individual, firm, company, corporation, government, state or agency of a state or any association, joint venture, company, trust or partnership (whether or not having separate legal personality) of two or more of the foregoing;

 

  (d) “ variation ” includes any variation, amendment, accession, novation, restatement, modification, assignment, transfer, supplement, extension, deletion or replacement however effected and “ vary ” and “ varied ” shall be construed accordingly;

 

  (e) “ writing ” includes facsimile transmission legibly received except in relation to any certificate, notice or other document which is expressly required by this Charge to be signed and “ written ” has a corresponding meaning;

 

  (f) “ Charged Assets ”, “ Derivative Assets ”, “ Original Shares ”, “ Secured Obligations ” or “ Shares ” shall be deemed to include a reference to any part of them or it;

 

  (g) “ tax ” includes any form of taxation, levy, duty, charge, contribution or impost of whatever nature (including any applicable fine, penalty, surcharge or interest) imposed by any local, municipal, governmental, state, federal or other fiscal, revenue, customs and/or excise authority, body or official anywhere in the world competent to impose any of them;

 

  (h) references to this Charge or to any other document or agreement (including any Finance Document) include references to this Charge or such other document or agreement as varied in any manner from time to time, even if changes are made to the composition of the Parties to this Charge or such other document or agreement, or to nature or amount of any liabilities owed under, or to the obligations of any parties to, such other document or agreement;

 

  (i) the singular shall include the plural and vice versa and any gender shall include the other genders;

 

  (j) Clauses, paragraphs and Schedules shall be construed as references to Clauses and paragraphs of, and Schedules to, this Charge;

  (k) any reference to any statute, ordinance, rule, regulation or statutory instrument or any section of it shall be deemed to include a reference to any statutory amendment, modification or re-enactment of it for the time being in force in relation to the particular circumstances;

 

  (l) the heading of any provision of this Charge is inserted for convenience and shall not affect the meaning or interpretation of that or any other provision;

 

  (m) An Event of Default is “continuing” if it has not been remedied or waived in accordance with the terms of the Indenture.

 

  (n) “ Blank share transfer form ” means a stock transfer form or other instrument of transfer duly executed by two directors or a director and the Secretary of the relevant Chargor (or otherwise in accordance with applicable law), together with bought and sold notes executed by the relevant Chargor (and/or its nominee(s)), where applicable, but with the sections relating to the date of transfer, the consideration and the name(s) and details of the transferee(s) left blank; and

 

  (o) Conflict of terms : if any conflict arises between the covenants and undertakings in Article 4 ( Covenants ) or Article 5 ( Consolidation, merger and sale of assets ) of the Indenture and the terms of this Charge, the covenants and undertakings set out in the Indenture shall prevail.

 

2. C OVENANT TO PAY

 

2.1 Covenant to pay: Each Chargor (as primary obligor and not merely as surety) covenants with the Security Trustee to pay or discharge, on the Security Trustee’s written demand, the Secured Obligations at the times and in the manner provided in the relevant Finance Documents.

 

2.2 Proviso: The covenants contained in this Clause 2 and the Security created by this Charge shall not extend to or include any liability or sum which would otherwise cause any such covenant or Security to be unlawful or prohibited by any applicable law.

 

2.3 Demands

 

  (a) The making of one demand under this Charge shall not preclude the Security Trustee and/or the Secured Parties from making any further demands.

 

  (b) Any third party dealing with the Security Trustee, the Secured Parties or any Receiver shall not be concerned to see or enquire as to the validity of any demand under this Charge.

 

2.4 Certification of amount: A certificate of the Security Trustee setting forth the amount of any Secured Obligations due from each Chargor shall be conclusive evidence of such amount against the Chargor in the absence of manifest error.

 

3. C HARGING CLAUSE

 

3.1 Fixed security: Each Chargor charges the Charged Assets legally and/or beneficially owned or held by it to the Security Trustee for the benefit of the Secured Parties by way of first fixed charge as continuing security for the payment and discharge of the Secured Obligations.

 

3.2 Delivery of documents: Each Chargor shall forthwith on execution of this Charge deliver to the Security Trustee the following documents (in each case, in form and substance necessary to effectuate the purpose of this Charge):

  (a) original of valid and duly issued share certificate(s) or other document(s) of title in respect of the Charged Assets owned or held by it (or, as applicable, its nominee);

 

  (b) original of duly executed Blank share transfer form(s) in respect of the Charged Assets owned or held by it (or, as applicable, its nominee);

 

  (c) if applicable, a Nominee Undertaking duly executed by each Chargor’s nominee(s);

 

  (d) certified copies of the register of directors and register of charges of each Chargor;

 

  (e) certified copies of the register of members of each Company;

 

  (f) all other Documents necessary or conducive to enable the Security Trustee to register such Charged Assets in its name or in the name of its nominee(s); and

 

  (g) all Documents necessary and satisfactory under applicable law in order to effect a valid transfer of any of its Charged Assets.

 

3.3 Future transfers and changes to directors: Subject to the other provisions of this Charge, each Chargor shall (and, if applicable, shall procure that its nominee(s) will):

 

  (a) at the request of the Security Trustee, immediately upon the completion of any transfer of Charged Assets to the Security Trustee (for the benefit of the Secured Parties) and/or its nominee(s), procure the immediate registration of such transfer in the company books of the relevant Company and the entry of the Security Trustee (for the benefit of the Secured Parties) and/or its nominee(s) in the register of members of the relevant Company as the holder(s) of such Charged Assets;

 

  (b) in respect of any Charged Assets owned or held by it which become subject to this Charge after the date of this Charge:

 

  (i) immediately following such Charged Assets becoming subject to this Charge, deposit with the Security Trustee the original share certificate(s) (or other document(s) of title or relevant paper(s)) together with duly executed Blank share transfer form(s) in respect thereof; and

 

  (ii) at the request of the Security Trustee, immediately upon the completion of any transfer of such Charged Assets to the Security Trustee (for the benefit of the Secured Parties) and/or its nominee(s), procure the immediate registration of such transfer in the book of the relevant Company and the entry of the Security Trustee (for the benefit of the Secured Parties) and/or its nominee(s) in the register of members of the relevant Company as the holder(s) of such Charged Assets.

 

3.4 Creation of security interest: To the extent that, in respect of any of the Charged Assets, Clause 3.1 ( Fixed security ) does not have the effect of creating or acknowledging a first priority fixed security interest in favour of the Security Trustee, the security interest created or acknowledged by Clause 3.1 ( Fixed security ) shall take effect as such type of Security as shall be required by the law applicable to the creation of a security interest in such Charged Assets for the purpose of conferring on the Security Trustee a first security interest in such Charged Assets.

4. P OWER OF ATTORNEY

 

4.1 Appointment of attorney : Each Chargor, by way of security and in order more fully to secure the performance of its obligations under this Charge, for so long as the Secured Obligations or any of them remain undischarged, irrevocably appoints the Security Trustee (whether or not a Receiver has been appointed) and separately any nominee and/or Receiver and/or any person deriving title under them jointly and also severally to be its attorney (with full power to appoint substitutes and to delegate), in its name and on its behalf, and as its act and deed or otherwise, at any time:

 

  (a) to complete, execute, seal, deliver and perfect any Document;

 

  (b) to do any such legal assignments and other assurances, charges, authorities and documents over the moneys, property and assets charged by this Charge;

 

  (c) to perform any acts, things or otherwise which may be required of each Chargor, under this Charge or deemed by such attorney as necessary or desirable for any purpose of this Charge or to enhance or perfect the security intended to be constituted by this Charge;

 

  (d) to exercise (or to delegate) all or any of the rights conferred on the Security Trustee and/or any Receiver by this Charge or by statute in relation to this Charge or the Charged Assets held or owned by it; or

 

  (e) to transfer legal ownership of any Charged Assets held or owned by it.

The Security Trustee shall have no obligation to undertake any of the foregoing actions, and, if it takes any such action in accordance with this Charge it shall have no liability to any Chargor to continue the same or for the sufficiency or adequacy thereof.

 

4.2 Ratification : Each Chargor ratifies and confirms all acts and things done by the Security Trustee or any Receiver, any substitute or delegate in the exercise or purported exercise of the power of attorney granted under this Clause 4.

 

4.3 Sums recoverable : All sums expended by the Security Trustee, any nominee and/or any Receiver under this Clause 4 shall be recoverable from each Chargor under Clause 14 (Expenses and indemnity).

 

5. V OTING RIGHTS AND DIVIDENDS

 

5.1 Before Charge becomes enforceable: Unless and until this Charge has become enforceable:

 

  (a) each Chargor shall, for so long as it remains the beneficial owner of the relevant Charged Assets, determine how all voting rights (and, if applicable, any right to nominate or remove a director) attaching to such Charged Assets are to be exercised;

 

  (b) each Chargor shall not permit any person other than that Chargor, the Security Trustee or its nominee(s) to be registered as holder of any Charged Assets owned or held by it or any part thereof; and

 

  (c) all cash dividends and other money received by the Security Trustee or its nominee(s) shall, on request by the relevant Chargor, be released to that Chargor,

provided always that no Chargor shall be entitled to exercise any of the above rights if the exercise of any such rights may be in breach of the terms of the Indenture or would be reasonably likely to have an adverse effect on the value of the Charged Assets or otherwise jeopardise the Security created or purported to be created under the terms of

this Charge or the interests of the Security Trustee or any of the Secured Parties under the terms of this Charge.

 

5.2 After Charge becomes enforceable: At any time after this Charge has become enforceable:

 

  (a) the Security Trustee may date and complete the Blank share transfer form(s) and other documents referred to in Clause 3.2 ( Delivery of documents ) and Clause 3.3 ( Future transfers and changes to directors ) and the Security Trustee may (but is not obliged to), in the name of each Chargor or otherwise and without any further consent, action or authority on the part of each Chargor, exercise all voting and other rights attaching to the Charged Assets, including any rights to nominate or remove a director as if the Security Trustee were the sole beneficial owner of the Charged Assets;

 

  (b) all Derivative Assets shall, if received by a Chargor or its nominee(s), be held on trust for and forthwith paid or transferred to the Security Trustee on demand; and

 

  (c) each Chargor shall (and shall procure that its nominee(s) shall) accept short notice for and attend any meeting of the holders of any Charged Assets owned or held by it, appoint proxies and exercise voting and other rights and powers exercisable by the holders of the Charged Assets owned or held by it as the Security Trustee may direct from time to time.

 

6. C ONTINUING SECURITY

This Charge shall be a continuing security notwithstanding any intermediate payment or settlement of accounts or other matters whatsoever, shall remain in full force and effect unless and until discharged in writing by the Security Trustee following the full and valid payment or discharge of the Secured Obligations and shall be in addition to and shall not prejudice or be prejudiced by any right of set-off, combination, lien or other rights exercisable by any Secured Party as banker against any Chargor or any security, guarantee, indemnity and/or negotiable instrument now or in the future held by any Secured Party.

 

7. R EPRESENTATIONS AND WARRANTIES

Each Chargor represents and warrants to the Security Trustee and each of the Secured Parties on the date of this Charge and on each date on which each Chargor acquires any additional Shares that:

 

  (a) Status:

 

  (i) it is duly constituted, validly existing and, where applicable, in good standing under the laws of the country in which it is incorporated;

 

  (ii) it is not insolvent or in liquidation or administration or subject to any other insolvency procedure;

 

  (iii) no receiver, manager, trustee, custodian or analogous officer has been appointed in respect of any part of its property, undertaking or assets; and

 

  (iv) it has the appropriate power and authority to own its property and assets and to carry on its business as it is conducted on the date of this Charge;

 

  (b) Capacity and approvals: it has the appropriate power to enter into and perform the terms and conditions of, and has taken all necessary action to authorise the execution, delivery and performance of, this Charge;

  (c) Proper execution: this Charge has been properly executed by it and the obligations expressed as being assumed by it under this Charge are valid and binding upon it and enforceable in accordance with their terms;

 

  (d) Compliance with legal restrictions: none of the provisions, covenants and obligations on its part contained in this Charge contravenes any of the provisions of its memorandum or articles of association or other constitutional documents and neither this Charge nor its performance will infringe any law or obligation binding upon it;

 

  (e) No restrictions: there are no provisions in the memorandum or articles of association or other constitutional documents of any Company of which it is a shareholder or any other agreement or Document which restrict the transfer of any Shares or that Chargor’s ability to enter into this Charge, including any rights of first refusal, pre-emption rights, requirements for consent or any rights restricting or affecting the voting rights or the disposal of any of the Shares, or (if such provisions exist) they have been varied or waived to enable this Charge to be enforced free from any such restriction or right;

 

  (f) Other approvals for this Charge: no authorisation of or registration with any governmental, judicial or other third party nor payment of any stamp, registration or other tax is required or desirable in connection with the execution, performance, validity, enforceability or admissibility in evidence of this Charge, other than registration of this Charge under Section 80 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong), Sections 162 and 163 of the BC Act (where the relevant Chargor is a business company incorporated or registered under the BC Act) and under Section 54 of the Companies Law of the Cayman Islands (where the relevant Chargor is an exempted company incorporated in the Cayman Islands);

 

  (g) Called up and paid up: the Original Shares are, and any Shares deposited after the date of this Charge will be, duly authorised, issued, fully called up and fully paid-up and the Original Shares represent the entire issued share capital of the relevant Company at the date of this Charge;

 

  (h) Legal and beneficial owner: subject to this Charge:

 

  (i) the Original Shares (other than the issued share capital of Sino-Wood Partners, Limited) are legally and beneficially owned by each relevant Chargor;

 

  (ii) the Original Shares of Sino-Wood Partners, Limited are beneficially owned by Emerald Plantation Group Limited; and

 

  (iii) any Shares acquired by each Chargor after the date of this Charge shall (subject to this Charge) be legally and/or beneficially (as the case may be) owned by the relevant Chargor, and in each case free from any option, equity, trust or Security; and

 

  (i) No Security/guarantees: except as previously disclosed in writing to the Security Trustee with express reference to this Clause, there is no Security affecting any Charged Assets other than any Security created by this Charge, and no Chargor has given any guarantee, indemnity or other assurance against loss in relation to the liability of any person other than in favour of the Secured Parties or as otherwise permitted under the terms of the Indenture.

8. C OVENANTS

 

8.1 Negative pledge and other restrictions: Each Chargor covenants with the Security Trustee for the benefit of the Secured Parties that it shall not, without the prior written consent of the Security Trustee and to the extent not otherwise permitted under the terms of the Indenture:

 

  (a) enter into a single transaction or a series of transactions to sell, transfer, assign or dispose of, or grant any interest in, or otherwise deal with, any of the Charged Assets owned or held by it, or part with possession or ownership of them, or purport or agree to do so;

 

  (b) create, or agree or attempt to create, or permit to arise or subsist, any Security, equity, option, trust or other third party right whatsoever over or affecting any Charged Assets owned or held by it or give any guarantee or indemnity to or for the benefit of any person or otherwise voluntarily assume any liability, whether actual or contingent, in respect of any obligation of any other person, except in favour of the Security Trustee or any Secured Party;

 

  (c) cause or permit any rights attaching to Charged Assets owned or held by it to be varied or abrogated;

 

  (d) cause or permit any of the Charged Assets owned or held by it to be consolidated, sub-divided or converted or the other capital of any Company to which it is a shareholder to be re-organised, exchanged or repaid;

 

  (e) cause or permit any amendment or change to be made to the memorandum or articles of association or other constitutional documents of any Company to which it is a shareholder, other than in accordance with paragraph (e) of Clause 7 ( Representations and warranties ); or

 

  (f) do or cause or permit to be done anything which may in any way depreciate, jeopardise or otherwise prejudice the value to the Security Trustee and/or any Secured Party of the Charged Assets owned or held by it or the Security created by this Charge.

 

8.2 Positive covenants: Each Chargor covenants with the Security Trustee for the benefit of the Secured Parties that it shall, unless otherwise permitted under the terms of the Indenture:

 

  (a) remain at all times during the continuance of this Charge the sole legal and/or beneficial and/or registered (as the case may be) owner of the Charged Assets owned or held by it;

 

  (b) procure that the Charged Assets owned or held by it at all times represent a percentage of the issued share capital of the relevant Company at least equal to the percentage owned or held as at the date of this Charge (or, if later, the date on which such Charged Assets become subject to the terms of this Charge);

 

  (c) make timely filing and registration of this Charge with each officer, registry and/or governmental or non-governmental body necessary in order to preserve, perfect and enforce the Security created by this Charge in the place of incorporation of each Chargor and each Company; and

 

  (d) on or before the date of this Charge, deliver, or cause to be delivered, to the Security Trustee a certified copy of resolutions of the members of the relevant Companies amending and restating the memorandum and articles of association of the Companies to expressly require without limitation:

  (i) registration by the board of directors of such Company of any transfer of the Shares pursuant to this Charge without delay;

 

  (ii) the removal or disapplication of lien, call and forfeiture provisions in respect of the Shares; and

 

  (iii) recognition of the Security created by this Charge and the irrevocable nature of any proxy granted to the Security Trustee in connection therewith,

and within 14 days of the date of this Charge, deliver, or cause to be delivered, a certified copy of the amended memorandum and articles of association of each Company stamped by the Companies Register.

 

8.3 Legal ownership covenants: Emerald Plantation Group Limited covenants with the Security Trustee for the benefit of the Secured Parties that it will procure that the Original Shares of Sino-Wood Partners, Limited are registered in its name in the register of members of Sino-Wood Partners, Limited as soon as practicable and in any event not later than 20 Business Days after the date of this Charge.

 

9. P OWERS OF THE S ECURITY T RUSTEE

 

9.1 When enforceable: This Charge and the Security constituted by this Charge shall be immediately enforceable if an Event of Default has occurred under the Indenture and is continuing.

 

9.2 Receiver’s powers : All powers of the Receiver conferred by this Charge may be exercised by the Security Trustee after this Charge has become enforceable. In that event, paragraph (i) of Clause 25.5 shall be read and construed as if the words “be charged on the Charged Assets” were substituted for the words “be deemed an expense properly incurred by the Receiver”.

 

9.3 Exercise of powers: The statutory power of sale, of appointing a receiver and the other statutory powers conferred on mortgagees by Sections 51 and 53 of, and the Fourth Schedule to, the Conveyancing and Property Ordinance (Chapter 219 of the Laws of Hong Kong) as varied and extended by this Charge shall arise on the date of this Charge and no restriction imposed by any ordinance or other statutory provision in relation to the exercise of any power of sale shall apply to this Charge.

 

9.4 Wide construction: The enforcement powers of the Security Trustee under this Charge shall be construed in the widest possible sense and all Parties intend that the Security Trustee shall have as wide and flexible a range of enforcement powers as may be conferred (or, if not expressly conferred, as is not restricted) by any applicable law.

 

9.5 Suspense account: All monies received by the Security Trustee on the realisation or enforcement of the Security constituted by this Charge may be applied by the Security Trustee in or towards the discharge of the Secured Obligations in accordance with the terms of the Indenture (and the Security Trustee may, pending the payment to the Security Trustee of all of the Secured Obligations, place and keep to the credit of a separate or suspense account any money so received for so long and in such manner as the Security Trustee may determine without any obligation to apply that money or any of it towards the discharge of the Secured Obligations) with any surplus being paid in accordance with the terms of the Indenture.

 

9.6

No liability of Security Trustee: The Security Trustee shall have no liability of any kind in connection with this Charge except to the extent of any losses arising out of its gross negligence or wilful misconduct in the exercise of its rights hereunder. Notwithstanding the foregoing, under no circumstances shall the Security Trustee be liable for

  consequential, special, punitive or indirect damages, regardless of being warned of the possibility thereof ahead of time and regardless of the case of action.

 

9.7 No duty to enquire: No person dealing with the Security Trustee, its brokers or agents, shall be concerned to enquire whether this Charge has become enforceable, whether any power exercised or purported to be exercised has become exercisable, whether any Secured Obligations remain due, as to the necessity or expediency of any terms subject to which any sale or other disposal of any Charged Assets shall be made, or otherwise as to the propriety or regularity of any sale or other disposal of any Charged Assets, or to see to the application of any money paid to the Security Trustee, its brokers or agents, and such dealings shall be deemed to be within the powers conferred by this Charge and to be valid accordingly.

 

9.8 Exercised power of sale:

 

  (a) The Security Trustee shall incur no liability as a result of the sale of any Charged Assets, or any part thereof, at any private or public sale conducted pursuant to this Charge in accordance with the requirements of applicable laws. With regards to private sales, each Chargor hereby waives any claims against the Security Trustee and the other Secured Parties arising by reason of the fact that the price at which the Charged Assets may have been sold at such a private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if the first offer received is accepted and the Charged Assets are not offered to more than one offeree, provided that any such private sale is conducted in accordance with applicable laws and this Charge.

 

  (b) Each Chargor hereby agrees that in respect of any sale of any of the Charged Assets pursuant to the terms of this Charge, the Security Trustee is hereby authorised to comply with any limitation or restriction in connection with such sale as it may be advised by its legal counsel is necessary:

 

  (i) in order to avoid any violation of applicable laws; or

 

  (ii) in order to obtain any required approval of the sale or of the purchaser or by any governmental authority or official,

and each Chargor further agrees that such compliance shall not, in and of itself, result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Security Trustee be liable or accountable to any Chargor for any discount allowed by reason of the fact that such Charged Asset is sold in compliance with any such limitation or restriction.

 

10. F URTHER ASSURANCE

Each Chargor shall at any time necessary or advisable under applicable law, and also from time to time if required by the Security Trustee, promptly complete, sign, seal, execute and deliver all Documents, give such instructions or directions and do all acts and things for:

 

  (a) perfecting, protecting, improving or maintaining the Security Trustee’s title to and Security over any of the Charged Assets owned or held by it;

 

  (b) vesting or enabling the Security Trustee to vest any of the Charged Assets owned or held by it in itself or its nominee(s) or in any purchaser or to facilitate the sale or other disposal of any of the Charged Assets owned or held by it; or

  (c) the exercise by the Security Trustee of any of the rights or powers or remedies attaching to the Charged Assets owned or held by it or conferred on the Security Trustee by this Charge,

such Documents to be prepared by or on behalf of the Security Trustee at the cost of the Chargors and to be in such form as the Security Trustee may require.

Notwithstanding anything to the contrary contained herein or under applicable law, but without limiting the rights and authorisations of the Security Trustee hereunder, the Security Trustee shall not be obliged to:

 

  (i) prepare, record, file, re-record, or re-file any financing statement, perfection statement, continuation statement or other instrument in any public office or otherwise ensure the perfection or maintenance of any security interest granted pursuant to, or contemplated by any Finance Document;

 

  (ii) take any necessary steps to preserve rights against any parties with respect to any Charged Assets; or

 

  (iii) take any action to protect against any diminution in value of any Charged Assets.

 

11. A DDITIONAL OR FUTURE S ECURITY

 

11.1 Additional security: This Charge is in addition to and shall not affect (or be affected by) any right of set-off, combination, lien or other rights exercisable by the Security Trustee and/or any of the Secured Parties as banker against each Chargor or any guarantees, indemnities, negotiable instruments and/or Security whatsoever which the Security Trustee and/or any of the Secured Parties may hold now or in the future for any part of the Secured Obligations and may be enforced without first having recourse to any such guarantee, indemnity, negotiable instrument or Security.

 

11.2 New account: I f the Security Trustee receives or is deemed to have received notice of any Security or any other interest affecting any Charged Assets:

 

  (a) the Security Trustee may open a new account for each Chargor and, if it does not, it shall be deemed to have done so at the time it received or is deemed to have received such notice; and

 

  (b) all payments received by the Security Trustee from each Chargor or any other person in respect of the Secured Obligations after the Security Trustee receives such notice shall be credited, or deemed to have been credited, to the new account and shall not operate to reduce the amount of the Secured Obligations at the time the Security Trustee received such notice.

 

11.3 Order of discharge: The Security Trustee and/or any Secured Party may obtain discharge of the Secured Obligations from any source in any order without releasing or affecting the liability of each Chargor under this Charge or the Security created or acknowledged by this Charge and may enforce this Charge before or after resorting to any such other means of discharge without entitling each Chargor to any benefit.

 

12. W AIVER , FORBEARANCE , SEVERABILITY AND PARTIAL INVALIDITY

 

12.1

No waiver: No failure to exercise and no delay on the part of the Security Trustee in exercising any right, remedy, power or privilege under this Charge and no course of dealing between the Parties and/or any Secured Party shall be construed or operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or

  privilege preclude any other or further exercise of it or the exercise of any other right, remedy, power or privilege. The rights and remedies provided in this Charge are cumulative and not exclusive of any rights or remedies provided by law or under any of the Finance Documents.

 

12.2 Illegality, invalidity, unenforceability: If any provision of this Charge is or becomes illegal, invalid or unenforceable, the other provisions and the remainder of the affected provision shall continue to be valid.

 

12.3 Severability: No provision of this Charge shall be avoided or invalidated by reason only of one or more other provisions being invalid or unenforceable.

 

13. V ARIATION OF TERMS

No variation, deletion, replacement of or supplement to this Charge or any of its terms shall be valid or effective unless such variation, deletion, replacement and/or supplement have been made in writing and signed by the Security Trustee on behalf of the Secured Parties and each Chargor.

 

14. E XPENSES AND INDEMNITY

 

14.1 Transaction expenses: Each Chargor shall promptly on demand pay to the Security Trustee the amount of all costs and expenses (including legal fees) reasonably incurred by the Security Trustee (or by any Receiver or delegate) in connection with the negotiation, preparation, printing, execution and perfection of this Charge or any other document referred to in this Charge and the completion of the transactions and perfection of the Security contemplated in this Charge.

 

14.2 Amendment costs: If any Chargor requests an amendment, waiver or consent, such Chargor shall within five Business Days of demand reimburse the Security Trustee (or any Receiver or delegate) for the amount of all costs and expenses (including legal fees) reasonably incurred by the Security Trustee (or any Receiver or delegate) in responding to, evaluating, negotiating or complying with that request or requirement.

 

14.3 Enforcement and preservation costs: Each Chargor shall within five Business Days of demand pay to the Security Trustee and each other Secured Party, the amount of all costs and expenses (including legal, valuation, accountancy and consultancy fees and disbursements and out-of-pocket expenses) and any indirect tax thereon incurred by the Security Trustee and/or any other Secured Party in connection with the exercise, enforcement and/or preservation of or the release of any rights under this Charge (or any documents contemplated by this Charge) or any proceedings instituted by or against the Security Trustee, in any jurisdiction, as a consequence of taking or holding this Charge or enforcing these rights.

 

14.4 Indemnity for Liabilities : Each Chargor shall also, promptly following the Security Trustee’s demand, reimburse or pay to the Security Trustee, its employees or agents, on demand (on the basis of a full indemnity) the amount of all Liabilities incurred by the Security Trustee, its employees or agents, in connection with:

 

  (a) any default or delay by that Chargor in the performance of any of its obligations under this Charge;

 

  (b) the exercise, or the attempted or purported exercise, by or on behalf of the Security Trustee of any of its powers or any other action taken by or on behalf of the Security Trustee with a view to or in connection with the recovery of the Secured Obligations, the enforcement of the Security created by this Charge or for any other purpose contemplated in this Charge;

  (c) the carrying out or consideration of any other act or matter which the Security Trustee may consider to be conducive after the occurrence of an Event of Default to the preservation, improvement or benefit of any Charged Asset; and

 

  (d) any stamp duty or similar tax which may be payable as a result of the execution or performance of this Charge.

 

14.5 Without prejudice : The terms of this Clause 14 shall operate without prejudice to the terms of the Indenture (including, for the avoidance of doubt, any indemnity or right of reimbursement granted to or in favour of the Security Trustee under Section 10.07 ( Additional Security Trustee Terms ) of the Indenture).

 

14.6 Joint and Several : The obligations of each Chargor under this Clause 14 shall be joint and several and continuing and shall survive the termination of this Charge and the resignation or removal of the Security Trustee.

 

15. S TAMP DUTY

Each Chargor shall pay all present and future stamp, registration and similar taxes or charges which may be payable or determined to be payable in any applicable jurisdiction in connection with the execution, delivery, performance or enforcement of this Charge or any judgment given in connection with this Charge and shall, jointly and severally, indemnify the Security Trustee, each Secured Party and each Receiver against any and all liabilities including penalties with respect to or resulting from its delay or omission to pay any such stamp, registration and similar taxes or charges.

 

16. T AX GROSS - UP

 

16.1 Definitions

 

  (a) In this Clause 16:

“ Tax Deduction ” means a deduction or withholding for or on account of Tax from a payment under this Charge.

 

  (b) In this Clause 16 a reference to “determines” or “determined” means a determination made in the absolute discretion of the person making the determination.

 

16.2 Tax gross-up

 

  (a) Each Chargor shall make all payments to be made by it in accordance with the terms of this Charge without any Tax Deduction, unless a Tax Deduction is required by law.

 

  (b) Each Chargor shall promptly upon becoming aware that it must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Security Trustee accordingly.

 

  (c) If the Tax Deduction is required by law to be made by any Chargor, the amount of the payment due from that Chargor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

 

  (d) If a Chargor is required to make a Tax Deduction, that Chargor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

  (e) Within thirty days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the relevant Chargor shall deliver to the Security Trustee evidence reasonably satisfactory to the Security Trustee that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

 

17. I NTEREST ON OVERDUE AMOUNTS

 

17.1 Default interest: Any overdue amounts not paid in accordance with this Charge when due shall carry interest at the rate and in accordance with the terms contained in the relevant Finance Document in relation to overdue sums or at such other rate as may be agreed between the relevant Chargor and the Secured Parties from time to time. In each case, interest shall accrue on a day to day basis to the date of irrevocable and unconditional repayment in full and, if unpaid, shall be compounded on the terms so agreed or (in the absence of such agreed terms) with quarterly rests on the Security Trustee’s and/or the relevant Secured Party’s usual quarterly interest days. Interest shall continue to be charged and compounded on this basis after as well as before any demand or judgment.

 

17.2 When payable: Clause 17.1 above shall not apply to the extent that default interest on such amount is payable pursuant to the terms of the Indenture and/or the Notes and itself constitutes part of the Secured Obligations.

 

18. C URRENCY INDEMNITY

If:

 

  (a) for any reason any amount payable by each Chargor under this Charge is paid or recovered by any Secured Party in a currency (the “ payment currency ”) other than that in which the Secured Obligations are denominated; and

 

  (b) the payment made to such Secured Party in the payment currency, when converted at such Secured Party’s then applicable rate of exchange into the currency in which the Secured Obligations are denominated, is less than the amount payable in the currency in which the Secured Obligations are denominated,

then each Chargor shall, jointly and severally, as a separate and independent obligation, fully indemnify such Secured Party within ten days of demand against the amount of the shortfall. For the purposes of this Clause, the expression “applicable rate of exchange” means the rate at which such Secured Party purchases the currency in which the Secured Obligations are denominated with the payment currency, taking into account any costs associated with the exchange.

 

19. I NFORMATION

The Security Trustee may from time to time seek from any other banker or finance provider to each Chargor such information about each Chargor and its affairs as the Security Trustee may think fit and each Chargor shall direct any such third party to provide such information to the Security Trustee and agrees to provide such further authority for this purpose as the Security Trustee may from time to time require. If the Security Trustee obtains any such information it shall not have any obligation to inform any Chargor or Company thereof.

 

20. D ISCHARGE AND RELEASE

 

20.1

No avoidance or reduction: Any settlement or discharge between the Security Trustee or any of the Secured Parties and any Chargor in respect of the Secured Obligations shall

  be subject to the condition that no Security or payment to the Security Trustee or any of the Secured Parties by that Chargor or any other person shall be avoided or reduced by virtue of any provisions or enactments relating to insolvency or otherwise. If any such Security or payment shall be so avoided or reduced, the Security Trustee or any of the Secured Parties shall nevertheless be entitled to recover the value or amount thereof subsequently from each Chargor and to exercise its rights under this Charge as if such settlement or discharge had not been effected. The Security Trustee and such Secured Party may retain any Security held by them for the obligations of each Chargor under this Charge until the expiry of the period of one month plus the maximum statutory period under the applicable law within which such Security or payment can be avoided, reduced or invalidated by virtue of any such provision or enactment.

 

20.2 Concession or settlement of claims: In the event of any claim being made or proceedings being taken against the Security Trustee or any other Secured Party the effect of which, if successful, would be the avoidance or reduction of any such Security or payment and whether or not each Chargor shall have been made a party thereto, the Security Trustee or such other Secured Party shall have absolute discretion to concede or settle the same on such terms as it may think fit whereupon Clause 20.1 ( No avoidance or reduction ) shall have the effect as if such concession or settlement had been ordered by the court (without possibility of appeal) and each Chargor shall, jointly and severally, in addition pay the Security Trustee (for the benefit of the relevant Secured Parties) all costs, charges and expenses (on a full indemnity basis) arising out of or in connection with any such claim or proceedings.

 

20.3 Consolidation of Security: Any restrictions on the consolidation of Security shall be excluded to the fullest extent permitted by law and the Security Trustee shall, so far as it is lawful and subject to other provisions of this Charge, be entitled to consolidate this Charge with any other Security whether in existence on the date of this Charge or in the future.

 

21. C OUNTERPARTS

This Charge may be executed in any number of counterparts and this will have the same effect as if the signatures on the counterparts were on a single copy of this Charge.

 

22. T RANSFER AND DISCLOSURE

 

22.1 Transfer by Chargors: No Chargor may assign or transfer any of its rights or obligations under this Charge.

 

22.2 Transfer by Secured Parties : Any Secured Party may at any time assign and transfer all or any part of its rights under this Charge to any person to which it has assigned and transferred the whole or part of its rights under the Notes in accordance with the terms of the Indenture and the Notes.

 

22.3 Transfer by Security Trustee : The Security Trustee may assign and transfer all of its rights and obligations under this Charge to any replacement Security Trustee appointed in accordance with the Indenture. Upon such assignment and transfer becoming effective, the replacement Security Trustee shall be, and be deemed to be, acting as agent and trustee for each of the Secured Parties (including itself) for the purposes of this Charge in replacement of the previous Security Trustee.

 

22.4 Disclosure of information : Each Chargor irrevocably authorises the Security Trustee and each Secured Party, at its discretion, at any time or from time to time, to disclose any information concerning each Chargor, this Charge and the Secured Obligations to:

 

  (a) any associated company of the Security Trustee or any of the Secured Parties or;

  (b) any prospective transferee or grantee referred to in Clause 22.3 ( Transfer by Security Trustee ) and any other person considered by the Security Trustee or any of the Secured Parties to be concerned in the relevant transaction or prospective transaction; or

 

  (c) any person who, as part of the arrangements made in connection with any transaction referred to in Clause 22.3 ( Transfer by Security Trustee ), requires such information after the transaction has been effected.

The above authority is without prejudice to the right of disclosure of the Security Trustee or any of the Secured Parties implied by law.

 

23. N OTICES

 

23.1 Delivery: Any notice, document or other communication to be given or delivered under or in connection with this Charge shall be in writing and, in the case of any notice, document or communication to a Chargor, shall be deemed to have been duly served on, given or delivered to or made if it is left at the authorised address of that Chargor, posted by pre-paid registered post addressed to that Chargor at such address, or sent by facsimile transmission to the facsimile number referenced in Clause 23.2 ( Addresses ) below and shall be deemed to have been received if:

 

  (a) personally delivered, at the time of delivery;

 

  (b) sent by mail, on the date of posting; or

 

  (c) sent by facsimile transmission, on receipt by the sender of a facsimile transmission report (or other appropriate evidence) confirming that the facsimile has been transmitted to the addressee.

 

23.2 Addresses: For the purposes of this Clause the authorised address of each Party shall be the address (including the details of the facsimile number and person for whose attention a notice, document or communication is to be addressed) identified with its name at the end of this Charge or such other address (and details) as that Party may notify to each other Party in writing from time to time in accordance with the requirements of this Clause.

 

23.3 Effectiveness: Any notice, document or communication to be made or delivered to the Security Trustee will be effective only when actually received by the Security Trustee and then only if it is expressly marked for the attention of the department or officer of the Security Trustee as identified above (or any substitute department or officer as the Security Trustee shall specify for this purpose).

 

23.4 English language: Each notice, document or communication between the Parties shall be either in English or accompanied by a translation into English, which is certified as being a true and accurate translation.

 

24. S ET - OFF

The Security Trustee may (but is not obliged to) retain any money standing to the credit of any Chargor with the Security Trustee in any currency upon any account (whether or not in that Chargor’s name) or otherwise as cover for any Secured Obligations and that Chargor agrees that the Security Trustee may at any time or times without notice to each Chargor combine or consolidate any or all sums of money now or subsequently standing to that Chargor’s credit upon any such account with all or such part of the Secured Obligations as the Security Trustee may determine (whether presently payable or not) and the Security Trustee may purchase with any such money any other currency required to effect such combination or consolidation.

25. A PPOINTMENT OF R ECEIVER

 

25.1 Appointment: At any time after this security has become enforceable or if so requested by any Chargor, the Security Trustee may appoint in writing any person or persons to be a receiver and manager or receivers and managers of all or any part of the Charged Assets, as the Security Trustee may choose in its entire discretion.

 

25.2 Severability: Where more than one Receiver is appointed, the appointees shall have power to act severally (unless the Security Trustee shall specify to the contrary) in relation to the Charged Assets. An appointment over part only of the Charged Assets shall not preclude the Security Trustee from making a subsequent appointment of a Receiver over any part of the Charged Assets over which an appointment has not previously been made by the Security Trustee.

 

25.3 Receiver’s remuneration: The Security Trustee may from time to time determine the remuneration of the Receiver (subject to Section 300 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) and remove the Receiver from all or any part of the Charged Assets of which he is the Receiver and after the Receiver has vacated office or ceased to act in respect of any of the Charged Assets appoint a further Receiver over all or any part in respect of which he shall have ceased to act.

 

25.4 Receiver’s agency: The Receiver shall be the agent of the relevant Chargor (who shall be solely liable for his acts, defaults and remuneration), unless and until that Chargor goes into bankruptcy or liquidation and thereafter he shall act as principal and shall not become the agent of the Security Trustee or any of the Secured Parties. The Security Trustee shall not be responsible, at any time, for the actions of the Receiver.

 

25.5 Powers of a Receiver: In addition to those powers conferred by law, the Receiver shall have and be entitled to exercise in relation to each Chargor concerned all the powers set out below:

 

  (a) to take possession of the Charged Assets, and to require payment to it of all Derivative Assets including without limitation, to complete any instruments of transfer and to procure the transfer of the Charged Assets into the name of the Receiver or its nominee and, if necessary, take possession of and collect the share certificates and/or other documents of title relating to the Charged Assets, at the cost and risk of the Chargors;

 

  (b) to sell, transfer, assign, exchange or otherwise dispose of or realise the Charged Assets to any person either by public offer or auction, tender or private contract and for a consideration of any kind (which may be payable or delivered in one amount or by instalments spread over a period or deferred);

 

  (c) to borrow or raise money, either unsecured or on the security of the Charged Assets (either in priority to the Charges or otherwise);

 

  (d) to exercise and do (or permit a Chargor or any nominee of it to exercise and do) all such rights and things as the Receiver would be capable of exercising or doing if it were the absolute beneficial owner of the Charged Assets (including but not limited to exercising all voting and other rights attaching to Charged Assets owned by the relevant Chargor and calling up all or any portion of the uncalled capital of the relevant Chargor);

 

  (e) to settle, adjust, refer to arbitration, compromise and arrange any claims, accounts, disputes, questions and demands with or by any person relating to the Charged Assets;

  (f) to bring, prosecute, enforce, defend and abandon actions, suits an proceedings in relation to the Charged Assets;

 

  (g) to make any arrangement or compromise with the Security Trustee or any of the Secured Parties as he shall think fit;

 

  (h) to appoint managers, officers and agents for the above purposes at such reasonable remuneration as the Receiver may determine;

 

  (i) to redeem any prior Security and to settle and pass the accounts of the Security holder, and any accounts so settled and passed shall (subject to any manifest error) be conclusive and binding on each Chargor and the money so paid shall be deemed an expense properly incurred by the Receiver;

 

  (j) to pay the proper administrative charges of the Security Trustee and/or any of the Secured Parties in respect of time spent by their agents and employees in dealing with matters raised by the Receiver or relating to the receivership of each Chargor; and

 

  (k) to do all such other acts and things as may be considered by the Receiver to be incidental or conducive to any of the above matters or powers or otherwise incidental or conducive to the preservation, improvement or realisation of the Charged Assets.

 

26. S ECURITY T RUSTEE

The provisions of Sections 10.04 ( Authorization of Actions to be Taken by the Trustee under the Security Documents ), 10.05 ( Authorization of Receipt of Funds by the Security Trustee Under the Security Documents ), 10.06 ( Release of the Collateral ) and 10.07 ( Additional Security Trustee Terms ) of the Indenture shall apply to the Security Trustee’s actions, rights, obligations, powers and duties under this Charge as if set out in this Charge in full. The Security Trustee shall be entitled to exercise its rights, powers, authorisations and duties under the terms of this Charge through designees, agents or co-Security Trustees appointed pursuant to the Indenture. The permissive authorisations, entitlements, powers and rights granted to the Security Trustee hereunder shall not be construed as duties. The Security Trustee shall be entitled to refuse to take or refrain from taking any discretionary action or exercise any discretionary powers set forth in this Charge until it has received with respect thereto satisfactory written direction in accordance with the terms of the Indenture and, if necessary, satisfactory indemnification.

 

27. G OVERNING L AW

This Charge shall be governed by and construed in accordance with Hong Kong law.

 

28. E NFORCEMENT

 

28.1 Jurisdiction

 

  (a) The courts of Hong Kong have non-exclusive jurisdiction to settle any dispute arising out of or in connection with this Charge (including a dispute regarding the existence, validity or termination of this Charge) (a “ Dispute ”).

 

  (b) Subject to paragraph (c) below, the Parties agree that the courts of Hong Kong are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.

 

  (c)

This Clause 28 ( Enforcement ) is for the benefit of the Secured Parties only. As a result, no Secured Party shall be prevented from taking proceedings relating to a

  Dispute in any other courts with jurisdiction. To the extent allowed by law, the Secured Parties may take concurrent proceedings in any number of jurisdictions.

 

  (d) Each Chargor irrevocably waives any objection which it may have now or in future to the laying of the venue of any proceedings in the courts of Hong Kong and any claim that any such proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgment in any such proceedings brought in such courts shall be conclusive and binding upon it and may be enforced in any other jurisdiction.

 

28.2 Service of process

 

  (a) Without prejudice to any other mode of service allowed under any relevant law, each Chargor (other than a Chargor incorporated in Hong Kong) irrevocably designates, appoints and empowers Sino-Wood Partners, Limited of Room 3815-29, Sun Hung Kai Centre 30 Harbour Road, Wanchai, Hong Kong (or such other address in Hong Kong as each Chargor may notify to the Security Trustee) as their agent to accept service of process in such jurisdiction in any proceedings arising out of or in connection with this Charge (the “ Proceedings ”) and agrees that failure by such agent to give notice of such service of process to the Chargors shall not impair or affect the validity of such service or any judgment based on it (and Sino-Wood Partners, Limited by its execution of this Charge, accepts that appointment).

 

  (b) Sino-Wood Partners, Limited expressly agrees and consents to the provisions of Clause 27 ( Governing Law ) and of Clause 28 ( Enforcement ).

 

  (c) Each Chargor further consents to the service of process out of the courts of Hong Kong in any such Proceedings by the mailing to it of copies by registered or certified airmail, postage prepaid.

 

28.3 Waiver of Immunity

Each Chargor irrevocably and unconditionally:

 

  (a) agrees that in any legal proceedings against it or its assets in connection with this Charge, no immunity from such legal proceedings (which shall include suit, attachment prior to judgment, other attachment, the obtaining of judgment, execution or other enforcement) shall be claimed by or on behalf of it or with respect to its assets;

 

  (b) waives any such right of immunity which it or its assets now has or may in the future acquire; and

 

  (c) consents generally in respect of such proceedings to the giving of relief or the issue of any process in connection with such proceedings including the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order of judgment which may be made or given in such proceedings.

I N W ITNESS whereof each Chargor have executed this Charge as a deed on the day and year first above written.

S CHEDULE 1

Chargors

 

Chargor

  

Jurisdiction

  

Registration Number

Emerald Plantation Group Limited    Cayman Islands    CT-274113
Sino-Wood Partners, Limited    Hong Kong    0381246
Mandra Forestry Anhui Limited    British Virgin Islands    633461
Sino-Plantation Limited    Hong Kong    0386411

S CHEDULE 2

Particulars of the Companies and the Original Shares

 

Chargor/Jurisdiction

  

Company

  

Place of

Incorporation of the

Company

  

Number of Original

Shares in the

Company

Emerald Plantation Group Limited (Cayman Islands)    Sino-Wood Partners, Limited    Hong Kong    3,000,003 ordinary shares and 129,927 class B shares
Sino-Wood Partners, Limited (Hong Kong)    Sino-Plantation Limited    Hong Kong    10,000 ordinary shares
Mandra Forestry Anhui Limited (British Virgin Islands)    Mandra Forestry Hubei Limited    Hong Kong    1 ordinary share
Sino-Plantation Limited (Hong Kong)    Sino-Wood (Guangxi) Limited    Hong Kong    2 ordinary shares
   Sino-Wood (Jiangxi) Limited    Hong Kong    2 ordinary shares
   Sino-Wood (Guangdong) Limited    Hong Kong    2 ordinary shares
   Sino-Wood (Fujian) Limited    Hong Kong    2 ordinary shares

S CHEDULE 3

Form of Nominee Undertaking

 

To:    Computershare Trust Company, N.A. (as Security Trustee)
From:    [ Name of the Nominee ]
   [ Address ]
Dated:    [***]

Dear Sirs

 

1. [I]/[We] refer to the share charge of even date (as may be amended from time to time, the “ Charge ”) between [ Name of the relevant Chargor ] (the “ Chargor ”) and yourselves. Terms defined in the Charge have the same meanings when used in this Nominee Undertaking.

 

2. [I]/[We] declare that [I]/[we] hold the securities listed in the Appendix of this Nominee Undertaking (the “ Nominee Securities ”) to your order subject to the terms and conditions of the Charge.

 

3. [I]/[We] will notify you promptly of the contents of any communication or document received by [me]/[us] as holder of the Nominee Securities.

 

4. [I]/[We] will, after [I]/[we] have received from you written notice informing [me]/[us] that you are entitled to enforce the Charge (such notice to be conclusive and binding on [me]/[us] for all purposes) (an “ Enforcement Notice ”), promptly pay to you, at the expense of the Secured Parties, any dividends or other money received by [me]/[us] in respect of the Nominee Securities and [I]/[we] hereby declare [myself]/[ourselves] as trustee of such dividends or other money to hold, pending such payment, upon trust to pay to you in the manner aforesaid.

 

5. [I]/[We] will, after [I]/[we] have received an Enforcement Notice, exercise or refrain from exercising, all of [my]/[our] voting rights in respect of the Nominee Securities in accordance with your instructions. Prior to receipt of an Enforcement Notice, [I]/[we] will not exercise any voting rights or all other rights forming part of the Nominee Securities in a manner which is inconsistent with the terms of the Charge.

 

6. [I]/[We] will, promptly upon receipt by [me]/[us] of any Derivative Assets in respect of the Nominee Securities, at the expense of the Secured Parties, deliver to you all certificates and other documents constituting or evidencing title to such Derivative Assets together with transfers relating to them complying with the provisions of Clause 3 ( Charging clause ) of the Charge and otherwise in such manner as you reasonably require and will promptly give such instructions or directions as you reasonably require relating to any Nominee Securities or their Derivative Assets to protect or preserve your security.

 

7. In the event that [I]/[we] fail to promptly perform any of my obligations under this Nominee Undertaking, [I]/[We] irrevocably appoint you by way of security as [my]/[our] attorney (with full power to appoint substitutes and to delegate), in [my]/[our] name and on [my]/[our] behalf and as [my]/[our] act and deed, at any time to execute, deliver and perfect any Document, perform any lawful act, or give any lawful instructions which may be required by [me]/[us] under this Nominee Undertaking or deemed by such attorney necessary to perfect the security intended to be constituted by the Charge or this Nominee Undertaking or to transfer the legal ownership of any of the Nominee Securities

  or their Derivative Assets and [I]/[We] shall ratify and confirm all acts and things lawfully done by you, any substitute or delegate in the exercise or purported exercise of this power of attorney, all at the expense of the Secured Parties. You shall have no other recourse against [me]/[us] in the event of my failure to perform my obligations under this Nominee Undertaking, other than by taking appointment as [my]/[our] attorney as described in the foregoing sentence.

 

8. [I]/[We] hereby waive any right [I]/[we] may have under the articles of association of [ Name of the Company ] or otherwise to purchase the Nominee Securities or any of them in the event that they are sold or otherwise disposed of pursuant to the Charge.

 

9. This Nominee Undertaking, and all of [my]/[our] obligations hereunder, will terminate upon termination of the Charge. Upon any such termination, you will, at [my]/[our] expense, execute and deliver to [me]/[us] such documents as [I]/[we] may reasonably request in writing to evidence such termination.

 

10. This Nominee Undertaking shall be governed by and construed in accordance with the laws of Hong Kong Special Administrative Region of the People’s Republic of China.

I N WITNESS whereof [I]/[we] have executed this Nominee Undertaking as a deed on the day and year first before written.

 

Signed, sealed and delivered   )    
as a deed by [ Name of individual   )  

 

  L.S.
nominee ] in the presence of:   )    

 

Witness’ signature  

 

Full name  

 

Address  

 

Occupation  

 

OR

 

The common seal of   )    
[ Name of the nominee ] was   )     C.S.
affixed in the presence of:   )    

 

Director’s signature  

 

Full name  

 

Secretary’s/Director’s signature  

 

Full name  

 

OR

 

Signed, sealed and delivered   )   Authorised signatory  

 

  L.S.

as a deed for and on behalf of   )      
[ Name of the nominee ]   )   Full name  

 

 
by its attorney(ies) in the   )      
presence of:   )   Authorised signatory  

 

  L.S.
    Full name  

 

 

 

Witness’ signature  

 

Full name  

 

Address  

 

Occupation  

 

A PPENDIX TO N OMINEE U NDERTAKING

The Nominee Securities

[***] [ordinary] shares of [HK$][***] each in the capital of [ Name of the Company ]

E XECUTION P AGE

The Chargors

 

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Emerald Plantation Group Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
Hong Kong
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

The common seal of    )   
Sino-Wood Partners, Limited    )   
was hereunto affixed in the presence of:    )    C.S.

Authorised signatory’s signature:

 

Full name:    Paul Jeremy Brough
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
Hong Kong
Fax No.:    +852 2877 0062
Attention:    Paul Jeremy Brough

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Mandra Forestry Anhui Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

The common seal of    )      
Sino-Plantation Limited    )       C.S.
was affixed in the presence of:    )      

Authorised signatory’s signature:

 

Full name:    Paul Jeremy Brough   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
Hong Kong
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

The Security Trustee

 

Signed by                        )   
For and on behalf of                        )   
Computershare Trust                        )   
Company, N.A.                        )   
      Authorised Signatory

 

Address:    350 Indiana Street, Suite 750, Golden, CO 80401
Fax:    303-262-0608
Attention:    Corporate Trust
With a copy to:   
Address:    480 Washington Blvd., Jersey City, NJ 07310
Fax:    201-680-4610
Attention:    Legal Department

D ATED    2013

 

T HE COMPANIES NAMED IN S CHEDULE 1

(as Chargors)

- and -

C OMPUTERSHARE T RUST C OMPANY , N.A.

(as Security Trustee)

D EBENTURE

 

LOGO

Matter ref 46749/00026

HKACSW/CHL/1011612

Hogan Lovells

11th Floor, One Pacific Place, 88 Queensway, Hong Kong

C ONTENTS

 

C LAUSE        P AGE  

1.

  D EFINITIONS AND INTERPRETATION      1   

2.

  C OVENANT TO PAY      5   

3.

  C REATION OF SECURITY      5   

4.

  C RYSTALLISATION      9   

5.

  T ITLE DOCUMENTS AND INSURANCE POLICIES      10   

6.

  M ANDATORY P REPAYMENT A CCOUNT      11   

7.

  R EPRESENTATIONS AND WARRANTIES      11   

8.

  N EGATIVE PLEDGE AND OTHER RESTRICTIONS      12   

9.

  F URTHER ASSURANCE      13   

10.

  C ONTINUING SECURITY      14   

11.

  L AND      14   

12.

  I NTELLECTUAL P ROPERTY R IGHTS      15   

13.

  O PENING OF NEW ACCOUNTS      15   

14.

  P OWERS OF SALE , LEASING AND ACCEPTING SURRENDERS      16   

15.

  P OWERS OF THE S ECURITY T RUSTEE      16   

16.

  P OWERS OF A R ECEIVER      17   

17.

  P OWER OF ATTORNEY      18   

18.

  O THER POWERS EXERCISABLE BY THE S ECURITY T RUSTEE      18   

19.

  A PPLICATION OF MONEY RECEIVED BY THE S ECURITY T RUSTEE OR A R ECEIVER      19   

20.

  P ROTECTION OF THIRD PARTIES      20   

21.

  P ROTECTION OF THE S ECURITY T RUSTEE , ANY NOMINEE AND R ECEIVER      20   

22.

  S ECURITY T RUSTEE      20   

23.

  C OSTS , EXPENSES AND LIABILITIES      21   

24.

  S TAMP DUTY      22   

25.

  T AX GROSS - UP      22   

26.

  I NFORMATION      23   

27.

  C URRENCY INDEMNITY      23   

28.

  I NTEREST ON OVERDUE AMOUNTS      23   

29.

  S ET - OFF      23   

31.

  T RANSFER AND DISCLOSURE      24   

32.

  R ELEASE OF S ECURITY      24   

33.

  R IGHTS OF THE P ARTIES TO VARY      25   

34.

  F ORBEARANCE , SEVERABILITY , VARIATIONS AND CONSENTS      25   

35.

  C OUNTERPARTS      25   

36.

  N OTICES      25   

37.

  S ECURITY T RUSTEE      26   

38.

  G OVERNING LAW      26   

39.

  E NFORCEMENT      26   

S CHEDULE 1

     28   
  Chargors      28   

S CHEDULE 2

     31   
  Land      31   

S CHEDULE 3

     32   
  Mandatory Prepayment Account      32   

S CHEDULE 4

     36   
  Specified Intellectual Property      36   

E XECUTION P AGE

     39   

T HIS D EBENTURE is made on            2013

B ETWEEN :

 

(1) The companies named in Schedule 1 ( Chargors ) (each a “ Chargor ” and together the “ Chargors ”); and

 

(2) Computershare Trust Company, N.A. as security trustee appointed under the Indenture (as defined below) acting for itself and for and on behalf of the Secured Parties (as defined in the Indenture) (the “ Security Trustee ”).

W ITNESSES AS FOLLOWS :

 

1. D EFINITIONS AND INTERPRETATION

 

1.1 Definitions : Unless the context otherwise requires, words or expressions defined in the Indenture shall have the same meanings in this Debenture and this construction shall survive the termination of the Indenture. In addition, in this Debenture:

“ Account Bank ” means the bank or financial institution with which the Mandatory Prepayment Account is held.

“ Assets ” means, in relation to a Chargor, all its undertaking, property, assets, revenues and rights of every description, or any part of them.

“BC Act” means the BVI Business Companies Act, 2004, as amended from time to time.

“Companies Law” means the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands.

“ CPO ” means the Conveyancing and Property Ordinance (Chapter 219 of the Laws of Hong Kong).

“ DMC ” means the deed(s) of mutual covenant, deed(s) of covenant, deed(s) of mutual covenant and management agreement, supplemental deed(s) of mutual covenant, or similar document(s) and any variation or modification of that or those deed(s) of mutual covenant.

“ Event of Default ” has the meaning given to that term in the Indenture.

“ Finance Document ” means the Indenture, this Debenture, each other Security Document, the Notes and any other document designated as such by the Security Trustee and the Issuer.

“ Fixed Security Asset ” means an Asset for the time being comprised within an assignment created by Clause 3.1 ( Assignments ) or within a mortgage or fixed charge created by Clause 3.2 ( Fixed security ) or arising on crystallisation of a floating charge whether under Clause 4 ( Crystallisation ) or otherwise.

“ Fixtures ” means fixtures, fittings (including trade fixtures and fittings) and fixed plant, machinery and apparatus.

“ Floating Charge Asset ” means an Asset for the time being comprised within the floating charge created by Clause 3.3 ( Creation of floating charge ) but, if it is also a Fixed Security Asset, only insofar as concerns that floating charge.

“ Government ” means the Government of Hong Kong.

“ Government Grant ” means, in relation to a Chargor, the government grants and conditions or government leases (and any variation or modification of that or those grants or leases) under which the Land in respect of such Chargor is held from the Government at the date of this Debenture by such Chargor and any other government grants and conditions or government leases relating to any Land which such Chargor from time to time benefits from.

“ Group ” means the Issuer and each of its Subsidiaries for the time being.

“ HK$ ” or “ Hong Kong Dollars ” means the lawful currency of Hong Kong.

“ Hong Kong ” means the Hong Kong Special Administrative Region of the People’s Republic of China.

“ Indenture ” means an indenture dated on or about the date of this Debenture in relation to issuance of up to US$300,000,000 6.00% senior secured notes due 2020 and, if and when issued, any additional notes and/or PIK notes issued under the terms of such indenture from time to time.

“ Insurance Policy ” means any contract or policy of insurance of any Chargor (including all cover notes) of whatever nature which are from time to time taken out by or on behalf of any Chargor or (to the extent of its interest) in which any Chargor has an interest at any time.

“ Intellectual Property ” means patents (including supplementary protection certificates), utility models, registered and unregistered trade marks (including service marks), rights in passing off, copyright, database rights, registered and unregistered rights in designs (including in relation to semiconductor products) anywhere in the world and, in each case, any extensions and renewals of, and any applications for, such rights.

“ Intellectual Property Rights ” in relation to a Chargor, means all and any of its Intellectual Property and all other intellectual property rights, causes of action, interests and assets charged by it pursuant to paragraphs (c)(vii) to (c)(xii) inclusive of Clause 3.2 ( Fixed security ).

“ Investments ” means all shares, stock, debentures, debenture stock, bonds and other investments, whether certificated or uncertificated and whether in registered or bearer form, including all depository interests representing any of them and including all rights and benefits of a capital nature accruing at any time in respect of any Investments by way of redemption, repayment, substitution, exchange, bonus or preference, option, rights or otherwise.

“ Issuer ” means Emerald Plantation Holdings Limited, an exempted company incorporated in the Cayman Islands (with registration number CT-274117) whose registered address is the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

“ Land ” in respect of a Chargor means:

 

  (a) any land (including freehold and leasehold) and immovable property under that Chargor’s name and subject to and with the benefit of all Leases, deeds, documents and other matters and any part or parts thereof and any other estate or interest in and all Rights attached or relating to such land or immovable property and all buildings, structures and Fixtures in or on such land or immovable property;

  (b) any leasehold land and immovable property held by that Chargor as tenant/lessee under the tenancy agreements and any other estate or interest in and all Rights attached or relating to such land or immovable property; and

 

  (c) any other land and immovable property of that Chargor and any other estate or interest in and all Rights attached or relating to such land or immovable property and all buildings, structures and Fixtures in or on such land or immovable property.

“ Land Registry ” means the Land Registry of Hong Kong.

“ Lease ” means any lease, tenancy, licence, letting arrangement, exchange, option, reservation, right of refusal or any other right or interest in any part of the Land or any other agreement or contract for any of these, granted by any Chargor or any person deriving title from that Chargor.

“ Liability ” means any liability, damage, loss, costs, claim or expense of any kind or nature, whether direct, indirect, special, consequential or otherwise.

“ Mandatory Prepayment Account ” has the meaning given to that term in the Indenture.

“ Nominee ” means any nominee as notified to any Chargor by the Security Trustee from time to time.

“ Notes ” has the meaning given to that term in the Indenture.

“ Ordinance ” means the Companies Ordinance (Chapter 32 of the Laws of Hong Kong).

“ Overseas Chargor ” means each Chargor which is incorporated in a jurisdiction outside Hong Kong and is not registered as a non-Hong Kong company in Hong Kong under Part XI of the Ordinance.

“ Party ” means a party to this Debenture.

“ Receiver ” means a receiver and manager appointed under Clause 15.2 ( Appointment of Receiver ) including (where the context requires or permits) any substituted receiver and manager.

“ Rights ” means rights (including rights of way), authorities, discretions, remedies, liberties, privileges, powers, easements, quasi-easements and appurtenances (in each case, of any nature whatsoever).

“ Secured Obligations ” means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Issuer and each other Subsidiary Guarantor to all or any of the Secured Parties under each or any of the Finance Documents, in each case together with:

 

  (a) all costs, charges and expenses incurred by any Secured Party in connection with the protection, preservation or enforcement of its rights under any Finance Document; and

 

  (b) all money, obligations and liabilities due, owing or incurred in respect of any variations or increases in the amount or composition of the Notes provided under the Indenture or the obligations and liabilities imposed under the Indenture or the Notes.

“ Secured Party ” has the meaning given to that term in the Indenture.

“ Security ” means a mortgage, charge, pledge, lien, assignment or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

“ Specified Intellectual Property ” means the Intellectual Property listed in Schedule 4 ( Specified Intellectual Property ).

“ Subsidiary Guarantor ” means each Subsidiary Guarantor under, and as such term is defined in, the Indenture.

“ Tax ” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

“ US$ ” means the lawful currency of the United States of America.

 

1.2 Interpretation : Unless the context otherwise requires, the interpretative provisions set out in the paragraphs below shall apply in this Debenture.

 

  (a) References to any Party shall be construed so as to include that Party’s respective successors in title, permitted assigns and permitted transferees.

 

  (b) “ Including ” and “ in particular ” shall not be construed restrictively but shall mean respectively “including, without prejudice to the generality of the foregoing” and “in particular, but without prejudice to the generality of the foregoing”.

 

  (c) A “ person ” includes any individual, firm, company, corporation, government, state or agency of a state or any association, joint venture, limited liability company, trust or partnership (whether or not having separate legal personality) of two or more of the foregoing.

 

  (d) “ Property ” includes any interest (legal or equitable) in real or personal property and anything in action.

 

  (e) “ Variation ” includes any variation, amendment, accession, novation, restatement, modification, assignment, transfer, supplement, extension, deletion or replacement however effected and “ vary ” and “ varied ” shall be construed accordingly.

 

  (f) “ Writing ” includes facsimile transmission legibly received except in relation to any certificate, notice or other document which is expressly required by this Debenture to be signed and “ written ” has a corresponding meaning.

 

  (g) Subject to Clause 34.4 ( Variations ), references to this Debenture or to any other document (including any Finance Document) include references to this Debenture or such other document as varied in any manner from time to time, even if changes are made to the composition of the parties to this Debenture or such other document or to the nature or amount of any liabilities owed under, or to the obligations of any party to, such other document.

 

  (h) The singular shall include the plural and vice versa and any gender shall include the other genders.

 

  (i) Clauses, paragraphs and Schedules shall be construed as references to Clauses and paragraphs of, and Schedules to, this Debenture.

  (j) Any reference to any statute, ordinance, rule, regulation or statutory instrument or any section of it shall be deemed to include a reference to any statutory modification or re-enactment of it for the time being in force in relation to the particular circumstances.

 

  (k) Headings in this Debenture are inserted for convenience and shall not affect its interpretation.

 

  (l) An Event of Default is “continuing” if it has not been remedied or waived in accordance with the terms of the Indenture.

 

1.3 Conflict of terms : If any conflict arises between the covenants and undertakings in Clause 11 ( Land ) and Clause 12 ( Intellectual Property Rights ) and the covenants and undertakings in Article 4 ( Covenants ) or Article 5 ( Consolidation, merger and sale of assets ) of the Indenture, the covenants and undertakings given in the Indenture shall prevail.

 

2. C OVENANT TO PAY

 

2.1 Covenant to pay : Each Chargor (as primary obligor and not merely as surety) covenants with the Security Trustee that it will, on the Security Trustee’s written demand, pay or discharge the Secured Obligations at the times and in the manner provided in the relevant Finance Documents.

 

2.2 Proviso : The covenants contained in this Clause 2 and the security created by this Debenture shall not extend to or include any liability or sum which would otherwise cause any such covenant or security to be unlawful or prohibited by any applicable law.

 

2.3 Demands :

 

  (a) The making of one demand shall not preclude the Security Trustee and/or the Secured Parties from making any further demands.

 

  (b) Any third party dealing with the Security Trustee, the Secured Parties or any Receiver shall not be concerned to see or enquire as to the validity of any demand under this Debenture.

 

2.4 Certificate of amount : A certificate signed (or, where reliance is being placed on it by any third party, appearing to be signed) by an officer of the Security Trustee as to the Secured Obligations for the time being due or owing from any Chargor to a Secured Party shall be treated, in favour of such Secured Party or any person to whom such certificate is issued, as conclusive evidence for all purposes against that Chargor and binding on it (save in the case of manifest error) and such certificate may be relied upon by any Secured Party and any other such person in all circumstances without further enquiry.

 

3. C REATION OF SECURITY

 

3.1 Assignments : Each Chargor, as beneficial owner, with full title guarantee, as security for the payment or discharge of all Secured Obligations, assigns absolutely to the Security Trustee:

 

  (a) all of its rights, title and interest from time to time in respect of any sums payable to it pursuant to each Insurance Policy; and

 

  (b) all of its rights, title and interest from time to time (except those charged by Clause 3.2 ( Fixed security )) in respect of the Land including:

  (i) all rights to any payment, covenant, agreement, undertaking or indemnity contained in any sale and purchase agreement, Lease or other document, agreement or undertaking whatsoever relating to the Land now or in the future including, without limitation, all its rights, title and interest in and to the present and future Leases;

 

  (ii) the proceeds of sale of any part of the Land and the benefits of any covenants for title given or entered into by any predecessor in title to it in respect of the Land (or any moneys paid or payable in respect of those covenants); and

 

  (iii) all rights against all past, present and future undertenants of the Land and their respective guarantors and sureties.

 

3.2 Fixed security : Each Chargor, as beneficial owner, with full title guarantee, as security for the payment or discharge of all Secured Obligations, charges to the Security Trustee:

 

  (a) by way of first fixed legal charge, to the extent that its interest in the Land constitutes a legal estate, all Land in Hong Kong as described in Schedule 2 ( Land ) together with all Rights relating to such Land and all its estate, right, interest, benefit, title, property, claim and demand of that Chargor in and to such Land and those Rights subject to and with the benefit of each related Government Grant and DMC;

 

  (b) by way of first fixed equitable charge, to the extent that its interest in the Land constitutes an equitable estate, all Land in Hong Kong as described in Schedule 2 ( Land ) together with all Rights relating to such Land and all the estate, right, interest, benefit, title, property, claim and demand of that Chargor in and to such Land and those Rights subject to and with the benefit of each related Government Grant and DMC;

 

  (c) by way of first fixed charge:

 

  (i) all other Land which is now, or in the future becomes, its property;

 

  (ii) all interests and rights in or relating to Land or the proceeds of sale of Land now or in the future belonging to it;

 

  (iii) all plant and machinery now or in the future attached to any Land which, or an interest in which, is charged by it under the preceding provisions of this Clause 3.2;

 

  (iv) all rental and other income and all debts and claims now or in the future due or owing to it under or in connection with any lease, agreement or licence relating to Land;

 

  (v) all insurance or assurance contracts or policies now or in the future held by or otherwise benefiting it which relate to Fixed Security Assets or which are now or in the future deposited by it with the Security Trustee, together with all its rights and interests in such contracts and policies (including the benefit of all claims arising and all money payable under them) apart from any claims which are otherwise subject to a fixed charge or assignment (at law or in equity) in this Debenture;

 

  (vi) all its goodwill and uncalled capital for the time being;

 

  (vii) all Specified Intellectual Property belonging to it;

  (viii) all other Intellectual Property presently belonging to it, including any Intellectual Property to which it is not absolutely entitled or to which it is entitled together with others;

 

  (ix) all Intellectual Property that may be acquired by or belong to it in the future, including any such Intellectual Property to which it is not absolutely entitled or to which it is entitled together with others;

 

  (x) the benefit of all agreements and licences now or in the future entered into or enjoyed by it relating to the use or exploitation of any Intellectual Property in any part of the world;

 

  (xi) all its rights now or in the future in relation to trade secrets, confidential information and knowhow in any part of the world;

 

  (xii) all its rights and causes of action in respect of infringement(s) (past, present or future) of the rights referred to in sub-paragraphs (c)(vii) to (xi) inclusive of this Clause 3.2;

 

  (xiii) all trade debts now or in the future owing to it;

 

  (xiv) all other debts now or in the future owing to it, excluding those arising on fluctuating accounts with other members of the Group;

 

  (xv) the benefit of all instruments, guarantees, charges, pledges and other security and all other rights and remedies available to it in respect of any Fixed Security Asset except to the extent that such items are for the time being effectively assigned under Clause 3.1 ( Assignments );

 

  (xvi) all its interests and rights (if any) in or to any money at any time standing to the credit of the Mandatory Prepayment Account;

 

  (xvii) all its interests and rights (if any) in or to any money at any time standing to the credit of each other current, deposit and/or other account held with any bank or financial institution from time to time;

 

  (xviii) any beneficial interest, claim or entitlement it has to any pension fund now or in the future;

 

  (xix) all rights, money or property accruing or payable to it now or in the future under or by virtue of a Fixed Security Asset except to the extent that such rights, money or property are for the time being effectively assigned or charged by fixed charge under the foregoing provisions of this Debenture; and

 

  (xx) the benefit of all licences, consents and authorisations held in connection with its business or the use of any Asset and the right to recover and receive all compensation which may be payable in respect of them.

 

3.3

Creation of floating charge : Each Chargor, as beneficial owner, with full title guarantee, charges to the Security Trustee as security for the payment or discharge of all Secured Obligations, by way of first floating charge all its Assets, except to the extent that such Assets are for the time being effectively assigned by way of security by virtue of Clause 3.1 ( Assignments ) or charged by any fixed charge contained in Clause 3.2 ( Fixed security ), including any Assets comprised within a charge which is reconverted under Clause 4.4 ( Reconversion ), so that such Chargor shall not create any Security over any such Floating Charge Asset (whether having priority over, or ranking pari passu with or

  subject to, this floating charge) or take any other step referred to in Clause 7 ( Negative pledge and other restrictions ) with respect to any such Floating Charge Asset, and such Chargor shall not, without the consent of the Security Trustee, sell, transfer, part with or dispose of any such Floating Charge Asset (except by way of sale in the ordinary course of its business to the extent that such action is not otherwise prohibited by any Finance Document).

 

3.4 Notices of Assignment:

 

  (a) Each Chargor shall on the date of this Debenture give notice to the insurer(s) (and any broker) of the security over the Insurance Policies and their proceeds created by this Debenture.

 

  (b) Each Chargor shall use all reasonable endeavours (including expending reasonable costs and expenses) to procure the execution and delivery to the Security Trustee of acknowledgments by the addressees of the notices delivered to them pursuant to paragraph (a).

 

3.5 Priority:

 

  (a) Any fixed Security created by a Chargor and subsisting in favour of the Security Trustee shall (save as the Security Trustee may otherwise declare at or after the time of its creation) have priority over the floating charge created by Clause 3.3 ( Creation of floating charge ).

 

  (b) Any Security created in the future by a Chargor (except in favour of the Security Trustee) shall be expressed to be subject to this Debenture and shall rank in order of priority behind the charges created by this Debenture.

 

3.6 Application to the Land Registry:

 

  (a) Registration of existing Land : Each Chargor shall:

 

  (i) promptly after it becomes possible to do so, apply to the Land Registry for registration of the instrument vesting legal and beneficial ownership of the Land in Hong Kong in that Chargor in all cases where it is not already so registered (and is required to be so registered) and notify the Security Trustee of the memorial number of that instrument; and

 

  (ii) request the Land Registrar to register the legal charge and/or the equitable charge created by Clause 3.2 ( Fixed security ) and notice of all other Security created or expressed to be created by this Debenture.

 

  (b) Registration of future Land : In the case of each Chargor’s Land in Hong Kong acquired after the date of this Debenture, that Chargor covenants that it shall:

 

  (i) promptly after it becomes possible to do so, apply to the Land Registry for registration of the instrument vesting legal and beneficial ownership to that Land in Hong Kong in that Chargor and notify the Security Trustee of the memorial number of that instrument;

 

  (ii) execute a supplemental deed of charge in favour of the Security Trustee in substantially the same terms as the charge created by Clause 3.2 ( Fixed security ) in respect of that Land in Hong Kong; and

  (iii) request the Land Registrar to register that supplemental deed of charge in relation to that Land in Hong Kong and notice of all Security created or expressed to be created by this Debenture.

 

4. C RYSTALLISATION

 

4.1 Crystallisation by notice : The floating charge created by each Chargor in Clause 3.3 ( Creation of floating charge ) may be crystallised into a fixed charge by notice in writing given at any time by the Security Trustee to the relevant Chargor (or to the Issuer on its behalf) if:

 

  (a) an Event of Default has occurred and is continuing;

 

  (b) the Security Trustee in good faith considers that a Default under Clause (7) or (8) of Section 6.01 ( Events of Default ) of the Indenture has occurred; or

 

  (c) the Security Trustee in good faith considers that any of the Assets expressed to be charged to the Security Trustee by this Debenture may be in jeopardy or in danger of being seized or sold pursuant to any form of legal process; or

 

  (d) a circumstance envisaged by paragraph (a) of Clause 4.2 ( Automatic crystallisation ) occurs and the Security Trustee in good faith considers that such crystallisation is desirable in order to protect the priority of its security.

Such crystallisation shall take effect over the Floating Charge Assets or class of Assets specified in the notice. If no Floating Charge Assets are specified, it shall take effect over all Floating Charge Assets of the relevant Chargor.

 

4.2 Automatic crystallisation : If, without the Security Trustee’s prior written consent:

 

  (a) any Chargor, in contravention of any Finance Document, resolves to take or takes any step to:

 

  (i) charge or otherwise encumber any of its Floating Charge Assets;

 

  (ii) create a trust over any of its Floating Charge Assets; or

 

  (iii) dispose of any Floating Charge Asset (except by way of sale in the ordinary course of its business to the extent that such disposal is not otherwise prohibited by any Finance Document); or

 

  (b) any person resolves to take or takes any step to seize or sell any Floating Charge Asset pursuant to any form of legal process; or

 

  (c) an Event of Default under Clause (7) or (8) of Section 6.01 ( Events of Default ) of the Indenture has occurred,

then the floating charge created by Clause 3.3 ( Creation of floating charge ) shall be automatically and instantly crystallised (without the necessity of notice) into a fixed charge over such Floating Charge Asset or, in the case of paragraph (c) above into a fixed charge over all Floating Charge Assets of the relevant Chargor.

 

4.3

Future Floating Charge Assets : Except as otherwise stated in any notice given under Clause 4.1 ( Crystallisation by notice ) or unless the crystallisation relates to all its Floating Charge Assets, prospective Floating Charge Assets acquired by any Chargor after crystallisation has occurred under Clause 4.1 ( Crystallisation by notice ) or 4.2 ( Automatic crystallisation ) shall become subject to the floating charge created by Clause 3.3

  ( Creation of floating charge ), so that the crystallisation shall be effective only as to the specific Floating Charge Assets affected by the crystallisation.

 

4.4 Reconversion : Any charge which has crystallised under Clause 4.1 ( Crystallisation by notice ) or 4.2 ( Automatic crystallisation ) may, by notice in writing given at any time by the Security Trustee to the relevant Chargor, be reconverted into a floating charge in relation to the Assets specified in such notice.

 

5. T ITLE DOCUMENTS AND INSURANCE POLICIES

 

5.1 Documents : Subject to the rights of any prior chargee and except as otherwise expressly agreed in writing by the Security Trustee, each Chargor shall deposit with the Security Trustee, and the Security Trustee shall be entitled to retain during the continuance of the security created by this Debenture, all deeds and documents of title relating to all its Fixed Security Assets, including policies of insurance and assurance, certificates of registration and certificates constituting or evidencing Intellectual Property Rights.

 

5.2 Insurance:

 

  (a) Each Chargor shall:

 

  (i) maintain at all times insurance policies which comply with (and otherwise comply with all its obligations under) Section 4.05 ( Maintenance of Properties and Insurance ) of the Indenture and comply with the terms of all such insurance policies, including any stipulations or restrictions as to use or operation of any asset, and not do or permit anything which may make any insurance policy void or voidable; and

 

  (ii) make notifications to insurers of any claims or prospective claims in accordance with the provisions of the relevant insurance policy and diligently pursue the making of recoveries from insurers.

 

  (b) Each Chargor shall procure that:

 

  (i) except where the proceeds of a particular insurance policy have been assigned by way of security to the Security Trustee, the Security Trustee be shown as the loss payee on the face of all its insurance policies in such form as the Security Trustee may require;

 

  (ii) the members of the Group shall punctually make all premium and other payments necessary for effecting or maintaining such insurances and on demand shall produce to the Security Trustee the receipts of such payments; and

 

  (iii) the members of the Group shall use their best endeavours to cause the policies of insurance maintained by them as required by this Clause to be forthwith amended to include clauses to ensure that the policies shall not be voidable by the insurers as a result of any misrepresentation, non-disclosure of material facts or breach of warranty provided that in each case there shall have been no fraud or wilful deceit on the part of the insured member of the Group.

 

  (c)

If any default shall at any time be made in effecting or maintaining insurance required by this Clause or in producing any payment receipt to the Security Trustee on demand or depositing any policy with the Security Trustee pursuant to the Security Documents, the Security Trustee may take out or renew such insurances in such sums as the Security Trustee may think expedient and all

  money expended by the Security Trustee under this provision shall be recoverable by the Security Trustee under Clause 23 ( Costs, expenses and liabilities ).

 

  (d) Each Chargor shall procure that its insurance broker undertakes in writing to the Security Trustee that:

 

  (i) upon becoming aware that the Chargor has failed to pay any premium or renew any insurance, it will take reasonable steps to keep the Security Trustee’s interest in such insurance in force up to the full sum insured and for the same risks (subject to the premium for any such period of extended cover being advanced to the broker by the Security Trustee for the account of the Chargor);

 

  (ii) it will advise the Security Trustee of any proposed cancellation of the policy as soon as reasonably practicable after being informed of such cancellation;

 

  (iii) if the insurance cover is to be reduced or any insured risks are to be restricted, it will advise the Security Trustee as soon as reasonably practicable after being informed of such reduction or restriction;

 

  (iv) it will advise the Security Trustee as soon as reasonably practicable of any act, omission or event which comes to its knowledge which might invalidate the insurance or render it unenforceable, in whole or in part; and

 

  (v) it will advise the Security Trustee if any claim with a value in excess of US$1,000,000 (or its equivalent in other currencies) is rejected by insurers.

 

6. M ANDATORY P REPAYMENT A CCOUNT

 

6.1 Notice to Account Bank : The Chargor that is the holder of the Mandatory Prepayment Account shall, immediately after the establishment of the Mandatory Prepayment Account, give notice to the Account Bank substantially in the form set out in Part 1 of Schedule 3 ( Mandatory Prepayment Account ) and shall use its best endeavours to procure that the Account Bank signs and delivers the form of acknowledgement to that notice.

 

6.2 Withdrawals: No Chargor may withdraw any moneys standing to the credit of the Mandatory Prepayment Account without the prior written consent of the Security Trustee.

 

7. R EPRESENTATIONS AND WARRANTIES

Each Chargor represents and warrants to the Security Trustee and each of the Secured Parties on the date of this Debenture:

 

  (a) Status:

 

  (i) it is duly constituted, validly existing and, where applicable, in good standing under the laws of the country in which it is incorporated;

 

  (ii) it is not insolvent or in liquidation or administration or subject to any other insolvency procedure;

 

  (iii) no receiver, manager, trustee, custodian or analogous officer has been appointed in respect of any part of its property, undertaking or assets; and

  (iv) it has the appropriate power and authority to own its property and assets and to carry on its business as it is conducted on the date of this Debenture;

 

  (b) Capacity and approvals: it has the appropriate power to enter into and perform the terms and conditions of, and has taken all necessary action to authorise the execution, delivery and performance of, this Debenture;

 

  (c) Proper execution: this Debenture has been properly executed by it and the obligations expressed as being assumed by it under this Debenture are valid and binding upon it and enforceable in accordance with their terms;

 

  (d) Compliance with legal restrictions: none of the provisions, covenants and obligations on its part contained in this Debenture contravenes any of the provisions of its memorandum or articles of association or other constitutional documents and neither this Debenture nor its performance will infringe any law or obligation binding upon it;

 

  (e) Other approvals for this Debenture: no authorisation of or registration with any governmental, judicial or other third party nor payment of any stamp, registration or other tax is required or desirable in connection with the execution, performance, validity, enforceability or admissibility in evidence of this Debenture, other than registration of this Debenture under Sections 80 and 91 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong), entry of particulars of the charge created under this Debenture in the register of charges of any Chargor incorporated or registered under the BC Act kept at the registered office of such Chargor or at the office of its registered agent, and registration of such charge at the office of the Registrar of Corporate Affairs pursuant to Section 163(1) of the BC Act, and entry of particulars of any charge created under this Debenture in the register of mortgages and charges of any Chargor as an exempted company under the Companies Law in accordance with Section 54 of the Companies Law; and

 

  (f) No Security/guarantees: except as previously disclosed in writing to the Security Trustee with express reference to this Clause, there is no Security affecting any Assets other than any Security created by this Debenture, and no Chargor has given any guarantee, indemnity or other assurance against loss in relation to the liability of any person other than in favour of the Secured Parties or as otherwise permitted under the terms of the Indenture.

 

8. N EGATIVE PLEDGE AND OTHER RESTRICTIONS

No Chargor shall, without the prior written consent of the Security Trustee (or unless otherwise permitted under the terms of the Indenture):

 

  (a) create, or agree or attempt to create, or permit to subsist, any Security or any trust over any of its Assets; or

 

  (b) sell, assign, lease, license or sub-license, or grant any interest in, any of its Fixed Security Assets, or part with possession or ownership of them, or purport or agree to do so.

9. F URTHER ASSURANCE

 

  (a) Each Chargor shall promptly do all such acts and execute all such documents (including assignments, transfers, mortgages, charges, notices, forms and instructions) (in favour of the Security Trustee or its nominee(s)) in order to:

 

  (i) perfect or protect the Security created or intended to be created by this Debenture (which may include the execution of a mortgage, charge, assignment, transfer, notice, instruction or other Security over all or any of the Assets which are, or are intended to be, the subject of the Security constituted by this Debenture) or for the exercise of any rights, powers and remedies of any Secured Party provided by this Debenture or by law;

 

  (ii) confer on the Security Trustee or confer on the Secured Parties, Security over any of its Assets located in any jurisdiction outside Hong Kong which is (to the extent permitted by local law) equivalent or similar to the Security intended to be conferred by or pursuant to this Debenture; and/or

 

  (iii) facilitate the realisation of the Assets subject to the Security conferred or intended to be conferred by this Debenture or the exercise of any rights vested in the Security Trustee, any Receiver or nominee, including executing any transfer, conveyance, charge, assignment or assurance of all or any of the Assets which are the subject of the Security constituted by this Debenture, making any registration and giving any notice, order or instructions.

 

  (b) Each Chargor shall (and the Issuer shall procure that each Chargor shall) take all such action as is available to it (including making all filings and registrations) as may be necessary for the purpose of the creation, perfection, protection or maintenance of any Security conferred or intended to be conferred on the Security Trustee or the Secured Parties by or pursuant to this Debenture. Without prejudice to the generality of this Clause 9, at the request of the Security Trustee each Chargor will promptly execute a legal mortgage, charge or assignment over any of the Assets subject to or intended to be subject to any fixed security created by this Debenture in favour of the Security Trustee.

 

  (c) Without prejudice to the generality of this Clause 9, each Chargor shall:

 

  (i) promptly after the execution of this Debenture, at the cost of that Chargor effect such filings, notices and registrations (or assist the counsel to the Security Trustee to effect such filings, notices and registrations) as are necessary or prudent in order to preserve, perfect and enforce the Security created or expressed to be created pursuant to this Debenture (including, for the avoidance of doubt, pursuant to Sections 80 and 91 of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong); entry of particulars of the charge created under this Debenture in the register of charges of any Chargor incorporated or registered under the BC Act kept at the registered office of such Chargor or at the office of its registered agent, and registration of such charge at the office of the Registrar of Corporate Affairs pursuant to Section 163(1) of the BC Act; and entry of particulars of any charge created under this Debenture in the register of mortgages and charges of any Chargor as an exempted company under the Companies Law in accordance with Section 54 of the Companies Law; and

  (ii) promptly provide to the Security Trustee evidence (in form and substance satisfactory to the Security Trustee) of all registrations, notices and filings completed pursuant to paragraph (i) above.

Notwithstanding anything to the contrary contained in this Debenture or under applicable law, but without limiting the rights and authorisations of the Security Trustee hereunder, the Security Trustee shall not be obliged to:

 

  (i) prepare, record, file, re-record, or re-file any financing statement, perfection statement, continuation statement or other instrument in any public office or otherwise ensure the perfection or maintenance of any security interest granted pursuant to, or contemplated by any Finance Document;

 

  (ii) take any necessary steps to preserve rights against any parties with respect to any Assets; or

 

  (iii) take any action to protect against any diminution in value of any Assets.

 

10. C ONTINUING SECURITY

This Debenture shall be a continuing security for the Secured Parties, notwithstanding any intermediate payment or settlement of accounts or other matter whatever, and shall be in addition to and shall not prejudice or be prejudiced by any right of set-off, combination, lien or other rights exercisable by any Secured Party as banker against any Chargor or any security, guarantee, indemnity and/or negotiable instrument now or in the future held by any Secured Party.

 

11. L AND

 

11.1 Negative covenants : Each Chargor shall not without the prior written consent of the Security Trustee (which will not be unreasonably withheld or delayed) or unless otherwise permitted under the terms of the Indenture:

 

  (a) save in the ordinary course of business, carry out any building work on its Land or make any structural alteration to any building on its Land or apply for any planning consent for the development or change of use of its Land, or at any time sever, remove or dispose of any Fixture on it if any such action would be reasonably likely to materially adversely affect the value of such Land;

 

  (b) enter into any onerous or restrictive obligations affecting its Land or create or permit to arise any overriding interest or any easement or right whatever in or over it which would be reasonably likely to affect adversely its value or the value of the Security constituted by this Debenture over it;

 

  (c) exercise any power of leasing in relation to its Land, or accept surrenders of leases of its any Land or agree to do so;

 

  (d) extend, renew on substantially different terms or vary any lease or tenancy agreement or give any licence to assign or underlet in relation to its Land to the extent that it would be reasonably likely to materially adversely affect its value or the value of the Security constituted by this Debenture;

 

  (e) part with possession of its Land (except on the determination of any Lease, tenancy or licence granted to it) or except as expressly permitted by the terms of the Finance Documents;

  (f) share the occupation of any Land with any other person or agree to do so;

 

  (g) change or permit to be changed the use of any of the Land or carry out any operation or begin or continue any use of the Land for which planning permission under applicable law or regulation is required but has not been obtained;

 

  (h) enter into any negotiations with any competent authorities relating to the resumption of any of the Land pursuant to the Government Lands Resumption Ordinance (Chapter 124 of the Laws of Hong Kong) or consent to the resumption of any Land and, if so requested by the Security Trustee, it will permit the Security Trustee or its representatives to conduct any negotiations or give any consent on its behalf; or

 

  (i) use the Land or permit the Land to be used for purposes other than those for which it has been permitted or designated in the Government Grant or by any other competent authority (or any building thereon has been built) and may lawfully be used.

 

11.2 Implied covenants for title : Each Chargor’s obligations under this Debenture are in addition to any covenant for title deemed to be included in this Debenture under the CPO, any equivalent statute or general law.

 

12. I NTELLECTUAL P ROPERTY R IGHTS

 

12.1 Negative covenants : Without the prior written consent of the Security Trustee (or unless otherwise permitted under the terms of the Indenture), each Chargor shall not:

 

  (a) sell, assign, lease, license, sub-license or grant any interest in its Intellectual Property Rights, or purport or agree to do so or part with possession or ownership of them, or allow any third party access to, or the right to use or exploit, any Intellectual Property Rights;

 

  (b) enter into any contract or arrangement for supply or otherwise whereby any third party obtains any assignment of or any right or licence in relation to any Intellectual Property Rights on the occurrence or non-occurrence of any future event or circumstance whatever;

 

  (c) amend the specification of any registered trade mark included in its Intellectual Property Rights or authorise or permit any third party to register any trade mark which is the same as or confusingly similar to any such trade mark in respect of goods or services which are the same as or similar to the goods or services for which such trade mark is registered; or

 

  (d) amend the specification or drawings referred to in any granted patent.

 

13. O PENING OF NEW ACCOUNTS

 

13.1 Creation of new account : On receiving notice that any Chargor has granted Security over or otherwise encumbered or disposed of any of its Assets in contravention of any Finance Document, a Secured Party may rule off all its accounts and open new accounts with it.

 

13.2 Credits to new account : If a Secured Party does not open a new account immediately on receipt of such notice, it shall nevertheless be treated as if it had done so on that day. From that day, all payments made by the relevant Chargor to that Secured Party shall be treated as having been credited to a new account and shall not operate to reduce the

  amount owing from the relevant Chargor to such Secured Party at the time when it received such notice.

 

14. P OWERS OF SALE , LEASING AND ACCEPTING SURRENDERS

 

14.1 Paragraph 11 of the Fourth Schedule of the CPO : Paragraph 11 of the Fourth Schedule of the CPO shall not apply to this Debenture, and the statutory power of sale shall arise on, and be exercisable at any time after, the execution of this Debenture. However, the Security Trustee shall not exercise such power of sale until the Security constituted by this Debenture has become enforceable.

 

14.2 Powers of sale extended : The statutory powers of sale, leasing and accepting surrenders exercisable by the Security Trustee by virtue of this Debenture are extended so as to authorise the Security Trustee (whether in its own name or that of the Chargor concerned) to:

 

  (a) grant a Lease of any Land vested in a Chargor or in which it has an interest on such terms and conditions as the Security Trustee shall think fit; and

 

  (b) sever any Fixtures from Land vested in a Chargor and sell them separately.

 

15. P OWERS OF THE S ECURITY T RUSTEE

 

15.1 Enforceable : On or at any time after the occurrence of an Event of Default that is continuing, then the Security constituted by this Debenture shall become enforceable.

 

15.2 Appointment of Receiver : On or at any time after the Security constituted by this Debenture has become enforceable, notwithstanding the terms of any other agreement between any Chargor and any Secured Party, the Security Trustee may (unless precluded by law) appoint in writing any person or persons to be a receiver and manager or receivers and managers of all or any part of the Assets of such Chargor or as the Security Trustee may choose in its entire discretion. The provisions of Section 50 ( Power to appoint a receiver ) of the CPO and similar provisions of any equivalent statute (as varied and/or extended by this Debenture) shall apply to any appointment made pursuant to this Debenture.

 

15.3 Power to act separately : Where more than one Receiver is appointed, the appointees shall have power to act separately unless the Security Trustee shall specify to the contrary.

 

15.4 Receiver’s remuneration : The Security Trustee may from time to time determine the remuneration of a Receiver (subject to Section 300 of the Ordinance).

 

15.5 Removal of Receiver : The Security Trustee may remove a Receiver from all or any of the Assets of which he is the Receiver.

 

15.6 Further appointments of a Receiver : Such an appointment of a Receiver shall not preclude:

 

  (a) the Security Trustee from making any subsequent appointment of a Receiver over all or any Assets over which a Receiver has not previously been appointed or has ceased to act; or

 

  (b) the appointment of an additional Receiver to act while the first Receiver continues to act.

15.7 Receiver’s agency : The Receiver shall be the agent of the relevant Chargor (which shall be solely liable for his acts, defaults and remuneration) unless and until such Chargor goes into liquidation, after which time he shall act as principal and shall not become the agent of the Security Trustee or any other Secured Party. The Security Trustee shall not be responsible, at any time, for the actions of the Receiver.

 

16. P OWERS OF A R ECEIVER

 

16.1 General : The Receiver may exercise, in relation to each Chargor over whose Assets he is appointed, all the powers, rights and discretions set out in Section 51 and the Fourth Schedule of the CPO and any equivalent statute (as varied and/or extended by this Debenture) and in particular, by way of addition to and without limiting such powers, the Receiver may, with or without the concurrence of others:

 

  (a) sell or concur in selling (where necessary with the leave of the court), lease or concur in leasing, license or concur in licensing, grant options over and vary the terms of, terminate or accept surrenders of leases, licences or tenancies of, all or any of the Assets of that Chargor, without the need to observe any of the provisions of Section 53 of the CPO, in such manner and generally on such terms and conditions as he shall think fit in his absolute and unfettered discretion and any such sale or disposition may be for cash, Investments or other valuable consideration (in each case payable in a lump sum or by instalments) and carry any such transactions into effect in the name of and on behalf of such Chargor;

 

  (b) promote the formation of a Subsidiary of the relevant Chargor with a view to such Subsidiary purchasing, leasing, licensing or otherwise acquiring interests in all or any of the Assets of such Chargor;

 

  (c) sever any Fixtures from Land and/or sell them separately;

 

  (d) arrange for the purchase, lease, licence or acquisition of all or any Assets of that Chargor by any Subsidiary contemplated by paragraph (b) above on a basis whereby the consideration may be for cash, Investments, shares of profits or sums calculated by reference to profits or turnover or royalties or licence fees or otherwise, whether or not secured on the assets of such Subsidiary and whether or not such consideration is payable or receivable in a lump sum or by instalments over such period as the Receiver may think fit;

 

  (e) make any arrangement or compromise with any Secured Party or others as he shall think fit;

 

  (f) make and effect all repairs, renewals and improvements to the Assets of the relevant Chargor and effect, renew or increase insurances on such terms and against such risks as he shall think fit;

 

  (g) appoint managers, officers and agents for the above purposes at such remuneration as the Receiver may determine;

 

  (h) redeem any prior encumbrance and settle and pass the accounts of the encumbrancer and any accounts so settled and passed shall (subject to any manifest error) be conclusive and binding on the relevant Chargor and the money so paid shall be deemed an expense properly incurred by the Receiver;

 

  (i) pay the proper administrative charges of any Secured Party in respect of time spent by their agents and employees in dealing with matters raised by the Receiver or relating to the receivership of the relevant Chargor;

  (j) commence and/or complete any building operations upon any Land of the relevant Chargor and apply for and obtain any planning permissions, building regulation consents or licences, in each case as he may in his absolute discretion think fit;

 

  (k) take all steps necessary to effect all registrations, renewals, applications and notifications as the Receiver may in his discretion think prudent to maintain in force or protect any of the relevant Chargor’s Intellectual Property Rights; and

 

  (l) do all such other acts and things as may be considered by the Receiver to be incidental or conducive to any of the above matters or powers or otherwise incidental or conducive to the preservation, improvement or realisation of the relevant Assets.

 

17. P OWER OF ATTORNEY

 

17.1 Appointment of attorney : Each Chargor, by way of security and to more fully secure the performance of its obligations under this Debenture, hereby irrevocably appoints the Security Trustee (whether or not a Receiver has been appointed) and separately any nominee and/or any Receiver to be its attorney (with full power to appoint substitutes and to delegate) with power in its name and on its behalf, and as its act and deed or otherwise to:

 

  (a) do anything which that Chargor is obliged to do (but has not done) in accordance with this Debenture, including to execute and deliver and otherwise perfect any agreement, assurance, deed, instrument or document;

 

  (b) enable the Security Trustee or any such nominee and/or Receiver to exercise (or to delegate) all or any of the rights conferred on it by this Debenture, the CPO, the Ordinance or any other statute in relation to this Debenture or the Assets charged, or purported to be charged, by it; and

 

  (c) perform any other act of any description.

The Security Trustee shall have no obligation to undertake any of the foregoing actions, and, if it takes any such action in accordance with this Debenture it shall have no liability to any Chargor to continue the same or for the sufficiency or adequacy thereof.

 

17.2 Ratification : Each Chargor ratifies and confirms whatever any attorney lawfully does or purports to do pursuant to his appointment under this Clause 17.

 

17.3 Sums recoverable : All sums expended by the Security Trustee nominee and/or any Receiver under this Clause 17 shall be recoverable from the Chargors under Clause 23 ( Costs, expenses and liabilities ).

 

18. O THER POWERS EXERCISABLE BY THE S ECURITY T RUSTEE

 

18.1 Receiver’s powers : All powers of a Receiver conferred by this Debenture may be exercised by the Security Trustee after this Debenture has become enforceable. In that event, paragraph (h) of Clause 16 ( Powers of a Receiver ) shall be read and construed as if the words “be charged on the Assets of the relevant Chargor” were substituted for the words “be deemed an expense properly incurred by the Receiver”.

 

18.2 Receipt of debts : The Security Trustee or any manager, officer, nominee or agent of the Security Trustee is hereby irrevocably empowered to:

  (a) receive all book or trade debts and other debts and claims which may be assigned to the Security Trustee pursuant to this Debenture and/or Clause 9 ( Further assurance );

 

  (b) on payment to give an effectual discharge for them and on non-payment to take and institute (if the Security Trustee in its sole discretion so decides) all steps and proceedings either in the name of any Chargor or in the name of the Security Trustee for their recovery; and

 

  (c) also to agree accounts and to make allowances and to give time to any surety.

Each Chargor ratifies and confirms whatever the Security Trustee or any manager or officer of the Security Trustee shall lawfully do or purport to do under this Clause 18.

 

18.3 Security Trustee’s powers : The Security Trustee shall have no liability or responsibility to any Chargor arising out of the exercise or non-exercise of the powers conferred on it by this Clause 18, except for gross negligence or wilful default.

 

18.4 No duty of enquiry : The Security Trustee need not enquire as to the sufficiency of any sums received by it in respect of any debt or claim or make any claim or take any other action to collect in or enforce them.

 

18.5 Exercised power of sale:

 

  (a) The Security Trustee shall incur no liability as a result of the sale of any Assets, or any part thereof, at any private or public sale conducted pursuant to this Debenture in accordance with the requirements of applicable laws. With regards to private sales, each Chargor hereby waives any claims against the Security Trustee and the other Secured Parties arising by reason of the fact that the price at which the Assets may have been sold at such a private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if the first offer received is accepted and the Assets are not offered to more than one offeree, provided that any such private sale is conducted in accordance with applicable laws and this Debenture.

 

  (b) Each Chargor hereby agrees that in respect of any sale of any of the Assets pursuant to the terms of this Debenture, the Security Trustee is hereby authorised to comply with any limitation or restriction in connection with such sale as it may be advised by its legal counsel is necessary, in order to:

 

  (i) avoid any violation of applicable laws; or

 

  (ii) obtain any required approval of the sale or of the purchaser or by any governmental authority or official,

and each Chargor further agrees that such compliance shall not, in and of itself, result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Security Trustee be liable or accountable to any Chargor for any discount allowed by reason of the fact that such Asset is sold in compliance with any such limitation or restriction.

 

19. A PPLICATION OF MONEY RECEIVED BY THE S ECURITY T RUSTEE OR A R ECEIVER

 

19.1 Order of priority : Any money received or realised under the powers conferred by this Debenture shall be paid or applied by the Security Trustee in or towards the discharge of the Secured Obligations as required by the Indenture.

19.2 Suspense account : Until all the Secured Obligations have been unconditionally and irrevocably paid and discharged in full, the Security Trustee (acting reasonably) may place and keep to the credit of a suspense account any money received from or realised in respect of any Chargor’s liability under this Debenture. The Security Trustee shall have no intermediate obligation to apply such money in or towards the discharge of any of the Secured Obligations. Amounts standing to the credit of any such suspense account shall bear interest at a rate considered by the Security Trustee in good faith to be a fair market rate.

 

19.3 Discretion to apply : Until all Secured Obligations have been unconditionally and irrevocably paid and discharged in full, the Security Trustee may refrain from applying or enforcing any other moneys, security or rights held by it in respect of the Secured Obligations or may apply and enforce such moneys, security or rights in such manner and in such order as it shall decide in its unfettered discretion.

 

20. P ROTECTION OF THIRD PARTIES

 

20.1 No duty to enquire : No purchaser from, or other person dealing with, the Security Trustee, its nominee or any Receiver appointed under this Debenture shall be concerned to enquire whether any of the powers which the Security Trustee has exercised or purported to exercise has arisen or become exercisable, or whether this Debenture has become enforceable, or whether any nominee or Receiver has been validly appointed, or whether any event or cause has happened to authorise the Security Trustee, any nominee or a Receiver to act or as to the propriety or validity of the exercise or purported exercise of any such power, and the title of such a purchaser and the position of such a person shall not be impeachable by reference to any of those matters.

 

20.2 Receipt : The receipt of the Security Trustee shall be an absolute and a conclusive discharge to a purchaser and shall relieve him of any obligation to see to the application of any money paid to or by the direction of the Security Trustee.

 

20.3 Protection to purchasers : Subject to the provisions of this Debenture, all the protection to purchasers contained in Sections 52 ( Protection of purchaser ), 53 ( Sale by mortgagee ) and 55 ( Mortgagee’s receipt ) of the CPO or in any other applicable statute shall apply to any person purchasing from or dealing with the Security Trustee or any Receiver.

 

21. P ROTECTION OF THE S ECURITY T RUSTEE , ANY NOMINEE AND R ECEIVER

 

21.1 Limitation : Neither the Security Trustee nor any nominee nor Receiver shall be liable in respect of this Debenture, except if and in so far as such Liability results directly from its own gross negligence or wilful misconduct. Notwithstanding the foregoing, under no circumstances shall the Security Trustee be liable for consequential, special, punitive or indirect damages, irrespective of being informed of the possibility thereof and regardless of the cause of action.

 

21.2 Entry into possession : Without prejudice to the generality of Clause 21.1 ( Limitation ), neither the Security Trustee, any nominee nor any Receiver shall be liable to account as mortgagee in possession or otherwise for any sum not actually received by it or him respectively. If and whenever the Security Trustee, or any nominee enters into possession of any Assets, it shall be entitled at any time at its discretion to go out of possession.

 

22. S ECURITY T RUSTEE

 

22.1

Security Trustee as trustee : The Security Trustee declares itself to be a trustee of this Debenture (and any other Security created in its favour pursuant to this Debenture) for the

  Secured Parties. The retirement of the person for the time being acting as Security Trustee and the appointment of a successor shall be effected in the manner provided for in the Indenture.

 

22.2 Perpetuity period : The perpetuity period applicable to the trust hereby constituted shall be 80 years.

 

22.3 No partnership : Nothing in this Debenture shall constitute or be deemed to constitute a partnership between any of the Secured Parties and the Security Trustee.

 

23. C OSTS , EXPENSES AND LIABILITIES

 

23.1 Costs and expenses : Each Chargor will, promptly on the Security Trustee’s demand from time to time, reimburse the Security Trustee for all costs and expenses (including legal fees) on a full indemnity basis, reasonably incurred by it in connection with:

 

  (a) the negotiation, preparation, printing and execution and perfection of this Debenture; and

 

  (b) the completion of the transactions and perfection of the Security contemplated in this Debenture in Clause 9 ( Further assurance ).

 

23.2 Amendment costs : If any Chargor requests an amendment, waiver or consent, the Chargor shall, within five Business Days of demand, reimburse the Security Trustee (or any Receiver or delegate) for the amount of all documented costs and expenses (including legal fees) reasonably incurred by the Security Trustee (or any Receiver or delegate) in responding to, evaluating, negotiating or complying with that request or requirement.

 

23.3 Enforcement costs : Each Chargor will, within five Business Days of the Security Trustee’s demand, pay to the Security Trustee and each other Secured Party on a full indemnity basis, the amount of all costs and expenses (including legal, valuation, accountancy and consultancy fees and disbursements and out-of-pocket expenses), and any indirect tax thereon, incurred by the Security Trustee and/or any other Secured Party in connection with the exercise, enforcement and/or preservation of any of its rights under this Debenture (or any of the documents contemplated by such documents) or any proceedings instituted by or against the Security Trustee, in any jurisdiction, as a consequence of taking or holding this Debenture or enforcing these rights.

 

23.4 Indemnity for Liabilities : Each Chargor shall also, promptly following the Security Trustee’s demand, reimburse or pay to the Security Trustee, its employees or agents, and any nominee on demand (on the basis of a full indemnity) the amount of all Liabilities incurred by the Security Trustee, its employees or agents and any nominee, in connection with:

 

  (a) any default or delay by that Chargor in the performance of any of its obligations under this Debenture;

 

  (b) the exercise, or the attempted or purported exercise, by or on behalf of the Security Trustee of any of its powers or any other action taken by or on behalf of the Security Trustee with a view to or in connection with the recovery of the Secured Obligations, the enforcement of the Security created by this Debenture or for any other purpose contemplated in this Debenture;

 

  (c) the carrying out or consideration of any other act or matter which the Security Trustee may consider to be conducive after the occurrence of an Event of Default to the preservation, improvement or benefit of any Asset; and

  (d) any stamp duty, stamp duty reserve tax or similar tax which may be payable as a result of the execution or performance of this Debenture.

 

23.5 Without prejudice : The above entitlement to costs, expenses and indemnities shall not prejudice the entitlement of the Security Trustee to indemnities and compensations provided under Section 10.07 ( Additional Security Trustee Terms ) of the Indenture.

 

23.6 Joint and Several : The obligations of each Chargor under this Clause 23 shall be joint and several and continuing and shall survive the termination of this Debenture and the resignation or removal of the Security Trustee.

 

24. S TAMP DUTY

Each Chargor shall pay all present and future stamp, registration and similar taxes or charges which may be payable or determined to be payable in any applicable jurisdiction in connection with the execution, delivery, performance or enforcement of this Debenture or any judgment given in connection with this Debenture and shall indemnify the Security Trustee, each Secured Party and each Receiver against any and all liabilities including penalties with respect to or resulting from its delay or omission to pay any such stamp, registration and similar taxes or charges.

 

25. T AX GROSS - UP

 

25.1 Definitions

 

  (a) In this Clause 25:

“ Tax Deduction ” means a deduction or withholding for or on account of Tax from a payment under this Debenture.

 

  (b) In this Clause 25 a reference to “determines” or “determined” means a determination made in the absolute discretion of the person making the determination.

 

25.2 Tax gross-up

 

  (a) Each Chargor shall make all payments to be made by it in accordance with the terms of this Debenture without any Tax Deduction, unless a Tax Deduction is required by law.

 

  (b) Each Chargor shall promptly upon becoming aware that it must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Security Trustee accordingly.

 

  (c) If the Tax Deduction is required by law to be made by any Chargor, the amount of the payment due from that Chargor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

 

  (d) If a Chargor is required to make a Tax Deduction, that Chargor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

 

  (e)

Within 30 days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the relevant Chargor shall deliver to the Security Trustee evidence reasonably satisfactory to the Security Trustee that the

  Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

 

26. I NFORMATION

The Security Trustee may from time to time seek from any other banker or finance provider to each Chargor such information about each Chargor and its affairs as the Security Trustee may think fit and each Chargor shall direct any such third party to provide such information to the Security Trustee and agrees to provide such further authority for this purpose as the Security Trustee may from time to time require. If the Security Trustee obtains any such information it shall not have any obligation to inform any Chargor thereof.

 

27. C URRENCY INDEMNITY

 

  If:  

 

  (a) for any reason any amount payable by each Chargor under this Debenture is paid or recovered by any Secured Party in a currency (the “ payment currency ”) other than that in which the Secured Obligations are denominated; and

 

  (b) the payment made to such Secured Party in the payment currency, when converted at such Secured Party’s then applicable rate of exchange into the currency in which the Secured Obligations are denominated, is less than the amount payable in the currency in which the Secured Obligations are denominated,

then each Chargor shall, jointly and severally, as a separate and independent obligation, fully indemnify such Secured Party within ten days of demand against the amount of the shortfall. For the purposes of this Clause, the expression “applicable rate of exchange” means the rate at which such Secured Party purchases the currency in which the Secured Obligations are denominated with the payment currency, taking into account any costs associated with the exchange.

 

28. I NTEREST ON OVERDUE AMOUNTS

 

28.1 Default interest: Any overdue amounts not paid in accordance with this Debenture when due shall carry interest at an interest rate and in accordance with the terms contained in the relevant Finance Document in relation to overdue sums or at such other rate as may be agreed between the relevant Chargor and the Secured Parties from time to time. In each case, interest shall accrue on a day to day basis to the date of irrevocable and unconditional repayment in full and, if unpaid, shall be compounded on the terms so agreed or (in the absence of such agreed terms) with quarterly rests on the Security Trustee’s and/or the relevant Secured Party’s usual quarterly interest days. Interest shall continue to be charged and compounded on this basis after as well as before any demand or judgment.

 

28.2 When payable: Clause 28.1 above shall not apply to the extent that default interest on such amount is payable pursuant to the terms of the Indenture and/or the Notes and itself constitutes part of the Secured Obligations.

 

29. S ET - OFF

 

30.

The Security Trustee may (but is not obliged to) retain any money standing to the credit of any Chargor with the Security Trustee in any currency upon any account (whether or not in that Chargor’s name) or otherwise as cover for any Secured Obligations and that Chargor agrees that the Security Trustee may at any time or times without notice to each

  Chargor combine or consolidate any or all sums of money now or subsequently standing to that Chargor’s credit upon any such account with all or such part of the Secured Obligations as the Security Trustee may determine (whether presently payable or not) and the Security Trustee may purchase with any such money any other currency required to effect such combination or consolidation.

 

31. T RANSFER AND DISCLOSURE

 

31.1 Transfer by Chargors: No Chargor may assign or transfer any of its rights or obligations under this Debenture.

 

31.2 Transfer by Secured Parties : Any Secured Party may at any time assign and transfer all or any part of its rights under this Debenture to any person to which it has assigned and transferred the whole or part of its rights under the Notes in accordance with the terms of the Indenture and the Notes.

 

31.3 Transfer by Security Trustee : The Security Trustee may assign and transfer all of its rights and obligations under this Debenture to any replacement Security Trustee appointed in accordance with the Indenture. Upon such assignment and transfer becoming effective, the replacement Security Trustee shall be, and be deemed to be, acting as agent and trustee for each of the Secured Parties (including itself) for the purposes of this Debenture in replacement of the previous Security Trustee.

 

31.4 Disclosure of information : Each Chargor irrevocably authorises the Security Trustee and each Secured Party, at its discretion, at any time or from time to time, to disclose any information concerning each Chargor, this Debenture and the Secured Obligations to:

 

  (a) any associated company of the Security Trustee or any of the Secured Parties or;

 

  (b) any prospective transferee or grantee referred to in Clause 31.3 ( Transfer by Security Trustee ) and any other person considered by the Security Trustee or any of the Secured Parties to be concerned in the relevant transaction or prospective transaction; or

 

  (c) any person who, as part of the arrangements made in connection with any transaction referred to in Clause 31.3 ( Transfer by Security Trustee ), requires such information after the transaction has been effected.

The above authority is without prejudice to the right of disclosure of the Security Trustee or any of the Secured Parties implied by law.

 

32. R ELEASE OF S ECURITY

 

32.1 Redemption : Subject to Clause 32.2 ( Avoidance of payments ), if all Secured Obligations have been unconditionally and irrevocably paid in full and none of the Secured Parties are under any further actual or contingent liability to make advance or provide other financial accommodation to any person under any Finance Document, the Security Trustee will (at the request and cost of the Chargors), upon receipt of any documents required by the Indenture, execute and do all such reasonable acts as may be necessary to release the Assets from the Security constituted by this Debenture. Such release shall not prejudice the rights of the Security Trustee under Clause 23 ( Costs, expenses and liabilities ).

 

32.2

Avoidance of payments : If the Security Trustee considers in good faith that any amount received in payment or purported payment of the Secured Obligations is capable of being avoided or reduced by virtue of any insolvency, bankruptcy, liquidation or other similar laws, the liability of the Chargors under this Debenture and the Security constituted by this

  Debenture shall continue and such amount shall not be considered to have been irrevocably paid.

 

33. R IGHTS OF THE P ARTIES TO VARY

The Parties (or the Issuer, on behalf of the Chargors, and the Security Trustee (on behalf of the Secured Parties)) may by agreement vary any term of this Debenture (including this Clause 33 without the necessity of obtaining any consent from any other person).

 

34. F ORBEARANCE , SEVERABILITY , VARIATIONS AND CONSENTS

 

34.1 Delay etc : All rights, powers and privileges under this Debenture shall continue in full force and effect, regardless of any Secured Party, nominee or Receiver exercising, delaying in exercising or omitting to exercise any of them.

 

34.2 Severability: No provision of this Debenture shall be avoided or invalidated by reason only of one or more other provisions being invalid or unenforceable.

 

34.3 Illegality, invalidity, unenforceability : Any provision of this Debenture which is or becomes illegal, invalid or unenforceable shall be ineffective only to the extent of such illegality, invalidity and unenforceability, without invalidating the remaining provisions of this Debenture.

 

34.4 Variations : No variation of this Debenture shall be valid and constitute part of this Debenture, unless such variation shall have been made in writing and signed by the Security Trustee (on behalf of the Secured Parties) and each Chargor (or the Issuer on behalf of each Chargors).

 

34.5 Consents : Save as otherwise expressly specified in this Debenture, any consent of the Security Trustee may be given absolutely or on any terms and subject to any conditions as the Security Trustee may determine in its entire discretion.

 

35. C OUNTERPARTS

This Debenture may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Debenture.

 

36. N OTICES

 

36.1 Delivery: Any notice, document or other communication to be given or delivered under or in connection with this Debenture shall be in writing and, in the case of any notice, document or communication to a Chargor, shall be deemed to have been duly served on, given or delivered to or made if it is left at the authorised address of that Chargor, posted by pre-paid registered post addressed to that Chargor at such address, or sent by facsimile transmission to a machine situated at such address and shall be deemed to have been received if:

 

  (a) personally delivered, at the time of delivery;

 

  (b) sent by mail, on the date of posting; or

 

  (c) sent by facsimile transmission, on receipt by the sender of a facsimile transmission report (or other appropriate evidence) confirming that the facsimile has been transmitted to the addressee.

 

36.2

Addresses: For the purposes of this Clause the authorised address of each Party shall be the address (including the details of the facsimile number and person for whose

  attention a notice, document or communication is to be addressed) identified with its name at the end of this Debenture or such other address (and details) as that Party may notify to each other Party in writing from time to time in accordance with the requirements of this Clause.

 

36.3 Effectiveness: Any notice, document or communication to be made or delivered to the Security Trustee will be effective only when actually received by the Security Trustee and then only if it is expressly marked for the attention of the department or officer of the Security Trustee as identified above (or any substitute department or officer as the Security Trustee shall specify for this purpose).

 

36.4 English language: Each notice, document or communication between the Parties shall be either in English or accompanied by a translation into English, which is certified as being a true and accurate translation.

 

37. S ECURITY T RUSTEE

The provisions of Sections 10.04 ( Authorization of Actions to be Taken by the Trustee under the Security Documents ), 10.05 ( Authorization of Receipt of Funds by the Security Trustee Under the Security Documents ), 10.06 ( Release of the Collateral ) and 10.07 ( Additional Security Trustee Terms ) of the Indenture shall apply to the Security Trustee’s actions, rights, obligations, powers, limitations of liability and duties under this Debenture as if set out in this Debenture in full. The Security Trustee shall be entitled to exercise its rights, powers, authorisations and duties under the terms of this Debenture through designees, agents or co-Security Trustees appointed pursuant to the Indenture. The permissive authorisations, entitlements, powers and rights granted to the Security Trustee hereunder (including, but not limited to, the rights under Clauses 4.1 ( Crystallisation by notice ) and 5.2 ( Insurance )) shall not be construed as duties. The Security Trustee shall be entitled to refuse to take or refrain from taking any discretionary action or exercise any discretionary powers set forth in this Debenture until it has received with respect thereto satisfactory written direction in accordance with the terms of the Indenture and, if necessary, satisfactory indemnification.

 

38. G OVERNING LAW

This Debenture shall be governed by and construed in accordance with Hong Kong law.

 

39. E NFORCEMENT

 

39.1 Jurisdiction :

 

  (a) The courts of Hong Kong have non-exclusive jurisdiction to settle any dispute arising out of or in connection with this Debenture (including a dispute regarding the existence, validity or termination of this Debenture) (a “Dispute” ).

 

  (b) The Parties agree that the courts of Hong Kong are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.

 

  (c) This Clause 39 ( Enforcement ) is for the benefit of the Secured Parties only. As a result, no Secured Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Secured Parties may take concurrent proceedings in any number of jurisdictions.

 

  (d)

Each Chargor irrevocably waives any objection which it may have now or in future to the laying of the venue of any proceedings in the courts of Hong Kong and any claim that any such proceedings have been brought in an inconvenient forum and

  further irrevocably agrees that a judgment in any such proceedings brought in such courts shall be conclusive and binding upon it and may be enforced in any other jurisdiction.

 

39.2 Service of process

 

  (a) Without prejudice to any other mode of service allowed under any relevant law, each Overseas Chargor irrevocably designates, appoints and empowers Sino-Wood Partners, Limited of Room 3815-29, Sun Hung Kai Centre 30 Harbour Road, Wanchai, Hong Kong (or such other address in Hong Kong as such Overseas Chargors may notify to the Security Trustee) as their agent to accept service of process in such jurisdiction in any proceedings arising out of or in connection with this Debenture (the “ Proceedings ”) and agrees that failure by such agent to give notice of such service of process to such Overseas Chargors shall not impair or affect the validity of such service or any judgment based on it (and Sino-Wood Partners, Limited by its execution of this Debenture, accepts that appointment).

 

  (b) Sino-Wood Partners, Limited expressly agrees and consents to the provisions of Clause 38 ( Governing Law ) and of Clause 39 ( Enforcement ).

 

  (c) Each Chargor further consents to the service of process out of the courts of Hong Kong in any such Proceedings by the mailing to it of copies by registered or certified airmail, postage prepaid.

 

39.3 Immunity : Each Chargor irrevocably and unconditionally:

 

  (a) agrees that in any legal proceedings against it or its assets in connection with this Debenture, no immunity from such legal proceedings (which shall include suit, attachment prior to judgment, other attachment, the obtaining of judgment, execution or other enforcement) shall be claimed by or on behalf of it or with respect to its assets;

 

  (b) waives any such right of immunity which it or its assets now has or may in the future acquire; and

 

  (c) consents generally in respect of such proceedings to the giving of relief or the issue of any process in connection with such proceedings including the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order of judgment which may be made or given in such proceedings.

T HIS D EBENTURE has been executed by each Chargor as a deed and signed by the Security Trustee and it shall take effect on the date stated at the beginning of this document.

S CHEDULE 1

Chargors

 

No.

  

Chargor

  

Place of incorporation of the Chargor

  

Registration number

1.    Emerald Plantation Holdings Limited    Cayman Islands    CT-274117
2.    Emerald Plantation Group Limited    Cayman Islands    CT-274113
3.    Sino-Panel Holdings Limited    British Virgin Islands    388858
4.    Sino-Global Holdings Inc.    British Virgin Islands    259917
5.    Sino-Wood Partners, Limited    Hong Kong    381246
6.    Sino Capital Global Inc.    British Virgin Islands    218658
7.    Sino-Panel (Asia) Inc.    British Virgin Islands    259918
8.    Grandeur Winway Limited    British Virgin Islands    499219
9.    Sinowin Investments Limited    British Virgin Islands    1067100
10.    Sino-Panel (Guangxi) Limited    British Virgin Islands    1381282
11.    Sino-Panel (Yunnan) Limited    British Virgin Islands    1381062
12.    Sino-Panel (North East China) Limited    British Virgin Islands    643479
13.    Sino-Panel [Xiangxi] Limited    British Virgin Islands    1069477
14.    Sino-Panel [Hunan] Limited    British Virgin Islands    1070457
15.    SFR (China) Inc.    British Virgin Islands    255656
16.    Sino-Panel [Suzhou] Limited    British Virgin Islands    1058647
17.    Sino-Panel (Gaoyao) Ltd.    British Virgin Islands    259915
18.    Sino-Panel (Guangzhou) Limited    British Virgin Islands    1052050
19.    Sino-Panel (North Sea) Limited    British Virgin Islands    1420406
20.    Sino-Panel (Guizhou) Limited    British Virgin Islands    1432429
21.    Sino-Panel (Huaihua) Limited    British Virgin Islands    1432427
22.    Sino-Panel (Qinzhou) Limited    British Virgin Islands    1432428
23.    Sino-Panel (Yongzhou) Limited    British Virgin Islands    1432426
24.    Sino-Panel (Fujian) Limited    British Virgin Islands    1434765
25.    Sino-Panel (Shaoyang) Limited    British Virgin Islands    1434767
26.    Sino-Panel (China) Nursery Limited    British Virgin Islands    1561607
27.    Sino-Panel (Russia) Limited    British Virgin Islands    1571333
28.    Sino-Panel Trading Limited    British Virgin Islands    1582977

No.

  

Chargor

  

Place of incorporation of the Chargor

  

Registration number

29.    Dynamic Profit Holdings Limited    British Virgin Islands    551237
30.    Sino-Forest Resources Inc.    British Virgin Islands    121457
31.    Sino-Wood Trading Limited    British Virgin Islands    1561911
32.    Sino-Plantation Limited    Hong Kong    386411
33.    Suri-Wood Inc.    British Virgin Islands    246849
34.    Sino-Forest Investments Limited    British Virgin Islands    558954
35.    Mandra Forestry Holdings Limited    British Virgin Islands    633459
36.    Mandra Forestry Finance Limited    British Virgin Islands    633460
37.    Mandra Forestry Anhui Limited    British Virgin Islands    633461
38.    Mandra Forestry Hubei Limited    Hong Kong    1147437
39.    Sino-Wood (Guangxi) Limited    Hong Kong    457149
40.    Sino-Wood (Jiangxi) Limited    Hong Kong    456977
41.    Sino-Wood (Guangdong) Limited    Hong Kong    450957
42.    Sino-Wood (Fujian) Limited    Hong Kong    450960
43.    Sinowood Limited    Cayman Islands    CR-124388
44.    Sino-Forest Bio-Science Limited    British Virgin Islands    548488
45.    Homix Limited    British Virgin Islands    1445474
46.    Sino-Global Management Consulting Inc.    British Virgin Islands    1598148
47.    Ace Supreme International Limited    British Virgin Islands    1515547
48.    Alliance Max Limited    British Virgin Islands    1561587
49.    Trillion Edge Limited    British Virgin Islands    1561622
50.    General Excel Limited    British Virgin Islands    1561583
51.    Brain Force Limited    British Virgin Islands    1561597
52.    Prime Kinetic Limited    British Virgin Islands    1561603
53.    Poly Market Limited    British Virgin Islands    1561584
54.    Value Quest International Limited    British Virgin Islands    1599749
55.    Well Keen Worldwide Limited    British Virgin Islands    1599750
56.    Cheer Gold Worldwide Limited    British Virgin Islands    1599753
57.    Regal Win Capital Limited    British Virgin Islands    1599759

No.

  

Chargor

  

Place of incorporation of the Chargor

  

Registration number

58.    Harvest Wonder Worldwide Limited    British Virgin Islands    1599752
59.    Rich Choice Worldwide Limited    British Virgin Islands    1599766
60.    Amplemax Worldwide Limited    British Virgin Islands    1515389
61.    Glory Billion International Limited    British Virgin Islands    1515518
62.    Smart Sure Enterprises Limited    British Virgin Islands    1515411
63.    Expert Bonus Investment Limited    British Virgin Islands    1515393
64.    Express Point Holdings Limited    British Virgin Islands    1515395
65.    Elite Legacy Limited    British Virgin Islands    1598779

S CHEDULE 2

Land

None as at the date of this Debenture.

S CHEDULE 3

Mandatory Prepayment Account

Part 1

 

 

Form of notice to be served at completion by the Chargor on the Account Bank pursuant to Clause 6.1 of the Debenture

 

 

[***O N THE HEADED NOTEPAPER OF THE C HARGOR ***]

[***Account Bank***]

[***Address***]

For the attention of [ *** ]

[***date***]

Dear Sirs

N OTICE OF C HARGE : D EBENTURE DATED [***] ( THE “D EBENTURE ”) BETWEEN E MERALD P LANTATION H OLDINGS L IMITED AND THE OTHER COMPANIES LISTED THEREIN (1)  AND C OMPUTERSHARE T RUST C OMPANY , N.A. (2) ( THE “S ECURITY T RUSTEE ”) AS TRUSTEE FOR THE S ECURED P ARTIES ( AS DEFINED IN THE D EBENTURE )

 

1. This letter constitutes notice to you that, under the Debenture, we have charged all our interests and rights (if any) in or to any money at any time standing to the credit of account number [***] held in the name of [***] with [***] (the “ Mandatory Prepayment Account ”) to the Security Trustee.

 

2. We each hereby irrevocably and unconditionally instruct and authorise you (notwithstanding any previous instructions which we may have given you to the contrary):

 

  (a) to disclose to the Security Trustee, without any reference to or further authority from us and without any enquiry by you as to the justification for such disclosure, such information relating to the Mandatory Prepayment Account and the amount from time to time standing to its credit as the Security Trustee may, at any time and from time to time, request you to disclose to it;

 

  (b) at any time and from time to time upon receipt by you of instructions in writing from the Security Trustee, to pay or release to the Security Trustee all or any of the money standing to the credit of the Mandatory Prepayment Account (after your exercise of any rights of set-off then available to you in accordance with the Finance Documents) and generally to act in accordance with such instructions in relation to the Mandatory Prepayment Account, without any reference to or further authority from us and without any enquiry by you as to the justification for such instructions or their validity;

 

  (c)

to comply with the terms of any written instructions in any way relating or purporting to relate to the Mandatory Prepayment Account which you may receive

  at any time and from time to time from the Security Trustee without any reference to or further authority from us and without any enquiry by you as to the justification for such notice, statement or instructions or its or their validity;

 

  (d) not to act upon our instructions with regard to the Mandatory Prepayment Account unless and until the Security Trustee confirms those instructions to you in writing and, in particular but without limitation, in these circumstances no Chargor shall be permitted to withdraw any amount from the Mandatory Prepayment Account without the prior written consent of the Security Trustee; and

 

  (e) after your exercise of any rights of set-off then available to you in accordance with the Finance Documents, to hold all sums from time to time standing to the credit of the Mandatory Prepayment Account to the order of the Security Trustee.

 

3. The instructions and authorisations which are contained in this letter shall remain in full force and effect until we and the Security Trustee together give you notice in writing revoking them.

 

4. This letter and all non-contractual obligations arising in any way whatsoever out of or in connection with this letter shall be governed by and construed in accordance with Hong Kong law.

 

5. Please will you acknowledge receipt of this letter and confirm your acceptance of the instructions and authorisations contained in it by signing and returning to the Security Trustee the attached copy of this letter.

Yours faithfully

 

 

For and on behalf of
[*** Chargor ***]

Part 2

 

 

F ORM OF A CKNOWLEDGEMENT TO BE DELIVERED BY THE A CCOUNT B ANK TO THE S ECURITY T RUSTEE

PURSUANT TO C LAUSE 6.1 OF THE D EBENTURE

 

 

[O N THE HEADED NOTEPAPER OF THE A CCOUNT B ANK ]

 

To: Computershare Trust Company, N.A.

[***address***]

(as Security Trustee)

For the attention of [***]

With a copy to:

[*** Chargor ***]

For the attention of [***]

[ Date ]

Dear Sirs

Mandatory Prepayment Account (account no: [***])

We hereby acknowledge receipt of a letter (a copy of which is attached) dated [***] (the “Notice” ) addressed to us by [*** Chargor ***] (the “Chargor” ). We confirm that we hold the Mandatory Prepayment Account.

We hereby agree with the Security Trustee for itself and on behalf of the Secured Parties that:

 

(a) we accept the instructions contained in the Notice and undertake to act in accordance and comply with the Notice;

 

(b) we have not received notice of the interest of any third party in the Mandatory Prepayment Account;

 

(c) we have neither claimed or exercised nor will claim or exercise without your prior written consent any security interest, set-off, counterclaim or other rights in respect of the Mandatory Prepayment Account or funds in it or debts represented by them;

 

(d) we shall not accept from the Chargor any instructions received by us in respect of the Mandatory Prepayment Account without having received your written confirmation of such instructions; and

 

(e) we shall not permit any amount to be withdrawn from the Mandatory Prepayment Account without your prior written consent.

The expressions defined or incorporated by reference in the Notice shall, unless the context otherwise require, have the same meanings in this letter.

This letter shall be governed by and construed in accordance with Hong Kong law.

Yours faithfully

 

 

For and on behalf of
[***]
(as Account Bank)

S CHEDULE 4

Specified Intellectual Property

P ART I

T RADE M ARK

 

No.

  

Trade Mark

  

Jurisdiction

  

Register

  

Certificate No.

  

Classes

  

Status

  

Date of Registration /
Application

1    LOGO    United Kingdom    Sino-Wood Partners, Limited    2270587    1, 16, 19, 31, 35    Registered    21 May 2001
2    LOGO    Japan    Sino-Wood Partners, Limited    4681407    1, 16, 19, 31, 35    Registered    13 June 2003
3    LOGO    PRC    Sino-Wood Partners, Limited    1750184    1    Registered    21 April 2002
4    LOGO    PRC    Sino-Wood Partners, Limited    3019215    16    Registered    28 March 2003
5    LOGO    PRC    Sino-Wood Partners, Limited    3019216    19    Registered    28 March 2003
6    LOGO    PRC    Sino-Wood Partners, Limited    1797519    31    Registered    28 June 2002

7    LOGO    PRC    Sino-Wood Partners, Limited    1951979    35    Registered    7 January 2004

P ART II

D OMAIN N AME

 

Domain Name

  

Registrant Name

  

Registrant Organization

sino-forest.cn    Sino-Wood Partners, Limited    -
sinoforest.cn    Sino-Wood Partners, Limited    -
sinoforest.org    Edwin Ng    Sino-Wood Partners, Limited
sinowood.com.hk    Sino-Wood Partners, Limited    -
sino-forest.com.hk    Sino-Wood Partners, Limited    -
sinoforest.com.hk    Sino-Wood Partners, Limited    -
sino-forest.hk    Sino-Wood Partners, Limited    -
sinoforest.hk    Sino-Wood Partners, Limited    -
LOGO    Sino-Wood Partners, Limited    -
LOGO    Sino-Wood Partners, Limited    -

LOGO    Sino-Wood Partners, Limited    -
LOGO    Sino-Wood Partners, Limited    -
LOGO    Sino-Wood Partners, Limited    -
LOGO    Sino-Wood Partners, Limited    -

P ART III

I NTERNET K EYWORD

 

Keyword

  

Registrant

LOGO

   Sino-Wood Partners, Limited

LOGO

   Sino-Wood Partners, Limited

LOGO

   Sino-Wood Partners, Limited

sino-forest

   Sino-Wood Partners, Limited

sinoforest

   Sino-Wood Partners, Limited

E XECUTION P AGE

The Chargors

 

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Emerald Plantation Holdings Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:   

Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,

Hong Kong

Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Emerald Plantation Group Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Sino-Panel Holdings Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Sino-Global Holdings Inc.    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

The Common Seal of    )   
Sino-Wood Partners, Limited    )   
was hereunto affixed in the presence of:    )    C.S.

Authorised signatory’s signature:

 

Full name:    Paul Jeremy Brough
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong
Fax No.:    +852 2877 0062
Attention:    Paul Jeremy Brough

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Sino Capital Global Inc.    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Sino-Panel (Asia) Inc.    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Grandeur Winway Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Sinowin Investments Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Sino-Panel (Guangxi) Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Sino-Panel (Yunnan) Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Sino-Panel (North East China) Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Sino-Panel [Xiangxi] Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Sino-Panel [Hunan] Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
SFR (China) Inc.    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Sino-Panel [Suzhou] Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Panel (Gaoyao) Ltd.    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Panel (Guangzhou) Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Panel (North Sea) Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Panel (Guizhou) Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Panel (Huaihua) Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Panel (Qinzhou) Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Panel (Yongzhou) Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Panel (Fujian) Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Panel (Shaoyang) Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Panel (China) Nursery Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Panel (Russia) Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Panel Trading Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Dynamic Profit Holdings Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Forest Resources Inc.    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Wood Trading Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

The Common Seal of    )   
Sino-Plantation Limited    )   
was hereunto affixed in the presence of:    )    C.S.

Authorised signatory’s signature:

 

Full name:    Paul Jeremy Brough
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong
Fax No.:    +852 2877 0062
Attention:    Paul Jeremy Brough

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Suri-Wood Inc.    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Forest Investments Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Mandra Forestry Holdings Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Mandra Forestry Finance Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Mandra Forestry Anhui Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

The Common Seal of    )   
Mandra Forestry Hubei Limited    )   
was hereunto affixed in the presence of:    )    C.S.

Authorised signatory’s signature:

 

Full name:    Paul Jeremy Brough
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong
Fax No.:    +852 2877 0062
Attention:    Paul Jeremy Brough

The Common Seal of    )   
Sino-Wood (Guangxi) Limited    )   
was hereunto affixed in the presence of:    )    C.S.

Authorised signatory’s signature:

 

Full name:    Paul Jeremy Brough
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong
Fax No.:    +852 2877 0062
Attention:    Paul Jeremy Brough

The Common Seal of    )   
Sino-Wood (Jiangxi) Limited    )   
was hereunto affixed in the presence of:    )    C.S.

Authorised signatory’s signature:

 

Full name:    Paul Jeremy Brough
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong
Fax No.:    +852 2877 0062
Attention:    Paul Jeremy Brough

The Common Seal of    )   
Sino-Wood (Guangdong) Limited    )   
was hereunto affixed in the presence of:    )    C.S.

Authorised signatory’s signature:

 

Full name:    Paul Jeremy Brough
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong
Fax No.:    +852 2877 0062
Attention:    Paul Jeremy Brough

The Common Seal of    )   
Sino-Wood (Fujian) Limited    )   
was hereunto affixed in the presence of:    )    C.S.

Authorised signatory’s signature:

 

Full name:    Paul Jeremy Brough
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong
Fax No.:    +852 2877 0062
Attention:    Paul Jeremy Brough

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sinowood Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Forest Bio-Science Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Homix Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Global Management Consulting Inc.    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Ace Supreme International Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Alliance Max Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Trillion Edge Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
General Excel Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Brain Force Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Prime Kinetic Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Poly Market Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Value Quest International Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Well Keen Worldwide Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Cheer Gold Worldwide Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Regal Win Capital Limited    )
in the presence of:    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Harvest Wonder Worldwide Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Rich Choice Worldwide Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Amplemax Worldwide Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Glory Billion International Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Smart Sure Enterprises Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Expert Bonus Investment Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:   

Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,

Hong Kong

Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Express Point Holdings Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:   

Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,

Hong Kong

Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Elite Legacy Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:   

Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,

Hong Kong

Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

The Security Trustee

 

Signed by    )   
for and on behalf of    )   
Computershare Trust Company, N.A.    )    Authorised Signatory

 

Address:    350 Indiana Street, Suite 750, Golden, CO 80401
Fax:    303-262-0608   
Attention:    Corporate Trust   
With a copy to:   
Address:    480 Washington Blvd., Jersey City, NJ 07310
Fax:    201-680-4610   
Attention:    Legal Department   

D ATED    2013

 

T HE C OMPANIES NAMED IN S CHEDULE 1

(as Chargors)

T O

C OMPUTERSHARE T RUST C OMPANY , N.A

(as Security Trustee)

S HARE C HARGE

Conyers Dill & Pearman

Road Town, Tortola

British Virgin Islands

C O NTENTS

 

C LAUSE        P AGE  
1.  

D EFINITIONS AND INTERPRETATION

     1   
2.  

C OVENANT TO PAY

     4   
3.  

C HARGING CLAUSE

     4   
4.  

P OWER OF ATTORNEY

     6   
5.  

V OTING RIGHTS AND DIVIDENDS

     6   
6.  

C ONTINUING SECURITY

     7   
7.  

R EPRESENTATIONS AND WARRANTIES

     7   
8.  

C OVENANTS

     9   
9.  

P OWERS OF THE S ECURITY T RUSTEE

     10   
10.  

F URTHER ASSURANCE

     11   
11.  

A DDITIONAL OR FUTURE S ECURITY

     12   
12.  

W AIVER , FORBEARANCE , SEVERABILITY AND PARTIAL INVALIDITY

     12   
13.  

V ARIATION OF TERMS

     13   
14.  

E XPENSES AND INDEMNITY

     13   
15.  

S TAMP DUTY

     14   
16.  

T AX GROSS - UP

     14   
17.  

I NTEREST ON OVERDUE AMOUNTS

     15   
18.  

C URRENCY INDEMNITY

     15   
19.  

I NFORMATION

     15   
20.  

D ISCHARGE AND RELEASE

     16   
21.  

C OUNTERPARTS

     16   
22.  

T RANSFER AND DISCLOSURE

     16   
23.  

N OTICES

     17   
24.  

S ET - OFF

     17   
25.  

A PPOINTMENT OF R ECEIVER

     18   
26.  

S ECURITY T RUSTEE

     19   
27.  

G OVERNING L AW

     19   
28.  

E NFORCEMENT

     19   
S CHEDULE 1      21   
  Chargors      21   
S CHEDULE 2      22   
  Particulars of the Companies and the Original Shares      22   
S CHEDULE 3      25   
  Form of Nominee Undertaking      25   
S CHEDULE 4      29   

  Form of Proxy      29   

E XECUTION P AGE

     30   

T HIS C HARGE is made on              2013

B ETWEEN

 

(1) The Companies named in Schedule 1 ( The Chargors ) (each a “ Chargor ” and together the “ Chargors ” ); and

 

(2) Computershare Trust Company, N.A. as security trustee appointed under the Indenture (as defined below) acting for itself and for and on behalf of the Secured Parties (as defined in the Indenture) (the “ Security Trustee ”).

T HIS CHARGE W ITNESSES as follows:

 

1. D EFINITIONS AND INTERPRETATION

 

1.1 In this Charge, terms defined and expressions construed or interpreted in the Indenture and used but not redefined in this Charge shall have the meanings set out in the Indenture, as if the same are set out in full in this Charge. In addition, in this Charge:

“ Authorisation ” means:

 

  (a) an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation, lodgement or registration; or

 

  (b) in relation to anything which will be fully or partly prohibited or restricted by law if a Governmental Agency intervenes or acts in any way within a specified period after lodgement, filing, registration or notification, the expiry of that period without intervention or action.

“ BC Act ” means the BVI Business Companies Act 2004, as amended from time to time.

“ BVI” means the British Virgin Islands.

“ Charged Assets ” means, in respect of each Chargor, all Shares and Derivative Assets owned or held by it, including all rights, benefits and sums now or in the future accruing to that Chargor as a result of or in connection with any of the Shares or Derivative Assets owned or held by it.

“ Company ” means each company listed in Schedule 2 ( Particulars of the Companies and the Original Shares ) under the column headed “Company”.

“ Derivative Assets ” includes, in respect of each Chargor:

 

  (a) allotments, rights, money or property arising at any time in relation to any Shares owned or held by it by way of conversion, exchange, redemption, bonus, preference, option, conversion, consolidation, subdivision or otherwise;

 

  (b) dividends, distributions, interest and other income paid or payable in relation to any Shares owned or held by it; and

 

  (c) shares and securities offered in addition to or substitution for any Shares owned or held by it.

“ Document ” includes any transfer, renunciation, proxy, mandate, legal or other charge, mortgage, assignment, deed or other document.

“ Event of Default ” has the meaning given to that term in the Indenture.

“ Finance Documents ” means the Indenture, this Charge, each other Security Document, the Notes and other document designated as such by the Security Trustee and the Issuer.

“ Governmental Agency ” means any government or any governmental agency, semi-governmental or judicial entity or authority (including, without limitation, any stock exchange, or any self-regulatory organisation established under statute, law or regulation).

“ Hong Kong ” means the Hong Kong Special Administrative Region of the People’s Republic of China.

“ IBC Act ” means the BVI International Business Companies Act which was fully repealed on 31 December 2006.

“ Indenture ” means an indenture dated on or about the date of this Charge in relation to issuance of up to US$300,000,000 6.00% senior secured notes due 2020 and, if and when issued, any additional notes and/or PIK notes issued under the terms of such indenture from time to time.

“ Issuer ” means Emerald Plantation Holdings Limited, an exempted company incorporated in the Cayman Islands (with registration number CT-274117) whose registered address is the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

“ Liability ” means any liability, damage, loss, cost, claim or expense of any kind or nature, whether direct, indirect, special, consequential or otherwise.

“ Nominee Undertaking ” means a nominee undertaking in the form or substantially in the form set out in Schedule 6 (Form of Nominee Undertaking) .

“ Notes ” has the meaning given to that term in the Indenture.

“ Original Shares ” means, in respect of each Company, the issued share capital of that Company (where such Company is an international business company incorporated under the IBC Act and has not dis-applied Part IV of Schedule 2 of the BC Act) or the number of issued shares of that Company (where such Company is a business company incorporated under the BC Act or is an international business company incorporated under the IBC Act and has dis-applied Part IV of Schedule 2 of the BC Act) beneficially owned by the relevant Chargor as at the date of this Charge, the particulars of which are set out in Schedule 2 (Particulars of the Companies and the Original Shares).

“ Party ” means a party to this Charge.

“ Receiver ” means a receiver and manager appointed under Clause 25 ( Appointment of Receiver) including (where the context requires or permits) any substituted receiver and manager.

“ Secured Obligations ” means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Issuer and each other Subsidiary Guarantor to all or any of the Secured Parties under each or any of the Finance Documents, in each case together with:

 

  (a) all costs, charges and expenses incurred by any Secured Party in connection with the protection, preservation or enforcement of its rights under any Finance Document; and

 

  (b) all money, obligations and liabilities due, owing or incurred in respect of any variations or increases in the amount or composition of the Notes provided under the Indenture or the obligations and liabilities imposed under the Indenture or the Notes.

“ Secured Party ” has the meaning given to that term in the Indenture.

“ Security ” means a mortgage, charge, pledge, lien, assignment or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

“ Shares ” means, in respect of each Company, the Original Shares and all other shares in that Company legally and/or beneficially owned by the relevant Chargor at any time while any Secured Obligations are outstanding and/or any substitute or additional shares and securities.

“ Subsidiary Guarantor ” means each Subsidiary Guarantor under, and as such term is defined in, the Indenture.

“ Tax ” means any tax, levy, impost, duty or other charge of withholding or a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

 

1.2 Unless the context otherwise requires, the interpretative provisions set out in the paragraphs below shall apply in this Charge:

 

  (a) references to any Party shall be construed so as to include that Party’s respective successors in title, permitted assigns and permitted transferees;

 

  (b) “ including ” and “ in particular ” shall not be construed restrictively but shall mean respectively “including, without prejudice to the generality of the foregoing” and “in particular, but without prejudice to the generality of the foregoing”;

 

  (c) a “ person ” includes any individual, firm, company, corporation, government, state or agency of a state or any association, joint venture, company, trust or partnership (whether or not having separate legal personality) of two or more of the foregoing;

 

  (d) “ variation ” includes any variation, amendment, accession, novation, restatement, modification, assignment, transfer, supplement, extension, deletion or replacement however effected and “ vary ” and “ varied ” shall be construed accordingly;

 

  (e) “ writing ” includes facsimile transmission legibly received except in relation to any certificate, notice or other document which is expressly required by this Charge to be signed and “ written ” has a corresponding meaning;

 

  (f) “ Charged Assets ”, “ Derivative Assets ”, “ Original Shares ”, “ Secured Obligations ” or “ Shares ” shall be deemed to include a reference to any part of them or it;

 

  (g) “ tax ” includes any form of taxation, levy, duty, charge, contribution or impost of whatever nature (including any applicable fine, penalty, surcharge or interest) imposed by any local, municipal, governmental, state, federal or other fiscal, revenue, customs and/or excise authority, body or official anywhere in the world competent to impose any of them;

 

  (h) references to this Charge or to any other document or agreement (including any Finance Document) include references to this Charge or such other document or agreement as varied in any manner from time to time, even if changes are made to the composition of the Parties to this Charge or such other document or agreement, or to nature or amount of any amounts owed under, or to the obligations of any parties to, such other document or agreement;

  (i) the singular shall include the plural and vice versa and any gender shall include the other genders;

 

  (j) Clauses, paragraphs and Schedules shall be construed as references to Clauses and paragraphs of, and Schedules to, this Charge;

 

  (k) any reference to any statute, ordinance, rule, regulation or statutory instrument or any section of it shall be deemed to include a reference to any statutory amendment, modification or re-enactment of it for the time being in force in relation to the particular circumstances;

 

  (l) the heading of any provision of this Charge is inserted for convenience and shall not affect the meaning or interpretation of that or any other provision;

 

  (m) An Event of Default is “continuing” if it has not been remedied or waived in accordance with the terms of the Indenture.

 

  (n) “ Blank share transfer form ” means a share transfer form or other instrument of transfer duly executed by two directors or a director and the Secretary of the relevant Chargor (or otherwise in accordance with applicable law and resolutions passed), together with bought and sold notes executed by the relevant Chargor (and/or its nominee(s)), where applicable, but with the sections relating to the date of transfer, the consideration and the name(s) and details of the transferee(s) left blank; and

 

  (o) Conflict of terms : if any conflict arises between the covenants and undertakings in Article 4 ( Covenants ) or Article 5 ( Consolidation, merger and sale of assets ) of the Indenture and the terms of this Charge, the covenants and undertakings set out in the Indenture shall prevail.

 

2. C OVENANT TO PAY

 

2.1 Covenant to pay: Each Chargor (as primary obligor and not merely as surety) covenants with the Security Trustee to pay or discharge, on the Security Trustee’s written demand, the Secured Obligations at the times and in the manner provided in the relevant Finance Documents.

 

2.2 Proviso: The covenants contained in this Clause 2 and the Security created by this Charge shall not extend to or include any liability or sum which would otherwise cause any such covenant or Security to be unlawful or prohibited by any applicable law.

 

2.3 Demands

 

  (a) The making of one demand under this Charge shall not preclude the Security Trustee and/or the Secured Parties from making any further demands.

 

  (b) Any third party dealing with the Security Trustee, the Secured Parties or any Receiver shall not be concerned to see or enquire as to the validity of any demand under this Charge.

 

2.4 Certification of amount: A certificate of the Security Trustee setting forth the amount of any Secured Obligations due from each Chargor shall be conclusive evidence of such amount against the Chargor in the absence of manifest error.

 

3. C HARGING CLAUSE

 

3.1

Fixed security: Each Chargor as legal and/or beneficial owner hereby assigns and agrees to assign to the Security Trustee for the benefit of the Secured Parties all benefits present and future, actual and contingent accruing in respect of its Charged Assets and

  all such Chargor’s right, title and interest to and in its Charged Assets including (without limitation) all voting and other consensual powers pertaining to the Charged Assets and hereby charges and agrees to charge in favour of the Security Trustee for the benefit of the Secured Parties all of its interest in the Charged Assets by way of a first fixed charge as continuing security for the payment and discharge of the Secured Obligations.

 

3.2 Delivery of documents: Each Chargor shall forthwith on execution of this Charge deliver to the Security Trustee the following documents (in each case, in form and substance necessary to effectuate the purpose of this Charge):

 

  (a) original of valid and duly issued share certificate(s) or other document(s) of title in respect of the Charged Assets owned or held by it (or as applicable, its nominee);

 

  (b) original of duly executed Blank share transfer form(s) in respect of the Charged Assets owned or held by it (or as applicable, its nominee);

 

  (c) an executed irrevocable proxy made in respect of the Charged Assets in favour of the Security Trustee in respect of all general meetings of the Company in the form set out in Schedule 4;

 

  (d) if applicable, a Nominee Undertaking duly executed by each Chargor’s nominee(s);

 

  (e) certified copies of the register of directors and register of charges of each Chargor;

 

  (f) certified copies of the register of members of each Company;

 

  (g) all other Documents necessary or conducive to enable the Security Trustee to register such Charged Assets in its name or in the name of its nominee(s); and

 

  (h) all Documents necessary and satisfactory under applicable law in order to effect a valid transfer of any of its Charged Assets.

 

3.3 Future transfers and changes to directors: Subject to the other provisions of this Charge, each Chargor shall (and, if applicable, shall procure that its nominee(s) will):

 

  (a) at the request of the Security Trustee, immediately upon the completion of any transfer of Charged Assets to the Security Trustee (for the benefit of the Secured Parties) and/or its nominee(s), procure the immediate registration of such transfer in the company books of the relevant Company and the entry of the Security Trustee (for the benefit of the Secured Parties) and/or its nominee(s) in the register of members of the relevant Company as the holder(s) of such Charged Assets;

 

  (b) in respect of any Charged Assets owned or held by it which become subject to this Charge after the date of this Charge:

 

  (i) immediately following such Charged Assets becoming subject to this Charge, deposit with the Security Trustee the original share certificate(s) (or other document(s) of title or relevant paper(s)) together with duly executed Blank share transfer form(s) in respect thereof; and

 

  (ii)

at the request of the Security Trustee, immediately upon the completion of any transfer of such Charged Assets to the Security Trustee (for the benefit of the Secured Parties) and/or its nominee(s), procure the immediate registration of such transfer in the book of the relevant Company and the entry of the Security Trustee (for the benefit of the

  Secured Parties) and/or its nominee(s) in the register of members of the relevant Company as the holder(s) of such Charged Assets; and

 

3.4 Creation of security interest: To the extent that, in respect of any of the Charged Assets, Clause 3.1 ( Fixed security ) does not have the effect of creating or acknowledging a first priority fixed security interest in favour of the Security Trustee, the security interest created or acknowledged by Clause 3.1 ( Fixed security ) shall take effect as such type of Security as shall be required by the law applicable to the creation of a security interest in such Charged Assets for the purpose of conferring on the Security Trustee a first security interest in such Charged Assets.

 

4. P OWER OF ATTORNEY

 

4.1 Appointment of attorney : Each Chargor, by way of security and in order more fully to secure the performance of its obligations under this Charge, for so long as the Secured Obligations or any of them remain undischarged, irrevocably appoints the Security Trustee (whether or not a Receiver has been appointed) and separately any nominee and/or Receiver and/or any person deriving title under them jointly and also severally to be its attorney (with full power to appoint substitutes and to delegate), in its name and on its behalf, and as its act and deed or otherwise, at any time:

 

  (a) to complete, execute, seal, deliver and perfect any Document;

 

  (b) to do any such legal assignments and other assurances, charges, authorities and documents over the moneys, property and assets charged by this Charge;

 

  (c) to perform any acts, things or otherwise which may be required of each Chargor, under this Charge or deemed by such attorney as necessary or desirable for any purpose of this Charge or to enhance or perfect the security intended to be constituted by this Charge;

 

  (d) to exercise (or to delegate) all or any of the rights conferred on the Security Trustee and/or any Receiver by this Charge or by statute in relation to this Charge or the Charged Assets held or owned by it; or

 

  (e) to transfer legal ownership of any Charged Assets held or owned by it.

The Security Trustee shall have no obligation to undertake any of the foregoing actions, and, if it takes any such action in accordance with this Charge it shall have no liability to any Chargor to continue the same or for the sufficiency or adequacy thereof.

 

4.2 Ratification : Each Chargor ratifies and confirms all acts and things done by the Security Trustee or any Receiver, any substitute or delegate in the exercise or purported exercise of the power of attorney granted under this Clause 4.

 

4.3 Sums recoverable : All sums expended by the Security Trustee, any nominee and/or any Receiver under this Clause 4 shall be recoverable from each Chargor under Clause 14 (Expenses and indemnity).

 

5. V OTING RIGHTS AND DIVIDENDS

 

5.1 Before Charge becomes enforceable: Unless and until this Charge has become enforceable:

 

  (a) each Chargor shall, for so long as it remains the beneficial owner of the relevant Charged Assets, determine how all voting rights (and, if applicable, any right to nominate or remove a director) attaching to such Charged Assets are to be exercised;

  (b) each Chargor shall not permit any person other than that Chargor, the Security Trustee or its nominee(s) to be registered as holder of any Charged Assets owned or held by it or any part thereof; and

 

  (c) all cash dividends and other money received by the Security Trustee or its nominee(s) shall, on request by the relevant Chargor, be released to that Chargor,

provided always that no Chargor shall be entitled to exercise any of the above rights if the exercise of any such rights may be in breach of the terms of the Indenture or would be reasonably likely to have an adverse effect on the value of the Charged Assets or otherwise jeopardise the Security created or purported to be created under the terms of this Charge or the interests of the Security Trustee or any of the Secured Parties under the terms of this Charge.

 

5.2 After Charge becomes enforceable: At any time after this Charge has become enforceable:

 

  (a) the Security Trustee may date and complete the Blank share transfer form(s) and other documents referred to in Clause 3.2 ( Delivery of documents ) and Clause 3.3 ( Future transfers and changes to directors ) and the Security Trustee may (but is not obliged to), in the name of each Chargor or otherwise and without any further consent, action or authority on the part of each Chargor, exercise all voting and other rights attaching to the Charged Assets, including any rights to nominate or remove a director as if the Security Trustee were the sole beneficial owner of the Charged Assets;

 

  (b) all Derivative Assets shall, if received by a Chargor or its nominee(s), be held on trust for and forthwith paid or transferred to the Security Trustee on demand; and

 

  (c) each Chargor shall (and shall procure that its nominee(s) shall) accept short notice for and attend any meeting of the holders of any Charged Assets owned or held by it, appoint proxies and exercise voting and other rights and powers exercisable by the holders of the Charged Assets owned or held by it as the Security Trustee may direct from time to time.

 

6. C ONTINUING SECURITY

This Charge shall be a continuing security notwithstanding any intermediate payment or settlement of accounts or other matters whatsoever, shall remain in full force and effect unless and until discharged in writing by the Security Trustee following the full and valid payment or discharge of the Secured Obligations and shall be in addition to and shall not prejudice or be prejudiced by any right of set-off, combination, lien or other rights exercisable by any Secured Party as banker against any Chargor or any security, guarantee, indemnity and/or negotiable instrument now or in the future held by any Secured Party.

 

7. R EPRESENTATIONS AND WARRANTIES

Each Chargor represents and warrants to the Security Trustee and each of the Secured Parties on the date of this Charge and on each date on which each Chargor acquires any additional Shares that:

 

  (a) Status:

 

  (i) it is duly constituted, validly existing and, where applicable, in good standing under the laws of the country in which it is incorporated;

 

  (ii) it is not insolvent or in liquidation or administration or subject to any other insolvency procedure;

  (iii) no receiver, manager, trustee, custodian or analogous officer has been appointed in respect of any part of its property, undertaking or assets; and

 

  (iv) it has the appropriate power and authority to own its property and assets and to carry on its business as it is conducted on the date of this Charge;

 

  (b) Capacity and approvals: it has the appropriate power to enter into and perform the terms and conditions of, and has taken all necessary action to authorise the execution, delivery and performance of, this Charge;

 

  (c) Proper execution: this Charge has been properly executed by it and the obligations expressed as being assumed by it under this Charge are valid and binding upon it and enforceable in accordance with their terms;

 

  (d) Compliance with legal restrictions: none of the provisions, covenants and obligations on its part contained in this Charge contravenes any of the provisions of its memorandum or articles of association or other constitutional documents and neither this Charge nor its performance will infringe any law or obligation binding upon it;

 

  (e) No restrictions: there are no provisions in the memorandum or articles of association or other constitutional documents of any Company of which it is a shareholder or any other agreement or Document which restrict the transfer of any Shares or that Chargor’s ability to enter into this Charge, including any rights of first refusal, pre-emption rights, requirements for consent or any rights restricting or affecting the voting rights or the disposal of any of the Shares, or (if such provisions exist) they have been varied or waived to enable this Charge to be enforced free from any such restriction or right;

 

  (f) Other approvals for this Charge: no authorisation of or registration with any governmental, judicial or other third party nor payment of any stamp, registration or other tax is required or desirable in connection with the execution, performance, validity, enforceability or admissibility in evidence of this Charge, other than (i) registration of this Charge under Sections 162 and 163 of the BC Act (where the relevant Chargor is a business company incorporated or registered under the BC Act) or Section 54 of the Companies Law of the Cayman Islands (where the relevant Chargor is incorporated in the Cayman Islands as an exempted company), provided that if a Chargor is incorporated in the Cayman Islands as an exempted company, this Charge is executed outside of the Cayman Islands and is not brought into the Cayman Islands; and (ii) in respect of each Company, registration in accordance with Clause 8.3 of this Charge;

 

  (g) Called up and paid up: the Original Shares are, and any Shares deposited after the date of this Charge will be, duly authorised, issued, fully called up and fully paid-up and the Original Shares represent the entire issued share capital or all issued shares of the relevant Company at the date of this Charge;

 

  (h) Legal and beneficial owner: subject to this Charge, the Original Shares are legally and/or beneficially (as the case may be) owned by each Chargor, and any Shares acquired by each Chargor after the date of this Charge shall (subject to this Charge) be legally and/or beneficially (as the case may be) owned by the relevant Chargor, and in each case free from any option, equity, trust or Security; and

 

  (i)

No Security/guarantees: except as previously disclosed in writing to the Security Trustee with express reference to this Clause, there is no Security affecting any Charged Assets other than any Security created by this Charge, and no Chargor has given any guarantee, indemnity or other assurance against loss in relation to

  the liability of any person other than in favour of the Secured Parties or as otherwise permitted under the terms of the Indenture.

 

8. C OVENANTS

 

8.1 Negative pledge and other restrictions: Each Chargor covenants with the Security Trustee for the benefit of the Secured Parties that it shall not, without the prior written consent of the Security Trustee and to the extent not otherwise permitted under the terms of the Indenture:

 

  (a) enter into a single transaction or a series of transactions to sell, transfer, assign or dispose of, or grant any interest in, or otherwise deal with, any of the Charged Assets owned or held by it, or part with possession or ownership of them, or purport or agree to do so;

 

  (b) create, or agree or attempt to create, or permit to arise or subsist, any Security, equity, option, trust or other third party right whatsoever over or affecting any Charged Assets owned or held by it or give any guarantee or indemnity to or for the benefit of any person or otherwise voluntarily assume any liability, whether actual or contingent, in respect of any obligation of any other person, except in favour of the Security Trustee or any Secured Party;

 

  (c) cause or permit any rights attaching to Charged Assets owned or held by it to be varied or abrogated;

 

  (d) cause or permit any of the Charged Assets owned or held by it to be consolidated, sub-divided or converted or the other capital of any Company to which it is a shareholder to be re-organised, exchanged or repaid;

 

  (e) cause or permit any amendment or change to be made to the memorandum or articles of association or other constitutional documents of any Company to which it is a shareholder, other than in accordance with paragraph (e) of Clause 7 ( Representations and warranties ); or

 

  (f) do or cause or permit to be done anything which may in any way depreciate, jeopardise or otherwise prejudice the value to the Security Trustee and/or any Secured Party of the Charged Assets owned or held by it or the Security created by this Charge.

 

8.2 Positive Covenants: Each Chargor covenants with the Security Trustee for the benefit of the Secured Parties that it shall, unless otherwise permitted under the terms of the Indenture:

 

  (a) remain at all times during the continuance of this Charge the sole legal and/or beneficial and/or registered (as the case may be) owner of the Charged Assets owned or held by it;

 

  (b) procure that the Charged Assets owned or held by it at all times represent a percentage of the issued share capital or total number of issued shares of the relevant Company at least equal to the percentage owned or held as at the date of this Charge (or, if later, the date on which such Charged Assets become subject to the terms of this Charge);

 

  (c) make timely filing and registration of this Charge with each officer, registry and/or governmental or non-governmental body necessary in order to preserve, perfect and enforce the Security created by this Charge in the place of incorporation of each Chargor and each Company; and

  (d) on or before the date of this Charge, deliver, or cause to be delivered, to the Security Trustee a certified copy of resolutions of the members of the relevant Companies amending and restating the memorandum and articles of association of the Companies to expressly require without limitation:

 

  (i) registration by the board of directors of such Company of any transfer of the Shares pursuant to this Charge without delay;

 

  (ii) the removal or disapplication of lien, call and forfeiture provisions in respect of the Shares; and

 

  (iii) recognition of the Security created by this Charge and the irrevocable nature of any proxy granted to the Security Trustee in connection therewith;

and within 14 days following the date of this Charge, deliver, or cause to be delivered, a certified copy of the amended memorandum and articles of association of each Company stamped by the BVI Registrar of Corporate Affairs.

 

8.3 Each Chargor shall procure the entry in the share register of each relevant Company pursuant to section 66(8) of the BC Act of the details of this Charge, to have such Company submit its share register for registration by the Registrar of Corporate Affairs pursuant to section 231 of the BC Act and to have such Company not amend the same or inform the Registrar of Corporate Affairs that it ceases to register any changes in the register, without the consent of the Security Trustee.

 

9. P OWERS OF THE S ECURITY T RUSTEE

 

9.1 When enforceable: This Charge and the Security constituted by this Charge shall be immediately enforceable if an Event of Default has occurred under the Indenture and is continuing.

 

9.2 Receiver’s powers : All powers of the Receiver conferred by this Charge may be exercised by the Security Trustee after this Charge has become enforceable. In that event, paragraph (i) of Clause 25.5 shall be read and construed as if the words “be charged on the Charged Assets” were substituted for the words “be deemed an expense properly incurred by the Receiver”.

 

9.3 Exercise of powers: Any remedies referred to in Section 66 of the BC Act, including the right to sell the shares and the right to appoint a receiver to vote the shares, receive distributions, and exercise any other rights in respect of the shares, shall be exercisable immediately upon the occurrence of an Event of Default. The Conveyancing and Law of Property Act shall not apply to this Charge.

 

9.4 Wide construction: The enforcement powers of the Security Trustee under this Charge shall be construed in the widest possible sense and all Parties intend that the Security Trustee shall have as wide and flexible a range of enforcement powers as may be conferred (or, if not expressly conferred, as is not restricted) by any applicable law.

 

9.5 Suspense account: All monies received by the Security Trustee on the realisation or enforcement of the Security constituted by this Charge may be applied by the Security Trustee in or towards the discharge of the Secured Obligations in accordance with the terms of the Indenture (and the Security Trustee may, pending the payment to the Security Trustee of all of the Secured Obligations, place and keep to the credit of a separate or suspense account any money so received for so long and in such manner as the Security Trustee may determine without any obligation to apply that money or any of it towards the discharge of the Secured Obligations) with any surplus being paid in accordance with the terms of the Indenture.

9.6 No liability of Security Trustee: The Security Trustee shall have no liability of any kind in connection with this Charge except to the extent of any losses arising out of its gross negligence or wilful misconduct in the exercise of its rights hereunder. Notwithstanding the foregoing, under no circumstances shall the Security Trustee be liable for consequential, special, punitive or indirect damages, regardless of being warned of the possibility thereof ahead of time and regardless of the case of action.

 

9.7 No duty to enquire: No person dealing with the Security Trustee, its brokers or agents, shall be concerned to enquire whether this Charge has become enforceable, whether any power exercised or purported to be exercised has become exercisable, whether any Secured Obligations remain due, as to the necessity or expediency of any terms subject to which any sale or other disposal of any Charged Assets shall be made, or otherwise as to the propriety or regularity of any sale or other disposal of any Charged Assets, or to see to the application of any money paid to the Security Trustee, its brokers or agents, and such dealings shall be deemed to be within the powers conferred by this Charge and to be valid accordingly.

 

9.8 Exercised power of sale:

 

  (a) The Security Trustee shall incur no liability as a result of the sale of any Charged Assets, or any part thereof, at any private or public sale conducted pursuant to this Charge in accordance with the requirements of applicable laws. With regards to private sales, each Chargor hereby waives any claims against the Security Trustee and the other Secured Parties arising by reason of the fact that the price at which the Charged Assets may have been sold at such a private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if the first offer received is accepted and the Charged Assets are not offered to more than one offeree, provided that any such private sale is conducted in accordance with applicable laws and this Charge.

 

  (b) Each Chargor hereby agrees that in respect of any sale of any of the Charged Assets pursuant to the terms of this Charge, the Security Trustee is hereby authorised to comply with any limitation or restriction in connection with such sale as it may be advised by its legal counsel is necessary:

 

  (i) in order to avoid any violation of applicable laws; or

 

  (ii) in order to obtain any required approval of the sale or of the purchaser or by any governmental authority or official,

and each Chargor further agrees that such compliance shall not, in and of itself, result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Security Trustee be liable or accountable to any Chargor for any discount allowed by reason of the fact that such Charged Asset is sold in compliance with any such limitation or restriction.

 

10. F URTHER ASSURANCE

Each Chargor shall at any time necessary or advisable under applicable law, and also from time to time if required by the Security Trustee, promptly complete, sign, seal, execute and deliver all Documents, give such instructions or directions and do all acts and things for:

 

  (a) perfecting, protecting, improving or maintaining the Security Trustee’s title to and Security over any of the Charged Assets owned or held by it;

  (b) vesting or enabling the Security Trustee to vest any of the Charged Assets owned or held by it in itself or its nominee(s) or in any purchaser or to facilitate the sale or other disposal of any of the Charged Assets owned or held by it; or

 

  (c) the exercise by the Security Trustee of any of the rights or powers or remedies attaching to the Charged Assets owned or held by it or conferred on the Security Trustee by this Charge,

such Documents to be prepared by or on behalf of the Security Trustee at the cost of the Chargors and to be in such form as the Security Trustee may require.

Notwithstanding anything to the contrary contained herein or under applicable law, but without limiting the rights and authorisations of the Security Trustee hereunder, the Security Trustee shall not be obliged to:

 

  (i) prepare, record, file, re-record, or re-file any financing statement, perfection statement, continuation statement or other instrument in any public office or otherwise ensure the perfection or maintenance of any security interest granted pursuant to, or contemplated by any Finance Document;

 

  (ii) take any necessary steps to preserve rights against any parties with respect to any Charged Assets; or

take any action to protect against any diminution in value of any Charged Assets.

 

11. A DDITIONAL OR FUTURE S ECURITY

 

11.1 Additional security: This Charge is in addition to and shall not affect (or be affected by) any right of set-off, combination, lien or other rights exercisable by the Security Trustee and/or any of the Secured Parties as banker against each Chargor or any guarantees, indemnities, negotiable instruments and/or Security whatsoever which the Security Trustee and/or any of the Secured Parties may hold now or in the future for any part of the Secured Obligations and may be enforced without first having recourse to any such guarantee, indemnity, negotiable instrument or Security.

 

11.2 New account: I f the Security Trustee receives or is deemed to have received notice of any Security or any other interest affecting any Charged Assets:

 

  (a) the Security Trustee may open a new account for each Chargor and, if it does not, it shall be deemed to have done so at the time it received or is deemed to have received such notice; and

 

  (b) all payments received by the Security Trustee from each Chargor or any other person in respect of the Secured Obligations after the Security Trustee receives such notice shall be credited, or deemed to have been credited, to the new account and shall not operate to reduce the amount of the Secured Obligations at the time the Security Trustee received such notice.

 

11.3 Order of discharge: The Security Trustee and/or any Secured Party may obtain discharge of the Secured Obligations from any source in any order without releasing or affecting the liability of each Chargor under this Charge or the Security created or acknowledged by this Charge and may enforce this Charge before or after resorting to any such other means of discharge without entitling each Chargor to any benefit.

 

12. W AIVER , FORBEARANCE , SEVERABILITY AND PARTIAL INVALIDITY

 

12.1

No waiver: No failure to exercise and no delay on the part of the Security Trustee in exercising any right, remedy, power or privilege under this Charge and no course of

  dealing between the Parties and/or any Secured Party shall be construed or operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other or further exercise of it or the exercise of any other right, remedy, power or privilege. The rights and remedies provided in this Charge are cumulative and not exclusive of any rights or remedies provided by law or under any of the Finance Documents.

 

12.2 Illegality, invalidity, unenforceability: If any provision of this Charge is or becomes illegal, invalid or unenforceable, the other provisions and the remainder of the affected provision shall continue to be valid.

 

12.3 Severability: No provision of this Charge shall be avoided or invalidated by reason only of one or more other provisions being invalid or unenforceable.

 

13. V ARIATION OF TERMS

No variation, deletion, replacement of or supplement to this Charge or any of its terms shall be valid or effective unless such variation, deletion, replacement and/or supplement have been made in writing and signed by the Security Trustee on behalf of the Secured Parties and each Chargor.

 

14. E XPENSES AND INDEMNITY

 

14.1 Transaction expenses: Each Chargor shall promptly on demand pay to the Security Trustee the amount of all costs and expenses (including legal fees) reasonably incurred by the Security Trustee (or by any Receiver or delegate) in connection with the negotiation, preparation, printing, execution and perfection of this Charge or any other document referred to in this Charge and the completion of the transactions and perfection of the Security contemplated in this Charge.

 

14.2 Amendment costs: If any Chargor requests an amendment, waiver or consent, such Chargor shall within five Business Days of demand reimburse the Security Trustee (or any Receiver or delegate) for the amount of all costs and expenses (including legal fees) reasonably incurred by the Security Trustee (or any Receiver or delegate) in responding to, evaluating, negotiating or complying with that request or requirement.

 

14.3 Enforcement and preservation costs: Each Chargor shall within five Business Days of demand pay to the Security Trustee and each other Secured Party, the amount of all costs and expenses (including legal, valuation, accountancy and consultancy fees and disbursements and out-of-pocket expenses) and any indirect tax thereon incurred by the Security Trustee and/or any other Secured Party in connection with the exercise, enforcement and/or preservation of or the release of any rights under this Charge (or any documents contemplated by this Charge) or any proceedings instituted by or against the Security Trustee, in any jurisdiction, as a consequence of taking or holding this Charge or enforcing these rights.

 

14.4 Indemnity for Liabilities : Each Chargor shall also, promptly following the Security Trustee’s demand, reimburse or pay to the Security Trustee, its employees or agents, on demand (on the basis of a full indemnity) the amount of all Liabilities incurred by the Security Trustee, its employees or agents, in connection with:

 

  (a) any default or delay by that Chargor in the performance of any of its obligations under this Charge;

 

  (b)

the exercise, or the attempted or purported exercise, by or on behalf of the Security Trustee of any of its powers or any other action taken by or on behalf of the Security Trustee with a view to or in connection with the recovery of the

  Secured Obligations, the enforcement of the Security created by this Charge or for any other purpose contemplated in this Charge;

 

  (c) the carrying out or consideration of any other act or matter which the Security Trustee may consider to be conducive after the occurrence of an Event of Default to the preservation, improvement or benefit of any Charged Asset; and

 

  (d) any stamp duty or similar tax which may be payable as a result of the execution or performance of this Charge.

 

14.5 Without prejudice : The terms of this Clause 14 shall operate without prejudice to the terms of the Indenture (including, for the avoidance of doubt, any indemnity or right or reimbursement granted to or in favour of the Security Trustee under Section 10.07 ( Additional Security Trustee Terms ) of the Indenture).

 

14.6 Joint and Several : The obligations of each Chargor under this Clause 14 shall be joint and several and continuing and shall survive the termination of this Charge and the resignation or removal of the Security Trustee.

 

15. S TAMP DUTY

Each Chargor shall pay all present and future stamp, registration and similar taxes or charges which may be payable or determined to be payable in any applicable jurisdiction in connection with the execution, delivery, performance or enforcement of this Charge or any judgment given in connection with this Charge and shall, jointly and severally, indemnify the Security Trustee, each Secured Party and each Receiver against any and all liabilities including penalties with respect to or resulting from its delay or omission to pay any such stamp, registration and similar taxes or charges.

 

16. T AX GROSS - UP

 

16.1 Definitions

 

  (a) In this Clause 16:

“ Tax Deduction ” means a deduction or withholding for or on account of Tax from a payment under this Charge.

 

  (b) In this Clause 16 a reference to “determines” or “determined” means a determination made in the absolute discretion of the person making the determination.

 

16.2 Tax gross-up

 

  (a) Each Chargor shall make all payments to be made by it in accordance with the terms of this Charge without any Tax Deduction, unless a Tax Deduction is required by law.

 

  (b) Each Chargor shall promptly upon becoming aware that it must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Security Trustee accordingly.

 

  (c) If the Tax Deduction is required by law to be made by any Chargor, the amount of the payment due from that Chargor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

  (d) If a Chargor is required to make a Tax Deduction, that Chargor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

 

  (e) Within thirty days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the relevant Chargor shall deliver to the Security Trustee evidence reasonably satisfactory to the Security Trustee that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

 

17. I NTEREST ON OVERDUE AMOUNTS

 

17.1 Default interest: Any overdue amounts not paid in accordance with this Charge when due shall carry interest at the rate and in accordance with the terms contained in the relevant Finance Document in relation to overdue sums or at such other rate as may be agreed between the relevant Chargor and the Secured Parties from time to time. In each case, interest shall accrue on a day to day basis to the date of irrevocable and unconditional repayment in full and, if unpaid, shall be compounded on the terms so agreed or (in the absence of such agreed terms) with quarterly rests on the Security Trustee’s and/or the relevant Secured Party’s usual quarterly interest days. Interest shall continue to be charged and compounded on this basis after as well as before any demand or judgment.

 

17.2 When payable: Clause 17.1 above shall not apply to the extent that default interest on such amount is payable pursuant to the terms of the Indenture and/or the Notes and itself constitutes part of the Secured Obligations.

 

18. C URRENCY INDEMNITY

If:

 

  (a) for any reason any amount payable by each Chargor under this Charge is paid or recovered by any Secured Party in a currency (the “ payment currency ”) other than that in which the Secured Obligations are denominated; and

 

  (b) the payment made to such Secured Party in the payment currency, when converted at such Secured Party’s then applicable rate of exchange into the currency in which the Secured Obligations are denominated, is less than the amount payable in the currency in which the Secured Obligations are denominated,

then each Chargor shall, jointly and severally, as a separate and independent obligation, fully indemnify such Secured Party within ten days of demand against the amount of the shortfall. For the purposes of this Clause, the expression “applicable rate of exchange” means the rate at which such Secured Party purchases the currency in which the Secured Obligations are denominated with the payment currency, taking into account any costs associated with the exchange.

 

19. I NFORMATION

The Security Trustee may from time to time seek from any other banker or finance provider to each Chargor such information about each Chargor and its affairs as the Security Trustee may think fit and each Chargor shall direct any such third party to provide such information to the Security Trustee and agrees to provide such further authority for this purpose as the Security Trustee may from time to time require. If the Security Trustee obtains any such information it shall not have any obligation to inform any Chargor or Company thereof.

20. D ISCHARGE AND RELEASE

 

20.1 No avoidance or reduction: Any settlement or discharge between the Security Trustee or any of the Secured Parties and any Chargor in respect of the Secured Obligations shall be subject to the condition that no Security or payment to the Security Trustee or any of the Secured Parties by that Chargor or any other person shall be avoided or reduced by virtue of any provisions or enactments relating to insolvency or otherwise. If any such Security or payment shall be so avoided or reduced, the Security Trustee or any of the Secured Parties shall nevertheless be entitled to recover the value or amount thereof subsequently from each Chargor and to exercise its rights under this Charge as if such settlement or discharge had not been effected. The Security Trustee and such Secured Party may retain any Security held by them for the obligations of each Chargor under this Charge until the expiry of the period of one month plus the maximum statutory period under the applicable law within which such Security or payment can be avoided, reduced or invalidated by virtue of any such provision or enactment.

 

20.2 Concession or settlement of claims: In the event of any claim being made or proceedings being taken against the Security Trustee or any other Secured Party the effect of which, if successful, would be the avoidance or reduction of any such Security or payment and whether or not each Chargor shall have been made a party thereto, the Security Trustee or such other Secured Party shall have absolute discretion to concede or settle the same on such terms as it may think fit whereupon Clause 20.1 ( No avoidance or reduction ) shall have the effect as if such concession or settlement had been ordered by the court (without possibility of appeal) and each Chargor shall, jointly and severally, in addition pay the Security Trustee (for the benefit of the relevant Secured Parties) all costs, charges and expenses (on a full indemnity basis) arising out of or in connection with any such claim or proceedings.

 

20.3 Consolidation of Security: Any restrictions on the consolidation of Security shall be excluded to the fullest extent permitted by law and the Security Trustee shall, so far as it is lawful and subject to other provisions of this Charge, be entitled to consolidate this Charge with any other Security whether in existence on the date of this Charge or in the future.

 

21. C OUNTERPARTS

This Charge may be executed in any number of counterparts and this will have the same effect as if the signatures on the counterparts were on a single copy of this Charge.

 

22. T RANSFER AND DISCLOSURE

 

22.1 Transfer by Chargors: No Chargor may assign or transfer any of its rights or obligations under this Charge.

 

22.2 Transfer by Secured Parties : Any Secured Party may at any time assign and transfer all or any part of its rights under this Charge to any person to which it has assigned and transferred the whole or part of its rights under the Notes in accordance with the terms of the Indenture and the Notes.

 

22.3 Transfer by Security Trustee : The Security Trustee may assign and transfer all of its rights and obligations under this Charge to any replacement Security Trustee appointed in accordance with the Indenture. Upon such assignment and transfer becoming effective, the replacement Security Trustee shall be, and be deemed to be, acting as agent and trustee for each of the Secured Parties (including itself) for the purposes of this Charge in replacement of the previous Security Trustee.

22.4 Disclosure of information : Each Chargor irrevocably authorises the Security Trustee and each Secured Party, at its discretion, at any time or from time to time, to disclose any information concerning each Chargor, this Charge and the Secured Obligations to:

 

  (a) any associated company of the Security Trustee or any of the Secured Parties or;

 

  (b) any prospective transferee or grantee referred to in Clause 22.3 and any other person considered by the Security Trustee or any of the Secured Parties to be concerned in the relevant transaction or prospective transaction; or

 

  (c) any person who, as part of the arrangements made in connection with any transaction referred to in Clause 22.3, requires such information after the transaction has been effected.

The above authority is without prejudice to the right of disclosure of the Security Trustee or any of the Secured Parties implied by law.

 

23. N OTICES

 

23.1 Delivery: Any notice, document or other communication to be given or delivered under or in connection with this Charge shall be in writing and, in the case of any notice, document or communication to a Chargor, shall be deemed to have been duly served on, given or delivered to or made if it is left at the authorised address of that Chargor, posted by pre-paid registered post addressed to that Chargor at such address, or sent by facsimile transmission to the facsimile number referenced in Clause 23.2 below and shall be deemed to have been received if:

 

  (a) personally delivered, at the time of delivery;

 

  (b) sent by mail, on the date of posting; or

 

  (c) sent by facsimile transmission, on receipt by the sender of a facsimile transmission report (or other appropriate evidence) confirming that the facsimile has been transmitted to the addressee.

 

23.2 Addresses: For the purposes of this Clause the authorised address of each Party shall be the address (including the details of the facsimile number and person for whose attention a notice, document or communication is to be addressed) identified with its name at the end of this Charge or such other address (and details) as that Party may notify to each other Party in writing from time to time in accordance with the requirements of this Clause.

 

23.3 Effectiveness: Any notice, document or communication to be made or delivered to the Security Trustee will be effective only when actually received by the Security Trustee and then only if it is expressly marked for the attention of the department or officer of the Security Trustee as identified above (or any substitute department or officer as the Security Trustee shall specify for this purpose).

 

23.4 English language: Each notice, document or communication between the Parties shall be either in English or accompanied by a translation into English, which is certified as being a true and accurate translation.

 

24. S ET - OFF

The Security Trustee may (but is not obliged to) retain any money standing to the credit of any Chargor with the Security Trustee in any currency upon any account (whether or not in that Chargor’s name) or otherwise as cover for any Secured Obligations and that Chargor agrees that the Security Trustee may at any time or times without notice to each Chargor combine or consolidate any or all sums of money now or subsequently standing

to that Chargor’s credit upon any such account with all or such part of the Secured Obligations as the Security Trustee may determine (whether presently payable or not) and the Security Trustee may purchase with any such money any other currency required to effect such combination or consolidation.

 

25. A PPOINTMENT OF R ECEIVER

 

25.1 Appointment: At any time after this security has become enforceable or if so requested by any Chargor, the Security Trustee may appoint in writing any person or persons to be a receiver and manager or receivers and managers of all or any part of the Charged Assets, as the Security Trustee may choose in its entire discretion.

 

25.2 Severability: Where more than one Receiver is appointed, the appointees shall have power to act severally (unless the Security Trustee shall specify to the contrary) in relation to the Charged Assets. An appointment over part only of the Charged Assets shall not preclude the Security Trustee from making a subsequent appointment of a Receiver over any part of the Charged Assets over which an appointment has not previously been made by the Security Trustee.

 

25.3 Receiver’s remuneration: The Security Trustee may from time to time agree with the Receiver the remuneration of the Receiver and remove the Receiver from all or any part of the Charged Assets of which he is the Receiver and after the Receiver has vacated office or ceased to act in respect of any of the Charged Assets appoint a further Receiver over all or any part in respect of which he shall have ceased to act.

 

25.4 Receiver’s agency: The Receiver shall be the agent of the relevant Chargor (who shall be solely liable for his acts, defaults and remuneration), unless and until that Chargor goes into bankruptcy or liquidation and thereafter he shall act as principal and shall not become the agent of the Security Trustee or any of the Secured Parties. The Security Trustee shall not be responsible, at any time, for the actions of the Receiver.

 

25.5 Powers of a Receiver: In addition to those powers conferred by law, the Receiver shall have and be entitled to exercise in relation to each Chargor concerned all the powers set out below:

 

  (a) to take possession of the Charged Assets, and to require payment to it of all Derivative Assets including without limitation, to complete any instruments of transfer and to procure the transfer of the Charged Assets into the name of the Receiver or its nominee and, if necessary, take possession of and collect the share certificates and/or other documents of title relating to the Charged Assets, at the cost and risk of the Chargors;

 

  (b) to sell, transfer, assign, exchange or otherwise dispose of or realise the Charged Assets to any person either by public offer or auction, tender or private contract and for a consideration of any kind (which may be payable or delivered in one amount or by instalments spread over a period or deferred);

 

  (c) to borrow or raise money, either unsecured or on the security of the Charged Assets (either in priority to the Charges or otherwise);

 

  (d) to exercise and do (or permit a Chargor or any nominee of it to exercise and do) all such rights and things as the Receiver would be capable of exercising or doing if it were the absolute beneficial owner of the Charged Assets (including but not limited to exercising all voting and other rights attaching to Charged Assets owned by the relevant Chargor and calling up all or any portion of the uncalled capital of the relevant Chargor);

  (e) to settle, adjust, refer to arbitration, compromise and arrange any claims, accounts, disputes, questions and demands with or by any person relating to the Charged Assets;

 

  (f) to bring, prosecute, enforce, defend and abandon actions, suits an proceedings in relation to the Charged Assets;

 

  (g) to make any arrangement or compromise with the Security Trustee or any of the Secured Parties as he shall think fit;

 

  (h) to appoint managers, officers and agents for the above purposes at such reasonable remuneration as the Receiver may determine;

 

  (i) to redeem any prior Security and to settle and pass the accounts of the Security holder, and any accounts so settled and passed shall (subject to any manifest error) be conclusive and binding on each Chargor and the money so paid shall be deemed an expense properly incurred by the Receiver;

 

  (j) to pay the proper administrative charges of the Security Trustee and/or any of the Secured Parties in respect of time spent by their agents and employees in dealing with matters raised by the Receiver or relating to the receivership of each Chargor; and

 

  (k) to do all such other acts and things as may be considered by the Receiver to be incidental or conducive to any of the above matters or powers or otherwise incidental or conducive to the preservation, improvement or realisation of the Charged Assets.

 

26. S ECURITY T RUSTEE

The provisions of Sections 10.04 ( Authorization of Actions to be Taken by the Trustee under the Security Documents ), 10.05 ( Authorization of Receipt of Funds by the Security Trustee Under the Security Documents ), 10.06 ( Release of the Collateral ) and 10.07 ( Additional Security Trustee Terms ) of the Indenture shall apply to the Security Trustee’s actions, rights, obligations, powers and duties under this Charge as if set out in this Charge in full. The Security Trustee shall be entitled to exercise its rights, powers, authorisations and duties under the terms of this Charge through designees, agents or co-Security Trustees appointed pursuant to the Indenture. The permissive authorisations, entitlements, powers and rights granted to the Security Trustee hereunder shall not be construed as duties. The Security Trustee shall be entitled to refuse to take or refrain from taking any discretionary action or exercise any discretionary powers set forth in this Charge until it has received with respect thereto satisfactory written direction in accordance with the terms of the Indenture and, if necessary, satisfactory indemnification.

 

27. G OVERNING L AW

This Charge shall be governed by and construed in accordance with the laws of the British Virgin Islands.

 

28. E NFORCEMENT

 

28.1 Jurisdiction

 

  (a) The courts of the British Virgin Islands have non-exclusive jurisdiction to settle any dispute arising out of or in connection with this Charge (including a dispute regarding the existence, validity or termination of this Charge) (a “Dispute” ).

  (b) Subject to paragraph (c) below, the Parties agree that the courts of the British Virgin Islands are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.

 

  (c) This Clause 28 ( Enforcement ) is for the benefit of the Secured Parties only. As a result, no Secured Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Secured Parties may take concurrent proceedings in any number of jurisdictions.

 

  (d) Each Chargor irrevocably waives any objection which it may have now or in future to the laying of the venue of any proceedings in the courts of the British Virgin Islands and any claim that any such proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgment in any such proceedings brought in such courts shall be conclusive and binding upon it and may be enforced in any other jurisdiction.

 

28.2 Service of process

 

  (a) Without prejudice to any other mode of service allowed under any relevant law, each Chargor (other than a Chargor incorporated in the British Virgin Islands) irrevocably designates, appoints and empowers Codan Trustees (B.V.I.) Ltd., of Commerce House, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands (or such other address in BVI as each Chargor may notify to the Security Trustee) as their agent to accept service of process in such jurisdiction in any proceedings arising out of or in connection with this Charge (the “ Proceedings ”) and agrees that failure by such agent to give notice of such service of process to the Chargors shall not impair or affect the validity of such service or any judgment based on it.

 

  (b) Codan Trustees (B.V.I.) Ltd. expressly agrees and consents to the provisions of Clause 26 ( Governing Law ) and of Clause 28 ( Enforcement ).

 

  (c) Each Chargor further consents to the service of process out of the courts of the British Virgin Islands in any such Proceedings by the mailing to it of copies by registered or certified airmail, postage prepaid.

 

28.3 Waiver of Immunity

Each Chargor irrevocably and unconditionally:

 

  (a) agrees that in any legal proceedings against it or its assets in connection with this Charge, no immunity from such legal proceedings (which shall include suit, attachment prior to judgment, other attachment, the obtaining of judgment, execution or other enforcement) shall be claimed by or on behalf of it or with respect to its assets;

 

  (b) waives any such right of immunity which it or its assets now has or may in the future acquire; and

 

  (c) consents generally in respect of such proceedings to the giving of relief or the issue of any process in connection with such proceedings including the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order of judgment which may be made or given in such proceedings.

I N W ITNESS whereof each Chargor have executed this Charge as a deed on the day and year first above written.

S CHEDULE 1

Chargors

 

Chargor

  

Jurisdiction

  

Registration Number

Emerald Plantation Group Limited    Cayman Islands    CT-274113
Sino-Panel Holdings Limited    BVI    388858
Sino-Global Holdings Inc.    BVI    259917
Sino-Panel (Asia) Inc.    BVI    259918
Sino-Wood Partners, Limited    Hong Kong    381246
Dynamic Profit Holdings Limited    BVI    551237
Sino-Forest Investments Limited    BVI    558954
Mandra Forestry Holdings Limited    BVI    633459
Mandra Forestry Finance Limited    BVI    633460
Sinowood Limited    Cayman Islands    CT-124388
Sino-Capital Global Inc.    BVI    218658
Suri-Wood Inc.    BVI    246849

S CHEDULE 2

Particulars of the Companies and the Original Shares

 

Chargor/Jurisdiction

 

Company

 

Place of
Incorporation of the
Company

 

Number of Original
Shares in the
Company

Emerald Plantation Group Limited   Sino-Panel Holdings Limited   BVI   1,002 registered shares

 

(Cayman Islands)

 

 

Sino-Global Holdings Inc.

 

 

BVI

 

 

1,002 ordinary shares

 

 

Sino-Capital Global Inc.

 

 

BVI

 

 

26,564 ordinary shares

 

 

Sino-Forest Resources Inc.

 

 

BVI

 

 

323,689,000

 

redeemable and retractable preference shares

Sino-Panel Holdings Limited   Sino-Panel (Asia) Inc.   BVI   1,002 ordinary shares

 

(BVI)

     
Sino-Global Holdings Inc.   Grandeur Winway Limited   BVI   1,001 ordinary shares

 

(BVI)

 

 

Sinowin Investments Limited

 

 

BVI

 

 

1,001 ordinary shares

Sino-Panel (Asia) Inc.   Sino-Panel (Guangxi) Limited   BVI   1,002 shares

 

(BVI)

 

 

Sino-Panel (Yunnan) Limited

 

 

BVI

 

 

1,001 ordinary shares

 

 

Sino-Panel (North East China) Limited

 

 

BVI

 

 

1,001 ordinary shares

 

 

Sino-Panel [Xiangxi] Limited

 

 

BVI

 

 

1,001 ordinary shares

 

 

Sino-Panel [Hunan] Limited

 

 

BVI

 

 

1,001 ordinary shares

 

 

SFR (China) Inc.

 

 

BVI

 

 

1,001 ordinary shares

 

 

Sino-Panel [Suzhou] Limited

 

 

BVI

 

 

1,001 ordinary shares

 

 

Sino-Panel (Gaoyao) Ltd.

 

 

BVI

 

 

1,002 ordinary shares

 

 

Sino-Panel (Guangzhou) Limited

 

 

BVI

 

 

1,001 ordinary shares

 

 

Sino-Panel (North Sea) Limited

 

 

BVI

 

 

1,002 ordinary shares

 

 

Sino-Panel (Guizhou) Limited

 

 

BVI

 

 

1 ordinary share

 

 

Sino-Panel (Huaihua)

 

 

BVI

 

 

1,001 ordinary shares

Chargor/Jurisdiction

 

Company

 

Place of
Incorporation of the
Company

 

Number of Original
Shares in the
Company

  Limited    
  Sino-Panel (Qinzhou) Limited   BVI   1 ordinary share
  Sino-Panel (Yongzhou) Limited   BVI   1,001 ordinary shares
  Sino-Panel (Fujian) Limited   BVI   1 ordinary share
  Sino-Panel (Shaoyang) Limited   BVI   1 ordinary share
  Sino-Panel (China) Nursery Limited   BVI   3 ordinary shares
  Sino-Panel (Russia) Limited   BVI   2 ordinary shares
  Sino-Panel Trading Limited   BVI   1 ordinary share

 

Sino-Wood Partners, Limited

 

 

Dynamic Profit Holdings Limited

 

 

BVI

 

 

1,010 ordinary shares

 

(Hong Kong)

 

 

Sino-Forest Resources Inc.

 

 

BVI

 

 

2,000 ordinary shares

 

 

Sino-Wood Trading Limited

 

 

BVI

 

 

2 shares

 

 

Suri-Wood Inc.

 

 

BVI

 

 

10,002 ordinary shares

Dynamic Profit Holdings Limited

 

(BVI)

  Sino-Forest Investments Limited   BVI   1,009 ordinary shares

 

Sino-Forest Investments Limited

 

(BVI)

 

 

Mandra Forestry Holdings Limited

 

 

BVI

 

 

125,001 shares

Mandra Forestry Holdings Limited

 

(BVI)

  Mandra Forestry Finance Limited   BVI   2,001 ordinary shares

 

Mandra Forestry Finance Limited

 

(BVI)

 

 

Mandra Forestry Anhui Limited

 

 

BVI

 

 

1 ordinary share

Sinowood Limited

 

(Cayman Islands)

  Sino-Forest Bio-Science Limited   BVI   1 ordinary share

 

Sino-Capital Global Inc.

 

 

Homix Limited

 

 

BVI

 

 

10,001 ordinary shares

 

(BVI)

 

 

Sino-Global Management

 

 

BVI

 

 

1 ordinary share

Chargor/Jurisdiction

 

Company

 

Place of
Incorporation of the
Company

 

Number of Original
Shares in the
Company

  Consulting Inc.    
 

 

Elite Legacy Limited

 

 

BVI

 

 

1,000 shares

 

Suri-Wood Inc.

 

(BVI)

 

 

Ace Supreme International Limited

 

 

BVI

 

 

1 share

 

 

Alliance Max Limited

 

 

BVI

 

 

1 share

 

 

Trillion Edge Limited

 

 

BVI

 

 

1 share

 

 

General Excel Limited

 

 

BVI

 

 

1 share

 

 

Brain Force Limited

 

 

BVI

 

 

1 share

 

 

Prime Kinetic Limited

 

 

BVI

 

 

1 share

 

 

Poly Market Limited

 

 

BVI

 

 

1 share

 

 

Value Quest International Limited

 

 

BVI

 

 

1 share

 

 

Well Keen Worldwide Limited

 

 

BVI

 

 

1 share

 

 

Cheer Gold Worldwide Limited

 

 

BVI

 

 

1 share

 

 

Regal Win Capital Limited

 

 

BVI

 

 

1 share

 

 

Harvest Wonder Worldwide Limited

 

 

BVI

 

 

1 share

 

 

Rich Choice Worldwide Limited

 

 

BVI

 

 

1 share

 

 

Amplemax Worldwide Limited

 

 

BVI

 

 

1 share

 

 

Glory Billion International Limited

 

 

BVI

 

 

1 share

 

 

Smart Sure Enterprises Limited

 

 

BVI

 

 

1 share

 

 

Expert Bonus Investment Limited

 

 

BVI

 

 

1 share

 

 

Express Point Holdings Limited

 

 

BVI

  1 share

S CHEDULE 3

Form of Nominee Undertaking

 

To:    Computershare Trust Company, N.A (as Security Trustee)
From:    [ Name of the Nominee ]
   [ Address ]
Dated:    [***]

Dear Sirs

 

1. [I]/[We] refer to the share charge of even date (as may be amended from time to time, the “ Charge ”) between [ Name of the relevant Chargor ] (the “ Chargor ”) and yourselves. Terms defined in the Charge have the same meanings when used in this Nominee Undertaking.

 

2. [I]/[We] declare that [I]/[we] hold the securities listed in the Appendix of this Nominee Undertaking (the “ Nominee Securities ”) to your order subject to the terms and conditions of the Charge.

 

3. [I]/[We] will notify you promptly of the contents of any communication or document received by [me]/[us] as holder of the Nominee Securities.

 

4. [I]/[We] will, after [I]/[we] have received from you written notice informing [me]/[us] that you are entitled to enforce the Charge (such notice to be conclusive and binding on [me]/[us] for all purposes) (an “ Enforcement Notice ”), promptly pay to you, at the expense of the Secured Parties, any dividends or other money received by [me]/[us] in respect of the Nominee Securities and [I]/[we] hereby declare [myself]/[ourselves] as trustee of such dividends or other money to hold, pending such payment, upon trust to pay to you in the manner aforesaid.

 

5. [I]/[We] will, after [I]/[we] have received an Enforcement Notice, exercise or refrain from exercising, all of [my]/[our] voting rights in respect of the Nominee Securities in accordance with your instructions. Prior to receipt of an Enforcement Notice, [I]/[we] will not exercise any voting rights or all other rights forming part of the Nominee Securities in a manner which is inconsistent with the terms of the Charge.

 

6. [I]/[We] will, promptly upon receipt by [me]/[us] of any Derivative Assets in respect of the Nominee Securities, at the expense of the Secured Parties, deliver to you all certificates and other documents constituting or evidencing title to such Derivative Assets together with transfers relating to them complying with the provisions of Clause 3 ( Charging clause ) of the Charge and otherwise in such manner as you reasonably require and will promptly give such instructions or directions as you reasonably require relating to any Nominee Securities or their Derivative Assets to protect or preserve your security.

 

7.

In the event that [I]/[we] fail to promptly perform any of my obligations under this Nominee Undertaking, [I]/[We] irrevocably appoint you by way of security as [my]/[our] attorney (with full power to appoint substitutes and to delegate), in [my]/[our] name and on [my]/[our] behalf and as [my]/[our] act and deed, at any time to execute, deliver and perfect any Document, perform any lawful act, or give any lawful instructions which may be required by [me]/[us] under this Nominee Undertaking or deemed by such attorney necessary to perfect the security intended to be constituted by the Charge or this Nominee Undertaking or to transfer the legal ownership of any of the Nominee Securities

  or their Derivative Assets and [I]/[We] shall ratify and confirm all acts and things lawfully done by you, any substitute or delegate in the exercise or purported exercise of this power of attorney, all at the expense of the Secured Parties. You shall have no other recourse against [me]/[us] in the event of my failure to perform my obligations under this Nominee Undertaking, other than by taking appointment as [my]/[our] attorney as described in the foregoing sentence.

 

8. [I]/[We] hereby waive any right [I]/[we] may have under the articles of association of [ Name of the Company ] or otherwise to purchase the Nominee Securities or any of them in the event that they are sold or otherwise disposed of pursuant to the Charge.

 

9. This Nominee Undertaking, and all of [my]/[our] obligations hereunder, will terminate upon termination of the Charge. Upon any such termination, you will, at [my]/[our] expense, execute and deliver to [me]/[us] such documents as [I]/[we] may reasonably request in writing to evidence such termination.

 

10. This Nominee Undertaking shall be governed by and construed in accordance with the laws of the British Virgin Islands.

I N WITNESS whereof [I]/[we] have executed this Nominee Undertaking as a deed on the day and year first before written.

 

Signed, sealed and delivered   )        
as a deed by [ Name of individual   )    

 

  L.S.
nominee ] in the presence of:-   )        

 

Witness’ signature  

 

 
Full name  

 

 
Address  

 

 
Occupation  

 

 

OR

 

The common seal of   )    
[ Name of the nominee ] was   )     C.S.
affixed in the presence of:-   )    

 

Director’s signature  

 

 
Full name  

 

 
Secretary’s/Director’s signature  

 

 
Full name  

 

 

OR

 

Signed, sealed and delivered   )     Authorised signatory  

 

  L.S.

as a deed for and on behalf of   )        
[ Name of the nominee ]   )     Full name  

 

by its attorney(ies) in the   )        
presence of:-   )     Authorised signatory  

 

  L.S.
         
      Full name  

 

 

Witness’ signature  

 

Full name  

 

Address  

 

Occupation  

 

A PPENDIX TO N OMINEE U NDERTAKING

The Nominee Securities

[***] [ordinary] shares of [HK$][***] each in the capital of [ Name of the Company ]

S CHEDULE 4

Form of Proxy

[Name of Company] (the “Company”)

P R O X Y

The undersigned, [ — ], of [ — ], holder of [all/ — ] of the issued and outstanding shares in the Company hereby irrevocably appoints [ — ] of [ — ] as our proxy to vote on our behalf at any meeting of shareholders or to execute on our behalf any written resolution of the shareholder(s) of the Company.

EXECUTED AS A DEED this [ — ] day of [ — ], [ — ].

[For and on behalf of [ — ]] By [ — ]

 

 

E XECUTION P AGE

The Chargors

 

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Emerald Plantation Group Limited    )
in the presence of:-    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong
Fax No.:    +852 2877 0062   

Attention:

   Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Panel Holdings Limited    )
in the presence of:-    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Global Holdings Inc.    )
in the presence of:-    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Panel (Asia) Inc.    )
in the presence of:-    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

The Common Seal of    )   
Sino-Wood Partners, Limited    )   
was hereunto affixed in the presence of:    )    C.S.

 

Authorised signatory’s signature:   
Full name:    Paul Jeremy Brough   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Dynamic Profit Holdings Limited    )
in the presence of:-    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Forest Investments Limited    )
in the presence of:-    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Mandra Forestry Holdings Limited    )
in the presence of:-    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Mandra Forestry Finance Limited    )
in the presence of:-    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sinowood Limited    )
in the presence of:-    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Sino-Capital Global Inc.    )
in the presence of:-    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

SIGNED as a DEED    )
By Paul Jeremy Brough    )
authorised signatory for    )
Suri-Wood Inc.    )
in the presence of:-    )

 

Name:   

 

  
   Witness   
Address:    11 th Floor, One Pacific Place   
   88 Queensway   
   Hong Kong   
Occupation:    Solicitor of Hong Kong   
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
   Hong Kong   
Fax No.:    +852 2877 0062   
Attention:    Paul Jeremy Brough   

The Security Trustee

 

Signed by    )   
For and on behalf of    )   
Computershare Trust    )   
Company, N.A.    )   
   )   
      Authorised Signatory

 

Address:    350 Indiana Street, Suite 750, Golden, CO 80401   
Fax:    303-262-0608   
Attention:    Corporate Trust   
With a copy to:      
Address:    480 Washington Blvd., Jersey City, NJ 07310   
Fax:    201-680-4610   
Attention:    Legal Department   

D ATED    2013

 

T HE C OMPANIES NAMED IN S CHEDULE 1

(as Chargors)

T O

C OMPUTERSHARE T RUST C OMPANY , N.A

(as Security Trustee)

S HARE C HARGE

Conyers Dill & Pearman (Cayman) Limited

Attorneys at Law

Cayman Islands

C O NTENTS

 

C LAUSE        P AGE  

1.

  D EFINITIONS AND INTERPRETATION      1   

2.

  C OVENANT TO PAY      4   

3.

  C HARGING CLAUSE      4   

4.

  P OWER OF ATTORNEY      6   

5.

  V OTING RIGHTS AND DIVIDENDS      6   

6.

  C ONTINUING SECURITY      7   

7.

  R EPRESENTATIONS AND WARRANTIES      7   

8.

  C OVENANTS      8   

9.

  P OWERS OF THE S ECURITY T RUSTEE      10   

10.

  F URTHER ASSURANCE      11   

11.

  A DDITIONAL OR FUTURE S ECURITY      12   

12.

  W AIVER , FORBEARANCE , SEVERABILITY AND PARTIAL INVALIDITY      12   

13.

  V ARIATION OF TERMS      12   

14.

  E XPENSES AND INDEMNITY      12   

15.

  S TAMP DUTY      13   

16.

  T AX GROSS - UP      14   

17.

  I NTEREST ON OVERDUE AMOUNTS      14   

18.

  C URRENCY INDEMNITY      15   

19.

  I NFORMATION      15   

20.

  D ISCHARGE AND RELEASE      15   

21.

  C OUNTERPARTS      16   

22.

  T RANSFER AND DISCLOSURE      16   

23.

  N OTICES      16   

24.

  S ET - OFF      17   

25.

  A PPOINTMENT OF R ECEIVER      17   

26.

  S ECURITY T RUSTEE      18   

27.

  G OVERNING L AW      19   

28.

  E NFORCEMENT      19   
S CHEDULE 1      21   
  Chargors      21   
S CHEDULE 2      22   
  Particulars of the Companies and the Original Shares      22   
S CHEDULE 3      23   
  Form of Nominee Undertaking      23   
S CHEDULE 4      27   

  Form of Proxy      27   
E XECUTION P AGE      28   

T HIS C HARGE is made on              2013

B ETWEEN

 

(1) The Companies named in Schedule 1 ( The Chargors ) (each a “Chargor” and together the “Chargors” ); and

 

(2) Computershare Trust Company, N.A. as security trustee appointed under the Indenture (as defined below) acting for itself and for and on behalf of the Secured Parties (as defined in the Indenture) (the “ Security Trustee ”).

T HIS CHARGE W ITNESSES as follows:

 

1. D EFINITIONS AND INTERPRETATION

 

1.1 In this Charge, terms defined and expressions construed or interpreted in the Indenture and used but not redefined in this Charge shall have the meanings set out in the Indenture, as if the same are set out in full in this Charge. In addition, in this Charge:

“ Authorisation ” means:

 

  (a) an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation, lodgement or registration; or

 

  (b) in relation to anything which will be fully or partly prohibited or restricted by law if a Governmental Agency intervenes or acts in any way within a specified period after lodgement, filing, registration or notification, the expiry of that period without intervention or action.

“ BC Act ” means the BVI Business Companies Act 2004, as amended from time to time.

“ Charged Assets ” means, in respect of each Chargor, all Shares and Derivative Assets owned or held by it, including all rights, benefits and sums now or in the future accruing to that Chargor as a result of or in connection with any of the Shares or Derivative Assets owned or held by it.

“ Companies Law ” means the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands.

“ Company ” means each company listed in Schedule 2 ( Particulars of the Companies and the Original Shares ) under the column headed “Company”.

“ Derivative Assets ” includes, in respect of each Chargor:

 

  (a) allotments, rights, money or property arising at any time in relation to any Shares owned or held by it by way of conversion, exchange, redemption, bonus, preference, option, conversion, consolidation, subdivision or otherwise;

 

  (b) dividends, distributions, interest and other income paid or payable in relation to any Shares owned or held by it; and

 

  (c) shares and securities offered in addition to or substitution for any Shares owned or held by it.

“ Document ” includes any transfer, renunciation, proxy, mandate, legal or other charge, mortgage, assignment, deed or other document.

“ Event of Default ” has the meaning given to that term in the Indenture.

“ Finance Documents ” means the Indenture, this Charge, each other Security Document, the Notes and other document designated as such by the Security Trustee and the Issuer.

“ Governmental Agency ” means any government or any governmental agency, semi-governmental or judicial entity or authority (including, without limitation, any stock exchange, or any self-regulatory organisation established under statute, law or regulation).

“ Hong Kong ” means the Hong Kong Special Administrative Region of the People’s Republic of China.

“ Indenture ” means an indenture dated on or about the date of this Charge in relation to issuance of up to US$300,000,000 6.00% senior secured notes due 2020 and, if and when issued, any additional notes and/or PIK notes issued under the terms of such indenture from time to time.

“ Issuer ” means Emerald Plantation Holdings Limited, an exempted company incorporated in the Cayman Islands (with registration number CT-274117) whose registered address is the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

“ Liability ” means any liability, damage, loss, cost, claim or expense of any kind or nature, whether direct, indirect, special, consequential or otherwise.

“ Nominee Undertaking ” means a nominee undertaking in the form or substantially in the form set out in Schedule 6 (Form of Nominee Undertaking) .

“ Notes ” has the meaning given to that term in the Indenture.

“ Original Shares ” means, in respect of each Company, the issued share capital of that Company beneficially owned by the relevant Chargor as at the date of this Charge, the particulars of which are set out in Schedule 2 (Particulars of the Companies and the Original Shares).

“ Party ” means a party to this Charge.

“ Receiver ” means a receiver and manager appointed under Clause 25 ( Appointment of Receiver) including (where the context requires or permits) any substituted receiver and manager.

“ Secured Obligations ” means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Issuer and each other Subsidiary Guarantor to all or any of the Secured Parties under each or any of the Finance Documents, in each case together with:

 

  (a) all costs, charges and expenses incurred by any Secured Party in connection with the protection, preservation or enforcement of its rights under any Finance Document; and

 

  (b) all money, obligations and liabilities due, owing or incurred in respect of any variations or increases in the amount or composition of the Notes provided under the Indenture or the obligations and liabilities imposed under the Indenture or the Notes.

“ Secured Party ” has the meaning given to that term in the Indenture.

“ Security ” means a mortgage, charge, pledge, lien, assignment or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

“ Shares ” means, in respect of each Company, the Original Shares and all other shares in that Company legally and/or beneficially owned by the relevant Chargor at any time while any Secured Obligations are outstanding and/or any substitute or additional shares and securities.

“ Subsidiary Guarantor ” means each Subsidiary Guarantor under, and as such term is defined in, the Indenture.

“ Tax ” means any tax, levy, impost, duty or other charge of withholding or a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

 

1.2 Unless the context otherwise requires, the interpretative provisions set out in the paragraphs below shall apply in this Charge:

 

  (a) references to any Party shall be construed so as to include that Party’s respective successors in title, permitted assigns and permitted transferees;

 

  (b) “ including ” and “ in particular ” shall not be construed restrictively but shall mean respectively “including, without prejudice to the generality of the foregoing” and “in particular, but without prejudice to the generality of the foregoing”;

 

  (c) a “ person ” includes any individual, firm, company, corporation, government, state or agency of a state or any association, joint venture, company, trust or partnership (whether or not having separate legal personality) of two or more of the foregoing;

 

  (d) “ variation ” includes any variation, amendment, accession, novation, restatement, modification, assignment, transfer, supplement, extension, deletion or replacement however effected and “ vary ” and “ varied ” shall be construed accordingly;

 

  (e) “ writing ” includes facsimile transmission legibly received except in relation to any certificate, notice or other document which is expressly required by this Charge to be signed and “ written ” has a corresponding meaning;

 

  (f) “ Charged Assets ”, “ Derivative Assets ”, “ Original Shares ”, “ Secured Obligations ” or “ Shares ” shall be deemed to include a reference to any part of them or it;

 

  (g) “ tax ” includes any form of taxation, levy, duty, charge, contribution or impost of whatever nature (including any applicable fine, penalty, surcharge or interest) imposed by any local, municipal, governmental, state, federal or other fiscal, revenue, customs and/or excise authority, body or official anywhere in the world competent to impose any of them;

 

  (h) references to this Charge or to any other document or agreement (including any Finance Document) include references to this Charge or such other document or agreement as varied in any manner from time to time, even if changes are made to the composition of the Parties to this Charge or such other document or agreement, or to nature or amount of any amounts owed under, or to the obligations of any parties to, such other document or agreement;

 

  (i) the singular shall include the plural and vice versa and any gender shall include the other genders;

 

  (j) Clauses, paragraphs and Schedules shall be construed as references to Clauses and paragraphs of, and Schedules to, this Charge;

  (k) any reference to any statute, ordinance, rule, regulation or statutory instrument or any section of it shall be deemed to include a reference to any statutory amendment, modification or re-enactment of it for the time being in force in relation to the particular circumstances;

 

  (l) the heading of any provision of this Charge is inserted for convenience and shall not affect the meaning or interpretation of that or any other provision;

 

  (m) An Event of Default is “continuing” if it has not been remedied or waived in accordance with the terms of the Indenture.

 

  (n) “ Blank share transfer form ” means a share transfer form or other instrument of transfer duly executed by two directors or a director and the Secretary of the relevant Chargor (or otherwise in accordance with applicable law and resolutions passed), together with bought and sold notes executed by the relevant Chargor (and/or its nominee(s)), where applicable, but with the sections relating to the date of transfer, the consideration and the name(s) and details of the transferee(s) left blank; and

 

  (o) Conflict of terms : if any conflict arises between the covenants and undertakings in Article 4 ( Covenants ) or Article 5 ( Consolidation, merger and sale of assets ) of the Indenture and the terms of this Charge, the covenants and undertakings set out in the Indenture shall prevail.

 

2. C OVENANT TO PAY

 

2.1 Covenant to pay: Each Chargor (as primary obligor and not merely as surety) covenants with the Security Trustee to pay or discharge, on the Security Trustee’s written demand, the Secured Obligations at the times and in the manner provided in the relevant Finance Documents.

 

2.2 Proviso: The covenants contained in this Clause 2 and the Security created by this Charge shall not extend to or include any liability or sum which would otherwise cause any such covenant or Security to be unlawful or prohibited by any applicable law.

 

2.3 Demands

 

  (a) The making of one demand under this Charge shall not preclude the Security Trustee and/or the Secured Parties from making any further demands.

 

  (b) Any third party dealing with the Security Trustee, the Secured Parties or any Receiver shall not be concerned to see or enquire as to the validity of any demand under this Charge.

 

2.4 Certification of amount: A certificate of the Security Trustee setting forth the amount of any Secured Obligations due from each Chargor shall be conclusive evidence of such amount against the Chargor in the absence of manifest error.

 

3. C HARGING CLAUSE

 

3.1 Fixed security: Each Chargor as legal and/or beneficial owner hereby assigns and agrees to assign to the Security Trustee for the benefit of the Secured Parties all benefits present and future, actual and contingent accruing in respect of its Charged Assets and all such Chargor’s right, title and interest to and in its Charged Assets including (without limitation) all voting and other consensual powers pertaining to the Charged Assets and hereby charges and agrees to charge in favour of the Security Trustee for the benefit of the Secured Parties all of its interest in the Charged Assets by way of a first fixed charge as continuing security for the payment and discharge of the Secured Obligations.

3.2 Delivery of documents: Each Chargor shall forthwith on execution of this Charge deliver to the Security Trustee the following documents (in each case, in form and substance necessary to effectuate the purpose of this Charge):

 

  (a) original of valid and duly issued share certificate(s) or other document(s) of title in respect of the Charged Assets owned or held by it (or as applicable, its nominee);

 

  (b) original of duly executed Blank share transfer form(s) in respect of the Charged Assets owned or held by it (or as applicable, its nominee);

 

  (c) an executed irrevocable proxy made in respect of the Charged Assets in favour of the Security Trustee in respect of all general meetings of the Company in the form set out in Schedule 4;

 

  (d) if applicable, a Nominee Undertaking duly executed by each Chargor’s nominee(s);

 

  (e) certified copies of the register of directors and register of charges of each Chargor;

 

  (f) certified copies of the register of members of each Company;

 

  (g) all other Documents necessary or conducive to enable the Security Trustee to register such Charged Assets in its name or in the name of its nominee(s); and

 

  (h) all Documents necessary and satisfactory under applicable law in order to effect a valid transfer of any of its Charged Assets.

 

3.3 Future transfers and changes to directors: Subject to the other provisions of this Charge, each Chargor shall (and, if applicable, shall procure that its nominee(s) will):

 

  (a) at the request of the Security Trustee, immediately upon the completion of any transfer of Charged Assets to the Security Trustee (for the benefit of the Secured Parties) and/or its nominee(s), procure the immediate registration of such transfer in the company books of the relevant Company and the entry of the Security Trustee (for the benefit of the Secured Parties) and/or its nominee(s) in the register of members of the relevant Company as the holder(s) of such Charged Assets;

 

  (b) in respect of any Charged Assets owned or held by it which become subject to this Charge after the date of this Charge:

 

  (i) immediately following such Charged Assets becoming subject to this Charge, deposit with the Security Trustee the original share certificate(s) (or other document(s) of title or relevant paper(s)) together with duly executed Blank share transfer form(s) in respect thereof; and

 

  (ii) at the request of the Security Trustee, immediately upon the completion of any transfer of such Charged Assets to the Security Trustee (for the benefit of the Secured Parties) and/or its nominee(s), procure the immediate registration of such transfer in the book of the relevant Company and the entry of the Security Trustee (for the benefit of the Secured Parties) and/or its nominee(s) in the register of members of the relevant Company as the holder(s) of such Charged Assets; and

 

3.4

Creation of security interest: To the extent that, in respect of any of the Charged Assets, Clause 3.1 ( Fixed security ) does not have the effect of creating or acknowledging a first priority fixed security interest in favour of the Security Trustee, the security interest created or acknowledged by Clause 3.1 ( Fixed security ) shall take effect as such type of

  Security as shall be required by the law applicable to the creation of a security interest in such Charged Assets for the purpose of conferring on the Security Trustee a first security interest in such Charged Assets.

 

4. P OWER OF ATTORNEY

 

4.1 Appointment of attorney : Each Chargor, by way of security and in order more fully to secure the performance of its obligations under this Charge, for so long as the Secured Obligations or any of them remain undischarged, irrevocably appoints the Security Trustee (whether or not a Receiver has been appointed) and separately any nominee and/or Receiver and/or any person deriving title under them jointly and also severally to be its attorney (with full power to appoint substitutes and to delegate), in its name and on its behalf, and as its act and deed or otherwise, at any time:

 

  (a) to complete, execute, seal, deliver and perfect any Document;

 

  (b) to do any such legal assignments and other assurances, charges, authorities and documents over the moneys, property and assets charged by this Charge;

 

  (c) to perform any acts, things or otherwise which may be required of each Chargor, under this Charge or deemed by such attorney as necessary or desirable for any purpose of this Charge or to enhance or perfect the security intended to be constituted by this Charge;

 

  (d) to exercise (or to delegate) all or any of the rights conferred on the Security Trustee and/or any Receiver by this Charge or by statute in relation to this Charge or the Charged Assets held or owned by it; or

 

  (e) to transfer legal ownership of any Charged Assets held or owned by it.

The Security Trustee shall have no obligation to undertake any of the foregoing actions, and, if it takes any such action in accordance with this Charge it shall have no liability to any Chargor to continue the same or for the sufficiency or adequacy thereof.

 

4.2 Ratification : Each Chargor ratifies and confirms all acts and things done by the Security Trustee or any Receiver, any substitute or delegate in the exercise or purported exercise of the power of attorney granted under this Clause 4.

 

4.3 Sums recoverable : All sums expended by the Security Trustee, any nominee and/or any Receiver under this Clause 4 shall be recoverable from each Chargor under Clause 14 (Expenses and indemnity).

 

5. V OTING RIGHTS AND DIVIDENDS

 

5.1 Before Charge becomes enforceable: Unless and until this Charge has become enforceable:

 

  (a) each Chargor shall, for so long as it remains the beneficial owner of the relevant Charged Assets, determine how all voting rights (and, if applicable, any right to nominate or remove a director) attaching to such Charged Assets are to be exercised;

 

  (b) each Chargor shall not permit any person other than that Chargor, the Security Trustee or its nominee(s) to be registered as holder of any Charged Assets owned or held by it or any part thereof; and

 

  (c)

all cash dividends and other money received by the Security Trustee or its nominee(s) shall, on request by the relevant Chargor, be released to that Chargor,

provided always that no Chargor shall be entitled to exercise any of the above rights if the exercise of any such rights may be in breach of the terms of the Indenture or would be reasonably likely to have an adverse effect on the value of the Charged Assets or otherwise jeopardise the Security created or purported to be created under the terms of this Charge or the interests of the Security Trustee or any of the Secured Parties under the terms of this Charge.

 

5.2 After Charge becomes enforceable: At any time after this Charge has become enforceable:

 

  (a) the Security Trustee may date and complete the Blank share transfer form(s) and other documents referred to in Clause 3.2 ( Delivery of documents ) and Clause 3.3 ( Future transfers and changes to directors ) and the Security Trustee may (but is not obliged to), in the name of each Chargor or otherwise and without any further consent, action or authority on the part of each Chargor, exercise all voting and other rights attaching to the Charged Assets, including any rights to nominate or remove a director as if the Security Trustee were the sole beneficial owner of the Charged Assets;

 

  (b) all Derivative Assets shall, if received by a Chargor or its nominee(s), be held on trust for and forthwith paid or transferred to the Security Trustee on demand; and

 

  (c) each Chargor shall (and shall procure that its nominee(s) shall) accept short notice for and attend any meeting of the holders of any Charged Assets owned or held by it, appoint proxies and exercise voting and other rights and powers exercisable by the holders of the Charged Assets owned or held by it as the Security Trustee may direct from time to time.

 

6. C ONTINUING SECURITY

This Charge shall be a continuing security notwithstanding any intermediate payment or settlement of accounts or other matters whatsoever, shall remain in full force and effect unless and until discharged in writing by the Security Trustee following the full and valid payment or discharge of the Secured Obligations and shall be in addition to and shall not prejudice or be prejudiced by any right of set-off, combination, lien or other rights exercisable by any Secured Party as banker against any Chargor or any security, guarantee, indemnity and/or negotiable instrument now or in the future held by any Secured Party.

 

7. R EPRESENTATIONS AND WARRANTIES

Each Chargor represents and warrants to the Security Trustee and each of the Secured Parties on the date of this Charge and on each date on which each Chargor acquires any additional Shares that:

 

  (a) Status:

 

  (i) it is duly constituted, validly existing and, where applicable, in good standing under the laws of the country in which it is incorporated;

 

  (ii) it is not insolvent or in liquidation or administration or subject to any other insolvency procedure;

 

  (iii) no receiver, manager, trustee, custodian or analogous officer has been appointed in respect of any part of its property, undertaking or assets; and

 

  (iv) it has the appropriate power and authority to own its property and assets and to carry on its business as it is conducted on the date of this Charge;

  (b) Capacity and approvals: it has the appropriate power to enter into and perform the terms and conditions of, and has taken all necessary action to authorise the execution, delivery and performance of, this Charge;

 

  (c) Proper execution: this Charge has been properly executed by it and the obligations expressed as being assumed by it under this Charge are valid and binding upon it and enforceable in accordance with their terms;

 

  (d) Compliance with legal restrictions: none of the provisions, covenants and obligations on its part contained in this Charge contravenes any of the provisions of its memorandum or articles of association or other constitutional documents and neither this Charge nor its performance will infringe any law or obligation binding upon it;

 

  (e) No restrictions: there are no provisions in the memorandum or articles of association or other constitutional documents of any Company of which it is a shareholder or any other agreement or Document which restrict the transfer of any Shares or that Chargor’s ability to enter into this Charge, including any rights of first refusal, pre-emption rights, requirements for consent or any rights restricting or affecting the voting rights or the disposal of any of the Shares, or (if such provisions exist) they have been varied or waived to enable this Charge to be enforced free from any such restriction or right;

 

  (f) Other approvals for this Charge: no authorisation of or registration with any governmental, judicial or other third party nor payment of any stamp, registration or other tax is required or desirable in connection with the execution, performance, validity, enforceability or admissibility in evidence of this Charge, other than registration of this Charge under Sections 162 and 163 of the BC Act (where the relevant Chargor is a business company incorporated or registered under the BC Act) or Section 54 of the Companies Law of the Cayman Islands (where the relevant Chargor is incorporated in the Cayman Islands as an exempted company), provided that if a Chargor is incorporated in the Cayman Islands as an exempted company, this Charge is executed outside of the Cayman Islands and is not brought into the Cayman Islands;

 

  (g) Called up and paid up: the Original Shares are, and any Shares deposited after the date of this Charge will be, duly authorised, issued, fully called up and fully paid-up and the Original Shares represent the entire issued share capital or all issued shares of the relevant Company at the date of this Charge;

 

  (h) Legal and beneficial owner: subject to this Charge, the Original Shares are legally and/or beneficially (as the case may be) owned by each Chargor, and any Shares acquired by each Chargor after the date of this Charge shall (subject to this Charge) be legally and/or beneficially (as the case may be) owned by the relevant Chargor, and in each case free from any option, equity, trust or Security; and

 

  (i) No Security/guarantees: except as previously disclosed in writing to the Security Trustee with express reference to this Clause, there is no Security affecting any Charged Assets other than any Security created by this Charge, and no Chargor has given any guarantee, indemnity or other assurance against loss in relation to the liability of any person other than in favour of the Secured Parties or as otherwise permitted under the terms of the Indenture.

 

8. C OVENANTS

 

8.1

Negative pledge and other restrictions: Each Chargor covenants with the Security Trustee for the benefit of the Secured Parties that it shall not, without the prior written

  consent of the Security Trustee and to the extent not otherwise permitted under the terms of the Indenture:

 

  (a) enter into a single transaction or a series of transactions to sell, transfer, assign or dispose of, or grant any interest in, or otherwise deal with, any of the Charged Assets owned or held by it, or part with possession or ownership of them, or purport or agree to do so;

 

  (b) create, or agree or attempt to create, or permit to arise or subsist, any Security, equity, option, trust or other third party right whatsoever over or affecting any Charged Assets owned or held by it or give any guarantee or indemnity to or for the benefit of any person or otherwise voluntarily assume any liability, whether actual or contingent, in respect of any obligation of any other person, except in favour of the Security Trustee or any Secured Party;

 

  (c) cause or permit any rights attaching to Charged Assets owned or held by it to be varied or abrogated;

 

  (d) cause or permit any of the Charged Assets owned or held by it to be consolidated, sub-divided or converted or the other capital of any Company to which it is a shareholder to be re-organised, exchanged or repaid;

 

  (e) cause or permit any amendment or change to be made to the memorandum or articles of association or other constitutional documents of any Company to which it is a shareholder, other than in accordance with paragraph (e) of Clause 7 ( Representations and warranties ); or

 

  (f) do or cause or permit to be done anything which may in any way depreciate, jeopardise or otherwise prejudice the value to the Security Trustee and/or any Secured Party of the Charged Assets owned or held by it or the Security created by this Charge.

 

8.2 Positive Covenants: Each Chargor covenants with the Security Trustee for the benefit of the Secured Parties that it shall, unless otherwise permitted under the terms of the Indenture:

 

  (a) remain at all times during the continuance of this Charge the sole legal and/or beneficial and/or registered (as the case may be) owner of the Charged Assets owned or held by it;

 

  (b) procure that the Charged Assets owned or held by it at all times represent a percentage of the issued share capital or total number of issued shares of the relevant Company at least equal to the percentage owned or held as at the date of this Charge (or, if later, the date on which such Charged Assets become subject to the terms of this Charge);

 

  (c) make timely filing and registration of this Charge with each officer, registry and/or governmental or non-governmental body necessary in order to preserve, perfect and enforce the Security created by this Charge in the place of incorporation of each Chargor and each Company; and

 

  (d) on or before the date of this Charge, deliver, or cause to be delivered, to the Security Trustee a certified copy of resolutions of the members of the relevant Companies amending and restating the memorandum and articles of association of the Companies to expressly require without limitation:

 

  (i) registration by the board of directors of such Company of any transfer of the Shares pursuant to this Charge without delay;

  (ii) the removal or disapplication of lien, call and forfeiture provisions in respect of the Shares; and

 

  (iii) recognition of the Security created by this Charge and the irrevocable nature of any proxy granted to the Security Trustee in connection therewith.

 

9. P OWERS OF THE S ECURITY T RUSTEE

 

9.1 When enforceable: This Charge and the Security constituted by this Charge shall be immediately enforceable if an Event of Default has occurred under the Indenture and is continuing.

 

9.2 Receiver’s powers : All powers of the Receiver conferred by this Charge may be exercised by the Security Trustee after this Charge has become enforceable. In that event, paragraph (i) of Clause 25.5 shall be read and construed as if the words “be charged on the Charged Assets” were substituted for the words “be deemed an expense properly incurred by the Receiver”.

 

9.3 Wide construction: The enforcement powers of the Security Trustee under this Charge shall be construed in the widest possible sense and all Parties intend that the Security Trustee shall have as wide and flexible a range of enforcement powers as may be conferred (or, if not expressly conferred, as is not restricted) by any applicable law.

 

9.4 Suspense account: All monies received by the Security Trustee on the realisation or enforcement of the Security constituted by this Charge may be applied by the Security Trustee in or towards the discharge of the Secured Obligations in accordance with the terms of the Indenture (and the Security Trustee may, pending the payment to the Security Trustee of all of the Secured Obligations, place and keep to the credit of a separate or suspense account any money so received for so long and in such manner as the Security Trustee may determine without any obligation to apply that money or any of it towards the discharge of the Secured Obligations) with any surplus being paid in accordance with the terms of the Indenture.

 

9.5 No liability of Security Trustee: The Security Trustee shall have no liability of any kind in connection with this Charge except to the extent of any losses arising out of its gross negligence or wilful misconduct in the exercise of its rights hereunder. Notwithstanding the foregoing, under no circumstances shall the Security Trustee be liable for consequential, special, punitive or indirect damages, regardless of being warned of the possibility thereof ahead of time and regardless of the case of action.

 

9.6 No duty to enquire: No person dealing with the Security Trustee, its brokers or agents, shall be concerned to enquire whether this Charge has become enforceable, whether any power exercised or purported to be exercised has become exercisable, whether any Secured Obligations remain due, as to the necessity or expediency of any terms subject to which any sale or other disposal of any Charged Assets shall be made, or otherwise as to the propriety or regularity of any sale or other disposal of any Charged Assets, or to see to the application of any money paid to the Security Trustee, its brokers or agents, and such dealings shall be deemed to be within the powers conferred by this Charge and to be valid accordingly.

 

9.7 Exercised power of sale:

 

  (a)

The Security Trustee shall incur no liability as a result of the sale of any Charged Assets, or any part thereof, at any private or public sale conducted pursuant to this Charge in accordance with the requirements of applicable laws. With regards to private sales, each Chargor hereby waives any claims against the Security Trustee and the other Secured Parties arising by reason of the fact that the price

  at which the Charged Assets may have been sold at such a private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if the first offer received is accepted and the Charged Assets are not offered to more than one offeree, provided that any such private sale is conducted in accordance with applicable laws and this Charge.

 

  (b) Each Chargor hereby agrees that in respect of any sale of any of the Charged Assets pursuant to the terms of this Charge, the Security Trustee is hereby authorised to comply with any limitation or restriction in connection with such sale as it may be advised by its legal counsel is necessary:

 

  (i) in order to avoid any violation of applicable laws; or

 

  (ii) in order to obtain any required approval of the sale or of the purchaser or by any governmental authority or official,

and each Chargor further agrees that such compliance shall not, in and of itself, result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Security Trustee be liable or accountable to any Chargor for any discount allowed by reason of the fact that such Charged Asset is sold in compliance with any such limitation or restriction.

 

10. F URTHER ASSURANCE

Each Chargor shall at any time necessary or advisable under applicable law, and also from time to time if required by the Security Trustee promptly complete, sign, seal, execute and deliver all Documents, give such instructions or directions and do all acts and things:

 

  (a) perfecting, protecting, improving or maintaining the Security Trustee’s title to and Security over any of the Charged Assets owned or held by it;

 

  (b) vesting or enabling the Security Trustee to vest any of the Charged Assets owned or held by it in itself or its nominee(s) or in any purchaser or to facilitate the sale or other disposal of any of the Charged Assets owned or held by it; or

 

  (c) the exercise by the Security Trustee of any of the rights or powers or remedies attaching to the Charged Assets owned or held by it or conferred on the Security Trustee by this Charge,

such Documents to be prepared by or on behalf of the Security Trustee at the cost of the Chargors and to be in such form as the Security Trustee may require.

Notwithstanding anything to the contrary contained herein or under applicable law, but without limiting the rights and authorisations of the Security Trustee hereunder, the Security Trustee shall not be obliged to:

 

  (i) prepare, record, file, re-record, or re-file any financing statement, perfection statement, continuation statement or other instrument in any public office or otherwise ensure the perfection or maintenance of any security interest granted pursuant to, or contemplated by any Finance Document;

 

  (ii) take any necessary steps to preserve rights against any parties with respect to any Charged Assets; or

 

  (iii) take any action to protect against any diminution in value of any Charged Assets.

11. A DDITIONAL OR FUTURE S ECURITY

 

11.1 Additional security: This Charge is in addition to and shall not affect (or be affected by) any right of set-off, combination, lien or other rights exercisable by the Security Trustee and/or any of the Secured Parties as banker against each Chargor or any guarantees, indemnities, negotiable instruments and/or Security whatsoever which the Security Trustee and/or any of the Secured Parties may hold now or in the future for any part of the Secured Obligations and may be enforced without first having recourse to any such guarantee, indemnity, negotiable instrument or Security.

 

11.2 New account: I f the Security Trustee receives or is deemed to have received notice of any Security or any other interest affecting any Charged Assets:

 

  (a) the Security Trustee may open a new account for each Chargor and, if it does not, it shall be deemed to have done so at the time it received or is deemed to have received such notice; and

 

  (b) all payments received by the Security Trustee from each Chargor or any other person in respect of the Secured Obligations after the Security Trustee receives such notice shall be credited, or deemed to have been credited, to the new account and shall not operate to reduce the amount of the Secured Obligations at the time the Security Trustee received such notice.

 

11.3 Order of discharge: The Security Trustee and/or any Secured Party may obtain discharge of the Secured Obligations from any source in any order without releasing or affecting the liability of each Chargor under this Charge or the Security created or acknowledged by this Charge and may enforce this Charge before or after resorting to any such other means of discharge without entitling each Chargor to any benefit.

 

12. W AIVER , FORBEARANCE , SEVERABILITY AND PARTIAL INVALIDITY

 

12.1 No waiver: No failure to exercise and no delay on the part of the Security Trustee in exercising any right, remedy, power or privilege under this Charge and no course of dealing between the Parties and/or any Secured Party shall be construed or operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other or further exercise of it or the exercise of any other right, remedy, power or privilege. The rights and remedies provided in this Charge are cumulative and not exclusive of any rights or remedies provided by law or under any of the Finance Documents.

 

12.2 Illegality, invalidity, unenforceability: If any provision of this Charge is or becomes illegal, invalid or unenforceable, the other provisions and the remainder of the affected provision shall continue to be valid.

 

12.3 Severability: No provision of this Charge shall be avoided or invalidated by reason only of one or more other provisions being invalid or unenforceable.

 

13. V ARIATION OF TERMS

No variation, deletion, replacement of or supplement to this Charge or any of its terms shall be valid or effective unless such variation, deletion, replacement and/or supplement have been made in writing and signed by the Security Trustee on behalf of the Secured Parties and each Chargor.

 

14. E XPENSES AND INDEMNITY

 

14.1

Transaction expenses: Each Chargor shall promptly on demand pay to the Security Trustee the amount of all costs and expenses (including legal fees) reasonably incurred by the Security Trustee (or by any Receiver or delegate) in connection with the

  negotiation, preparation, printing, execution and perfection of this Charge or any other document referred to in this Charge and the completion of the transactions and perfection of the Security contemplated in this Charge.

 

14.2 Amendment costs: If any Chargor requests an amendment, waiver or consent, such Chargor shall within five Business Days of demand reimburse the Security Trustee (or any Receiver or delegate) for the amount of all costs and expenses (including legal fees) reasonably incurred by the Security Trustee (or any Receiver or delegate) in responding to, evaluating, negotiating or complying with that request or requirement.

 

14.3 Enforcement and preservation costs: Each Chargor shall within five Business Days of demand pay to the Security Trustee and each other Secured Party, the amount of all costs and expenses (including legal, valuation, accountancy and consultancy fees and disbursements and out-of-pocket expenses) and any indirect tax thereon incurred by the Security Trustee and/or any other Secured Party in connection with the exercise, enforcement and/or preservation of or the release of any rights under this Charge (or any documents contemplated by this Charge) or any proceedings instituted by or against the Security Trustee, in any jurisdiction, as a consequence of taking or holding this Charge or enforcing these rights.

 

14.4 Indemnity for Liabilities : Each Chargor shall also, promptly following the Security Trustee’s demand, reimburse or pay to the Security Trustee, its employees or agents, on demand (on the basis of a full indemnity) the amount of all Liabilities incurred by the Security Trustee, its employees or agents, in connection with:

 

  (a) any default or delay by that Chargor in the performance of any of its obligations under this Charge;

 

  (b) the exercise, or the attempted or purported exercise, by or on behalf of the Security Trustee of any of its powers or any other action taken by or on behalf of the Security Trustee with a view to or in connection with the recovery of the Secured Obligations, the enforcement of the Security created by this Charge or for any other purpose contemplated in this Charge;

 

  (c) the carrying out or consideration of any other act or matter which the Security Trustee may consider to be conducive after the occurrence of an Event of Default to the preservation, improvement or benefit of any Charged Asset; and

 

  (d) any stamp duty or similar tax which may be payable as a result of the execution or performance of this Charge.

 

14.5 Without prejudice : The terms of this Clause 14 shall operate without prejudice to the terms of the Indenture (including, for the avoidance of doubt, any indemnity or right or reimbursement granted to or in favour of the Security Trustee under Section 10.07 ( Additional Security Trustee Terms ) of the Indenture).

 

14.6 Joint and Several : The obligations of each Chargor under this Clause 14 shall be joint and several and continuing and shall survive the termination of this Charge and the resignation or removal of the Security Trustee.

 

15. S TAMP DUTY

Each Chargor shall pay all present and future stamp, registration and similar taxes or charges which may be payable or determined to be payable in any applicable jurisdiction in connection with the execution, delivery, performance or enforcement of this Charge or any judgment given in connection with this Charge and shall, jointly and severally, indemnify the Security Trustee, each Secured Party and each Receiver against any and

all liabilities including penalties with respect to or resulting from its delay or omission to pay any such stamp, registration and similar taxes or charges.

 

16. T AX GROSS - UP

 

16.1 Definitions

 

  (a) In this Clause 16:

“ Tax Deduction ” means a deduction or withholding for or on account of Tax from a payment under this Charge.

 

  (b) In this Clause 16 a reference to “determines” or “determined” means a determination made in the absolute discretion of the person making the determination.

 

16.2 Tax gross-up

 

  (a) Each Chargor shall make all payments to be made by it in accordance with the terms of this Charge without any Tax Deduction, unless a Tax Deduction is required by law.

 

  (b) Each Chargor shall promptly upon becoming aware that it must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Security Trustee accordingly.

 

  (c) If the Tax Deduction is required by law to be made by any Chargor, the amount of the payment due from that Chargor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

 

  (d) If a Chargor is required to make a Tax Deduction, that Chargor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

 

  (e) Within thirty days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the relevant Chargor shall deliver to the Security Trustee evidence reasonably satisfactory to the Security Trustee that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

 

17. I NTEREST ON OVERDUE AMOUNTS

 

17.1 Default interest: Any overdue amounts not paid in accordance with this Charge when due shall carry interest at the rate and in accordance with the terms contained in the relevant Finance Document in relation to overdue sums or at such other rate as may be agreed between the relevant Chargor and the Secured Parties from time to time. In each case, interest shall accrue on a day to day basis to the date of irrevocable and unconditional repayment in full and, if unpaid, shall be compounded on the terms so agreed or (in the absence of such agreed terms) with quarterly rests on the Security Trustee’s and/or the relevant Secured Party’s usual quarterly interest days. Interest shall continue to be charged and compounded on this basis after as well as before any demand or judgment.

 

17.2 When payable: Clause 17.1 above shall not apply to the extent that default interest on such amount is payable pursuant to the terms of the Indenture and/or the Notes and itself constitutes part of the Secured Obligations.

18. C URRENCY INDEMNITY

If:

 

  (a) for any reason any amount payable by each Chargor under this Charge is paid or recovered by any Secured Party in a currency (the “ payment currency ”) other than that in which the Secured Obligations are denominated; and

 

  (b) the payment made to such Secured Party in the payment currency, when converted at such Secured Party’s then applicable rate of exchange into the currency in which the Secured Obligations are denominated, is less than the amount payable in the currency in which the Secured Obligations are denominated,

then each Chargor shall, jointly and severally, as a separate and independent obligation, fully indemnify such Secured Party within ten days of demand against the amount of the shortfall. For the purposes of this Clause, the expression “applicable rate of exchange” means the rate at which such Secured Party purchases the currency in which the Secured Obligations are denominated with the payment currency, taking into account any costs associated with the exchange.

 

19. I NFORMATION

The Security Trustee may from time to time seek from any other banker or finance provider to each Chargor such information about each Chargor and its affairs as the Security Trustee may think fit and each Chargor shall direct any such third party to provide such information to the Security Trustee and agrees to provide such further authority for this purpose as the Security Trustee may from time to time require. If the Security Trustee obtains any such information it shall not have any obligation to inform any Chargor or Company thereof.

 

20. D ISCHARGE AND RELEASE

 

20.1 No avoidance or reduction: Any settlement or discharge between the Security Trustee or any of the Secured Parties and any Chargor in respect of the Secured Obligations shall be subject to the condition that no Security or payment to the Security Trustee or any of the Secured Parties by that Chargor or any other person shall be avoided or reduced by virtue of any provisions or enactments relating to insolvency or otherwise. If any such Security or payment shall be so avoided or reduced, the Security Trustee or any of the Secured Parties shall nevertheless be entitled to recover the value or amount thereof subsequently from each Chargor and to exercise its rights under this Charge as if such settlement or discharge had not been effected. The Security Trustee and such Secured Party may retain any Security held by them for the obligations of each Chargor under this Charge until the expiry of the period of one month plus the maximum statutory period under the applicable law within which such Security or payment can be avoided, reduced or invalidated by virtue of any such provision or enactment.

 

20.2 Concession or settlement of claims: In the event of any claim being made or proceedings being taken against the Security Trustee or any other Secured Party the effect of which, if successful, would be the avoidance or reduction of any such Security or payment and whether or not each Chargor shall have been made a party thereto, the Security Trustee or such other Secured Party shall have absolute discretion to concede or settle the same on such terms as it may think fit whereupon Clause 20.1 ( No avoidance or reduction ) shall have the effect as if such concession or settlement had been ordered by the court (without possibility of appeal) and each Chargor shall, jointly and severally, in addition pay the Security Trustee (for the benefit of the relevant Secured Parties) all costs, charges and expenses (on a full indemnity basis) arising out of or in connection with any such claim or proceedings.

20.3 Consolidation of Security: Any restrictions on the consolidation of Security shall be excluded to the fullest extent permitted by law and the Security Trustee shall, so far as it is lawful and subject to other provisions of this Charge, be entitled to consolidate this Charge with any other Security whether in existence on the date of this Charge or in the future.

 

21. C OUNTERPARTS

This Charge may be executed in any number of counterparts and this will have the same effect as if the signatures on the counterparts were on a single copy of this Charge.

 

22. T RANSFER AND DISCLOSURE

 

22.1 Transfer by Chargors: No Chargor may assign or transfer any of its rights or obligations under this Charge.

 

22.2 Transfer by Secured Parties : Any Secured Party may at any time assign and transfer all or any part of its rights under this Charge to any person to which it has assigned and transferred the whole or part of its rights under the Notes in accordance with the terms of the Indenture and the Notes.

 

22.3 Transfer by Security Trustee : The Security Trustee may assign and transfer all of its rights and obligations under this Charge to any replacement Security Trustee appointed in accordance with the Indenture. Upon such assignment and transfer becoming effective, the replacement Security Trustee shall be, and be deemed to be, acting as agent and trustee for each of the Secured Parties (including itself) for the purposes of this Charge in replacement of the previous Security Trustee.

 

22.4 Disclosure of information : Each Chargor irrevocably authorises the Security Trustee and each Secured Party, at its discretion, at any time or from time to time, to disclose any information concerning each Chargor, this Charge and the Secured Obligations to:

 

  (a) any associated company of the Security Trustee or any of the Secured Parties or;

 

  (b) any prospective transferee or grantee referred to in Clause 22.3 ( Transfer by Security Trustee ) and any other person considered by the Security Trustee or any of the Secured Parties to be concerned in the relevant transaction or prospective transaction; or

 

  (c) any person who, as part of the arrangements made in connection with any transaction referred to in Clause 22.3 ( Transfer by Security Trustee) , requires such information after the transaction has been effected.

The above authority is without prejudice to the right of disclosure of the Security Trustee or any of the Secured Parties implied by law.

 

23. N OTICES

 

23.1 Delivery: Any notice, document or other communication to be given or delivered under or in connection with this Charge shall be in writing and, in the case of any notice, document or communication to a Chargor, shall be deemed to have been duly served on, given or delivered to or made if it is left at the authorised address of that Chargor, posted by pre-paid registered post addressed to that Chargor at such address, or sent by facsimile transmission to the facsimile number referenced in Clause 23.2 ( Addresses ) below and shall be deemed to have been received if:

 

  (a) personally delivered, at the time of delivery;

 

  (b) sent by mail, on the date of posting; or

  (c) sent by facsimile transmission, on receipt by the sender of a facsimile transmission report (or other appropriate evidence) confirming that the facsimile has been transmitted to the addressee.

 

23.2 Addresses: For the purposes of this Clause the authorised address of each Party shall be the address (including the details of the facsimile number and person for whose attention a notice, document or communication is to be addressed) identified with its name at the end of this Charge or such other address (and details) as that Party may notify to each other Party in writing from time to time in accordance with the requirements of this Clause.

 

23.3 Effectiveness: Any notice, document or communication to be made or delivered to the Security Trustee will be effective only when actually received by the Security Trustee and then only if it is expressly marked for the attention of the department or officer of the Security Trustee as identified above (or any substitute department or officer as the Security Trustee shall specify for this purpose).

 

23.4 English language: Each notice, document or communication between the Parties shall be either in English or accompanied by a translation into English, which is certified as being a true and accurate translation.

 

24. S ET - OFF

The Security Trustee may (but is not obliged to) retain any money standing to the credit of any Chargor with the Security Trustee in any currency upon any account (whether or not in that Chargor’s name) or otherwise as cover for any Secured Obligations and that Chargor agrees that the Security Trustee may at any time or times without notice to each Chargor combine or consolidate any or all sums of money now or subsequently standing to that Chargor’s credit upon any such account with all or such part of the Secured Obligations as the Security Trustee may determine (whether presently payable or not) and the Security Trustee may purchase with any such money any other currency required to effect such combination or consolidation.

 

25. A PPOINTMENT OF R ECEIVER

 

25.1 Appointment: At any time after this security has become enforceable or if so requested by any Chargor, the Security Trustee may appoint in writing any person or persons to be a receiver and manager or receivers and managers of all or any part of the Charged Assets, as the Security Trustee may choose in its entire discretion.

 

25.2 Severability: Where more than one Receiver is appointed, the appointees shall have power to act severally (unless the Security Trustee shall specify to the contrary) in relation to the Charged Assets. An appointment over part only of the Charged Assets shall not preclude the Security Trustee from making a subsequent appointment of a Receiver over any part of the Charged Assets over which an appointment has not previously been made by the Security Trustee.

 

25.3 Receiver’s remuneration: The Security Trustee may from time to time agree with the Receiver the remuneration of the Receiver and remove the Receiver from all or any part of the Charged Assets of which he is the Receiver and after the Receiver has vacated office or ceased to act in respect of any of the Charged Assets appoint a further Receiver over all or any part in respect of which he shall have ceased to act.

 

25.4 Receiver’s agency: The Receiver shall be the agent of the relevant Chargor (who shall be solely liable for his acts, defaults and remuneration), unless and until that Chargor goes into bankruptcy or liquidation and thereafter he shall act as principal and shall not become the agent of the Security Trustee or any of the Secured Parties. The Security Trustee shall not be responsible, at any time, for the actions of the Receiver.

25.5 Powers of a Receiver: In addition to those powers conferred by law, the Receiver shall have and be entitled to exercise in relation to each Chargor concerned all the powers set out below:

 

  (a) to take possession of the Charged Assets, and to require payment to it of all Derivative Assets including without limitation, to complete any instruments of transfer and to procure the transfer of the Charged Assets into the name of the Receiver or its nominee and, if necessary, take possession of and collect the share certificates and/or other documents of title relating to the Charged Assets, at the cost and risk of the Chargors;

 

  (b) to sell, transfer, assign, exchange or otherwise dispose of or realise the Charged Assets to any person either by public offer or auction, tender or private contract and for a consideration of any kind (which may be payable or delivered in one amount or by instalments spread over a period or deferred);

 

  (c) to borrow or raise money, either unsecured or on the security of the Charged Assets (either in priority to the Charges or otherwise);

 

  (d) to exercise and do (or permit a Chargor or any nominee of it to exercise and do) all such rights and things as the Receiver would be capable of exercising or doing if it were the absolute beneficial owner of the Charged Assets (including but not limited to exercising all voting and other rights attaching to Charged Assets owned by the relevant Chargor and calling up all or any portion of the uncalled capital of the relevant Chargor);

 

  (e) to settle, adjust, refer to arbitration, compromise and arrange any claims, accounts, disputes, questions and demands with or by any person relating to the Charged Assets;

 

  (f) to bring, prosecute, enforce, defend and abandon actions, suits an proceedings in relation to the Charged Assets;

 

  (g) to make any arrangement or compromise with the Security Trustee or any of the Secured Parties as he shall think fit;

 

  (h) to appoint managers, officers and agents for the above purposes at such reasonable remuneration as the Receiver may determine;

 

  (i) to redeem any prior Security and to settle and pass the accounts of the Security holder, and any accounts so settled and passed shall (subject to any manifest error) be conclusive and binding on each Chargor and the money so paid shall be deemed an expense properly incurred by the Receiver;

 

  (j) to pay the proper administrative charges of the Security Trustee and/or any of the Secured Parties in respect of time spent by their agents and employees in dealing with matters raised by the Receiver or relating to the receivership of each Chargor; and

 

  (k) to do all such other acts and things as may be considered by the Receiver to be incidental or conducive to any of the above matters or powers or otherwise incidental or conducive to the preservation, improvement or realisation of the Charged Assets.

 

26. S ECURITY T RUSTEE

The provisions of Sections 10.04 ( Authorization of Actions to be Taken by the Trustee under the Security Documents ), 10.05 ( Authorization of Receipt of Funds by the Security Trustee Under the Security Documents ), 10.06 ( Release of the Collateral ) and 10.07

( Additional Security Trustee Terms ) of the Indenture shall apply to the Security Trustee’s actions, rights, obligations, powers and duties under this Charge as if set out in this Charge in full. The Security Trustee shall be entitled to exercise its rights, powers, authorisations and duties under the terms of this Charge through designees, agents or co-Security Trustees appointed pursuant to the Indenture. The permissive authorisations, entitlements, powers and rights granted to the Security Trustee hereunder shall not be construed as duties. The Security Trustee shall be entitled to refuse to take or refrain from taking any discretionary action or exercise any discretionary powers set forth in this Charge until it has received with respect thereto satisfactory written direction in accordance with the terms of the Indenture and, if necessary, satisfactory indemnification.

 

27. G OVERNING L AW

This Charge shall be governed by and construed in accordance with the laws of the Cayman Islands.

 

28. E NFORCEMENT

 

28.1 Jurisdiction

 

  (a) The courts of the Cayman Islands have non-exclusive jurisdiction to settle any dispute arising out of or in connection with this Charge (including a dispute regarding the existence, validity or termination of this Charge) (a “ Dispute ” ).

 

  (b) Subject to paragraph (c) below, the Parties agree that the courts of the Cayman Islands are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.

 

  (c) This Clause 28 ( Enforcement ) is for the benefit of the Secured Parties only. As a result, no Secured Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Secured Parties may take concurrent proceedings in any number of jurisdictions.

 

  (d) Each Chargor irrevocably waives any objection which it may have now or in future to the laying of the venue of any proceedings in the courts of the Cayman Islands and any claim that any such proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgment in any such proceedings brought in such courts shall be conclusive and binding upon it and may be enforced in any other jurisdiction.

 

28.2 Service of process

 

  (a) Without prejudice to any other mode of service allowed under any relevant law, each Chargor (other than a Chargor incorporated in the Cayman Islands) irrevocably designates, appoints and empowers Emerald Plantation Holdings Limited of the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands (or such other address in the Cayman Islands as each Chargor may notify to the Security Trustee) as their agent to accept service of process in such jurisdiction in any proceedings arising out of or in connection with this Charge (the “ Proceedings ”) and agrees that failure by such agent to give notice of such service of process to the Chargors shall not impair or affect the validity of such service or any judgment based on it (and Emerald Plantation Holdings Limited by its execution of this Charge, accepts that appointment).

 

  (b) Emerald Plantation Holdings Limited expressly agrees and consents to the provisions of Clause 26 ( Governing Law ) and of Clause 28 ( Enforcement ).

  (c) Each Chargor further consents to the service of process out of the courts of the Cayman Islands in any such Proceedings by the mailing to it of copies by registered or certified airmail, postage prepaid.

 

28.3 Waiver of Immunity

Each Chargor irrevocably and unconditionally:

 

  (a) agrees that in any legal proceedings against it or its assets in connection with this Charge, no immunity from such legal proceedings (which shall include suit, attachment prior to judgment, other attachment, the obtaining of judgment, execution or other enforcement) shall be claimed by or on behalf of it or with respect to its assets;

 

  (b) waives any such right of immunity which it or its assets now has or may in the future acquire; and

 

  (c) consents generally in respect of such proceedings to the giving of relief or the issue of any process in connection with such proceedings including the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order of judgment which may be made or given in such proceedings.

I N W ITNESS whereof each Chargor have executed this Charge as a deed on the day and year first above written.

S CHEDULE 1

Chargors

 

Chargor

  

Jurisdiction

  

Registration Number

Emerald Plantation Holdings Limited    Cayman Islands    CT-274117
Sino-Capital Global Inc.    British Virgin Islands    218658

S CHEDULE 2

Particulars of the Companies and the Original Shares

 

Chargor/Jurisdiction

  

Company

  

Place of

Incorporation of the

Company

  

Number of Original

Shares in the

Company

Emerald Plantation Holdings Limited    Emerald Plantation Group Limited    Cayman Islands    9,001
Sino-Capital Global Inc.    Sinowood Limited    Cayman Islands    1,000,001

S CHEDULE 3

Form of Nominee Undertaking

 

To:    Computershare Trust Company, N.A (as Security Trustee)
From:    [ Name of the Nominee ]
   [ Address ]
Dated:    [***]

Dear Sirs

 

1. [I]/[We] refer to the share charge of even date (as may be amended from time to time, the “ Charge ”) between [ Name of the relevant Chargor ] (the “ Chargor ”) and yourselves. Terms defined in the Charge have the same meanings when used in this Nominee Undertaking.

 

2. [I]/[We] declare that [I]/[we] hold the securities listed in the Appendix of this Nominee Undertaking (the “ Nominee Securities ”) to your order subject to the terms and conditions of the Charge.

 

3. [I]/[We] will notify you promptly of the contents of any communication or document received by [me]/[us] as holder of the Nominee Securities.

 

4. [I]/[We] will, after [I]/[we] have received from you written notice informing [me]/[us] that you are entitled to enforce the Charge (such notice to be conclusive and binding on [me]/[us] for all purposes) (an “ Enforcement Notice ”), promptly pay to you, at the expense of the Secured Parties, any dividends or other money received by [me]/[us] in respect of the Nominee Securities and [I]/[we] hereby declare [myself]/[ourselves] as trustee of such dividends or other money to hold, pending such payment, upon trust to pay to you in the manner aforesaid.

 

5. [I]/[We] will, after [I]/[we] have received an Enforcement Notice, exercise or refrain from exercising, all of [my]/[our] voting rights in respect of the Nominee Securities in accordance with your instructions. Prior to receipt of an Enforcement Notice, [I]/[we] will not exercise any voting rights or all other rights forming part of the Nominee Securities in a manner which is inconsistent with the terms of the Charge.

 

6. [I]/[We] will, promptly upon receipt by [me]/[us] of any Derivative Assets in respect of the Nominee Securities, at the expense of the Secured Parties, deliver to you all certificates and other documents constituting or evidencing title to such Derivative Assets together with transfers relating to them complying with the provisions of Clause 3 ( Charging clause ) of the Charge and otherwise in such manner as you reasonably require and will promptly give such instructions or directions as you reasonably require relating to any Nominee Securities or their Derivative Assets to protect or preserve your security.

 

7.

In the event that [I]/[we] fail to promptly perform any of my obligations under this Nominee Undertaking, [I]/[We] irrevocably appoint you by way of security as [my]/[our] attorney (with full power to appoint substitutes and to delegate), in [my]/[our] name and on [my]/[our] behalf and as [my]/[our] act and deed, at any time to execute, deliver and perfect any Document, perform any lawful act, or give any lawful instructions which may be required by [me]/[us] under this Nominee Undertaking or deemed by such attorney necessary to perfect the security intended to be constituted by the Charge or this Nominee Undertaking or to transfer the legal ownership of any of the Nominee Securities

  or their Derivative Assets and [I]/[We] shall ratify and confirm all acts and things lawfully done by you, any substitute or delegate in the exercise or purported exercise of this power of attorney, all at the expense of the Secured Parties. You shall have no other recourse against [me]/[us] in the event of my failure to perform my obligations under this Nominee Undertaking, other than by taking appointment as [my]/[our] attorney as described in the foregoing sentence.

 

8. [I]/[We] hereby waive any right [I]/[we] may have under the articles of association of [ Name of the Company ] or otherwise to purchase the Nominee Securities or any of them in the event that they are sold or otherwise disposed of pursuant to the Charge.

 

9. This Nominee Undertaking, and all of [my]/[our] obligations hereunder, will terminate upon termination of the Charge. Upon any such termination, you will, at [my]/[our] expense, execute and deliver to [me]/[us] such documents as [I]/[we] may reasonably request in writing to evidence such termination.

 

10. This Nominee Undertaking shall be governed by and construed in accordance with the laws of the Cayman Islands.

I N WITNESS whereof [I]/[we] have executed this Nominee Undertaking as a deed on the day and year first before written.

 

Signed, sealed and delivered    )         
as a deed by [ Name of individual    )      

 

   L.S.
nominee ] in the presence of:-    )         

 

Witness’ signature  

 

 
Full name  

 

 
Address  

 

 
Occupation  

 

 

OR

 

The common seal of    )         
[ Name of the nominee ] was    )          C.S.
affixed in the presence of:-    )         

 

Director’s signature  

 

 
Full name  

 

 
Secretary’s/Director’s signature  

 

 
Full name  

 

 

OR

 

Signed, sealed and delivered    )    Authorised signatory   

 

   L.S.

as a deed for and on behalf of    )            
[ Name of the nominee ]    )       Full name       
by its attorney(ies) in the    )         
presence of:-    )       Authorised signatory           L.S.   
              
   Full name              

 

Witness’ signature  

 

 
Full name  

 

 
Address  

 

 
Occupation  

 

 

A PPENDIX TO N OMINEE U NDERTAKING

The Nominee Securities

[***] [ordinary] shares of [HK$][***] each in the capital of [ Name of the Company ]

S CHEDULE 4

Form of Proxy

[Name of Company] (the “Company”)

P R O X Y

The undersigned, [ — ], of [ — ], holder of [all/ — ] of the issued and outstanding shares in the Company hereby irrevocably appoints [ — ] of [ — ] as our proxy to vote on our behalf at any meeting of shareholders or to execute on our behalf any written resolution of the shareholder(s) of the Company.

 

EXECUTED AS A DEED this [ — ] day of [ — ], [ — ].
[For and on behalf of [ — ]] By [ — ]

 

E XECUTION P AGE

The Chargors

 

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Emerald Plantation Holdings Limited    )   
in the presence of:    )   

 

Name:   

 

  
   Witness
Address:    11 th Floor, One Pacific Place
   88 Queensway
   Hong Kong
Occupation:    Solicitor of Hong Kong
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong
Fax No.:    +852 2877 0062
Attention:    Paul Jeremy Brough

SIGNED as a DEED    )   
By Paul Jeremy Brough    )   
authorised signatory for    )   
Sino-Capital Global Inc.    )   
in the presence of:    )   

 

Name:   

 

  
   Witness
Address:    11 th Floor, One Pacific Place
   88 Queensway
   Hong Kong
Occupation:    Solicitor of Hong Kong
Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong
Fax No.:    +852 2877 0062
Attention:    Paul Jeremy Brough

The Security Trustee

 

Signed by    )   
For and on behalf of    )   
Computershare Trust    )   
Company, N.A.    )   
   )   
   Authorised Signatory

 

Address:    350 Indiana Street, Suite 750, Golden, CO 80401
Fax:    303-262-0608
Attention:    Corporate Trust
With a copy to:
Address:    480 Washington Blvd., Jersey City, NJ 07310
Fax:    201-680-4610
Attention:    Legal Department

BARBADOS

CHARGE OVER SHARES

THIS Charge is made this      day of              2013 between:

 

(1) EMERALD PLANTATION GROUP LIMITED, a company incorporated in the Cayman Islands (the ‘ Chargor ’); and

 

(2) COMPUTERSHARE TRUST COMPANY N.A. a national banking association organised and existing under the laws of the United States of America in its capacity as security trustee appointed under the Indenture (as defined below) acting for itself and for and on behalf of the Secured Parties (as defined in the Indenture) (the “ Security Trustee ”).

WHEREAS

 

  A. By an indenture dated as of              2013 amongst others, Emerald Plantation Holdings Limited as Issuer, Computershare Trust Company, N.A. as security trustee and the entities listed in Schedule 1 thereto as Initial Subsidiary Guarantors (as defined in the therein) (the “ Indenture” ) the Issuer will Issue up to US$300,000,000 aggregate principal amount of 6.00% guaranteed senior notes due 2020 and may issue additional notes and or PIK notes on the same terms in accordance with the terms of the Indenture.

 

  B. Pursuant to the terms of the Indenture the Chargor has agreed to enter into this Charge and in accordance with the terms hereof charge its shares in the company identified in Schedule 1 hereto as security for the discharge of the Secured Obligations.

NOW THIS DEED WITNESSES as follows:

 

1. COVENANT TO PAY

 

1.1. The Chargor hereby covenants to pay on demand to the Security Trustee all moneys and discharge the Secured Obligations hereby charged on a full indemnity basis.

 

1.2.

All sums payable by the Chargor under this Charge shall be paid without any set-off, counterclaim, withholding or deduction whatsoever unless required by law in which event the Chargor will simultaneously with making the relevant payment under this Charge pay to the Security Trustee such additional amount as will result in the receipt by the Security Trustee of the full amount which would otherwise have been receivable and will supply the Security Trustee promptly

  with evidence satisfactory to the Security Trustee that the Chargor has accounted to the relevant authority for the sum withheld or deducted.

 

2. INTEREST

 

2.1. The Chargor shall pay commission interest fees and charges to date of payment (as well after as before any demand or judgment or the insolvency or bankruptcy of the Chargor) at the rates and upon the terms from time to time set out in the Indenture (or such other rates and terms as may be agreed between the Chargor and any Secured Party).

 

3. CHARGING CLAUSE

 

3.1. The Chargor as beneficial owner hereby charges to the Security Trustee as a continuing security for the payment of all moneys and the discharge of the Secured Obligations hereby covenanted to be paid or otherwise hereby secured by way of first fixed charge ALL stocks and shares including but not limited to the Charged Shares, bonds and securities (including warrants and options in relation to the same) of any kind whatsoever (marketable or otherwise) negotiable instruments and warrants both present and future of the Chargor including the Derivative Assets (all of which are hereinafter called the “ Charged Property ”) but so that the Security Trustee shall not in any circumstances incur any liability whatsoever in respect of any calls instalments or otherwise in connection with the Charged Property.

 

3.2. The Chargor hereby agrees that the Security Trustee may at any time without notice (as well before as after demand) notwithstanding any settlement of account or other matter whatsoever combine or consolidate all or any of its then existing accounts including accounts in the name of the Security Trustee or the Chargor jointly with others (whether current deposit loan or of any other nature whatsoever and whether subject to notice or not whether in United States dollars or in any other currency) wheresoever situate and set off or transfer any sum standing to the credit of any one or more such accounts in or towards satisfaction of any Secured Obligations or liabilities of the Chargor to the Security Trustee whether such liabilities be present future actual contingent primary collateral several or joint. Where such combination set-off or transfer requires the conversion of one currency into another such conversion shall be calculated at the applicable rate of exchange of the Security Trustee (as conclusively determined by the Security Trustee) for purchasing the currency for which the Chargor is liable with the existing currency.

 

4. REPRESENTATIONS AND WARRANTIES

 

4.1. The Chargor represents and warrants to the Security Trustee and each of the Secured Parties on the date of this Charge and on each date on which the Chargor acquires any additional Charged Shares that:

 

  4.1.1. Status:

 

  4.1.1.1.

it is duly constituted, validly existing and, where applicable, in good standing under the laws of the country in which it is

  incorporated;

 

  4.1.1.2. it is not insolvent or in liquidation or administration or subject to any other insolvency procedure;

 

  4.1.1.3. no receiver, manager, trustee, custodian or analogous officer has been appointed in respect of any part of its property, undertaking or assets; and

 

  4.1.1.4. it has the appropriate power and authority to own its property and assets and to carry on its business as it is conducted on the date of this Charge;

 

  4.1.2. Capacity and approvals: it has the appropriate power to enter into and perform the terms and conditions of, and has taken all necessary action to authorise the execution, delivery and performance of, this Charge;

 

  4.1.3. Proper execution: this Charge has been properly executed by it and the obligations expressed as being assumed by it under this Charge are valid and binding upon it and enforceable in accordance with their terms;

 

  4.1.4. Compliance with legal restrictions: none of the provisions, covenants and obligations on its part contained in this Charge contravenes any of the provisions of its memorandum or articles of association or other constitutional documents and neither this Charge nor its performance will infringe any law or obligation binding upon it;

 

  4.1.5. No restrictions: there are no provisions in the memorandum or articles of association or other constitutional documents of the Company of which it is a shareholder or any other agreement or document which restrict the transfer of any Charged Shares or the Chargor’s ability to enter into this Charge, including any rights of first refusal, pre-emption rights, requirements for consent or any rights restricting or affecting the voting rights or the disposal of any of the Charged Shares, or (if such provisions exist) they have been varied or waived to enable this Charge to be enforced free from any such restriction or right;

 

  4.1.6. Other approvals for this Charge: no authorisation of or registration with any governmental, judicial or other third party nor payment of any stamp, registration or other tax is required or desirable in connection with the execution, performance, validity, enforceability or admissibility in evidence of this Charge, other than the adjudication, stamping and lodgement of this Charge within 28 days of its creation at the Corporate Affairs and Intellectual Property Office, Barbados, and the prior written permission of the Exchange Control Authority of the Central Bank of Barbados for any transfer of the Charged Shares;

 

  4.1.7.

Called up and paid up: the Charged Shares as at the date of this Charge are, and any Charged Shares deposited after the date of this Charge will be, duly authorised, issued, fully called up and fully paid-up and the Charged Shares represent the entire issued share capital of the

  Company at the date of this Charge;

 

  4.1.8. Legal and beneficial owner: subject to this Charge, the Charged Shares at the date of this Charge are legally and/or beneficially (as the case may be) owned by the Chargor, and any Charged Shares acquired by the Chargor after the date of this Charge shall (subject to this Charge) be legally and/or beneficially (as the case may be) owned by the Chargor, in each case free from any option, equity, trust, security, encumbrance or Lien; and

 

  4.1.9. No Security/guarantees: except as previously disclosed in writing to the Security Trustee with express reference to this Clause, there is no Lien affecting any Charged Property other than any security created by this Charge, and the Chargor has not given any guarantee, indemnity or other assurance against loss in relation to the liability of any person other than in favour of the Secured Parties or as otherwise permitted under the terms of the Indenture.

 

5. COVENANTS BY THE CHARGOR

 

  5.1. The Chargor hereby covenants with the Security Trustee that the Chargor shall:

 

  5.1.1. ensure at all times that all Charged Property is fully paid up and free from any option lien charge or encumbrance of any kind;

 

  5.1.2. on or prior to the date of this Charge lodge with the Security Trustee (i) all original stock and share certificates and documents of title in relation to the Charged Shares owned or held by it at the date of this Charge; and (ii) executed and undated transfers of such Charged Shares in the form of Schedule 3 attached hereto duly completed as the Security Trustee may direct and also as may be required by applicable law;

 

  5.1.3. in respect of any Charged Shares issued or transferred to it after the date of this Charge, immediately following such issuance or transfer lodge with the Security Trustee (i) all original stock and share certificates and documents of title in relation to such Charged Shares; and (ii) executed and undated transfers of such Charged Shares in the form of Schedule 3 attached hereto duly completed as the Security Trustee may direct and also as may be required by applicable law;

 

  5.1.4. at all times duly and promptly pay all calls instalments or other payments which may be made or become due in respect of any of the Charged Property as and when the same from time to time become due;

 

  5.1.5. make timely filing and registration of this Charge with each officer, registry and or governmental or non-governmental body necessary in order to preserve, perfect and enforce the Lien created by this Charge in the place of incorporation of the Chargor;

 

  5.1.6.

on or before the date of this Charge, deliver, or cause to be delivered, to the Security Trustee a certified copy of resolutions of the Chargor as the

  sole shareholder of the Company amending and restating the articles of incorporation of the Company to expressly require without limitation:

 

  5.1.6.1. registration by the board of directors of the Company of any transfer of the Charged Shares pursuant to this Charge without delay;

 

  5.1.6.2. the removal or disapplication of lien, call and forfeiture provisions in respect of the Charged Shares; and

 

  5.1.6.3. recognition of the security created by this Charge and the irrevocable nature of any proxy granted to the Security Trustee in connection therewith;

 

  5.1.7. not at any time (without the prior consent in writing of the Security Trustee):

 

  5.1.7.1. permit any person other than the Chargor to be registered as holder of the Charged Property or any part thereof;

 

  5.1.7.2. create or purport to create or permit to subsist any mortgage, debenture, charge lien or encumbrance (other than in favour of the Security Trustee) on or over the Charged Property or any part thereof or interest therein;

 

  5.1.7.3. sell, transfer or otherwise dispose of the Charged Property or any part thereof or interest therein or attempt or agree so to do;

 

  5.1.7.4. cause or permit any rights attaching to the Charged Property to be varied or abrogated; or

 

  5.1.7.5. cause or permit any of the Charged Property to be consolidated, sub-divided or converted or the other capital of the Company to be reorganised, exchanged or repaid; and

 

  5.1.8. not at any time do or cause or permit to be done anything which may in any way depreciate jeopardise or otherwise prejudice the value to the Security Trustee and/or any Secured Party of the Charged Property or the Lien created by this Charge.

 

5.2. The Chargor undertakes to the Security Trustee that it will not (without the prior written consent of the Security Trustee) propose or vote in favour of any amendment, modification or change to the by-laws or articles of incorporation of the Company.

 

5.3. The Chargor hereby further covenants and agrees with the Security Trustee that:

 

  5.3.1.

the Security Trustee and its nominees at the discretion of the Security Trustee may exercise in the name of the Chargor or otherwise upon the occurrence of an Event of Default that is continuing and without any

  further consent or authority on the part of the Chargor in respect of the Charged Property any voting rights and all powers given to trustees under the Trustee Act Chapter 250 of the laws of Barbados in respect of securities or property subject to a trust and any powers or rights which may be exercisable by the person in whose name the Charged Property is registered;

 

  5.3.2. upon or following the occurrence of an Event of Default that is continuing the Chargor will if so requested by the Security Trustee promptly transfer all or any of the Charged Property to such nominees or agents wheresoever situate as the Security Trustee may select and that the Security Trustee may hold all or any of such Charged Property in any affiliate of the Security Trustee or with any correspondents or other agents whether in Barbados or overseas and that all the Charged Property shall be held at the expense risk and responsibility of the Chargor.

 

5.4. If the Security Trustee receives notice of any subsequent mortgage charge assignment or other disposition affecting the Charged Property or any part thereof or interest therein the Security Trustee may open a new account or record for the Chargor; if the Security Trustee does not open a new account then unless the Security Trustee gives express written notice to the contrary to the Chargor it shall nevertheless be treated as if it had done so at the time when it received such notice and as from that time all payments made by or on behalf of the Chargor to the Security Trustee shall be credited or be treated as having been credited to the new account and shall not operate to reduce the amount due from the Chargor to the Security Trustee at the time when it received notice.

 

6. RIGHTS AND OPTIONS

 

6.1. If the Charged Shares are registered in the name of the Chargor, the Chargor shall:

 

  6.1.1. notify the Security Trustee before exercising any right or option in relation to any of the Charged Shares and give to the Security Trustee such information (including a copy of any notice received in relation to the Charged Property) as it may require in relation to the exercise of such right or option;

 

  6.1.2. not exercise any right or option in relation to any of the Charged Shares in a way that could lessen the value of the Lien created or purported to be created under the terms of this Charge or the interests of the Security Trustee or any of the Secured Parties under the terms of this Charge; and

 

  6.1.3. upon or following the occurrence of an Event of Default that is continuing, promptly exercise any such right or option in accordance with any written instruction given to the Chargor by the Security Trustee provided that the Security Trustee shall not be obliged to give such instruction and provided also that the instruction is received by the Chargor in sufficient time to allow the instruction to be implemented.

7. VOTING RIGHTS AND DIVIDENDS

 

7.1. Before the Charge becomes enforceable: Unless and until this Charge has become enforceable:

 

  7.1.1. the Chargor shall, for so long as it remains the beneficial owner of the relevant Charged Shares, determine how all voting rights (and, if applicable, any right to nominate or remove a director) attaching to such Charged Shares are to be exercised;

 

  7.1.2. the Chargor shall not permit any person other than the Chargor, the Security Trustee or its nominee(s) to be registered as holder of any Charged Shares owned or held by it or any part thereof; and

 

  7.1.3. all cash dividends and other money received by the Security Trustee or its nominee(s) shall, on request by the Chargor, be released to that Chargor,

provided always that the Chargor shall not be entitled to exercise any of the above rights if the exercise of any such rights may be in breach of the terms of the Indenture or would be reasonably likely to have an adverse effect on the value of the Charged Shares or otherwise jeopardise the Lien created or purported to be created under the terms of this Charge or the interests of the Security Trustee or any of the Secured Parties under the terms of this Charge.

 

7.2. After Charge becomes enforceable: At any time after this Charge has become enforceable:

 

  7.2.1. the Security Trustee may date and complete the undated share transfer form(s) and other documents referred to in Clause 5.1.2 and Clause 5.1.3 and the Security Trustee may (but is not obliged to), in the name of the Chargor or otherwise and without any further consent, action or authority on the part of each Chargor, exercise all voting and other rights attaching to the Charged Assets, including any rights to nominate or remove a director as if the Security Trustee were the sole beneficial owner of the Charged Assets;

 

  7.2.2. all Derivative Assets shall, if received by the Chargor or its nominee(s), be held on trust for and forthwith paid or transferred to the Security Trustee on demand; and

 

  7.2.3. the Chargor shall (and shall procure that its nominee(s) shall) accept short notice for and attend any meeting of the holders of any Charged Shares owned or held by it, appoint proxies and exercise voting and other rights and powers exercisable by the holder of the Charged Shares owned or held by it as the Security Trustee may direct from time to time.

 

8. FURTHER ASSURANCE

 

8.1.

The Chargor shall at any time necessary or advisable under applicable law, and also if and when required by the Security Trustee, execute such further legal or

  other charges or assignments in favour of the Security Trustee over all or any of the Charged Property and all rights relating thereto both present and future (including any substituted securities and any vendor’s lien) and any other transfers or documents the Security Trustee may from time to time require or that are necessary or advisable under applicable law from time to time for perfecting the Security Trustee’s title to the same or for vesting or enabling it to vest the same in itself or its nominees or in any purchaser to secure all moneys Secured Obligations and liabilities hereby covenanted to be paid or otherwise hereby secured or to facilitate the realisation of the Charged Property or the exercise of the powers conferred on the Security Trustee such further charges or assignments to be prepared by or on behalf of the Security Trustee at the cost of the Chargor and to contain an immediate power of sale without notice a clause excluding section 103 and the restrictions contained in section 111 of the Property Act Chapter 236 of the laws of Barbados and such other clauses for the benefit of the Security Trustee as the Security Trustee may reasonably require.

 

8.2. Notwithstanding anything to the contrary contained herein or under applicable law, but without limiting the rights and authorisations of the Security Trustee hereunder, the Security Trustee shall not be obligated to:

 

  8.2.1. prepare, record, file, re-record, or re-file any financing statement, perfection statement, continuation statement or other instrument in any public office or otherwise ensure the perfection or maintenance of any security interest granted pursuant to, or contemplated by any Finance Document;

 

  8.2.2. take any necessary steps to preserve rights against any parties with respect to any Charged Property; or

 

  8.2.3. take any action to protect against any diminution in value of any Charged Property.

 

9. POWERS OF THE SECURITY TRUSTEE

 

9.1. At any time after the Security Trustee shall have demanded payment of any money or discharge of any obligation or liability hereby secured or if requested by the Chargor:

 

  9.1.1. the Security Trustee and any nominee of the Security Trustee wheresoever situate may without further notice and without the restrictions contained in s.111 of the Property Act Chapter 236 of the laws of Barbados in respect of all or any of the Charged Property exercise all the powers or rights which may be exercisable by the registered holder of the Charged Property and all other powers conferred on mortgagees by the Property Act Chapter 236 of the laws of Barbados as hereby varied or extended; and

 

  9.1.2. any dividends, interest or other payments which may be received or receivable by the Security Trustee or by any nominee in respect of any of the Charged Property may be applied by the Security Trustee as though they were proceeds of sale.

9.2. Section 103 of the Property Act Chapter 236 of the laws of Barbados shall not apply to this security or to any security given to the Security Trustee pursuant hereto.

 

9.3. In exercising the powers referred to in Clause 9.1 above, the Charged Property or any part thereof may be sold or disposed of at such times in such manner and generally on such terms and conditions and for such consideration as the Security Trustee may think fit. Any such sale or disposition may be for cash debentures or other Secured Obligations shares stock securities or other valuable consideration and be payable immediately or by instalments spread over such period as the Security Trustee shall think fit. No purchaser or other person shall be bound or concerned to see or enquire whether the right of the Security Trustee to exercise any of the powers hereby conferred has arisen or not or be concerned with notice to the contrary or with the propriety of the exercise or purported exercise of such powers.

 

9.4. All money received by the Security Trustee in the exercise of any powers conferred by this Charge shall be applied in or towards satisfaction of the Secured Obligations and liabilities hereby secured and in such order as required by the Indenture (save that the Security Trustee may credit the same to a suspense account for so long and in such manner as the Security Trustee may from time to time determine).

 

9.5. The Security Trustee may place and keep (for such time as it shall think prudent) any money received, recovered or realised pursuant to this Charge in a separate suspense account (to the credit of either the Chargor or the Security Trustee, as the Security Trustee shall think fit).

 

9.6. The Chargor hereby covenants with the Security Trustee on demand to pay all costs charges and expenses (including stamp duty registration fees and other duties) incurred by the Security Trustee or which it shall properly incur in or about the enforcement preservation or attempted preservation of this security or of the Charged Property or in the exercise or purported exercise of any of the powers herein contained on a full indemnity basis.

 

9.7. The Security Trustee shall not be liable to account as mortgagee in possession in respect of all or any of the Charged Property and shall not be liable for any loss upon realisation or for any neglect or default to present any interest coupon or any bond or stock drawn for repayment or for any failure to pay any call or instalment or to accept any offer or to notify the Chargor of any such matter or for any negligence or default by its nominees, correspondents or agents. The Security Trustee shall have no liability of any kind in connection with this Charge except to the extent of any losses arising directly out of its gross negligence or wilful misconduct. Notwithstanding the foregoing, under no circumstances shall the Security Trustee be liable for consequential, special, punitive or indirect damages, irrespective of being informed of the possibility thereof and regardless of the cause of action.

 

9.8.

Without prejudice to the terms of the Indenture (including, for the avoidance of doubt, any indemnity or right of reimbursement granted to or in favour of the

  Security Trustee under the terms of the Indenture), the Chargor hereby agrees fully to indemnify on demand and hold harmless the Security Trustee from and against all losses actions claims expenses demands and liabilities whether in contract tort or otherwise and in respect of calls or other payments relating to the Charged Property now or hereafter incurred by it or by any nominee correspondent agent officer or employee for whose liability act or omission it may be answerable for anything done or omitted in the exercise or purported exercise of the powers herein contained or occasioned by any breach by the Chargor of any of its covenants or other secured obligations to the Security Trustee.

 

9.9.     

 

  9.9.1. The Security Trustee shall incur no liability as a result of the sale of any Charged Property, or any part thereof, at any private or public sale conducted pursuant to this Charge in accordance with the requirements of applicable laws. With regards to private sales, the Chargor hereby waives any claims against the Security Trustee and the other Secured Parties arising by reason of the fact that the price at which the Charged Property may have been sold at such a private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if the first offer received is accepted and the Charged Property are not offered to more than one offeree, provided that any such private sale is conducted in accordance with applicable laws and this Charge.

 

  9.9.2. The Chargor hereby agrees that in respect of any sale of any of the Charged Property pursuant to the terms of this Charge, the Security Trustee is hereby authorised to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary:

 

  9.9.2.1. in order to avoid any violation of applicable laws; or

 

  9.9.2.2. in order to obtain any required approval of the sale or of the purchaser by any governmental authority or official,

and the Chargor further agrees that such compliance shall not, in and of itself, result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall Security Trustee be liable or accountable to the Chargor for any discount allowed by reason of the fact that such Charged Property is sold in compliance with any such limitation or restriction.

 

10. INTEREST ON OVERDUE AMOUNTS

 

10.1.

Any overdue amounts not paid in accordance with this Charge when due shall carry interest at the rate and in accordance with the terms contained in the relevant Finance Document in relation to overdue sums or at such other rate as may be agreed between the relevant Chargor and the Secured Parties from time to time. In each case, interest shall accrue on a day to day basis to the date of irrevocable and unconditional repayment in full and, if unpaid, shall be compounded on the terms so agreed or (in the absence of such agreed terms) with quarterly rests on the Security

  Trustee’s and/or the relevant Secured Party’s usual quarterly interest days. Interest shall continue to be charged and compounded on this basis after as well as before any demand or judgment.

 

11. POWER OF ATTORNEY

 

11.1. The Chargor by way of security hereby irrevocably appoints the Security Trustee and the persons deriving title under it severally to be its attorney in the name and on behalf of and as the act and deed of the Chargor or otherwise to execute and complete any transfers or other documents which may be required for perfecting the Security Trustee’s title to or for vesting the Charged Property in the Security Trustee or its nominees or in any purchaser and to make any alteration or addition to the Charged Property comprised therein or any other alteration or addition thereto and to re-deliver the same thereafter and otherwise generally to sign seal and deliver and otherwise perfect any such transfers or other documents and any such legal or other charges or assignments over the Charged Property required by the Security Trustee and all such deeds and documents and do all such acts and things as may be required for the full exercise of the powers hereby conferred including any sale or other disposition realisation or getting in by the Security Trustee or its nominees of the Charged Property. The Chargor hereby covenants with the Security Trustee to ratify and confirm any deed document act and thing and all transactions which any such attorney may lawfully execute or do. The Security Trustee shall have no obligation to undertake any of the foregoing actions, and, if it takes any such action in accordance with this Charge, it shall have no liability to the Chargor to continue the same or for the sufficiency or adequacy thereof.

 

12. CONTINUING SECURITY

 

12.1. This security shall be a continuing security notwithstanding the bankruptcy of the Chargor or any change in the constitution of the Chargor or any settlement of account or other matter whatsoever and is in addition to and shall not merge with or otherwise prejudice or affect any contractual or other right or remedy or any guarantee indemnity lien pledge bill note mortgage charge or other security (whether created by the deposit of documents or otherwise) now or hereafter held by or available to the Security Trustee and shall not be in any way prejudiced or affected thereby or by the invalidity thereof or by the Security Trustee now or hereafter dealing with exchanging releasing varying or abstaining from perfecting or enforcing any of the same or any rights which it may now or hereafter have or giving time for payment or indulgence or compounding with any other person liable.

 

13. AMOUNT SECURED

 

13.1.

The amount to be secured by this Charge shall be unlimited. This Charge shall be stamped in Barbados pursuant to the provisions of the Stamp Duty Act, Cap. 91 of the laws of Barbados, in the first instance with stamp duty covering an aggregate indebtedness of the amount stated in Schedule 2 and the Chargor hereby agrees that the Security Trustee shall be and is hereby empowered at any time or times hereafter (without further licence or consent of the Chargor ) to

  affix additional stamp duty hereon covering any sum or sums by which the said indebtedness may exceed the said sum, it being the intent of these presents that until its discharge in writing by the Security Trustee any charge hereby created shall be a continuing security for the Secured Obligations whether incurred, existing or arising before or after the execution and delivery of the Indenture.

 

13.2. Without prejudice to the right of the Security Trustee under Clause 13.1 hereof the Chargor will at all times and from time to time duly stamp this Charge in accordance with the intent of Clause 13.1 hereof and shall procure that such statement of the charge hereby created or such amended particulars thereof in such form as the Security Trustee may reasonably require are duly lodged with the Registrar, Corporate Affairs and Intellectual Property Office, Barbados, pursuant to Part II Division A of the Companies Act, Cap. 308 of the laws of Barbados. The Chargor shall promptly inform the Security Trustee of:

 

  13.2.1. any action necessary to ensure compliance with the provisions of the Stamp Duty Act, Cap. 91 of the laws of Barbados; and

 

  13.2.2. the completion of any such action.

 

14. PAYMENTS

 

14.1. Any payment made by the Chargor under this Charge shall be made free and clear of and without any deduction for or on account of any set-off or counterclaim.

 

15. CURRENCY CLAUSES

 

15.1. All moneys received or held by the Security Trustee under this Charge may from time to time after demand has been made by the Security Trustee be converted into such other currency as the Security Trustee considers necessary or desirable to cover the Secured Obligations and liabilities actual or contingent of the Chargor in that currency at the applicable rate of exchange of the Security Trustee (as conclusively determined by the Security Trustee) for purchasing that other currency with the existing currency.

 

15.2. If and to the extent that the Chargor fails to pay the amount due on demand the Security Trustee may in its absolute discretion without notice to the Chargor purchase at any time thereafter so much of any currency as the Security Trustee considers necessary or desirable to cover the Secured Obligations and liabilities actual or contingent of the Chargor in such currency hereby secured at the applicable rate of exchange of the Security Trustee (as conclusively determined by the Security Trustee) for purchasing such currency with United States dollars and the Chargor hereby agrees to indemnify the Security Trustee against the full United States dollar cost incurred by the Security Trustee for such purchase.

 

15.3. The Security Trustee shall not be liable to the Chargor for any loss resulting from any fluctuation in exchange rates before or after the exercise of the foregoing powers.

15.4. No payment to the Security Trustee (whether under any judgment or court order or otherwise) shall discharge the obligation or liability of the Chargor in respect of which it was made unless and until the Security Trustee shall have received payment in full in the currency in which such obligation or liability was incurred and to the extent that the amount of any such payment shall on actual conversion into such currency fall short of such obligation or liability actual or contingent expressed in that currency the Security Trustee shall have a further separate cause of action against the Chargor and shall be entitled to enforce the charge hereby created to recover the amount of the shortfall.

 

16. SECURITY TRUSTEE

The provisions of Sections 10.04 ( Authorization of Actions to be Taken by the Trustee under the Security Documents ), 10.05 ( Authorization of Receipt of Funds by the Security Trustee Under the Security Documents ), 10.06 ( Release of the Collateral ) and 10.07 ( Additional Security Trustee Terms ) of the Indenture shall apply to the Security Trustee’s actions, rights, obligations, powers and duties under this Charge as if set out in this Charge in full. The Security Trustee shall be entitled to exercise its rights, powers, authorisations and duties under the terms of this Charge through designees, agents or co-Security Trustees appointed pursuant to the Indenture. The permissive authorisations, entitlements, powers and rights granted to the Security Trustee hereunder shall not be construed as duties. The Security Trustee shall be entitled to refuse to take or refrain from taking any discretionary action or exercise any discretionary powers set forth in this Charge until it has received with respect thereto satisfactory written direction in accordance with the terms of the Indenture and, if necessary, satisfactory indemnification.

 

17. MISCELLANEOUS

 

17.1. No failure or delay by the Security Trustee in exercising any right or remedy shall operate as a waiver thereof nor shall any single or partial exercise or waiver of any right or remedy preclude its further exercise or the exercise of any other right or remedy.

 

17.2. Each of the provisions of this Charge is severable and distinct from the others and if at any time one or more of such provisions is or becomes invalid illegal or unenforceable, the validity legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby.

 

17.3. In this Charge headings to clauses are for convenience only and have no legal effect and references to Clauses and Schedules are to Clauses and Schedules of this Charge unless otherwise stated.

 

17.4. In this Charge the expressions “the Chargor” and “the Security Trustee” where the context permits include their respective successors and assigns whether immediate or derivative. Any reconstruction reorganisation or change in the constitution of the Security Trustee or its absorption in or amalgamation with any other person or the acquisition of all or part of its undertaking by any other person shall not in any way prejudice or affect its rights hereunder.

 

17.5. This Charge is freely assignable or transferable by the Security Trustee.

17.6. The Chargor may not assign any of its rights and may not transfer any of its Secured Obligations under this Charge or enter into any transaction which would result in any of those rights or Secured Obligations passing to another person.

 

17.7. The Chargor hereby irrevocably appoints any such successors or assigns of the Security Trustee to be its attorney in the terms and for the purposes set out in Clause 11 above.

 

17.8. This Charge may be executed in any number of counterparts. This has the same effect as if the signatures on the counterparts were on a single copy of this Charge.

 

18. NOTICES

 

18.1. Any notice, document or other communication to be given or delivered under or in connection with this Charge shall be in writing and, in the case of any notice, document or communication to the Chargor, shall be deemed to have been duly served on, given or delivered to or made if it is left at the authorised address of the Chargor, posted by pre-paid registered post addressed to the Chargor at such address, or sent by facsimile transmission to the facsimile number reference in Clause 18.2 below and shall be deemed to have been received if:

 

  18.1.1. personally delivered, at the time of delivery;

 

  18.1.2. sent by mail, on the date of posting; or

 

  18.1.3. sent by facsimile transmission, on receipt by the sender of a facsimile transmission report (or other appropriate evidence) confirming that the facsimile has been transmitted to the addressee.

 

18.2. For the purposes of this Clause the authorised address of each party to this Charge shall be the address (including the details of the facsimile number and person for whose attention a notice, document or communication is to be addressed) identified with its name at the end of this Charge or such other address (and details) as that party may notify to each other party in writing from time to time in accordance with the requirements of this Clause.

 

18.3. Any notice, document or communication to be made or delivered to the Security Trustee will be effective only when actually received by the Security Trustee and then only if it is expressly marked for the attention of the department or officer of the Security Trustee as identified above (or any substitute department or officer as the Security Trustee shall specify for this purpose).

 

18.4. Each notice, document or communication between the parties to this Charge shall be either in English or accompanied by a translation into English, which is certified as being a true and accurate translation.

 

19. JURISDICTION

 

19.1.

This Charge shall be governed by and interpreted in accordance with Barbados

  Law.

 

19.2. The Chargor hereby irrevocably submits to the non-exclusive jurisdiction of the High Court of Barbados but this Charge may be enforced in any court of competent jurisdiction.

 

19.3. Without prejudice to any other mode of service allowed under any relevant law, the Chargor irrevocably designates, appoints and empowers Sino-Forest International (Barbados) Corporation of PO Box 169W, Christ Church, Barbados (or such other address in Barbados as the Chargor may notify to the Security Trustee) as their agent to accept service of all legal process arising out of or in connection with this Charge (the “ Proceedings ”) and service on Sino-Forest International (Barbados) Corporation (or such substitute shall be deemed to be service on the Chargor. The Chargor agrees that failure by such agent to give notice of such service of process to the Chargor shall not impair or affect the validity of such service or any judgment based on it.

 

20. DEFINITIONS AND INTERPRETATION

 

20.1. Capitalised terms used in this Charge and not otherwise defined herein shall have the same meaning as in the Indenture; and;

“ Charged Property ” has the meaning given to that term in Clause 3.1 above;

“Charged Shares” means the stock, shares and other securities listed in Schedule 1 and all other stock, shares and other securities owned or held by the Chargor in the Company at any time while any Secured Obligations are outstanding and/or any substitute or additional stock, shares and other securities;

“Companies Act” means the Companies Act, Cap. 308 of the laws of Barbados;

“Company” means Sino-Forest International (Barbados) Corporation, a limited liability company incorporated in Barbados with company number 32799;

“Derivative Assets” includes, in respect of the Chargor:

 

  (i) allotments, rights, money or property arising at any time in relation to any Charged Share owned or held by it by way of conversion, exchange, redemption, bonus, preference, option, conversion, consolidation, subdivision or otherwise;

 

  (ii) dividends, distributions, interest and other income paid or payable in relation to any Charged Share owned or held by it; and

 

  (iii) stock, shares and securities offered in addition to or substitution for any Charged Share owned or held by it.

“Event of Default” has the meaning given to that term in the Indenture;

“Finance Documents” means the Indenture, this Charge, each other Security Document, the Notes and other document designated as such by the Security Trustee and the Issuer;

“Issuer” means Emerald Plantation Holdings Limited, an exempted company incorporated in the Cayman Islands (with registration number CT-274117) whose registered address is the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands;

“Secured Obligations” means all present and future secured obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Issuer and each Subsidiary Guarantor to all or any of the Secured Parties under each or any of the Finance Documents, in each case together with:

 

  (iv) all costs, charges and expenses incurred by any Secured Party in connection with the protection, preservation or enforcement of its rights under any Finance Document; and

 

  (v) all money, obligations and liabilities due, owing or incurred in respect of any variations or increases in the amount or composition of the Notes provided under the Indenture or the obligations and liabilities imposed under the Indenture or the Notes.

“ Secured Party ” has the meaning give to that term in the Indenture; and

“ Subsidiary Guarantor ” means each Subsidiary Guarantor under, and as that term is defined in, the Indenture.

 

20.2. References to:

 

  20.2.1. statutes, statutory provisions and other legislation shall include all amendments, substitutions, modifications and re-enactments for the time being in force and shall include any orders, regulations, instruments or other subordinate legislation made under the relevant legislation;

 

  20.2.2. “ control ” of any company shall be interpreted in accordance with section 441 of the Companies Act;

 

  20.2.3. “ including ” shall not be construed as limiting the generality of the words preceding it;

 

  20.2.4. this Charge shall include the Schedules;

 

  20.2.5. any term or phrase defined in the Companies Act (as amended from time to time) shall bear the same meaning in this Charge;

  20.2.6. words importing the singular shall include the plural and vice versa and words denoting any gender shall include all genders;

 

  20.2.7. this Charge and to any provisions of it or to any other document referred to in this Charge shall be construed as references to it in force for the time being as amended, varied, supplemented, restated, substituted or novated from time to time;

 

  20.2.8. any person are to be construed to include references to a corporation, firm, company, partnership, joint venture, unincorporated body of persons, individual or any state or agency of a state, whether or not a separate legal entity;

 

  20.2.9. any person are to be construed to include that person’s assignees or transferees or successors in title, whether direct or indirect;

 

  20.2.10. clause headings are for ease of reference only and are not to affect the interpretation of this Charge.

Schedule 1

The Charged Shares

 

Company

   Number and Class of Shares  

Sino-Forest International (Barbados) Corporation

     300,000,000 common   

Schedule 2

First aggregate indebtedness Deed of Charge over Shares to cover:

US$600,000,000

SCHEDULE 3

(CLAUSE 5.1.2 and 5.1.3)

Form of Share Transfer Instrument 1

BARBADOS

[Name of company]

[Name of transferor] a company incorporated under the laws of [            ] with its registered office at [                    ] (hereinafter called the “Transferor” ) hereby transfers to [ Name of transferee             ] a corporation incorporated in [*], with its registered office at [*] (hereinafter called the “Transferee” ), [No. and type] Shares having a fair market value of [US$**] in [Name of company                     ] a duly licensed international business company incorporated in Barbados with its registered office at [    ], being the shares represented by share certificates no.[*] to [*] TO HOLD unto the Transferee its successors and assigns subject to the several conditions on which the Transferor held the same at the time of execution hereof; and the Transferee hereby agrees to take the above mentioned shares subject to the conditions aforesaid.

And it is hereby certified that:

 

1. the Transferor is a company duly incorporated in [            ] ;

 

2. the Transferee is not resident in Barbados for the purposes of the section 15 of the International Business Companies Act, 1991-24; and

 

3. [ Name of company                     ] is a duly licensed international business company (Licence no.**) under the International Business Companies Act, 1991-24.

AS WITNESS our hands this             , 20

 

SIGNED by the Transferor in the   )       
presence of:-   )      By:  

 

Before me:         

 

        
Notary Public         

 

1   The prior written permission of the Exchange Control Authority, Barbados, is required for the transfer of the shares of an international business company. A share transfer instrument must be presented to the Barbados Registrar of Companies within 30 days of its execution for the assessment and payment of property transfer tax and stamp duty, if any, and until the share transfer instrument is so presented, the beneficial ownership of the shares does not pass to the transferee.

DECLARATION

I, [**], Attorney-at-Law of [**], Barbados, do SOLEMNLY AND SINCERELY DECLARE as follows:

 

(a) That [ Name of company ] is an international business company as defined in Section 3(1) of the International Business Companies Act, 1991-24.

 

(b) That the assets being transferred do not consist of taxable assets under Section 15(2) of the International Business Companies Act, 1991-24.

 

(c) That the Transferor and the Transferee are entitled to be exempt from property transfer tax under Section 15(1) of the International Business Companies Act, 1991-24.

 

(d) That the Transferor is a company incorporated in [                    ] with its registered office at [                    ].

AND I make this solemn declaration conscientiously believing the same to be true and by virtue of the Evidence Act.

 

DECLARED this      day    )  
of             , 20            )  
BEFORE ME:  

 

 
Justice of the Peace  

[ The remainder of this page intentionally left blank. Signature pages of the Chargor and the Security Trustee follows .]

IN WITNESS whereof this Charge has been executed and delivered as a Deed on the date first above written.

 

SIGNED SEALED and DELIVERED
by the said Emerald Plantation Group Limited
By:

 

Name in print: Paul Jeremy Brough
Director/Authorised Officer

 

Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road,
   Wanchai, Hong Kong
Fax No.:    +852 2877 0062
Attention:    Paul Jeremy Brough
Before me   

 

 

Notary Public

The Security Trustee

 

SIGNED SEALED and DELIVERED
by the said Computershare Trust Company, N.A.
By:

 

Name in print:
Director/Authorised Officer

 

Address:    350 Indiana Street, Suite 750, Golden, CO 80401
Fax:    303-262-0608
Attention:    Corporate Trust
With a copy to:
Address:    480 Washington Blvd., Jersey City, NJ 07310
Fax:    201-680-4610
Attention:    Legal Department
Before me

 

 

Notary Public

D ATED   2013

 

S INO -F OREST I NTERNATIONAL (B ARBADOS ) C ORPORATION

(as Chargor)

- and -

C OMPUTERSHARE T RUST C OMPANY , N.A.

(as Security Trustee)

D EBENTURE

 

LOGO

Matter ref 46749/00026

HKACSW/CHL/1015202

Hogan Lovells

11th Floor, One Pacific Place, 88 Queensway, Hong Kong

C ONTENTS

 

C LAUSE        P AGE  

1.

  D EFINITIONS AND INTERPRETATION      1   

2.

  C OVENANT TO PAY      4   

3.

  C REATION OF SECURITY      5   

4.

  C RYSTALLISATION      8   

5.

  T ITLE DOCUMENTS AND INSURANCE POLICIES      9   

6.

  R EPRESENTATIONS AND WARRANTIES      10   

7.

  N EGATIVE PLEDGE AND OTHER RESTRICTIONS      11   

8.

  F URTHER ASSURANCE      12   

9.

  C ONTINUING SECURITY      13   

10.

  A MOUNT S ECURED      13   

11.

  L AND      13   

12.

  I NTELLECTUAL P ROPERTY R IGHTS      14   

13.

  O PENING OF NEW ACCOUNTS      15   

14.

  P OWERS OF SALE , LEASING AND ACCEPTING SURRENDERS      15   

15.

  P OWERS OF THE S ECURITY T RUSTEE      15   

16.

  P OWERS OF A R ECEIVER      16   

17.

  P OWER OF ATTORNEY      17   

18.

  O THER POWERS EXERCISABLE BY THE S ECURITY T RUSTEE      17   

19.

  A PPLICATION OF MONEY RECEIVED BY THE S ECURITY T RUSTEE OR A R ECEIVER      19   

20.

  P ROTECTION OF THIRD PARTIES      19   

21.

  P ROTECTION OF THE S ECURITY T RUSTEE , ANY NOMINEE AND R ECEIVER      19   

22.

  S ECURITY T RUSTEE      20   

23.

  C OSTS , EXPENSES AND LIABILITIES      20   

24.

  S TAMP DUTY      21   

25.

  T AX GROSS - UP      21   

26.

  I NFORMATION      22   

27.

  C URRENCY INDEMNITY      22   

28.

  I NTEREST ON OVERDUE AMOUNTS      22   

29.

  S ET - OFF      23   

31.

  T RANSFER AND DISCLOSURE      23   

32.

  R ELEASE OF S ECURITY      23   

33.

  R IGHTS OF THE P ARTIES TO VARY      24   

34.

  F ORBEARANCE , SEVERABILITY , VARIATIONS AND CONSENTS      24   

35.

  C OUNTERPARTS      24   

36.

  N OTICES      24   

37.

  S ECURITY T RUSTEE      25   

38.

  G OVERNING LAW      25   

39.

  E NFORCEMENT      25   
S CHEDULE  1        27   
  Land      27   
S CHEDULE 2        28   
  Specified Intellectual Property      28   
S CHEDULE 3        29   
  Stamped aggregate indebtedness      29   
E XECUTION P AGE      30   

T HIS D EBENTURE is made on              2013

B ETWEEN :

 

(1) Sino-Forest International (Barbados) Corporation , registration number 32799, a company incorporated under the laws of Barbados (the “ Chargor ”); and

 

(2) Computershare Trust Company, N.A. as security trustee appointed under the Indenture (as defined below) acting for itself and for and on behalf of the Secured Parties (as defined in the Indenture) (the “ Security Trustee ”).

W ITNESSES AS FOLLOWS :

 

1. D EFINITIONS AND INTERPRETATION

 

1.1 Definitions : Unless the context otherwise requires, words or expressions defined in the Indenture shall have the same meanings in this Debenture and this construction shall survive the termination of the Indenture. In addition, in this Debenture:

“ Assets ” means, in relation to the Chargor, all its undertaking, property, assets, revenues and rights of every description, or any part of them.

“ Companies Act ” means the Companies Act, Cap. 308 of the laws of Barbados.

“ CPO ” means the Conveyancing and Property Ordinance (Chapter 219 of the Laws of Hong Kong).

“ DMC ” means the deed(s) of mutual covenant, deed(s) of covenant, deed(s) of mutual covenant and management agreement, supplemental deed(s) of mutual covenant, or similar document(s) and any variation or modification of that or those deed(s) of mutual covenant.

“ Event of Default ” has the meaning given to that term in the Indenture.

“ Finance Document ” means the Indenture, this Debenture, each other Security Document, the Notes and any other document designated as such by the Security Trustee and the Issuer.

“ Fixed Security Asset ” means an Asset for the time being comprised within an assignment created by Clause 3.1 ( Assignments ) or within a mortgage or fixed charge created by Clause 3.2 ( Fixed security ) or arising on crystallisation of a floating charge whether under Clause 4 ( Crystallisation ) or otherwise.

“ Fixtures ” means fixtures, fittings (including trade fixtures and fittings) and fixed plant, machinery and apparatus.

“ Floating Charge Asset ” means an Asset for the time being comprised within the floating charge created by Clause 3.3 ( Creation of floating charge ) but, if it is also a Fixed Security Asset, only insofar as concerns that floating charge.

“ Government ” means the Government of Hong Kong.

“ Government Grant ” means the government grants and conditions or government leases (and any variation or modification of that or those grants or leases) under which the Land is held from the Government at the date of this Debenture by the Chargor and any other government grants and conditions or government leases relating to any Land which the Chargor from time to time benefits from.

“ Group ” means the Issuer and each of its Subsidiaries for the time being.

“ HK$ ” or “ Hong Kong Dollars ” means the lawful currency of Hong Kong.

“ Hong Kong ” means the Hong Kong Special Administrative Region of the People’s Republic of China.

“ Indenture ” means an indenture dated on or about the date of this Debenture in relation to issuance of up to US$300,000,000 6.00% senior secured notes due 2020 and, if and when issued, any additional notes and/or PIK notes issued under the terms of such indenture from time to time.

“ Insurance Policy ” means any contract or policy of insurance of the Chargor (including all cover notes) of whatever nature which are from time to time taken out by or on behalf of the Chargor or (to the extent of its interest) in which the Chargor has an interest at any time.

“ Intellectual Property ” means patents (including supplementary protection certificates), utility models, registered and unregistered trade marks (including service marks), rights in passing off, copyright, database rights, registered and unregistered rights in designs (including in relation to semiconductor products) anywhere in the world and, in each case, any extensions and renewals of, and any applications for, such rights.

“ Intellectual Property Rights ” means all and any of the Chargor’s Intellectual Property and all other intellectual property rights, causes of action, interests and assets charged by it pursuant to paragraphs (c)(vii) to (c)(xii) inclusive of Clause 3.2 ( Fixed security ).

“ Investments ” means all shares, stock, debentures, debenture stock, bonds and other investments, whether certificated or uncertificated and whether in registered or bearer form, including all depository interests representing any of them and including all rights and benefits of a capital nature accruing at any time in respect of any Investments by way of redemption, repayment, substitution, exchange, bonus or preference, option, rights or otherwise.

“ Issuer ” means Emerald Plantation Holdings Limited, an exempted company incorporated in the Cayman Islands (with registration number CT-274117) whose registered address is the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

“ Land ” means:

 

  (a) any land (including freehold and leasehold) and immovable property under the Chargor’s name and subject to and with the benefit of all Leases, deeds, documents and other matters and any part or parts thereof and any other estate or interest in and all Rights attached or relating to such land or immovable property and all buildings, structures and Fixtures in or on such land or immovable property;

 

  (b) any leasehold land and immovable property held by the Chargor as tenant/lessee under the tenancy agreements and any other estate or interest in and all Rights attached or relating to such land or immovable property; and

 

  (c) any other land and immovable property of the Chargor and any other estate or interest in and all Rights attached or relating to such land or immovable property and all buildings, structures and Fixtures in or on such land or immovable property.

“ Land Registry ” means the Land Registry of Hong Kong.

“ Lease ” means any lease, tenancy, licence, letting arrangement, exchange, option, reservation, right of refusal or any other right or interest in any part of the Land or any other agreement or contract for any of these, granted by the Chargor or any person deriving title from it.

“ Liability ” means any liability, damage, loss, costs, claim or expense of any kind or nature, whether direct, indirect, special, consequential or otherwise.

“ Nominee ” means any nominee as notified to the Chargor by the Security Trustee from time to time.

“ Notes ” has the meaning given to that term in the Indenture.

“ Party ” means a party to this Debenture.

“ Receiver ” means a receiver and manager appointed under Clause 15.2 ( Appointment of Receiver ) including (where the context requires or permits) any substituted receiver and manager.

“ Rights ” means rights (including rights of way), authorities, discretions, remedies, liberties, privileges, powers, easements, quasi-easements and appurtenances (in each case, of any nature whatsoever).

“ Secured Obligations ” means all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Issuer and each other Subsidiary Guarantor to all or any of the Secured Parties under each or any of the Finance Documents, in each case together with:

 

  (a) all costs, charges and expenses incurred by any Secured Party in connection with the protection, preservation or enforcement of its rights under any Finance Document; and

 

  (b) all money, obligations and liabilities due, owing or incurred in respect of any variations or increases in the amount or composition of the Notes provided under the Indenture or the obligations and liabilities imposed under the Indenture or the Notes.

“ Secured Party ” has the meaning given to that term in the Indenture.

“ Security ” means a mortgage, charge, pledge, lien, assignment or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

“ Specified Intellectual Property ” means the Intellectual Property listed in Schedule 2 ( Specified Intellectual Property ).

“ Subsidiary Guarantor ” means each Subsidiary Guarantor under, and as such term is defined in, the Indenture.

“ Tax ” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

“ US$ ” means the lawful currency of the United States of America.

 

1.2 Interpretation : Unless the context otherwise requires, the interpretative provisions set out in the paragraphs below shall apply in this Debenture.

  (a) References to any Party shall be construed so as to include that Party’s respective successors in title, permitted assigns and permitted transferees.

 

  (b) “ Including ” and “ in particular ” shall not be construed restrictively but shall mean respectively “including, without prejudice to the generality of the foregoing” and “in particular, but without prejudice to the generality of the foregoing”.

 

  (c) A “ person ” includes any individual, firm, company, corporation, government, state or agency of a state or any association, joint venture, limited liability company, trust or partnership (whether or not having separate legal personality) of two or more of the foregoing.

 

  (d) “ Property ” includes any interest (legal or equitable) in real or personal property and anything in action.

 

  (e) “ Variation ” includes any variation, amendment, accession, novation, restatement, modification, assignment, transfer, supplement, extension, deletion or replacement however effected and “ vary ” and “ varied ” shall be construed accordingly.

 

  (f) “ Writing ” includes facsimile transmission legibly received except in relation to any certificate, notice or other document which is expressly required by this Debenture to be signed and “ written ” has a corresponding meaning.

 

  (g) Subject to Clause 34.4 ( Variations ), references to this Debenture or to any other document (including any Finance Document) include references to this Debenture or such other document as varied in any manner from time to time, even if changes are made to the composition of the parties to this Debenture or such other document or to the nature or amount of any liabilities owed under, or to the obligations of any party to, such other document.

 

  (h) The singular shall include the plural and vice versa and any gender shall include the other genders.

 

  (i) Clauses, paragraphs and Schedules shall be construed as references to Clauses and paragraphs of, and Schedules to, this Debenture.

 

  (j) Any reference to any statute, ordinance, rule, regulation or statutory instrument or any section of it shall be deemed to include a reference to any statutory modification or re-enactment of it for the time being in force in relation to the particular circumstances.

 

  (k) Headings in this Debenture are inserted for convenience and shall not affect its interpretation.

 

  (l) An Event of Default is “continuing” if it has not been remedied or waived in accordance with the terms of the Indenture.

 

1.3 Conflict of terms : If any conflict arises between the covenants and undertakings in Clause 10 ( Land ) and Clause 12 ( Intellectual Property Rights ) and the covenants and undertakings in Article 4 ( Covenants ) or Article 5 ( Consolidation, merger and sale of assets ) of the Indenture, the covenants and undertakings given in the Indenture shall prevail.

 

2. C OVENANT TO PAY

 

2.1

Covenant to pay : The Chargor (as primary obligor and not merely as surety) covenants with the Security Trustee that it will, on the Security Trustee’s written demand, pay or

  discharge the Secured Obligations at the times and in the manner provided in the relevant Finance Documents.

 

2.2 Proviso : The covenants contained in this Clause 2 and the security created by this Debenture shall not extend to or include any liability or sum which would otherwise cause any such covenant or security to be unlawful or prohibited by any applicable law.

 

2.3 Demands :

 

  (a) The making of one demand shall not preclude the Security Trustee and/or the Secured Parties from making any further demands.

 

  (b) Any third party dealing with the Security Trustee, the Secured Parties or any Receiver shall not be concerned to see or enquire as to the validity of any demand under this Debenture.

 

2.4 Certificate of amount : A certificate signed (or, where reliance is being placed on it by any third party, appearing to be signed) by an officer of the Security Trustee as to the Secured Obligations for the time being due or owing from the Chargor to a Secured Party shall be treated, in favour of such Secured Party or any person to whom such certificate is issued, as conclusive evidence for all purposes against the Chargor and binding on it (save in the case of manifest error) and such certificate may be relied upon by any Secured Party and any other such person in all circumstances without further enquiry.

 

3. C REATION OF SECURITY

 

3.1 Assignments : The Chargor, as beneficial owner, with full title guarantee, as security for the payment or discharge of all Secured Obligations, assigns absolutely to the Security Trustee:

 

  (a) all of its rights, title and interest from time to time in respect of any sums payable to it pursuant to each Insurance Policy; and

 

  (b) all of its rights, title and interest from time to time (except those charged by Clause 3.2 ( Fixed security )) in respect of the Land including:

 

  (i) all rights to any payment, covenant, agreement, undertaking or indemnity contained in any sale and purchase agreement, Lease or other document, agreement or undertaking whatsoever relating to the Land now or in the future including, without limitation, all its rights, title and interest in and to the present and future Leases;

 

  (ii) the proceeds of sale of any part of the Land and the benefits of any covenants for title given or entered into by any predecessor in title to it in respect of the Land (or any moneys paid or payable in respect of those covenants); and

 

  (iii) all rights against all past, present and future undertenants of the Land and their respective guarantors and sureties.

 

3.2 Fixed security : The Chargor, as beneficial owner, with full title guarantee, as security for the payment or discharge of all Secured Obligations, charges to the Security Trustee:

 

  (a)

by way of first fixed legal charge, to the extent that its interest in the Land constitutes a legal estate, all Land in Hong Kong as described in Schedule 1 ( Land ) together with all Rights relating to such Land and all its estate, right, interest, benefit, title, property, claim and demand of the Chargor in and to such

  Land and those Rights subject to and with the benefit of each related Government Grant and DMC;

 

  (b) by way of first fixed equitable charge, to the extent that its interest in the Land constitutes an equitable estate, all Land in Hong Kong as described in Schedule 1 ( Land ) together with all Rights relating to such Land and all the estate, right, interest, benefit, title, property, claim and demand of the Chargor in and to such Land and those Rights subject to and with the benefit of each related Government Grant and DMC;

 

  (c) by way of first fixed charge:

 

  (i) all other Land which is now, or in the future becomes, its property;

 

  (ii) all interests and rights in or relating to Land or the proceeds of sale of Land now or in the future belonging to it;

 

  (iii) all plant and machinery now or in the future attached to any Land which, or an interest in which, is charged by it under the preceding provisions of this Clause 3.2;

 

  (iv) all rental and other income and all debts and claims now or in the future due or owing to it under or in connection with any lease, agreement or licence relating to Land;

 

  (v) all insurance or assurance contracts or policies now or in the future held by or otherwise benefiting it which relate to Fixed Security Assets or which are now or in the future deposited by it with the Security Trustee, together with all its rights and interests in such contracts and policies (including the benefit of all claims arising and all money payable under them) apart from any claims which are otherwise subject to a fixed charge or assignment (at law or in equity) in this Debenture;

 

  (vi) all its goodwill and uncalled capital for the time being;

 

  (vii) all Specified Intellectual Property belonging to it;

 

  (viii) all other Intellectual Property presently belonging to it, including any Intellectual Property to which it is not absolutely entitled or to which it is entitled together with others;

 

  (ix) all Intellectual Property that may be acquired by or belong to it in the future, including any such Intellectual Property to which it is not absolutely entitled or to which it is entitled together with others;

 

  (x) the benefit of all agreements and licences now or in the future entered into or enjoyed by it relating to the use or exploitation of any Intellectual Property in any part of the world;

 

  (xi) all its rights now or in the future in relation to trade secrets, confidential information and knowhow in any part of the world;

 

  (xii) all its rights and causes of action in respect of infringement(s) (past, present or future) of the rights referred to in sub-paragraphs (c)(vii) to (xi) inclusive of this Clause 3.2;

 

  (xiii) all trade debts now or in the future owing to it;

  (xiv) all other debts now or in the future owing to it, excluding those arising on fluctuating accounts with other members of the Group;

 

  (xv) the benefit of all instruments, guarantees, charges, pledges and other security and all other rights and remedies available to it in respect of any Fixed Security Asset except to the extent that such items are for the time being effectively assigned under Clause 3.1 ( Assignments );

 

  (xvi) all its interests and rights (if any) in or to any money at any time standing to the credit of each current, deposit and/or other account held by the Chargor with any bank or financial institution from time to time;

 

  (xvii) any beneficial interest, claim or entitlement it has to any pension fund now or in the future;

 

  (xviii) all rights, money or property accruing or payable to it now or in the future under or by virtue of a Fixed Security Asset except to the extent that such rights, money or property are for the time being effectively assigned or charged by fixed charge under the foregoing provisions of this Debenture; and

 

  (xix) the benefit of all licences, consents and authorisations held in connection with its business or the use of any Asset and the right to recover and receive all compensation which may be payable in respect of them.

 

3.3 Creation of floating charge : The Chargor, as beneficial owner, with full title guarantee, charges to the Security Trustee as security for the payment or discharge of all Secured Obligations, by way of first floating charge all its Assets, except to the extent that such Assets are for the time being effectively assigned by way of security by virtue of Clause 3.1 ( Assignments ) or charged by any fixed charge contained in Clause 3.2 ( Fixed security ), including any Assets comprised within a charge which is reconverted under Clause 4.4 ( Reconversion ), so that the Chargor shall not create any Security over any such Floating Charge Asset (whether having priority over, or ranking pari passu with or subject to, this floating charge) or take any other step referred to in Clause 6 ( Negative pledge and other restrictions ) with respect to any such Floating Charge Asset, and it shall not, without the consent of the Security Trustee, sell, transfer, part with or dispose of any such Floating Charge Asset (except by way of sale in the ordinary course of its business to the extent that such action is not otherwise prohibited by any Finance Document).

 

3.4 Notices of Assignment:

 

  (a) The Chargor shall on the date of this Debenture give notice to the insurer(s) (and any broker) of the security over the Insurance Policies and their proceeds created by this Debenture.

 

  (b) The Chargor shall use all reasonable endeavours (including expending reasonable costs and expenses) to procure the execution and delivery to the Security Trustee of acknowledgments by the addressees of the notices delivered to them pursuant to paragraph (a).

 

3.5 Priority:

 

  (a) Any fixed Security created by the Chargor and subsisting in favour of the Security Trustee shall (save as the Security Trustee may otherwise declare at or after the time of its creation) have priority over the floating charge created by Clause 3.3 ( Creation of floating charge ).

  (b) Any Security created in the future by the Chargor (except in favour of the Security Trustee) shall be expressed to be subject to this Debenture and shall rank in order of priority behind the charges created by this Debenture.

 

3.6 Application to the Land Registry:

 

  (a) Registration of existing Land : The Chargor shall:

 

  (i) promptly after it becomes possible to do so, apply to the Land Registry for registration of the instrument vesting legal and beneficial ownership of the Land in Hong Kong in the Chargor in all cases where it is not already so registered (and is required to be so registered) and notify the Security Trustee of the memorial number of that instrument; and

 

  (ii) request the Land Registrar to register the legal charge and/or the equitable charge created by Clause 3.2 ( Fixed security ) and notice of all other Security created or expressed to be created by this Debenture.

 

  (b) Registration of future Land : In the case of the Chargor’s Land in Hong Kong acquired after the date of this Debenture, the Chargor covenants that it shall:

 

  (i) promptly after it becomes possible to do so, apply to the Land Registry for registration of the instrument vesting legal and beneficial ownership to that Land in Hong Kong in the Chargor and notify the Security Trustee of the memorial number of that instrument;

 

  (ii) execute a supplemental deed of charge in favour of the Security Trustee in substantially the same terms as the charge created by Clause 3.2 ( Fixed security ) in respect of that Land in Hong Kong; and

 

  (iii) request the Land Registrar to register that supplemental deed of charge in relation to that Land in Hong Kong and notice of all Security created or expressed to be created by this Debenture.

 

4. C RYSTALLISATION

 

4.1 Crystallisation by notice : The floating charge created by the Chargor in Clause 3.3 ( Creation of floating charge ) may be crystallised into a fixed charge by notice in writing given at any time by the Security Trustee to the Chargor (or to the Issuer on its behalf) if:

 

  (a) an Event of Default has occurred and is continuing;

 

  (b) the Security Trustee in good faith considers that a Default under Clause (7) or (8) of Section 6.01 ( Events of Default ) of the Indenture has occurred; or

 

  (c) the Security Trustee in good faith considers that any of the Assets expressed to be charged to the Security Trustee by this Debenture may be in jeopardy or in danger of being seized or sold pursuant to any form of legal process; or

 

  (d) a circumstance envisaged by paragraph (a) of Clause 4.2 ( Automatic crystallisation ) occurs and the Security Trustee in good faith considers that such crystallisation is desirable in order to protect the priority of its security.

Such crystallisation shall take effect over the Floating Charge Assets or class of Assets specified in the notice. If no Floating Charge Assets are specified, it shall take effect over all Floating Charge Assets of the Chargor.

 

4.2 Automatic crystallisation : If, without the Security Trustee’s prior written consent:

  (a) the Chargor, in contravention of any Finance Document, resolves to take or takes any step to:

 

  (i) charge or otherwise encumber any of its Floating Charge Assets;

 

  (ii) create a trust over any of its Floating Charge Assets; or

 

  (iii) dispose of any Floating Charge Asset (except by way of sale in the ordinary course of its business to the extent that such disposal is not otherwise prohibited by any Finance Document); or

 

  (b) any person resolves to take or takes any step to seize or sell any Floating Charge Asset pursuant to any form of legal process; or

 

  (c) an Event of Default under Clause (7) or (8) of Section 6.01 ( Events of Default ) of the Indenture has occurred,

then the floating charge created by Clause 3.3 ( Creation of floating charge ) shall be automatically and instantly crystallised (without the necessity of notice) into a fixed charge over such Floating Charge Asset or, in the case of paragraph (c) above into a fixed charge over all Floating Charge Assets of the Chargor.

 

4.3 Future Floating Charge Assets : Except as otherwise stated in any notice given under Clause 4.1 ( Crystallisation by notice ) or unless the crystallisation relates to all its Floating Charge Assets, prospective Floating Charge Assets acquired by the Chargor after crystallisation has occurred under Clause 4.1 ( Crystallisation by notice ) or 4.2 ( Automatic crystallisation ) shall become subject to the floating charge created by Clause 3.3 ( Creation of floating charge ), so that the crystallisation shall be effective only as to the specific Floating Charge Assets affected by the crystallisation.

 

4.4 Reconversion : Any charge which has crystallised under Clause 4.1 ( Crystallisation by notice ) or 4.2 ( Automatic crystallisation ) may, by notice in writing given at any time by the Security Trustee to the Chargor, be reconverted into a floating charge in relation to the Assets specified in such notice.

 

5. T ITLE DOCUMENTS AND INSURANCE POLICIES

 

5.1 Documents : Subject to the rights of any prior chargee and except as otherwise expressly agreed in writing by the Security Trustee, the Chargor shall deposit with the Security Trustee, and the Security Trustee shall be entitled to retain during the continuance of the security created by this Debenture, all deeds and documents of title relating to all its Fixed Security Assets, including policies of insurance and assurance, certificates of registration and certificates constituting or evidencing Intellectual Property Rights.

 

5.2 Insurance:

 

  (a) The Chargor shall:

 

  (i) maintain at all times insurance policies which comply with (and otherwise comply with all its obligations under) Section 4.05 ( Maintenance of properties and insurance ) of the Indenture and comply with the terms of all such insurance policies, including any stipulations or restrictions as to use or operation of any asset, and not do or permit anything which may make any insurance policy void or voidable; and

 

  (ii) make notifications to insurers of any claims or prospective claims in accordance with the provisions of the relevant insurance policy and diligently pursue the making of recoveries from insurers.

  (b) The Chargor shall procure that:

 

  (i) except where the proceeds of a particular insurance policy have been assigned by way of security to the Security Trustee, the Security Trustee be shown as the loss payee on the face of all its insurance policies in such form as the Security Trustee may require;

 

  (ii) the members of the Group shall punctually make all premium and other payments necessary for effecting or maintaining such insurances and on demand shall produce to the Security Trustee the receipts of such payments; and

 

  (iii) the members of the Group shall use their best endeavours to cause the policies of insurance maintained by them as required by this Clause to be forthwith amended to include clauses to ensure that the policies shall not be voidable by the insurers as a result of any misrepresentation, non-disclosure of material facts or breach of warranty provided that in each case there shall have been no fraud or wilful deceit on the part of the insured member of the Group.

 

  (c) If any default shall at any time be made in effecting or maintaining insurance required by this Clause or in producing any payment receipt to the Security Trustee on demand or depositing any policy with the Security Trustee pursuant to the Security Documents, the Security Trustee may take out or renew such insurances in such sums as the Security Trustee may think expedient and all money expended by the Security Trustee under this provision shall be recoverable by the Security Trustee under Clause 23 ( Costs, expenses and liabilities ).

 

  (d) The Chargor shall procure that its insurance broker undertakes in writing to the Security Trustee that:

 

  (i) upon becoming aware that it has failed to pay any premium or renew any insurance, it will take reasonable steps to keep the Security Trustee’s interest in such insurance in force up to the full sum insured and for the same risks (subject to the premium for any such period of extended cover being advanced to the broker by the Security Trustee for the account of the Chargor);

 

  (ii) it will advise the Security Trustee of any proposed cancellation of the policy as soon as reasonably practicable after being informed of such cancellation;

 

  (iii) if the insurance cover is to be reduced or any insured risks are to be restricted, it will advise the Security Trustee as soon as reasonably practicable after being informed of such reduction or restriction;

 

  (iv) it will advise the Security Trustee as soon as reasonably practicable of any act, omission or event which comes to its knowledge which might invalidate the insurance or render it unenforceable, in whole or in part; and

 

  (v) it will advise the Security Trustee if any claim with a value in excess of US$1,000,000 (or its equivalent in other currencies) is rejected by insurers.

 

6. R EPRESENTATIONS AND WARRANTIES

The Chargor represents and warrants to the Security Trustee and each of the Secured Parties on the date of this Debenture:

  (a) Status:

 

  (i) it is duly constituted, validly existing and, where applicable, in good standing under the laws of the country in which it is incorporated;

 

  (ii) it is not insolvent or in liquidation or administration or subject to any other insolvency procedure;

 

  (iii) no receiver, manager, trustee, custodian or analogous officer has been appointed in respect of any part of its property, undertaking or assets; and

 

  (iv) it has the appropriate power and authority to own its property and assets and to carry on its business as it is conducted on the date of this Debenture;

 

  (b) Capacity and approvals: it has the appropriate power to enter into and perform the terms and conditions of, and has taken all necessary action to authorise the execution, delivery and performance of, this Debenture;

 

  (c) Proper execution: this Debenture has been properly executed by it and the obligations expressed as being assumed by it under this Debenture are valid and binding upon it and enforceable in accordance with their terms;

 

  (d) Compliance with legal restrictions: none of the provisions, covenants and obligations on its part contained in this Debenture contravenes any of the provisions of its memorandum or articles of association or other constitutional documents and neither this Debenture nor its performance will infringe any law or obligation binding upon it;

 

  (e) Other approvals for this Debenture: no authorisation of or registration with any governmental, judicial or other third party nor payment of any stamp, registration or other tax is required or desirable in connection with the execution, performance, validity, enforceability or admissibility in evidence of this Debenture, other than the adjudication and stamping of this Debenture, and its lodgment at the Corporate Affairs and Intellectual Property Office, Barbados in duplicate original, within 28 days of its execution, together with duplicate originals of a statement of charge; and

 

  (f) No Security/guarantees: except as previously disclosed in writing to the Security Trustee with express reference to this Clause, there is no Security affecting any Assets other than any Security created by this Debenture, and no Chargor has given any guarantee, indemnity or other assurance against loss in relation to the liability of any person other than in favour of the Secured Parties or as otherwise permitted under the terms of the Indenture.

 

7. N EGATIVE PLEDGE AND OTHER RESTRICTIONS

No Chargor shall, without the prior written consent of the Security Trustee (or unless otherwise permitted under the terms of the Indenture):

 

  (a) create, or agree or attempt to create, or permit to subsist, any Security or any trust over any of its Assets; or

 

  (b) sell, assign, lease, license or sub-license, or grant any interest in, any of its Fixed Security Assets, or part with possession or ownership of them, or purport or agree to do so.

8. F URTHER ASSURANCE

 

  (a) The Chargor shall promptly do all such acts and execute all such documents (including assignments, transfers, mortgages, charges, notices, forms and instructions) (in favour of the Security Trustee or its nominee(s)) in order to:

 

  (i) perfect or protect the Security created or intended to be created by this Debenture (which may include the execution of a mortgage, charge, assignment, transfer, notice, instruction or other Security over all or any of the Assets which are, or are intended to be, the subject of the Security constituted by this Debenture) or for the exercise of any rights, powers and remedies of any Secured Party provided by this Debenture or by law;

 

  (ii) confer on the Security Trustee or confer on the Secured Parties, Security over any of its Assets located in any jurisdiction outside Hong Kong which is (to the extent permitted by local law) equivalent or similar to the Security intended to be conferred by or pursuant to this Debenture; and/or

 

  (iii) facilitate the realisation of the Assets subject to the Security conferred or intended to be conferred by this Debenture or the exercise of any rights vested in the Security Trustee, any Receiver or nominee, including executing any transfer, conveyance, charge, assignment or assurance of all or any of the Assets which are the subject of the Security constituted by this Debenture, making any registration and giving any notice, order or instructions.

 

  (b) The Chargor shall take all such action as is available to it (including making all filings and registrations) as may be necessary for the purpose of the creation, perfection, protection or maintenance of any Security conferred or intended to be conferred on the Security Trustee or the Secured Parties by or pursuant to this Debenture. Without prejudice to the generality of this Clause 8, at the request of the Security Trustee the Chargor will promptly execute a legal mortgage, charge or assignment over any of the Assets subject to or intended to be subject to any fixed security created by this Debenture in favour of the Security Trustee.

 

  (c) Without prejudice to the generality of this Clause 8, the Chargor shall:

 

  (i) promptly after the execution of this Debenture, at the cost of the Chargor effect such filings, notices and registrations (or assist the counsel to the Security Trustee to effect such filings, notices and registrations) as are necessary or prudent in order to preserve, perfect and enforce the Security created or expressed to be created pursuant to this Debenture (including, for the avoidance of doubt, the adjudication and stamping of this Debenture, and its lodgment at the Corporate Affairs and Intellectual Property Office, Barbados in duplicate original, within 28 days of its execution, together with duplicate originals of a statement of charge); and

 

  (ii) promptly provide to the Security Trustee evidence (in form and substance satisfactory to the Security Trustee) of all registrations, notices and filings completed pursuant to paragraph (i) above.

Notwithstanding anything to the contrary contained in this Debenture or under applicable law, but without limiting the rights and authorisations of the Security Trustee hereunder, the Security Trustee shall not be obliged to:

 

  (i)

prepare, record, file, re-record, or re-file any financing statement, perfection statement, continuation statement or other instrument in any

  public office or otherwise ensure the perfection or maintenance of any security interest granted pursuant to, or contemplated by any Finance Document;

 

  (ii) take any necessary steps to preserve rights against any parties with respect to any Assets; or

 

  (iii) take any action to protect against any diminution in value of any Assets.

 

9. C ONTINUING SECURITY

This Debenture shall be a continuing security for the Secured Parties, notwithstanding any intermediate payment or settlement of accounts or other matter whatever, and shall be in addition to and shall not prejudice or be prejudiced by any right of set-off, combination, lien or other rights exercisable by any Secured Party as banker against the Chargor or any security, guarantee, indemnity and/or negotiable instrument now or in the future held by any Secured Party.

 

10. A MOUNT S ECURED

 

10.1 Unlimited amount: The amount to be secured by this Debenture shall be unlimited. This Debenture shall be stamped in Barbados pursuant to the provisions of the Stamp Duty Act, Cap. 91 of the laws of Barbados, in the first instance with stamp duty covering an aggregate indebtedness of the amount stated in Schedule 3 ( Stamped aggregate indebtedness ) and the Chargor hereby agrees that the Security Trustee shall be and is hereby empowered at any time or times hereafter (without further licence or consent of the Chargor) to affix additional stamp duty hereon covering any sum or sums by which the said indebtedness may exceed the said sum, it being the intent of these presents that until its discharge in writing by the Security Trustee any charge hereby created shall be a continuing security for the Secured Obligations whether incurred, existing or arising before or after the execution and delivery of this Debenture.

 

10.2 Stamping: Without prejudice to the right of the Security Trustee under Clause 10.1 ( Unlimited amount ) the Company will at all times and from time to time duly stamp this Debenture in accordance with the intent of Clause 10.1( Unlimited amount ) and shall procure that such statement of the charge hereby created or such amended particulars thereof in such form as the Security Trustee may reasonably require are duly lodged with the Registrar of Companies pursuant to and in accordance with Part II Division A of the Companies Act.

 

11. L AND

 

11.1 Negative covenants : The Chargor shall not without the prior written consent of the Security Trustee (which will not be unreasonably withheld or delayed) or unless otherwise permitted under the terms of the Indenture:

 

  (a) save in the ordinary course of business, carry out any building work on its Land or make any structural alteration to any building on its Land or apply for any planning consent for the development or change of use of its Land, or at any time sever, remove or dispose of any Fixture on it if any such action would be reasonably likely to materially adversely affect the value of such Land;

 

  (b) enter into any onerous or restrictive obligations affecting its Land or create or permit to arise any overriding interest or any easement or right whatever in or over it which would be reasonably likely to affect adversely its value or the value of the Security constituted by this Debenture over it;

  (c) exercise any power of leasing in relation to its Land, or accept surrenders of leases of its any Land or agree to do so;

 

  (d) extend, renew on substantially different terms or vary any lease or tenancy agreement or give any licence to assign or underlet in relation to its Land to the extent that it would be reasonably likely to materially adversely affect its value or the value of the Security constituted by this Debenture;

 

  (e) part with possession of its Land (except on the determination of any Lease, tenancy or licence granted to it) or except as expressly permitted by the terms of the Finance Documents;

 

  (f) share the occupation of any Land with any other person or agree to do so;

 

  (g) change or permit to be changed the use of any of the Land or carry out any operation or begin or continue any use of the Land for which planning permission under applicable law or regulation is required but has not been obtained;

 

  (h) enter into any negotiations with any competent authorities relating to the resumption of any of the Land pursuant to the Government Lands Resumption Ordinance (Chapter 124 of the Laws of Hong Kong) or consent to the resumption of any Land and, if so requested by the Security Trustee, it will permit the Security Trustee or its representatives to conduct any negotiations or give any consent on its behalf; or

 

  (i) use the Land or permit the Land to be used for purposes other than those for which it has been permitted or designated in the Government Grant or by any other competent authority (or any building thereon has been built) and may lawfully be used.

 

11.2 Implied covenants for title : The Chargor’s obligations under this Debenture are in addition to any covenant for title deemed to be included in this Debenture under the CPO, any equivalent statute or general law.

 

12. I NTELLECTUAL P ROPERTY R IGHTS

 

12.1 Negative covenants : Without the prior written consent of the Security Trustee (or unless otherwise permitted under the terms of the Indenture), the Chargor shall not:

 

  (a) sell, assign, lease, license, sub-license or grant any interest in its Intellectual Property Rights, or purport or agree to do so or part with possession or ownership of them, or allow any third party access to, or the right to use or exploit, any Intellectual Property Rights;

 

  (b) enter into any contract or arrangement for supply or otherwise whereby any third party obtains any assignment of or any right or licence in relation to any Intellectual Property Rights on the occurrence or non-occurrence of any future event or circumstance whatever;

 

  (c) amend the specification of any registered trade mark included in its Intellectual Property Rights or authorise or permit any third party to register any trade mark which is the same as or confusingly similar to any such trade mark in respect of goods or services which are the same as or similar to the goods or services for which such trade mark is registered; or

 

  (d) amend the specification or drawings referred to in any granted patent.

13. O PENING OF NEW ACCOUNTS

 

13.1 Creation of new account : On receiving notice that the Chargor has granted Security over or otherwise encumbered or disposed of any of its Assets in contravention of any Finance Document, a Secured Party may rule off all its accounts and open new accounts with it.

 

13.2 Credits to new account : If a Secured Party does not open a new account immediately on receipt of such notice, it shall nevertheless be treated as if it had done so on that day. From that day, all payments made by the relevant Chargor to that Secured Party shall be treated as having been credited to a new account and shall not operate to reduce the amount owing from the Chargor to such Secured Party at the time when it received such notice.

 

14. P OWERS OF SALE , LEASING AND ACCEPTING SURRENDERS

 

14.1 Paragraph 11 of the Fourth Schedule of the CPO : Paragraph 11 of the Fourth Schedule of the CPO shall not apply to this Debenture, and the statutory power of sale shall arise on, and be exercisable at any time after, the execution of this Debenture. However, the Security Trustee shall not exercise such power of sale until the Security constituted by this Debenture has become enforceable.

 

14.2 Powers of sale extended : The statutory powers of sale, leasing and accepting surrenders exercisable by the Security Trustee by virtue of this Debenture are extended so as to authorise the Security Trustee (whether in its own name or the Chargor’s name) to:

 

  (a) grant a Lease of any Land vested in the Chargor or in which it has an interest on such terms and conditions as the Security Trustee shall think fit; and

 

  (b) sever any Fixtures from Land vested in the Chargor and sell them separately.

 

15. P OWERS OF THE S ECURITY T RUSTEE

 

15.1 Enforceable : On or at any time after the occurrence of an Event of Default that is continuing, then the Security constituted by this Debenture shall become enforceable.

 

15.2 Appointment of Receiver : On or at any time after the Security constituted by this Debenture has become enforceable, notwithstanding the terms of any other agreement between the Chargor and any Secured Party, the Security Trustee may (unless precluded by law) appoint in writing any person or persons to be a receiver and manager or receivers and managers of all or any part of the Assets of the Chargor or as the Security Trustee may choose in its entire discretion. The provisions of Section 50 ( Power to appoint a receiver ) of the CPO and similar provisions of any equivalent statute (as varied and/or extended by this Debenture) shall apply to any appointment made pursuant to this Debenture.

 

15.3 Power to act separately : Where more than one Receiver is appointed, the appointees shall have power to act separately unless the Security Trustee shall specify to the contrary.

 

15.4 Receiver’s remuneration : The Security Trustee may from time to time determine the remuneration of a Receiver (subject to Section 300 of the Ordinance).

 

15.5 Removal of Receiver : The Security Trustee may remove a Receiver from all or any of the Assets of which he is the Receiver.

15.6 Further appointments of a Receiver : Such an appointment of a Receiver shall not preclude:

 

  (a) the Security Trustee from making any subsequent appointment of a Receiver over all or any Assets over which a Receiver has not previously been appointed or has ceased to act; or

 

  (b) the appointment of an additional Receiver to act while the first Receiver continues to act.

 

15.7 Receiver’s agency : The Receiver shall be the agent of the Chargor (which shall be solely liable for his acts, defaults and remuneration) unless and until the Chargor goes into liquidation, after which time he shall act as principal and shall not become the agent of the Security Trustee or any other Secured Party. The Security Trustee shall not be responsible, at any time, for the actions of the Receiver.

 

16. P OWERS OF A R ECEIVER

 

16.1 General : The Receiver may exercise, in relation to the Chargor over whose Assets he is appointed, all the powers, rights and discretions set out in Section 51 and the Fourth Schedule of the CPO and any equivalent statute (as varied and/or extended by this Debenture) and in particular, by way of addition to and without limiting such powers, the Receiver may, with or without the concurrence of others:

 

  (a) sell or concur in selling (where necessary with the leave of the court), lease or concur in leasing, license or concur in licensing, grant options over and vary the terms of, terminate or accept surrenders of leases, licences or tenancies of, all or any of the Assets of the Chargor, without the need to observe any of the provisions of Section 53 of the CPO, in such manner and generally on such terms and conditions as he shall think fit in his absolute and unfettered discretion and any such sale or disposition may be for cash, Investments or other valuable consideration (in each case payable in a lump sum or by instalments) and carry any such transactions into effect in the name of and on behalf of the Chargor;

 

  (b) promote the formation of a Subsidiary of the Chargor with a view to such Subsidiary purchasing, leasing, licensing or otherwise acquiring interests in all or any of the Assets of the Chargor;

 

  (c) sever any Fixtures from Land and/or sell them separately;

 

  (d) arrange for the purchase, lease, licence or acquisition of all or any Assets of the Chargor by any Subsidiary contemplated by paragraph (b) above on a basis whereby the consideration may be for cash, Investments, shares of profits or sums calculated by reference to profits or turnover or royalties or licence fees or otherwise, whether or not secured on the assets of such Subsidiary and whether or not such consideration is payable or receivable in a lump sum or by instalments over such period as the Receiver may think fit;

 

  (e) make any arrangement or compromise with any Secured Party or others as he shall think fit;

 

  (f) make and effect all repairs, renewals and improvements to the Assets of the Chargor and effect, renew or increase insurances on such terms and against such risks as he shall think fit;

 

  (g) appoint managers, officers and agents for the above purposes at such remuneration as the Receiver may determine;

  (h) redeem any prior encumbrance and settle and pass the accounts of the encumbrancer and any accounts so settled and passed shall (subject to any manifest error) be conclusive and binding on the Chargor and the money so paid shall be deemed an expense properly incurred by the Receiver;

 

  (i) pay the proper administrative charges of any Secured Party in respect of time spent by their agents and employees in dealing with matters raised by the Receiver or relating to the receivership of the Chargor;

 

  (j) commence and/or complete any building operations upon any Land of the Chargor and apply for and obtain any planning permissions, building regulation consents or licences, in each case as he may in his absolute discretion think fit;

 

  (k) take all steps necessary to effect all registrations, renewals, applications and notifications as the Receiver may in his discretion think prudent to maintain in force or protect any of the Chargor’s Intellectual Property Rights; and

 

  (l) do all such other acts and things as may be considered by the Receiver to be incidental or conducive to any of the above matters or powers or otherwise incidental or conducive to the preservation, improvement or realisation of the relevant Assets.

 

17. P OWER OF ATTORNEY

 

17.1 Appointment of attorney : The Chargor, by way of security and to more fully secure the performance of its obligations under this Debenture, hereby irrevocably appoints the Security Trustee (whether or not a Receiver has been appointed) and separately any nominee and/or any Receiver to be its attorney (with full power to appoint substitutes and to delegate) with power in its name and on its behalf, and as its act and deed or otherwise to:

 

  (a) do anything which the Chargor is obliged to do (but has not done) in accordance with this Debenture, including to execute and deliver and otherwise perfect any agreement, assurance, deed, instrument or document;

 

  (b) enable the Security Trustee or any such nominee and/or Receiver to exercise (or to delegate) all or any of the rights conferred on it by this Debenture, the CPO or any other statute in relation to this Debenture or the Assets charged, or purported to be charged, by it; and

 

  (c) perform any other act of any description.

The Security Trustee shall have no obligation to undertake any of the foregoing actions, and, if it takes any such action in accordance with this Debenture it shall have no liability to the Chargor to continue the same or for the sufficiency or adequacy thereof.

 

17.2 Ratification : The Chargor ratifies and confirms whatever any attorney lawfully does or purports to do pursuant to his appointment under this Clause 17.

 

17.3 Sums recoverable : All sums expended by the Security Trustee nominee and/or any Receiver under this Clause 17 shall be recoverable from the Chargor under Clause 23 ( Costs, expenses and liabilities ).

 

18. O THER POWERS EXERCISABLE BY THE S ECURITY T RUSTEE

 

18.1 Receiver’s powers : All powers of a Receiver conferred by this Debenture may be exercised by the Security Trustee after this Debenture has become enforceable. In that event, paragraph (h) of Clause 16 ( Powers of a Receiver ) shall be read and construed as

  if the words “be charged on the Assets of the Chargor” were substituted for the words “be deemed an expense properly incurred by the Receiver”.

 

18.2 Receipt of debts : The Security Trustee or any manager, officer, nominee or agent of the Security Trustee is hereby irrevocably empowered to:

 

  (a) receive all book or trade debts and other debts and claims which may be assigned to the Security Trustee pursuant to this Debenture and/or Clause 8 ( Further assurance );

 

  (b) on payment to give an effectual discharge for them and on non-payment to take and institute (if the Security Trustee in its sole discretion so decides) all steps and proceedings either in the name of the Chargor or in the name of the Security Trustee for their recovery; and

 

  (c) also to agree accounts and to make allowances and to give time to any surety.

The Chargor ratifies and confirms whatever the Security Trustee or any manager or officer of the Security Trustee shall lawfully do or purport to do under this Clause 18.

 

18.3 Security Trustee’s powers : The Security Trustee shall have no liability or responsibility to the Chargor arising out of the exercise or non-exercise of the powers conferred on it by this Clause 18, except for gross negligence or wilful default.

 

18.4 No duty of enquiry : The Security Trustee need not enquire as to the sufficiency of any sums received by it in respect of any debt or claim or make any claim or take any other action to collect in or enforce them.

 

18.5 Exercised power of sale:

 

  (a) The Security Trustee shall incur no liability as a result of the sale of any Assets, or any part thereof, at any private or public sale conducted pursuant to this Debenture in accordance with the requirements of applicable laws. With regards to private sales, the Chargor hereby waives any claims against the Security Trustee and the other Secured Parties arising by reason of the fact that the price at which the Assets may have been sold at such a private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if the first offer received is accepted and the Assets are not offered to more than one offeree, provided that any such private sale is conducted in accordance with applicable laws and this Debenture.

 

  (b) The Chargor hereby agrees that in respect of any sale of any of the Assets pursuant to the terms of this Debenture, the Security Trustee is hereby authorised to comply with any limitation or restriction in connection with such sale as it may be advised by its legal counsel is necessary, in order to:

 

  (i) avoid any violation of applicable laws; or

 

  (ii) obtain any required approval of the sale or of the purchaser or by any governmental authority or official,

and the Chargor further agrees that such compliance shall not, in and of itself, result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Security Trustee be liable or accountable to the Chargor for any discount allowed by reason of the fact that such Asset is sold in compliance with any such limitation or restriction.

19. A PPLICATION OF MONEY RECEIVED BY THE S ECURITY T RUSTEE OR A R ECEIVER

 

19.1 Order of priority : Any money received or realised under the powers conferred by this Debenture shall be paid or applied by the Security Trustee in or towards the discharge of the Secured Obligations as required by the Indenture.

 

19.2 Suspense account : Until all the Secured Obligations have been unconditionally and irrevocably paid and discharged in full, the Security Trustee (acting reasonably) may place and keep to the credit of a suspense account any money received from or realised in respect of the Chargor’s liability under this Debenture. The Security Trustee shall have no intermediate obligation to apply such money in or towards the discharge of any of the Secured Obligations. Amounts standing to the credit of any such suspense account shall bear interest at a rate considered by the Security Trustee in good faith to be a fair market rate.

 

19.3 Discretion to apply : Until all Secured Obligations have been unconditionally and irrevocably paid and discharged in full, the Security Trustee may refrain from applying or enforcing any other moneys, security or rights held by it in respect of the Secured Obligations or may apply and enforce such moneys, security or rights in such manner and in such order as it shall decide in its unfettered discretion.

 

20. P ROTECTION OF THIRD PARTIES

 

20.1 No duty to enquire : No purchaser from, or other person dealing with, the Security Trustee, its nominee or any Receiver appointed under this Debenture shall be concerned to enquire whether any of the powers which the Security Trustee has exercised or purported to exercise has arisen or become exercisable, or whether this Debenture has become enforceable, or whether any nominee or Receiver has been validly appointed, or whether any event or cause has happened to authorise the Security Trustee, any nominee or a Receiver to act or as to the propriety or validity of the exercise or purported exercise of any such power, and the title of such a purchaser and the position of such a person shall not be impeachable by reference to any of those matters.

 

20.2 Receipt : The receipt of the Security Trustee shall be an absolute and a conclusive discharge to a purchaser and shall relieve him of any obligation to see to the application of any money paid to or by the direction of the Security Trustee.

 

20.3 Protection to purchasers : Subject to the provisions of this Debenture, all the protection to purchasers contained in Sections 52 ( Protection of purchaser ), 53 ( Sale by mortgagee ) and 55 ( Mortgagee’s receipt ) of the CPO or in any other applicable statute shall apply to any person purchasing from or dealing with the Security Trustee or any Receiver.

 

21. P ROTECTION OF THE S ECURITY T RUSTEE , ANY NOMINEE AND R ECEIVER

 

21.1 Limitation : Neither the Security Trustee nor any nominee nor Receiver shall be liable in respect of this Debenture, except if and in so far as such Liability results directly from its own gross negligence or wilful misconduct. Notwithstanding the foregoing, under no circumstances shall the Security Trustee be liable for consequential, special, punitive or indirect damages, irrespective of being informed of the possibility thereof and regardless of the cause of action.

 

21.2

Entry into possession : Without prejudice to the generality of Clause 21.1 ( Limitation ), neither the Security Trustee, any nominee nor any Receiver shall be liable to account as mortgagee in possession or otherwise for any sum not actually received by it or him respectively. If and whenever the Security Trustee, or any nominee enters into

  possession of any Assets, it shall be entitled at any time at its discretion to go out of possession.

 

22. S ECURITY T RUSTEE

 

22.1 Security Trustee as trustee : The Security Trustee declares itself to be a trustee of this Debenture (and any other Security created in its favour pursuant to this Debenture) for the Secured Parties. The retirement of the person for the time being acting as Security Trustee and the appointment of a successor shall be effected in the manner provided for in the Indenture.

 

22.2 Perpetuity period : The perpetuity period applicable to the trust hereby constituted shall be 80 years.

 

22.3 No partnership : Nothing in this Debenture shall constitute or be deemed to constitute a partnership between any of the Secured Parties and the Security Trustee.

 

23. C OSTS , EXPENSES AND LIABILITIES

 

23.1 Costs and expenses : The Chargor will, promptly on the Security Trustee’s demand from time to time, reimburse the Security Trustee for all costs and expenses (including legal fees) on a full indemnity basis, reasonably incurred by it in connection with:

 

  (a) the negotiation, preparation, printing and execution and perfection of this Debenture; and

 

  (b) the completion of the transactions and perfection of the Security contemplated in this Debenture in Clause 8 ( Further assurance ).

 

23.2 Amendment costs : If the Chargor requests an amendment, waiver or consent, the Chargor shall, within five Business Days of demand, reimburse the Security Trustee (or any Receiver or delegate) for the amount of all documented costs and expenses (including legal fees) reasonably incurred by the Security Trustee (or any Receiver or delegate) in responding to, evaluating, negotiating or complying with that request or requirement.

 

23.3 Enforcement costs : The Chargor will, within five Business Days of the Security Trustee’s demand, pay to the Security Trustee and each other Secured Party on a full indemnity basis, the amount of all costs and expenses (including legal, valuation, accountancy and consultancy fees and disbursements and out-of-pocket expenses), and any indirect tax thereon, incurred by the Security Trustee and/or any other Secured Party in connection with the exercise, enforcement and/or preservation of any of its rights under this Debenture (or any of the documents contemplated by such documents) or any proceedings instituted by or against the Security Trustee, in any jurisdiction, as a consequence of taking or holding this Debenture or enforcing these rights.

 

23.4 Indemnity for Liabilities : The Chargor shall also, promptly following the Security Trustee’s demand, reimburse or pay to the Security Trustee, its employees or agents, and any nominee on demand (on the basis of a full indemnity) the amount of all Liabilities incurred by the Security Trustee, its employees or agents and any nominee, in connection with:

 

  (a) any default or delay by the Chargor in the performance of any of its obligations under this Debenture;

 

  (b)

the exercise, or the attempted or purported exercise, by or on behalf of the Security Trustee of any of its powers or any other action taken by or on behalf of the Security Trustee with a view to or in connection with the recovery of the

  Secured Obligations, the enforcement of the Security created by this Debenture or for any other purpose contemplated in this Debenture;

 

  (c) the carrying out or consideration of any other act or matter which the Security Trustee may consider to be conducive after the occurrence of an Event of Default to the preservation, improvement or benefit of any Asset; and

 

  (d) any stamp duty, stamp duty reserve tax or similar tax which may be payable as a result of the execution or performance of this Debenture.

 

23.5 Without prejudice : The above entitlement to costs, expenses and indemnities shall not prejudice the entitlement of the Security Trustee to indemnities and compensations provided under Section 10.07 ( Additional Security Trustee Terms ) of the Indenture.

 

23.6 Continuing obligations : The obligations of the Chargor under this Clause 23 shall be continuing and shall survive the termination of this Debenture and the resignation or removal of the Security Trustee.

 

24. S TAMP DUTY

The Chargor shall pay all present and future stamp, registration and similar taxes or charges which may be payable or determined to be payable in any applicable jurisdiction in connection with the execution, delivery, performance or enforcement of this Debenture or any judgment given in connection with this Debenture and shall indemnify the Security Trustee, each Secured Party and each Receiver against any and all liabilities including penalties with respect to or resulting from its delay or omission to pay any such stamp, registration and similar taxes or charges.

 

25. T AX GROSS - UP

 

25.1 Definitions

 

  (a) In this Clause 25:

 

    “ Tax Deduction ” means a deduction or withholding for or on account of Tax from a payment under this Debenture.

 

  (b) In this Clause 25 a reference to “determines” or “determined” means a determination made in the absolute discretion of the person making the determination.

 

25.2 Tax gross-up

 

  (a) The Chargor shall make all payments to be made by it in accordance with the terms of this Debenture without any Tax Deduction, unless a Tax Deduction is required by law.

 

  (b) The Chargor shall promptly upon becoming aware that it must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Security Trustee accordingly.

 

  (c) If the Tax Deduction is required by law to be made by the Chargor, the amount of the payment due from it shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

  (d) If the Chargor is required to make a Tax Deduction, it shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

 

  (e) Within 30 days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Chargor shall deliver to the Security Trustee evidence reasonably satisfactory to the Security Trustee that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

 

26. I NFORMATION

The Security Trustee may from time to time seek from any other banker or finance provider to the Chargor such information about the Chargor and its affairs as the Security Trustee may think fit and the Chargor shall direct any such third party to provide such information to the Security Trustee and agrees to provide such further authority for this purpose as the Security Trustee may from time to time require. If the Security Trustee obtains any such information it shall not have any obligation to inform the Chargor thereof.

 

27. C URRENCY INDEMNITY

If:

 

  (a) for any reason any amount payable by the Chargor under this Debenture is paid or recovered by any Secured Party in a currency (the “ payment currency ”) other than that in which the Secured Obligations are denominated; and

 

  (b) the payment made to such Secured Party in the payment currency, when converted at such Secured Party’s then applicable rate of exchange into the currency in which the Secured Obligations are denominated, is less than the amount payable in the currency in which the Secured Obligations are denominated,

then the Chargor shall, as a separate and independent obligation, fully indemnify such Secured Party within ten days of demand against the amount of the shortfall. For the purposes of this Clause, the expression “applicable rate of exchange” means the rate at which such Secured Party purchases the currency in which the Secured Obligations are denominated with the payment currency, taking into account any costs associated with the exchange.

 

28. I NTEREST ON OVERDUE AMOUNTS

 

28.1 Default interest: Any overdue amounts not paid in accordance with this Debenture when due shall carry interest at an interest rate and in accordance with the terms contained in the relevant Finance Document in relation to overdue sums or at such other rate as may be agreed between the Chargor and the Secured Parties from time to time. In each case, interest shall accrue on a day to day basis to the date of irrevocable and unconditional repayment in full and, if unpaid, shall be compounded on the terms so agreed or (in the absence of such agreed terms) with quarterly rests on the Security Trustee’s and/or the relevant Secured Party’s usual quarterly interest days. Interest shall continue to be charged and compounded on this basis after as well as before any demand or judgment.

 

28.2 When payable: Clause 28.1 above shall not apply to the extent that default interest on such amount is payable pursuant to the terms of the Indenture and/or the Notes and itself constitutes part of the Secured Obligations.

29. S ET - OFF

 

30. The Security Trustee may (but is not obliged to) retain any money standing to the credit of the Chargor with the Security Trustee in any currency upon any account (whether or not in the Chargor’s name) or otherwise as cover for any Secured Obligations and the Chargor agrees that the Security Trustee may at any time or times without notice to the Chargor combine or consolidate any or all sums of money now or subsequently standing to the Chargor’s credit upon any such account with all or such part of the Secured Obligations as the Security Trustee may determine (whether presently payable or not) and the Security Trustee may purchase with any such money any other currency required to effect such combination or consolidation.

 

31. T RANSFER AND DISCLOSURE

 

31.1 Transfer by Chargors: The Chargor shall not assign or transfer any of its rights or obligations under this Debenture.

 

31.2 Transfer by Secured Parties : Any Secured Party may at any time assign and transfer all or any part of its rights under this Debenture to any person to which it has assigned and transferred the whole or part of its rights under the Notes in accordance with the terms of the Indenture and the Notes.

 

31.3 Transfer by Security Trustee : The Security Trustee may assign and transfer all of its rights and obligations under this Debenture to any replacement Security Trustee appointed in accordance with the Indenture. Upon such assignment and transfer becoming effective, the replacement Security Trustee shall be, and be deemed to be, acting as agent and trustee for each of the Secured Parties (including itself) for the purposes of this Debenture in replacement of the previous Security Trustee.

 

31.4 Disclosure of information : The Chargor irrevocably authorises the Security Trustee and each Secured Party, at its discretion, at any time or from time to time, to disclose any information concerning the Chargor, this Debenture and the Secured Obligations to:

 

  (a) any associated company of the Security Trustee or any of the Secured Parties or;

 

  (b) any prospective transferee or grantee referred to in Clause 31.3 ( Transfer by Security Trustee ) and any other person considered by the Security Trustee or any of the Secured Parties to be concerned in the relevant transaction or prospective transaction; or

 

  (c) any person who, as part of the arrangements made in connection with any transaction referred to in Clause 31.3 ( Transfer by Security Trustee ), requires such information after the transaction has been effected.

The above authority is without prejudice to the right of disclosure of the Security Trustee or any of the Secured Parties implied by law.

 

32. R ELEASE OF S ECURITY

 

32.1 Redemption : Subject to Clause 32.2 ( Avoidance of payments ), if all Secured Obligations have been unconditionally and irrevocably paid in full and none of the Secured Parties are under any further actual or contingent liability to make advance or provide other financial accommodation to any person under any Finance Document, the Security Trustee will (at the request and cost of the Chargors), upon receipt of any documents required by the Indenture, execute and do all such reasonable acts as may be necessary to release the Assets from the Security constituted by this Debenture. Such release shall not prejudice the rights of the Security Trustee under Clause 23 ( Costs, expenses and liabilities ).

32.2 Avoidance of payments : If the Security Trustee considers in good faith that any amount received in payment or purported payment of the Secured Obligations is capable of being avoided or reduced by virtue of any insolvency, bankruptcy, liquidation or other similar laws, the liability of the Chargor under this Debenture and the Security constituted by this Debenture shall continue and such amount shall not be considered to have been irrevocably paid.

 

33. R IGHTS OF THE P ARTIES TO VARY

The Parties (or the Issuer, on behalf of the Chargor, and the Security Trustee (on behalf of the Secured Parties)) may by agreement vary any term of this Debenture (including this Clause 33 without the necessity of obtaining any consent from any other person).

 

34. F ORBEARANCE , SEVERABILITY , VARIATIONS AND CONSENTS

 

34.1 Delay etc : All rights, powers and privileges under this Debenture shall continue in full force and effect, regardless of any Secured Party, nominee or Receiver exercising, delaying in exercising or omitting to exercise any of them.

 

34.2 Severability: No provision of this Debenture shall be avoided or invalidated by reason only of one or more other provisions being invalid or unenforceable.

 

34.3 Illegality, invalidity, unenforceability : Any provision of this Debenture which is or becomes illegal, invalid or unenforceable shall be ineffective only to the extent of such illegality, invalidity and unenforceability, without invalidating the remaining provisions of this Debenture.

 

34.4 Variations : No variation of this Debenture shall be valid and constitute part of this Debenture, unless such variation shall have been made in writing and signed by the Security Trustee (on behalf of the Secured Parties) and the Chargor (or the Issuer on behalf of it).

 

34.5 Consents : Save as otherwise expressly specified in this Debenture, any consent of the Security Trustee may be given absolutely or on any terms and subject to any conditions as the Security Trustee may determine in its entire discretion.

 

35. C OUNTERPARTS

This Debenture may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Debenture.

 

36. N OTICES

 

36.1 Delivery: Any notice, document or other communication to be given or delivered under or in connection with this Debenture shall be in writing and, in the case of any notice, document or communication to the Chargor, shall be deemed to have been duly served on, given or delivered to or made if it is left at the authorised address of the Chargor, posted by pre-paid registered post addressed to the Chargor at such address, or sent by facsimile transmission to a machine situated at such address and shall be deemed to have been received if:

 

  (a) personally delivered, at the time of delivery;

 

  (b) sent by mail, on the date of posting; or

 

  (c) sent by facsimile transmission, on receipt by the sender of a facsimile transmission report (or other appropriate evidence) confirming that the facsimile has been transmitted to the addressee.

36.2 Addresses: For the purposes of this Clause the authorised address of each Party shall be the address (including the details of the facsimile number and person for whose attention a notice, document or communication is to be addressed) identified with its name at the end of this Debenture or such other address (and details) as that Party may notify to each other Party in writing from time to time in accordance with the requirements of this Clause.

 

36.3 Effectiveness: Any notice, document or communication to be made or delivered to the Security Trustee will be effective only when actually received by the Security Trustee and then only if it is expressly marked for the attention of the department or officer of the Security Trustee as identified above (or any substitute department or officer as the Security Trustee shall specify for this purpose).

 

36.4 English language: Each notice, document or communication between the Parties shall be either in English or accompanied by a translation into English, which is certified as being a true and accurate translation.

 

37. S ECURITY T RUSTEE

The provisions of Sections 10.04 ( Authorization of Actions to be Taken by the Trustee under the Security Documents ), 10.05 ( Authorization of Receipt of Funds by the Security Trustee Under the Security Documents ), 10.06 ( Release of the Collateral ) and 10.07 ( Additional Security Trustee Terms ) of the Indenture shall apply to the Security Trustee’s actions, rights, obligations, powers, limitations of liability and duties under this Debenture as if set out in this Debenture in full. The Security Trustee shall be entitled to exercise its rights, powers, authorisations and duties under the terms of this Debenture through designees, agents or co-Security Trustees appointed pursuant to the Indenture. The permissive authorisations, entitlements, powers and rights granted to the Security Trustee hereunder (including, but not limited to, the rights under Clauses 4.1 ( Crystallisation by notice ) and 5.2 ( Insurance )) shall not be construed as duties. The Security Trustee shall be entitled to refuse to take or refrain from taking any discretionary action or exercise any discretionary powers set forth in this Debenture until it has received with respect thereto satisfactory written direction in accordance with the terms of the Indenture and, if necessary, satisfactory indemnification.

 

38. G OVERNING LAW

This Debenture shall be governed by and construed in accordance with Hong Kong law.

 

39. E NFORCEMENT

 

39.1 Jurisdiction :

 

  (a) The courts of Hong Kong have non-exclusive jurisdiction to settle any dispute arising out of or in connection with this Debenture (including a dispute regarding the existence, validity or termination of this Debenture) (a “ Dispute ”).

 

  (b) The Parties agree that the courts of Hong Kong are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.

 

  (c) This Clause 39 ( Enforcement ) is for the benefit of the Secured Parties only. As a result, no Secured Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Secured Parties may take concurrent proceedings in any number of jurisdictions.

 

  (d)

The Chargor irrevocably waives any objection which it may have now or in future to the laying of the venue of any proceedings in the courts of Hong Kong and any

  claim that any such proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgment in any such proceedings brought in such courts shall be conclusive and binding upon it and may be enforced in any other jurisdiction.

 

39.2 Service of process

 

  (a) Without prejudice to any other mode of service allowed under any relevant law, the Chargor irrevocably designates, appoints and empowers Sino-Wood Partners, Limited of Room 3815-29, Sun Hung Kai Centre 30 Harbour Road, Wanchai, Hong Kong (or such other address in Hong Kong as such it may notify to the Security Trustee) as its agent to accept service of process in such jurisdiction in any proceedings arising out of or in connection with this Debenture (the “ Proceedings ”) and agrees that failure by such agent to give notice of such service of process to it shall not impair or affect the validity of such service or any judgment based on it.

 

  (b) Sino-Wood Partners, Limited expressly agrees and consents to the provisions of Clause 38 ( Governing Law ) and of Clause 39 ( Enforcement ).

 

  (c) The Chargor further consents to the service of process out of the courts of Hong Kong in any such Proceedings by the mailing to it of copies by registered or certified airmail, postage prepaid.

 

39.3 Immunity : The Chargor irrevocably and unconditionally:

 

  (a) agrees that in any legal proceedings against it or its assets in connection with this Debenture, no immunity from such legal proceedings (which shall include suit, attachment prior to judgment, other attachment, the obtaining of judgment, execution or other enforcement) shall be claimed by or on behalf of it or with respect to its assets;

 

  (b) waives any such right of immunity which it or its assets now has or may in the future acquire; and

 

  (c) consents generally in respect of such proceedings to the giving of relief or the issue of any process in connection with such proceedings including the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order of judgment which may be made or given in such proceedings.

T HIS D EBENTURE has been executed by the Chargor as a deed and signed by the Security Trustee and it shall take effect on the date stated at the beginning of this document.

S CHEDULE 1

Land

None as at the date of this Debenture.

S CHEDULE 2

Specified Intellectual Property

None as at the date of this Debenture.

S CHEDULE 3

Stamped aggregate indebtedness

First aggregate indebtedness this Debenture is stamped to cover:

US$600,000,000

Execution Page

The Chargor

 

SIGNED SEALED and DELIVERED
by the said Sino-Forest International (Barbados) Corporation
By:

 

Name in print: Paul Jeremy Brough
Director/Authorised Officer

 

Address:    Rooms 3815-29, 38/F., Sun Hung Kai Centre, 30 Harbour Road, Wanchai,
Hong Kong
Fax No.:    +852 2877 0062
Attention:    Paul Jeremy Brough

 

Before me

 

Notary Public

The Security Trustee

 

Signed by   )   
for and on behalf of   )   
Computershare Trust Company, N.A.   )    Authorised Signatory

 

Address:    350 Indiana Street, Suite 750, Golden, CO 80401
Fax:    303-262-0608
Attention:    Corporate Trust
With a copy to:
Address:    480 Washington Blvd., Jersey City, NJ 07310
Fax:    201-680-4610
Attention:    Legal Department

 

Before me

 

Notary Public

EXHIBIT G

FORM OF COMPLIANCE CERTIFICATE UNDER SECTION 10.03

This Compliance Certificate is delivered pursuant to Section 10.03 of the Indenture, dated as of January 17, 2013, as amended, supplemented or modified from time to time (the “ Indenture ”), among Emerald Plantation Holdings Limited, a Cayman Island exempted company limited by shares (the “ Company ”), the Subsidiary Guarantors parties thereto, Computershare Trust Company, N.A., as Trustee and Computershare Trust Company, N.A., as Security Trustee. Terms defined in the Indenture are used herein as therein defined.

The undersigned hereby certifies to the Trustee as follows:

1. I am the duly elected, qualified and acting [Officer] of the Company.

2. I have reviewed and am familiar with the contents of this Compliance Certificate.

3. I have reviewed the terms of the Indenture and the Security Documents and have made or caused to be made under my supervision, a review in reasonable detail of the Collateral and condition of the Collateral. Such review did not disclose the existence during or at the end of the annual period covered by this Compliance Certificate, and I have no knowledge of the existence as of the date of this Compliance Certificate, of any condition or event which would impair the perfected security interest created by the Indenture and the Security Documents with at least the priority of such security interest on the Closing Date [, except as set forth below].

4. Since the Closing Date:

(a) neither the Company nor any Subsidiary Guarantor has changed its jurisdiction of organization, name, identity or corporate structure to such an extent that any financing statement or other Security Document filed by the Trustee or the Security Trustee would become misleading;

(b) the Company has provided such assistance to the Trustee or the Security Trustee with respect to any re-filing, re-recording or continuation of documentation with respect to the Collateral as necessary to maintain such security interest in the Collateral in favor of the Trustee or the Security Trustee on behalf of the Holders of Notes.

except, in each case, (i) any of the foregoing that has been previously disclosed to the Trustee or the Security Trustee in accordance with the Indenture and any relevant Security Document and in respect of which the Company and each Subsidiary Guarantor have delivered to the Trustee or the Security Trustee all required documents and other filings required to maintain the perfection and priority of the Trustee’s or the Security Trustee’s security interest in the Collateral after giving effect to such event, in each case as required by the Indenture and the relevant Security Documents and (ii) any of the foregoing described in Attachment 1 hereto in respect of which the Company or the Subsidiary Guarantor is delivering to the Trustee or the Security Trustee herewith all required statements and other filings required to maintain the perfection and priority of the Trustee’s or the Security Trustee’s security interest in the Collateral after giving effect to such event, in each case as required by the Indenture and the relevant Security Documents.

 

G-1

IN WITNESS WHEREOF, the undersigned has executed this Compliance Certificate as of the date set forth below.

 

EMERALD PLANTATION HOLDINGS LIMITED
By:  

 

Title:  

Date:                     , 20      

 

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EXHIBIT H

FORM OF TRANSFER NOTICE TO CANADIAN PERSONS WITHIN THE

CANADIAN RESTRICTED PERIOD

FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto

Insert Taxpayer Identification No./ Canadian Social Insurance Number

 

 

 

Please print or typewrite name and address including postal code of assignee

the within Note and all rights thereunder, hereby irrevocably constituting and appointing

 

 

 

attorney to transfer said Note on the books of the Company with full power of substitution in the premises.

In connection with any transfer of this Note:

(a) this Note is being transferred to a person resident in, or subject to the securities legislation of, any province or territory in Canada; and

(b) the transfer of this Note is being effected pursuant to and in accordance with exemptions from the prospectus and dealer registration requirements contained in the Canadian securities legislation applicable to the purchaser and the undersigned has delivered to the Trustee such additional evidence that the Company, each of the Subsidiary Guarantors or the Trustee may require as to compliance with such available exemptions.

The Trustee or other Registrar shall not be obligated to register this Note in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer or registration set forth herein and in Section 2.07(a) of the Indenture shall have been satisfied.

 

Date:  

 

     

 

        Name of Transferor
       

 

        Signature of Transferor

NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever.

 

H-1

TO BE COMPLETED BY PURCHASER

The undersigned acknowledges that the certificate representing the Note to be issued to the undersigned upon completion of the above transfer shall contain the following legend:

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND ONE DAY AFTER THE LATER OF (i) THE ORIGINAL ISSUE DATE AND (ii) THE DATE THE COMPANY BECAME A REPORTING ISSUER IN ANY PROVINCE OF TERRITORY OF CANADA.

 

Date:  

 

     

 

        Name of Purchaser
       

 

        Signature of Purchaser

 

H-2

EXHIBIT I

TRUSTEE, PAYING AGENT, TRANSFER AGENT AND REGISTRAR

Trustee, Paying Agent, Transfer Agent and Registrar

Computershare Trust Company, N.A.

350 Indiana Street, Suite 750

Golden, CO 80401

Attention: Corporate Trust

 

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EXHIBIT J

PRE-AGREED INTERCREDITOR TERMS

 

1. Defined Terms

Capitalized terms used in this Exhibit J and not otherwise defined have the meanings ascribed to such terms in the Indenture. The following terms have the following meanings:

Common Obligors shall mean each Person that is both (i) a borrower/issuer or guarantor of the Permitted Priority Obligations, and (ii) a borrower/issuer or guarantor of the Note Obligations.

Collateral shall mean all of the property and assets of the Common Obligors that are subject to both the Permitted Priority Security and the Note Security.

Creditors means, collectively the Permitted Priority Creditors and the Note Creditors and, individually, any one of them.

Default means any event of default specified in any Document entitling a Creditor to accelerate payment of any Obligations.

Demand means any notification, following and during the continuance of a Default, by any Creditor to any Common Obligor of a demand for payment under any Document.

Documents means, collectively, the Permitted Priority Debt Documents and the Note Documents and, individually, any one of them.

Enforcement Action means any of the following actions taken by or on behalf of a Creditor: (a) the initiation of any Insolvency or Liquidation Proceeding, (b) to sue for payment of, or to initiate or participate with others in any suit, action or proceeding (including any Insolvency or Liquidation Proceeding) against any Common Obligor (i) to enforce payment of or to collect the whole or any part of the Obligations owed to such Creditor or (ii) to commence judicial enforcement of any of the rights and remedies under any document evidencing such Obligations or such Creditor’s Security or under applicable law with respect thereto including, without limitation, any right of set-off or compensation, (c) to demand for accelerated payment, or the acceleration of, any or all of the Obligations owed to such Creditor, (d) the filing of any proof or notice of claim in any Insolvency or Liquidation Proceeding involving any Common Obligor, (e) the exercise of any rights or remedies against or in respect of any of the Collateral pursuant to such Creditor’s Security, by way of judicial action or otherwise (including the appointment of a receiver for any Common Obligor or any Collateral), or (f) the exercise of any other right or remedy available to such Creditor, including any right of set-off.

Insolvency or Liquidation Proceeding means an event of insolvency, bankruptcy, or filing by or against a Common Obligor under any restructuring proceeding under any corporate statute or any other similar proceeding in any jurisdiction.

Intercreditor Agreement means the Intercreditor Agreement executed on terms and conditions substantially the same as those set forth herein pursuant to Section 4.20 of the Note Indenture.

 

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Note Creditors means, collectively, any and all holders of Notes from time to time, the Security Trustee (in relation to the Notes) and the Note Trustee.

Note Indenture means the Indenture, dated as of January 17, 2013, between the Note Obligors, the Note Trustee, as trustee, and Computershare Trust Company, N.A., as security trustee providing for the issuance of 6.00% guaranteed secured notes due 2020, as amended, modified, supplemented, restated or replaced from time to time.

Note Obligations means all debts, obligations and liabilities of every nature, present or future, direct or indirect, absolute or contingent, matured or unmatured, and whether as principal debtor, guarantor, surety or otherwise at any time from time to time owing by any Common Obligor to the Note Creditors, or any of them, pursuant to or in connection with the Note Documents, including the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all premium, fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of an Insolvency or Liquidation Proceeding, together with (a) any amendments, modifications, renewals, restatements, refinancing or extensions thereof in accordance with the terms of this Agreement and (b) any interest accruing thereon after the commencement of an Insolvency or Liquidation Proceeding, without regard to whether or not such interest is allowed in such Insolvency or Liquidation Proceeding.

Notes means any and all notes issued under the Note Indenture (including Additional Notes and PIK Notes), together with any and all instruments or debt securities that are issued in exchange for or replacement of such Notes.

Note Documents means the Note Indenture, the Notes, the Note Security Documents and all other documents, instruments and agreements now or hereafter executed in connection therewith, in each case as the same may be amended, waived, modified, supplemented or restated from time to time.

Note Obligors means Emerald Plantation Holdings Limited and any of its Subsidiaries that is a guarantor of the Note Obligations.

Note Security means any and all Liens now or hereafter granted by any Common Obligor to secure the payment of any Note Obligations.

Note Security Documents means all documents, instruments and agreements now or hereafter executed for the purpose of granting a Lien over the Collateral in favor of the Note Creditors, in each case as the same may be amended, waived, modified, supplemented or restated from time to time.

Note Trustee means Computershare Trust Company, N.A., as trustee under the Note Indenture, together with its successors and assigns.

Obligations means, collectively, the Permitted Priority Obligations and the Note Obligations; or, with respect to Permitted Priority Creditors, the Permitted Priority Obligations, and with respect to Note Creditors, the Note Obligations.

 

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Parties means the Permitted Priority Trustee on behalf of the Permitted Priority Creditors, the Note Trustee on behalf of the Note Creditors, the Security Trustee and the Company.

Permitted Priority Agreement means [identify instrument or agreement creating the Permitted Priority Obligations] .

Permitted Priority Creditors means, collectively, the Holders of the Indebtedness Incurred by the Company pursuant to the Permitted Priority Agreement from time to time, the Security Trustee (in relation to the Permitted Priority Debt) and the Permitted Priority Trustee.

Permitted Priority Debt Documents means the Permitted Priority Agreement, any instrument or agreement evidencing the Indebtedness created by the Permitted Priority Agreement, the Permitted Priority Security Documents and all other documents, instruments and agreements now or hereafter executed in connection therewith, in each case as the same may be amended, waived, modified, supplemented or restated from time to time.

Permitted Priority Obligations means all debts, obligations and liabilities of every nature, present or future, direct or indirect, absolute or contingent, matured or unmatured, and whether as principal debtor, guarantor, surety or otherwise at any time from time to time owing by any Common Obligor to the Permitted Priority Creditors or any of them, pursuant to or in connection with the Permitted Priority Debt Documents, including the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all premium, fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of an Insolvency or Liquidation Proceeding, together with (a) any indebtedness which refinances such principal, interest or other obligations and any amendments, modifications, renewals, restatements, refinancing or extensions thereof in accordance with the terms of this Agreement and (b) any interest accruing thereon after the commencement of an Insolvency or Liquidation Proceeding, without regard to whether or not such interest is allowed in such Insolvency or Liquidation Proceeding; provided , however , that the maximum principal amount of the Permitted Priority Obligations shall not exceed the Priority Debt Cap.

Permitted Priority Security means any and all Liens now or hereafter granted by the Common Obligors to secure the payment of any Permitted Priority Obligations.

Permitted Priority Security Documents means all documents, instruments and agreements now or hereafter executed for the purpose of granting a Lien over the Collateral in favor of the Permitted Priority Creditors, in each case as the same may be amended, waived, modified, supplemented or restated from time to time.

Permitted Priority Trustee means the Note Trustee or such other trustee approved by the Note Creditors holding at least a majority in principal amount of the outstanding Notes.

Priority Debt Cap means $200,000,000 million, less any mandatory pre-payments or repurchases of any Permitted Priority Obligations made pursuant to any Permitted Priority Debt Documents.

Priority Debt Obligors means Emerald Plantation Holdings Limited and any of its Subsidiaries that is a guarantor of the Permitted Priority Obligations.

 

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Proceeds of Realization means all cash and non-cash proceeds received by any Creditor in respect of any Collateral or Security granted to or for the benefit of such Creditor by Common Obligors and derived from any sale, disposition or other realization of any Collateral (i) after any Demand, (ii) upon any dissolution, liquidation, winding-up, reorganization, bankruptcy, insolvency or receivership of any Common Obligor (or any other arrangement or marshalling of any Common Obligor’s assets that is similar thereto), or (iii) upon any other Enforcement Action.

Security means, collectively, the Permitted Priority Security and the Note Security; or, with respect to Permitted Priority Creditors, the Permitted Priority Security, and with respect to Note Creditors, the Note Security.

Security Trustee means Computershare Trust Company, N.A., as trustee under the Note Indenture, together with its successors and assigns.

 

2. Lien Priorities and Subordination

Lien Priorities – The Permitted Priority Security will have priority, with respect to the Collateral over the Note Security to the extent of the Priority Debt Cap in all respects and at all times.

Scope of Common Obligors/Collateral – Notwithstanding anything to the contrary contained herein, (A) the Collateral shall extend to all property and assets mortgaged, charged and/or pledged by the Company and by each Subsidiary Guarantor and each Permitted Priority Subsidiary Guarantor, and (B) the Common Obligors shall be the same for each of the Permitted Priority Obligations and the Note Obligations.

Rights of Permitted Priority Trustee and Permitted Priority Creditors – The prior ranking security rights of the Permitted Priority Trustee and the Permitted Priority Creditors established by the provisions of the Intercreditor Agreement shall be applicable irrespective of the time or order of creation, execution, delivery attachment or perfection or notification of any Liens securing any of the Obligations, the method of perfecting such Liens, the time or order of registration or filing of financing statements or recording of such Liens, the time or order of the incurring of any of the Obligations, the date or dates of any Default by any Common Obligor under the terms of any Permitted Priority Debt Documents or any Note Documents, the date of the taking of any Enforcement Action including possession with respect to such Liens, the sequence or date in which any order or judgment is entered or obtained or any execution is obtained or registered or any other factor of legal relevance.

 

3. Payments

Payments of Permitted Priority Obligations and Note Obligations – The Common Obligors may make any payment, repayment or prepayment in respect of the Permitted Priority Obligations and Note Obligations to any Creditor at any time; provided that at any time after the occurrence of a Default under the Documents that is continuing, Proceeds of Realization shall be applied and distributed in accordance with Section 5 below.

Payment of Obligations after Default – After the occurrence of a Default under the Documents that is continuing, Proceeds of Realization shall be applied and distributed in accordance with

 

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Section 5 below and no payments shall be made to the Note Creditors from the proceeds of any Collateral other than in accordance with Section 5 below; provided that (i) fees and expenses owing to the Security Trustee or the Note Trustee in connection with its role as trustee in the ordinary course of business shall be permitted to be paid at any time; and (ii) interest on the Note Obligations may be paid in kind or capitalized. For clarity, the occurrence of a Default shall not reduce or affect the obligation of any Common Obligor under the Note Documents such that a Default may still arise in accordance with the terms of the Note Documents.

 

4. Exercise of Remedies

Enforcement Action by Creditors : The Creditors shall be entitled to instruct the Security Trustee to take any Enforcement Action at any time in accordance with the terms of the Documents provided that (i) any such Creditors give notice to the other Creditors thereof, and (ii) all Proceeds of Realization shall be applied in accordance with Section 5 below.

 

5. Application of Proceeds

Waterfall – All Proceeds of Realization shall be applied and distributed by the Security Trustee as follows:

(1) first, to the payment of all reimbursable costs and expenses incurred by the Security Trustee, the Permitted Priority Trustee and the Note Trustee in the taking of any Enforcement Action (including without limitation any remuneration of any receiver and all reimbursable costs incurred by such receiver in the exercise of all or any powers granted to it under the Documents or otherwise in connection with the Security);

(2) second, to the payment to the Permitted Priority Trustee of the Permitted Priority Obligations in accordance with the Permitted Priority Documents in an amount not to exceed the Priority Debt Cap and in such manner as the Permitted Priority Trustee may see fit;

(3) third, to the payment to the Note Trustee in full of the Note Obligations in accordance with the Note Documents and in such manner as the Note Trustee may see fit; and

(4) the balance, if any, in accordance with applicable law or as directed by a court of competent jurisdiction.

Payments Over . Any Collateral or Proceeds of Realization thereof received by any Note Creditor in connection with the exercise of any right or remedy (including setoff) relating to the Collateral in contravention of the terms of the Intercreditor Agreement shall, until such time as an amount not to exceed the Permitted Priority Obligations shall have been paid in full (but subject to the Permitted Priority Debt Cap), be segregated and held in trust and forthwith paid over to the Permitted Priority Trustee for the benefit of the Permitted Priority Creditors in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct.

 

6. Amendments

Restrictions on Amendments to Permitted Priority Debt Documents – The Permitted Priority Debt Documents may at any time be amended, modified, restated, refinanced or waived and the

 

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Permitted Priority Obligations may be increased (subject to the terms of Section 4.06 of the Note Indenture) or decreased, in each case, without limitation upon notice to, but without the consent of, the Note Trustee or any other Note Creditor, subject in all cases to the following limitations:

(A) the maximum amount of the Permitted Priority Obligations Incurred by the Company shall not exceed the Priority Debt Cap; and

(B) the Permitted Priority Debt Documents may not be amended, modified, supplemented, restated or replaced if the effect of such action is to (i) alter, or add additional rights, in respect of the Collateral, including the Parties’ agreements as evidenced by the terms of the Intercreditor Agreement, (ii) change any redemption or prepayment provisions of the Permitted Priority Documents to the extent applicable to any Common Obligor, provided , however , that the Permitted Priority Documents may be amended or modified to add covenants or Defaults to the extent corresponding amendments or modifications are made to the Note Documents, or (iii) impose repayment or other requirements that could prevent compliance with, or could result in a breach of, the Note Documents or the Intercreditor Agreement.

The Permitted Priority Trustee, on behalf of the Permitted Priority Creditors, acknowledges and agrees to the repayment and redemption requirements set forth in the Note Indenture and the Note Trustee, on behalf of the Note Creditors, acknowledges and agrees that the Permitted Priority Debt Documents may contain repayment and other requirements provided that such requirements do not and could not (i) alter the repayment and redemption requirements set forth in the Note Indenture, or (ii) prevent compliance with, or result in a breach of, the Note Documents or the Intercreditor Agreement.

Restrictions on Amendments to Note Documents – The Note Documents may not be amended, modified, restated or supplemented, if the effect of which is to: (i) change or add any Default or any covenant with respect to the Note Obligations, if such Default or covenant would be more restrictive to any Common Obligor, or (ii) change any redemption or prepayment provisions of the Note Documents to the extent applicable to any Common Obligor, provided , however , that the Note Documents may be amended or modified to add covenants or Defaults to the extent corresponding amendments or modifications are made to the Permitted Priority Debt Documents.

Restrictions on Amendments to Intercreditor Agreement – The provisions of the Intercreditor Agreement may only be amended or waived by an instrument in writing signed by the Permitted Priority Trustee, on behalf of the Permitted Priority Creditors, the Note Trustee, on behalf of the Note Creditors, and the Security Trustee.

 

7. Insolvency Provisions

Postponement – In the event of any Insolvency or Liquidation Proceeding in connection with or relating to any Common Obligor or in the event of any proceedings for voluntary liquidation, dissolution or other winding-up of any Common Obligor, whether or not involving insolvency or bankruptcy, or upon any assignment for the benefit of creditors or any marshalling of the assets and liabilities of any Common Obligor or otherwise, or in the event that any Common Obligor makes a bulk sale of any of its assets within the provisions of any bulk sales legislation or any composition with creditors or scheme or arrangement, then the Proceeds of Realization from all Collateral shall be distributed and dealt with as provided for in paragraph 5.

 

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Subrogation – If cash, securities or other property otherwise payable or deliverable to the Note Creditors has been applied to the irrevocable payment in full of the Permitted Priority Obligations, then, the Note Creditors shall be subrogated to the rights of the Permitted Priority Creditors with respect to both the Permitted Priority Security and the right to receive payments and distributions made on the Permitted Priority Obligations until the Note Obligations shall have been paid in full.

No Contest/Voting – The Note Trustee on behalf of the Note Creditors agrees that it will not at any time take any action, nor will it, in connection with any Insolvency or Liquidation Proceeding in respect of a Common Obligor, vote in any way so as to (i) contest the validity, perfection or priority of the Permitted Priority Security, or (ii) contest the prior ranking Lien of the Permitted Priority Creditors over the Collateral as provided for under the Intercreditor Agreement. The Permitted Priority Trustee on behalf of the Permitted Priority Creditors agrees that it will not at any time take any action, nor will it, in connection with any Insolvency or Liquidation Proceeding in respect of a Common Obligor, vote in any way so as to (i) contest the validity, perfection or priority of the Note Security, or (ii) subject to the prior rights of the Permitted Priority Creditors to payment from the Proceeds of Realization as provided in Section 5 above, contest the rights of the Note Creditors to the Collateral as provided for under the Note Documents and the Intercreditor Agreement.

 

8. Assignments of Permitted Priority Obligations or Note Obligations

All rights of the Permitted Priority Trustee, the other Permitted Priority Creditors, the Note Trustee and the other Note Creditors will be assignable in accordance with the terms of the Permitted Priority Debt Documents and the Note Documents, as applicable, and without any further consent under the Intercreditor Agreement. Any new creditor in connection with a refinancing will obtain the benefit of the Intercreditor Agreement without further action or consent by any other Creditor, subject to any successor Permitted Priority Trustee or Note Trustee, as the case may be, signing an agreement in writing in favor of the other Parties whereby it agrees to be bound by the provisions of the Intercreditor Agreement in the same manner and to the same extent as the applicable predecessor and providing an executed copy of such agreement to each of the other Parties. Likewise, concurrently with the assignment of any of the Permitted Priority Obligations or Note Obligations, the assignee shall execute an agreement in writing in favor of the other Parties agreeing to be bound by the provisions of the Intercreditor Agreement in the same manner and to the same extent as the applicable assignor and shall provide an executed copy of such agreement to each of the other Parties. Such assignment shall not be effective and shall not relieve the applicable assignor of any liability until such assignee is bound by the terms of the Intercreditor Agreement.

 

9. Pledged Securities

Bailee for Perfection – The Security Trustee agrees to hold any pledged collateral that is part of the Collateral in its possession or control (or in the possession or control of its agents or bailees) as agent for each Creditor solely for the purpose of perfecting the security interest of all Creditors granted in such pledged collateral by “control” under applicable securities transfer legislation; provided , such bailee status shall not subject the Security Trustee to any fiduciary or higher standard of care.

 

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10. Termination

The Intercreditor Agreement shall terminate on the earlier of (i) the date on which the Permitted Priority Trustee and the Note Trustee agree in writing; (ii) the date on which all of the Collateral has been disposed of (or otherwise realized upon) and the Proceeds of Realization have been applied in accordance with Section 5 above.

 

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Schedule I

Initial Subsidiary Guarantors

 

1. Sino-Capital Global Inc. (BVI)

 

2. Sino-Panel Holdings Limited (BVI)

 

3. Sino-Panel (Asia) Inc. (BVI)

 

4. Sino-Panel (Gaoyao) Ltd. (BVI)

 

5. SFR (China) Inc. (BVI)

 

6. Sino-Wood Partners, Limited (H.K.)

 

7. Sino-Forest Resources Inc. (BVI)

 

8. Suri-Wood Inc. (BVI)

 

9. Sino-Plantation Limited (H.K.)

 

10. Sino-Wood (Guangxi) Limited (H.K.)

 

11. Sino-Wood (Jiangxi) Limited (H.K.)

 

12. Sino-Wood (Guangdong) Limited (H.K.)

 

13. Sino-Global Holdings Inc. (BVI)

 

14. Sinowin Investments Limited (BVI)

 

15. Sino-Panel (North East China) Limited (BVI)

 

16. Sino-Panel [Hunan] Limited (BVI) (formerly known as Comtech Universal Limited)

 

17. Sino-Panel [Xiangxi] Limited (BVI) (formerly known as Rich Base Worldwide Limited)

 

18. Sino-Forest Bio-Science Limited (BVI) (formerly known as Sino-Two Limited)

 

19. Sino-Panel (Guangzhou) Limited (BVI)

 

20. Sino-Panel [Suzhou] Limited (BVI) (formerly known as Pacific Harvest Holdings Limited)

 

21. Sino-Panel (Yunnan) Limited (BVI)

 

22. Sino-Panel (Guangxi) Limited (BVI)

 

23. Sino-Panel (Guizhou) Limited (BVI)

 

24. Sino-Panel (Qinzhou) Limited (BVI) (formerly known as Sino-Panel (Jiayu) Ltd.)

 

25. Sino-Panel (Shaoyang) Limited (BVI)

 

26. Sino-Panel (Yongzhou) Limited (BVI)

 

27. Sino-Panel (Fujian) Limited (BVI)

 

28. Grandeur Winway Limited (BVI)

 

29. Sinowood Limited (Cayman Islands)

 

30. Sino-Forest Investments Limited (BVI)

 

31. Sino-Wood (Fujian) Limited (H.K.)

 

32. Sino-Panel (North Sea) Limited (BVI)

 

33. Sino-Panel (Huaihua) Limited (BVI)

 

34. Amplemax Worldwide Limited (BVI)

 

35. Ace Supreme International Limited (BVI)

 

36. Express Point Holdings Limited (BVI)

 

37. Glory Billion International Limited (BVI)

 

38. Smart Sure Enterprises Limited (BVI)

 

39. Expert Bonus Investment Limited (BVI)

 

40. Dynamic Profit Holdings Limited (BVI)

 

41. Alliance Max Limited (BVI)

 

42. Brain Force Limited (BVI)

 

Sch. I-1

43. Cheer Gold Worldwide Limited (BVI)

 

44. General Excel Limited (BVI)

 

45. Harvest Wonder Worldwide Limited (BVI)

 

46. Homix Limited (BVI)

 

47. Poly Market Limited (BVI)

 

48. Prime Kinetic Limited (BVI)

 

49. Regal Win Capital Limited (BVI)

 

50. Rich Choice Worldwide Limited (BVI)

 

51. Sino-Forest International (Barbados) Corporation (Barbados)

 

52. Sino-Global Management Consulting Inc. (BVI)

 

53. Sino-Panel (China) Nursery Limited (BVI)

 

54. Sino-Panel (Russia) Limited (BVI)

 

55. Sino-Wood Trading Limited (BVI)

 

56. Sino-Panel Trading Limited (BVI)

 

57. Trillion Edge Limited (BVI)

 

58. Value Quest International Limited (BVI)

 

59. Well Keen Worldwide Limited (BVI)

 

60. Mandra Forestry Holdings Limited (BVI)

 

61. Mandra Forestry Finance Limited (BVI)

 

62. Mandra Forestry Anhui Limited (BVI)

 

63. Mandra Forestry Hubei Limited (H.K.)

 

64. Elite Legacy Limited (BVI)

 

65. Emerald Plantation Group Limited (Cayman Islands)

 

Sch. I-2

Schedule II

Initial Unrestricted Subsidiaries

 

1. Greenheart Group Limited and each of its Subsidiaries

 

2. Greenheart Resources Holdings Limited (BVI)

 

3. Mega Harvest International Limited (BVI)

 

Sch. II-1

Exhibit T3D

Court File No. CV-12-9667-00CL

ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

 

THE HONOURABLE MR.    )    MONDAY, THE 10 th DAY
   )   
JUSTICE MORAWETZ    )    OF DECEMBER, 2012

IN THE MATTER OF THE COMPANIES’ CREDITORS

ARRANGEMENT ACT , R.S.C. 1985, c. C-36, AS AMENDED

AND IN THE MATTER OF A PLAN OF COMPROMISE OR

ARRANGEMENT OF SINO-FOREST CORPORATION

PLAN SANCTION ORDER

THIS MOTION , made by Sino-Forest Corporation (“ SFC ”), for an order (i) pursuant to the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36, as amended (the “ CCAA ”), sanctioning the plan of compromise and reorganization dated December 3, 2012 (including all schedules thereto), which Plan is attached as Schedule “ A ” hereto, as supplemented by the plan supplement dated November 21, 2012 previously filed with the Court, as the Plan may be further amended, varied or supplemented from time to time in accordance with the terms thereof (the “ Plan ”), and (ii) pursuant to the section 191 of the Canada Business Corporations Act , R.S.C. 1985, c. C-44, as amended (the “ CBCA ”), approving the Plan and amending the articles of SFC and giving effect to the changes and transactions arising therefrom, was heard on December 7, 2012 at 330 University Avenue, Toronto, Ontario.

ON READING the Notice of Motion, the Affidavit of W. Judson Martin sworn November 29, 2012 (the “ Martin Affidavit ”), the Thirteenth Report of FTI Consulting Canada Inc. in its capacity as monitor of SFC (the “ Monitor ”) dated November 22, 2012 (the “ Monitor’s Thirteenth Report ”), the supplemental report to the Monitor’s Thirteenth Report (the “ Supplemental Report ”), and the second supplemental report to the Monitor’s Thirteenth Report (the “ Second Supplemental Report ”) and on hearing the submissions of counsel for

SFC, the Monitor, the ad hoc committee of Noteholders (the “ Ad Hoc Noteholders ”), and such other counsel as were present, no one else appearing for any other party, although duly served with the Motion Record as appears from the Affidavit of Service, filed.

DEFINED TERMS

1. THIS COURT ORDERS that any capitalized terms not otherwise defined in this Plan Sanction Order shall have the meanings ascribed to such terms in the Plan and/or the Plan Filing and Meeting Order granted by the Court on August 31, 2012 (the “ Plan Filing and Meeting Order ”), as the case may be.

SERVICE, NOTICE AND MEETING

2. THIS COURT ORDERS that the time for service of the Notice of Motion, the Motion Record in support of this motion, the Monitor’s Thirteenth Report, the Supplemental Report and the Second Supplemental Report be and are hereby abridged and validated so that the motion is properly returnable today and service upon any interested party other than those parties served is hereby dispensed with.

3. THIS COURT ORDERS AND DECLARES that there has been good and sufficient notice, service and delivery of the Plan Filing and Meeting Order and the Meeting Materials (including, without limitation, the Plan) to all Persons upon which notice, service and delivery was required.

4. THIS COURT ORDERS AND DECLARES that the Meeting was duly convened and held, all in conformity with the CCAA and the Orders of this Court made in the CCAA Proceeding, including, without limitation, the Plan Filing and Meeting Order.

5. THIS COURT ORDERS AND DECLARES that: (i) the hearing of the Plan Sanction Order was open to all of the Affected Creditors and all other Persons with an interest in SFC and that such Affected Creditors and other Persons were permitted to be heard at the hearing in respect of the Plan Sanction Order; and (ii) prior to the hearing, all of the Affected Creditors and all other Persons on the Service List in respect of the CCAA Proceeding were given adequate notice thereof.

 

2

SANCTION OF THE PLAN

6. THIS COURT ORDERS that the relevant class of Affected Creditors of SFC for the purposes of voting to approve the Plan is the Affected Creditors Class.

7. THIS COURT ORDERS AND DECLARES that the Plan, and all the terms and conditions thereof, and matters and transactions contemplated thereby, are fair and reasonable.

8. THIS COURT ORDERS that the Plan is hereby sanctioned and approved pursuant to section 6 of the CCAA.

PLAN IMPLEMENTATION

9. THIS COURT ORDERS AND DECLARES that the Plan and all associated steps, compromises, releases, discharges, cancellations, transactions, arrangements and reorganizations effected thereby are approved and shall be deemed to be implemented, binding and effective in accordance with the provisions of the Plan as of the Plan Implementation Date at the Effective Time, or at such other time, times or manner as may be set forth in the Plan, and shall enure to the benefit of and be binding upon SFC, the other Released Parties, the Affected Creditors and all other Persons and parties named or referred to in, affected by, or subject to the Plan, including, without limitation, their respective heirs, administrators, executors, legal representatives, successors, and assigns.

10. THIS COURT ORDERS that each of SFC and the Monitor are authorized and directed to take all steps and actions, and to do all things, necessary or appropriate to implement the Plan in accordance with its terms and to enter into, execute, deliver, complete, implement and consummate all of the steps, transactions, distributions, deliveries, allocations, instruments and agreements contemplated pursuant to the Plan, and such steps and actions are hereby authorized, ratified and approved. Furthermore, neither SFC nor the Monitor shall incur any liability as a result of acting in accordance with terms of the Plan and the Plan Sanction Order.

11. THIS COURT ORDERS that SFC, the Monitor, Newco, the Litigation Trustee, the Trustees, DTC, the Unresolved Claims Escrow Agent, all Transfer Agents and any other Person required to make any distributions, deliveries or allocations or take any steps or actions related

 

3

thereto pursuant to the Plan are hereby directed to complete such distributions, deliveries or allocations and to take any such related steps and/or actions in accordance with the terms of the Plan, and such distributions, deliveries and allocations, and steps and actions related thereto, are hereby approved.

12. THIS COURT ORDERS that upon the satisfaction or waiver, as applicable, of the conditions precedent set out in section 9.1 of the Plan in accordance with the terms of the Plan, as confirmed by SFC and Goodmans LLP to the Monitor in writing, the Monitor is authorized and directed to deliver to SFC and Goodmans LLP a certificate substantially in the form attached hereto as Schedule “ B ” (the “ Monitor’s Certificate ”) signed by the Monitor, certifying that the Plan Implementation Date has occurred and that the Plan and this Plan Sanction Order are effective in accordance with their terms. Following the Plan Implementation Date, the Monitor shall file the Monitor’s Certificate with this Court.

13. THIS COURT ORDERS AND DECLARES that the steps, compromises, releases, discharges, cancellations, transactions, arrangements and reorganizations to be effected on the Plan Implementation Date are deemed to occur and be effected in the sequential order contemplated in the Plan, without any further act or formality, beginning at the Effective Time.

14. THIS COURT ORDERS that SFC, the Monitor and the Initial Consenting Noteholders are hereby authorized and empowered to exercise all such consent and approval rights in the manner set forth in the Plan, whether prior to or after implementation of the Plan.

15. THIS COURT ORDERS that from and after the Plan Implementation Date, and for the purposes of the Plan only, (i) if SFC does not have the ability or the capacity pursuant to Applicable Law to provide its agreement, waiver, consent or approval to any matter requiring SFC’s agreement, waiver, consent or approval under this Plan, such agreement, waiver consent or approval may be provided by the Monitor; and (ii) if SFC does not have the ability or the capacity pursuant to Applicable Law to provide its agreement, waiver, consent or approval to any matter requiring SFC’s agreement, waiver, consent or approval under this Plan, and the Monitor has been discharged pursuant to an Order, such agreement, waiver consent or approval shall be deemed not to be necessary.

 

4

COMPROMISE OF CLAIMS AND EFFECT OF PLAN

16. THIS COURT ORDERS AND DECLARES that, pursuant to and in accordance with the terms of the Plan, on the Plan Implementation Date, any and all Affected Claims shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred, subject only to the right of the applicable Persons to receive the distributions and interests to which they are entitled pursuant to the Plan.

17. THIS COURT ORDERS AND DECLARES that, pursuant to and in accordance with the terms of the Plan, on the Plan Implementation Date and at the time specified in Section 6.4 of the Plan, all accrued and unpaid interest owing on, or in respect of, or as part of, Affected Creditor Claims (including any Accrued Interest on the Notes and any interest accruing on the Notes or any Ordinary Affected Creditor Claim after the Filing Date) shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred for no consideration and no Person shall have any entitlement to any such accrued and unpaid interest.

18. THIS COURT ORDERS AND DECLARES that, on the Plan Implementation Date, the ability of any Person to proceed against SFC or the Subsidiaries in respect of any Released Claims shall be forever discharged, barred and restrained, and all proceedings with respect to, in connection with, or relating to any such matter shall be permanently stayed.

19. THIS COURT ORDERS that each Affected Creditor is hereby deemed to have consented to all of the provisions of the Plan, in its entirety, and each Affected Creditor is hereby deemed to have executed and delivered to SFC all consents, releases, assignments and waivers, statutory or otherwise, required to implement and carry out the Plan in its entirety.

20. THIS COURT ORDERS that, on the Plan Implementation Date and at the time specified in Section 6.4 of the Plan, the SFC Assets (including for greater certainty the Direct Subsidiary Shares, the SFC Intercompany Claims and all other SFC Assets assigned, transferred and conveyed to Newco and/or Newco II pursuant to section 6.4 of the Plan) shall vest in the Person to whom such assets are being assigned, transferred and conveyed, in accordance with the terms of the Plan, free and clear of and from any and all Charges, Claims (including, notwithstanding anything to the contrary herein, any Unaffected Claims), D&O Claims, D&O Indemnity Claims, Section 5.1(2) D&O Claims, Conspiracy Claims, Continuing Other D&O

 

5

Claims, Non-Released D&O Claims, Affected Claims, Class Action Claims, Class Action Indemnity Claims, claims or rights of any kind in respect of the Notes or the Note Indentures, and any right or claim that is based in whole or in part on facts, underlying transactions, Causes of Action or events relating to the Restructuring Transaction, the CCAA Proceedings or any of the foregoing, and any guarantees or indemnities with respect to any of the foregoing. Any Encumbrances or claims affecting, attaching to or relating to the SFC Assets in respect of the foregoing are and shall be deemed to be irrevocably expunged and discharged as against the SFC Assets, and no such Encumbrances or claims shall be pursued or enforceable as against Newco, Newco II or any other Person.

21. THIS COURT ORDERS that any securities, interests, rights or claims pursuant to the Plan, including the Newco Shares, the Newco Notes and the Litigation Trust Interests, issued, assigned, transferred or conveyed pursuant to the Plan will be free and clear of and from any and all Charges, Claims (including, notwithstanding anything to the contrary herein, any Unaffected Claims), D&O Claims, D&O Indemnity Claims, Affected Claims, Section 5.1(2) D&O Claims, Conspiracy Claims, Continuing Other D&O Claims, Non-Released D&O Claims, Class Action Claims, Class Action Indemnity Claims, claims or rights of any kind in respect of the Notes or the Note Indentures, and any right or claim that is based in whole or in part on facts, underlying transactions, causes of action or events relating to the Restructuring Transaction, the CCAA Proceedings or any of the foregoing, and any guarantees or indemnities with respect to any of the foregoing.

22. THIS COURT ORDERS that the Litigation Trust Agreement is hereby approved and deemed effective as of the Plan Implementation Date, including with respect to the transfer, assignment and delivery of the Litigation Trust Claims to the Litigation Trustee which shall, and are hereby deemed to, occur on and as of the Plan Implementation Date. For greater certainty, the Litigation Trust Claims transferred, assigned and delivered to the Litigation Trustee shall not include any Excluded Litigation Trust Claims and all Affected Creditors shall be deemed to have consented to the release of any such Excluded Litigation Trust Claims pursuant to the Plan.

23. THIS COURT ORDERS that section 36.1 of the CCAA, sections 95 to 101 of the BIA and any other federal or provincial Law relating to preferences, fraudulent conveyances or transfers at undervalue, shall not apply to the Plan or to any payments, distributions, transfers,

 

6

allocations or transactions made or completed in connection with the restructuring and recapitalization of SFC, whether before or after the Filing Date, including, without limitation, to any and all of the payments, distributions, transfers, allocations or transactions contemplated by and to be implemented pursuant to the Plan.

24. THIS COURT ORDERS that the articles of reorganization to be filed by SFC pursuant to section 191 of the CBCA, substantially in the form attached as Schedule “ C ” hereto, are hereby approved, and SFC is hereby authorized to file the articles of reorganization with the Director (as defined in the CBCA).

25. THIS COURT ORDERS that on the Equity Cancellation Date, or such other date as agreed to by the Monitor, SFC and the Initial Consenting Noteholders, all Existing Shares and other Equity Interests shall be fully, finally and irrevocably cancelled.

26. THIS COURT ORDERS AND DECLARES that the Newco Shares shall be and are hereby deemed to have been validly authorized, created, issued and outstanding as fully-paid and non-assessable shares in the capital of Newco as of the Effective Time.

27. THIS COURT ORDERS AND DECLARES that upon the Plan Implementation Date the initial Newco Share in the capital of Newco held by the Initial Newco Shareholder shall be deemed to have been redeemed and cancelled for no consideration.

28. THIS COURT ORDERS AND DECLARES that it was advised prior to the hearing in respect of the Plan Sanction Order that the Plan Sanction Order will be relied upon by SFC and Newco as an approval of the Plan for the purpose of relying on the exemption from the registration requirements of the United States Securities Act of 1933 , as amended, pursuant to section 3(a)(10) thereof for the issuance of the Newco Shares, Newco Notes and, to the extent they may be deemed to be securities, the Litigation Trust Interests, and any other securities to be issued pursuant to the Plan.

STAY OF PROCEEDINGS

29. THIS COURT ORDERS that all obligations, agreements or leases to which (i) SFC remains a party on the Plan Implementation Date, or (ii) Newco and/or Newco II becomes a party as a result of the conveyance of the SFC Assets to Newco and the further conveyance of

 

7

the SFC Assets to Newco II on the Plan Implementation Date, shall be and remain in full force and effect, unamended, as at the Plan Implementation Date and no party to any such obligation, agreement or lease shall on or following the Plan Implementation Date, accelerate, terminate, refuse to renew, rescind, refuse to perform or otherwise disclaim or resiliate its obligations thereunder, or enforce or exercise (or purport to enforce or exercise) any right or remedy under or in respect of any such obligation, agreement or lease, (including any right of set-off, dilution or other remedy), or make any demand against SFC, Newco, Newco II, any Subsidiary or any other Person under or in respect of any such agreement with Newco, Newco II or any Subsidiary, by reason:

 

  (a) of any event which occurred prior to, and not continuing after, the Plan Implementation Date, or which is or continues to be suspended or waived under the Plan, which would have entitled any other party thereto to enforce those rights or remedies;

 

  (b) that SFC sought or obtained relief under the CCAA or by reason of any steps or actions taken as part of the CCAA Proceeding or this Plan Sanction Order or prior orders of this Court;

 

  (c) of any default or event of default arising as a result of the financial condition or insolvency of SFC;

 

  (d) of the completion of any of the steps, actions or transactions contemplated under the Plan, including, without limitation, the transfer, conveyance and assignment of the SFC Assets to Newco and the further transfer, conveyance and assignment of the SFC Assets by Newco to Newco II; or

 

  (e) of any steps, compromises, releases, discharges, cancellations, transactions, arrangements or reorganizations effected pursuant to the Plan.

30. THIS COURT ORDERS that from and after the Plan Implementation Date, any and all Persons shall be and are hereby stayed from commencing, taking, applying for or issuing or continuing any and all steps or proceedings, including without limitation, administrative hearings and orders, declarations or assessments, commenced, taken or proceeded with or that may be commenced, taken or proceed with to advance any Released Claims.

 

8

31. THIS COURT ORDERS that between (i) the Plan Implementation Date and (ii) the earlier of the Ernst & Young Settlement Date or such other date as may be ordered by the Court on a motion to the Court on reasonable notice to Ernst & Young, any and all Persons shall be and are hereby stayed from commencing, taking, applying for or issuing or continuing any and all steps or proceedings against Ernst & Young (other than all steps or proceedings to implement the Ernst & Young Settlement) pursuant to the terms of the Order of the Honourable Justice Morawetz dated May 8, 2012, provided that no steps or proceedings against Ernst & Young by the Ontario Securities Commission or by staff of the Ontario Securities Commission under the Securities Act (Ontario) shall be stayed by this Order.

RELEASES

32. THIS COURT ORDERS that, subject to section 7.2 of the Plan, all of the following shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date at the time or times and in the manner set forth in section 6.4 of the Plan:

 

  (a) all Affected Claims, including, without limitation, all Affected Creditor Claims, Equity Claims, D&O Claims (other than Section 5.1(2) D&O Claims, Conspiracy Claims, Continuing Other D&O Claims and Non-Released D&O Claims), D&O Indemnity Claims (except as set forth in section 7.1(d) of the Plan) and Noteholder Class Action Claims (other than the Continuing Noteholder Class Action Claims);

 

  (b) all Claims of the Ontario Securities Commission or any other Governmental Entity that have or could give rise to a monetary liability, including, without limitation, fines, awards, penalties, costs, claims for reimbursement or other claims having a monetary value;

 

  (c) all Class Action Claims (including, without limitation, the Noteholder Class Action Claims) against SFC, the Subsidiaries or the Named Directors or Officers of SFC or the Subsidiaries (other than Class Action Claims that are Section 5.1(2) D&O Claims, Conspiracy Claims or Non-Released D&O Claims);

 

9

  (d) all Class Action Indemnity Claims (including, without limitation, related D&O Indemnity Claims), other than any Class Action Indemnity Claim by the Third Party Defendants against SFC in respect of the Indemnified Noteholder Class Action Claims (including, without limitation, any D&O Indemnity Claim in that respect), which shall be limited to the Indemnified Noteholder Class Action Limit pursuant to the releases set out in section 7.1(f) of the Plan and the injunctions set out in section 7.3 of the Plan;

 

  (e) any portion or amount of liability of the Third Party Defendants for the Indemnified Noteholder Class Action Claims (on a collective, aggregate basis in reference to all Indemnified Noteholder Class Action Claims together) that exceeds the Indemnified Noteholder Class Action Limit;

 

  (f) any portion or amount of liability of the Underwriters for the Noteholder Class Action Claims (other than any Noteholder Class Action Claims against the Underwriters for fraud or criminal conduct) (on a collective, aggregate basis in reference to all such Noteholder Class Action Claims together) that exceeds the Indemnified Noteholder Class Action Limit;

 

  (g) any portion or amount of, or liability of SFC for, any Class Action Indemnity Claims by the Third Party Defendants against SFC in respect of the Indemnified Noteholder Class Action Claims (on a collective, aggregate basis in reference to all such Noteholder Class Action Claims together) to the extent that such Class Action Indemnity Claims exceed the Indemnified Noteholder Class Action Limit;

 

  (h) any and all Excluded Litigation Trust Claims;

 

  (i)

any and all Causes of Action against Newco, Newco II, the directors and officers of Newco, the directors and officers of Newco II, the Noteholders, members of the ad hoc committee of Noteholders, the Trustees, the Transfer Agent, the Monitor, FTI Consulting Canada Inc., FTI HK, counsel for the current Directors of SFC, counsel for the Monitor, counsel for the Trustees, the SFC Advisors, the Noteholder Advisors, and each and every member (including, without limitation, members of any committee or governance council), partner or employee of any of the foregoing, for or in connection with or in any way relating to: any Claims (including, without limitation, notwithstanding anything to the contrary herein, any Unaffected Claims);

 

10

  Affected Claims; Section 5.1(2) D&O Claims; Conspiracy Claims; Continuing Other D&O Claims; Non-Released D&O Claims; Class Action Claims; Class Action Indemnity Claims; any right or claim in connection with or liability for the Notes or the Note Indentures; any guarantees, indemnities, claims for contribution, share pledges or Encumbrances related to the Notes or the Note Indentures; any right or claim in connection with or liability for the Existing Shares, Equity Interests or any other securities of SFC; any rights or claims of the Third Party Defendants relating to SFC or the Subsidiaries;

 

  (j) any and all Causes of Action against Newco, Newco II, the directors and officers of Newco, the directors and officers of Newco II, the Noteholders, members of the ad hoc committee of Noteholders, the Trustees, the Transfer Agent, the Monitor, FTI Consulting Canada Inc., FTI HK, the Named Directors and Officers, counsel for the current Directors of SFC, counsel for the Monitor, counsel for the Trustees, the SFC Advisors, the Noteholder Advisors, and each and every member (including, without limitation, members of any committee or governance council), partner or employee of any of the foregoing, based in whole or in part on any act, omission, transaction, duty, responsibility, indebtedness, liability, obligation, dealing or other occurrence existing or taking place on or prior to the Plan Implementation Date (or, with respect to actions taken pursuant to the Plan after the Plan Implementation Date, the date of such actions) in any way relating to, arising out of, leading up to, for, or in connection with the CCAA Proceeding, RSA, the Restructuring Transaction, the Plan, any proceedings commenced with respect to or in connection with the Plan, or the transactions contemplated by the RSA and the Plan, including, without limitation, the creation of Newco and/or Newco II and the creation, issuance or distribution of the Newco Shares, the Newco Notes, the Litigation Trust or the Litigation Trust Interests, provided that nothing in this paragraph shall release or discharge any of the Persons listed in this paragraph from or in respect of any obligations any of them may have under or in respect of the RSA, the Plan or under or in respect of any of Newco, Newco II, the Newco Shares, the Newco Notes, the Litigation Trust or the Litigation Trust Interests, as the case may be;

 

11

  (k) any and all Causes of Action against the Subsidiaries for or in connection with any Claim (including, without limitation, notwithstanding anything to the contrary herein, any Unaffected Claim); any Affected Claim (including, without limitation, any Affected Creditor Claim, Equity Claim, D&O Claim, D&O Indemnity Claim and Noteholder Class Action Claim); any Section 5.1(2) D&O Claim; any Conspiracy Claim; any Continuing Other D&O Claim; any Non-Released D&O Claim; any Class Action Claim; any Class Action Indemnity Claim; any right or claim in connection with or liability for the Notes or the Note Indentures; any guarantees, indemnities, share pledges or Encumbrances relating to the Notes or the Note Indentures; any right or claim in connection with or liability for the Existing Shares, Equity Interests or any other securities of SFC; any rights or claims of the Third Party Defendants relating to SFC or the Subsidiaries; any right or claim in connection with or liability for the RSA, the Plan, the CCAA Proceedings, the Restructuring Transaction, the Litigation Trust, the business and affairs of SFC and the Subsidiaries (whenever or however conducted), the administration and/or management of SFC and the Subsidiaries, or any public filings, statements, disclosures or press releases relating to SFC; any right or claim in connection with or liability for any indemnification obligation to Directors or Officers of SFC or the Subsidiaries pertaining to SFC, the Notes, the Note Indentures, the Existing Shares, the Equity Interests, any other securities of SFC or any other right, claim or liability for or in connection with the RSA, the Plan, the CCAA Proceedings, the Restructuring Transaction, the Litigation Trust, the business and affairs of SFC (whenever or however conducted), the administration and/or management of SFC, or any public filings, statements, disclosures or press releases relating to SFC; any right or claim in connection with or liability for any guaranty, indemnity or claim for contribution in respect of any of the foregoing; and any Encumbrance in respect of the foregoing;

 

  (l) all Subsidiary Intercompany Claims as against SFC (which are assumed by Newco and then Newco II pursuant to the Plan);

 

  (m) any entitlements of Ernst & Young to receive distributions of any kind (including, without limitation, Newco Shares, Newco Notes and Litigation Trust Interests) under this Plan;

 

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  (n) any entitlements of the Underwriters to receive distributions of any kind (including, without limitation, Newco Shares, Newco Notes and Litigation Trust Interests) under this Plan; and

 

  (o) any entitlements of the Named Third Party Defendants to receive distributions of any kind (including, without limitation, Newco Shares, Newco Notes and Litigation Trust Interests) under this Plan.

33. THIS COURT ORDERS that nothing in the Plan nor in this Plan Sanction Order shall waive, compromise, release, discharge, cancel or bar any of the claims listed in section 7.2 of the Plan.

34. THIS COURT ORDERS that, for greater certainty, nothing in the Plan nor in this Plan Sanction Order shall release any obligations of the Subsidiaries owed to (i) any employees, directors or officers of those Subsidiaries in respect of any wages or other compensation related arrangements, or (ii) to suppliers and trade creditors of the Subsidiaries in respect of goods or services supplied to the Subsidiaries.

35. THIS COURT ORDERS that any guarantees, indemnities, Encumbrances or other obligations owing by or in respect of SFC relating to the Notes or the Note Indentures shall be and are hereby deemed to be released, discharged and cancelled.

36. THIS COURT ORDERS that the Trustees are hereby authorized and directed to release, discharge and cancel any guarantees, indemnities, Encumbrances or other obligations owing by or in respect of any Subsidiary relating to the Notes or the Note Indentures.

37. THIS COURT ORDERS that any claims against the Named Directors and Officers in respect of Section 5.1(2) D&O Claims or Conspiracy Claims shall be limited to recovery from any insurance proceeds payable in respect of such Section 5.1(2) D&O Claims or Conspiracy Claims, as applicable, pursuant to the Insurance Policies, and Persons with any such Section 5.1(2) D&O Claims against Named Directors and Officers or Conspiracy Claims against Named Directors and Officers shall have no right to, and shall not, make any claim or seek any recoveries from any Person, (including SFC, any of the Subsidiaries, Newco or Newco II), other than enforcing such Persons’ rights to be paid from the proceeds of an Insurance Policy by the applicable insurer(s).

 

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38. THIS COURT ORDERS that all Persons are permanently and forever barred, estopped, stayed and enjoined, on and after the Effective Time, with respect to any and all Released Claims, from (i) commencing, conducting or continuing in any manner, directly or indirectly, any action, suits, demands or other proceedings of any nature or kind whatsoever (including, without limitation, any proceeding in a judicial, arbitral, administrative or other forum) against the Released Parties; (ii) enforcing, levying, attaching, collecting or otherwise recovering or enforcing by any manner or means, directly or indirectly, any judgment, award, decree or order against the Released Parties or their property; (iii) commencing, conducting or continuing in any manner, directly or indirectly, any action, suits or demands, including without limitation, by way of contribution or indemnity or other relief, in common law, or in equity, breach of trust or breach of fiduciary duty or under the provisions of any statute or regulation, or other proceedings of any nature or kind whatsoever (including, without limitation, any proceeding in a judicial, arbitral, administrative or other forum) against any Person who makes such a claim or might reasonably be expected to make such a claim, in any manner or forum, against one or more of the Released Parties; (iv) creating, perfecting, asserting or otherwise enforcing, directly or indirectly, any lien or encumbrance of any kind against the Released Parties or their property; or (v) taking any actions to interfere with the implementation or consummation of this Plan; provided, however, that the foregoing shall not apply to the enforcement of any obligations under the Plan.

39. THIS COURT ORDERS AND DECLARES that from and after the Plan Implementation Date, (i) subject to the prior consent of the Initial Consenting Noteholders and the terms of the Litigation Trust Agreement, each of the Litigation Trustee and the Monitor shall have the right to seek and obtain an order from any court of competent jurisdiction, including an Order of the Court in the CCAA or otherwise, that gives effect to any releases of any Litigation Trust Claims agreed to by the Litigation Trustee in accordance with the Litigation Trust Agreement, and (ii) all Affected Creditors shall be deemed to consent to any such treatment of any Litigation Trust Claims.

40. THIS COURT ORDERS that the Ernst & Young Settlement and the release of the Ernst & Young Claims pursuant to section 11.1 of the Plan shall become effective upon the satisfaction of the following conditions precedent:

 

14

  (a) approval by this Honourable Court of the terms of the Ernst & Young Settlement, including the terms and scope of the Ernst & Young Release and the Settlement Trust Order;

 

  (b) issuance by this Honourable Court of the Settlement Trust Order;

 

  (c) the granting of orders under Chapter 15 of the United States Bankruptcy Code recognizing and enforcing the Sanction Order and the Settlement Trust Order and any court orders necessary in the United States to approve the Ernst & Young Settlement and any other necessary ancillary order;

 

  (d) any other order necessary to give effect to the Ernst & Young Settlement (the orders referenced in (c) and (d) being collectively the “ Ernst & Young Orders ”);

 

  (e) the fulfillment of all conditions precedent in the Ernst & Young Settlement and the fulfillment by the Ontario Class Action Plaintiffs of all of their obligations thereunder;

 

  (f) the Sanction Order, the Settlement Trust Order and all Ernst & Young Orders being final orders and not subject to further appeal or challenge; and

 

  (g) the payment by Ernst & Young of the settlement amount as provided in the Ernst & Young Settlement to the trust established pursuant to the Settlement Trust Order,

Upon the foregoing conditions precedent having been satisfied and upon receipt of a certificate from Ernst & Young confirming it has paid the settlement amount to the Settlement Trust in accordance with the Ernst & Young Settlement and the trustee of the Settlement Trust confirming receipt of such settlement amount, the Monitor shall be authorized and directed to deliver to Ernst & Young the Monitor’s Ernst & Young Settlement Certificate and the Monitor shall file the Monitor’s Ernst & Young Settlement Certificate with this Honourable Court after delivery of such certificate to Ernst & Young, all as provided for in section 11.1 of the Plan.

 

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41. THIS COURT ORDERS that any Named Third Party Defendant Settlement, Named Third Party Defendant Settlement Order and Named Third Party Defendant Release, the terms and scope of which remain in each case subject to future court approval in accordance with the Plan, shall only become effective after the Plan Implementation Date and upon the satisfaction of the conditions precedent to the applicable Named Third Party Defendant Settlement and the delivery of the applicable Monitor’s Named Third Party Settlement Certificate to the applicable Named Third Party Defendant, all as set forth in section 11.2 of the Plan.

THE MONITOR

42. THIS COURT ORDERS that the Monitor, in addition to its prescribed rights and obligations under the CCAA and the powers provided to the Monitor herein and in the Plan, shall be and is hereby authorized, directed and empowered to perform its functions and fulfill its obligations under the Plan to facilitate the implementation of the Plan.

43. THIS COURT ORDERS that the Monitor shall not make any payment from the Monitor’s Post-Implementation Reserve to any third party professional services provider (other than its counsel) that exceeds $250,000 (alone or in a series of related payments) without the prior consent of the Initial Consenting Noteholders or an Order of this Court.

44. THIS COURT ORDERS that: (i) in carrying out the terms of this Plan Sanction Order and the Plan, the Monitor shall have all the protections given to it by the CCAA, the Initial Order, the Order of this Court dated April 20, 2012 expanding the powers of the Monitor, and as an officer of the Court, including the stay of proceedings in its favour; (ii) the Monitor shall incur no liability or obligation as a result of carrying out the provisions of this Plan Sanction Order and/or the Plan, save and except for any gross negligence or wilful misconduct on its part; (iii) the Monitor shall be entitled to rely on the books and records of SFC and any information provided by SFC without independent investigation; and (iv) the Monitor shall not be liable for any claims or damages resulting from any errors or omissions in such books, records or information.

45. THIS COURT ORDERS that upon completion by the Monitor of its duties in respect of SFC pursuant to the CCAA, the Plan and the Orders, the Monitor may file with the Court a certificate stating that all of its duties in respect of SFC pursuant to the CCAA, the Plan and the Orders have been completed and thereupon, FTI Consulting Canada Inc. shall be deemed to be discharged from its duties as Monitor and released of all claims relating to its activities as Monitor.

 

16

46. THIS COURT ORDERS that in no circumstances will the Monitor have any liability for any of SFC’s tax liabilities, if any, regardless of how or when such liabilities may have arisen.

47. THIS COURT ORDERS that, subject to the due performance of its obligations as set forth in the Plan and subject to its compliance with any written directions or instructions of the Monitor and/or directions of the Court in the manner set forth in the Plan, SFC Escrow Co. shall have no liabilities whatsoever arising from the performance of its obligations under the Plan.

RESERVES AND OTHER AMOUNTS

48. THIS COURT ORDERS AND DECLARES that the amount of each of the Indemnified Noteholder Class Action Limit, the Litigation Funding Amount, the Unaffected Claims Reserve, the Administration Charge Reserve, the Monitor’s Post-Implementation Reserve and the Unresolved Claims Reserve, is as provided for in the Plan, the Plan Supplement or in Schedule “ D ” hereto, or such other amount as may be agreed by SFC, the Monitor and the Initial Consenting Noteholders, as applicable, in accordance with the terms of the Plan.

49. THIS COURT ORDERS that Goodmans LLP, in its capacity as counsel to the Initial Consenting Noteholders, shall be permitted to apply for an Order of the Court at any time directing the Monitor to make distributions from the Monitor’s Post-Implementation Reserve.

50. THIS COURT ORDERS AND DECLARES that, on the Plan Implementation Date, at the time or times and in the manner set forth in section 6.4 of the Plan, each of the Charges shall be discharged, released and cancelled, and any obligations secured thereby shall be satisfied pursuant to section 4.2(b) of the Plan, and from and after the Plan Implementation Date the Administration Charge Reserve shall stand in place of the Administration Charge as security for the payment of any amounts secured by the Administration Charge.

51. THIS COURT ORDERS AND DECLARES that any Unresolved Claims that exceed $1 million shall not be accepted or resolved without further Order of the Court. All parties with Unresolved Claims shall have standing in any proceeding with respect to the determination or status of any other Unresolved Claim. Counsel to the Initial Consenting Noteholders, Goodmans LLP, shall continue to have standing in any such proceeding on behalf of the Initial Consenting Noteholders, in their capacity as Affected Creditors with Proven Claims.

 

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DOCUMENT PRESERVATION

52. THIS COURT ORDERS AND DECLARES that, prior to the Effective Time, SFC shall: (i) preserve or cause to be preserved copies of any documents (as such term is defined in the Rules of Civil Procedure (Ontario)) that are relevant to the issues raised in the Class Actions; and (ii) make arrangements acceptable to SFC, the Monitor, the Initial Consenting Noteholders, counsel to Ontario Class Action Plaintiffs, counsel to Ernst & Young, counsel to the Underwriters and counsel to the Named Third Party Defendants to provide the parties to the Class Actions with access thereto, subject to customary commercial confidentiality, privilege or other applicable restrictions, including lawyer-client privilege, work product privilege and other privileges or immunities, and to restrictions on disclosure arising from s. 16 of the Securities Act (Ontario) and comparable restrictions on disclosure in other relevant jurisdictions, for purposes of prosecuting and/or defending the Class Actions, as the case may be, provided that nothing in the foregoing reduces or otherwise limits the parties’ rights to production and discovery in accordance with the Rules of Civil Procedure (Ontario) and the Class Proceedings Act, 1992 (Ontario).

EFFECT, RECOGNITION AND ASSISTANCE

53. THIS COURT ORDERS that nothing in this Plan Sanction Order or as a result of the implementation of the Plan shall affect the standing any Person has at the date of this Plan Sanction Order in respect of the CCAA Proceeding or the Litigation Trust.

54. THIS COURT ORDERS that the transfer, assignment and delivery to the Litigation Trustee pursuant to the Litigation Trust of (i) rights, title and interests in and to the Litigation Trust Claims and (ii) all respective rights, title and interests in and to any lawyer-client privilege, work product privilege or other privilege or immunity attaching to any documents or communications (whether written or oral) associated with the Litigation Trust Claims, regardless of whether such documents or copies thereof have been requested by the Litigation Trustee pursuant to the Litigation Trust Agreement (collectively, the “ Privileges ”) shall not constitute a waiver of any such Privileges, and that such Privileges are expressly maintained.

 

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55. THIS COURT ORDERS that the current directors of SFC shall be deemed to have resigned on the Plan Implementation Date. The current directors of SFC shall have no liability in such capacity for any and all demands, claims, actions, causes of action, counterclaims, suits, debts, sums of money, accounts, covenants, damages, judgments, orders, including, without limitation, for injunctive relief or specific performance and compliance orders, expenses, executions, Encumbrances and other recoveries on account of any liability, obligation, demand or cause of action of whatever nature which any Person may be entitled to assert, whether known or unknown, matured or unmatured, direct, indirect or derivative, foreseen or unforeseen, arising on or after the Plan Implementation Date.

56. THIS COURT ORDERS that SFC and the Monitor may apply to this Court for advice and direction with respect to any matter arising from or under the Plan or this Plan Sanction Order.

57. THIS COURT ORDERS that this Plan Sanction Order shall have full force and effect in all provinces and territories of Canada and abroad as against all persons and parties against whom it may otherwise be enforced.

58. THIS COURT ORDERS that, from and after the Plan Implementation Date, the Monitor is hereby authorized and appointed to act as the foreign representative in respect of the within proceedings for the purposes of having these proceedings recognized in the United States pursuant to chapter 15 of title 11 of the United States Code.

59. THIS COURT ORDERS that, as promptly as practicable following the Plan Implementation Date, but in no event later than the third Business Day following the Plan Implementation Date, the Monitor, as the foreign representative of SFC and of the within proceedings, is hereby authorized and directed to commence a proceeding in a court of competent jurisdiction in the United States seeking recognition of the Plan and this Plan Sanction Order and confirming that the Plan and this Plan Sanction Order are binding and effective in the United States.

60. THIS COURT HEREBY REQUESTS the aid and recognition of any court or any judicial, regulatory or administrative body having jurisdiction in Canada, the United States, Barbados, the British Virgin Islands, Cayman Islands, Hong Kong, the People’s Republic of

 

19

China or in any other foreign jurisdiction, to give effect to this Plan Sanction Order and to assist SFC, the Monitor and their respective agents in carrying out the terms of this Plan Sanction Order. All courts, tribunals, regulatory and administrative bodies are hereby respectfully requested to make such orders and to provide such assistance to SFC and to the Monitor, as an officer of this Court, as may be necessary or desirable to give effect to this Plan Sanction Order, to grant representative status to the Monitor in any foreign proceeding, or to assist SFC and the Monitor and their respective agents in carrying out the terms of this Plan Sanction Order.

61. THIS COURT ORDERS that each of SFC and the Monitor shall, following consultation with Goodmans LLP, be at liberty, and is hereby authorized and empowered, to make such further applications, motions or proceedings to or before such other courts and judicial, regulatory and administrative bodies, and take such steps in Canada, the United States of America, the British Virgin Islands, Cayman Islands, Hong Kong, the People’s Republic of China or in any other foreign jurisdiction, as may be necessary or advisable to give effect to this Plan Sanction Order and any other Order granted by this Court, including for recognition of this Plan Sanction Order and for assistance in carrying out its terms.

62. THIS COURT ORDERS that this Plan Sanction Order shall be posted on the Monitor’s Website at http://cfcanada.fticonsulting.com/sfc and only be required to be served upon the parties on the Service List and those parties who appeared at the hearing of the motion for this Plan Sanction Order.

63. THIS COURT ORDERS AND DECLARES that any conflict or inconsistency between the Plan and this Plan Sanction Order shall be governed by the terms, conditions and provisions of the Plan, which shall take precedence and priority.

ENTERED AT/INSCRIT À TORONTO

ON / BOOK NO.:

LE / DANS LE REGISTRE NO.:

DEC 12 2012

             /Signature/                                                                               

 

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Schedule “A”

 

21

Court File No. CV-12-9667-00CL

ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

IN THE MATTER OF THE COMPANIES’ CREDITORS

ARRANGEMENT ACT , R.S.C. 1985, c. C-36, AS AMENDED

AND IN THE MATTER OF A PLAN OF COMPROMISE AND

ARRANGEMENT OF SINO-FOREST

CORPORATION

APPLICANT

 

 

PLAN OF COMPROMISE AND REORGANIZATION

pursuant to the Companies’ Creditors Arrangement Act

and the Canada Business Corporations Act

concerning, affecting and involving

SINO-FOREST CORPORATION

 

 

December 3, 2012

ARTICLE 1 INTERPRETATION      4   

1.1

     Definitions      4   

1.2

     Certain Rules of Interpretation      25   

1.3

     Currency      26   

1.4

     Successors and Assigns      26   

1.5

     Governing Law      26   

1.6

     Schedule “A”      26   
ARTICLE 2 PURPOSE AND EFFECT OF THE PLAN      26   

2.1

     Purpose      26   

2.2

     Claims Affected      27   

2.3

     Unaffected Claims against SFC Not Affected      27   

2.4

     Insurance      27   

2.5

     Claims Procedure Order      29   
ARTICLE 3 CLASSIFICATION, VOTING AND RELATED MATTERS      29   

3.1

     Claims Procedure      29   

3.2

     Classification      29   

3.3

     Unaffected Creditors      29   

3.4

     Creditors’ Meeting      29   

3.5

     Approval by Creditors      30   
ARTICLE 4 DISTRIBUTIONS, PAYMENTS AND TREATMENT OF CLAIMS      30   

4.1

     Affected Creditors      30   

4.2

     Unaffected Creditors      30   

4.3

     Early Consent Noteholders      31   

4.4

     Noteholder Class Action Claimants      31   

4.5

     Equity Claimants      34   

4.6

     Claims of the Trustees and Noteholders      34   

4.7

     Claims of the Third Party Defendants      34   

4.8

     Defence Costs      34   

4.9

     D&O Claims      35   

4.10

     Intercompany Claims      36   

4.11

     Entitlement to Litigation Trust Interests      37   

4.12

     Litigation Trust Claims      37   

4.13

     Multiple Affected Claims      38   

4.14

     Interest      38   

4.15

     Existing Shares      39   

4.16

     Canadian Exempt Plans      39   
ARTICLE 5 DISTRIBUTION MECHANICS      39   

5.1

     Letters of Instruction      39   

5.2

     Distribution Mechanics with respect to Newco Shares and Newco Notes      40   

5.3

     Allocation of Litigation Trust Interests      44   

5.4

     Treatment of Undeliverable Distributions      45   

5.5

     Procedure for Distributions Regarding Unresolved Claims      45   

5.6

     Tax Refunds      47   

5.7

     Final Distributions from Reserves      47   

5.8

     Other Payments and Distributions      48   

5.9

     Note Indentures to Remain in Effect Solely for Purpose of Distributions      48   

5.10

     Assignment of Claims for Distribution Purposes      48   

5.11

     Withholding Rights      49   

5.12

     Fractional Interests      50   

5.13

     Further Direction of the Court      50   
ARTICLE 6 RESTRUCTURING TRANSACTION      50   

6.1

     Corporate Actions      50   

6.2

     Incorporation of Newco and Newco II      50   

6.3

     Incorporation of SFC Escrow Co.      51   

6.4

     Plan Implementation Date Transactions      52   

6.5

     Cancellation of Existing Shares and Equity Interests      58   

6.6

     Transfers and Vesting Free and Clear      59   
ARTICLE 7 RELEASES      60   

7.1

     Plan Releases      60   

7.2

     Claims Not Released      63   

7.3

     Injunctions      64   

7.4

     Timing of Releases and Injunctions      64   

7.5

     Equity Class Action Claims Against the Third Party Defendants      64   
ARTICLE 8 COURT SANCTION      65   

8.1

     Application for Sanction Order      65   

8.2

     Sanction Order      65   
ARTICLE 9 CONDITIONS PRECEDENT AND IMPLEMENTATION      69   

9.1

     Conditions Precedent to Implementation of the Plan      69   

9.2

     Monitor’s Certificate of Plan Implementation      75   
ARTICLE 10 ALTERNATIVE SALE TRANSACTION      76   

10.1

     Alternative Sale Transaction      76   
ARTICLE 11 SETTLEMENT OF CLAIMS AGAINST THIRD PARTY DEFENDANTS      77   

11.1

     Ernst & Young      77   

11.2

     Named Third Party Defendants      78   
ARTICLE 12 GENERAL      79   

12.1

     Binding Effect      79   

12.2

     Waiver of Defaults      79   

12.3

     Deeming Provisions      80   

12.4

     Non-Consummation      80   

12.5

     Modification of the Plan      81   

12.6

     Actions and Approvals of SFC after Plan Implementation      81   

12.7

     Consent of the Initial Consenting Noteholders      82   

 

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12.8

     Claims Not Subject to Compromise      82   

12.9

     Paramountcy      83   

12.10

     Foreign Recognition      83   

12.11

     Severability of Plan Provisions      83   

12.12

     Responsibilities of the Monitor      84   

12.13

     Different Capacities      84   

12.14

     Notices      84   

12.15

     Further Assurances      86   

 

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PLAN OF COMPROMISE AND REORGANIZATION

WHEREAS Sino-Forest Corporation (“ SFC ”) is insolvent;

AND WHEREAS , on March 30, 2012 (the “ Filing Date ”), the Honourable Justice Morawetz of the Ontario Superior Court of Justice (Commercial List) (the “ Court ”) granted an initial Order in respect of SFC (as such Order may be amended, restated or varied from time to time, the “ Initial Order ”) pursuant to the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36, as amended (the “ CCAA ”) and the Canada Business Corporation Act , R.S.C. 1985, c. C-44, as amended (the “ CBCA ”);

AND WHEREAS , on August 31, 2012, the Court granted a Plan Filing and Meeting Order (as such Order may be amended, restated or varied from time to time, the “ Meeting Order ”) pursuant to which, among other things, SFC was authorized to file this plan of compromise and reorganization and to convene a meeting of affected creditors to consider and vote on this plan of compromise and reorganization.

NOW THEREFORE , SFC hereby proposes this plan of compromise and reorganization pursuant to the CCAA and CBCA.

ARTICLE 1

INTERPRETATION

1.1 Definitions

In the Plan, unless otherwise stated or unless the subject matter or context otherwise requires:

“ 2013 Note Indenture ” means the indenture dated as of July 23, 2008, by and between SFC, the entities listed as subsidiary guarantors therein, and The Bank of New York Mellon, as trustee, as amended, modified or supplemented.

“ 2014 Note Indenture ” means the indenture dated as of July 27, 2009, by and between SFC, the entities listed as subsidiary guarantors therein, and Law Debenture Trust Company of New York, as trustee, as amended, modified or supplemented.

“ 2016 Note Indenture ” means the indenture dated as of December 17, 2009, by and between SFC, the entities listed as subsidiary guarantors therein, and The Bank of New York Mellon, as trustee, as amended, modified or supplemented.

“ 2017 Note Indenture ” means the indenture dated as of October 21, 2010, by and between SFC, the entities listed as subsidiary guarantors therein, and Law Debenture Trust Company of New York, as trustee, as amended, modified or supplemented.

“ 2013 Notes ” means the aggregate principal amount of US$345,000,000 of 5.00% Convertible Senior Notes Due 2013 issued pursuant to the 2013 Note Indenture.

 

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“ 2014 Notes ” means the aggregate principal amount of US$399,517,000 of 10.25% Guaranteed Senior Notes Due 2014 issued pursuant to the 2014 Note Indenture.

“ 2016 Notes ” means the aggregate principal amount of US$460,000,000 of 4.25% Convertible Senior Notes Due 2016 issued pursuant to the 2016 Note Indenture.

“ 2017 Notes ” means the aggregate principal amount of US$600,000,000 of 6.25% Guaranteed Senior Notes Due 2017 issued pursuant to the 2017 Note Indenture.

“ Accrued Interest ” means, in respect of any series of Notes, all accrued and unpaid interest on such Notes, at the regular rates provided in the applicable Note Indentures, up to and including the Filing Date.

“ Administration Charge ” has the meaning ascribed thereto in the Initial Order.

“ Administration Charge Reserve ” means the cash reserve to be established by SFC on the Plan Implementation Date in the amount of $500,000 or such other amount as agreed to by the Monitor and the Initial Consenting Noteholders, which cash reserve: (i) shall be maintained and administered by the Monitor, in trust, for the purpose of paying any amounts secured by the Administration Charge; and (ii) upon the termination of the Administration Charge pursuant to the Plan, shall stand in place of the Administration Charge as security for the payment of any amounts secured by the Administration Charge.

“ Affected Claim ” means any Claim, D&O Claim or D&O Indemnity Claim that is not: an Unaffected Claim; a Section 5.1(2) D&O Claim; a Conspiracy Claim; a Continuing Other D&O Claim; a Non-Released D&O Claim; or a Subsidiary Intercompany Claim, and “Affected Claim” includes any Class Action Indemnity Claim. For greater certainty, all of the following are Affected Claims: Affected Creditor Claims; Equity Claims; Noteholder Class Action Claims (other than the Continuing Noteholder Class Action Claims); and Class Action Indemnity Claims.

“ Affected Creditor ” means a Person with an Affected Creditor Claim, but only with respect to and to the extent of such Affected Creditor Claim.

“ Affected Creditor Claim ” means any Ordinary Affected Creditor Claim or Noteholder Claim.

“ Affected Creditors Class ” has the meaning ascribed thereto in section 3.2(a) hereof.

“ Affected Creditors Equity Sub-Pool ” means an amount of Newco Shares representing 92.5% of the Newco Equity Pool.

“ Alternative Sale Transaction ” has the meaning ascribed thereto in section 10.1 hereof.

“ Alternative Sale Transaction Consideration ” has the meaning ascribed thereto in section 10.1 hereof.

“ Applicable Law ” means any applicable law, statute, order, decree, consent decree, judgment, rule, regulation, ordinance or other pronouncement having the effect of law whether in Canada, the United States, Hong Kong, the PRC or any other country, or any domestic or foreign state, county, province, city or other political subdivision or of any Governmental Entity.

 

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“ Auditors ” means the former auditors of SFC that are named as defendants to the Class Actions Claims, including for greater certainty Ernst & Young LLP and BDO Limited.

“ Barbados Loans ” means the aggregate amount outstanding at the date hereof pursuant to three loans made by SFC Barbados to SFC in the amounts of US$65,997,468.10 on February 1, 2011, US$59,000,000 on June 7, 2011 and US$176,000,000 on June 7, 2011.

“ Barbados Property ” has the meaning ascribed thereto in section 6.4(j) hereof.

“ BIA ” means the Bankruptcy and Insolvency Act , R. S. C. 1985, c. B-3.

“ Business Day ” means a day, other than Saturday, Sunday or a statutory holiday, on which banks are generally open for business in Toronto, Ontario.

“ Canadian Tax Act ” means the Income Tax Act (Canada) and the Income Tax Regulations , in each case as amended from time to time.

“ Causes of Action ” means any and all claims, actions, causes of action, demands, counterclaims, suits, rights, entitlements, litigation, arbitration, proceeding, hearing, complaint, debt, obligation, sums of money, accounts, covenants, damages, judgments, orders, including for injunctive relief or specific performance and compliance orders, expenses, executions, Encumbrances and other recoveries of whatever nature that any Person may be entitled to assert in law, equity or otherwise, whether known or unknown, foreseen or unforeseen, reduced to judgment or not reduced to judgment, liquidated or unliquidated, contingent or non-contingent, matured or unmatured, disputed or undisputed, secured or unsecured, assertable directly, indirectly or derivatively, existing or hereafter arising and whether pertaining to events occurring before, on or after the Filing Date.

“ CBCA ” has the meaning ascribed thereto in the recitals.

“ CCAA ” has the meaning ascribed thereto in the recitals.

“ CCAA Proceeding ” means the proceeding commenced by SFC under the CCAA on the Filing Date in the Ontario Superior Court of Justice (Commercial List) under court file number CV-12-9667-00CL.

“ Charges ” means the Administration Charge and the Directors’ Charge.

“ Claim ” means any right or claim of any Person that may be asserted or made against SFC, in whole or in part, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind whatsoever, and any interest accrued thereon or costs payable in respect thereof, including by reason of the commission of a tort (intentional or unintentional), by reason of any breach of contract or other agreement (oral or written), by reason of any breach of duty (including any legal, statutory, equitable or fiduciary duty) or by reason of any right of ownership of or title to property or assets or right to a trust or deemed trust (statutory, express,

 

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implied, resulting, constructive or otherwise), and whether or not any indebtedness, liability or obligation is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, unsecured, present or future, known or unknown, by guarantee, surety or otherwise, and whether or not any right or claim is executory or anticipatory in nature, including any right or ability of any Person (including any Directors or Officers of SFC or any of the Subsidiaries) to advance a claim for contribution or indemnity or otherwise with respect to any matter, action, cause or chose in action, whether existing at present or commenced in the future, which indebtedness, liability or obligation, and any interest accrued thereon or costs payable in respect thereof (A) is based in whole or in part on facts prior to the Filing Date, (B) relates to a time period prior to the Filing Date, or (C) is a right or claim of any kind that would be a claim provable against SFC in bankruptcy within the meaning of the BIA had SFC become bankrupt on the Filing Date, or is an Equity Claim, a Noteholder Class Action Claim against SFC, a Class Action Indemnity Claim against SFC, a Restructuring Claim or a Lien Claim, provided, however, that “Claim” shall not include a D&O Claim or a D&O Indemnity Claim.

“ Claims Bar Date ” has the meaning ascribed thereto in the Claims Procedure Order.

“ Claims Procedure ” means the procedure established for determining the amount and status of Claims, D&O Claims and D&O Indemnity Claims, including in each case any such claims that are Unresolved Claims, pursuant to the Claims Procedure Order.

“ Claims Procedure Order ” means the Order under the CCAA of the Honourable Justice Morawetz dated May 14, 2012, establishing, among other things, a claims procedure in respect of SFC and calling for claims in respect of the Subsidiaries, as such Order may be amended, restated or varied from time to time.

“ Class Action Claims ” means, collectively, any rights or claims of any kind advanced or which may subsequently be advanced in the Class Actions or in any other similar proceeding, whether a class action proceeding or otherwise, and for greater certainty includes any Noteholder Class Action Claims.

“ Class Actions ” means, collectively, the following proceedings: (i)  Trustees of the Labourers’ Pension Fund of Central and Eastern Canada et al v. Sino-Forest Corporation et al. (Ontario Superior Court of Justice, Court File No. CV-11-431153-00CP); (ii)  Guining Liu v. Sino-Forest Corporation et al. (Quebec Superior Court, Court File No. 200-06-000132-111); (iii)  Allan Haigh v. Sino-Forest Corporation et al. (Saskatchewan Court of Queen’s Bench, Court File No. 2288 of 2011); and (iv)  David Leapard et al. v. Allen T.Y. Chan et al. (District Court of the Southern District of New York, Court File No. 650258/2012).

“ Class Action Court ” means, with respect to the Class Action Claims, the court of competent jurisdiction that is responsible for administering the applicable Class Action Claim.

“ Class Action Indemnity Claim ” means any right or claim of any Person that may be asserted or made in whole or in part against SFC and/or any Subsidiary for indemnity, contribution, reimbursement or otherwise from or in connection with any Class Action Claim asserted against such Person. For greater certainty, Class Action Indemnity Claims are distinct from and do not include Class Action Claims.

 

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“ Consent Date ” means May 15, 2012.

“ Conspiracy Claim ” means any D&O Claim alleging that the applicable Director or Officer committed the tort of civil conspiracy, as defined under Canadian common law.

“ Continuing Noteholder Class Action Claim ” means any Noteholder Class Action Claim that is: (i) a Section 5.1(2) D&O Claim; (ii) a Conspiracy Claim; (iii) a Non-Released D&O Claim; (iv) a Continuing Other D&O Claim; (v) a Noteholder Class Action Claim against one or more Third Party Defendants that is not an Indemnified Noteholder Class Action Claim; (vi) the portion of an Indemnified Noteholder Class Action Claim that is permitted to continue against the Third Party Defendants, subject to the Indemnified Noteholder Class Action Limit, pursuant to section 4.4(b)(i) hereof.

“ Continuing Other D&O Claims ” has the meaning ascribed thereto in section 4.9(b) hereof.

“ Court ” has the meaning ascribed thereto in the recitals.

“ D&O Claim ” means (i) any right or claim of any Person that may be asserted or made in whole or in part against one or more Directors or Officers of SFC that relates to a Claim for which such Directors or Officers are by law liable to pay in their capacity as Directors or Officers of SFC, or (ii) any right or claim of any Person that may be asserted or made in whole or in part against one or more Directors or Officers of SFC, in that capacity, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind whatsoever, and any interest accrued thereon or costs payable in respect thereof, including by reason of the commission of a tort (intentional or unintentional), by reason of any breach of contract or other agreement (oral or written), by reason of any breach of duty (including any legal, statutory, equitable or fiduciary duty and including, for greater certainty, any monetary administrative or other monetary penalty or claim for costs asserted against any Officer or Director of SFC by any Government Entity) or by reason of any right of ownership of or title to property or assets or right to a trust or deemed trust (statutory, express, implied, resulting, constructive or otherwise), and whether or not any indebtedness, liability or obligation, and any interest accrued thereon or costs payable in respect thereof, is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, unsecured, present or future, known or unknown, by guarantee, surety or otherwise, and whether or not any right or claim is executory or anticipatory in nature, including any right or ability of any Person to advance a claim for contribution or indemnity from any such Directors or Officers of SFC or otherwise with respect to any matter, action, cause or chose in action, whether existing at present or commenced in the future, which indebtedness, liability or obligation, and any interest accrued thereon or costs payable in respect thereof (A) is based in whole or in part on facts prior to the Filing Date, or (B) relates to a time period prior to the Filing Date.

“ D&O Indemnity Claim ” means any existing or future right of any Director or Officer of SFC against SFC that arose or arises as a result of any Person filing a D&O Proof of Claim (as defined in the Claims Procedure Order) in respect of such Director or Officer of SFC for which such Director or Officer of SFC is entitled to be indemnified by SFC.

 

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“ Defence Costs ” has the meaning ascribed thereto in section 4.8 hereof.

“ Director ” means, with respect to SFC or any Subsidiary, anyone who is or was, or may be deemed to be or have been, whether by statute, operation of law or otherwise, a director or de facto director of such SFC Company.

“ Directors’ Charge ” has the meaning ascribed thereto in the Initial Order.

“ Direct Registration Account ” means, if applicable, a direct registration account administered by the Transfer Agent in which those Persons entitled to receive Newco Shares and/or Newco Notes pursuant to the Plan will hold such Newco Shares and/or Newco Notes in registered form.

“ Direct Registration Transaction Advice ” means, if applicable, a statement delivered by the Monitor, the Trustees, the Transfer Agent or any such Person’s agent to any Person entitled to receive Newco Shares or Newco Notes pursuant to the Plan on the Initial Distribution Date and each subsequent Distribution Date, as applicable, indicating the number of Newco Shares and/or Newco Notes registered in the name of or as directed by the applicable Person in a Direct Registration Account.

“ Direct Subsidiaries ” means, collectively, Sino-Panel Holdings Limited, Sino-Global Holdings Inc., Sino-Panel Corporation, Sino-Capital Global Inc., SFC Barbados, Sino-Forest Resources Inc. Sino-Wood Partners, Limited.

“ Distribution Date ” means the date or dates from time to time set in accordance with the provisions of the Plan to effect distributions in respect of the Proven Claims, excluding the Initial Distribution Date.

“ Distribution Escrow Position ” has the meaning ascribed thereto in section 5.2(d) hereof.

“ Distribution Record Date ” means the Plan Implementation Date, or such other date as SFC, the Monitor and the Initial Consenting Noteholders may agree.

“ DTC ” means The Depository Trust Company, or any successor thereof.

“ Early Consent Equity Sub-Pool ” means an amount of Newco Shares representing 7.5% of the Newco Equity Pool.

“ Early Consent Noteholder ” means any Noteholder that:

 

  (a) (i) as confirmed by the Monitor on June 12, 2012, executed the (A) RSA, (B) a support agreement with SFC and the Direct Subsidiaries in the form of the RSA or (C) a joinder agreement in the form attached as Schedule C to the RSA; (ii) provided evidence satisfactory to the Monitor in accordance with section 2(a) of the RSA of the Notes held by such Noteholder as at the Consent Date (the “ Early Consent Notes ”), as such list of Noteholders and Notes held has been verified and is maintained by the Monitor on a confidential basis; and (iii) continues to hold such Early Consent Notes as at the Distribution Record Date; or

 

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  (b) (i) has acquired Early Consent Notes; (ii) has signed the necessary transfer and joinder documentation as required by the RSA and has otherwise acquired such Early Consent Notes in compliance with the RSA; and (iii) continues to hold such Early Consent Notes as at the Distribution Record Date.

“ Effective Time ” means 8:00 a.m. (Toronto time) on the Plan Implementation Date or such other time on such date as SFC, the Monitor and the Initial Consenting Noteholders may agree.

“ Eligible Third Party Defendant ” means any of the Underwriters, BDO Limited and Ernst & Young (in the event that the Ernst & Young Settlement is not completed), together with any of their respective present and former affiliates, partners, associates, employees, servants, agents, contractors, directors, officers, insurers and successors, administrators, heirs and assigns (but excluding any Director or Officer and successors, administrators, heirs and assigns of any Director or Officer in their capacity as such), and any Director or Officer together with their respective successors, administrators, heirs and assigns.

“ Employee Priority Claims ” means the following Claims of employees and former employees of SFC:

 

  (a) Claims equal to the amounts that such employees and former employees would have been qualified to receive under paragraph 136(1)(d) of the BIA if SFC had become bankrupt on the Filing Date; and

 

  (b) Claims for wages, salaries, commissions or compensation for services rendered by them after the Filing Date and on or before the Plan Implementation Date.

“ Encumbrance ” means any security interest (whether contractual, statutory, or otherwise), hypothec, mortgage, trust or deemed trust (whether contractual, statutory, or otherwise), lien, execution, levy, charge, demand, action, liability or other claim, action, demand or liability of any kind whatsoever, whether proprietary, financial or monetary, and whether or not it has attached or been perfected, registered or filed and whether secured, unsecured or otherwise, including: (i) any of the Charges; and (ii) any charge, security interest or claim evidenced by registrations pursuant to the Personal Property Security Act (Ontario) or any other personal property registry system.

“ Equity Cancellation Date ” means the date that is the first Business Day at least 31 days after the Plan Implementation Date, or such other date as may be agreed to by SFC, the Monitor and the Initial Consenting Noteholders.

“ Equity Claim ” means a Claim that meets the definition of “equity claim” in section 2(1) of the CCAA and, for greater certainty, includes any of the following:

 

  (a) any claim against SFC resulting from the ownership, purchase or sale of an equity interest in SFC, including the claims by or on behalf of current or former shareholders asserted in the Class Actions;

 

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  (b) any indemnification claim against SFC related to or arising from the claims described in sub-paragraph (a), including any such indemnification claims against SFC by or on behalf of any and all of the Third Party Defendants (other than for Defence Costs, unless any such claims for Defence Costs have been determined to be Equity Claims subsequent to the date of the Equity Claims Order); and

 

  (c) any other claim that has been determined to be an Equity Claim pursuant to an Order of the Court.

“ Equity Claimant ” means any Person having an Equity Claim, but only with respect to and to the extent of such Equity Claim.

“ Equity Claimant Class ” has the meaning ascribed thereto in section 3.2(b).

“ Equity Claims Order ” means the Order under the CCAA of the Honourable Justice Morawetz dated July 27, 2012, in respect of Shareholder Claims and Related Indemnity Claims against SFC, as such terms are defined therein.

“ Equity Interest ” has the meaning set forth in section 2(1) of the CCAA.

“Ernst & Young” means Ernst & Young LLP (Canada), Ernst & Young Global Limited and all other member firms thereof, and all present and former affiliates, partners, associates, employees, servants, agents, contractors, directors, officers, insurers and successors, administrators, heirs and assigns of each, but excludes any Director or Officer (in their capacity as such) and successors, administrators, heirs and assigns of any Director or Officer (in their capacity as such).

“Ernst & Young Claim” means any and all demands, claims, actions, Causes of Action, counterclaims, suits, debts, sums of money, accounts, covenants, damages, judgments, orders, including injunctive relief or specific performance and compliance orders, expenses, executions, Encumbrances and other recoveries on account of any claim, indebtedness, liability, obligation, demand or cause of action of whatever nature that any Person, including any Person who may claim contribution or indemnification against or from them and also including for greater certainty the SFC Companies, the Directors (in their capacity as such), the Officers (in their capacity as such), the Third Party Defendants, Newco, Newco II, the directors and officers of Newco and Newco II, the Noteholders or any Noteholder, any past, present or future holder of a direct or indirect equity interest in the SFC Companies, any past, present or future direct or indirect investor or security holder of the SFC Companies, any direct or indirect security holder of Newco or Newco II, the Trustees, the Transfer Agent, the Monitor, and each and every member (including members of any committee or governance council), present and former affiliate, partner, associate, employee, servant, agent, contractor, director, officer, insurer and each and every successor, administrator, heir and assign of each of any of the foregoing may or could (at any time past present or future) be entitled to assert against Ernst & Young, including any and all claims in respect of statutory liabilities of Directors (in their capacity as such), Officers (in their capacity as such) and any alleged fiduciary (in any capacity) whether known or unknown, matured or unmatured, direct or derivative, foreseen or unforeseen, suspected or unsuspected, contingent or not contingent, existing or hereafter arising, based in whole or in part

 

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on any act or omission, transaction, dealing or other occurrence existing or taking place on, prior to or after the Ernst & Young Settlement Date relating to, arising out of or in connection with the SFC Companies, the SFC Business, any Director or Officer (in their capacity as such) and/or professional services performed by Ernst & Young or any other acts or omissions of Ernst & Young in relation to the SFC Companies, the SFC Business, any Director or Officer (in their capacity as such), including for greater certainty but not limited to any claim arising out of:

 

  (a) all audit, tax, advisory and other professional services provided to the SFC Companies or related to the SFC Business up to the Ernst & Young Settlement Date, including for greater certainty all audit work performed, all auditors’ opinions and all consents in respect of all offering of SFC securities and all regulatory compliance delivered in respect of all fiscal periods and all work related thereto up to and inclusing the Ernst & Young Settlement Date;

 

  (b) all claims advanced or which could have been advanced in any or all of the Class Actions;

 

  (c) all claims advanced or which could have been advanced in any or all actions commenced in all jurisdictions prior the Ernst & Young Settlement Date; or

 

  (d) all Noteholder Claims, Litigation Trust Claims or any claim of the SFC Companies,

provided that “Ernst & Young Claim” does not include any proceedings or remedies that may be taken against Ernst & Young by the Ontario Securities Commission or by staff of the Ontario Securities Commission, and the jurisdiction of the Ontario Securities Commission and staff of the Ontario Securities Commission in relation to Ernst & Young under the Securities Act, R.S.O. 1990, c. S-5 is expressly preserved.

“ Ernst & Young Orders ” has the meaning ascribed thereto in section 11.1(a) hereof.

“Ernst & Young Release” means the release described in 11.1(b) hereof.

“Ernst & Young Settlement” means the settlement as reflected in the Minutes of Settlement executed on November 29, 2012 between Ernst & Young LLP, on behalf of itself and Ernst & Young Global Limited and all member firms thereof and the plaintiffs in Ontario Superior Court Action No. CV-11-4351153-00CP and in Quebec Superior Court No. 200-06-00132-111, and such other documents contemplated thereby.

“Ernst & Young Settlement Date” means the date that the Monitor’s Ernst & Young Settlement Certificate is delivered to Ernst & Young.

“ Excluded Litigation Trust Claims ” has the meaning ascribed thereto in section 4.12(a) hereof.

“ Excluded SFC Assets ” means (i) the rights of SFC to be transferred to the Litigation Trust in accordance with section 6.4(o) hereof; (ii) any entitlement to insurance proceeds in respect of Insured Claims, Section 5.1(2) D&O Claims and/or Conspiracy Claims; (iii) any secured property of SFC that is to be returned in satisfaction of a Lien Claim pursuant to section 4.2(c)(i)

 

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hereof; (iv) any input tax credits or other refunds received by SFC after the Effective Time; and (v) cash in the aggregate amount of (and for the purpose of): (A) the Litigation Funding Amount; (B) the Unaffected Claims Reserve; (C) the Administration Charge Reserve; (D) the Expense Reimbursement and the other payments to be made pursuant to section 6.4(d) hereof (having regard to the application of any outstanding retainers, as applicable); (E) any amounts in respect of Lien Claims to be paid in accordance with section 4.2(c)(ii) hereof; and (F) the Monitor’s Post-Implementation Reserve; (vi) any office space, office furniture or other office equipment owned or leased by SFC in Canada; (vii) the SFC Escrow Co. Share; (viii) Newco Promissory Note 1; and (ix) Newco Promissory Note 2.

“Existing Shares” means all existing shares in the equity of SFC issued and outstanding immediately prior to the Effective Time and all warrants, options or other rights to acquire such shares, whether or not exercised as at the Effective Time.

“ Expense Reimbursement ” means the aggregate amount of (i) the reasonable and documented fees and expenses of the Noteholder Advisors, pursuant to their respective engagement letters with SFC, and other advisors as may be agreed to by SFC and the Initial Consenting Noteholders and (ii) the reasonable fees and expenses of the Initial Consenting Noteholders incurred in connection with the negotiation and development of the RSA and this Plan, including in each case an estimated amount for any such fees and expenses expected to be incurred in connection with the implementation of the Plan, including in the case of (ii) above, an aggregate work fee of up to $5 million (which work fee may, at the request of the Monitor, be paid by any of the Subsidiaries instead of SFC).

“ Filing Date ” has the meaning ascribed thereto in the recitals.

“ Fractional Interests ” has the meaning given in section 5.12 hereof.

“ FTI HK ” means FTI Consulting (Hong Kong) Limited.

“ Governmental Entity ” means any government, regulatory authority, governmental department, agency, commission, bureau, official, minister, Crown corporation, court, board, tribunal or dispute settlement panel or other law, rule or regulation-making organization or entity: (a) having or purporting to have jurisdiction on behalf of any nation, province, territory or state or any other geographic or political subdivision of any of them; or (b) exercising, or entitled or purporting to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power.

“Government Priority Claims” means all Claims of Governmental Entities in respect of amounts that were outstanding as of the Plan Implementation Date and that are of a kind that could be subject to a demand under:

 

  (a) subsections 224(1.2) of the Canadian Tax Act;

 

  (b) any provision of the Canada Pension Plan or the Employment Insurance Act (Canada) that refers to subsection 224(1.2) of the Canadian Tax Act and provides for the collection of a contribution, as defined in the Canada Pension Plan , or employee’s premium or employer’s premium as defined in the Employment Insurance Act (Canada), or a premium under Part VII.1 of that Act, and of any related interest, penalties or other amounts; or

 

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  (c) any provision of provincial legislation that has a similar purpose to subsection 224(1.2) of the Canadian Tax Act, or that refers to that subsection, to the extent that it provides for the collection of a sum, and of any related interest, penalties or other amounts, where the sum:

 

  (i) has been withheld or deducted by a person from a payment to another person and is in respect of a tax similar in nature to the income tax imposed on individuals under the Canadian Tax Act; or

 

  (ii) is of the same nature as a contribution under the Canada Pension Plan if the province is a “province providing a comprehensive pension plan” as defined in subsection 3(1) of the Canada Pension Plan and the provincial legislation establishes a “provincial pension plan” as defined in that subsection.

“ Greenheart ” means Greenheart Group Limited, a company established under the laws of Bermuda.

“ Indemnified Noteholder Class Action Claims ” has the meaning ascribed thereto in section 4.4(b)(i) hereof.

“ Indemnified Noteholder Class Action Limit ” means $150 million or such lesser amount agreed to by SFC, the Monitor, the Initial Consenting Noteholders and counsel to the Ontario Class Action Plaintiffs prior to the Plan Implementation Date or agreed to by the Initial Consenting Noteholders and counsel to the Class Action Plaintiffs after the Plan Implementation Date.

“ Initial Consenting Noteholders ” means, subject to section 12.7 hereof, the Noteholders that executed the RSA on March 30, 2012.

“ Initial Distribution Date ” means a date no more than ten (10) Business Days after the Plan Implementation Date or such other date as SFC, the Monitor and the Initial Consenting Noteholders may agree.

“ Initial Newco Shareholder ” means a Person to be determined by the Initial Consenting Noteholders prior to the Effective Time, with the consent of SFC and the Monitor, to serve as the initial sole shareholder of Newco pursuant to section 6.2(a) hereof.

“ Initial Order ” has the meaning ascribed thereto in the recitals.

“ Insurance Policies ” means, collectively, the following insurance policies, as well as any other insurance policy pursuant to which SFC or any Director or Officer is insured: ACE INA Insurance Policy Number DO024464; Chubb Insurance Company of Canada Policy Number 8209-4449; Lloyds of London, England Policy Number XTFF0420; Lloyds of London, England Policy Number XTFF0373; and Travelers Guarantee Company of Canada Policy Number 10181108, and “ Insurance Policy ” means any one of the Insurance Policies.

 

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“ Insured Claim ” means all or that portion of any Claim for which SFC is insured and all or that portion of any D&O Claim for which the applicable Director or Officer is insured, in each case pursuant to any of the Insurance Policies.

“ Intellectual Property ” means: (i) patents, and applications for patents, including divisional and continuation patents; (ii) registered and unregistered trade-marks, logos and other indicia of origin, pending trade-mark registration applications, and proposed use application or similar reservations of marks, and all goodwill associated therewith; (iii) registered and unregistered copyrights, including all copyright in and to computer software programs, and applications for and registration of such copyright (including all copyright in and to the SFC Companies’ websites); (iv) world wide web addresses and internet domain names, applications and reservations for world wide web addresses and internet domain names, uniform resource locators and the corresponding internet sites; (v) industrial designs; and (vi) trade secrets and proprietary information not otherwise listed in (i) through (v) above, including all inventions (whether or not patentable), invention disclosures, moral and economic rights of authors and inventors (however denominated), confidential information, technical data, customer lists, corporate and business names, trade names, trade dress, brand names, know-how, formulae, methods (whether or not patentable), designs, processes, procedures, technology, business methods, source codes, object codes, computer software programs (in either source code or object code form), databases, data collections and other proprietary information or material of any type, and all derivatives, improvements and refinements thereof, howsoever recorded, or unrecorded.

“ Letter of Instruction ” means a form, to be completed by each Ordinary Affected Creditor and each Early Consent Noteholder, and that is to be delivered to the Monitor in accordance with section 5.1 hereof, which form shall set out:

 

  (a) the registration details for the Newco Shares and, if applicable, Newco Notes to be distributed to such Ordinary Affected Creditor or Early Consent Noteholder in accordance with the Plan; and

 

  (b) the address to which such Ordinary Affected Creditor’s or Early Consent Noteholder’s Direct Registration Transaction Advice or its Newco Share Certificates and Newco Note Certificates, as applicable, are to be delivered.

“ Lien Claim ” means any Proven Claim of a Person indicated as a secured creditor in Schedule “B” to the Initial Order (other than the Trustees) that is secured by a lien or encumbrance on any property of SFC, which lien is valid, perfected and enforceable pursuant to Applicable Law, provided that the Charges and any Claims in respect of Notes shall not constitute “Lien Claims”.

“ Lien Claimant ” means a Person having a Lien Claim, other than any Noteholder or Trustee in respect of any Noteholder Claim.

 

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“ Litigation Funding Amount ” means the cash amount of $1,000,000 to be advanced by SFC to the Litigation Trustee for purposes of funding the Litigation Trust on the Plan Implementation Date in accordance with section 6.4(o) hereof.

“ Litigation Funding Receivable ” has the meaning ascribed thereto in section 6.4(o) hereof.

“ Litigation Trust ” means the trust to be established on the Plan Implementation Date at the time specified in section 6.4(p) in accordance with the Litigation Trust Agreement pursuant to the laws of a jurisdiction that is acceptable to SFC and the Initial Consenting Noteholders, which trust will acquire the Litigation Trust Claims and will be funded with the Litigation Funding Amount in accordance with the Plan and the Litigation Trust Agreement.

“ Litigation Trust Agreement ” means the trust agreement dated as of the Plan Implementation Date, between SFC and the Litigation Trustee, establishing the Litigation Trust.

“ Litigation Trust Claims ” means any Causes of Action that have been or may be asserted by or on behalf of: (a) SFC against any and all third parties; or (b) the Trustees (on behalf of the Noteholders) against any and all Persons in connection with the Notes issued by SFC; provided, however, that in no event shall the Litigation Trust Claims include any (i) claim, right or cause of action against any Person that is released pursuant to Article 7 hereof or (ii) any Excluded Litigation Trust Claim. For greater certainty: (x) the claims being advanced or that are subsequently advanced in the Class Actions are not being transferred to the Litigation Trust; and (y) the claims transferred to the Litigation Trust shall not be advanced in the Class Actions.

“ Litigation Trust Interests ” means the beneficial interests in the Litigation Trust to be created on the Plan Implementation Date.

“ Litigation Trustee ” means a Person to be determined by SFC and the Initial Consenting Noteholders prior to the Effective Time, with the consent of the Monitor, to serve as trustee of the Litigation Trust pursuant to and in accordance with the terms thereof.

“ Material ” means a fact, circumstance, change, effect, matter, action, condition, event, occurrence or development that, individually or in the aggregate, is, or would reasonably be expected to be, material to the business, affairs, results of operations or financial condition of the SFC Companies (taken as a whole).

“ Material Adverse Effect ” means a fact, event, change, occurrence, circumstance or condition that, individually or together with any other event, change or occurrence, has or would reasonably be expected to have a material adverse impact on the assets, condition (financial or otherwise), business, liabilities, obligations (whether absolute, accrued, conditional or otherwise) or operations of the SFC Companies (taken as a whole); provided, however, that a Material Adverse Effect shall not include and shall be deemed to exclude the impact of any fact, event, change, occurrence, circumstance or condition resulting from or relating to: (A) changes in Applicable Laws of general applicability or interpretations thereof by courts or Governmental Entities or regulatory authorities, which changes do not have a Material disproportionate effect on the SFC Companies (taken as a whole), (B) any change in the forestry industry generally, which does not have a Material disproportionate effect on the SFC Companies (taken as a whole) (relative to other industry participants operating primarily in the PRC), (C) actions and omissions

 

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of any of the SFC Companies required pursuant to the RSA or this Plan or taken with the prior written consent of the Initial Consenting Noteholders, (D) the effects of compliance with the RSA or this Plan, including on the operating performance of the SFC Companies, (E) the negotiation, execution, delivery, performance, consummation, potential consummation or public announcement of the RSA or this Plan or the transactions contemplated thereby or hereby, (F) any change in U.S. or Canadian interest rates or currency exchange rates unless such change has a Material disproportionate effect on the SFC Companies (taken as a whole), and (G) general political, economic or financial conditions in Canada, the United States, Hong Kong or the PRC, which changes do not have a Material disproportionate effect on the SFC Companies (taken as a whole).

“ Meeting ” means the meeting of Affected Creditors, and any adjournment or extension thereof, that is called and conducted in accordance with the Meeting Order for the purpose of considering and voting on the Plan.

“ Meeting Order ” has the meaning ascribed thereto in the recitals.

“ Monitor ” means FTI Consulting Canada Inc., in its capacity as Court-appointed Monitor of SFC in the CCAA Proceeding.

“ Monitor’s Post-Implementation Reserve ” means the cash reserve to be established by SFC on the Plan Implementation Date in the amount of $5,000,000 or such other amount as may be agreed by SFC, the Monitor and the Initial Consenting Noteholders, which cash reserve shall be maintained and administered by the Monitor for the purpose of administering SFC and the Claims Procedure, as necessary, from and after the Plan Implementation Date.

“ Monitor’s Ernst & Young Settlement Certificate ” has the meaning ascribed thereto in section 11.1(a) hereof.

“ Monitor’s Named Third Party Settlement Certificate ” has the meaning ascribed thereto in section 11.2(b) hereof.

“ Named Directors and Officers ” means Andrew Agnew, William E. Ardell, James Bowland, Leslie Chan, Michael Cheng, Lawrence Hon, James M.E. Hyde, Richard M. Kimel, R. John (Jack) Lawrence, Jay A. Lefton, Edmund Mak, Tom Maradin, Judson Martin, Simon Murray, James F. O’Donnell, William P. Rosenfeld, Peter Donghong Wang, Garry West and Kee Y. Wong, in their respective capacities as Directors or Officers, and “ Named Director or Officer ” means any one of them.

“ Named Third Party Defendant Settlement ” means a binding settlement between any applicable Named Third Party Defendant and one or more of: (i) the plaintiffs in any of the Class Actions; and (ii) the Litigation Trustee (on behalf of the Litigation Trust) (if after the Plan Implementation Date), provided that, in each case, such settlement must be acceptable to SFC (if on or prior to the Plan Implementation Date), the Monitor, the Initial Consenting Noteholders (if on or prior to the Plan Implementation Date) and the Litigation Trustee (if after the Plan Implementation Date), and provided further that such settlement shall not affect the plaintiffs in the Class Actions without the consent of counsel to the Ontario Class Action Plaintiffs.

 

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“ Named Third Party Defendant Settlement Order ” means a court order approving a Named Third Party Defendant Settlement in form and in substance satisfactory to the applicable Named Third Party Defendant, SFC (if occurring on or prior to the Plan Implementation Date), the Monitor, the Initial Consenting Noteholders (if on or prior to the Plan Implementation Date), the Litigation Trustee (if after the Plan Implementation Date) and counsel to the Ontario Class Action Plaintiffs (if the plaintiffs in any of the Class Actions are affected by the applicable Named Third Party Defendant Settlement).

“ Named Third Party Defendant Release ” means a release of any applicable Named Third Party Defendant agreed to pursuant to a Named Third Party Defendant Settlement and approved pursuant to a Named Third Party Defendant Settlement Order, provided that such release must be acceptable to SFC (if on or prior to the Plan Implementation Date), the Monitor, the Initial Consenting Noteholders (if on or prior to the Plan Implementation Date) and the Litigation Trustee (if after the Plan Implementation Date), and provided further that such release shall not affect the plaintiffs in the Class Actions without the consent of counsel to the Ontario Class Action Plaintiffs.

“ Named Third Party Defendants ” means the Third Party Defendants listed on Schedule “A” to the Plan in accordance with section 11.2(a) hereof, provided that only Eligible Third Party Defendants may become Named Third Party Defendants.

“ Newco ” means the new corporation to be incorporated pursuant to section 6.2(a) hereof under the laws of the Cayman Islands or such other jurisdiction as agreed to by SFC, the Monitor and the Initial Consenting Noteholders.

“ Newco II ” means the new corporation to be incorporated pursuant to section 6.2(b) hereof under the laws of the Cayman Islands or such other jurisdiction as agreed to by SFC, the Monitor and the Initial Consenting Noteholders.

“ Newco II Consideration ” has the meaning ascribed thereto in section 6.4(x) hereof.

“ Newco Equity Pool ” means all of the Newco Shares to be issued by Newco on the Plan Implementation Date. The number of Newco Shares to be issued on the Plan Implementation Date shall be agreed by SFC, the Monitor and the Initial Consenting Noteholders prior to the Plan Implementation Date.

“ Newco Note Certificate ” means a certificate evidencing Newco Notes.

“ Newco Notes ” means the new notes to be issued by Newco on the Plan Implementation Date in the aggregate principal amount of $300,000,000, on such terms and conditions as are satisfactory to the Initial Consenting Noteholders and SFC, acting reasonably.

“ Newco Promissory Note 1 ”, “ Newco Promissory Note 2 ”, “ Newco Promissory Note 3 ” and “ Newco Promissory Notes ” have the meanings ascribed thereto in sections 6.4(k), 6.4(m), 6.4(n) and 6.4(q) hereof, respectively.

“ Newco Share Certificate ” means a certificate evidencing Newco Shares.

 

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“ Newco Shares ” means common shares in the capital of Newco.

“ Non-Released D&O Claims ” has the meaning ascribed thereto in section 4.9(f) hereof.

“ Noteholder Advisors ” means Goodmans LLP, Hogan Lovells and Conyers, Dill & Pearman LLP in their capacity as legal advisors to the Initial Consenting Noteholders, and Moelis & Company LLC and Moelis and Company Asia Limited, in their capacity as the financial advisors to the Initial Consenting Noteholders.

“ Noteholder Claim ” means any Claim by a Noteholder (or a Trustee or other representative on the Noteholder’s behalf) in respect of or in relation to the Notes owned or held by such Noteholder, including all principal and Accrued Interest payable to such Noteholder pursuant to such Notes or the Note Indentures, but for greater certainty does not include any Noteholder Class Action Claim.

“ Noteholder Class Action Claim ” means any Class Action Claim, or any part thereof, against SFC, any of the Subsidiaries, any of the Directors and Officers of SFC or the Subsidiaries, any of the Auditors, any of the Underwriters and/or any other defendant to the Class Action Claims that relates to the purchase, sale or ownership of Notes, but for greater certainty does not include a Noteholder Claim.

“ Noteholder Class Action Claimant ” means any Person having or asserting a Noteholder Class Action Claim.

“ Noteholder Class Action Representative ” means an individual to be appointed by counsel to the Ontario Class Action Plaintiffs.

“ Noteholders ” means, collectively, the beneficial owners of Notes as of the Distribution Record Date and, as the context requires, the registered holders of Notes as of the Distribution Record Date, and “ Noteholder ” means any one of the Noteholders.

“ Note Indentures ” means, collectively, the 2013 Note Indenture, the 2014 Note Indenture, the 2016 Note Indenture and the 2017 Note Indenture.

“ Notes ” means, collectively, the 2013 Notes, the 2014 Notes, the 2016 Notes and the 2017 Notes.

“ Officer ” means, with respect to SFC or any Subsidiary, anyone who is or was, or may be deemed to be or have been, whether by statute, operation of law or otherwise, an officer or de facto officer of such SFC Company.

“ Ontario Class Action Plaintiffs ” means the plaintiffs in the Ontario class action case styled as Trustees of the Labourers’ Pension Fund of Central and Eastern Canada et al v. Sino-Forest Corporation et al. (Ontario Superior Court of Justice, Court File No. CV-11-431153-00CP).

“ Order ” means any order of the Court made in connection with the CCAA Proceeding or this Plan.

 

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“ Ordinary Affected Creditor ” means a Person with an Ordinary Affected Creditor Claim.

“ Ordinary Affected Creditor Claim ” means a Claim that is not: an Unaffected Claim; a Noteholder Claim; an Equity Claim; a Subsidiary Intercompany Claim; a Noteholder Class Action Claim; or a Class Action Indemnity Claim (other than a Class Action Indemnity Claim by any of the Third Party Defendants in respect of the Indemnified Noteholder Class Action Claims).

“ Other Directors and/or Officers ” means any Directors and/or Officers other than the Named Directors and Officers.

“ Permitted Continuing Retainer ” has the meaning ascribed thereto in section 6.4(d) hereof.

“ Person ” means any individual, sole proprietorship, limited or unlimited liability corporation, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, body corporate, joint venture, trust, pension fund, union, Governmental Entity, and a natural person including in such person’s capacity as trustee, heir, beneficiary, executor, administrator or other legal representative.

“ Plan ” means this Plan of Compromise and Reorganization (including all schedules hereto) filed by SFC pursuant to the CCAA and the CBCA, as it may be further amended, supplemented or restated from time to time in accordance with the terms hereof or an Order.

“ Plan Implementation Date ” means the Business Day on which this Plan becomes effective, which shall be the Business Day on which the Monitor has filed with the Court the certificate contemplated in section 9.2 hereof, or such other date as SFC, the Monitor and the Initial Consenting Noteholders may agree.

“ PRC ” means the People’s Republic of China.

“ Proof of Claim ” means the “Proof of Claim” referred to in the Claims Procedure Order, substantially in the form attached to the Claims Procedure Order.

“ Pro-Rata ” means:

 

  (a) with respect to any Noteholder in relation to all Noteholders, the proportion of (i) the principal amount of Notes beneficially owned by such Noteholder as of the Distribution Record Date plus the Accrued Interest owing on such Notes as of the Filing Date, in relation to (ii) the aggregate principal amount of all Notes outstanding as of the Distribution Record Date plus the aggregate of all Accrued Interest owing on all Notes as of the Filing Date;

 

  (b) with respect to any Early Consent Noteholder in relation to all Early Consent Noteholders, the proportion of the principal amount of Early Consent Notes beneficially owned by such Early Consent Noteholder as of the Distribution Record Date in relation to the aggregate principal amount of Early Consent Notes held by all Early Consent Noteholders as of the Distribution Record Date; and

 

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  (c) with respect to any Affected Creditor in relation to all Affected Creditors, the proportion of such Affected Creditor’s Affected Creditor Claim as at any relevant time in relation to the aggregate of all Proven Claims and Unresolved Claims of Affected Creditors as at that time.

“ Proven Claim ” means an Affected Creditor Claim to the extent that such Affected Creditor Claim is finally determined and valued in accordance with the provisions of the Claims Procedure Order, the Meeting Order or any other Order, as applicable.

“ Released Claims ” means all of the rights, claims and liabilities of any kind released pursuant to Article 7 hereof.

“ Released Parties ” means, collectively, those Persons released pursuant to Article 7 hereof, but only to the extent so released, and each such Person is referred to individually as a “ Released Party ”.

“ Required Majority ” means a majority in number of Affected Creditors with Proven Claims, and two-thirds in value of the Proven Claims held by such Affected Creditors, in each case who vote (in person or by proxy) on the Plan at the Meeting.

“ Remaining Post-Implementation Reserve Amount ” has the meaning ascribed thereto in section 5.7(b) hereof.

“ Restructuring Claim ” means any right or claim of any Person that may be asserted or made in whole or in part against SFC, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind arising out of the restructuring, termination, repudiation or disclaimer of any lease, contract, or other agreement or obligation on or after the Filing Date and whether such restructuring, termination, repudiation or disclaimer took place or takes place before or after the date of the Claims Procedure Order.

“ Restructuring Transaction ” means the transactions contemplated by this Plan (including any Alternative Sale Transaction that occurs pursuant to section 10.1 hereof).

“ RSA ” means the Restructuring Support Agreement executed as of March 30, 2012 by SFC, the Direct Subsidiaries and the Initial Consenting Noteholders, and subsequently executed or otherwise agreed to by the Early Consent Noteholders, as such Restructuring Support Agreement may be amended, restated and varied from time to time in accordance with its terms.

“ Sanction Date ” means the date that the Sanction Order is granted by the Court.

“ Sanction Order ” means the Order of the Court sanctioning and approving this Plan.

“ Section 5.1(2) D&O Claim ” means any D&O Claim that is not permitted to be compromised pursuant to section 5.1(2) of the CCAA, but only to the extent not so permitted, provided that any D&O Claim that qualifies as a Non-Released D&O Claim or a Continuing Other D&O Claim shall not constitute a Section 5.1(2) D&O Claim.

“ Settlement Trust ” has the meaning ascribed thereto in section 11.1(a) hereof.

 

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“ Settlement Trust Order ” means a court order that establishes the Settlement Trust and approves the Ernst & Young Settlement and the Ernst & Young Release, in form and in substance satisfactory to Ernst & Young and counsel to the Ontario Class Action Plaintiffs, provided that such order shall also be acceptable to SFC (if occurring on or prior to the Plan Implementation Date), the Monitor and the Initial Consenting Noteholders, as applicable, to the extent, if any, that such order affects SFC, the Monitor or the Initial Consenting Noteholders, each acting reasonably.

“ SFC ” has the meaning ascribed thereto in the recitals.

“ SFC Advisors ” means Bennett Jones LLP, Appleby Global Group, King & Wood Mallesons and Linklaters LLP, in their respective capacities as legal advisors to SFC, and Houlihan Lokey Howard & Zukin Capital, Inc., in its capacity as financial advisor to SFC.

“ SFC Assets ” means all of SFC’s right, title and interest in and to all of SFC’s properties, assets and rights of every kind and description (including all restricted and unrestricted cash, contracts, real property, receivables or other debts owed to SFC, Intellectual Property, SFC’s corporate name and all related marks, all of SFC’s ownership interests in the Subsidiaries (including all of the shares of the Direct Subsidiaries and any other Subsidiaries that are directly owned by SFC immediately prior to the Effective Time), all of SFC’s ownership interest in Greenheart and its subsidiaries, all SFC Intercompany Claims, any entitlement of SFC to any insurance proceeds and a right to the Remaining Post-Implementation Reserve Amount), other than the Excluded SFC Assets.

“ SFC Barbados ” means Sino-Forest International (Barbados) Corporation, a wholly-owned subsidiary of SFC established under the laws of Barbados.

“ SFC Business ” means the business operated by the SFC Companies.

“ SFC Continuing Shareholder ” means the Litigation Trustee or such other Person as may be agreed to by the Monitor and the Initial Consenting Noteholders.

“ SFC Companies ” means, collectively, SFC and all of the Subsidiaries, and “ SFC Company ” means any of them.

“ SFC Escrow Co. ” means the company to be incorporated as a wholly-owned subsidiary of SFC pursuant to section 6.3 hereof under the laws of the Cayman Islands or such other jurisdiction as agreed to by SFC, the Monitor and the Initial Consenting Noteholders.

“ SFC Escrow Co. Share ” has the meaning ascribed thereto in section 6.3 hereof.

“ SFC Intercompany Claim ” means any amount owing to SFC by any Subsidiary or Greenheart and any claim by SFC against any Subsidiary or Greenheart.

“ Subsidiaries ” means all direct and indirect subsidiaries of SFC, other than (i) Greenheart and its direct and indirect subsidiaries and (ii) SFC Escrow Co., and “ Subsidiary ” means any one of the Subsidiaries.

 

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“ Subsidiary Intercompany Claim ” means any Claim by any Subsidiary or Greenheart against SFC.

“ Tax ” or “ Taxes ” means any and all federal, provincial, municipal, local and foreign taxes, assessments, reassessments and other governmental charges, duties, impositions and liabilities including for greater certainty taxes based upon or measured by reference to income, gross receipts, profits, capital, transfer, land transfer, sales, goods and services, harmonized sales, use, value-added, excise, withholding, business, franchising, property, development, occupancy, employer health, payroll, employment, health, social services, education and social security taxes, all surtaxes, all customs duties and import and export taxes, all licence, franchise and registration fees and all employment insurance, health insurance and government pension plan premiums or contributions, together with all interest, penalties, fines and additions with respect to such amounts.

“ Taxing Authorities ” means any one of Her Majesty the Queen, Her Majesty the Queen in right of Canada, Her Majesty the Queen in right of any province or territory of Canada, the Canada Revenue Agency, any similar revenue or taxing authority of Canada and each and every province or territory of Canada and any political subdivision thereof, any similar revenue or taxing authority of the United States, the PRC, Hong Kong or other foreign state and any political subdivision thereof, and any Canadian, United States, Hong Kong, PRC or other government, regulatory authority, government department, agency, commission, bureau, minister, court, tribunal or body or regulation-making entity exercising taxing authority or power, and “ Taxing Authority ” means any one of the Taxing Authorities.

“ Third Party Defendants ” means any defendants to the Class Action Claims (present or future) other than SFC, the Subsidiaries, the Named Directors and Officers or the Trustees.

“ Transfer Agent ” means Computershare Limited (or a subsidiary or affiliate thereof) or such other transfer agent as Newco may appoint, with the prior written consent of the Monitor and the Initial Consenting Noteholders.

“ Trustee Claims ” means any rights or claims of the Trustees against SFC under the Note Indentures for compensation, fees, expenses, disbursements or advances, including reasonable legal fees and expenses, incurred or made by or on behalf of the Trustees before or after the Plan Implementation Date in connection with the performance of their respective duties under the Note Indentures or this Plan.

“ Trustees ” means, collectively, The Bank of New York Mellon in its capacity as trustee for the 2013 Notes and the 2016 Notes, and Law Debenture Trust Company of New York in its capacity as trustee for the 2014 Notes and the 2017 Notes, and “ Trustee ” means either one of them.

“ Unaffected Claim ” means any:

 

  (a) Claim secured by the Administration Charge;

 

  (b) Government Priority Claim;

 

  (c) Employee Priority Claim;

 

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  (d) Lien Claim;

 

  (e) any other Claim of any employee, former employee, Director or Officer of SFC in respect of wages, vacation pay, bonuses, termination pay, severance pay or other remuneration payable to such Person by SFC, other than any termination pay or severance pay payable by SFC to a Person who ceased to be an employee, Director or Officer of SFC prior to the date of this Plan;

 

  (f) Trustee Claims; and

 

  (g) any trade payables that were incurred by SFC (i) after the Filing Date but before the Plan Implementation Date; and (ii) in compliance with the Initial Order or other Order issued in the CCAA Proceeding.

“ Unaffected Claims Reserve ” means the cash reserve to be established by SFC on the Plan Implementation Date and maintained by the Monitor, in escrow, for the purpose of paying certain Unaffected Claims in accordance with section 4.2 hereof.

“ Unaffected Creditor ” means a Person who has an Unaffected Claim, but only in respect of and to the extent of such Unaffected Claim.

“ Undeliverable Distribution ” has the meaning ascribed thereto in section 5.4.

“ Underwriters ” means any underwriters of SFC that are named as defendants in the Class Action Claims, including for greater certainty Credit Suisse Securities (Canada), Inc., TD Securities Inc., Dundee Securities Corporation, RBC Dominion Securities Inc., Scotia Capital Inc., CIBC World Markets Inc., Merrill Lynch Canada Inc., Canaccord Financial Ltd., Maison Placements Canada Inc., Credit Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated (successor by merger to Banc of America Securities LLC).

“ Unresolved Claim ” means an Affected Creditor Claim in respect of which a Proof of Claim has been filed in a proper and timely manner in accordance with the Claims Procedure Order but that, as at any applicable time, has not been finally (i) determined to be a Proven Claim or (ii) disallowed in accordance with the Claims Procedure Order, the Meeting Order or any other Order.

“ Unresolved Claims Escrow Agent ” means SFC Escrow Co. or such other Person as may be agreed by SFC, the Monitor and the Initial Consenting Noteholders.

“ Unresolved Claims Reserve ” means the reserve of Newco Shares, Newco Notes and Litigation Trust Interests, if any, to be established pursuant to sections 6.4(h)(ii) and 6.4(r) hereof in respect of Unresolved Claims as at the Plan Implementation Date, which reserve shall be held and maintained by the Unresolved Claims Escrow Agent, in escrow, for distribution in accordance with the Plan. As at the Plan Implementation Date, the Unresolved Claims Reserve will consist of that amount of Newco Shares, Newco Notes and Litigation Trust Interests as is necessary to make any potential distributions under the Plan in respect of the following Unresolved Claims: (i) Class Action Indemnity Claims in an amount up to the Indemnified Noteholder Class Action Limit; (ii) Claims in respect of Defence Costs in the amount of $30 million or such other amount

 

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as may be agreed by the Monitor and the Initial Consenting Noteholders; and (iii) other Affected Creditor Claims that have been identified by the Monitor as Unresolved Claims in an amount up to $500,000 or such other amount as may be agreed by the Monitor and the Initial Consenting Noteholders.

“ Website ” means the website maintained by the Monitor in respect of the CCAA Proceeding pursuant to the Initial Order at the following web address: http://cfcanada.fticonsulting.com/sfc.

1.2 Certain Rules of Interpretation

For the purposes of the Plan:

 

  (a) any reference in the Plan to an Order, agreement, contract, instrument, indenture, release, exhibit or other document means such Order, agreement, contract, instrument, indenture, release, exhibit or other document as it may have been or may be validly amended, modified or supplemented;

 

  (b) the division of the Plan into “articles” and “sections” and the insertion of a table of contents are for convenience of reference only and do not affect the construction or interpretation of the Plan, nor are the descriptive headings of “articles” and “sections” intended as complete or accurate descriptions of the content thereof;

 

  (c) unless the context otherwise requires, words importing the singular shall include the plural and vice versa , and words importing any gender shall include all genders;

 

  (d) the words “includes” and “including” and similar terms of inclusion shall not, unless expressly modified by the words “only” or “solely”, be construed as terms of limitation, but rather shall mean “includes but is not limited to” and “including but not limited to”, so that references to included matters shall be regarded as illustrative without being either characterizing or exhaustive;

 

  (e) unless otherwise specified, all references to time herein and in any document issued pursuant hereto mean local time in Toronto, Ontario and any reference to an event occurring on a Business Day shall mean prior to 5:00 p.m. (Toronto time) on such Business Day;

 

  (f) unless otherwise specified, time periods within or following which any payment is to be made or act is to be done shall be calculated by excluding the day on which the period commences and including the day on which the period ends and by extending the period to the next succeeding Business Day if the last day of the period is not a Business Day;

 

  (g) unless otherwise provided, any reference to a statute or other enactment of parliament or a legislature includes all regulations made thereunder, all amendments to or re-enactments of such statute or regulations in force from time to time, and, if applicable, any statute or regulation that supplements or supersedes such statute or regulation; and

 

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  (h) references to a specified “article” or “section” shall, unless something in the subject matter or context is inconsistent therewith, be construed as references to that specified article or section of the Plan, whereas the terms “the Plan”, “hereof”, “herein”, “hereto”, “hereunder” and similar expressions shall be deemed to refer generally to the Plan and not to any particular “article”, “section” or other portion of the Plan and include any documents supplemental hereto.

1.3 Currency

For the purposes of this Plan, all amounts shall be denominated in Canadian dollars and all payments and distributions to be made in cash shall be made in Canadian dollars. Any Claims or other amounts denominated in a foreign currency shall be converted to Canadian dollars at the Reuters closing rate on the Filing Date.

1.4 Successors and Assigns

The Plan shall be binding upon and shall enure to the benefit of the heirs, administrators, executors, legal personal representatives, successors and assigns of any Person named or referred to in the Plan.

1.5 Governing Law

The Plan shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. All questions as to the interpretation of or application of the Plan and all proceedings taken in connection with the Plan and its provisions shall be subject to the jurisdiction of the Court.

1.6 Schedule “A”

Schedule “A” to the Plan is incorporated by reference into the Plan and forms part of the Plan.

ARTICLE 2

PURPOSE AND EFFECT OF THE PLAN

2.1 Purpose

The purpose of the Plan is:

 

  (a) to effect a full, final and irrevocable compromise, release, discharge, cancellation and bar of all Affected Claims;

 

  (b) to effect the distribution of the consideration provided for herein in respect of Proven Claims;

 

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  (c) to transfer ownership of the SFC Business to Newco and then from Newco to Newco II, in each case free and clear of all claims against SFC and certain related claims against the Subsidiaries, so as to enable the SFC Business to continue on a viable, going concern basis; and

 

  (d) to allow Affected Creditors and Noteholder Class Action Claimants to benefit from contingent value that may be derived from litigation claims to be advanced by the Litigation Trustee.

The Plan is put forward in the expectation that the Persons with an economic interest in SFC, when considered as a whole, will derive a greater benefit from the implementation of the Plan and the continuation of the SFC Business as a going concern than would result from a bankruptcy or liquidation of SFC.

2.2 Claims Affected

The Plan provides for, among other things, the full, final and irrevocable compromise, release, discharge, cancellation and bar of Affected Claims and effectuates the restructuring of SFC. The Plan will become effective at the Effective Time on the Plan Implementation Date, other than such matters occurring on the Equity Cancellation Date (if the Equity Cancellation date does not occur on the Plan Implementation Date) which will occur and be effective on such date, and the Plan shall be binding on and enure to the benefit of SFC, the Subsidiaries, Newco, Newco II, SFC Escrow Co., any Person having an Affected Claim, the Directors and Officers of SFC and all other Persons named or referred to in, or subject to, the Plan, as and to the extent provided for in the Plan.

2.3 Unaffected Claims against SFC Not Affected

Any amounts properly owing by SFC in respect of Unaffected Claims will be satisfied in accordance with section 4.2 hereof. Consistent with the foregoing, all liabilities of the Released Parties in respect of Unaffected Claims (other than the obligation of SFC to satisfy such Unaffected Claims in accordance with section 4.2 hereof) will be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred pursuant to Article 7 hereof. Nothing in the Plan shall affect SFC’s rights and defences, both legal and equitable, with respect to any Unaffected Claims, including all rights with respect to legal and equitable defences or entitlements to set-offs or recoupments against such Unaffected Claims.

2.4 Insurance

 

  (a) Subject to the terms of this section 2.4, nothing in this Plan shall prejudice, compromise, release, discharge, cancel, bar or otherwise affect any right, entitlement or claim of any Person against SFC or any Director or Officer, or any insurer, in respect of an Insurance Policy or the proceeds thereof.

 

  (b)

Nothing in this Plan shall prejudice, compromise, release or otherwise affect any right or defence of any such insurer in respect of any such Insurance Policy. Furthermore, nothing in this Plan shall prejudice, compromise, release or otherwise affect (i) any right of subrogation any such insurer may have against

 

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  any Person, including against any Director or Officer in the event of a determination of fraud against SFC or any Director or Officer in respect of whom such a determination is specifically made, and /or (ii) the ability of such insurer to claim repayment of Defense Costs (as defined in any such policy) from SFC and/or any Director or Officer in the event that the party from whom repayment is sought is not entitled to coverage under the terms and conditions of any such Insurance Policy

 

  (c) Notwithstanding anything herein (including section 2.4(b) and the releases and injunctions set forth in Article 7 hereof), but subject to section 2.4(d) hereof, all Insured Claims shall be deemed to remain outstanding and are not released following the Plan Implementation Date, but recovery as against SFC and the Named Directors and Officers is limited only to proceeds of Insurance Policies that are available to pay such Insured Claims, either by way of judgment or settlement. SFC and the Directors or Officers shall make all reasonable efforts to meet all obligations under the Insurance Policies. The insurers agree and acknowledge that they shall be obliged to pay any Loss payable pursuant to the terms and conditions of their respective Insurance Policies notwithstanding the releases granted to SFC and the Named Directors and Officers under this Plan, and that they shall not rely on any provisions of the Insurance Policies to argue, or otherwise assert, that such releases excuse them from, or relieve them of, the obligation to pay Loss that otherwise would be payable under the terms of the Insurance Policies. For greater certainty, the insurers agree and consent to a direct right of action against the insurers, or any of them, in favour of any plaintiff who or which has (a) negotiated a settlement of any Claim covered under any of the Insurance Policies, which settlement has been consented to in writing by the insurers or such of them as may be required or (b) obtained a final judgment against one or more of SFC and/or the Directors or Officers which such plaintiff asserts, in whole or in part, represents Loss covered under the Insurance Policies, notwithstanding that such plaintiff is not a named insured under the Insurance Policies and that neither SFC nor the Directors or Officers are parties to such action.

 

  (d) Notwithstanding anything in this section 2.4, from and after the Plan Implementation Date, any Person having an Insured Claim shall, as against SFC and the Named Directors and Officers, be irrevocably limited to recovery solely from the proceeds of the Insurance Policies paid or payable on behalf of SFC or its Directors or Officers, and Persons with any Insured Claims shall have no right to, and shall not, directly or indirectly, make any claim or seek any recoveries from SFC, any of the Named Directors and Officers, any of the Subsidiaries, Newco or Newco II, other than enforcing such Person’s rights to be paid from the proceeds of an Insurance Policy by the applicable insurer(s), and this section 2.4(d) may be relied upon and raised or pled by SFC, Newco, Newco II, any Subsidiary and any Named Director and Officer in defence or estoppel of or to enjoin any claim, action or proceeding brought in contravention of this section

 

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2.5 Claims Procedure Order

For greater certainty, nothing in this Plan revives or restores any right or claim of any kind that is barred or extinguished pursuant to the terms of the Claims Procedure Order, provided that nothing in this Plan, the Claims Procedure Order or any other Order compromises, releases, discharges, cancels or bars any claim against any Person for fraud or criminal conduct, regardless of whether or not any such claim has been asserted to date.

ARTICLE 3

CLASSIFICATION, VOTING AND RELATED MATTERS

3.1 Claims Procedure

The procedure for determining the validity and quantum of the Affected Claims shall be governed by the Claims Procedure Order, the Meeting Order, the CCAA, the Plan and any other Order, as applicable. SFC, the Monitor and any other creditor in respect of its own Claim, shall have the right to seek the assistance of the Court in valuing any Claim, whether for voting or distribution purposes, if required, and to ascertain the result of any vote on the Plan.

3.2 Classification

 

  (a) The Affected Creditors shall constitute a single class, the “ Affected Creditors Class ”, for the purposes of considering and voting on the Plan.

 

  (b) The Equity Claimants shall constitute a single class, separate from the Affected Creditors Class, but shall not, and shall have no right to, attend the Meeting or vote on the Plan in such capacity.

3.3 Unaffected Creditors

No Unaffected Creditor, in respect of an Unaffected Claim, shall:

 

  (a) be entitled to vote on the Plan;

 

  (b) be entitled to attend the Meeting; or

 

  (c) receive any entitlements under this Plan in respect of such Unaffected Creditor’s Unaffected Claims (other than its right to have its Unaffected Claim addressed in accordance with section 4.2 hereof).

3.4 Creditors’ Meeting

The Meeting shall be held in accordance with the Plan, the Meeting Order and any further Order of the Court. The only Persons entitled to attend and vote on the Plan at the Meeting are those specified in the Meeting Order.

 

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3.5 Approval by Creditors

In order to be approved, the Plan must receive the affirmative vote of the Required Majority of the Affected Creditors Class.

ARTICLE 4

DISTRIBUTIONS, PAYMENTS AND TREATMENT OF CLAIMS

4.1 Affected Creditors

All Affected Creditor Claims shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date. Each Affected Creditor that has a Proven Claim shall be entitled to receive the following in accordance with the Plan:

 

  (a) such Affected Creditor’s Pro-Rata number of the Newco Shares to be issued by Newco from the Affected Creditors Equity Sub-Pool in accordance with the Plan;

 

  (b) such Affected Creditor’s Pro-Rata amount of the Newco Notes to be issued by Newco in accordance with the Plan; and

 

  (c) such Affected Creditor’s Pro-Rata share of the Litigation Trust Interests to be allocated to the Affected Creditors in accordance with 4.11 hereof and the terms of the Litigation Trust.

From and after the Plan Implementation Date, each Affected Creditor, in such capacity, shall have no rights as against SFC in respect of its Affected Creditor Claim.

4.2 Unaffected Creditors

Each Unaffected Claim that is finally determined as such, as to status and amount, and that is finally determined to be valid and enforceable against SFC, in each case in accordance with the Claims Procedure Order or other Order:

 

  (a) subject to sections 4.2(b) and 4.2(c) hereof, shall be paid in full from the Unaffected Claims Reserve and limited to recovery against the Unaffected Claims Reserve, and Persons with Unaffected Claims shall have no right to, and shall not, make any claim or seek any recoveries from any Person in respect of Unaffected Claims, other than enforcing such Person’s right against SFC to be paid from the Unaffected Claims Reserve;

 

  (b) in the case of Claims secured by the Administration Charge:

 

  (i) if billed or invoiced to SFC prior to the Plan Implementation Date, such Claims shall be paid by SFC in accordance with section 6.4(d) hereof; and

 

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  (ii) if billed or invoiced to SFC on or after the Plan Implementation Date, such Claims shall be paid from the Administration Charge Reserve, and all such Claims shall be limited to recovery against the Administration Charge Reserve, and any Person with such Claims shall have no right to, and shall not, make any claim or seek any recoveries from any Person in respect of such Claims, other than enforcing such Person’s right against the Administration Charge Reserve; and

 

  (c) in the case of Lien Claims:

 

  (i) at the election of the Initial Consenting Noteholders, and with the consent of the Monitor, SFC shall satisfy such Lien Claim by the return of the applicable property of SFC that is secured as collateral for such Lien Claim, and the applicable Lien Claimant shall be limited to its recovery against such secured property in respect of such Lien Claim.

 

  (ii) if the Initial Consenting Noteholders do not elect to satisfy such Lien Claim by the return of the applicable secured property: (A) SFC shall repay the Lien Claim in full in cash on the Plan Implementation Date; and (B) the security held by the applicable Lien Claimant over the property of SFC shall be fully, finally, irrevocably and forever released, discharged, cancelled and barred; and

 

  (iii) upon the satisfaction of a Lien Claim in accordance with sections 4.2(c)(i) or 4.2(c)(ii) hereof, such Lien Claims shall be fully, finally, irrevocably and forever released, discharged, cancelled and barred.

4.3 Early Consent Noteholders

As additional consideration for the compromise, release, discharge, cancellation and bar of the Affected Creditor Claims in respect of its Notes, each Early Consent Noteholder shall receive (in addition to the consideration it is entitled to receive in accordance with section 4.1 hereof) its Pro-Rata number of the Newco Shares to be issued by Newco from the Early Consent Equity Sub-Pool in accordance with the Plan.

4.4 Noteholder Class Action Claimants

 

  (a) All Noteholder Class Action Claims against SFC, the Subsidiaries or the Named Directors or Officers (other than any Noteholder Class Action Claims against the Named Directors or Officers that are Section 5.1(2) D&O Claims, Conspiracy Claims or Non-Released D&O Claims) shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred without consideration as against all said Persons on the Plan Implementation Date. Subject to section 4.4(f) hereof, Noteholder Class Action Claimants shall not receive any consideration or distributions under the Plan in respect of their Noteholder Class Action Claims. Noteholder Class Action Claimants shall not be entitled to attend or to vote on the Plan at the Meeting in respect of their Noteholder Class Action Claims.

 

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  (b) Notwithstanding anything to the contrary in section 4.4(a), Noteholder Class Action Claims as against the Third Party Defendants (x) are not compromised, discharged, released, cancelled or barred, (y) shall be permitted to continue as against the Third Party Defendants and (z) shall not be limited or restricted by this Plan in any manner as to quantum or otherwise (including any collection or recovery for such Noteholder Class Action Claims that relates to any liability of the Third Party Defendants for any alleged liability of SFC), provided that:

 

  (i) in accordance with the releases set forth in Article 7 hereof, the collective aggregate amount of all rights and claims asserted or that may be asserted against the Third Party Defendants in respect of any such Noteholder Class Action Claims for which any such Persons in each case have a valid and enforceable Class Action Indemnity Claim against SFC (the “ Indemnified Noteholder Class Action Claims ”) shall not exceed, in the aggregate, the Indemnified Noteholder Class Action Limit, and in accordance with section 7.3 hereof, all Persons shall be permanently and forever barred, estopped, stayed and enjoined, on and after the Effective Time, from seeking to enforce any liability in respect of the Indemnified Noteholder Class Action Claims that exceeds the Indemnified Noteholder Class Action Limit;

 

  (ii) subject to section 4.4(g), any Class Action Indemnity Claims against SFC by the Third Party Defendants in respect of the Indemnified Noteholder Class Action Claims shall be treated as Affected Creditor Claims against SFC, but only to the extent that any such Class Action Indemnity Claims that are determined to be properly indemnified by SFC, enforceable against SFC and are not barred or extinguished by the Claims Procedure Order, and further provided that the aggregate liability of SFC in respect of all such Class Action Indemnity Claims shall be limited to the lesser of: (A) the actual aggregate liability of the Third Party Defendants pursuant to any final judgment, settlement or other binding resolution in respect of the Indemnified Noteholder Class Action Claims; and (B) the Indemnified Noteholder Class Action Limit; and

 

  (iii) for greater certainty, in the event that any Third Party Defendant is found to be liable for or agrees to a settlement in respect of a Noteholder Class Action Claim (other than a Noteholder Class Action Claim for fraud or criminal conduct) and such amounts are paid by or on behalf of the applicable Third Party Defendant, then the amount of the Indemnified Noteholder Class Action Limit applicable to the remaining Third Party Defendants shall be reduced by the amount paid in respect of such Noteholder Class Action Claim, as applicable.

 

  (c)

Subject to section 7.1(o), the Claims of the Underwriters for indemnification in respect of any Noteholder Class Action Claims (other than Noteholder Class Action Claims against the Underwriters for fraud or criminal conduct) shall, for purposes of the Plan, be deemed to be valid and enforceable Class Action

 

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  Indemnity Claims against SFC (as limited pursuant to section 4.4(b) hereof), provided that: (i) the Underwriters shall not be entitled to receive any distributions of any kind under the Plan in respect of such Claims; (ii) such Claims shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date; and (iii) the amount of such Claims shall not affect the calculation of any Pro-Rata entitlements of the Affected Creditors under this Plan. For greater certainty, to the extent of any conflict with respect to the Underwriters between section 4.4(e) hereof and this section 4.4(c), this section 4.4(c) shall prevail.

 

  (d) Subject to section 7.1(m), any and all indemnification rights and entitlements of Ernst & Young at common law and any and all indemnification agreements between Ernst & Young and SFC shall be deemed to be valid and enforceable in accordance with their terms for the purpose of determining whether the Claims of Ernst & Young for indemnification in respect of Noteholder Class Action Claims are valid and enforceable within the meaning of section 4.4(b) hereof. With respect to Claims of Ernst & Young for indemnification in respect of Noteholder Class Action Claims that are valid and enforceable: (i) Ernst & Young shall not be entitled to receive any distributions of any kind under the Plan in respect of such Claims; (ii) such Claims shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date; and (iii) the amount of such Claims shall not affect the calculation of any Pro-Rata entitlements of the Affected Creditors under this Plan.

 

  (e) Subject to section 7.1(n), any and all indemnification rights and entitlements of the Named Third Party Defendants at common law and any and all indemnification agreements between the Named Third Party Defendants and SFC shall be deemed to be valid and enforceable in accordance with their terms for the purpose of determining whether the Claims of the Named Third Party Defendants for indemnification in respect of Noteholder Class Action Claims are valid and enforceable within the meaning of section 4.4(b) hereof. With respect to Claims of the Named Third Party Defendants for indemnification in respect of Noteholder Class Action Claims that are valid and enforceable: (i) the Named Third Party Defendants shall not be entitled to receive any distributions of any kind under the Plan in respect of such Claims; (ii) such Claims shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date; and (iii) the amount of such Claims shall not affect the calculation of any Pro-Rata entitlements of the Affected Creditors under this Plan.

 

  (f) Each Noteholder Class Action Claimant shall be entitled to receive its share of the Litigation Trust Interests to be allocated to Noteholder Class Action Claimants in accordance with the terms of the Litigation Trust and section 4.11 hereof, as such Noteholder Class Action Claimant’s share is determined by the applicable Class Action Court.

 

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  (g) Nothing in this Plan impairs, affects or limits in any way the ability of SFC, the Monitor or the Initial Consenting Noteholders to seek or obtain an Order, whether before or after the Plan Implementation Date, directing that Class Action Indemnity Claims in respect of Noteholder Class Action Claims or any other Claims of the Third Party Defendants should receive the same or similar treatment as is afforded to Class Action Indemnity Claims in respect of Equity Claims under the terms of this Plan.

4.5 Equity Claimants

All Equity Claims shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date. Equity Claimants shall not receive any consideration or distributions under the Plan and shall not be entitled to vote on the Plan at the Meeting.

4.6 Claims of the Trustees and Noteholders

For purposes of this Plan, all claims filed by the Trustees in respect of the Noteholder Claims (other than any Trustee Claims) shall be treated as provided in section 4.1 and the Trustees and the Noteholders shall have no other entitlements in respect of the guarantees and share pledges that have been provided by the Subsidiaries, or any of them, all of which shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date as against the Subsidiaries pursuant to Article 7 hereof.

4.7 Claims of the Third Party Defendants

For purposes of this Plan, all claims filed by the Third Party Defendants against SFC and/or any of its Subsidiaries shall be treated as follows:

 

  (a) all such claims against the Subsidiaries shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date in accordance with Article 7 hereof;

 

  (b) all such claims against SFC that are Class Action Indemnity Claims in respect of Indemnified Noteholder Class Action Claims shall be treated as set out in section 4.4(b)(ii) hereof;

 

  (c) all such claims against SFC for indemnification of Defence Costs shall be treated in accordance with section 4.8 hereof; and

 

  (d) all other claims shall be treated as Equity Claims.

4.8 Defence Costs

All Claims against SFC for indemnification of defence costs incurred by any Person (other than a Named Director or Officer) in connection with defending against Shareholder Claims (as defined in the Equity Claims Order), Noteholder Class Action Claims or any other claims of any kind relating to SFC or the Subsidiaries (“ Defence Costs ”) shall be treated as follows:

 

  (a) as Equity Claims to the extent they are determined to be Equity Claims under any Order; and

 

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  (b) as Affected Creditor Claims to the extent that they are not determined to be Equity Claims under any Order, provided that:

 

  (i) if such Defence Costs were incurred in respect of a claim against the applicable Person that has been successfully defended and the Claim for such Defence Costs is otherwise valid and enforceable against SFC, the Claim for such Defence Costs shall be treated as a Proven Claim, provided that if such Claim for Defence Costs is a Class Action Indemnity Claim of a Third Party Defendant against SFC in respect of any Indemnified Noteholder Class Action Claim, such Claim for Defence Costs shall be treated in the manner set forth in section 4.4(b)(ii) hereof;

 

  (ii) if such Defence Costs were incurred in respect of a claim against the applicable Person that has not been successfully defended or such Defence Costs are determined not to be valid and enforceable against SFC, the Claim for such Defence Costs shall be disallowed and no consideration will be payable in respect thereof under the Plan; and

 

  (iii) until any such Claim for Defence Costs is determined to be either a Claim within section 4.8(b)(i) or a Claim within section 4.8(b)(ii), such Claim shall be treated as an Unresolved Claim,

provided that nothing in this Plan impairs, affects or limits in any way the ability of SFC, the Monitor or the Initial Consenting Noteholders to seek an Order that Claims against SFC for indemnification of any Defence Costs should receive the same or similar treatment as is afforded to Equity Claims under the terms of this Plan.

4.9 D&O Claims

 

  (a) All D&O Claims against the Named Directors and Officers (other than Section 5.1(2) D&O Claims, Conspiracy Claims and Non-Released D&O Claims) shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred without consideration on the Plan Implementation Date.

 

  (b) All D&O Claims against the Other Directors and/or Officers shall not be compromised, released, discharged, cancelled or barred by this Plan and shall be permitted to continue as against the applicable Other Directors and/or Officers (the “ Continuing Other D&O Claims ”), provided that any Indemnified Noteholder Class Action Claims against the Other Directors and/or Officers shall be limited as described in section 4.4(b)(i) hereof.

 

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  (c) All D&O Indemnity Claims and any other rights or claims for indemnification held by the Named Directors and Officers shall be deemed to have no value and shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred without consideration on the Plan Implementation Date.

 

  (d) All D&O Indemnity Claims and any other rights or claims for indemnification held by the Other Directors and/or Officers shall be deemed to have no value and shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred without consideration on the Plan Implementation Date, except that: (i) any such D&O Indemnity Claims for Defence Costs shall be treated in accordance with section 4.8 hereof; and (ii) any Class Action Indemnity Claim of an Other Director and/or Officer against SFC in respect of the Indemnified Noteholder Class Action Claims shall be treated in the manner set forth in section 4.4(b)(ii) hereof.

 

  (e) All Section 5.1(2) D&O Claims and all Conspiracy Claims shall not be compromised, released, discharged, cancelled or barred by this Plan, provided that any Section 5.1(2) D&O Claims against Named Directors and Officers and any Conspiracy Claims against Named Directors and Officers shall be limited to recovery from any insurance proceeds payable in respect of such Section 5.1(2) D&O Claims or Conspiracy Claims, as applicable, pursuant to the Insurance Policies, and Persons with any such Section 5.1(2) D&O Claims against Named Directors and Officers or Conspiracy Claims against Named Directors and Officers shall have no right to, and shall not, make any claim or seek any recoveries from any Person (including SFC, any of the Subsidiaries, Newco or Newco II), other than enforcing such Persons’ rights to be paid from the proceeds of an Insurance Policy by the applicable insurer(s).

 

  (f) All D&O Claims against the Directors and Officers of SFC or the Subsidiaries for fraud or criminal conduct shall not be compromised, discharged, released, cancelled or barred by this Plan and shall be permitted to continue as against all applicable Directors and Officers (“ Non-Released D&O Claims ”).

 

  (g) Notwithstanding anything to the contrary herein, from and after the Plan Implementation Date, a Person may only commence an action for a Non-Released D&O Claim against a Named Director or Officer if such Person has first obtained (i) the consent of the Monitor or (ii) leave of the Court on notice to the applicable Directors and Officers, SFC, the Monitor, the Initial Consenting Noteholders and any applicable insurers. For the avoidance of doubt, the foregoing requirement for the consent of the Monitor or leave of the Court shall not apply to any Non-Released D&O Claim that is asserted against an Other Director and/or Officer.

4.10 Intercompany Claims

All SFC Intercompany Claims (other than those transferred to SFC Barbados pursuant to section 6.4(j) hereof or set-off pursuant to section 6.4(l) hereof) shall be deemed to be assigned by SFC to Newco on the Plan Implementation Date pursuant to section 6.4(m) hereof, and shall

 

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then be deemed to be assigned by Newco to Newco II pursuant to section 6.4(x) hereof. The obligations of SFC to the applicable Subsidiaries and Greenheart in respect of all Subsidiary Intercompany Claims (other than those set-off pursuant to section 6.4(l) hereof) shall be assumed by Newco on the Plan Implementation Date pursuant to 6.4(m) hereof, and then shall be assumed by Newco II pursuant to section 6.4(x) hereof. Notwithstanding anything to the contrary herein, Newco II shall be liable to the applicable Subsidiaries and Greenheart for such Subsidiary Intercompany Claims and SFC shall be released from such Subsidiary Intercompany Claims from and after the Plan Implementation Date, and the applicable Subsidiaries and Greenheart shall be liable to Newco II for such SFC Intercompany Claims from and after the Plan Implementation Date. For greater certainty, nothing in this Plan affects any rights or claims as between any of the Subsidiaries, Greenheart and Greenheart’s direct and indirect subsidiaries.

4.11 Entitlement to Litigation Trust Interests

 

  (a) The Litigation Trust Interests to be created in accordance with this Plan and the Litigation Trust shall be allocated as follows:

 

  (i) the Affected Creditors shall be collectively entitled to 75% of such Litigation Trust Interests; and

 

  (ii) the Noteholder Class Action Claimants shall be collectively entitled to 25% of such Litigation Trust Interests,

which allocations shall occur at the times and in the manner set forth in section 6.4 hereof and shall be recorded by the Litigation Trustee in its registry of Litigation Trust Interests.

 

  (b) Notwithstanding anything to the contrary in section 4.11(a) hereof, if any of the Noteholder Class Action Claims against any of the Third Party Defendants are finally resolved (whether by final judgment, settlement or any other binding means of resolution) within two years of the Plan Implementation Date, then the Litigation Trust Interests to which the applicable Noteholder Class Action Claimants would otherwise have been entitled in respect of such Noteholder Class Action Claims pursuant to section 4.11(a)(ii) hereof (based on the amount of such resolved Noteholder Class Action Claims in proportion to all Noteholder Class Action Claims in existence as of the Claims Bar Date) shall be fully, finally, irrevocably and forever cancelled.

4.12 Litigation Trust Claims

 

  (a) At any time prior to the Plan Implementation Date, SFC and the Initial Consenting Noteholders may agree to exclude one or more Causes of Action from the Litigation Trust Claims and/or to specify that any Causes of Action against a specified Person will not constitute Litigation Trust Claims (“ Excluded Litigation Trust Claims ”), in which case, any such Causes of Action shall not be transferred to the Litigation Trust on the Plan Implementation Date. Any such Excluded Litigation Trust Claims shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date in accordance with Article 7 hereof. All Affected Creditors shall be deemed to consent to such treatment of Excluded Litigation Trust Claims pursuant to this section 4.12(a).

 

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  (b) All Causes of Action against the Underwriters by (i) SFC or (ii) the Trustees (on behalf of the Noteholders) shall be deemed to be Excluded Litigation Trust Claims that are fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date in accordance with Article 7 hereof, provided that, unless otherwise agreed by SFC and the Initial Consenting Noteholders prior to the Plan Implementation Date in accordance with section 4.12(a) hereof, any such Causes of Action for fraud or criminal conduct shall not constitute Excluded Litigation Trust Claims and shall be transferred to the Litigation Trust in accordance with section 6.4(o) hereof.

 

  (c) At any time from and after the Plan Implementation Date, and subject to the prior consent of the Initial Consenting Noteholders and the terms of the Litigation Trust Agreement, the Litigation Trustee shall have the right to seek and obtain an order from any court of competent jurisdiction, including an Order of the Court in the CCAA or otherwise, that gives effect to any releases of any Litigation Trust Claims agreed to by the Litigation Trustee in accordance with the Litigation Trust Agreement, including a release that fully, finally, irrevocably and forever compromises, releases, discharges, cancels and bars the applicable Litigation Trust Claims as if they were Excluded Litigation Trust Claims released in accordance with Article 7 hereof. All Affected Creditors shall be deemed to consent to any such treatment of any Litigation Trust Claims pursuant to this section 4.12(b).

4.13 Multiple Affected Claims

On the Plan Implementation Date, any and all liabilities for and guarantees and indemnities of the payment or performance of any Affected Claim, Unaffected Claim, Section 5.1(2) D&O Claim, Conspiracy Claim, Continuing Other D&O Claim or Non-Released D&O Claim by any of the Subsidiaries, and any purported liability for the payment or performance of such Affected Claim, Unaffected Claim, Section 5.1(2) D&O Claim, Conspiracy Claim, Continuing Other D&O Claim or Non-Released D&O Claim by Newco or Newco II, will be deemed eliminated and cancelled, and no Person shall have any rights whatsoever to pursue or enforce any such liabilities for or guarantees or indemnities of the payment or performance of any such Affected Claim, Unaffected Claim, Section 5.1(2) D&O Claim, Conspiracy Claim, Continuing Other D&O Claim or Non-Released D&O Claim against any Subsidiary, Newco or Newco II.

4.14 Interest

Subject to section 12.4 hereof, no holder of an Affected Claim shall be entitled to interest accruing on or after the Filing Date.

 

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4.15 Existing Shares

Holders of Existing Shares and Equity Interests shall not receive any consideration or distributions under the Plan in respect thereof and shall not be entitled to vote on the Plan at the Meeting. Unless otherwise agreed between the Monitor, SFC and the Initial Consenting Noteholders, all Existing Shares and Equity Interests shall be fully, finally and irrevocably cancelled in accordance with and at the time specified in section 6.5 hereof.

4.16 Canadian Exempt Plans

If an Affected Creditor is a trust governed by a plan which is exempt from tax under Part I of the Canadian Tax Act (including, for example, a registered retirement savings plan), such Affected Creditor may make arrangements with Newco (if Newco so agrees) and the Litigation Trustee (if the Litigation Trustee so agrees) to have the Newco Shares, Newco Notes and Litigation Trust Interests to which it is entitled under this Plan directed to (or in the case of Litigation Trust Interests, registered in the name of ) an affiliate of such Affected Creditor or the annuitant or controlling person of the governing tax-deferred plan.

ARTICLE 5

DISTRIBUTION MECHANICS

5.1 Letters of Instruction

In order to issue (i) Newco Shares and Newco Notes to Ordinary Affected Creditors and (ii) Newco Shares to Early Consent Noteholders, the following steps will be taken:

 

  (a) with respect to Ordinary Affected Creditors with Proven Claims or Unresolved Claims:

 

  (i) on the next Business Day following the Distribution Record Date, the Monitor shall send blank Letters of Instruction by prepaid first class mail, courier, email or facsimile to each such Ordinary Affected Creditor to the address of each such Ordinary Affected Creditor (as specified in the applicable Proof of Claim) as of the Distribution Record Date, or as evidenced by any assignment or transfer in accordance with section 5.10;

 

  (ii) each such Ordinary Affected Creditor shall deliver to the Monitor a duly completed and executed Letter of Instruction that must be received by the Monitor on or before the date that is seven (7) Business Days after the Distribution Record Date or such other date as the Monitor may determine; and

 

  (iii) any such Ordinary Affected Creditor that does not return a Letter of Instruction to the Monitor in accordance with section 5.1(a)(ii) shall be deemed to have requested that such Ordinary Affected Creditor’s Newco Shares and Newco Notes be registered or distributed, as applicable, in accordance with the information set out in such Ordinary Affected Creditor’s Proof of Claim; and

 

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  (b) with respect to Early Consent Noteholders:

 

  (i) on the next Business Day following the Distribution Record Date the Monitor shall send blank Letters of Instruction by prepaid first class mail, courier, email or facsimile to each Early Consent Noteholder to the address of each such Early Consent Noteholder as confirmed by the Monitor on or before the Distribution Record Date;

 

  (ii) each Early Consent Noteholder shall deliver to the Monitor a duly completed and executed Letter of Instruction that must be received by the Monitor on or before the date that is seven (7) Business Days after the Distribution Record Date or such other date as the Monitor may determine; and

 

  (iii) any such Early Consent Noteholder that does not return a Letter of Instruction to the Monitor in accordance with section 5.1(b)(ii) shall be deemed to have requested that such Early Consent Noteholder’s Newco Shares be distributed or registered, as applicable, in accordance with information confirmed by the Monitor on or before the Distribution Record Date.

5.2 Distribution Mechanics with respect to Newco Shares and Newco Notes

 

  (a) To effect distributions of Newco Shares and Newco Notes, the Monitor shall deliver a direction at least two (2) Business Days prior to the Initial Distribution Date to Newco or its agent, as applicable, directing Newco or its agent, as applicable, to issue on such Initial Distribution Date or subsequent Distribution Date:

 

  (i) in respect of the Ordinary Affected Creditors with Proven Claims:

 

  (A) the number of Newco Shares that each such Ordinary Affected Creditor is entitled to receive in accordance with section 4.1(a) hereof; and

 

  (B) the amount of Newco Notes that each such Ordinary Affected Creditor is entitled to receive in accordance with section 4.1(b) hereof,

all of which Newco Shares and Newco Notes shall be issued to such Ordinary Affected Creditors and distributed in accordance with this Article 5;

 

  (ii) in respect of the Ordinary Affected Creditors with Unresolved Claims:

 

  (A) the number of Newco Shares that each such Ordinary Affected Creditor would have been entitled to receive in accordance with section 4.1(a) hereof had such Ordinary Affected Creditor’s Unresolved Claim been a Proven Claim on the Plan Implementation Date; and

 

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  (B) the amount of Newco Notes that each such Ordinary Affected Creditor would have been entitled to receive in accordance with section 4.1(b) hereof had such Ordinary Affected Creditor’s Unresolved Claim been a Proven Claim on the Plan Implementation Date,

all of which Newco Shares and Newco Notes shall be issued in the name of the Unresolved Claims Escrow Agent for the benefit of the Persons entitled thereto under the Plan, which Newco Shares and Newco Notes shall comprise part of the Unresolved Claims Reserve and shall be held in escrow by the Unresolved Claims Escrow Agent until released and distributed in accordance with this Article 5;

 

  (iii) in respect of the Noteholders:

 

  (A) the number of Newco Shares that the Trustees are collectively required to receive such that, upon distribution to the Noteholders in accordance with this Article 5, each individual Noteholder receives the number of Newco Shares to which it is entitled in accordance with section 4.1(a) hereof; and

 

  (B) the amount of Newco Notes that the Trustees are collectively required to receive such that, upon distribution to the Noteholders in accordance with this Article 5, each individual Noteholder receives the amount of Newco Notes to which it is entitled in accordance with section 4.1(b) hereof,

all of which Newco Shares and Newco Notes shall be issued to such Noteholders and distributed in accordance with this Article 5; and

 

  (iv) in respect of Early Consent Noteholders, the number of Newco Shares that each such Early Consent Noteholder is entitled to receive in accordance with section 4.3 hereof, all of which Newco Shares shall be issued to such Early Consent Noteholders and distributed in accordance with this Article 5.

The direction delivered by the Monitor in respect of the applicable Ordinary Affected Creditors and Early Consent Noteholders shall: (A) indicate the registration and delivery details of each applicable Ordinary Affected Creditor and Early Consent Noteholder based on the information prescribed in section 5.1; and (B) specify the number of Newco Shares and, in the case of Ordinary Affected Creditors, the amount of Newco Notes to be issued to each such Person on the applicable Distribution Date. The direction delivered by the Monitor in respect of the Noteholders shall: (C) indicate that the registration and delivery details with respect to the number of Newco Shares and amount of Newco Notes

 

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to be distributed to each Noteholder will be the same as the registration and delivery details in effect with respect to the Notes held by each Noteholder as of the Distribution Record Date; and (D) specify the number of Newco Shares and the amount of Newco Notes to be issued to each of the Trustees for purposes of satisfying the entitlements of the Noteholders set forth in sections 4.1(a) and 4.1(b) hereof. The direction delivered by the Monitor in respect of the Newco Shares and Newco Notes to be issued in the name of the Unresolved Claims Escrow Agent, for the benefit of the Persons entitled thereto under the Plan, for purposes of the Unresolved Claims Reserve shall specify the number of Newco Shares and the amount of Newco Notes to be issued in the name of the Unresolved Claims Escrow Agent for that purpose.

 

  (b) If the registers for the Newco Shares and/or Newco Notes are maintained by the Transfer Agent in a direct registration system (without certificates), the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, shall, on the Initial Distribution Date or any subsequent Distribution Date, as applicable:

 

  (i) instruct the Transfer Agent to record, and the Transfer Agent shall record, in the Direct Registration Account of each applicable Ordinary Affected Creditor and each Early Consent Noteholder the number of Newco Shares and, in the case of Ordinary Affected Creditors, the amount of Newco Notes that are to be distributed to each such Person, and the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, shall send or cause to be sent to each such Ordinary Affected Creditor and Early Consent Noteholder a Direct Registration Transaction Advice based on the delivery information as determined pursuant to section 5.1; and

 

  (ii) with respect to the distribution of Newco Shares and/or Newco Notes to Noteholders:

 

  (A) if the Newco Shares and/or Newco Notes are DTC eligible, the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, shall instruct the Transfer Agent to register, and the Transfer Agent shall register, the applicable Newco Shares and/or Newco Notes in the name of DTC (or its nominee) for the benefit of the Noteholders, and the Trustees shall provide their consent to DTC to the distribution of such Newco Shares and Newco Notes to the applicable Noteholders, in the applicable amounts, through the facilities of DTC in accordance with customary practices and procedures; and

 

  (B)

if the Newco Shares and/or Newco Notes are not DTC eligible, the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, shall instruct the Transfer Agent to register the applicable Newco Shares and/or Newco Notes in the Direct Registration Accounts of the applicable Noteholders pursuant to the registration instructions obtained through DTC and the DTC

 

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  participants (by way of a letter of transmittal process or such other process as agreed by SFC, the Monitor, the Trustees and the Initial Consenting Noteholders), and the Transfer Agent shall (A) register such Newco Shares and/or Newco Notes, in the applicable amounts, in the Direct Registration Accounts of the applicable Noteholders; and (B) send or cause to be sent to each Noteholder a Direct Registration Transaction Advice in accordance with customary practices and procedures; provided that the Transfer Agent shall not be permitted to effect the foregoing registrations without the prior written consent of the Trustees.

 

  (c) If the registers for the Newco Shares and/or Newco Notes are not maintained by the Transfer Agent in a direct registration system, Newco shall prepare and deliver to the Monitor and/or the Unresolved Claims Escrow Agent, as applicable, and the Monitor and/or the Unresolved Claims Escrow Agent, as applicable, shall promptly thereafter, on the Initial Distribution Date or any subsequent Distribution Date, as applicable:

 

  (i) deliver to each Ordinary Affected Creditor and each Early Consent Noteholder Newco Share Certificates and, in the case of Ordinary Affected Creditors, Newco Note Certificates representing the applicable number of Newco Shares and the applicable amount of Newco Notes that are to be distributed to each such Person; and

 

  (ii) with respect to the distribution of Newco Shares and/or Newco Notes to Noteholders:

 

  (A) if the Newco Shares and/or Newco Notes are DTC eligible, the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, shall distribute to DTC (or its nominee), for the benefit of the Noteholders, Newco Share Certificates and/or Newco Note Certificates representing the aggregate of all Newco Shares and Newco Notes to be distributed to the Noteholders on such Distribution Date, and the Trustees shall provide their consent to DTC to the distribution of such Newco Shares and Newco Notes to the applicable Noteholders, in the applicable amounts, through the facilities of DTC in accordance with customary practices and procedures; and

 

  (B)

if the Newco Shares and/or Newco Notes are not DTC eligible, the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, shall distribute to the applicable Trustees, Newco Share Certificates and/or Newco Note Certificates representing the aggregate of all Newco Shares and/or Newco Notes to be distributed to the Noteholders on such Distribution Date, and the Trustees shall make delivery of such Newco Share Certificates and Newco Note Certificates, in the applicable

 

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  amounts, directly to the applicable Noteholders pursuant to the delivery instructions obtained through DTC and the DTC participants (by way of a letter of transmittal process or such other process as agreed by SFC, the Monitor, the Trustees and the Initial Consenting Noteholders), all of which shall occur in accordance with customary practices and procedures.

 

  (d) Upon receipt of and in accordance with written instructions from the Monitor, the Trustees shall instruct DTC to and DTC shall: (i) set up an escrow position representing the respective positions of the Noteholders as of the Distribution Record Date for the purpose of making distributions on the Initial Distribution Date and any subsequent Distribution Dates (the “ Distribution Escrow Position ”); and (ii) block any further trading of the Notes, effective as of the close of business on the day immediately preceding the Plan Implementation Date, all in accordance with DTC’s customary practices and procedures.

 

  (e) The Monitor, Newco, Newco II, the Trustees, SFC, the Named Directors and Officers and the Transfer Agent shall have no liability or obligation in respect of deliveries by DTC (or its nominee) to the DTC participants or the Noteholders pursuant to this Article 5.

5.3 Allocation of Litigation Trust Interests

The Litigation Trustee shall administer the Litigation Trust Claims and the Litigation Funding Amount for the benefit of the Persons that are entitled to the Litigation Trust Interests and shall maintain a registry of such Persons as follows:

 

  (a) with respect to Affected Creditors:

 

  (i) the Litigation Trustee shall maintain a record of the amount of Litigation Trust Interests that each Ordinary Affected Creditor is entitled to receive in accordance with sections 4.1(c) and 4.11(a) hereof;

 

  (ii) the Litigation Trustee shall maintain a record of the aggregate amount of all Litigation Trust Interests to which the Noteholders are collectively entitled in accordance with sections 4.1(c) and 4.11(a) hereof, and if cash is distributed from the Litigation Trust to Persons with Litigation Trust Interests, the amount of such cash that is payable to the Noteholders will be distributed through the Distribution Escrow Position (such that each beneficial Noteholder will receive a percentage of such cash distribution that is equal to its entitlement to Litigation Trust Interests (as set forth in section 4.1(c) hereof) as a percentage of all Litigation Trust Interests); and

 

  (iii) with respect to any Litigation Trust Interests to be allocated in respect of the Unresolved Claims Reserve, the Litigation Trustee shall record such Litigation Trust Interests in the name of the Unresolved Claims Escrow Agent, for the benefit of the Persons entitled thereto in accordance with this Plan, which shall be held by the Unresolved Claims Escrow Agent in escrow until released and distributed unless and until otherwise directed by the Monitor in accordance with this Plan;

 

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  (b) with respect to the Noteholder Class Action Claimants, the Litigation Trustee shall maintain a record of the aggregate of all Litigation Trust Interests that the Noteholder Class Action Claimants are entitled to receive pursuant to sections 4.4(f) and 4.11(a) hereof, provided that such record shall be maintained in the name of the Noteholder Class Action Representative, to be allocated to individual Noteholder Class Action Claimants in any manner ordered by the applicable Class Action Court, and provided further that if any such Litigation Trust Interests are cancelled in accordance with section 4.11(b) hereof, the Litigation Trustee shall record such cancellation in its registry of Litigation Trust Interests.

5.4 Treatment of Undeliverable Distributions

If any distribution under section 5.2 or section 5.3 of Newco Shares, Newco Notes or Litigation Trust Interests is undeliverable (that is, for greater certainty, that it cannot be properly registered or delivered to the Applicable Affected Creditor because of inadequate or incorrect registration or delivery information or otherwise) (an “ Undeliverable Distribution ”), it shall be delivered to SFC Escrow Co., which shall hold such Undeliverable Distribution in escrow and administer it in accordance with this section 5.4. No further distributions in respect of an Undeliverable Distribution shall be made unless and until SFC and the Monitor are notified by the applicable Person of its current address and/or registration information, as applicable, at which time the Monitor shall direct SFC Escrow Co. to make all such distributions to such Person, and SFC Escrow Co. shall make all such distributions to such Person. All claims for Undeliverable Distributions must be made on or before the date that is six months following the final Distribution Date, after which date the right to receive distributions under this Plan in respect of such Undeliverable Distributions shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred, without any compensation therefore, notwithstanding any federal, state or provincial laws to the contrary, at which time any such Undeliverable Distributions held by SFC Escrow Co. shall be deemed to have been gifted by the owner of the Undeliverable Distribution to Newco or the Litigation Trust, as applicable, without consideration, and, in the case of Newco Shares, Newco Notes and Litigation Trust Interests, shall be cancelled by Newco and the Litigation Trustee, as applicable. Nothing contained in the Plan shall require SFC, the Monitor, SFC Escrow Co. or any other Person to attempt to locate any owner of an Undeliverable Distribution. No interest is payable in respect of an Undeliverable Distribution. Any distribution under this Plan on account of the Notes, other than any distributions in respect of Litigation Trust Interests, shall be deemed made when delivered to DTC or the applicable Trustee, as applicable, for subsequent distribution to the applicable Noteholders in accordance with section 5.2.

5.5 Procedure for Distributions Regarding Unresolved Claims

 

  (a) An Affected Creditor that has asserted an Unresolved Claim will not be entitled to receive a distribution under the Plan in respect of such Unresolved Claim or any portion thereof unless and until such Unresolved Claim becomes a Proven Claim.

 

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  (b) Distributions in respect of any Unresolved Claim in existence at the Plan Implementation Date will be held in escrow by the Unresolved Claims Escrow Agent in the Unresolved Claims Reserve until settlement or final determination of the Unresolved Claim in accordance with the Claims Procedure Order, the Meeting Order or this Plan, as applicable.

 

  (c) To the extent that Unresolved Claims become Proven Claims or are finally disallowed, the Unresolved Claims Escrow Agent shall release from escrow and deliver (or in the case of Litigation Trust Interests, cause to be registered) the following from the Unresolved Claims Reserve (on the next Distribution Date, as determined by the Monitor with the consent of SFC and the Initial Consenting Noteholders):

 

  (i) in the case of Affected Creditors whose Unresolved Claims are ultimately determined, in whole or in part, to be Proven Claims, the Unresolved Claims Escrow Agent shall release from escrow and deliver to such Affected Creditor that number of Newco Shares, Newco Notes and Litigation Trust Interests (and any income or proceeds therefrom) that such Affected Creditor is entitled to receive in respect of its Proven Claim pursuant to section 4.1 hereof;

 

  (ii) in the case of Affected Creditors whose Unresolved Claims are ultimately determined, in whole or in part, to be disallowed, the Unresolved Claims Escrow Agent shall release from escrow and deliver to all Affected Creditors with Proven Claims the number of Newco Shares, Newco Notes and Litigation Trust Interests (and any income or proceeds therefrom) that had been reserved in the Unresolved Claims Reserve for such Affected Creditor whose Unresolved Claims has been disallowed, Claims such that, following such delivery, all of the Affected Creditors with Proven Claims have received the amount of Newco Shares, Newco Notes and Litigation Trust Interests that they are entitled to receive pursuant to section 4.1 hereof, which delivery shall be effected in accordance with sections 5.2 and 5.3 hereof.

 

  (d) As soon as practicable following the date that all Unresolved Claims have been finally resolved and any required distributions contemplated in section 5.5(c) have been made, the Unresolved Claims Escrow Agent shall distribute (or in the case of Litigation Trust Interests, cause to be registered) any Litigation Trust Interests, Newco Shares and Newco Notes (and any income or proceeds therefrom), as applicable, remaining in the Unresolved Claims Reserve to the Affected Creditors with Proven Claims such that after giving effect to such distributions each such Affected Creditor has received the amount of Litigation Trust Interests, Newco Shares and Newco Notes that it is entitled to receive pursuant to section 4.1 hereof.

 

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  (e) During the time that Newco Shares, Newco Notes and/or Litigation Trust Interests are held in escrow in the Unresolved Claims Reserve, any income or proceeds received therefrom or accruing thereon shall be added to the Unresolved Claims Reserve by the Unresolved Claims Escrow Agent and no Person shall have any right to such income or proceeds until such Newco Shares, Newco Notes or Litigation Trust Interests, as applicable, are distributed (or in the case of Litigation Trust Interests, registered) in accordance with section 5.5(c) and 5.5(d) hereof, at which time the recipient thereof shall be entitled to any applicable income or proceeds therefrom.

 

  (f) The Unresolved Claims Escrow Agent shall have no beneficial interest or right in the Unresolved Claims Reserve. The Unresolved Claims Escrow Agent shall not take any step or action with respect to the Unresolved Claims Reserve or any other matter without the consent or direction of the Monitor or the direction of the Court. The Unresolved Claims Escrow Agent shall forthwith, upon receipt of an Order of the Court or instruction of the Monitor directing the release of any Newco Shares, Newco Notes and/or Litigation Trust Interests from the Unresolved Claims Reserve, comply with any such Order or instruction.

 

  (g) Nothing in this Plan impairs, affects or limits in any way the ability of SFC, the Monitor or the Initial Consenting Noteholders to seek or obtain an Order, whether before or after the Plan Implementation Date, directing that any Unresolved Claims should be disallowed in whole or in part or that such Unresolved Claims should receive the same or similar treatment as is afforded to Equity Claims under the terms of this Plan.

 

  (h) Persons with Unresolved Claims shall have standing in any proceeding in respect of the determination or status of any Unresolved Claim, and Goodmans LLP (in its capacity as counsel to the Initial Consenting Noteholders) shall have standing in any such proceeding on behalf of the Initial Consenting Notheolders (in their capacity as Affected Creditors with Proven Claims).

5.6 Tax Refunds

Any input tax credits or tax refunds received by or on behalf of SFC after the Effective Time shall, immediately upon receipt thereof, be paid directly by, or on behalf of, SFC to Newco without consideration.

5.7 Final Distributions from Reserves

 

  (a) If there is any cash remaining in: (i) the Unaffected Claims Reserve on the date that all Unaffected Claims have been finally paid or otherwise discharged and/or (ii) the Administration Charge Reserve on the date that all Claims secured by the Administration Charge have been finally paid or otherwise discharged, the Monitor shall, in each case, forthwith transfer all such remaining cash to the Monitor’s Post-Implementation Reserve.

 

  (b)

The Monitor will not terminate the Monitor’s Post-Implementation Reserve prior to the termination of each of the Unaffected Claims Reserve and the Administration Charge Reserve. The Monitor may, at any time, from time to time

 

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  and at its sole discretion, release amounts from the Monitor’s Post-Implementation Reserve to Newco. Goodmans LLP (in its capacity as counsel to the Initial Consenting Noteholders) shall be permitted to apply for an Order of the Court directing the Monitor to make distributions from the Monitor’s Post-Implementation Reserve. Once the Monitor has determined that the cash remaining in the Monitor’s Post-Implementation Reserve is no longer necessary for administering SFC or the Claims Procedure, the Monitor shall forthwith transfer any such remaining cash (the “ Remaining Post-Implementation Reserve Amount ”) to Newco.

5.8 Other Payments and Distributions

All other payments and distributions to be made pursuant to this Plan shall be made in the manner described in this Plan, the Sanction Order or any other Order, as applicable.

5.9 Note Indentures to Remain in Effect Solely for Purpose of Distributions

Following completion of the steps in the sequence set forth in section 6.4, all debentures, indentures, notes (including the Notes), certificates, agreements, invoices and other instruments evidencing Affected Claims will not entitle any holder thereof to any compensation or participation other than as expressly provided for in the Plan and will be cancelled and will be null and void. Any and all obligations of SFC and the Subsidiaries under and with respect to the Notes, the Note Indentures and any guarantees or indemnities with respect to the Notes or the Note Indentures shall be terminated and cancelled on the Plan Implementation Date and shall not continue beyond the Plan Implementation Date. Notwithstanding the foregoing and anything to the contrary in the Plan, the Note Indentures shall remain in effect solely for the purpose of and only to the extent necessary to allow the Trustees to make distributions to Noteholders on the Initial Distribution Date and, as necessary, each subsequent Distribution Date thereafter, and to maintain all of the rights and protections afforded to the Trustees as against the Noteholders under the applicable Note Indentures, including their lien rights with respect to any distributions under this Plan, until all distributions provided for hereunder have been made to the Noteholders. The obligations of the Trustees under or in respect of this Plan shall be solely as expressly set out herein. Without limiting the generality of the releases, injunctions and other protections afforded to the Trustees under this Plan and the applicable Note Indentures, the Trustees shall have no liability whatsoever to any Person resulting from the due performance of their obligations hereunder, except if such Trustee is adjudged by the express terms of a non-appealable judgment rendered on a final determination on the merits to have committed gross negligence or wilful misconduct in respect of such matter.

5.10 Assignment of Claims for Distribution Purposes

 

  (a) Assignment of Claims by Ordinary Affected Creditors

Subject to any restrictions contained in Applicable Laws, an Ordinary Affected Creditor may transfer or assign the whole of its Affected Claim after the Meeting provided that neither SFC nor Newco nor Newco II nor the Monitor nor the Unresolved Claims Escrow Agent shall be obliged to make distributions to any such transferee or assignee or otherwise deal with such

 

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transferee or assignee as an Ordinary Affected Creditor in respect thereof unless and until actual notice of the transfer or assignment, together with satisfactory evidence of such transfer or assignment and such other documentation as SFC and the Monitor may reasonably require, has been received by SFC and the Monitor on or before the Plan Implementation Date, or such other date as SFC and the Monitor may agree, failing which the original transferor shall have all applicable rights as the “Ordinary Affected Creditor” with respect to such Affected Claim as if no transfer of the Affected Claim had occurred. Thereafter, such transferee or assignee shall, for all purposes in accordance with this Plan, constitute an Ordinary Affected Creditor and shall be bound by any and all notices previously given to the transferor or assignor in respect of such Claim. For greater certainty, SFC shall not recognize partial transfers or assignments of Claims.

 

  (b) Assignment of Notes

Only those Noteholders who have beneficial ownership of one or more Notes as at the Distribution Record Date shall be entitled to receive a distribution under this Plan on the Initial Distribution Date or any Distribution Date. Noteholders who have beneficial ownership of Notes shall not be restricted from transferring or assigning such Notes prior to or after the Distribution Record Date (unless the Distribution Record Date is the Plan Implementation Date), provided that if such transfer or assignment occurs after the Distribution Record Date, neither SFC nor Newco nor Newco II nor the Monitor nor the Unresolved Claims Escrow Agent shall have any obligation to make distributions to any such transferee or assignee of Notes in respect of the Claims associated therewith, or otherwise deal with such transferee or assignee as an Affected Creditor in respect thereof. Noteholders who assign or acquire Notes after the Distribution Record Date shall be wholly responsible for ensuring that Plan distributions in respect of the Claims associated with such Notes are in fact delivered to the assignee, and the Trustees shall have no liability in connection therewith.

5.11 Withholding Rights

SFC, Newco, Newco II, the Monitor, the Litigation Trustee, the Unresolved Claims Escrow Agent and/or any other Person making a payment contemplated herein shall be entitled to deduct and withhold from any consideration payable to any Person such amounts as it is required to deduct and withhold with respect to such payment under the Canadian Tax Act, the United States Internal Revenue Code of 1986 or any provision of federal, provincial, territorial, state, local or foreign Tax laws, in each case, as amended. To the extent that amounts are so withheld or deducted, such withheld or deducted amounts shall be treated for all purposes hereof as having been paid to the Person in respect of which such withholding was made, provided that such amounts are actually remitted to the appropriate Taxing Authority. To the extent that the amounts so required or permitted to be deducted or withheld from any payment to a Person exceed the cash portion of the consideration otherwise payable to that Person: (i) the payor is authorized to sell or otherwise dispose of such portion of the consideration as is necessary to provide sufficient funds to enable it to comply with such deduction or withholding requirement or entitlement, and the payor shall notify the applicable Person thereof and remit to such Person any unapplied balance of the net proceeds of such sale; or (ii) if such sale is not reasonably possible, the payor shall not be required to make such excess payment until the Person has directly satisfied any such withholding obligation and provides evidence thereof to the payor.

 

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5.12 Fractional Interests

No fractional interests of Newco Shares or Newco Notes (“ Fractional Interests ”) will be issued under this Plan. For purposes of calculating the number of Newco Shares and Newco Notes to be issued by Newco pursuant to this Plan, recipients of Newco Shares or Newco Notes will have their entitlements adjusted downwards to the nearest whole number of Newco Shares or Newco Notes, as applicable, to eliminate any such Fractional Interests and no compensation will be given for the Fractional Interest.

5.13 Further Direction of the Court

The Monitor shall, in its sole discretion, be entitled to seek further direction of the Court, including a plan implementation order, with respect to any matter relating to the implementation of the plan including with respect to the distribution mechanics and restructuring transaction as set out in Articles 5 and 6 of this Plan.

ARTICLE 6

RESTRUCTURING TRANSACTION

6.1 Corporate Actions

The adoption, execution, delivery, implementation and consummation of all matters contemplated under the Plan involving corporate action of SFC will occur and be effective as of the Plan Implementation Date, other than such matters occurring on the Equity Cancellation Date which will occur and be effective on such date, and in either case will be authorized and approved under the Plan and by the Court, where appropriate, as part of the Sanction Order, in all respects and for all purposes without any requirement of further action by shareholders, Directors or Officers of SFC. All necessary approvals to take actions shall be deemed to have been obtained from the directors or the shareholders of SFC, as applicable, including the deemed passing by any class of shareholders of any resolution or special resolution and no shareholders’ agreement or agreement between a shareholder and another Person limiting in any way the right to vote shares held by such shareholder or shareholders with respect to any of the steps contemplated by the Plan shall be deemed to be effective and shall have no force and effect, provided that, subject to sections 12.6 and 12.7 hereof, where any matter expressly requires the consent or approval of SFC, the Initial Consenting Noteholders or SFC’s board of directors pursuant to this Plan, such consent or approval shall not be deemed to be given unless actually given.

6.2 Incorporation of Newco and Newco II

 

  (a)

Newco shall be incorporated prior to the Plan Implementation Date. Newco shall be authorized to issue an unlimited number of Newco Shares and shall have no restrictions on the number of its shareholders. At the time that Newco is incorporated, Newco shall issue one Newco Share to the Initial Newco Shareholder, as the sole shareholder of Newco, and the Initial Newco Shareholder shall be deemed to hold the Newco Share for the purpose of facilitating the

 

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  Restructuring Transaction. For greater certainty, the Initial Newco Shareholder shall not hold such Newco Share as agent of or for the benefit of SFC, and SFC shall have no rights in relation to such Newco Share. Newco shall not carry on any business or issue any other Newco Shares or other securities until the Plan Implementation Date, and then only in accordance with section 6.4 hereof. The Initial Newco Shareholder shall be deemed to have no liability whatsoever for any matter pertaining to its status as the Initial Newco Shareholder, other than its obligations under this Plan to act as the Initial Newco Shareholder.

 

  (b) Newco II shall be incorporated prior to the Plan Implementation Date as a wholly-owned subsidiary of Newco. The memorandum and articles of association of Newco II will be in a form customary for a wholly-owned subsidiary under the applicable jurisidiction and the initial board of directors of Newco II will consist of the same Persons appointed as the directors of Newco on or prior to the Plan Implementation Date.

6.3 Incorporation of SFC Escrow Co.

SFC Escrow Co. shall be incorporated prior to the Plan Implementation Date. SFC Escrow Co. shall be incorporated under the laws of the Cayman Islands, or such other jurisdiction as may be agreed by SFC, the Monitor and the Initial Consenting Noteholders. The sole director of SFC Escrow Co. shall be Codan Services (Cayman) Limited, or such other Person as may be agreed by SFC, the Monitor and the Initial Consenting Noteholders. At the time that SFC Escrow Co. is incorporated, SFC Escrow Co. shall issue one share (the “SFC Escrow Co. Share”) to SFC, as the sole shareholder of SFC Escrow Co. and SFC shall be deemed to hold the SFC Escrow Co. Share for the purpose of facilitating the Restructuring Transaction. SFC Escrow Co. shall have no assets other than any assets that it is required to hold in escrow pursuant to the terms of this Plan, and it shall have no liabilities other than its obligations as set forth in this Plan. SFC Escrow Co. shall not carry on any business or issue any shares or other securities (other than the SFC Escrow Co. Share). The sole activity and function of SFC Escrow Co. shall be to perform the obligations of the Unresolved Claims Escrow Agent as set forth in this Plan and to administer Undeliverable Distributions as set forth in section 5.4 of this Plan. SFC Escrow Co. shall not make any sale, distribution, transfer or conveyance of any Newco Shares, Newco Notes or any other assets or property that it holds unless it is directed to do so by an Order of the Court or by a written direction from the Monitor, in which case SFC Escrow Co. shall promptly comply with such Order of the Court or such written direction from the Monitor. SFC shall not sell, transfer or convey the SFC Escrow Co. Share nor effect or cause to be effected any liquidation, dissolution, merger or other corporate reorganization of SFC Escrow Co. unless it is directed to do so by an Order of the Court or by a written direction from the Monitor, in which case SFC shall promptly comply with such Order of the Court or such written direction from the Monitor. SFC Escrow Co. shall not exercise any voting rights (including any right to vote at a meeting of shareholders or creditors held or in any written resolution) in respect of Newco Shares or Newco Notes held in the Unresolved Claims Reserve. SFC Escrow Co. shall not be entitled to receive any compensation for the performance of its obligations under this Plan.

 

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6.4 Plan Implementation Date Transactions

The following steps and compromises and releases to be effected shall occur, and be deemed to have occurred in the following manner and order (sequentially, each step occurring five minutes apart, except that within such order steps (a) to (f) (Cash Payments) shall occur simultaneously and steps (t) to (w) (Releases) shall occur simultaneously) without any further act or formality, on the Plan Implementation Date beginning at the Effective Time (or in such other manner or order or at such other time or times as SFC, the Monitor and the Initial Consenting Noteholders may agree):

Cash Payments and Satisfaction of Lien Claims

 

  (a) SFC shall pay required funds to the Monitor for the purpose of funding the Unaffected Claims Reserve, and the Monitor shall hold and administer such funds in trust for the purpose of paying the Unaffected Claims pursuant to the Plan.

 

  (b) SFC shall pay the required funds to the Monitor for the purpose of funding the Administration Charge Reserve, and the Monitor shall hold and administer such funds in trust for the purpose of paying Unaffected Claims secured by Administration Charge.

 

  (c) SFC shall pay the required funds to the Monitor for the purpose of funding the Monitor’s Post-Implementation Reserve, and the Monitor shall hold and administer such funds in trust for the purpose of administering SFC, as necessary, from and after the Plan Implementation Date.

 

  (d) SFC shall pay to the Noteholder Advisors and the Initial Consenting Noteholders, as applicable, each such Person’s respective portion of the Expense Reimbursement. SFC shall pay all fees and expenses owing to each of the SFC Advisors, the advisors to the current Board of Directors of SFC, Chandler Fraser Keating Limited and Spencer Stuart and SFC or any of the Subsidiaries shall pay all fees and expenses owing to each of Indufor Asia Pacific Limited and Stewart Murray (Singapore) Pte. Ltd. If requested by the Monitor (with the consent of the Initial Consenting Noteholders) no more than 10 days prior to the Plan Implementation Date and provided that all fees and expenses set out in all previous invoices rendered by the applicable Person to SFC have been paid, SFC and the Subsidiaries, as applicable, shall, with respect to the final one or two invoices rendered prior to the Plan Implementation Date, pay any such fees and expenses to such Persons for all work up to and including the Plan Implementation Date (including any reasonable estimates of work to be performed on the Plan Implementation Date) first by applying any such monetary retainers currently held by such Persons and then by paying any remaining balance in cash.

 

  (e)

If requested by the Monitor (with the consent of the Initial Consenting Noteholders) prior to the Plan Implementation Date, any Person with a monetary retainer from SFC that remains outstanding following the steps and payment of all

 

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  fees and expenses set out in section 6.4(d) hereof shall pay to SFC in cash the full amount of such remaining retainer, less any amount permitted by the Monitor (with the Consent of the Initial Consenting Noteholders and after prior discussion with the applicable Person as to any remaining work that may reasonably be required) to remain as a continuing monetary retainer in connection with completion of any remaining work after the Plan Implementation Date that may be requested by the Monitor, SFC or the Initial Consenting Noteholders (each such continuing monetary retainer being a “ Permitted Continuing Retainer ”). Such Persons shall have no duty or obligation to perform any further work or tasks in respect of SFC unless such Persons are satisfied that they are holding adequate retainers or other security or have received payment to compensate them for all fees and expenses in respect of such work or tasks. The obligation of such Persons to repay the remaining amounts of any monetary retainers (including the unused portions of any Permitted Continuing Retainers) and all cash received therefrom shall constitute SFC Assets.

 

  (f) The Lien Claims shall be satisfied in accordance with section 4.2(c) hereof.

Transaction Steps

 

  (g) All accrued and unpaid interest owing on, or in respect of, or as part of, Affected Creditor Claims (including any Accrued Interest on the Notes and any interest accruing on the Notes or any Ordinary Affected Creditor Claim after the Filing Date) shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred for no consideration, and from and after the occurrence of this step, no Person shall have any entitlement to any such accrued and unpaid interest.

 

  (h) All of the Affected Creditors shall be deemed to assign, transfer and convey to Newco all of their Affected Creditor Claims, and from and after the occurrence of this step, Newco shall be the legal and beneficial owner of all Affected Creditor Claims. In exchange for the assignment, transfer and conveyance of the Affected Creditor Claims to Newco:

 

  (i) with respect to Affected Creditor Claims that are Proven Claims at the Effective Time:

 

  (A) Newco shall issue to each applicable Affected Creditor the number of Newco Shares that each such Affected Creditor is entitled to receive in accordance with section 4.1(a) hereof;

 

  (B) Newco shall issue to each applicable Affected Creditor the amount of Newco Notes that each such Affected Creditor is entitled to receive in accordance with section 4.1(b) hereof;

 

  (C) Newco shall issue to each of the Early Consent Noteholders the number of Newco Shares that each such Early Consent Noteholder is entitled to receive pursuant to section 4.3 hereof;

 

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  (D) such Affected Creditors shall be entitled to receive the Litigation Trust Interests to be acquired by Newco in section 6.4(q) hereof, following the establishment of the Litigation Trust;

 

  (E) such Affected Creditors shall be entitled to receive, at the time or times contemplated in sections 5.5(c) and 5.5(d) hereof, the Newco Shares, Newco Notes and Litigation Trust Interests that are subsequently distributed to (or in the case of Litigation Trust Interests registered for the benefit of) Affected Creditors with Proven Claims pursuant to sections 5.5(c) and 5.5(d) hereof (if any),

and all such Newco Shares and Newco Notes shall be distributed in the manner described in section 5.2 hereof; and

 

  (ii) with respect to Affected Creditor Claims that are Unresolved Claims as at the Effective Time, Newco shall issue in the name of the Unresolved Claims Escrow Agent, for the benefit of the Persons entitled thereto under the Plan, the Newco Shares and the Newco Notes that would have been distributed to the applicable Affected Creditors in respect of such Unresolved Claims if such Unresolved Claims had been Proven Claims at the Effective Time; such Newco Shares, Newco Notes and Litigation Trust Interests acquired by Newco in section 6.4(q) and assigned to and registered in the name of the Unresolved Claims Escrow Agent in accordance with section 6.4(r) shall comprise part of the Unresolved Claims Reserve and the Unresolved Claims Escrow Agent shall hold all such Newco Shares, Newco Notes and Litigation Trust Interests in escrow for the benefit of those Persons entitled to receive distributions thereof pursuant to the Plan.

 

  (i) The initial Newco Share in the capital of Newco held by the Initial Newco Shareholder shall be redeemed and cancelled for no consideration.

 

  (j) SFC shall be deemed to assign, transfer and convey to SFC Barbados those SFC Intercompany Claims and/or Equity Interests in one or more Direct Subsidiaries as agreed to by SFC and the Initial Consenting Noteholders prior to the Plan Implementation Date (the “ Barbados Property ”) first in full repayment of the Barbados Loans and second, to the extent the fair market value of the Barbados Property exceeds the amount owing under the Barbados Loans, as a contribution to the capital of SFC Barbados by SFC. Immediately after the time of such assignment, transfer and conveyance, the Barbados Loans shall be considered to be fully paid by SFC and no longer outstanding.

 

  (k)

SFC shall be deemed to assign, transfer and convey to Newco all shares and other Equity Interests (other than the Barbados Property) in the capital of (i) the Direct Subsidiaries and (ii) any other Subsidiaries that are directly owned by SFC immediately prior to the Effective Time, other than SFC Escrow Co. (all such

 

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  shares and other equity interests being the “ Direct Subsidiary Shares ”) for a purchase price equal to the fair market value of the Direct Subsidiary Shares and, in consideration therefor, Newco shall be deemed to pay to SFC consideration equal to the fair market value of the Direct Subsidiary Shares, which consideration shall be comprised of a U.S. dollar denominated demand non-interest-bearing promissory note issued to SFC by Newco having a principal amount equal to the fair market value of the Direct Subsidiary Shares (the “ Newco Promissory Note 1 ”). At the time of such assignment, transfer and conveyance, all prior rights that Newco had to acquire the Direct Subsidiary Shares, under the Plan or otherwise, shall cease to be outstanding. For greater certainty, SFC shall not assign, transfer or convey the SFC Escrow Co. Share, and the SFC Escrow Co. Share shall remain the property of SFC.

 

  (l) If the Initial Consenting Noteholders and SFC agree prior to the Plan Implementation Date, there will be a set-off of any SFC Intercompany Claim so agreed against a Subsidiary Intercompany Claim owing between SFC and the same Subsidiary. In such case, the amounts will be set-off in repayment of both claims to the extent of the lesser of the two amounts, and the excess (if any) shall continue as an SFC Intercompany Claim or a Subsidiary Intercompany Claim, as applicable.

 

  (m) SFC shall be deemed to assign, transfer and convey to Newco all SFC Intercompany Claims (other than the SFC Intercompany Claims transferred to SFC Barbados in section 6.4(j) hereof or set-off pursuant to section 6.4(l) hereof) for a purchase price equal to the fair market value of such SFC Intercompany Claims and, in consideration therefor, Newco shall be deemed to pay SFC consideration equal to the fair market value of the SFC Intercompany Claims, which consideration shall be comprised of the following: (i) the assumption by Newco of all of SFC’s obligations to the Subsidiaries in respect of Subsidiary Intercompany Claims (other than the Subsidiary Intercompany Claims set-off pursuant to section 6.4(l) hereof); and (ii) if the fair market value of the transferred SFC Intercompany Claims exceeds the fair market value of the assumed Subsidiary Intercompany Claims, Newco shall issue to SFC a U.S. dollar denominated demand non-interest-bearing promissory note having a principal amount equal to such excess (the “ Newco Promissory Note 2 ”).

 

  (n) SFC shall be deemed to assign, transfer and convey to Newco all other SFC Assets (namely, all SFC Assets other than the Direct Subsidiary Shares and the SFC Intercompany Claims (which shall have already been transferred to Newco in accordance with sections 6.4(k) and 6.4(m) hereof)), for a purchase price equal to the fair market value of such other SFC Assets and, in consideration therefor, Newco shall be deemed to pay to SFC consideration equal to the fair market value of such other SFC Assets, which consideration shall be comprised of a U.S. dollar denominated demand non-interest-bearing promissory note issued to SFC by Newco having a principal amount equal to the fair market value of such other SFC Assets (the “ Newco Promissory Note 3 ”).

 

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  (o) SFC shall establish the Litigation Trust and SFC and the Trustees (on behalf of the Noteholders) shall be deemed to convey, transfer and assign to the Litigation Trustee all of their respective rights, title and interest in and to the Litigation Trust Claims. SFC shall advance the Litigation Funding Amount to the Litigation Trustee for use by the Litigation Trustee in prosecuting the Litigation Trust Claims in accordance with the Litigation Trust Agreement, which advance shall be deemed to create a non-interest bearing receivable from the Litigation Trustee in favour of SFC in the amount of the Litigation Funding Amount (the “ Litigation Funding Receivable ”). The Litigation Funding Amount and Litigation Trust Claims shall be managed by the Litigation Trustee in accordance with the terms and conditions of the Litigation Trust Agreement.

 

  (p) The Litigation Trust shall be deemed to be effective from the time that it is established in section 6.4(o) hereof. Initially, all of the Litigation Trust Interests shall be held by SFC. Immediately thereafter, SFC shall assign, convey and transfer a portion of the Litigation Trust Interests to the Noteholder Class Action Claimants in accordance with the allocation set forth in section 4.11 hereof.

 

  (q) SFC shall settle and discharge the Affected Creditor Claims by assigning Newco Promissory Note 1, Newco Promissory Note 2 and Newco Promissory Note 3 (collectively, the “ Newco Promissory Notes ”), the Litigation Funding Receivable and the remaining Litigation Trust Interests held by SFC to Newco. Such assignment shall constitute payment, by set-off, of the full principal amount of the Newco Promissory Notes and of a portion of the Affected Creditor Claims equal to the aggregate principal amount of the Newco Promissory Notes, the Litigation Trust Receivable and the fair market value of the Litigation Trust Interests so transferred (with such payment being allocated first to the Noteholder Claims and then to the Ordinary Affected Creditor Claims). As a consequence thereof:

 

  (i) Newco shall be deemed to discharge and release SFC of and from all of SFC’s obligations to Newco in respect of the Affected Creditor Claims, and all of Newco’s rights against SFC of any kind in respect of the Affected Creditor Claims shall thereupon be fully, finally, irrevocably and forever compromised, released, discharged and cancelled; and

 

  (ii) SFC shall be deemed to discharge and release Newco of and from all of Newco’s obligations to SFC in respect of the Newco Promissory Notes, and the Newco Promissory Notes and all of SFC’s rights against Newco in respect thereof shall thereupon be fully, finally, irrevocably and forever released, discharged and cancelled.

 

  (r)

Newco shall cause a portion of the Litigation Trust Interests it acquired in section 6.4(q) hereof to be assigned to and registered in the name of the Affected Creditors with Proven Claims as contemplated in section 6.4(h), and with respect to any Affected Creditor Claims that are Unresolved Claims as at the Effective Time, the remaining Litigation Trust Interests held by Newco that would have been allocated to the applicable Affected Creditors in respect of such Unresolved

 

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  Claims if such Unresolved Claims had been Proven Claims at the Effective Time shall be assigned and registered by the Litigation Trustee to the Unresolved Claims Escrow Agent and in the name of the Unresolved Claims Escrow Agent, in escrow for the benefit of Persons entitled thereto, and such Litigation Trust Interests shall comprise part of the Unresolved Claims Reserve. The Litigation Trustee shall record entitlements to the Litigation Trust Interests in the manner set forth in section 5.3.

Cancellation of Instruments and Guarantees

 

  (s) Subject to section 5.9 hereof, all debentures, indentures, notes, certificates, agreements, invoices, guarantees, pledges and other instruments evidencing Affected Claims, including the Notes and the Note Indentures, will not entitle any holder thereof to any compensation or participation other than as expressly provided for in the Plan and shall be cancelled and will thereupon be null and void. The Trustees shall be directed by the Court and shall be deemed to have released, discharged and cancelled any guarantees, indemnities, Encumbrances or other obligations owing by or in respect of any Subsidiary relating to the Notes or the Note Indentures.

Releases

 

  (t) Each of Newco and Newco II shall be deemed to have no liability or obligation of any kind whatsoever for: any Claim (including, notwithstanding anything to the contrary herein, any Unaffected Claim); any Affected Claim (including any Affected Creditor Claim, Equity Claim, D&O Claim, D&O Indemnity Claim and Noteholder Class Action Claim); any Section 5.1(2) D&O Claim; any Conspiracy Claim; any Continuing Other D&O Claim; any Non-Released D&O Claim; any Class Action Claim; any Class Action Indemnity Claim; any right or claim in connection with or liability for the Notes or the Note Indentures; any guarantees, indemnities, share pledges or Encumbrances relating to the Notes or the Note Indentures; any right or claim in connection with or liability for the Existing Shares or other Equity Interests or any other securities of SFC; any rights or claims of the Third Party Defendants relating to SFC or the Subsidiaries; any right or claim in connection with or liability for the RSA, the Plan, the CCAA Proceedings, the Restructuring Transaction, the Litigation Trust, the business and affairs of SFC and the Subsidiaries (whenever or however conducted), the administration and/or management of SFC and the Subsidiaries, or any public filings, statements, disclosures or press releases relating to SFC; any right or claim in connection with or liability for any guaranty, indemnity or claim for contribution in respect of any of the foregoing; and any Encumbrance in respect of the foregoing, provided only that Newco shall assume SFC’s obligations to the applicable Subsidiaries in respect of the Subsidiary Intercompany Claims pursuant to section 6.4(l) hereof and Newco II shall assume Newco’s obligations to the applicable Subsidiaries in respect of the Subsidiary Intercompany Claims pursuant to section 6.4(x) hereof.

 

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  (u) Each of the Charges shall be discharged, released and cancelled.

 

  (v) The releases and injunctions referred to in Article 7 of the Plan shall become effective in accordance with the Plan.

 

  (w) Any contract defaults arising as a result of the CCAA Proceedings and/or the implementation of the Plan (including, notwithstanding anything to the contrary herein, any such contract defaults in respect of the Unaffected Claims) shall be deemed to be cured.

Newco II

 

  (x) Newco shall be deemed to assign, transfer and convey to Newco II all of Newco’s right, title and interest in and to all of its properties, assets and rights of every kind and description (namely the SFC Assets acquired by Newco pursuant to the Plan) for a purchase price equal to the fair market value thereof and, in consideration therefor, Newco II shall be deemed to pay to Newco consideration equal to the fair market value of such properties, assets and rights (the “ Newco II Consideration ”). The Newco II Consideration shall be comprised of: (i) the assumption by Newco II of any and all indebtedness of Newco other than the indebtedness of Newco in respect of the Newco Notes (namely, any indebtedness of Newco in respect of the Subsidiary Intercompany Claims); and (ii) the issuance to Newco of that number of common shares in Newco II as is necessary to ensure that the value of the Newco II Consideration is equal to the fair market value of the properties, assets and rights conveyed by Newco to Newco II pursuant to this section 6.4(x).

6.5 Cancellation of Existing Shares and Equity Interests

Unless otherwise agreed between the Monitor, SFC and the Initial Consenting Noteholders, on the Equity Cancellation Date all Existing Shares and Equity Interests shall be fully, finally and irrevocably cancelled, and the following steps will be implemented pursuant to the Plan as a plan of reorganization under section 191 of the CBCA, to be effected by articles of reorganization to be filed by SFC, subject to the receipt of any required approvals from the Ontario Securities Commission with respect to the trades in securities contemplated by the following:

 

  (a) SFC will create a new class of common shares to be called Class A common shares that are equivalent to the current Existing Shares except that they carry two votes per share;

 

  (b) SFC will amend the share conditions of the Existing Shares to provide that they are cancellable for no consideration at such time as determined by the board of directors of SFC;

 

  (c) prior to the cancellation of the Existing Shares, SFC will issue for nominal consideration one Class A common share of SFC to the SFC Continuing Shareholder;

 

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  (d) SFC will cancel the Existing Shares for no consideration on the Equity Cancellation Date; and

 

  (e) SFC will apply to Canadian securities regulatory authorities for SFC to cease to be a reporting issuer effective immediately before the Effective Time.

Unless otherwise agreed by SFC, the Monitor and the Initial Consenting Noteholders or as otherwise directed by Order of the Court, SFC shall maintain its corporate existence at all times from and after the Plan Implementation Date until the later of the date: (i) on which SFC Escrow Co. has completed all of its obligations as Unresolved Claims Escrow Agent under this Plan; (ii) on which SFC escrow Co. no longer holds any Undeliverable Distributions delivered to it in accordance with the section 5.4 hereof; and (iii) as determined by the Litigation Trustee.

6.6 Transfers and Vesting Free and Clear

 

  (a) All of the SFC Assets (including for greater certainty the Direct Subsidiary Shares, the SFC Intercompany Claims and all other SFC Assets assigned, transferred and conveyed to Newco and/or Newco II pursuant to section 6.4) shall be deemed to vest absolutely in Newco or Newco II, as applicable, free and clear of and from any and all Charges, Claims (including, notwithstanding anything to the contrary herein, any Unaffected Claims), D&O Claims, D&O Indemnity Claims, Section 5.1(2) D&O Claims, Conspiracy Claims, Continuing Other D&O Claims, Non-Released D&O Claims, Affected Claims, Class Action Claims, Class Action Indemnity Claims, claims or rights of any kind in respect of the Notes or the Note Indentures, and any right or claim that is based in whole or in part on facts, underlying transactions, Causes of Action or events relating to the Restructuring Transaction, the CCAA Proceedings or any of the foregoing, and any guarantees or indemnities with respect to any of the foregoing. Any Encumbrances or claims affecting, attaching to or relating to the SFC Assets in respect of the foregoing shall be deemed to be irrevocably expunged and discharged as against the SFC Assets, and no such Encumbrances or claims shall be pursued or enforceable as against Newco or Newco II. For greater certainty, with respect to the Subsidiaries, Greenheart and Greenheart’s direct and indirect subsidiaries: (i) the vesting free and clear in Newco and/or Newco II, as applicable, and the expunging and discharging that occurs by operation of this paragraph shall only apply to SFC’s ownership interests in the Subsidiaries, Greenheart and Greenheart’s subsidiaries; and (ii) except as provided for in the Plan (including this section 6.6(a) and sections 4.9(g), 6.4(k), 6.4(l) and 6.4(m) hereof and Article 7 hereof) and the Sanction Order, the assets, liabilities, business and property of the Subsidiaries, Greenheart and Greenheart’s direct and indirect subsidiaries shall remain unaffected by the Restructuring Transaction.

 

  (b)

Any issuance, assignment, transfer or conveyance of any securities, interests, rights or claims pursuant to the Plan, including the Newco Shares, the Newco Notes and the Affected Creditor Claims, will be free and clear of and from any and all Charges, Claims (including, notwithstanding anything to the contrary herein, any Unaffected Claims), D&O Claims, D&O Indemnity Claims, Affected

 

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  Claims, Section 5.1(2) D&O Claims; Conspiracy Claims; Continuing Other D&O Claims, Non-Released D&O Claims; Class Action Claims, Class Action Indemnity Claims, claims or rights of any kind in respect of the Notes or the Note Indentures, and any right or claim that is based in whole or in part on facts, underlying transactions, Causes of Action or events relating to the Restructuring Transaction, the CCAA Proceedings or any of the foregoing, and any guarantees or indemnities with respect to any of the foregoing. For greater certainty, with respect to the Subsidiaries, Greenheart and Greenheart’s direct and indirect subsidiaries: (i) the vesting free and clear in Newco and Newco II that occurs by operation of this paragraph shall only apply to SFC’s direct and indirect ownership interests in the Subsidiaries, Greenheart and Greenheart’s direct and indirect subsidiaries; and (ii) except as provided for in the Plan (including section 6.6(a) and sections 4.9(g), 6.4(k), 6.4(l) and 6.4(m) hereof and Article 7 hereof) and the Sanction Order, the assets, liabilities, business and property of the Subsidiaries, Greenheart and Greenheart’s direct and indirect subsidiaries shall remain unaffected by the Restructuring Transaction.

ARTICLE 7

RELEASES

7.1 Plan Releases

Subject to 7.2 hereof, all of the following shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date:

 

  (a) all Affected Claims, including all Affected Creditor Claims, Equity Claims, D&O Claims (other than Section 5.1(2) D&O Claims, Conspiracy Claims, Continuing Other D&O Claims and Non-Released D&O Claims), D&O Indemnity Claims (except as set forth in section 7.1(d) hereof) and Noteholder Class Action Claims (other than the Continuing Noteholder Class Action Claims);

 

  (b) all Claims of the Ontario Securities Commission or any other Governmental Entity that have or could give rise to a monetary liability, including fines, awards, penalties, costs, claims for reimbursement or other claims having a monetary value;

 

  (c) all Class Action Claims (including the Noteholder Class Action Claims) against SFC, the Subsidiaries or the Named Directors or Officers of SFC or the Subsidiaries (other than Class Action Claims that are Section 5.1(2) D&O Claims, Conspiracy Claims or Non-Released D&O Claims);

 

  (d) all Class Action Indemnity Claims (including related D&O Indemnity Claims), other than any Class Action Indemnity Claim by the Third Party Defendants against SFC in respect of the Indemnified Noteholder Class Action Claims (including any D&O Indemnity Claim in that respect), which shall be limited to the Indemnified Noteholder Class Action Limit pursuant to the releases set out in section 7.1(f) hereof and the injunctions set out in section 7.3 hereof;

 

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  (e) any portion or amount of liability of the Third Party Defendants for the Indemnified Noteholder Class Action Claims (on a collective, aggregate basis in reference to all Indemnified Noteholder Class Action Claims together) that exceeds the Indemnified Noteholder Class Action Limit;

 

  (f) any portion or amount of liability of the Underwriters for the Noteholder Class Action Claims (other than any Noteholder Class Action Claims against the Underwriters for fraud or criminal conduct) (on a collective, aggregate basis in reference to all such Noteholder Class Action Claims together) that exceeds the Indemnified Noteholder Class Action Limit;

 

  (g) any portion or amount of, or liability of SFC for, any Class Action Indemnity Claims by the Third Party Defendants against SFC in respect of the Indemnified Noteholder Class Action Claims (on a collective, aggregate basis in reference to all such Class Action Indemnity Claims together) to the extent that such Class Action Indemnity Claims exceed the Indemnified Noteholder Class Action Limit;

 

  (h) any and all Excluded Litigation Trust Claims;

 

  (i) any and all Causes of Action against Newco, Newco II, the directors and officers of Newco, the directors and officers of Newco II, the Noteholders, members of the ad hoc committee of Noteholders, the Trustees, the Transfer Agent, the Monitor, FTI Consulting Canada Inc., FTI HK, counsel for the current Directors of SFC, counsel for the Monitor, counsel for the Trustees, the SFC Advisors, the Noteholder Advisors, and each and every member (including members of any committee or governance council), partner or employee of any of the foregoing, for or in connection with or in any way relating to: any Claims (including, notwithstanding anything to the contrary herein, any Unaffected Claims); Affected Claims; Section 5.1(2) D&O Claims; Conspiracy Claims; Continuing Other D&O Claims; Non-Released D&O Claims; Class Action Claims; Class Action Indemnity Claims; any right or claim in connection with or liability for the Notes or the Note Indentures; any guarantees, indemnities, claims for contribution, share pledges or Encumbrances related to the Notes or the Note Indentures; any right or claim in connection with or liability for the Existing Shares, Equity Interests or any other securities of SFC; any rights or claims of the Third Party Defendants relating to SFC or the Subsidiaries;

 

  (j)

any and all Causes of Action against Newco, Newco II, the directors and officers of Newco, the directors and officers of Newco II, the Noteholders, members of the ad hoc committee of Noteholders, the Trustees, the Transfer Agent, the Monitor, FTI Consulting Canada Inc., FTI HK, the Named Directors and Officers, counsel for the current Directors of SFC, counsel for the Monitor, counsel for the Trustees, the SFC Advisors, the Noteholder Advisors, and each and every member (including members of any committee or governance council), partner or employee of any of the foregoing, based in whole or in part on any act, omission, transaction, duty, responsibility, indebtedness, liability, obligation, dealing or other occurrence existing or taking place on or prior to the Plan Implementation

 

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  Date (or, with respect to actions taken pursuant to the Plan after the Plan Implementation Date, the date of such actions) in any way relating to, arising out of, leading up to, for, or in connection with the CCAA Proceeding, RSA, the Restructuring Transaction, the Plan, any proceedings commenced with respect to or in connection with the Plan, or the transactions contemplated by the RSA and the Plan, including the creation of Newco and/or Newco II and the creation, issuance or distribution of the Newco Shares, the Newco Notes, the Litigation Trust or the Litigation Trust Interests, provided that nothing in this paragraph shall release or discharge any of the Persons listed in this paragraph from or in respect of any obligations any of them may have under or in respect of the RSA, the Plan or under or in respect of any of Newco, Newco II, the Newco Shares, the Newco Notes, the Litigation Trust or the Litigation Trust Interests, as the case may be;

 

  (k) any and all Causes of Action against the Subsidiaries for or in connection with any Claim (including, notwithstanding anything to the contrary herein, any Unaffected Claim); any Affected Claim (including any Affected Creditor Claim, Equity Claim, D&O Claim, D&O Indemnity Claim and Noteholder Class Action Claim); any Section 5.1(2) D&O Claim; any Conspiracy Claim; any Continuing Other D&O Claim; any Non-Released D&O Claim; any Class Action Claim; any Class Action Indemnity Claim; any right or claim in connection with or liability for the Notes or the Note Indentures; any guarantees, indemnities, share pledges or Encumbrances relating to the Notes or the Note Indentures; any right or claim in connection with or liability for the Existing Shares, Equity Interests or any other securities of SFC; any rights or claims of the Third Party Defendants relating to SFC or the Subsidiaries; any right or claim in connection with or liability for the RSA, the Plan, the CCAA Proceedings, the Restructuring Transaction, the Litigation Trust, the business and affairs of SFC and the Subsidiaries (whenever or however conducted), the administration and/or management of SFC and the Subsidiaries, or any public filings, statements, disclosures or press releases relating to SFC; any right or claim in connection with or liability for any indemnification obligation to Directors or Officers of SFC or the Subsidiaries pertaining to SFC, the Notes, the Note Indentures, the Existing Shares, the Equity Interests, any other securities of SFC or any other right, claim or liability for or in connection with the RSA, the Plan, the CCAA Proceedings, the Restructuring Transaction, the Litigation Trust, the business and affairs of SFC (whenever or however conducted), the administration and/or management of SFC, or any public filings, statements, disclosures or press releases relating to SFC; any right or claim in connection with or liability for any guaranty, indemnity or claim for contribution in respect of any of the foregoing; and any Encumbrance in respect of the foregoing;

 

  (l) all Subsidiary Intercompany Claims as against SFC (which are assumed by Newco and then Newco II pursuant to the Plan);

 

  (m) any entitlements of Ernst & Young to receive distributions of any kind (including Newco Shares, Newco Notes and Litigation Trust Interests) under this Plan;

 

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  (n) any entitlements of the Named Third Party Defendants to receive distributions of any kind (including Newco Shares, Newco Notes and Litigation Trust Interests) under this Plan; and

 

  (o) any entitlements of the Underwriters to receive distributions of any kind (including Newco Shares, Newco Notes and Litigation Trust Interests) under this Plan.

7.2 Claims Not Released

Notwithstanding anything to the contrary in section 7.1 hereof, nothing in this Plan shall waive, compromise, release, discharge, cancel or bar any of the following:

 

  (a) SFC of its obligations under the Plan and the Sanction Order;

 

  (b) SFC from or in respect of any Unaffected Claims (provided that recourse against SFC in respect of Unaffected Claims shall be limited in the manner set out in section 4.2 hereof);

 

  (c) any Directors or Officers of SFC or the Subsidiaries from any Non-Released D&O Claims, Conspiracy Claims or any Section 5.1(2) D&O Claims, provided that recourse against the Named Directors or Officers of SFC in respect of any Section 5.1(2) D&O Claims and any Conspiracy Claims shall be limited in the manner set out in section 4.9(e) hereof;

 

  (d) any Other Directors and/or Officers from any Continuing Other D&O Claims, provided that recourse against the Other Directors and/or Officers in respect of the Indemnified Noteholder Class Action Claims shall be limited in the manner set out in section 4.4(b)(i) hereof;

 

  (e) the Third Party Defendants from any claim, liability or obligation of whatever nature for or in connection with the Class Action Claims, provided that the maximum aggregate liability of the Third Party Defendants collectively in respect of the Indemnified Noteholder Class Action Claims shall be limited to the Indemnified Noteholder Class Action Limit pursuant to section 4.4(b)(i) hereof and the releases set out in sections 7.1(e) and 7.1(f) hereof and the injunctions set out in section 7.3 hereof;

 

  (f) Newco II from any liability to the applicable Subsidiaries in respect of the Subsidiary Intercompany Claims assumed by Newco II pursuant to section 6.4(x) hereof;

 

  (g) the Subsidiaries from any liability to Newco II in respect of the SFC Intercompany Claims conveyed to Newco II pursuant to section 6.4(x) hereof;

 

  (h) SFC of or from any investigations by or non-monetary remedies of the Ontario Securities Commission, provided that, for greater certainty, all monetary rights, claims or remedies of the Ontario Securities Commission against SFC shall be treated as Affected Creditor Claims in the manner described in section 4.1 hereof and released pursuant to section 7.1(b) hereof;

 

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  (i) the Subsidiaries from their respective indemnification obligations (if any) to Directors or Officers of the Subsidiaries that relate to the ordinary course operations of the Subsidiaries and that have no connection with any of the matters listed in section 7.1(i) hereof;

 

  (j) SFC or the Directors and Officers from any Insured Claims, provided that recovery for Insured Claims shall be irrevocably limited to recovery solely from the proceeds of Insurance Policies paid or payable on behalf of SFC or its Directors and Officers in the manner set forth in section 2.4 hereof;

 

  (k) insurers from their obligations under insurance policies; and

 

  (l) any Released Party for fraud or criminal conduct.

7.3 Injunctions

All Persons are permanently and forever barred, estopped, stayed and enjoined, on and after the Effective Time, with respect to any and all Released Claims, from (i) commencing, conducting or continuing in any manner, directly or indirectly, any action, suits, demands or other proceedings of any nature or kind whatsoever (including, without limitation, any proceeding in a judicial, arbitral, administrative or other forum) against the Released Parties; (ii) enforcing, levying, attaching, collecting or otherwise recovering or enforcing by any manner or means, directly or indirectly, any judgment, award, decree or order against the Released Parties or their property; (iii) commencing, conducting or continuing in any manner, directly or indirectly, any action, suits or demands, including without limitation, by way of contribution or indemnity or other relief, in common law, or in equity, breach of trust or breach of fiduciary duty or under the provisions of any statute or regulation, or other proceedings of any nature or kind whatsoever (including, without limitation, any proceeding in a judicial, arbitral, administrative or other forum) against any Person who makes such a claim or might reasonably be expected to make such a claim, in any manner or forum, against one or more of the Released Parties; (iv) creating, perfecting, asserting or otherwise enforcing, directly or indirectly, any lien or encumbrance of any kind against the Released Parties or their property; or (v) taking any actions to interfere with the implementation or consummation of this Plan; provided, however, that the foregoing shall not apply to the enforcement of any obligations under the Plan.

7.4 Timing of Releases and Injunctions

All releases and injunctions set forth in this Article 7 shall become effective on the Plan Implementation Date at the time or times and in the manner set forth in section 6.4 hereof.

7.5 Equity Class Action Claims Against the Third Party Defendants

Subject only to Article 11 hereof, and notwithstanding anything else to the contrary in this Plan, any Class Action Claim against the Third Party Defendants that relates to the purchase, sale or ownership of Existing Shares or Equity Interests: (a) is unaffected by this Plan; (b) is not

 

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discharged, released, cancelled or barred pursuant to this Plan; (c) shall be permitted to continue as against the Third Party Defendants; (d) shall not be limited or restricted by this Plan in any manner as to quantum or otherwise (including any collection or recovery for any such Class Action Claim that relates to any liability of the Third Party Defendants for any alleged liability of SFC); and (e) does not constitute an Equity Claim or an Affected Claim under this Plan.

ARTICLE 8

COURT SANCTION

8.1 Application for Sanction Order

If the Plan is approved by the Required Majority, SFC shall apply for the Sanction Order on or before the date set for the hearing of the Sanction Order or such later date as the Court may set.

8.2 Sanction Order

The Sanction Order shall, among other things:

 

  (a) declare that: (i) the Plan has been approved by the Required Majority in conformity with the CCAA; (ii) the activities of SFC have been in reasonable compliance with the provisions of the CCAA and the Orders of the Court made in this CCAA Proceeding in all respects; (iii) the Court is satisfied that SFC has not done or purported to do anything that is not authorized by the CCAA; and (iv) the Plan and the transactions contemplated thereby are fair and reasonable;

 

  (b) declare that the Plan and all associated steps, compromises, releases, discharges, cancellations, transactions, arrangements and reorganizations effected thereby are approved, binding and effective as herein set out as of the Plan Implementation Date;

 

  (c) confirm the amount of each of the Unaffected Claims Reserve, the Administration Charge Reserve and the Monitor’s Post-Implementation Reserve;

 

  (d) declare that, on the Plan Implementation Date, all Affected Claims shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred, subject only to the right of the applicable Persons to receive the distributions to which they are entitled pursuant to the Plan;

 

  (e) declare that, on the Plan Implementation Date, the ability of any Person to proceed against SFC or the Subsidiaries in respect of any Released Claims shall be forever discharged and restrained, and all proceedings with respect to, in connection with or relating to any such matter shall be permanently stayed;

 

  (f) declare that the steps to be taken, the matters that are deemed to occur and the compromises and releases to be effective on the Plan Implementation Date are deemed to occur and be effected in the sequential order contemplated by section 6.4, beginning at the Effective Time;

 

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  (g) declare that, on the Plan Implementation Date, the SFC Assets vest absolutely in Newco and that, in accordance with section 6.4(x) hereof, the SFC Assets transferred by Newco to Newco II vest absolutely in Newco II, in each case in accordance with the terms of section 6.6(a) hereof;

 

  (h) confirm that the Court was satisfied that: (i) the hearing of the Sanction Order was open to all of the Affected Creditors and all other Persons with an interest in SFC and that such Affected Creditors and other Persons were permitted to be heard at the hearing in respect of the Sanction Order; (ii) prior to the hearing, all of the Affected Creditors and all other Persons on the service list in respect of the CCAA Proceeding were given adequate notice thereof;

 

  (i) provide that the Court was advised prior to the hearing in respect of the Sanction Order that the Sanction Order will be relied upon by SFC and Newco as an approval of the Plan for the purpose of relying on the exemption from the registration requirements of the United States Securities Act of 1933, as amended, pursuant to Section 3(a)(10) thereof for the issuance of the Newco Shares, Newco Notes and, to the extent they may be deemed to be securities, the Litigation Trust Interests, and any other securities to be issued pursuant to the Plan;

 

  (j) declare that all obligations, agreements or leases to which (i) SFC remains a party on the Plan Implementation Date, or (ii) Newco and/or Newco II becomes a party as a result of the conveyance of the SFC Assets to Newco and the further conveyance of the SFC Assets to Newco II on the Plan Implementation Date, shall be and remain in full force and effect, unamended, as at the Plan Implementation Date and no party to any such obligation or agreement shall on or following the Plan Implementation Date, accelerate, terminate, refuse to renew, rescind, refuse to perform or otherwise disclaim or resiliate its obligations thereunder, or enforce or exercise (or purport to enforce or exercise) any right or remedy under or in respect of any such obligation or agreement, by reason:

 

  (i) of any event which occurred prior to, and not continuing after, the Plan Implementation Date, or which is or continues to be suspended or waived under the Plan, which would have entitled any other party thereto to enforce those rights or remedies;

 

  (ii) that SFC sought or obtained relief or has taken steps as part of the Plan or under the CCAA;

 

  (iii) of any default or event of default arising as a result of the financial condition or insolvency of SFC;

 

  (iv) of the completion of any of the transactions contemplated under the Plan, including the transfer, conveyance and assignment of the SFC Assets to Newco and the further transfer, conveyance and assignment of the SFC Assets by Newco to Newco II; or

 

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  (v) of any compromises, settlements, restructurings, recapitalizations or reorganizations effected pursuant to the Plan;

 

  (k) stay the commencing, taking, applying for or issuing or continuing any and all steps or proceedings, including without limitation, administrative hearings and orders, declarations or assessments, commenced, taken or proceeded with or that may be commenced, taken or proceed with to advance any Released Claims;

 

  (l) stay as against Ernst & Young the commencing, taking, applying for or issuing or continuing any and all steps or proceedings (other than all steps or proceedings to implement the Ernst & Young Settlement) pursuant to the terms of the Order of the Honourable Justice Morawetz dated May 8, 2012 between (i) the Plan Implementation Date and (ii) the earlier of the Ernst & Young Settlement Date or such other date as may be ordered by the Court on a motion to the Court on reasonable notice to Ernst & Young;

 

  (m) declare that in no circumstances will the Monitor have any liability for any of SFC’s tax liability regardless of how or when such liability may have arisen;

 

  (n) authorize the Monitor to perform its functions and fulfil its obligations under the Plan to facilitate the implementation of the Plan;

 

  (o) direct and deem the Trustees to release, discharge and cancel any guarantees, indemnities, Encumbrances or other obligations owing by or in respect of any Subsidiary relating to the Notes or the Note Indentures;

 

  (p) declare that upon completion by the Monitor of its duties in respect of SFC pursuant to the CCAA and the Orders, the Monitor may file with the Court a certificate of Plan Implementation stating that all of its duties in respect of SFC pursuant to the CCAA and the Orders have been completed and thereupon, FTI Consulting Canada Inc. shall be deemed to be discharged from its duties as Monitor and released of all claims relating to its activities as Monitor; and

 

  (q) declare that, on the Plan Implementation Date, each of the Charges shall be discharged, released and cancelled, and that any obligations secured thereby shall satisfied pursuant to section 4.2(b) hereof, and that from and after the Plan Implementation Date the Administration Charge Reserve shall stand in place of the Administration Charge as security for the payment of any amounts secured by the Administration Charge;

 

  (r) declare that the Monitor may not make any payment from the Monitor’s Post-Implementation Plan Reserve to any third party professional services provider (other than its counsel) that exceeds $250,000 (alone or in a series of related payments) without the prior consent of the Initial Consenting Noteholders or an Order of the Court;

 

  (s) declare that SFC and the Monitor may apply to the Court for advice and direction in respect of any matters arising from or under the Plan;

 

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  (t) declare that, subject to the due performance of its obligations as set forth in the Plan and subject to its compliance with any written directions or instructions of the Monitor and/or directions of the Court in the manner set forth in the Plan, SFC Escrow Co. shall have no liabilities whatsoever arising from the performance of its obligations under the Plan;

 

  (u) order and declare that all Persons with Unresolved Claims shall have standing in any proceeding in respect of the determination or status of any Unresolved Claim, and that Goodmans LLP (in its capacity as counsel to the Initial Consenting Noteholders) shall have standing in any such proceeding on behalf of the Initial Consenting Notheolders (in their capacity as Affected Creditors with Proven Claims);

 

  (v) order and declare that, from and after the Plan Implementation Date, Newco will be permitted, in its sole discretion and on terms acceptable to Newco, to advance additional cash amounts to the Litigation Trustee from time to time for the purpose of providing additional financing to the Litigation Trust, including the provision of such additional amounts as a non-interest bearing loan to the Litigation Trust that is repayable to Newco on similar terms and conditions as the Litigation Funding Receivable;

 

  (w) order and declare that: (i) subject to the prior consent of the Initial Consenting Noteholders, each of the Monitor and the Litigation Trustee shall have the right to seek and obtain an order from any court of competent jurisdiction, including an Order of the Court in the CCAA or otherwise, that gives effect to any releases of any Litigation Trust Claims agreed to by the Litigation Trustee in accordance with the Litigation Trust Agreement, and (ii) in accordance with this section 8.2(w), all Affected Creditors shall be deemed to consent to any such releases in any such proceedings;

 

  (x) order and declare that, prior to the Effective Time, SFC shall: (i) preserve or cause to be preserved copies of any documents (as such term is defined in the Rules of Civil Procedure (Ontario)) that are relevant to the issues raised in the Class Actions; and (ii) make arrangements acceptable to SFC, the Monitor, the Initial Consenting Noteholders, counsel to Ontario Class Action Plaintiffs, counsel to Ernst & Young, counsel to the Underwriters and counsel to the Named Third Party Defendants to provide the parties to the Class Actions with access thereto, subject to customary commercial confidentiality, privilege or other applicable restrictions, including lawyer-client privilege, work product privilege and other privileges or immunities, and to restrictions on disclosure arising from s. 16 of the Securities Act (Ontario) and comparable restrictions on disclosure in other relevant jurisdictions, for purposes of prosecuting and/or defending the Class Actions, as the case may be, provided that nothing in the foregoing reduces or otherwise limits the parties’ rights to production and discovery in accordance with the Rules of Civil Procedure (Ontario) and the Class Proceedings Act, 1992 (Ontario);

 

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  (y) order that releases and injunctions set forth in Article 7 of this Plan are effective on the Plan Implementation Date at the time or times and in the manner set forth in section 6.4 hereof;

 

  (z) order that the Ernst & Young Release shall become effective on the Ernst & Young Settlement Date in the manner set forth in section 11.1 hereof;

 

  (aa) order that any Named Third Party Defendant Releases shall become effective if and when the terms and conditions of sections 11.2(a), 11.2(b), 11.2(c) have been fulfilled.;

 

  (bb) order and declare that the matters described in Article 11 hereof shall occur subject to and in accordance with the terms and conditions of Article 11; and

 

  (cc) declare that section 95 to 101 of the BIA shall not apply to any of the transactions implemented pursuant to the Plan.

If agreed by SFC, the Monitor and the Initial Consenting Noteholders, any of the relief to be included in the Sanction Order pursuant to this section 8.2 in respect of matters relating to the Litigation Trust may instead be included in a separate Order of the Court satisfactory to SFC, the Monitor and the Initial Consenting Noteholders granted prior to the Plan Implementation Date.

ARTICLE 9

CONDITIONS PRECEDENT AND IMPLEMENTATION

9.1 Conditions Precedent to Implementation of the Plan

The implementation of the Plan shall be conditional upon satisfaction or waiver of the following conditions prior to or at the Effective Time, each of which is for the benefit of SFC and the Initial Consenting Noteholders and may be waived only by SFC and the Initial Consenting Noteholders collectively; provided, however, that the conditions in sub-paragraphs (g), (h), (n), (o), (q), (r), (u), (z), (ff), (gg), (mm), (ll) and (nn) shall only be for the benefit of the Initial Consenting Noteholders and, if not satisfied on or prior to the Effective Time, may be waived only by the Initial Consenting Noteholders; and provided further that such conditions shall not be enforceable by SFC if any failure to satisfy such conditions results from an action, error, omission by or within the control of SFC and such conditions shall not be enforceable by the Initial Consenting Noteholders if any failure to satisfy such conditions results from an action, error, omission by or within the control of the Initial Consenting Noteholders:

Plan Approval Matters

 

  (a) the Plan shall have been approved by the Required Majority and the Court, and in each case the Plan shall have been approved in a form consistent with the RSA or otherwise acceptable to SFC and the Initial Consenting Noteholders, each acting reasonably;

 

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  (b) the Sanction Order shall have been made and shall be in full force and effect prior to December 17, 2012 (or such later date as may be consented to by SFC and the Initial Consenting Noteholders), and all applicable appeal periods in respect thereof shall have expired and any appeals therefrom shall have been disposed of by the applicable appellate court;

 

  (c) the Sanction Order shall be in a form consistent with the Plan or otherwise acceptable to SFC and the Initial Consenting Noteholders, each acting reasonably;

 

  (d) all filings under Applicable Laws that are required in connection with the Restructuring Transaction shall have been made and any regulatory consents or approvals that are required in connection with the Restructuring Transaction shall have been obtained and, in the case of waiting or suspensory periods, such waiting or suspensory periods shall have expired or been terminated; without limiting the generality of the foregoing, such filings and regulatory consents or approvals include:

 

  (i) any required filings, consents and approvals of securities regulatory authorities in Canada;

 

  (ii) a consultation with the Executive of the Hong Kong Securities and Futures Commission that is satisfactory to SFC, the Monitor and the Initial Consenting Noteholders confirming that implementation of the Restructuring Transaction will not result in an obligation arising for Newco, its shareholders, Newco II or any Subsidiary to make a mandatory offer to acquire shares of Greenheart;

 

  (iii) the submission by SFC and each applicable Subsidiary of a Circular 698 tax filing with all appropriate tax authorities in the PRC within the requisite time prior to the Plan Implementation Date, such filings to be in form and substance satisfactory to the Initial Consenting Noteholders; and

 

  (iv) if notification is necessary or desirable under the Antimonopoly Law of People’s Republic of China and its implementation rules, the submission of all antitrust filings considered necessary or prudent by the Initial Consenting Noteholders and the acceptance and (to the extent required) approval thereof by the competent Chinese authority, each such filing to be in form and substance satisfactory to the Initial Consenting Noteholders;

 

  (e) there shall not be in effect any preliminary or final decision, order or decree by a Governmental Entity, no application shall have been made to any Governmental Entity, and no action or investigation shall have been announced, threatened or commenced by any Governmental Entity, in consequence of or in connection with the Restructuring Transaction that restrains, impedes or prohibits (or if granted could reasonably be expected to restrain, impede or prohibit) the Restructuring Transaction or any material part thereof or requires or purports to require a variation of the Restructuring Transaction, and SFC shall have provided the Initial Consenting Noteholders with a certificate signed by an officer of SFC, without personal liability on the part of such officer, certifying compliance with this Section 9.1(e) as of the Plan Implementation Date;

 

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Newco and Newco II Matters

 

  (f) the organization, incorporating documents, articles, by-laws and other constating documents of Newco and Newco II (including any shareholders agreement, shareholder rights plan and classes of shares (voting and non-voting)) and any affiliated or related entities formed in connection with the Restructuring Transaction or the Plan, and all definitive legal documentation in connection with all of the foregoing, shall be acceptable to the Initial Consenting Noteholders and in form and in substance reasonably satisfactory to SFC;

 

  (g) the composition of the board of directors of Newco and Newco II and the senior management and officers of Newco and Newco II that will assume office, or that will continue in office, as applicable, on the Plan Implementation Date shall be acceptable to the Initial Consenting Noteholders;

 

  (h) the terms of employment of the senior management and officers of Newco and Newco II shall be acceptable to the Initial Consenting Noteholders;

 

  (i) except as expressly set out in this Plan, neither Newco nor Newco II shall have: (i) issued or authorized the issuance of any shares, notes, options, warrants or other securities of any kind, (ii) become subject to any Encumbrance with respect to its assets or property; (iii) become liable to pay any indebtedness or liability of any kind (other than as expressly set out in section 6.4 hereof); or (iv) entered into any Material agreement;

 

  (j) any securities that are formed in connection with the Plan, including the Newco Shares and the Newco Notes, when issued and delivered pursuant to the Plan, shall be duly authorized, validly issued and fully paid and non-assessable and the issuance and distribution thereof shall be exempt from all prospectus and registration requirements of any applicable securities, corporate or other law, statute, order, decree, consent decree, judgment, rule, regulation, ordinance, notice, policy or other pronouncement having the effect of law applicable in the provinces of Canada;

 

  (k) Newco shall not be a reporting issuer (or equivalent) in any province of Canada or any other jurisdiction;

 

  (l) all of the steps, terms, transactions and documents relating to the conveyance of the SFC Assets to Newco and the further conveyance of the SFC Assets by Newco to Newco II in accordance with the Plan shall be in form and in substance acceptable to SFC and the Initial Consenting Noteholders;

 

  (m) all of the following shall be in form and in substance acceptable to the Initial Consenting Noteholders and reasonably satisfactory to SFC: (i) the Newco Shares; (ii) the Newco Notes (including the aggregate principal amount of the Newco Notes); (iii) any trust indenture or other document governing the terms of the Newco Notes; and (iv) the number of Newco Shares and Newco Notes to be issued in accordance with this Plan;

 

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Plan Matters

 

  (n) the Indemnified Noteholder Class Action Limit shall be acceptable to the Initial Consenting Noteholders;

 

  (o) the aggregate amount of the Proven Claims held by Ordinary Affected Creditors shall be acceptable to the Initial Consenting Noteholders;

 

  (p) the amount of each of the Unaffected Claims Reserve and the Administration Charge Reserve shall, in each case, be acceptable to SFC, the Monitor and the Initial Consenting Noteholders;

 

  (q) the amount of the Monitor’s Post-Implementation Reserve and the amount of any Permitted Continuing Retainers shall be acceptable to the Initial Consenting Noteholders, and the Initial Consenting Noteholders shall be satisfied that all outstanding monetary retainers held by any SFC Advisors (net of any Permitted Continuing Retainers) have been repaid to SFC on the Plan Implementation Date;

 

  (r) [Intentionally deleted] ;

 

  (s) the amount of each of the following shall be acceptable to SFC, the Monitor and the Initial Consenting Noteholders: (i) the aggregate amount of Lien Claims to be satisfied by the return to the applicable Lien Claimants of the applicable secured property in accordance with section 4.2(c)(i) hereof; and (ii) the aggregate amount of Lien Claims to be repaid in cash on the Plan Implementation Date in accordance with section 4.2(c)(ii) hereof;

 

  (t) the aggregate amount of Unaffected Claims, and the aggregate amount of the Claims listed in each subparagraph of the definition of “Unaffected Claims” shall, in each case, be acceptable to SFC, the Monitor and the Initial Consenting Noteholders;

 

  (u) the aggregate amount of Unresolved Claims and the amount of the Unresolved Claims Reserve shall, in each case, be acceptable to the Initial Consenting Noteholders and shall be confirmed in the Sanction Order;

 

  (v) Litigation Trust and the Litigation Trust Agreement shall be in form and in substance acceptable to SFC and the Initial Consenting Noteholders, each acting reasonably, and the Litigation Trust shall be established in a jurisdiction that is acceptable to the Initial Consenting Noteholders and SFC, each acting reasonably;

 

  (w)

SFC, the Monitor and the Initial Consenting Noteholders, each acting reasonably, shall be satisfied with the proposed use of proceeds and payments relating to all aspects of the Restructuring Transaction and the Plan, including, without

 

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  limitation, any change of control payments, consent fees, transaction fees, third party fees or termination or severance payments, in the aggregate of $500,000 or more, payable by SFC or any Subsidiary to any Person (other than a Governmental Entity) in respect of or in connection with the Restructuring Transaction or the Plan, including without limitation, pursuant to any employment agreement or incentive plan of SFC or any Subsidiary;

 

  (x) SFC, the Monitor and the Initial Consenting Noteholders, each acting reasonably, shall be satisfied with the status and composition of all liabilities, indebtedness and obligations of the Subsidiaries and all releases of the Subsidiaries provided for in the Plan and the Sanction Order shall be binding and effective as of the Plan Implementation Date;

Plan Implementation Date Matters

 

  (y) the steps required to complete and implement the Plan shall be in form and in substance satisfactory to SFC and the Initial Consenting Noteholders;

 

  (z) the Noteholders and the Early Consent Noteholders shall receive, on the Plan Implementation Date, all of the consideration to be distributed to them pursuant to the Plan;

 

  (aa) all of the following shall be in form and in substance satisfactory to SFC and the Initial Consenting Noteholders: (i) all materials filed by SFC with the Court or any court of competent jurisdiction in the United States, Canada, Hong Kong, the PRC or any other jurisdiction that relates to the Restructuring Transaction; (ii) the terms of any court-imposed charges on any of the assets, property or undertaking of any of SFC, including without limitation any of the Charges; (iii) the Initial Order; (iv) the Claims Procedure Order; (v) the Meeting Order; (vi) the Sanction Order; (vii) any other Order granted in connection with the CCAA Proceeding or the Restructuring Transaction by the Court or any other court of competent jurisdiction in Canada, the United States, Hong Kong, the PRC or any other jurisdiction; and (viii) the Plan (as it is approved by the Required Majority and the Sanction Order);

 

  (bb) any and all court-imposed charges on any assets, property or undertaking of SFC, including the Charges, shall be discharged on the Plan Implementation Date on terms acceptable to the Initial Consenting Noteholders and SFC, each acting reasonably;

 

  (cc) SFC shall have paid, in full, the Expense Reimbursement and all fees and costs owing to the SFC Advisors on the Plan Implementation Date, and neither Newco nor Newco II shall have any liability for any fees or expenses due to the SFC Advisors or the Noteholder Advisors either as at or following the Plan Implementation Date;

 

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  (dd) SFC or the Subsidiaries shall have paid, in full all fees owing to each of Chandler Fraser Keating Limited and Spencer Stuart on the Plan Implementation Date, and neither Newco nor Newco II shall have any liability for any fees or expenses due to either Chandler Fraser Keating Limited and Spencer Stuart as at or following the Plan Implementation Date;

 

  (ee) SFC shall have paid all Trustee Claims that are outstanding as of the Plan Implementation Date, and the Initial Consenting Noteholders shall be satisfied that SFC has made adequate provision in the Unaffected Claims Reserve for the payment of all Trustee Claims to be incurred by the Trustees after the Plan Implementation Date in connection with the performance of their respective duties under the Note Indentures or this Plan;

 

  (ff) there shall not exist or have occurred any Material Adverse Effect, and SFC shall have provided the Initial Consenting Noteholders with a certificate signed by an officer of the Company, without any personal liability on the part of such officer, certifying compliance with this section 9.1(ff) as of the Plan Implementation Date;

 

  (gg) there shall have been no breach of the Noteholder Confidentiality Agreements (as defined in the RSA) by SFC or any of the Sino-Forest Representatives (as defined therein) in respect of the applicable Initial Consenting Noteholder;

 

  (hh) the Plan Implementation Date shall have occurred no later than January 15, 2013 (or such later date as may be consented to by SFC and the Initial Consenting Noteholders);

RSA Matters

 

  (ii) all conditions set out in sections 6 and 7 of the RSA shall have been satisfied or waived in accordance with the terms of the RSA;

 

  (jj) the RSA shall not have been terminated;

Other Matters

 

  (kk) the organization, incorporating documents, articles, by-laws and other constating documents of SFC Escrow Co. and all definitive legal documentation in connection with SFC Escrow Co., shall be acceptable to the Initial Consenting Noteholders and the Monitor and in form and in substance reasonably satisfactory to SFC;

 

  (ll) except as expressly set out in this Plan, SFC Escrow Co. shall not have: (i) issued or authorized the issuance of any shares, notes, options, warrants or other securities of any kind, (ii) become subject to any Encumbrance with respect to its assets or property; (iii) acquired any assets or become liable to pay any indebtedness or liability of any kind (other than as expressly set out in this Plan); or (iv) entered into any agreement;

 

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  (mm) the Initial Consenting Noteholders shall have completed due diligence in respect of SFC and the Subsidiaries and the results of such due diligence shall be acceptable to the Initial Consenting Noteholders prior to the date for the hearing of the Sanction Order, except in respect of any new material information or events arising or discovered on or after the date of the hearing for the Sanction Order of which the Initial Consenting Noteholders were previously unaware, in respect of which the date for the Initial Consenting Noteholders to complete such due diligence shall be the Plan Implementation Date, provided that “new material information or events” for purposes of this Section 9.1(mm) shall not include any information or events disclosed prior to the date of the hearing for the Sanction Order in a press release issued by SFC, an affidavit filed with the Court by SFC or a Monitor’s Report filed with the Court;

 

  (nn) if so requested by the Initial Consenting Noteholders, the Sanction Order shall have been recognized and confirmed as binding and effective pursuant to an order of a court of competent jurisdiction in Canada and any other jurisdiction requested by the Initial Consenting Noteholders, and all applicable appeal periods in respect of any such recognition order shall have expired and any appeals therefrom shall have been disposed of by the applicable appellate court;

 

  (oo) all press releases, disclosure documents and definitive agreements in respect of the Restructuring Transaction or the Plan shall be in form and substance satisfactory to SFC and the Initial Consenting Noteholders, each acting reasonably; and

 

  (pp) Newco and SFC shall have entered into arrangements reasonably satisfactory to SFC and the Initial Consenting Noteholders for ongoing preservation and access to the books and records of SFC and the Subsidiaries in existence as at the Plan Implementation Date, as such access may be reasonably requested by SFC or any Director or Officer in the future in connection with any administrative or legal proceeding, in each such case at the expense of the Person making such request.

For greater certainty, nothing in Article 11 hereof is a condition precedent to the implementation of the Plan.

9.2 Monitor’s Certificate of Plan Implementation

Upon delivery of written notice from SFC and Goodmans LLP (on behalf of the Initial Consenting Noteholders) of the satisfaction of the conditions set out in section 9.1, the Monitor shall deliver to Goodmans LLP and SFC a certificate stating that the Plan Implementation Date has occurred and that the Plan and the Sanction Order are effective in accordance with their respective terms. Following the Plan Implementation Date, the Monitor shall file such certificate with the Court.

 

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ARTICLE 10

ALTERNATIVE SALE TRANSACTION

10.1 Alternative Sale Transaction

At any time prior to the Plan Implementation Date (whether prior to or after the granting of the Sanction Order), and subject to the prior written consent of the Initial Consenting Noteholders, SFC may complete a sale of all or substantially all of the SFC Assets on terms that are acceptable to the Initial Consenting Noteholders (an “ Alternative Sale Transaction ”), provided that such Alternative Sale Transaction has been approved by the Court pursuant to section 36 of the CCAA on notice to the service list. In the event that such an Alternative Sale Transaction is completed, the terms and conditions of this Plan shall continue to apply in all respects, subject to the following:

 

  (a) The Newco Shares and Newco Notes shall not be distributed in the manner contemplated herein. Instead, the consideration paid or payable to SFC pursuant to the Alternative Sale Transaction (the “ Alternative Sale Transaction Consideration ”) shall be distributed to the Persons entitled to receive Newco Shares hereunder, and such Persons shall receive the Alternative Sale Transaction Consideration in the same proportions and subject to the same terms and conditions as are applicable to the distribution of Newco Shares hereunder.

 

  (b) All provisions in this Plan that address Newco or Newco II shall be deemed to be ineffective to the extent that they address Newco or Newco II, given that Newco and Newco II will not be required in connection with an Alternative Sale Transaction.

 

  (c) All provisions addressing the Newco Notes shall be deemed to be ineffective to the extent such provisions address the Newco Notes, given that the Newco Notes will not be required in connection with an Alternative Sale Transaction.

 

  (d) All provisions relating to the Newco Shares shall be deemed to address the Alternative Sale Transaction Consideration to the limited extent such provisions address the Newco Shares.

 

  (e) SFC, with the written consent of the Monitor and the Initial Consenting Noteholders, shall be permitted to make such amendments, modifications and supplements to the terms and conditions of this Plan as are necessary to: (i) facilitate the Alternative Sale Transaction; (ii) cause the Alternative Sale Transaction Consideration to be distributed in the same proportions and subject to the same terms and conditions as are subject to the distribution of Newco Shares hereunder; and (iii) complete the Alternative Sale Transaction and distribute the Alternative Sale Transaction Proceeds in a manner that is tax efficient for SFC and the Affected Creditors with Proven Claims, provided in each case that (y) a copy of such amendments, modifications or supplements is filed with the Court and served upon the service list; and (z) the Monitor is satisfied that such amendments, modifications or supplements do not materially alter the proportionate entitlements of the Affected Creditors, as amongst themselves, to the consideration distributed pursuant to the Plan.

 

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Except for the requirement of obtaining the prior written consent of the Initial Consenting Noteholders with respect to the matters set forth in this section 10.1 and subject to the approval of the Alternative Sale Transaction by the Court pursuant to section 36 of the CCAA (on notice to the service list), once this Plan has been approved by the Required Majority of Affected Creditors, no further meeting, vote or approval of the Affected Creditors shall be required to enable SFC to complete an Alternative Sale Transaction or to amend the Plan in the manner described in this 10.1.

ARTICLE 11

SETTLEMENT OF CLAIMS AGAINST THIRD PARTY DEFENDANTS

11.1 Ernst & Young

 

  (a) Notwithstanding anything to the contrary herein, subject to: (i) the granting of the Sanction Order; (ii) the issuance of the Settlement Trust Order (as may be modified in a manner satisfactory to the parties to the Ernst & Young Settlement and SFC (if occurring on or prior to the Plan Implementation Date), the Monitor and the Initial Consenting Noteholders, as applicable, to the extent, if any, that such modifications affect SFC, the Monitor or the Initial Consenting Noteholders, each acting reasonably); (iii) the granting of an Order under Chapter 15 of the United States Bankruptcy Code recognizing and enforcing the Sanction Order and the Settlement Trust Order in the United States; (iv) any other order necessary to give effect to the Ernst & Young Settlement (the orders referenced in (iii) and (iv) being collectively the “ Ernst & Young Orders ”); (v) the fulfillment of all conditions precedent in the Ernst & Young Settlement and the fulfillment by the Ontario Class Action Plaintiffs of all of their obligations thereunder; and (vi) the Sanction Order, the Settlement Trust Order and all Ernst & Young Orders being final orders and not subject to further appeal or challenge, Ernst & Young shall pay the settlement amount as provided in the Ernst & Young Settlement to the trust established pursuant to the Settlement Trust Order (the “ Settlement Trust ”). Upon receipt of a certificate from Ernst & Young confirming it has paid the settlement amount to the Settlement Trust in accordance with the Ernst & Young Settlement and the trustee of the Settlement Trust confirming receipt of such settlement amount, the Monitor shall deliver to Ernst & Young a certificate (the “ Monitor’s Ernst & Young Settlement Certificate ”) stating that (i) Ernst & Young has confirmed that the settlement amount has been paid to the Settlement Trust in accordance with the Ernst & Young Settlement; (ii) the trustee of the Settlement Trust has confirmed that such settlement amount has been received by the Settlement Trust; and (iii) the Ernst & Young Release is in full force and effect in accordance with the Plan. The Monitor shall thereafter file the Monitor’s Ernst & Young Settlement Certificate with the Court.

 

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  (b) Notwithstanding anything to the contrary herein, upon receipt by the Settlement Trust of the settlement amount in accordance with the Ernst & Young Settlement: (i) all Ernst & Young Claims shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled, barred and deemed satisfied and extinguished as against Ernst & Young; (ii) section 7.3 hereof shall apply to Ernst & Young and the Ernst & Young Claims mutatis mutandis on the Ernst & Young Settlement Date; and (iii) none of the plaintiffs in the Class Actions shall be permitted to claim from any of the other Third Party Defendants that portion of any damages that corresponds to the liability of Ernst & Young, proven at trial or otherwise, that is the subject of the Ernst & Young Settlement.

 

  (c) In the event that the Ernst & Young Settlement is not completed in accordance with its terms, the Ernst & Young Release and the injunctions described in section 11.1(b) shall not become effective.

11.2 Named Third Party Defendants

 

  (a) Notwithstanding anything to the contrary in section 12.5(a) or 12.5(b) hereof, at any time prior to 10:00 a.m. (Toronto time) on December 6, 2012 or such later date as agreed in writing by the Monitor, SFC (if on or prior to the Plan Implementation Date) and the Initial Consenting Noteholders, Schedule “A” to this Plan may be amended, restated, modified or supplemented at any time and from time to time to add any Eligible Third Party Defendant as a “Named Third Party Defendant”, subject in each case to the prior written consent of such Third Party Defendant, the Initial Consenting Noteholders, counsel to the Ontario Class Action Plaintiffs, the Monitor and, if occurring on or prior to the Plan Implementation Date, SFC. Any such amendment, restatement, modification and/or supplement of Schedule “A” shall be deemed to be effective automatically upon all such required consents being received. The Monitor shall: (A) provide notice to the service list of any such amendment, restatement, modification and/or supplement of Schedule “A”; (B) file a copy thereof with the Court; and (C) post an electronic copy thereof on the Website. All Affected Creditors shall be deemed to consent thereto any and no Court Approval thereof will be required.

 

  (b)

Notwithstanding anything to the contrary herein, subject to: (i) the granting of the Sanction Order; (ii) the granting of the applicable Named Third Party Defendant Settlement Order; and (iii) the satisfaction or waiver of all conditions precedent contained in the applicable Named Third Party Defendant Settlement, the applicable Named Third Party Defendant Settlement shall be given effect in accordance with its terms. Upon receipt of a certificate (in form and in substance satisfactory to the Monitor) from each of the parties to the applicable Named Third Party Defendant Settlement confirming that all conditions precedent thereto have been satisfied or waived, and that any settlement funds have been paid and received, the Monitor shall deliver to the applicable Named Third Party Defendant a certificate (the “ Monitor’s Named Third Party Settlement Certificate ”) stating that (i) each of the parties to such Named Third Party Defendant Settlement has confirmed that all conditions precedent thereto have been satisfied or waived; (ii) any settlement funds have been paid and received; and (iii) immediately upon the delivery of the Monitor’s Named Third Party

 

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  Settlement Certificate, the applicable Named Third Party Defendant Release will be in full force and effect in accordance with the Plan. The Monitor shall thereafter file the Monitor’s Named Third Party Settlement Certificate with the Court.

 

  (c) Notwithstanding anything to the contrary herein, upon delivery of the Monitor’s Named Third Party Settlement Certificate, any claims and Causes of Action shall be dealt with in accordance with the terms of the applicable Named Third Party Defendant Settlement, the Named Third Party Defendant Settlement Order and the Named Third Party Defendant Release. To the extent provided for by the terms of the applicable Named Third Party Defendant Release: (i) the applicable Causes of Action against the applicable Named Third Party Defendant shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled, barred and deemed satisfied and extinguished as against the applicable Named Third Party Defendant; and (ii) section 7.3 hereof shall apply to the applicable Named Third Party Defendant and the applicable Causes of Action against the applicable Named Third Party Defendant mutatis mutandis on the effective date of the Named Third Party Defendant Settlement.

ARTICLE 12

GENERAL

12.1 Binding Effect

On the Plan Implementation Date:

 

  (a) the Plan will become effective at the Effective Time;

 

  (b) the Plan shall be final and binding in accordance with its terms for all purposes on all Persons named or referred to in, or subject to, the Plan and their respective heirs, executors, administrators and other legal representatives, successors and assigns;

 

  (c) each Person named or referred to in, or subject to, the Plan will be deemed to have consented and agreed to all of the provisions of the Plan, in its entirety and shall be deemed to have executed and delivered all consents, releases, assignments and waivers, statutory or otherwise, required to implement and carry out the Plan in its entirety.

12.2 Waiver of Defaults

 

  (a)

From and after the Plan Implementation Date, all Persons shall be deemed to have waived any and all defaults of SFC then existing or previously committed by SFC, or caused by SFC, the commencement of the CCAA Proceedings by SFC, any matter pertaining to the CCAA Proceedings, any of the provisions in the Plan or steps contemplated in the Plan, or non-compliance with any covenant, warranty, representation, term, provision, condition or obligation, expressed or implied, in any contract, instrument, credit document, indenture, note, lease,

 

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  guarantee, agreement for sale or other agreement, written or oral, and any and all amendments or supplements thereto, existing between such Person and SFC, and any and all notices of default and demands for payment or any step or proceeding taken or commenced in connection therewith under any such agreement shall be deemed to have been rescinded and of no further force or effect, provided that nothing shall be deemed to excuse SFC from performing its obligations under the Plan or be a waiver of defaults by SFC under the Plan and the related documents.

 

  (b) Effective on the Plan Implementation Date, any and all agreements that are assigned to Newco and/or to Newco II as part of the SFC Assets shall be and remain in full force and effect, unamended, as at the Plan Implementation Date, and no Person shall, following the Plan Implementation Date, accelerate, terminate, rescind, refuse to perform or otherwise repudiate its obligations under, or enforce or exercise any right (including any right of set-off, dilution or other remedy) or make any demand against Newco, Newco II or any Subsidiary under or in respect of any such agreement with Newco, Newco II or any Subsidiary, by reason of:

 

  (i) any event that occurred on or prior to the Plan Implementation Date that would have entitled any Person thereto to enforce those rights or remedies (including defaults or events of default arising as a result of the insolvency of SFC);

 

  (ii) the fact that SFC commenced or completed the CCAA Proceedings;

 

  (iii) the implementation of the Plan, or the completion of any of the steps, transactions or things contemplated by the Plan; or

 

  (iv) any compromises, arrangements, transactions, releases, discharges or injunctions effected pursuant to the Plan or this Order.

12.3 Deeming Provisions

In the Plan, the deeming provisions are not rebuttable and are conclusive and irrevocable.

12.4 Non-Consummation

SFC reserves the right to revoke or withdraw the Plan at any time prior to the Sanction Date, with the consent of the Monitor and the Initial Consenting Noteholders. If SFC so revokes or withdraws the Plan, or if the Sanction Order is not issued or if the Plan Implementation Date does not occur, (a) the Plan shall be null and void in all respects, (b) any settlement or compromise embodied in the Plan, including the fixing or limiting to an amount certain any Claim, and any document or agreement executed pursuant to the Plan shall be deemed null and void, and (c) nothing contained in the Plan, and no acts taken in preparation for consummation of the Plan, shall (i) constitute or be deemed to constitute a waiver or release of any Claims by or against SFC or any other Person; (ii) prejudice in any manner the rights of SFC or any other Person in any further proceedings involving SFC; or (iii) constitute an admission of any sort by SFC or any other Person.

 

- 80 -

12.5 Modification of the Plan

 

  (a) SFC may, at any time and from time to time, amend, restate, modify and/or supplement the Plan with the consent of the Monitor and the Initial Consenting Noteholders, provided that: any such amendment, restatement, modification or supplement must be contained in a written document that is filed with the Court and:

 

  (i) if made prior to or at the Meeting: (A) the Monitor, SFC or the Chair (as defined in the Meeting Order) shall communicate the details of any such amendment, restatement, modification and/or supplement to Affected Creditors and other Persons present at the Meeting prior to any vote being taken at the Meeting; (B) SFC shall provide notice to the service list of any such amendment, restatement, modification and/or supplement and shall file a copy thereof with the Court forthwith and in any event prior to the Court hearing in respect of the Sanction Order; and (C) the Monitor shall post an electronic copy of such amendment, restatement, modification and/or supplement on the Website forthwith and in any event prior to the Court hearing in respect of the Sanction Order; and

 

  (ii) if made following the Meeting: (A) SFC shall provide notice to the service list of any such amendment, restatement, modification and/or supplement and shall file a copy thereof with the Court; (B) the Monitor shall post an electronic copy of such amendment, restatement, modification and/or supplement on the Website; and (C) such amendment, restatement, modification and/or supplement shall require the approval of the Court following notice to the Affected Creditors and the Trustees.

 

  (b) Notwithstanding section 12.5(a), any amendment, restatement, modification or supplement may be made by SFC: (i) if prior to the Sanction Date, with the consent of the Monitor and the Initial Consenting Noteholders; and (ii) if after the Sanction Date, with the consent of the Monitor and the Initial Consenting Noteholders and upon approval by the Court, provided in each case that it concerns a matter that, in the opinion of SFC, acting reasonably, is of an administrative nature required to better give effect to the implementation of the Plan and the Sanction Order or to cure any errors, omissions or ambiguities and is not materially adverse to the financial or economic interests of the Affected Creditors or the Trustees.

 

  (c) Any amended, restated, modified or supplementary plan or plans of compromise filed with the Court and, if required by this section, approved by the Court, shall, for all purposes, be and be deemed to be a part of and incorporated in the Plan.

12.6 Actions and Approvals of SFC after Plan Implementation

 

  (a) From and after the Plan Implementation Date, and for the purpose of this Plan only:

 

- 81 -

  (i) if SFC does not have the ability or the capacity pursuant to Applicable Law to provide its agreement, waiver, consent or approval to any matter requiring SFC’s agreement, waiver, consent or approval under this Plan, such agreement, waiver consent or approval may be provided by the Monitor; and

 

  (ii) if SFC does not have the ability or the capacity pursuant to Applicable Law to provide its agreement, waiver, consent or approval to any matter requiring SFC’s agreement, waiver, consent or approval under this Plan, and the Monitor has been discharged pursuant to an Order, such agreement, waiver consent or approval shall be deemed not to be necessary.

12.7 Consent of the Initial Consenting Noteholders

For the purposes of this Plan, any matter requiring the agreement, waiver, consent or approval of the Initial Consenting Noteholders shall be deemed to have been agreed to, waived, consented to or approved by such Initial Consenting Noteholders if such matter is agreed to, waived, consented to or approved in writing by Goodmans LLP, provided that Goodmans LLP expressly confirms in writing (including by way of e-mail) to the applicable Person that it is providing such agreement, consent or waiver on behalf of Initial Consenting Noteholders. In addition, following the Plan Implementation Date, any matter requiring the agreement, waiver, consent or approval of the Initial Consenting Noteholders shall: (i) be deemed to have been given if agreed to, waived, consented to or approved by Initial Consenting Noteholders in their capacities as holders of Newco Shares, Newco Notes or Litigation Trust Interests (provided that they continue to hold such consideration); and (ii) with respect to any matter concerning the Litigation Trust or the Litigation Trust Claims, be deemed to be given if agreed to, waived, consented to or approved by the Litigation Trustee.

12.8 Claims Not Subject to Compromise

Nothing in this Plan, including section 2.4 hereof, shall prejudice, compromise, release, discharge, cancel, bar or otherwise affect any: (i) Non-Released D&O Claims (except to the extent that such Non-Released D&O Claim is asserted against a Named Director or Officer, in which case section 4.9(g) applies); (ii) Section 5.1(2) D&O Claims or Conspiracy Claims (except that, in accordance with section 4.9(e) hereof, any Section 5.1(2) D&O Claims against Named Directors and Officers and any Conspiracy Claims against Named Directors and Officers shall be limited to recovery from any insurance proceeds payable in respect of such Section 5.1(2) D&O Claims or Conspiracy Claims, as applicable, pursuant to the Insurance Policies, and Persons with any such Section 5.1(2) D&O Claims against Named Directors and Officers or Conspiracy Claims against Named Directors and Officers shall have no right to, and shall not, make any claim or seek any recoveries from any Person, other than enforcing such Persons’ rights to be paid from the proceeds of an Insurance Policy by the applicable insurer(s)); or (iii) any Claims that are not permitted to be compromised under section 19(2) of the CCAA .

 

- 82 -

12.9 Paramountcy

From and after the Effective Time on the Plan Implementation Date, any conflict between:

 

  (a) the Plan; and

 

  (b) the covenants, warranties, representations, terms, conditions, provisions or obligations, expressed or implied, of any contract, mortgage, security agreement, indenture, trust indenture, note, loan agreement, commitment letter, agreement for sale, lease or other agreement, written or oral and any and all amendments or supplements thereto existing between any Person and SFC and/or the Subsidiaries as at the Plan Implementation Date,

will be deemed to be governed by the terms, conditions and provisions of the Plan and the Sanction Order, which shall take precedence and priority.

12.10 Foreign Recognition

 

  (a) From and after the Plan Implementation Date, if requested by the Initial Consenting Noteholders or Newco, the Monitor (at the Monitor’s election) or Newco (if the Monitor does not so elect) shall and is hereby authorized to seek an order of any court of competent jurisdiction recognizing the Plan and the Sanction Order and confirming the Plan and the Sanction Order as binding and effective in Canada, the United States, and any other jurisdiction so requested by the Initial Consenting Noteholders or Newco, as applicable.

 

  (b) Without limiting the generality of section 12.10(a), as promptly as practicable, but in no event later than the third Business Day following the Plan Implementation Date, a foreign representative of SFC (as agreed by SFC, the Monitor and the Initial Consenting Noteholders) (the “ Foreign Representative ”) shall commence a proceeding in a court of competent jurisdiction in the United States seeking recognition of the Plan and the Sanction Order and confirming that the Plan and the Sanction Order are binding and effective in the United States, and the Foreign Representative shall use its best efforts to obtain such recognition order.

12.11 Severability of Plan Provisions

If, prior to the Sanction Date, any term or provision of the Plan is held by the Court to be invalid, void or unenforceable, the Court, at the request of SFC and with the consent of the Monitor and the Initial Consenting Noteholders, shall have the power to either (a) sever such term or provision from the balance of the Plan and provide SFC with the option to proceed with the implementation of the balance of the Plan as of and with effect from the Plan Implementation Date, or (b) alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision shall then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, and provided that SFC proceeds with the implementation of the Plan, the remainder of the terms and provisions of the Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated by such holding, alteration or interpretation.

 

- 83 -

12.12 Responsibilities of the Monitor

The Monitor is acting in its capacity as Monitor in the CCAA Proceeding and the Plan with respect to SFC and will not be responsible or liable for any obligations of SFC.

12.13 Different Capacities

Persons who are affected by this Plan may be affected in more than one capacity. Unless expressly provided herein to the contrary, a Person will be entitled to participate hereunder, and will be affected hereunder, in each such capacity. Any action taken by or treatment of a Person in one capacity will not affect such Person in any other capacity, unless expressly agreed by the Person, SFC, the Monitor and the Initial Consenting Noteholders in writing, or unless the Person’s Claims overlap or are otherwise duplicative.

12.14 Notices

Any notice or other communication to be delivered hereunder must be in writing and reference the Plan and may, subject as hereinafter provided, be made or given by personal delivery, ordinary mail or by facsimile or email addressed to the respective parties as follows:

 

  (a) if to SFC or any Subsidiary:

Sino-Forest Corporation

Room 3815-29 38/F, Sun Hung Kai Centre

30 Harbour Road, Wanchai, Hong Kong

 

  Attention: Mr. Judson Martin, Executive Vice-Chairman and Chief Executive Officer
  Fax: +852-2877-0062

with a copy by email or fax (which shall not be deemed notice) to:

Bennett Jones LLP

One First Canadian Place, Suite 3400

Toronto, ON M5X 1A4

 

  Attention: Kevin J. Zych and Raj S. Sahni
  Email: zychk@bennettjones.com and sahnir@bennettjones.com
  Fax: 416-863-1716

 

- 84 -

  (b) if to the Initial Consenting Noteholders:

c/o Goodmans LLP

Bay Adelaide Centre

333 Bay Street, Suite 3400

Toronto, Ontario M5H 2S7

 

  Attention: Robert Chadwick and Brendan O’Neill
  Email: rchadwick@goodmans.ca and boneill@goodmans.ca
  Fax: 416-979-1234

and with a copy by email or fax (which shall not be deemed notice) to:

Hogan Lovells International LLP

11 th Floor, One Pacific Place, 88 Queensway

Hong Kong China

 

  Attention: Neil McDonald
  Email: neil.mcdonald@hoganlovells.com
  Fax: 852-2219-0222

 

  (c) if to the Monitor:

FTI Consulting Canada Inc.

TD Waterhouse Tower

79 Wellington Street West

Suite 2010, P.O. Box 104

Toronto, ON M5K 1G8

 

  Attention: Greg Watson
  Email: greg.watson@fticonsulting.com
  Fax: (416) 649-8101

and with a copy by email or fax (which shall not be deemed notice) to:

Gowling Lafleur Henderson LLP

1 First Canadian Place

100 King Street West, Suite 1600

Toronto, Ontario M5X 1G5

 

  Attention: Derrick Tay
  Email: derrick.tay@gowlings.com
  Fax: (416) 862-7661

 

  (d) if to Ernst & Young:

Ernst & Young LLP

Ernst & Young Tower

222 Bay Street

P.O. Box 251

Toronto, ON M5K 1J7

 

- 85 -

  Attention: Doris Stamml
  Email: doris.stamml@ca.ey.com
  Fax: (416) 943-[TBD]

and with a copy by email or fax (which shall not be deemed notice) to:

Lenczner Slaght Royce Smith Griffin

130 Adelaide Street West, Suite 2600

Toronto, Ontario M5H 3P5

 

  Attention: Peter Griffin
  Email: pgriffin@litigate.com
  Fax: (416) 865-2921

or to such other address as any party may from time to time notify the others in accordance with this section. Any such communication so given or made shall be deemed to have been given or made and to have been received on the day of delivery if delivered, or on the day of faxing or sending by other means of recorded electronic communication, provided that such day in either event is a Business Day and the communication is so delivered, faxed or sent before 5:00 p.m. (Toronto time) on such day. Otherwise, such communication shall be deemed to have been given and made and to have been received on the next following Business Day.

12.15 Further Assurances

SFC, the Subsidiaries and any other Person named or referred to in the Plan will execute and deliver all such documents and instruments and do all such acts and things as may be necessary or desirable to carry out the full intent and meaning of the Plan and to give effect to the transactions contemplated herein.

DATED as of the 3 rd day of December, 2012.

 

- 86 -

SCHEDULE A

NAMED THIRD PARTY DEFENDANTS

 

  1. The Underwriters, together with their respective present and former affiliates, partners, associates, employees, servants, agents, contractors, directors, officers, insurers and successors, administrators, heirs and assigns, excluding any Director or Officer and successors, administrators, heirs and assigns of any Director or Officer in their capacity as such.

 

  2. Ernst & Young LLP (Canada), Ernst & Young Global Limited and all other member firms thereof, together with their respective present and former affiliates, partners, associates, employees, servants, agents, contractors, directors, officers, insurers and successors, administrators, heirs and assigns, excluding any Director or Officer and successors, administrators, heirs and assigns of any Director or Officer in their capacity as such, in the event that the Ernst & Young Settlement is not completed.

 

  3. BDO Limited, together with its respective present and former affiliates, partners, associates, employees, servants, agents, contractors, directors, officers, insurers and successors, administrators, heirs and assigns, excluding any Director or Officer and successors, administrators, heirs and assigns of any Director or Officer in their capacity as such.

Schedule “B”

FORM OF MONITOR’S CERTIFICATE OF PLAN IMPLEMENTATION

Court File No. CV-12-9667-00CL

ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

IN THE MATTER OF THE COMPANIES’ CREDITORS

ARRANGEMENT ACT , R.S.C. 1985, c. C-36, AS AMENDED

AND IN THE MATTER OF A PLAN OF COMPROMISE OR

ARRANGEMENT OF SINO-FOREST CORPORATION

MONITOR’S CERTIFICATE

(Plan Implementation)

All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Plan of Compromise and Reorganization of Sino-Forest Corporation (“ SFC ”) dated December 3, 2012 (the “ Plan ”), which is attached as Schedule “A” to the Order of the Honourable Mr. Justice Morawetz made in these proceedings on the [ 7 th ] day of December, 2012 (the “ Order ”), as such Plan may be further amended, varied or supplemented from time to time in accordance with the terms thereof.

Pursuant to paragraph 12 of the Order, FTI Consulting Canada Inc. (the “ Monitor ”) in its capacity as Court-appointed Monitor of SFC delivers to SFC and Goodmans LLP this certificate and hereby certifies that:

1. The Monitor has received written notice from SFC and Goodmans LLP (on behalf of the Initial Consenting Noteholders) that the conditions precedent set out in section 9.1 of the Plan have been satisfied or waived in accordance with the terms of the Plan; and

2. The Plan Implementation Date has occurred and the Plan and the Plan Sanction Order are effective in accordance with their terms.

 

22

DATED at the City of Toronto, in the Province of Ontario, this         day of         , 201    .

 

FTI CONSULTING CANADA INC., in its capacity as Court-appointed Monitor of the Sino-Forest Corporation and not in its personal capacity
By:    
  Name:
  Title:

 

23

Schedule “C”

 

24

LOGO

 

Industry   Canada

Canada Business

Corporations Act

 

Industrie Canada

Lol canadlenne sur les sociétés par actions

  

FORM 14

ARTICLES OF REORGANIZATION

(SECTION 191)

  

FORMULAIRE 14

CLAUSES DE RÉORGANISATION

(ARTICLE 191)

1 —    Name of Corporation - Dénomination sociale de la société

 

Sino-Forest Corporation

  

2 — Corporation No. - N° de la société

 

409023-3

3 —    in accordance with the order for reorganization, the articles of Incorporation are amended as follows:

   Conformément à l’ordonnance de réorganisation, les statuts constitutifs sont modifiés comme sult :

Please see Schedule A attached hereto.

 

 

Signature    Printed Name - Nom en lettres moulées    4 — Capacity of - En qualité de    5 — Tel. N°. - N° de tél.

FOR DEPARTMENTAL USE ONLY - ALUSAGE DU MINISTERE SEULEMENT

 

IC3409 (2003/06)    LOGO

Schedule A

3. In accordance with the order for reorganization, the articles of continuance of the Corporation dated June 25, 2002, as amended by articles of amendment dated June 22, 2004, are amended as follows:

(a) to decrease the minimum number of directors of the Corporation from three (3) directors to one (1) director;

(b) to create a new class of shares consisting of an unlimited number of “Class A Common Shares” having the following rights, privileges, restrictions and conditions:

The holders of Class A Common Shares are entitled:

(i) to two (2) votes per Class A Common Share at any meeting of shareholders of the Corporation, except meetings at which only holders of a specified class of shares are entitled to vote;

(ii) subject to the rights, privileges, restrictions and conditions attaching to shares of any other class or series of shares of the Corporation, to receive the remaining property of the Corporation upon dissolution pro rata with the holders of the Common Shares; and

(iii) subject to the rights, privileges, restrictions and conditions attaching to shares of any other class or series of shares of the Corporation, to receive any dividend declared by the directors of the Corporation and payable on the Class A Common Shares.

(c) to delete the rights, privileges, restrictions and conditions attaching to the Common Shares and to substitute therefor the following:

(1) The holders of Common Shares are entitled:

(i) to one (1) vote per Common Share at any meeting of shareholders of the Corporation, except meetings at which only holders of a specified class of shares are entitled to vote;

(ii) subject to the rights, privileges, restrictions and conditions attaching to shares of any other class or series of shares of the Corporation, to receive the remaining property of the Corporation upon dissolution pro rata with the holders of the Class A Common Shares; and

(iii) subject to the rights, privileges, restrictions and conditions attaching to shares of any other class or series of shares of the Corporation, to receive any dividend declared by the directors of the Corporation and payable on the Common Shares,

(2) At a time to be determined by the board of directors of the Corporation, the Common Shares shall be cancelled and eliminated for no consideration whatsoever, and shall be of no further force and effect, whether surrendered for cancellation or otherwise, and the obligation of the Corporation thereunder or in any way related thereto shall be deemed to

be satisfied and discharged and the holders of the Common Shares shall have no further rights or interest in the Corporation on account thereof and the rights, privileges, restrictions and conditions attached to the Common Shares shall be deleted,

(d) to confirm that the authorized capital of the Corporation consists of an unlimited number of Class A Common Shares, an unlimited number of Common Shares and an unlimited number of Preference Shares, issuable in series,

Schedule “D”

 

1.      Unaffected Claims Reserve:

  $ 1,500,000   

2.      Unresolved Claims Reserve for Defence Costs:

  $ 8,000,000   

 

25

IN THE MATTER OF THE COMPANIES CREDITORS’ ARRANGEMENT ACT , R.S.C. 1985, c. C-36, AS AMENDED AND IN THE MATTER OF A PLAN OR COMPROMISE OR ARRANGEMENT OF SINO-FOREST CORPORATION

 

   Court File No. CV-12-9667-00CL
  

ONTARIO

        SUPERIOR COURT OF JUSTICE        

(COMMERCIAL LIST)

 

Proceedings commenced in Toronto

   PLAN SANCTION ORDER
  

BENNETT JONES LLP

One First Canadian Place

Suite 3400, P.O. Box 130

Toronto, Ontario

M5X 1A4

 

Rob Staley (LSUC #27115J)

Kevin Zych (LSUC #33129T)

Derek Bell (LSUC #43420J)

Jonathan Bell (LSUC #55457P)

Tel: 416-863-1200

Fax: 416-863-1716

 

Lawyers for Sino-Forest Corporation

Exhibit T3E1

 

LOGO

NOTICE OF MEETING

AND

MEETING INFORMATION STATEMENT

relating to a proposed

PLAN OF COMPROMISE AND REORGANIZATION

under the

COMPANIES’ CREDITORS ARRANGEMENT ACT (CANADA)

and the

CANADA BUSINESS CORPORATIONS ACT

concerning, affecting and involving

SINO-FOREST CORPORATION

October 20, 2012

This meeting information statement is being distributed to creditors of Sino-Forest Corporation in connection with the meeting called to consider the plan of compromise and reorganization proposed by Sino-Forest Corporation which is scheduled to be held at 10:00 a.m. (Toronto time) on November 29, 2012 at the offices of Bennett Jones LLP, 3400 One First Canadian Place, Toronto, Ontario.

These materials require your immediate attention. You should consult your legal, financial, tax or other professional advisors in connection with the contents of these documents.

TABLE OF CONTENTS

 

     Page  

IMPORTANT DISCLAIMERS

     2   

IMPORTANT INFORMATION

     2   

INFORMATION FOR UNITED STATES CREDITORS

     4   

CAUTIONARY NOTICE REGARDING FORWARD LOOKING INFORMATION

     4   

EXCHANGE RATES

     5   

GLOSSARY OF TERMS

     5   

SUMMARY INFORMATION

     23   

INFORMATION REGARDING SINO-FOREST

     30   

Business of Sino-Forest

     30   

Corporate Structure

     30   

Capital Structure

     30   

Business Model

     31   

CCAA PROCEEDINGS AND OTHER MATTERS

     35   

Events Leading to the Commencement of CCAA Proceedings

     35   

Commencement of CCAA Proceedings

     40   

Resignation of External Auditor

     40   

OSC Proceedings

     41   

Sale Solicitation Process

     42   

Effects of MW Report, OSC Allegations and Related Events

     42   

Asset Verification Process

     44   

Equity Claims Motion

     45   

DESCRIPTION OF THE PLAN

     45   

Purpose of the Plan

     45   

Impact of the Plan

     46   

Classification of Creditors

     46   

Treatment of Affected Parties Pursuant to the Plan

     46   

Releases to be Given under the Plan

     52   

Injunctions

     55   

Alternative Sale Transaction

     55   

Effect of the Plan

     56   

INFORMATION REGARDING NEWCO

     56   

DESCRIPTION OF LITIGATION TRUST

     59   

REQUIRED APPROVALS UNDER THE CCAA AND OTHER CONDITIONS TO IMPLEMENTATION

     59   

Creditor Approval

     59   

Court Approval of the Plan under the CCAA

     59   

Conditions to Implementation of Plan

     62   

Regulatory Approvals

     66   

IMPLEMENTATION OF THE PLAN

     68   

Timing of Implementation

     68   

Implementation Steps

     68   

Distributions under the Plan

     72   

LIQUIDATION ASSESSMENT

     78   

STATUS OF CLAIMS PROCESS

     78   

MONITOR

     78   

 

-i-

TABLE OF CONTENTS

(continued)

 

     Page  

RECOMMENDATION OF THE BOARD OF DIRECTORS

     78   

SUPPORT OF THE NOTEHOLDERS

     80   

MEETING AND VOTING

     80   

Meeting Order

     80   

Procedure for the Meeting

     80   

Classification of Creditors

     81   

Entitlement to Vote

     81   

Solicitation of Proxies

     82   

Appointment of Proxyholders and Voting

     82   

Revocation of Proxies

     83   

Advice to Beneficial Holders

     83   

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

     84   

Residents of Canada

     85   

Noteholders

     85   

CERTAIN REGULATORY MATTERS RELATING TO THE PLAN

     87   

Canada

     87   

United States

     87   

RISK FACTORS

     88   

Risks Relating to Non-Implementation of the Plan

     88   

Risks Relating to the Plan and its Implementation

     88   

Risks Related to Securities of Newco

     91   

Risk Factors Related To Muddy Waters’ and OSC Allegations

     92   

Risks Related To Our Business

     93   

Risks Related to the PRC

     103   

DOCUMENTS INCORPORATED BY REFERENCE

     107   
SCHEDULE ‘A’ – FORM OF RESOLUTION   
SCHEDULE ‘B’ – MEETING ORDER AND ENDORSEMENT   
SCHEDULE ‘C’ – PLAN OF COMPROMISE AND REORGANIZATION   
SCHEDULE ‘D’ – CLAIMS PROCEDURE ORDER   
SCHEDULE ‘E’ – RESTRUCTURING SUPPORT AGREEMENT   

 

-iii-

 

LOGO

NOTICE TO AFFECTED CREDITORS OF SINO-FOREST CORPORATION

NOTICE IS HEREBY GIVEN that a plan of compromise and reorganization (as amended from time to time, the “ Plan ”) has been filed with the Ontario Superior Court of Justice (Commercial List) (the “ Court ”) in respect of Sino-Forest Corporation (the “ Applicant ”) pursuant to the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36, as amended (the “ CCAA ”).

A copy of the Plan is set out as a schedule to the meeting information statement dated October 20, 2012 (the “ Information Statement ”) for the Meeting (as defined below).

NOTICE IS ALSO HEREBY GIVEN that a meeting of Affected Creditors (the “ Meeting ”) will be held at 10:00 a.m. on November 29, 2012 (or such other date as may be set and announced in accordance with the Meeting Order) at the offices of Bennett Jones LLP, 3400 One First Canadian Place, Toronto, Ontario, for the purpose of considering and, if thought advisable, passing, with or without variation, a resolution to approve the Plan (the full text of which resolution is set out as a schedule to the Information Statement) and to transact such other business as may properly come before the Meeting (or any adjournment thereof). The Meeting is being held pursuant to the Order of the Court made on August 31, 2012 (the “ Meeting Order ”). A copy of the Meeting Order is set out as a schedule to the Information Statement. Capitalized terms used but not otherwise defined in this notice have the meaning ascribed to them in the Meeting Order.

The Plan must receive an affirmative vote of the Required Majority in order to be approved by the Affected Creditors. The Required Majority is a majority in number of Affected Creditors with Voting Claims, and two-thirds in value of the Voting Claims held by such Affected Creditors, in each case who vote (in person or by proxy) on the Plan at the Meeting. The Plan must also be sanctioned by a final order of the Court (the “ Sanction Order ”) pursuant to the CCAA. Notice is also hereby given that, if the Plan is approved by the Required Majority at the Meeting, the Sanction Order will be sought in an application before the Court at 10:00 a.m. on December 7, 2012 and December 10, 2012 (or such other date after the Meeting as may be set by the Court), to seek approval of the Plan. If the Plan is approved by the Required Majority and sanctioned by the Court, then, subject to the satisfaction or waiver of the conditions to implementation of the Plan, all Persons referred to in the Plan (including the Affected Creditors) will receive the treatment set out in the Plan.

AMENDMENTS TO THE PLAN

The Applicant may, at any time and from time to time prior to or at the Meeting, amend, restate, modify and/or supplement the Plan, subject to the terms of the Plan, provided that: (i) the Monitor, the Applicant or the Chair shall communicate the details of any such amendment, restatement and/or supplement to all Affected Creditors present at the Meeting prior to any vote being taken at the Meeting; (ii) the Applicant shall provide notice to the service list of any such amendment, restatement and/or supplement and shall file a copy thereof with this Court forthwith and in any event prior to the Sanction Hearing; and (iii) the Monitor shall post an electronic copy of any such amendment, restatement and/or supplement on its website forthwith and in any event prior to the hearing for the Sanction Order.

COMPLETION OF PROXIES

Any Affected Creditor who is entitled to vote at the Meeting and that wishes to vote at the Meeting must complete, sign and return the applicable form of proxy enclosed with the Information Statement in the return envelope provided or by fax at the fax number below or by email in PDF format at the email address below. In order to be effective, a proxy must be deposited with the Monitor, at the address, fax or email below, at any time prior to 5:00 p.m. on the third Business Day before the Meeting (or any adjournment thereof).

The Monitor’s contact information for the purpose of filing forms of proxy and for obtaining any additional information or materials related to the Meeting is:

FTI Consulting Canada Inc.

TD Waterhouse Tower

79 Wellington Street West, Suite 2010

P.O. Box 104

Toronto, Ontario M5K 1G8

Attention: Jodi Porepa

Email: sfc@fticonsulting.com

Tel: (416) 649-8094

This notice is given by the Monitor pursuant to the Meeting Order.

You can also view copies of documents relating to this process on the following website http://cfcanada.fticonsulting.com/sfc/.

Dated at Toronto, Ontario this 20th day of October, 2012.

 

2

 

LOGO

MEETING INFORMATION STATEMENT

relating to a proposed

PLAN OF COMPROMISE AND REORGANIZATION

under the

COMPANIES’ CREDITORS ARRANGEMENT ACT (CANADA)

and the

CANADA BUSINESS CORPORATIONS ACT

concerning, affecting and involving

SINO-FOREST CORPORATION

OCTOBER 20, 2012

IMPORTANT DISCLAIMERS

READERS ARE CAUTIONED THAT INFORMATION CONTAINED IN THIS INFORMATION STATEMENT MAY NOT BE RELIABLE. ON NOVEMBER 15, 2011, THE COMPANY ANNOUNCED THAT IT WAS DEFERRING THE RELEASE OF ITS INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011, BECAUSE CERTAIN ISSUES IDENTIFIED DURING THE REVIEW OF ITS INDEPENDENT COMMITTEE (AS DESCRIBED IN THE REPORTS OF THE INDEPENDENT COMMITTEE), WHICH WAS FORMED TO EXAMINE THE ALLEGATIONS CONTAINED IN THE MW REPORT, COULD NOT BE RESOLVED. ON JANUARY 10, 2012, THE COMPANY ISSUED A PRESS RELEASE CAUTIONING THAT ITS HISTORICAL FINANCIAL STATEMENTS AND RELATED AUDIT REPORTS COULD NOT BE RELIED UPON. ON APRIL 4, 2012, THE COMPANY'S AUDITOR RESIGNED AND A SUCCESSOR AUDITOR HAS NOT BEEN APPOINTED. ON MAY 22, 2012, STAFF OF THE OSC COMMENCED PROCEEDINGS BEFORE THE OSC AGAINST THE COMPANY AND SIX OF ITS FORMER OFFICERS. OSC STAFF ALLEGE THAT THE COMPANY BREACHED ONTARIO SECURITIES LAWS AND ACTED IN A MANNER THAT IS CONTRARY TO THE PUBLIC INTEREST BY PROVIDING INFORMATION TO THE PUBLIC IN DOCUMENTS REQUIRED TO BE FILED OR FURNISHED UNDER ONTARIO SECURITIES LAWS WHICH WAS FALSE OR MISLEADING IN A MATERIAL RESPECT CONTRARY TO SECTION 122 OF THE SECURITIES ACT AND BY ENGAGING OR PARTICIPATING IN ACTS, PRACTICES OR A COURSE OF CONDUCT RELATED TO ITS SECURITIES WHICH IT KNOWS OR REASONABLY OUGHT TO KNOW PERPETUATE A FRAUD ON ANY PERSON OR COMPANY CONTRARY TO SECTION 126.1 OF THE SECURITIES ACT. ON SEPTEMBER 26, 2012, SINO-FOREST ANNOUNCED THAT THE COMPANY HAD RECEIVED A SECOND ENFORCEMENT NOTICE FROM STAFF OF THE OSC, WHICH ADDED A FURTHER ALLEGATION SIMILAR IN NATURE TO THE ALLEGATIONS IN THE STATEMENT OF ALLEGATIONS IN RELATION TO THE COMPANY AND OTHERS POSTED ON THE OSC'S WEBSITE ON MAY 22, 2012. BASED ON THE CONTENTS OF OSC STAFF'S ENFORCEMENT NOTICES AND STATEMENT OF ALLEGATIONS, THE EVIDENCE DISCLOSED BY OSC STAFF, AND ALL OF THE EVIDENCE NOW KNOWN TO THE COMPANY, THERE MAY BE MERIT TO SOME OF THE ALLEGATIONS MADE AGAINST THE SIX FORMER OFFICERS OF THE COMPANY. THAT, IN TURN, COULD IMPACT THE INTEGRITY OF THE COMPANY'S HISTORICAL FINANCIAL AND OTHER DISCLOSURES.

THIS INFORMATION STATEMENT HAS BEEN PREPARED BASED ON THE INFORMATION AVAILABLE TO THE COMPANY AS AT THE DATE HEREOF. GIVEN THE ISSUES IDENTIFIED BY THE INDEPENDENT COMMITTEE WHICH HAVE NOT BEEN RESOLVED AND GIVEN THE SERIOUS NATURE OF THE ALLEGATIONS MADE BY OSC STAFF AND ALL OF THE EVIDENCE NOW KNOWN TO THE COMPANY, NO ASSURANCE CAN BE GIVEN THAT THIS INFORMATION STATEMENT DOES NOT CONTAIN A MISREPRESENTATION OR THAT IT CONTAINS FULL, TRUE AND PLAIN DISCLOSURE OF ALL MATERIAL FACTS RELATING TO THE COMPANY AND ITS SUBSIDIARIES.

THE INFORMATION CONCERNING NEWCO CONTAINED HEREIN IS BASED UPON INFORMATION PROVIDED BY THE NOTEHOLDER ADVISORS. ALTHOUGH THE COMPANY HAS NO KNOWLEDGE THAT WOULD INDICATE THAT ANY STATEMENTS CONTAINED HEREIN RELATING TO NEWCO ARE UNTRUE OR INCOMPLETE, THE COMPANY AND ITS DIRECTORS OR OFFICERS DISCLAIM ANY RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION, OR FOR ANY FAILURE BY THE COMPANY TO DISCLOSE EVENTS OR FACTS THAT MAY HAVE OCCURRED OR WHICH MAY AFFECT THE SIGNIFICANCE OR ACCURACY OF ANY SUCH INFORMATION, BUT WHICH ARE UNKNOWN TO THE COMPANY.

IMPORTANT INFORMATION

SUBJECT TO THE FOREGOING, THIS INFORMATION STATEMENT CONTAINS IMPORTANT INFORMATION THAT SHOULD BE READ BY AFFECTED CREDITORS BEFORE ANY DECISION IS MADE WITH RESPECT TO THE MATTERS REFERRED TO HEREIN.

 

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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE MATTERS TO BE CONSIDERED AT THE MEETING OTHER THAN THOSE CONTAINED IN THIS INFORMATION STATEMENT AND IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION SHOULD BE CONSIDERED AS NOT HAVING BEEN AUTHORIZED AND MUST NOT BE RELIED UPON. THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES DESCRIBED IN THIS INFORMATION STATEMENT, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION, TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS INFORMATION STATEMENT NOR ANY DISTRIBUTION OF THE SECURITIES PURSUANT TO THE PLAN REFERRED TO IN THIS INFORMATION STATEMENT SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS INFORMATION STATEMENT.

Affected Creditors should not construe the contents of this Information Statement as investment, legal or tax advice. An Affected Creditor should consult its own legal, financial, tax or other professional advisors with respect to the legal, tax, business, financial and related consequences of the Plan for such Affected Creditor. In making a decision regarding the Plan, Affected Creditors must rely on their own examination of the SFC Companies and the advice of their own advisors. Affected Creditors should seek advice from their own advisors concerning the income tax consequences of the Plan.

The solicitation presented in this Information Statement does not extend to Affected Creditors residing in jurisdictions where solicitations for proxies under this Information Statement are unlawful, or to Affected Creditors to whom it is unlawful to direct these types of activities. The solicitation for proxies for the implementation of the Plan is being made on the basis of this Information Statement and is subject to the terms and conditions described herein.

Each Affected Creditor must comply with all applicable laws and regulations in force in any jurisdiction in which it participates in the solicitation for proxies for the Resolution approving the Plan, or in which it possesses or distributes this Information Statement, and must obtain any consent, approval or permission required by it for participation in the solicitation for proxies for the Resolution approving the Plan under the laws and regulations in force in any jurisdiction to which it is subject, and none of the SFC Companies or the Monitor nor any of their respective representatives shall have any responsibility therefor.

The information contained in this Information Statement is given as of October 20, 2012, unless otherwise specifically stated, and is subject to change or amendment without notice. Any statement contained in this Information Statement, a document incorporated by reference or referred to in this Information Statement, or any amendment hereof or supplement hereto, is to be considered modified or replaced to the extent that a statement contained herein or in any amendment or supplement or any subsequently filed document modifies or replaces such statement. Any statement so modified or replaced is not to be considered, except as so modified or replaced, to be a part of this Information Statement.

All summaries of and references to certain documents in this Information Statement, including the summary of the Plan in this Information Statement, are qualified in their entirety by reference to the complete text of each of those documents. Copies of documents referred to herein are either attached as Schedules hereto or will be made available to Affected Creditors upon request to the Monitor. Affected Creditors are urged to carefully read the full text of the Plan attached hereto as Schedule C. Copies of all Court documents are posted on the Website.

Affected Creditors are urged to carefully read the “ Risk Factors ” section of this Information Statement before making any decision regarding the Plan.

THE ISSUANCE OF THE PLAN SECURITIES PURSUANT TO THE PLAN WILL BE EXEMPT FROM THE PROSPECTUS REQUIREMENTS UNDER APPLICABLE CANADIAN SECURITIES LEGISLATION. AS A CONSEQUENCE OF THESE EXEMPTIONS, CERTAIN PROTECTIONS, RIGHTS AND REMEDIES PROVIDED BY CANADIAN SECURITIES LEGISLATION, INCLUDING STATUTORY RIGHTS OF RESCISSION OR DAMAGES, WILL NOT BE AVAILABLE IN RESPECT OF THE NEW SECURITIES TO BE ISSUED IN CONNECTION WITH THE PLAN. THE NEW SECURITIES TO BE ISSUED IN CONNECTION WITH THE PLAN WILL BE SUBJECT TO RESTRICTIONS ON TRANSFER. SEE “CERTAIN REGULATORY MATTERS RELATING TO THE RESTRUCTURING.”

 

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All references to this Information Statement shall be deemed to include the Schedules attached hereto.

INFORMATION FOR UNITED STATES CREDITORS

Sino-Forest is a corporation governed by the laws of Canada. The proxy solicitation rules under the United States 1934 Act are not applicable to Sino-Forest or this solicitation, and, accordingly, this solicitation is not being effected in accordance with such rules. Affected Creditors in the United States should be aware that disclosure requirements in proxy statements under Canadian securities laws are different from requirements under United States federal securities laws.

NEITHER THE PLAN NOR THE NEW SECURITIES ISSUABLE IN CONNECTION WITH THE PLAN HAVE BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY U.S. STATE SECURITIES REGULATORY AUTHORITY OR ANY U.S. BANKRUPTCY COURT, NOR HAS THE SEC, ANY U.S. SECURITIES REGULATORY AUTHORITY OR ANY U.S. BANKRUPTCY COURT PASSED UPON THE FAIRNESS OR MERITS OF THE PLAN OR UPON THE ADEQUACY, COMPLETENESS OR ACCURACY OF THE INFORMATION CONTAINED IN THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.

This Information Statement does not discuss any United States federal or state tax consequences of the Restructuring. Certain information concerning Canadian federal income tax consequences of the Restructuring for Securityholders who are not resident in Canada is set forth under the heading “ Certain Canadian Federal Income Tax Considerations ”. Securityholders resident in the United States should be aware that the transactions contemplated herein may have tax consequences both in Canada and the United States. Such consequences are not described herein. Securityholders should consult with their own tax advisors with respect to their particular circumstances and the tax considerations applicable to them.

The Plan Securities to be delivered pursuant to the Plan have not been registered under the United States 1933 Act or the securities laws of any state of the United States and are being delivered in reliance on the exemption from registration set forth in Section 3(a)(10) of the United States 1933 Act on the basis of the approval of the Court, which will consider, among other things, the fairness of the Plan to the persons affected. See “Certain Regulatory Matters relating to the Restructuring”.

The enforcement by Affected Creditors of civil liabilities under the United States federal securities laws may be affected adversely by the fact that all of the SFC Companies are incorporated or organized outside the United States, that none of their officers or directors are residents of the United States, that all or a substantial portion of the assets of the SFC Companies and of their officers and directors are located outside the United States and that the experts named in this Information Statement are not residents of the United States. Affected Creditors may not be able to sue a corporation governed by the laws of Canada in a Canadian court for violations of the United States federal securities laws and it may be difficult to compel the foregoing persons to subject themselves to a judgment by a United States court.

CAUTIONARY NOTICE REGARDING FORWARD LOOKING INFORMATION

This Information Statement contains forward-looking information within the meaning of applicable Canadian provincial securities laws (“forward-looking statements”), including forward-looking statements relating to: the Company's belief that the successful transition of assets from a BVI model to a WFOE model has many merits; the Company's expectations with respect to the costs in connection with any “on-shoring” process undertaken by Sino-Forest; the Company's expectations regarding the proposed Plan involving the Company and the expected terms of, treatment of claims under and consideration payable pursuant to such Plan; the Company's expectations with respect to timing of the meeting of Affected Creditors to consider the Plan; and Sino-Forest's intentions with respect to the timing of completion of the Plan. The forward looking statements expressed or implied by this Information Statement are subject to important risks and uncertainties. When used in this Information Statement, the words

 

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“expect”, “anticipate”, “may”, “will”, “should”, “intend”, “believe”, “plan” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate in the circumstances. The results or events predicted in these statements may differ materially from actual results or events and are not guarantees of future performance of Sino-Forest. Factors which could cause results or events to differ from current expectations include, among other things: the Company's ability to complete the Plan in the time period contemplated, if at all, which is dependent on its ability to comply with the closing conditions to the Plan, many of which are significant and beyond the control of Sino-Forest, including the approval of the Court, the Company's creditors and securities and other regulatory authorities; orders of the Court in the CCAA Proceedings; actions taken against the Company by governmental agencies and securities and other regulators; actions taken by the Company's Noteholders, lenders, creditors, shareholders, and other stakeholders to enforce their rights; the outcome of examinations and proceedings currently underway by law enforcement and securities regulatory authorities; the outcome of class action or other proceedings which have been or may in future be initiated against the Company; the accuracy and outcome of the results of tree asset verification testing undertaken by the Company; the Company's reliance on key employees; the Company's ability to acquire rights to additional standing timber; the cyclical nature of the forest products industry and price fluctuation in and the demand and supply of logs; the Company's reliance on the relationship with local plantation land owners and/or plantation land use rights holders, authorized intermediaries, key customers, suppliers and third party service providers; the Company's ability to operate its production facilities on a profitable basis; changes in currency exchange rates and interest rates; the evaluation of the Company's provision for income and related taxes; economic, political and social conditions and government policy in the PRC, the Republic of Suriname and New Zealand; the risks identified in the “ Risk Factors ” section of this Information Statement; and other factors not currently viewed as material that could cause actual results to differ materially from those described in the forwarding-looking statements. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

EXCHANGE RATES

In this Information Statement, unless otherwise specified, all references to “dollars” or “$” are to Canadian dollars and all references to “U.S. dollars” or to “U.S.$” are to United States dollars. Unless specifically provided for in the Plan or the Sanction Order, all payments and distributions to be made in cash shall be made in Canadian dollars.

Any Claims or other amounts denominated in a foreign currency shall be converted to Canadian dollars at the Reuters closing rate on the Filing Date, being March 30, 2012. On March 30, 2012, Reuters closing rate in Canadian dollars was $0.9978 for each U.S.$1.00.

GLOSSARY OF TERMS

Unless the context otherwise requires, when used in this Information Statement the following terms shall have the meanings set forth below. Words importing the singular shall include the plural and vice versa, and words importing any gender shall include all genders.

“ 2011 Results ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – Events Leading to the Commencement of CCAA Proceedings – Restructuring Support Agreements with Noteholders ”.

“ 2013 Note Indenture ” means the indenture dated as of July 23, 2008, by and between SFC, the entities listed as subsidiary guarantors therein, and The Bank of New York Mellon, as trustee, as amended, modified or supplemented.

“ 2014 Note Indenture ” means the indenture dated as of July 27, 2009, by and between SFC, the entities listed as subsidiary guarantors therein, and Law Debenture Trust Company of New York, as trustee, as amended, modified or supplemented.

 

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“ 2016 Note Indenture ” means the indenture dated as of December 17, 2009, by and between SFC, the entities listed as subsidiary guarantors therein, and The Bank of New York Mellon, as trustee, as amended, modified or supplemented.

“ 2017 Note Indenture ” means the indenture dated as of October 21, 2010, by and between SFC, the entities listed as subsidiary guarantors therein, and Law Debenture Trust Company of New York, as trustee, as amended, modified or supplemented.

“ 2013 Notes ” means the aggregate principal amount of U.S.$345,000,000 of 5.00% Convertible Senior Notes Due 2013 issued pursuant to the 2013 Note Indenture.

“ 2014 Notes ” means the aggregate principal amount of U.S.$399,517,000 of 10.25% Guaranteed Senior Notes Due 2014 issued pursuant to the 2014 Note Indenture.

“ 2016 Notes ” means the aggregate principal amount of U.S.$460,000,000 of 4.25% Convertible Senior Notes Due 2016 issued pursuant to the 2016 Note Indenture.

“ 2017 Notes ” means the aggregate principal amount of U.S.$600,000,000 of 6.25% Guaranteed Senior Notes Due 2017 issued pursuant to the 2017 Note Indenture.

“ Accrued Interest ” means, in respect of any series of Notes, all accrued and unpaid interest on such Notes, at the regular rates provided in the applicable Note Indentures, up to and including the Filing Date.

“ Administration Charge ” means the administration charge granted pursuant to the Initial Order pursuant to which the Monitor, counsel to the Monitor, counsel to SFC, counsel to the directors of SFC, Houlihan, FTI HK, and the Noteholder Advisors were granted a charge not exceeding an aggregate amount of $15,000,000 on the property of SFC (other than certain excluded property), as security for their professional fees and disbursements incurred at their respective standard rates and charges in respect of such services, both before and after the making of the Interim Order.

“ Administration Charge Reserve ” means the cash reserve to be established by SFC on the Plan Implementation Date in an amount acceptable to the Persons secured by the Administration Charge (having regard to, among other things, any retainers held by Persons secured by the Administration Charge), which cash reserve: (i) shall be maintained and administered by the Monitor, in trust, for the purpose of paying any amounts secured by the Administration Charge; and (ii) upon the termination of the Administration Charge pursuant to the Plan, shall stand in place of the Administration Charge as security for the payment of any amounts secured by the Administration Charge.

“ Affected Claim ” means any Claim, D&O Claim or D&O Indemnity Claim that is not: an Unaffected Claim; a Section 5.1(2) D&O Claim; a Conspiracy Claim; a Continuing Other D&O Claim; a Non-Released D&O Claim; or a Subsidiary Intercompany Claim, and “Affected Claim” includes any Class Action Indemnity Claim. For greater certainty, all of the following are Affected Claims: Affected Creditor Claims; Equity Claims; Noteholder Class Action Claims (other than the Continuing Noteholder Class Action Claims); and Class Action Indemnity Claims.

“ Affected Creditor ” means a Person with an Affected Creditor Claim, but only with respect to and to the extent of such Affected Creditor Claim.

“ Affected Creditor Claim ” means any Ordinary Affected Creditor Claim or Noteholder Claim.

“ Affected Creditors Class ” has the meaning given in this Information Statement under the heading “ Description of the Plan – Classification of Creditors ”.

“ Affected Creditors Equity Sub-Pool ” means an amount of Newco Shares representing 92.5% of the Newco Equity Pool.

 

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“ AIs ” has the meaning given in this Information Statement under the heading “ Information Regarding Sino Forest—Business Model – The BVI Model ”.

“ AI Agreements ” has the meaning given in this Information Statement under the heading “ Risk Factors – Risks Related to Our Business ”.

“ Alternative Sale Transaction ” has the meaning given in this Information Statement under the heading “ Description of the Plan – Alternative Sale Transaction ”.

“ Alternative Sale Transaction Consideration ” has the meaning given in this Information Statement under the heading “ Description of the Plan – Alternative Sale Transaction ”.

“ AML ” has the meaning given in this Information Statement under the heading “ Required Approvals Under the CCAA and Other Conditions to Implementation – Regulatory Approvals – PRC Antimonopoly Law Approval ”.

“ Applicable Law ” means any applicable law, statute, order, decree, consent decree, judgment, rule, regulation, ordinance or other pronouncement having the effect of law whether in Canada, the United States, Hong Kong, the PRC or any other country, or any domestic or foreign state, county, province, city or other political subdivision or of any Governmental Entity.

“ Auditors ” means the former auditors of SFC that are named as defendants to the Class Actions Claims, including for greater certainty Ernst & Young LLP and BDO Limited.

“ Authorized Sales Activities ” has the meaning given in this Information Statement under the heading “ Risk Factors – Risks Related to Our Business ”.

“ Barbados Loans ” means the aggregate amount outstanding at the date hereof pursuant to three loans made by SFC Barbados to SFC in the amounts of U.S.$65,997,468.10 on February 1, 2011, U.S.$59,000,000 on June 7, 2011 and U.S.$176,000,000 on June 7, 2011.

“ Barbados Property ” has the meaning given in this Information Statement under the heading “ Implementation of the Plan – Implementation Steps ”.

“ Beneficial Noteholder ” means a beneficial owner of any Notes as at the Voting Record Date (or, if applicable, an investment advisor, manager or representative with voting discretion over the Notes owned by such beneficial owners), regardless of whether such beneficial owner is a Registered Noteholder or an Unregistered Noteholder.

“ BIA ” means the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3, as amended.

“ Board ” or “ Board of Directors ” means the board of directors of SFC.

“ Business Day ” means a day, other than Saturday, Sunday or a statutory holiday, on which banks are generally open for business in Toronto, Ontario.

“ BVI ” means the British Virgin Islands.

“ BVI Entities ” has the meaning given in this Information Statement under the heading “ Information Regarding Sino Forest—Business Model—Plantation / Timber Rights in the PRC ”.

“ Canadian Holders ” has the meaning given in this Information Statement under the heading “ Certain Canadian Federal Income Tax Considerations – Residents of Canada ”.

“ Canadian Tax Act ” means the Income Tax Act (Canada) and the Income Tax Regulations, in each case as amended from time to time.

 

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“ CBCA ” means the Canada Business Corporations Act , R.S.C. 1985, c. C-44, as amended.

“ CCAA ” means the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36, as amended.

“ CCAA Proceedings ” means the proceedings commenced by SFC under the CCAA on the Filing Date in the Ontario Superior Court of Justice (Commercial List) under court file number CV-12-9667-00CL.

“ Chair ” has the meaning given in this Information Statement under the heading “ Meeting and Voting – Procedure for the Meeting ”.

“ Charges ” means the Administration Charge and the Directors’ Charge.

“ CJV ” means a Sino-foreign cooperative joint venture enterprise with limited liability established in the PRC under the relevant PRC laws and regulations which provides, among other things, that the distribution of profit or loss and the control of the joint venture company is entirely based on the joint venture contract and not on the joint venture parties' contributions to the registered capital of the joint venture.

“ Claim ” means any right or claim of any Person that may be asserted or made against SFC, in whole or in part, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind whatsoever, and any interest accrued thereon or costs payable in respect thereof, including by reason of the commission of a tort (intentional or unintentional), by reason of any breach of contract or other agreement (oral or written), by reason of any breach of duty (including any legal, statutory, equitable or fiduciary duty) or by reason of any right of ownership of or title to property or assets or right to a trust or deemed trust (statutory, express, implied, resulting, constructive or otherwise), and whether or not any indebtedness, liability or obligation is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, unsecured, present or future, known or unknown, by guarantee, surety or otherwise, and whether or not any right or claim is executory or anticipatory in nature, including any right or ability of any Person (including any Directors or Officers of SFC or any of the Subsidiaries) to advance a claim for contribution or indemnity or otherwise with respect to any matter, action, cause or chose in action, whether existing at present or commenced in the future, which indebtedness, liability or obligation, and any interest accrued thereon or costs payable in respect thereof (A) is based in whole or in part on facts prior to the Filing Date, (B) relates to a time period prior to the Filing Date, or (C) is a right or claim of any kind that would be a claim provable against SFC in bankruptcy within the meaning of the BIA had SFC become bankrupt on the Filing Date, or is an Equity Claim, a Noteholder Class Action Claim against SFC, a Class Action Indemnity Claim against SFC, a Restructuring Claim or a Lien Claim, provided, however, that “Claim” shall not include a D&O Claim or a D&O Indemnity Claim.

“ Claims Bar Date ” has the meaning ascribed thereto in the Claims Procedure Order.

“ Claims Procedure ” means the procedure established for determining the amount and status of Claims, D&O Claims and D&O Indemnity Claims, including in each case any such claims that are Unresolved Claims, pursuant to the Claims Procedure Order.

“ Claims Procedure Order ” means the Order under the CCAA of the Honourable Justice Morawetz dated May 14, 2012, establishing, among other things, a claims procedure in respect of SFC and calling for claims in respect of the Subsidiaries, as such Order may be amended, restated or varied from time to time.

“ Class Action Claims ” means, collectively, any rights or claims of any kind advanced or which may subsequently be advanced in the Class Actions or in any other similar proceeding, whether a class action proceeding or otherwise and, for greater certainty includes any Noteholder Class Action Claims.

“ Class Actions ” means, collectively, the following proceedings: (i)  Trustees of the Labourers’ Pension Fund of Central and Eastern Canada et al v. Sino-Forest Corporation et al. (Ontario Superior Court of Justice, Court File No. CV-11-431153-00CP); (ii)  Guining Liu v. Sino-Forest Corporation et al. (Quebec Superior Court, Court File No. 200-06-000132-111); (iii)  Allan Haigh v. Sino-Forest Corporation et al. (Saskatchewan Court of Queen’s Bench, Court File No. 2288 of 2011); and (iv)  David Leapard et al. v. Allen T.Y. Chan et al. (District Court of the Southern District of New York, Court File No. 650258/2012).

 

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“ Class Action Court ” means, with respect to the Class Action Claims, the court of competent jurisdiction that is responsible for administering the applicable Class Action Claim.

“ Class Action Indemnity Claim ” means any right or claim of any Person that may be asserted or made in whole or in part against SFC and/or any Subsidiary for indemnity, contribution, reimbursement or otherwise from or in connection with any Class Action Claim asserted against such Person. For greater certainty, Class Action Indemnity Claims are distinct from and do not include Class Action Claims.

“ Common Shares ” means common shares in the capital of SFC.

“ Consent Date ” means May 15, 2012.

“ Conspiracy Claim ” means any D&O Claim alleging that the applicable Director or Officer committed the tort of civil conspiracy, as defined under Canadian common law.

“ Consultants ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – Asset Verification Process ”.

“ Continuing Noteholder Class Action Claim ” means any Noteholder Class Action Claim that is: (i) a Section 5.1(2) D&O Claim; (ii) a Conspiracy Claim; (iii) a Non-Released D&O Claim; (iv) a Continuing Other D&O Claim; (v) a Noteholder Class Action Claim against one or more Third Party Defendants that is not an Indemnified Noteholder Class Action Claim; (vi) the portion of an Indemnified Noteholder Class Action Claim that is permitted to continue against the Third Party Defendants, subject to the Indemnified Noteholder Class Action Limit, pursuant to section 4.4(b)(i) of the Plan.

“ Continuing Other D&O Claim ” has the meaning given in this Information Statement under the heading “ Description of the Plan – Treatment of Affected Parties Pursuant to the Plan – D&O Claims ”.

“ Court ” means the Ontario Superior Court of Justice (Commercial List).

“ CRA ” means the Canada Revenue Agency, and any successor agency thereto.

“ D&O Claim ” means (i) any right or claim of any Person that may be asserted or made in whole or in part against one or more Directors or Officers of SFC that relates to a Claim for which such Directors or Officers are by law liable to pay in their capacity as Directors or Officers of SFC, or (ii) any right or claim of any Person that may be asserted or made in whole or in part against one or more Directors or Officers of SFC, in that capacity, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind whatsoever, and any interest accrued thereon or costs payable in respect thereof, including by reason of the commission of a tort (intentional or unintentional), by reason of any breach of contract or other agreement (oral or written), by reason of any breach of duty (including any legal, statutory, equitable or fiduciary duty and including, for greater certainty, any monetary administrative or other monetary penalty or claim for costs asserted against any Officer or Director of SFC by any Government Entity) or by reason of any right of ownership of or title to property or assets or right to a trust or deemed trust (statutory, express, implied, resulting, constructive or otherwise), and whether or not any indebtedness, liability or obligation, and any interest accrued thereon or costs payable in respect thereof, is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, unsecured, present or future, known or unknown, by guarantee, surety or otherwise, and whether or not any right or claim is executory or anticipatory in nature, including any right or ability of any Person to advance a claim for contribution or indemnity from any such Directors or Officers of SFC or otherwise with respect to any matter, action, cause or chose in action, whether existing at present or commenced in the future, which indebtedness, liability or obligation, and any interest accrued thereon or costs payable in respect thereof (A) is based in whole or in part on facts prior to the Filing Date, or (B) relates to a time period prior to the Filing Date.

 

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“ D&O Indemnity Claim ” means any existing or future right of any Director or Officer of SFC against SFC that arose or arises as a result of any Person filing a D&O Proof of Claim (as defined in the Claims Procedure Order) in respect of such Director or Officer of SFC for which such Director or Officer of SFC is entitled to be indemnified by SFC.

“ Defence Costs ” has the meaning given in this Information Statement under the heading “ Description of the Plan – Treatment of Affected Parties Pursuant to the Plan – Defence Costs ”.

“ Direct Subsidiaries ” means, collectively, Sino-Panel Holdings Limited, Sino-Global Holdings Inc., Sino-Panel Corporation, Sino-Capital Global Inc., SFC Barbados, Sino-Forest Resources Inc. Sino-Wood Partners, Limited.

“ Direct Subsidiary Shares ” has the meaning given in this Information Statement under the heading “ Implementation of the Plan – Implementation Steps ”.

“ Director ” means, with respect to SFC or any Subsidiary, anyone who is or was, or may be deemed to be or have been, whether by statute, operation of law or otherwise, a director or de facto director of such SFC Company.

“ Directors’ Charge ” means the directors' charge granted pursuant to the Initial Order, pursuant to which the directors and officers of SFC were granted a charge not exceeding an aggregate amount of $3,200,000 on the property of SFC (other than certain excluded property), as security for the indemnity provided for in the Initial Order.

“ Directors’ Charge Reserve ” means the cash reserve to be established by SFC on the Plan Implementation Date in an amount acceptable to SFC, the Monitor, Osler Hoskin & Harcourt LLP and the Initial Consenting Noteholders, which cash reserve: (i) shall be maintained by the Monitor, in trust, for the purpose of paying any amounts secured by the Directors' Charge; and (ii) upon the termination of the Directors' Charge pursuant to the Plan, shall stand in place of the Directors' Charge as security for the payment of any amounts secured by the Directors' Charge.

“ Distribution Date ” means the date or dates from time to time set in accordance with the provisions of the Plan to effect distributions in respect of the Proven Claims, excluding the Initial Distribution Date.

“ Distribution Escrow Position ” has the meaning given in this Circular under the heading “ Implementation of the Plan – Distributions Under the Plan – Distribution Mechanics with respect to Newco Shares and Newco Notes ”.

“ Distribution Record Date ” means the Plan Implementation Date, or such other date as SFC, the Monitor and the Initial Consenting Noteholders may agree.

“ Direct Registration Account ” means, if applicable, a direct registration account administered by the Transfer Agent in which those Persons entitled to receive Newco Shares and/or Newco Notes pursuant to the Plan will hold such Newco Shares and/or Newco Notes in registered form.

“ Direct Registration Transaction Advice ” means, if applicable, a statement delivered by the Monitor, the Trustees, the Transfer Agent or any such Person's agent to any Person entitled to receive Newco Shares or Newco Notes pursuant to the Plan on the Initial Distribution Date and each subsequent Distribution Date, as applicable, indicating the number of Newco Shares and/or Newco Notes registered in the name of or as directed by the applicable Person in a Direct Registration Account.

“ DTC ” means The Depository Trust Company, or any successor thereof.

“ E&Y ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – Events Leading to the Commencement of CCAA Proceedings – Gating Issues to an Audit ”.

“ Early Consent Equity Sub-Pool ” means an amount of Newco Shares representing 7.5% of the Newco Equity Pool.

 

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“ Early Consent Noteholder ” means any Noteholder that: (a) (i) as confirmed by the Monitor on June 12, 2012, executed the (A) Support Agreement, (B) a support agreement with SFC and the Direct Subsidiaries in the form of the Support Agreement or (C) a joinder agreement in the form attached as Schedule C to the Support Agreement; (ii) provided evidence satisfactory to the Monitor in accordance with section 2(a) of the Support Agreement of the Notes held by such Noteholder as at the Consent Date (the “ Early Consent Notes ”), as such list of Noteholders and Notes held has been verified and is maintained by the Monitor on a confidential basis; and (iii) continues to hold such Early Consent Notes as at the Distribution Record Date; or (b) (i) has acquired Early Consent Notes; (ii) has signed the necessary transfer and joinder documentation as required by the Support Agreement and has otherwise acquired such Early Consent Notes in compliance with the Support Agreement; and (iii) continues to hold such Early Consent Notes as at the Distribution Record Date.

“ Effective Time ” means 8:00 a.m. (Toronto time) on the Plan Implementation Date or such other time on such date as SFC, the Monitor and the Initial Consenting Noteholders may agree.

“ Employee Priority Claims ” means the following Claims of employees and former employees of SFC: (a) Claims equal to the amounts that such employees and former employees would have been qualified to receive under paragraph 136(1)(d) of the BIA if SFC had become bankrupt on the Filing Date; and (b) Claims for wages, salaries, commissions or compensation for services rendered by them after the Filing Date and on or before the Plan Implementation Date.

“ Encumbrance ” means any security interest (whether contractual, statutory, or otherwise), hypothec, mortgage, trust or deemed trust (whether contractual, statutory, or otherwise), lien, execution, levy, charge, demand, action, liability or other claim, action, demand or liability of any kind whatsoever, whether proprietary, financial or monetary, and whether or not it has attached or been perfected, registered or filed and whether secured, unsecured or otherwise, including: (i) any of the Charges; and (ii) any charge, security interest or claim evidenced by registrations pursuant to the Personal Property Security Act (Ontario) or any other personal property registry system.

“ Enforcement Notices ” means the enforcement notices delivered by OSC staff to SFC and the Individual Respondents.

“ Equity Cancellation Date ” means the date that is the first Business Day at least 31 days after the Plan Implementation Date, or such other date as may be agreed to by SFC, the Monitor and the Initial Consenting Noteholders.

“ Equity Claim ” means a Claim that meets the definition of “equity claim” in section 2(1) of the CCAA and, for greater certainty, includes any of the following: (a) any claim against SFC resulting from the ownership, purchase or sale of an equity interest in SFC, including the claims by or on behalf of current or former shareholders asserted in the Class Actions; (b) any indemnification claim against SFC related to or arising from the claims described in sub-paragraph (a), including any such indemnification claims against SFC by or on behalf of any and all of the Third Party Defendants (other than for Defence Costs, unless any such claims for Defence Costs have been determined to be Equity Claims subsequent to the date of the Equity Claims Order); and (c) any other claim that has been determined to be an Equity Claim pursuant to an Order of the Court.

“ Equity Claimant ” means any Person having an Equity Claim, but only with respect to and to the extent of such Equity Claim.

“ Equity Claims Order ” means the Order under the CCAA of the Honourable Justice Morawetz dated July 27, 2012, in respect of Shareholder Claims and Related Indemnity Claims against SFC, as such terms are defined therein.

“ Equity Interest ” has the meaning set forth in section 2(1) of the CCAA.

 

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“ Excluded SFC Assets ” means (i) the rights of SFC to be transferred to the Litigation Trust in accordance with the Plan; (ii) any entitlement to insurance proceeds in respect of insured Claims, Section 5.1(2) D&O Claims and/or Conspiracy Claims; (iii) any secured property of SFC that is to be returned in satisfaction of a Lien Claim pursuant to the Plan; (iv) any input tax credits or other refunds received by SFC after the Effective Time; and (v) cash in the aggregate amount of (and for the purpose of): (A) the Litigation Funding Amount; (B) the Unaffected Claims Reserve; (C) the Administration Charge Reserve; (D) the Directors' Charge Reserve; (E) the Expense Reimbursement; (F) any amounts in respect of Lien Claims to be paid in accordance with the Plan; (G) the Monitor's Post-Implementation Reserve; (vi) any office space, office furniture or other office equipment owned or leased by SFC in Canada; (vii) the SFC Escrow Co. Share; (viii) Newco Promissory Note 1; and (ix) Newco Promissory Note 2.

“ Existing Shares ” means all existing shares in the equity of SFC issued and outstanding immediately prior to the Effective Time and all warrants, options or other rights to acquire such shares, whether or not exercised as at the Effective Time.

“ Expense Reimbursement ” means the aggregate amount of (i) the reasonable and documented fees and expenses of the Noteholder Advisors, pursuant to their respective engagement letters with SFC, and other advisors as may be agreed to by SFC and the Initial Consenting Noteholders and (ii) the reasonable fees and expenses of the Initial Consenting Noteholders incurred in connection with the negotiation and development of the Support Agreement and the Plan, including in each case an estimated amount for any such fees and expenses expected to be incurred in connection with the implementation of the Plan, and in the case of (ii) above, including an aggregate work fee of up to $5 million (which work fee may, at the request of the Monitor, be paid by any of the Subsidiaries instead of SFC).

“ Filing Date ” means March 30, 2012.

“ Final Report ” has the meaning given in this Information Statement under the heading “ Documents Incorporated by Reference ”.

“ First Interim Report ” has the meaning given in this Information Statement under the heading “ Documents Incorporated by Reference ”.

“ FTI HK ” means FTI Consulting (Hong Kong) Limited.

“ Government Priority Claims ” means all Claims of Governmental Entities in respect of amounts that were outstanding as of the Plan Implementation Date and that are of a kind that could be subject to a demand under: (a) subsections 224(1.2) of the Canadian Tax Act; (b) any provision of the Canada Pension Plan or the Employment Insurance Act (Canada) that refers to subsection 224(1.2) of the Canadian Tax Act and provides for the collection of a contribution, as defined in the Canada Pension Plan , or employee's premium or employer's premium as defined in the Employment Insurance Act (Canada), or a premium under Part VII.1 of that Act, and of any related interest, penalties or other amounts; or (c) any provision of provincial legislation that has a similar purpose to subsection 224(1.2) of the Canadian Tax Act, or that refers to that subsection, to the extent that it provides for the collection of a sum, and of any related interest, penalties or other amounts, where the sum: (i) has been withheld or deducted by a person from a payment to another person and is in respect of a tax similar in nature to the income tax imposed on individuals under the Canadian Tax Act; or (ii) is of the same nature as a contribution under the Canada Pension Plan if the province is a “province providing a comprehensive pension plan” as defined in subsection 3(1) of the Canada Pension Plan and the provincial legislation establishes a “provincial pension plan” as defined in that subsection.

“ Governmental Entity ” means any government, regulatory authority, governmental department, agency, commission, bureau, official, minister, Crown corporation, court, board, tribunal or dispute settlement panel or other law, rule or regulation-making organization or entity: (a) having or purporting to have jurisdiction on behalf of any nation, province, territory or state or any other geographic or political subdivision of any of them; or (b) exercising, or entitled or purporting to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power.

“ Greenheart ” means Greenheart Group Limited, a company established under the laws of Bermuda.

“ Greenheart Group ” means Greenheart and its subsidiaries.

 

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“ HKSFC ” means the Hong Kong Securities and Futures Commission.

“ Houlihan ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – Commencement of CCAA Proceedings ”.

“ Indemnified Noteholder Class Action Claims ” has the meaning given in this Information Statement under the heading “ Description of the Plan – Treatment of Affected Parties Pursuant to the Plan – Noteholder Class Action Claimants ”.

“ Indemnified Noteholder Class Action Limit ” an amount agreed to by SFC, the Monitor, the Initial Consenting Noteholders and counsel to the Ontario Class Action Plaintiffs, or such other amount as is determined by the Court.

“ Independent Committee ” means the committee formed by the Board to examine the allegations contained in the MW Report, consisting entirely of directors independent from management of Sino-Forest.

“ Independent Committee Reports ” means the First Interim Report, the Second Interim Report and the Final Report.

“ Individual Respondents ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – OSC Proceedings ”.

“ Indufor ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – Asset Verification Process ”.

“ Information Statement ” means this meeting information statement of SFC, including the notice of meeting and all schedules hereto.

“ Initial Consenting Noteholders ” means the Noteholders that executed the Support Agreement on March 30, 2012.

“ Initial Distribution Date ” means a date no more than ten Business Days after the Plan Implementation Date or such other date as SFC, the Monitor and the Initial Consenting Noteholders may agree.

“ Initial Newco Shareholder ” means a Person to be determined by the Initial Consenting Noteholders prior to the Effective Time, with the consent of SFC and the Monitor, to serve as the initial sole shareholder of Newco pursuant to the Plan.

“ Initial Order ” means the initial Order granted on the Filing Date by the Honourable Justice Morawetz of the Court in respect of SFC pursuant to the CCAA, as amended, restated or varied from time to time.

“ Insurance Policies ” means, collectively, the following insurance policies, as well as any other insurance policy pursuant to which SFC or any Director or Officer is insured: ACE INA Insurance Policy Number DO024464; Chubb Insurance Company of Canada Policy Number 8209-4449; Lloyds of London, England Policy Number XTFF0420; Lloyds of London, England Policy Number XTFF0373; and Travelers Guarantee Company of Canada Policy Number 10181108, and “ Insurance Policy ” means any one of the Insurance Policies.

“ Insured Claim ” means all or that portion of any Claim for which SFC is insured and all or that portion of any D&O Claim for which the applicable Director or Officer is insured, in each case pursuant to any of the Insurance Policies.

“ Intellectual Property ” means: (i) patents, and applications for patents, including divisional and continuation patents; (ii) registered and unregistered trade-marks, logos and other indicia of origin, pending trade-mark registration applications, and proposed use application or similar reservations of marks, and all goodwill associated therewith; (iii) registered and unregistered copyrights, including all copyright in and to computer software programs, and applications for and registration of such copyright (including all copyright in and to the SFC Companies' websites); (iv) world wide web addresses and internet domain names, applications and reservations for world wide

 

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web addresses and internet domain names, uniform resource locators and the corresponding internet sites; (v) industrial designs; and (vi) trade secrets and proprietary information not otherwise listed in (i) through (v) above, including all inventions (whether or not patentable), invention disclosures, moral and economic rights of authors and inventors (however denominated), confidential information, technical data, customer lists, corporate and business names, trade names, trade dress, brand names, know-how, formulae, methods (whether or not patentable), designs, processes, procedures, technology, business methods, source codes, object codes, computer software programs (in either source code or object code form), databases, data collections and other proprietary information or material of any type, and all derivatives, improvements and refinements thereof, howsoever recorded, or unrecorded.

“ Letter of Instruction ” means a form, to be completed by each Ordinary Affected Creditor and each Early Consent Noteholder, and that is to be delivered to the Monitor in accordance with the Plan, which form shall set out: (a) the registration details for the Newco Shares and, if applicable, Newco Notes to be distributed to such Ordinary Affected Creditor or Early Consent Noteholder in accordance with the Plan; and (b) the address to which such Affected Creditor's or Early Consent Noteholder's Direct Registration Transaction Advice or its Newco Share Certificates and Newco Note Certificates, as applicable, are to be delivered.

“ Lien Claim ” means any Proven Claim of a Person indicated as a secured creditor in Schedule “B” to the Initial Order (other than the Trustees) that is secured by a lien or encumbrance on any property of SFC, which lien is valid, perfected and enforceable pursuant to Applicable Law, provided that the Charges and any Claims in respect of Notes shall not constitute “Lien Claims”.

“ Lien Claimant ” means a Person having a Lien Claim, other than any Noteholder or Trustee in respect of any Noteholder Claim.

“ LOIs ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – Sale Solicitation Process ”.

“ Litigation Funding Amount ” means a cash amount to be contributed by SFC to the Litigation Trustee for purposes of funding the Litigation Trust on the Plan Implementation Date in accordance with the Plan.

“ Litigation Trust ” means the trust to be established on the Plan Implementation Date at the time specified in the Plan in accordance with the Litigation Trust Agreement pursuant to the laws of a jurisdiction that is acceptable to SFC and the Initial Consenting Noteholders, which trust will acquire the Litigation Trust Claims and the Litigation Funding Amount in accordance with the Plan.

“ Litigation Trust Agreement ” means the trust agreement dated as of the Plan Implementation Date, between SFC and the Litigation Trustee, establishing the Litigation Trust.

“ Litigation Trust Claims ” means any and all claims, actions, causes of action, demands, suits, rights, entitlements, litigation, arbitration, proceeding, hearing or complaint, whether known or unknown, reduced to judgment or not reduced to judgment, liquidated or unliquidated, contingent or non-contingent, matured or unmatured, disputed or undisputed, secured or unsecured, assertable directly or derivatively, in law, equity or otherwise, based in whole or in part upon any act or omission or other event occurring before or after the Filing Date that have been or may be asserted by or on behalf of: (i) SFC against any and all third parties; or (ii) the Trustees, the Noteholders or any representative of the Noteholders against any and all Persons in connection with the Notes issued by SFC; provided, however, that the Litigation Trust Claims do not include any claim, right or cause of action against any Person that is released pursuant to Article 7 of the Plan. The claims being advanced or that are subsequently advanced in the Class Actions are not being transferred to the Litigation Trust and the claims transferred to the Litigation Trust will not be advanced in the Class Actions.

“ Litigation Trust Interests ” means the beneficial interests in the Litigation Trust to be created on the Plan Implementation Date.

 

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“ Litigation Trustee ” means a Person to be determined by SFC and the Initial Consenting Noteholders prior to the Effective Time, with the consent of the Monitor, to serve as trustee of the Litigation Trust pursuant to and in accordance with the terms thereof.

“ Material ” means a fact, circumstance, change, effect, matter, action, condition, event, occurrence or development that, individually or in the aggregate, is, or would reasonably be expected to be, material to the business, affairs, results of operations or financial condition of the SFC Companies (taken as a whole).

“ Material Adverse Effect ” means a fact, event, change, occurrence, circumstance or condition that, individually or together with any other event, change or occurrence, has or would reasonably be expected to have a material adverse impact on the assets, condition (financial or otherwise), business, liabilities, obligations (whether absolute, accrued, conditional or otherwise) or operations of the SFC Companies (taken as a whole); provided, however, that a Material Adverse Effect shall not include and shall be deemed to exclude the impact of any fact, event, change, occurrence, circumstance or condition resulting from or relating to: (A) changes in Applicable Laws of general applicability or interpretations thereof by courts or Governmental Entities or regulatory authorities, which changes do not have a Material disproportionate effect on the SFC Companies (taken as a whole), (B) any change in the forestry industry generally, which does not have a Material disproportionate effect on the SFC Companies (taken as a whole) (relative to other industry participants operating primarily in the PRC), (C) actions and omissions of any of the SFC Companies required pursuant to the Support Agreement or the Plan or taken with the prior written consent of the Initial Consenting Noteholders, (D) the effects of compliance with the Support Agreement or the Plan, including on the operating performance of the SFC Companies, (E) the negotiation, execution, delivery, performance, consummation, potential consummation or public announcement of the Support Agreement or the Plan or the transactions contemplated thereby or hereby, (F) any change in U.S. or Canadian interest rates or currency exchange rates unless such change has a Material disproportionate effect on the SFC Companies (taken as a whole), and (G) general political, economic or financial conditions in Canada, the United States, Hong Kong or the PRC, which changes do not have a Material disproportionate effect on the SFC Companies (taken as a whole).

“ Meeting ” means the meeting of Affected Creditors, and any adjournment or extension thereof, that is called and conducted in accordance with the Meeting Order for the purpose of considering and voting on the Plan.

“ Meeting Order ” means the Order of the Court dated August 31, 2012 that, among other things, provides for the calling and holding of the Meeting and establishes the procedures for voting on the Plan, as such Order may be amended, restated or varied from time to time.

“ Monitor ” means FTI Consulting Canada Inc., in its capacity as Court-appointed Monitor of SFC in the CCAA Proceedings.

“ Monitor’s Post-Implementation Reserve ” means the cash reserve to be established by SFC on the Plan Implementation Date in an amount acceptable to SFC, the Monitor, and the Initial Consenting Noteholders, which cash reserve shall be maintained and administered by the Monitor for the purpose of administering SFC and the Claims Procedure, as necessary, from and after the Plan Implementation Date.

“ Muddy Waters ” means Muddy Waters, LLC.

“ MW Report ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – Events Leading to the Commencement of CCAA Proceedings – Muddy Waters Report ”.

“ Named Directors and Officers ” means Andrew Agnew, William E. Ardell, James Bowland, Leslie Chan, Michael Cheng, Lawrence Hon, James M.E. Hyde, Richard M. Kimel, R. John (Jack) Lawrence, Jay A. Lefton, Edmund Mak, Tom Maradin, Judson Martin, Simon Murray, James F. O'Donnell, William P. Rosenfeld, Peter Donghong Wang, Garry West and Kee Y. Wong, in their respective capacities as Directors or Officers, and “Named Director or Officer” means any one of them.

“ Newco ” means the new corporation to be incorporated pursuant to the Plan under the laws of the Cayman Islands or such other jurisdiction as agreed to by SFC, the Monitor and the Initial Consenting Noteholders.

 

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“ Newco Equity Pool ” means all of the Newco Shares to be issued by Newco on the Plan Implementation Date pursuant to the Plan. The number of Newco Shares to be issued on the Plan Implementation Date shall be agreed by SFC, the Monitor and the Initial Consenting Noteholders prior to the Plan Implementation Date.

“ Newco Note Certificate ” means a certificate evidencing Newco Notes.

“ Newco Notes ” means the new notes to be issued by Newco on the Plan Implementation Date pursuant to the Plan in the aggregate principal amount of $300 million, on such terms and conditions as are satisfactory to the Initial Consenting Noteholders and SFC, acting reasonably.

“ Newco Promissory Note 1 ”, “ Newco Promissory Note 2 ”, “ Newco Promissory Note 3 ” and “ Newco Promissory Notes ” have the meanings given in this Information Statement under the heading “ Implementation of the Plan –Implementation Steps ”.

“ Newco Share Certificate ” means a certificate evidencing Newco Shares.

“ Newco Shares ” means the shares in the capital of Newco.

“ Non-Released D&O Claims ” has the meaning given in this Information Statement under the heading “ Description of the Plan – Treatment of Affected Parties Pursuant to the Plan – D&O Claims ”.

“ Non-Resident Holder ” has the meaning given in this Information Statement under the heading “ Certain Canadian Federal Income Tax Considerations – Non-Residents of Canada ”.

“ Noteholder Advisors ” means Goodmans LLP, Hogan Lovells US LLP and Conyers, Dill & Pearman LLP in their capacity as legal advisors to the Initial Consenting Noteholders, and Moelis & Company LLC and Moelis and Company Asia Limited, in their capacity as the financial advisors to the Initial Consenting Noteholders.

“ Noteholder Claim ” means any Claim by a Noteholder (or a Trustee or other representative on the Noteholder's behalf) in respect of or in relation to the Notes owned or held by such Noteholder, including all principal and Accrued Interest payable to such Noteholder pursuant to such Notes or the Note Indentures, but for greater certainty does not include any Noteholder Class Action Claim.

“ Noteholder Class Action Claim ” means any Class Action Claim, or any part thereof, against SFC, any of the Subsidiaries, any of the Directors and Officers of SFC or the Subsidiaries, any of the Auditors, any of the Underwriters and/or any other defendant to the Class Action Claims that relates to the purchase, sale or ownership of Notes, but for greater certainty does not include a Noteholder Claim.

“ Noteholder Class Action Claimant ” means any Person having or asserting a Noteholder Class Action Claim.

“ Noteholder Class Action Representative ” means an individual to be appointed by counsel to the Ontario Class Action Plaintiffs.

“ Noteholders ” means, collectively, the beneficial owners of Notes as of the Distribution Record Date and, as the context requires, the registered holders of Notes as of the Distribution Record Date, and “ Noteholder ” means any one of the Noteholders.

“ Noteholders’ Proxy ” means a proxy substantially in the form of Schedule “F” to the Meeting Order, to be submitted to the Monitor by any Beneficial Noteholder that wishes to vote by proxy at the Meeting.

“ Note Indentures ” means, collectively, the 2013 Note Indenture, the 2014 Note Indenture, the 2016 Note Indenture and the 2017 Note Indenture.

“ Notes ” means, collectively, the 2013 Notes, the 2014 Notes, the 2016 Notes, and the 2017 Notes.

 

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“ Officer ” means, with respect to SFC or any Subsidiary, anyone who is or was, or may be deemed to be or have been, whether by statute, operation of law or otherwise, an officer or de facto officer of such SFC Company.

“ Ontario Class Action Plaintiffs ” means the plaintiffs in the Ontario class action case styled as Trustees of the Labourers’ Pension Fund of Central and Eastern Canada et al v. Sino-Forest Corporation et al. (Ontario Superior Court of Justice, Court File No. CV-11-431153-00CP).

“ Order ” means any order of the Court made in connection with the CCAA Proceedings or the Plan.

“ Ordinary Affected Creditor ” means a Person with an Ordinary Affected Creditor Claim.

“ Ordinary Affected Creditor Claim ” means a Claim that is not an Unaffected Claim, a Noteholder Claim, an Equity Claim, a Subsidiary Intercompany Claim, a Noteholder Class Action Claim, or a Class Action Indemnity Claim (other than a Class Action Indemnity Claim by any of the Third Party Defendants in respect of the Indemnified Noteholder Class Action Claims).

“ Ordinary Affected Creditors' Proxy ” means a proxy substantially in the form attached the Meeting Order, to be submitted to the Monitor by any Ordinary Affected Creditor who wishes to vote by proxy at the Meeting.

“ Other Directors and/or Officers ” means any Directors and/or Officers other than the Named Directors and Officers.

“ OSC ” means the Ontario Securities Commission.

“ Outside Date ” means January 15, 2013.

“ Participant Holder ” means a Person whose name appears on any of the Participant Holders Lists as at the Voting Record Date but who is not a Beneficial Noteholder.

“ Participant Holders Lists ” means the lists of DTC participant holders of Notes as at the Voting Record Date to be provided to the Monitor by DTC or any similar depository or trust company with respect to each series of Notes in accordance with the Meeting Order.

“ Person ” means any individual, sole proprietorship, limited or unlimited liability corporation, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, body corporate, joint venture, trust, pension fund, union, Governmental Entity, and a natural person including in such person's capacity as trustee, heir, beneficiary, executor, administrator or other legal representative.

“ Phase I Bid Deadline ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – Sale Solicitation Process ”.

“ Plan ” means the Plan of Compromise and Reorganization filed by SFC pursuant to the CCAA and the CBCA, as such Plan may be amended, supplemented or restated from time to time in accordance with the terms of the Plan or an Order.

“ Plan Implementation Date ” means the Business Day on which the Plan becomes effective, which shall be the Business Day on which the Monitor has filed with the Court the certificate contemplated in the Plan, or such other date as SFC, the Monitor and the Initial Consenting Noteholders may agree.

“ Plan Securities ” means Newco Shares, Newco Notes, and to the extent they are deemed to be securities, the Litigation Trust Interests.

“ Plan Supplement ” means the supplement(s) to the Plan, which shall contain draft copies of the Litigation Trust Agreement, relevant documents concerning Newco (including the terms of the Newco Shares and the Newco Notes) and such other documents as the Applicant and the Monitor may consider appropriate or necessary for purposes of the Meeting and voting on the Plan.

 

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“ Plantation Rights Certificates ” has the meaning given in this Information Statement under the heading “ Risk Factors – Risks Related to the PRC ”.

“ Pöyry ” means Pöyry Forest Industries Pre. Ltd

“ Pöyry Reports ” has the meaning given in this Information Statement under the heading “ Risk Factors – Risks Related to Our Business ”.

“ PRC ” means the People's Republic of China.

“ Proof of Claim ” means the “Proof of Claim” referred to in the Claims Procedure Order, substantially in the form attached to the Claims Procedure Order.

“ Pro-Rata ” means: (a) with respect to any Noteholder in relation to all Noteholders, the proportion of (i) the principal amount of Notes beneficially owned by such Noteholder as of the Distribution Record Date plus the Accrued Interest owing on such Notes as of the Filing Date, in relation to (ii) the aggregate principal amount of all Notes outstanding as of the Distribution Record Date plus the aggregate of all Accrued Interest owing on all Notes as of the Filing Date; (b) with respect to any Early Consent Noteholder in relation to all Early Consent Noteholders, the proportion of the principal amount of Early Consent Notes beneficially owned by such Early Consent Noteholder as of the Distribution Record Date in relation to the aggregate principal amount of Early Consent Notes held by all Early Consent Noteholders as of the Distribution Record Date; and (c) with respect to any Affected Creditor in relation to all Affected Creditors, the proportion of such Affected Creditor's Affected Creditor Claim as at any relevant time in relation to the aggregate of all Proven Claims and Unresolved Claims of Affected Creditors as at that time.

“ Proven Claim ” means an Affected Creditor Claim to the extent that such Affected Creditor Claim is finally determined and valued in accordance with the provisions of the Claims Procedure Order, the Meeting Order or any other Order, as applicable.

“ Q2 Results ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – Events Leading to the Commencement of CCAA Proceedings – Second Quarter 2011 Financial Results ”.

“ Q3 Results ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – Events Leading to the Commencement of CCAA Proceedings – Failure to Release Q3 and Default Under the Notes ”.

“ RCMP ” means the Royal Canadian Mounted Police.

“ Registered Noteholder ” means a Noteholder who is the legal owner or holder of one or more Notes and whose name appears on any Registered Noteholder List.

“ Registered Noteholder List ” means each list of Registered Noteholders as at the Voting Record Date provided by the Trustees to the Monitor in accordance with the Meeting Order.

“ Released Claims ” means all of the rights, claims and liabilities of any kind released pursuant to Article 7 of the Plan.

“ Released Parties ” means, collectively, those Persons released pursuant to Article 7 of the Plan, but only to the extent so released, and each such Person is referred to individually as a “ Released Party ”.

 

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“ Remaining Post-Implementation Reserve Amount ” has the meaning given in this Circular under the heading “ Implementation of the Plan – Distributions under the Plan – Final Distributions from the Reserves ”.

“ Required Majority ” means a majority in number of Affected Creditors with Proven Claims, and two-thirds in value of the Proven Claims held by such Affected Creditors, in each case who vote (in person or by proxy) on the Plan at the Meeting.

“ Resolution ” means the resolution substantially in the form attached as Schedule A to this Information Statement providing for the approval of the Plan by Affected Creditors.

“ Restructuring Claim ” means any right or claim of any Person that may be asserted or made in whole or in part against SFC, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind arising out of the restructuring, termination, repudiation or disclaimer of any lease, contract, or other agreement or obligation on or after the Filing Date and whether such restructuring, termination, repudiation or disclaimer took place or takes place before or after the date of the Claims Procedure Order.

“ Restructuring Committee ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – Events Leading to the Commencement of CCAA Proceedings – Failure to Release Q3 and Default Under the Notes ”.

“ Restructuring Transaction ” or “ Restructuring ” means the transactions contemplated by the Plan (including any Alternative Sale Transaction that may occur pursuant to the Plan).

“ RMB ” means the Renminbi, the lawful currency of the PRC.

“ SAFE ” has the meaning given in this Information Statement under the heading “ Risk Factors – Risks Relating to our Business ”.

“ Sale Solicitation Process ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – Commencement of CCAA Proceedings ”.

“ Sanction Hearing ” means the hearing on the Sanction Hearing Date (or such other date as may be set by the Court) for the Sanction Order.

“ Sanction Hearing Date ” means the date to be selected by the Monitor for the Sanction Hearing (in consultation with SFC and counsel to the Initial Consenting Noteholders), which date shall be within three Business Days of the Meeting Date (or such other date on or after the Meeting Date as may be set by the Monitor or the Court).

“ Sanction Order ” means the Order of the Court sanctioning and approving the Plan.

“ SCG ” means Sino-Capital Global Inc.

“ SEC ” means the United States Securities and Exchange Commission.

“ Second Interim Report ” has the meaning given in this Information Statement under the heading “ Documents Incorporated by Reference ”.

“ Section 5.1(2) D&O Claim ” means any D&O Claim that is not permitted to be compromised pursuant to section 5.1(2) of the CCAA, but only to the extent not so permitted, provided that any D&O Claim that qualifies as a Non-Released D&O Claim or a Continuing Other D&O Claim shall not constitute a Section 5.1(2) D&O Claim.

“ Securities Act ” means the Securities Act (Ontario).

“ Securityholder ” has the meaning given in this Information Statement under the heading “ Certain Canadian Federal Income Tax Considerations ”.

 

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“ SFC ” or the “ Company ” means Sino-Forest Corporation.

“ SFC Advisors ” means Bennett Jones LLP, Appleby Global Group, King & Wood Mallesons and Linklaters LLP, in their respective capacities as legal advisors to SFC, and Houlihan Lokey Howard & Zukin Capital, Inc., in its capacity as financial advisor to SFC.

“ SFC Assets ” means all of SFC's right, title and interest in and to all of SFC's properties, assets and rights of every kind and description (including all restricted and unrestricted cash, contracts, real property, receivables or other debts owed to SFC, Intellectual Property, SFC's corporate name and all related marks, all of SFC's ownership interests in the Subsidiaries (including all of the shares of the Direct Subsidiaries and any other Subsidiaries that are directly owned by SFC immediately prior to the Effective Time), all of SFC's ownership interest in Greenheart and its subsidiaries, all SFC Intercompany Claims and a right to the Remaining Post-Implementation Reserve Amount), other than the Excluded SFC Assets.

“ SFC Barbados ” means Sino-Forest International (Barbados) Corporation, a wholly-owned subsidiary of SFC established under the laws of Barbados.

“ SFC Business ” means the business operated by the SFC Companies.

“ SFC Continuing Shareholder ” means the Litigation Trustee or such other Person as may be agreed to by the Monitor and the Initial Consenting Noteholders.

“ SFC Companies ” or “ Sino-Forest ” means, collectively, SFC and all of the Subsidiaries.

“ SFC Escrow Co. ” means the company to be incorporated as a wholly-owned subsidiary of SFC pursuant to the Plan under the laws of the Cayman Islands or such other jurisdiction as agreed to by SFC, the Monitor and the Initial Consenting Noteholders.

“ SFC Escrow Co. Share ” means the one share to be issued by SFC Escrow Co. at the time that SFC Escrow Co. is incorporated to SFC, as the sole shareholder of SFC Escrow Co., in accordance with the Plan.

“ SFC Intercompany Claim ” means any amount owing to SFC by any Subsidiary or Greenheart and any claim by SFC against any Subsidiary or Greenheart.

“ SPP ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – Sale Solicitation Process ”.

“ Statement of Allegations ” means the statement of allegations of staff of the OSC dated May 22, 2012, concerning SFC and the Individual Respondents.

“ Stewart Murray ” has the meaning given in this Information Statement under the heading “ CCAA Proceedings and Other Proceedings – Asset Verification Process ”.

“ Subsidiaries ” means all direct and indirect subsidiaries of SFC, other than (i) Greenheart and its direct and indirect subsidiaries and (ii) SFC Escrow Co., and “ Subsidiary ” means any one of the Subsidiaries.

“ Subsidiary Intercompany Claim ” means any Claim by any Subsidiary or Greenheart against SFC.

“ Support Agreement ” means the Restructuring Support Agreement executed as of March 30, 2012 by SFC, the Direct Subsidiaries and the Initial Consenting Noteholders, and subsequently executed or otherwise agreed to by the Early Consent Noteholders, as such Restructuring Support Agreement may be amended, restated and varied from time to time in accordance with its terms.

 

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“ Tax ” or “ Taxes ” means any and all federal, provincial, municipal, local and foreign taxes, assessments, reassessments and other governmental charges, duties, impositions and liabilities including for greater certainty taxes based upon or measured by reference to income, gross receipts, profits, capital, transfer, land transfer, sales, goods and services, harmonized sales, use, value-added, excise, withholding, business, franchising, property, development, occupancy, employer health, payroll, employment, health, social services, education and social security taxes, all surtaxes, all customs duties and import and export taxes, all licence, franchise and registration fees and all employment insurance, health insurance and government pension plan premiums or contributions, together with all interest, penalties, fines and additions with respect to such amounts.

“ Tax Shield ” has the meaning given in this Information Statement under the heading “ Certain Canadian Federal Income Tax Considerations – Consequences to the Company ”.

“ taxable capital gain ” has the meaning given in this Information Statement under the heading “ Certain Canadian Federal Income Tax Considerations – Shareholders – Taxation of Capital Gains and Capital Losses ”.

“ Taxing Authorities ” means any one of Her Majesty the Queen, Her Majesty the Queen in right of Canada, Her Majesty the Queen in right of any province or territory of Canada, the Canada Revenue Agency, any similar revenue or taxing authority of Canada and each and every province or territory of Canada and any political subdivision thereof, any similar revenue or taxing authority of the United States, the PRC, Hong Kong or other foreign state and any political subdivision thereof, and any Canadian, United States, Hong Kong, PRC or other government, regulatory authority, government department, agency, commission, bureau, minister, court, tribunal or body or regulation-making entity exercising taxing authority or power, and “ Taxing Authority ” means any one of the Taxing Authorities.

“ Third Party Defendants ” means any defendants to the Class Action Claims (present or future) other than SFC, the Subsidiaries, the Named Directors and Officers or the Trustees.

“ Transfer Agent ” means Computershare Investor Services (or a subsidiary or affiliate thereof) or such other transfer agent as Newco may appoint, with the prior written consent of the Monitor and the Initial Consenting Noteholders.

“ Trustee Claims ” means any rights or claims of the Trustees against SFC under the Note Indentures for compensation, fees, expenses, disbursements or advances, including reasonable legal fees and expenses, incurred or made by or on behalf of the Trustees before or after the Plan Implementation Date in connection with the performance of their respective duties under the Note Indentures or the Plan.

“ Trustees ” means, collectively, The Bank of New York Mellon in its capacity as trustee for the 2013 Notes and the 2016 Notes, and Law Debenture Trust Company of New York in its capacity as trustee for the 2014 Notes and the 2017 Notes, and “ Trustee ” means either one of them.

“ U.S. ” means the United States of America.

“ Unaffected Claim ” means any: (a) Claim secured by any of the Charges (provided that, following the discharge of the Charges on the Plan Implementation Date, such Claims shall be paid from and limited to recovery as against the Administration Charge Reserve or the Directors’ Charge Reserve, as applicable, in accordance with the Plan); (b) Government Priority Claim; (c) Employee Priority Claim; (d) Lien Claim; (e) other Claim of any employee, former employee, Director or Officer of SFC in respect of wages, vacation pay, bonuses, termination pay, severance pay or other remuneration payable to such Person by SFC; (f) Trustee Claims; and (g) any trade payables that were incurred by SFC (i) after the Filing Date but before the Plan Implementation Date; and (ii) in compliance with the Initial Order or other Order issued in the CCAA Proceeding.

“ Unaffected Claims Reserve ” means the cash reserve to be established by SFC on the Plan Implementation Date and maintained by the Monitor, in escrow, for the purpose of paying certain Unaffected Claims in accordance with the Plan.

“ Unaffected Creditor ” means a Person who has an Unaffected Claim, but only in respect of and to the extent of such Unaffected Claim.

 

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“ Underwriters ” means any underwriters of SFC that are named as defendants in the Class Action Claims, including for greater certainty Credit Suisse Securities (Canada), Inc., TD Securities Inc., Dundee Securities Corporation, RBC Dominion Securities Inc., Scotia Capital Inc., CIBC World Markets Inc., Merrill Lynch Canada Inc., Canaccord Financial Ltd., Maison Placements Canada Inc., Credit Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated (successor by merger to Banc of America Securities LLC).

“ United States 1933 Act ” means the United States Securities Act of 1933 , as amended.

“ United States 1934 Act ” means the United States Securities Exchange Act of 1934 , as amended.

“ Unregistered Noteholder ” means a Noteholder whose name does not appear on any Registered Noteholder List.

“ Unresolved Claim ” means an Affected Creditor Claim in respect of which a Proof of Claim has been filed in a proper and timely manner in accordance with the Claims Procedure Order but that, as at any applicable time, has not been finally (i) determined to be a Proven Claim or (ii) disallowed in accordance with the Claims Procedure Order, the Meeting Order or any other Order.

“ Unresolved Claims Escrow Agent ” means SFC Escrow Co. or such other Person as may be agreed by SFC, the Monitor and the Initial Consenting Noteholders.

“ Unresolved Claims Reserve ” means the reserve of Newco Shares, Newco Notes and Litigation Trust Interests, if any, to be established pursuant to the Plan in respect of Unresolved Claims as at the Plan Implementation Date, which reserve shall be held and maintained by the Unresolved Claims Escrow Agent, in escrow, for distribution in accordance with the Plan.

“ Voting Claim ” means an Affected Creditor Claim to the extent that such Affected Creditor Claim has been accepted by the Monitor solely for purpose of voting on the Plan (which acceptance for the purpose of voting shall have no effect on whether such Claim is a Proven Claim for purposes of the Plan), in each case in accordance with the provisions of the Claims Procedure Order, the Meeting Order or any other Order, as applicable.

“ Voting Record Date ” means August 31, 2012.

“ Website ” means the website maintained by the Monitor in respect of the CCAA Proceedings pursuant to the Initial Order at the following web address: http://cfcanada.fticonsulting.com/sfc.

“ WFOEs ” has the meaning given in this Information Statement under the heading “ Information Regarding Sino Forest—Business Model-Plantation / Timber Rights in the PRC ”.

“ WTO ” means World Trade Organization.

 

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SUMMARY INFORMATION

The following is a summary of certain information contained elsewhere in this Information Statement, including the Schedules hereto and is qualified in its entirety by reference to the more detailed disclaimers and information contained or referred to elsewhere in this Information Statement or the Schedules hereto. Terms with initial capital letters used in this summary are defined in the “Glossary of Terms”.

 

Important Disclaimers

   The information contained in this Information Statement may not be reliable. See “ Important Disclaimers ”.

Meeting

  

Pursuant to the Meeting Order, the Meeting has been called for the purpose of having Affected Creditors with Voting Claims consider and, if deemed advisable, adopt, with or without variation, the Resolution to approve the Plan. The Meeting is scheduled to be held at 10:00 a.m.(Toronto time) on November 29, 2012 at the offices of Bennett Jones LLP, 3400 One First Canadian Place, Toronto, Ontario.

 

The Meeting shall be held in accordance with the Plan, the Meeting Order and any further Order of the Court. The only Persons entitled to attend and vote on the Plan at the Meeting are those specified in the Meeting Order.

 

The quorum required at the Meeting has been set by the Meeting Order as one Affected Creditor with a Voting Claim present at the Meeting (in person or by proxy).

See “ Meeting and Voting – Procedure for the Meeting ”.

Entitlement to Vote

  

The only Persons entitled to vote at the Meeting (whether in person or by proxy) are: (i) Beneficial Noteholders with Voting Claims that have beneficial ownership of one or more Notes as at the Voting Record Date (or any such Beneficial Noteholder’s validly appointed holder of its Noteholders’ Proxy); and (ii) Ordinary Affected Creditors with Voting Claims as at the Voting Record Date (which, for greater certainty, includes any transferee of an Ordinary Affected Creditor Claim that is a Voting Claim, provided that such transferee has been recognized as an Ordinary Affected Creditor in respect of such transferred Ordinary Affected Creditor Claim) (or any such Ordinary Affected Creditor’s validly appointed holder of its Ordinary Affected Creditors’ Proxy).

 

Each Beneficial Noteholder with a Voting Claim shall be entitled to one vote as a member of the Affected Creditors’ Class, which vote shall have a value equal to the principal and Accrued Interest owing under the Notes owned by such Beneficial Noteholder as at the Voting Record Date.

Each Ordinary Affected Creditor with a Voting Claim shall be entitled to one vote as a member of the Affected Creditors Class, which vote shall have a value equal to the dollar value of such Ordinary Affected Creditor’s Voting Claim.

 

Each Affected Creditor with an Unresolved Claim as at the Voting Record Date shall be entitled to attend the Meeting and shall be entitled to one vote at the Meeting in respect of such Unresolved Claim. Any vote cast in respect of an Unresolved Claim shall be dealt with as described in the Meeting Order unless and until (and then only to the extent that) such Unresolved Claim is ultimately determined to be (i) a Voting Claim, in which case such vote shall have the dollar value attributable to such Voting Claim or (ii) disallowed, in which case such vote shall not be counted for any purpose.

 

Each of the Third Party Defendants will be entitled to one vote as a member of the Affected Creditors Class in respect of any Class Action Indemnity Claim that it has properly filed in respect of the Indemnified Noteholder Class Action Claims, provided that the aggregate value of all such Class Action Indemnity Claims shall, for voting purposes, be deemed to be equal to the amount of the Indemnified Noteholder Class Action Limit.

 

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   See “ Meeting and Voting – Entitlement to Vote ”.

Appointment of

Proxyholders and

Voting

  

In Person . Any Ordinary Affected Creditor or Beneficial Noteholder that is entitled to vote at the Meeting and that wishes to vote at the Meeting in person must: (i) duly complete and sign an Ordinary Creditors’ Proxy or a Noteholders’ Proxy, as applicable; (ii) identify itself in the Ordinary Creditors’ Proxy or a Noteholders’ Proxy, as applicable, as the Person with the power to attend and vote at the Meeting on behalf of such Ordinary Affected Creditor or Beneficial Noteholder, as the case may be; and (iii) deliver such Ordinary Affected Creditors’ Proxy or Noteholders’ Proxy, as the case may be, to the Monitor so that it is received on or before 5:00 p.m. on the third Business Day before the Meeting (or any adjournment thereof), and such delivery must be made in accordance with the instructions accompanying such Ordinary Affected Creditors’ Proxy or Noteholders’ Proxy.

 

By Proxy . Any Ordinary Affected Creditor or Beneficial Noteholder that is entitled to vote at the Meeting and that wishes to appoint a nominee to vote on its behalf at the Meeting must: (i) duly complete and sign an Ordinary Creditors’ Proxy or a Noteholders’ Proxy, as applicable; (ii) identify its desired nominee in the Ordinary Creditors’ Proxy or a Noteholders’ Proxy, as applicable, as the Person with the power to attend and vote at the Meeting on behalf of such Ordinary Affected Creditor or Beneficial Noteholder, as the case may be; and (iii) deliver such Ordinary Affected Creditors’ Proxy or Noteholders’ Proxy, as the case may be, to the Monitor so that it is received on or before 5:00 p.m. on the third Business Day before the Meeting (or any adjournment thereof), and such delivery must be made in accordance with the instructions accompanying such Ordinary Affected Creditors’ Proxy or Noteholders’ Proxy.

 

See “ Meeting and Voting – Appointment of Proxyholders and Voting” .

Purpose of the Plan

  

The purpose of the Plan is to: (i) effect a full, final and irrevocable compromise, release, discharge, cancellation and bar of all Affected Claims; (ii) effect the distribution of the consideration provided for herein in respect of Proven Claims; (iii) transfer ownership of the SFC Business to Newco, free and clear of all claims against SFC and certain related claims against the Subsidiaries, so as to enable the SFC Business to continue on a viable, going concern basis; and (iv) allow Affected Creditors and Noteholder Class Action Claimants to benefit from contingent value that may be derived from litigation claims to be advanced by the Litigation Trustee.

The Plan is put forward in the expectation that the Persons with an economic interest in SFC, when considered as a whole, will derive a greater benefit from the implementation of the Plan and the continuation of the SFC Business as a going concern than would result from a bankruptcy or liquidation of SFC.

Classification and

Voting

   The Plan provides for one class of Affected Creditors for the purpose of considering and voting on the Plan.

 

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Treatment of Affected

Parties

  

Generally, the Plan provides for treatment of claims as follows:

 

Claims of Current Noteholders and Other Affected Creditors. Noteholders and other Affected Creditors with Proven Claims will receive their pro rata share of 92.5% of the outstanding Newco Shares, 100% of $300 million principal amount of Newco Notes (the general terms of which are described herein and the specific terms of which will be described in a Plan Supplement to be issued in advance of the Meeting in accordance with the terms of the Meeting Order) and a 75% interest in the Litigation Trust (described below). Noteholders that became parties to the Support Agreement on or before the Consent Date of May 15, 2012 (or their assignees) will receive the remaining 7.5% of the outstanding Newco Shares (including the Unresolved Claims Reserve).

 

Shareholder and Shareholder Class Action Claims . The Plan does not provide for any recovery for current shareholders of SFC in their capacity as such. However, to the extent that current shareholders of SFC are within the class of claimants in the shareholder Class Actions involving the Company, the Plan preserves their ability to continue their claims against Third Party Defendants. Sino-Forest’s Existing Shares will be cancelled as part of the Plan for no consideration.

 

Indemnity Claims against Sino-Forest in respect of Shareholder Class Action Claims . All Class Action Indemnity Claims in respect of shareholder Class Action Claims (including indemnity claims against the Company by auditors, underwriters and directors and officers) will be released and will receive no recovery.

 

Claims of Former Noteholders . Class Action Claims of former noteholders of Sino-Forest against Sino-Forest and certain directors and officers will be released. Claims of former noteholders against certain third parties will be allowed to proceed subject to a limited claim amount that can be asserted in respect of any such claims that are validly indemnified by Sino-Forest, which amount shall be acceptable to the Company, the Initial Consenting Noteholders, the Monitor and counsel to the Class Action plaintiffs. The Noteholder Class Action Claimants will be collectively entitled to receive 25% of the Litigation Trust Interests, subject to certain conditions.

 

Indemnity Claims against Sino-Forest in respect of Class Action Claims by Former Noteholders . Class Action Indemnity Claims in respect of Indemnified Noteholder Class Action Claims will be allowed on a contingent basis, subject to the same limit as the claims of former Noteholders. However, nothing in the Plan impairs the ability of the Company, the Monitor and the Initial Consenting Noteholders from seeking a Court order that would cause such indemnity claims to be released without recovery in the same manner as indemnity claims in respect of shareholder Class Action Claims or otherwise.

 

Unaffected Claims . Certain other claims are “unaffected claims”, and holders of those unaffected claims will not be entitled to vote on the Plan. Holders of unaffected claims will be paid in full. Unaffected claims include: certain government priority claims relating to taxes, if any; certain employee priority and other employee claims, if any; and trade payables incurred by Sino-Forest after March 30, 2012.

 

Unresolved Claims . Distributions of Newco Notes, Newco Shares and Litigation Trust Interests in respect of Unresolved Claims will be maintained in the Unresolved Claims Reserve until such claims become Proven Claims or are disallowed or subordinated. All Claims against SFC for indemnification in respect of Indemnified Noteholder Class Action Claims or Defence Costs will be treated as Unresolved Claims for purposes of the Plan unless and until determined to be a Proven Claim or disallowed. To the extent that any distributions are made after the Plan Implementation Date in respect of any Unresolved Claims that have become Proven Claims, these distributions will have the effect of diluting the distributions (or recoveries) received by the Affected Creditors with Proven Claims as at the Plan Implementation Date.

 

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Directors and Officers . The Plan provides for releases in favour of the Named Directors, being the current directors and officers of SFC as well as certain former directors or officers. However, certain types of claims will not be released pursuant to the Plan, including: (a) claims not permitted to be released by section 5.1(2) of the CCAA (b) claims for the tort of conspiracy; and (c) claims for fraud or criminal conduct. As noted above, the Third Party Defendants to the Class Action Claims that are proceeding would not be released under the Plan, other than the Named Directors to the extent noted above.

 

See “ Description of the Plan – Treatment of Affected Parties Pursuant to the Plan ”.

Creditor Approval of

Plan

  

In order for the Plan to be approved pursuant to the CCAA, the Plan must be approved by a majority in number of Affected Creditors with Proven Claims, and two-thirds in value of the Proven Claims held by Affected Creditors, in each case who vote (in person or by proxy) on the Plan at the Meeting. If such approvals are obtained, in order to make the Plan effective, the Sanction Order must be obtained.

 

See “ Required Approvals Under the CCAA and Other Conditions to Implementation – Creditor Approval ”.

Court Approval under

the CCAA

  

If the Plan is approved by the Required Majority, SFC shall apply for the Sanction Order. The hearing in respect of the Sanction Order is scheduled to take place on or about December 7, 2012 and December 10, 2012 at 10:00 a.m. (Toronto time) at the Court at 330 University Avenue, Toronto, Ontario, Canada.

 

See “ Required Approvals Under the CCAA and Other Conditions to Implementation – Court Approval of the Plan Under the CCAA ”.

Conditions to

Implementation of the Plan

  

The implementation of the Plan is conditional upon satisfaction of, among others, the following conditions prior to or at the Effective Time:

 

(i)     the Plan shall have been approved by the Required Majority and the Court, and in each case the Plan shall have been approved in a form consistent with the Support Agreement or otherwise acceptable to SFC and the Initial Consenting Noteholders, each acting reasonably;

 

(ii)    the Sanction Order shall have been made and shall be in full force and effect prior to December 17, 2012, and the Plan Implementation Date shall have occurred no later than January 15, 2013;

 

(iii)  certain elements of the Restructuring Transaction and the Plan and matters relating to Newco shall be acceptable to the Initial Consenting Noteholders (as provided in greater detail in the Plan);

 

(iv)   the aggregate amounts of each of the: Indemnified Noteholder Class Action Limit, Proven Claims held by Ordinary Affected Creditors, Unaffected Claims Reserve, Administration Charge Reserve, Directors’ Charge Reserve, Monitor’s Post-Implementation Reserve, Litigation Funding Amount, Lien Claims to be satisfied by the return to the applicable Lien Claimants of the applicable secured property, Lien Claims to be repaid in cash, Unaffected Claims and each category of Unaffected Claims, Unresolved Claims and the Unresolved Claims Reserve, shall be acceptable to SFC, the Monitor and Initial Consenting Noteholders;

 

(v)    the Initial Consenting Noteholders shall have completed due diligence in respect of SFC and the Subsidiaries and the results of such due diligence shall be acceptable to the Initial Consenting Noteholders prior to the date of the hearing of the Sanction Order; and

 

(vi)   Certain regulatory approvals in the PRC and Canada.

 

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   (The foregoing is a brief summary of certain of the conditions precedent to the implementation of the Plan. A comprehensive list of conditions precedent is provided in Section 9.1 of the Plan. See “Required Approvals Under the CCAA and Other Conditions to Implementation – Conditions to Implementation of the Plan”.)

Timing of Plan

Implementation

  

It is anticipated that the Plan will be implemented in accordance with the following timetable:

 

No later than November 29, 2012 -         Meeting

 

No later than December 17, 2012 -          Sanction Order

 

No later than January 15, 2013 -              Implementation of the Plan

Monitor

   The Monitor and its counsel have been involved throughout the course of negotiations regarding the Plan and the Monitor supports the Company’s request to convene the meeting to consider the Plan.

Recommendations of the

Board of Directors

   For the reasons set out in “ Recommendation of the Board of Directors ”, the Board of Directors recommends that Affected Creditors vote for the Resolution to approve the Plan.

Support of Noteholders

   Noteholders representing an aggregate of over 72% of the outstanding principal amount of the Notes as at the Consent Date as at the date hereof, have agreed to vote in favour of and to support the Restructuring and the Plan, in accordance with the terms and conditions of the Support Agreement. See “ Support of the Noteholders ”.

Certain Canadian Federal

Income Tax Considerations

  

Certain tax considerations relating to the Plan are described in “Certain Canadian Federal Income Tax Considerations”. Affected Creditors should consult their own tax advisors with respect to their individual circumstances.

 

See “ Certain Canadian Federal Income Tax Considerations ”.

Risk Factors

  

Affected Creditors should carefully consider certain risk factors relating, among other things, to the non-implementation of the Plan, the Plan and its implementation, the securities of Newco, the Muddy Waters and OSC allegations, the SFC Business, and the PRC.

See “ Risk Factors ”.

Newco

  

Newco is expected to be incorporated as an exempt company under the laws of the Cayman Islands (or such other jurisdiction as is acceptable to SFC and the Initial Consenting Noteholders) pursuant to the Plan with share capital consisting of a single class of voting shares, being the Newco Shares. Holders of Newco Shares will be entitled to certain voting, information, pre-emptive and approval rights as provided in Newco's articles of association. See “Information Regarding Newco – Newco Shares” .

 

Newco will also issue U.S.$300 million principal amount of Newco Notes pursuant to the Plan. The Newco Notes will be senior debt obligations of Newco and will be secured, subject to permitted liens, on a first-priority basis with share pledges from certain Subsidiaries in a manner substantially similar to the pledges currently in place

 

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for the 2014 Notes and 2017 Notes and will have guarantees from certain Subsidiaries in a manner substantially similar to the guarantees currently in place for the 2013 Notes and 2016 Notes. Interest on the Newco Notes will be payable in cash or in kind, at Newco’s option, at a rate of 6% per annum if paid in cash, or 8% if paid in kind. Other terms of the Newco Notes are expected to be substantially similar to the 2014 Notes and 2017 Notes, with appropriate adjustments to reflect to size and structure of the business operated by Newco following the Plan Implementation Date See “Information Regarding Newco – Newco Notes” .

 

Additional information regarding Newco, including information relating to Newco’s governance and management and information relating to the Newco Shares and Newco Notes, will be provided in the Plan Supplement to be issued in accordance with the terms of the Meeting Order.

Litigation Trust

   A description of the Litigation Trust, including the Litigation Funding Amount, will be provided in the Plan Supplement to be issued in advance of the Meeting in accordance with the terms of the Meeting Order.

Alternative Sale

Transaction

  

The Plan provides that, at any time prior to the implementation of the Plan, SFC may, with the consent of the Initial Consenting Noteholders, complete a sale of all or substantially all of the SFC Assets on terms that are acceptable to the Initial Consenting Noteholders (an “ Alternative Sale Transaction ”), provided that any such Alternative Sale Transaction has been approved by the Court pursuant to section 36 of the CCAA on notice to the service list. In the event that an Alternative Sale Transaction is completed, the terms and conditions of the Plan would continue to apply, subject to the following:

 

(a)    The Newco Shares and Newco Notes would not be distributed under the Plan (given that Newco would not need to be formed in the context of any such asset sale). Instead, the consideration paid or payable to SFC pursuant to the Alternative Sale Transaction (the “ Alternative Sale Transaction Consideration ”) would be distributed to the Persons entitled to receive Newco Shares under the Plan in the same proportions (and subject to the same terms and conditions) as are applicable to the distribution of Newco Shares under the Plan.

 

(b)    All provisions in the Plan that address Newco would be deemed ineffective given that Newco would not need to be formed in connection with an Alternative Sale Transaction.

 

(c)    All provisions in the Plan that address the creation and issuance of the Newco Shares and Newco Notes would be deemed ineffective given that the Newco Shares and the Newco Notes would not be issued in connection with an Alternative Sale Transaction.

 

(d)    All provisions relating to the entitlement of Affected Creditors to receive Newco Shares, and the amount of Newco Shares any given Affected Creditor is entitled to receive under the Plan, would continue to apply so as to govern the distribution of the Alternative Sale Transaction Consideration in place of the Newco Shares, and in the same proportions among the Affected Creditors.

 

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(e)    SFC, with the written consent of the Monitor and the Initial Consenting Noteholders, shall be permitted to make any such other amendments, modifications and supplements to the terms and conditions of the Plan as may be necessary to: (i) facilitate the Alternative Sale Transaction; (ii) cause the Alternative Sale Transaction Consideration to be distributed in the same proportions and subject to the same terms and conditions as are subject to the distribution of Newco Shares under the Plan; and (iii) complete the Alternative Sale Transaction and distribute the Alternative Sale Transaction Proceeds in a manner that is tax efficient for SFC and the Affected Creditors with Proven Claims, provided in each case that (A) a copy of such amendments, modifications or supplements is filed with the Court and served upon the service list; and (B) the Monitor is satisfied that such amendments, modifications or supplements do not materially alter the proportionate entitlements of the Affected Creditors, as among themselves, to the consideration distributed pursuant to the Plan.

 

Except for the requirements to obtain (i) the prior written consent of the Initial Consenting Noteholders for an Alternative Sale Transaction and (ii) the approval of the Alternative Sale Transaction by the Court pursuant to section 36 of the CCAA (on notice to the service list), once the Plan has been approved by the Required Majority of Affected Creditors, no further meeting, vote or approval of the Affected Creditors would be required to enable SFC to complete an Alternative Sale Transaction.

 

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INFORMATION REGARDING SINO-FOREST

Business of Sino-Forest

SFC is a corporation continued under the CBCA . It is an integrated forest plantation operator and forest products company, with assets predominantly located in the PRC. Its principal businesses include the ownership and management of forest plantation trees, the sale of standing timber, wood logs and wood products, and the complementary manufacturing of downstream engineered-wood products.

In addition, SFC holds an indirect majority interest in Greenheart, a Hong Kong listed investment holding company, which, together with the Greenheart Group, owns certain rights and manages hardwood forest concessions in the Republic of Suriname and a radiata pine plantation on freehold land in New Zealand. While Greenheart is an indirect Subsidiary of SFC, it has its own distinct operations and financing arrangements and is not party to or a guarantor of the Notes, which are described below. Greenheart Group and SFC operate out of separate office buildings in Hong Kong. Greenheart Group was not implicated in the allegations made against Sino-Forest by Muddy Waters on June 2, 2011, which are described further below.

Corporate Structure

SFC is a holding company. Its principal assets are the shares it holds in the Direct Subsidiaries, some cash and the SFC Intercompany Claims. It operates its business through 136 Subsidiaries, six of which are directly wholly-owned by it being Sino-Panel Holdings Limited (incorporated in the BVI), Sino-Global Holdings Inc. (incorporated in the BVI), Sino-Panel Corporation (incorporated in Canada), Sino-Wood Partners, Limited (incorporated in Hong Kong), Sino-Capital Global Inc. (incorporated in the BVI), and SFC Barbados. SFC also holds all of the preference shares of Sino-Forest Resources Inc. (incorporated in the BVI). The 136 Subsidiaries are comprised of 67 PRC incorporated corporations (with 11 branch companies), 58 BVI incorporated corporations, seven Hong Kong incorporated corporations, one Canadian corporation and three corporations incorporated in other jurisdictions. The Greenheart Group is not included in the foregoing.

Capital Structure

Equity

As at the date of this Information Statement, approximately 246 million Common Shares are issued and outstanding. No other classes of shares of SFC are outstanding.

Debt

SFC has issued four series of Notes which remain outstanding. In addition to the four series of Notes issued by SFC, many of the Subsidiaries (and the Greenheart Group) have their own banking facilities aggregating approximately $43.2 million in principal amount as at September 29, 2012, including lending facilities, which are not intended to be affected by the Plan.

2017 Senior Notes

On October 21, 2010, SFC issued the 2017 Notes in the principal amount of U.S. $600 million. The 2017 Notes mature on October 21, 2017, and interest is payable semi-annually, on April 21 and October 21, at a rate of 6.25% per annum. The 2017 Notes are listed but do not trade on the Singapore Stock Exchange and are supported by guarantees from 60 Subsidiaries and share pledges from 10 of those same Subsidiaries.

2016 Convertible Notes

On December 17, 2009, SFC issued the 2016 Notes in the principal amount of U.S. $460 million. The 2016 Notes mature on December 15, 2016, and interest is payable semi-annually, on June 15 and December 15, at a rate of 4.25% per annum. The 2016 Notes are supported by guarantees from 64 Subsidiaries.

 

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2014 Senior Notes

On July 27, 2009, SFC issued by way of exchange offer the 2014 Notes in the principal amount of U.S. $399,517,000. The 2014 Notes mature on July 28, 2014, and interest is payable semi-annually, on January 26 and July 26, at a rate of 10.25% per annum. The 2014 Notes are listed but do not trade on the Singapore Stock Exchange and are supported by guarantees from 60 Subsidiaries and share pledges from 10 of those same Subsidiaries.

2013 Convertible Notes

On July 17, 2008 and August 6, 2008, SFC issued the 2013 Notes in the aggregate principal amount of U.S. $345 million. The 2013 Notes mature on August 1, 2013, and interest is payable semi-annually, on February 1 and August 1, at a rate of 5% per annum. The 2013 Notes are supported by guarantees from 64 Subsidiaries.

Business Model

Plantation / Timber Rights in the PRC

There are four types of rights associated with timber plantations in the PRC: (i) plantation land ownership; (ii) plantation land use rights; (iii) timber ownership; and (iv) timber use rights. All of these are separate rights and can be separately owned by different parties.

Private enterprises cannot own plantation land in the PRC but may hold plantation land use rights for a specified duration (up to 70 years but typically 30 to 50 years), timber ownership and timber use rights. Foreign enterprises are not prohibited by law from acquiring timber ownership or timber use rights.

The various rights associated with timber plantations in the PRC and the limitations on which entities can hold such rights were one of management's stated reasons for Sino-Forest’s complex business models described below.

For its timber business in the PRC, Sino-Forest utilizes two models, one involving BVI entities (“ BVI Entities ”), and the other involving Subsidiaries incorporated in the PRC as wholly foreign owned enterprises (“ WFOEs ”).

The BVI Model

Due to restrictions on wholly foreign-owned enterprises from engaging in the commodity distribution industry in the PRC until 2004, Sino-Forest uses BVI Entities to carry on its forestry business in the PRC.

Under the BVI model, the Sino-Forest BVI Entities involved in the standing timber business acquire standing timber from suppliers. The suppliers are usually aggregators who acquire the standing timber and, typically, plantation land use rights from other suppliers or from original timber owners, such as villagers or collectives, or from smaller aggregators. As non-PRC companies, the BVI Entities could not and did not acquire plantation land use rights in the PRC, and instead only acquired the rights to timber in the PRC pursuant to the relevant standing timber purchase contracts.

The BVI model does not involve the Sino-Forest BVI Entities concurrently acquiring the plantation land use rights or leases of the underlying plantation land with the purchase of standing timber, as the BVI Entities cannot legally acquire plantation land use rights. However, the BVI Entities' supply contracts typically contain a right of first refusal for the BVI Entities to acquire, or nominate an affiliate to acquire, the plantation land use rights after the timber has been harvested. Despite such common contractual provisions, such right has rarely, if ever, been exercised by the Sino-Forest BVI Entities.

Due to restrictions under PRC laws, the Sino-Forest BVI Entities do not sell standing timber directly to customers. Instead, they conduct the sale of standing timber through “authorized intermediaries” (“ AIs ”, which are also called “entrusted sales agents” in the BVI model) pursuant to “entrusted sales agreements”. Under the BVI model, the AIs serve as Sino-Forest’s customers of its standing timber business.

 

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Pursuant to the entrusted sales agreements entered into with the AIs, the AIs are obliged to deduct and remit on behalf of Sino-Forest all of the applicable taxes payable to the PRC government in connection with the ultimate sale of the timber by the AIs. Sino-Forest is not, however, in a position to know whether or not the AIs have in fact remitted applicable taxes on behalf of Sino-Forest.

Under PRC law, BVI Entities are not allowed to have bank accounts in the PRC and money flowing in and out of the PRC is strictly controlled through foreign exchange controls. As a result, the Sino-Forest BVI Entities do not directly pay the suppliers or receive payments from the AIs. Instead, the AIs are instructed by Sino-Forest to make set-off payments. Pursuant to the instructions of Sino-Forest, AIs make payments directly or indirectly to Sino-Forest’s suppliers for amounts owed by Sino-Forest BVI Entities to those suppliers. As a result, no cash actually flows directly through the BVI Entities. SFC then receives confirmations from the AIs and suppliers that payments have been made and received, respectively.

The nature of the BVI model means that Sino-Forest cannot obtain cash from its BVI model operations or monetize its BVI model assets without engaging in the complicated “on-shoring” process which is discussed further below or by using other more costly methods than the “on-shoring” process. Furthermore, the set-off payment system necessitated by the BVI model impaired the Independent Committee’s ability to verify the flow of funds during its investigation. The Independent Committee was also unable to confirm whether a number of suppliers and AIs were unrelated to Sino-Forest.

Sino-Forest has established 58 BVI Entities, 55 of which are guarantors of at least certain of the Notes. Not all of these BVI Entities are involved in the BVI model or standing timber business. Of the 58, there are 20 involved in the BVI standing timber business while the remaining BVI Entities are either holding companies or used in Sino-Forest’s log trading business.

Sino-Forest has historically reported that its revenues and profits were primarily generated from the BVI model.

The WFOE Model

Commencing in 2004, the PRC’s Ministry of Commerce permitted foreign investors to invest in PRC-incorporated trading companies and to participate in most areas of the commodity distribution industry, including the purchase and sale of standing timber throughout the PRC. Prior to this time, WFOEs were prohibited from engaging in the commodity distribution industry.

Management of the Company has informed the Board that since 2006 almost all of Sino-Forest’s new cash capital invested in timber assets has been employed through the WFOE model (as opposed to the BVI model).

Unlike BVI Entities, WFOEs can acquire land use rights or land leases as well as standing timber rights, and can have bank accounts in the PRC. Because of the WFOEs’ direct presence in the PRC, they are also eligible to obtain financing from PRC banks to finance their operations. WFOEs can log the timber and sell both logs and standing timber to end customers, which means they do not need (and do not use) AIs. The WFOEs generally pay the suppliers directly for the standing timber and generally directly receive payment from end customers instead of utilizing the set-off arrangement used by Sino-Forest’s BVI Entities in the BVI model.

None of Sino-Forest’s WFOEs are guarantors of the Notes, nor have their shares been pledged by their BVI parents.

On-shoring

Given the inherent problems with the BVI model and the relative advantages of the WFOE model, Sino-Forest has explored various methods of migrating or “on-shoring” its BVI model timber assets into the WFOE model. SFC believes that the successful transition of assets from a BVI model to a WFOE model has many merits, including providing the foreign parent an ability to have direct access to the cash generated from the sale of timber assets to customers.

 

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SFC has been investigating alternative on-shoring structures. The Board understands that there are a number of alternatives available; however, any alternative that is ultimately chosen is expected to be a multi-year process due to (i) the volume of assets that need to be moved into the WFOE model, (ii) the large number of different locations in which Sino-Forest has BVI model timber assets in the PRC, (iii) the likely multiple rounds of negotiations required with the various stakeholders in each location, and (iv) SFC’s currently limited resources. Sino-Forest expects to incur substantial costs in connection with any “on-shoring” process it undertakes. There can be no assurance that any on-shoring process will be successful, or if successful, the costs or timing thereof.

Operations

Sino-Forest’s operations are comprised of three core business segments. Wood fibre operations and log trading have historically been the primary revenue contributors, while manufacturing and other operations enhance the value of the fibre operations by producing downstream products.

Wood Fibre Operations

Sino-Forest’s wood fibre operations consist of acquiring, cultivating and selling standing timber or logs from purchased and planted plantations in nine provinces across the PRC.

Sino-Forest generates the majority of its revenue from the sale of standing timber and logs. Most of the standing timber and logs sold by Sino-Forest come from Sino-Forest’s tree plantations, located primarily in the southern and eastern regions of the PRC.

Sino-Forest operates plantations for the wood fibre operations using two principal plantation models: purchased and planted, each of which is explained in greater detail below. The purchased plantation model operates through two legal structures: the BVI model and, to a lesser extent, the WFOE model. The planted plantation model is operated exclusively through the WFOE model, although the WFOEs themselves are typically held indirectly through a BVI Entity.

A. Purchased Plantation Model

The purchased plantation model under the BVI model only involves the purchase and sale of standing timber.

WFOEs are also engaged in the purchase and sale of standing timber. When conducted through a WFOE, purchases of standing timber are sometimes accompanied by concurrently obtaining plantation land use rights or leases.

In both the BVI and WFOE models, the purchase price of the trees takes into account a variety of factors such as the trees’ species, age, size, quality and location. Other considerations include soil and weather conditions for replanting, log prices, and regional market location and demand. Sino-Forest does not typically need to conduct extensive plantation management work with respect to the trees growing on the purchased plantations, but does take measures to ensure that the trees are protected from pests, disease and theft.

Sino-Forest’s approach is to purchase plantations in remote parts of the PRC that the PRC government has identified in its five year plans as being areas for future development. As a result, physical access to the plantations is often very challenging.

The purchased plantations under Sino-Forest management in the PRC consist of a diverse mix of tree species, predominantly Chinese fir and pine. Purchasing trees allows Sino-Forest to quickly expand its plantation portfolio geographically, as well as its inventory of harvestable fibre and leasable land.

B. Planted Plantation Model

The planted plantation model is conducted by WFOEs, and involves obtaining plantation land use rights, sometimes with standing timber and sometimes as bare land suitable for planting. Sales from these planted plantations do not utilize AIs but rather generally involve direct fund transfers to and from the WFOEs’ suppliers and customers.

 

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Sino-Forest leases suitable land on a long-term basis, typically 30 to 50 years, and applies scientifically advanced seedling technology and silviculture techniques that management believes improves tree growth. The mature trees are sold as standing timber or as harvested logs, and then Sino-Forest replants the land with seedlings.

Sino-Forest’s operating model allows for the sale of fibre either as standing timber or harvested logs, depending on its customers’ preferences and market demand.

Sino-Forest’s planted plantations consist primarily of eucalyptus trees, a fast-growing high yielding species.

The goal of Sino-Forest’s R&D efforts has been to improve tree plantation yields and the quality of the trees grown on Sino-Forest’s plantations.

Log Trading Operations

Sino-Forest’s operations in the trading of wood logs included the sourcing of wood logs and wood-based products mainly globally, and selling them in the domestic PRC market.

These wood-based products consist primarily of large diameter logs, sawn timber, veneers and other wood-based products sourced from Thailand, Suriname, Papua New Guinea, Brazil, Vietnam, Russia and New Zealand. In these transactions, Sino-Forest purchases wood-based products that correspond to the requirements of wood dealers, and sells directly to these dealers. Sino-Forest’s customers in these transactions are primarily wood dealers in the PRC. Given its current financial challenges, Sino-Forest has substantially ceased any new log trading initiatives.

Manufacturing and Other Operations

Sino-Forest currently has manufacturing operations in six provinces in the PRC that produce various wood-based products. In addition, Sino-Forest has greenery and nursery operations based in Jiangsu Province, which were established to source, supply and manage landscaping products for property developers and other organizations.

Location of Sales

Substantially all of Sino-Forest’s sales (including the sales of Greenheart Group) are generated in the PRC.

Suppliers

Standing timber is sourced primarily from local suppliers in the PRC. As described above, the PRC-based suppliers are usually aggregators who acquire standing timber and/or land use rights from other suppliers or from original timber owners such as villagers or collectives.

Logs and wood-based products supplied through Sino-Forest’s trading activities are sourced primarily from suppliers outside the PRC, primarily from Thailand, Suriname, Papua New Guinea, Brazil, Vietnam, Russia and New Zealand.

Customers

As described above, the AIs serve as Sino-Forest’s customers under the BVI model of its standing timber business. WFOEs, on the other hand, can log the timber and sell both logs and standing timber to end customers, which means they do not need (and do not use) AIs.

Employees

SFC currently has two employees, one of which is based in Canada. As at September 30, 2012, collectively, the SFC Companies employ a total of approximately 3,203 employees, with approximately 3,129 located in the PRC and approximately 72 located in Hong Kong. In addition, the Greenheart Group employs approximately 436 employees as at August 31, 2012.

 

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Reporting Issuer Status & Stock Exchange Listings

SFC is a reporting issuer under Canadian securities laws and its Common Shares previously traded on the Toronto Stock Exchange. Currently, SFC is in default of its reporting obligations under Canadian securities laws, its securities are subject to a cease trade order issued by the OSC and its Common Shares were delisted from the Toronto Stock Exchange in May, 2012. The 2017 Notes and the 2014 Notes are listed but do not trade on the Singapore Stock Exchange.

CCAA PROCEEDINGS AND OTHER MATTERS

Events Leading to the Commencement of CCAA Proceedings

Muddy Waters Report

On June 2, 2011, Muddy Waters, which held a short position on SFC’s shares, published a report (the “ MW Report ”) alleging that Sino-Forest, among other things, was a “near total fraud” and a “Ponzi scheme.” Among other things, the MW Report alleged that Sino-Forest does not hold the full amount of timber assets that it reports, that the timber assets actually held by Sino-Forest have been overstated, and that Sino-Forest overstated its revenue. In addition, the MW Report alleged that Sino-Forest has engaged in unreported related-party transactions.

The Independent Committee, Ontario Securities Commission, Royal Canadian Mounted Police and Hong Kong Securities and Futures Commission Investigations

On June 2, 2011, the same day that the MW Report was released, the Board appointed the Independent Committee, a Board committee consisting exclusively of directors independent of management of the Company, which in turn retained independent legal and financial advisors in Canada, Hong Kong and the PRC, to investigate the allegations set out in the MW Report.

On June 8, 2011, the OSC publicly announced that it was investigating matters related to SFC.

Later in June 2011, the HKSFC commenced an investigation into Greenheart Group. As a company listed on the Hong Kong Stock Exchange and headquartered in Hong Kong, the HKSFC is Greenheart’s primary securities regulator. In addition to its investigation of Greenheart Group, the HKSFC has been assisting the OSC with its investigation pursuant to standing reciprocal agreements between the HKSFC and OSC.

In late August 2011, counsel for the Independent Committee received an inquiry from the RCMP requesting cooperation from the Independent Committee in connection with an investigation into the allegations in the MW Report. Representatives of the Independent Committee met with and provided information to the RCMP from time to time. The RCMP also has made information requests of the Independent Committee from time to time.

In connection with the OSC, HKSFC and RCMP investigations, Sino-Forest made extensive production of documents, in particular to the OSC, including documents sourced from jurisdictions outside of the OSC’s power to compel production. Sino-Forest also has facilitated interviews by the OSC with Sino-Forest personnel. In addition, Sino-Forest has responded to extensive inquiries, the most far-reaching coming from the OSC, and has provided periodic oral briefings to OSC staff. The Independent Committee Reports were provided to OSC staff on an unredacted basis, as described below.

First Interim Report

On August 10, 2011, the Independent Committee delivered the First Interim Report. SFC has publicly disclosed on SEDAR and on its website redacted versions of the First Interim Report and the two subsequent reports of the Independent Committee. The three reports have been redacted to protect information that the Board believes is commercially sensitive, the disclosure of which could be harmful to Sino-Forest's business and operations, especially in the PRC. Each of the three reports has been produced without redactions to OSC staff pursuant to a

 

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compelled process designed to allow OSC staff to receive information relevant to its investigation, while at the same time protecting SFC’s sensitive information.

The First Interim Report was the result of the Independent Committee and its advisors assembling and organizing significant data from Sino-Forest’s records, and reviewing Sino-Forest’s cash holdings, revenue and relationships. In the First Interim Report, while the Independent Committee did not determine that there was any validity to the allegations in the MW Report, its findings were limited as the investigation was still ongoing.

Also in its First Interim Report, the Independent Committee’s accounting advisors confirmed Sino-Forest’s cash balances in specific accounts as at June 13, 2011, for accounts located inside and outside of the PRC. A total of 293 accounts controlled by Sino-Forest in Hong Kong were confirmed, representing 100% of the expected cash position in Hong Kong. However, Sino-Forest had 267 accounts in the PRC with respect to which the logistics and requirements of in-person/in-branch verification in the PRC led the Independent Committee advisors to confirm 28 accounts, representing approximately 81% of the expected cash position in the PRC. The Independent Committee was satisfied based on this verification that Sino-Forest’s expected cash position in the PRC existed as at the date of confirmation.

Second Quarter 2011 Financial Results

The First Interim Report was delivered to the Board shortly before the Board was asked to authorize the release of SFC’s 2011 interim financial statements for the second quarter ended June 30, 2011 (the “ Q2 Results ”). The Q2 Results were released on August 15, 2011.

Almost immediately after the Q2 Results were released, the Independent Committee’s advisors identified and brought to the attention of the Independent Committee approximately 60 documents, some of which raised potential conduct issues and others of which raised questions as to whether Sino-Forest’s relationships with some of its AIs and suppliers were conducted at arm’s length.

On August 26, 2011, Allen Chan resigned as Chairman, Chief Executive Officer and as a director of SFC pending the completion of the review by the Independent Committee of the allegations in the MW Report. He was appointed Founding Chairman Emeritus and Mr. Judson Martin was appointed as Chief Executive Officer. Sino-Forest also placed three employees on administrative leave, and a fourth senior employee was requested to act solely on the instructions of Mr. Martin.

Also on August 26, 2011, the OSC issued a cease trade order with respect to the securities of SFC and with respect to certain senior management personnel. The cease trade order continues in force to date.

Second Interim Report

On November 13, 2011, the Independent Committee delivered its Second Interim Report to the Board. Subject to the limitations described therein, the Second Interim Report confirmed registered title or contractual or other rights to Sino-Forest’s stated timber assets, reconciled the book value of the BVI timber assets and Sino-Forest WFOE standing timber assets as set out in SFC’s 2010 annual financial statements to the purchase prices for such assets as set out in the BVI and WFOE standing timber purchase contracts reviewed by the Independent Committee advisors and reconciled reported total revenue to sales contracts. Subject to the scope limitations described in the Second Interim Report, the Independent Committee confirmed to its satisfaction that the Company has registered title to approximately 151,000 hectares of plantations, being 17.9% of its disclosed timber holdings by area as at December 31, 2010, and additional contractual rights to approximately 683,000 hectares of plantations, being 81.3% of its disclosed timber holdings by area as at December 31, 2010. The Independent Committee reported that it or its advisors had reviewed originals or copies of purchase contracts for the acquisition by Sino-Forest of virtually all of its disclosed timber holdings as at December 31, 2010.

The Independent Committee noted a number of challenges that it had encountered in conducting its investigation including the following:

 

 

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  (a) The PRC legal regime for forestry did not permit title to standing timber, when not held in conjunction with a land use right, to be definitively proven by reference to a government maintained register.

 

  (b) Obtaining information from third parties outside the control of the Independent Committee was very difficult.

 

  (c) Sino-Forest had a small management team which was stretched by the demands of the Independent Committee investigation, the OSC investigation and the auditors’ review, as well as the management changes described above, among other reasons.

 

  (d) Cultural, language and geographic issues including that most of the Company’s documents are in Chinese and most of its Asia-based management’s first language is Chinese; the importance of personal relationships in the PRC; business practices with respect to documentation of contractual arrangements is not as comprehensive as would be typical in Western jurisdictions; and the wide geographic scope of the Company’s operations within China.

 

  (e) Corporate governance and operational weaknesses arising from the fact that a small group of management are integral to maintaining relationships and negotiating contracts; operational and administrative systems are not sophisticated having regard to the size and complexity of the Company’s business; no internal audit function; and use of personal email for Company business.

 

  (f) Complexity, lack of visibility and limitations of BVI model.

 

  (g) Lack of full cooperation/openness in the Independent Committee’s examination from certain members of management.

 

  (h) Lack of independence of the Independent Committee process due to reliance on management.

For the full list of challenges and a more extensive description of them, refer to the Second Interim Report.

Failure to Release Third Quarter 2011 Financial Results and Default Under the Notes

Subsequent to August 26, 2011, the Independent Committee’s advisors identified additional documents that raised issues meriting comment and explanation from SFC’s management. SFC’s external counsel, in responding to requests from the OSC, also identified documents of a similar nature. Further documents meriting comment and explanation were identified by SFC’s external auditors and in interviews conducted by OSC staff.

As SFC reached the November 15, 2011 deadline to release its 2011 third quarter financial statements for the period ended September 30, 2011 (the “ Q3 Results ”), the Audit Committee recommended and the Board agreed that SFC should defer the release of the Q3 Results until certain issues could be resolved to the satisfaction of the Board and SFC’s then external auditor. The issues included (i) determining the nature and scope of the relationships between Sino-Forest and certain of its AIs and suppliers, as discussed in the Second Interim Report, and (ii) the satisfactory explanation and resolution of issues raised by certain documents identified by the Independent Committee’s advisors, SFC’s counsel, SFC’s external auditors, and/or by OSC staff.

On November 15, 2011, the date upon which SFC’s Q3 Results were due, SFC issued a press release announcing that the Independent Committee had delivered its Second Interim Report to the Board. The November 15, 2011 press release also stated that the Board had concluded that, as a result of ongoing work arising from the allegations raised in the MW Report, it was not in a position to authorize the release of the Q3 Results at that time. The release stated that SFC would try to release the Q3 Results within 30 days.

SFC’s failure to file the Q3 Results and provide a copy of the Q3 Results to the Trustees and to its Noteholders under the Note Indentures on or before November 15, 2011 constituted a default under those Note Indentures. Pursuant to the Note Indentures, an event of default would have occurred if SFC failed to cure that default within 30 days in the

 

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case of the senior Notes, and 60 days in the case of the convertible Notes, after having received written notice of such default from the relevant Trustee or the holders of 25% or more in aggregate principal amount of a given series of Notes.

While SFC worked diligently to try to resolve the outstanding issues, it became clear that SFC was not going to be able to release the Q3 Results within that time frame. On December 12, 2011, SFC issued a press release announcing that it would not be able to release the Q3 Results within the 30-day period originally indicated in the November 15, 2011 press release.

Moreover, in the press release, SFC announced that, in the circumstances, there was no assurance that it would be able to release the Q3 Results, or, if able, as to when such release would occur. In the December 12, 2011 press release, SFC also announced that the Board had determined not to make the $9.775 million interest payment on the 2016 Notes that was due on December 15, 2011.

As disclosed in the December 12, 2011 press release, the circumstances that caused SFC to be unable to release the Q3 Results also could impact the reliability of SFC’s historical financial statements and related audit reports.

SFC’s failure to make the $9.775 million interest payment on the 2016 Notes when due on December 15, 2011 constituted a default under the 2016 Note Indenture. Under the terms of that Note Indenture, SFC had 30 days to cure its default and make the required interest payment in order to prevent an event of default from occurring, which could have resulted in the acceleration and enforcement of the approximately $1.8 billion in Notes which have been issued by SFC and guaranteed by many of its Subsidiaries outside of the PRC.

On December 18, 2011, SFC announced that it had received written notices of default dated December 16, 2011, in respect of its 2014 Notes and its 2017 Notes. The notices, which were sent by the Trustees under the relevant Note Indentures, referenced SFC’s previously-disclosed failure to release the Q3 Results on a timely basis. SFC reiterated in the December 18, 2011 press release that it did not expect to be able to file the Q3 Results and cure the default within the 30-day cure period.

In response to the receipt of the notices of default, among other considerations, on December 16, 2011, the Board established a Special Restructuring Committee of the Board (the “ Restructuring Committee ”) comprised exclusively of directors independent of management of SFC, for the purpose of supervising, analyzing and managing strategic options available to SFC. The members of the Restructuring Committee are William Ardell, Chair of the Board, who is also Chair of the Restructuring Committee, and Garry West. James Hyde, Chair of the Audit Committee and an independent director, while not a member of the Restructuring Committee, has attended meetings of the Restructuring Committee and participated fully in its deliberations.

Following discussions with its external auditors, on January 10, 2012, SFC issued a press release cautioning that its historical financial statements and related audit reports should not be relied upon.

The Waiver Agreements

On January 12, 2012, SFC announced that following extensive discussions with an ad hoc committee of Noteholders, holders of a majority in principal amount of SFC’s 2014 Notes and its 2017 Notes had agreed to waive the default arising from SFC’s failure to release the Q3 Results on a timely basis.

Pursuant to the waiver agreements, SFC agreed, among other things, to make the $9.775 million interest payment on its 2016 Notes that was due on December 15, 2011, curing the default under the 2016 Note Indenture. That payment was made in accordance with the waiver agreements.

The Independent Committee’s Final Report

On January 31, 2012, SFC publicly released a redacted version of the Final Report of the Independent Committee. The Final Report set out the activities undertaken by the Independent Committee since mid-November 2011, the findings from such activities and the Independent Committee’s conclusions regarding its examination and review.

 

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The Independent Committee concluded that notwithstanding that there remained issues which had not been fully answered, the work of the Independent Committee was at the point of diminishing returns because much of the information which it was seeking lay with non-compellable third parties, might not exist or was apparently not retrievable from the records of the Company.

In its January 31, 2012 press release announcing the release of the Final Report, SFC also disclosed the results of a “proof of concept” tree asset verification process undertaken to determine if the standing timber referenced in particular purchase contracts could be located and quantified by an independent forestry expert engaged to undertake the exercise. The exercise was undertaken to address the issue raised in the Second Interim Report regarding the absence of maps in the possession of SFC’s BVI Subsidiaries to show the precise location of the timber subject to plantation purchase contracts.

Subsequent to January 31, 2012, Sino-Forest has taken steps to apply the tree asset verification process over a statistically relevant sampling of Sino-Forest’s forest assets. The results of the proof of concept exercise and the process undertaken since the release of the Final Report are described below in “ CCAA Proceedings and Other Matters – Asset Verification Process ”.

Following the delivery of the Final Report, and in accordance with the waiver agreements, the Board adopted a resolution instructing the Independent Committee to cease its investigative, review and oversight activities. Any issues within the authority of the Independent Committee that remained outstanding were referred to SFC’s Audit Committee or Restructuring Committee.

Gating Issues to an Audit

SFC worked diligently to address issues identified by SFC’s Audit Committee, the Independent Committee and by its then external auditor, Ernst & Young LLP (“ E&Y ”), as requiring resolution in order for SFC to be in a position to obtain an audit opinion in relation to the 2011 Results. Many of the same issues also impact SFC’s ability to release the Q3 Results.

As SFC has publicly disclosed in its press releases, the gating issues to the release of the Q3 Results and to obtaining an audit of the 2011 Results include (i) determining the nature and scope of the relationships between Sino-Forest and certain of its AIs and suppliers, and (ii) the satisfactory explanation and resolution of issues raised by certain documents identified by the Independent Committee’s advisors, SFC’s counsel, SFC’s auditors, and/or by OSC staff.

The “relationship issues” described above are discussed extensively in the Second Interim Report and in the Final Report of the Independent Committee. Relationship issues were prominent in the approximately 60 documents provided to OSC staff, and SFC remains unable to resolve them.

Restructuring Support Agreement with Noteholders

While the waiver agreements prevented the Trustees under the relevant Note Indentures from accelerating and enforcing the Note indebtedness as a result of SFC’s failure to file its Q3 Results, those waiver agreements would have expired on the earlier of April 30, 2012 and any earlier termination of the waiver agreements in accordance with their terms. In addition, SFC’s pending failure to file its audited financial statements for its fiscal year ended December 31, 2011 (the “ 2011 Results ”) by March 30, 2012, would have again put the Trustees in a position to accelerate and enforce the Note indebtedness, creating additional uncertainty around the SFC Business.

Following extensive arm’s length negotiations between SFC and an ad hoc committee of Noteholders, the parties agreed on the framework for a consensual resolution of SFC’s defaults and the restructuring of its business, and entered into the Support Agreement on March 30, 2012, which was initially executed by holders of SFC’s Notes holding approximately 40% of the aggregate principal amount of the Notes. As at the Consent Date, holders of over 72% of the aggregate principal amount of the Notes have agreed to be parties to the Support Agreement.

From a commercial perspective, the restructuring contemplated by the Support Agreement was intended to accomplish the following objectives:

 

 

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  (a) the separation of Sino-Forest’s business operations from the problems facing SFC outside of the PRC by transferring the intermediate holding companies which own the SFC Business and SFC's intercompany claims against its Subsidiaries (which include the entire substantive operations of the SFC Companies) to the Noteholders and Other Affected Creditors (as defined in the Support Agreement) in compromise of their claims against SFC (if the Sale Solicitation Process did not generate a superior transaction, as described below);

 

  (b) the Sale Solicitation Process being undertaken to determine if any person or group of persons would purchase Sino-Forest's business operations pursuant to a CCAA plan for an amount in excess of a threshold amount of consideration, with the potential for excess above such threshold amount being directed to shareholders and other stakeholders subordinate to the Noteholders. The Sale Solicitation Process was intended to ensure that SFC pursued all avenues available to it to maximize value for its stakeholders;

 

  (c) a structure (including funding) that would enable litigation claims to be pursued for the benefit of SFC's stakeholders in accordance with the Support Agreement against a number of potential defendants; and

 

  (d) if the Sale Solicitation Process did not result in a sale, constituents subordinate to the Noteholders recovering some “upside” in the form of a profit participation if Sino-Forest’s business operations acquired by the Noteholders were monetized within seven years from the date of the implementation of the Plan at a profit, as further described in the Support Agreement.

The decision to enter into the Support Agreement was given careful consideration by the Board. But for the negotiation and execution of the Support Agreement, SFC would have been unable to prevent the acceleration and enforcement of the rights of the Noteholders as soon as April 30, 2012, in which case SFC would have been unable to continue as a going concern.

The Support Agreement provided that SFC would make an application under the CCAA, and if necessary under the CBCA, in order to implement the Plan. The Plan as described in this Information Statement contains certain terms that differ materially from the terms of the Support Agreement as entered into on March 31, 2012.

The Support Agreement was amended effective as of August 14, 2012 and October 19, 2012, to extend certain dates and conform the Support Agreement to the terms ultimately agreed to in the Plan.

Commencement of CCAA Proceedings

On March 30, 2012, SFC announced that it had entered into the Support Agreement and that it had obtained the Initial Order from the Court for creditor protection pursuant to the provisions of the CCAA. Under the terms of the Initial Order, FTI Consulting Canada Inc. was appointed as Monitor.

On March 30, 2012, SFC also obtained an order from the Court approving a sale solicitation process (the “ Sale Solicitation Process ”) pursuant to which SFC’s financial advisor, Houlihan Lokey (“ Houlihan ”) would solicit from prospective strategic or financial parties offers to purchase substantially all of SFC’s assets (other than certain excluded assets).

Resignation of External Auditor

On April 5, 2012, SFC announced that E&Y had notified SFC that it has resigned as SFC’s auditor effective April 4, 2012. In its resignation letter to the Company, E&Y noted that SFC had not prepared December 31, 2011 consolidated financial statements for audit and that, in SFC’s March 30, 2012 filing under the CCAA, SFC said that it remained unable to satisfactorily address outstanding issues in relation to its 2011 Results.

 

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OSC Proceedings

On April 5, 2012, the Company announced that it had received an “Enforcement Notice” from staff of the OSC. The Company also learned that Enforcement Notices were received that day by six of its former officers, Allen Chan, Albert Ip, Alfred Hung, George Ho, Simon Yeung and David Horsley.

Following review of the Enforcement Notice directed at the Company, further discussions with staff of the OSC, together with examination of issues identified in the Enforcement Notice received by the Company, on April 17, 2012, SFC announced that it had terminated the employment of Messrs. Hung, Ho and Yeung, each of whom had previously been placed on administrative leave from the Company, and that Mr. Ip, who had previously resigned as an officer of the Company, would no longer serve as a consultant to the Company. The Company also announced that Mr. Chan, who had previously resigned as Chairman, Chief Executive Officer and Director but continued with the Company as Founding Chairman Emeritus, had resigned from the Company and that Mr. Horsley had resigned as the Company's Chief Financial Officer but would continue as an officer and employee of the Company, to assist with the Company's restructuring efforts. Following discussions with the Monitor, the Company obtained an Order of the Court to enhance the powers of the Monitor in order to, among other things, facilitate the Monitor providing additional assistance and oversight to the Company in light of the personnel changes identified above.

On May 22, 2012, the OSC commenced proceedings before the OSC against the Company and Messrs. Chan, Ip, Hung, Ho, Yeung and Horsley (collectively, the “Individual Respondents”). In the notice of hearing and statement of allegations, OSC staff allege that the Company breached Ontario securities laws and acted in a manner that is contrary to the public interest by (i) providing information to the public in documents required to be filed or furnished under Ontario securities laws which was false or misleading in a material respect contrary to section 122 of the Securities Act and (ii) engaging or participating in acts, practices or a course of conduct related to its securities which it knows or reasonably ought to know perpetuate a fraud on any person or company contrary to section 126.1 of the Act. The alleged breaches of Ontario securities laws relate, among other things, to the following allegations:

 

  (a) the Company had undisclosed control over suppliers, AIs and other nominee companies within the BVI model employed by the Company to buy and sell standing timber in the PRC through its BVI Subsidiaries;

 

  (b) the Company had an undisclosed dishonest process of creating deceitful purchase contracts and sales contracts and their key attachments to buy and sell standing timber to inflate assets and revenue; and

 

  (c) the Company had undisclosed internal control weaknesses/deficiencies that facilitated and concealed the fraudulent conduct of its BVI Subsidiaries, suppliers, AIs and other companies who bought and sold assets in the BVI model, and the dishonest creation of purchase contracts and sales contracts, including their key attachments.

OSC staff has made allegations against the Individual Respondents, other than Mr. Horsley, consistent with those noted above. In addition, OSC staff has made certain additional allegations against each of the Individual Respondents, including Mr. Horsley.

On September 26, 2012, SFC announced that the Company had received a second enforcement notice from staff of the OSC. The second enforcement notice added a further allegation similar in nature to the allegations in the statement of allegations issued on May 22, 2012.

On September 27, 2012, SFC announced that Mr. Horsley had ceased to be employed by Sino-Forest.

In its notice of hearing dated May 22, 2012, OSC staff asked the OSC to consider whether it would be in the public interest to impose various monetary and non-monetary sanctions against the Company and against the Individual Respondents.

 

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OSC staff has reserved the right to claim up to $100 million as against the Directors and Officers of SFC.

As part of the OSC proceeding, OSC staff is required to make disclosure to SFC and to the Individual Respondents of evidence collected by OSC staff, including evidence on which OSC staff will attempt to prove the allegations in the Statement of Allegations. This includes evidence not previously known to SFC. Based on the contents of the Enforcement Notices, the Statement of Allegations, the evidence disclosed by OSC Staff, and all of the evidence now known to SFC, there may be merit to some of the allegations made against the Individual Respondents. That, in turn, could impact the integrity of SFC’s historical financial and other disclosures, and could impact some of the operational issues being experienced by SFC.

Sale Solicitation Process

In connection with the commencement of the CCAA Proceedings, and as contemplated by the Support Agreement, the Company obtained the Sale Process Order which provided for the implementation of the Sale Solicitation Process in accordance with Court-approved Sale Process Procedures (the “ SPP ”).

The purpose of the Sale Solicitation Process was to determine whether any parties were willing to purchase substantially all of Sino-Forest's business operations for an amount equal to at least 85% of the amount owing under the Notes. Under the terms of the Sale Process Order, the Company’s financial advisor, Houlihan, conducted the Sale Solicitation Process in consultation with the Company and the Monitor.

Houlihan, in consultation with the Monitor and the Company, selected a group of eighty-five strategic and financial buyers (comprised of buyers who had either contacted Houlihan or the Company or were otherwise chosen to be in the group) and provided those potentially interested parties with copies of a “teaser” letter containing a brief description of the business of Sino-Forest.

The Company negotiated fourteen confidentiality agreements with those parties who indicated an interest in the Sino-Forest business and provided such parties with access to a data room containing certain limited corporate and other information regarding Sino-Forest. Certain of these bidders were ultimately deemed to be “Phase I Qualified Bidders” in accordance with the SPP requirements.

On or about June 28, 2012 (the “ Phase I Bid Deadline ”), a number of non-binding letters of intent (the “ LOIs ”) were received by the Company.

Pursuant to the SPP, upon receipt of the LOIs the Company, in consultation with Houlihan and the Monitor, was required to determine whether any such LOIs constituted “Qualified Letters of Intent” and to notify parties as to whether their LOI constituted a Qualified Letter of Intent within seven business days of the Phase 1 Bid Deadline.

The Company, in consultation with the Monitor and Houlihan, determined that none of the LOIs constituted a Qualified Letter of Intent as provided for under the SPP, and on July 10, 2012, the Company issued a press release announcing the termination of the Sale Solicitation Process. The Company also announced that it intended to proceed with the Restructuring Transaction as contemplated by the Support Agreement.

Effects of MW Report, OSC Allegations and Related Events

The uncertainty concerning Sino-Forest’s business practices, created by the allegations set forth in the MW Report, the allegations set out in the OSC’s Statement of Allegations and other events discussed below among other things, continue to have significant negative effects on the reputation and business of Sino-Forest, as described below.

Effects on Operations (including Accounts Receivable)

Sino-Forest’s timber and trading businesses have effectively frozen and ground to a halt. Since January 2012, in order to conserve cash, Sino-Forest has only completed cash purchases which were previously committed to and has not made any new commitments in the WFOE model. Sino-Forest has therefore not grown its asset base since the release of the MW Report.

 

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Also, the SFC Companies have had an extremely difficult time collecting outstanding receivables as a result of, among other things, the perceived uncertainty surrounding the SFC Companies in the PRC. On March 30, 2012, the date SFC obtained the Initial Order, Sino-Forest’s counsel in the PRC had sent legal demand letters to 12 BVI trading companies for accounts receivable totaling approximately U.S.$126 million and five WFOE companies totaling approximately RMB 224.5 million. Additional legal demand letters for smaller accounts were also in process, and other accounts receivable were being negotiated. The Company has also sent a legal demand letter to a supplier of logs who has failed to deliver on time in connection with a U.S.$47 million purchase which the Company paid in advance.

Subsequent to March 30, 2012, SFC has continued efforts through its PRC counsel and otherwise to collect receivables owing to its WFOE Subsidiaries and to preserve receivables owing to SFC’s BVI Subsidiaries held by AIs and other PRC and BVI domiciled corporate customers. In taking these steps, SFC has learned that certain of the entities with receivables owing to the Subsidiaries have recently deregistered under PRC law. Deregistration has the effect of terminating the existence of the entity. Of the U.S.$887.4 million SFC's records show as owed to BVI Subsidiaries from AIs, approximately U.S.$504.8 million is owed by three AIs that SFC has learned have been deregistered. Of the U.S.$126.2 million the Company’s records show as owed to other BVI Subsidiaries from certain PRC and BVI domiciled corporate customers, approximately U.S.$63.8 million is owed by six PRC corporate customers that SFC has learned have been deregistered. One of these six companies also is one of the three AIs that deregistered. SFC believes, based on advice from its PRC counsel, that the deregistrations were improper under PRC law, and that remedies are available to it as a result of the actions taken.

At the same time that the SFC Companies are having a difficult time collecting outstanding receivables, they are receiving increased demands on their payables. Certain of Sino-Forest’s creditors in the PRC have taken aggressive collection tactics in the PRC, including filing court claims in an effort to be paid amounts owed to them by Sino-Forest. If the uncertainty related to Sino-Forest’s business operations continues, SFC expects increasing legal actions from other creditors in respect of the Subsidiaries.

Sino-Forest has not been able to secure or renew certain existing onshore banking facilities and has been unable to obtain offshore letters of credit to facilitate Sino-Forest’s trading business. All offshore banking facilities have been repaid and frozen, or cancelled. Since June 2, 2011, all Hong Kong banks have asked for voluntary repayment of outstanding loans. Banking facilities with a total credit amount of U.S.$67.9 million were terminated by four banks between June 10, 2011 and August 29, 2011. Facilities of U.S.$152.3 million were frozen upon full repayment. In the PRC, facilities totaling RMB 159.6 million were asking for voluntary repayments. For the PRC banks providing facilities, Sino-Forest was requested to increase its cash deposits so as to demonstrate financial strength. This has led to substantial damage in Sino-Forest’s operations, and affects Sino-Forest’s ability to complete obligations under existing contracts, resulting in losses potentially in excess of U.S.$100 million.

Certain PRC governmental agencies and authorities are expressing increased concern over SFC and are becoming less inclined to be supportive of Sino-Forest, making the ability to obtain legal documents more difficult. For example, a certain PRC governmental authority has withheld cutting licenses resulting in lower harvesting volumes. Relationships with certain local government and local plantation suppliers have also become strained, resulting in many difficulties and obstacles in Sino-Forest’s operations including an inability to complete certain acquisitions of plantations. For example, in the Anqing, Anhui area in the PRC, the local government no longer showed support to Sino-Forest and the plantation land owner refused to honour the plantation purchase contracts.

Fees and Expenses

SFC has and will continue to incur a substantial amount of fees and expenses in connection with the CCAA Proceedings, the prosecution by the OSC, and the Class Actions. Further, pursuant to indemnification agreements between SFC and its directors and certain officers as well as with auditors, underwriters and other parties, SFC may be obligated to indemnify such individuals and firms for additional legal and other expenses pursuant to such proceedings. The aggregate of SFC’s fees and expenses to date is substantial and has had an adverse effect on Sino-Forest’s operating results.

 

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Asset Verification Process

Subsequent to the release of the Second Interim Report, the Independent Committee requested that an independent forestry expert undertake a proof of concept exercise to determine if two compartments in particular purchase contracts could be located and quantified by such forestry expert. A “compartment” is a forestry term used to indicate an area of trees, usually contiguous. The Company retained Stewart Murray (Singapore) Pte. Ltd. (“ Stewart Murray ”) and Indufor Asia Pacific Limited (“ Indufor ”) as third-party consultants (collectively, the “ Consultants ”). The proof of concept exercise was confined to two compartments. The selection criteria limited the sample to purchased timber assets located in Yunnan province. The candidate assets were acquired prior to the allegations in the MW Report. They were listed as being held by BVI Entities and not by WFOE entities. At the Independent Committee’s request, the Consultants selected a shortlist of 10 possible compartments meeting the criteria above, avoiding any prospect that the sampling involved personnel from the Company. Multiple county forestry bureaus were represented in the shortlist, and the Independent Committee made the final selection of compartments to ensure more than one county forestry bureau was represented.

Within the proof of concept exercise, the maps of the two compartments were provided by the Company to Indufor. Such maps were borrowed by the contracted survey company from forestry bureaus. These showed the extent of each compartment’s boundary that corresponded to those in surveys related to the purchase contracts. The Consultants then geo-referenced and digitized these boundaries, and entered them into a Geographic Information System. The Consultants located and physically inspected the two forest compartments. The inspection procedure included documenting certain qualitative characteristics of each compartment. The Consultants confirmed that the compartments were forested, but did not undertake an assessment of standing timber volume. The geo-referenced compartment boundaries were superimposed on recent high resolution satellite imagery and this allowed measurement of each compartment’s forest cover. This process allowed the removal of areas lacking forest cover from the assessment of compartment net stocked area. The Consultants compared the net stocked area of forest cover that they assessed for each compartment with that stated in the Sino-Forest purchase contracts and forest survey reports. The Consultants found that the net stocked area of forest cover in each compartment was within six percent of that stated in the relevant purchase contracts and forest survey reports. The analysis and findings from the area verification test were limited solely to the two compartments that were the subject of the proof of concept exercise. These findings were publicly announced in a news release issued by the Company January 31, 2012.

As the proof of concept exercise was successful, the area verification test process was implemented on a broader scale. As of October 15, 2012, Indufor reported that it had obtained access to the compartment maps for BVI purchase contracts and WFOE plantation rights certificates that cover 158,735 hectares representing close to 20% of the 806,685 hectares of Sino-Forest’s reported estate as at December 31, 2011. Indufor has subsequently confirmed the compartment locations of 88,885 hectares of these purchase contracts and plantation rights certificates representing close to 11% of the reported Sino-Forest estate as at December 31, 2011.

The total area of the compartments assessed by Indufor using the satellite based verification process is comprised of 83,139 hectares of WFOE plantations and 5,746 hectares of BVI plantations. This represents a difference of 944 hectares (+1.1%) when compared to the equivalent measurement of area as detailed in the Company’s BVI purchase contracts and WFOE plantation rights certificates for these same compartments. Indufor has assessed the productive area of these compartments as being 86,332 hectares and this has been determined by removing areas that cannot contain forest cover. The Company understands this to be standard industry practice and represents the removal of non-productive areas such as swamps, rivers and permanent roads from the total area of each compartment. Indufor has assessed the area of stocked forest cover within these compartments to be 76,276 hectares.

The 10,057 hectare difference between the productive area and the area of stocked forest cover is accounted for by operational roads and landings used for forest management (3,139 hectares) and unstocked areas (6,918 hectares) where harvesting has recently occurred or where the status of the forest cover cannot be determined using the satellite images.

As previously disclosed, including in the reports of the Independent Committee and the affidavit for the Initial Order, asset verification to any degree of certainty may be difficult in this situation given many factors including, the nature of the assets, geographical impediments, political impediments and financial resources available. Analysis and findings of the Indufor reports are limited solely to the area that has been verified. No extrapolations

 

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of findings to the wider Sino-Forest estate are possible or implied, and conclusions as to forest yield cannot be made based on the results of the stocked forest cover assessment. Forest inspection visits are required to confirm the quality and yield of the area assessed as stocked forest cover. To date inspection of the forest cover has not been conducted and the interpretation of stocked forest area may therefore be subject to change as a result of any future forest inspections.

The asset verification testing does not establish title to or value of the assets.

The area verification exercise undertaken by Indufor is a lengthy and expensive process that requires the dedication of long-term resources. In October, 2012, at the request of the Initial Consenting Noteholders, Sino-Forest has agreed to wind down the existing asset verification process in order to conserve resources and focus on implementation of the Restructuring.

Equity Claims Motion

On June 26, 2012, the Company brought a motion for a direction from the Court that certain claims against the Company that result from the ownership, purchase or sale of an equity interest in the Company and resulting indemnity claims are “equity claims” as defined in the section 2 of the CCAA. On July 27, 2012, the Court issued its decision. The Court found, among other things, that certain shareholder claims and related indemnity claims are “equity claims” as defined in section 2 of the CCAA, which would be subordinated to any impaired debt claims in a CCAA proceeding. With respect to the claims of SFC’s former auditors, E&Y, BDO Limited, and SFC’s former underwriters for indemnification in respect of the shareholder claims that have been made against them as defendants in the Class Actions, the Court concluded that the most significant aspect of those claims constitute subordinated “equity claims”. However, the Court did not make a determination as to whether defence costs incurred in defending the Class Action Claims were “equity claims”. The Court’s decision was without prejudice to the Company’s right to apply for a similar order with respect to (i) any claims made in the Class Actions or otherwise that are in respect of securities other than shares (such as notes) and (ii) any indemnification claims against the Company related thereto. The foregoing description is qualified in its entirety by the full text of the Court’s decision, a copy of which is available on the Website.

On October 10, 2012, the Ontario Court of Appeal granted leave to E&Y, BDO Limited and the underwriters involved in the CCAA Proceedings to appeal the Court’s decision. The appeal is scheduled to be heard on November 13, 2012.

DESCRIPTION OF THE PLAN

The following is a summary only of certain material terms of the Plan. Creditors are urged to read the Plan in its entirety. A copy of the Plan is attached as Schedule C to this Information Statement.

Purpose of the Plan

The purpose of the Plan is: (a) to effect a full, final and irrevocable compromise, release, discharge, cancellation and bar of all Affected Claims; (b) to effect the distribution of the consideration provided for in the Plan in respect of Proven Claims; (c) to transfer ownership of the SFC Business to Newco, free and clear of all claims against SFC and certain related claims against the Subsidiaries, so as to enable the SFC Business to continue on a viable, going concern basis; and (d) to allow Affected Creditors and Noteholder Class Action Claimants to benefit from contingent value that may be derived from litigation claims to be advanced by the Litigation Trustee.

The Plan is put forward in the expectation that the Persons with an economic interest in SFC, when considered as a whole, will derive a greater benefit from the implementation of the Plan and the continuation of the SFC Business as a going concern than would result from a bankruptcy or liquidation of SFC. The Plan was negotiated with counsel to the Initial Consenting Noteholders. As at the Consent Date under the Support Agreement, Noteholders holding over 72% of the aggregate principal amount of the Notes have become parties to the Support Agreement, pursuant to which they have agreed to vote in favour of the Plan in accordance with the terms of the Support Agreement.

 

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Impact of the Plan

The Plan provides for, among other things, the final and irrevocable settlement, compromise, discharge and release of Affected Claims and effectuates the restructuring of SFC.

Classification of Creditors

For the purposes of considering and voting on the Plan, the Affected Creditors will constitute a single class (the “ Affected Creditors Class ”). The Equity Claimants will constitute a single class separate from the Affected Creditors Class, but will have no right to attend the Meeting or vote on the Plan in such capacity.

Treatment of Affected Parties Pursuant to the Plan

Affected Creditors

All Affected Creditor Claims will be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date. Each Affected Creditor that has a Proven Claim will be entitled to receive the following in accordance with the Plan:

 

  (a) such Affected Creditor’s Pro-Rata number of the Newco Shares to be issued by Newco from the Affected Creditors Equity Sub-Pool in accordance with the Plan;

 

  (b) such Affected Creditor’s Pro-Rata amount of the Newco Notes to be issued by Newco in accordance with the Plan; and

 

  (c) such Affected Creditor’s Pro-Rata share of the Litigation Trust Interests to be allocated to the Affected Creditors in accordance the Plan and the terms of the Litigation Trust.

From and after the Plan Implementation Date, each Affected Creditor, in such capacity, will have no rights as against SFC in respect of its Affected Creditor Claim.

Early Consent Noteholders

As additional consideration for the compromise, release, discharge, cancellation and bar of the Affected Creditor Claims in respect of its Notes, each Early Consent Noteholder will receive its Pro-Rata number of the Newco Shares to be issued by Newco from the Early Consent Equity Sub-Pool in accordance with the Plan.

Unaffected Claims

Any amounts properly owing by SFC in respect of Unaffected Claims will be satisfied in accordance with the Plan. Nothing in the Plan will affect SFC's rights and defences, both legal and equitable, with respect to any Unaffected Claims, including all rights with respect to legal and equitable defences or entitlements to set-offs or recoupments against such Unaffected Claims.

In accordance with the Plan, each Unaffected Claim that is finally determined as such, as to status and amount, and that is finally determined to be valid and enforceable against SFC, in each case in accordance with the Claims Procedure Order or other Order (i) except for Claims secured by the Administration Charge or the Directors' Charge and Lien Claims as described in subparagraphs (ii) and (iii) below, will be paid in full from the Unaffected Claims Reserve and limited to recovery against the Unaffected Claims Reserve, and Persons with Unaffected Claims will have no right to make any claim or seek any recoveries from any Person in respect of Unaffected Claims, other than enforcing such Person’s right against SFC to be paid from the Unaffected Claims Reserve; (ii) in the case of Claims secured by the Administration Charge or the Directors' Charge, will, if billed or invoiced sufficiently prior to the Plan Implementation Date, be paid prior to the Effective Time and, if billed or invoiced to SFC after the Plan Implementation Date, be paid in the ordinary course from the Administration Charge Reserve (in the case of claims secured by the Administration Charge) or the Directors' Charge Reserve (in the case of claims secured by the

 

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Directors’ Charge), and all Claims secured by the Administration Charge will be limited to recovery against the Administration Charge Reserve and all Claims secured by the Directors’ Charge will be limited to recovery against the Directors' Charge Reserve, and Persons with Claims secured by the Administration Charge or the Directors’ Charge will have no right to make any claim or seek any recoveries from any Person in respect of such Claims, other than enforcing such Person’s right against the Administration Charge Reserve or the Directors’ Charge Reserve, respectively; and (iii) in the case of Lien Claims: (a) at the election of the Initial Consenting Noteholders, and with the consent of the Monitor, SFC will satisfy such Lien Claim by the return of the applicable property of SFC that is secured as collateral for such Lien Claim, and the applicable Lien Claimant will be limited to its recovery against such secured property in respect of such Lien Claim, (b) if the Initial Consenting Noteholders do not elect to satisfy such Lien Claim by the return of the applicable secured property: (A) SFC shall repay the Lien Claim in full in cash on the Plan Implementation Date; and (B) the security held by the applicable Lien Claimant over the property of SFC shall be fully, finally, irrevocably and forever released, discharged, cancelled and barred, and (c) upon the satisfaction of a Lien Claim in accordance with the foregoing, such Lien Claims shall be fully, finally, irrevocably and forever released, discharged, cancelled and barred.

Noteholder Class Action Claimants

Pursuant to the Plan, all Noteholder Class Action Claims against SFC, the Subsidiaries or the Named Directors or Officers (other than any Noteholder Class Action Claims against the Named Directors or Officers that are Section 5.1(2) D&O Claims, Conspiracy Claims or Non-Released D&O Claims) will be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred without consideration as against all said Persons on the Plan Implementation Date. Noteholder Class Action Claimants will not receive any consideration or distributions under the Plan in respect of their Noteholder Class Action Claims, except that each Noteholder Class Action Claimant will be entitled to receive its share of the Litigation Trust Interests to be allocated to Noteholder Class Action Claimants in accordance with the terms of the Litigation Trust and the Plan, as such Noteholder Class Action Claimant’s share is determined by the applicable Class Action Court.

Pursuant to the Plan, Noteholder Class Action Claims as against the Third Party Defendants are not compromised, discharged, released, cancelled or barred, and will be permitted to continue as against the Third Party Defendants and will not be limited or restricted by the Plan in any manner as to quantum or otherwise (including any collection or recovery for such Noteholder Class Action Claims that relates to any liability of the Third Party Defendants for any alleged liability of SFC), provided that:

 

  (a) in accordance with the releases set forth in Article 7 of the Plan, the collective aggregate amount of all rights and claims asserted or that may be asserted against the Third Party Defendants in respect of any such Noteholder Class Action Claims for which any such Persons in each case have a valid and enforceable Class Action Indemnity Claim against SFC (the “ Indemnified Noteholder Class Action Claims ”) will not exceed, in the aggregate, the Indemnified Noteholder Class Action Limit, and in accordance with section 7.3 of the Plan, all Persons will be permanently and forever barred, estopped, stayed and enjoined, on and after the Effective Time, from seeking to enforce any liability in respect of the Indemnified Noteholder Class Action Claims that exceeds the Indemnified Noteholder Class Action Limit; and

 

  (b) any Class Action Indemnity Claims against SFC by the Third Party Defendants in respect of the Indemnified Noteholder Class Action Claims will be treated as Affected Creditor Claims against SFC, but only to the extent that any such Class Action Indemnity Claims are determined to be properly indemnified by SFC, enforceable against SFC and are not barred, extinguished or subordinated by the Claims Procedure Order or otherwise, and further provided that the aggregate liability of SFC in respect of all such Class Action Indemnity Claims will be limited to the lesser of: (x) the actual aggregate liability of the Third Party Defendants pursuant to any final judgment, settlement or other binding resolution in respect of the Indemnified Noteholder Class Action Claims (inclusive of any defence costs incurred by the Third Party Defendants in their defence of the Indemnified Noteholder Class Action Claims to the extent that SFC owes a valid and enforceable indemnification obligation to any such Persons in respect of such defence costs); and (y) the Indemnified Noteholder Class Action Limit.

 

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Nothing in the Plan impairs, affects or limits in any way the ability of SFC, the Monitor or the Initial Consenting Noteholders to seek or obtain an Order, whether before or after the Plan Implementation Date, directing that Class Action Indemnity Claims in respect of Noteholder Class Action Claims or any other Claims of the Third Party Defendants should receive the same or similar treatment as is afforded to Class Action Indemnity Claims in respect of Equity Claims under the terms of the Plan.

Equity Claimants

Pursuant to the Plan, all Equity Claims will be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Equity Cancellation Date. Equity Claimants will not receive any consideration or distributions under the Plan and will not be entitled to vote on the Plan at the Meeting.

Holders of Existing Shares and Equity Interests will not receive any consideration or distributions under the Plan in respect thereof and will not be entitled to vote on the Plan at the Meeting. Unless otherwise agreed between the Monitor, SFC and the Initial Consenting Noteholders, all Existing Shares and Equity Interests shall be fully, finally and irrevocably cancelled on the Equity Cancellation Date.

Equity Class Action Claims Against the Third Party Defendants

Notwithstanding anything to the contrary in the Plan, any Class Action Claim against the Third Party Defendants that relates to the purchase, sale or ownership of Existing Shares or Equity Interests: (a) is unaffected by the Plan; (b) is not discharged, released, cancelled or barred pursuant to the Plan; (c) will be permitted to continue as against the Third Party Defendants; (d) will not be limited or restricted by the Plan in any manner as to quantum or otherwise (including any collection or recovery for any such Class Action Claim that relates to any liability of the Third Party Defendants for any alleged liability of SFC); and (e) does not constitute an Equity Claim or an Affected Claim under the Plan.

Claims of the Trustees and Noteholders

Pursuant to the Plan, all claims filed by the Trustees in respect of the Noteholder Claims (other than any Trustee Claims) will be treated as Affected Creditor Claims and the Trustees and the Noteholders will have no other entitlements in respect of the guarantees and share pledges that have been provided by the Subsidiaries, or any of them, all of which will be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date as against the Subsidiaries pursuant to the Plan.

Claims of the Third Party Defendants

Pursuant to the Plan, all claims filed by the Third Party Defendants against SFC and/or any of its Subsidiaries will be treated as follows:

 

  (a) all such claims against the Subsidiaries will be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date in accordance with the Plan;

 

  (b) all such claims against SFC that are Class Action Indemnity Claims in respect of Indemnified Noteholder Class Action Claims shall be treated as described in “ Description of the Plan – Treatment of Affected Parties Pursuant to the Plan – Noteholder Class Action Claimants ”;

 

  (c) all such claims against SFC for indemnification of Defence Costs will be treated as described in “ Description of the Plan – Treatment of Affected Parties Pursuant to the Plan – Defence Costs ”; and

 

  (d) all other claims will be treated as Equity Claims.

 

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Defence Costs

Pursuant to the Plan, all Claims against SFC for indemnification of defence costs incurred by any Person in connection with defending against Shareholder Claims (as defined in the Equity Claims Order), Noteholder Class Action Claims or any other claims of any kind relating to SFC or the Subsidiaries (“ Defence Costs ”) will be treated as follows:

 

  (a) as Equity Claims to the extent they are determined to be Equity Claims under any Order; and

 

  (b) as Affected Creditor Claims to the extent that they are not determined to be Equity Claims under any Order, provided that:

 

  (i) if such Defence Costs were incurred in respect of a claim against the applicable Person that has been successfully defended and the Claim for such Defence Costs is otherwise valid and enforceable against SFC, the Claim for such Defence Costs will be treated as a Proven Claim; provided that if such Claim for Defence Costs is a Class Action Indemnity Claim of a Third Party Defendant against SFC in respect of any Indemnified Noteholder Class Action Claim, such Claim for Defence Costs shall be treated in the manner described in “ Description of the Plan – Treatment of Affected Parties Pursuant to the Plan – Noteholder Class Action Claimants ”;

 

  (ii) if such Defence Costs were incurred in respect of a claim against the applicable Person that has not been successfully defended or such Defence Costs are determined not to be valid and enforceable against SFC, the Claim for such Defence Costs will be disallowed and no consideration will be payable in respect thereof under the Plan; and

 

  (iii) until any such Claim for Defence Costs is determined to be a Claim within section subparagraphs (i) or (ii) above, such Claim shall be treated as an Unresolved Claim.

Nothing in the Plan impairs, affects or limits in any way the ability of SFC, the Monitor or the Initial Consenting Noteholders to seek an Order that Claims against SFC for indemnification of any Defence Costs should receive the same or similar treatment as is afforded to Equity Claims under the terms of the Plan.

D&O Claims & D&O Indemnity Claims

Pursuant to the Plan, all D&O Claims against the Named Directors and Officers (other than Section 5.1(2) D&O Claims, Conspiracy Claims and Non-Released D&O Claims) will be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred without consideration on the Plan Implementation Date. All D&O Indemnity Claims and any other rights or claims for indemnification held by the Named Directors and Officers will be deemed to have no value and will be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred without consideration on the Plan Implementation Date except that any such D&O Indemnity Claims for Defence Costs shall be treated as described in “ Description of the Plan – Treatment of Affected Parties Pursuant to the Plan – Defence Costs ” and any claims for indemnification held by the Named Directors and Officers properly the subject of the Directors' Charge, if any, shall be limited to the Directors' Charge Reserve.

Pursuant to the Plan, all D&O Claims against the Other Directors and/or Officers will not be compromised, released, discharged, cancelled or barred by the Plan and will be permitted to continue as against the applicable Other Directors and/or Officers (the “ Continuing Other D&O Claims ”), provided that any Indemnified Noteholder Class Action Claims against the Other Directors and/or Officers will be limited as described in “ Description of the Plan – Treatment of Affected Parties Pursuant to the Plan – Noteholder Class Action Claimants ”. All D&O Indemnity Claims and any other rights or claims for indemnification held by the Other Directors and/or Officers will be deemed to have no value and will be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred without consideration on the Plan Implementation Date, except that (i) any such D&O Indemnity Claims for Defence Costs shall be treated as described in “ Description of the Plan – Treatment of

 

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Affected Parties Pursuant to the Plan – Defence Costs ”; and (ii) any Class Action Indemnity Claim of an Other Director and/or Officer against SFC in respect of the Indemnified Noteholder Class Action Claims will be treated as described in “ Description of the Plan – Treatment of Affected Parties Pursuant to the Plan – Noteholder Class Action Claimants ”.

The Plan provides that all Section 5.1(2) D&O Claims and all Conspiracy Claims will not be compromised, released, discharged, cancelled or barred by the Plan, provided that any Section 5.1(2) D&O Claims against Named Directors and Officers and any Conspiracy Claims against Named Directors and Officers shall be limited to recovery from any insurance proceeds payable in respect of such Section 5.1(2) D&O Claims or Conspiracy Claims, as applicable, pursuant to the Insurance Policies, and Persons with any such Section 5.1(2) D&O Claims against Named Directors and Officers or Conspiracy Claims against Named Directors and Officers will have no right to, and will not, make any claim or seek any recoveries from any Person (including SFC, any of the Subsidiaries or Newco), other than enforcing such Persons' rights to be paid from the proceeds of an Insurance Policy by the applicable insurer(s). The Plan also provides that all D&O Claims against the Directors and Officers of SFC or the Subsidiaries for fraud or criminal conduct will not be compromised, discharged, released, cancelled or barred by the Plan and will be permitted to continue as against all applicable Directors and Officers (“ Non-Released D&O Claims ”).

The Plan provides that, from and after the Plan Implementation Date, a Person may only commence an action for a Non-Released D&O Claim against a Named Director or Officer if such Person has first obtained (i) the consent of the Monitor or (ii) leave of the Court on notice to the applicable Directors and Officers, SFC, the Monitor, the Initial Consenting Noteholders and any applicable insurers. The foregoing requirement for the consent of the Monitor or leave of the Court does not apply to any Non-Released D&O Claim that is asserted against an Other Director and/or Officer.

Intercompany Claims

Pursuant to the Plan, unless set off or transferred under the Plan, all SFC Intercompany Claims will be assigned by SFC to Newco on the Plan Implementation Date. Newco will assume the obligations of SFC to the applicable Subsidiaries and Greenheart in respect of all Subsidiary Intercompany Claims (other than those set off pursuant to the Plan) assigned to it on the Plan Implementation Date pursuant to the Plan. Newco will be liable to the applicable Subsidiaries and Greenheart for such Subsidiary Intercompany Claims and SFC shall be released from such Subsidiary Intercompany Claims from and after the Plan Implementation Date, and the applicable Subsidiaries and Greenheart will be liable to Newco for such SFC Intercompany Claims from and after the Plan Implementation Date. Nothing in the Plan affects any rights or claims as between any of the Subsidiaries, Greenheart and Greenheart's direct and indirect subsidiaries.

Entitlement to Litigation Trust Interests

The Litigation Trust Interests to be created in accordance with the Plan and the Litigation Trust will be allocated as follows:

 

  (a) the Affected Creditors will be collectively entitled to 75% of such Litigation Trust Interests; and

 

  (b) the Noteholder Class Action Claimants will be collectively entitled to 25% of such Litigation Trust Interests.

Notwithstanding the foregoing, if any of the Noteholder Class Action Claims against any of the Third Party Defendants are finally resolved (whether by final judgment, settlement or any other binding means of resolution) within two years of the Plan Implementation Date, then the Litigation Trust Interests to which the applicable Noteholder Class Action Claimants would otherwise have been entitled in respect of such Noteholder Class Action Claims (based on the amount of such resolved Noteholder Class Action Claims in proportion to all Noteholder Class Action Claims in existence as of the Claims Bar Date) will instead be fully, finally, irrevocably and forever cancelled.

 

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Multiple Affected Claims

On the Plan Implementation Date, any and all liabilities for and guarantees and indemnities of the payment or performance of any Affected Claim, Unaffected Claim, Section 5.1(2) D&O Claim, Conspiracy Claim, Continuing Other D&O Claim or Non-Released D&O Claim by any of the Subsidiaries, and any purported liability for the payment or performance of such Affected Claim, Unaffected Claim, Section 5.1(2) D&O Claim, Conspiracy Claim, Continuing Other D&O Claim or Non-Released D&O Claim by Newco, will be deemed eliminated and cancelled, and no Person will have any rights whatsoever to pursue or enforce any such liabilities for or guarantees or indemnities of the payment or performance of any such Affected Claim, Unaffected Claim, Section 5.1(2) D&O Claim, Conspiracy Claim, Continuing Other D&O Claim or Non-Released D&O Claim against any Subsidiary or Newco.

Unresolved Claims

An Affected Creditor that has asserted an Unresolved Claim will not be entitled to receive a distribution under the Plan in respect of such Unresolved Claim or any portion thereof unless and until such Unresolved Claim becomes a Proven Claim. Distributions in respect of any Unresolved Claim in existence at the Plan Implementation Date will be held in escrow by the Unresolved Claims Escrow Agent in the Unresolved Claims Reserve until settlement or final determination of the Unresolved Claim in accordance with the Claims Procedure Order, the Meeting Order, the Plan or otherwise, as applicable. All Claims against SFC for indemnification in respect of the Indemnified Noteholder Class Action Claims or Defence Costs shall be treated as Unresolved Claims for purposes of the Plan. To the extent that any distributions are made after the Plan Implementation Date in respect of any Unresolved Claims that have become Proven Claims, these distributions will have the effect of diluting the distributions (or recoveries) received by the Affected Creditors with Proven Claims as at the Plan Implementation Date.

SFC Escrow Co. will not exercise any voting rights (including any right to vote at a meeting of shareholders or creditors held or in any written resolution) in respect of Newco Shares or Newco Notes held in the Unresolved Claims Reserve.

Canadian Tax Exempt Plans

If an Affected Creditor is a trust governed by a plan which is exempt from tax under Part I of the Canadian Tax Act (including, for example, a registered retirement savings plan), such Affected Creditor may make arrangements with Newco (if Newco so agrees) and the Litigation Trustee (if the Litigation Trustee so agrees) to have the Newco Shares, Newco Notes and Litigation Trust Interests to which it is entitled under the Plan directed to (or in the case of Litigation Trust Interests, registered in the name of ) an affiliate of such Affected Creditor or the annuitant or controlling person of the governing tax-deferred plan.

Insurance

Except as described below, nothing in the Plan will prejudice, compromise, release, discharge, cancel, bar or otherwise affect any right, entitlement or claim of any Person against SFC or any Director or Officer, or any insurer, in respect of an Insurance Policy or the proceeds thereof. Nothing in the Plan will prejudice, compromise, release or otherwise affect any right or defence of any such insurer in respect of any such Insurance Policy. Furthermore, nothing in the Plan will prejudice, compromise, release or otherwise affect (i) any right of subrogation any such insurer may have against any Person, including against any Director or Officer in the event of a determination of fraud against SFC or any Director or Officer in respect of whom such a determination is specifically made, and /or (ii) the ability of such insurer to claim repayment of Defense Costs (as defined in any such policy) from SFC and/or any Director or Officer in the event that the party from whom repayment is sought is not entitled to coverage under the terms and conditions of any such Insurance Policy. Notwithstanding anything in the Plan (including section 2.4(b) of the Plan and the releases and injunctions set forth in Article 7 of the Plan), but subject to section 2.4(d) of the Plan, all Insured Claims will be deemed to remain outstanding and are not released following the Plan Implementation Date, but recovery as against SFC and the Named Directors and Officers is limited only to proceeds of Insurance Policies that are available to pay such Insured Claims, either by way of judgment or settlement. Pursuant to the Plan, SFC and the Directors or Officers are required to make all reasonable efforts to meet all obligations under the Insurance Policies. The Plan provides that the insurers agree and acknowledge that they will

 

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be obliged to pay any Loss payable pursuant to the terms and conditions of their respective Insurance Policies notwithstanding the releases granted to SFC and the Named Directors and Officers under the Plan, and that they will not rely on any provisions of the Insurance Policies to argue, or otherwise assert, that such releases excuse them from, or relieve them of, the obligation to pay Loss that otherwise would be payable under the terms of the Insurance Policies. For greater certainty, the Plan provides that the insurers agree and consent to a direct right of action against the insurers, or any of them, in favour of any plaintiff who or which has (a) negotiated a settlement of any Claim covered under any of the Insurance Policies, which settlement has been consented to in writing by the insurers or such of them as may be required or (b) obtained a final judgment against one or more of SFC and/or the Directors or Officers which such plaintiff asserts, in whole or in part, represents Loss covered under the Insurance Policies, notwithstanding that such plaintiff is not a named insured under the Insurance Policies and that neither SFC nor the Directors or Officers are parties to such action.

Notwithstanding the foregoing, from and after the Plan Implementation Date, any Person having an Insured Claim will, as against SFC and the Named Directors and Officers, be irrevocably limited to recovery solely from the proceeds of the Insurance Policies paid or payable on behalf of SFC or its Directors or Officers, and Persons with any Insured Claims will have no right to, and will not, directly or indirectly, make any claim or seek any recoveries from SFC, any of the Named Directors and Officers, any of the Subsidiaries or Newco, other than enforcing such Person's rights to be paid from the proceeds of an Insurance Policy by the applicable insurer(s).

Releases to be Given under the Plan

The Plan provides that, subject to section 7.2 of the Plan (which is described in the following paragraph), all of the following shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date:

 

  (a) all Affected Claims, including all Affected Creditor Claims, Equity Claims, D&O Claims (other than Section 5.1(2) D&O Claims, Conspiracy Claims, Continuing Other D&O Claims and Non-Released D&O Claims), D&O Indemnity Claims (except as set forth in section 7.1(d) of the Plan) and Noteholder Class Action Claims (other than the Continuing Noteholder Class Action Claims);

 

  (b) all Claims of the OSC or any other Governmental Entity that have or could give rise to a monetary liability, including fines, awards, penalties, costs, claims for reimbursement or other claims having a monetary value;

 

  (c) all Class Action Claims (including the Noteholder Class Action Claims) against SFC, the Subsidiaries or the Named Directors or Officers of SFC or the Subsidiaries (other than Class Action Claims that are Section 5.1(2) D&O Claims, Conspiracy Claims or Non-Released D&O Claims);

 

  (d) all Class Action Indemnity Claims (including related D&O Indemnity Claims), other than any Class Action Indemnity Claim by the Third Party Defendants against SFC in respect of the Indemnified Noteholder Class Action Claims (including any D&O Indemnity Claim in that respect), which shall be limited to the Indemnified Noteholder Class Action Limit pursuant to the releases set out in section 7.1(f) of the Plan and the injunctions set out in section 7.3 of the Plan;

 

  (e) any portion or amount of or liability of the Third Party Defendants for the Indemnified Noteholder Class Action Claims (on a collective, aggregate basis in reference to all Indemnified Noteholder Class Action Claims together) that exceeds the Indemnified Noteholder Class Action Limit;

 

  (f) any portion or amount of, or liability of SFC for, any Class Action Indemnity Claims by the Third Party Defendants against SFC in respect of the Indemnified Noteholder Class Action Claims to the extent that such Class Action Indemnity Claims exceed the Indemnified Noteholder Class Action Limit;

 

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  (g) any and all demands, claims, actions, causes of action, counterclaims, suits, debts, sums of money, accounts, covenants, damages, judgments, orders, including for injunctive relief or specific performance and compliance orders, expenses, executions, Encumbrances and other recoveries on account of any liability, obligation, demand or cause of action of whatever nature which any Person may be entitled to assert, whether known or unknown, matured or unmatured, direct, indirect or derivative, foreseen or unforeseen, existing or hereafter arising, against Newco, the directors and officers of Newco, the Noteholders, members of the ad hoc committee of Noteholders, the Trustees, the Transfer Agent, the Monitor, FTI Consulting Canada Inc., FTI HK, counsel for the current Directors of SFC, counsel for the Monitor, counsel for the Trustees, the SFC Advisors, the Noteholder Advisors, and each and every member (including members of any committee or governance council), partner or employee of any of the foregoing, for or in connection with or in any way relating to: any Claims (including, notwithstanding anything to the contrary herein, any Unaffected Claims); Affected Claims; Section 5.1(2) D&O Claims; Conspiracy Claims; Continuing Other D&O Claims; Non-Released D&O Claims; Class Action Claims; Class Action Indemnity Claims; any right or claim in connection with or liability for the Notes or the Note Indentures; any guarantees, indemnities, claims for contribution, share pledges or Encumbrances related to the Notes or the Note Indentures; any right or claim in connection with or liability for the Existing Shares, Equity Interests or any other securities of SFC; any rights or claims of the Third Party Defendants relating to SFC or the Subsidiaries;

 

  (h) any and all demands, claims, actions, causes of action, counterclaims, suits, debts, sums of money, accounts, covenants, damages, judgments, orders, including for injunctive relief or specific performance and compliance orders, expenses, executions, Encumbrances and other recoveries on account of any liability, obligation, demand or cause of action of whatever nature which any Person may be entitled to assert, whether known or unknown, matured or unmatured, direct, indirect or derivative, foreseen or unforeseen, existing or hereafter arising, against Newco, the directors and officers of Newco, the Noteholders, members of the ad hoc committee of Noteholders, the Trustees, the Transfer Agent, the Monitor, FTI Consulting Canada Inc., FTI HK, the Named Directors and Officers, counsel for the current Directors of SFC, counsel for the Monitor, counsel for the Trustees, the SFC Advisors, the Noteholder Advisors, and each and every member (including members of any committee or governance council), partner or employee of any of the foregoing, based in whole or in part on any act, omission, transaction, duty, responsibility, indebtedness, liability, obligation, dealing or other occurrence existing or taking place on or prior to the Plan Implementation Date (or, with respect to actions taken pursuant to the Plan after the Plan Implementation Date, the date of such actions) in any way relating to, arising out of, leading up to, for, or in connection with the CCAA Proceeding, Support Agreement, the Restructuring Transaction, the Plan, any proceedings commenced with respect to or in connection with the Plan, or the transactions contemplated by the Support Agreement and the Plan, including the creation of Newco and the creation, issuance or distribution of the Newco Shares, the Newco Notes, the Litigation Trust or the Litigation Trust Interests, provided that nothing in this paragraph will release or discharge any of the Persons listed in this paragraph from or in respect of any obligations any of them may have under or in respect of the Support Agreement, the Plan or under or in respect of any of Newco, the Newco Shares, the Newco Notes, the Litigation Trust or the Litigation Trust Interests, as the case may be;

 

  (i)

any and all demands, claims, actions, causes of action, counterclaims, suits, debts, sums of money, accounts, covenants, damages, judgments, orders, including for injunctive relief or specific performance and compliance orders, expenses, executions, Encumbrances and other recoveries on account of any liability, obligation, demand or cause of action of whatever nature which any Person may be entitled to assert, whether known or unknown, matured or unmatured, direct, indirect or derivative, foreseen or unforeseen, existing or hereafter arising, against the Subsidiaries for or in connection with any Claim (including, notwithstanding anything to the contrary herein, any Unaffected Claim); any Affected Claim (including any Affected Creditor Claim, Equity Claim, D&O Claim, D&O Indemnity Claim and Noteholder Class Action Claim); any Section 5.1(2) D&O Claim; any Conspiracy Claim; any Continuing Other D&O Claim; any Non-Released D&O Claim; any Class Action Claim; any Class Action Indemnity Claim; any right or claim in

 

53

  connection with or liability for the Notes or the Note Indentures; any guarantees, indemnities, share pledges or Encumbrances relating to the Notes or the Note Indentures; any right or claim in connection with or liability for the Existing Shares, Equity Interests or any other securities of SFC; any rights or claims of the Third Party Defendants relating to SFC or the Subsidiaries; any right or claim in connection with or liability for the Support Agreement, the Plan, the CCAA Proceedings, the Restructuring Transaction, the Litigation Trust, the business and affairs of SFC and the Subsidiaries (whenever or however conducted), the administration and/or management of SFC and the Subsidiaries, or any public filings, statements, disclosures or press releases relating to SFC; any right or claim in connection with or liability for any indemnification obligation to Directors or Officers of SFC or the Subsidiaries pertaining to SFC, the Notes, the Note Indentures, the Existing Shares, the Equity Interests, any other securities of SFC or any other right, claim or liability for or in connection with the Support Agreement, the Plan, the CCAA Proceedings, the Restructuring Transaction, the Litigation Trust, the business and affairs of SFC (whenever or however conducted), the administration and/or management of SFC, or any public filings, statements, disclosures or press releases relating to SFC; any right or claim in connection with or liability for any guaranty, indemnity or claim for contribution in respect of any of the foregoing; and any Encumbrance in respect of the foregoing; and

 

  (j) all Subsidiary Intercompany Claims as against SFC (which are assumed by Newco pursuant to the Plan).

Notwithstanding the foregoing, nothing in the Plan will waive, compromise, release, discharge, cancel or bar any of the following:

 

  (a) SFC of its obligations under the Plan and the Sanction Order;

 

  (b) SFC from or in respect of any Unaffected Claims (provided that recourse against SFC in respect of Unaffected Claims will be limited in the manner set out in section 4.2 of the Plan);

 

  (c) any Directors or Officers of SFC or the Subsidiaries from any Non-Released D&O Claims, Conspiracy Claims or any Section 5.1(2) D&O Claims, provided that recourse against the Named Directors or Officers of SFC in respect of any Section 5.1(2) D&O Claims and any Conspiracy Claims will be limited in the manner set out in section 4.9(e) of the Plan;

 

  (d) any Other Directors and/or Officers from any Continuing Other D&O Claims, provided that recourse against the Other Directors and/or Officers in respect of the Indemnified Noteholder Class Action Claims will be limited in the manner set out in section 4.4(b)(i) of the Plan;

 

  (e) the Third Party Defendants from any claim, liability or obligation of whatever nature for or in connection with the Class Action Claims, provided that the maximum aggregate liability of the Third Party Defendants collectively in respect of the Indemnified Noteholder Class Action Claims will be limited to the Indemnified Noteholder Class Action Limit pursuant to section 4.4(b)(i) of the Plan and the releases set out in section 7.1(e) of the Plan and the injunctions set out in section 7.3 of the Plan;

 

  (f) Newco from any liability to the applicable Subsidiaries in respect of the Subsidiary Intercompany Claims assumed by Newco pursuant to section 6.4(n) of the Plan;

 

  (g) the Subsidiaries from any liability to Newco in respect of the SFC Intercompany Claims conveyed to Newco pursuant to section 6.4(m) of the Plan;

 

  (h) SFC of or from any investigations by or non-monetary remedies of the OSC, provided that, for greater certainty, all monetary rights, claims or remedies of the OSC against SFC will be treated as Affected Creditor Claims in the manner described in section 4.1 of the Plan and released pursuant to section 7.1(b) of the Plan;

 

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  (i) the Subsidiaries from their respective indemnification obligations (if any) to Directors or Officers of the Subsidiaries that relate to the ordinary course operations of the Subsidiaries and that have no connection with any of the matters listed in section 7.1(g) of the Plan;

 

  (j) SFC or the Directors and Officers from any Insured Claims, provided that recovery for Insured Claims will be irrevocably limited to recovery solely from the proceeds of Insurance Policies paid or payable on behalf of SFC or its Directors and Officers in the manner set forth in section 2.4 of the Plan;

 

  (k) insurers from their obligations under insurance policies; and

 

  (l) any Released Party for fraud or criminal conduct.

Injunctions

Pursuant to the Plan, all Persons will be permanently and forever barred, estopped, stayed and enjoined, on and after the Effective Time, with respect to any and all Released Claims, from (i) commencing, conducting or continuing in any manner, directly or indirectly, any action, suits, demands or other proceedings of any nature or kind whatsoever (including, without limitation, any proceeding in a judicial, arbitral, administrative or other forum) against the Released Parties; (ii) enforcing, levying, attaching, collecting or otherwise recovering or enforcing by any manner or means, directly or indirectly, any judgment, award, decree or order against the Released Parties or their property; (iii) commencing, conducting or continuing in any manner, directly or indirectly, any action, suits or demands, including without limitation, by way of contribution or indemnity or other relief, in common law, or in equity, breach of trust or breach of fiduciary duty or under the provisions of any statute or regulation, or other proceedings of any nature or kind whatsoever (including, without limitation, any proceeding in a judicial, arbitral, administrative or other forum) against any Person who makes such a claim or might reasonably be expected to make such a claim, in any manner or forum, against one or more of the Released Parties; (iv) creating, perfecting, asserting or otherwise enforcing, directly or indirectly, any lien or encumbrance of any kind against the Released Parties or their property; or (v) taking any actions to interfere with the implementation or consummation of the Plan; provided, however, that the foregoing will not apply to the enforcement of any obligations under the Plan.

Alternative Sale Transaction

The Plan provides that, at any time prior to the implementation of the Plan, SFC may, with the consent of the Initial Consenting Noteholders, complete a sale of all or substantially all of the SFC Assets on terms that are acceptable to the Initial Consenting Noteholders (an “ Alternative Sale Transaction ”), provided that any such Alternative Sale Transaction has been approved by the Court pursuant to section 36 of the CCAA on notice to the service list. In the event that an Alternative Sale Transaction is completed, the terms and conditions of the Plan would continue to apply, subject to the following:

 

  (a) The Newco Shares and Newco Notes would not be distributed under the Plan given that Newco would not need to be formed in the context of any such asset sale). Instead, the consideration paid or payable to SFC pursuant to the Alternative Sale Transaction (the “ Alternative Sale Transaction Consideration ”) would be distributed to the Persons entitled to receive Newco Shares under the Plan in the same proportions (and subject to the same terms and conditions) as are applicable to the distribution of Newco Shares under the Plan.

 

  (b) All provisions in the Plan that address Newco would be deemed ineffective given that Newco would not need to be formed in connection with an Alternative Sale Transaction.

 

  (c) All provisions in the Plan that address the creation and issuance of the Newco Shares and Newco Notes would be deemed ineffective given that the Newco Shares and the Newco Notes would not be issued in connection with an Alternative Sale Transaction.

 

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  (d) All provisions relating to the entitlement of Affected Creditors to receive Newco Shares, and the amount of Newco Shares any given Affected Creditors is entitled to receive under the Plan, would continue to apply so as to govern the distribution of the Alternative Sale Transaction Consideration in place of the Newco Shares, and in the same proportions among the Affected Creditors.

 

  (e) SFC, with the written consent of the Monitor and the Initial Consenting Noteholders, shall be permitted to make any such other amendments, modifications and supplements to the terms and conditions of the Plan as may be necessary to: (i) facilitate the Alternative Sale Transaction; (ii) cause the Alternative Sale Transaction Consideration to be distributed in the same proportions and subject to the same terms and conditions as are subject to the distribution of Newco Shares under the Plan; and (iii) complete the Alternative Sale Transaction and distribute the Alternative Sale Transaction Proceeds in a manner that is tax efficient for SFC and the Affected Creditors with Proven Claims, provided in each case that (y) a copy of such amendments, modifications or supplements is filed with the Court and served upon the service list; and (z) the Monitor is satisfied that such amendments, modifications or supplements do not materially alter the proportionate entitlements of the Affected Creditors, as amongst themselves, to the consideration distributed pursuant to the Plan.

Except for the requirements to obtain (i) the prior written consent of the Initial Consenting Noteholders for an Alternative Sale Transaction and (ii) the approval of the Alternative Sale Transaction by the Court pursuant to section 36 of the CCAA (on notice to the service list), once the Plan has been approved by the Required Majority of Affected Creditors, no further meeting, vote or approval of the Affected Creditors would be required to enable SFC to complete an Alternative Sale Transaction.

Effect of the Plan

If the Plan is approved, on the Plan Implementation Date the Plan will be final and binding in accordance with its terms for all purposes on all Persons named or referred to in, or subject to, the Plan and their respective heirs, executors, administrators and other legal representatives, successors and assigns. In addition, each Person named or referred to in, or subject to, the Plan will be deemed to have consented and agreed to all of the provisions of the Plan, in its entirety and will be deemed to have executed and delivered all consents, releases, assignments and waivers, statutory or otherwise, required to implement and carry out the Plan in its entirety.

INFORMATION REGARDING NEWCO

The information concerning Newco contained herein is based upon information provided by the Noteholder Advisors. Although the Company has no knowledge that would indicate that any statements contained herein relating to Newco are untrue or incomplete, the Company and its directors or officers disclaim any responsibility for the accuracy or completeness of such information, or for any failure by the Company to disclose events or facts that may have occurred or which may affect the significance or accuracy of any such information, but which are unknown to the Company.

Newco is expected to be incorporated as an exempt company under the laws of the Cayman Islands (or such other jurisdiction as is acceptable to SFC and the Initial Consenting Noteholders) pursuant to the Plan. Newco will be formed and organized in a manner acceptable to the Initial Consenting Noteholders and in form and substance satisfactory to SFC. To date, Newco has not been created.

Newco Shares

Newco will have share capital consisting of a single class of voting shares, being the Newco Shares. Newco is not, and will not be following the Plan Implementation Date, a reporting issuer (or equivalent) in any jurisdiction and the Newco Shares will not be listed on any stock exchange or quotation service on the Plan Implementation Date.

 

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Shareholder Meetings

Newco will hold its first annual general meeting of shareholders not earlier than 12 months following the Plan Implementation Date, with subsequent annual general meetings to be held annually thereafter. At any time after the expiry of the first 12-month period following the Plan Implementation Date, an extraordinary general meeting may be requisitioned by Newco shareholders holding 10% or more of the Newco Shares outstanding.

Board of Directors

The board of directors of Newco is expected to initially consist of up to five directors, who will be satisfactory to the Initial Consenting Noteholders, and may be expanded to include up to ten directors commencing with the first annual general meeting of Newco shareholders following the Plan Implementation Date. Commencing at that first annual general meeting, any beneficial shareholder that (i) was an Initial Consenting Noteholder and (ii) has held 10% or more of the Newco Shares outstanding (excluding any Newco Shares held by the Unresolved Claims Escrow Agent) continuously since the Plan Implementation Date (each a “ 10%+ Shareholder ”) shall be entitled to appoint one director to the board. The remaining directors shall be elected by the Newco shareholders as a group. Unaffiliated beneficial shareholders will not be permitted to aggregate their respective shareholdings for purposes of constituting a 10%+ Shareholder.

A 10%+ Shareholder’s board appointment right shall be transferable only in connection with its sale of 10% or more of the Newco Shares outstanding (excluding any Newco Shares held by SFC Escrow Co.) (a “10%+ Position”) to another person. No person that acquires a 10%+ Position after the Plan Implementation Date, other than in connection with an acquisition of a 10%+ Position from a 10%+ Shareholder, shall be entitled to appoint a director to the Newco board.

Directors (other than any director appointed by a 10%+ Shareholder) will be elected by shareholders on an annual basis at the Newco annual general meeting. Any director appointed by a 10%+ Shareholder may only be removed by that 10%+ Shareholder and a 10%+ Shareholder shall be entitled to appoint another director in his place.

Prior to the first annual general meeting, a director may only be removed by shareholders holding 66-2/3% or more of the Newco Shares present and voting at the meeting. On or following the first annual general meeting, a director (other than a director appointed by a 10%+ Shareholder) may be removed by shareholders holding more than 50% of the Newco Shares present and voting at the meeting.

In the event a 10%+ Shareholder ceases to own a 10%+ Position, the director appointed by it shall resign and such 10%+ Shareholder will lose its right to appoint a director to the Newco board.

Information Rights

Newco will deliver to each shareholder: (a) copies of Newco's annual financial statements within 90 days of each fiscal year end; and (b) copies of Newco's semi-annual financial statements within 60 days of the end of each financial half-year. The board of directors of Newco will have the discretion whether or not to obtain an audit of the annual financial statements. Upon reasonable request, Newco will also deliver to any shareholder, at the cost and expense of such shareholder, such tax-related information, reports and statements relating to Newco and its subsidiaries as are reasonably necessary for the filing of any tax return or the making or implementing of any election related to taxes.

Pre-emptive Rights

If Newco wishes to issue equity securities (or any securities convertible into or exchangeable for equity securities of Newco, including convertible debt) other than (a) pursuant to an initial public offering, or (b) equity incentive awards to directors, officers or employees of Newco, which awards represent in the aggregate less than 10% of the outstanding Newco Shares (or such higher limit as may be approved by shareholders), it shall offer such securities to each shareholder pro rata in proportion to the number of Newco Shares held by such shareholder at the time of the offer prior to selling such securities to non-shareholders.

 

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Redemption

Newco may only redeem Newco Shares on a pro rata basis.

Drag-Along Rights

In the event holders of at least 66-2/3% of the outstanding Newco Shares wish to sell all of their Newco Shares to a third party, they will have the right to force the other shareholders to sell all of their Newco Shares on the same terms, thereby enabling a sale of the entire company.

Shareholder Approval Rights

In addition to certain other matters requiring approval by special resolution under applicable law (including amendment of Newco's memorandum or articles and a winding-up of Newco), Newco may not undertake any of the following fundamental actions without the prior approval of shareholders holding at least 66-2/3% of the Newco Shares present and voting at the meeting:

 

  • any reorganization, recapitalization, amalgamation, merger or consolidation of or involving Newco;

 

  • issuance of (i) any equity securities having a preference over the Newco Shares, or (ii) equity incentive awards to directors, officers or employees, which awards represent in the aggregate in excess of 10% of the outstanding Newco Shares;

 

  • the sale of all or substantially all of Newco's assets (on a consolidated basis);

 

  • any material change in the nature of Newco's business;

 

  • affiliated/related party transactions (other than transactions between Newco and its wholly-owned subsidiaries);

 

  • a voluntary liquidation, dissolution or winding up of Newco or any of its material Subsidiaries (other than in connection with an internal restructuring); and

 

  • any amendment to the articles or memorandum of association of Newco that would amend any of the provisions outlined in this summary.

Newco Notes

Newco will also issue U.S.$300 million principal amount of Newco Notes pursuant to the Plan.

Security

The Newco Notes will be senior debt obligations of Newco and will be secured, subject to permitted liens, on a first-priority basis with share pledges from SFC’s Subsidiaries in a manner substantially similar to the pledges currently in place for the 2014 Notes and 2017 Notes and will have guarantees from SFC's Subsidiaries in a manner substantially similar to the guarantees currently in place for the 2013 Notes and 2016 Notes.

Interest

Interest on the Newco Notes will be payable in cash or in kind, at Newco's option, at a rate of 6% per annum if paid in cash, or 8% if paid in kind.

Ranking

The Newco Notes will be Newco’s general senior secured obligations and will rank equally in right of payment with all of Newco’s existing and future senior indebtedness and, together with any other secured obligations, will effectively rank senior in right of payment to Newco’s existing and future unsecured obligations; provided that Newco will be permitted to issue up to $200 million principal amount of indebtedness having prior ranking security over the collateral to the security granted for the benefit of the holders of the Newco Notes. In addition, Newco will be permitted to issue up to an additional $100 million of Newco Notes.

 

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Other

Other terms of the Newco Notes are expected to be substantially similar to the 2014 Notes and 2017 Notes, with appropriate adjustments to reflect to size and structure of the business operated by Newco following the Plan Implementation Date.

Additional information regarding Newco, including additional information relating to Newco's governance and management and information relating to the Newco Shares and Newco Notes, will be provided in the Plan Supplement to be issued in accordance with the terms of the Meeting Order.

DESCRIPTION OF LITIGATION TRUST

The Plan provides that the Litigation Trust is to be established on the Plan Implementation Date to which will be contributed the Litigation Funding Amount by SFC for the purpose of funding any claims by the Litigation Trust against third parties. Each Affected Creditor is entitled to receive its pro rata share of 75% of the Litigation Trust Interests and each Noteholder Class Action Claimant is entitled to receive its pro rata share of 25% of the Litigation Trust Interests, subject to certain exceptions provided in the Plan. A description of the Litigation Trust, including the Litigation Funding Amount, will be provided in the Plan Supplement to be issued in accordance with the terms of the Meeting Order.

REQUIRED APPROVALS UNDER THE CCAA

AND OTHER CONDITIONS TO IMPLEMENTATION

Creditor Approval

In order to be approved and binding in accordance with the CCAA, the Resolution must receive the affirmative vote of the Required Majority of the Affected Creditor Class, being a majority in number of Affected Creditors with Proven Claims, and two-thirds in value of the Proven Claims held by such Affected Creditors, in each case who vote (in person or by proxy) on the Plan at the Meeting.

Court Approval of the Plan under the CCAA

Prior to the mailing of this Information Statement, SFC obtained the Meeting Order providing for, among other things, the calling and holding of the Meeting, acceptance of filing the Plan with the Court, mailing of this Information Statement and other related procedural matters.

A copy of the Meeting Order is attached as Schedule B to this Information Statement. Prior to the Plan becoming effective, the CCAA requires that the Plan be approved by the Court if it is approved by Affected Creditors at the Meeting.

Subject to the approval of the Resolution in respect of the Plan by the Affected Creditors, the hearing in respect of the Sanction Order is scheduled to take place on or about December 7, 2012 and December 10, 2012 at 10:00 a.m. (Toronto time) at the Court at 330 University Avenue, Toronto, Ontario, Canada. Any Person who wishes to oppose the Sanction Hearing must serve on SFC, the Monitor and the service list a notice setting out the basis for such opposition and a copy of the materials to be used to oppose the Sanction Hearing at least four days before the date set for the Sanction Hearing.

Interested parties should consult their legal advisors with respect to the legal rights available to them in relation to the Plan and the Sanction Hearing. If the date of the Court hearing is postponed, adjourned or otherwise rescheduled, SFC will provide notice of the new date by issuance of a news release. Persons who wish to receive individual notification of the date of any adjourned, postponed or otherwise rescheduled Court hearing by facsimile or electronic mail should contact the Monitor at FTI Consulting Canada Inc., as Court-appointed Monitor of SFC, at TD Waterhouse Tower, 79 Wellington Street West, Suite 2010, P.O. Box 104, Toronto, Ontario M5K 1G8 (Attention: the Monitor of Sino-Forest Corporation), telephone number: 416-649-8094 or email: sfc@fticonsulting.com, and provide a facsimile number or an e-mail address. The authority and discretion of the

 

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Court is very broad under the CCAA. The Company's legal counsel has advised SFC that the Court will consider, among other things, the fairness and reasonableness of the terms and conditions of the Plan. The Court must issue the Sanction Order before the Plan can be implemented. If the Court grants the Sanction Order, the Plan will become binding on SFC, the Affected Creditors and all Persons named or referred to in, or subject to, the Plan.

The Plan provides that the Sanction Order will be effective at the Effective Time. The Plan states that the Sanction Order will, among other things:

 

  (a) declare that: (i) the Plan has been approved by the Required Majority in conformity with the CCAA; (ii) the activities of SFC have been in reasonable compliance with the provisions of the CCAA and the Orders of the Court made in this CCAA Proceeding in all respects; (iii) the Court is satisfied that SFC has not done or purported to do anything that is not authorized by the CCAA; and (iv) the Plan and the transactions contemplated thereby are fair and reasonable;

 

  (b) declare that the Plan and all associated steps, compromises, releases, discharges, cancellations, transactions, arrangements and reorganizations effected thereby are approved, binding and effective as set out in the Plan as of the Plan Implementation Date;

 

  (c) confirm the amount of each of the Unaffected Claims Reserve, the Administration Charge Reserve, the Directors' Charge Reserve and the Monitor’s Post-Implementation Reserve;

 

  (d) declare that, on the Plan Implementation Date, all Affected Claims shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred, subject only to the right of the applicable Persons to receive the distributions to which they are entitled pursuant to the Plan;

 

  (e) declare that, on the Plan Implementation Date, the ability of any Person to proceed against SFC or the Subsidiaries in respect of any Released Claims shall be forever discharged and restrained, and all proceedings with respect to, in connection with or relating to any such matter shall be permanently stayed;

 

  (f) declare that the steps to be taken, the matters that are deemed to occur and the compromises and releases to be effective on the Plan Implementation Date are deemed to occur and be effected in the sequential order contemplated by the Plan on the Plan Implementation Date, beginning at the Effective Time;

 

  (g) declare that, as at the Effective Time, the SFC Assets vest absolutely in Newco in accordance with the Plan;

 

  (h) confirm that the Court was satisfied that: (i) the hearing of the Sanction Order was open to all of the Affected Creditors and all other Persons with an interest in SFC and that such Affected Creditors and other Persons were permitted to be heard at the hearing in respect of the Sanction Order; (ii) prior to the hearing, all of the Affected Creditors and all other Persons on the service list in respect of the CCAA Proceeding were given adequate notice thereof;

 

  (i) provide that the Court was advised prior to the hearing in respect of the Sanction Order that the Sanction Order will be relied upon by SFC and Newco as an approval of the Plan for the purpose of relying on the exemption from the registration requirements of the United States Securities Act of 1933, as amended, pursuant to Section 3(a)(10) thereof for the issuance of the Newco Shares, Newco Notes and, to the extent they may be deemed to be securities, the Litigation Trust Interests, and any other securities to be issued pursuant to the Plan;

 

  (j)

declare that all obligations, agreements or leases to which (i) SFC remains a party on the Plan Implementation Date, or (ii) Newco becomes a party as a result of the conveyance of the SFC Assets to Newco on the Plan Implementation Date, shall be and remain in full force and effect,

 

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  unamended, as at the Plan Implementation Date and no party to any such obligation or agreement shall on or following the Plan Implementation Date, accelerate, terminate, refuse to renew, rescind, refuse to perform or otherwise disclaim or resiliate its obligations thereunder, or enforce or exercise (or purport to enforce or exercise) any right or remedy under or in respect of any such obligation or agreement, by reason:

 

  (i) of any event which occurred prior to, and not continuing after, the Plan Implementation Date, or which is or continues to be suspended or waived under the Plan, which would have entitled any other party thereto to enforce those rights or remedies;

 

  (ii) that SFC sought or obtained relief or has taken steps as part of the Plan or under the CCAA;

 

  (iii) of any default or event of default arising as a result of the financial condition or insolvency of SFC;

 

  (iv) of the completion of any of the transactions contemplated under the Plan, including the transfer, conveyance and assignment of the SFC Assets to Newco; or

 

  (v) of any compromises, settlements, restructurings, recapitalizations or reorganizations effected pursuant to the Plan;

 

  (k) stay the commencing, taking, applying for or issuing or continuing any and all steps or proceedings, including without limitation, administrative hearings and orders, declarations or assessments, commenced, taken or proceeded with or that may be commenced, taken or proceed with to advance any Released Claims;

 

  (l) declare that in no circumstances will the Monitor have any liability for any of SFC’s tax liability regardless of how or when such liability may have arisen;

 

  (m) authorize the Monitor to perform its functions and fulfil its obligations under the Plan to facilitate the implementation of the Plan;

 

  (n) direct and deem the Trustees to release, discharge and cancel any guarantees, indemnities, Encumbrances or other obligations owing by or in respect of any Subsidiary relating to the Notes or the Note Indentures;

 

  (o) declare that upon completion by the Monitor of its duties in respect of SFC pursuant to the CCAA and the Orders, the Monitor may file with the Court a certificate of Plan Implementation stating that all of its duties in respect of SFC pursuant to the CCAA and the Orders have been completed and thereupon, FTI Consulting Canada Inc. shall be deemed to be discharged from its duties as Monitor and released of all claims relating to its activities as Monitor;

 

  (p) declare that, on the Plan Implementation Date, each of the Charges shall be discharged, released and cancelled, and that any obligations secured thereby shall satisfied pursuant to the Plan, and that from and after the Plan Implementation Date: (i) the Administration Charge Reserve shall stand in place of the Administration Charge as security for the payment of any amounts secured by the Administration Charge and; (ii) the Directors' Charge Reserve shall stand in place of the Directors' Charge as security for the payment of any amounts secured by the Directors' Charge;

 

  (q) declare that SFC and the Monitor may apply to the Court for advice and direction in respect of any matters arising from or under the Plan;

 

  (r)

declare that, subject to the due performance of its obligations as set forth in the Plan and subject to its compliance with any written directions or instructions of the Monitor and/or directions of the

 

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  Court in the manner set forth in the Plan, SFC Escrow Co. will have no liabilities whatsoever arising from the performance of its obligations under the Plan;

 

  (s) order that releases and injunctions set forth in the Plan are effective on the Plan Implementation Date at the time or times and in the manner set forth in the Plan; and

 

  (t) declare that section 95 to 101 of the BIA shall not apply to any of the transactions implemented pursuant to the Plan.

Conditions to Implementation of Plan

The implementation of the Plan is conditional upon satisfaction or waiver of the following conditions prior to or at the Effective Time, each of which is for the benefit of SFC and the Initial Consenting Noteholders and may be waived only by SFC and the Initial Consenting Noteholders collectively; provided, however, that the conditions in sub-paragraphs (g), (h), (y), (ee), (ff), (ll), (kk) and (mm) are only for the benefit of the Initial Consenting Noteholders and, if not satisfied on or prior to the Effective Time, may be waived only by the Initial Consenting Noteholders; and provided further that such conditions will not be enforceable by SFC if any failure to satisfy such conditions results from an action, error, omission by or within the control of SFC and such conditions will not be enforceable by the Initial Consenting Noteholders if any failure to satisfy such conditions results from an action, error, omission by or within the control of the Initial Consenting Noteholders:

 

  (a) the Plan shall have been approved by the Required Majority and the Court, and in each case the Plan shall have been approved in a form consistent with the Support Agreement or otherwise acceptable to SFC and the Initial Consenting Noteholders, each acting reasonably;

 

  (b) the Sanction Order shall have been made and shall be in full force and effect prior to December 17, 2012 (or such later date as may be consented to by SFC and the Initial Consenting Noteholders), and all applicable appeal periods in respect thereof shall have expired and any appeals therefrom shall have been disposed of by the applicable appellate court;

 

  (c) the Sanction Order shall be in a form consistent with the Plan or otherwise acceptable to SFC and the Initial Consenting Noteholders, each acting reasonably;

 

  (d) all filings under Applicable Laws that are required in connection with the Restructuring Transaction shall have been made and any regulatory consents or approvals that are required in connection with the Restructuring Transaction shall have been obtained and, in the case of waiting or suspensory periods, such waiting or suspensory periods shall have expired or been terminated; without limiting the generality of the foregoing, such filings and regulatory consents or approvals include:

 

  (i) any required filings, consents and approvals of securities regulatory authorities in Canada;

 

  (ii) a consultation with the Executive of the HKSFC that is satisfactory to SFC, the Monitor and the Initial Consenting Noteholders confirming that implementation of the Restructuring Transaction will not result in an obligation arising for Newco, its shareholders or any Subsidiary to make a mandatory offer to acquire shares of Greenheart;

 

  (iii) the submission by SFC and each applicable Subsidiary of a Circular 698 tax filing with all appropriate tax authorities in the PRC within the requisite time prior to the Plan Implementation Date, such filings to be in form and substance satisfactory to the Initial Consenting Noteholders; and

 

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  (iv) if notification is necessary or desirable under the AML and its implementation rules, the submission of all antitrust filings considered necessary or prudent by the Initial Consenting Noteholders and the acceptance and (to the extent required) approval thereof by the competent PRC authority, each such filing to be in form and substance satisfactory to the Initial Consenting Noteholders;

 

  (e) there shall not be in effect any preliminary or final decision, order or decree by a Governmental Entity, no application shall have been made to any Governmental Entity, and no action or investigation shall have been announced, threatened or commenced by any Governmental Entity, in consequence of or in connection with the Restructuring Transaction that restrains, impedes or prohibits (or if granted could reasonably be expected to restrain, impede or prohibit) the Restructuring Transaction or any material part thereof or requires or purports to require a variation of the Restructuring Transaction, and SFC shall have provided the Initial Consenting Noteholders with a certificate signed by an officer of SFC, without personal liability on the part of such officer, certifying compliance with the foregoing as of the Plan Implementation Date;

 

  (f) the organization, incorporating documents, articles, by-laws and other constating documents of Newco (including any shareholders agreement, shareholder rights plan and classes of shares (voting and non-voting)) and any affiliated or related entities formed in connection with the Restructuring Transaction or the Plan, and all definitive legal documentation in connection with all of the foregoing, shall be acceptable to the Initial Consenting Noteholders and in form and in substance reasonably satisfactory to SFC;

 

  (g) the composition of the board of directors of Newco and the senior management and officers of Newco that will assume office, or that will continue in office, as applicable, on the Plan Implementation Date shall be acceptable to the Initial Consenting Noteholders;

 

  (h) the terms of employment of the senior management and officers of Newco shall be acceptable to the Initial Consenting Noteholders;

 

  (i) except as expressly set out in the Plan, Newco shall not have: (i) issued or authorized the issuance of any shares, notes, options, warrants or other securities of any kind, (ii) become subject to any Encumbrance with respect to its assets or property; (iii) become liable to pay any indebtedness or liability of any kind other than as expressly set out in the Plan; or (iv) entered into any Material agreement;

 

  (j) any securities that are formed in connection with the Plan, including the Newco Shares and the Newco Notes, when issued and delivered pursuant to the Plan, shall be duly authorized, validly issued and fully paid and non-assessable and the issuance and distribution thereof shall be exempt from all prospectus and registration requirements of any applicable securities, corporate or other law, statute, order, decree, consent decree, judgment, rule, regulation, ordinance, notice, policy or other pronouncement having the effect of law applicable in the provinces of Canada;

 

  (k) Newco shall not be a reporting issuer (or equivalent) in any province of Canada or any other jurisdiction;

 

  (l) all of the steps, terms, transactions and documents relating to the conveyance of the SFC Assets to Newco in accordance with the Plan shall be in form and in substance acceptable to SFC and the Initial Consenting Noteholders;

 

  (m) all of the following shall be in form and in substance acceptable to the Initial Consenting Noteholders and reasonably satisfactory to SFC: (i) the Newco Shares; (ii) the Newco Notes (including the aggregate principal amount of the Newco Notes); (iii) any trust indenture or other document governing the terms of the Newco Notes; and (iv) the number of Newco Shares and Newco Notes to be issued in accordance with the Plan;

 

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  (n) the Indemnified Noteholder Class Action Limit shall be acceptable to SFC, the Monitor and the Initial Consenting Noteholders;

 

  (o) the aggregate amount of Proven Claims held by Ordinary Affected Creditors shall be acceptable to SFC, the Monitor and the Initial Consenting Noteholders;

 

  (p) the amount of each of the Unaffected Claims Reserve, the Administration Charge Reserve, the Directors' Charge Reserve and the Monitor’s Post-Implementation Reserve shall, in each case, be acceptable to SFC, the Monitor and the Initial Consenting Noteholders;

 

  (q) the Litigation Funding Amount shall be acceptable to SFC, the Monitor and the Initial Consenting Noteholders;

 

  (r) the amount of each of the following shall be acceptable to SFC, the Monitor and the Initial Consenting Noteholders: (i) the aggregate amount of Lien Claims to be satisfied by the return to the applicable Lien Claimants of the applicable secured property in accordance with the Plan; and (ii) the aggregate amount of Lien Claims to be repaid in cash on the Plan Implementation Date in accordance with the Plan;

 

  (s) the aggregate amount of Unaffected Claims, and the aggregate amount of the Claims listed in each subparagraph of the definition of “Unaffected Claims” shall, in each case, be acceptable to SFC, the Monitor and the Initial Consenting Noteholders;

 

  (t) the aggregate amount of Unresolved Claims and the amount of the Unresolved Claims Reserve shall, in each case, be acceptable to the Initial Consenting Noteholders;

 

  (u) the Litigation Trust and the Litigation Trust Agreement shall be in form and in substance acceptable to SFC and the Initial Consenting Noteholders, each acting reasonably, and the Litigation Trust shall be established in a jurisdiction that is acceptable to the Initial Consenting Noteholders and SFC, each acting reasonably;

 

  (v) SFC, the Monitor and the Initial Consenting Noteholders, each acting reasonably, shall be satisfied with the proposed use of proceeds and payments relating to all aspects of the Restructuring Transaction and the Plan, including, without limitation, any change of control payments, consent fees, transaction fees, third party fees or termination or severance payments, in the aggregate of $500,000 or more, payable by SFC or any Subsidiary to any Person (other than a Governmental Entity) in respect of or in connection with the Restructuring Transaction or the Plan, including without limitation, pursuant to any employment agreement or incentive plan of SFC or any Subsidiary;

 

  (w) SFC, the Monitor and the Initial Consenting Noteholders, each acting reasonably, shall be satisfied with the status and composition of all liabilities, indebtedness and obligations of the Subsidiaries and all releases of the Subsidiaries provided for in the Plan and the Sanction Order shall be binding and effective as of the Plan Implementation Date;

 

  (x) the steps required to complete and implement the Plan shall be in form and in substance satisfactory to SFC and the Initial Consenting Noteholders;

 

  (y) the Noteholders and the Early Consent Noteholders shall receive, on the Plan Implementation Date, all of the consideration to be distributed to them pursuant to the Plan;

 

  (z)

all of the following shall be in form and in substance satisfactory to SFC and the Initial Consenting Noteholders: (i) all materials filed by SFC with the Court or any court of competent jurisdiction in the United States, Canada, Hong Kong, the PRC or any other jurisdiction that relates to the Restructuring Transaction; (ii) the terms of any court-imposed charges on any of the

 

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assets, property or undertaking of any of SFC, including without limitation any of the Charges; (iii) the Initial Order; (iv) the Claims Procedure Order; (v) the Meeting Order; (vi) the Sanction Order; (vii) any other Order granted in connection with the CCAA Proceedings or the Restructuring Transaction by the Court or any other court of competent jurisdiction in Canada, the United States, Hong Kong, the PRC or any other jurisdiction; and (viii) the Plan (as it is approved by the Required Majority and the Sanction Order);

 

  (aa) any and all court-imposed charges on any assets, property or undertaking of SFC, including the Charges, shall be discharged on the Plan Implementation Date on terms acceptable to the Initial Consenting Noteholders and SFC, each acting reasonably;

 

  (bb) SFC shall have paid, in full, the Expense Reimbursement and all fees and costs owing to the SFC Advisors on the Plan Implementation Date, and Newco shall have no liability for any fees or expenses due to the SFC Advisors or the Noteholder Advisors either as at or following the Plan Implementation Date;

 

  (cc) SFC or the Subsidiaries shall have paid, in full all fees owing to each of Chandler Fraser Keating Limited and Spencer Stuart on the Plan Implementation Date, and Newco shall have no liability for any fees or expenses due to either Chandler Fraser Keating Limited and Spencer Stuart as at or following the Plan Implementation Date;

 

  (dd) SFC shall have paid all Trustee Claims that are outstanding as of the Plan Implementation Date, and the Initial Consenting Noteholders shall be satisfied that SFC has made adequate provision in the Unaffected Claims Reserve for the payment of all Trustee Claims to be incurred by the Trustees after the Plan Implementation Date in connection with the performance of their respective duties under the Note Indentures or the Plan;

 

  (ee) there shall not exist or have occurred any Material Adverse Effect, and SFC shall have provided the Initial Consenting Noteholders with a certificate signed by an officer of the Company, without personal liability on the part of such officer, certifying compliance with the foregoing as of the Plan Implementation Date;

 

  (ff) there shall have been no breach of the Noteholder Confidentiality Agreements (as defined in the Support Agreement) by the Company or any of the Sino-Forest Representatives (as defined therein) in respect of the applicable Initial Consenting Noteholder;

 

  (gg) the Plan Implementation Date shall have occurred no later than January 15, 2013 (or such later date as may be consented to by SFC and the Initial Consenting Noteholders);

 

  (hh) all conditions set out in sections 6 and 7 of the Support Agreement shall have been satisfied or waived in accordance with the terms of the Support Agreement;

 

  (ii) the Support Agreement shall not have been terminated;

 

  (jj) the organization, incorporating documents, articles, by-laws and other constating documents of SFC Escrow Co. and all definitive legal documentation in connection with SFC Escrow Co., shall be acceptable to the Initial Consenting Noteholders and the Monitor and in form and in substance reasonably satisfactory to SFC;

 

  (kk) except as expressly set out in the Plan, SFC Escrow Co. shall not have: (i) issued or authorized the issuance of any shares, notes, options, warrants or other securities of any kind, (ii) become subject to any Encumbrance with respect to its assets or property; (iii) acquired any assets or become liable to pay any indebtedness or liability of any kind (other than as expressly set out in the Plan); or (iv) entered into any agreement;

 

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  (ll) the Initial Consenting Noteholders shall have completed due diligence in respect of SFC and the Subsidiaries and the results of such due diligence shall be acceptable to the Initial Consenting Noteholders prior to the date of the hearing of the Sanction Order;

 

  (mm) if so requested by the Initial Consenting Noteholders, the Sanction Order shall have been recognized and confirmed as binding and effective pursuant to an order of a court of competent jurisdiction in Canada, the United States, and any other jurisdiction requested by the Initial Consenting Noteholders, and all applicable appeal periods in respect of any such recognition order shall have expired and any appeals therefrom shall have been disposed of by the applicable appellate court;

 

  (nn) all press releases, disclosure documents and definitive agreements in respect of the Restructuring Transaction or the Plan shall be in form and substance satisfactory to SFC and the Initial Consenting Noteholders, each acting reasonably; and

 

  (oo) Newco and SFC shall have entered into arrangements reasonably satisfactory to SFC and the Initial Consenting Noteholders for ongoing preservation and access to the books and records of SFC and the Subsidiaries in existence as at the Plan Implementation Date, as such access may be reasonably requested by SFC or any Director or Officer in the future in connection with any administrative or legal proceeding, in each such case at the expense of the Person making such request.

Regulatory Approvals

The Plan is subject to the condition that any regulatory consents or approvals required in connection with the Restructuring Transaction, including the consents and approvals described below, shall have been obtained and, in the case of waiting or suspensory periods, such waiting or suspensory periods shall have expired or been terminated. See “ Required Approvals under the CCAA and Other Conditions to Implementation – Conditional to Implementation of the Plan ”.

PRC Antimonopoly Law Approval

The indirect transfer of Sino-Forest’s PRC subsidiaries to Newco may be subject to the merger control review under the Antimonopoly Law of the PRC (the “ AML ”).

Under the AML, a transaction needs to obtain the merger control review approval before implementation, if it constitutes a “concentration of operators” and the turnover thresholds are triggered. An “operator” under the AML means a legal person, natural person or other organization that engages in the manufacturing or sale of products and/or the provision of services.

Article 20 of the AML provides that a concentration of operators could occur through the following: (i) a merger of the operators; (ii) the acquisition by an operator, whether by purchase of securities or assets, of control of another operator; or (iii) the acquisition, by contact or any other means, of control of another operator or the possibility to exercise decisive influence on another operator.

The turnover thresholds would be triggered, if either of the following conditions is satisfied: (1) the total revenue worldwide of all the “entities involved in the concentration” exceeds RMB 10 billion in the previous financial year, and at least two of the entities involved in the concentration each have a revenue of more than RMB 400 million in the PRC in the previous financial year; or (2) the total revenue in China of all the entities involved in the concentration exceeds RMB 2 billion in the previous financial year, and at least two of the entities involved in the concentration each have a revenue of more than RMB 400 million in the PRC in the previous financial year. “Entities involved in the concentration” refer to the buyer and all its affiliates in a relationship of control, as well as the target and all its affiliates in a relationship of control, but does not include the entities and assets of the seller’s group which are not transferred to Newco (i.e., in this transaction, the revenue of Newco and all its affiliates in a relationship of control including parent companies, and the revenue generated by Sino-Forest’s PRC subsidiaries to be transferred must be taken into account when examining whether the thresholds are met.) The parties are still evaluating whether the turnover thresholds would be triggered and thus the Plan is notifiable under the AML.

 

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The review period provided under the AML is from 30 days to 180 days in length. In practice, it cannot be excluded that the relevant PRC regulatory authority may take an even longer period of time to conduct the review work. Before obtaining the approval granted by the regulatory authority, the Plan cannot be implemented or, if implemented, can be voided post-closing. The implementation of the Plan is subject to the condition that if notification is necessary or desirable under the AML, the acceptance of all antitrust filings considered necessary or prudent by the Initial Consenting Noteholders and (to the extent required) approval thereof by the competent Chinese authority shall have been obtained. See “ Required Approvals Under the CCAA and Other Conditions to Implementation – Conditions to Implementation” and “Risk Factors – Risks Relating to the Plan ”.

Potential application of chain principle by the Takeovers Executive of the HKSFC

Sino-Forest owns approximately 65% of Greenheart through Sino-Capital Global Inc. (“ SCG ”). Greenheart is a company which is incorporated in Bermuda and listed on the Main Board of the Hong Kong Stock Exchange. Under the Hong Kong Takeovers Code, if a person or group of persons acting in concert (the “ Acquiror ”) obtains statutory control of a company (the “ First Company ”) and thereby acquires or consolidates control (as defined in the Hong Kong Takeovers Code) of another company (the “ Second Company ”) because the First Company itself holds, either directly or indirectly through intermediate companies, 30% or more of the voting rights of the Second Company or holds voting rights which, when aggregated with those already held by the Acquiror, secure or consolidate control of the Second Company, the chain principle may apply meaning that the Acquiror may be required to make an offer to acquire all the shares in the Second Company not already owned by it and the First Company. The chain principle would only apply with the Takeovers Executive (the part of the HKSFC which administers the Hong Kong Takeovers Code) requiring such an offer in these circumstances where: (A) the holding in Second Company is significant (determined based on a number of factors, including, as appropriate, the assets and profits of the respective companies, with relative values of 60% or more normally being regarded as significant) in relation to the First Company; or (B) one of the main purposes of the Acquiror acquiring control of the First Company was to secure control of the Second Company.

If the Takeovers Executive determines that Greenheart is significant relative to Sino-Forest, the Takeovers Executive could require Newco to make an offer to acquire all of the shares of Greenheart not already owned by SCG. Even if the Takeovers Executive determines that Greenheart is not significant relative to Sino-Forest, the Takeovers Executive could impose a mandatory offer obligation if it determines that one of the main purposes of Newco acquiring SCG is to secure control of Greenheart. Accordingly, Newco intends to consult with the Takeovers Executive as to the application of the Hong Kong Takeovers Code in the present circumstances to consider whether it is necessary to seek a ruling under the Hong Kong Takeovers Code that it is not necessary to make an offer for all of the outstanding shares of Greenheart not already owned by SCG. The implementation of the Plan is subject to the condition that implementation of the Restructuring will not result in an obligation arising for Newco, its shareholders or any Subsidiary to make a mandatory offer to acquire shares of Greenheart. See “ Required Approvals Under the CCAA and Other Conditions to Implementation – Conditions to Implementation” and “Risk Factors – Risks Relating to the Plan ”.

Exemptive Relief from Canadian Securities Administrators

The Company is at the date hereof in default in its reporting obligations under Canadian securities laws and its securities are subject to a cease trade order issued by the OSC. The Company will require an exemption or variation order in respect of the cease trade order and other exemptive relief from the Canadian Securities Administrators to implement the Plan in its current form.

Application to Cease to be a Reporting Issuer

SFC has applied to cease to be a reporting issuer under the securities laws of each province of Canada in which it is a reporting issuer effective immediately prior to the Effective Time on the Plan Implementation Date.

 

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IMPLEMENTATION OF THE PLAN

Timing of Implementation

In accordance with the Support Agreement, SFC and the Direct Subsidiaries have agreed to effect the following timeline to complete the Restructuring:

 

No later than November 29, 2012

   —      Meeting

No later than December 17, 2012

   —      Sanction Order

No later than January 15, 2013

   —      Implementation of the Plan

The Plan will become effective at the Effective Time on the Plan Implementation Date, other than such matters occurring on the Equity Cancellation Date (if the Equity Cancellation Date does not occur on the Plan Implementation Date) which will occur and be effective on such date, and the Plan will be binding on and enure to the benefit of SFC, the Subsidiaries, Newco, SFC Escrow Co., any Person having an Affected Claim, the Directors and Officers of SFC and all other Persons named or referred to in, or subject to, the Plan, as and to the extent provided for in the Plan.

Implementation Steps

The following is a summary only of certain material terms of the Plan. Creditors are urged to read the Plan in its entirety. A copy of the Plan is attached as Schedule C to this Information Statement.

In accordance with the Plan, the following steps and compromises and releases to be effected will occur, and be deemed to have occurred in the following manner and order (sequentially, each step occurring five minutes apart, except that within such order steps (a) to (g) will occur simultaneously and steps (u) to (x) will occur simultaneously) without any further act or formality, on the Plan Implementation Date (except that step (y) will occur on the Equity Cancellation Date) beginning at the Effective Time (or in such other manner or order or at such other time or times as SFC, the Monitor and the Initial Consenting Noteholders may agree):

 

  (a) SFC will pay required funds to the Monitor for the purpose of funding the Unaffected Claims Reserve, and the Monitor will hold and administer such funds in trust for the purpose of paying the Unaffected Claims pursuant to the Plan.

 

  (b) SFC will pay the required funds to the Monitor for the purpose of funding the Administration Charge Reserve, and the Monitor will hold and administer such funds in trust for the purpose of paying Unaffected Claims secured by Administration Charge.

 

  (c) SFC will pay the required funds to the Monitor for the purpose of funding the Directors' Charge Reserve, and the Monitor will hold and administer such funds in trust for the purpose of paying the Unaffected Claims secured by the Directors' Charge.

 

  (d) SFC will pay the required funds to the Monitor for the purpose of funding the Monitor's Post-Implementation Reserve, and the Monitor will hold and administer such funds in trust for the purpose of administering SFC, as necessary, from and after the Plan Implementation Date.

 

  (e) SFC will pay to the Noteholder Advisors and the Initial Consenting Noteholders, as applicable, each such Person's respective portion of the Expense Reimbursement.

 

  (f) SFC will pay all fees and expenses owing to each of the SFC Advisors, the advisors to the current Board of Directors of SFC, Chandler Fraser Keating Limited and Spencer Stuart and SFC or any of the Subsidiaries shall pay all fees and expenses owing to each of Indufor Asia Pacific Limited and Stewart Murray (Singapore) Pte. Ltd.

 

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  (g) The Lien Claims will be satisfied in accordance with the Plan.

 

  (h) All accrued and unpaid interest owing on, or in respect of, or as part of, Affected Creditor Claims (including any Accrued Interest on the Notes and any interest accruing on the Notes or any Ordinary Affected Creditor Claim after the Filing Date) will be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred for no consideration, and from and after the occurrence of this step, no Person will have any entitlement to any such accrued and unpaid interest.

 

  (i) All of the Affected Creditors shall be deemed to assign, transfer and convey to Newco all of their Affected Creditor Claims, and from and after the occurrence of this step, Newco will be the legal and beneficial owner of all Affected Creditor Claims. In exchange for the assignment, transfer and conveyance of the Affected Creditor Claims to Newco:

 

  (i) with respect to Affected Creditor Claims that are Proven Claims at the Effective Time:

 

  (A) Newco will issue to each applicable Affected Creditor the number of Newco Shares that each such Affected Creditor is entitled to receive in accordance with the Plan;

 

  (B) Newco will issue to each applicable Affected Creditor the amount of Newco Notes that each such Affected Creditor is entitled to receive in accordance with the Plan;

 

  (C) Newco will issue to each of the Early Consent Noteholders the number of Newco Shares that each such Early Consent Noteholder is entitled to receive pursuant to the Plan;

 

  (D) such Affected Creditors will be entitled to receive the Litigation Trust Interests to be acquired by Newco in accordance with the Plan, following the establishment of the Litigation Trust;

 

  (E) such Affected Creditors will be entitled to receive, at the time or times contemplated in the Plan, the Newco Shares, Newco Notes and Litigation Trust Interests that are subsequently distributed to (or in the case of Litigation Trust Interests registered for the benefit of) Affected Creditors with Proven Claims pursuant to the Plan (if any),

and all such Newco Shares and Newco Notes shall be distributed in the manner described in the Plan; and

 

  (ii) with respect to Affected Creditor Claims that are Unresolved Claims as at the Effective Time, Newco will issue in the name of the Unresolved Claims Escrow Agent, for the benefit of the Persons entitled thereto under the Plan, the Newco Shares and the Newco Notes that would have been distributed to the applicable Affected Creditors in respect of such Unresolved Claims if such Unresolved Claims had been Proven Claims at the Effective Time; such Newco Shares, Newco Notes and the Litigation Trust Interests acquired by Newco and assigned to and registered in the name of the Unresolved Claims Escrow Agent in accordance with the Plan will comprise part of the Unresolved Claims Reserve and the Unresolved Claims Escrow Agent will hold all such Newco Shares, Newco Notes and Litigation Trust Interests in escrow for the benefit of those Persons entitled to receive distributions thereof pursuant to the Plan.

 

  (j) The initial Newco Share in the capital of Newco held by the Initial Newco Shareholder will be redeemed and cancelled for no consideration.

 

  (k) SFC will be deemed to assign, transfer and convey to SFC Barbados those SFC Intercompany Claims and/or Equity Interests in one or more Direct Subsidiaries as agreed to by SFC and the Initial Consenting Noteholders prior to the Plan Implementation Date (the “ Barbados Property ”) first in full repayment of the Barbados Loans and second, to the extent the fair market value of the Barbados Property exceeds the amount owing under the Barbados Loans, as a contribution to the capital of SFC Barbados by SFC. Immediately after the time of such assignment, transfer and conveyance, the Barbados Loans will be considered to be fully paid by SFC and no longer outstanding.

 

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  (l) SFC will be deemed to assign, transfer and convey to Newco all shares and other Equity Interests (other than the Barbados Property) in the capital of (i) the Direct Subsidiaries and (ii) any other Subsidiaries that are directly owned by SFC immediately prior to the Effective Time other than SFC Escrow Co. (all such shares and other equity interests being the “ Direct Subsidiary Shares ”) for a purchase price equal to the fair market value of the Direct Subsidiary Shares and, in consideration therefor, Newco will be deemed to pay to SFC consideration equal to the fair market value of the Direct Subsidiary Shares, which consideration will be comprised of a U.S. dollar denominated demand non-interest-bearing promissory note issued to SFC by Newco in having a principal amount equal to the fair market value of the Direct Subsidiary Shares (the “ Newco Promissory Note 1 ”). At the time of such assignment, transfer and conveyance, all prior rights that Newco had to acquire the Direct Subsidiary Shares, under the Plan or otherwise, will cease to be outstanding. For greater certainty, SFC will not assign, transfer or convey the SFC Escrow Co. Share, and the SFC Escrow Co. Share shall remain the property of SFC. SFC will not assign, transfer or convey the SFC Escrow Co. Share, and the SFC Escrow Co. Share shall remain the property of SFC.

 

  (m) If the Initial Consenting Noteholders and SFC agree prior to the Plan Implementation Date, there will be a set-off of any SFC Intercompany Claim so agreed against a Subsidiary Intercompany Claim owing between SFC and the same Subsidiary. In such case, the amounts will be set-off in repayment of both claims to the extent of the lesser of the two amounts, and the excess (if any) will continue as an SFC Intercompany Claim or a Subsidiary Intercompany Claim, as applicable.

 

  (n) SFC will be deemed to assign, transfer and convey to Newco all SFC Intercompany Claims (other than those SFC Intercompany Claims transferred to SFC Barbados or set-off pursuant to the Plan) for a purchase price equal to the fair market value of such SFC Intercompany Claims and, in consideration therefor, Newco will be deemed to pay SFC consideration equal to the fair market value of the SFC Intercompany Claims, which consideration will be comprised of the following: (i) the assumption by Newco of all of SFC's obligations to the Subsidiaries in respect of Subsidiary Intercompany Claims (other than the Subsidiary Intercompany Claims set-off pursuant to the Plan); and (ii) if the fair market value of the transferred SFC Intercompany Claims exceeds the fair market value of the assumed Subsidiary Intercompany Claims, Newco will issue to SFC a U.S. dollar denominated demand non-interest-bearing promissory note in having a principal amount equal to such excess (the “ Newco Promissory Note 2 ”).

 

  (o) SFC will be deemed to assign, transfer and convey to Newco all other SFC Assets (namely, all SFC Assets other than the Direct Subsidiary Shares and the SFC Intercompany Claims (which shall have already been transferred to Newco in accordance with the Plan), for a purchase price equal to the fair market value of such other SFC Assets and, in consideration therefor, Newco will be deemed to pay to SFC consideration equal to the fair market value of such other SFC Assets, which consideration will be comprised of a U.S. dollar denominated demand non-interest-bearing promissory note issued to SFC by Newco having a principal amount equal to the fair market value of such other SFC Assets (the “ Newco Promissory Note 3 ”).

 

  (p) SFC will establish the Litigation Trust and will contribute the Litigation Funding Amount to the Litigation Trustee for the benefit of the Litigation Trust. Immediately thereafter, SFC, the Subsidiaries and the Trustees (on behalf of the Noteholders) will be deemed to convey, transfer and assign to the Litigation Trustee all of their respective rights, title and interest in and to the Litigation Trust Claims. The Litigation Funding Amount and Litigation Trust Claims will be managed by the Litigation Trustee in accordance with the terms and conditions of the Litigation Trust Agreement.

 

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  (q) The Litigation Trust will be deemed to be effective from the time that it is established in accordance with the Plan. Initially, all of the Litigation Trust Interests will be held by SFC. Immediately thereafter, SFC will assign, convey and transfer a portion of the Litigation Trust Interests to the Noteholder Class Action Claimants in accordance with the allocation set forth in the Plan.

 

  (r) SFC will settle and discharge the Affected Creditor Claims by assigning Newco Promissory Note 1, Newco Promissory Note 2 and Newco Promissory Note 3 (collectively, the “ Newco Promissory Notes ”) and the remaining Litigation Trust Interests held by SFC to Newco. Such assignment will constitute payment, by set-off, of the full principal amount of the Newco Promissory Notes and of a portion of the Affected Creditor Claims equal to the aggregate principal amount of the Newco Promissory Notes and the fair market value of the Litigation Trust Interests so transferred (with such payment being allocated first to the Noteholder Claims and then to the Ordinary Affected Creditor Claims). As a consequence thereof:

 

  (i) Newco will be deemed to discharge and release SFC of and from all of SFC’s obligations to Newco in respect of the Affected Creditor Claims, and all of Newco’s rights against SFC of any kind in respect of the Affected Creditor Claims will thereupon be fully, finally, irrevocably and forever compromised, released, discharged and cancelled; and

 

  (ii) SFC will be deemed to discharge and release Newco of and from all of Newco’s obligations to SFC in respect of the Newco Promissory Notes, and the Newco Promissory Notes and all of SFC’s rights against Newco in respect thereof shall thereupon be fully, finally, irrevocably and forever released, discharged and cancelled.

 

  (s) Newco will cause a portion of the Litigation Trust Interests it acquired in accordance with the Plan to be assigned to and registered in the name of the Affected Creditors with Proven Claims as contemplated in the Plan, and with respect to any Affected Creditor Claims that are Unresolved Claims as at the Effective Time, the remaining Litigation Trust Interests held by Newco that would have been allocated to the applicable Affected Creditors in respect of such Unresolved Claims if such Unresolved Claims had been Proven Claims at the Effective Time will be assigned and registered by the Litigation Trustee to the Unresolved Claims Escrow Agent and in the name of the Unresolved Claims Escrow Agent, in escrow for the benefit of Persons entitled thereto, and such Litigation Trust Interests will comprise part of the Unresolved Claims Reserve. The Litigation Trustee will record entitlements to the Litigation Trust Interests in the manner set forth in the Plan.

 

  (t) Subject to section 5.9 of the Plan, all debentures, indentures, notes, certificates, agreements, invoices, guarantees, pledges and other instruments evidencing Affected Claims, including the Notes and the Note Indentures, will not entitle any holder thereof to any compensation or participation other than as expressly provided for in the Plan and will be cancelled and will thereupon be null and void. The Trustees will be directed and will be deemed to have released, discharged and cancelled any guarantees, indemnities, Encumbrances or other obligations owing by or in respect of any Subsidiary relating to the Notes or the Note Indentures.

 

  (u)

Newco will be deemed to have no liability or obligation of any kind whatsoever for: any Claim (including, notwithstanding anything to the contrary herein, any Unaffected Claim); any Affected Claim (including any Affected Creditor Claim, Equity Claim, D&O Claim, D&O Indemnity Claim and Noteholder Class Action Claim); any Section 5.1(2) D&O Claim; any Conspiracy Claim; any Continuing Other D&O Claim; any Non-Released D&O Claim; any Class Action Claim; any Class Action Indemnity Claim; any right or claim in connection with or liability for the Notes or the Note Indentures; any guarantees, indemnities, share pledges or Encumbrances relating to the Notes or the Note Indentures; any right or claim in connection with or liability for the Existing

 

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Shares or other Equity Interests or any other securities of SFC; any rights or claims of the Third Party Defendants relating to SFC or the Subsidiaries; any right or claim in connection with or liability for the Support Agreement, the Plan, the CCAA Proceedings, the Restructuring Transaction, the Litigation Trust, the business and affairs of SFC and the Subsidiaries (whenever or however conducted), the administration and/or management of SFC and the Subsidiaries, or any public filings, statements, disclosures or press releases relating to SFC; any right or claim in connection with or liability for any guaranty, indemnity or claim for contribution in respect of any of the foregoing; and any Encumbrance in respect of the foregoing, provided only that Newco will assume SFC's obligations to the applicable Subsidiaries in respect of the Subsidiary Intercompany Claims.

 

  (v) Each of the Charges will be discharged, released and cancelled.

 

  (w) The releases and injunctions referred to in Article 7 of the Plan will become effective in accordance with the Plan.

 

  (x) Any contract defaults arising as a result of the CCAA Proceedings and/or the implementation of the Plan (including, notwithstanding anything to the contrary in the Plan, any such contract defaults in respect of the Unaffected Claims) will be deemed to be cured.

 

  (y) On the Equity Cancellation Date, all Existing Shares and Equity Interests shall be cancelled in accordance with the steps set out in section 6.5 of the Plan.

Unless otherwise agreed by SFC, the Monitor and the Initial Consenting Noteholders or as otherwise directed by Order of the Court, SFC will maintain its corporate existence at all times from and after the Plan Implementation Date until the later of the date: (i) on which SFC Escrow Co. has completed all of its obligations as Unresolved Claims Escrow Agent under this Plan; (ii) on which SFC Escrow Co. no longer holds any Undeliverable Distributions delivered to it in accordance with the Plan; and (iii) as determined by the Litigation Trustee.

Distributions under the Plan

Letters of Instruction

In order to issue Newco Shares and Newco Notes to Ordinary Affected Creditors and Newco Shares to Early Consent Noteholders, the steps set out below will be taken.

With respect to Ordinary Affected Creditors with Proven Claims or Unresolved Claims, on the next Business Day following the Distribution Record Date, the Monitor will send blank Letters of Instruction by prepaid first class mail, courier, email or facsimile to each such Ordinary Affected Creditor to the address of each such Ordinary Affected Creditor (as specified in the applicable Proof of Claim) as of the Distribution Record Date, or as evidenced by any assignment or transfer in accordance with the Plan. Each such Ordinary Affected Creditor must deliver to the Monitor a duly completed and executed Letter of Instruction that must be received by the Monitor on or before the date that is seven Business Days after the Distribution Record Date or such other date as the Monitor may determine. Any such Ordinary Affected Creditor that does not return a Letter of Instruction to the Monitor in accordance with the Plan will be deemed to have requested that such Ordinary Affected Creditor’s Newco Shares and Newco Notes be registered or distributed, as applicable, in accordance with the information set out in such Ordinary Affected Creditor’s Proof of Claim.

With respect to Early Consent Noteholders, on the next Business Day following the Distribution Record Date the Monitor will send blank Letters of Instruction by prepaid first class mail, courier, email or facsimile to each Early Consent Noteholder to the address of each such Early Consent Noteholder as confirmed by the Monitor on or before the Distribution Record Date. Each Early Consent Noteholder will deliver to the Monitor a duly completed and executed Letter of Instruction that must be received by the Monitor on or before the date that is seven Business Days after the Distribution Record Date or such other date as the Monitor may determine. Any such Early Consent Noteholder that does not return a Letter of Instruction to the Monitor in accordance with the Plan will be deemed to have requested that such Early Consent Noteholder’s Newco Shares be distributed or registered, as applicable, in accordance with information confirmed by the Monitor on or before the Distribution Record Date.

 

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Distribution Mechanics with respect to Newco Shares and Newco Notes

To effect distributions of Newco Shares and Newco Notes, the Monitor will deliver a direction at least two Business Days prior to the Initial Distribution Date to Newco or its agent, as applicable, directing Newco or its agent, as applicable, to issue on such Initial Distribution Date or subsequent Distribution Date:

 

  (a) in respect of the Ordinary Affected Creditors with Proven Claims:

 

  (i) the number of Newco Shares that each such Ordinary Affected Creditor is entitled to receive in accordance with the Plan; and

 

  (ii) the number of Newco Notes that each such Ordinary Affected Creditor is entitled to receive in accordance with the Plan;

all of which Newco Shares and Newco Notes will be issued to such Ordinary Affected Creditors and distributed as described below;

 

  (b) in respect of the Ordinary Affected Creditors with Unresolved Claims:

 

  (i) the number of Newco Shares that each such Ordinary Affected Creditor would have been entitled to receive in accordance with the Plan had such Ordinary Affected Creditor's Unresolved Claim been a Proven Claim on the Plan Implementation Date; and

 

  (ii) the amount of Newco Notes that each such Ordinary Affected Creditor would have been entitled to receive in accordance with the Plan had such Ordinary Affected Creditor's Unresolved Claim been a Proven Claim on the Plan Implementation Date,

all of which Newco Shares and Newco Notes will be issued in the name of the Unresolved Claims Escrow Agent for the benefit of the Persons entitled thereto under the Plan, which Newco Shares and Newco Notes will comprise part of the Unresolved Claims Reserve and will be held in escrow by the Unresolved Claims Escrow Agent until released and distributed as described below;

 

  (c) in respect of the Noteholders:

 

  (i) the number of Newco Shares that the Trustees are collectively required to receive such that, upon distribution to the Noteholders in accordance with the Plan, each individual Noteholder receives the number of Newco Shares to which it is entitled in accordance with the Plan; and

 

  (ii) the amount of Newco Notes that the Trustees are collectively required to receive such that, upon distribution to the Noteholders in accordance with the Plan, each individual Noteholder receives the amount of Newco Notes to which it is entitled in accordance with the Plan;

all of which Newco Shares and Newco Notes will be issued to such Noteholders and distributed as described below; and

 

  (d) in respect of Early Consent Noteholders, the number of Newco Shares that each such Early Consent Noteholder is entitled to receive in accordance with the Plan, all of which Newco Shares will be issued to such Early Consent Noteholders and distributed as described below.

 

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If the registers for the Newco Shares and/or Newco Notes are maintained by the Transfer Agent in a direct registration system (without certificates), the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent as applicable, will, on the Initial Distribution Date or any subsequent Distribution Date, as applicable, (i) instruct the Transfer Agent to record, and the Transfer Agent will record, in the Direct Registration Account of each applicable Ordinary Affected Creditor and each Early Consent Noteholder the number of Newco Shares and, in the case of Ordinary Affected Creditors, the amount of Newco Notes that are to be distributed to each such Person, and the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, will send or cause to be sent to each such Ordinary Affected Creditor and Early Consent Noteholder a Direct Registration Transaction Advice, and (ii) with respect to the distribution of Newco Shares and/or Newco Notes to Noteholders: (A) if the Newco Shares and/or Newco Notes are DTC eligible, the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, will instruct the Transfer Agent to register, and the Transfer Agent will register, the applicable Newco Shares and/or Newco Notes in the name of DTC (or its nominee) for the benefit of the Noteholders, and the Trustees will provide their consent to DTC to the distribution of such Newco Shares and Newco Notes to the applicable Noteholders, in the applicable amounts, through the facilities of DTC in accordance with customary practices and procedures; and (B) if the Newco Shares and/or Newco Notes are not DTC eligible, the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, will instruct the Transfer Agent to register the applicable Newco Shares and/or Newco Notes in the Direct Registration Accounts of the applicable Noteholders pursuant to the registration instructions obtained through DTC and the DTC participants (by way of a letter of transmittal process or such other process as agreed by SFC, the Monitor, the Trustees and the Initial Consenting Noteholders), and the Transfer Agent will (A) register such Newco Shares and/or Newco Notes, in the applicable amounts, in the Direct Registration Accounts of the applicable Noteholders; and (B) send or cause to be sent to each Noteholder a Direct Registration Transaction Advice in accordance with customary practices and procedures; provided that the Transfer Agent will not be permitted to effect the foregoing registrations without the prior written consent of the Trustees.

If the registers for the Newco Shares and/or Newco Notes are not maintained by the Transfer Agent in a direct registration system, Newco will prepare and deliver to the Monitor and/or the Unresolved Claims Escrow Agent, as applicable, and the Monitor and/or the Unresolved Claims Escrow Agent, as applicable, will promptly thereafter, on the Initial Distribution Date or any subsequent Distribution Date, as applicable (i) deliver to each Ordinary Affected Creditor and each Early Consent Noteholder Newco Share Certificates and, in the case of Ordinary Affected Creditors, Newco Note Certificates representing the applicable number of Newco Shares and the applicable amount of Newco Notes that are to be distributed to each such Person; and (ii) with respect to the distribution of Newco Shares and/or Newco Notes to Noteholders: (A) if the Newco Shares and/or Newco Notes are DTC eligible, the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, will distribute to DTC (or its nominee), for the benefit of the Noteholders, Newco Share Certificates and/or Newco Note Certificates representing the aggregate of all Newco Shares and Newco Notes to be distributed to the Noteholders on such Distribution Date, and the Trustees will provide their consent to DTC to the distribution of such Newco Shares and Newco Notes to the applicable Noteholders, in the applicable amounts, through the facilities of DTC in accordance with customary practices and procedures; and (B) if the Newco Shares and/or Newco Notes are not DTC eligible, the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, will distribute to the applicable Trustees, Newco Share Certificates and/or Newco Note Certificates representing the aggregate of all Newco Shares and/or Newco Notes to be distributed to the Noteholders on such Distribution Date, and the Trustees will make delivery of such Newco Share Certificates and Newco Note Certificates, in the applicable amounts, directly to the applicable Noteholders pursuant to the delivery instructions obtained through DTC and the DTC participants (by way of a letter of transmittal process or such other process as agreed by SFC, the Monitor, the Trustees and the Initial Consenting Noteholders), all of which will occur in accordance with customary practices and procedures. Upon receipt of and in accordance with written instructions from the Monitor, the Trustees will instruct DTC to and DTC will: (i) set up an escrow position representing the respective positions of the Noteholders as of the Distribution Record Date for the purpose of making distributions on the Initial Distribution Date and any subsequent Distribution Dates (the “ Distribution Escrow Position ”); and (ii) block any further trading of the Notes, effective as of the close of business on the day immediately preceding the Plan Implementation Date, all in accordance with DTC's customary practices and procedures.

The Monitor, Newco, the Trustees, SFC, the Named Directors and Officers and the Transfer Agent will have no liability or obligation in respect of deliveries by DTC (or its nominee) to the DTC participants or the Noteholders pursuant to the Plan.

 

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Distribution of Litigation Trust Rights

The Litigation Trustee will administer the Litigation Trust Claims and the Litigation Funding Amount for the benefit of the Persons that are entitled to the Litigation Trust Interests and will maintain a registry of such Persons as follows:

 

  (a) with respect to Affected Creditors, (i) the Litigation Trustee will maintain a record of the amount of Litigation Trust Interests that each Ordinary Affected Creditor is entitled to receive in accordance with the Plan; (ii) the Litigation Trustee will maintain a record of the aggregate amount of all Litigation Trust Interests to which the Noteholders are collectively entitled in accordance with the Plan, and if cash is distributed from the Litigation Trust to Persons with Litigation Trust Interests, the amount of such cash that is payable to the Noteholders will be distributed through the Distribution Escrow Position (such that each beneficial Noteholder will receive a percentage of such cash distribution that is equal to its entitlement to Litigation Trust Interests (as set forth in the Plan) as a percentage of all Litigation Trust Interests); and (iii) with respect to any Litigation Trust Interests to be allocated in respect of the Unresolved Claims Reserve, the Litigation Trustee will record such Litigation Trust Interests in the name of the Unresolved Claims Escrow Agent, for the benefit of the Persons entitled thereto in accordance with the Plan, which will be held by the Unresolved Claims Escrow Agent in escrow until released and distributed unless and until otherwise directed by the Monitor in accordance with the Plan; and

 

  (b) with respect to the Noteholder Class Action Claimants, the Litigation Trustee will maintain a record of the aggregate of all Litigation Trust Interests that the Noteholder Class Action Claimants are entitled to receive pursuant to the Plan, provided that such record shall be maintained in the name of the Noteholder Class Action Representative, to be allocated to individual Noteholder Class Action Claimants in any manner ordered by the applicable Class Action Court, and provided further that if any such Litigation Trust Interests are cancelled in accordance with the Plan, the Litigation Trustee shall record such cancellation in its registry of Litigation Trust Interests.

Treatment of Undeliverable Distributions

If any distribution pursuant to the Plan of Newco Shares, Newco Notes and/or Litigation Trust Interests is undeliverable (that is, for greater certainty, that it cannot be properly registered or delivered to the Applicable Affected Creditor because of inadequate or incorrect registration or delivery information or otherwise) (an “ Undeliverable Distribution ”), it will be delivered to SFC Escrow Co., which will hold such Undeliverable Distribution in escrow and administer it in accordance with the Plan. No further distributions in respect of an Undeliverable Distribution will be made unless and until SFC and the Monitor are notified by the applicable Person of its current address and/or registration information, as applicable, at which time the Monitor will direct SFC Escrow Co. to make all such distributions to such Person, and SFC Escrow Co. will make all such distributions to such Person. All claims for Undeliverable Distributions must be made on or before the date that is six months following the final Distribution Date, after which date the right to receive distributions under the Plan in respect of such Undeliverable Distributions shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred, without any compensation therefore, notwithstanding any federal, state or provincial laws to the contrary, at which time any such Undeliverable Distributions held by SFC Escrow Co. will be deemed to have been gifted by the owner of the Undeliverable Distribution to Newco or the Litigation Trust, as applicable, without consideration, and, in the case of Newco Shares, Newco Notes and Litigation Trust Interests, will be cancelled by Newco and the Litigation Trustee, as applicable. Nothing contained in the Plan will require SFC, the Monitor, SFC Escrow Co. or any other Person to attempt to locate any owner of an Undeliverable Distribution. No interest is payable in respect of an Undeliverable Distribution. Any distribution under the Plan on account of the Notes, other than any distributions in respect of Litigation Trust Interests, will be deemed made when delivered to DTC or the applicable Trustee, as applicable, for subsequent distribution to the applicable Noteholders in accordance with the Plan.

 

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Distribution Mechanics with respect to Unresolved Claims

An Affected Creditor that has asserted an Unresolved Claim will not be entitled to receive a distribution under the Plan in respect of such Unresolved Claim or any portion thereof unless and until such Unresolved Claim becomes a proven claim.

Distributions in respect of any Unresolved Claim in existence at the Plan Implementation Date will be held in escrow by the Unresolved Claims Escrow Agent in the Unresolved Claims Reserve until settlement or final determination of the Unresolved Claim in accordance with the Claims Procedure Order, the Meeting Order or the Plan, as applicable.

To the extent that Unresolved Claims become Proven Claims or are finally disallowed, the Unresolved Claims Escrow Agent shall release from escrow and deliver (or in the case of Litigation Trust Interests, cause to be registered) the following from the Unresolved Claims Reserve (on the next Distribution Date, as determined by the Monitor with the consent of SFC and the Initial Consenting Noteholders):

 

  (a) in the case of Affected Creditors whose Unresolved Claims are ultimately determined, in whole or in part to be Proven Claims, the Unresolved Claims Escrow Agent will release from escrow and deliver to such Affected Creditor that number of Newco Shares, Newco Notes and Litigation Trust Interests (and any income or proceeds therefrom) that such Affected Creditor is entitled to receive in respect of its Proven Claim pursuant to the Plan;

 

  (b) in the case of Affected Creditors whose Unresolved Claims are ultimately determined, in whole or in part to be disallowed, the Unresolved Claims Escrow Agent will release from escrow and deliver to all Affected Creditors with Proven Claims the number of Newco Shares, Newco Notes and Litigation Trust Interests (and any income or proceeds therefrom) that had been reserved in the Unresolved Claims Reserve for such Affected Creditor whose Unresolved Claims has been disallowed, such that, following such delivery, all of the Affected Creditors with Proven Claims have received the amount of Newco Shares, Newco Notes and Litigation Trust Interests that they are entitled to receive pursuant to the Plan.

As soon as practicable following the date that all Unresolved Claims have been finally resolved and any required distributions contemplated by the Plan have been made, the Unresolved Claims Escrow Agent will distribute (or in the case of Litigation Trust Interests, cause to be registered) any Litigation Trust Interests, Newco Shares and Newco Notes (and any income or proceeds therefrom), as applicable, remaining in the Unresolved Claims Reserve to the Affected Creditors with Proven Claims such that after giving effect to such distributions each such Affected Creditor has received the amount of Litigation Trust Interests, Newco Shares and Newco Notes that it is entitled to receive pursuant to the Plan.

During the time that Newco Shares, Newco Notes and/or Litigation Trust Interests are held in escrow in the Unresolved Claims Reserve, any income or proceeds received therefrom or accruing thereon shall be added to the Unresolved Claims Reserve by the Unresolved Claims Escrow Agent and no Person will have any right to such income or proceeds until such Newco Shares, Newco Notes or Litigation Trust Interests, as applicable, are distributed (or in the case of Litigation Trust Interests, registered) in accordance with the Plan, at which time the recipient thereof will be entitled to any applicable income or proceeds therefrom.

The Unresolved Claims Escrow Agent will have no beneficial interest or right in the Unresolved Claims Reserve. The Unresolved Claims Escrow Agent shall not take any step or action with respect to the Unresolved Claims Reserve or any other matter without the consent or direction of the Monitor or the direction of the Court. The Unresolved Claims Escrow Agent shall forthwith, upon receipt of an Order of the Court or instruction of the Monitor directing the release of any Newco Shares, Newco Notes and/or Litigation Trust Interests from the Unresolved Claims Reserve, comply with any such Order or instruction.

Nothing in the Plan impairs, affects or limits in any way the ability of SFC, the Monitor or the Initial Consenting Noteholders to seek or obtain an Order, whether before or after the Plan Implementation Date, directing that any Unresolved Claims should be disallowed in whole or in part or that such Unresolved Claims should receive the same or similar treatment as is afforded to Equity Claims under the terms of the Plan.

 

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Final Distributions from Reserves

If there is any cash remaining in: (i) the Unaffected Claims Reserve on the date that all Unaffected Claims have been finally paid or otherwise discharged; (ii) the Administration Charge Reserve on the date that all Claims secured by the Administration Charge have been finally paid or otherwise discharged; and/ or (iii) the Directors’ Charge Reserve on the date that all Claims secured by the Directors’ Charge have been finally paid or otherwise discharged, the Monitor will, in each case, forthwith transfer all such remaining cash to the Monitor’s Post-Implementation Reserve.

The Monitor will not terminate the Monitor’s Post-Implementation Reserve prior to the termination of each of the Unaffected Claims Reserve, the Administration Charge Reserve and the Directors’ Charge Reserve. The Monitor may, at any time, from time to time and at its sole discretion, release amounts from the Monitor’s Post-Implementation Reserve to Newco. Once the Monitor has determined that the cash remaining in the Monitor’s Post-Implementation Reserve is no longer necessary for administering SFC or the Claims Procedure, the Monitor will forthwith transfer any such remaining cash (the “ Remaining Post-Implementation Reserve Amount ”) to Newco.

Assignment of Claims for Distribution Purposes

Assignment of Claims by Ordinary Affected Creditors

Subject to any restrictions contained in Applicable Laws, an Ordinary Affected Creditor may transfer or assign the whole of its Affected Claim after the Meeting provided that neither SFC nor Newco nor the Monitor nor the Unresolved Claims Escrow Agent will be obliged to make distributions to any such transferee or assignee or otherwise deal with such transferee or assignee as an Ordinary Affected Creditor in respect thereof unless and until actual notice of the transfer or assignment, together with satisfactory evidence of such transfer or assignment and such other documentation as SFC and the Monitor may reasonably require, has been received by SFC and the Monitor on or before the Plan Implementation Date, or such other date as SFC and the Monitor may agree, failing which the original transferor will have all applicable rights as the “Ordinary Affected Creditor” with respect to such Affected Claim as if no transfer of the Affected Claim had occurred. Thereafter, such transferee or assignee will, for all purposes in accordance with the Plan, constitute an Ordinary Affected Creditor and will be bound by any and all notices previously given to the transferor or assignor in respect of such Claim. Partial transfers or assignments of Claims will not be recognized.

Assignment of Notes

Only those Noteholders who have beneficial ownership of one or more Notes as at the Distribution Record Date will be entitled to receive a distribution under the Plan on the Initial Distribution Date or any Distribution Date. Noteholders who have beneficial ownership of Notes will not be restricted from transferring or assigning such Notes prior to or after the Distribution Record Date (unless the Distribution Record Date is the Plan Implementation Date), provided that if such transfer or assignment occurs after the Distribution Record Date, neither SFC nor Newco nor the Monitor nor the Unresolved Claims Escrow Agent will have any obligation to make distributions to any such transferee or assignee of Notes in respect of the Claims associated therewith, or otherwise deal with such transferee or assignee as an Affected Creditor in respect thereof. Noteholders who assign or acquire Notes after the Distribution Record Date will be wholly responsible for ensuring that Plan distributions in respect of the Claims associated with such Notes are in fact delivered to the assignee, and the Trustees will have no liability in connection therewith.

 

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Withholding Rights

SFC, Newco, the Monitor, the Litigation Trustee, the Unresolved Claims Escrow Agent and/or any other Person making a payment contemplated herein will be entitled to deduct and withhold from any consideration payable to any Person such amounts as it is required to deduct and withhold with respect to such payment under the Canadian Tax Act, the United States Internal Revenue Code of 1986 or any provision of federal, provincial, territorial, state, local or foreign Tax laws, in each case, as amended. To the extent that amounts are so withheld or deducted, such withheld or deducted amounts will be treated for all purposes hereof as having been paid to the Person in respect of which such withholding was made, provided that such amounts are actually remitted to the appropriate Taxing Authority. To the extent that the amounts so required or permitted to be deducted or withheld from any payment to a Person exceed the cash portion of the consideration otherwise payable to that Person: (i) the payor is authorized to sell or otherwise dispose of such portion of the consideration as is necessary to provide sufficient funds to enable it to comply with such deduction or withholding requirement or entitlement, and the payor will notify the applicable Person thereof and remit to such Person any unapplied balance of the net proceeds of such sale; or (ii) if such sale is not reasonably possible, the payor will not be required to make such excess payment until the Person has directly satisfied any such withholding obligation and provides evidence thereof to the payor.

Fractional Interests

No fractional interests of Newco Shares or Newco Notes (“ Fractional Interests ”) will be issued under the Plan. For purposes of calculating the number of Newco Shares and Newco Notes to be issued by Newco pursuant to the Plan, recipients of Newco Shares or Newco Notes will have their entitlements adjusted downwards to the nearest whole number of Newco Shares or Newco Notes, as applicable, to eliminate any such Fractional Interests and no compensation will be given for the Fractional Interests.

LIQUIDATION ASSESSMENT

At the date hereof, the Company believes that a liquidation of the Company's assets appears to be the likely result in the event the Plan is not implemented. Based on the results of the Sale Solicitation Process, the Company believes that a liquidation of SFC would not provide equivalent value to Affected Creditors compared to the consideration to be received by Affected Creditors pursuant to the Plan.

STATUS OF CLAIMS PROCESS

On May 14, 2012, the Court granted the Claims Procedure Order establishing a process for the identification and determination of claims against the Company and its current and former directors and officers. Under the Claims Procedure Order, the Claims Bar Date was June 20, 2012. The Company and the Monitor are continuing with the process of reviewing, reconciling and determining the quantum and the nature of all claims against SFC. The Monitor provided a summary regarding this issue in the Sixth Report of the Monitor which is available on the Website.

MONITOR

The Monitor and its counsel have been involved throughout the course of negotiations regarding the Plan and the Monitor supports the Company's request to convene meetings to consider the Plan.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Board of Directors appointed the Restructuring Committee, comprised exclusively of directors independent of management of the Company, for the purpose of reviewing and analyzing all strategic options available to the Company, including, without limitation, the recapitalization or restructuring of the Company or the sale of some or all of its business, or any similar transaction, or any alternatives to the aforementioned transactions and to do any other such things as the Restructuring Committee deemed necessary or advisable and in the best interests of the Company in connection with the foregoing.

The Restructuring Committee and the Board's advisors, together with the Company's advisors and the Monitor, met frequently to consider the alternatives available to Company, including the terms of the Restructuring, to consider and approve the terms of the Support Agreement with Initial Consenting Noteholders, and to consider and approve the Plan for filing with the Court.

 

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The following is a summary of certain factors, among others, which the Board of Directors and the Restructuring Committee reviewed and considered in relation to the approval of the Plan:

 

  • the continued overall challenges facing Sino-Forest arising out of the allegations contained in the MW Report, the OSC proceedings, investigations by the RCMP and HKSFC and related events;

 

  • the Sale Solicitation Process conducted by the Company to provide a “market test” by which third parties could propose to acquire Sino-Forest's business operations through a CCAA plan (in a manner that would under certain scenarios potentially allow shareholders and other stakeholders subordinate to the Noteholders to share in the proceeds of a sale even though the Noteholders may not be paid in full) as an alternative to the Restructuring;

 

  • the risk factors described in this Information Statement, including issues associated with liquidation in the PRC and risks relating to SAFE and potential tax liabilities;

 

  • the challenges faced by Sino-Forest to meet its expected cash requirements, including to service and repay its existing debt;

 

  • the impact on the SFC Companies and their stakeholders including employees, creditors, shareholders and suppliers of possible alternatives to the Restructuring, including the sale of assets or liquidation of the Company, and the risks associated with such alternatives, including the timing and uncertainties associated with successfully completing such alternatives;

 

  • the impact of the Restructuring on the SFC Companies and their stakeholders including employees, creditors, shareholders and suppliers;

 

  • the findings, conclusions and observations of the Independent Committee as reported in the reports of the Independent Committee;

 

  • the uncertainties and costs also associated with “on-shoring” of the assets of the BVI Entities involved in the BVI model;

 

  • the fact that Noteholders representing an aggregate of over 72% of the outstanding principal amount of the Notes as at the date hereof, have agreed to vote in favour of and to support the Restructuring and the Plan, in accordance with the terms of the Support Agreement;

 

  • the fact that Monitor and its counsel were involved throughout the course of negotiations regarding the Plan and that the Monitor supports the Company's request to convene meetings to consider the Plan;

 

  • the fact that if the Restructuring is not completed, there would be no assurance that SFC would be able to complete a restructuring of its businesses or that any such restructuring will be on terms that provide equivalent value to Affected Creditors compared to the consideration to be received by Affected Creditors pursuant to the Restructuring and the Plan;

 

  • the fact that (i) the Company believes that a liquidation of the Company's assets appears to be the likely result in the event the Plan is not implemented, and (ii) based on the results of the Sale Solicitation Process, the Company believes that a liquidation of SFC would not provide equivalent value to Affected Creditors compared to the consideration to be received by Affected Creditors pursuant to the Plan; and

 

  • the required approvals of the Restructuring by the Affected Creditors, the Court and regulatory authorities.

 

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The foregoing discussion of the information and factors considered by the Board of Directors and the Restructuring Committee is not intended to be exhaustive, but includes the material factors considered by the Board of Directors and the Restructuring Committee. In view of the variety of factors considered in connection with its evaluation of the Recapitalization Transaction, the Board of Directors and the Restructuring Committee did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching their recommendations. In addition, individual members of the Board of Directors and the Restructuring Committee may have given differing weights to the different factors. After careful consideration of all relevant factors relating to the Restructuring and the Plan, and after receiving the advice of its advisors, the Company's management and advisors and having regard to the views of the Monitor, the Board of Directors has determined, in its business judgment, that the transactions contemplated by the Restructuring are in the best interests of the Company and recommends that Affected Creditors approve the Restructuring.

SUPPORT OF THE NOTEHOLDERS

Noteholders representing an aggregate of over 72% of the outstanding principal amount of the Notes as at the date hereof, have agreed to vote in favour of and to support the Restructuring and the Plan, in accordance with the terms of the Support Agreement. The Noteholders' agreement to vote in favour of and to support the Restructuring of the Plan under the terms of the Support Agreement is subject to certain terms, conditions and conditions precedent, as set forth in the Support Agreement, a copy of which is attached as Schedule E to this Information Statement. See also “ Required Approvals under the CCAA and Other Conditions to Implementation – Conditions to Implementation of the Plan .”

MEETING AND VOTING

Meeting Order

The endorsement for the Meeting Order provides that the Meeting Order was made on the basis that there has been no determination of (a) the test for approval of the Plan, including (i) the jurisdiction to approve the Plan in its current form; (ii) whether the Plan complies with the CCAA; and (iii) whether any aspect or term of the Plan is fair and reasonable, (b) the validity or quantum of any claims, and (c) the classification of creditors for voting purposes.

Procedure for the Meeting

Pursuant to the Meeting Order, the Meeting has been called for the purpose of having Affected Creditors with Voting Claims consider and, if deemed advisable, adopt, with or without variation, the Resolution to approve the Plan. The Meeting is scheduled to be held at 10:00 a.m. (Toronto time) on November 29, 2012 at the offices of Bennett Jones LLP, 3400 One First Canadian Place, Toronto, Ontario.

A representative of the Monitor, designated by the Monitor, shall preside as the chair of the Meeting (the “ Chair ”) and, subject to this Meeting Order or any further Order of the Court, shall decide all matters relating to the conduct of the Meeting.

The quorum required at the Meeting has been set by the Meeting Order as one Affected Creditor with a Voting Claim present at the Meeting (in person or by proxy). The only Persons entitled to attend and speak at the Meeting are: (i) the Affected Creditors entitled to vote at the Meeting (or, if applicable, any Person holding a valid Ordinary Creditors' Proxy or Noteholders' Proxy on behalf of one or more such Affected Creditors) and any such Affected Creditor's or valid proxyholder's legal counsel and financial advisors; (ii) the Chair, the Scrutineers and the Secretary; (iii) one or more representatives of the Monitor and the Monitor's legal counsel; (iv) one or more representatives of the current board of directors and/or senior management of SFC, as selected by SFC, SFC's legal counsel and financial advisors; (v) counsel to the directors and officers of SFC; (vi) one or more representatives of the Initial Consenting Noteholders and the Initial Consenting Noteholders' legal counsel and financial advisors; and (vii) the Trustees and their respective legal counsel. Any other person may be admitted to the Meeting on invitation of the Chair.

 

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In order for the Resolution to be approved, the Resolution must receive the affirmative vote of the Required Majority of the Affected Creditors Class, being a majority in number of Affected Creditors with Voting Claims, and two-thirds in value of the Voting Claims held by such Affected Creditors, in each case who vote (in person or by proxy) on the Plan at the Meeting.

For the purpose of calculating the two-thirds majority in value of Voting Claims, the aggregate amount of Voting Claims held by all Affected Creditors that vote in favour of the Plan (in person or by proxy) shall be divided by the aggregate amount of all Voting Claims held by all Affected Creditors that vote on the Plan (in person or by proxy). For the purpose of calculating a majority in number of Affected Creditors voting on the Plan, (i) each Ordinary Affected Creditor that votes on the Plan (in person or by proxy) shall only be counted once, without duplication; and (ii) each individual Beneficial Noteholder that votes on the Plan (in person or by proxy) shall only be counted once, without duplication, even if that Beneficial Noteholder holds Notes through more than one Registered Noteholder or Participant Holder.

Classification of Creditors

For the purposes of considering and voting on the Resolution, the Affected Creditors shall constitute a single class, who are referred to as the ’Affected Creditors Class’.

Entitlement to Vote

The only Persons entitled to vote at the Meeting (whether in person or by proxy) are: (i) Beneficial Noteholders with Voting Claims that have beneficial ownership of one or more Notes as at the Voting Record Date (or any such Beneficial Noteholder’s validly appointed holder of its Noteholders’ Proxy); and (ii) Ordinary Affected Creditors with Voting Claims as at the Voting Record Date (which, for greater certainty, includes any transferee of an Ordinary Affected Creditor Claim that is a Voting Claim, provided that such transferee has been recognized as an Ordinary Affected Creditor in respect of such transferred Ordinary Affected Creditor Claim) (or any such Ordinary Affected Creditor’s validly appointed holder of its Ordinary Affected Creditors’ Proxy).

Beneficial Noteholders

Each Beneficial Noteholder with a Voting Claim shall be entitled to one vote as a member of the Affected Creditors’ Class, which vote shall have a value equal to the principal and Accrued Interest owing under the Notes owned by such Beneficial Noteholder as at the Voting Record Date. For greater certainty, with respect to voting by Beneficial Noteholders, only the Beneficial Noteholders, and not Registered Noteholders or Participant Holders (unless any such Registered Noteholder or Participant Noteholder is itself a Beneficial Noteholder), shall be entitled to vote on the Plan as provided for in this Meeting Order.

Ordinary Affected Creditors

Each Ordinary Affected Creditor with a Voting Claim shall be entitled to one vote as a member of the Affected Creditors Class, which vote shall have a value equal to the dollar value of such Ordinary Affected Creditor’s Voting Claim.

Subject to any restrictions contained in Applicable Laws, an Ordinary Affected Creditor may transfer or assign the whole of its Ordinary Affected Creditor Claim prior to the Meeting (or any adjournment thereof), provided that neither SFC nor the Monitor shall be obliged to deal with any transferee or assignee thereof as an Ordinary Affected Creditor in respect of such Ordinary Affected Creditor Claim, including allowing such transferee or assignee to attend or vote at the Meeting, unless and until actual notice of the transfer or assignment, together with satisfactory evidence of such transfer or assignment, has been received and acknowledged by SFC and the Monitor, which receipt and acknowledgment must have occurred on or before 5:00 p.m. (Toronto time) on the date that is seven days prior to the date of the Meeting (or any adjournment thereof), failing which the original transferor shall have all applicable rights as the ’Ordinary Affected Creditor’ with respect to such Ordinary Affected Creditor Claim as if no transfer of the Ordinary Affected Creditor Claim had occurred.

 

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If such receipt and acknowledgment by the Applicant and the Monitor have occurred on or before 5:00 p.m. (Toronto time) on the date that is seven days prior to the date of the Meeting (or any adjournment thereof): (i) the transferor of the applicable Ordinary Affected Creditor Claim shall no longer constitute an Ordinary Affected Creditor in respect of such Ordinary Affected Creditor Claim; and (ii) the transferee or assignee of the applicable Ordinary Affected Creditor Claim shall, for all purposes in accordance with this Meeting Order, constitute an Ordinary Affected Creditor in respect of such Ordinary Affected Creditor Claim and shall be bound by any and all notices previously given to the transferor or assignor in respect thereof and shall be bound by any Ordinary Creditors’ Proxy duly submitted to the Monitor in accordance with this Meeting Order. For greater certainty, the Applicant and the Monitor shall not recognize partial transfers or assignments of Ordinary Affected Creditor Claims.

Affected Creditors with Unresolved Claims

Each Affected Creditor with an Unresolved Claim as at the Voting Record Date shall be entitled to attend the Meeting and shall be entitled to one vote at the Meeting in respect of such Unresolved Claim. Any vote cast in respect of an Unresolved Claim shall be dealt with as provided in the following sentence unless and until (and then only to the extent that) such Unresolved Claim is ultimately determined to be (i) a Voting Claim, in which case such vote shall have the dollar value attributable to such Voting Claim or (ii) disallowed, in which case such vote shall not be counted for any purpose. The Monitor shall keep a separate record of votes cast by Affected Creditors with Unresolved Claims and shall report to the Court with respect thereto at the Sanction Hearing. If approval or non-approval of the Plan by Affected Creditors would be altered by the votes cast in respect of Unresolved Claims: (i) such result shall be reported to the Court as soon as reasonably practicable after the Meeting; (ii) if a deferral of the Sanction Hearing is deemed to be necessary or advisable by the Monitor (in consultation with SFC and counsel to the Initial Consenting Noteholders), the Monitor shall request an appropriate deferral of the Sanction Hearing; and (iii) the Monitor may make a request to the Court for directions.

Third Party Defendants

Each of the Third Party Defendants will be entitled to one vote as a member of the Affected Creditors Class in respect of any Class Action Indemnity Claim that it has properly filed in respect of the Indemnified Noteholder Class Action Claims, provided that the aggregate value of all such Class Action Indemnity Claims shall, for voting purposes, be deemed to be equal to the amount of the Indemnified Noteholder Class Action Limit. The Monitor will keep a separate record of votes cast by the Third Party Defendants in respect of such Class Action Indemnity Claims, and the Monitor will report to the Court with respect thereto at the Sanction Hearing, including as to whether or not a vote in favour of the Plan or against the Plan in the amount of the Indemnified Noteholder Class Action Limit would have had any effect on the approval of the Plan by the Required Majority.

Solicitation of Proxies

Solicitation of proxies will be primarily by mail and the costs of such solicitation will be borne by SFC as a cost of the CCAA Proceedings.

Appointment of Proxyholders and Voting

In Person

Any Ordinary Affected Creditor or Beneficial Noteholder that is entitled to vote at the Meeting and that wishes to vote at the Meeting in person must: (i) duly complete and sign an Ordinary Creditors’ Proxy or a Noteholders’ Proxy, as applicable; (ii) identify itself in the Ordinary Creditors’ Proxy or a Noteholders’ Proxy, as applicable, as the Person with the power to attend and vote at the Meeting on behalf of such Ordinary Affected Creditor or Beneficial Noteholder, as the case may be; and (iii) deliver such Ordinary Affected Creditors’ Proxy or Noteholders’ Proxy, as the case may be, to the Monitor so that it is received on or before 5:00 p.m. on the third Business Day before the Meeting (or any adjournment thereof), and such delivery must be made in accordance with the instructions accompanying such Ordinary Affected Creditors' Proxy or Noteholders’ Proxy.

 

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By Proxy

Any Ordinary Affected Creditor or Beneficial Noteholder that is entitled to vote at the Meeting and that wishes to appoint a nominee to vote on its behalf at the Meeting must: (i) duly complete and sign an Ordinary Creditors' Proxy or a Noteholders' Proxy, as applicable; (ii) identify its desired nominee in the Ordinary Creditors' Proxy or a Noteholders' Proxy, as applicable, as the Person with the power to attend and vote at the Meeting on behalf of such Ordinary Affected Creditor or Beneficial Noteholder, as the case may be; and (iii) deliver such Ordinary Affected Creditors' Proxy or Noteholders' Proxy, as the case may be, to the Monitor so that it is received on or before 5:00 p.m. on the third Business Day before the Meeting (or any adjournment thereof), and such delivery must be made in accordance with the instructions accompanying such Ordinary Affected Creditors' Proxy or Noteholders' Proxy.

In order to be effective, any Noteholders' Proxy must clearly state the name and contain the signature of the applicable Participant Holder, the applicable account number or numbers of the account or accounts maintained by the applicable Beneficial Noteholder with such Participant Holder, and the principal amount of Notes (excluding any pre-or post-filing interest) that such Beneficial Noteholder holds in each such account or accounts. Where a Beneficial Noteholder holds Notes through more than one Participant Holder, its Noteholders' Proxy is required to be executed by only one of those Participant Holders, provided that the Beneficial Noteholder shall provide the information required in its Noteholders' Proxy with respect to its Notes held with all Participant Holders to allow the Monitor to verify the aggregate amount of Notes held by such Beneficial Noteholder for the purposes of voting on the Plan.

Notwithstanding any minor error or omission in any Ordinary Affected Creditors' Proxy or Noteholders' Proxy that is submitted to the Monitor, the Chair shall have the discretion to accept for voting purposes any Ordinary Affected Creditors' Proxy or Noteholders' Proxy submitted to the Monitor in accordance with the Meeting Order.

Revocation of Proxies

In addition to any other manner permitted by law, an Affected Creditor may revoke a proxy by depositing a valid proxy bearing or deemed to bear a later date.

Advice to Beneficial Holders

The information set forth in this section is of significant importance to Beneficial Noteholders. The Notes are registered under the name of DTC, which acts as nominee for many U.S. brokerage firms. As such, Beneficial Noteholders do not hold Notes registered in their own name, but rather, hold Notes that are held in the name of a Participant Holder, such as an investment dealer, broker, bank, trust company, trustee, custodian or other nominee, or a clearing agency in which the Participant Holder participates.

The Meeting Order requires each Participant Holder, within five days of such Participant Holder's receipt of the Noteholder meeting materials from the Monitor pursuant, to: (i) complete and sign the applicable section of the Noteholders' Proxy relating to Participant Holders for each Unregistered Noteholder that has an account (directly or through an agent or custodian) with such Participant Holder; and (ii) deliver by courier or personal delivery to each such Unregistered Noteholder the Noteholders' Proxy as so completed and signed together with one copy of the Noteholder meeting materials. Each Participant Holder shall take any other action reasonably required to enable any Unregistered Noteholder that has an account (directly or through an agent or custodian) with such Participant Holder to provide a Noteholders' Proxy to the Monitor with respect to the Notes owned by or held for the benefit of such Unregistered Noteholder.

However, the Meeting Order provides that where: (i) a Participant Holder or its agent has a standard practice for distribution of meeting materials to Unregistered Noteholders and for the gathering of information and proxies or voting instructions from Unregistered Noteholders; (ii) the Participant Holder has discussed such standard practice in advance with SFC, the Monitor and counsel to the Initial Consenting Noteholders; and (iii) such standard practice is acceptable to SFC, the Monitor and counsel to the Initial Consenting Noteholders, such Participant Holder or its agent may, in lieu of following the procedure set out above, follow such standard practice provided that all applicable proxies or voting instructions are received by the Monitor no later than 5:00 P.M. on the third Business Day before the Meeting.

 

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Each Beneficial Noteholder should contact his, her, or its broker or other nominee and carefully follow the voting instructions provided by such broker or nominee.

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

The following summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular holder of Common Shares or Notes. Consequently, Securityholders are urged to consult their own tax advisors for advice as to the tax considerations in respect of the Restructuring having regard to their particular circumstances. This Information Statement does not discuss any United States federal or state tax consequences of the Restructuring or the tax consequences of the Restructuring under the laws of any other jurisdiction. Securityholders resident in a jurisdiction other than Canada should be aware that the Restructuring may have tax consequences both in Canada and in such jurisdiction. Such consequences are not described herein. Securityholders should consult with their own tax advisors with respect to their particular circumstances and the tax considerations applicable to them.

The following is a summary of the principal Canadian federal income tax consequences, pursuant to the Canadian Tax Act, of the Restructuring to holders of Common Shares and to holders of Notes (each a “ Securityholder ”) who deal at arm's length with and are not affiliated with the Company or Newco, who hold their Notes and Common Shares, as the case may be, as capital property, and who dispose, or are deemed to have disposed, of their Common Shares or Notes, as applicable, pursuant to the Restructuring. The Notes and Common Shares, as the case may be, will generally be considered to be capital property for this purpose to a holder of Notes or Common Shares, as the case may be, unless such Securityholder holds such securities in the course of carrying on a business, or the Securityholder acquired such securities in a transaction or transactions considered to be an adventure or concern in the nature of trade.

This summary is not applicable to a Securityholder: (i) that is a “financial institution” (as defined in the Canadian Tax Act) for purposes of the mark-to-market rules, (ii) that is a “specified financial institution” (as defined in the Canadian Tax Act), (iii) a Securityholder who makes or has made a “functional currency” reporting election under the Canadian Tax Act, (iv) that is exempt from tax under Part I of the Canadian Tax Act (which includes a trust governed by a registered retirement savings plan (“ RRSP ”), registered retirement income fund (“ RRIF ”), tax-free savings account (“ TFSA ”) registered education savings plan, deferred profit sharing plan or registered disability savings plan (collectively, “ Deferred Plans ”)), or (v) an interest in which is a “tax shelter investment” (as defined in the Canadian Tax Act). This summary does not address the Canadian federal income tax consequences to any other person, including any Noteholder Class Action Claimant. Such Securityholders should consult with their own tax advisors to determine the particular Canadian federal income tax consequences to them of the Restructuring. T he Restructuring may have adverse Canadian federal income tax consequences to a Securityholder that is a Deferred Plan and, in particular that is an RRSP, RRIF, or TFSA and such holders, if any, are strongly encouraged to consult their own tax advisors.

This summary is based upon the current provisions of the Canadian Tax Act, the current regulations thereto and the current published administrative practices and policies of the CRA. This summary assumes that all specific proposals to amend the Canadian Tax Act which have been publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date of this document will be enacted as proposed, although there can be no assurance that any tax proposals will be implemented in their current form or at all. This summary does not otherwise take into account or anticipate any changes in law, whether by way of legislative, judicial or administrative action or interpretation, nor does it address any provincial, territorial or foreign tax considerations.

This summary is intended for general information purposes only, and does not purport to address all of the Canadian federal income tax considerations that may be relevant to the particular circumstances of a Securityholder. This summary is not intended to be, nor should it be construed to be legal or tax advice to any particular holder or Notes or Common Shares. Holders of Notes or Common Shares are urged to consult their own tax advisors concerning the tax consequences to them of the Restructuring.

 

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All amounts, including the cost of, interest or dividends, received and accrued on, and proceeds of disposition from, the Notes and Common Shares must be determined in Canadian dollars at applicable exchange rates for the purposes of the Canadian Tax Act. Any amount denominated in U.S. dollars must be converted into Canadian dollars, generally at the exchange rate quoted by the Bank of Canada as its noon rate on the date the amount first arose. The amount of interest and any capital gain or capital loss of a holder of Notes or Common Shares may be affected by fluctuations in Canadian dollar exchange rates.

The Canadian federal income tax consequences of any Alternative Transaction are not discussed herein.

Residents of Canada

The following discussion applies to Securityholders who, for the purposes of the Canadian Tax Act and any applicable income tax treaty or convention, and at all relevant times, are residents of Canada (“ Canadian Holders ”). Certain Canadian Holders whose Notes or Common Shares, as the case may be, might not otherwise qualify as capital property may, in certain circumstances, treat such Notes or Common Shares as capital property by making an irrevocable election pursuant to subsection 39(4) of the Canadian Tax Act.

Noteholders

Transfer of Noteholder Claims

A Canadian Holder will be considered to have disposed of Notes upon the transfer of such Canadian Noteholder Claims to Newco. A Canadian Holder that is a corporation, partnership, unit trust or any trust of which a corporation or partnership is a beneficiary will generally be required to include in income the amount of interest accrued or deemed to accrue on the Notes up to the Effective Date or that became receivable or was received on or before the Effective Date, to the extent that such amounts have not otherwise been included in the Canadian Holder's income for the year or a preceding taxation year. Any other Canadian Holder, including an individual, will be required to include in income for a taxation year any interest on the Notes received or receivable by such Canadian Holder in the year (depending upon the method regularly followed by the Canadian Holder in computing income) except to the extent that such amount was otherwise included in its income for the year or a preceding taxation year. Where a Canadian Holder is required to include an amount in income on account of interest on the Notes that accrues in respect of the period between the date of the last interest payment and the Effective Date, the Canadian Holder should be entitled to a deduction of an equivalent amount in computing income.

In general, a Canadian Holder will realize a capital gain (or capital loss) on the transfer of the Noteholder Claims equal to the amount by which the proceeds of disposition exceed (or are exceeded by) the adjusted cost base to the Canadian Holder of the Notes, plus any reasonable costs of disposition. The tax treatment of any such capital gain (or capital loss) is the same as described below under “ Certain Canadian Federal Income Tax Considerations – Taxation of Capital Gains and Capital Losses ”. A Canadian Holder's proceeds of disposition of the Notes upon the transfer of the Noteholder Claims to Newco will be an amount equal to the fair market value (at the time of the exchange) of the Newco Shares, Newco Notes and Litigation Trust Interests received in exchange therefor. Canadian Holders should consult their own advisors.

Holding and Disposition of Newco Shares, Newco Notes and Litigation Trust Interests

Canadian Holders of Notes should consult their own advisors concerning the consequences to them of acquiring, holding and/or disposing of Newco Shares, Newco Notes and Litigation Trust Interests, including the receipt of dividends, interest or distributions thereon.

Additional Refundable Tax

A Canadian Holder of Notes that is a “Canadian-controlled private corporation” (as defined in the Canadian Tax Act) may be liable to pay an additional refundable tax of 6  2 / 3 % on certain investment income including amounts in respect of interest and taxable capital gains.

 

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Shareholders

Cancellation of Shares

A Canadian Holder will realize a capital loss on the cancellation of the Common Shares pursuant to the Restructuring for nil consideration equal to the adjusted cost base to the Canadian Holder of such Common Shares, plus any reasonable costs of disposition. The tax treatment of any such capital loss is the same as described below in respect of capital losses under “Income Tax Taxation of Capital Gains and Capital Losses”.

A deemed dividend will not arise on the cancellation of the Common Shares.

Taxation of Capital Gains and Capital Losses

In general, one-half of any capital gain (a “ taxable capital gain ”) realized by a Canadian Holder of Common Shares in a taxation year will be included in the Canadian Holder's income in the year and one-half of the amount of any capital loss realized by a Canadian Holder in a taxation year may be deducted from net taxable capital gains realized by the Canadian Holder in the year and any of the three preceding taxation years or in any subsequent year, to the extent and under the circumstances described in the Canadian Tax Act. The amount of any capital loss realized by a holder that is a corporation on the disposition of a share may be reduced by the amount of dividends received or deemed to be received by it on such share (or on a share for which the share has been substituted) to the extent and under the circumstances prescribed by the Canadian Tax Act. Similar rules may apply where a corporation is a member of a partnership or a beneficiary of a trust that owns shares, directly or indirectly through a partnership or a trust.

Non-Residents of Canada

The following discussion applies to a Securityholder who, for the purposes of the Canadian Tax Act and any applicable income tax treaty or convention, and at all relevant times, is not resident in, and is not deemed to be resident in, Canada and does not use or hold the Notes or the Common Shares, as the case may be, in carrying on a business in Canada (a “ Non-Resident Holder ”). In addition, this discussion does not apply to an insurer who carries on an insurance business in Canada and elsewhere or an authorized foreign bank that carries on a Canadian banking business. The following discussion assumes that the Notes do not constitute “taxable Canadian property” (within the meaning of the Canadian Tax Act) to any particular Non-Resident Holder.

Noteholders

Transfer Noteholder Claims

No taxes will be payable under the Canadian Tax Act by a Non-Resident Holder upon the transfer of Noteholder Claims to Newco.

Holding and Disposition of Newco Shares, Newco Notes and Litigation Trust Interests

Non-Resident Holders should consult their own advisors concerning the consequences to them of acquiring, holding and/or disposing of Newco Shares, Newco Notes and Litigation Trust Interests, including the receipt of dividends, interest or distributions thereon.

Shareholders

Cancellation of Shares

A Non-Resident Holder of Common Shares will not be subject to Canadian federal income tax in respect of the cancellation of such Common Shares for nil consideration pursuant to the Restructuring.

 

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Consequences to the Company

The Restructuring will result in the settlement or extinguishment of the Notes. The “forgiven amount”, as defined in the Canadian Tax Act, arising from the Restructuring will reduce, in prescribed order, certain tax attributes of the Company, including non-capital losses, net capital losses, undepreciated capital cost of depreciable property, cumulative eligible capital, and the adjusted cost base of certain capital property (the “ Tax Shield ”). Generally, one half of the amount by which the forgiven amount exceeds the Tax Shield will be required to be included in the Company's income for the taxation year in which the Plan Implementation Date takes place, subject to a potential off-setting deduction for insolvent corporations.

CERTAIN REGULATORY MATTERS RELATING TO THE PLAN

Canada

The issuance of Plan Securities pursuant to the Plan will be exempt from the prospectus and registration requirements under applicable Canadian securities legislation. As a consequence of these exemptions, certain protections, rights and remedies provided by Canadian securities legislation, including statutory rights of rescission or damages, will not be available in respect of such new securities to be issued in connection with the Plan.

The Newco Shares and Newco Notes will be subject to restrictions on transfer in Canada. Newco is not, and will not be following the Plan Implementation Date, a reporting issuer (or equivalent) in any province or territory of Canada and Newco's securities will not be listed on any stock exchange in Canada and have not been and will not be qualified for sale to the public under any applicable Canadian securities laws. Any resale of the Newco Shares or Newco Notes in Canada must be made in accordance with applicable securities laws, which will vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority.

United States

The Plan Securities to be received by eligible Affected Creditors in the United States pursuant to the Plan are not required to be, and will not be, registered under the United States 1933 Act or the securities law of any state of the United States. Such Plan Securities will be issued in reliance upon the exemption provided by Section 3(a)(10) of the United States 1933 Act. Section 3(a)(10) exempts from the registration requirements of the United States 1933 Act securities issued in exchange for one or more bona fide outstanding securities, claims or property interests, or partly in such exchange and partly for cash, where the terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by a court or by a governmental authority expressly authorized by law to grant such approval. In accordance with the requirements of the SEC. SFC will advise the Court prior to the hearing in respect of the Order that the Plan Securities will not be registered under the United States 1933 Act in reliance upon the Section 3(a)(10) exemption and that such reliance will be based on the Court's approval of the Plan. The Court will conduct a hearing to determine the fairness of the terms and conditions of the Plan, including the proposed issuance of the Plan Securities. Accordingly, SFC believes that the Order will, if granted, constitute a basis for the exemption from the registration requirements of the United States 1933 Act with respect to Plan Securities issued in connection with the Plan.

Pursuant to the rules of the SEC in effect on the date hereof, all Plan Securities received by eligible Affected Creditors pursuant to the Plan will be freely transferrable, except by persons who are deemed to be “affiliates” of Newco, as that term is defined in Rule 144 under the United States 1933 Act, or have been “affiliates” of Newco within 90 days of the Plan Implementation Date, who will be subject to transfer restrictions under the United States 1933 Act.

This document does not constitute a registration statement covering resales of Plan Securities by persons who are restricted from selling their Plan Securities pursuant to any rule under the United States 1933 Act.

 

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The foregoing discussion is only a general overview of the requirements of the U.S. securities laws that may be applicable to the resale of Plan Securities received pursuant to the Plan. Recipients of Plan Securities are urged to obtain legal advice to ensure that the resale of such securities complies with applicable U.S. securities laws.

RISK FACTORS

In evaluating the Plan and determining whether to vote for the Resolution, Affected Creditors should read and consider carefully the risk factors set forth below. These risk factors should not, however, be regarded as the only risks associated with the SFC Companies, Newco and the Plan. Additional risks and uncertainties not currently known to the SFC Companies or that the SFC Companies do not view as material may impair the SFC Companies' business operations. As well, SFC has no knowledge of the manner in which Newco intends to operate the SFC Business following the Plan Implementation Date and therefore has no knowledge of any additional risks that may arise therefrom. If any of the following risks actually occur, the SFC Companies' business, results of operations and financial condition of Newco or the SFC Companies could be harmed. You should carefully consider information about these risks and uncertainties, together with all of the other information contained within this document.

Risks Relating to Non-Implementation of the Plan

Failure to Implement the Plan

If the Plan is not implemented before the Outside Date or an Alternative Sale Transaction is not completed and another plan is not proposed that meets the approval requirements of the Court, SFC may remain under CCAA protection for an indefinite period of time and its businesses could continue to substantially erode, or an insolvency proceeding involving the liquidation of the assets of SFC could result.

If the Restructuring is not completed, there is no assurance that SFC will be able to complete a restructuring of its businesses or that any such restructuring will be on terms that provide equivalent value to Affected Creditors compared to the consideration to be received by Affected Creditors pursuant to the Restructuring and the Plan.

Pursuant to the terms of the Support Agreement, if the Restructuring is not implemented on or before the Outside Date, the Support Agreement may be terminated by Initial Consenting Noteholders holding at least two-thirds of the principal amount of Relevant Notes (as defined in the Support Agreement).

If the Support Agreement is terminated and the Plan is not consummated, the SFC Companies will have an immediate need to pursue other alternatives to manage their liquidity needs, including potentially filing under the insolvency laws of various jurisdictions. There can be no assurance as to the value, if any, that would be available to Affected Creditors, including holders of the Notes, in the case of any such insolvency filing.

Risks Relating to the Plan and its Implementation

Consummation of the CCAA Plan is subject to Affected Creditors' acceptance and Court approval

Before the Plan can be consummated, it must have been approved by the Required Majority and sanctioned, after notice and a hearing on any objection, by the Court. There can be no assurance that the Plan will be approved by the Required Majority, and that even if approved, the Court will sanction the Plan. The failure of any of these conditions will delay or prevent the consummation of the Plan. The Third Party Defendants have raised numerous objections in the CCAA proceedings to the Plan, claiming that the Plan does not adequately address their claims against SFC. Copies of materials filed by the Third Party Defendants in the CCAA Proceedings are available on the Website.

 

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There is no assurance that the parties will receive merger control approval under the AML in the time period contemplated or at all

As noted above, the implementation of the Plan is subject to the condition that if notification is necessary or desirable under the AML, the acceptance of all antitrust filings considered necessary or prudent by the Initial Consenting Noteholders and (to the extent required) approval thereof by the competent PRC authority shall have been obtained. The review period provided under the legislation is 30 to 180 days and at the date hereof, no application has been made. There can be no assurance that the merger control approval under the AML will be obtained on terms acceptable to Newco, or at all, or that any such approval will be obtained prior to the Outside Date, the date by which the Restructuring must be completed in accordance with the terms of the Support Agreement, unless such date is extended in accordance with the terms of the Support Agreement.

There is no assurance that Newco will obtain an exemption from the Takeovers Executive under the Hong Kong Takeovers Code

As noted above, Newco intends to consult with the Takeovers Executive regarding the application of the Hong Kong Takeovers Code in the present circumstances and, if necessary, apply to the Takeovers Executive for an exemption from the obligation under the Hong Kong Takeovers Code to make an offer for all of the outstanding shares of Greenheart not already owned by SCG. The implementation of the Plan is subject to the condition that implementation of the Restructuring will not result in an obligation arising for Newco, its shareholders or any Subsidiary to make a mandatory offer to acquire shares of Greenheart. There can be no assurance that the Takeovers Executive will grant such exemption on terms acceptable to Newco or at all or that such exemption will be granted prior to the Outside Date, the date by which the Restructuring must be completed in accordance with the terms of the Support Agreement, unless such date is extended in accordance with the terms of the Support Agreement.

The Implementation of the Plan is subject to a number of other significant conditions

Implementation of the Plan is subject to numerous other conditions, which must be satisfied (or waived, if applicable) prior to implementation and effectiveness of the Plan. As of the date hereof, there can be no assurance that any or all of the conditions in the Plan or in the Support Agreement, will be satisfied (or waived, if applicable). Accordingly, there can be no assurance that the Plan will be consummated even if approved by the Affected Creditors and sanctioned by the Court. See “ Required Approvals under the CCAA and Other Conditions to Implementation ”.

If any of the conditions to consummation are not satisfied or an alternative plan is not approved, SFC may be forced to liquidate

If any of the conditions precedent as described in the Plan, including Court sanction and the satisfaction of the implementation conditions, are not satisfied (or waived, if applicable) and the Plan is not consummated or an Alternative Sale Transaction is not completed, or an alternative plan is not approved, there can be no assurance that the CCAA Proceedings will continue, or that an alternative plan of compromise and reorganization, if any, would be on comparable terms for the Affected Creditors. The most likely alternative to a continuation of the CCAA Proceedings, which itself could be protracted, is liquidation. For more information on the potential risks involved in a protracted reorganization, see “ Undue delay in confirmation may significantly disrupt the operations of the SFC Companies ” below. Based on the results of the Sale Solicitation Process, the Company believes that a liquidation would not provide equivalent value to Affected Creditors compared to the consideration to be received by Affected Creditors pursuant to the Plan.

The actual amount of Proven Claims may differ from the estimated Affected Claims and adversely affect the percentage recovery of each individual Affected Creditor

Affected Creditors that have Unresolved Claims will not be entitled to receive a distribution under the Plan in respect of such Unresolved Claim or any portion thereof unless and until such Unresolved Claim becomes a Proven Claim. Distributions in respect of any Unresolved Claims in existence at the Plan Implementation Date will be held in escrow by the Unresolved Claims Escrow Agent in the Unresolved Claims Reserve until settlement or final determination of the Unresolved Claim. To the extent that Unresolved Claims become Proven Claims or are finally disallowed, such Unresolved Claims that become Proven Claims may materially adversely affect the percentage recovery of each individual Affected Creditor.

 

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Unresolved Claims that could cause dilution of Affected Creditors' recoveries following the Plan Implementation Date (to the extent that any such Unresolved Claims become Proven Claims) could potentially include, but are not limited to, claims for indemnification by Third Party Defendants (i) up to the Indemnified Noteholder Class Action Limit, (ii) in respect of OSC claims or penalties against Third Party Defendants (e.g. the OSC has reserved the right to claim up to $100 million as against the Directors and Officers of SFC), and (iii) Defence Costs. As discussed, all rights and defences to any such indemnification claims have been reserved.

Certain claims against the Subsidiaries of SFC will not be affected by the Plan

Any claims against the Subsidiaries of SFC that are not released or compromised under the Plan will continue following the Plan Implementation Date and such claims may be material to the SFC Business.

Undue delay in implementation of the Restructuring may continue to significantly disrupt the operations of the SFC Companies

SFC has incurred significant costs and expenses to date in connection with its ongoing restructuring efforts. Even if the Restructuring is completed, it may not be completed on the schedule described in this Information Statement or on or prior to the Outside Date. Accordingly, Affected Creditors participating in the Restructuring may have to wait longer than expected to receive consideration, if any, for their Affected Claims. In addition, if the Restructuring is not completed on the schedule described in this Information Statement, SFC may incur additional expenses.

Although the Plan is designed to minimize the length of the CCAA Proceedings, it is not possible to predict the amount of time the Company may spend in the CCAA Proceedings or to provide any assurance as to whether or not the Plan will be confirmed or sanctioned. The continuation of the CCAA Proceedings, particularly if the Plan is not approved or confirmed in the time frame currently contemplated, could materially and adversely affect the SFC Companies' operations and relationships with its authorized intermediaries, suppliers, customers, employees, regulators and PRC governmental agencies and authorities. Also, transactions outside the ordinary course of business are subject to the prior approval of the Court, which may limit the Company's ability to respond timely to certain events or take advantage of certain opportunities. Prolonged CCAA Proceedings may also make it more difficult to retain and attract management and other key personnel, and would require senior management to continue to spend a significant amount of time and effort dealing with the Company's restructuring instead of focusing on the operation of the SFC Business.

The tax authorities of the PRC may levy a 10% withholding tax on a capital gain realized or deemed to be realized for PRC tax purposes on the indirect disposition of PRC entities

The tax authorities of the PRC may levy a 10% withholding tax on a capital gain realized or deemed to be realized for PRC tax purposes on the indirect disposition of PRC entities. The transfer of the SFC Assets by SFC to Newco pursuant to the Plan may be deemed to constitute an indirect disposition of Sino-Forest's subsidiaries in the PRC. For PRC tax purposes, as a general principle, a capital gain is calculated as equity transfer proceeds minus original investment cost. Nevertheless, there are no explicit guidance rules as to the mechanism according to which the PRC tax authorities may calculate the capital gain in the indirect disposition of a group of PRC entities, and it is subject to the assessment and confirmation of the competent tax authorities on a case by case basis, consequently, the exposure for such PRC withholding tax is not known.

Canada Revenue Agency may treat a portion of Noteholders' consideration as income for Canadian tax purposes

The Canadian federal income tax considerations described above under “Certain Canadian Federal Income Tax Considerations” are applicable on the basis that all of the Newco Shares, Newco Notes and Litigation Trust Interests received by Noteholders constitute consideration for the disposition of the Notes by Noteholders to Newco. No assurances can be given that CRA will concur with such position. If the CRA does not concur, the Canadian federal income tax considerations relevant to Noteholders may be different than set out under the heading “ Certain Canadian Federal Income Tax Considerations ” and a portion of the value of the Newco Shares, Newco Notes, and/or Litigation Trust Interests received by Noteholders, may be treated as income for Canadian tax purposes. In particular, a portion of the value of the Newco Shares received by an Early Consent Noteholder that is a Canadian Holder may be included in the income of such Canadian Holder. Noteholders are advised to consult their own tax advisors regarding the potential consequences.

 

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Risks Related to Securities of Newco

If SFC completes the Restructuring, the Newco Shares and Newco Notes may be concentrated in a few holders

Under the Plan, the Affected Creditors will receive their pro rata share of 92.5% of the Newco Shares and 100% of the Newco Notes (and Early Consent Noteholders will also receive their pro rata share of 7.5% of the Newco Shares) to be issued and outstanding on the Plan Implementation Date. The Company believes that a substantial majority of the Affected Claims are held by a few Affected Creditors. Consequently, these Affected Creditors individually will hold high concentrations of the Newco Shares and Newco Notes immediately after the consummation of the Plan which may make some transactions more difficult or impossible to complete without the support of these securityholders.

Certain fundamental changes relating to Newco will require supermajority approval by Newco shareholders

Certain fundamental changes relating to Newco, including a merger, a sale of all or substantially all of Newco’s assets, a material change in Newco’s business and a voluntary liquidation of Newco, will require the approval of shareholders holding at least 66-2/3% of the Newco Shares present and voting at the meeting. See “ Information Regarding Newco – Shareholder Approval Rights ”. Accordingly, shareholders holding more than one-third of the Newco Shares present at a meeting will be able to veto any of these fundamental changes, even if such changes are otherwise supported by a substantial majority of Newco shareholders. In addition, Newco shareholders may be forced to sell their Newco Shares in the event holders of at least 66-2/3% of the outstanding Newco Shares wish to sell all of their Newco Shares to a third party. See “ Information Regarding Newco – Drag-Along Rights ”.

The Newco Shares will be junior to all of Newco’s other securities, including the Newco Notes and any existing and future indebtedness

The Newco Shares will be the most junior of all of Newco’s securities. As a result, Newco's existing and future indebtedness and other non-equity claims, as well as any preferred stock Newco may issue, will rank senior to the Newco Shares as to rights upon any foreclosure, dissolution, winding-up, liquidation or reorganization, or other bankruptcy proceeding relating to Newco. In the event of any distribution or payment of Newco’s assets in any foreclosure, dissolution, winding-up, liquidation or reorganization, or other bankruptcy proceeding, Newco’s creditors will have a superior claim and interest, as applicable, to the interests of holders of Newco Shares. If any of the foregoing events occur, there may not be sufficient assets for distribution in respect of the Newco Shares.

Newco will be incorporated under the laws of a jurisdiction other than Canada and the rights and remedies of holders of Newco Shares may be different from the rights and remedies of holders of shares of a Canadian corporation

Newco will be incorporated under the laws of a jurisdiction other than Canada. The rights and remedies of holders of securities of a non-Canadian company may differ from the rights and remedies of holders of securities of a Canadian corporation and those differences may be material. Newco will have no assets, operations or management in Canada.

There is currently no public market for Newco Shares or Newco Notes and no public market is expected to develop

There is currently no public market for the Newco Shares or Newco Notes, and no public market for the Newco Shares or Newco Notes is expected to develop after such securities are issued. Accordingly, the liquidity of the Newco Shares and Newco Notes may be limited and the value of the Newco Shares and Newco Notes may be significantly negatively affected.

 

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The capital available to Newco and the SFC Companies upon completion of the Restructuring may be insufficient to fund their continuing operations and service the Newco Notes and they may need to raise additional capital to fund the businesses of the SFC Companies

As described above under “ There is uncertainty regarding the financial condition of SFC Business ”, the SFC Companies’ financial condition and ability to conduct their operations in the normal course of business has been materially affected. The capital available to Newco and the Subsidiaries upon completion of the Restructuring may be insufficient to fund their continuing operations, including interest payable on the Newco Notes and principal payments upon maturity of the Newco Notes. If the on-shoring process is undertaken, Newco and the Subsidiaries will face increased demands for additional capital in respect of such process. The SFC Companies have been unable to access capital markets since the MW Report was released and there can be no assurance that Newco and the SFC Companies will be able to access capital markets if the Restructuring is complete. Accordingly, Newco may be required to raise additional capital from its existing investors or otherwise through the issuance of equity or debt in order to continue to operate the businesses of the SFC Companies. There is no assurance such capital will be available on acceptable terms or at all.

Risk Factors Related To Muddy Waters’ and OSC Allegations

The allegations set forth in the MW Report and the allegations made by the OSC may be wholly or substantially true

The allegations set forth in the MW Report and the allegations made by the OSC may be wholly or substantially true. If those allegations are wholly or substantially true, the value of Sino-Forest’s assets could be materially less than the value recorded in the financial statements of SFC. In addition, the ability to operate the SFC Business in such circumstances through Newco, and even under new management, could be materially and adversely impaired.

The allegations set forth in the MW Report and the OSC’s Statement of Allegations have had significant negative effects on the reputation and business of Sino-Forest

The allegations set forth in the MW Report and the OSC’s Statement of Allegations have had significant negative effects on the reputation and business of Sino-Forest. These effects are continuing. As a result, Sino-Forest’s ability to conduct its operations in the normal course of business has been materially affected. For example: creditors are increasing legal demands with respect to accounts payable; at the same time, collections of accounts receivables is increasingly difficult; sales in the WFOE model have also slowed substantially in response to views on accounts receivable payments; cash flow issues have resulted in a cessation of any expansion or modernization; the inability to fund purchases of raw materials has caused a slowdown in production or, in many cases, a shutdown; certain timber assets have been frozen as Sino-Forest has been unable to keep current with payments; certain deposits put down on standing timber purchases by WFOEs may be unrealizable due to an inability to generate cash to pay off outstanding payables under those contracts; offshore banking facilities have been repaid and frozen or cancelled, leading to substantial damage in Sino-Forest’s trading business; relationships with local governments and plantation land owners have become strained; Sino-Forest is unable to complete various projects, contracts and acquisitions; and certain PRC governmental agencies and authorities are expressing increased concern over SFC and are becoming less inclined to be supportive of Sino-Forest, making the ability to obtain legal documents for Sino-Forest's operations increasingly difficult.

Following the implementation of the Plan, there can be no assurance that negative publicity will not adversely affect Sino-Forest’s results from operations or have a long-term negative effect on the SFC Business. Such uncertainty may adversely affect the SFC Companies relationships with their authorized intermediaries, suppliers and customers. Following the implementation of the Plan, authorized intermediaries, suppliers and customers may continue to be concerned about the financial condition of the SFC Business and, as a result, they may demand faster payment terms or not extend normal trade credit, both of which could adversely affect the SFC Companies. The SFC Companies may not be successful in obtaining alternative authorized intermediaries, suppliers and customers if the need arises and this would adversely affect the SFC Companies’ results from operations and their ability to conduct the SFC Business.

 

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The investigations conducted by the OSC and the RCMP and the Class Action Claims against the Company have and may continue to require significant resources to be expended by the directors, officers and employees of the Company and SFC has and may continue to incur a substantial amount of fees and expenses in connection with these investigations and lawsuits

The investigations conducted by the OSC and the RCMP and the class action lawsuits against the Company have and may continue to require significant resources to be expended by the directors, officers and employees of Sino-Forest. As a result, the diversion of such resources has had an adverse effect on the ability of Sino-Forest to conduct its operations in the normal course of business. Management expects that, if the Plan is implemented, certain of these matters will be resolved by the consummation of the Restructuring.

In addition, SFC has and may continue to incur a substantial amount of fees and expenses in connection with the investigations by the OSC and the RCMP and the Class Action Claims. Further, pursuant to indemnification agreements between SFC and its directors and certain officers as well as with auditors, underwriters and other parties, SFC may be obligated to indemnify such individuals for additional legal and other expenses pursuant to such proceedings. The aggregate of SFC's fees and expenses to date is substantial and has had a negative effect on Sino-Forest's operating results.

The Company may be unable to obtain additional financing on acceptable terms or at all

The Company is at the date hereof in default in its reporting obligations under Canadian securities laws, its securities are subject to a cease trade order issued by the OSC and its Common Shares were delisted from the Toronto Stock Exchange in May, 2012. If the Plan is not implemented, in the future the Company may require additional financing to operate its business. The Company may be unable to obtain such additional financing on acceptable terms or at all, particularly if the cease trade order remains in place.

Risks Related To Our Business

Certain of the following risks relate to the SFC Business as it was historically operated by SFC. While these risks are material to the SFC Business as at the date hereof, the SFC Business will be conducted by Newco under a new governance structure and with new management, and, as a result, some of these risk factors may not be material to the SFC Business following the Plan Implementation Date. SFC has no knowledge of the manner in which Newco intends to operate the SFC Business following the Plan Implementation Date and therefore has no knowledge of any additional risks that may arise therefrom. If any of the following risks actually occur, the business, results of operations and financial condition of Newco or the Subsidiaries could be harmed. You should carefully consider information about these risks and uncertainties, together with all of the other information contained within this document.

The Company's historical financial statements may not be reliable

On November 15, 2011, the Company announced that it was deferring the release of its interim financial statements for the three and nine months ended September 30, 2011, because certain issues identified during the review of its Independent Committee (as described in the Reports of the Independent Committee), which was formed to examine the allegations contained in the MW Report, could not be resolved to the satisfaction of its Board of Directors. On January 10, 2012, the Company issued a press release cautioning that its historical financial statements and related audit reports could not be relied upon. On April 4, 2012, the Company's auditor resigned and a successor auditor has not been appointed. On May 22, 2012, Staff of the OSC commenced proceedings before the OSC against the Company and six of its former officers. OSC staff allege that the Company breached Ontario securities laws and acted in a manner that is contrary to the public interest by providing information to the public in documents required to be filed or furnished under Ontario securities laws which was false or misleading in a material respect contrary to Section 122 of the Securities Act and by engaging or participating in acts, practices or a course of conduct related to its securities which it knows or reasonably ought to know perpetuate a fraud on any person or Company contrary to Section 126.1 of the Securities Act. Given the issues identified by the Independent Committee which have not been resolved to the satisfaction of the Board of Directors and given the serious allegations made by the OSC, no assurance can be given that the Company's historical financial statement do not contain a misrepresentation or that any other financial information concerning the Company is accurate. See also “ CCAA Proceedings and Other Matters—Effects of MW Report, OSC Allegations and Related Events—Effects on Operations (including Accounts Receivable) ” for a discussion relating to issues surrounding the Company's accounts receivables.

 

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Sino-Forest may be liable for income and other taxes on its business and operations, particularly its BVI Subsidiaries, in amounts materially greater than the amounts that it has estimated and for which it has provisioned

Sino-Forest has operations in various countries (mainly in the PRC, Canada and Hong Kong) that have different tax laws and rates and that are subject to audit by all relevant tax authorities. The effective tax rate may change from year to year based on the mix of income among the different tax jurisdictions, changes in tax laws and administrative practice in these jurisdictions, and changes in tax treaties between various tax jurisdictions in which Sino-Forest operates. It is possible that profits already taxed by one tax jurisdiction could be taxed by another tax jurisdiction or multiple jurisdictions.

In particular, Sino-Forest's principal operating subsidiaries incorporated in the BVI are engaged in the sale of standing timber and logs and in earning income (“ Authorized Sales Activities ”) in the PRC through AIs that are domestic enterprises of the PRC. In accordance with the current PRC laws and regulations relating to PRC enterprise income tax, foreign companies such as the BVI Subsidiaries, deriving income from sources in the PRC, are more-likely-than-not subject to enterprise income tax on a deemed profit basis based on a deemed profit rate and are more-likely-than-not expected to be taxed on this basis for the current year end plus three prior years instead of current year plus five prior years.

Under the terms of our long-term master agreements, relevant sales and purchase contracts and commission agreements (“ AI Agreements ”) made with the AIs, the AIs are responsible for withholding and remitting relevant PRC taxes that arise from the Authorized Sales Activities for the BVI Subsidiaries. Sino-Forest is not, however, in a position to know whether or not the AIs have in fact remitted applicable taxes on behalf of Sino-Forest. It is a question of fact whether the PRC tax authorities may be successful in establishing that the BVI Subsidiaries are directly subject to enterprise income tax because of the Authorized Sales Activities. Should the PRC tax authorities recover income tax, business tax and value-added tax directly from the BVI Subsidiaries, they might do so together with related tax surcharges and tax penalties on applicable income or profits of the Authorized Sales Activities for up to a period from four to six years in practice (including the current year). Under prevailing PRC tax rules, the tax surcharge is calculated at 0.05% per day on the tax amount overdue while the tax penalties can range from 50% to 500% of taxes underpaid. Under the Hong Kong tax regulations, assessments are open for up to six years in practice and tax penalties can be up to triple the amount of the tax underpaid.

The PRC tax authorities issued Information Statement 19 in February 2010 stating that the deemed profit percentage for certain activities should be a minimum of 15%. The activities subject to this minimum percentage appear to include sales of plantation fibre.

Management is unable to determine with any certainty the appropriate amount of tax related liabilities, and contingencies for such liabilities, to be recognized and disclosed in the Company's financial statements. Sino-Forest may be liable for taxes and penalties in amounts materially greater than SFC had estimated and for which it had provisioned in SFC's annual financial statements for the year ended December 31, 2010.

Sino-Forest has lost many of its key personnel, which has and may continue to adversely affect its business, financial condition and operations

Sino-Forest was heavily dependent upon its senior management and their expertise in the forestry industry, R&D, forest plantation management practices and wood-based products manufacturing production processes, and their relationships cultivated with various PRC governmental agencies and authorities and Sino-Forest's major customers, suppliers and other business partners and stakeholders. As described above, each of the Individual Respondents, each of whom was a member of senior management of Sino-Forest, is no longer employed by the Company. In some cases, their responsibilities have been assumed by other Sino-Forest personnel but in other cases their responsibilities have not been assumed and are not currently being performed by any Sino-Forest personnel. The departure of these key members of senior management has adversely affected Sino-Forest's business, financial condition and operations and may continue to do so in the future.

 

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Failure to continue with certain initiatives could harm relations within the PRC and could have significant adverse affects on Sino-Forest

While the Company has historically generated most of its revenue and profits from the sale of standing timber and logs, the Company has invested throughout the PRC in manufacturing plants and offices that create jobs within the PRC. It has also conducted research and development (“R&D”) intended to improve yields of planted plantations and help the PRC address its wood fibre deficit issues. The manufacturing plants, offices and R&D initiatives are not currently profitable but the Company believes they are important in establishing and maintaining good relations with local governments and communities in the PRC in which the Company conducts business. Failure to maintain good relations with all levels of the PRC government and local PRC communities could have significant adverse affects on the Company's ability to do business in the PRC, including its ability to acquire plantations and obtain plantation rights certificates as well as permits to harvest and transport logs.

The cyclical nature of the forest products industry and price fluctuations could adversely affect our results of operations

Sino-Forest's results of operations are, and will continue to be, affected by the cyclical nature of the forest products industry. Market prices and demand for standing timber, wood logs and wood products have been, and in the future are expected to be, subject to cyclical fluctuations, which have a significant effect on the SFC Business, results of operations and financial condition. PRC product pricing in forestry markets is affected by the prices of the ultimate wood products produced from logs, including furniture, construction materials, interior decoration materials and pulp and paper products. The prices of wood products are also affected by the availability of wood substitutes. The markets for wood products are sensitive to changes in industry capacity and output levels, general timber industry conditions and cyclical changes in the world and PRC economies, any of which can have a significant impact on market prices of wood products. The demand for wood products is also substantially affected by the level of new construction activity, which is subject to fluctuations that may or may not correspond to overall economic trends. Decreases in the level of construction activity generally reduce demand for wood products. The demand for wood products is also affected by the level of interior decoration activity. These activities are, in turn, subject to fluctuations due to, among other factors:

 

  • changes in domestic and international economic conditions;

 

  • changes in market prices of commodities;

 

  • government regulations and policies;

 

  • interest rates;

 

  • population growth and mobility and changing demographics; and

 

  • seasonal weather cycles (such as dry or hot summers, wet or cold winters, flooding and other factors affecting tree growth).

Cyclical changes in the forest products industry, including changes in demand and pricing for our products and the other factors described above, could have a material adverse effect on our business, financial condition and results of operations.

Expanding Sino-Forest's tree plantations and manufacturing operations requires substantial future capital expenditures and Sino-Forest may be unable to obtain adequate financing to fund capital and other requirements

Expanding Sino-Forest's tree plantations and manufacturing operations requires intensive capital investment. In recent years, Sino-Forest has expanded manufacturing operations through investments in an engineered-wood flooring plant in Jiangsu, a block board facility in Hunan, a wood and composite flooring facility in Guangxi, plywood facilities in Guangxi, engineered veneer facilities in Jiangsu and Guangdong, block board and finger-joint board facilities in Hunan and sawn timber facilities in Yunnan. We have financed our expansion of tree plantations

 

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and manufacturing operations primarily from internal cash flows and debt and equity financing. If Sino-Forest requires additional debt or equity financing for future capital expenditures, Sino-Forest has no assurance that such financing will be available in the future on attractive terms or at all. If Sino-Forest is not able to obtain financing for expanding its tree plantations and/or manufacturing operations and/or other capital requirements, Sino-Forest's business, financial condition and results of operations may be materially and adversely affected.

Sino-Forest's decisions and ability to develop and operate future tree plantations are subject to various factors and uncertainties, and there is no assurance that Sino-Forest will continuously develop and operate the amount of tree plantations where it has certain contractual rights

Sino-Forest's ability to further expand and develop its tree plantations and successfully implement its tree plantation models depends on, among other things, its ability to purchase trees with respect to which it has certain contractual rights and to lease the underlying plantation land on which it owns trees or to find other suitable plantation land. Under the purchase agreements for most of Sino-Forest's purchased plantations, it has a pre-emptive right to lease the underlying plantation land for a maximum period of up to 30 to 50 years, subject to negotiation of the definitive land use right transfer agreement, obtaining the requisite governmental approval and completing the requisite registration procedures. Sino-Forest's decision and ability to purchase the trees and exercise its contractual rights with respect to its tree plantations will depend on, among other factors, its business strategy and the availability of future financing, its ability to negotiate a suitable final price, whether the area is desirable for tree plantations, and the availability of tree plantations for expansion.

Should Sino-Forest be unable to purchase the trees, exercise its right to acquire the underlying plantation land use rights or obtain the requisite governmental approval and registration procedures, or should Sino-Forest be unable to locate available and suitable plantation land for expansion, Sino-Forest's business, financial condition and results of operations could be materially and adversely affected.

Sino-Forest may be unable to continue acquiring standing timber under the long term acquisition agreements

Sino-Forest may be unable to continue acquiring standing timber under long-term acquisition agreements due to factors such as: (i) risks of disagreement with counterparties and/or original plantation rights holders regarding entering into specific agreements for the implementation of our plantation acquisition plan, (ii) the failure of any such counterparty to obtain any requisite consents from the original plantation rights holders, (iii) risks of the counterparties failing to coordinate with Sino-Forest to obtain the requisite governmental approvals and complete the related registration procedures, and (iv) lack of available capital.

Sino-Forest's expansion into new regions may pose certain implementation risks

Sino-Forest is exposed to certain risks related to its ability to successfully expand its plantation operations into new regions such as Suriname and New Zealand and new provinces such as Anhui and Guizhou Provinces, primarily because Sino-Forest has no operating history in such regions or provinces, and also because Sino-Forest does not have extensive experience interacting with local governments, business counterparties and original plantation rights holders in these regions or provinces. With respect to Greenheart Group's operations in Suriname, forest concessions in Suriname do not convey exclusive rights to the land and it is therefore possible to have geographically overlapping rights to different resources with a resulting potential for future land use conflict. In addition, Greenheart Group's concession rights may be adversely affected by changes in policies of the Suriname government.

Sino-Forest's plantations are susceptible to weather conditions, changes in climate, timber growth cycles and natural disasters outside of our control

Sino-Forest's business, financial condition and results of operations depend to a significant extent on its ability to harvest trees or engage in trading activities at adequate levels. The following factors, which are outside of our control, may affect the prices of logs and wood-based products, and our ability to harvest the trees on our tree plantations or engage in our trading activities:

 

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  • unfavourable local and global weather conditions, such as prolonged drought, flooding, hailstorms, windstorms, typhoons, frost and winter freezing; and

 

  • the occurrence of natural disasters, such as damage by fire, insect infestation, crop pests, and earthquakes.

In recent years, certain areas of the PRC have been adversely affected by severe earthquakes, flooding, droughts and landslides. For example, the heavy rainfall in the second quarter of 2010 caused severe flooding in many provinces across China, which affected the ability of certain of Sino-Forest's customers to harvest plantation trees that Sino-Forest sold to them. In addition, the southern coastal areas of the PRC suffer a number of typhoons each season, which occasionally results in significant damage. Further, there have been several incidences of forest fires in Guangdong Province. Similar conditions may recur in the future.

Sino-Forest also holds a majority interest in Greenheart Group, which owns certain rights and manages hardwood forest concessions in Suriname. Suriname is located south of the hurricane belt which affects the southern part of the United States and the Caribbean. While the risks of major catastrophic damage are therefore lower than in some other tropical areas, losses due to storms may still occur. In addition, although the risk of damage caused by fire exists, it is somewhat mitigated by the high levels of rainfall in Suriname. Our operations are also subject to long term periodic climate events, such as weather patterns affected by the El Niño and La Niña weather pattern, and could be adversely affected by other climate changes. The occurrence of these or other natural disasters may disrupt or reduce the supply of trees available for harvesting in the areas of the PRC, Suriname or New Zealand where our tree plantations or certain rights of hardwood forest concessions are located, or otherwise disrupt our trading activities, which may adversely affect our business, financial condition and results of operations.

Sino-Forest may not be able to meet its expectations for the yields of our tree plantations

The success of Sino-Forest's business depends on the productivity of its tree plantations and its ability to realize yields at attractive levels. Tree plantation yields depend on a number of factors, many of which may be beyond Sino-Forest's control. These include climate and soil conditions, as well as damage due to disease, pests and other natural problems and threats. Sino-Forest's ability to maintain its yields will depend on these factors, and environmental conditions at additional tree plantations that Sino-Forest may acquire or manage in the future.

Sino-Forest's ability to improve or maintain its yields depends on the factors described above as well as its ability to develop genetic improvements in planting materials, to grow improved species of eucalyptus trees, and to implement improved silvicultural practices. As a result, Sino-Forest cannot provide any assurance that it will be able to realize the historical or future yields we expect. If Sino-Forest cannot achieve yields at expected levels, its business, financial condition and results of operations would be materially and adversely affected.

Sino-Forest may not be able to effectively manage its tree plantations if we do not hire additional employees and improve our management systems and internal controls

As of the date of this Information Statement, Sino-Forest had approximately 3,203 permanent employees and an additional approximately 436 employees from the Greenheart Group based primarily in Hong Kong, PRC and Suriname to manage its operations. Sino-Forest also engages third parties to perform the day-to-day operations of its tree plantations. If Sino-Forest expands its portfolio of our tree plantations, it will have to hire additional staff and management employees, strengthen its management processes, and develop a plantation resources information system in order to effectively manage its tree plantations. There is no assurance that Sino-Forest will be able to do this in a timely manner, or at all. Sino-Forest also believes that it is necessary to improve its internal controls and corporate governance. Should Sino-Forest fail to take these measures, it may not be able to implement its strategy, and its business, financial condition and results of operations could be materially and adversely affected.

 

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The forest products industry is highly competitive

Sino-Forest's industry is highly competitive in terms of raw material sourcing and product pricing and quality. Wood products are subject to increasing competition from a variety of substitute products, including non-wood and engineered-wood products. Lumber and log suppliers in the PRC experience competition from worldwide suppliers. With respect to Sino-Forest's tree plantations and standing timber and wood-based products trading activities, Sino-Forest is subject to increasing competition from other large domestic and foreign owned tree plantation operators in the PRC, as well as from wood dealers and local forestry companies that sell logs and wood-based products in the PRC. Sino-Forest also competes indirectly with many foreign forestry companies which import logs and wood-based products into the PRC.

Sino-Forest's manufacturing plants face competition from other large domestic and foreign owned wood panel manufacturers in the PRC, as well as from manufacturers in other countries importing into the PRC. In this regard, other manufacturers of wood panels are currently constructing new mills in the PRC that will substantially increase the production capacity of wood panels. Sino-Forest may not be able to compete effectively against these and other potential competitors. If Sino-Forest is not able to compete effectively in its various business lines, or if competition significantly increases, Sino-Forest's business, results of operations and financial results could be materially and adversely affected.

Sino-Forest relies on its relationships with local plantation landowners and/or plantation land use rights holders

Sino-Forest's transition from using the CJV legal structure for its planted plantations to the WFOE legal structure was completed in the fourth quarter of 2007 and after the conversion, one of the converted WFOEs merged with another WFOE and was deregistered. Negotiations with local farmers, collective organizations or other land use rights holders for entering into new plantation land use agreements are in progress for the remaining WFOEs. There can be no assurance that through the WFOEs Sino-Forest will be able to secure all the plantation land use rights that it would expect to secure, or secure such rights on satisfactory terms, from the farmers, collective organizations or other land use rights holders, or that it will be able to enter into any plantation land use agreements with relevant farmers, collective organizations or other land use rights holders to maintain the use of the tree plantations originally operated by its former CJVs or to obtain additional tree plantations.

In addition, Sino-Forest relies on our relationships with local plantation landowners and/or plantation land use rights holders to enter into any plantation land use agreements on commercially acceptable terms for our purchased plantations. Sino-Forest cannot give any assurance that we will be able to enter into any such agreements on commercially acceptable terms.

Sino-Forest's deteriorating relationships with its suppliers, as further described below, further impedes the Company's ability to communicate and have a relationship with land owners.

Certain of Sino-Forest's major customers have been deregistered under PRC laws and the loss of business from these customers or any additional major customers could materially adversely reduce Sino-Forest's sales and harm its business and prospects

A few large customers account for a significant percentage of Sino-Forest's total revenue. These major customers are all wood dealers and AIs, who sell logs and wood-based products to end-user customers of these products. Dependence on a limited number of customers exposes Sino-Forest to the risk that a reduction of business volume from any one customer could have a material adverse effect on our business, financial condition and results of operations. As described above, SFC has learned that certain of these entities with receivables owing to the SFC's Subsidiaries have recently deregistered under PRC law. The Company has been advised that deregistration has the effect of terminating the existence of the entity. The accounts receivable owing by these deregistered entities is significant. If Sino-Forest is unable to collect these accounts receivable the SFC Business will be materially affected. The loss of these customers on a going forward basis could materially adversely reduce Sino-Forest's sales and harm its business and prospects.

Disruptions in Sino-Forest's supply of raw timber could adversely affect the its business

A few large suppliers account for a significant percentage of Sino-Forest's timber supply. These major suppliers are all plantation suppliers or agents. Dependence on a limited number of suppliers exposes us to the risk that any significant interruption in the supply of raw timber could have a material adverse effect on our business, financial condition and results of operations.

 

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Sino-Forest depends on services provided by third party service providers

Sino-Forest relies to a significant extent on third party service providers for day-to-day operation of its tree plantations. The operations performed by third party service providers include: site preparation, planting, plantation management, fertilization and harvesting. Sino-Forest occasionally experiences seasonal labour shortages in May and September as farmers become fully engaged in the planting and harvesting of food crops. If Sino-Forest is unable to obtain services from these and other third party service providers, at economical rates or at all, or if any of the services they provide are inadequately performed, its business, financial condition and results of operations would be materially adversely affected.

Many of our manufacturing plants are in an early stage of development and have a short operating history; some plants may not be profitable or successful

Sino-Forest's manufacturing plants are subject to the risks inherent in establishing a new business, including competitive pressures. Sino-Forest's ability to operate and expand its manufacturing plants successfully depends upon our ability to, among other things:

 

  • produce and develop high-quality, wood-based products that are needed by customers;

 

  • recruit and retain technical and management personnel with requisite expertise and experience in the wood-based products manufacturing industry; and

 

  • raise working capital and fund capital expenditures for the expansion of the manufacturing plants.

Sino-Forest can give no assurance that these facilities will operate at their planned operating capacity.

Sino-Forest's ability to invest in and operate state-owned plantation entities in the PRC is subject to various factors and uncertainties, and no assurance can be given that Sino-Forest will actually do so at all or successfully or without significant delays

In June 2010, the State Forestry Administration announced plan to reform state-owned forest farms, as part of China's 12th Five Year Plan, by sponsoring studies and identifying five provinces for pilot reform. The objectives of the state-owned plantation farms (“ SOP ”) reform were to develop the economic value of these farms by introducing modern plantation management know-how and practices while improving the country's ecosystems.

Sino-Forest has been exploring opportunities to expand its forestry operations in the PRC. Sino-Forest hopes to form Co-op entities with SOPs, however, as the pilot reform has been extended with no concrete timetable, at this current time, no agreements nor structure in respect to the Co-op entities have been put in place. Sino-Forest's ability to successfully develop and operate these forestry investments in cooperation with SOPs depends on various factors and uncertainties, including the time required for the PRC government to formalize a forestry commercialization policy, Sino-Forest's limited operating history with SOPs, implementing a capital and ownership structure for the investments with the SOPs that permits Sino-Forest to exercise the requisite level of control and oversight, availability of additional debt or equity funding as necessary on acceptable terms to make these investments, and receipt of requisite government approvals. Sino-Forest has not previously entered into such arrangements with SOPs, and there can be no assurance that it will actually develop and operate such entities successfully or at all or without significant delays. In addition, the reputational and other damage arising following the public announcement of the allegations contained in the MW Report could adversely affect Sino-Forest's ability to participate in forestry investments with SOPs.

 

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Sino-Forest's insurance coverage may be in insufficient to cover unexpected losses

Consistent with PRC forestry industry practice, Sino-Forest has a policy of obtaining external insurance coverage for key insurable risks relating to our tree plantations and the operation of our manufacturing facilities. As a general matter, most of Sino-Forest's insurance policies include a coverage limit that applies either per claim, or, per claim and per year, in particular for the purchased plantations.

Sino-Forest insures its planted and purchased plantations in many locations in the PRC against certain accident and disaster related losses such as fires, lightning, explosion, flooding and windstorm. Sino-Forest does not, however, insure its plantations against losses from all natural and other disasters, such as tsunami and disease, and does not carry business interruption insurance. As a result, Sino-Forest's insurance coverage may be insufficient to cover losses that we may incur at our tree plantations. If Sino-Forest were to suffer an uninsured loss or a loss in excess of its insurance coverage to the tree plantations, its business, financial condition and results of operations could be materially and adversely affected. Sino-Forest also maintains property all risk and public liability insurance policies for its manufacturing facilities. Sino-Forest maintains a level of fire insurance in amounts that it considers to be appropriate for such risks. Such insurance is subject to deductibles that Sino-Forest considers reasonable and not excessive given the current insurance market environment. The occurrence of a loss at Sino-Forest's manufacturing facilities that Sino-Forest is not fully insured or indemnified against, or the failure of a party to meet its indemnification obligations, could materially and adversely affect Sino-Forest's business, financial condition and results of operations.

Sino-Forest's manufacturing plants are subject to operational risks for which it may not be adequately insured

The operation of manufacturing plants involves many risks and hazards, including the breakdown, failure or substandard performance of equipment, the improper installation or operation of equipment, labour disturbances, natural disasters, environmental hazards, and industrial accidents. In addition, the costs of repairing or replacing its production equipment and the associated downtime of the affected production line may not be totally reimbursed, or the level of insurance may not be adequate. The occurrence of material operational problems could have a material adverse effect on its business, financial condition and results of operations.

Increases in the export tax on logs in Russia may have an impact on Sino-Forest's business of importing logs

The Russian government significantly increased its export tariffs on logs from 6.5% to 25% (or a minimum of €15 per cubic metre for softwood logs) in April 2008. Originally, Russia intended to increase log export tariffs to 80% (or a minimum of €50 per cubic metre). In December 2011, Russia was accepted into the World Trade Organisation (“ WTO ”) and one of the requirements for the entry into the organization was that the country would have to reduce its export tariffs on forest products for certain log species from 25% to 15%. However, a formal proposal for the amendment for the Russian log export tariff system has not been announced and there is no assurance that Russia will lower the log export tariff.

Sino-Forest's tree plantations and wood-based products trading activities are subject to numerous laws and regulations in the PRC and other jurisdictions in which we operate

Sino-Forest's operations are subject to a variety of PRC national and local laws and regulations, including, among others, the PRC Forestry Law and its Implementation Regulations, the Forest Tree and Forestry Land Ownership and Use Rights Registration Administrative Measures, the Environmental Protection Law of the PRC and various rules and regulations enforced by local governmental authorities. Sino-Forest is also subject to such other laws and regulations as may be applicable to it in other jurisdictions in which it operates, including Suriname and New Zealand. Violations of any of these laws and regulations, including environmental policies and programs that apply to Sino-Forest's tree plantations, could result in civil and criminal penalties, including the revocation of licenses required for its business. We engage in the following activities that are subject to regulation:

 

  • tree plantation activities, including planting, plantation use and maintenance, logging and transportation of logs;

 

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  • map usage and forest inventory surveying;

 

  • marketing, sales and trading of standing timber, logs and wood-based products; and

 

  • timber processing and manufacturing and sale of wood panels.

For further details on these regulations and risks relating to them with respect to the PRC specifically, see “Risks Related to the PRC.”

The Pöyry Reports for Sino-Forest are subject to significant assumptions and limitations and actual values realized by us may differ materially

We engaged Pöyry Forest Industry Pte. Ltd. (“ Pöyry ”) to prepare reports that regarding the value of our plantation forest crop assets as at December 31, 2006, 2007, 2008, 2009 and 2010 (the “Pöyry Reports”). The Pöyry Reports contain a discussion of the principal assumptions, limitations and other considerations utilized in their preparation, which prospective investors should review carefully, including, without limitation that:

 

  • Pöyry assumes that the forests visited by them in field inspection represent the full range of conditions that exist for the species seen,

 

  • for species not assessed as part of the valuation, Pöyry has applied yield estimates that it has previously derived and,

 

  • Pöyry made assumptions with respect to future costs and market prices.

As a result of the foregoing and other limitations to the Pöyry Reports, actual conditions of our forestry plantations may be substantially different than those set forth in the Pöyry Reports, and, as a result, investors should not place undue reliance on the reports. Accordingly, the valuations set forth in the Pöyry Reports are not necessarily indicative of the actual values that can be realized by Sino-Forest. If actual values realized by us are less favourable than those shown in the Pöyry Reports, or the assumptions used in deriving the valuation included in the Pöyry Reports prove to be incorrect, our business, financial condition or results of operation could be adversely affected.

Based on an internal risk assessment conducted through Pöyry's management consulting business group in 2010, Pöyry has changed its disclosure policy such that clients, including Sino-Forest, are no longer allowed to make its detailed valuation reports publicly available.

SFC's subsidiaries are subject to restrictions on the payment of dividends and the repayment of intercompany loans or advances to SFC and its subsidiaries

As a holding company, SFC currently depends upon the repayment of intercompany loans and interest or advances from its subsidiaries and affiliates to satisfy its obligations. The ability of SFC's direct and indirect subsidiaries to pay dividends and repay intercompany loans or advances to their shareholders (including SFC) is subject to, among other things, distributable earnings, cash flow conditions, restrictions contained in the articles of association of SFC subsidiaries, applicable laws, foreign exchange restrictions and restrictions contained in debt instruments of such subsidiaries. Covenants in the debt instruments of certain of SFC's direct and indirect subsidiaries limit their ability to pay dividends. In addition, if any of SFC subsidiaries raises capital by issuing equity securities to third parties, dividends declared and paid with respect to such shares would not be available to SFC to make payments on the debt obligations. These restrictions could reduce the amounts that SFC receives from its subsidiaries, which could restrict its ability to meet our payment under the debt obligations. SFC's ability to utilize cash resources from its subsidiaries to finance the needs of other subsidiaries, to a significant extent, is subject to the same restrictions. These same restrictions may also affect Newco following the Plan Implementation Date.

 

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According to relevant PRC laws and regulations, including the tax and foreign exchange regulations, the BVI subsidiaries´ ability to remit foreign currency outside the PRC is limited. As a result, in order to provide accessible cash to cover any of Sino-Forest's holding companies´ obligations, including debt obligations, Sino-Forest currently does not rely upon the repatriation of earnings of the BVI subsidiaries. Sino-Forest has expanded its investments in the PRC through WFOEs. As the plantations held by Sino-Forest WFOEs are sold, income generated and associated cash flow is expected to be available for repatriation from the PRC, subject to relevant procedures for approval from State Administration of Foreign Exchange (“ SAFE ”) and other relevant requirements being satisfied.

In addition, for Sino-Forest's PRC subsidiaries, PRC regulations permit payment of dividends only out of accumulated profits as determined in accordance with PRC accounting standards and regulations including tax and foreign exchange regulations. Sino-Forest's WFOEs are also required to set aside a portion of their after-tax profits according to PRC accounting standards and regulations to fund certain reserve funds that are not distributable as cash dividends. Furthermore, under prevailing PRC income tax laws, there is a 10% withholding tax imposed on dividend payments made by our WFOEs to a foreign-invested holding company. If the foreign investor is a Hong Kong resident who holds more than 25% equity interest in the PRC subsidiaries and is the beneficial owner of the dividend, such withholding tax rate, after obtaining approval from the competent tax authorities, may be lowered to 5% pursuant to the tax arrangement between Hong Kong and the PRC.

Under their articles of association adopted by each WFOE in accordance with PRC regulations, WFOEs are only allowed to declare dividends once a year at the end of each financial year although such dividends may be distributed multiple times each year. As a result of such limitations, there could be timing limitations on payments from Sino-Forest's WFOEs to meet its payment obligations under the debt obligations and there could be restrictions on payments required to pay off the debt obligations at maturity or upon conversion or for repurchase or redemption.

Furthermore, in practice, the market interest rate that Sino-Forest's WFOEs can pay with respect to offshore loans generally may not exceed comparable interest rates in the international finance markets. Sino-Forest's WFOEs are also required to pay a 10% (which may be lowered to 7% after obtaining approval from the competent tax authorities, if the interest is paid to a Hong Kong resident and if it is the beneficial owner of the interest) withholding tax as well as a 5% business tax on Sino-Forest's behalf on the interest paid under any shareholders' loans. Prior to payment of interest and principal on such shareholder loan, the WFOEs must present evidence of payment of the required withholding tax on the interest payable under any such shareholder loan and evidence of registration with SAFE, as well as any other documents that SAFE or its local branch may require.

As a result of the foregoing, there can be no assurance that Sino-Forest will have sufficient cash flow from dividends or payments on intercompany loans or advances from our WFOEs to satisfy its debt obligations.

Sino-Forest is subject to risks associated with fluctuations in foreign currency exchange rates.

Since 1994, the conversion of Renminbi into U.S. dollars has been based on rates set by the People's Bank of China (“ PBOC ”), which are set daily based on the previous day's PRC interbank foreign exchange market rate and current exchange rates on the world's financial markets. The relative value and rate of exchange of the Renminbi against the U.S. dollar is affected by, among other things, changes in the PRC's political and economic conditions. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed range against a basket of certain foreign currencies. On May 18, 2007, the PBOC enlarged the floating range for the trading prices in the inter-bank foreign exchange market of the Renminbi against the U.S. dollar from 0.3% to 0.5% above or below the central parity rate, effective on May 21, 2007. This allows the Renminbi to fluctuate against the U.S. dollar by up to 0.5% above or below the central parity rate published by the PBOC. On June 19, 2010, the PBOC announced its intention to proceed with the reform of the Renminbi exchange rate regime and increase the Chinese currency's exchange rate flexibility, which has resulted in an appreciation of the Renminbi against the U.S. dollar. The PRC government may decide to further liberalize its currency policy in the future, which could result in a further and more significant appreciation or depreciation of the Renminbi against the U.S. dollar. Any significant fluctuation in the exchange rates between the Renminbi and other currencies, such as the U.S. dollar, Canadian dollar, New Zealand dollar, Euro and H.K. dollar, or in the U.S. dollar against the Renminbi, Canadian dollar, New Zealand dollar, Euro or H.K. dollar, may have an adverse impact on Sino-Forest's results of operations and its ability to satisfy any debt obligations denominated in a currency other than Renminbi.

 

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Risks Related to the PRC

PRC economic, political and social conditions as well as government policies could adversely affect Sino-Forest’s business

Sino-Forest’s tree plantations are primarily located in the PRC. The PRC economy differs from the economies of most developed countries in many respects, including structure, government involvement, level of development, economic growth rate, government control of foreign exchange, allocation of resources and balance of payment position.

The PRC economy has been transitioning from a planned economy to a more market oriented economy. For the past two decades the PRC government has implemented economic reform measures emphasizing utilization of market forces in the development of the PRC economy. Some of these measures will benefit the overall PRC economy, but may have a negative effect on us.

Sino-Forest’s business, financial condition and results of operations may be adversely affected by:

 

  • changes in PRC political, economic and social conditions;

 

  • changes in policies of the PRC government, including changes in policies affecting the forestry industry and downstream industries;

 

  • changes in laws and regulations or the interpretation of laws and regulations;

 

  • measures which may be introduced to control inflation or deflation;

 

  • changes in the rate or method of taxation;

 

  • changes in interpretation of tax laws and regulations by provincial or regional tax authorities in the PRC;

 

  • imposition of additional restrictions on currency conversion and remittances abroad; and

 

  • reduction in tariff protection and other import restrictions.

In addition, the level of demand in the PRC for forestry products depends heavily on economic growth. Growth in the PRC has been uneven both geographically and among various sectors of the economy. From time to time, the central government of the PRC has taken corrective measures and actions to stabilize the country’s economy and any possible social unrest, and has implemented various measures in strengthening and improving macroeconomic regulation. However, there is no assurance that it will do so in the future.

Sino-Forest’s operations are subject to the uncertainty of the PRC legal system

The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since 1979, the PRC government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, as these laws and regulations are relatively new, interpretation of many laws, regulations and rules has not always been uniform, and enforcement of these laws and regulations involve significant uncertainties, which may limit or otherwise adversely affect legal protections available to Sino-Forest. Moreover, the PRC legal system is based partly on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, Sino-Forest may not be aware of any violation of these policies or rules until sometime after such violation. In addition, litigation in the PRC may be protracted and may result in substantial costs and diversion of resources and management attention. Sino-Forest cannot predict the effect of future developments in the PRC legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the pre-emption of local regulations by national laws.

 

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Furthermore, the administration of PRC laws and regulations may be subject to a certain degree of discretion by the executive authorities. This may result in the outcome of dispute resolutions not being as consistent or predictable as compared with more developed jurisdictions. In addition, it may be difficult to obtain a swift and equitable enforcement of laws in the PRC, or the enforcement of judgments by a court of another jurisdiction.

At present, the legal framework for the tree plantation industry in the PRC is at an early stage of development. For example, the laws and regulations relating to the ownership, licensing and rights over forestry areas are not well developed. As these laws and regulations may not be comprehensive, and due to the limited volume of published cases and judicial interpretations and the non-binding nature of prior court decisions, the interpretation and enforcement of these laws, regulations and legal requirements involve a certain extent of uncertainty. Such uncertainty may make it difficult for us to enforce our plantation land use rights and other rights. As the PRC legal system develops together with the PRC forestry industry, we cannot be certain that changes in such laws and regulations, or in their interpretation or enforcement, will not have a material adverse effect on our business, financial condition and results of operations.

In recent years, the reform of the collectively owned plantation rights system has been ongoing in the PRC in order to enhance the rural land contract relationship and ensure that farmers have proper legal plantation rights. Farmers and rural collective organizations are currently permitted to transfer their plantation rights to third parties pursuant to existing PRC laws and regulations by means of bidding, public auction or competitive negotiation, as recognized by certain local practices. We cannot assure that the PRC government may or may not promulgate new rules and regulations that may be more detailed and complex than existing ones for regulating the transfer of plantation rights. Such rules may restrict or delay the acquisition of any new plantation rights from original plantation rights holders. Moreover, Sino-Forest cannot assure that the enforcement of such rules and regulations will not have a material adverse effect on our business, financial condition and results of operations. The RMB has a fixed conversion rate into United States dollars.

Restrictions on foreign currency exchange may limit our ability to obtain foreign currency or to utilize our revenue effectively

Sino-Forest receives most of its revenues in RMB. As a result, any restrictions on currency exchange may limit its ability to use revenue generated in RMB to:

 

  • purchase timber imported from other countries;

 

  • fund other business activities outside the PRC, such as the purchase of equipment for our manufacturing plants;

 

  • service and repay its indebtedness; and

 

  • pay out dividends to its shareholders.

Sino-Forest's WFOEs in the PRC do not require prior approval from SAFE before undertaking current account foreign exchange transactions. Current account transactions refer to those international revenue and expenditure dealings that occur on a current basis, including revenues and expenditures in trade and labour services, and the declaration of and payment of dividends out of after tax retained earnings. Foreign exchange for current account transactions may be obtained by producing commercial documents evidencing such transactions, provided that the transactions must be processed through banks in the PRC licensed to engage in foreign exchange.

Foreign exchange transactions under the capital account, however, will be subject to the registration requirements and approval of SAFE. Capital account transactions refer to international revenues and expenditures, that, being inflows and outflows of capital, produce increases or reductions in debt and equity, including direct investment, various types of borrowings and investment in securities. In addition, for either current or capital account transactions, Sino-Forest's WFOEs must purchase foreign currency from one of the PRC banks licensed to conduct foreign exchange.

 

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Sino-Forest cannot assure that sufficient amounts of foreign currency will always be available to enable Sino-Forest to meet its foreign currency obligations, whether to service or repay indebtedness not denominated in Renminbi, or to remit profits out of the PRC. In addition, Sino-Forest's subsidiaries incorporated in the PRC may not be able to obtain sufficient foreign currency to pay dividends, repay intercompany loans or to satisfy their other foreign currency requirements. Sino-Forest's capital is subject to PRC foreign currency exchange controls which may limit the ability to repatriate funds. Since foreign exchange transactions under the capital account are still subject to limitations and require approval from SAFE, this could affect Sino-Forest's subsidiaries' ability to obtain foreign currency through debt or equity financing, including by means of loans or capital contributions from us. Sino-Forest also cannot provide assurance that the PRC government will not impose further restrictions on the convertibility of the Renminbi.

Sino-Forest's BVI Subsidiaries' retained earnings and equity are subject to PRC foreign currency exchange controls, which may limit their ability to repatriate funds. Should Sino-Forest decide to repatriate earnings of the BVI Subsidiaries out of the PRC, there may be a significant amount of cash tax payable. Since foreign exchange transactions are subject to limitations and require approval from SAFE, this affects the BVI Subsidiaries´ ability to obtain foreign exchange from PRC operations which could be used to satisfy Sino-Forest's obligations. In addition, there is no assurance that the PRC government will not impose further restrictions on the convertibility of the Renminbi.

Certain PRC regulations governing PRC companies are less developed than those applicable to companies incorporated in more developed countries

Sino-Forest's WFOEs are subject to PRC laws and regulations applicable to foreign investment companies, and other applicable laws and regulations in the PRC. These laws and regulations may not afford investors the same legal protections available to them in the United States, Canada or elsewhere, and may be less developed than those applicable to companies incorporated in the United States, Canada and other developed countries or regions.

Implementation and Issuance of New Form of Plantation Rights Certificates

Since 2000, the PRC has been improving its system of registering plantation land ownership, plantation land use rights and plantation ownership and use rights and of issuing certificates to the persons having such plantation rights (the “Plantation Rights Certificates”). In April 2000, the PRC State Forestry Administration issued a notice, which provided that a new form of Plantation Rights Certificate was to be used from the date of the notice. The PRC government is in the process of gradually implementing the issuance of the new form of certificates on a nationwide scale. However, the registration and issuance of the new form plantation rights certificates by the PRC State Forestry Administration have not been fully implemented in a timely manner in certain parts of the PRC. Sino-Forest has obtained the plantation rights certificates or requisite approvals for acquiring the relevant plantation rights for most of the purchased plantations and planted plantations currently under its management, and it is in the process of applying for the plantation rights certificates for those plantations for which we have not obtained such certificates.

Sino-Forest can give no assurance when the official Plantation Rights Certificates will be issued by the relevant local PRC governments to all the purchased plantations and planted plantations acquired and under Sino-Forest's management and cultivation. Until official new form Plantation Rights Certificates are issued, there can be no assurance that Sino-Forest's rights to its tree plantations will not be subject to dispute or challenge. If such certificates are not issued, or are not issued in a timely manner, or if Sino-Forest's rights to any of our tree plantation lands are subject to dispute or challenge, Sino-Forest's business, financial condition and results of operations could be materially adversely affected.

 

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Operational Licenses and Permits

Currently, PRC laws and regulations require tree plantation companies to obtain licenses and permits to operate tree plantations, harvest logs on the tree plantations and transport the logs out of the forest areas. The tree plantation companies must apply to the relevant Administration for Industry and Commerce of the PRC for the business license, and must apply to the local forestry bureaus for the logging permits and transportation permits for plantations that are to be harvested. Sino-Forest currently has the relevant business licenses for its subsidiaries in the PRC to engage in forestry activities and has received the requisite logging permits and transportation permits for its completed logging and transportation activities. In this regard, the PRC State Council reviews and approves the annual logging quota every five years. This annual logging quota is allocated by the local forestry bureaus within their administrative regions. For foreign invested plantations, the logging quota is allocated separately by the provincial forestry department within the annual logging quota approved by the PRC State Council. There is no assurance that Sino-Forest will continue to maintain the business licenses and obtain the relevant permits for its future logging and transportation activities, or that the PRC government will not enact laws and regulations that would add requirements for tree plantation companies to conduct these activities in the PRC.

Further, PRC laws and regulations require manufacturers to obtain licenses and permits to operate timber manufacturing plants. The timber manufacturing companies must apply to the relevant Administration for Industry and Commerce of the PRC for a business license, and those established in the forestry areas must apply for the Timber Operation (Processing) Permit required by the relevant forestry regulatory authorities in the PRC. Sino-Forest currently has the requisite business licenses and the Timber Operation (Processing) Permits for our subsidiary companies in the PRC to engage in timber manufacturing activities. However, there is no assurance that Sino-Forest will continue to maintain the business licenses or the Timber Operation (Processing) Permits for its manufacturing plants, or that the PRC government will not pass laws and regulations that would place additional requirements on companies conducting these activities in the PRC.

Environmental Regulations

Laws and regulations protecting the environment have generally become stricter in the PRC in recent years and could become more stringent in the future. On December 26, 1989, the Standing Committee of the National People's Congress of the PRC adopted the Environmental Protection Law of the PRC. This law contains, and future legislation with respect to protection of the environment, whether relating to forests, protected animal species, or water conservation, could contain, restrictions on tree planting, timber harvesting, and other forest practices. Sino-Forest's tree plantations and manufacturing plants will also be subject to environmental laws and regulations, particularly with respect to air emissions and discharges of wastewater and other pollutants into land, water and air, and the use, disposal and remediation of hazardous substances and contaminants. Sino-Forest may be required to incur significant expenditures to comply with applicable environmental laws and regulations. Moreover, some or all of the environmental laws and regulations to which Sino-Forest is subject in its tree plantations and manufacturing plants could become more stringent in the future, which could affect its production costs and results of operations. For example, international standards in wood-based products manufacturing currently require that wood panels satisfy specified maximum levels of formaldehyde emissions, as well as providing for other environmental protection measures. Any failure by us to comply with applicable environmental laws and regulations could result in civil or criminal fines or penalties or enforcement actions, including a requirement to install pollution control equipment or other mandated actions. As a result, environmental laws and regulations may adversely affect Sino-Forest's business, financial condition and results of operations.

Agricultural Taxes and Other Related Forestry Fees

Prior to February 2006, agricultural taxes on forestry companies were levied by the PRC government and generally amounted to approximately 8% of the selling prices or government standardized prices, depending upon the entity and the province in which it operates. The agricultural taxes and other forestry related fees are levied at the time trees are harvested or sold. In certain provinces where Sino-Forest's tree plantations are located, the agricultural taxes have been exempted or reduced. On February 17, 2006, the agricultural taxes were abolished by the PRC State Council. The forestry related fees include the reforestation fund and maintenance fees, which are generally charged at 10% to 20% of sales and, under a new rule effective from July 1, 2009, the reforestation fund shall be charged at no more than 10% of sales, but the fees actually charged vary from place to place. There is also a forest protection fee of RMB 5 per cubic metre of wood harvested, which has been cancelled by a notice issued by the Ministry of Finance, the National Development and Reform Commission and the PRC State Forestry Administration on August 4, 2003. However, the cancellation of the forestry protection fee has not yet been fully implemented in the provinces where Sino-Forest's tree plantations are located. No assurance can be given that other forestry related taxes will not be levied and such forestry related fees will not be increased in the future.

 

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DOCUMENTS INCORPORATED BY REFERENCE

The following documents, which have been filed with securities commissions or other similar authorities in Canada, are specifically incorporated by reference into and form an integral part of this Information Statement:

 

  (a) The Redacted First Interim Report of the Independent Committee of the Board of Directors of Sino-Forest Corporation dated August 10, 2011 (the “ First Interim Report ”);

 

  (b) The Redacted Second Interim Report of the Independent Committee of the Board of Directors of Sino-Forest Corporation dated November 13, 2011 (the “ Second Interim Report ”); and

 

  (c) The Redacted Final Report of the Independent Committee of the Board of Directors of Sino-Forest Corporation dated January 31, 2012 (the “ Final Report ”).

Any material change reports (excluding confidential material change reports) and any news release issued by the Company that specifically states that it is intended to be incorporated by reference in this Information Statement and subsequently filed by the Company with a securities commission or similar authority in any province or territory of Canada subsequent to the date of this Information Statement shall be deemed to be incorporated by reference into this Information Statement.

Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Information Statement to the extent that a statement contained herein or any other subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes that statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Information Statement.

 

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SCHEDULE ‘A’

FORM OF RESOLUTION

BE IT RESOLVED THAT:

 

  1. The plan of compromise and reorganization (the “CCAA Plan”) under the Companies' Creditors Arrangement Act (Canada) and the Canada Business Corporations Act concerning, affecting and involving Sino-Forest Corporation (“SFC”), substantially in the form attached as Schedule C to the notice of meeting and meeting information statement of SFC dated October 20, 2012 (the “Information Statement”) (as such CCAA Plan may be amended, varied or supplemented by SFC from time to time in accordance with its terms) and the transactions contemplated therein be and it is hereby accepted, approved, agreed to and authorized;

 

  2. Notwithstanding the passing of this resolution by each Affected Creditor Class (as defined in the Information Statement) or the passing of similar resolutions or approval of the Ontario Superior Court of Justice (the “Court”), the board of directors of SFC, without further notice to, or approval of, the Affected Creditors (as defined in the Information Statement), subject to the terms of the CCAA Plan, may decide not to proceed with the CCAA Plan or may revoke this resolution at any time prior to the CCAA Plan becoming effective, provided that any such decision after the issuance of a sanction order shall require the approval of the Monitor and the Court; and

 

  3. Any director or officer of SFC be and is hereby authorized, for and on behalf of SFC, to execute and deliver, or cause to be executed and delivered, any and all documents and instruments and to take or cause to be taken such other actions as he or she may deem necessary or desirable to implement this resolution and the matters authorized hereby, including the transactions required by the CCAA Plan, such determination to be conclusively evidenced by the execution and delivery of such documents or other instruments or taking of any such actions.

 

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SCHEDULE ‘B’

MEETING ORDER AND ENDORSEMENT

 

1

Court File No. CV-12-9667-00CL

 

LOGO   

ONTARIO

 

SUPERIOR COURT OF JUSTICE

 

COMMERCIAL LIST

  
     
     

 

THE HONOURABLE MR.      )       FRIDAY, THE 31 st DAY
     )      
JUSTICE MORAWETZ      )       OF AUGUST, 2012

IN THE MATTER OF THE COMPANIES’ CREDITORS

ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED

AND IN THE MATTER OF A PLAN OF COMPROMISE OR

ARRANGEMENT OF SING-FOREST CORPORATION

PLAN FILING AND MEETING ORDER

THIS MOTION, made by Sino-Forest Corporation (the “ Applicant ” or “SFC”) for an order, inter alia, (a) accepting the filing of the Plan, (b) authorizing the classification of creditors for purposes of voting on the Plan, (c) authorizing and directing the Applicant to call, hold and conduct a meeting of Affected Creditors to consider and vote on a resolution to approve the Plan, (d) authorizing and directing the mailing and distribution of the Meeting Materials, (e) approving the procedures to be followed with respect to the meeting of Affected Creditors, (f) setting a date for the hearing of the Applicant’s motion for Court approval of the Plan and (g) amending the Claims Procedure Order to call for monetary Claims of the Ontario Securities Commission, was heard this day at 330 University Avenue, Toronto, Ontario.

ON READING the Applicant’s Notice of Motion, the affidavit of W. Judson Martin sworn on August 14, 2012, the affidavit of Audra Hawkins sworn on August 15, 2012, the affidavit of Elizabeth Fimio sworn on August 27, 2012 and the Seventh Report of FTI Consulting Canada Inc. (tile “ Monitor ”) dated August 17, 2012 (the “Monitor’s Seventh Report”), and on hearing the submissions of counsel for the Monitor, no one appearing for the other parties served with the Applicant’s Motion Record, although duly served as appears from the affidavit of service, filed;

AND FURTHER TO the endorsement of this Honourable Court made August 31, 2012 (the “ Endorsement ”):

SERVICE

1. THIS COURT ORDERS that the time for service of the Notice of Motion, the Applicant’s Motion Record and the Monitor’s Seventh Report is hereby abridged and validated such that this Motion is properly returnable today and service upon any interested party other than those parties served is hereby dispensed with.

MONITOR’S ROLE

2. THIS COURT ORDERS that the Monitor, in addition to its prescribed rights and obligations under (i) the CCAA, (ii) the Initial Order, (iii) the Order of this Court dated April 20, 2012 expanding the powers of the Monitor and (iv) the Claims Procedure Order, is hereby directed and empowered to take such other actions and fulfill such other roles as are authorized by this Meeting Order.

3. THIS COURT ORDERS that: (i) in carrying out the terms of this Meeting Order, the Monitor shall have all the protections given to it by the CCAA, the Initial Order, the Order of this Court dated April 20, 2012 expanding the powers of the Monitor, or as an officer of the Court, including the stay of proceedings in its favour; (ii) the Monitor shall incur no liability or obligation as a result of carrying out the provisions of this Meeting Order, save and except for any gross negligence or wilful misconduct on its part; (iii) the Monitor shall be entitled to rely on the books and records of the Applicant and any information provided by the Applicant without independent investigation; and (iv) the Monitor shall not be liable for any claims or damages resulting from any errors or omissions in such books, records or information.

4. THIS COURT ORDERS that the Monitor and the Applicant, with the consent of the Monitor, are hereby authorized to retain such agents as they deem to be advisable to assist them in connection with calling and conducting the Meeting, including with respect to the distribution of Meeting Materials, the identification of the applicable Ordinary Affected Creditors and Noteholders, and the solicitation of proxies from Persons entitled to vote at the Meeting.

 

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DEFINITIONS

5. THIS COURT ORDERS that any capitalized terms used herein but not otherwise defined herein have the meanings ascribed thereto in the Plan.

6. THIS COURT ORDERS that for the purposes of this Meeting Order, in addition to the terms defined elsewhere in this Meeting Order or in the Plan, the following terms shall have the following meanings:

 

  (a) “Affected Creditor” means a Person with an Affected Creditor Claim, but only with respect to and to the extent of such Affected Creditor Claim;

 

  (b) “Affected Creditor Claim” means any Ordinary Affected Creditor Claim or Noteholder Claim;

 

  (c) “Beneficial Noteholder” means a beneficial owner of any Notes as at the Voting Record Date (or, if applicable, an investment advisor, manager or representative with voting discretion over the Notes owned by such beneficial owners), regardless of whether such beneficial owner is a Registered Noteholder or an Unregistered Noteholder;

 

  (d) “DTC” means The Depository Trust Company, or any successor thereof;

 

  (e) “Equity Claim” means a Claim that meets the definition of “equity claim” in section 2(1) of the CCAA and, for greater certainty, includes any claim that has been determined to be an Equity Claim by the Court in these proceedings;

 

  (f) “Equity Claimant” means any Person having an Equity Claim, but only with respect to and to the extent of such Equity Claim;

 

  (g) “Equity Claims Order” means the Order of this Court dated July 27, 2012, in respect of Shareholder Claims and Related Indemnity Claims against SFC, as such terms are defined therein;

 

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  (h) “Information Circular” means the information circular in respect of the Plan and the Meeting substantially in the form filed by the Applicant prior to the date hereof, as the same may be amended, supplemented or restated from time to time;

 

  (i) “Instructions to Ordinary Affected Creditors” means the instructions substantially in the form attached as Schedule “C” hereto;

 

  (j) “Instructions to Participant Holders” means the instructions substantially in the form attached as Schedule “B” hereto;

 

  (k) “Instructions to Registered Noteholders” means the instructions substantially in the form attached as Schedule “D” hereto;

 

  (l) “Instructions to Unregistered Noteholders” means the instructions substantially in the form attached as Schedule “E” hereto;

 

  (m) “Mailing Date” means the dale to be selected by the Monitor (in consultation with the Applicant and counsel to the Initial Consenting Noteholders) on which the Monitor shall make the mailings contemplated by paragraphs 18 and 20 of this Meeting Order, which date shall be within twenty (20) days of the date of this Meeting Order (unless extended with the consent of the Applicant and counsel to the Initial Consenting Noteholders);

 

  (n) “Meeting” means the meeting of Affected Creditors, and any extension or adjournment thereof, that is called and conducted in accordance with this Meeting Order for the purpose of considering and voting on the Plan;

 

  (o) “Meeting Date” means the date and time for the Meeting to be selected by the Monitor (in consultation with the Applicant and counsel to the Initial Consenting Noteholders), which date shall he within thirty (30) days of the Mailing Date (unless extended with the consent of the Applicant and counsel to the Initial Consenting Noteholders);

 

  (p) “Meeting Materials” means the Noteholder Meeting Materials and the Ordinary Affected Creditor Meeting Materials;

 

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  (q) “Meeting Order” means this Order, as it may be amended by any further Order of the Court;

 

  (r) “Noteholder Claim” means any Claim by a Beneficial Noteholder (or a Trustee or other representative on such Beneficial Noteholder’s behalf) in respect of or in relation to Notes, including all principal, Accrued Interest and any amounts payable pursuant to the Notes or the Note Indentures ;

 

  (s) “Noteholder” means, as at the Voting Record Date, any Registered Noteholder, Unregistered Noteholder, Participant Holder or Beneficial Noteholder, as the context requires, in such capacity;

 

  (t) “ Noteholder Meeting Materials” means copies of:

 

  (i) the Notice to Affected Creditors;

 

  (ii) the Plan;

 

  (iii) the Information Circular;

 

  (iv) the Meeting Order and Endorsement;

 

  (v) a blank form of the Noteholders’ Proxy;

 

  (vi) the Instructions to Registered Noteholders; and

 

  (vii) the Instructions to Unregistered Noteholders;

 

  (u) “Noteholders’ Proxy” means a proxy substantially in the form of Schedule “F”, to be submitted to the Monitor by any Beneficial Noteholder that wishes to vote by proxy at the Meeting;

 

  (v) “Notes” means, collectively, the 2013 Notes, the 2014 Notes, the 2016 Notes and the 2017 Notes;

 

  (w) “Notice to Affected Creditors” means the notice to Affected Creditors substantially in the form attached as Schedule “A” hereto;

 

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  (x) “Ordinary Affected Creditor” means a Person with an Ordinary Affected Creditor Claim;

 

  (y) “Ordinary Affected Creditor Claim” means a Claim that is not: an Unaffected Claim; a Noteholder Claim; an Equity Claim; a Subsidiary Intercompany Claim; a Noteholder Class Action Claim; or a Class Action Indemnity Claim (other than a Class Action Indemnity Claim by any of the Third Party Defendants in respect of the Indemnified Noteholder Class Action Claims);

 

  (z) “Ordinary Affected Creditor Meeting Materials” means copies of:

 

  (i) the Notice to Affected Creditors;

 

  (ii) the Plan;

 

  (iii) the Information Circular;

 

  (iv) the Meeting Order and Endorsement;

 

  (v) a blank form of the Ordinary Affected Creditors’ Proxy; and

 

  (vi) the Instructions to Ordinary Affected Creditors;

 

  (aa) “Ordinary Affected Creditors’ Proxy” means a proxy substantially in the form attached as Schedule “G” hereto, to be submitted to the Monitor by any Ordinary Affected Creditor who wishes to vote by proxy at the Meeting;

 

  (bb) “Participant Holder” means a Person whose name appears on any of the Participant Holders Lists as at the Voting Record Date but who is not a Beneficial Noteholder;

 

  (cc) “Participant Holders Lists” means the lists of DTC participant holders of Notes as at the Voting Record Date to be provided to the Monitor by DTC or any similar depository or trust company with respect to each series of Notes in accordance with paragraph 23 of this Meeting Order;

 

  (dd) “Plan” means the plan of compromise and reorganization proposed by the Applicant as described in the Martin Affidavit and attached as Exhibit “B” to the affidavit of Elizabeth Fimio, as such plan of compromise and reorganization may be amended from time to time in accordance with its terms;

 

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  (ee) “Plan Supplement” means the supplement(s) to the Plan, which shall contain draft copies of the Litigation Trust Agreement, relevant documents concerning Newco (including the terms of the Newco Shares and the Newco Notes) and such other documents as the Applicant and the Monitor may consider appropriate or necessary for purposes of the Meeting and voting on the Plan;

 

  (ff) “Proof of Claim” means the “Proof of Claim” referred to in the Claims Procedure Order, substantially in the form attached to the Claims Procedure Order;

 

  (gg) “Registered Noteholder” means a Noteholder who is the legal owner or holder of one or more Notes and whose name appears on any Registered Noteholder List;

 

  (hh) “Registered Noteholder List” means each list of Registered Noteholders as at the Voting Record Date provided by the Trustees to the Monitor in accordance with paragraph 21 of this Meeting Order;

 

  (ii) “Required Majority” means a majority in number of Affected Creditors with Voting Claims, and two-thirds in value of the Voting Claims held by such Affected Creditors, in each case who vote (in person or by proxy) on the Plan at the Meeting;

 

  (jj) “Sanction Hearing Date” means the date to be selected by the Monitor for the Sanction Hearing (in consultation with the Applicant and counsel to the Initial Consenting Noteholders), which date shall be within seven (7) days of the Meeting Date (or such other date on or after the Meeting Date as may be set by the Monitor or the Court);

 

  (kk) “Shareholder Claims” has the meaning ascribed thereto in the endorsement of this Court dated July 27, 2012 in these proceedings;

 

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  (ll) “Unregistered Noteholder” means a Noteholder whose name does not appear on any Registered Noteholder List;

 

  (mm) “Unresolved Claim” means an Affected Creditor Claim in respect of which a Proof of Claim has been filed in a proper and timely manner in accordance with the Claims Procedure Order but that. as at any applicable time, has not been (i) determined to be a Voting Claim or (ii) finally disallowed;

 

  (nn) “ Voting Claim” means an Affected Creditor Claim to the extent that such Affected Creditor Claim has been accepted by the Monitor solely for purpose of voting on the Plan (which acceptance for the purpose of voting shall have no effect on whether such Claim is a Proven Claim for purposes of the Plan). in each case in accordance with the provisions of the Claims Procedure Order or any other Order, as applicable;

 

  (oo) “Voting Record Date” means the date of this Meeting Order; and

 

  (pp) “Website” means the website maintained by the Monitor in respect of the CCAA proceedings pursuant to the Initial Order at the following web address: http://cfcanada.fticonsulting.com/sfc/.

7. THIS COURT ORDERS that all references to time herein shall mean local time in Toronto, Ontario, Canada, and any reference to an event occurring on a Business Day shall mean prior to 5:00 P.M. on such Business Day unless otherwise indicated herein.

8. THIS COURT ORDERS that all references to the word “including” shall mean “including without limitation”.

9. THIS COURT ORDERS that, unless the context otherwise requires, words importing (he singular shall include the plural and vice versa, and words importing any gender shall include all genders.

 

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THE PLAN

10. THIS COURT ORDERS that the Plan is hereby accepted for filing, and the Applicant is hereby authorized and directed to call and hold a meeting of Affected Creditors to vote on the Plan in the manner set forth herein.

11. THIS COURT ORDERS that the Applicant may, at any time and from time to time prior to or at the Meeting, amend, restate, modify and/or supplement the Plan, subject to the terms of the Plan, provided that: (i) the Monitor, the Applicant or the Chair shall communicate the details of any such amendments, restatements, modifications and/or supplements to Affected Creditors present at the Meeting prior to any vote being taken at the Meeting; (ii) the Applicant shall forthwith provide notice to the service list of any such amendments, restatements, modifications and/or supplements and shall file a copy thereof with this Court forthwith and in any event prior to the Sanction Hearing; and (iii) the Monitor shall post an electronic copy of any such amendments, restatements, modifications and/or supplements on the Website forthwith and in any event prior to the Sanction Hearing.

12. THIS COURT ORDERS that the Applicant shall serve and file the Plan Supplement, and the Monitor shall post the Plan Supplement on the Website, no later than seven (7) days prior to the Meeting. Thereafter, the Applicant may, at any time and from time to time prior to or at the Meeting, amend, restate, modify and/or supplement the Plan Supplement, subject to the terms of the Plan, provided that: (i) the Monitor, the Applicant or the Chair shall communicate the details of any such amendments, restatements, modifications and/or supplements to Affected Creditors present at the Meeting prior to any vote being taken at the Meeting; (ii) the Applicant shall forthwith provide notice to the service list of any such amendments, restatements, modifications and/or supplements and shall file a copy thereof with this Court forthwith and in any event prior to the Sanction Hearing; and (iii) the Monitor shall post an electronic copy of any such amendments, restatements, modifications and/or supplements on the Website forthwith and in any event prior to the Sanction Hearing.

 

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FORMS OF DOCUMENTS

13. THIS COURT ORDERS that the forms of Information Circular, Notice to Affected Creditors, Ordinary Affected Creditors’ Proxy, Noteholders’ Proxy, Instructions to Ordinary Affected Creditors, Instructions to Registered Noteholders, Instructions to Unregistered Noteholders and Instructions to Participant Holders are hereby approved. The Applicant, with the consent of the Monitor, may (x) make any changes to such materials as are necessary or desirable to conform the content thereof to the terms of the Plan or this Meeting Order, and (y) at any time and from time to time prior to or at the Meeting, amend, restate, modify and/or supplement any of such materials, subject to the terms of the Plan, provided that: (i) the Monitor, the Applicant or the Chair shall communicate the details of any such amendments, restatements, modifications and/or supplements to Affected Creditors present at the Meeting prior to any vote being taken at the Meeting; (ii) the Applicant shall forthwith provide notice to the service list of any such amendments, restatements, modifications and/or supplements and shall file a copy thereof with this Court forthwith and in any event prior to the Sanction Hearing; and (iii) the Monitor shall post an electronic copy of any such amendments, restatements, modifications ancUor supplements on the Website forthwith and in any event prior to the Sanction Hearing.

VOTING BY CREDITORS

14. THIS COURT ORDERS that, the Affected Creditors shall constitute a single class, the “Affected Creditors Class”, for the purposes of considering and voting on the Plan.

15. [Intentionally deleted]

16. [Intentionally deleted]

NOTICE TO ORDINARY AFFECTED CREDITORS

17. THIS COURT ORDERS that the Monitor shall, no later than three (3) Business Days following the date of this Meeting Order, post an electronic copy of the Notice to Affected Creditors, the Plan and the Information Circular (in the form provided by the Applicant as at the date of this Meeting Order) on the Website.

 

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18. THIS COURT ORDERS (hat the Monitor shall, on the Mailing Date, deliver the Ordinary Affected Creditor Meeting Materials by courier, personal delivery or email to each Ordinary Affected Creditor with a Voting Claim and/or an Unresolved Claim at the address set out in such Ordinary Affected Creditor’s Proof of Claim (or in any other written notice that has been received by the Monitor in advance of such date regarding a change of address for an Ordinary Affected Creditor).

NOTICE TO NOTEHOLDERS

19. THIS COURT ORDERS that, no later than three (3) Business Days following the date of this Meeting Order, the Monitor shall post an electronic copy of the Notice to Affected Creditors, the Plan and the Information Circular (in the form provided by the Applicant as at the date of this Meeting Order) on the Website.

20. THIS COURT ORDERS that the Monitor shall, on the Mailing Date, deliver the Noteholder Meeting Materials by courier, personal delivery or email to the Trustees and DTC.

21. THIS COURT ORDERS that, no later than four (4) Business Days following the date of this Meeting Order, each of the Trustees shall provide to the Applicant and the Monitor a Registered Noteholder List for each series of Notes in respect of which such Trustee acts as trustee, each of which Registered Noteholder Lists shall list the Registered Noteholders of the applicable series of Notes as at the Voting Record Date and their respective addresses, telephone numbers, fax numbers and email addresses, to the extent available.

22. THIS COURT ORDERS that, on the later of (i) the Mailing Date and (ii) the date upon which the Monitor receives a Registered Noteholder List from any Trustee as provided for in paragraph 21, the Monitor shall send the Noteholder Meeting Materials to each Person listed on the Registered Noteholder List.

23. THIS COURT ORDERS that: (i) no later than four (4) Business Days following the date of this Meeting Order, DTC shall provide to the Applicant and the Monitor a Participant Holders List in respect of the Notes; and (ii) as soon as practicable following the date of this Meeting Order and in any event within four (4) Business Days of receiving notice from the Monitor of this Meeting Order, any other Registered Noteholder (if any) who holds Notes on behalf of one

 

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or more Participant Holders shall provide to the Applicant and the Monitor a Participant Holders List in respect of the Notes. In each case the Participant Holder List so provided shall list the Participant Holders as at the Voting Record Date and their respective addresses and telephone numbers, fax numbers and email addresses, to the extent available.

24. THIS COURT ORDERS that, upon receipt by the Monitor of the Participant Holders Lists, the Monitor shall contact each Participant Holder listed thereon to determine the number of copies of the Noteholder Meeting Materials such Participant Holder requires in order to provide one copy of the Noteholder Meeting Materials to each of its customers or principals who are Unregistered Noteholders as at the Voting Record Date, and each Participant Holder shall provide the Monitor with a response as to the number of copies of the Noteholder Meeting Materials required within two (2) Business Days of being so contacted by the Monitor.

25. THIS COURT ORDERS that on the later of (i) the Mailing Dale, and (ii) the date upon which the Monitor receives the information referred to in paragraph 24, the Monitor shall deliver by courier, persona) delivery or email to such Participant Holder a copy of the Instructions to Participant Holders together with that number of copies of the Noteholder Meeting Materials required by such Participant Holder for distribution to the Unregistered Noteholders that are its customers or principals.

26. THIS COURT ORDERS that, within five (5) Business Days of any Participant Holder’s receipt of the Noteholder Meeting Materials from the Monitor pursuant to paragraph 25, such Participant Holder shall: (i) complete and sign the applicable section of the Noteholders’ Proxy relating to Participant Holders for each Unregistered Noteholder that has an account (directly or through an agent or custodian) with such Participant Holder; and (ii) deliver by courier or personal delivery to each such Unregistered Noteholder the Noteholders’ Proxy as so completed and signed together with one copy of the Noteholder Meeting Materials. Each Participant Holder shall take any other action reasonably required to enable any Unregistered Noteholder that has an account (directly or through an agent or custodian) with such Participant Holder to provide a Noteholders’ Proxy to the Monitor with respect to the Notes owned by or held for the benefit of such Unregistered Noteholder.

 

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27. THIS COURT ORDERS that where: (i) a Participant Holder or its agent has a standard practice for distribution of meeting materials to Unregistered Noteholders and for the gathering of information and proxies or voting instructions from Unregistered Noteholders; (ii) the Participant Holder has discussed such standard practice in advance with the Applicant, the Monitor and counsel to the Initial Consenting Noteholders; and (iii) such standard practice is acceptable to the Applicant, the Monitor and counsel to the Initial Consenting Noteholders, such Participant Holder or its agent may, in lieu of following the procedure set out in paragraph 26 above, follow such standard practice provided that all applicable proxies or voting instructions are received by the Monitor no later than 5:00 P.M. on the third Business Day before the Meeting.

NOTICE, SERVICE AND DELIVERY

28. THIS COURT ORDERS that the Monitor’s fulfillment of the notice, delivery and Website posting requirements set out in this Meeting Order shall constitute good and sufficient notice, service and delivery thereof on all Persons who may be entitled to receive notice, service or delivery thereof or who may wish to be present or vote (in person or by proxy) at the Meeting, and that no other form of notice, service or delivery need be given or made on such Persons and no other document or material need be served on such Persons.

CONDUCT OF MEETING AND DELIVERY OF PROXIES

29. THIS COURT ORDERS that the Applicant is hereby authorized and directed to call the Meeting and to hold and conduct the Meeting on the Meeting Date at the offices of Bennett Jones LLP, 3400 One First Canadian Place, Toronto, Ontario, for the purpose of seeking approval of the Plan by the Affected Creditors with Voting Claims at the Meeting in the manner set forth herein. In the event that the Meeting Date is extended after the Mailing Date, the Monitor shall post notice of the extension of the Meeting Date on the Website and provide notice of extension of the Meeting Date to the service list.

30. THIS COURT ORDERS that Greg Watson or another representative of the Monitor, designated by the Monitor, shall preside as the chair of the Meeting (the “Chair”) and, subject to this Meeting Order or any further Order of the Court, shall decide all matters relating to the conduct of the Meeting.

 

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31. THIS COURT ORDERS that the Monitor may appoint scrutineers for the supervision and tabulation of the attendance at, quorum at and votes cast at the Meeting (the “Scrutineers” ). A person designated by the Monitor shall act as secretary of the Meeting (the “Secretary” ).

32. THIS COURT ORDERS that the quorum required at the Meeting shall be one Affected Creditor with a Voting Claim present at the Meeting (in person or by proxy).

33. THIS COURT ORDERS that if the requisite quorum is not present at the Meeting, or if the Meeting is postponed by the vote of a majority in value of Voting Claims of the Affected Creditors present at the Meeting (in person or by proxy), then the Meeting shall be adjourned by the Chair to a later date, time and place as designated by the Chair. The Chair shall be entitled to adjourn and further adjourn the Meeting at the Meeting or at any adjourned Meeting. Any adjournment or adjournments described in this paragraph 33 shall be for a period of not more than thirty (30) days in total unless otherwise agreed to by the Applicant, the Monitor and counsel to the Initial Consenting Noteholders. In the event of any adjournment described in this paragraph 33, no Person shall be required to deliver any notice of the adjournment of the Meeting or adjourned Meeting, provided that the Monitor shall: (i) announce the adjournment at the Meeting or adjourned Meeting, as applicable; (ii) post notice of the adjournment at the originally designated time and location of the Meeting or adjourned Meeting, as applicable; (iii) forthwith post notice of the adjournment on the Website; and (iv) provide notice of the adjournment to the service list forthwith. Any Ordinary Affected Creditor Proxies and Noteholder Proxies validly delivered in connection with the Meeting shall be accepted as proxies in respect of any adjourned Meeting.

34. THIS COURT ORDERS that the only Persons entitled to attend and speak at the Meeting are: (i) the Affected Creditors entitled to vote at the Meeting (or, if applicable, any Person holding a valid Ordinary Creditors’ Proxy or Noteholders’ Proxy on behalf of one or more such Affected Creditors) and any such Affected Creditor’s or valid proxyholder’s legal counsel and financial advisors; (ii) the Chair, the Scrutineers and the Secretary; (iii) one or more representatives of the Monitor and the Monitor’s legal counsel; (iv) one or more representatives

 

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of the current board of directors and/or senior management of Applicant, as selected by the Applicant, and the Applicant’s legal counsel and financial advisors; (v) counsel to the Directors and Officers; (vi) one or more representatives of the Initial Consenting Noteholders and the Initial Consenting Noteholders’ legal counsel and financial advisors; and (vii) the Trustees and their respective legal counsel. Any other person may be admitted to the Meeting on invitation of the Chair.

35. THIS COURT ORDERS that the Monitor may, with the consent of the Applicant, waive in writing the time limits imposed on Affected Creditors as set out in this Meeting Order (including the schedules hereto), generally or in individual circumstances, if the Monitor deems it advisable to do so.

ASSIGNMENT OF AFFECTED CLAIMS PRIOR TO THE MEETING

36. THIS COURT ORDERS that, subject to any restrictions contained in Applicable Laws, an Ordinary Affected Creditor may transfer or assign the whole of its Ordinary Affected Creditor Claim prior to the Meeting (or any adjournment thereof), provided that neither the Applicant nor the Monitor shall be obliged to deal with any transferee or assignee thereof as an Ordinary Affected Creditor in respect of such Ordinary Affected Creditor Claim, including allowing such transferee or assignee to attend or vote at the Meeting, unless and until actual notice of the transfer or assignment, together with satisfactory evidence of such transfer or assignment, has been received and acknowledged by the Applicant and the Monitor, which receipt and acknowledgment must have occurred on or before 5 p.m. (Toronto time) on the date that is seven (7) days prior to the date of the Meeting (or any adjournment thereof), failing which the original transferor shall have all applicable rights as the “Ordinary Affected Creditor” with respect to such Ordinary Affected Creditor Claim as if no transfer of the Ordinary Affected Creditor Claim had occurred. If such receipt and acknowledgment by the Applicant and the Monitor have occurred on or before 5 p.m. (Toronto time) on the date that is seven (7) days prior to the date of the Meeting (or any adjournment thereof): (i) the transferor of the applicable Ordinary Affected Creditor Claim shall no longer constitute an Ordinary Affected Creditor in respect of such Ordinary Affected Creditor Claim; and (ii) the transferee or assignee of the applicable Ordinary Affected Creditor Claim shall, for all purposes in accordance with this Meeting Order, constitute

 

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an Ordinary Affected Creditor in respect of such Ordinary Affected Creditor Claim and shall be bound by any and all notices previously given to the transferor or assignor in respect thereof and shall be bound by any Ordinary Creditors’ Proxy duly submitted to the Monitor in accordance with this Meeting Order. For greater certainty, the Applicant and the Monitor shall not recognize partial transfers or assignments of Ordinary Affected Creditor Claims.

37. THIS COURT ORDERS that only those Beneficial Noteholders that have beneficial ownership of one or more Notes as at the Voting Record Date shall be entitled to vote at the Meeting (whether in person or by proxy). Nothing in this Meeting Order restricts the Beneficial Noteholders from transferring or assigning such Notes prior to or after the Voting Record Date, provided that if such transfer or assignment occurs after the Voting Record Date, only the original Beneficial Noteholder of such Notes as at the Voting Record Date (and not any transferee) shall be treated as a Beneficial Noteholder for purposes of this Meeting Order and the Meeting.

VOTING PROCEDURE

38. THIS COURT ORDERS that at the Meeting, the Chair shall direct a vote, by written ballot, on a resolution to approve the Plan and any amendments thereto.

39. THIS COURT ORDERS that, subject to paragraph 49, the only Persons entitled to vote at the Meeting (whether in person or by proxy) are: (i) Beneficial Noteholders with Voting Claims that have beneficial ownership of one or more Notes as at the Voting Record Date (or any such Beneficial Noteholder’s validly appointed holder of its Noteholders’ Proxy); and (ii) Ordinary Affected Creditors with Voting Claims as at the Voting Record Date (which, for greater certainty, includes any transferee of an Ordinary Affected Creditor Claim that is a Voting Claim, provided that such transferee has been recognized as an Ordinary Affected Creditor in respect of such transferred Ordinary Affected Creditor Claim in accordance with paragraph 36) (or any such Ordinary Affected Creditor’s validly appointed holder of its Ordinary Affected Creditors’ Proxy).

 

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40. THIS COURT ORDERS that each Ordinary Affected Creditor with a Voting Claim shall be entitled to one vote as a member of the Affected Creditors Class, which vote shall have a value equal to the dollar value of such Ordinary Affected Creditor’s Voting Claim.

41. THIS COURT ORDERS that each Beneficial Noteholder with a Voting Claim shall be entitled to one vote as a member of the Affected Creditors’ Class, which vote shall have a value equal to the principal and Accrued Interest owing under the Notes owned by such Beneficial Noteholder as at the Voting Record Date. For greater certainty, with respect to voting by Beneficial Noteholders, only the Beneficial Noteholders, and not Registered Noteholders or Participant Holders (unless any such Registered Noteholder or Participant Noteholder is itself a Beneficial Noteholder), shall be entitled to vote on the Plan as provided for in this Meeting Order.

42. THIS COURT ORDERS that for the purpose of calculating the two-thirds majority in value of Voting Claims, the aggregate amount of Voting Claims held by all Affected Creditors that vote in favour of the Plan (in person or by proxy) shall be divided by the aggregate amount of all Voting Claims held by all Affected Creditors that vote on the Plan (in person or by proxy). For the purpose of calculating a majority in number of Affected Creditors voting on the Plan, (i) each Ordinary Affected Creditor that votes on the Plan (in person or by proxy) shall only be counted once, without duplication; and (ii) each individual Beneficial Noteholder that votes on the Plan (in person or by proxy) shall only be counted once, without duplication, even if that Beneficial Noteholder holds Notes through more than one Registered Noteholder or Participant Holder.

43. THIS COURT ORDERS that, for purposes of tabulating the votes cast on any matter that may come before the Meeting, the Chair shall be entitled to rely on any vote cast by a holder of an Ordinary Affected Creditors’ Proxy and/or a Noteholders’ Proxy that has been duly submitted to the Monitor in the manner set forth in this Meeting Order.

44. THIS COURT ORDERS that any Ordinary Affected Creditor or Beneficial Noteholder that is entitled to vote at the Meeting and that wishes to vote at the Meeting in person must: (i) duly complete and sign an Ordinary Creditors’ Proxy or a Noteholders’ Proxy, as applicable; (ii) identify itself in the Ordinary Creditors’ Proxy or a Noteholders’ Proxy, as applicable, as the

 

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Person with the power to attend and vote at the Meeting on behalf of such Ordinary Affected Creditor or Beneficial Noteholder, as the case may be; and (iii) deliver such Ordinary Affected Creditors’ Proxy or Noteholders’ Proxy, as the case may be, to the Monitor so that it is received on or before 5:00 p.m. on the third Business Day before the Meeting (or any adjournment thereof), and such delivery must be made in accordance with the instructions accompanying such Ordinary Affected Creditors’ Proxy or Noteholders’ Proxy.

45. THIS COURT ORDERS that any Ordinary Affected Creditor or Beneficial Noteholder that is entitled to vote at the Meeting and that wishes to appoint a nominee to vote on its behalf at the Meeting must: (i) duly complete and sign an Ordinary Creditors’ Proxy or a Noteholders’ Proxy, as applicable; (ii) identify its desired nominee in the Ordinary Creditors’ Proxy or a Noteholders’ Proxy, as applicable, as the Person with the power to attend and vote at the Meeting on behalf of such Ordinary Affected Creditor or Beneficial Noteholder, as the case may be and (iii) deliver such Ordinary Affected Creditors’ Proxy or Noteholders’ Proxy, as the case may be, to the Monitor so that it is received on or before 5:00 p.m. on the third Business Day before the Meeting (or any adjournment thereof), and such delivery must be made in accordance with the instructions accompanying such Ordinary Affected Creditors’ Proxy or Noteholders’ Proxy.

46. THIS COURT ORDERS that, in order to be effective, any Noteholders’ Proxy must clearly state the name and contain the signature of the applicable Participant Holder, the applicable account number or numbers of the account or accounts maintained by the applicable Beneficial Noteholder with such Participant Holder, and the principal amount of Notes (excluding any pre-or post-filing interest) that such Beneficial Noteholder holds in each such account or accounts. Where a Beneficial Noteholder holds Notes through more than one Participant Holder, its Noteholders’ Proxy is required to be executed by only one of those Participant Holders, provided that the Beneficial Noteholder shall provide the information required in its Noteholders’ Proxy with respect to its Notes held with all Participant Holders to allow the Monitor to verify the aggregate amount of Notes held by such Beneficial Noteholder for the purposes of voting on the Plan.

47. THIS COURT ORDERS that notwithstanding anything in paragraphs 44, 45 or 46 or any minor error or omission in any Ordinary Affected Creditors’ Proxy or Noteholders’ Proxy that is submitted to the Monitor, the Chair shall have the discretion to accept for voting purposes any Ordinary Affected Creditors’ Proxy or Noteholders’ Proxy submitted to the Monitor in accordance with the Meeting Order.

 

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48. THIS COURT ORDERS that if there is any dispute as to the principal amount or number of Notes held by any Beneficial Noteholder, the Monitor will request the Participant Holder, if any, who maintains book entry records or other records evidencing such Beneficial Noteholder’s ownership of Notes, to confirm with the Monitor the information provided by such Beneficial Noteholder, If any such dispute is not resolved by such Beneficial Noteholder and the Monitor by the date of the Meeting (or any adjournment thereof), the Monitor shall tabulate the vote for or against the Plan in respect of the disputed principal amount of such Beneficial Noteholder’s Notes separately. If : (i) any such dispute remains unresolved as of the date of the Sanction Hearing; and (ii) the approval or non-approval of the Plan would be affected by the votes cast in respect of such disputed principal amount of Notes, then such result shall be reported to the Court at the Sanction Hearing and, if necessary, the Monitor may make a request to the Court for directions.

VOTING OF UNRESOLVED CLAIMS

49. THIS COURT ORDERS that notwithstanding anything to the contrary herein or in the Plan, each Affected Creditor with an Unresolved Claim as at the Voting Record Date shall be entitled to attend the Meeting and shall be entitled to one vote at the Meeting in respect of such Unresolved Claim. Any vote cast in respect of an Unresolved Claim shall be dealt with in accordance with paragraph 50, unless and until (and then only to the extent that) such Unresolved Claim is ultimately determined to be: (i) a Voting Claim, in which case such vote shall have the dollar value attributable to such Voting Claim; or (ii) disallowed, in which case such vote shall not be counted for any purpose.

50. THIS COURT ORDERS that the Monitor shall keep a separate record of votes cast by Affected Creditors with Unresolved Claims and shall report to the Court with respect thereto at the Sanction Hearing. If approval or non-approval of the Plan by Affected Creditors would be altered by the votes cast in respect of Unresolved Claims: (i) such result shall be reported to the Court as soon as reasonably practicable after the Meeting; (ii) if a deferral of the Sanction

 

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Hearing is deemed to be necessary or advisable by the Monitor (in consultation with the Applicant and counsel to the Initial Consenting Noteholders), the Monitor shall request an appropriate deferral of the Sanction Hearing; and (iii) the Monitor may make a request to the Court for directions.

51. THIS COURT ORDERS that each of the Third Party Defendants shall be entitled to one vote as a member of the Affected Creditors Class in respect of any Class Action Indemnity Claim that it has properly filed in respect of the Indemnified Noteholder Class Action Claims, provided that the aggregate value of all such Class Action Indemnity Claims shall, for voting purposes, be deemed to be limited to the amount of the Indemnified Noteholder Class Action Limit in the event that such Indemnified Noteholder Class Action Limit is in place at the time of voting. The Monitor shall keep a separate record of votes cast by the Third Party Defendants in respect of such Class Action indemnity Claims, and the Monitor shall report to the Court with respect thereto at the Sanction Hearing, including as to whether or not a vote in favour of the Plan or against the Plan by the Third Party Defendants would have had any effect on the approval of the Plan by the Required Majority.

52. THIS COURT ORDERS that the Applicant and the Monitor shall have the right to seek the assistance of the Court at any time in valuing any Unresolved Claim if required to ascertain the result of any vote on the Plan.

53. THIS COURT ORDERS that, pursuant to the Order of this Court dated July 27, 2012 in these proceedings, any Claims that have been properly filed by any of the Third Party Defendants against the Applicant in respect of defence costs incurred or to be incurred by the Third Party Defendants in connection with defending themselves against the Shareholder Claims (“Defence Costs Claims”) shall be treated as Unresolved Claims for purposes of this Meeting Order and voting at the Meeting.

PERSONS NOT ENTITLED TO VOTE

54. THIS COURT ORDERS that, for greater certainty, the following Persons, in such capacity, shall have no right to, and shall not, vote at the Meeting: Unaffected Creditors; Noteholder Class Action Claimants; Equity Claimants; any Person with a D&O Claim; any

 

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Person with a D&O Indemnity Claim (other than a D&O Indemnity Claim in respect of Defence Costs Claims or in respect of the Indemnified Noteholder Class Action Claims); any Person with a Subsidiary Intercompany Claim; and any other Person asserting Claims against the Applicant whose Claims do not constitute Affected Creditor Claims on the Voting Record Date.

CLAIMS OF THE ONTARIO SECURITIES COMMISSION

55. THIS COURT ORDERS that the Ontario Securities Commission (the “OSC” ) shall (i) advise the Applicant and the Monitor as to whether it will pursue any rights or claims against the Applicant or the Directors or Officers that have or could give rise to a monetary administrative or other monetary penalty or claim ( “OSC Monetary Claims” ) on or prior to September 13, 2012, which date shall serve in effect as a claims bar date for purposes of any OSC Monetary Claims that may be asserted by the OSC as against the Applicant or any Director or Officer, and (ii) with respect to any OSC Monetary Claims that the OSC may so assert, shall in each case specify the quantum of each such OSC Monetary Claim.

56. THIS COURT ORDERS that, in the event that the Applicant and the Monitor are advised of any OSC Monetary Claims pursuant to and in accordance with paragraph S5, the Monitor shall within three (3) Business Days of being so advised, deliver the Ordinary Affected Creditor Meeting Materials by courier, personal delivery or email to the OSC (or to counsel for the OSC as appears on the service list).

RESTRUCTURING CLAIMS

57. THIS COURT ORDERS that the Monitor shall, no later than three (3) Business Days following the receipt of a Proof of Claim from any Person asserting a Restructuring Claim, deliver the Ordinary Affected Creditor Meeting Materials by courier, personal delivery or email to such Person at the address set out in any such Proof of Claim.

APPROVAL OF THE PLAN

58.THIS COURT ORDERS that the Plan must receive an affirmative vote of the Required Majority in order to be approved by the Affected Creditors.

 

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59. THIS COURT ORDERS that the result of any vote at the Meeting shall be binding on all Affected Creditors, regardless of whether such Affected Creditor was present at or voted at the Meeting.

PLAN SANCTION

60. THIS COURT ORDERS that the Monitor shall report to the Court the results of any votes taken at the Meeting as soon as reasonably practicable after the Meeting (or any adjournment thereof). If the Plan is approved by the Required Majority, the Applicant may apply to the Court at 10:00 A.M. on the Sanction Hearing Date for the Sanction Order (the “Sanction Hearing” ).

61. THIS COURT ORDERS that service of this Meeting Order by the Monitor or the Applicant to the parties on the service list shall constitute good and sufficient service of notice of the Sanction Hearing on all Persons entitled to receive such service and no other form of notice or service need be made and no other materials need be served in respect of the Sanction Hearing, except that any party shall also serve the service list with any additional materials that it intends to use in support of the Sanction Hearing,

62. THIS COURT ORDERS that any Person who wishes to oppose the Sanction Hearing shall serve on the Applicant, the Monitor and the service list a notice setting out the basis for such opposition and a copy of the materials to be used to oppose the Sanction Hearing at least four (4) days before the date set for the Sanction Hearing.

MISCELLANEOUS

63. THIS COURT ORDERS that nothing in this Meeting Order (including the acceptance or determination of any Claim, or any part thereof, as a Voting Claim in accordance with this Meeting Order) has the effect or determining Proven Claims for purposes of the Plan.

64. THIS COURT ORDERS that, for the purposes of this Meeting Order (including the calculation of the Required Majority), all Affected Creditor Claims shall be deemed to be denominated in Canadian dollars and any Affected Creditor Claims denominated in a foreign currency shall be deemed to be converted to Canadian dollars using the Reuters closing rate on the Filing Date (as found at http://www.reuters.com/finance/currencies), without prejudice to a different exchange rate being proposed in the Plan.

 

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65. THIS COURT ORDERS that the Applicant or the Monitor may from time to time apply to this Court for advice and directions in the discharge of their powers and duties hereunder.

 

LOGO

 

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SCHEDULE “A”

NOTICE TO AFFECTED CREDITORS OF STNO-FOREST CORPORATION

NOTICE IS HEREBY GIVEN that a plan of compromise and reorganization (as amended from time to time, the “Plan”) has been filed with the Ontario Superior Court of Justice (Commercial List) (the “Court”) in respect of Sino-Forest Corporation (the “ Applicant ”) pursuant to the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (the “ CCAA ”).

A copy of the Plan is set out as a schedule to the information circular dated • (the “ Circular ”) for the Meeting (as defined below).

NOTICE IS ALSO HEREBY GIVEN that a meeting of Affected Creditors (the “ Meeting ”) will be held at 10:00 a.m. on — , 2012 (or such other date as may be set and announced in accordance with the Meeting Order) at the offices of Bennett Jones LLP, 3400 One First Canadian Place, Toronto, Ontario, for the purpose of considering and, if thought advisable, passing, with or without variation, a resolution to approve the Plan (the full text of which resolution is set out as a schedule to the Circular) and to transact such other business as may properly come before the Meeting (or any adjournment thereof). The Meeting is being held pursuant to the Order of the Court made on — (the “ Meeting Order ”) and the endorsement of the Court made on August 31, 2012 (the “ Endorsement ”). Copies of the Meeting Order and the Endorsement are set out as schedules to the Circular. Capitalized terms used but not otherwise defined in this notice have the meaning ascribed to them in the Meeting Order.

The Plan must receive an affirmative vote of the Required Majority in order to be approved by the Affected Creditors. The Required Majority is a majority in number of Affected Creditors with Voting Claims, and two-thirds in value of the Voting Claims held by such Affected Creditors, in each case who vote (in person or by proxy) on the Plan at the Meeting. The Plan must also be sanctioned by a final order of the Court (the “ Sanction Order ”) pursuant to the CCAA. Notice is also hereby given that, if the Plan is approved by the Required Majority at the Meeting, the Sanction Order will be sought in an application before the Court at 10:00 a.m. on — , 2012 (or such other date after the Meeting as may be set by the Court), to seek approval of the Plan. If the Plan is approved by the Requisite Majority and sanctioned by the Court, then, subject to the satisfaction or waiver of the conditions to implementation of the Plan, all Persons referred to in the Plan (including the Affected Creditors) will receive the treatment set out in the Plan.

AMENDMENTS TO THE PLAN

The Applicant may, at any time and from time to time prior to or at the Meeting, amend, restate, modify and/or supplement the Plan, subject to the terms of the Plan, provided that: (i) the Monitor, the Applicant or the Chair shall communicate the details of any such amendment, restatement and/or supplement to all Affected Creditors present at the Meeting prior to any vote being taken at the Meeting; (ii) the Applicant shall provide notice to the service list of any such amendment, restatement and/or supplement and shall file a copy thereof with this Court forthwith and in any event prior to the Sanction Hearing; and (iii) the Monitor shall post an electronic copy of any such amendment, restatement and/or supplement on the Website forthwith and in any event prior to the Sanction Hearing.

COMPLETION OF PROXIES

Any Affected Creditor who is entitled to vote at the Meeting and that wishes to vote at the Meeting must complete, sign and return the applicable form of proxy enclosed in the Circular in the return envelope provided or by fax at the fax number below or by email in PDF format at the email address below, In order to be effective, a proxy must be deposited with the Monitor, at the address, fax or email below, at any time prior to 5:00 p.m. on the third Business Day before the Meeting (or any adjournment thereof),

The Monitor’s contact information for the purpose of filing forms of proxy and for obtaining any additional information or materials related to the Meeting is:

FTI Consulting Canada Inc.

TD Waterhouse Tower

79 Wellington Street West, Suite 2010

P.O. Box 104

Toronto, Ontario M5K 1G8

Attention: Jodi Porepa

Email: sfc@fticonsulting.com

Fax: (416)649-8101

 

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This notice is given by the Monitor pursuant to the Meeting Order.

You can also view copies of documents relating to this process on the following website http://cfcanada.fticonsulting.com/sfc/.

Dated at Toronto, Ontario this — day of — , 2012.

 

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SCHEDULE “B”

INSTRUCTIONS TO PARTICIPANT HOLDERS

URGENT — IMMEDIATE ACTION REQUIRED

— , 2012

 

TO: PARTICIPANT HOLDERS OF SINO-FOREST CORPORATION’S:

 

  (i) US$345,000,000 5.00% CONVERTIBLE SENIOR NOTES DUE 2013 (Rule 144A CUSIP No. 82934HAB7/Regulation S CUSIP No. C83912AB8);

 

  (ii) US$399,517,000 10.25% GUARANTEED SENIOR NOTES DUE 2014 (Rule 144A CUSIP No. 82934HAC5/Regulation S CUSIP No. C83912AC6);

 

  (iii) US$460,000,000 4.25% CONVERTIBLE SENIOR NOTES DUE 2016 (Rule 144A CUSIP No. 82934HAD3/Regulation S CUSIP No. C83912AD4); and

 

  (iv) US$600,000,000 6.25% GUARANTEED SENIOR NOTES DUE 2017 Rule I44A CUSIP No. 82934HAF8/Regulation S CUSIP No C83912AF9),

(collectively, the “ Notes ”)

 

Re: Meeting of Affected Creditors of Sino-Forest Corporation to vote on the Plan of Compromise and Reorganization pursuant to the Companies’ Creditors Arrangement Act (the “Plan”)

According to the records of The Depository Trust Company (“DTC”) or the applicable note indenture trustee, you are the holder or custodian (the “Participant Holder”) on behalf of an unregistered holder of one or more of the Notes (an “ Unregistered Notcholder”). You (or your agent) are required by paragraph 26 of the enclosed Court Order (the “Meeting Order”) to complete and sign the applicable part of an enclosed Noteholders’ Proxy (the box on page 2) for each Unregistered Noteholder for whom you act as Participant Holder and to mail it directly to each such applicable Unregistered Notcholder within five (5) Business Days.

We enclose Noteholder Meeting Materials to be forwarded by you or your agent (together with an appropriately completed and signed Noteholders’ Proxy) to each of the Unregistered Noteholders recorded in your account records or book entry records. We enclose one additional copy of these materials for your use. THE MATERIALS ARE TIME SENSITIVE AND MUST BE FORWARDED TO EACH OF THE UNREGISTERED NOTEHOLDERS TOGETHER WITH THE NOTEHOLDERS’ PROXY COMPLETED BY YOU FOR THAT UNREGISTERED NOTEHOLDER WITHOUT DELAY.

THE TOTAL AMOUNT OF ALL NOTEHOLDER CLAIMS HAS BEEN FILED BY THE NOTE INDENTURE TRUSTEES. THEREFORE YOU DO NOT HAVE TO PROVIDE A PROOF OF CLAIM.

The Noteholders’ Proxy is to be completed and signed by you or your agent and by the Unregistered Noteholder and is to be provided by the Unregistered Noteholder directly to Sino-Forest’s Monitory FTI Consulting Canada Inc., in the enclosed envelope or by facsimile transmission or email.

PLEASE INSTRUCT UNREGISTERED NOTEHOLDERS TO DELIVER THEIR PROXIES DIRECTLY TO FTI CONSULTING CANADA INC. IN ACCORDANCE WITH THE INSTRUCTIONS TO UNREGISTERED NOTEHOLDERS. PROXIES MUST BE RECEIVED BY FTI CONSULTING CANADA INC. PRIOR TO THE DEADLINE OF 5:00 P.M. ON THE THIRD BUSINESS DAY BEFORE THE MEETING (OR ANY ADJOURNMENT THEREOF).

Before sending the Noteholders’ Proxy and the other materials to an Unregistered Noteholder, please:

 

  1. insert in the Noteholders’ Proxy in the appropriate spaces (in the box on page 2) the name of the applicable Unregistered Noteholder, your organization’s name as Participant Holder, the applicable account number and the principal amount of the Notes held in such account; and

 

  2. sign the Noteholders’ Proxy as Participant Holder where indicated.

 

- 2 -

We request that you provide any assistance that an Unregistered Noteholder may require in completing its Noteholders’ Proxy. You are required by the Meeting Order to complete and forward such Noteholders’ Proxies and the other materials to the applicable Unregistered Noteholders as specified in these instructions.

If you have a standard practice for distribution of meeting materials to Unregistered Noteholders and for the gathering of information and proxies or voting instructions from Unregistered Noteholders that differs from the process described above, please contact the Monitor immediately to determine whether you are able to use such standard practice as an alternative to the process described above.

If you have any questions regarding your obligations or the process, or require additional copies of any materials, please contact the Monitor at the following address.

FTI Consulting Canada Inc., the Court-appointed

Monitor of Sino-Forest Corporation

TD Waterhouse Tower

79 Wellington Street West, Suite 2010

P.O. Box 104

Toronto, Ontario MSK 1G8

Attention: Jodi Porepa

Email: sfc@fticonsulting.com

Fax: (416) 649-8101

You can also view copies of documents relating to this process on the following website http://cfcanada.fticonsulting.com/sfc/.

 

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SCHEDULE “C”

INSTRUCTIONS TO ORDINARY AFFECTED CREDITORS

URGENT — IMMEDIATE ACTION REQUIRED

— , 2012

 

TO: ORDINARY AFFECTED CREDITORS OF STNO-FOREST CORPORATION

 

Re: Meeting of Affected Creditors of Sino-Forest Corporation to vote on the Plan of Compromise and Reorganization pursuant to the Companies’ Creditors Arrangement Act ( the “Plan ”)

We enclose in this package the following documents for your review and consideration:

 

  1. Notice to Affected Creditors;

 

  2. the Plan proposed in respect of Sino-Forest Corporation;

 

  3. an Information Circular in respect of Sino-Forest Corporation and the Plan;

 

  4, copy of the Meeting Order of the Ontario Superior Court of Justice dated — (the “ Meeting Order ”);

 

  5. copy of the endorsement of the Ontario Superior Court of Justice made on August 31, 2012 (the “Endorsement”); and

 

  6. blank form of Ordinary Affected Creditors’ Proxy, completion instructions and a return envelope.

The purpose of these materials is to enable you to consider the Plan and vote to accept or reject the resolution to approve the Plan at the Meeting of Affected Creditors of Sino-Forest Corporation to be held at 10:00 a,m. on — , 2012 (or such other date as may be set and announced in accordance with the Meeting Order) at the offices of Bennett Jones LLP, 3400 One First Canadian Place, Toronto, Ontario (the “ Meeting ”),

PROXIES

Ordinary Affected Creditors who wish to vote at the Meeting must complete the enclosed Ordinary Affected Creditors’ Proxy and provide it to the Monitor, using the enclosed envelope, or by sending it to the Monitor by facsimile transmission at the fax number noted below or by email (in PDF format) at the email address below, so that it is received by the Monitor no later than 5:00 p.m. (Toronto time) on the third Business Day before the Meeting (or any adjournment thereof). Any Ordinary Affected Creditor must provide the Ordinary Affected Creditors’ Proxy to the Monitor by this deadline to vote at the Meeting of Affected Creditors.

FURTHER INFORMATION

If you have any questions regarding the process or any of the enclosed forms, please contact FTI Consulting Canada Inc. at the following address:

FTI Consulting Canada Inc., the Court-appointed

Monitor of Sino-Forest Corporation

TD Waterhouse Tower

79 Wellington Street West, Suite 2010

P.O. Box 104

Toronto, Ontario M5K 108

Attention: Jodi Porepa

Email: sfc@fticonsulting.com

Fax: (416) 649-8i 0 I

You can also view copies of documents relating to this process on the following website http://cfcanacia,fticonsulting.com/sfc/.

 

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SCHEDULE “D”

INSTRUCTIONS TO REGISTERED NOTEHOLDERS

URGENT — IMMEDIATE ACTION REQUIRED

— , 2012

 

TO: REGISTERED HOLDERS OF SINO-FOREST CORPORATION’S:

 

  (i) US$345,000,000 5.00% CONVERTIBLE SENIOR NOTES DUE 2013 (Rule 144A CUSIP No. 82934HAB7/Regulation S CUSIP No. C83912AB8);

 

  (ii) US$399,517,000 10.25% GUARANTEED SENIOR NOTES DUE 2014 (Rule 144A CUSIP No. 82934H AC5i/Regulation S CUSIP No. C83912AC6);

 

  (iii) US$460,000,000 4.25% CONVERTIBLE SENIOR NOTES DUE 2016 (Rule 144A CUSIP No. 82934HAD3/Regulation S CUSIP No. C83912AD4); and

 

  (iv) US$600,000,000 6.25% GUARANTEED SENIOR NOTES DUE 2017 Rule I44A CUSIP No. 82934HAF8/Regulation S CUSIP No. C83912AF9),

(collectively, the “ Notes ”)

 

Re: Meeting of Affected Creditors of Sino-Forest Corporation to vote on the Plan of Compromise and Reorganization pursuant to the Companies’ Creditors Arrangement Act (the “Plan”)

We enclose in this package the following documents for your review and consideration:

 

  1. Notice to Affected Creditors;

 

  2. the Plan proposed in respect of Sino-Forest Corporation;

 

  3. an Information Circular with respect to Sino-Forest Corporation and the Plan;

  4. copy of the Meeting Order of the Ontario Superior Court of Justice dated • (the “Meeting Order”);

 

  5. copy of the endorsement of the Ontario Superior Court of Justice made on August 31, 2012 (the “ Endorsement ”); and

 

  6. blank form of Noteholders’ Proxy, completion instructions and return envelope.

The purpose of these materials is to provide you with the documents required for dissemination to Beneficial Noteholders to enable Beneficial Noteholders to consider the Plan and to cast their vote to accept or reject the resolution to approve the Plan at the meeting of the Affected Creditors to be held at 10:00 a.m. on — , 2012 (or such other date as may be set and announced in accordance with the Meeting Order) at the offices of Bennett Jones LLP, 3400 One First Canadian Place, Toronto, Ontario (the “ Meeting ”).

IF YOU HOLD NOTES FOR ANOTHER PERSON PROXIES ARE TO BE FILED ONLY BY BENEFICIAL NOTEHOLDERS . IF YOU ARE A TRUST COMPANY, DEPOSITORY, A BROKER, A BOOK ENTRY SYSTEM, AN AGENT, A CUSTODIAN OR ANY OTHER ENTITY WHICH HOLDS NOTES FOR ANOTHER PERSON, PLEASE IMMEDIATELY CONTACT FTI CONSULTING CANADA INC. (THE “MONITOR”) AT THE ADDRESS BELOW TO SO ADVISE IT. THE MONITOR WILL THEN SEND YOU THE MATERIALS SET OUT IN SCHEDULE “B” OF THE MEETING ORDER WHICH HAVE BEEN PREPARED TO ADDRESS YOUR SITUATION.

CLAIM

THE TOTAL AMOUNT OF ALL NOTEHOLDER CLAIMS HAS BEEN FILED BY THE NOTE INDENTURE TRUSTEES. THEREFORE YOU DO NOT HAVE TO PROVIDE A PROOF OF CLAIM.

 

- 2 -

IF YOU ARE A BENEFICIAL NOTEHOLDER

If you are a Beneficial Noteholder (i.e., you own Notes beneficially yourself and do not hold such Notes for the benefit of another person) and you wish to vote at the Meeting, you must complete the enclosed Noteholders’ Proxy and provide it to the Monitor using the enclosed envelope, or by sending it to the Monitor by facsimile transmission at the fax number noted below or by email (in PDF format) at the email address below, so that it is received by the Monitor no later than 5:00 p.m. (Toronto time) on the third Business Day before the Meeting or any adjournment thereof. Beneficial Noteholder must provide the Noteholders’ Proxy to the Monitor by this deadline in order to vote at the Meeting of Affected Creditors.

FURTHER INFORMATION

If you have any questions regarding the process or any of the enclosed forms, please contact FTI Consulting Canada Inc. at the following address:

FTI Consulting Canada Inc., the Court-appointed

Monitor of Sino-Forest Corporation

TD Waterhouse Tower

79 Wellington Street West, Suite 2010

P.O. Box 104

Toronto, Ontario M5K 108

Attention: Jodi Porepa

Email: sfc@fticonsulting.com

Fax: (416) 649 8101

You can also view copies of documents relating to this process on the following website littp://cfcanada.fticonsulting.com/sfc/.

 

- 3 -

SCHEDULE “E”

INSTRUCTIONS TO UNREGISTERED NOTEHOLDERS

URGENT — IMMEDIATE ACTION REQUIRED

— , 2012

 

TO: UNREGISTERED HOLDERS OF SINO-FOREST CORPORATION’S:

 

  (i) US$345,000,000 5.00% CONVERTIBLE SENIOR NOTES DUE 2013 (Rule 144A CUSIP No. 82934HAB7/Regulation S CUSIP No. C83912AB8);

 

  (ii) US$399,517,000 10.25% GUARANTEED SENIOR NOTES DUE 2014 (Rule 144A CUSIP No. 82934HAC5/Regulation S CUSIP No. C83912AC6);

 

  (iii) US$460,000,000 4.25% CONVERTIBLE SENIOR NOTES DUE 2016 (Rule 144A CUSIP No. 82934HAD3/Regulation S CUSIP No. C83912AD4); and

 

  (iv) US$600,000,000 6.25% GUARANTEED SENIOR NOTES DUE 2017 Rule 144A CUSIP No. 82934HAF8/Regulation S CUSIP No. C83912AF9),

(collectively, the “ Notes ”)

 

Re: Meeting of Affected Creditors of Sino-Forest Corporation to vote on the Plan of Compromise and Reorganization pursuant to the Companies’ Creditors Arrangement Act (the “Plan”)

You are considered an Unregistered Noteholder if your Notes are shown by the books and records of the applicable indenture trustee to be held by your broker, DTC or another similar holder (a “ Participant Holder”) on your behalf. If your Notes are held by a Participant Holder, these instructions apply to you.

We enclose in this package the following documents for your review and consideration:

 

  1. Notice to Affected Creditors;

  2. the Plan proposed in respect of Sino-Forest Corporation;

 

  3. an Information Circular with respect to Sino-Forest and the Plan;

 

  4. copy of the Meeting Order of the Ontario Superior Court of Justice dated — (the “Meeting Order”), 2012;

 

  5. copy of the endorsement of the Ontario Superior Court of Justice made on August 31, 2012 (the “Endorsement”); and

 

  6. bank form of Noteholders’ Proxy, completion instructions and return envelope.

The purpose of these materials is to provide you with the documents required to enable you to consider the Plan and to cast your vote to accept or reject the resolution to approve the Plan at the meeting of the Affected Creditors to be held at 10:00 a.m. on — , 2012 (or such other date as may be set and announced in accordance with the Meeting Order) at the offices of Bennett Jones LLP, 3400 One First Canadian Place, Toronto, Ontario (the “Meeting’ ).

CLAIM

THE TOTAL AMOUNT OF ALL THE NOTEHOLDER CLAIMS HAS BEEN FILED BY THE NOTE INDENTURE TRUSTEES. THEREFORE YOU DO NOT HAVE TO PROVIDE A PROOF OF CLAIM . HOWEVER IF YOU WISH TO VOTE ON THE PLAN, YOU MUST COMPLETE THE ENCLOSED NOTEHOLDERS’ PROXY IN ACCORDANCE WITH THE INSTRUCTIONS SET OUT THEREIN AND RETURN IT TO THE MONITOR PRIOR TO 5:00 P.M. (TORONTO TIME) ON THE THIRD BUSINESS DAY BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.

PROXY

The box on page 2 of your proxy should have been completed and signed by your Participant Holder to indicate the principal amount of Notes held by the Participant Holder on your behalf as at the Voting Record Date of — . If it has not been completed and signed. please contact your Participant Holder immediately to arrange for it to be completed and signed . You must complete your portion of the enclosed Noteholders’ Proxy (including paragraph 1 of the proxy) and

 

- 2 -

provide it to FTI Consulting Canada Inc. (the “Monitor”), using the enclosed envelope, or by sending to the Monitor by facsimile transmission at the fax number noted below or by email (in PDF format) at the email address below, so that it is received by the Monitor no later than 5:00 p.m. (Toronto time) on the third Business Day before the Meeting or any adjournment thereof. You must provide the completed proxy to the Monitor by this deadline if you wish to cast your vote at the Meeting of Affected Creditors.

YOU SHOULD NOT SEND THE PROXY TO YOUR PARTICIPANT HOLDER. YOUR PROXY SHOULD BE SENT DIRECTLY TO FTI CONSULTING CANADA INC. IN THE ENVELOPE PROVIDED OR BY FACSIMILE OR EMAIL.

If you have any questions regarding your obligations or the process, or require additional copies of any materials please contact the Monitor at the following address:

The Monitor

FTI Consulting Canada Inc., the Court-appointed

Monitor of Sino-Forest Corporation

TD Waterhouse Tower

79 Wellington Street West, Suite 2010

P.O. Box 104

Toronto, Ontario M5K 1G8

Attention: Jodi Porepa

Email: sfc@fticonsulting.com

Fax: (416) 649-8101

You can also view copies of documents relating to this process on the following website http://cfcanada.fticonsulting.com/sfc/.

 

- 3 -

SCHEDULE “F”

NOTEHOLDERS’ PROXY

For Use by Beneficial Owners of Sino-Forest Corporation’s Notes

MEETING OF AFFECTED CREDITORS OF SINO-FOREST CORPORATION

to be held pursuant to an Order of the Ontario Superior Court of Justice (the “ Meeting Order ”)

in connection with the Plan of Compromise and Reorganization (the “ plan ”)

under the Companies’ Creditors Arrangement Act (Canada) in respect of

Sino-Forest Corporation (“Sino-Forest”)

on — , 2012 at 10:00 a.m.

(or such other date as may be set and announced in accordance with the Meeting Order)

at:

Bennett Jones LLP, 3400 One First Canadian Place

Toronto, Ontario

and at any adjournment thereof.

Before completing this Proxy, please read carefully the instructions accompanying this Proxy for information respecting the proper completion and return of this Proxy.

THIS PROXY MUST BE COMPLETED AND SIGNED BY THE PARTICIPANT HOLDER AND THE UNREGISTERED NOTEHOLDER AND MUST BE PROVIDED TO THE MONITOR, FTI CONSULTING CANADA INC, PRIOR TO 5:00 P.M. TORONTO TIME ON THE THIRD BUSINESS DAY BEFORE THE MEETING (OR ANY ADJOURNMENT THEREOF).

TO BE COMPLETED AND SIGNED BY THE PARTICIPANT HOLDER PRIOR TO SENDING THIS PROXY TO THE BENEFICIAL OWNER OF NOTES
Name of Unregistered Noteholder   
(Client or Principal for whom Notes are held):     
Name of Participant Holder for this Unregistered   
Noteholder’s Notes:     
Account Number:     
Principal Amount of Notes   
Held for this Unregistered Noteholder by series:     
Participant Holder Signature:     
   (Print Name of Contact at Participant Holder)
Phone Number of Participant Holder:    By:                                                                                   
     (Signature of authorized signing officer of
   Participant Holder)
Email Address of Participant Holder:   
    

 

 

 

- 2 -

REMAINDER OF PROXY TO BE COMPLETED BY BENEFICIAL OWNER

THE UNDERSIGNED UNREGISTERED NOTEHOLDER hereby revokes all proxies previously given and nominates, constitutes and appoints                     or, if no person is named, Robert J. Chadwick of Goodmans LLP (or his designee), as nominee of the Unregistered Noteholder, with power of substitution, to attend on behalf of and act for the Unregistered Noteholder at the Meeting of Affected Creditors of Sino-Forest Corporation to be held in connection with the Plan and at any and all adjournments thereof, and to vote the Unregistered Noteholder’s claims in respect of the Notes beneficially owned by it as follows:

 

  A. (mark one only)

¨ VOTE FOR approval of the Plan; or

¨ VOTE AGAINST approval of the Plan;

- and -

 

  B. vote at the nominee’s discretion and otherwise act for and on behalf of the undersigned Unregistered Noteholder with respect to any amendments or variations to the Plan and to any other matters that may come before the Meeting of the Affected Creditors of Sino-Forest Corporation or any adjournment thereof.

If you do not indicate your vote in part “A” above and Robert J. Chadwick of Goodmans LLP (or his designee) is your nominee, he will vote this proxy FOR approval of the Plan.

Please provide below: (i) the Name of each Participant Holder through which the Unregistered Noteholder holds Notes; (ii) the Unregistered Noteholder’s account number with each such Participant Noteholder; and (iii) the principal amount of all Notes held on behalf of the Unregistered Noteholder by each Participant Holder.

 

- 3 -

NAME AND PHONE #

OF PARTICIPANT HOLDER

  

ACCOUNT

NUMBER

  

PRINCIPAL

AMOUNT OF NOTES

AND SERIES

(Please list all Participants Holders

through which you hold Notes)

        (Please identify the series of Notes)

(If additional space is required, please attach a separate page)

 

- 4 -

The Unregistered Noteholder hereby authorizes FTI Consulting Canada Inc. to contact any Participant Holder named above to confirm that the information set out above conforms to the information contained in the records of the Participant Holder.

DATED this             day of            , 2012.

 

 
(Print Name of Unregistered Noteholder)
 
(Signature of Unregistered Noteholder or, if the Unregistered Noteholder is a corporation, signature of an authorized signing officer of the corporation and such officer’s title)
 
Phone Number of Unregistered Noteholder

 

- 5 -

INSTRUCTIONS FOR COMPLETION OF PROXY

 

1. Each Unregistered Noteholder has the right to appoint a person (who need not be a Noteholder) to attend, act and vote for and on the Unregistered Noteholder’s behalf and such right may be exercised by inserting in the space in paragraph 1 the name of the person to be appointed. An individual Unregistered Noteholder wishing to attend and vote in person at the Meeting of Affected Creditors of Sino- Forest Corporation should insert the Unregistered Noteholder’s own name in the space provided. If no name has been inserted in the space provided, the Unregistered Noteholder will be deemed to have appointed Robert J. Chadwick of Goodmans LLP (or his designee) as the Unregistered Noteholder’s proxyholder.

 

2. If Robert J. Chadwick of Goodmans LLP (or his designee) is appointed or deemed to be appointed as proxyholder and the Unregistered Noteholder fails to indicate on this Proxy a vote for or against the approval of the Plan, this Proxy will be voted FOR approval of the Plan.

 

3. The Unregistered Noteholder should insert the principal amount of each series of Notes owned by the Unregistered Noteholder, specifying in each case the applicable Participant Holder and the series of Notes, in the space provided on page 4.

 

4. If this Proxy is not dated in the space provided, it will be deemed to bear the date on which it is received by the Monitor.

 

5. This Proxy must be signed by the Beneficial Owner of the applicable Notes or by his or her attorney duly authorized in writing or, if the Unregistered Noteholder is a corporation, by a duly authorized officer or attorney of the corporation specifying the title of such officer or attorney.

 

6. The Participant Holder must complete and sign the applicable portion of the Proxy (in the box on page 2) PRIOR to sending the Proxy to the Beneficial Owner.

 

- 6 -

7 Valid proxies bearing or deemed to bear a later date will revoke this Proxy. If more than one valid proxy for the same Unregistered Noteholder and bearing or deemed to bear the same date are received with conflicting instructions, such proxies will be treated as disputed proxies and will not be counted.

 

8. This Proxy must be received by the Monitor by no later than 5:00 p.m. (Toronto time) on the third Business Day before the Meeting or any adjournment thereof, at the address set out below:

FTI Consulting Canada Inc., the Court-appointed Monitor of Sino-Forest Corporation

TD Waterhouse Tower

79 Wellington Street West, Suite 2010

P.O. Box 104

Toronto, Ontario M5K 1G8

Attention: Jodi Porepa

Email: sfc@fticonsulting.com

Fax: (416) 649-8101

 

- 7 -

SCHEDULE “G”

ORDINARY AFFECTED CREDITORS’ PROXY

For Use by Ordinary Affected Creditors of Sino-Forest Corporation

MEETING OF AFFECTED CREDITORS OF SINO-FOREST CORPORATION

to be held pursuant to an Order of the Ontario Superior Court of Justice (the “ Meeting Order ”)

in connection with the Plan of Compromise and Reorganization (the “ Plan ”)

under the Companies’ Creditors Arrangement Act (Canada) in respect of

Sino-Forest Corporation (“ Sino-Forest ”)

on — , 2012 at 10:00 a.m.

(or such other date as may be set and announced in accordance with the Meeting Order)

at:

Bennett Jones LLP, 3400 One First Canadian Place

Toronto, Ontario

and at any adjournment thereof.

Before completing this Proxy, please read carefully the instructions accompanying ibis Proxy for information respecting the proper completion and return of this Proxy.

IN ORDER TO VOTE ON THE PLAN, THIS PROXY MUST BE COMPLETED AND SIGNED BY THE ORDINARY AFFECTED CREDITOR AND PROVIDED TO THE MONITOR, FTI CONSULTING CANADA INC., PRIOR TO 5:00 P.M. TORONTO TIME ON THE THIRD BUSINESS DAY BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.

THE UNDERSIGNED ORDINARY AFFECTED CREDITOR hereby revokes all proxies previously given and nominates, constitutes and appoints                or, if no person is named, [insert representative of the Monitor] (or his/her designee), as nominee of the Ordinary Affected Creditor, with power of substitution, to attend on behalf of and act for the Ordinary Affected Creditor at the Meeting of Affected Creditors of Sino-Forest Corporation to be held in connection with the Plan and at any and all adjournments thereof, and to vote the Ordinary Affected Creditor’s Claim as follows:

 

  A. (mark one only)

 

  ¨ VOTE FOR approval of the Plan; or

 

  ¨ VOTE AGAINST approval of the Plan;

- and -

 

  B. vote at the nominee’s discretion and otherwise act for and on behalf of the undersigned Ordinary Affected Creditor with respect to any amendments or variations to the Plan and to any other matters that may come before the Meeting of the Affected Creditors of Sino-Forest Corporation or any adjournment thereof.

If you do not indicate your vote in part “A” above and [insert representative of the Monitor] or his/her designee is your nominee, and he/she will vote this proxy FOR approval of the Plan.

 

- 2 -

Dated this             day of             , 2012.

 

 
(Print Name of Ordinary Affected Creditor)
 
(Signature of Ordinary Affected Creditor or, if the Voting Affected Creditor is a corporation, signature of an authorized signing officer of the corporation and such officer’s name and title)
 
Phone Number of Ordinary Affected Creditor

 

- 3 -

INSTRUCTIONS FOR COMPLETION OF PROXY

 

  1. Each Ordinary Affected Creditor has the right to appoint a person (who need not be a Ordinary Affected Creditor) to attend, act and vote for and on the Ordinary Affected Creditor’s behalf and such right may be exercised by inserting in the space provided the name of the person to be appointed. An individual Ordinary Affected Creditor wishing to attend and vote in person at the Meeting of Affected Creditors of Sino-Forest Corporation should insert the Ordinary Affected Creditor’s own name in the space provided. If no name has been inserted in the space provided, the Ordinary Affected Creditor will be deemed to have appointed [insert representative of Monitor] (or his/her designee) as the Ordinary Affected Creditor’s proxyholder.

 

  2. If [insert representative of Monitor] (or his/her designee) is appointed or deemed to be appointed as proxyholder and the Ordinary Affected Creditor fails to indicate on this Proxy a vote for or against the approval of the Plan, this Proxy will be voted FOR approval of the Plan.

 

  3. If this Proxy is not dated in the space provided, it will be deemed to bear the date on which it is received by the Monitor.

 

  4, This Proxy must be signed by the Ordinary Affected Creditor or by the Ordinary Affected Creditor’s attorney duly authorized in writing or, if the Ordinary Affected Creditor is a corporation, by a duly authorized officer or attorney of the corporation specifying the title of such officer or attorney.

 

  5. Valid proxies bearing or deemed to bear a later date will revoke this Proxy. If more than one valid proxy for the same Ordinary Affected Creditor and bearing or deemed to bear the same date are received with conflicting instructions, such proxies will be treated as disputed proxies and will not be counted.

 

  6. This Proxy must be received by the Monitor by no later than 5:00 p.m. (Toronto time) on the third Business Day before the Meeting or any adjournment thereof, at the address set out below:

 

- 4 -

FTI Consulting Canada lnc., the Court-appointed Monitor of Sino-Forest Corporation

TD Waterhouse Tower

79 Wellington Street West, Suite 2010

P.O. Box 104

Toronto, Ontario M5K 1G8

Attention: Jodi Porepa

Email: sfc@fticonsulting.com

Fax: (416) 649-8101

TOR_LAW\ 7988452\3

 

- 5 -

Court File No.: CV-12-9667-00CL

IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF SINO-FOREST CORPORATION

 

   

 

ONTARIO

SUPERIOR COURT OF JUSTICE

(Commercial List)

 

(PROCEEDING COMMENCED IN TORONTO)

 

   

 

PLAN FILING AND MEETING ORDER

 

   

 

B ENNETT J ONES LLP

Barristers and Solicitors

One First Canadian Place

Suite 3400, P.O. Box 150

Toronto ON

MSX 1A4

 

Robert W. Staley (LSUC #27115J)

Kevin Zych (LSUC #33129T)

DerekJ. Bell (LSUC #43420J)

Raj Sahni (LSUC#42942U)

Jonathan Bell (LSUC #55457P)

Tel: 416-863-1200

Fax: 416-863-1716

 

Lawyers for the Applicant

CITATION : Sino-Forest Corporation (Re), 2012 ONSC 5011

COURT FILE NO .: CV-12-9667-00CL

DATE : 20120831

SUPERIOR COURT OF JUSTICE — ONTARIO

(COMMERCIAL LIST)

 

RE:   IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED
  AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF SINO-FOREST CORPORATION, Applicant
BEFORE:   MORAWETZ J.
COUNSEL:   Jennifer Stam, for the Monitor
HEARD:   AUGUST 31, 2012

ENDORSEMENT

[1] The parties have reached agreement that the requested relief should focus on the issues relating to Plan Filing and a Meeting Order. This will result in a modified order from that originally contemplated.

[2] The Meeting Order is being made on the basis that there has been no determination of (a) the test for approval of the Plan, including (i) the jurisdiction to approve the Plan in its current form; (ii) whether the Plan complies with the CCAA; and (iii) whether any aspect or term of the Plan is fair and reasonable, (b) the validity or quantum of any claims; and (c) the classification of creditors for voting purposes.

[3] Further, nothing in the Order should be interpreted as preventing or restricting or otherwise limiting the ability of any party to oppose a motion for sanction of the Plan.

[4] Monitor’s counsel to attend on Tuesday, September 4, 2012 with a form of Order for my review.

 

LOGO
MORAWETZ  J.

Date: August 31, 2012

SCHEDULE ‘C’

PLAN OF COMPROMISE AND REORGANIZATION

 

1

Court File No. CV-12-9667-00CL

ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

IN THE MATTER OF THE COMPANIES’ CREDITORS

ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED

AND IN THE MATTER OF A PLAN OF COMPROMISE AND

ARRANGEMENT OF SINO-FOREST

CORPORATION

APPLICANT

 

 

PLAN OF COMPROMISE AND REORGANIZATION

pursuant to the Companies’ Creditors Arrangement Act

and the Canada Business Corporations Act

concerning, affecting and involving

SINO-FOREST CORPORATION

 

 

October 19, 2012

ARTICLE 1 INTERPRETATION      3   

1.1 Definitions

     3   

1.2 Certain Rules of Interpretation

     21   

1.3 Currency

     22   

1.4 Successors and Assigns

     22   

1.5 Governing Law

     22   
ARTICLE 2 PURPOSE AND EFFECT OF THE PLAN      22   

2.1 Purpose

     22   

2.2 Claims Affected

     23   

2.3 Unaffected Claims against SFC Not Affected

     23   

2.4 Insurance

     23   

2.5 Claims Procedure Order

     24   
ARTICLE 3 CLASSIFICATION, VOTING AND RELATED MATTERS      25   

3.1 Claims Procedure

     25   

3.2 Classification

     25   

3.3 Unaffected Creditors

     25   

3.4 Creditors’ Meeting

     25   

3.5 Approval by Creditors

     25   
ARTICLE 4 DISTRIBUTIONS, PAYMENTS AND TREATMENT OF CLAIMS      26   

4.1 Affected Creditors

     26   

4.2 Unaffected Creditors

     26   

4.3 Early Consent Noteholders

     27   

4.4 Noteholder Class Action Claimants

     27   

4.5 Equity Claimants

     29   

4.6 Claims of the Trustees and Noteholders

     29   

4.7 Claims of the Third Party Defendants

     29   

4.8 Defence Costs

     29   

4.9 D&O Claims

     30   

4.10 Intercompany Claims

     31   

4.11 Entitlement to Litigation Trust Interests

     32   

4.12 Multiple Affected Claims

     32   

4.13 Interest

     32   

4.14 Existing Shares

     33   

4.15 Canadian Exempt Plans

     33   
ARTICLE 5 DISTRIBUTION MECHANICS      33   

5.1 Letters of Instruction

     33   

5.2 Distribution Mechanics with respect to Newco Shares and Newco Notes

     34   

5.3 Allocation of Litigation Trust Interests

     38   

5.4 Treatment of Undeliverable Distributions

     39   

5.5 Procedure for Distributions Regarding Unresolved Claims

     39   

5.6 Tax Refunds

     41   

5.7 Final Distributions from Reserves

     41   

5.8 Other Payments and Distributions

     42   

5.9 Note Indentures to Remain in Effect Solely for Purpose of Distributions

     42   

5.10 Assignment of Claims for Distribution Purposes

     42   

5.11 Withholding Rights

     43   

5.12 Fractional Interests

     44   
ARTICLE 6 RESTRUCTURING TRANSACTION      44   

6.1 Corporate Actions

     44   

6.2 Incorporation of Newco

     44   

6.3 Incorporation of SFC Escrow Co.

     45   

6.4 Plan Implementation Date Transactions

     45   

6.5 Cancellation of Existing Shares and Notes

     51   

6.6 Transfers and Vesting Free and Clear

     52   
ARTICLE 7 RELEASES      53   

7.1 Plan Releases

     53   

7.2 Claims Not Released

     56   

7.3 Injunctions

     57   

7.4 Timing of Releases and Injunctions

     57   

7.5 Equity Class Action Claims Against the Third Party Defendants

     57   
ARTICLE 8 COURT SANCTION 58   

8.1 Application for Sanction Order

     58   

8.2 Sanction Order

     58   
ARTICLE 9 CONDITIONS PRECEDENT AND IMPLEMENTATION      61   

9.1 Conditions Precedent to Implementation of the Plan

     61   

9.2 Monitor’s Certificate

     66   
ARTICLE 10 ALTERNATIVE SALE TRANSACTION      67   

10.1 Alternative Sale Transaction

     67   
ARTICLE 11 GENERAL      68   

11.1 Binding Effect

     68   

11.2 Waiver of Defaults

     68   

11.3 Deeming Provisions

     69   

11.4 Non-Consummation

     69   

11.5 Modification of the Plan

     69   

11.6 Actions and Approvals of SFC after Plan Implementation

     70   

11.7 Consent of the Initial Consenting Noteholders

     71   

11.8 Claims Not Subject to Compromise

     71   

11.9 Paramountcy

     71   

11.10 Severability of Plan Provisions

     72   

11.11 Responsibilities of the Monitor

     72   

11.12 Different Capacities

     72   

11.13 Notices

     72   

11.14 Further Assurances

     74   

 

- 2 -

PLAN OF COMPROMISE AND REORGANIZATION

WHEREAS Sino-Forest Corporation (“ SFC ”) is insolvent;

AND WHEREAS , on March 30, 2012 (the “ Filing Date ”), the Honourable Justice Morawetz of the Ontario Superior Court of Justice (Commercial List) (the “ Court ”) granted an initial Order in respect of SFC (as such Order may be amended, restated or varied from time to time, the “ Initial Order ”) pursuant to the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36, as amended (the “ CCAA ”) and the Canada Business Corporation Act , R.S.C. 1985, c. C-44, as amended (the “ CBCA ”);

AND WHEREAS , on August 31, 2012, the Court granted a Plan Filing and Meeting Order (as such Order may be amended, restated or varied from time to time, the “ Meeting Order ”) pursuant to which, among other things, SFC was authorized to file this plan of compromise and reorganization and to convene a meeting of affected creditors to consider and vote on this plan of compromise and reorganization.

NOW THEREFORE , SFC hereby proposes this plan of compromise and reorganization pursuant to the CCAA and CBCA.

ARTICLE 1

INTERPRETATION

1.1 Definitions

In the Plan, unless otherwise stated or unless the subject matter or context otherwise requires:

“ 2013 Note Indenture ” means the indenture dated as of July 23, 2008, by and between SFC, the entities listed as subsidiary guarantors therein, and The Bank of New York Mellon, as trustee, as amended, modified or supplemented.

“ 2014 Note Indenture ” means the indenture dated as of July 27, 2009, by and between SFC, the entities listed as subsidiary guarantors therein, and Law Debenture Trust Company of New York, as trustee, as amended, modified or supplemented.

“ 2016 Note Indenture ” means the indenture dated as of December 17, 2009, by and between SFC, the entities listed as subsidiary guarantors therein, and The Bank of New York Mellon, as trustee, as amended, modified or supplemented.

“ 2017 Note Indenture ” means the indenture dated as of October 21, 2010, by and between SFC, the entities listed as subsidiary guarantors therein, and Law Debenture Trust Company of New York, as trustee, as amended, modified or supplemented.

“ 2013 Notes ” means the aggregate principal amount of US$345,000,000 of 5.00% Convertible Senior Notes Due 2013 issued pursuant to the 2013 Note Indenture.

 

- 3 -

“ 2014 Notes ” means the aggregate principal amount of US$399,517,000 of 10.25% Guaranteed Senior Notes Due 2014 issued pursuant to the 2014 Note Indenture.

“ 2016 Notes ” means the aggregate principal amount of US$460,000,000 of 4.25% Convertible Senior Notes Due 2016 issued pursuant to the 2016 Note Indenture.

“ 2017 Notes ” means the aggregate principal amount of US$600,000,000 of 6.25% Guaranteed Senior Notes Due 2017 issued pursuant to the 2017 Note Indenture.

“ Accrued Interest ” means, in respect of any series of Notes, all accrued and unpaid interest on such Notes, at the regular rates provided in the applicable Note Indentures, up to and including the Filing Date.

“ Administration Charge ” has the meaning ascribed thereto in the Initial Order.

“ Administration Charge Reserve ” means the cash reserve to be established by SFC on the Plan Implementation Date in an amount acceptable to the Persons secured by the Administration Charge (having regard to, among other things, any retainers held by Persons secured by the Administration Charge), which cash reserve: (i) shall be maintained and administered by the Monitor, in trust, for the purpose of paying any amounts secured by the Administration Charge; and (ii) upon the termination of the Administration Charge pursuant to the Plan, shall stand in place of the Administration Charge as security for the payment of any amounts secured by the Administration Charge.

“ Affected Claim ” means any Claim, D&O Claim or D&O Indemnity Claim that is not: an Unaffected Claim; a Section 5.1(2) D&O Claim; a Conspiracy Claim; a Continuing Other D&O Claim; a Non-Released D&O Claim; or a Subsidiary Intercompany Claim, and “Affected Claim” includes any Class Action Indemnity Claim. For greater certainty, all of the following are Affected Claims: Affected Creditor Claims; Equity Claims; Noteholder Class Action Claims (other than the Continuing Noteholder Class Action Claims); and Class Action Indemnity Claims.

“ Affected Creditor ” means a Person with an Affected Creditor Claim, but only with respect to and to the extent of such Affected Creditor Claim.

“ Affected Creditor Claim ” means any Ordinary Affected Creditor Claim or Noteholder Claim.

“ Affected Creditors Class ” has the meaning ascribed thereto in section 3.2(a) hereof.

“ Affected Creditors Equity Sub-Pool ” means an amount of Newco Shares representing 92.5% of the Newco Equity Pool.

“ Alternative Sale Transaction ” has the meaning ascribed thereto in section 10.1 hereof.

“ Alternative Sale Transaction Consideration ” has the meaning ascribed thereto in section 10.1 hereof.

 

- 4 -

“ Applicable Law ” means any applicable law, statute, order, decree, consent decree, judgment, rule, regulation, ordinance or other pronouncement having the effect of law whether in Canada, the United States, Hong Kong, the PRC or any other country, or any domestic or foreign state, county, province, city or other political subdivision or of any Governmental Entity.

“ Auditors ” means the former auditors of SFC that are named as defendants to the Class Actions Claims, including for greater certainty Ernst & Young LLP and BDO Limited.

“ Barbados Loans ” means the aggregate amount outstanding at the date hereof pursuant to three loans made by SFC Barbados to SFC in the amounts of US$65,997,468.10 on February 1, 2011, US$59,000,000 on June 7, 2011 and US$176,000,000 on June 7, 2011.

“ Barbados Property ” has the meaning ascribed thereto in section 6.4(k) hereof.

“ BIA ” means the Bankruptcy and Insolvency Act , R. S. C. 1985, c. B-3.

“ Business Day ” means a day, other than Saturday, Sunday or a statutory holiday, on which banks are generally open for business in Toronto, Ontario.

“ Canadian Tax Act ” means the Income Tax Act (Canada) and the Income Tax Regulations , in each case as amended from time to time.

“ CBCA ” has the meaning ascribed thereto in the recitals.

“ CCAA ” has the meaning ascribed thereto in the recitals.

“ CCAA Proceeding ” means the proceeding commenced by SFC under the CCAA on the Filing Date in the Ontario Superior Court of Justice (Commercial List) under court file number CV-12-9667-00CL.

“ Charges ” means the Administration Charge and the Directors’ Charge.

“ Claim ” means any right or claim of any Person that may be asserted or made against SFC, in whole or in part, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind whatsoever, and any interest accrued thereon or costs payable in respect thereof, including by reason of the commission of a tort (intentional or unintentional), by reason of any breach of contract or other agreement (oral or written), by reason of any breach of duty (including any legal, statutory, equitable or fiduciary duty) or by reason of any right of ownership of or title to property or assets or right to a trust or deemed trust (statutory, express, implied, resulting, constructive or otherwise), and whether or not any indebtedness, liability or obligation is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, unsecured, present or future, known or unknown, by guarantee, surety or otherwise, and whether or not any right or claim is executory or anticipatory in nature, including any right or ability of any Person (including any Directors or Officers of SFC or any of the Subsidiaries) to advance a claim for contribution or indemnity or otherwise with respect to any matter, action, cause or chose in action, whether existing at present or commenced in the future, which indebtedness, liability or obligation, and any interest accrued thereon or costs payable in respect thereof (A) is based in whole or in part

 

- 5 -

on facts prior to the Filing Date, (B) relates to a time period prior to the Filing Date, or (C) is a right or claim of any kind that would be a claim provable against SFC in bankruptcy within the meaning of the BIA had SFC become bankrupt on the Filing Date, or is an Equity Claim, a Noteholder Class Action Claim against SFC, a Class Action Indemnity Claim against SFC, a Restructuring Claim or a Lien Claim, provided, however, that “Claim” shall not include a D&O Claim or a D&O Indemnity Claim.

“ Claims Bar Date ” has the meaning ascribed thereto in the Claims Procedure Order.

“ Claims Procedure ” means the procedure established for determining the amount and status of Claims, D&O Claims and D&O Indemnity Claims, including in each case any such claims that are Unresolved Claims, pursuant to the Claims Procedure Order.

“ Claims Procedure Order ” means the Order under the CCAA of the Honourable Justice Morawetz dated May 14, 2012, establishing, among other things, a claims procedure in respect of SFC and calling for claims in respect of the Subsidiaries, as such Order may be amended, restated or varied from time to time.

“ Class Action Claims ” means, collectively, any rights or claims of any kind advanced or which may subsequently be advanced in the Class Actions or in any other similar proceeding, whether a class action proceeding or otherwise, and for greater certainty includes any Noteholder Class Action Claims.

“ Class Actions ” means, collectively, the following proceedings: (i)  Trustees of the Labourers’ Pension Fund of Central and Eastern Canada et al v. Sino-Forest Corporation et al. (Ontario Superior Court of Justice, Court File No. CV-11-431153-00CP); (ii)  Guining Liu v. Sino-Forest Corporation et al. (Quebec Superior Court, Court File No. 200-06-000132-111); (iii)  Allan Haigh v. Sino-Forest Corporation et al. (Saskatchewan Court of Queen’s Bench, Court File No. 2288 of 2011); and (iv)  David Leapard et al. v. Allen T.Y. Chan et al. (District Court of the Southern District of New York, Court File No. 650258/2012).

“ Class Action Court ” means, with respect to the Class Action Claims, the court of competent jurisdiction that is responsible for administering the applicable Class Action Claim.

“ Class Action Indemnity Claim ” means any right or claim of any Person that may be asserted or made in whole or in part against SFC and/or any Subsidiary for indemnity, contribution, reimbursement or otherwise from or in connection with any Class Action Claim asserted against such Person. For greater certainty, Class Action Indemnity Claims are distinct from and do not include Class Action Claims.

“ Consent Date ” means May 15, 2012.

“ Conspiracy Claim ” means any D&O Claim alleging that the applicable Director or Officer committed the tort of civil conspiracy, as defined under Canadian common law.

“ Continuing Noteholder Class Action Claim ” means any Noteholder Class Action Claim that is: (i) a Section 5.1(2) D&O Claim; (ii) a Conspiracy Claim; (iii) a Non-Released D&O Claim; (iv) a Continuing Other D&O Claim; (v) a Noteholder Class Action Claim against one or more

 

- 6 -

Third Party Defendants that is not an Indemnified Noteholder Class Action Claim; (vi) the portion of an Indemnified Noteholder Class Action Claim that is permitted to continue against the Third Party Defendants, subject to the Indemnified Noteholder Class Action Limit, pursuant to section 4.4(b)(i) hereof.

“ Continuing Other D&O Claims ” has the meaning ascribed thereto in section 4.9(b) hereof.

“ Court ” has the meaning ascribed thereto in the recitals.

“D&O Claim” means (i) any right or claim of any Person that may be asserted or made in whole or in part against one or more Directors or Officers of SFC that relates to a Claim for which such Directors or Officers are by law liable to pay in their capacity as Directors or Officers of SFC, or (ii) any right or claim of any Person that may be asserted or made in whole or in part against one or more Directors or Officers of SFC, in that capacity, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind whatsoever, and any interest accrued thereon or costs payable in respect thereof, including by reason of the commission of a tort (intentional or unintentional), by reason of any breach of contract or other agreement (oral or written), by reason of any breach of duty (including any legal, statutory, equitable or fiduciary duty and including, for greater certainty, any monetary administrative or other monetary penalty or claim for costs asserted against any Officer or Director of SFC by any Government Entity) or by reason of any right of ownership of or title to property or assets or right to a trust or deemed trust (statutory, express, implied, resulting, constructive or otherwise), and whether or not any indebtedness, liability or obligation, and any interest accrued thereon or costs payable in respect thereof, is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, unsecured, present or future, known or unknown, by guarantee, surety or otherwise, and whether or not any right or claim is executory or anticipatory in nature, including any right or ability of any Person to advance a claim for contribution or indemnity from any such Directors or Officers of SFC or otherwise with respect to any matter, action, cause or chose in action, whether existing at present or commenced in the future, which indebtedness, liability or obligation, and any interest accrued thereon or costs payable in respect thereof (A) is based in whole or in part on facts prior to the Filing Date, or (B) relates to a time period prior to the Filing Date.

“ D&O Indemnity Claim ” means any existing or future right of any Director or Officer of SFC against SFC that arose or arises as a result of any Person filing a D&O Proof of Claim (as defined in the Claims Procedure Order) in respect of such Director or Officer of SFC for which such Director or Officer of SFC is entitled to be indemnified by SFC.

“ Defence Costs ” has the meaning ascribed thereto in section 4.8 hereof.

“ Director ” means, with respect to SFC or any Subsidiary, anyone who is or was, or may be deemed to be or have been, whether by statute, operation of law or otherwise, a director or de facto director of such SFC Company.

“ Directors’ Charge ” has the meaning ascribed thereto in the Initial Order.

 

- 7 -

“ Directors’ Charge Reserve ” means the cash reserve to be established by SFC on the Plan Implementation Date in an amount acceptable to SFC, the Monitor, Osler Hoskin & Harcourt LLP and the Initial Consenting Noteholders, which cash reserve: (i) shall be maintained by the Monitor, in trust, for the purpose of paying any amounts secured by the Directors’ Charge; and (ii) upon the termination of the Directors’ Charge pursuant to the Plan, shall stand in place of the Directors’ Charge as security for the payment of any amounts secured by the Directors’ Charge.

“ Direct Registration Account ” means, if applicable, a direct registration account administered by the Transfer Agent in which those Persons entitled to receive Newco Shares and/or Newco Notes pursuant to the Plan will hold such Newco Shares and/or Newco Notes in registered form.

“ Direct Registration Transaction Advice ” means, if applicable, a statement delivered by the Monitor, the Trustees, the Transfer Agent or any such Person’s agent to any Person entitled to receive Newco Shares or Newco Notes pursuant to the Plan on the Initial Distribution Date and each subsequent Distribution Date, as applicable, indicating the number of Newco Shares and/or Newco Notes registered in the name of or as directed by the applicable Person in a Direct Registration Account.

“ Direct Subsidiaries ” means, collectively, Sino-Panel Holdings Limited, Sino-Global Holdings Inc., Sino-Panel Corporation, Sino-Capital Global Inc., SFC Barbados, Sino-Forest Resources Inc. Sino-Wood Partners, Limited.

“ Distribution Date ” means the date or dates from time to time set in accordance with the provisions of the Plan to effect distributions in respect of the Proven Claims, excluding the Initial Distribution Date.

“ Distribution Escrow Position ” has the meaning ascribed thereto in section 5.2(d) hereof.

“ Distribution Record Date ” means the Plan Implementation Date, or such other date as SFC, the Monitor and the Initial Consenting Noteholders may agree.

“ DTC ” means The Depository Trust Company, or any successor thereof.

“ Early Consent Equity Sub-Pool ” means an amount of Newco Shares representing 7.5% of the Newco Equity Pool.

“ Early Consent Noteholder ” means any Noteholder that:

 

  (a) (i) as confirmed by the Monitor on June 12, 2012, executed the (A) RSA, (B) a support agreement with SFC and the Direct Subsidiaries in the form of the RSA or (C) a joinder agreement in the form attached as Schedule C to the RSA; (ii) provided evidence satisfactory to the Monitor in accordance with section 2(a) of the RSA of the Notes held by such Noteholder as at the Consent Date (the “ Early Consent Notes ”), as such list of Noteholders and Notes held has been verified and is maintained by the Monitor on a confidential basis; and (iii) continues to hold such Early Consent Notes as at the Distribution Record Date; or

 

- 8 -

  (b) (i) has acquired Early Consent Notes; (ii) has signed the necessary transfer and joinder documentation as required by the RSA and has otherwise acquired such Early Consent Notes in compliance with the RSA; and (iii) continues to hold such Early Consent Notes as at the Distribution Record Date.

“ Effective Time ” means 8:00 a.m. (Toronto time) on the Plan Implementation Date or such other time on such date as SFC, the Monitor and the Initial Consenting Noteholders may agree.

“ Employee Priority Claims ” means the following Claims of employees and former employees of SFC:

 

  (a) Claims equal to the amounts that such employees and former employees would have been qualified to receive under paragraph 136(1)(d) of the BIA if SFC had become bankrupt on the Filing Date; and

 

  (b) Claims for wages, salaries, commissions or compensation for services rendered by them after the Filing Date and on or before the Plan Implementation Date.

“ Encumbrance ” means any security interest (whether contractual, statutory, or otherwise), hypothec, mortgage, trust or deemed trust (whether contractual, statutory, or otherwise), lien, execution, levy, charge, demand, action, liability or other claim, action, demand or liability of any kind whatsoever, whether proprietary, financial or monetary, and whether or not it has attached or been perfected, registered or filed and whether secured, unsecured or otherwise, including: (i) any of the Charges; and (ii) any charge, security interest or claim evidenced by registrations pursuant to the Personal Property Security Act (Ontario) or any other personal property registry system.

“ Equity Cancellation Date ” means the date that is the first Business Day at least 31 days after the Plan Implementation Date, or such other date as may be agreed to by SFC, the Monitor and the Initial Consenting Noteholders.

“ Equity Claim ” means a Claim that meets the definition of “equity claim” in section 2(1) of the CCAA and, for greater certainty, includes any of the following:

 

  (a) any claim against SFC resulting from the ownership, purchase or sale of an equity interest in SFC, including the claims by or on behalf of current or former shareholders asserted in the Class Actions;

 

  (b) any indemnification claim against SFC related to or arising from the claims described in sub-paragraph (a), including any such indemnification claims against SFC by or on behalf of any and all of the Third Party Defendants (other than for Defence Costs, unless any such claims for Defence Costs have been determined to be Equity Claims subsequent to the date of the Equity Claims Order); and

 

  (c) any other claim that has been determined to be an Equity Claim pursuant to an Order of the Court.

 

- 9 -

“ Equity Claimant ” means any Person having an Equity Claim, but only with respect to and to the extent of such Equity Claim.

“ Equity Claimant Class ” has the meaning ascribed thereto in section 3.2(b).

“ Equity Claims Order ” means the Order under the CCAA of the Honourable Justice Morawetz dated July 27, 2012, in respect of Shareholder Claims and Related Indemnity Claims against SFC, as such terms are defined therein.

“ Equity Interest ” has the meaning set forth in section 2(1) of the CCAA.

“ Excluded SFC Assets ” means (i) the rights of SFC to be transferred to the Litigation Trust in accordance with section 6.4(p) hereof; (ii) any entitlement to insurance proceeds in respect of insured Claims, Section 5.1(2) D&O Claims and/or Conspiracy Claims; (iii) any secured property of SFC that is to be returned in satisfaction of a Lien Claim pursuant to section 4.2(c)(i) hereof; (iv) any input tax credits or other refunds received by SFC after the Effective Time; and (v) cash in the aggregate amount of (and for the purpose of): (A) the Litigation Funding Amount; (B) the Unaffected Claims Reserve; (C) the Administration Charge Reserve; (D) the Directors’ Charge Reserve; (E) the Expense Reimbursement; (F) any amounts in respect of Lien Claims to be paid in accordance with section 4.2(c)(ii) hereof; and (G) the Monitor’s Post-Implementation Reserve; (vi) any office space, office furniture or other office equipment owned or leased by SFC in Canada; (vii) the SFC Escrow Co. Share; (viii) Newco Promissory Note 1; and (ix) Newco Promissory Note 2.

“Existing Shares” means all existing shares in the equity of SFC issued and outstanding immediately prior to the Effective Time and all warrants, options or other rights to acquire such shares, whether or not exercised as at the Effective Time.

“ Expense Reimbursement ” means the aggregate amount of (i) the reasonable and documented fees and expenses of the Noteholder Advisors, pursuant to their respective engagement letters with SFC, and other advisors as may be agreed to by SFC and the Initial Consenting Noteholders and (ii) the reasonable fees and expenses of the Initial Consenting Noteholders incurred in connection with the negotiation and development of the RSA and this Plan, including in each case an estimated amount for any such fees and expenses expected to be incurred in connection with the implementation of the Plan, including in the case of (ii) above, an aggregate work fee of up to $5 million (which work fee may, at the request of the Monitor, be paid by any of the Subsidiaries instead of SFC).

“ Filing Date ” has the meaning ascribed thereto in the recitals.

“ Fractional Interests ” has the meaning given in section 5.12 hereof.

“ FTI HK ” means FTI Consulting (Hong Kong) Limited.

“ Governmental Entity ” means any government, regulatory authority, governmental department, agency, commission, bureau, official, minister, Crown corporation, court, board, tribunal or dispute settlement panel or other law, rule or regulation-making organization or entity: (a) having or purporting to have jurisdiction on behalf of any nation, province, territory or state or any other geographic or political subdivision of any of them; or (b) exercising, or entitled or purporting to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power.

 

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“Government Priority Claims” means all Claims of Governmental Entities in respect of amounts that were outstanding as of the Plan Implementation Date and that are of a kind that could be subject to a demand under:

 

  (a) subsections 224(1.2) of the Canadian Tax Act;

 

  (b) any provision of the Canada Pension Plan or the Employment Insurance Act (Canada) that refers to subsection 224(1.2) of the Canadian Tax Act and provides for the collection of a contribution, as defined in the Canada Pension Plan , or employee’s premium or employer’s premium as defined in the Employment Insurance Act (Canada), or a premium under Part VII.1 of that Act, and of any related interest, penalties or other amounts; or

 

  (c) any provision of provincial legislation that has a similar purpose to subsection 224(1.2) of the Canadian Tax Act, or that refers to that subsection, to the extent that it provides for the collection of a sum, and of any related interest, penalties or other amounts, where the sum:

 

  (i) has been withheld or deducted by a person from a payment to another person and is in respect of a tax similar in nature to the income tax imposed on individuals under the Canadian Tax Act; or

 

  (ii) is of the same nature as a contribution under the Canada Pension Plan if the province is a “province providing a comprehensive pension plan” as defined in subsection 3(1) of the Canada Pension Plan and the provincial legislation establishes a “provincial pension plan” as defined in that subsection.

“ Greenheart ” means Greenheart Group Limited, a company established under the laws of Bermuda.

“ Indemnified Noteholder Class Action Claims ” has the meaning ascribed thereto in section 4.4(b)(i) hereof.

“ Indemnified Noteholder Class Action Limit ” means an amount agreed to by SFC, the Monitor, the Initial Consenting Noteholders and counsel to the Ontario Class Action Plaintiffs, or such other amount as is determined by the Court.

“ Initial Consenting Noteholders ” means the Noteholders that executed the RSA on March 30, 2012.

“ Initial Distribution Date ” means a date no more than ten (10) Business Days after the Plan Implementation Date or such other date as SFC, the Monitor and the Initial Consenting Noteholders may agree.

 

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“ Initial Newco Shareholder ” means a Person to be determined by the Initial Consenting Noteholders prior to the Effective Time, with the consent of SFC and the Monitor, to serve as the initial sole shareholder of Newco pursuant to section 6.2 hereof.

“ Initial Order ” has the meaning ascribed thereto in the recitals.

“ Insurance Policies ” means, collectively, the following insurance policies, as well as any other insurance policy pursuant to which SFC or any Director or Officer is insured: ACE INA Insurance Policy Number DO024464; Chubb Insurance Company of Canada Policy Number 8209-4449; Lloyds of London, England Policy Number XTFF0420; Lloyds of London, England Policy Number XTFF0373; and Travelers Guarantee Company of Canada Policy Number 10181108, and “ Insurance Policy ” means any one of the Insurance Policies.

“ Insured Claim ” means all or that portion of any Claim for which SFC is insured and all or that portion of any D&O Claim for which the applicable Director or Officer is insured, in each case pursuant to any of the Insurance Policies.

“ Intellectual Property ” means: (i) patents, and applications for patents, including divisional and continuation patents; (ii) registered and unregistered trade-marks, logos and other indicia of origin, pending trade-mark registration applications, and proposed use application or similar reservations of marks, and all goodwill associated therewith; (iii) registered and unregistered copyrights, including all copyright in and to computer software programs, and applications for and registration of such copyright (including all copyright in and to the SFC Companies’ websites); (iv) world wide web addresses and internet domain names, applications and reservations for world wide web addresses and internet domain names, uniform resource locators and the corresponding internet sites; (v) industrial designs; and (vi) trade secrets and proprietary information not otherwise listed in (i) through (v) above, including all inventions (whether or not patentable), invention disclosures, moral and economic rights of authors and inventors (however denominated), confidential information, technical data, customer lists, corporate and business names, trade names, trade dress, brand names, know-how, formulae, methods (whether or not patentable), designs, processes, procedures, technology, business methods, source codes, object codes, computer software programs (in either source code or object code form), databases, data collections and other proprietary information or material of any type, and all derivatives, improvements and refinements thereof, howsoever recorded, or unrecorded.

“ Letter of Instruction ” means a form, to be completed by each Ordinary Affected Creditor and each Early Consent Noteholder, and that is to be delivered to the Monitor in accordance with section 5.1 hereof, which form shall set out:

 

  (a) the registration details for the Newco Shares and, if applicable, Newco Notes to be distributed to such Ordinary Affected Creditor or Early Consent Noteholder in accordance with the Plan; and

 

  (b) the address to which such Ordinary Affected Creditor’s or Early Consent Noteholder’s Direct Registration Transaction Advice or its Newco Share Certificates and Newco Note Certificates, as applicable, are to be delivered.

 

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“ Lien Claim ” means any Proven Claim of a Person indicated as a secured creditor in Schedule “B” to the Initial Order (other than the Trustees) that is secured by a lien or encumbrance on any property of SFC, which lien is valid, perfected and enforceable pursuant to Applicable Law, provided that the Charges and any Claims in respect of Notes shall not constitute “Lien Claims”.

“ Lien Claimant ” means a Person having a Lien Claim, other than any Noteholder or Trustee in respect of any Noteholder Claim.

“ Litigation Funding Amount ” means a cash amount to be contributed by SFC to the Litigation Trustee for purposes of funding the Litigation Trust on the Plan Implementation Date in accordance with section 6.4(p) hereof.

“ Litigation Trust ” means the trust to be established on the Plan Implementation Date at the time specified in section 6.4(q) in accordance with the Litigation Trust Agreement pursuant to the laws of a jurisdiction that is acceptable to SFC and the Initial Consenting Noteholders, which trust will acquire the Litigation Trust Claims and the Litigation Funding Amount in accordance with the Plan.

“ Litigation Trust Agreement ” means the trust agreement dated as of the Plan Implementation Date, between SFC and the Litigation Trustee, establishing the Litigation Trust.

“ Litigation Trust Claims ” means any and all claims, actions, causes of action, demands, suits, rights, entitlements, litigation, arbitration, proceeding, hearing or complaint, whether known or unknown, reduced to judgment or not reduced to judgment, liquidated or unliquidated, contingent or non-contingent, matured or unmatured, disputed or undisputed, secured or unsecured, assertable directly or derivatively, in law, equity or otherwise, based in whole or in part upon any act or omission or other event occurring before or after the Filing Date that have been or may be asserted by or on behalf of: (i) SFC against any and all third parties; or (ii) the Trustees, the Noteholders or any representative of the Noteholders against any and all Persons in connection with the Notes issued by SFC; provided, however, that in no event shall the Litigation Trust Claims include any claim, right or cause of action against any Person that is released pursuant to Article 7 hereof. For greater certainty: (i) the claims being advanced or that are subsequently advanced in the Class Actions are not being transferred to the Litigation Trust; and (ii) the claims transferred to the Litigation Trust shall not be advanced in the Class Actions.

“ Litigation Trust Interests ” means the beneficial interests in the Litigation Trust to be created on the Plan Implementation Date.

“ Litigation Trustee ” means a Person to be determined by SFC and the Initial Consenting Noteholders prior to the Effective Time, with the consent of the Monitor, to serve as trustee of the Litigation Trust pursuant to and in accordance with the terms thereof.

“ Material ” means a fact, circumstance, change, effect, matter, action, condition, event, occurrence or development that, individually or in the aggregate, is, or would reasonably be expected to be, material to the business, affairs, results of operations or financial condition of the SFC Companies (taken as a whole).

 

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“ Material Adverse Effect ” means a fact, event, change, occurrence, circumstance or condition that, individually or together with any other event, change or occurrence, has or would reasonably be expected to have a material adverse impact on the assets, condition (financial or otherwise), business, liabilities, obligations (whether absolute, accrued, conditional or otherwise) or operations of the SFC Companies (taken as a whole); provided, however, that a Material Adverse Effect shall not include and shall be deemed to exclude the impact of any fact, event, change, occurrence, circumstance or condition resulting from or relating to: (A) changes in Applicable Laws of general applicability or interpretations thereof by courts or Governmental Entities or regulatory authorities, which changes do not have a Material disproportionate effect on the SFC Companies (taken as a whole), (B) any change in the forestry industry generally, which does not have a Material disproportionate effect on the SFC Companies (taken as a whole) (relative to other industry participants operating primarily in the PRC), (C) actions and omissions of any of the SFC Companies required pursuant to the RSA or this Plan or taken with the prior written consent of the Initial Consenting Noteholders, (D) the effects of compliance with the RSA or this Plan, including on the operating performance of the SFC Companies, (E) the negotiation, execution, delivery, performance, consummation, potential consummation or public announcement of the RSA or this Plan or the transactions contemplated thereby or hereby, (F) any change in U.S. or Canadian interest rates or currency exchange rates unless such change has a Material disproportionate effect on the SFC Companies (taken as a whole), and (G) general political, economic or financial conditions in Canada, the United States, Hong Kong or the PRC, which changes do not have a Material disproportionate effect on the SFC Companies (taken as a whole).

“ Meeting ” means the meeting of Affected Creditors, and any adjournment or extension thereof, that is called and conducted in accordance with the Meeting Order for the purpose of considering and voting on the Plan.

“ Meeting Order ” has the meaning ascribed thereto in the recitals.

“ Monitor ” means FTI Consulting Canada Inc., in its capacity as Court-appointed Monitor of SFC in the CCAA Proceeding.

“ Monitor’s Post-Implementation Reserve ” means the cash reserve to be established by SFC on the Plan Implementation Date in an amount acceptable to SFC, the Monitor, and the Initial Consenting Noteholders, which cash reserve shall be maintained and administered by the Monitor for the purpose of administering SFC and the Claims Procedure, as necessary, from and after the Plan Implementation Date.

“ Named Directors and Officers ” means Andrew Agnew, William E. Ardell, James Bowland, Leslie Chan, Michael Cheng, Lawrence Hon, James M.E. Hyde, Richard M. Kimel, R. John (Jack) Lawrence, Jay A. Lefton, Edmund Mak, Tom Maradin, Judson Martin, Simon Murray, James F. O’Donnell, William P. Rosenfeld, Peter Donghong Wang, Garry West and Kee Y. Wong, in their respective capacities as Directors or Officers, and “ Named Director or Officer ” means any one of them.

 

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“ Newco ” means the new corporation to be incorporated pursuant to section 6.2 hereof under the laws of the Cayman Islands or such other jurisdiction as agreed to by SFC, the Monitor and the Initial Consenting Noteholders.

“ Newco Equity Pool ” means all of the Newco Shares to be issued by Newco on the Plan Implementation Date. The number of Newco Shares to be issued on the Plan Implementation Date shall be agreed by SFC, the Monitor and the Initial Consenting Noteholders prior to the Plan Implementation Date.

“ Newco Note Certificate ” means a certificate evidencing Newco Notes.

“ Newco Notes ” means the new notes to be issued by Newco on the Plan Implementation Date in the aggregate principal amount of $300,000,000, on such terms and conditions as are satisfactory to the Initial Consenting Noteholders and SFC, acting reasonably.

“ Newco Promissory Note 1 ”, “ Newco Promissory Note 2 ”, “ Newco Promissory Note 3 ” and “ Newco Promissory Notes ” have the meanings ascribed thereto in sections 6.4(l), 6.4(n), 6.4(o) and 6.4(r) hereof, respectively.

“ Newco Share Certificate ” means a certificate evidencing Newco Shares.

“ Newco Shares ” means common shares in the capital of Newco.

“ Non-Released D&O Claims ” has the meaning ascribed thereto in section 4.9(f) hereof.

“ Noteholder Advisors ” means Goodmans LLP, Hogan Lovells and Conyers, Dill & Pearman LLP in their capacity as legal advisors to the Initial Consenting Noteholders, and Moelis & Company LLC and Moelis and Company Asia Limited, in their capacity as the financial advisors to the Initial Consenting Noteholders.

“ Noteholder Claim ” means any Claim by a Noteholder (or a Trustee or other representative on the Noteholder’s behalf) in respect of or in relation to the Notes owned or held by such Noteholder, including all principal and Accrued Interest payable to such Noteholder pursuant to such Notes or the Note Indentures, but for greater certainty does not include any Noteholder Class Action Claim.

“ Noteholder Class Action Claim ” means any Class Action Claim, or any part thereof, against SFC, any of the Subsidiaries, any of the Directors and Officers of SFC or the Subsidiaries, any of the Auditors, any of the Underwriters and/or any other defendant to the Class Action Claims that relates to the purchase, sale or ownership of Notes, but for greater certainty does not include a Noteholder Claim.

“ Noteholder Class Action Claimant ” means any Person having or asserting a Noteholder Class Action Claim.

“ Noteholder Class Action Representative ” means an individual to be appointed by counsel to the Ontario Class Action Plaintiffs.

 

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“ Noteholders ” means, collectively, the beneficial owners of Notes as of the Distribution Record Date and, as the context requires, the registered holders of Notes as of the Distribution Record Date, and “ Noteholder ” means any one of the Noteholders.

“ Note Indentures ” means, collectively, the 2013 Note Indenture, the 2014 Note Indenture, the 2016 Note Indenture and the 2017 Note Indenture.

“ Notes ” means, collectively, the 2013 Notes, the 2014 Notes, the 2016 Notes and the 2017 Notes.

“ Officer ” means, with respect to SFC or any Subsidiary, anyone who is or was, or may be deemed to be or have been, whether by statute, operation of law or otherwise, an officer or de facto officer of such SFC Company.

“ Ontario Class Action Plaintiffs ” means the plaintiffs in the Ontario class action case styled as Trustees of the Labourers’ Pension Fund of Central and Eastern Canada et al v. Sino-Forest Corporation et al. (Ontario Superior Court of Justice, Court File No. CV-11-431153-00CP).

“ Order ” means any order of the Court made in connection with the CCAA Proceeding or this Plan.

“ Ordinary Affected Creditor ” means a Person with an Ordinary Affected Creditor Claim.

“ Ordinary Affected Creditor Claim ” means a Claim that is not: an Unaffected Claim; a Noteholder Claim; an Equity Claim; a Subsidiary Intercompany Claim; a Noteholder Class Action Claim; or a Class Action Indemnity Claim (other than a Class Action Indemnity Claim by any of the Third Party Defendants in respect of the Indemnified Noteholder Class Action Claims).

“ Other Directors and/or Officers ” means any Directors and/or Officers other than the Named Directors and Officers.

“ Person ” means any individual, sole proprietorship, limited or unlimited liability corporation, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, body corporate, joint venture, trust, pension fund, union, Governmental Entity, and a natural person including in such person’s capacity as trustee, heir, beneficiary, executor, administrator or other legal representative.

“ Plan ” means this Plan of Compromise and Reorganization filed by SFC pursuant to the CCAA and the CBCA, as such Plan may be amended, supplemented or restated from time to time in accordance with the terms hereof or an Order.

“ Plan Implementation Date ” means the Business Day on which this Plan becomes effective, which shall be the Business Day on which the Monitor has filed with the Court the certificate contemplated in section 9.2 hereof, or such other date as SFC, the Monitor and the Initial Consenting Noteholders may agree.

“ PRC ” means the People’s Republic of China.

 

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“ Proof of Claim ” means the “Proof of Claim” referred to in the Claims Procedure Order, substantially in the form attached to the Claims Procedure Order.

“ Pro-Rata ” means:

 

  (a) with respect to any Noteholder in relation to all Noteholders, the proportion of (i) the principal amount of Notes beneficially owned by such Noteholder as of the Distribution Record Date plus the Accrued Interest owing on such Notes as of the Filing Date, in relation to (ii) the aggregate principal amount of all Notes outstanding as of the Distribution Record Date plus the aggregate of all Accrued Interest owing on all Notes as of the Filing Date;

 

  (b) with respect to any Early Consent Noteholder in relation to all Early Consent Noteholders, the proportion of the principal amount of Early Consent Notes beneficially owned by such Early Consent Noteholder as of the Distribution Record Date in relation to the aggregate principal amount of Early Consent Notes held by all Early Consent Noteholders as of the Distribution Record Date; and

 

  (c) with respect to any Affected Creditor in relation to all Affected Creditors, the proportion of such Affected Creditor’s Affected Creditor Claim as at any relevant time in relation to the aggregate of all Proven Claims and Unresolved Claims of Affected Creditors as at that time.

“ Proven Claim ” means an Affected Creditor Claim to the extent that such Affected Creditor Claim is finally determined and valued in accordance with the provisions of the Claims Procedure Order, the Meeting Order or any other Order, as applicable.

“ Released Claims ” means all of the rights, claims and liabilities of any kind released pursuant to Article 7 hereof.

“ Released Parties ” means, collectively, those Persons released pursuant to Article 7 hereof, but only to the extent so released, and each such Person is referred to individually as a “ Released Party ”.

“ Required Majority ” means a majority in number of Affected Creditors with Proven Claims, and two-thirds in value of the Proven Claims held by such Affected Creditors, in each case who vote (in person or by proxy) on the Plan at the Meeting.

“ Remaining Post-Implementation Reserve Amount ” has the meaning ascribed thereto in section 5.7(b) hereof.

“ Restructuring Claim ” means any right or claim of any Person that may be asserted or made in whole or in part against SFC, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind arising out of the restructuring, termination, repudiation or disclaimer of any lease, contract, or other agreement or obligation on or after the Filing Date and whether such restructuring, termination, repudiation or disclaimer took place or takes place before or after the date of the Claims Procedure Order.

 

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“ Restructuring Transaction ” means the transactions contemplated by this Plan (including any Alternative Sale Transaction that occurs pursuant to section 10.1 hereof).

“ RSA ” means the Restructuring Support Agreement executed as of March 30, 2012 by SFC, the Direct Subsidiaries and the Initial Consenting Noteholders, and subsequently executed or otherwise agreed to by the Early Consent Noteholders, as such Restructuring Support Agreement may be amended, restated and varied from time to time in accordance with its terms.

“ Sanction Date ” means the date that the Sanction Order is granted by the Court.

“ Sanction Order ” means the Order of the Court sanctioning and approving this Plan.

“ Section 5.1(2) D&O Claim ” means any D&O Claim that is not permitted to be compromised pursuant to section 5.1(2) of the CCAA, but only to the extent not so permitted, provided that any D&O Claim that qualifies as a Non-Released D&O Claim or a Continuing Other D&O Claim shall not constitute a Section 5.1(2) D&O Claim.

“ SFC ” has the meaning ascribed thereto in the recitals.

“ SFC Advisors ” means Bennett Jones LLP, Appleby Global Group, King & Wood Mallesons and Linklaters LLP, in their respective capacities as legal advisors to SFC, and Houlihan Lokey Howard & Zukin Capital, Inc., in its capacity as financial advisor to SFC.

“ SFC Assets ” means all of SFC’s right, title and interest in and to all of SFC’s properties, assets and rights of every kind and description (including all restricted and unrestricted cash, contracts, real property, receivables or other debts owed to SFC, Intellectual Property, SFC’s corporate name and all related marks, all of SFC’s ownership interests in the Subsidiaries (including all of the shares of the Direct Subsidiaries and any other Subsidiaries that are directly owned by SFC immediately prior to the Effective Time), all of SFC’s ownership interest in Greenheart and its subsidiaries, all SFC Intercompany Claims and a right to the Remaining Post-Implementation Reserve Amount), other than the Excluded SFC Assets.

“ SFC Barbados ” means Sino-Forest International (Barbados) Corporation, a wholly-owned subsidiary of SFC established under the laws of Barbados.

“ SFC Business ” means the business operated by the SFC Companies.

“ SFC Continuing Shareholder ” means the Litigation Trustee or such other Person as may be agreed to by the Monitor and the Initial Consenting Noteholders.

“ SFC Companies ” means, collectively, SFC and all of the Subsidiaries, and “ SFC Company ” means any of them.

“ SFC Escrow Co. ” means the company to be incorporated as a wholly-owned subsidiary of SFC pursuant to section 6.3 hereof under the laws of the Cayman Islands or such other jurisdiction as agreed to by SFC, the Monitor and the Initial Consenting Noteholders.

“ SFC Escrow Co. Share ” has the meaning ascribed thereto in section 6.3 hereof.

 

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“ SFC Intercompany Claim ” means any amount owing to SFC by any Subsidiary or Greenheart and any claim by SFC against any Subsidiary or Greenheart.

“ Subsidiaries ” means all direct and indirect subsidiaries of SFC, other than (i) Greenheart and its direct and indirect subsidiaries and (ii) SFC Escrow Co., and “ Subsidiary ” means any one of the Subsidiaries.

“ Subsidiary Intercompany Claim ” means any Claim by any Subsidiary or Greenheart against SFC.

“ Tax ” or “ Taxes ” means any and all federal, provincial, municipal, local and foreign taxes, assessments, reassessments and other governmental charges, duties, impositions and liabilities including for greater certainty taxes based upon or measured by reference to income, gross receipts, profits, capital, transfer, land transfer, sales, goods and services, harmonized sales, use, value-added, excise, withholding, business, franchising, property, development, occupancy, employer health, payroll, employment, health, social services, education and social security taxes, all surtaxes, all customs duties and import and export taxes, all licence, franchise and registration fees and all employment insurance, health insurance and government pension plan premiums or contributions, together with all interest, penalties, fines and additions with respect to such amounts.

“ Taxing Authorities ” means any one of Her Majesty the Queen, Her Majesty the Queen in right of Canada, Her Majesty the Queen in right of any province or territory of Canada, the Canada Revenue Agency, any similar revenue or taxing authority of Canada and each and every province or territory of Canada and any political subdivision thereof, any similar revenue or taxing authority of the United States, the PRC, Hong Kong or other foreign state and any political subdivision thereof, and any Canadian, United States, Hong Kong, PRC or other government, regulatory authority, government department, agency, commission, bureau, minister, court, tribunal or body or regulation-making entity exercising taxing authority or power, and “ Taxing Authority ” means any one of the Taxing Authorities.

“ Third Party Defendants ” means any defendants to the Class Action Claims (present or future) other than SFC, the Subsidiaries, the Named Directors and Officers or the Trustees.

“ Transfer Agent ” means Computershare Limited (or a subsidiary or affiliate thereof) or such other transfer agent as Newco may appoint, with the prior written consent of the Monitor and the Initial Consenting Noteholders.

“ Trustee Claims ” means any rights or claims of the Trustees against SFC under the Note Indentures for compensation, fees, expenses, disbursements or advances, including reasonable legal fees and expenses, incurred or made by or on behalf of the Trustees before or after the Plan Implementation Date in connection with the performance of their respective duties under the Note Indentures or this Plan.

“ Trustees ” means, collectively, The Bank of New York Mellon in its capacity as trustee for the 2013 Notes and the 2016 Notes, and Law Debenture Trust Company of New York in its capacity as trustee for the 2014 Notes and the 2017 Notes, and “ Trustee ” means either one of them.

 

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“ Unaffected Claim ” means any:

 

  (a) Claim secured by any of the Charges (provided that, following the discharge of the Charges on the Plan Implementation Date, such Claims shall be paid from and limited to recovery as against the Administration Charge Reserve or the Directors’ Charge Reserve, as applicable, in accordance with section 4.2(b) hereof);

 

  (b) Government Priority Claim;

 

  (c) Employee Priority Claim;

 

  (d) Lien Claim;

 

  (e) any other Claim of any employee, former employee, Director or Officer of SFC in respect of wages, vacation pay, bonuses, termination pay, severance pay or other remuneration payable to such Person by SFC;

 

  (f) Trustee Claims; and

 

  (g) any trade payables that were incurred by SFC (i) after the Filing Date but before the Plan Implementation Date; and (ii) in compliance with the Initial Order or other Order issued in the CCAA Proceeding.

“ Unaffected Claims Reserve ” means the cash reserve to be established by SFC on the Plan Implementation Date and maintained by the Monitor, in escrow, for the purpose of paying certain Unaffected Claims in accordance with section 4.2 hereof.

“ Unaffected Creditor ” means a Person who has an Unaffected Claim, but only in respect of and to the extent of such Unaffected Claim.

“ Undeliverable Distribution ” has the meaning ascribed thereto in section 5.4.

“ Underwriters ” means any underwriters of SFC that are named as defendants in the Class Action Claims, including for greater certainty Credit Suisse Securities (Canada), Inc., TD Securities Inc., Dundee Securities Corporation, RBC Dominion Securities Inc., Scotia Capital Inc., CIBC World Markets Inc., Merrill Lynch Canada Inc., Canaccord Financial Ltd., Maison Placements Canada Inc., Credit Suisse Securities (USA) LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated (successor by merger to Banc of America Securities LLC).

“ Unresolved Claim ” means an Affected Creditor Claim in respect of which a Proof of Claim has been filed in a proper and timely manner in accordance with the Claims Procedure Order but that, as at any applicable time, has not been finally (i) determined to be a Proven Claim or (ii) disallowed in accordance with the Claims Procedure Order, the Meeting Order or any other Order.

“ Unresolved Claims Escrow Agent ” means SFC Escrow Co. or such other Person as may be agreed by SFC, the Monitor and the Initial Consenting Noteholders.

 

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“ Unresolved Claims Reserve ” means the reserve of Newco Shares, Newco Notes and Litigation Trust Interests, if any, to be established pursuant to sections 6.4(i)(ii) and 6.4(s) hereof in respect of Unresolved Claims as at the Plan Implementation Date, which reserve shall be held and maintained by the Unresolved Claims Escrow Agent, in escrow, for distribution in accordance with the Plan.

“ Website ” means the website maintained by the Monitor in respect of the CCAA Proceeding pursuant to the Initial Order at the following web address: http://cfcanada.fticonsulting.com/sfc.

1.2 Certain Rules of Interpretation

For the purposes of the Plan:

 

  (a) any reference in the Plan to an Order, agreement, contract, instrument, indenture, release, exhibit or other document means such Order, agreement, contract, instrument, indenture, release, exhibit or other document as it may have been or may be validly amended, modified or supplemented;

 

  (b) the division of the Plan into “articles” and “sections” and the insertion of a table of contents are for convenience of reference only and do not affect the construction or interpretation of the Plan, nor are the descriptive headings of “articles” and “sections” intended as complete or accurate descriptions of the content thereof;

 

  (c) unless the context otherwise requires, words importing the singular shall include the plural and vice versa , and words importing any gender shall include all genders;

 

  (d) the words “includes” and “including” and similar terms of inclusion shall not, unless expressly modified by the words “only” or “solely”, be construed as terms of limitation, but rather shall mean “includes but is not limited to” and “including but not limited to”, so that references to included matters shall be regarded as illustrative without being either characterizing or exhaustive;

 

  (e) unless otherwise specified, all references to time herein and in any document issued pursuant hereto mean local time in Toronto, Ontario and any reference to an event occurring on a Business Day shall mean prior to 5:00 p.m. (Toronto time) on such Business Day;

 

  (f) unless otherwise specified, time periods within or following which any payment is to be made or act is to be done shall be calculated by excluding the day on which the period commences and including the day on which the period ends and by extending the period to the next succeeding Business Day if the last day of the period is not a Business Day;

 

  (g)

unless otherwise provided, any reference to a statute or other enactment of parliament or a legislature includes all regulations made thereunder, all amendments to or re-enactments of such statute or regulations in force from time

 

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  to time, and, if applicable, any statute or regulation that supplements or supersedes such statute or regulation; and

 

  (h) references to a specified “article” or “section” shall, unless something in the subject matter or context is inconsistent therewith, be construed as references to that specified article or section of the Plan, whereas the terms “the Plan”, “hereof”, “herein”, “hereto”, “hereunder” and similar expressions shall be deemed to refer generally to the Plan and not to any particular “article”, “section” or other portion of the Plan and include any documents supplemental hereto.

1.3 Currency

For the purposes of this Plan, all amounts shall be denominated in Canadian dollars and all payments and distributions to be made in cash shall be made in Canadian dollars. Any Claims or other amounts denominated in a foreign currency shall be converted to Canadian dollars at the Reuters closing rate on the Filing Date.

1.4 Successors and Assigns

The Plan shall be binding upon and shall enure to the benefit of the heirs, administrators, executors, legal personal representatives, successors and assigns of any Person named or referred to in the Plan.

1.5 Governing Law

The Plan shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. All questions as to the interpretation of or application of the Plan and all proceedings taken in connection with the Plan and its provisions shall be subject to the jurisdiction of the Court.

ARTICLE 2

PURPOSE AND EFFECT OF THE PLAN

2.1 Purpose

The purpose of the Plan is:

 

  (a) to effect a full, final and irrevocable compromise, release, discharge, cancellation and bar of all Affected Claims;

 

  (b) to effect the distribution of the consideration provided for herein in respect of Proven Claims;

 

  (c) to transfer ownership of the SFC Business to Newco, free and clear of all claims against SFC and certain related claims against the Subsidiaries, so as to enable the SFC Business to continue on a viable, going concern basis; and

 

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  (d) to allow Affected Creditors and Noteholder Class Action Claimants to benefit from contingent value that may be derived from litigation claims to be advanced by the Litigation Trustee.

The Plan is put forward in the expectation that the Persons with an economic interest in SFC, when considered as a whole, will derive a greater benefit from the implementation of the Plan and the continuation of the SFC Business as a going concern than would result from a bankruptcy or liquidation of SFC.

2.2 Claims Affected

The Plan provides for, among other things, the full, final and irrevocable compromise, release, discharge, cancellation and bar of Affected Claims and effectuates the restructuring of SFC. The Plan will become effective at the Effective Time on the Plan Implementation Date, other than such matters occurring on the Equity Cancellation Date (if the Equity Cancellation date does not occur on the Plan Implementation Date) which will occur and be effective on such date, and the Plan shall be binding on and enure to the benefit of SFC, the Subsidiaries, Newco, SFC Escrow Co., any Person having an Affected Claim, the Directors and Officers of SFC and all other Persons named or referred to in, or subject to, the Plan, as and to the extent provided for in the Plan.

2.3 Unaffected Claims against SFC Not Affected

Any amounts properly owing by SFC in respect of Unaffected Claims will be satisfied in accordance with section 4.2 hereof. Consistent with the foregoing, all liabilities of the Released Parties in respect of Unaffected Claims (other than the obligation of SFC to satisfy such Unaffected Claims in accordance with section 4.2 hereof) will be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred pursuant to Article 7 hereof. Nothing in the Plan shall affect SFC’s rights and defences, both legal and equitable, with respect to any Unaffected Claims, including all rights with respect to legal and equitable defences or entitlements to set-offs or recoupments against such Unaffected Claims.

2.4 Insurance

 

  (a) Subject to the terms of this section 2.4, nothing in this Plan shall prejudice, compromise, release, discharge, cancel, bar or otherwise affect any right, entitlement or claim of any Person against SFC or any Director or Officer, or any insurer, in respect of an Insurance Policy or the proceeds thereof.

 

  (b)

Nothing in this Plan shall prejudice, compromise, release or otherwise affect any right or defence of any such insurer in respect of any such Insurance Policy. Furthermore, nothing in this Plan shall prejudice, compromise, release or otherwise affect (i) any right of subrogation any such insurer may have against any Person, including against any Director or Officer in the event of a determination of fraud against SFC or any Director or Officer in respect of whom such a determination is specifically made, and /or (ii) the ability of such insurer to claim repayment of Defense Costs (as defined in any such policy) from SFC and/or any Director or Officer in the event that the party from whom repayment is

 

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  sought is not entitled to coverage under the terms and conditions of any such Insurance Policy

 

  (c) Notwithstanding anything herein (including section 2.4(b) and the releases and injunctions set forth in Article 7 hereof), but subject to section 2.4(d) hereof, all Insured Claims shall be deemed to remain outstanding and are not released following the Plan Implementation Date, but recovery as against SFC and the Named Directors and Officers is limited only to proceeds of Insurance Policies that are available to pay such Insured Claims, either by way of judgment or settlement. SFC and the Directors or Officers shall make all reasonable efforts to meet all obligations under the Insurance Policies. The insurers agree and acknowledge that they shall be obliged to pay any Loss payable pursuant to the terms and conditions of their respective Insurance Policies notwithstanding the releases granted to SFC and the Named Directors and Officers under this Plan, and that they shall not rely on any provisions of the Insurance Policies to argue, or otherwise assert, that such releases excuse them from, or relieve them of, the obligation to pay Loss that otherwise would be payable under the terms of the Insurance Policies. For greater certainty, the insurers agree and consent to a direct right of action against the insurers, or any of them, in favour of any plaintiff who or which has (a) negotiated a settlement of any Claim covered under any of the Insurance Policies, which settlement has been consented to in writing by the insurers or such of them as may be required or (b) obtained a final judgment against one or more of SFC and/or the Directors or Officers which such plaintiff asserts, in whole or in part, represents Loss covered under the Insurance Policies, notwithstanding that such plaintiff is not a named insured under the Insurance Policies and that neither SFC nor the Directors or Officers are parties to such action.

 

  (d) Notwithstanding anything in this section 2.4, from and after the Plan Implementation Date, any Person having an Insured Claim shall, as against SFC and the Named Directors and Officers, be irrevocably limited to recovery solely from the proceeds of the Insurance Policies paid or payable on behalf of SFC or its Directors or Officers, and Persons with any Insured Claims shall have no right to, and shall not, directly or indirectly, make any claim or seek any recoveries from SFC, any of the Named Directors and Officers, any of the Subsidiaries or Newco, other than enforcing such Person’s rights to be paid from the proceeds of an Insurance Policy by the applicable insurer(s), and this section 2.4(d) may be relied upon and raised or pled by SFC, Newco, any Subsidiary and any Named Director and Officer in defence or estoppel of or to enjoin any claim, action or proceeding brought in contravention of this section

2.5 Claims Procedure Order

For greater certainty, nothing in this Plan revives or restores any right or claim of any kind that is barred or extinguished pursuant to the terms of the Claims Procedure Order, provided that nothing in this Plan, the Claims Procedure Order or any other Order compromises, releases,

 

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discharges, cancels or bars any claim against any Person for fraud or criminal conduct, regardless of whether or not any such claim has been asserted to date.

ARTICLE 3

CLASSIFICATION, VOTING AND RELATED MATTERS

3.1 Claims Procedure

The procedure for determining the validity and quantum of the Affected Claims shall be governed by the Claims Procedure Order, the Meeting Order, the CCAA, the Plan and any other Order, as applicable. SFC, the Monitor and any other creditor in respect of its own Claim, shall have the right to seek the assistance of the Court in valuing any Claim, whether for voting or distribution purposes, if required, and to ascertain the result of any vote on the Plan.

3.2 Classification

 

  (a) The Affected Creditors shall constitute a single class, the “ Affected Creditors Class ”, for the purposes of considering and voting on the Plan.

 

  (b) The Equity Claimants shall constitute a single class, separate from the Affected Creditors Class, but shall not, and shall have no right to, attend the Meeting or vote on the Plan in such capacity.

3.3 Unaffected Creditors

No Unaffected Creditor, in respect of an Unaffected Claim, shall:

 

  (a) be entitled to vote on the Plan;

 

  (b) be entitled to attend the Meeting; or

 

  (c) receive any entitlements under this Plan in respect of such Unaffected Creditor’s Unaffected Claims (other than its right to have its Unaffected Claim addressed in accordance with section 4.2 hereof).

3.4 Creditors’ Meeting

The Meeting shall be held in accordance with the Plan, the Meeting Order and any further Order of the Court. The only Persons entitled to attend and vote on the Plan at the Meeting are those specified in the Meeting Order.

3.5 Approval by Creditors

In order to be approved, the Plan must receive the affirmative vote of the Required Majority of the Affected Creditors Class.

 

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ARTICLE 4

DISTRIBUTIONS, PAYMENTS AND TREATMENT OF CLAIMS

4.1 Affected Creditors

All Affected Creditor Claims shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date. Each Affected Creditor that has a Proven Claim shall be entitled to receive the following in accordance with the Plan:

 

  (a) such Affected Creditor’s Pro-Rata number of the Newco Shares to be issued by Newco from the Affected Creditors Equity Sub-Pool in accordance with the Plan;

 

  (b) such Affected Creditor’s Pro-Rata amount of the Newco Notes to be issued by Newco in accordance with the Plan; and

 

  (c) such Affected Creditor’s Pro-Rata share of the Litigation Trust Interests to be allocated to the Affected Creditors in accordance with 4.11 hereof and the terms of the Litigation Trust.

From and after the Plan Implementation Date, each Affected Creditor, in such capacity, shall have no rights as against SFC in respect of its Affected Creditor Claim.

4.2 Unaffected Creditors

Each Unaffected Claim that is finally determined as such, as to status and amount, and that is finally determined to be valid and enforceable against SFC, in each case in accordance with the Claims Procedure Order or other Order:

 

  (a) subject to sections 4.2(b) and 4.4(c) hereof, shall be paid in full from the Unaffected Claims Reserve and limited to recovery against the Unaffected Claims Reserve, and Persons with Unaffected Claims shall have no right to, and shall not, make any claim or seek any recoveries from any Person in respect of Unaffected Claims, other than enforcing such Person’s right against SFC to be paid from the Unaffected Claims Reserve;

 

  (b) in the case of Claims secured by the Administration Charge or the Directors’ Charge, shall, if billed or invoiced prior to the Plan Implementation Date, be paid prior to the Effective Time and, if billed or invoiced to SFC after the Plan Implementation Date, be paid in the ordinary course from the Administration Charge Reserve (in the case of claims secured by the Administration Charge) or the Directors’ Charge Reserve (in the case of claims secured by the Directors’ Charge), and all Claims secured by the Administration Charge shall be limited to recovery against the Administration Charge Reserve and all Claims secured by the Directors’ Charge shall be limited to recovery against the Directors’ Charge Reserve, and Persons with Claims secured by the Administration Charge or the Directors’ Charge shall have no right to, and shall not, make any claim or seek any recoveries from any Person in respect of such Claims, other than enforcing such Person’s right against the Administration Charge Reserve or the Directors’ Charge Reserve, respectively; and

 

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  (c) in the case of Lien Claims:

 

  (i) at the election of the Initial Consenting Noteholders, and with the consent of the Monitor, SFC shall satisfy such Lien Claim by the return of the applicable property of SFC that is secured as collateral for such Lien Claim, and the applicable Lien Claimant shall be limited to its recovery against such secured property in respect of such Lien Claim.

 

  (ii) if the Initial Consenting Noteholders do not elect to satisfy such Lien Claim by the return of the applicable secured property: (A) SFC shall repay the Lien Claim in full in cash on the Plan Implementation Date; and (B) the security held by the applicable Lien Claimant over the property of SFC shall be fully, finally, irrevocably and forever released, discharged, cancelled and barred; and

 

  (iii) upon the satisfaction of a Lien Claim in accordance with sections 4.2(b) and 4.4(c) hereof, such Lien Claims shall be fully, finally, irrevocably and forever released, discharged, cancelled and barred.

4.3 Early Consent Noteholders

As additional consideration for the compromise, release, discharge, cancellation and bar of the Affected Creditor Claims in respect of its Notes, each Early Consent Noteholder shall receive (in addition to the consideration it is entitled to receive in accordance with section 4.1 hereof) its Pro-Rata number of the Newco Shares to be issued by Newco from the Early Consent Equity Sub-Pool in accordance with the Plan.

4.4 Noteholder Class Action Claimants

 

  (a) All Noteholder Class Action Claims against SFC, the Subsidiaries or the Named Directors or Officers (other than any Noteholder Class Action Claims against the Named Directors or Officers that are Section 5.1(2) D&O Claims, Conspiracy Claims or Non-Released D&O Claims) shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred without consideration as against all said Persons on the Plan Implementation Date. Subject to section 4.4(c) hereof, Noteholder Class Action Claimants shall not receive any consideration or distributions under the Plan in respect of their Noteholder Class Action Claims. Noteholder Class Action Claimants shall not be entitled to attend or to vote on the Plan at the Meeting in respect of their Noteholder Class Action Claims.

 

  (b)

Notwithstanding anything to the contrary in section 4.4(a), Noteholder Class Action Claims as against the Third Party Defendants (x) are not compromised, discharged, released, cancelled or barred, (y) shall be permitted to continue as against the Third Party Defendants and (z) shall not be limited or restricted by this

 

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  Plan in any manner as to quantum or otherwise (including any collection or recovery for such Noteholder Class Action Claims that relates to any liability of the Third Party Defendants for any alleged liability of SFC), provided that:

 

  (i) in accordance with the releases set forth in Article 7 hereof, the collective aggregate amount of all rights and claims asserted or that may be asserted against the Third Party Defendants in respect of any such Noteholder Class Action Claims for which any such Persons in each case have a valid and enforceable Class Action Indemnity Claim against SFC (the “ Indemnified Noteholder Class Action Claims ”) shall not exceed, in the aggregate, the Indemnified Noteholder Class Action Limit, and in accordance with section 7.3 hereof, all Persons shall be permanently and forever barred, estopped, stayed and enjoined, on and after the Effective Time, from seeking to enforce any liability in respect of the Indemnified Noteholder Class Action Claims that exceeds the Indemnified Noteholder Class Action Limit; and

 

  (ii) subject to section 4.4(d), any Class Action Indemnity Claims against SFC by the Third Party Defendants in respect of the Indemnified Noteholder Class Action Claims shall be treated as Affected Creditor Claims against SFC, but only to the extent that any such Class Action Indemnity Claims that are determined to be properly indemnified by SFC, enforceable against SFC and are not barred or extinguished by the Claims Procedure Order, and further provided that the aggregate liability of SFC in respect of all such Class Action Indemnity Claims shall be limited to the lesser of: (A) the actual aggregate liability of the Third Party Defendants pursuant to any final judgment, settlement or other binding resolution in respect of the Indemnified Noteholder Class Action Claims (inclusive of any defence costs incurred by the Third Party Defendants in their defence of the Indemnified Noteholder Class Action Claims to the extent that SFC owes a valid and enforceable indemnification obligation to any such Persons in respect of such defence costs); and (B) the Indemnified Noteholder Class Action Limit.

 

  (c) Each Noteholder Class Action Claimant shall be entitled to receive its share of the Litigation Trust Interests to be allocated to Noteholder Class Action Claimants in accordance with the terms of the Litigation Trust and section 4.11 hereof, as such Noteholder Class Action Claimant’s share is determined by the applicable Class Action Court.

 

  (d) Nothing in this Plan impairs, affects or limits in any way the ability of SFC, the Monitor or the Initial Consenting Noteholders to seek or obtain an Order, whether before or after the Plan Implementation Date, directing that Class Action Indemnity Claims in respect of Noteholder Class Action Claims or any other Claims of the Third Party Defendants should receive the same or similar treatment as is afforded to Class Action Indemnity Claims in respect of Equity Claims under the terms of this Plan.

 

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4.5 Equity Claimants

All Equity Claims shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date. Equity Claimants shall not receive any consideration or distributions under the Plan and shall not be entitled to vote on the Plan at the Meeting.

4.6 Claims of the Trustees and Noteholders

For purposes of this Plan, all claims filed by the Trustees in respect of the Noteholder Claims (other than any Trustee Claims) shall be treated as provided in section 4.1 and the Trustees and the Noteholders shall have no other entitlements in respect of the guarantees and share pledges that have been provided by the Subsidiaries, or any of them, all of which shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date as against the Subsidiaries pursuant to Article 7 hereof.

4.7 Claims of the Third Party Defendants

For purposes of this Plan, all claims filed by the Third Party Defendants against SFC and/or any of its Subsidiaries shall be treated as follows:

 

  (a) all such claims against the Subsidiaries shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date in accordance with Article 7 hereof;

 

  (b) all such claims against SFC that are Class Action Indemnity Claims in respect of Indemnified Noteholder Class Action Claims shall be treated as set out in section 4.4(b)(ii) hereof;

 

  (c) all such claims against SFC for indemnification of Defence Costs shall be treated in accordance with section 4.8 hereof; and

 

  (d) all other claims shall be treated as Equity Claims.

4.8 Defence Costs

All Claims against SFC for indemnification of defence costs incurred by any Person in connection with defending against Shareholder Claims (as defined in the Equity Claims Order), Noteholder Class Action Claims or any other claims of any kind relating to SFC or the Subsidiaries (“ Defence Costs ”) shall be treated as follows:

 

  (a) as Equity Claims to the extent they are determined to be Equity Claims under any Order; and

 

  (b) as Affected Creditor Claims to the extent that they are not determined to be Equity Claims under any Order, provided that:

 

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  (i) if such Defence Costs were incurred in respect of a claim against the applicable Person that has been successfully defended and the Claim for such Defence Costs is otherwise valid and enforceable against SFC, the Claim for such Defence Costs shall be treated as a Proven Claim, provided that if such Claim for Defence Costs is a Class Action Indemnity Claim of a Third Party Defendant against SFC in respect of any Indemnified Noteholder Class Action Claim, such Claim for Defence Costs shall be treated in the manner set forth in section 4.4(b)(ii) hereof;

 

  (ii) if such Defence Costs were incurred in respect of a claim against the applicable Person that has not been successfully defended or such Defence Costs are determined not to be valid and enforceable against SFC, the Claim for such Defence Costs shall be disallowed and no consideration will be payable in respect thereof under the Plan; and

 

  (iii) until any such Claim for Defence Costs is determined to be either a Claim within section 4.8(b)(i) or a Claim within section 4.8(b)(ii), such Claim shall be treated as an Unresolved Claim,

provided that nothing in this Plan impairs, affects or limits in any way the ability of SFC, the Monitor or the Initial Consenting Noteholders to seek an Order that Claims against SFC for indemnification of any Defence Costs should receive the same or similar treatment as is afforded to Equity Claims under the terms of this Plan.

4.9 D&O Claims

 

  (a) All D&O Claims against the Named Directors and Officers (other than Section 5.1(2) D&O Claims, Conspiracy Claims and Non-Released D&O Claims) shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred without consideration on the Plan Implementation Date.

 

  (b) All D&O Claims against the Other Directors and/or Officers shall not be compromised, released, discharged, cancelled or barred by this Plan and shall be permitted to continue as against the applicable Other Directors and/or Officers (the “ Continuing Other D&O Claims ”), provided that any Indemnified Noteholder Class Action Claims against the Other Directors and/or Officers shall be limited as described in section 4.4(b)(i) hereof.

 

  (c) All D&O Indemnity Claims and any other rights or claims for indemnification held by the Named Directors and Officers shall be deemed to have no value and shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred without consideration on the Plan Implementation Date, except that any such D&O Indemnity Claims for Defence Costs shall be treated in accordance with section 4.8 hereof and any claims for indemnification held by the Named Directors and Officers properly the subject of the Directors’ Charge, if any, shall be limited to the Directors’ Charge Reserve.

 

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  (d) All D&O Indemnity Claims and any other rights or claims for indemnification held by the Other Directors and/or Officers shall be deemed to have no value and shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred without consideration on the Plan Implementation Date, except that: (i) any such D&O Indemnity Claims for Defence Costs shall be treated in accordance with section 4.8 hereof; and (ii) any Class Action Indemnity Claim of an Other Director and/or Officer against SFC in respect of the Indemnified Noteholder Class Action Claims shall be treated in the manner set forth in section 4.4(b)(ii) hereof.

 

  (e) All Section 5.1(2) D&O Claims and all Conspiracy Claims shall not be compromised, released, discharged, cancelled or barred by this Plan, provided that any Section 5.1(2) D&O Claims against Named Directors and Officers and any Conspiracy Claims against Named Directors and Officers shall be limited to recovery from any insurance proceeds payable in respect of such Section 5.1(2) D&O Claims or Conspiracy Claims, as applicable, pursuant to the Insurance Policies, and Persons with any such Section 5.1(2) D&O Claims against Named Directors and Officers or Conspiracy Claims against Named Directors and Officers shall have no right to, and shall not, make any claim or seek any recoveries from any Person (including SFC, any of the Subsidiaries or Newco), other than enforcing such Persons’ rights to be paid from the proceeds of an Insurance Policy by the applicable insurer(s).

 

  (f) All D&O Claims against the Directors and Officers of SFC or the Subsidiaries for fraud or criminal conduct shall not be compromised, discharged, released, cancelled or barred by this Plan and shall be permitted to continue as against all applicable Directors and Officers (“ Non-Released D&O Claims ”).

 

  (g) Notwithstanding anything to the contrary herein, from and after the Plan Implementation Date, a Person may only commence an action for a Non-Released D&O Claim against a Named Director or Officer if such Person has first obtained (i) the consent of the Monitor or (ii) leave of the Court on notice to the applicable Directors and Officers, SFC, the Monitor, the Initial Consenting Noteholders and any applicable insurers. For the avoidance of doubt, the foregoing requirement for the consent of the Monitor or leave of the Court shall not apply to any Non-Released D&O Claim that is asserted against an Other Director and/or Officer.

4.10 Intercompany Claims

All SFC Intercompany Claims (other than those transferred to SFC Barbados pursuant to section 6.4(k) hereof or set-off pursuant to section 6.4(m) hereof) shall be deemed to be assigned by SFC to Newco on the Plan Implementation Date pursuant to section 6.4(n) hereof. Newco shall assume the obligations of SFC to the applicable Subsidiaries and Greenheart in respect of all Subsidiary Intercompany Claims (other than those set-off pursuant to section 6.4(m) hereof) on the Plan Implementation Date pursuant to 6.4(n) hereof. Notwithstanding anything to the contrary herein, Newco shall be liable to the applicable Subsidiaries and Greenheart for such Subsidiary Intercompany Claims and SFC shall be released from such Subsidiary Intercompany

 

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Claims from and after the Plan Implementation Date, and the applicable Subsidiaries and Greenheart shall be liable to Newco for such SFC Intercompany Claims from and after the Plan Implementation Date. For greater certainty, nothing in this Plan affects any rights or claims as between any of the Subsidiaries, Greenheart and Greenheart’s direct and indirect subsidiaries.

4.11 Entitlement to Litigation Trust Interests

 

  (a) The Litigation Trust Interests to be created in accordance with this Plan and the Litigation Trust shall be allocated as follows:

 

  (i) the Affected Creditors shall be collectively entitled to 75% of such Litigation Trust Interests; and

 

  (ii) the Noteholder Class Action Claimants shall be collectively entitled to 25% of such Litigation Trust Interests,

which allocations shall occur at the times and in the manner set forth in section 6.4 hereof and shall be recorded by the Litigation Trustee in its registry of Litigation Trust Interests.

 

  (b) Notwithstanding anything to the contrary in section 4.11(a) hereof, if any of the Noteholder Class Action Claims against any of the Third Party Defendants are finally resolved (whether by final judgment, settlement or any other binding means of resolution) within two years of the Plan Implementation Date, then the Litigation Trust Interests to which the applicable Noteholder Class Action Claimants would otherwise have been entitled in respect of such Noteholder Class Action Claims pursuant to section 4.11(a)(ii) hereof (based on the amount of such resolved Noteholder Class Action Claims in proportion to all Noteholder Class Action Claims in existence as of the Claims Bar Date) shall be fully, finally, irrevocably and forever cancelled.

4.12 Multiple Affected Claims

On the Plan Implementation Date, any and all liabilities for and guarantees and indemnities of the payment or performance of any Affected Claim, Unaffected Claim, Section 5.1(2) D&O Claim, Conspiracy Claim, Continuing Other D&O Claim or Non-Released D&O Claim by any of the Subsidiaries, and any purported liability for the payment or performance of such Affected Claim, Unaffected Claim, Section 5.1(2) D&O Claim, Conspiracy Claim, Continuing Other D&O Claim or Non-Released D&O Claim by Newco, will be deemed eliminated and cancelled, and no Person shall have any rights whatsoever to pursue or enforce any such liabilities for or guarantees or indemnities of the payment or performance of any such Affected Claim, Unaffected Claim, Section 5.1(2) D&O Claim, Conspiracy Claim, Continuing Other D&O Claim or Non-Released D&O Claim against any Subsidiary or Newco.

4.13 Interest

Subject to section 11.4 hereof, no holder of an Affected Claim shall be entitled to interest accruing on or after the Filing Date.

 

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4.14 Existing Shares

Holders of Existing Shares and Equity Interests shall not receive any consideration or distributions under the Plan in respect thereof and shall not be entitled to vote on the Plan at the Meeting. Unless otherwise agreed between the Monitor, SFC and the Initial Consenting Noteholders, all Existing Shares and Equity Interests shall be fully, finally and irrevocably cancelled in accordance with and at the time specified in section 6.5 hereof.

4.15 Canadian Exempt Plans

If an Affected Creditor is a trust governed by a plan which is exempt from tax under Part I of the Canadian Tax Act (including, for example, a registered retirement savings plan), such Affected Creditor may make arrangements with Newco (if Newco so agrees) and the Litigation Trustee (if the Litigation Trustee so agrees)to have the Newco Shares, Newco Notes and Litigation Trust Interests to which it is entitled under this Plan directed to (or in the case of Litigation Trust Interests, registered in the name of ) an affiliate of such Affected Creditor or the annuitant or controlling person of the governing tax-deferred plan.

ARTICLE 5

DISTRIBUTION MECHANICS

5.1 Letters of Instruction

In order to issue (i) Newco Shares and Newco Notes to Ordinary Affected Creditors and (ii) Newco Shares to Early Consent Noteholders, the following steps will be taken:

 

  (a) with respect to Ordinary Affected Creditors with Proven Claims or Unresolved Claims:

 

  (i) on the next Business Day following the Distribution Record Date, the Monitor shall send blank Letters of Instruction by prepaid first class mail, courier, email or facsimile to each such Ordinary Affected Creditor to the address of each such Ordinary Affected Creditor (as specified in the applicable Proof of Claim) as of the Distribution Record Date, or as evidenced by any assignment or transfer in accordance with section 5.10;

 

  (ii) each such Ordinary Affected Creditor shall deliver to the Monitor a duly completed and executed Letter of Instruction that must be received by the Monitor on or before the date that is seven (7) Business Days after the Distribution Record Date or such other date as the Monitor may determine; and

 

  (iii) any such Ordinary Affected Creditor that does not return a Letter of Instruction to the Monitor in accordance with section 5.1(a)(ii) shall be deemed to have requested that such Ordinary Affected Creditor’s Newco Shares and Newco Notes be registered or distributed, as applicable, in accordance with the information set out in such Ordinary Affected Creditor’s Proof of Claim; and

 

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  (b) with respect to Early Consent Noteholders:

 

  (i) on the next Business Day following the Distribution Record Date the Monitor shall send blank Letters of Instruction by prepaid first class mail, courier, email or facsimile to each Early Consent Noteholder to the address of each such Early Consent Noteholder as confirmed by the Monitor on or before the Distribution Record Date;

 

  (ii) each Early Consent Noteholder shall deliver to the Monitor a duly completed and executed Letter of Instruction that must be received by the Monitor on or before the date that is seven (7) Business Days after the Distribution Record Date or such other date as the Monitor may determine; and

 

  (iii) any such Early Consent Noteholder that does not return a Letter of Instruction to the Monitor in accordance with section 5.1(b)(ii) shall be deemed to have requested that such Early Consent Noteholder’s Newco Shares be distributed or registered, as applicable, in accordance with information confirmed by the Monitor on or before the Distribution Record Date.

5.2 Distribution Mechanics with respect to Newco Shares and Newco Notes

 

  (a) To effect distributions of Newco Shares and Newco Notes, the Monitor shall deliver a direction at least two (2) Business Days prior to the Initial Distribution Date to Newco or its agent, as applicable, directing Newco or its agent, as applicable, to issue on such Initial Distribution Date or subsequent Distribution Date:

 

  (i) in respect of the Ordinary Affected Creditors with Proven Claims:

 

  (A) the number of Newco Shares that each such Ordinary Affected Creditor is entitled to receive in accordance with section 4.1(a) hereof; and

 

  (B) the amount of Newco Notes that each such Ordinary Affected Creditor is entitled to receive in accordance with section 4.1(b) hereof,

all of which Newco Shares and Newco Notes shall be issued to such Ordinary Affected Creditors and distributed in accordance with this Article 5;

 

  (ii) in respect of the Ordinary Affected Creditors with Unresolved Claims:

 

  (A)

the number of Newco Shares that each such Ordinary Affected Creditor would have been entitled to receive in accordance with section 4.1(a) hereof had such Ordinary Affected Creditor’s

 

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  Unresolved Claim been a Proven Claim on the Plan Implementation Date; and

 

  (B) the amount of Newco Notes that each such Ordinary Affected Creditor would have been entitled to receive in accordance with section 4.1(b) hereof had such Ordinary Affected Creditor’s Unresolved Claim been a Proven Claim on the Plan Implementation Date,

all of which Newco Shares and Newco Notes shall be issued in the name of the Unresolved Claims Escrow Agent for the benefit of the Persons entitled thereto under the Plan, which Newco Shares and Newco Notes shall comprise part of the Unresolved Claims Reserve and shall be held in escrow by the Unresolved Claims Escrow Agent until released and distributed in accordance with this Article 5;

 

  (iii) in respect of the Noteholders:

 

  (A) the number of Newco Shares that the Trustees are collectively required to receive such that, upon distribution to the Noteholders in accordance with this Article 5, each individual Noteholder receives the number of Newco Shares to which it is entitled in accordance with section 4.1(a) hereof; and

 

  (B) the amount of Newco Notes that the Trustees are collectively required to receive such that, upon distribution to the Noteholders in accordance with this Article 5, each individual Noteholder receives the amount of Newco Notes to which it is entitled in accordance with section 4.1(b) hereof,

all of which Newco Shares and Newco Notes shall be issued to such Noteholders and distributed in accordance with this Article 5; and

 

  (iv) in respect of Early Consent Noteholders, the number of Newco Shares that each such Early Consent Noteholder is entitled to receive in accordance with section 4.3 hereof, all of which Newco Shares shall be issued to such Early Consent Noteholders and distributed in accordance with this Article 5.

The direction delivered by the Monitor in respect of the applicable Ordinary Affected Creditors and Early Consent Noteholders shall: (A) indicate the registration and delivery details of each applicable Ordinary Affected Creditor and Early Consent Noteholder based on the information prescribed in section 5.1; and (B) specify the number of Newco Shares and, in the case of Ordinary Affected Creditors, the amount of Newco Notes to be issued to each such Person on the applicable Distribution Date. The direction delivered by the Monitor in respect of the Noteholders shall: (C) indicate that the registration and delivery details with respect to the number of Newco Shares and amount of Newco Notes

 

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to be distributed to each Noteholder will be the same as the registration and delivery details in effect with respect to the Notes held by each Noteholder as of the Distribution Record Date; and (D) specify the number of Newco Shares and the amount of Newco Notes to be issued to each of the Trustees for purposes of satisfying the entitlements of the Noteholders set forth in sections 4.1(a) and 4.1(b) hereof. The direction delivered by the Monitor in respect of the Newco Shares and Newco Notes to be issued in the name of the Unresolved Claims Escrow Agent, for the benefit of the Persons entitled thereto under the Plan, for purposes of the Unresolved Claims Reserve shall specify the number of Newco Shares and the amount of Newco Notes to be issued in the name of the Unresolved Claims Escrow Agent for that purpose.

 

  (b) If the registers for the Newco Shares and/or Newco Notes are maintained by the Transfer Agent in a direct registration system (without certificates), the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, shall, on the Initial Distribution Date or any subsequent Distribution Date, as applicable:

 

  (i) instruct the Transfer Agent to record, and the Transfer Agent shall record, in the Direct Registration Account of each applicable Ordinary Affected Creditor and each Early Consent Noteholder the number of Newco Shares and, in the case of Ordinary Affected Creditors, the amount of Newco Notes that are to be distributed to each such Person, and the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, shall send or cause to be sent to each such Ordinary Affected Creditor and Early Consent Noteholder a Direct Registration Transaction Advice based on the delivery information as determined pursuant to section 5.1; and

 

  (ii) with respect to the distribution of Newco Shares and/or Newco Notes to Noteholders:

 

  (A) if the Newco Shares and/or Newco Notes are DTC eligible, the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, shall instruct the Transfer Agent to register, and the Transfer Agent shall register, the applicable Newco Shares and/or Newco Notes in the name of DTC (or its nominee) for the benefit of the Noteholders, and the Trustees shall provide their consent to DTC to the distribution of such Newco Shares and Newco Notes to the applicable Noteholders, in the applicable amounts, through the facilities of DTC in accordance with customary practices and procedures; and

 

  (B)

if the Newco Shares and/or Newco Notes are not DTC eligible, the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, shall instruct the Transfer Agent to register the applicable Newco Shares and/or Newco Notes in the Direct Registration Accounts of the applicable Noteholders pursuant to the registration instructions obtained through DTC and the DTC

 

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  participants (by way of a letter of transmittal process or such other process as agreed by SFC, the Monitor, the Trustees and the Initial Consenting Noteholders), and the Transfer Agent shall (A) register such Newco Shares and/or Newco Notes, in the applicable amounts, in the Direct Registration Accounts of the applicable Noteholders; and (B) send or cause to be sent to each Noteholder a Direct Registration Transaction Advice in accordance with customary practices and procedures; provided that the Transfer Agent shall not be permitted to effect the foregoing registrations without the prior written consent of the Trustees.

 

  (c) If the registers for the Newco Shares and/or Newco Notes are not maintained by the Transfer Agent in a direct registration system, Newco shall prepare and deliver to the Monitor and/or the Unresolved Claims Escrow Agent, as applicable, and the Monitor and/or the Unresolved Claims Escrow Agent, as applicable, shall promptly thereafter, on the Initial Distribution Date or any subsequent Distribution Date, as applicable:

 

  (i) deliver to each Ordinary Affected Creditor and each Early Consent Noteholder Newco Share Certificates and, in the case of Ordinary Affected Creditors, Newco Note Certificates representing the applicable number of Newco Shares and the applicable amount of Newco Notes that are to be distributed to each such Person; and

 

  (ii) with respect to the distribution of Newco Shares and/or Newco Notes to Noteholders:

 

  (A) if the Newco Shares and/or Newco Notes are DTC eligible, the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, shall distribute to DTC (or its nominee), for the benefit of the Noteholders, Newco Share Certificates and/or Newco Note Certificates representing the aggregate of all Newco Shares and Newco Notes to be distributed to the Noteholders on such Distribution Date, and the Trustees shall provide their consent to DTC to the distribution of such Newco Shares and Newco Notes to the applicable Noteholders, in the applicable amounts, through the facilities of DTC in accordance with customary practices and procedures; and

 

  (B)

if the Newco Shares and/or Newco Notes are not DTC eligible, the Monitor and/or Newco and/or the Unresolved Claims Escrow Agent, as applicable, shall distribute to the applicable Trustees, Newco Share Certificates and/or Newco Note Certificates representing the aggregate of all Newco Shares and/or Newco Notes to be distributed to the Noteholders on such Distribution Date, and the Trustees shall make delivery of such Newco Share Certificates and Newco Note Certificates, in the applicable

 

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  amounts, directly to the applicable Noteholders pursuant to the delivery instructions obtained through DTC and the DTC participants (by way of a letter of transmittal process or such other process as agreed by SFC, the Monitor, the Trustees and the Initial Consenting Noteholders), all of which shall occur in accordance with customary practices and procedures.

 

  (d) Upon receipt of and in accordance with written instructions from the Monitor, the Trustees shall instruct DTC to and DTC shall: (i) set up an escrow position representing the respective positions of the Noteholders as of the Distribution Record Date for the purpose of making distributions on the Initial Distribution Date and any subsequent Distribution Dates (the “ Distribution Escrow Position ”); and (ii) block any further trading of the Notes, effective as of the close of business on the day immediately preceding the Plan Implementation Date, all in accordance with DTC’s customary practices and procedures.

 

  (e) The Monitor, Newco, the Trustees, SFC, the Named Directors and Officers and the Transfer Agent shall have no liability or obligation in respect of deliveries by DTC (or its nominee) to the DTC participants or the Noteholders pursuant to this Article 5.

5.3 Allocation of Litigation Trust Interests

The Litigation Trustee shall administer the Litigation Trust Claims and the Litigation Funding Amount for the benefit of the Persons that are entitled to the Litigation Trust Interests and shall maintain a registry of such Persons as follows:

 

  (a) with respect to Affected Creditors:

 

  (i) the Litigation Trustee shall maintain a record of the amount of Litigation Trust Interests that each Ordinary Affected Creditor is entitled to receive in accordance with sections 4.1(c) and 4.11(a) hereof;

 

  (ii) the Litigation Trustee shall maintain a record of the aggregate amount of all Litigation Trust Interests to which the Noteholders are collectively entitled in accordance with sections 4.1(c) and 4.11(a) hereof, and if cash is distributed from the Litigation Trust to Persons with Litigation Trust Interests, the amount of such cash that is payable to the Noteholders will be distributed through the Distribution Escrow Position (such that each beneficial Noteholder will receive a percentage of such cash distribution that is equal to its entitlement to Litigation Trust Interests (as set forth in section 4.1(c) hereof) as a percentage of all Litigation Trust Interests); and

 

  (iii)

with respect to any Litigation Trust Interests to be allocated in respect of the Unresolved Claims Reserve, the Litigation Trustee shall record such Litigation Trust Interests in the name of the Unresolved Claims Escrow Agent, for the benefit of the Persons entitled thereto in accordance with

 

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  this Plan, which shall be held by the Unresolved Claims Escrow Agent in escrow until released and distributed unless and until otherwise directed by the Monitor in accordance with this Plan;

 

  (b) with respect to the Noteholder Class Action Claimants, the Litigation Trustee shall maintain a record of the aggregate of all Litigation Trust Interests that the Noteholder Class Action Claimants are entitled to receive pursuant to sections 4.4(c) and 4.11(a) hereof, provided that such record shall be maintained in the name of the Noteholder Class Action Representative, to be allocated to individual Noteholder Class Action Claimants in any manner ordered by the applicable Class Action Court, and provided further that if any such Litigation Trust Interests are cancelled in accordance with section 4.11(b) hereof, the Litigation Trustee shall record such cancellation in its registry of Litigation Trust Interests.

5.4 Treatment of Undeliverable Distributions

If any distribution under section 5.2 or section 5.3 of Newco Shares, Newco Notes or Litigation Trust Interests is undeliverable (that is, for greater certainty, that it cannot be properly registered or delivered to the Applicable Affected Creditor because of inadequate or incorrect registration or delivery information or otherwise) (an “ Undeliverable Distribution ”), it shall be delivered to SFC Escrow Co., which shall hold such Undeliverable Distribution in escrow and administer it in accordance with this section 5.4. No further distributions in respect of an Undeliverable Distribution shall be made unless and until SFC and the Monitor are notified by the applicable Person of its current address and/or registration information, as applicable, at which time the Monitor shall direct SFC Escrow Co. to make all such distributions to such Person, and SFC Escrow Co. shall make all such distributions to such Person. All claims for Undeliverable Distributions must be made on or before the date that is six months following the final Distribution Date, after which date the right to receive distributions under this Plan in respect of such Undeliverable Distributions shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred, without any compensation therefore, notwithstanding any federal, state or provincial laws to the contrary, at which time any such Undeliverable Distributions held by SFC Escrow Co. shall be deemed to have been gifted by the owner of the Undeliverable Distribution to Newco or the Litigation Trust, as applicable, without consideration, and, in the case of Newco Shares, Newco Notes and Litigation Trust Interests, shall be cancelled by Newco and the Litigation Trustee, as applicable. Nothing contained in the Plan shall require SFC, the Monitor, SFC Escrow Co. or any other Person to attempt to locate any owner of an Undeliverable Distribution. No interest is payable in respect of an Undeliverable Distribution. Any distribution under this Plan on account of the Notes, other than any distributions in respect of Litigation Trust Interests, shall be deemed made when delivered to DTC or the applicable Trustee, as applicable, for subsequent distribution to the applicable Noteholders in accordance with section 5.2.

5.5 Procedure for Distributions Regarding Unresolved Claims

 

  (a) An Affected Creditor that has asserted an Unresolved Claim will not be entitled to receive a distribution under the Plan in respect of such Unresolved Claim or any portion thereof unless and until such Unresolved Claim becomes a Proven Claim.

 

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  (b) Distributions in respect of any Unresolved Claim in existence at the Plan Implementation Date will be held in escrow by the Unresolved Claims Escrow Agent in the Unresolved Claims Reserve until settlement or final determination of the Unresolved Claim in accordance with the Claims Procedure Order, the Meeting Order or this Plan, as applicable.

 

  (c) To the extent that Unresolved Claims become Proven Claims or are finally disallowed, the Unresolved Claims Escrow Agent shall release from escrow and deliver (or in the case of Litigation Trust Interests, cause to be registered) the following from the Unresolved Claims Reserve (on the next Distribution Date, as determined by the Monitor with the consent of SFC and the Initial Consenting Noteholders):

 

  (i) in the case of Affected Creditors whose Unresolved Claims are ultimately determined, in whole or in part, to be Proven Claims, the Unresolved Claims Escrow Agent shall release from escrow and deliver to such Affected Creditor that number of Newco Shares, Newco Notes and Litigation Trust Interests (and any income or proceeds therefrom) that such Affected Creditor is entitled to receive in respect of its Proven Claim pursuant to section 4.1 hereof;

 

  (ii) in the case of Affected Creditors whose Unresolved Claims are ultimately determined, in whole or in part, to be disallowed, the Unresolved Claims Escrow Agent shall release from escrow and deliver to all Affected Creditors with Proven Claims the number of Newco Shares, Newco Notes and Litigation Trust Interests (and any income or proceeds therefrom) that had been reserved in the Unresolved Claims Reserve for such Affected Creditor whose Unresolved Claims has been disallowed, Claims such that, following such delivery, all of the Affected Creditors with Proven Claims have received the amount of Newco Shares, Newco Notes and Litigation Trust Interests that they are entitled to receive pursuant to section 4.1 hereof, which delivery shall be effected in accordance with sections 5.2 and 5.3 hereof.

 

  (d) As soon as practicable following the date that all Unresolved Claims have been finally resolved and any required distributions contemplated in section 5.5(c) have been made, the Unresolved Claims Escrow Agent shall distribute (or in the case of Litigation Trust Interests, cause to be registered) any Litigation Trust Interests, Newco Shares and Newco Notes (and any income or proceeds therefrom), as applicable, remaining in the Unresolved Claims Reserve to the Affected Creditors with Proven Claims such that after giving effect to such distributions each such Affected Creditor has received the amount of Litigation Trust Interests, Newco Shares and Newco Notes that it is entitled to receive pursuant to section 4.1 hereof.

 

  (e)

During the time that Newco Shares, Newco Notes and/or Litigation Trust Interests are held in escrow in the Unresolved Claims Reserve, any income or proceeds

 

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  received therefrom or accruing thereon shall be added to the Unresolved Claims Reserve by the Unresolved Claims Escrow Agent and no Person shall have any right to such income or proceeds until such Newco Shares, Newco Notes or Litigation Trust Interests, as applicable, are distributed (or in the case of Litigation Trust Interests, registered) in accordance with section 5.5(c) and 5.5(d) hereof, at which time the recipient thereof shall be entitled to any applicable income or proceeds therefrom.

 

  (f) The Unresolved Claims Escrow Agent shall have no beneficial interest or right in the Unresolved Claims Reserve. The Unresolved Claims Escrow Agent shall not take any step or action with respect to the Unresolved Claims Reserve or any other matter without the consent or direction of the Monitor or the direction of the Court. The Unresolved Claims Escrow Agent shall forthwith, upon receipt of an Order of the Court or instruction of the Monitor directing the release of any Newco Shares, Newco Notes and/or Litigation Trust Interests from the Unresolved Claims Reserve, comply with any such Order or instruction.

 

  (g) Nothing in this Plan impairs, affects or limits in any way the ability of SFC, the Monitor or the Initial Consenting Noteholders to seek or obtain an Order, whether before or after the Plan Implementation Date, directing that any Unresolved Claims should be disallowed in whole or in part or that such Unresolved Claims should receive the same or similar treatment as is afforded to Equity Claims under the terms of this Plan.

5.6 Tax Refunds

Any input tax credits or tax refunds received by SFC after the Effective Time shall be paid into the Monitor’s Post-Implementation Reserve and shall be treated in the same manner as cash held in the Monitor’s Post-Implementation Reserve. If any such tax credits or tax refunds become payable to SFC after the final payments from the Monitor’s Post-Implementation Reserve have been made, such input tax credits and tax refunds shall be paid directly by, or on behalf of, SFC to Newco without consideration.

5.7 Final Distributions from Reserves

 

  (a) If there is any cash remaining in: (i) the Unaffected Claims Reserve on the date that all Unaffected Claims have been finally paid or otherwise discharged; (ii) the Administration Charge Reserve on the date that all Claims secured by the Administration Charge have been finally paid or otherwise discharged; and/ or (iii) the Directors’ Charge Reserve on the date that all claims secured by the Directors’ Charge have been finally paid or otherwise discharged, the Monitor shall, in each case, forthwith transfer all such remaining cash to the Monitor’s Post-Implementation Reserve.

 

  (b)

The Monitor will not terminate the Monitor’s Post-Implementation Reserve prior to the termination of each of the Unaffected Claims Reserve, the Administration Charge Reserve and the Directors’ Charge Reserve. The Monitor may, at any

 

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  time, from time to time and at its sole discretion, release amounts from the Monitor’s Post-Implementation Reserve to Newco. Once the Monitor has determined that the cash remaining in the Monitor’s Post-Implementation Reserve is no longer necessary for administering SFC or the Claims Procedure, the Monitor shall forthwith transfer any such remaining cash (the “ Remaining Post-Implementation Reserve Amount ”) to Newco.

5.8 Other Payments and Distributions

All other payments and distributions to be made pursuant to this Plan shall be made in the manner described in this Plan, the Sanction Order or any other Order, as applicable.

5.9 Note Indentures to Remain in Effect Solely for Purpose of Distributions

Following completion of the steps in the sequence set forth in section 6.4, all debentures, indentures, notes (including the Notes), certificates, agreements, invoices and other instruments evidencing Affected Claims will not entitle any holder thereof to any compensation or participation other than as expressly provided for in the Plan and will be cancelled and will be null and void. Any and all obligations of SFC and the Subsidiaries under and with respect to the Notes, the Note Indentures and any guarantees or indemnities with respect to the Notes or the Note Indentures shall be terminated and cancelled on the Plan Implementation Date and shall not continue beyond the Plan Implementation Date. Notwithstanding the foregoing and anything to the contrary in the Plan, the Note Indentures shall remain in effect solely for the purpose of and only to the extent necessary to allow the Trustees to make distributions to Noteholders on the Initial Distribution Date and, as necessary, each subsequent Distribution Date thereafter, and to maintain all of the rights and protections afforded to the Trustees as against the Noteholders under the applicable Note Indentures, including their lien rights with respect to any distributions under this Plan, until all distributions provided for hereunder have been made to the Noteholders. The obligations of the Trustees under or in respect of this Plan shall be solely as expressly set out herein. Without limiting the generality of the releases, injunctions and other protections afforded to the Trustees under this Plan and the applicable Note Indentures, the Trustees shall have no liability whatsoever to any Person resulting from the due performance of their obligations hereunder, except if such Trustee is adjudged by the express terms of a non-appealable judgment rendered on a final determination on the merits to have committed gross negligence or wilful misconduct in respect of such matter.

5.10 Assignment of Claims for Distribution Purposes

(a) Assignment of Claims by Ordinary Affected Creditors

Subject to any restrictions contained in Applicable Laws, an Ordinary Affected Creditor may transfer or assign the whole of its Affected Claim after the Meeting provided that neither SFC nor Newco nor the Monitor nor the Unresolved Claims Escrow Agent shall be obliged to make distributions to any such transferee or assignee or otherwise deal with such transferee or assignee as an Ordinary Affected Creditor in respect thereof unless and until actual notice of the transfer or assignment, together with satisfactory evidence of such transfer or assignment and such other documentation as SFC and the Monitor may reasonably require, has been received by

 

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SFC and the Monitor on or before the Plan Implementation Date, or such other date as SFC and the Monitor may agree, failing which the original transferor shall have all applicable rights as the “Ordinary Affected Creditor” with respect to such Affected Claim as if no transfer of the Affected Claim had occurred. Thereafter, such transferee or assignee shall, for all purposes in accordance with this Plan, constitute an Ordinary Affected Creditor and shall be bound by any and all notices previously given to the transferor or assignor in respect of such Claim. For greater certainty, SFC shall not recognize partial transfers or assignments of Claims.

(b) Assignment of Notes

Only those Noteholders who have beneficial ownership of one or more Notes as at the Distribution Record Date shall be entitled to receive a distribution under this Plan on the Initial Distribution Date or any Distribution Date. Noteholders who have beneficial ownership of Notes shall not be restricted from transferring or assigning such Notes prior to or after the Distribution Record Date (unless the Distribution Record Date is the Plan Implementation Date), provided that if such transfer or assignment occurs after the Distribution Record Date, neither SFC nor Newco nor the Monitor nor the Unresolved Claims Escrow Agent shall have any obligation to make distributions to any such transferee or assignee of Notes in respect of the Claims associated therewith, or otherwise deal with such transferee or assignee as an Affected Creditor in respect thereof. Noteholders who assign or acquire Notes after the Distribution Record Date shall be wholly responsible for ensuring that Plan distributions in respect of the Claims associated with such Notes are in fact delivered to the assignee, and the Trustees shall have no liability in connection therewith.

5.11 Withholding Rights

SFC, Newco, the Monitor, the Litigation Trustee, the Unresolved Claims Escrow Agent and/or any other Person making a payment contemplated herein shall be entitled to deduct and withhold from any consideration payable to any Person such amounts as it is required to deduct and withhold with respect to such payment under the Canadian Tax Act, the United States Internal Revenue Code of 1986 or any provision of federal, provincial, territorial, state, local or foreign Tax laws, in each case, as amended. To the extent that amounts are so withheld or deducted, such withheld or deducted amounts shall be treated for all purposes hereof as having been paid to the Person in respect of which such withholding was made, provided that such amounts are actually remitted to the appropriate Taxing Authority. To the extent that the amounts so required or permitted to be deducted or withheld from any payment to a Person exceed the cash portion of the consideration otherwise payable to that Person: (i) the payor is authorized to sell or otherwise dispose of such portion of the consideration as is necessary to provide sufficient funds to enable it to comply with such deduction or withholding requirement or entitlement, and the payor shall notify the applicable Person thereof and remit to such Person any unapplied balance of the net proceeds of such sale; or (ii) if such sale is not reasonably possible, the payor shall not be required to make such excess payment until the Person has directly satisfied any such withholding obligation and provides evidence thereof to the payor.

 

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5.12 Fractional Interests

No fractional interests of Newco Shares or Newco Notes (“ Fractional Interests ”) will be issued under this Plan. For purposes of calculating the number of Newco Shares and Newco Notes to be issued by Newco pursuant to this Plan, recipients of Newco Shares or Newco Notes will have their entitlements adjusted downwards to the nearest whole number of Newco Shares or Newco Notes, as applicable, to eliminate any such Fractional Interests and no compensation will be given for the Fractional Interest.

5.13 Further Direction of the Court

The Monitor shall, in its sole discretion, be entitled to seek further direction of the Court, including a plan implementation order, with respect to any matter relating to the implementation of the plan including with respect to the distribution mechanics and restructuring transaction as set out in Articles 5 and 6 of this Plan.

ARTICLE 6

RESTRUCTURING TRANSACTION

6.1 Corporate Actions

The adoption, execution, delivery, implementation and consummation of all matters contemplated under the Plan involving corporate action of SFC will occur and be effective as of the Plan Implementation Date, other than such matters occurring on the Equity Cancellation Date which will occur and be effective on such date, and in either case will be authorized and approved under the Plan and by the Court, where appropriate, as part of the Sanction Order, in all respects and for all purposes without any requirement of further action by shareholders, Directors or Officers of SFC. All necessary approvals to take actions shall be deemed to have been obtained from the directors or the shareholders of SFC, as applicable, including the deemed passing by any class of shareholders of any resolution or special resolution and no shareholders’ agreement or agreement between a shareholder and another Person limiting in any way the right to vote shares held by such shareholder or shareholders with respect to any of the steps contemplated by the Plan shall be deemed to be effective and shall have no force and effect, provided that, subject to sections 11.6 and 11.7 hereof, where any matter expressly requires the consent or approval of SFC, the Initial Consenting Noteholders or SFC’s board of directors pursuant to this Plan, such consent or approval shall not be deemed to be given unless actually given.

6.2 Incorporation of Newco

Newco shall be incorporated prior to the Plan Implementation Date. Newco shall be authorized to issue an unlimited number of Newco Shares and shall have no restrictions on the number of its shareholders. At the time that Newco is incorporated, Newco shall issue one Newco Share to the Initial Newco Shareholder, as the sole shareholder of Newco, and the Initial Newco Shareholder shall be deemed to hold the Newco Share for the purpose of facilitating the Restructuring Transaction. For greater certainty, the Initial Newco Shareholder shall not hold

 

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such Newco Share as agent of or for the benefit of SFC, and SFC shall have no rights in relation to such Newco Share. Newco shall not carry on any business or issue any other Newco Shares or other securities until the Plan Implementation Date, and then only in accordance with section 6.4 hereof. The Initial Newco Shareholder shall be deemed to have no liability whatsoever for any matter pertaining to its status as the Initial Newco Shareholder, other than its obligations under this Plan to act as the Initial Newco Shareholder.

6.3 Incorporation of SFC Escrow Co.

SFC Escrow Co. shall be incorporated prior to the Plan Implementation Date. SFC Escrow Co. shall be incorporated under the laws of the Cayman Islands, or such other jurisdiction as may be agreed by SFC, the Monitor and the Initial Consenting Noteholders. The sole director of SFC Escrow Co. shall be Codan Services (Cayman) Limited, or such other Person as may be agreed by SFC, the Monitor and the Initial Consenting Noteholders. At the time that SFC Escrow Co. is incorporated, SFC Escrow Co. shall issue one share (the “SFC Escrow Co. Share”) to SFC, as the sole shareholder of SFC Escrow Co. and SFC shall be deemed to hold the SFC Escrow Co. Share for the purpose of facilitating the Restructuring Transaction. SFC Escrow Co. shall have no assets other than any assets that it is required to hold in escrow pursuant to the terms of this Plan, and it shall have no liabilities other than its obligations as set forth in this Plan. SFC Escrow Co. shall not carry on any business or issue any shares or other securities (other than the SFC Escrow Co. Share). The sole business and function of SFC Escrow Co. shall be to perform the obligations of the Unresolved Claims Escrow Agent as set forth in this Plan and to administer Undeliverable Distributions as set forth in section 5.4 of this Plan. SFC Escrow Co. shall not make any sale, distribution, transfer or conveyance of any Newco Shares, Newco Notes or any other assets or property that it holds unless it is directed to do so by an Order of the Court or by a written direction from the Monitor, in which case SFC Escrow Co. shall promptly comply with such Order of the Court or such written direction from the Monitor. SFC shall not sell, transfer or convey the SFC Escrow Co. Share nor effect or cause to be effected any liquidation, dissolution, merger or other corporate reorganization of SFC Escrow Co. unless it is directed to do so by an Order of the Court or by a written direction from the Monitor, in which case SFC shall promptly comply with such Order of the Court or such written direction from the Monitor. SFC Escrow Co. shall not exercise any voting rights (including any right to vote at a meeting of shareholders or creditors held or in any written resolution) in respect of Newco Shares or Newco Notes held in the Unresolved Claims Reserve. SFC Escrow Co. shall not be entitled to receive any compensation for the performance of its obligations under this Plan.

6.4 Plan Implementation Date Transactions

The following steps and compromises and releases to be effected shall occur, and be deemed to have occurred in the following manner and order (sequentially, each step occurring five minutes apart, except that within such order steps (a) to (g) (Cash Payments) shall occur simultaneously and steps (u) to (x) (Releases) shall occur simultaneously) without any further act or formality, on the Plan Implementation Date beginning at the Effective Time (or in such other manner or order or at such other time or times as SFC, the Monitor and the Initial Consenting Noteholders may agree):

 

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Cash Payments and Satisfaction of Lien Claims

 

  (a) SFC shall pay required funds to the Monitor for the purpose of funding the Unaffected Claims Reserve, and the Monitor shall hold and administer such funds in trust for the purpose of paying the Unaffected Claims pursuant to the Plan.

 

  (b) SFC shall pay the required funds to the Monitor for the purpose of funding the Administration Charge Reserve, and the Monitor shall hold and administer such funds in trust for the purpose of paying Unaffected Claims secured by Administration Charge.

 

  (c) SFC shall pay the required funds to the Monitor for the purpose of funding the Directors’ Charge Reserve, and the Monitor shall hold and administer such funds in trust for the purpose of paying the Unaffected Claims secured by the Directors’ Charge.

 

  (d) SFC shall pay the required funds to the Monitor for the purpose of funding the Monitor’s Post-Implementation Reserve, and the Monitor shall hold and administer such funds in trust for the purpose of administering SFC, as necessary, from and after the Plan Implementation Date.

 

  (e) SFC shall pay to the Noteholder Advisors and the Initial Consenting Noteholders, as applicable, each such Person’s respective portion of the Expense Reimbursement.

 

  (f) SFC shall pay all fees and expenses owing to each of the SFC Advisors, the advisors to the current Board of Directors of SFC, Chandler Fraser Keating Limited and Spencer Stuart and SFC or any of the Subsidiaries shall pay all fees and expenses owing to each of Indufor Asia Pacific Limited and Stewart Murray (Singapore) Pte. Ltd.

 

  (g) The Lien Claims shall be satisfied in accordance with section 4.2(c) hereof.

Transaction Steps

 

  (h) All accrued and unpaid interest owing on, or in respect of, or as part of, Affected Creditor Claims (including any Accrued Interest on the Notes and any interest accruing on the Notes or any Ordinary Affected Creditor Claim after the Filing Date) shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred for no consideration, and from and after the occurrence of this step, no Person shall have any entitlement to any such accrued and unpaid interest.

 

  (i) All of the Affected Creditors shall be deemed to assign, transfer and convey to Newco all of their Affected Creditor Claims, and from and after the occurrence of this step, Newco shall be the legal and beneficial owner of all Affected Creditor Claims. In exchange for the assignment, transfer and conveyance of the Affected Creditor Claims to Newco:

 

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  (i) with respect to Affected Creditor Claims that are Proven Claims at the Effective Time:

 

  (A) Newco shall issue to each applicable Affected Creditor the number of Newco Shares that each such Affected Creditor is entitled to receive in accordance with section 4.1(a) hereof;

 

  (B) Newco shall issue to each applicable Affected Creditor the amount of Newco Notes that each such Affected Creditor is entitled to receive in accordance with section 4.1(b) hereof;

 

  (C) Newco shall issue to each of the Early Consent Noteholders the number of Newco Shares that each such Early Consent Noteholder is entitled to receive pursuant to section 4.3 hereof;

 

  (D) such Affected Creditors shall be entitled to receive the Litigation Trust Interests to be acquired by Newco in section 6.4(r) hereof, following the establishment of the Litigation Trust;

 

  (E) such Affected Creditors shall be entitled to receive, at the time or times contemplated in sections 5.5(c) and 5.5(d) hereof, the Newco Shares, Newco Notes and Litigation Trust Interests that are subsequently distributed to (or in the case of Litigation Trust Interests registered for the benefit of) Affected Creditors with Proven Claims pursuant to sections 5.5(c) and 5.5(d) hereof (if any),

and all such Newco Shares and Newco Notes shall be distributed in the manner described in section 5.2 hereof; and

 

  (ii) with respect to Affected Creditor Claims that are Unresolved Claims as at the Effective Time, Newco shall issue in the name of the Unresolved Claims Escrow Agent, for the benefit of the Persons entitled thereto under the Plan, the Newco Shares and the Newco Notes that would have been distributed to the applicable Affected Creditors in respect of such Unresolved Claims if such Unresolved Claims had been Proven Claims at the Effective Time; such Newco Shares, Newco Notes and Litigation Trust Interests acquired by Newco in section 6.4(r) and assigned to and registered in the name of the Unresolved Claims Escrow Agent in accordance with section 6.4(s) shall comprise part of the Unresolved Claims Reserve and the Unresolved Claims Escrow Agent shall hold all such Newco Shares, Newco Notes and Litigation Trust Interests in escrow for the benefit of those Persons entitled to receive distributions thereof pursuant to the Plan.

 

  (j) The initial Newco Share in the capital of Newco held by the Initial Newco Shareholder shall be redeemed and cancelled for no consideration.

 

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  (k) SFC shall be deemed to assign, transfer and convey to SFC Barbados those SFC Intercompany Claims and/or Equity Interests in one or more Direct Subsidiaries as agreed to by SFC and the Initial Consenting Noteholders prior to the Plan Implementation Date (the “ Barbados Property ”) first in full repayment of the Barbados Loans and second, to the extent the fair market value of the Barbados Property exceeds the amount owing under the Barbados Loans, as a contribution to the capital of SFC Barbados by SFC. Immediately after the time of such assignment, transfer and conveyance, the Barbados Loans shall be considered to be fully paid by SFC and no longer outstanding.

 

  (l) SFC shall be deemed to assign, transfer and convey to Newco all shares and other Equity Interests (other than the Barbados Property) in the capital of (i) the Direct Subsidiaries and (ii) any other Subsidiaries that are directly owned by SFC immediately prior to the Effective Time, other than SFC Escrow Co. (all such shares and other equity interests being the “ Direct Subsidiary Shares ”) for a purchase price equal to the fair market value of the Direct Subsidiary Shares and, in consideration therefor, Newco shall be deemed to pay to SFC consideration equal to the fair market value of the Direct Subsidiary Shares, which consideration shall be comprised of a U.S. dollar denominated demand non-interest-bearing promissory note issued to SFC by Newco having a principal amount equal to the fair market value of the Direct Subsidiary Shares (the “ Newco Promissory Note 1 ”). At the time of such assignment, transfer and conveyance, all prior rights that Newco had to acquire the Direct Subsidiary Shares, under the Plan or otherwise, shall cease to be outstanding. For greater certainty, SFC shall not assign, transfer or convey the SFC Escrow Co. Share, and the SFC Escrow Co. Share shall remain the property of SFC.

 

  (m) If the Initial Consenting Noteholders and SFC agree prior to the Plan Implementation Date, there will be a set-off of any SFC Intercompany Claim so agreed against a Subsidiary Intercompany Claim owing between SFC and the same Subsidiary. In such case, the amounts will be set-off in repayment of both claims to the extent of the lesser of the two amounts, and the excess (if any) shall continue as an SFC Intercompany Claim or a Subsidiary Intercompany Claim, as applicable.

 

  (n)

SFC shall be deemed to assign, transfer and convey to Newco all SFC Intercompany Claims (other than the SFC Intercompany Claims transferred to SFC Barbados in section 6.4(k) hereof or set-off pursuant to section 6.4(m) hereof) for a purchase price equal to the fair market value of such SFC Intercompany Claims and, in consideration therefor, Newco shall be deemed to pay SFC consideration equal to the fair market value of the SFC Intercompany Claims, which consideration shall be comprised of the following: (i) the assumption by Newco of all of SFC’s obligations to the Subsidiaries in respect of Subsidiary Intercompany Claims (other than the Subsidiary Intercompany Claims set-off pursuant to section 6.4(m) hereof); and (ii) if the fair market value of the transferred SFC Intercompany Claims exceeds the fair market value of the assumed Subsidiary Intercompany Claims, Newco shall issue to SFC a U.S. dollar

 

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  denominated demand non-interest-bearing promissory note having a principal amount equal to such excess (the “ Newco Promissory Note 2 ”).

 

  (o) SFC shall be deemed to assign, transfer and convey to Newco all other SFC Assets (namely, all SFC Assets other than the Direct Subsidiary Shares and the SFC Intercompany Claims (which shall have already been transferred to Newco in accordance with sections 6.4(l) and 6.4(n) hereof)), for a purchase price equal to the fair market value of such other SFC Assets and, in consideration therefor, Newco shall be deemed to pay to SFC consideration equal to the fair market value of such other SFC Assets, which consideration shall be comprised of a U.S. dollar denominated demand non-interest-bearing promissory note issued to SFC by Newco having a principal amount equal to the fair market value of such other SFC Assets (the “ Newco Promissory Note 3 ”).

 

  (p) SFC shall establish the Litigation Trust and shall contribute the Litigation Funding Amount to the Litigation Trustee for the benefit of the Litigation Trust. Immediately thereafter, SFC, the Subsidiaries and the Trustees (on behalf of the Noteholders) shall be deemed to convey, transfer and assign to the Litigation Trustee all of their respective rights, title and interest in and to the Litigation Trust Claims. The Litigation Funding Amount and Litigation Trust Claims shall be managed by the Litigation Trustee in accordance with the terms and conditions of the Litigation Trust Agreement.

 

  (q) The Litigation Trust shall be deemed to be effective from the time that it is established in section 6.4(p) hereof. Initially, all of the Litigation Trust Interests shall be held by SFC. Immediately thereafter, SFC shall assign, convey and transfer a portion of the Litigation Trust Interests to the Noteholder Class Action Claimants in accordance with the allocation set forth in section 4.11 hereof.

 

  (r) SFC shall settle and discharge the Affected Creditor Claims by assigning Newco Promissory Note 1, Newco Promissory Note 2 and Newco Promissory Note 3 (collectively, the “ Newco Promissory Notes ”) and the remaining Litigation Trust Interests held by SFC to Newco. Such assignment shall constitute payment, by set-off, of the full principal amount of the Newco Promissory Notes and of a portion of the Affected Creditor Claims equal to the aggregate principal amount of the Newco Promissory Notes and the fair market value of the Litigation Trust Interests so transferred (with such payment being allocated first to the Noteholder Claims and then to the Ordinary Affected Creditor Claims). As a consequence thereof:

 

  (i) Newco shall be deemed to discharge and release SFC of and from all of SFC’s obligations to Newco in respect of the Affected Creditor Claims, and all of Newco’s rights against SFC of any kind in respect of the Affected Creditor Claims shall thereupon be fully, finally, irrevocably and forever compromised, released, discharged and cancelled; and

 

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  (ii) SFC shall be deemed to discharge and release Newco of and from all of Newco’s obligations to SFC in respect of the Newco Promissory Notes, and the Newco Promissory Notes and all of SFC’s rights against Newco in respect thereof shall thereupon be fully, finally, irrevocably and forever released, discharged and cancelled.

 

  (s) Newco shall cause a portion of the Litigation Trust Interests it acquired in section 6.4(r) hereof to be assigned to and registered in the name of the Affected Creditors with Proven Claims as contemplated in section 6.4(i), and with respect to any Affected Creditor Claims that are Unresolved Claims as at the Effective Time, the remaining Litigation Trust Interests held by Newco that would have been allocated to the applicable Affected Creditors in respect of such Unresolved Claims if such Unresolved Claims had been Proven Claims at the Effective Time shall be assigned and registered by the Litigation Trustee to the Unresolved Claims Escrow Agent and in the name of the Unresolved Claims Escrow Agent, in escrow for the benefit of Persons entitled thereto, and such Litigation Trust Interests shall comprise part of the Unresolved Claims Reserve. The Litigation Trustee shall record entitlements to the Litigation Trust Interests in the manner set forth in section 5.3.

Cancellation of Instruments and Guarantees

 

  (t) Subject to section 5.9 hereof, all debentures, indentures, notes, certificates, agreements, invoices, guarantees, pledges and other instruments evidencing Affected Claims, including the Notes and the Note Indentures, will not entitle any holder thereof to any compensation or participation other than as expressly provided for in the Plan and shall be cancelled and will thereupon be null and void. The Trustees shall be directed by the Court and shall be deemed to have released, discharged and cancelled any guarantees, indemnities, Encumbrances or other obligations owing by or in respect of any Subsidiary relating to the Notes or the Note Indentures.

Releases

 

  (u)

Newco shall be deemed to have no liability or obligation of any kind whatsoever for: any Claim (including, notwithstanding anything to the contrary herein, any Unaffected Claim); any Affected Claim (including any Affected Creditor Claim, Equity Claim, D&O Claim, D&O Indemnity Claim and Noteholder Class Action Claim); any Section 5.1(2) D&O Claim; any Conspiracy Claim; any Continuing Other D&O Claim; any Non-Released D&O Claim; any Class Action Claim; any Class Action Indemnity Claim; any right or claim in connection with or liability for the Notes or the Note Indentures; any guarantees, indemnities, share pledges or Encumbrances relating to the Notes or the Note Indentures; any right or claim in connection with or liability for the Existing Shares or other Equity Interests or any other securities of SFC; any rights or claims of the Third Party Defendants relating to SFC or the Subsidiaries; any right or claim in connection with or liability for the RSA, the Plan, the CCAA Proceedings, the Restructuring

 

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  Transaction, the Litigation Trust, the business and affairs of SFC and the Subsidiaries (whenever or however conducted), the administration and/or management of SFC and the Subsidiaries, or any public filings, statements, disclosures or press releases relating to SFC; any right or claim in connection with or liability for any guaranty, indemnity or claim for contribution in respect of any of the foregoing; and any Encumbrance in respect of the foregoing, provided only that Newco shall assume SFC’s obligations to the applicable Subsidiaries in respect of the Subsidiary Intercompany Claims pursuant to section 6.4(m) hereof.

 

  (v) Each of the Charges shall be discharged, released and cancelled.

 

  (w) The releases and injunctions referred to in Article 7 of the Plan shall become effective in accordance with the Plan.

 

  (x) Any contract defaults arising as a result of the CCAA Proceedings and/or the implementation of the Plan (including, notwithstanding anything to the contrary herein, any such contract defaults in respect of the Unaffected Claims) shall be deemed to be cured.

6.5 Cancellation of Existing Shares and Equity Interests

Unless otherwise agreed between the Monitor, SFC and the Initial Consenting Noteholders, on the Equity Cancellation Date all Existing Shares and Equity Interests shall be fully, finally and irrevocably cancelled, and the following steps will be implemented pursuant to the Plan as a plan of reorganization under section 191 of the CBCA, to be effected by articles of reorganization to be filed by SFC, subject to the receipt of any required approvals from the Ontario Securities Commission with respect to the trades in securities contemplated by the following:

 

  (a) SFC will create a new class of common shares to be called Class A common shares that are equivalent to the current Existing Shares except that they carry two votes per share;

 

  (b) SFC will amend the share conditions of the Existing Shares to provide that they are cancellable for no consideration at such time as determined by the board of directors of SFC;

 

  (c) prior to the cancellation of the Existing Shares, SFC will issue for nominal consideration one Class A common share of SFC to the SFC Continuing Shareholder;

 

  (d) SFC will cancel the Existing Shares for no consideration on the Equity Cancellation Date; and

 

  (e) SFC will apply to Canadian securities regulatory authorities for SFC to cease to be a reporting issuer effective immediately before the Effective Time.

 

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Unless otherwise agreed by SFC, the Monitor and the Initial Consenting Noteholders or as otherwise directed by Order of the Court, SFC shall maintain its corporate existence at all times from and after the Plan Implementation Date until the later of the date: (i) on which SFC Escrow Co. has completed all of its obligations as Unresolved Claims Escrow Agent under this Plan; (ii) on which SFC escrow Co. no longer holds any Undeliverable Distributions delivered to it in accordance with the section 5.4 hereof; and (iii) as determined by the Litigation Trustee.

6.6 Transfers and Vesting Free and Clear

 

  (a) All of the SFC Assets (including for greater certainty the Direct Subsidiary Shares, the SFC Intercompany Claims and all other SFC Assets assigned, transferred and conveyed to Newco pursuant to section 6.4) shall be deemed to vest absolutely in Newco, free and clear of and from any and all Charges, Claims (including, notwithstanding anything to the contrary herein, any Unaffected Claims), D&O Claims, D&O Indemnity Claims, Section 5.1(2) D&O Claims, Conspiracy Claims, Continuing Other D&O Claims, Non-Released D&O Claims, Affected Claims, Class Action Claims, Class Action Indemnity Claims, claims or rights of any kind in respect of the Notes or the Note Indentures, and any right or claim that is based in whole or in part on facts, underlying transactions, causes of action or events relating to the Restructuring Transaction, the CCAA Proceedings or any of the foregoing, and any guarantees or indemnities with respect to any of the foregoing. Any Encumbrances or claims affecting, attaching to or relating to the SFC Assets in respect of the foregoing shall be deemed to be irrevocably expunged and discharged as against the SFC Assets, and no such Encumbrances or claims shall be pursued or enforceable as against Newco. For greater certainty, with respect to the Subsidiaries, Greenheart and Greenheart’s direct and indirect subsidiaries: (i) the vesting free and clear in Newco and the expunging and discharging that occurs by operation of this paragraph shall only apply to SFC’s ownership interests in the Subsidiaries, Greenheart and Greenheart’s subsidiaries; and (ii) except as provided for in the Plan (including this section 6.6(a) and sections 4.9(g), 6.4(l), 6.4(m) and 6.4(n) hereof and Article 7 hereof) and the Sanction Order, the assets, liabilities, business and property of the Subsidiaries, Greenheart and Greenheart’s direct and indirect subsidiaries shall remain unaffected by the Restructuring Transaction.

 

  (b)

Any issuance, assignment, transfer or conveyance of any securities, interests, rights or claims pursuant to the Plan, including the Newco Shares, the Newco Notes and the Affected Creditor Claims, will be free and clear of and from any and all Charges, Claims (including, notwithstanding anything to the contrary herein, any Unaffected Claims), D&O Claims, D&O Indemnity Claims, Affected Claims, Section 5.1(2) D&O Claims; Conspiracy Claims; Continuing Other D&O Claims, Non-Released D&O Claims; Class Action Claims, Class Action Indemnity Claims, claims or rights of any kind in respect of the Notes or the Note Indentures, and any right or claim that is based in whole or in part on facts, underlying transactions, causes of action or events relating to the Restructuring Transaction, the CCAA Proceedings or any of the foregoing, and any guarantees or indemnities with respect to any of the foregoing. For greater certainty, with

 

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  respect to the Subsidiaries, Greenheart and Greenheart’s direct and indirect subsidiaries: (i) the vesting free and clear in Newco that occurs by operation of this paragraph shall only apply to SFC’s direct and indirect ownership interests in the Subsidiaries, Greenheart and Greenheart’s direct and indirect subsidiaries; and (ii) except as provided for in the Plan (including section 6.6(a) and sections 4.9(g), 6.4(l), 6.4(m) and 6.4(n) hereof and Article 7 hereof) and the Sanction Order, the assets, liabilities, business and property of the Subsidiaries, Greenheart and Greenheart’s direct and indirect subsidiaries shall remain unaffected by the Restructuring Transaction.

ARTICLE 7

RELEASES

7.1 Plan Releases

Subject to 7.2 hereof, all of the following shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date:

 

  (a) all Affected Claims, including all Affected Creditor Claims, Equity Claims, D&O Claims (other than Section 5.1(2) D&O Claims, Conspiracy Claims, Continuing Other D&O Claims and Non-Released D&O Claims), D&O Indemnity Claims (except as set forth in section 7.1(d) hereof) and Noteholder Class Action Claims (other than the Continuing Noteholder Class Action Claims);

 

  (b) all Claims of the Ontario Securities Commission or any other Governmental Entity that have or could give rise to a monetary liability, including fines, awards, penalties, costs, claims for reimbursement or other claims having a monetary value;

 

  (c) all Class Action Claims (including the Noteholder Class Action Claims) against SFC, the Subsidiaries or the Named Directors or Officers of SFC or the Subsidiaries (other than Class Action Claims that are Section 5.1(2) D&O Claims, Conspiracy Claims or Non-Released D&O Claims);

 

  (d) all Class Action Indemnity Claims (including related D&O Indemnity Claims), other than any Class Action Indemnity Claim by the Third Party Defendants against SFC in respect of the Indemnified Noteholder Class Action Claims (including any D&O Indemnity Claim in that respect), which shall be limited to the Indemnified Noteholder Class Action Limit pursuant to the releases set out in section 7.1(f) hereof and the injunctions set out in section 7.3 hereof;

 

  (e) any portion or amount of or liability of the Third Party Defendants for the Indemnified Noteholder Class Action Claims (on a collective, aggregate basis in reference to all Indemnified Noteholder Class Action Claims together) that exceeds the Indemnified Noteholder Class Action Limit;

 

  (f)

any portion or amount of, or liability of SFC for, any Class Action Indemnity Claims by the Third Party Defendants against SFC in respect of the Indemnified

 

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  Noteholder Class Action Claims to the extent that such Class Action Indemnity Claims exceed the Indemnified Noteholder Class Action Limit;

 

  (g) any and all demands, claims, actions, causes of action, counterclaims, suits, debts, sums of money, accounts, covenants, damages, judgments, orders, including for injunctive relief or specific performance and compliance orders, expenses, executions, Encumbrances and other recoveries on account of any liability, obligation, demand or cause of action of whatever nature which any Person may be entitled to assert, whether known or unknown, matured or unmatured, direct, indirect or derivative, foreseen or unforeseen, existing or hereafter arising, against Newco, the directors and officers of Newco, the Noteholders, members of the ad hoc committee of Noteholders, the Trustees, the Transfer Agent, the Monitor, FTI Consulting Canada Inc., FTI HK, counsel for the current Directors of SFC, counsel for the Monitor, counsel for the Trustees, the SFC Advisors, the Noteholder Advisors, and each and every member (including members of any committee or governance council), partner or employee of any of the foregoing, for or in connection with or in any way relating to: any Claims (including, notwithstanding anything to the contrary herein, any Unaffected Claims); Affected Claims; Section 5.1(2) D&O Claims; Conspiracy Claims; Continuing Other D&O Claims; Non-Released D&O Claims; Class Action Claims; Class Action Indemnity Claims; any right or claim in connection with or liability for the Notes or the Note Indentures; any guarantees, indemnities, claims for contribution, share pledges or Encumbrances related to the Notes or the Note Indentures; any right or claim in connection with or liability for the Existing Shares, Equity Interests or any other securities of SFC; any rights or claims of the Third Party Defendants relating to SFC or the Subsidiaries;

 

  (h)

any and all demands, claims, actions, causes of action, counterclaims, suits, debts, sums of money, accounts, covenants, damages, judgments, orders, including for injunctive relief or specific performance and compliance orders, expenses, executions, Encumbrances and other recoveries on account of any liability, obligation, demand or cause of action of whatever nature which any Person may be entitled to assert, whether known or unknown, matured or unmatured, direct, indirect or derivative, foreseen or unforeseen, existing or hereafter arising, against Newco, the directors and officers of Newco, the Noteholders, members of the ad hoc committee of Noteholders, the Trustees, the Transfer Agent, the Monitor, FTI Consulting Canada Inc., FTI HK, the Named Directors and Officers, counsel for the current Directors of SFC, counsel for the Monitor, counsel for the Trustees, the SFC Advisors, the Noteholder Advisors, and each and every member (including members of any committee or governance council), partner or employee of any of the foregoing, based in whole or in part on any act, omission, transaction, duty, responsibility, indebtedness, liability, obligation, dealing or other occurrence existing or taking place on or prior to the Plan Implementation Date (or, with respect to actions taken pursuant to the Plan after the Plan Implementation Date, the date of such actions) in any way relating to, arising out of, leading up to, for, or in connection with the CCAA Proceeding, RSA, the Restructuring Transaction, the Plan, any proceedings commenced with respect to

 

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  or in connection with the Plan, or the transactions contemplated by the RSA and the Plan, including the creation of Newco and the creation, issuance or distribution of the Newco Shares, the Newco Notes, the Litigation Trust or the Litigation Trust Interests, provided that nothing in this paragraph shall release or discharge any of the Persons listed in this paragraph from or in respect of any obligations any of them may have under or in respect of the RSA, the Plan or under or in respect of any of Newco, the Newco Shares, the Newco Notes, the Litigation Trust or the Litigation Trust Interests, as the case may be;

 

  (i) any and all demands, claims, actions, causes of action, counterclaims, suits, debts, sums of money, accounts, covenants, damages, judgments, orders, including for injunctive relief or specific performance and compliance orders, expenses, executions, Encumbrances and other recoveries on account of any liability, obligation, demand or cause of action of whatever nature which any Person may be entitled to assert, whether known or unknown, matured or unmatured, direct, indirect or derivative, foreseen or unforeseen, existing or hereafter arising, against the Subsidiaries for or in connection with any Claim (including, notwithstanding anything to the contrary herein, any Unaffected Claim); any Affected Claim (including any Affected Creditor Claim, Equity Claim, D&O Claim, D&O Indemnity Claim and Noteholder Class Action Claim); any Section 5.1(2) D&O Claim; any Conspiracy Claim; any Continuing Other D&O Claim; any Non-Released D&O Claim; any Class Action Claim; any Class Action Indemnity Claim; any right or claim in connection with or liability for the Notes or the Note Indentures; any guarantees, indemnities, share pledges or Encumbrances relating to the Notes or the Note Indentures; any right or claim in connection with or liability for the Existing Shares, Equity Interests or any other securities of SFC; any rights or claims of the Third Party Defendants relating to SFC or the Subsidiaries; any right or claim in connection with or liability for the RSA, the Plan, the CCAA Proceedings, the Restructuring Transaction, the Litigation Trust, the business and affairs of SFC and the Subsidiaries (whenever or however conducted), the administration and/or management of SFC and the Subsidiaries, or any public filings, statements, disclosures or press releases relating to SFC; any right or claim in connection with or liability for any indemnification obligation to Directors or Officers of SFC or the Subsidiaries pertaining to SFC, the Notes, the Note Indentures, the Existing Shares, the Equity Interests, any other securities of SFC or any other right, claim or liability for or in connection with the RSA, the Plan, the CCAA Proceedings, the Restructuring Transaction, the Litigation Trust, the business and affairs of SFC (whenever or however conducted), the administration and/or management of SFC, or any public filings, statements, disclosures or press releases relating to SFC; any right or claim in connection with or liability for any guaranty, indemnity or claim for contribution in respect of any of the foregoing; and any Encumbrance in respect of the foregoing; and

 

  (j) all Subsidiary Intercompany Claims as against SFC (which are assumed by Newco pursuant to the Plan).

 

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7.2 Claims Not Released

Notwithstanding anything to the contrary in section 7.1 hereof, nothing in this Plan shall waive, compromise, release, discharge, cancel or bar any of the following:

 

  (a) SFC of its obligations under the Plan and the Sanction Order;

 

  (b) SFC from or in respect of any Unaffected Claims (provided that recourse against SFC in respect of Unaffected Claims shall be limited in the manner set out in section 4.2 hereof);

 

  (c) any Directors or Officers of SFC or the Subsidiaries from any Non-Released D&O Claims, Conspiracy Claims or any Section 5.1(2) D&O Claims, provided that recourse against the Named Directors or Officers of SFC in respect of any Section 5.1(2) D&O Claims and any Conspiracy Claims shall be limited in the manner set out in section 4.9(e) hereof;

 

  (d) any Other Directors and/or Officers from any Continuing Other D&O Claims, provided that recourse against the Other Directors and/or Officers in respect of the Indemnified Noteholder Class Action Claims shall be limited in the manner set out in section 4.4(b)(i) hereof;

 

  (e) the Third Party Defendants from any claim, liability or obligation of whatever nature for or in connection with the Class Action Claims, provided that the maximum aggregate liability of the Third Party Defendants collectively in respect of the Indemnified Noteholder Class Action Claims shall be limited to the Indemnified Noteholder Class Action Limit pursuant to section 4.4(b)(i) hereof and the releases set out in section 7.1(e) hereof and the injunctions set out in section 7.3 hereof;

 

  (f) Newco from any liability to the applicable Subsidiaries in respect of the Subsidiary Intercompany Claims assumed by Newco pursuant to section 6.4(n) hereof;

 

  (g) the Subsidiaries from any liability to Newco in respect of the SFC Intercompany Claims conveyed to Newco pursuant to section 6.4(m) hereof;

 

  (h) SFC of or from any investigations by or non-monetary remedies of the Ontario Securities Commission, provided that, for greater certainty, all monetary rights, claims or remedies of the Ontario Securities Commission against SFC shall be treated as Affected Creditor Claims in the manner described in section 4.1 hereof and released pursuant to section 7.1(b) hereof;

 

  (i) the Subsidiaries from their respective indemnification obligations (if any) to Directors or Officers of the Subsidiaries that relate to the ordinary course operations of the Subsidiaries and that have no connection with any of the matters listed in section 7.1(g) hereof;

 

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  (j) SFC or the Directors and Officers from any Insured Claims, provided that recovery for Insured Claims shall be irrevocably limited to recovery solely from the proceeds of Insurance Policies paid or payable on behalf of SFC or its Directors and Officers in the manner set forth in section 2.4 hereof;

 

  (k) insurers from their obligations under insurance policies; and

 

  (l) any Released Party for fraud or criminal conduct.

7.3 Injunctions

All Persons are permanently and forever barred, estopped, stayed and enjoined, on and after the Effective Time, with respect to any and all Released Claims, from (i) commencing, conducting or continuing in any manner, directly or indirectly, any action, suits, demands or other proceedings of any nature or kind whatsoever (including, without limitation, any proceeding in a judicial, arbitral, administrative or other forum) against the Released Parties; (ii) enforcing, levying, attaching, collecting or otherwise recovering or enforcing by any manner or means, directly or indirectly, any judgment, award, decree or order against the Released Parties or their property; (iii) commencing, conducting or continuing in any manner, directly or indirectly, any action, suits or demands, including without limitation, by way of contribution or indemnity or other relief, in common law, or in equity, breach of trust or breach of fiduciary duty or under the provisions of any statute or regulation, or other proceedings of any nature or kind whatsoever (including, without limitation, any proceeding in a judicial, arbitral, administrative or other forum) against any Person who makes such a claim or might reasonably be expected to make such a claim, in any manner or forum, against one or more of the Released Parties; (iv) creating, perfecting, asserting or otherwise enforcing, directly or indirectly, any lien or encumbrance of any kind against the Released Parties or their property; or (v) taking any actions to interfere with the implementation or consummation of this Plan; provided, however, that the foregoing shall not apply to the enforcement of any obligations under the Plan.

7.4 Timing of Releases and Injunctions

All releases and injunctions set forth in this Article 7 shall become effective on the Plan Implementation Date at the time or times and in the manner set forth in section 6.4 hereof.

7.5 Equity Class Action Claims Against the Third Party Defendants

Notwithstanding anything to the contrary in this Plan, any Class Action Claim against the Third Party Defendants that relates to the purchase, sale or ownership of Existing Shares or Equity Interests: (a) is unaffected by this Plan; (b) is not discharged, released, cancelled or barred pursuant to this Plan; (c) shall be permitted to continue as against the Third Party Defendants; (d) shall not be limited or restricted by this Plan in any manner as to quantum or otherwise (including any collection or recovery for any such Class Action Claim that relates to any liability of the Third Party Defendants for any alleged liability of SFC); and (e) does not constitute an Equity Claim or an Affected Claim under this Plan.

 

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ARTICLE 8

COURT SANCTION

8.1 Application for Sanction Order

If the Plan is approved by the Required Majority, SFC shall apply for the Sanction Order on or before the date set for the hearing of the Sanction Order or such later date as the Court may set.

8.2 Sanction Order

The Sanction Order shall, among other things:

 

  (a) declare that: (i) the Plan has been approved by the Required Majority in conformity with the CCAA; (ii) the activities of SFC have been in reasonable compliance with the provisions of the CCAA and the Orders of the Court made in this CCAA Proceeding in all respects; (iii) the Court is satisfied that SFC has not done or purported to do anything that is not authorized by the CCAA; and (iv) the Plan and the transactions contemplated thereby are fair and reasonable;

 

  (b) declare that the Plan and all associated steps, compromises, releases, discharges, cancellations, transactions, arrangements and reorganizations effected thereby are approved, binding and effective as herein set out as of the Plan Implementation Date;

 

  (c) confirm the amount of each of the Unaffected Claims Reserve, the Administration Charge Reserve, the Directors’ Charge Reserve and the Monitor’s Post-Implementation Reserve;

 

  (d) declare that, on the Plan Implementation Date, all Affected Claims shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred, subject only to the right of the applicable Persons to receive the distributions to which they are entitled pursuant to the Plan;

 

  (e) declare that, on the Plan Implementation Date, the ability of any Person to proceed against SFC or the Subsidiaries in respect of any Released Claims shall be forever discharged and restrained, and all proceedings with respect to, in connection with or relating to any such matter shall be permanently stayed;

 

  (f) declare that the steps to be taken, the matters that are deemed to occur and the compromises and releases to be effective on the Plan Implementation Date are deemed to occur and be effected in the sequential order contemplated by section 6.4, beginning at the Effective Time;

 

  (g) declare that, on the Plan Implementation Date, the SFC Assets vest absolutely in Newco in accordance with the terms of section 6.6(a) hereof;

 

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  (h) confirm that the Court was satisfied that: (i) the hearing of the Sanction Order was open to all of the Affected Creditors and all other Persons with an interest in SFC and that such Affected Creditors and other Persons were permitted to be heard at the hearing in respect of the Sanction Order; (ii) prior to the hearing, all of the Affected Creditors and all other Persons on the service list in respect of the CCAA Proceeding were given adequate notice thereof;

 

  (i) provide that the Court was advised prior to the hearing in respect of the Sanction Order that the Sanction Order will be relied upon by SFC and Newco as an approval of the Plan for the purpose of relying on the exemption from the registration requirements of the United States Securities Act of 1933, as amended, pursuant to Section 3(a)(10) thereof for the issuance of the Newco Shares, Newco Notes and, to the extent they may be deemed to be securities, the Litigation Trust Interests, and any other securities to be issued pursuant to the Plan;

 

  (j) declare that all obligations, agreements or leases to which (i) SFC remains a party on the Plan Implementation Date, or (ii) Newco becomes a party as a result of the conveyance of the SFC Assets to Newco on the Plan Implementation Date, shall be and remain in full force and effect, unamended, as at the Plan Implementation Date and no party to any such obligation or agreement shall on or following the Plan Implementation Date, accelerate, terminate, refuse to renew, rescind, refuse to perform or otherwise disclaim or resiliate its obligations thereunder, or enforce or exercise (or purport to enforce or exercise) any right or remedy under or in respect of any such obligation or agreement, by reason:

 

  (i) of any event which occurred prior to, and not continuing after, the Plan Implementation Date, or which is or continues to be suspended or waived under the Plan, which would have entitled any other party thereto to enforce those rights or remedies;

 

  (ii) that SFC sought or obtained relief or has taken steps as part of the Plan or under the CCAA;

 

  (iii) of any default or event of default arising as a result of the financial condition or insolvency of SFC;

 

  (iv) of the completion of any of the transactions contemplated under the Plan, including the transfer, conveyance and assignment of the SFC Assets to Newco; or

 

  (v) of any compromises, settlements, restructurings, recapitalizations or reorganizations effected pursuant to the Plan;

 

  (k) stay the commencing, taking, applying for or issuing or continuing any and all steps or proceedings, including without limitation, administrative hearings and orders, declarations or assessments, commenced, taken or proceeded with or that may be commenced, taken or proceed with to advance any Released Claims;

 

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  (l) declare that in no circumstances will the Monitor have any liability for any of SFC’s tax liability regardless of how or when such liability may have arisen;

 

  (m) authorize the Monitor to perform its functions and fulfil its obligations under the Plan to facilitate the implementation of the Plan;

 

  (n) direct and deem the Trustees to release, discharge and cancel any guarantees, indemnities, Encumbrances or other obligations owing by or in respect of any Subsidiary relating to the Notes or the Note Indentures;

 

  (o) declare that upon completion by the Monitor of its duties in respect of SFC pursuant to the CCAA and the Orders, the Monitor may file with the Court a certificate of Plan Implementation stating that all of its duties in respect of SFC pursuant to the CCAA and the Orders have been completed and thereupon, FTI Consulting Canada Inc. shall be deemed to be discharged from its duties as Monitor and released of all claims relating to its activities as Monitor; and

 

  (p) declare that, on the Plan Implementation Date, each of the Charges shall be discharged, released and cancelled, and that any obligations secured thereby shall satisfied pursuant to section 4.2(b) hereof, and that from and after the Plan Implementation Date: (i) the Administration Charge Reserve shall stand in place of the Administration Charge as security for the payment of any amounts secured by the Administration Charge and; (ii) the Directors’ Charge Reserve shall stand in place of the Directors’ Charge as security for the payment of any amounts secured by the Directors’ Charge;

 

  (q) declare that SFC and the Monitor may apply to the Court for advice and direction in respect of any matters arising from or under the Plan;

 

  (r) declare that, subject to the due performance of its obligations as set forth in the Plan and subject to its compliance with any written directions or instructions of the Monitor and/or directions of the Court in the manner set forth in the Plan, SFC Escrow Co. shall have no liabilities whatsoever arising from the performance of its obligations under the Plan;

 

  (s) order that releases and injunctions set forth in Article 7 of this Plan are effective on the Plan Implementation Date at the time or times and in the manner set forth in section 6.4 hereof; and

 

  (t) declare that section 95 to 101 of the BIA shall not apply to any of the transactions implemented pursuant to the Plan.

 

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ARTICLE 9

CONDITIONS PRECEDENT AND IMPLEMENTATION

9.1 Conditions Precedent to Implementation of the Plan

The implementation of the Plan shall be conditional upon satisfaction or waiver of the following conditions prior to or at the Effective Time, each of which is for the benefit of SFC and the Initial Consenting Noteholders and may be waived only by SFC and the Initial Consenting Noteholders collectively; provided, however, that the conditions in sub-paragraphs (g), (h), (y), (ee), (ff), (ll), (kk) and (mm) shall only be for the benefit of the Initial Consenting Noteholders and, if not satisfied on or prior to the Effective Time, may be waived only by the Initial Consenting Noteholders; and provided further that such conditions shall not be enforceable by SFC if any failure to satisfy such conditions results from an action, error, omission by or within the control of SFC and such conditions shall not be enforceable by the Initial Consenting Noteholders if any failure to satisfy such conditions results from an action, error, omission by or within the control of the Initial Consenting Noteholders:

Plan Approval Matters

 

  (a) the Plan shall have been approved by the Required Majority and the Court, and in each case the Plan shall have been approved in a form consistent with the RSA or otherwise acceptable to SFC and the Initial Consenting Noteholders, each acting reasonably;

 

  (b) the Sanction Order shall have been made and shall be in full force and effect prior to December 17, 2012 (or such later date as may be consented to by SFC and the Initial Consenting Noteholders), and all applicable appeal periods in respect thereof shall have expired and any appeals therefrom shall have been disposed of by the applicable appellate court;

 

  (c) the Sanction Order shall be in a form consistent with the Plan or otherwise acceptable to SFC and the Initial Consenting Noteholders, each acting reasonably;

 

  (d) all filings under Applicable Laws that are required in connection with the Restructuring Transaction shall have been made and any regulatory consents or approvals that are required in connection with the Restructuring Transaction shall have been obtained and, in the case of waiting or suspensory periods, such waiting or suspensory periods shall have expired or been terminated; without limiting the generality of the foregoing, such filings and regulatory consents or approvals include:

 

  (i) any required filings, consents and approvals of securities regulatory authorities in Canada;

 

  (ii)

a consultation with the Executive of the Hong Kong Securities and Futures Commission that is satisfactory to SFC, the Monitor and the Initial Consenting Noteholders confirming that implementation of the Restructuring Transaction will not result in an obligation arising for

 

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  Newco, its shareholders or any Subsidiary to make a mandatory offer to acquire shares of Greenheart;

 

  (iii) the submission by SFC and each applicable Subsidiary of a Circular 698 tax filing with all appropriate tax authorities in the PRC within the requisite time prior to the Plan Implementation Date, such filings to be in form and substance satisfactory to the Initial Consenting Noteholders; and

 

  (iv) if notification is necessary or desirable under the Antimonopoly Law of People’s Republic of China and its implementation rules, the submission of all antitrust filings considered necessary or prudent by the Initial Consenting Noteholders and the acceptance and (to the extent required) approval thereof by the competent Chinese authority, each such filing to be in form and substance satisfactory to the Initial Consenting Noteholders;

 

  (e) there shall not be in effect any preliminary or final decision, order or decree by a Governmental Entity, no application shall have been made to any Governmental Entity, and no action or investigation shall have been announced, threatened or commenced by any Governmental Entity, in consequence of or in connection with the Restructuring Transaction that restrains, impedes or prohibits (or if granted could reasonably be expected to restrain, impede or prohibit) the Restructuring Transaction or any material part thereof or requires or purports to require a variation of the Restructuring Transaction, and SFC shall have provided the Initial Consenting Noteholders with a certificate signed by an officer of SFC, without personal liability on the part of such officer, certifying compliance with this Section 9.1(e) as of the Plan Implementation Date;

Newco Matters

 

  (f) the organization, incorporating documents, articles, by-laws and other constating documents of Newco (including any shareholders agreement, shareholder rights plan and classes of shares (voting and non-voting)) and any affiliated or related entities formed in connection with the Restructuring Transaction or the Plan, and all definitive legal documentation in connection with all of the foregoing, shall be acceptable to the Initial Consenting Noteholders and in form and in substance reasonably satisfactory to SFC;

 

  (g) the composition of the board of directors of Newco and the senior management and officers of Newco that will assume office, or that will continue in office, as applicable, on the Plan Implementation Date shall be acceptable to the Initial Consenting Noteholders;

 

  (h) the terms of employment of the senior management and officers of Newco shall be acceptable to the Initial Consenting Noteholders;

 

  (i)

except as expressly set out in this Plan, Newco shall not have: (i) issued or authorized the issuance of any shares, notes, options, warrants or other securities

 

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  of any kind, (ii) become subject to any Encumbrance with respect to its assets or property; (iii) become liable to pay any indebtedness or liability of any kind (other than as expressly set out in section 6.4 hereof); or (iv) entered into any Material agreement;

 

  (j) any securities that are formed in connection with the Plan, including the Newco Shares and the Newco Notes, when issued and delivered pursuant to the Plan, shall be duly authorized, validly issued and fully paid and non-assessable and the issuance and distribution thereof shall be exempt from all prospectus and registration requirements of any applicable securities, corporate or other law, statute, order, decree, consent decree, judgment, rule, regulation, ordinance, notice, policy or other pronouncement having the effect of law applicable in the provinces of Canada;

 

  (k) Newco shall not be a reporting issuer (or equivalent) in any province of Canada or any other jurisdiction;

 

  (l) all of the steps, terms, transactions and documents relating to the conveyance of the SFC Assets to Newco in accordance with the Plan shall be in form and in substance acceptable to SFC and the Initial Consenting Noteholders;

 

  (m) all of the following shall be in form and in substance acceptable to the Initial Consenting Noteholders and reasonably satisfactory to SFC: (i) the Newco Shares; (ii) the Newco Notes (including the aggregate principal amount of the Newco Notes); (iii) any trust indenture or other document governing the terms of the Newco Notes; and (iv) the number of Newco Shares and Newco Notes to be issued in accordance with this Plan;

Plan Matters

 

  (n) the Indemnified Noteholder Class Action Limit shall be acceptable to SFC, the Monitor and the Initial Consenting Noteholders;

 

  (o) the aggregate amount of Proven Claims held by Ordinary Affected Creditors shall be acceptable to SFC, the Monitor and the Initial Consenting Noteholders;

 

  (p) the amount of each of the Unaffected Claims Reserve, the Administration Charge Reserve, the Directors’ Charge Reserve and the Monitor’s Post-Implementation Reserve shall, in each case, be acceptable to SFC, the Monitor and the Initial Consenting Noteholders;

 

  (q) the Litigation Funding Amount shall be acceptable to SFC, the Monitor and the Initial Consenting Noteholders;

 

  (r) the amount of each of the following shall be acceptable to SFC, the Monitor and the Initial Consenting Noteholders: (i) the aggregate amount of Lien Claims to be satisfied by the return to the applicable Lien Claimants of the applicable secured property in accordance with section 4.2(c)(i) hereof; and (ii) the aggregate amount of Lien Claims to be repaid in cash on the Plan Implementation Date in accordance with section 4.2(c)(ii) hereof;

 

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  (s) the aggregate amount of Unaffected Claims, and the aggregate amount of the Claims listed in each subparagraph of the definition of “Unaffected Claims” shall, in each case, be acceptable to SFC, the Monitor and the Initial Consenting Noteholders;

 

  (t) the aggregate amount of Unresolved Claims and the amount of the Unresolved Claims Reserve shall, in each case, be acceptable to SFC, the Monitor and the Initial Consenting Noteholders and shall be confirmed in the Sanction Order;

 

  (u) Litigation Trust and the Litigation Trust Agreement shall be in form and in substance acceptable to SFC and the Initial Consenting Noteholders, each acting reasonably, and the Litigation Trust shall be established in a jurisdiction that is acceptable to the Initial Consenting Noteholders and SFC, each acting reasonably;

 

  (v) SFC, the Monitor and the Initial Consenting Noteholders, each acting reasonably, shall be satisfied with the proposed use of proceeds and payments relating to all aspects of the Restructuring Transaction and the Plan, including, without limitation, any change of control payments, consent fees, transaction fees, third party fees or termination or severance payments, in the aggregate of $500,000 or more, payable by SFC or any Subsidiary to any Person (other than a Governmental Entity) in respect of or in connection with the Restructuring Transaction or the Plan, including without limitation, pursuant to any employment agreement or incentive plan of SFC or any Subsidiary;

 

  (w) SFC, the Monitor and the Initial Consenting Noteholders, each acting reasonably, shall be satisfied with the status and composition of all liabilities, indebtedness and obligations of the Subsidiaries and all releases of the Subsidiaries provided for in the Plan and the Sanction Order shall be binding and effective as of the Plan Implementation Date;

Plan Implementation Date Matters

 

  (x) the steps required to complete and implement the Plan shall be in form and in substance satisfactory to SFC and the Initial Consenting Noteholders;

 

  (y) the Noteholders and the Early Consent Noteholders shall receive, on the Plan Implementation Date, all of the consideration to be distributed to them pursuant to the Plan;

 

  (z)

all of the following shall be in form and in substance satisfactory to SFC and the Initial Consenting Noteholders: (i) all materials filed by SFC with the Court or any court of competent jurisdiction in the United States, Canada, Hong Kong, the PRC or any other jurisdiction that relates to the Restructuring Transaction; (ii) the terms of any court-imposed charges on any of the assets, property or undertaking of any of SFC, including without limitation any of the Charges; (iii) the Initial

 

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  Order; (iv) the Claims Procedure Order; (v) the Meeting Order; (vi) the Sanction Order; (vii) any other Order granted in connection with the CCAA Proceeding or the Restructuring Transaction by the Court or any other court of competent jurisdiction in Canada, the United States, Hong Kong, the PRC or any other jurisdiction; and (viii) the Plan (as it is approved by the Required Majority and the Sanction Order);

 

  (aa) any and all court-imposed charges on any assets, property or undertaking of SFC, including the Charges, shall be discharged on the Plan Implementation Date on terms acceptable to the Initial Consenting Noteholders and SFC, each acting reasonably;

 

  (bb) SFC shall have paid, in full, the Expense Reimbursement and all fees and costs owing to the SFC Advisors on the Plan Implementation Date, and Newco shall have no liability for any fees or expenses due to the SFC Advisors or the Noteholder Advisors either as at or following the Plan Implementation Date;

 

  (cc) SFC or the Subsidiaries shall have paid, in full all fees owing to each of Chandler Fraser Keating Limited and Spencer Stuart on the Plan Implementation Date, and Newco shall have no liability for any fees or expenses due to either Chandler Fraser Keating Limited and Spencer Stuart as at or following the Plan Implementation Date;

 

  (dd) SFC shall have paid all Trustee Claims that are outstanding as of the Plan Implementation Date, and the Initial Consenting Noteholders shall be satisfied that SFC has made adequate provision in the Unaffected Claims Reserve for the payment of all Trustee Claims to be incurred by the Trustees after the Plan Implementation Date in connection with the performance of their respective duties under the Note Indentures or this Plan;

 

  (ee) there shall not exist or have occurred any Material Adverse Effect, and SFC shall have provided the Initial Consenting Noteholders with a certificate signed by an officer of the Company, without any personal liability on the part of such officer, certifying compliance with this section 9.1(ee) as of the Plan Implementation Date;

 

  (ff) there shall have been no breach of the Noteholder Confidentiality Agreements (as defined in the RSA) by the Company or any of the Sino-Forest Representatives (as defined therein) in respect of the applicable Initial Consenting Noteholder;

 

  (gg) the Plan Implementation Date shall have occurred no later than January 15, 2013 (or such later date as may be consented to by SFC and the Initial Consenting Noteholders);

RSA Matters

 

  (hh) all conditions set out in sections 6 and 7 of the RSA shall have been satisfied or waived in accordance with the terms of the RSA;

 

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  (ii) the RSA shall not have been terminated;

Other Matters

 

  (jj) the organization, incorporating documents, articles, by-laws and other constating documents of SFC Escrow Co. and all definitive legal documentation in connection with SFC Escrow Co., shall be acceptable to the Initial Consenting Noteholders and the Monitor and in form and in substance reasonably satisfactory to SFC;

 

  (kk) except as expressly set out in this Plan, SFC Escrow Co. shall not have: (i) issued or authorized the issuance of any shares, notes, options, warrants or other securities of any kind, (ii) become subject to any Encumbrance with respect to its assets or property; (iii) acquired any assets or become liable to pay any indebtedness or liability of any kind (other than as expressly set out in this Plan); or (iv) entered into any agreement;

 

  (ll) the Initial Consenting Noteholders shall have completed due diligence in respect of SFC and the Subsidiaries and the results of such due diligence shall be acceptable to the Initial Consenting Noteholders prior to the date of the hearing of the Sanction Order;

 

  (mm) if so requested by the Initial Consenting Noteholders, the Sanction Order shall have been recognized and confirmed as binding and effective pursuant to an order of a court of competent jurisdiction in Canada, the United States, and any other jurisdiction requested by the Initial Consenting Noteholders, and all applicable appeal periods in respect of any such recognition order shall have expired and any appeals therefrom shall have been disposed of by the applicable appellate court;

 

  (nn) all press releases, disclosure documents and definitive agreements in respect of the Restructuring Transaction or the Plan shall be in form and substance satisfactory to SFC and the Initial Consenting Noteholders, each acting reasonably; and

 

  (oo) Newco and SFC shall have entered into arrangements reasonably satisfactory to SFC and the Initial Consenting Noteholders for ongoing preservation and access to the books and records of SFC and the Subsidiaries in existence as at the Plan Implementation Date, as such access may be reasonably requested by SFC or any Director or Officer in the future in connection with any administrative or legal proceeding, in each such case at the expense of the Person making such request.

9.2 Monitor’s Certificate

Upon delivery of written notice from SFC and Goodmans LLP (on behalf of the Initial Consenting Noteholders) of the satisfaction of the conditions set out in section 9.1, the Monitor shall deliver to Goodmans LLP and SFC a certificate stating that the Plan Implementation Date has occurred and that the Plan and the Sanction Order are effective in accordance with their respective terms. Following the Plan Implementation Date, the Monitor shall file such certificate with the Court.

 

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ARTICLE 10

ALTERNATIVE SALE TRANSACTION

10.1 Alternative Sale Transaction

At any time prior to the Plan Implementation Date (whether prior to or after the granting of the Sanction Order), and subject to the prior written consent of the Initial Consenting Noteholders, SFC may complete a sale of all or substantially all of the SFC Assets on terms that are acceptable to the Initial Consenting Noteholders (an “ Alternative Sale Transaction ”), provided that such Alternative Sale Transaction has been approved by the Court pursuant to section 36 of the CCAA on notice to the service list. In the event that such an Alternative Sale Transaction is completed, the terms and conditions of this Plan shall continue to apply in all respects, subject to the following:

 

  (a) The Newco Shares and Newco Notes shall not be distributed in the manner contemplated herein. Instead, the consideration paid or payable to SFC pursuant to the Alternative Sale Transaction (the “ Alternative Sale Transaction Consideration ”) shall be distributed to the Persons entitled to receive Newco Shares hereunder, and such Persons shall receive the Alternative Sale Transaction Consideration in the same proportions and subject to the same terms and conditions as are applicable to the distribution of Newco Shares hereunder.

 

  (b) All provisions in this Plan that address Newco shall be deemed to be ineffective to the extent that they address Newco, given that Newco will not be required in connection with an Alternative Sale Transaction.

 

  (c) All provisions addressing the Newco Notes shall be deemed to be ineffective to the extent such provisions address the Newco Notes, given that the Newco Notes will not be required in connection with an Alternative Sale Transaction.

 

  (d) All provisions relating to the Newco Shares shall be deemed to address the Alternative Sale Transaction Consideration to the limited extent such provisions address the Newco Shares.

 

  (e)

SFC, with the written consent of the Monitor and the Initial Consenting Noteholders, shall be permitted to make such amendments, modifications and supplements to the terms and conditions of this Plan as are necessary to: (i) facilitate the Alternative Sale Transaction; (ii) cause the Alternative Sale Transaction Consideration to be distributed in the same proportions and subject to the same terms and conditions as are subject to the distribution of Newco Shares hereunder; and (iii) complete the Alternative Sale Transaction and distribute the Alternative Sale Transaction Proceeds in a manner that is tax efficient for SFC and the Affected Creditors with Proven Claims, provided in each case that (y) a copy of such amendments, modifications or supplements is filed with the Court and served upon the service list; and (z) the Monitor is satisfied that such

 

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  amendments, modifications or supplements do not materially alter the proportionate entitlements of the Affected Creditors, as amongst themselves, to the consideration distributed pursuant to the Plan.

Except for the requirement of obtaining the prior written consent of the Initial Consenting Noteholders with respect to the matters set forth in this section 10.1 and subject to the approval of the Alternative Sale Transaction by the Court pursuant to section 36 of the CCAA (on notice to the service list), once this Plan has been approved by the Required Majority of Affected Creditors, no further meeting, vote or approval of the Affected Creditors shall be required to enable SFC to complete an Alternative Sale Transaction or to amend the Plan in the manner described in this 10.1.

ARTICLE 11

GENERAL

11.1 Binding Effect

On the Plan Implementation Date:

 

  (a) the Plan will become effective at the Effective Time;

 

  (b) the Plan shall be final and binding in accordance with its terms for all purposes on all Persons named or referred to in, or subject to, the Plan and their respective heirs, executors, administrators and other legal representatives, successors and assigns;

 

  (c) each Person named or referred to in, or subject to, the Plan will be deemed to have consented and agreed to all of the provisions of the Plan, in its entirety and shall be deemed to have executed and delivered all consents, releases, assignments and waivers, statutory or otherwise, required to implement and carry out the Plan in its entirety.

11.2 Waiver of Defaults

 

  (a) From and after the Plan Implementation Date, all Persons shall be deemed to have waived any and all defaults of SFC then existing or previously committed by SFC, or caused by SFC, the commencement of the CCAA Proceedings by SFC, any matter pertaining to the CCAA Proceedings, any of the provisions in the Plan or steps contemplated in the Plan, or non-compliance with any covenant, warranty, representation, term, provision, condition or obligation, expressed or implied, in any contract, instrument, credit document, indenture, note, lease, guarantee, agreement for sale or other agreement, written or oral, and any and all amendments or supplements thereto, existing between such Person and SFC, and any and all notices of default and demands for payment or any step or proceeding taken or commenced in connection therewith under any such agreement shall be deemed to have been rescinded and of no further force or effect, provided that nothing shall be deemed to excuse SFC from performing its obligations under the Plan or be a waiver of defaults by SFC under the Plan and the related documents.

 

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(b) Effective on the Plan Implementation Date, any and all agreements that are assigned to Newco as part of the SFC Assets shall be and remain in full force and effect, unamended, as at the Plan Implementation Date, and no Person shall, following the Plan Implementation Date, accelerate, terminate, rescind, refuse to perform or otherwise repudiate its obligations under, or enforce or exercise any right (including any right of set-off, dilution or other remedy) or make any demand against Newco or any Subsidiary under or in respect of any such agreement with Newco or any Subsidiary, by reason of:

 

  (i) any event that occurred on or prior to the Plan Implementation Date that would have entitled any Person thereto to enforce those rights or remedies (including defaults or events of default arising as a result of the insolvency of SFC);

 

  (ii) the fact that SFC commenced or completed the CCAA Proceedings;

 

  (iii) the implementation of the Plan, or the completion of any of the steps, transactions or things contemplated by the Plan; or

 

  (iv) any compromises, arrangements, transactions, releases, discharges or injunctions effected pursuant to the Plan or this Order.

11.3 Deeming Provisions

In the Plan, the deeming provisions are not rebuttable and are conclusive and irrevocable.

11.4 Non-Consummation

SFC reserves the right to revoke or withdraw the Plan at any time prior to the Sanction Date, with the consent of the Monitor and the Initial Consenting Noteholders. If SFC so revokes or withdraws the Plan, or if the Sanction Order is not issued or if the Plan Implementation Date does not occur, (a) the Plan shall be null and void in all respects, (b) any settlement or compromise embodied in the Plan, including the fixing or limiting to an amount certain any Claim, and any document or agreement executed pursuant to the Plan shall be deemed null and void, and (c) nothing contained in the Plan, and no acts taken in preparation for consummation of the Plan, shall (i) constitute or be deemed to constitute a waiver or release of any Claims by or against SFC or any other Person; (ii) prejudice in any manner the rights of SFC or any other Person in any further proceedings involving SFC; or (iii) constitute an admission of any sort by SFC or any other Person.

11.5 Modification of the Plan

 

  (a) SFC may, at any time and from time to time, amend, restate, modify and/or supplement the Plan with the consent of the Monitor and the Initial Consenting Noteholders, provided that: any such amendment, restatement, modification or supplement must be contained in a written document that is filed with the Court and:

 

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  (i) if made prior to or at the Meeting: (A) the Monitor, SFC or the Chair (as defined in the Meeting Order) shall communicate the details of any such amendment, restatement, modification and/or supplement to Affected Creditors and other Persons present at the Meeting prior to any vote being taken at the Meeting; (B) SFC shall provide notice to the service list of any such amendment, restatement, modification and/or supplement and shall file a copy thereof with the Court forthwith and in any event prior to the Court hearing in respect of the Sanction Order; and (C) the Monitor shall post an electronic copy of such amendment, restatement, modification and/or supplement on the Website forthwith and in any event prior to the Court hearing in respect of the Sanction Order; and

 

  (ii) if made following the Meeting: (A) SFC shall provide notice to the service list of any such amendment, restatement, modification and/or supplement and shall file a copy thereof with the Court; (B) the Monitor shall post an electronic copy of such amendment, restatement, modification and/or supplement on the Website; and (C) such amendment, restatement, modification and/or supplement shall require the approval of the Court following notice to the Affected Creditors and the Trustees.

 

  (b) Notwithstanding section 11.5(a), any amendment, restatement, modification or supplement may be made by SFC: (i) if prior to the Sanction Date, with the consent of the Monitor and the Initial Consenting Noteholders; and (ii) if after the Sanction Date, with the consent of the Monitor and the Initial Consenting Noteholders and upon approval by the Court, provided in each case that it concerns a matter that, in the opinion of SFC, acting reasonably, is of an administrative nature required to better give effect to the implementation of the Plan and the Sanction Order or to cure any errors, omissions or ambiguities and is not materially adverse to the financial or economic interests of the Affected Creditors or the Trustees.

 

  (c) Any amended, restated, modified or supplementary plan or plans of compromise filed with the Court and, if required by this section, approved by the Court, shall, for all purposes, be and be deemed to be a part of and incorporated in the Plan.

11.6 Actions and Approvals of SFC after Plan Implementation

 

  (a) From and after the Plan Implementation Date, and for the purpose of this Plan only:

 

  (i) if SFC does not have the ability or the capacity pursuant to Applicable Law to provide its agreement, waiver, consent or approval to any matter requiring SFC’s agreement, waiver, consent or approval under this Plan, such agreement, waiver consent or approval may be provided by the Monitor; and

 

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  (ii) if SFC does not have the ability or the capacity pursuant to Applicable Law to provide its agreement, waiver, consent or approval to any matter requiring SFC’s agreement, waiver, consent or approval under this Plan, and the Monitor has been discharged pursuant to an Order, such agreement, waiver consent or approval shall be deemed not to be necessary.

11.7 Consent of the Initial Consenting Noteholders

For the purposes of this Plan, any matter requiring the agreement, waiver, consent or approval of the Initial Consenting Noteholders shall be deemed to have been agreed to, waived, consented to or approved by such Initial Consenting Noteholders if such matter is agreed to, waived, consented to or approved in writing by Goodmans LLP, provided that Goodmans LLP expressly confirms in writing (including by way of e-mail) to the applicable Person that it is providing such agreement, consent or waiver on behalf of Initial Consenting Noteholders.

11.8 Claims Not Subject to Compromise

Nothing in this Plan, including section 2.4 hereof, shall prejudice, compromise, release, discharge, cancel, bar or otherwise affect any: (i) Non-Released D&O Claims (except to the extent that such Non-Released D&O Claim is asserted against a Named Director or Officer, in which case section 4.9(g) applies); (ii) Section 5.1(2) D&O Claims or Conspiracy Claims (except that, in accordance with section 4.9(e) hereof, any Section 5.1(2) D&O Claims against Named Directors and Officers and any Conspiracy Claims against Named Directors and Officers shall be limited to recovery from any insurance proceeds payable in respect of such Section 5.1(2) D&O Claims or Conspiracy Claims, as applicable, pursuant to the Insurance Policies, and Persons with any such Section 5.1(2) D&O Claims against Named Directors and Officers or Conspiracy Claims against Named Directors and Officers shall have no right to, and shall not, make any claim or seek any recoveries from any Person, other than enforcing such Persons’ rights to be paid from the proceeds of an Insurance Policy by the applicable insurer(s)); or (iii) any Claims that are not permitted to be compromised under section 19(2) of the CCAA .

11.9 Paramountcy

From and after the Effective Time on the Plan Implementation Date, any conflict between:

 

  (a) the Plan; and

 

  (b) the covenants, warranties, representations, terms, conditions, provisions or obligations, expressed or implied, of any contract, mortgage, security agreement, indenture, trust indenture, note, loan agreement, commitment letter, agreement for sale, lease or other agreement, written or oral and any and all amendments or supplements thereto existing between any Person and SFC and/or the Subsidiaries as at the Plan Implementation Date,

will be deemed to be governed by the terms, conditions and provisions of the Plan and the Sanction Order, which shall take precedence and priority.

 

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11.10 Severability of Plan Provisions

If, prior to the Sanction Date, any term or provision of the Plan is held by the Court to be invalid, void or unenforceable, the Court, at the request of SFC and with the consent of the Monitor and the Initial Consenting Noteholders, shall have the power to either (a) sever such term or provision from the balance of the Plan and provide SFC with the option to proceed with the implementation of the balance of the Plan as of and with effect from the Plan Implementation Date, or (b) alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision shall then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, and provided that SFC proceeds with the implementation of the Plan, the remainder of the terms and provisions of the Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated by such holding, alteration or interpretation.

11.11 Responsibilities of the Monitor

The Monitor is acting in its capacity as Monitor in the CCAA Proceeding and the Plan with respect to SFC and will not be responsible or liable for any obligations of SFC.

11.12 Different Capacities

Persons who are affected by this Plan may be affected in more than one capacity. Unless expressly provided herein to the contrary, a Person will be entitled to participate hereunder, and will be affected hereunder, in each such capacity. Any action taken by or treatment of a Person in one capacity will not affect such Person in any other capacity, unless expressly agreed by the Person, SFC, the Monitor and the Initial Consenting Noteholders in writing, or unless the Person’s Claims overlap or are otherwise duplicative.

11.13 Notices

Any notice or other communication to be delivered hereunder must be in writing and reference the Plan and may, subject as hereinafter provided, be made or given by personal delivery, ordinary mail or by facsimile or email addressed to the respective parties as follows:

 

  (a) if to SFC or any Subsidiary:

Sino-Forest Corporation

Room 3815-29 38/F, Sun Hung Kai Centre

30 Harbour Road, Wanchai, Hong Kong

Attention:  Mr. Judson Martin, Executive Vice-Chairman and Chief

  Executive Officer

 

  Fax:   +852-2877-0062

 

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with a copy by email or fax (which shall not be deemed notice) to:

Bennett Jones LLP

One First Canadian Place, Suite 3400

Toronto, ON M5X 1A4

Attention: Kevin J. Zych and Raj S. Sahni

Email:      zychk@bennettjones.com and sahnir@bennettjones.com

Fax:         416-863-1716

 

  (b) if to the Initial Consenting Noteholders:

c/o Goodmans LLP

Bay Adelaide Centre

333 Bay Street, Suite 3400

Toronto, Ontario M5H 2S7

Attention: Robert Chadwick and Brendan O’Neill

Email:      rchadwick@goodmans.ca and boneill@goodmans.ca

Fax:         416-979-1234

and with a copy by email or fax (which shall not be deemed notice) to:

Hogan Lovells International LLP

11 th Floor, One Pacific Place, 88 Queensway

Hong Kong China

Attention: Neil McDonald

Email:      neil.mcdonald@hoganlovells.com

Fax:         852-2219-0222

 

  (c) if to the Monitor:

FTI Consulting Canada Inc.

TD Waterhouse Tower

79 Wellington Street West

Suite 2010, P.O. Box 104

Toronto, ON M5K 1G8

Attention: Greg Watson

Email:      greg.watson@fticonsulting.com

Fax:         (416) 649-8101

and with a copy by email or fax (which shall not be deemed notice) to:

Gowling Lafleur Henderson LLP

1 First Canadian Place

100 King Street West, Suite 1600

Toronto, Ontario M5X 1G5

 

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  Attention: Derrick Tay
  Email: derrick.tay@gowlings.com
  Fax: (416) 862-7661

or to such other address as any party may from time to time notify the others in accordance with this section. Any such communication so given or made shall be deemed to have been given or made and to have been received on the day of delivery if delivered, or on the day of faxing or sending by other means of recorded electronic communication, provided that such day in either event is a Business Day and the communication is so delivered, faxed or sent before 5:00 p.m. (Toronto time) on such day. Otherwise, such communication shall be deemed to have been given and made and to have been received on the next following Business Day.

11.14 Further Assurances

SFC, the Subsidiaries and any other Person named or referred to in the Plan will execute and deliver all such documents and instruments and do all such acts and things as may be necessary or desirable to carry out the full intent and meaning of the Plan and to give effect to the transactions contemplated herein.

DATED as of the 19 th day of October, 2012.

 

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SCHEDULE ‘D’

CLAIMS PROCEDURE ORDER

 

1

      Court File No. CV-12-9667-00CL
LOGO   

ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

  
THE HONOURABLE MR.    )    MONDAY, THE 14th
   )   
JUSTICE MORAWETZ    )    DAY OF MAY, 2012

IN THE MATTER OF THE COMPANIES’ CREDITORS

ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED

AND IN THE MATTER OF A PLAN OF COMPROMISE AND

ARRANGEMENT OF SINO-FOREST CORPORATION

CLAIMS PROCEDURE ORDER

THIS MOTION, made by Sino-Forest Corporation (the “Applicant”) for an order establishing a claims procedure for the identification and determination of certain claims was heard this day at 330 University Avenue, Toronto, Ontario.

ON READING the Applicants Notice of Motion, the affidavit of W. Judson Martin sworn on May 2, 2012, the Second Report of FTI Consulting Canada Inc. (the “Monitor”) dated April 30, 2012 (the “Monitor’s Second Report”) and the Supplemental Report to the Monitor’s Second Report dated May 12, 2012 (the “Supplemental Report”), and on hearing the submissions of counsel for the Applicant, the Applicant’s directors, the Monitor, the ad hoc committee of Noteholders (the “Ad Hoc Noteholders”), and those other parties present, no one appearing for the other parties served with the Applicant’s Motion Record, although duly served as appears from the affidavit of service, filed:

SERVICE

1. THIS COURT ORDERS that the time for service of the Notice of Motion, the Motion Record, the Monitor’s Second Report and the Supplemental Report is hereby abridged and validated such that this Motion is properly returnable today and hereby dispenses with further service thereof.

DEFINTTIONS AND INTERPRETATION

2. The following terms shall have the following meanings ascribed thereto:

 

  (a) “2013 and 2016 Trustee” means The Bank of New York Mellon, in its capacity as trustee for the 2013 Notes and the 2016 Notes;

 

  (b) “2014 and 2017 Trustee” means Law Debenture Trust Company of New York, in its capacity as trustee for the 2014 Notes and the 2017 Notes;

 

  (c) “2013 Note Indenture” means the indenture dated as of July 23, 2008, by and between the Applicant, the entities listed as subsidiary guarantors thereto, and The Bank of New York Mellon, as trustee, as amended, modified or supplemented;

 

  (d) “2014 Note Indenture” means the indenture dated as of July 27, 2009 entered into by and between the Applicant, the entities listed as subsidiary guarantors thereto, and Law Debenture Trust Company of New York, as trustee, as amended, modified or supplemented;

 

  (e) “2016 Note Indenture” means the indenture dated as of December 17, 2009, by and between the Applicant, the entities listed as subsidiary guarantors thereto, and The Bank of New York Mellon, as trustee, as amended, modified or supplemented;

 

  (f) “2017 Note Indenture” means the indenture dated as of October 21, 2010, by and between the Applicant, the entities listed as subsidiary guarantors thereto, and Law Debenture Trust Company of New York, as trustee, as amended, modified or supplemented;

 

  (g) “2013 Notes” means the US$345,000,000 of 5.00% Convertible Senior Notes Due 2013 issued pursuant to the 2013 Note Indenture;

 

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  (h) “2014 Notes” means the US$399,517,000 of 10.25% Guaranteed Senior Notes Due 2014 issued pursuant to the 2014 Note Indenture;

 

  (i) “2016 Notes” means the US$460,000,000 of 4.25% Convertible Senior Notes Due 2016 issued pursuant to the 2016 Note Indenture;

 

  (j) “2017 Notes” means the US$600,000,000 of 6.25% Guaranteed Senior Notes Due 2017 issued pursuant to the 2017 Note Indenture;

 

  (k) “Administration Charge” has the meaning given to that term in paragraph 37 of the Initial Order;

 

  (l) “BIA” means the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended;

 

  (m) “Business Day” means a day, other than a Saturday or a Sunday, on which banks are generally open for business in Toronto, Ontario;

 

  (n) “CCAA” means the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C- 36, as amended;

 

  (o) “CCAA Proceedings” means the proceedings commenced by the Applicant in the Court under Court File

No. CV-12-9667-00CL;

 

  (p) “CCAA Service List” means the service list in the CCAA Proceedings posted on the Monitor’s Website, as amended from time to time;

 

  (q) “Claim” means:

 

  (i)

any right or claim of any Person that may be asserted or made in whole or in part against the Applicant, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind whatsoever, and any interest accrued thereon or costs payable in respect thereof, including by reason of the commission of a tort (intentional or unintentional), by reason of any breach of contract or other agreement

 

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  (oral or written), by reason of any breach of duty (including any legal, statutory, equitable or fiduciary duty) or by reason of any right of ownership of or title to property or assets or right to a trust or deemed trust (statutory, express, implied, resulting, constructive or otherwise), and whether or not any indebtedness, liability or obligation is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, unsecured, present or future, known or unknown, by guarantee, surety or otherwise, and whether or not any right or claim is executory or anticipatory in nature, including any right or ability of any Person (including Directors and Officers) to advance a claim for contribution or indemnity or otherwise with respect to any matter, action, cause or chose in action, whether existing at present or commenced in the future, which indebtedness, liability or obligation, and any interest accrued thereon or costs payable in respect thereof (A) is based in whole or in part on facts prior to the Filing Date, (B) relates to a time period prior to the Filing Date, or (C) is a right or claim of any kind that would be a claim provable in bankruptcy within the meaning of the BIA had the Applicant become bankrupt on the Filing Date, or an Equity Claim (each a “Prefiling Claim”, and collectively, the “Prefiling Claims”);

 

  (ii) a Restructuring Claim; and

 

  (iii) a Secured Claim;

provided, however, that “Claim” shall not include an Excluded Claim, a D&O Claim or a D&O Indemnity Claim;

 

  (r) “Claimant” means any Person having a Claim, a D&O Claim or a D&O Indemnity Claim and includes the transferee or assignee of a Claim, a D&O Claim or a D&O Indemnity Claim transferred and recognized as a Claimant in accordance with paragraphs 46 and 47 hereof or a trustee, executor, liquidator, receiver, receiver and manager, or other Person acting on behalf of or through such Person;

 

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  (s) “Claimants’ Guide to Completing the D&O Proof of Claim” means the guide to completing the D&O Proof of Claim form, in substantially the form attached as Schedule “E-2” hereto;

 

  (t) “Claimants’ Guide to Completing the Proof of Claim” means the guide to completing the Proof of Claim form, in substantially the form attached as Schedule “E” hereto;

 

  (u) “Claims Bar Date” means June 20, 2012;

 

  (v) “Class” means the National Class and the Quebec Class;

 

  (w) “Court” means the Ontario Superior Court of Justice (Commercial List);

 

  (x) “Creditors’ Meeting” means any meeting of creditors called for the purpose of considering and voting in respect of the Plan, if one is filed, to be scheduled pursuant to further order of the Court;

 

  (y)

“D&O Claim” means, other than an Excluded Claim, (i) any right or claim of any Person that may be asserted or made in whole or in part against one or more Directors or Officers that relates to a Claim for which such Directors or Officers are by law liable to pay in their capacity as Directors or Officers, or (ii) any right or claim of any Person that may be asserted or made in whole or in part against one or more Directors or Officers, in that capacity, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind whatsoever, and any interest accrued thereon or costs payable in respect thereof, including by reason of the commission of a tort (intentional or unintentional), by reason of any breach of contract or other agreement (oral or written), by reason of any breach of duty (including any legal, statutory, equitable or fiduciary duty) or by reason of any right of ownership of or title to property or assets or right to a trust or deemed trust (statutory, express, implied, resulting, constructive or otherwise), and whether or not any indebtedness, liability or obligation, and any interest accrued thereon or costs payable in respect thereof, is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,

 

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  disputed, undisputed, legal, equitable, secured, unsecured, present or future, known or unknown, by guarantee, surety or otherwise, and whether or not any right or claim is executory or anticipatory in nature, including any right or ability of any Person to advance a claim for contribution or indemnity from any such Directors or Officers or otherwise with respect to any matter, action, cause or chose in action, whether existing at present or commenced in the future, which indebtedness, liability or obligation, and any interest accrued thereon or costs payable in respect thereof (A) is based in whole or in part on facts prior to the Filing Date, or (B) relates to a time period prior to the Filing Date;

 

  (z) “D&O Indemnity Claim” means any existing or future right of any Director or Officer against the Applicant which arose or arises as a result of any Person filing a D&O Proof of Claim in respect of such Director or Officer for which such Director or Officer is entitled to be indemnified by the Applicant;

 

  (aa) “D&O Indemnity Claims Bar Date” has the meaning set forth in paragraph 19 of this Order;

 

  (bb) “D&O Indemnity Proof of Claim” means the indemnity proof of claim in substantially the form attached as Schedule “F” hereto to be completed and filed by a Director or Officer setting forth its purported D&O Indemnity Claim;

 

  (cc) “D&O Proof of Claim” means the proof of claim in substantially the form attached as Schedule “D-2” hereto to be completed and filed by a Person setting forth its purported D&O Claim and which shall include all supporting documentation in respect of such purported D&O Claim;

 

  (dd) “Directors” means anyone who is or was, or may be deemed to be or have been whether by statute, operation of law or otherwise, a director or de facto director of the Applicant;

 

  (ee) “Directors’ Charge” has the meaning given to that term in paragraph 26 of the Initial Order;

 

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  (ff) “Dispute Notice” means a written notice to the Monitor, in substantially the form attached as Schedule “B” hereto, delivered to the Monitor by a Person who has received a Notice of Revision or Disallowance, of its intention to dispute such Notice of Revision or Disallowance;

 

  (gg) “Employee Amounts” means all outstanding wages, salaries and employee benefits (including, employee medical, dental, disability, life insurance and similar benefit plans or arrangements, incentive plans, share compensation plans and employee assistance programs and employee or employer contributions in respect of pension and other benefits), vacation pay, commissions, bonuses and other incentive payments, termination and severance payments, and employee expenses and reimbursements, in each case incurred in the ordinary course of business and consistent with existing compensation policies and arrangements;

 

  (hh) “Equity Claim” has the meaning set forth in Section 2(1) of the CCAA;

 

  (ii) “Excluded Claim” means:

 

  (i) any Claims entitled to the benefit of the Administration Charge or the Directors’ Charge, or any further charge as may be ordered by the Court;

 

  (ii) any Claims of the Subsidiaries against the Applicant;

 

  (iii) any Claims of employees of the Applicant as at the Filing Date in respect of Employee Amounts;

 

  (iv) any Post-Filing Claims;

 

  (v) any Claims of the Ontario Securities Commission; and

 

  (vi) any D&O Claims in respect of (i) though (v) above;

 

  (jj) “Filing Date” means March 30, 2012;

 

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  (kk) “Government Authority” means a federal, provincial, territorial, municipal or other government or government department, agency or authority (including a court of law) having jurisdiction over the Applicant;

 

  (ll) “Initial Order” means the Initial order of the Honourable Mr. Justice Morawetz made March 30, 2012 in the CCAA Proceedings, as amended, restated or varied from time to time;

 

  (mm)  “Known Claimants” means:

 

  (i) any Persons which, based upon the books and records of the Applicant, was owed monies by the Applicant as of the Filing Date and which monies remain unpaid in whole or in part;

 

  (ii) any Person who has commenced a legal proceeding in respect of a Claim or D&O Claim or given the Applicant written notice of an intention to commence a legal proceeding or a demand for payment in respect of a Claim or D&O Claim, provided that where a lawyer of record has been listed in connection with any such proceedings, the “Known Claimant” for the purposes of any notice required herein or to be given hereunder shall be, in addition to that Person, its lawyer of record; and

 

  (iii) any Person who is a party to a lease, contract, or other agreement or obligation of the Applicant which was restructured, terminated, repudiated or disclaimed by the Applicant between the Filing Date and the date of this Order;

 

  (nn) “Monitor’s Website” has the meaning set forth in paragraph 12(a) of this Order;

 

  (oo) “National Class” has the meaning given to it in the Fresh As Amended Statement of Claim in the Ontario Class Action;

 

  (pp) “Note Indenture Trustees” means, collectively, the 2013 and 2016 Trustee and the 2014 and 2017 Trustee;

 

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  (qq) “Notes” means, collectively, the 2013 Notes, the 2014 Notes, the 2016 Notes, and the 2017 Notes;

 

  (rr) “Noteholder” means a registered or beneficial holder on or after the Filing Date of a Note in that capacity, and, for greater certainty, does not include former registered or beneficial holders of Notes;

 

  (ss) “Notice of Revision or Disallowance” means a notice, in substantially the form attached as Schedule “A” hereto, advising a Person that the Monitor has revised or disallowed all or part of such Person’s purported Claim, D&O Claim or D&O Indemnity Claim set out in such Person’s Proof of Claim, D&O Proof of Claim or D&O Indemnity Proof of Claim;

 

  (tt) “Notice to Claimants” means the notice to Claimants for publication in substantially the form attached as Schedule “C” hereto;

 

  (uu) “Officers” means anyone who is or was, or may be deemed to be or have been, whether by statute, operation of law or otherwise, an officer or de facto officer of the Applicant;

 

  (vv) “Ontario Class Action: means the action commenced against the Applicant and others in the Ontario Superior Court of Justice, bearing (Toronto) Court File No. CV-11-431153-00CP;

 

  (ww) “Ontario Plaintiffs” means the Trustees of the Labourers’ Pension Fund of Central and Eastern Canada and the other named Plaintiffs in the Ontario Class Action;

 

  (xx) “Person” is to be broadly interpreted and includes any individual, firm, corporation, limited or unlimited liability company, general or limited partnership, association, trust, unincorporated organization, joint venture, Government Authority or any agency, regulatory body, officer or instrumentality thereof or any other entity, wherever situate or domiciled, and whether or not having legal status, and whether acting on their own or in a representative capacity;

 

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  (yy) “Plan” means any proposed plan of compromise or arrangement filed in respect of the Applicant pursuant to the CCAA as the same may be amended, supplemented or restated from time to time in accordance with its terms;

 

  (zz) “Post-Filing Claims” means any claims against the Applicant that arose from the provision of authorized goods and services provided or otherwise incurred on or after the Filing Date in the ordinary course of business, but specifically excluding any Restructuring Claim;

 

  (aaa) “Proof of Claim” means the proof of claim in substantially the form attached as Schedule “D” hereto to be completed and filed by a Person setting forth its purported Claim and which shall include all supporting documentation in respect of such purported Claim;

 

  (bbb) “Proof of Claim Document Package” means a document package that includes a copy of the Notice to Claimants, the Proof of Claim form, the D&O Proof of Claim form, the Claimants’ Guide to Completing the Proof of Claim form, the Claimants’ Guide to Completing the D&O Proof of Claim form, and such other materials as the Monitor, in consultation with the Applicant, may consider appropriate or desirable;

 

  (ccc) “Proven Claim” means the amount and Status of a Claim, D&O Claim or D&O Indemnity Claim of a Claimant as determined in accordance with this Order;

 

  (ddd) “Quebec Class” has the meaning given to it in the statement of claim in the Quebec Class Action;

 

  (eee) “Quebec Class Action” means the action commenced against the Applicant and others in the Quebec Superior Court, bearing Court File No. 200-06-000132-111;

 

  (fff) “Quebec Plaintiffs” means Guining Liu and the other named plaintiffs in the Quebec Class Action;

 

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  (ggg) “Restructuring Claim” means any right or claim of any Person that may be asserted or made in whole or in part against the Applicant, whether or not asserted or made, in connection with any indebtedness, liability or obligation of any kind arising out of the restructuring, termination, repudiation or disclaimer of any lease, contract, or other agreement or obligation on or after the Filing Date and whether such restructuring, termination, repudiation or disclaimer took place or takes place before or after the date of this Order;

 

  (hhh) “Restructuring Claims Bar Date” means, in respect of a Restructuring Claim, the later of (i) the Claims Bar Date, and (ii) 30 days after a Person is deemed to receive a Proof of Claim Document Package pursuant to paragraph 12(e) hereof.

 

  (iii) “Secured Claim” means that portion of a Claim that is (i) secured by security validly charging or encumbering property or assets of the Applicant (including statutory and possessor liens that create security interests) up to the value of such collateral, and (ii) duly and properly perfected in accordance with the relevant legislation in the appropriate jurisdiction as of the Filing Date;

 

  (jjj) “Status” means, with respect to a Claim, D&O Claim or D&O Indemnity Claim, or a purported Claim, D&O Claim or D&O Indemnity Claim, whether such claim is secured or unsecured; and

 

  (kkk) “Subsidiaries” means all direct and indirect subsidiaries of the Applicant other than Greenheart Group Limited (Bermuda) and its direct and indirect subsidiaries, and “Subsidiary” means any one of the Subsidiaries.

3. THIS COURT ORDERS that all references as to time herein shall mean local time in Toronto, Ontario, Canada, and any reference to an event occurring on a Business Day shall mean prior to 5:00 p.m. on such Business Day unless otherwise indicated herein.

4. THIS COURT ORDERS that all references to the word “including” shall mean “including without limitation”.

5. THIS COURT ORDERS that all references to the singular herein include the plural, the plural include the singular, and any gender includes the other gender.

 

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GENERAL PROVISIONS

6. THIS COURT ORDERS that the Monitor, in consultation with the Applicant, is hereby authorized to use reasonable discretion as to the adequacy of compliance with respect to the manner in which forms delivered hereunder are completed and executed, and may, where it is satisfied that a Claim, a D&O Claim or a D&O Indemnity Claim has been adequately proven, waive strict compliance with the requirements of this Order as to completion and execution of such forms and to request any further documentation from a Person that the Monitor, in consultation with the Applicant, may require in order to enable it to determine the validity of a Claim, a D&O Claim or a D&O Indemnity Claim.

7. THIS COURT ORDERS that if any purported Claim, D&O Claim or D&O Indemnity Claim arose in a currency other than Canadian dollars, then the Person making the purported Claim, D&O Claim or D860 Indemnity Claim shall complete its Proof of Claim, D&O Proof of Claim or D&O Indemnity Proof of Claim, as applicable, indicating the amount of the purported Claim, D&O Claim or D&O Indemnity Claim in such currency, rather than in Canadian dollars or any other currency. The Monitor shall subsequently calculate the amount of such purported Claim, D&O Claim or D&O Indemnity Claim in Canadian Dollars, using the Reuters closing rate on the Filing Date (as found at lattp://www.reuters.comifinance/currencies), without prejudice to a different exchange rate being proposed in any Plan.

8. THIS COURT ORDERS that a Person making a purported Claim, D&O Claim or D&O Indemnity Claim shall complete its Proof of Claim, D&O Proof of Claim or Indemnity Proof of Claim, as applicable, indicating the amount of the purported Claim, D&O Claim or D&O Indemnity Claim without including any interest and penalties that would otherwise accrue after the Filing Date.

9. THIS COURT ORDERS that the form and substance of each of the Notice of Revision or Disallowance, Dispute Notice, Notice to Claimants, the Proof of Claim, the D&O Proof of Claim, the Claimants’ Guide to Completing the Proof of Claim, the Claimants’ Guide to Completing the D&O Proof of Claim, and D&:0 Indemnity Proof of Claim substantially in the forms attached as Schedules “A”, “B”, “C”, “D”, “D-2”, “E”, “E-2” and “F” respectively to this Order are hereby approved. Notwithstanding the foregoing, the Monitor, in consultation with the Applicant, may from time to time make minor non-substantive changes to such forms as the Monitor, in consultation with the Applicant, considers necessary or advisable.

 

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MONITOR’S ROLE

10. THIS COURT ORDERS that the Monitor, in addition to its prescribed rights, duties, responsibilities and obligations under the CCAA and under the Initial Order, is hereby directed and empowered to take such other actions and fulfill such other roles as are authorized by this Order or incidental thereto.

11. THIS COURT ORDERS that (i) in carrying out the terms of this Order, the Monitor shall have all of the protections given to it by the CCAA, the Initial Order, and this Order, or as an officer of the Court, including the stay of proceedings in its favour, (ii) the Monitor shall incur no liability or obligation as a result of the carrying out of the provisions of this Order, (iii) the Monitor shall be entitled to rely on the books and records of the Applicant and any information provided by the Applicant, all without independent investigation, and (iv) the Monitor shall not be liable for any claims or damages resulting from any errors or omissions in such books, records or information.

NOTICE TO CLAIMANTS, DIRECTORS AND OFFICERS

12. THIS COURT ORDERS that:

 

  (a) the Monitor shall no later than five (5) Business Days following the making of this Order, post a copy of the Proof of Claim Document Package on its website at http://cfcanada.fticonsulting.com/sfc (“Monitor’s Website”);

 

  (b) the Monitor shall no later than five (5) Business Days following the making of this Order, send on behalf of the Applicant to the Note Indenture Trustees (or to counsel for the Note Indenture Trustees as appears on the CCAA Service List if applicable) a copy of the Proof of Claim Document Package;

 

  (c)

the Monitor shall no later than five (5) Business Days following the making of this Order, send on behalf of the Applicant to each of the Known Claimants a copy of the Proof of Claim Document Package, provided however that

 

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  the Monitor is not required to send Proof of Claim Document Packages to Noteholders;

 

  (d) the Monitor shall no later than five (5) Business Days following the making of this Order, cause the Notice to Claimants to be published in (i) The Globe and Mail newspaper (National Edition) on one such day, and (ii) the Wall Street Journal (Global Edition) on one such day;

 

  (e) with respect to Restructuring Claims arising from the restructuring, termination, repudiation or disclaimer of any lease, contract, or other agreement or obligation, the Monitor shall send to the counterparty(ies) to such lease, contract, or other agreement or obligation a Proof of Claim Document Package no later than five (5) Business Days following the time the Monitor becomes aware of the restructuring, termination, repudiation or disclaimer of any such lease, contract, or other agreement or obligation;

 

  (f) the Monitor shall, provided such request is received by the Monitor prior to the Claims Bar Date, deliver as soon as reasonably possible following receipt of a request therefor a copy of the Proof of Claim Document Package to any Person requesting such material; and

 

  (g) the Monitor shall send to any Director of Officer named in a D&O Proof of Claim received by the Claims Bar Date a copy of such D&O Proof of Claim as soon as practicable along with an D&O Indemnity Proof of Claim form, with a copy to counsel for such Directors or Officers.

13. THIS COURT ORDERS that the Applicant shall (i) inform the Monitor of all Known Claimants by providing the Monitor with a list of all Known Claimants and their last known addresses according to the books and records of the Applicant and (ii) provide the Monitor with a list of all Directors and Officers and their last known addresses according to the books and records of the Applicant.

 

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14. THIS COURT ORDERS that, except as otherwise set out in this Order or other orders of the Court, neither the Monitor nor the Applicant is under any obligation to send notice to any Person holding a Claim, a D&O Claim or a D&O Indemnity Claim, and without limitation, neither the Monitor nor the Applicant shall have any obligation to send notice to any Person having a security interest in a Claim, D&O Claim or D&O Indemnity Claim (including the holder of a security interest created by way of a pledge or a security interest created by way of an assignment of a Claim, D&O Claim or D&O Indemnity Claim), and all Persons (including Known Claimants) shall be bound by any notices published pursuant to paragraphs 12(a) and 12(d) of this Order regardless of whether or not they received actual notice, and any steps taken in respect of any Claim, D&O Claim or D&O Indemnity Claim in accordance with this Order.

15. THIS COURT ORDERS that the delivery of a Proof of Claim, D&O Proof of Claim, or D&O Indemnity Proof of Claim by the Monitor to a Person shall not constitute an admission by the Applicant or the Monitor of any liability of the Applicant or any Director of Officer to any Person.

CLAIMS BAR DATES

Claims and D&O Claims

16. THIS COURT ORDERS that (i) Proofs of Claim (but not in respect of any Restructuring Claims) and D&O Proofs of Claim shall be filed with the Monitor on or before the Claims Bar Date, and (ii) Proofs of Claim in respect of Restructuring Claims shall be filed with the Monitor on or before the Restructuring Claims Bar Date. For the avoidance of doubt, a Proof of Claim or D&O Proof of Claim, as applicable, must be filed in respect of every Claim or D&O Claim, regardless of whether or not a legal proceeding in respect of a Claim or D&O Claim was commenced prior to the Filing Date.

17. THIS COURT ORDERS that any Person that does not file a Proof of Claim as provided for herein such that the Proof of Claim is received by the Monitor on or before the Claims Bar Date or the Restructuring Claims Bar Date, as applicable, (a) shall be and is hereby forever barred from making or enforcing such Claim against the Applicant and all such Claims shall be forever extinguished; (b) shall be and is hereby forever barred from making or enforcing such Claim as against any other Person who could claim contribution or indemnity from the Applicant; (c) shall not be entitled to vote such Claim at the Creditors’ Meeting in respect of the Plan or to receive any distribution thereunder in respect of such Claim; and (d) shall not be entitled to any further notice in, and shall not be entitled to participate as a Claimant or creditor in, the CCAA Proceedings in respect of such Claim.

 

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18. THIS COURT ORDERS that any Person that does not file a D&O Proof of Claim as provided for herein such that the D&O Proof of Claim is received by the Monitor on or before the Claims Bar Date (a) shall be and is hereby forever barred from making or enforcing such D&O Claim against any Directors or Officers, and all such D&O Claims shall be forever extinguished; (b) shall be and is hereby forever barred from making or enforcing such D&O Claim as against any other Person who could claim contribution or indemnity from any Directors or Officers; (c) shall not be entitled to vote such D&O Claim at the Creditors’ Meeting or to receive any distribution in respect of such D&O Claim; and (d) shall not be entitled to any further notice in, and shall not be entitled to participate as a Claimant or creditor in, the CCAA Proceedings in respect of such D&O Claim.

D&O Indemnity Claims

19. THIS COURT ORDERS that any Director of Officer wishing to assert a D&O Indemnity Claim shall deliver a D&O Indemnity Proof of Claim to the Monitor so that it is received by no later than fifteen (15) Business Days after the date of receipt of the D&O Proof of Claim by such Director or Officer pursuant to paragraph 12(g) hereof (with respect to each D&O Indemnity Claim, the “D&O Indemnity Claims Bar Date”).

20. THIS COURT ORDERS that any Director of Officer that does not file a D&O Indemnity Proof of Claim as provided for herein such that the D&O Indemnity Proof of Claim is received by the Monitor on or before the D&O Indemnity Claims Bar Date (a) shall be and is hereby forever barred from making or enforcing such D&O Indemnity Claim against the Applicant, and such D&O Indemnity Claim shall be forever extinguished; (b) shall be and is hereby forever barred from making or enforcing such D&O Indemnity Claim as against any other Person who could claim contribution or indemnity from the Applicant; and (c) shall not be entitled to vote such D&O Indemnity Claim at the Creditors’ Meeting or to receive any distribution in respect of such D&O Indemnity Claim.

 

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Excluded Claims

21. THIS COURT ORDERS that Persons with Excluded Claims shall not be required to file a Proof of Claim in this process in respect of such Excluded Claims, unless required to do so by further order of the Court.

PROOFS OF CLAIM

22. THIS COURT ORDERS that (i) each Person shall include any and all Claims it asserts against the Applicant in a single Proof of Claim, provided however that where a Person has taken assignment or transfer of a purported Claim after the Filing Date, that Person shall file a separate Proof of Claim for each such assigned or transferred purported Claim, and (ii) each Person that has or intends to assert a right or claim against one or more Subsidiaries which is based in whole or in part on facts, underlying transactions, causes of action or events relating to a purported Claim made against the Applicant shall so indicate on such Claimant’s Proof of Claim.

23. THIS COURT ORDERS that each Person shall include any and all D&O Claims it asserts against one or more Directors or Officers in a single D&O Proof of Claim, provided however that where a Person has taken assignment or transfer of a purported D&O Claim after the Filing Date, that Person shall file a separate D&O Proof of Claim for each such assigned or transferred purported D&O Claim.

24. THIS COURT ORDERS that the 2013 and 2016 Trustee is authorized and directed to file one Proof of Claim on or before the Claims Bar Date in respect of each of the 2013 Notes and the 2016 Notes, indicating the amount owing on an aggregate basis as at the Filing Date under each of the 2013 Note Indenture and the 2016 Note Indenture.

25. THIS COURT ORDERS that the 2014 and 2017 Trustee is authorized and directed to file one Proof of Claim on or before the Claims Bar Date in respect of each of the 2014 Notes and the 2017 Notes, indicating the amount owing on an aggregate basis as at the Filing Date under each of the 2014 Note Indenture and the 2017 Note Indenture.

 

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26. Notwithstanding any other provisions of this Order, Noteholders are not required to file individual Proofs of Claim in respect of Claims relating solely to the debt evidenced by their Notes. The Monitor may disregard any Proofs of Claim filed by any individual Noteholder claiming the debt evidenced by the Notes, and such Proofs of Claim shall be ineffective for all purposes. The process for determining each individual Noteholder’s Claim for voting and distribution purposes with respect to the Plan and the process for voting on the Plan by Noteholders will be established by further order of the Court.

27. THIS COURT ORDERS that the Ontario Plaintiffs are, collectively, authorized to file, on or before the Claims Bar Date, one Proof of Claim and, if applicable, one D&O Proof of Claim, in respect of the substance of the matters set out in the Ontario Class Action, notwithstanding that leave to make a secondary market liability claim has not be granted and that the National Class has not yet been certified, and that members of the National Class may rely on the one Proof of Claim and/or one D&O Proof of Claim filed by the counsel for the Ontario Plaintiffs and are not required to file individual Proofs of Claim or D&O Proofs of Claim in respect of the Claims forming the subject matter of the Ontario Class Action.

28. THIS COURT ORDERS that the Quebec Plaintiffs are, collectively, authorized to file, on Or before the Claims Bar Date, one Proof of Claim and, if applicable, one D&O Proof of Claim, in respect of the substance of the matters set out in the Quebec Class Action, notwithstanding that leave to make a secondary market liability claim has not be granted and that the Quebec Class has not yet been certified, and that members of the Quebec Class may rely on the one Proof of Claim and/or one D&O Proof of Claim filed by the counsel for the Quebec Plaintiffs and are not required to file individual Proofs of Claim or D&O Proofs of Claim in respect of the Claims forming the subject matter of the Quebec Class Action.

REVIEW OF PROOFS OF CLAIM

29. THIS COURT ORDERS that any Claimant filing a Proof of Claim, D&O Proof of Claim or D&O Indemnity Proof of Claim shall clearly mark as “Confidential” any documents or portions thereof that that Person believes should be treated as confidential.

 

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30. THIS COURT ORDERS that with respect to documents or portions thereof that are marked “Confidential”, the following shall apply:

 

  (a) any information that is otherwise publicly available shall not be treated as “Confidential” regardless of whether it is marked as such;

 

  (b) subject to the following, such information will be accessible to and may be reviewed only by the Monitor, the Applicant, any Director or Officer named in the applicable D&O Proof of Claim or D&O Indemnity Proof of Claim and each of their respective counsel, or as otherwise ordered by the Court (“Designated Persons”) or consented to by the Claimant, acting reasonably; and

 

  (c) any Designated Person may provide Confidential Information to other interested stakeholders (who shall have provided non-disclosure undertakings or agreements) on not less than 3 Business Days’ notice to the Claimant. If such Claimant objects to such disclosure, the Claimant and the relevant Designated Person shall attempt to settle any objection, failing which, either party may seek direction from the Court.

31. THIS COURT ORDERS that the Monitor (in consultation with the Applicant and the Directors and Officers named in the D&O Proof of Claim, as applicable), subject to the terms of this Order, shall review all Proofs of Claim and D&O Proofs of Claim filed, and at any time:

 

  (a) may request additional information from a purported Claimant;

 

  (b) may request that a purported Claimant file a revised Proof of Claim or D&O Proof of Claim, as applicable;

 

  (c) may, with the consent of the Applicant and any Person whose liability may be affected or further order of the Court, attempt to resolve and settle any issue arising in a Proof of Claim or D&O Proof of Claim or in respect of a purported Claim or D&O Claim, provided that if a Director or Officer disputes all or any portion of a purported D&O Claim, then the disputed portion of such purported D&O Claim may not be resolved or settled without such Director or Officer’s consent or further order of the Court;

 

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  (d) may, with the consent of the Applicant and any Person whose liability may be affected or further order of the Court, accept (in whole or in part) the amount and/or Status of any Claim or D&O Claim, provided that if a Director or Officer disputes all or any portion of a purported D&O Claim against such Director or Officer, then the disputed portion of such purported D&O Claim may not be accepted without such Director or Officer’s consent or further order of the Court; and

 

  (e) may by notice in writing revise or disallow (in whole or in part) the amount and/or Status of any purported Claim or D&O Claim,

32. THIS COURT ORDERS that where a Claim or D&O Claim has been accepted by the Monitor in accordance with this Order, such Claim or D&O Claim shall constitute such Claimant’s Proven Claim. The acceptance of any Claim or D&O Claim or other determination of same in accordance with this Order, in full or in part, shall not constitute an admission of any fact, thing, liability, or quantum or status of any claim by any Person, save and except in the context of the CCAA Proceedings, and, for greater certainty, shall not constitute an admission of any fact, thing, liability, or quantum or status of any claim by any Person as against any Subsidiary.

33. THIS COURT ORDERS that where a purported Claim or D&O Claim is revised or disallowed (in whole or in part, and whether as to amount and/or Status), the Monitor shall deliver to the purported Claimant a Notice of Revision or Disallowance, attaching the form of Dispute Notice.

34. THIS COURT ORDERS that where a purported Claim or D&O Claim has been revised or disallowed (in whole or in part, and whether as to amount and/or as to Status), the revised or disallowed purported Claim or D&O Claim (or revised or disallowed portion thereof) shall not be a Proven Claim until determined otherwise in accordance with the procedures set out in paragraphs 42 to 45 hereof or as otherwise ordered by the Court.

 

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REVIEW OF D&O INDEMNITY PROOFS OF CLAIM

35.THIS COURT ORDERS that the Monitor, subject to the terms of this Order, shall review all D&O Indemnity Proofs of Claim filed, and at any time:

 

  (a) may request additional information from a Director of Officer;

 

  (b) may request that a Director or Officer file a revised D&O Indemnity Proof of Claim;

 

  (c) may attempt to resolve and settle any issue arising in a D&O Indemnity Proof of Claim or in respect of a purported D&O Indemnity Claim;

 

  (d) may accept (in whole or in part) the amount and/or Status of any D&O Indemnity Claim; and

 

  (e) may by notice in writing revise or disallow (in whole or in part) the amount and/or Status of any purported D&O Indemnity Claim.

36. THIS COURT ORDERS that where a D&O Indemnity Claim has been accepted by the Monitor in accordance with this Order, such D&O Indemnity Claim shall constitute such Director or Officer’s Proven Claim. The acceptance of any D&O Indemnity Claim or other determination of same in accordance with this Order, in full or in part, shall not constitute an admission of any fact, thing, liability, or quantum or Status of any claim by any Person, save and except in the context of the CCAA Proceedings, and, for greater certainty, shall not constitute an admission of any fact, thing, liability, or quantum or Status of any claim by any Person as against any Subsidiary.

37. THIS COURT ORDERS that where a purported D&O Indemnity Claim is revised or disallowed (in whole or in part, and whether as to amount and/or Status), the Monitor shall deliver to the Director or Officer a Notice of Revision or Disallowance, attaching the form of Dispute Notice.

 

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38. THIS COURT ORDERS that where a purported D&O Indemnity Claim has been revised or disallowed (in whole or in part, and whether as to amount and/or as to Status), the revised or disallowed purported D&O Indemnity Claim (or revised or disallowed portion thereof) shall not be a Proven Claim until determined otherwise in accordance with the procedures set out in paragraphs 42 to 45 hereof or as otherwise ordered by the Court.

39.THIS COURT ORDERS that, notwithstanding anything to the contrary in this Order, in respect of any Claim, D&O Claim or D&O Indemnity Claim that exceeds $1 million, the Monitor and the Applicant shall not accept, admit, settle, resolve, value (for any purpose), revise Or reject such Claim, D&O Claim or D&O Indemnity Claim without Order of the Court.

DISPUTE NOTICE

40. THIS COURT ORDERS that a purported Claimant who intends to dispute a Notice of Revision or Disallowance shall file a Dispute Notice with the Monitor as soon as reasonably possible but in any event such that such Dispute Notice shall be received by the Monitor on the day that is fourteen (14) days after such purported Claimant is deemed to have received the Notice of Revision or Disallowance in accordance with paragraph 50 of this Order. The filing of a Dispute Notice with the Monitor within the fourteen (14) day period specified in this paragraph shall constitute an application to have the amount or Status of such claim determined as set out in paragraphs 42 to 45 of this Order.

41. THIS COURT ORDERS that where a purported Claimant that receives a Notice of Revision or Disallowance fails to file a Dispute Notice with the Monitor within the time period provided therefor in this Order, the amount and Status of such purported Claimant’s purported Claim, D&O Claim or D&O Indemnity Claim, as applicable, shall be deemed to be as set out in the Notice of Revision or Disallowance and such amount and Status, if any, shall constitute such purported Claimant’s Proven Claim, and the balance of such purported Claimant’s purported Claim, D&O Claim, or D&O Indemnity Claim, if any, shall be forever barred and extinguished.

RESOLUTION OF CLAIMS, D&O CLAIMS AND D&O INDEMNITY CLAIMS

42. THIS COURT ORDERS that as soon as practicable after the delivery of the Dispute Notice to the Monitor, the Monitor, in accordance with paragraph 31(c), shall attempt to resolve and settle the purported Claim or D&O Claim with the purported Claimant.

 

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43. THIS COURT ORDERS that as soon as practicable after the delivery of the Dispute Notice in respect of a D&O Indemnity Claim to the Monitor, the Monitor, in accordance with paragraph 35(c), shall attempt to resolve and settle the purported D&O Indemnity Claim with the Director or Officer.

44. THIS COURT ORDERS that in the event that a dispute raised in a Dispute Notice is not settled within a time period or in a manner satisfactory to the Monitor, the Applicant and the applicable Claimant, the Monitor shall seek direction from the Court, on the correct process for resolution of the dispute. Without limitation, the foregoing includes any dispute arising as to whether a Claim is or is not an “equity claim” as defined in the CCAA.

45. THIS COURT ORDERS that any Claims and related D&O Claims and/or D&O Indemnity Claims shall be determined at the same time and in the same proceeding.

NOTICE OF TRANSFEREES

46. THIS COURT ORDERS that neither the Monitor nor the Applicant shall be obligated to send notice to or otherwise deal with a transferee or assignee of a Claim, D&O Claim or D&O Indemnity Claim as the Claimant in respect thereof unless and until (i) actual written notice of transfer or assignment, together with satisfactory evidence of such transfer or assignment, shall have been received by the Monitor and the Applicant, and (ii) the Monitor shall have acknowledged in writing such transfer or assignment, and thereafter such transferee or assignee shall for all purposes hereof constitute the “Claimant” in respect of such Claim, D&O Claim or D&O Indemnity Claim. Any such transferee or assignee of a Claim, D&O Claim or D&O Indemnity Claim, and such Claim, D&O Claim or D&O Indemnity Claim shall be bound by all notices given or steps taken in respect of such Claim, D&O Claim or D&O Indemnity Claim in accordance with this Order prior to the written acknowledgement by the Monitor of such transfer or assignment.

47. THIS COURT ORDERS that if the holder of a Claim, D&O Claim or D&O Indemnity Claim has transferred or assigned the whole of such Claim, D&O Claim or D&O Indemnity Claim to more than one Person or part of such Claim, D&O Claim or D&O Indemnity Claim to another Person or Persons, such transfer or assignment shall not create a separate Claim, D&O

 

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Claim or D&O Indemnity Claim and such Claim, D&O Claim or D&O Indemnity Claim shall continue to constitute and be dealt with as a single Claim, D&O Claim or D&O Indemnity Claim notwithstanding such transfer or assignment, and the Monitor and the Applicant shall in each such case not be bound to acknowledge or recognize any such transfer or assignment and shall be entitled to send notice to and to otherwise deal with such Claim, D&O Claim or D&O Indemnity Claim only as a whole and then only to and with the Person last holding such Claim, D&O Claim or D&O Indemnity Claim in whole as the Claimant in respect of such Claim, D&O Claim or D&O Indemnity Claim. Provided that a transfer or assignment of the Claim, D&O Claim or D&O Indemnity Claim has taken place in accordance with paragraph 46 of this Order and the Monitor has acknowledged in writing such transfer or assignment, the Person last holding such Claim, D&O Claim or D&O Indemnity Claim in whole as the Claimant in respect of such Claim, D&O Claim or D&O Indemnity Claim may by notice in writing to the Monitor direct that subsequent dealings in respect of such Claim, D&O Claim or D&O Indemnity Claim, but only as a whole, shall be with a specified Person and, in such event, such Claimant, transferee or assignee of the Claim, D&O Claim or D&O Indemnity Claim shall be bound by any notices given or steps taken in respect of such Claim, D&O Claim or D&O Indemnity Claim by or with respect to such Person in accordance with this Order.

48. THIS COURT ORDERS that the transferee or assignee of any Claim, D&O Claim or D&O Indemnity Claim (i) shall take the Claim, D&O Claim or D&O Indemnity Claim subject to the rights and obligations of the transferor/assignor of the Claim, D&O Claim or D&O Indemnity Claim, and subject to the rights of the Applicant or Director or Officer against any such transferor or assignor, including any rights of set-off which the Applicant, Director or Officers had against such transferor or assignor, and (ii) cannot use any transferred or assigned Claim, D&O Claim or D&O Indemnity Claim to reduce any amount owing by the transferee or assignee to the Applicant, Director or Officer, whether by way of set off, application, merger, consolidation or otherwise.

 

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DIRECTIONS

49. THIS COURT ORDERS that the Monitor, the Applicant and any Person (but only to the extent such Person may be affected with respect to the issue on which directions are sought) may, at any time, and with such notice as the Court may require, seek directions from the Court with respect to this Order and the claims process set out herein, including the forms attached as Schedules hereto.

SERVICE AND NOTICE

50. THIS COURT ORDERS that the Monitor and the Applicant may, unless otherwise specified by this Order, serve and deliver the Proof of Claim Document Package, and any letters, notices or other documents to Claimants, purported Claimants, Directors or Officers, or other interested Persons, by forwarding true copies thereof by prepaid ordinary mail, courier, personal delivery or electronic or digital transmission to such Persons (with copies to their counsel as appears on the CCAA Service List if applicable) at the address as last shown on the records of the Applicant or set out in such Person’s Proof of Claim, D&O Proof of Claim or D&O Indemnity Proof of Claim. Any such service or notice by courier, personal delivery or electronic or digital transmission shall be deemed to have been received: (i) if sent by ordinary mail, on the third Business Day after mailing within Ontario, the fifth Business Day after mailing within Canada (other than within Ontario), and the tenth Business Day after mailing internationally; (ii) if sent by courier or personal delivery, on the next Business Day following dispatch; and (iii) if delivered by electronic or digital transmission by 6:00 p.m. on a Business Day, on such Business Day, and if delivered after 6:00 p.m. or other than on a Business Day, on the following Business Day. Notwithstanding anything to the contrary in this paragraph 50, Notices of Revision or Disallowance shall be sent only by (i) facsimile to a number that has been provided in writing by the purported Claimant, Director or Officer, or (ii) courier.

51. THIS COURT ORDERS that any notice or other communication (including Proofs of Claim, D&O Proofs of Claims, D&O Indemnity Proofs of Claim and Notices of Dispute) to be given under this Order by any Person to the Monitor shall be in writing in substantially the form, if any, provided for in this Order and will be sufficiently given only if delivered by prepaid registered mail, courier, personal delivery or electronic or digital transmission addressed to:

 

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FTI Consulting Canada Inc.

Court-appointed Monitor of Sino-Forest Corporation

TD Waterhouse Tower

79 Wellington Street West

Suite 2010, P.O. Box 104

Toronto, Ontario M5K 1G8

Attention: Jodi Porepa

Telephone: (416) 649-8094

E-mail: sfc@fticonsulting.com

Any such notice or other communication by a Person shall be deemed received only upon actual receipt thereof during normal business hours on a Business Day, or if delivered outside of a normal business hours, the next Business Day.

52. THIS COURT ORDERS that if during any period during which notices or other communications are being given pursuant to this Order a postal strike or postal work stoppage of general application should occur, such notices or other communications sent by ordinary mail and then not received shall not, absent further Order of the Court, be effective and notices and other communications given hereunder during the course of any such postal strike or work stoppage of general application shall only be effective if given by courier, personal delivery or electronic or digital transmission in accordance with this Order.

53. THIS COURT ORDERS that in the event that this Order is later amended by further order of the Court, the Monitor shall post such further order on the Monitor’s Website and such posting shall constitute adequate notice of such amended claims procedure.

MISCELLANEOUS

54. THIS COURT ORDERS that notwithstanding any other provision of this Order, the solicitation of Proofs of Claim, D&O Proofs of Claim and D&O Indemnity Proofs of Claim and the filing by a Person of any Proof of Claim, D&O Proof of Claim or D&O Indemnity Proof of Claim shall not, for that reason only, grant any Person any standing in the CCAA Proceedings or rights under the Plan.

55. THIS COURT ORDERS that the rights of the Ontario Plaintiffs and the Quebec Plaintiffs granted pursuant to paragraphs 27 and 28 of this Order are limited to filing a single Proof of

 

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Claim and, if applicable, a single D&O Proof in respect of each of the National Class and the Quebec Class in these proceedings, and not for any other purpose. Without limiting the generality of the foregoing, the filing of any Proof of Claim or D&O Proof of Claim by the Ontario Plaintiffs or the Quebec Plaintiffs pursuant to this Order:

 

  (a) is not an admission or recognition of their right to represent the Class for any other purpose, including with respect to quantification, settlement or voting in these proceedings, the Ontario Class Action or the Quebec Class Action; and

 

  (b) is without prejudice to the right of the Ontario Plaintiffs and the Quebec Plaintiffs or their counsel to seek an order granting them rights of representation in these proceedings, the Ontario Class Action or the Quebec Class Action.

56. THIS COURT ORDERS that nothing in this Order shall constitute or be deemed to constitute an allocation or assignment of Claims, D&O Claims, D&O Indemnity Claims, or Excluded Claims into particular affected or unaffected classes for the purpose of a Plan and, for greater certainty, the treatment of Claims, D&O Claims, D&O Indemnity Claims, Excluded Claims or any other claims are to be subject to a Plan and the class or classes of creditors for voting and distribution purposes shall be subject to the terms of any proposed Plan or further Order of the Court.

57. THIS COURT ORDERS that nothing in this Order shall prejudice the rights and remedies of any Directors or Officers or other persons under any existing Director and Officers or other insurance policy or prevent or bar any Person from seeking recourse against or payment from the Applicant’s insurance and any Director’s and/or Officer’s liability insurance policy or policies that exist to protect or indemnify the Directors and/or Officers or other persons, whether such recourse or payment is sought directly by the Person asserting a Claim or a D&O Claim from the insurer or derivatively through the Director or Officer or Applicant; provided, however, that nothing in this Order shall create any rights in favour of such Person under any policies of insurance nor shall anything in this Order limit, remove, modify or alter any defence to such claim available to the insurer pursuant to the provisions of any insurance policy or at law.

 

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58.THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal, regulatory or administrative body having jurisdiction in Canada, the United States, Barbados, the British Virgin Islands, Cayman Islands, Hong Kong, the People’s Republic of China or in any other foreign jurisdiction, to give effect to this Order and to assist the Applicant, the Monitor and their respective agents in carrying out the terms of this Order. All courts, tribunals, regulatory and administrative bodies are hereby respectfully requested to make such orders and to provide such assistance to the Applicant and to the Monitor, as an officer of the Court, as may be necessary or desirable to give effect to this Order, to grant representative status to the Monitor in any foreign proceeding, or to assist the Applicant and the Monitor and their respective agents in carrying out the terms of this Order.

 

   LOGO

 

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SCHEDULE “A”

NOTICE OF REVISION OR DISALLOWANCE

For Persons that have asserted Claims against Sino-Forest Corporation,

D&O Claims against the Directors or Officers of Sino-Forest Corporation or D&O

Indemnity Claims against Sino-Forest Corporation

 

Claim Reference Number:        
TO:        
  

(Name of purported claimant)

  

Defined terms not defined in this Notice of Revision or Disallowance have the meaning ascribed in the Order of the Ontario Superior Court of Justice dated May 8, 2012 (the “Claims Procedure Order”). All dollar values contained herein are in Canadian dollars unless otherwise noted.

Pursuant to 31 of the Claims Procedure Order, the Monitor hereby gives you notice that it has reviewed your Proof of Claim, D&O Proof of Claim or D&O Indemnity Proof of Claim and has revised or disallowed all or part of your purported Claim, D&O Claim or D&O Indemnity Claim, as the case may be. Subject to further dispute by you in accordance with the Claims Procedure Order, your Proven Claim will be as follows:

 

    Amount as submitted     Amount allowed by
Monitor 		 
    (original  currency
amount) 		    (in  Canadian
dollars) 		    (in  Canadian
dollars) 		 

A. Prefiling Claim

  $        $        $     

B. Restructuring Claim

  $        $        $     

C. Secured Claim

  $        $        $     

D. D&O Claim

  $        $        $     

E. D&O Indemnity Claim

  $        $        $     

F. Total Claim

  $        $        $     

Reasons for Revision or Disallowance:

 

 

 

 

 

 

SERVICE OF DISPUTE NOTICES

If you intend to dispute this Notice of Revision or Disallowance, you must, no later than 5:00 p.m. (prevailing time in Toronto) on the day that is fourteen (14) days after this Notice of Revision or Disallowance is deemed to have been received by you (in accordance with paragraph 50 of the Claims Procedure Order), deliver a Dispute Notice to the Monitor by registered mail, courier, personal delivery or electronic or digital transmission to the address below. In accordance with the Claims Procedure Order, notices shall be deemed to be received upon actual receipt thereof by the Monitor during normal business hours on a Business Day, or if delivered outside of normal business hours, on the next Business Day. The form of Dispute Notice is enclosed and can also be accessed on the Monitor’s website at http ://cfcanada.fticonsulting.com/sfc.

FTI Consulting Canada Inc.

Court-appointed Monitor of Sino-Forest Corporation

TD Waterhouse Tower

79 Wellington Street West

Suite 2010, P.O. Box 104

Toronto, Ontario M5K 1G8

Attention: Jodi Porepa

Telephone: (416) 649-8094

Email: sfc@fticonsulting.com

 

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IF YOU FAIL TO FILE A DISPUTE NOTICE WITHIN THE PRESCRIBED TIME PERIOD, THIS NOTICE OF REVISION OR DISALLOWANCE WILL BE BINDING UPON YOU.

DATED at Toronto, this            day of         , 2012.

FTI Consulting Canada Inc., solely in its capacity as Court-appointed Monitor of Sino-Forest Corporation and not in its personal or corporate capacity

Per: Greg Watson / Jodi Porepa

 

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SCHEDULE “B”

DISPUTE NOTICE

With respect to Sino-Forest Corporation

Claim Reference Number:                                                                                           

 

1. Particulars of Claimant:

Full Legal Name of claimant (include trade name, if different):

 

                                                                                                                                                                                                                                                    

 

                                                                                                                                                                                                                                                   

   (the “Claimant”)

Full Mailing Address of the Claimant:

 

                                                                                                                                                                                                                                                   

 

                                                                                                                                                                                                                                                    

Other Contract Information of the Claimant:

 

   Telephone Number:     
   Email Address:     
   Facsimile Number:     
   Attention (Contact Person):             

2. Particulars of original Claimant from whom you acquired the Claim, D&O Claim or D&O Indemnity Claim:

Have you acquired this purported Claim, D&O Claim or D&O Indemnity Claim by assignment?

Yes:    ¨                                 No:    ¨

If yes and if not already provided, attach documents evidencing assignment.

Full Legal Name of original Claimant(s):                                                                                                

 

3. Dispute of Revision or Disallowance of Claim, D&O Claim or D&O Indemnity Claim, as the case may be:

For the purposes of the Claims Procedure Order only (and without prejudice to the terms of any plan of arrangement or compromise), claims in a foreign currency will be converted to Canadian dollars at the exchange rates set out in the Claims Procedure Order.

The Claimant hereby disagrees with the value of its Claim, D&O Claim or D&O Indemnity Claim, as the case may be, as set out in the Notice of Revision or Disallowance and asserts a Claim, D&O Claim or D&O Indemnity Claim, as the case may be, as follows:

 

     Amount allowed  by
Monitor:
(Notice of Revision  or
Disallowance)
(in Canadian dollars) 		     Amount claimed by
Claimant:
(in Canadian Dollars) 		 

A. Prefiling Claim

   $         $     

B. Restructuring Claim

   $         $     

C. Secured Claim

   $         $     

D. D&O Claim

   $         $     

E. D&O Indemnity Claim

   $         $     

F. Total Claim

   $         $     

 

- 2 -

REASON(S) FOR THE DISPUTE:

 

 

 

 

 

 

 

 

SERVICE OF DISPUTE NOTICES

If you intend to dispute a Notice of Revision or Disallowance, you must,, by no later than the date that is fourteen (14) days after the Notice of Revision or Disallowance is deemed to have been received by you (in accordance with paragraph 50 of the Claims Procedure Order), deliver to the Monitor this Dispute Notice by registered mail, courier, personal delivery or electronic or digital transmission to the address below. In accordance with the Claims Procedure Order, notices shall be deemed to be received upon actual receipt thereof by the Monitor during normal business hours on a Business Day, or if delivered outside of normal business hours, on the next Business Day.

FTI Consulting Canada Inc.

Court-appointed Monitor of Sino-Forest Corporation

TD Waterhouse Tower

79 Wellington Street West

Suite 2010, P.O. Box 104

Toronto, Ontario M5K 1G8

Attention: Jodi Porepa

Telephone: (416) 649-8094

E-mail: sfc@fticonsulting.com

 

- 3 -

DATED this                  day of                                      , 2012.    .
Name of Claimant:      
     Per:     
Witness       Name:   
      Title:   
      (please print)   

 

- 4 -

SCHEDULE “C”

NOTICE TO CLAIMANTS

AGAINST SINO-FOREST CORPORATION

(hereinafter referred to as the “Applicant”)

 

RE: NOTICE OF CLAIMS PROCEDURE FOR THE APPLICANT PURSUANT TO THE COMPANIES’ CREDITORS ARRANGEMENT ACT (the “CCAA”)

PLEASE TAKE NOTICE that this notice is being published pursuant to an Order of the Superior Court of Justice of Ontario made on May 8, 2012 (the “Claims Procedure Order”). Pursuant to the Claims Procedure Order, Proof of Claim Document Packages will be sent to claimants by mail, on or before May 15, 2012, if those claimants are known to the Applicant. Claimants may also obtain the Claims Procedure Order and a Proof of Claim Document Package from the website of the Monitor at http://cfcanadafticonsulting.com/sfc, or by contacting the Monitor by telephone (416-649-8094).

Proofs of Claim (including D&O Proofs of Claim) must be submitted to the Monitor for any claim against the Applicant, whether unliquidated, contingent or otherwise, or a claim against any current or former officer or director of the Applicant, in each case where the claim (i) arose prior to March 30, 2012, or (ii) arose on or after March 30, 2012 as a result of the restructuring, termination, repudiation or disclaimer of any lease, contract, or other agreement or obligation. Please consult the Proof of Claim Document Package for more details.

Completed Proofs of Claim must be received by the Monitor by 5:00 p.m. (prevailing Eastern Time) on the applicable claims bar date, as set out in the Claims Procedure Order. It is your responsibility to ensure that the Monitor receives your Proof of Claim or D&O Proof of Claim by the applicable claims bar date.

Certain Claimants are exempted from the requirement to file a Proof of Claim. Among those claimants who do not need to file a Proof of Claim are individual noteholders in respect of Claims relating solely to the debt evidenced by their notes and persons whose Claims form the subject matter of the Ontario Class Action or the Quebec Class Action. Please consult the Claims Procedure Order for additional details.

CLAIMS AND D&O CLAIMS WHICH ARE NOT RECEIVED BY THE APPLICABLE CLAIMS BAR DATE WILL BE BARRED AND EXTINGUISHED FOREVER.

DATED at Toronto this — day of — , 2012.

SCHEDULE “D”

PROOF OF CLAIM AGAINST

SINO-FOREST CORPORATION

1. Original Claimant Identification (the “Claimant”)

 

Legal Name of Claimant                                                                                                          Name of Contact     
Address                                                                                                                                          Title                                                                                               
     Phone #                                                                                        
          Fax #                                                                                             
City                                      Prov / State                                                  e-mail                                                                                            
Postal/Zip code                                           
2. Assignee, if claim has been assigned
Full Legal Name of Assignee                                                                                                 Name of Contact     
Address                                                                                                                                          Phone #                                                                                        
     Fax #                                                                                             
City                                      Prov / State                                                  e-mail                                                                                            
Postal/Zip code                                               

3a. Amount of Claim

The Applicant or Director or Officer was and still Is indebted to the Claimant as follows:

 

Currency    Original Currency    Unsecured    Restructuring    Secured
     Amount    Prefiling Claim    Claim    Claim

 

  

 

   ¨    ¨    ¨

 

  

 

   ¨    ¨    ¨

 

  

 

   ¨    ¨    ¨

 

  

 

   ¨    ¨    ¨

 

  

 

   ¨    ¨    ¨

3b. Claim against Subsidiaries

If you have or intend to make a claim against one or more Subsidiaries which is based in whole or in part on facts, underlying transactions, causes of action or events relating to a claim made against the Applicant above, check the box below, list the Subsidiaries against whom you assert your claim, and provide particulars of your claim against such Subsidiaries,

¨ I/we have a claim against one or more Subsidiary

 

Name(s) of Subsidiaries    Currency   

Original

Currency Amount

   Amount of Claim

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

- 2 -

4. Documentation

Provide all particulars of the Claim and supporting documentation, including amount, and description of transactions) or agreement(s), or legal breach(es) giving rise to the Claim.

5. Certification

I hereby certify that

 

  1. 1 am the Claimant, or authorized representative of the Claimant

 

  2. 1 have knowledge of all the circumstances connected with this Claim,

 

  3. Complete documentation in support of this claim is attached.

 

   Name   
    
   Title     
Dated at                                                                
   Signature     
this              day of                                  2012      
   Witness     

6. Filing of Claim

This Proof of Claim must be received by the Monitor by no later than 5:00 p.m. (prevailing Eastern Time) on June 20, 2012, by registered mail, courier, personal delivery or electronic or digital transmission at the following address:

FTI Consulting Canada Inc.

Court-appointed Monitor of Sino-Forest Corporation

TD Waterhouse Tower

79 Wellington Street West

Suite 2010, P.O. Box 104

Toronto, Ontario M5K 1G8

Attention: Jodi Porepa

Telephone: (416) 649-8094

E-mail: sfc@fticonsulting.com

An electronic version of this form is available at http://cfcanada.fticonsulting.com/sfc,

 

- 3 -

SCHEDULE “D-2”

PROOF OF CLAIM AGAINST

DIRECTORS OR OFFICERS OF SINO-FOREST CORPORATION

This form is to be used only by Claimants asserting a claim against any director and/or officers of Sino-Forest Corporation, and NOT for claims against Sino-Forest Corporation itself. For claims against Sino-Forest Corporation, please use the form titled “Proof of Claim Against Sino-Forest Corporation”, which is available on the Monitor’s website at http://cfcanadafticonsulting.com/sfc.

1. Original Claimant Identification (the “Claimant”)

 

Legal Name of Claimant       Name of Contact    
Address       Title    
    Phone #    
City       Prov / State       Fax #    
Postal/Zip code           e-mail    

2. Assignee, if D&O Claim has been assigned

 

Full Legal Name of Assignee       Name of Contact    
Address       Phone #    
    Fax #    
City       Prov / State       e-mail    
Postal/Zip code            

3. Amount of D&O Claim

The Director or Officer was and still is indebted to the Claimant as follows:

¨ I/we have a claim against a Director(s) and/or Officer(s)

 

Name(s) of Director(s) and/or Officer(s)    Currency   

Original

Currency Amount

   Amount of Claim

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

  

 

  

 

  

 

 

  

 

  

 

  

 

4. Documentation

Provide all particulars of the D&O Claim and supporting documentation, including amount, and description of transaction(s) or agreement(s), or legal breach(es) giving rise to the D&O Claim.

5. Certification

I hereby certify that

 

  1. 1 am the Claimant, or authorized representative of the Claimant.

 

- 2 -

  2. I have knowledge of all the circumstances connected with this D&O Claim.

 

  3. Complete documentation in support of this D&O Claim is attached.

 

  Name   
   
  Title     
Dated at                                                               
  Signature     
this              day of                                  2012     
  Witness     

6. Filing of D&O Claim

This Proof of Claim must be received by the Monitor by no later than 5:00 p.m. (prevailing Eastern Time) on June 20, 2012, by registered mail, courier, personal delivery or electronic or digital transmission at the following address:

FTI Consulting Canada Inc.

Court-appointed Monitor of Sino-Forest Corporation

TD Waterhouse Tower

79 Wellington Street West

Suite 2010, P.O. Box 104

Toronto, Ontario M5K 1G8

Attention: Jodi Porepa

Telephone: (416) 649-8094

E-mail: sfcgfticonsulting.com

An electronic version of this form Is available at http://cfcanada.fticonsulting.com/sfc

 

- 3 -

SCHEDULE “E”

GUIDE TO COMPLETING THE PROOF OF CLAIM FOR CLAIMS AGAINST SINO-FOREST-CORPORATION

This Guide has been prepared to assist Claimants in filling out the Proof of Claim with respect to Sino-Forest Corporation (the “Applicant”). If you have any additional questions regarding completion of the Proof of Claim, please consult the Monitor’s website at http://cfcanada.fticonsulting.com/sfc or contact the Monitor, whose contact information is shown below.

Additional copies of the Proof of Claim may be found at the Monitor’s website address noted above.

Please note that this is a guide only, and that in the event of any inconsistency between the terms of this guide and the terms of the Claims Procedure Order made on May 8, 2012 (the “Claims Procedure Order”), the terms of the Claims Procedure Order will govern.

SECTION 1— ORIGINAL CLAIMANT

4. A separate Proof of Claim must be filed by each legal entity or person asserting a claim against the Applicant.

5. The Claimant shall include any and all Claims it asserts against the Applicant in a single Proof of Claim.

6. The full legal name of the Claimant must be provided.

7. If the Claimant operates under a different name, or names, please indicate this in a separate schedule in the supporting documentation.

8. If the Claim has been assigned or transferred to another party, Section 2 must also be completed.

9. Unless the Claim is assigned or transferred., all future correspondence, notices, etc. regarding the Claim will be directed to the address and contact indicated in this section.

10. Certain Claimants are exempted from the requirement to file a Proof of Claim. Among those claimants who do not need to file a Proof of Claim are individual noteholders in respect of Claims relating solely to the debt evidenced by their notes. Please consult the Claims Procedure Order for details with respect to these and other exemptions.

SECTION 2—ASSIGNEE

11. If the Claimant has assigned or otherwise transferred its Claim, then Section 2 must be completed.

12. The full legal name of the Assignee must be provided.

13. If the Assignee operates under a different name, or names, please indicate this in a separate schedule in the supporting documentation.

14. If the Monitor in consultation with the Applicant is satisfied that an assignment or transfer has occurred, all future correspondence, notices, etc. regarding the Claim will be directed to the Assignee at the address and contact indicated in this section.

SECTION 3A—AMOUNT OF CLAIM OF CLAIMANT AGAINST DEBTOR

15. Indicate the amount the Applicant was and still is indebted to the Claimant.

Currency, Original Currency Amount

16. The amount of the Claim must be provided in the currency in which it arose.

17. Indicate the appropriate currency in the Currency column.

18. If the Claim is denominated in multiple currencies, use a separate line to indicate the Claim amount in each such currency. If there are insufficient lines to record these amounts, attach a separate schedule indicating the required information.

19. Claims denominated in a currency other than Canadian dollars will be converted into Canadian dollars in accordance with the Claims Procedure Order.

Unsecured Prefiling Claim

20. Check this box ONLY if the Claim recorded on that line is an unsecured prefiling claim.

Restructuring Claim

21. Check this box ONLY if the amount of the Claim against the Applicant arose out of the restructuring, termination, repudiation or disclaimer of a lease, contract, or other agreement or obligation on or after March 30, 2012.

Secured Claim

Check this box ONLY if the Claim recorded on that line is a secured claim.

SECTION 3B—CLAIM AGAINST SUBSIDIARIES

22. Check this box ONLY if you have or intend to make a claim against one or more Subsidiaries which is based in whole or in part on facts, underlying transactions, causes of action or events relating to a claim made against the Applicant above, and list the Subsidiaries against whom you assert your claim.

 

2

SECTION 4—DOCUMENTATION

23. Attach to the claim form all particulars of the Claim and supporting documentation, including amount, description of transaction(s) or agreement(s) or breach(es) giving rise to the Claim.

SECTION 5—CERTIFICATION

24. The person signing the Proof of Claim should:

 

  (a) be the Claimant, or authorized representative of the Claimant.

 

  (b) have knowledge of all the circumstances connected with this Claim.

 

  (c) have a witness to its certification.

25. By signing and submitting the Proof of Claim, the Claimant is asserting the claim against the Applicant.

SECTION 6—FILING OF CLAIM

26. This Proof of Claim must be received by the Monitor by no later than 5:00 p.m. (prevailing Eastern Time) on June 20, 2012. Proofs of Claim should be sent by prepaid ordinary mail, courier, personal delivery or electronic or digital transmission to the following address:

FTI Consulting Canada Inc.

Court-appointed Monitor of Sino-Forest Corporation

TD Waterhouse Tower

79 Wellington Street West

Suite 2010, P.O. Box 104

Toronto, Ontario M5K 1G8

Attention: Jodi Porepa

Telephone: (416) 649-8094

E-mail: sfc@fticonsulting.com

Failure to file your Proof of Claim so that it is received by the Monitor by 5:00 p.m., on the applicable claims bar date will result in your claim being barred and you will be prevented from making or enforcing a Claim against the Applicant. In addition, you shall not be entitled to further notice in and shall not be entitled to participate as a creditor in these proceedings.

 

3

SCHEDULE “E-2”

GUIDE TO COMPLETING THE PROOF OF CLAIM FOR CLAIMS AGAINST

DIRECTORS OR OFFICERS OF SINO-FOREST-CORPORATION

This Guide has been prepared to assist Claimants in filling out the D&O Proof of Claim against any Directors or Officers of Sino-Forest Corporation (the “Applicant”). If you have any additional questions regarding completion of the Proof of Claim, please consult the Monitor’s website at http://cfcanada.fticonsulting.com/sfc or contact the Monitor, whose contact information is shown below.

The D&O Proof of Claim is to be used only by Claimants asserting a claim against a director and/or officer of Sino-Forest Corporation, and NOT for claims against Sino-Forest Corporation itself. For claims against Sino-Forest Corporation, please use the form titled “Proof of Claim Against Sino-Forest Corporation”, which is available on the Monitor’s website at http://cfcanada.fticonsulting.com/sfc.

Additional copies of the D&O Proof of Claim may be found at the Monitor’s website address noted above.

Please note that this is a guide only, and that in the event of any inconsistency between the terms of this guide and the terms of the Claims Procedure Order made on May 8, 2012 (the “Claims Procedure Order”), the terms of the Claims Procedure Order will govern.

SECTION 1—ORIGINAL CLAIMANT

27. A separate D&O Proof of Claim must be filed by each legal entity or person asserting a claim against any Directors or Officers of the Applicant.

28. The Claimant shall include any and all D&O Claims it asserts in a single D&O Proof of Claim.

29. The full legal name of the Claimant must be provided.

30. If the Claimant operates under a different name, or names, please indicate this in a separate schedule in the supporting documentation.

31. If the D&O Claim has been assigned or transferred to another party, Section 2 must also be completed.

32. Unless the D&O Claim is assigned or transferred, all future correspondence, notices, etc. regarding the D&O Claim will be directed to the address and contact indicated in this section.

SECTION 2—ASSIGNEE

33. If the Claimant has assigned or otherwise transferred its D&O Claim, then Section 2 must be completed.

 

4

34. The full legal name of the Assignee must be provided.

35. If the Assignee operates under a different name, or names, please indicate this in a separate schedule in the supporting documentation.

36. If the Monitor in consultation with the Applicant is satisfied that an assignment or transfer has occurred, all future correspondence, notices, etc. regarding the D&O Claim will be directed to the Assignee at the address and contact indicated in this section.

SECTION 3—AMOUNT OF CLAIM OF CLAIMANT AGAINST DIRECTOR OR OFFICER

37. Indicate the amount the Director or Officer is claimed to be indebted to the Claimant and provide all other request details.

Currency, Original Currency Amount

38. The amount of the D&O Claim must be provided in the currency in which it arose.

39. Indicate the appropriate currency in the Currency column.

40. If the D&O Claim is denominated in multiple currencies, use a separate line to indicate the Claim amount in each such currency. If there are insufficient lines to record these amounts, attach a separate schedule indicating the required information.

41. D&O Claims denominated in a currency other than Canadian dollars will be converted into Canadian dollars in accordance with the Claims Procedure Order.

SECTION 4—DOCUMENTATION

42. Attach to the claim form all particulars of the D&O Claim and supporting documentation, including amount, description of transaction(s) or agreement(s) or breach(es) giving rise to the D&O Claim.

SECTION 5—CERTIFICATION

43. The person signing the D&O Proof of Claim should:

(a) be the Claimant, or authorized representative of the Claimant.

(b) have knowledge of all the circumstances connected with this D&O Claim,

(c) have a witness to its certification.

44. By signing and submitting the D&O Proof of Claim, the Claimant is asserting the claim against the Directors and Officers identified therein.

 

5

SECTION 6—FILING OF CLAIM

45. The D&O Proof of Claim must be received by the Monitor by no later than 5:00 p.m. (prevailing Eastern Time) on June 20, 2012. D&O Proofs of Claim should be sent by prepaid ordinary mail, courier, personal delivery or electronic or digital transmission to the following address:

FTI Consulting Canada Inc.

Court-appointed Monitor of Sino-Forest Corporation

TD Waterhouse Tower

79 Wellington Street West

Suite 2010, P.O. Box 104

Toronto, Ontario M5K 1G8

Attention: Jodi Porepa

Telephone: (416) 649-8094

E-mail: sfc@fticonsulting.com

Failure to file your D&O Proof of Claim so that it is received by the Monitor by 5:00 p.m., on the applicable claims bar date will result in your claim being barred and you will be prevented from making or enforcing a D&O Claim against the any directors or officers of the Applicant. In addition, you shall not be entitled to further notice in and shall not be entitled to participate as a D&O claimant in these proceedings.

 

6

SCHEDULE “F”

D&O INDEMNITY PROOF OF CLAIM

SINO-FOREST CORPORATION

1. Director and /or Officer Particulars (the “Indemnitee”)

 

Legal Name of Indemintee                                                                                                                              
Address                                                                                                                                                                    Phone #                                                                  
                                                                                                                                                                                    Fax #                                                                       
                                                                                                                                                                                   
City                                                                                    Prov / State                                                               e-mail                                                                     
Postal/Zip code                                                                

2. Indemnification Claim

 

Position(s) Held                                                                                                                                           
Dates Position(s) Held: From                to                                                                                               
    

 

Reference Number of Proof of Claim with respect to which this D&O Indemnity Claim is made                                                               

Particulars of and basis for D&O Indemnity

Claim                                                                                                                                                                                                                                                            

 

 

 

 

 

 

(Provide all particulars of the D&O Indemnity Claim, including all supporting documentation)

3 Filing of Claim

This D&O Indemnity Proof of Claim and supporting documentation are to be returned to the Monitor within ten Business Days of the date of deemed receipt by the Director or Officer of the Proof of Claim by registered mail, courier, personal delivery or electronic or digital transmission at the following address:

FTI Consulting Canada Inc,

Court-appointed Monitor of Sino-Forest Corporation

TD Waterhouse Tower

79 Wellington Street West

Suite 2010, P.O. Box 104

Toronto, Ontario M5K 1GB

Attention: Jodi Porepa

Telephone: (416) 649-8094

E-mail: sfc@fticonsulting.com

 

7

Failure to file your D&O Indemnity Proof of Claim in accordance with the Claims Procedure Order will result in your D&O Indemnity Claim being barred and forever extinguished and you will be prohibited from making or enforcing such D&O Indemnity Claim against the Applicant

 

Dated at                          , this                  day of                              2012.

 

Per:                                                                                                  

        

        Name

           

 

Signature                                                                                       

  (Former Director and/or Officer)   

 

8

IN THE MATTER OF THE COMPANIES CREDITORS’ ARRANGEMENT ACT , R.S.C. 1985, c. C-36, AS AMENDED AND IN THE MATTER OF A PLAN OR COMPROMISE OR ARRANGEMENT OF SINO-FOREST CORPORATION

Court File No. CV-12-9667-00CL                

    

 

ONTARIO

SUPERIOR COURT OF JUSTICE

(COMMERCIAL LIST)

 

Proceedings commenced in Toronto

 

    

 

ORDER

 

 

    

 

BENNETT JONES LLP

One First Canadian Place

Suite 3400, P.O. Box 130

Toronto, Ontario

M5X 1A4

 

Robert W. Staley (LSUC #27115J)

Kevin Zych (LSUC #33129T)

Derek J. Bell (LSUC #43420J)

Jonathan Bell (LSUC #55457P)

Tel: 416-863-1200

Fax: 416-863-1716

 

Lawyers for the Applicant

Execution Version

RESTRUCTURING SUPPORT AGREEMENT

This Restructuring Support Agreement dated as of March 30, 2012 (the “ Agreement Date ”) among: (a) Sino-Forest Corporation (the “ Company ” ), (b) each of the subsidiaries of the Company as listed in Schedule A (the “ Direct Subsidiaries ”), and (c) each of the other signatories hereto, to support agreements in the form hereof or to Joinder Agreements attached hereto as Schedule C (each a “ Consenting Noteholder ” and collectively the “ Consenting Noteholders ” ) , with each Consenting Noteholder being a holder of, and/or investment advisor or manager with investment discretion with respect to holdings in, one or more series of Notes, addresses the principal aspects of the restructuring transaction agreed to by the Company and the Consenting Noteholders as described in Section 1 hereof. The Transaction is to be effected pursuant to a plan of compromise or arrangement under the Companies’ Creditors Arrangement Act (Canada), R.S.C. 1985, c. C-36, as amended (the “ CCAA ”), and, if determined necessary or advisable by the Company in conjunction with the CCAA Plan, and with the consent of the Advisors, the Canada Business Corporations Act, R.S.C., 1985, c. C-44 (the “ CBCA ”), in full and final settlement of, among other Claims, all Noteholder Claims (whether directly or pursuant to any guarantee of the Notes provided by any subsidiary of the Company, and any security provided in respect thereof). Capitalized terms used but not otherwise defined in this Agreement have the meanings ascribed thereto in Schedule B . The Consenting Noteholders, the Company and the Direct Subsidiaries are collectively referred to as the “ Parties ” and each (including each Consenting Noteholder, individually) is a “ Party ” . This agreement and all schedules to this agreement are collectively referred to herein as the “ Agreement ” .

 

1. Transaction

The principal Transaction Terms (which are subject to the other terms and conditions of this Agreement) are as follows:

Restructuring Transaction:

 

  (a) Pursuant to the Plan, and subject to Section 1(i) hereof, the Company will implement the Restructuring Transaction, pursuant to which:

 

  (i) A new company ( “ Newco ” ) , authorized to issue an unlimited number of common shares and having no restrictions on the number of its shareholders, will be incorporated as a private company in the BVI or the Cayman Islands (or any other jurisdiction acceptable to the Initial Consenting Noteholders, and satisfactory to the Company, acting reasonably) and otherwise organized in a manner acceptable to the Initial Consenting Noteholders, and satisfactory to the Company, acting reasonably;

 

  (ii)

Except as otherwise provided for herein, pursuant to the Plan, the Company shall convey, assign and transfer all of its right, title and interest in and to all of the Company’s properties, assets and rights of every kind and description (including, without limitation, all restricted and unrestricted cash, contracts, real property, receivables or other debt owed

 

- 1 -

  to the Company, Intellectual Property, the Company name and all related marks, all of its shares in its subsidiaries (including, without limitation, all of the shares of the Direct Subsidiaries) and all intercompany debt owed to the Company by any of its Subsidiaries), other than the Excluded Assets, to Newco, free and clear of all Claims, options and interests;

 

  (iii) Pursuant to the Plan, each Noteholder shall receive the following on the Implementation Date of the Restructuring Transaction in full and complete satisfaction of its Noteholder Claims:

 

  (A) its Pro Rata share of 92.5% of the Newco Shares (subject to any dilution in respect of the New Management Plan); plus

 

  (B) its Pro Rata share of the Secured Newco Note; plus

 

  (C) its right to receive the consideration set forth in Section 1(h)(ii)(B) hereof (if any); plus

 

  (D) if applicable to such Noteholder, the Early Consent Consideration set forth in Section I (b) hereof; and

 

  (iv) On the Implementation Date, the following consideration shall be placed into trust with the Monitor, for the benefit of the Junior Constituents, to be paid to such Junior Constituents in accordance with their respective legal priorities, subject to payment in full of any prior ranking Junior Constituents:

 

  (A) the Contingent Value Rights; plus

 

  (B) the consideration set forth in Section l(h)(ii) hereof (if any).

Early Consent Consideration:

 

  (b) Each Noteholder (including the Initial Consenting Noteholders) that on or prior to the Consent Date executes (i) this Agreement, (ii) a support agreement in the form hereof or (iii) a Joinder Agreement in the form attached hereto as Schedule C (each a “ Consent Date Noteholder ”) and provides evidence satisfactory to the Monitor in accordance with Section 2(a) hereof of the Notes held by such Consent Date Noteholder as at the Consent Date shall receive on the Implementation Date, as additional consideration for its Notes, its Pro Rata share of 7.5% of the Newco Shares (the “ Early Consent Consideration ”).

Other Plan Matters:

 

  (c)

Pursuant to the Plan and the Final Order in respect of the Plan, all Noteholder Claims and Claims of Other Affected Creditors (including Claims of Junior Constituents) with respect to the Company (including, thereby, all class action type claims (whether debt or equity) and related indemnification claims) shall be

 

- 2 -

  forever extinguished as against the Company and its Subsidiaries, without any consideration other than as provided for herein.

 

  (d) Pursuant to the Plan and the Final Order in respect of the Plan, each current or former director or officer of the Company shall be released from any and all claims against them in their capacities as current or former directors or officers of the Company, except that such release shall not apply to or affect any claims that cannot be compromised under section 5.1(2) of the CCAA.

 

  (e) Pursuant to the Plan, the Other Affected Creditors shall receive: (A) in respect of a Restructuring Transaction, the treatment afforded to the Noteholders pursuant to Sections 1(a)(iii)(A)-1(a)(iii)(C) hereof, or such other treatment as is acceptable to the Initial Consenting Noteholders and any Other Affected Creditor, provided that the aggregate amount of the Claims of the Other Affected Creditors shall not exceed $250,000, without the consent of the Company and the Initial Consenting Noteholders, acting reasonably, and (B) in respect of a Sale Transaction, the treatment set forth in Section 1(k) hereof.

 

  (f) The Plan may provide that Noteholders and Other Affected Creditors holding claims less than an amount to be agreed between the Company and the Initial Consenting Noteholders, each acting reasonably, or who agree to reduce their claims for distribution purposes to such amount, will be entitled to receive a cash distribution in respect of such amount pursuant to the Plan in lieu of the other consideration such Persons are entitled to receive pursuant to the Plan.

 

  (g) The Unaffected Claims shall not be impacted by the Plan, provided that the aggregate amount of the Unaffected Claims shall not exceed an amount to be agreed upon between the Company and the Initial Consenting Noteholders, each acting reasonably.

 

  (h) Pursuant to the Plan, the Litigation Trust will be established on the Implementation Date for the benefit of the Noteholders and the Junior Constituents, as follows:

 

  (i) The Litigation Trust shall be funded with $20 million in cash (“the “ Funding Amount ”), which amount shall be funded by the Company into the Litigation Trust on the Implementation Date;

 

  (ii) To the extent that any proceeds are realized by the Litigation Trust as a result of:

 

  (A) claims by the Litigation Trust against, or settlements with, Muddy Waters, LLC or any of its affiliates or subsidiaries (collectively, “ Muddy Waters ” ) or any Person acting jointly or in concert with Muddy Waters, then 100% of any and all of such proceeds shall be paid to the Monitor pursuant to Section I(a)(iv) for the benefit of the Junior Constituents only; or

 

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  (B) claims by the Litigation Trust against, or settlements with, any Person other than Muddy Waters or any Person acting jointly or in concert with Muddy Waters, then:

 

  (I) for the first $25,000,000 of any such proceeds, 100% of such proceeds shall be paid to the Monitor pursuant to Section 1(a)(iv) for the benefit of the Junior Constituents only; and

 

  (II) for any such proceeds beyond the initial $25,000,000:

 

  i in the event that the enterprise value of Newco (as determined in accordance with generally accepted principles applied by Chartered Business Valuators or other manner agreed upon between the Company and the Advisors, acting reasonably) ( “ Newco EV ” ) is, at the time that any proceeds are so available for distribution from the Litigation Trust, less than the Aggregate Principal Payment Amount plus Accrued Interest up to and including the CCAA Filing Date for all series of Notes, then 30% of any such proceeds shall in each such case be allocated Pro Rata among the Noteholders (up to a maximum of the difference between: (A) the Aggregate Principal Payment Amount plus Accrued Interest and (B) the Newco EV), and 70% of any such proceeds shall be paid to the Monitor pursuant to Section 1(a)(iv) for the benefit of the Junior Constituents; and

 

  ii. in the event that Newco EV is, at the time that any proceeds are so available for distribution from the Litigation Trust, greater than the Aggregate Principal Payment Amount plus Accrued Interest up to and including the CCAA Filing Date for all series of Notes, then 100% of any such proceeds shall be paid to the Monitor pursuant to Section 1(a)(iv) for the benefit of the Junior Constituents only, and the Noteholders shall not be entitled to receive any distributions from the Litigation Trust.

Alternative Sale Transaction:

 

  (i)

Pursuant to the Sale Process Procedures, the Company shall simultaneously pursue a sale process for all or substantially all of the assets of the Company

 

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  (other than the Excluded Assets), and shall consummate a sale of all or substantially all of its assets pursuant to such process, and in lieu of the Restructuring Transaction, provided that any such sale is on terms acceptable to the Company and (i) shall be implemented pursuant to a Plan under the CCAA, and if determined necessary or advisable by the Company, the CBCA, (ii) complies with the terms, conditions and deadlines of the Sale Process Procedures, the Sale Process Order, this Agreement and the Plan, (iii) provides for a cash payment equal to the Aggregate Principal Payment Amount (being, as defined, 85% of the aggregate principal amount of the Notes outstanding as of the CCAA Filing Date, (iv) provides for a cash payment of all Accrued Interest on the Notes up to and including the CCAA Filing Date, and (v) provides for payment of the Expense Reimbursement; or (vi) is otherwise acceptable to the Company and the Initial Consenting Noteholders (any such sale on such terms, being a “ Sale Transaction ”).

 

  (j) In the event of a Sale Transaction, each Noteholder shall receive the following on the Implementation Date in full and complete satisfaction of its Noteholder Claims:

 

  (i) a cash payment equal to all Accrued Interest due in respect of its Notes up to and including the CCAA Filing Date; plus

 

  (ii) cash payment equal to its Pro Rata share of 82% of the principal amount of its Notes; plus

 

  (iii) if applicable to such Noteholder, its Pro Rata share of the Early Consent Consideration (which in the case of a Sale Transaction shall be paid in the form of a cash payment to each Consent Date Noteholder in an amount equal to its Pro Rata share of 3% of the principal amount of its Notes). For greater certainty, the total amount payable under Sections 1(j)(ii) and 1(j)(iii) shall in no case exceed the Aggregate Principal Payment Amount

 

  (k) In the event of a Sale Transaction, on the Implementation Date, in full and complete satisfaction of its Claims, each Other Affected Creditor shall receive the following:

 

  (i) a cash payment equal to its Pro Rata share of any and all net sale proceeds realized after payment of the amounts set forth in Section 1(j) hereof (“ Excess Net Proceeds ”), up to an amount not exceeding its proven Claim.

 

  (1) In the event of a Sale Transaction, on the Implementation Date, the following consideration shall be placed into trust with the Monitor, for the benefit of the Junior Constituents:

 

  (i) any remaining Excess Net Proceeds after payment of the amounts set forth in Section 1(k); plus

 

 

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  (ii) the consideration set forth in Section I(h)(ii) hereof (if any),

and/or such other consideration permitted by the Sale Process Procedures.

 

2. The Consenting Noteholder’s Representations and Warranties

Each Consenting Noteholder hereby represents and warrants, severally and not jointly, to the Company and the Direct Subsidiaries (and acknowledges that each of the Company and the Direct Subsidiaries are relying upon such representations and warranties) that:

 

  (a) As of Agreement Date: it (i) either is the sole legal and beneficial owner of the principal amount of Notes disclosed to the Advisors as of such date or has the investment and voting discretion with respect to the principal amount of Notes disclosed to the Advisors as of such date (the amount of Notes disclosed to the Advisors by such Consenting Noteholder as of such dale being the “ Relevant Notes ” ; the accrued and unpaid interest and any other amount that such Consenting Noteholder is entitled to claim pursuant to the Relevant Notes is its “ Debt ” ); (ii) has the power and authority to bind the beneficial owner(s) of such Notes to the terms of this Agreement; (iii) has authorized and instructed the Advisors to advise the Company, in writing, of the aggregate amount of each series of Notes held by the Consenting Noteholders collectively as of the date hereof, and shall cause the Advisors to promptly (and in any event, within five (5) Business Days) notify the Company or its advisors of any change (upon actual knowledge of such change) to the aggregate holdings of Notes held by the Consenting Noteholders, as well as update any writing delivered to the Company in respect thereof; and (iv) has authorized and instructed the Advisors to advise the Monitor, in writing, of the individual principal amount of each series of Notes held by it as of the date hereof, and shall cause the Advisors to promptly (and in any event, within five (5) Business Days) notify the Monitor or its advisors of any change (upon actual knowledge of such change) to the principal amount of Notes held by it, as well as update any writing delivered to the Monitor in respect thereof.

 

  (b) To the best of its knowledge after due inquiry, there is no proceeding, claim or investigation pending before any court, regulatory body, tribunal, agency, government or legislative body, or threatened against it or any of its properties that, individually or in the aggregate, would reasonably be expected to impair the Consenting Noteholder’s ability to execute and deliver this Agreement and to comply with its terms.

 

  (c) The Debt held by the Consenting Noteholder is not subject to any liens, charges, encumbrances, obligations or other restrictions that would reasonably be expected to adversely affect its ability to perform its obligations under this Agreement.

 

  (d)

Except as contemplated by this Agreement, the Consenting Noteholder has not deposited any of its Relevant Notes into a voting trust, or granted (or permitted

 

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  to be granted) any proxies or powers of attorney or attorney in fact, or entered into a voting agreement, understanding or arrangement, with respect to the voting of its Relevant Notes where such trust, grant, agreement, understanding or arrangement would in any manner restrict the ability of the Consenting Noteholder to comply with its obligations under this Agreement.

 

  (e) It (i) is a sophisticated party with sufficient knowledge and experience to properly evaluate the terms and conditions of this Agreement; (ii) has conducted its own analysis and made its own decision, in the exercise of its independent judgment, to enter into this Agreement; (iii) has obtained such independent advice in this regard as it deemed appropriate; and (iv) has not relied on the analysis or the decision of any Person other than its own members, employees, representatives or independent advisors (it being recognized that the Advisors are not the advisor to any individual holder of the Notes, including any Initial Consenting Noteholder or Consenting Noteholder, on an individual basis).

 

  (f) The execution, delivery and performance by the Consenting Noteholder of its obligations under this Agreement:

 

  (i) are within its corporate, partnership, limited partnership or similar power, as applicable;

 

  (ii) have been duly authorized, by all necessary corporate, partnership, limited partnership or similar action, as applicable, including all necessary consents of the holders of its equity or other participating interests where required; and

 

  (iii) do not (A) contravene its certificate of incorporation, articles, by-laws, membership agreement, limited partnership agreement or other constating documents, as applicable, (B)   violate any judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to it or any of its assets, or (C) conflict with or result in the breach of, or constitute a default under, or require a consent under, any contract material to the Consenting Noteholder.

 

  (g) This Agreement constitutes a valid and binding obligation of the Consenting Noteholder enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally or by general principles of equity, whether asserted in a proceeding in equity or law.

 

  (h) it is an accredited investor within the meaning of the rules of the United States Securities and Exchange Commission under the Securities Act of 1933, as amended, and the regulations promulgated thereunder, as modified by The Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

  (i)

It is an “accredited investor”, as such term is defined in National Instrument 45-106 — Prospectus and Registration Exemptions of the Canadian Securities

 

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  Administrators ( “ NI 45-106 ”) and it was not created or used solely to purchase or hold securities as an accredited investor as described in paragraph (m) of the definition of “accredited investor” in NI 45-106.

 

  (j) It is resident in the jurisdiction indicated on its signature page to this Agreement.

 

3. The Company’s and the Direct Subsidiaries’ Representations and Warranties

The Company and each of the Direct Subsidiaries hereby represent and warrant, severally and not jointly, to each Consenting Noteholder (and the Company and each of the Direct Subsidiaries acknowledge that each Consenting Noteholder is relying upon such representations and warranties) that:

 

  (a) To the best of its knowledge after due inquiry, except as disclosed in the Data Room, there is no proceeding, claim or investigation pending before any court, regulatory body, tribunal, agency, government or legislative body, or threatened against it or any of the Subsidiaries or properties that, individually or in the aggregate, would reasonably be expected to impair the ability of the Company or any of the Direct Subsidiaries to execute and deliver this Agreement and to comply with its terms, or which, if the Transaction was consummated, would result in a Material Adverse Effect.

 

  (b) The execution, delivery and performance by the Company and each of the Direct Subsidiaries of this Agreement:

 

  (i) are within its corporate, partnership, limited partnership or similar power, as applicable;

 

  (ii) have been duly authorized by all necessary corporate, partnership, limited partnership or similar action, as applicable, including all necessary consents of the holders of its equity or other participating interests, where required; and

 

  (iii) do not (A) contravene its or any of the Subsidiaries’ certificate of incorporation, articles of amalgamation, by-laws or limited partnership agreement or other constating documents, as applicable, (B) violate any judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to it or any of the Subsidiaries, properties or assets, or (C) result in the creation or imposition of any lien or encumbrance upon any of the property of the Company or any of its Subsidiaries.

 

  (c) This Agreement constitutes a valid and binding obligation of the Company and each of the Direct Subsidiaries enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally or by general principles of equity, whether asserted in a proceeding in equity or law.

 

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  (d) To the knowledge of the Company, neither the Company nor any of its Subsidiaries has any material liability for borrowed money other than pursuant to those banking and other lending agreements that are disclosed in the Data Room.

 

  (e) Except as disclosed in the Information, the Company has filed with the applicable securities regulators all documents required to be filed by it under Applicable Securities Laws except to the extent that such a failure to file would not be Material.

 

  (f) Except as disclosed in the Information, no order halting or suspending trading in securities of the Company or prohibiting the sale of such securities has been issued to and is outstanding against the Company, and to the knowledge of the Company, and except as may be related to matters disclosed in the Information, no other investigations or proceedings for such purpose are pending or threatened.

 

  (g) the Company has delivered or otherwise made available to the Advisors complete copies of all employment agreements for the Executive Officers, all of which are in full force and effect, and there have been no extension, supplements or amendments thereto other than as disclosed in the Data Room.

 

  (h) The board of directors of the Company has: (i) reviewed the Transaction Terms; (ii) determined, in its business judgment, that the transactions contemplated by the Transaction Terms are in the best interests of the Company; (iii) resolved to recommend approval of this Agreement and the transactions and agreements contemplated hereby to the Noteholders and Other Affected Creditors; and (iv) approved this Agreement and the implementation of the Transaction Terms.

 

  (i) Other than pursuant to this Agreement and any Joinder thereto, there are no agreements between the Company and any Noteholder with respect to any restructuring or recapitalization matters.

 

4. Consenting Noteholders’ Covenants and Consents

Each Consenting Noteholder covenants and agrees as follows:

 

  (a) Each Consenting Noteholder consents and agrees to the terms and conditions of, and the transactions contemplated by, this Agreement.

 

  (b) Each Consenting Noteholder agrees to:

 

  (i) vote (or cause to be voted) all of its Debt in all votes and in each vote in favour of the approval, consent, ratification and adoption of the Plan and the Restructuring Transaction or Sale Transaction contemplated thereby, as the case may be (arid any actions required in furtherance of the foregoing);

 

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  (ii) support the approval of the Plan as promptly as practicable by the Court; and

 

  (iii) instruct the Advisors to support the making of Initial Order and the Sale Process Order and any other matters relating thereto, and all other motions tiled by the Company in furtherance of the transactions contemplated by this Agreement; provided in each case, that such orders and motions are in form and substance satisfactory to the Advisors and/or the Initial Consenting Noteholders.

 

  (c) Each Consenting Noteholder agrees not to sell, assign, pledge or hypothecate (except with respect to security generally applying to its investments which does not adversely affect such Consenting Notehol der’s ability to perform its obligations under this Agreement) or otherwise transfer (a “ Transfer ”), between the Agreement Date and the Termination Date, any Relevant Notes (or any rights or interests in respect thereof, including, but not limited to, the right to vote) held by such Consenting Noteholder, except to a transferee, who (i) is already a Consenting Noteholder if the representations and warranties of such transferee Consenting Noteholder in Section 2 remain true and correct after such Transfer; or (ii) contemporaneously with any such Transfer, agrees to be fully bound as a signatory Consenting Noteholder hereunder in respect of the Notes that are the subject of the Transfer, by executing and delivering to the Company, with a copy to the Advisors, a Joinder Agreement, the form of which is attached hereto as Schedule C . For greater certainty, where the transferee is not already a Consenting Noteholder, such transferee shall be bound by the terms of this Agreement only in respect of the Relevant Notes that are the subject of the Transfer, and not in respect of any other Notes of the transferee. Each Consenting Noteholder hereby agrees to provide the Company and the Advisors with written notice and, in the case of a Transfer pursuant to subparagraph (ii) of this Section 4(c), a fully executed copy of the Joinder Agreement, within three (3) Business Days following any Transfer to a transferee described in (i) or (ii) of this Section 4(c). Any transfer that does not comply with this Section 4(c) shall be void ab initio. For greater certainty, where a Consenting Noteholder assigns all of its Relevant Notes pursuant to this Section 4(c), this Agreement shall continue to be binding upon such Consenting Noteholder with respect to any Notes it subsequently acquires.

 

  (d) Each Consenting Noteholder agrees, to the extent it effects a Transfer of any of its Relevant Notes in accordance with Section 4(c) hereof after 5:00 p.m. (Toronto time) on the Record Date and is entitled to vote on the adoption and approval of the Transaction and the Plan, to vote all of the Relevant Notes that are the subject of the Transfer on behalf of the transferee in all votes and in each vote in favour of the approval, consent, ratification and adoption of the Transaction and the Plan (and any actions required in furtherance thereof).

 

  (e)

Except as contemplated by this Agreement, each Consenting Noteholder agrees not to deposit any of its Relevant Notes into a voting trust, or grant (or permit to

 

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  be granted) any proxies or powers of attorney or attorney in fact, or enter into a voting agreement, understanding or arrangement, with respect to the voting of any of its Relevant Notes if such trust, grant, agreement, understanding or arrangement would in any manner restrict the ability of the Consenting Noteholder to comply with its obligations under this Agreement.

 

  (f) Each Consenting Noteholder agrees that it shall:

 

  (i) not accelerate or enforce or take any action or initiate any proceeding to accelerate or enforce the payment or repayment of any of its Debt (including for greater certainty any due and unpaid interest on its Relevant Notes), whether against the Company or any Subsidiary or any property of any of them;

 

  (ii) execute any and all documents and perform any and all commercially reasonable acts required by this Agreement to satisfy its obligations hereunder including any consent, approval or waiver requested by the Company, acting reasonably;

 

  (iii) forbear from exercising, or directing the Trustee to exercise, any default-related rights, remedies, powers or privileges, or from instituting any enforcement actions or collection actions with respect to any obligations under the Note Indentures, whether against the Company or any Subsidiary or any property of any of them and

 

  (iv) (A) not object to, delay, impede or take any other action to interfere with the acceptance or implementation of the Transaction; (B) not propose, file, support or vote (or cause to vote) any of its Debt in favour of any alternative offer, restructuring, liquidation, workout or plan of compromise or arrangement or reorganization of or for the Company or any of its Subsidiaries that is inconsistent with the Plan or this Agreement; (C) vote (or cause to vote) any of its Debt against and oppose any proceeding under the CCAA or any other legislation in Canada or elsewhere, or any alternative offer, restructuring, liquidation, workout or plan of compromise or arrangement or reorganization of or for the Company or any of its Subsidiaries, in each case that is inconsistent with the Plan or this Agreement; or (D) not take, or omit to take, any action, directly or indirectly, that is materially inconsistent with, or is intended or is likely to interfere with the consummation of the Transaction, except as and only to the extent required by applicable Law or by any stock exchange rules, by any other regulatory authority having jurisdiction over the Consenting Noteholder or by any court of competent jurisdiction.

The Consenting Noteholders acknowledge and agree that the Subsidiaries are direct beneficiaries of this Section 4(f) and may raise any defense (including, without limitation, any estoppel) or pursue any claim or remedy for any breach of this Section 4(f) or any action taken by any

 

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Noteholder or Trustee in contravention of this Section 4(f).

 

5. Company’s and the Direct Subsidiaries’ Covenants and Consents

The Company and each of the Direct Subsidiaries covenants and agrees as follows:

 

  (a) The Company and each Direct Subsidiary consents and agrees to the terms and conditions of, and the transactions contemplated by, this Agreement.

 

  (b) Immediately upon this Agreement being executed by the Company and the Direct Subsidiaries and the Initial Consenting Noteholders, the Company will (i) cause to be issued a press release or other public disclosure in form and in substance reasonably acceptable to the Advisors that discloses the material provisions of the Transaction Terms and all such other information as the Company is required to disclose under the terms of the Noleholder Confidentiality Agreements, subject to the terms of Section 9 hereof, and (ii) file a copy of this Agreement on SEDAR, which shall be redacted to remove any information disclosing the identity or holdings of any Noteholders.

 

  (c) The Company and the Direct Subsidiaries shall pursue the completion of the Transaction in good faith by way of the Plan, in accordance with the Transaction Terms, and in respect of a Restructuring Transaction or a Sale Transaction as the case may be, and shall use commercially reasonable efforts (including recommending to Noteholders and any other Person entitled to vote on the Plan that they vote to approve the Plan and taking all reasonable actions necessary to obtain any regulatory approvals for the Transaction) to achieve the following timeline (which may be amended by the Company with the consent of the Initial Consenting Noteholders or the Advisors, each acting reasonably):

 

  (i) the initiation of proceedings pursuant to the CCAA (the “ CCAA Proceedings ” ), as evidenced by filing the application seeking the Initial Order and the Sale Process Order with the Court, by no later than March 30, 2012;

 

  (ii) approval of the Initial Order by the Court by no later than March 30, 2012;

 

  (iii) approval of the Sale Process Order by the Court by no later than April 5, 2012; and

 

  (iv) If no Approved Bidders are selected pursuant to the Sale Process Procedure in accordance with the terms thereof:

 

  (A) filing of the Meeting Order and Plan by no later July 16, 2012;

 

  (B) meeting of the Noteholders by no later than August 27, 2012;

 

  (C) sanction of the Plan by the Court by no later than August 31, 2012; and

 

 

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  (D) implementation of the Plan by no later than the Outside Date.

 

  (d) The Company shall provide draft copies of all motions or applications and other documents that the Company intends to file with the Court in connection with the Initial Order, the Sale Process Order, the Meeting Order, the Final Order, the Restructuring Transaction, any Sale Transaction, the Plan, and the transactions contemplated by any of the foregoing, to the Advisors at least two (2) Business Days prior to the date when the Company intends to file such documents (except in exigent circumstances where the Company shall provide the documents within such time prior to the filing as is practicable), and such filings shall in each case, when filed, be in form and substance acceptable to the Advisors, acting reasonably.

 

  (e) Subject to any order of the Court, the Company and the Direct Subsidiaries shall (and shall cause each of the Subsidiaries, as required, to) (i) pursue, support and use commercially reasonable efforts to complete the Transaction in good faith, (ii) do all things that are reasonably necessary and appropriate in furtherance of and to consummate and make effective, the Transaction, including, without limitation, using commercially reasonable efforts to satisfy the conditions precedent set forth in this Agreement, (iii) as soon as practicable following the date hereof, in cooperation with the Initial Consenting Noteholders and the Advisors, make all such filings and seek all such consents, approvals, permits and authorizations with any Governmental Entities or third parties whose consent is required in connection with the Transaction and use commercially reasonable efforts to obtain any and all required regulatory and/or third party approvals for or in connection with the Transaction and (iv) not take any action, directly or indirectly, that is materially inconsistent with, or is intended or is likely to interfere with the consummation of, the Transaction, except as required by applicable Law or by any stock exchange rules, or by any other Governmental Entity having jurisdiction over the Company or any of its Subsidiaries.

 

  (f) Except as provided for in the Transaction Terms or as otherwise agreed to in writing by the Initial Consenting Noteholders, the Company shall not make any payment or pay any consideration of any nature or kind whatsoever on account of any amounts owing under the Notes.

 

  (g) Except as contemplated by this Agreement, including pursuant to the Plan, the Company shall not (and shall cause each of the Subsidiaries not to) amend or modify any terms or conditions of the Note Indentures.

 

  (h) Following a reasonable advance written request (which can be made by way of e-mail and, in terms of reasonable notice, shall in no event require more than five (5) Business Days notice and no less than two (2) Business Days notice) by any of the Advisors or any Initial Consenting Noteholder to any officer, director or employee of the Company or the Subsidiaries, and Allen Chan, with a copy in each case to any of Houlihan Lokey, Bennett Jones or the Chief Executive

 

- 13 -

  Officer, the Company and the Direct Subsidiaries shall (subject, with respect to any confidential information to be provided to an Initial Consenting Noteholder or any of its representatives and affiliates, to the Initial Consenting Noteholder having executed, and its representatives and affiliates being bound by, a confidentiality agreement acceptable to the Company and the Advisors, acting reasonably):

 

  (i) provide the Initial Consenting Noteholder (or its representatives and affiliates, as the case may be) or the Advisor, as the case may be, with access at reasonable times to the Company’s and its Subsidiaries’ premises, assets, accounts, books and records for use in connection with the Transaction; and

 

  (ii) make Houlihan Lokey and any other advisor to the Company or the Subsidiaries, the officers, directors and employees of the Company and the Subsidiaries, and Allen Chan, available at reasonable times and places for any discussions with the Initial Consenting Noteholder (or its representatives and affiliates, as the case may be) or the Advisor, as the case may be.

 

  (i) The Company shall assist the Initial Consenting Noteholders in their search for and selection of directors for the board of directors of Newco to be formed in connection with the Restructuring Transaction, and for any new senior management of Newco, to be put in place on the Implementation Date, including by establishing a search committee appointed by the Initial Consenting Noteholders, hiring a search firm chosen by the Initial Consenting Noteholders and paying all costs and expenses in respect of the search and selection process, including all reasonable costs associated with the search firm and all reasonable and documented out-of-pocket fees and expenses incurred by any Initial Consenting Noteholder in connection with such search and selection process.

 

  (j) The Company shall, within thirty (30) days following the date of this Agreement, provide the Advisors with a detailed budget (including any financial retainers provided to its advisors) reflecting the Company’s current best estimate of (i) the costs of completing the Transaction, including any material fees anticipated to be payable in connection with the Transaction (to professionals, employees, officers, directors, third parties or otherwise on the Implementation Date or otherwise) and (ii) the anticipated fees of the professional advisors to the Company (including, but not limited to, their legal advisors, auditors, and the Board of Directors’ counsel and financial advisors) for all matters being addressed by such professionals, which shall include general descriptions of the work being or to be performed by each of these professionals (the “ Restructuring Budget ”). The Company shall update the Restructuring Budget on a monthly basis to reflect any changes in the Company’s current best estimate of the costs of completing the Transaction, and to report on the actual amount of each such professional’s fees for the preceding month.

 

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  (k) The Company shall pay the reasonable and documented fees of the Advisors and Conyers, Dill & Pearman LLP pursuant to their respective engagement letters with the Company within ten (10) Business Days following the receipt of any invoice from any such party.

 

  (l) The Company shall keep the Advisors reasonably informed regarding any material discussions with any Person (other than the legal and financial advisors to the Company, the Initial Consenting Noteholders and their legal and financial advisors) with respect to the Transaction and shall provide the Advisors with an opportunity for a representative of the Advisors or the Initial Consenting Noteholders (subject to confidentiality restrictions) to participate in such material discussions. Notwithstanding the foregoing, with respect to a Sale Transaction, the Company may provide such information and opportunities as and to the extent set out in the Sale Process Procedures.

 

  (m) Except to the extent they are to be continued pursuant to and in compliance with the Sale Process Procedures, the Company and the Direct Subsidiaries shall, and shall cause its Representatives and the Subsidiaries to, immediately terminate any existing solicitations, discussions or negotiations with any Person (other than the Initial Consenting Noteholders and their legal and financial advisors) that has made, indicated any interest in or may reasonably be expected to propose, any other transaction. The Company and the Direct Subsidiaries agree not to (and shall cause each of the Subsidiaries not to) release any party from any standstill covenant to which it is a party, or amend, waive or modify in any way any such standstill covenant.

 

  (n) Other than through and in accordance with the Sale Process Procedures, the Company and the Direct Subsidiaries shall not (and shall cause each of the Subsidiaries not to), directly or indirectly through any Representative or any of the Subsidiaries: (i) solicit, initiate, knowingly facilitate or knowingly encourage (including by way of furnishing information or entering into any agreement) any inquiries or proposals regarding any transaction that is an alternative to the Transaction (an “ Other Transaction ” ) ; (ii) participate in any substantive discussions or negotiations with any person (other than the Initial Consenting Noteholders and the Advisors) regarding any Other Transaction; (iii) accept, approve, endorse or recommend or propose publicly to accept, approve, endorse or recommend any Other Transaction; or (iv) enter into, or publicly propose to enter into, any agreement in respect of any Other Transaction; provided, however, that notwithstanding anything to the contrary in this Section 5(n), the Company may, after consulting with the Advisors, consider an Other Transaction if:

 

  (i) the Company and each of the Direct Subsidiaries is in compliance, in all material respects, with all terms and conditions of this Agreement; and

 

  (ii)

(A) such Other Transaction is based on a proposal received from an arm’s length third party that none of the Company or any Subsidiary has,

 

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  directly or indirectly through any Representative, solicited, initiated, knowingly facilitated or knowingly encouraged; and

 

  (B) such Other Transaction provides for either:

(I) the repayment in full in cash of the principal amount of the Notes, all Accrued Interest and the Expense Reimbursement on closing of the Other Transaction; or

(II) is determined by the Company and its advisors to be financially superior for the Noteholders and can be implemented through a plan of arrangement with the support of the Initial Consenting Noteholders

provided for greater certainty that nothing in this Section 5(n) shall prohibit or restrict in any way the Company’s rights under the Sale Procedure Process to solicit, discuss and negotiate a potential Sale Transaction with any other Person, all in each case in accordance with the terms of the Sale Process Procedures.

 

  (o) Except in respect of an Other Transaction that is obtained through and in accordance with the Sale Process Procedures, (i) the Company shall promptly (and in any event within 24 hours following receipt by any of the Companies) notify the Advisors, at first orally and thereafter in writing, of any proposal in respect of any Other Transaction, in each case received after the Agreement Date, of which it or any of its Representatives are or become aware, or any amendments to such proposal in respect of any Other Transaction, any request for discussions or negotiations, or any request for non-public information relating to the Company or any of its Subsidiaries in connection with such Other Transaction or for access to the books or records of any the Company or any of its Subsidiaries by any Person that informs the Company or any of its Subsidiaries that it is considering making, or has made, a proposal with respect to any Other Transaction and any amendment thereto; and the Company shall promptly provide to the Advisors a description of the material terms and conditions of any such proposed Other Transaction or request; (ii) the Company the Direct Subsidiaries shall not, and shall cause its Representatives and the Subsidiaries not to, participate in any discussions with any Person that has delivered a proposal in respect of any Other Transaction, without providing reasonable notice to the Advisors and an opportunity for the Advisors or the Initial Consenting Noteholders to participate in any such discussions; and (iii) the Company shall keep the Advisors informed of any material change to the material terms of any such proposed Other Transaction.

 

  (p) The Company and the Direct Subsidiaries shall not and shall cause the Subsidiaries not to materially increase compensation or severance entitlements or other benefits payable to directors, officers or employees, or pay any bonuses whatsoever, other than as required by law, or pursuant to the terms of existing

 

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  incentive plans or employment contracts, true and complete copies of which have been delivered or otherwise made available to the Advisors prior to the date hereof. Other than those outlined in the Data Room, there shall be no change of control payments paid by the Company or any of its Subsidiaries under any employment agreement, incentive plan or any other Material agreements as a result of the Transaction.

 

  (q) The Company and the Direct Subsidiaries shall not and shall cause each of the Subsidiaries not to amalgamate, merge or consolidate with, or sell all or substantially all of its assets to, one or more other Persons, or enter into any other transaction of similar effect under the laws of any jurisdiction, or change the nature of its business or the corporate or capital structure, except as contemplated by this Agreement or with the consent of the Advisors.

 

  (r) The Company and the Direct Subsidiaries shall not and shall cause each of the Subsidiaries not to (i) prepay, redeem prior to maturity, defease, repurchase or make other prepayments in respect of any indebtedness other than payments permitted or as required hereby, (ii) directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any indebtedness of any kind whatsoever (except for indebtedness that is incurred in the Ordinary Course which is in compliance with the covenants set out in the Note Indentures), (iii) create, incur, assume or otherwise cause or suffer to exist or become effective any lien, charge, mortgage, hypothec or security interest of any kind whatsoever on, over or against any of its assets or property (except for any lien, charge, mortgage, hypothec or security interest that is incurred in the Ordinary Course and that is not Material); (iv) issue, grant, sell, pledge or otherwise encumber or agree to issue, grant, sell, pledge or otherwise encumber any securities of the Company, the Direct Subsidiaries or any of the other Subsidiaries, or securities convertible into or exchangeable or exercisable for, or otherwise evidencing a right to acquire, securities of the Company, the Direct Subsidiaries or any of the other Subsidiaries, except in the Ordinary Course which is in compliance with the covenants set out in the Note Indentures; or (v) enter into any new secured or unsecured lending or credit facilities of any kind, without the consent of the Advisors except to replace existing lending or credit facilities and provided that the aggregate amount of such facilities does not exceed the aggregate amount of the Company’s lending and credit facilities as at the date hereof; provided, however, that nothing in this Section 5(r) shall preclude any Subsidiary organized under the laws of the PRC from obtaining additional lending or credit facilities if doing so is determined to be in the Ordinary Course of such Subsidiary and, provided further, that the Advisors are informed of, and consent to, any such lending or credit facilities.

 

  (s) Other than as contemplated and permitted by this Agreement, the Company and the Direct Subsidiaries shall not and shall cause each of the Subsidiaries not to, outside of the Ordinary Course, sell, transfer, lease, license or otherwise dispose of all or any part of its property, assets or undertaking (including, without limitation, by way of any loan transaction) with a value of over US$10,000,000

 

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  at any one time or in any series of transactions aggregating over US$30,000,000 (whether voluntarily or involuntarily) during the term of this Agreement, except on terms acceptable to the Initial Consenting Noteholders or the Advisors, acting reasonably.

 

  (t) The Company and the Direct Subsidiaries shall and shall cause each of the Subsidiaries to (i) operate its business in the Ordinary Course and in a manner that is intended to preserve or enhance the value of such Person, to the extent possible having regard to such Person’s financial condition, and (ii) shall not enter into any Material agreement outside the Ordinary Course, except as contemplated by this Agreement and the Sale Process Procedures and except with respect to any other transactions or potential transactions disclosed to the Advisors prior to the execution of this Agreement or with the prior written consent of the Initial Consenting Noteholders or the Advisors, which consent shall not be unreasonably withheld.

 

  (u) The Company and the Direct Subsidiaries shall use reasonable commercial efforts, and shall cause the Subsidiaries to use reasonable commercial efforts, to maintain appropriate insurance coverage in amounts and on terms that are customary in the industry of the Company and its Subsidiaries, provided that such insurance is available on reasonable commercial terms.

 

  (v) Except as may be provided for as part of the Transaction Terms, the Company and the Direct Subsidiaries shall not, and shall cause the Subsidiaries not to, directly or indirectly, declare, make or pay any dividend, charge, fee or other distribution, whether by way of cash or other consideration, to or with respect to any of its issued and outstanding shares (or any rights issued in respect thereof), provided that (x) the foregoing shall not limit the ability of any Restricted Subsidiary to pay dividends or make other distributions on any Capital Stock of such Restricted Subsidiary owned by the Company or any other Restricted Subsidiary to the extent that such limitation would violate provisions of the Note Indentures, and (y) the Company and its Subsidiaries shall be entitled to engage in intercompany transactions that are in the Ordinary Course or that are necessary and appropriate to preserve the value of the business or to carry out the repatriation of onshore cash referenced in subsection 5(x) below.

 

  (w) The Company shall, from and after the date hereof, cause its subsidiaries to maintain a minimum aggregate cash balance (outside of Canada) of the aggregate of: (i) US$125,000,000 (ii) the amount by which cash received (net of associated expenses) from the sale of Thai redwood timber exceeds US$46,000,000 less (iii) the amount by which cash received (net of associated expenses) from the sale of Thai redwood timber is less than US$46,000,000.

 

  (x) Subject to the other terms and conditions of this Agreement, the Company and its management shall identify, implement and monitor both short-term and long-term liquidity generating initiatives and all reasonable steps to monetize assets for the repayment of the indebtedness of the Company and its Subsidiaries. In

 

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  this regard, and subject to the need of the Company and its Subsidiaries to prioritize efforts relating to the orderly management of its PRC tax affairs and the reorganization of the ownership structure of its BVI purchased plantations, and the other terms and conditions of this Agreement, the Company and its management shall take all reasonable steps (including but not limited to seeking all necessary SAFE and other regulatory approvals) to repatriate to the Company or its offshore Subsidiaries in a timely manner all onshore cash in excess of the projected onshore operating requirements of the Company and its Subsidiaries.

 

  (y) The Company shall produce a rolling 90-day cash flow forecast and shall discuss the receipts and disbursements for same with the Advisors, and shall consult with the Advisors regarding the matters referenced in subsections (w), (x) and (z) on no less than a bi-weekly basis.

 

  (z) The Company shall keep the Advisors reasonably informed regarding any material discussions with any Person (other than legal and financial advisors to the Company) with respect to any material transactions concerning the Company and its Subsidiaries and shall provide the Advisors with an opportunity for a representative of the Advisors or of the Initial Consenting Noteholders (subject to any confidentially restrictions) to participate in such material discussions.

 

  (aa) The Company shall keep the Advisors reasonably informed regarding any material discussions with the Ontario Securities Commission or the Royal Canadian Mounted Police concerning the Company or the Subsidiaries, or any director or officer thereof.

 

  (bb) The Company shall forthwith expand its engagement of FTI Consulting (Hong Kong) Ltd. ( “ FTI HK ” ) and shall instruct FTI HK (to: (i) attend at the premises of its Subsidiaries in Hong Kong and the PRC (including its Sino-Wood and Sino-Panel divisions) to monitor and report on operations, cash management functions (including the collection and disbursement of cash in such operations); and (ii) provide such information and reports as may be requested by the Company, the Monitor or any of the Advisors, acting reasonably (provided that all such information shall be subject to the confidentiality agreements and undertakings executed by the parties and any such information provided by FTI HK to the Advisors or the Monitor shall be made available to the Company).

 

  (cc) In the event that, after having received information and/or reports from FTI HK pursuant to Section 5(bb), the Initial Consenting Noteholders are not satisfied with the operations and management of the Company’s Subsidiaries, the Initial Consenting Noteholders shall have the right to notify the Company that, in their view, additional operational, management or other expertise is required in respect of the Subsidiaries (or any of them), and to require the appointment within thirty (30) days of one or more Persons having such expertise, the identity of which shall be acceptable to the Company and the Initial Consenting Noteholders.

 

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  (dd) Any new additions to the board of directors of the Company shall be acceptable to the Initial Consenting Noteholders.

 

  (ee) The Company shall cause its BVI Subsidiaries to carry out commercially reasonable and prudent procedures with respect to the screening and evaluating of new timber contracts (including, without limitation, with respect to the identity and creditworthiness of the contractual counterparties, and also verification of legal chain of title, plantation rights certificates, and valuation, as the case may be) through its BVI /AI structure (the “ BVI Structure ” ) (as distinct from its Wholly Foreign-Owned Entity Structure), which procedures shall be periodically reviewed and discussed with the Advisors (the “ BVI Timber Diligence Procedures ” ).

 

  (ff) The Company shall cause its BVI Subsidiaries not to invest funds held by its AIs in the BVI Structure in new timber contracts for the BVI entities except in accordance with the BVI Timber Diligence Procedures, or in a manner otherwise acceptable to the Advisors.

 

  (gg) The Company and its Subsidiaries shall not directly or indirectly enter into any contract for the sale or purchase of timber (including with any AI or supplier) through the BVI Structure with a value of more than US$5,000,000 at any one time or for any series of transactions aggregating over US$10,000,000 without the consent of the advisors.

 

  (hh) The Company and its Subsidiaries shall make commercially reasonable efforts to collect all accounts receivable (including all accounts receivable payable by any AI) in the BVI Structure; and shall keep the Advisors informed of their efforts and status regarding same.

 

6. Conditions Precedent to Noteholder’s Support Obligations

 

  (a) Subject to Section 6(b), the obligation of the Consenting Noteholder to vote in favour of the Plan pursuant to Section 4(b)(i) shall be subject to the reasonable satisfaction of the following conditions prior to the Voting Deadline, each of which, if not satisfied prior to the Voting Deadline, can only be waived by the Initial Consenting Noteholders:

 

  (i) the Initial Order, the Sale Process Order, the Meeting Order, the Plan and the proposed Final Order in respect of the Plan, and all other material filings by or on behalf of the Companies, or Orders entered by the Court, in the CCAA Proceedings to date, shall have been filed, and the Orders shall have been entered, in form and substance acceptable to the Advisors, acting reasonably;

 

  (ii) the terms and conditions of the Plan shall be consistent with this Agreement or otherwise acceptable to the Initial Consenting Noteholders, acting reasonably (including, without limitation, all terms and conditions of the Litigation Trust and the Contingent Value Rights);

 

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  (iii) the Initial Consenting Noteholders shall be satisfied with the results of due diligence concerning the Company, its Subsidiaries and their businesses;

 

  (iv) the Company and each of the Direct Subsidiaries shall have complied in all material respects with each covenant in this Agreement that is to be performed on or before the date that is three (3) Business Days prior to the Voting Deadline, including without limitation, by having complied with the timeline set forth in Section 5(c) hereof (as the same may have been amended with the consent of the Initial Consenting Noteholders or the Advisors, acting reasonably), and the Company shall have provided the Advisors with a certificate signed by an officer of the Company certifying compliance with this Section 6(iv) as of the date that is three (3) Business Days prior to the Voting Deadline;

 

  (v) the Restructuring Budget shall be in form and substance acceptable to the Initial Consenting Noteholders, acting reasonably;

 

  (vi) there shall have been no appointment of any new senior executive officers of the Company or any of its Subsidiaries or members of the board of directors of the Company, or any chief restructuring officer of the Company, unless such appointment, including its terms, was on terms satisfactory to the Initial Consenting Noteholders, acting reasonably;

 

  (vii) the composition of the board of directors of Newco and the senior management and officers of Newco to be appointed on the Implementation Date shall be acceptable to the Initial Consenting Noteholders;

 

  (viii) the terms of any New Management Plan shall be acceptable to the Initial Consenting Noteholders;

 

  (ix) the representations and warranties of the Company and the Direct Subsidiaries set forth in this Agreement shall be true and correct in all respects without regard to any materiality or Material Adverse Effect qualifications contained in them as of the date that is three (3) Business Days prior to the Voting Deadline with the same force and effect as if made at and as of such date (except to the extent such representations and warranties are by their terms given as of a specified date, in which case such representations and warranties shall be true and correct in all respects as of such date), in each case except (A) as such representations and warranties may be affected by the occurrence of events or transactions contemplated by this Agreement, and (B) where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect, and the Company shall have provided the Advisors with a certificate signed by an officer of the Company certifying compliance with this Section 6(a)(ix) as of the date that is three (3) Business Days prior to the Voting Deadline;

 

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  (x) there shall not exist or have occurred any Material Adverse Effect, and the Company shall have provided the Advisors with a certificate signed by an officer of the Company certifying compliance with this Section 6(x) as of the date that is three (3) Business Days prior to the Voting Deadline;

 

  (xi) there shall not be in effect any preliminary or final decision, order or decree by a Governmental Entity, and no action shall have been announced, threatened or commenced by any Governmental Entity in consequence of or in connection with the Transaction that restrains or impedes, or prohibits (or if granted could reasonably be expected to restrain, impede or inhibit) the Transaction or any material part thereof or requires or purports to require a material variation of the Transaction, and the Company shall have provided the Advisors with a certificate signed by an officer of the Company certifying compliance with this Section 6(a)(xi) as of the date that is three (3) Business Days prior to the Voting Deadline; and

 

  (xii) there shall have been no breach of the Noteholder Confidentiality Agreements by the Company or any of the Sino-Forest Representatives (as defined therein) in respect of that Consenting Noteholder.

 

  (b) Notwithstanding Section 6(a), if the Company has, in compliance with the Sale Process Procedures, entered into a definitive agreement with respect to a Sale Transaction prior to the Voting Deadline, the obligation of the Consenting Noteholder to vote in favour of the Plan in respect of such Sale Transaction pursuant to Section 4(b)(i) shall be subject to the reasonable satisfaction of only the conditions precedent set forth in Sections 6(a)(i), 6(a)(ii), 6(a)(iv), 6(a)(xi) and 6(a)(xii) prior to the Voting Deadline, which, if not satisfied prior to the Voting Deadline, can only be waived by the Initial Consenting Noteholders.

 

7. Conditions Precedent to Restructuring

 

  (a) Subject to Section 7(b), the Transaction shall be subject to the reasonable satisfaction of the following conditions prior to or at the time on which the Transaction is implemented (the “ Effective Time ” ), each of which, if not satisfied on or prior to the Effective Date, can only be waived by the Initial Consenting Noteholders; provided, however that (A) the conditions in sub-clauses 7(a)(i) to 7(a)(iii), 7(a)(v) to 7(a)(viii), 7(a)(xi) and 7(a)(xvii) below shall also be for the benefit of the Company and (B) if not satisfied on or prior to the Effective Time, can only be waived by both the Company and the Initial Consenting Noteholders:

 

  (i) (v) the Plan shall have been approved by the applicable stakeholders of the Company as and to the extent required by the Court or otherwise, any such requirement being acceptable to the Company and the Initial Consenting Noteholders, each acting reasonably; (w) the Plan shall have been approved by the Court and the Final Order shall be in full force and effect

 

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  prior to August 31, 2012 in respect of a Restructuring Transaction, and prior to the Outside Date in respect of a Sale Transaction; (x) the Plan shall have been approved by the applicable stakeholders and the Court in a form consistent with this Agreement or otherwise acceptable to the Company and the Initial Consenting Noteholders, each acting reasonably; (y) the Final Order shall have been entered by the Court in a form consistent with this Agreement or otherwise acceptable to the Company and the Initial Consenting Noteholders, each acting reasonably; and (z) the Implementation Date shall have occurred no later than the Outside Date;

 

  (ii) all press releases, disclosure documents and definitive agreements in respect of the Transaction shall be in a form and substance satisfactory to the Company and the Initial Consenting Noteholders, each acting reasonably;

 

  (iii) the new memorandum and articles of association, by-laws and other constating documents of Newco (including, without limitation, any shareholders agreement, shareholder rights plan, classes of shares (voting and non-voting)) or any affiliated or related entities to be formed in connection with the Transaction, as applicable, and all definitive legal documentation in connection with all of the foregoing shall be acceptable to the Initial Consenting Noteholders and in form and substance reasonably satisfactory to the Company;

 

  (iv) the composition of the board of directors of Newco and the senior management and officers of Newco shall have been put in place on the Implementation Date and shall be acceptable to the Initial Consenting Noteholders;

 

  (v) the terms of the New Management Plan, together with the terms of employment for the senior executive officers of Newco, shall have been put in place on the Implementation Date and shall be acceptable to the Initial Consenting Noteholders, and reasonably satisfactory to the Company;

 

  (vi) the terms of the Litigation Trust and the Contingent Value Rights shall be satisfactory to the Company and the Initial Consenting Noteholders, each acting reasonably;

 

  (vii) all Material filings under applicable Laws that are required in connection with the Transaction shall have been made and any Material regulatory consents or approvals that are required in connection with the Transaction shall have been obtained (including, without limitation, any required consent(s) of the Ontario Securities Commission) and, in the case of waiting or suspensory periods, such waiting or suspensory periods shall have expired or been terminated;

 

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  (viii) there shall not be in effect any preliminary or final decision, order or decree by a Governmental Entity, and no action shall have been announced, threatened or commenced by any Governmental Entity, in consequence of or in connection with the Transaction that restrains or impedes, or prohibits (or if granted could reasonably be expected to restrain, impede or inhibit) the Transaction or any material part thereof or requires or purports to require a material variation of the Transaction and the Company shall have provided the Consenting Noteholders with a certificate signed by an officer of the Company certifying compliance with this Section 7(a)(viii) as at the Effective Time;

 

  (ix) the representations and warranties of the Company and the Direct Subsidiaries set forth in this Agreement shall he true and correct in all respects without regard to any materiality or Material Adverse Effect qualifications contained in them as of the Effective Time with the same force and effect as if made at and as of such date (except to the extent such representations and warranties are by their terms given as of a specified date, in which case such representations and warranties shall be true and correct in all respects as of such date), in each case except (A) as such representations and warranties may be affected by the occurrence of events or transactions contemplated by this Agreement, and (B) where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect, and the Company shall have provided the Consenting Noteholders with a certificate signed by an officer of the Company certifying compliance with this Section 7(a)(ix) as at the Effective Time;

 

  (x) there shall not exist or have occurred any Material Adverse Effect, and the Company shall have provided the Consenting Noteholders with a certificate signed by an officer of the Company certifying compliance with this Section 7(a)(x) as at the Effective Time;

 

  (xi) all securities of the Company, Newco and any affiliated or related entities that are formed in connection with the Transaction, when issued and delivered, shall be duly authorized, validly issued and fully paid and non-assessable and the issuance thereof shall be exempt from all prospectus and registration requirements and resale restrictions of applicable Securities Legislation;

 

  (xii) the Noteholders shall have received the consideration described in the Transaction Terms on the Implementation Date;

 

  (xiii) in the case of a Restructuring Transaction all Existing Shares, Equity Interests, including all existing options, warrants, deferred share units and restricted share units held by current directors and officers or other third parties, and all Equity Claims shall have been cancelled or extinguished or

 

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  otherwise dealt with to the satisfaction of the Initial Consenting Noteholders, acting reasonably to ensure that no rights in respect thereof attach to the assets and property conveyed to Newco pursuant to the Restructuring Transaction;

 

  (xiv) the Initial Consenting Noteholders, acting reasonably, shall be satisfied with the use of proceeds and payments relating to all aspects of the Transaction, including, without limitation, any change of control payments, consent fees, transaction fees or third party fees, in the aggregate of $500,000 or more, payable by the Company or any Subsidiary to any Person (other than a Governmental Entity) in respect of or in connection with the Transaction, including without limitation, pursuant to any employment agreement or incentive plan of the Company or any Subsidiary;

 

  (xv) the Company shall have paid the Expense Reimbursement in full on the Implementation Date, and Newco shall have no liability for any fees or expenses due to the Company’s legal, financial or advisors either as at or following the Implementation Date;

 

  (xvi) the Company and the Direct Subsidiaries shall have complied in all material respects with each covenant in this Agreement that is to be performed on or before the Effective Time, and the Company shall have provided the Consenting Noteholders with a certificate signed by an officer of the Company certifying compliance with this Section 7(a)(xvi) as at the Effective Time; and

 

  (xvii) any Sale Transaction shall be on terms and conditions consistent with this Agreement or otherwise acceptable to the Company and the Initial Consenting Noteholders, each acting reasonably.

 

  (b) Notwithstanding Section 7(a), if the Company has, in compliance with the Sale Process Procedures, entered into a definitive agreement with respect to a Sale Transaction, such Sale Transaction shall be subject to the reasonable satisfaction of only the conditions in Sections 7(a)(i), 7(a)(ii), 7(a)(vii), 7(a)(viii), 7(a)(xii), 7(a)(xv), 7(a)(xvi) and 7(a)(xvii), prior to or at the Effective Time, each of which, if not satisfied on or prior to the Effective Date, can only be waived by the Initial Consenting Noteholders; provided, however that (A) the condition in Sections 7(a)(i), 7(a)(vii), 7(a)(viii) and 7(a)(xvii) shall also be for the benefit of the Company and (B) if not satisfied on or prior to the Effective Time, can only be waived by both the Company and the Initial Consenting Noteholders.

 

8. Conditions Precedent to Company’s Obligations

The obligations of the Company under this Agreement shall be subject to the reasonable satisfaction of the following conditions, each of which, if not satisfied, can only be waived by the Company:

 

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  (a) the Consenting Noteholders shall have complied in all material respects with each of their covenants in this Agreement that is to be performed on or before the Implementation Date; and

 

  (b) the representations and warranties of the Consenting Noteholders set forth in this Agreement shall be true and correct in all material respects without regard to any materiality qualifications contained in them as of the Implementation Date with the same force and effect as if made at and as of such time, except that representations and warranties that are given as of a specified date shall be true and correct in all material respects as of such date.

 

9. Press Releases and Public Disclosure Concerning Transaction

 

  (a) No press release or other public disclosure concerning the transactions contemplated herein shall be made by the Company or any of its Representatives or Subsidiaries without the prior consent of the Advisors (such consent not to be unreasonably withheld) except as, and only to the extent that, the disclosure is required (as determined by the Company) by applicable Law or by any stock exchange rules on which its securities or those of any of its affiliates are traded, by any other regulatory authority having jurisdiction over the Company or any Direct Subsidiary, or by any court of competent jurisdiction; provided, however, that the Company shall provide the Advisors with a copy of such disclosure in advance of any release and an opportunity to consult with the Company as to the contents, and to provide comments thereon, and provided further that any such disclosure shall in all cases also comply with the terms and conditions set forth in Section 16 hereof and in any of the applicable Noteholder Confidentiality Agreements.

 

  (b) Notwithstanding the foregoing and subject to Section 16 hereof, no information with respect to the principal amount of Notes or the number of Common Shares held or managed by any individual Consenting Noteholder or the identity of any individual Consenting Noteholder shall be disclosed by the Company or any of its Representatives or Subsidiaries in any press release or other public disclosure concerning the transactions contemplated herein.

 

  (c)

No press release or other public disclosure concerning the transactions contemplated herein shall be made by any Consenting Noteholder without the prior consent of the Company (such consent not to be unreasonably withheld) except as, and only to the extent that, the disclosure is required (as determined by the Consenting Noteholder) by applicable Law or by any stock exchange rules on which its securities or those of any of its affiliates are traded, by any other regulatory authority having jurisdiction over the Consenting Noteholder, or by any court of competent jurisdiction; provided, however, that the Consenting Noteholder shall provide the Company with a copy of such disclosure in advance of any release and an opportunity to consult with the Consenting Noteholder as to the contents, and to provide comments thereon, and provided further that any

 

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  such disclosure shall also comply with the terms of any applicable Noteholder Confidentiality Agreement.

 

  (d) To the extent that there is a conflict between the provisions of this Section 9 and a Noteholder Confidentiality Agreement, the provisions of the Noteholder Confidentiality Agreement shall govern.

 

10. Further Assurances

Each Party shall do all such things in its control, take all such actions as are commercially reasonable, deliver to the other Parties such further information and documents and execute and deliver to the other Parties such further instruments and agreements as another Party shall reasonably request to consummate or confirm the transactions provided for in this Agreement, to accomplish the purpose of this Agreement or to assure to the other Party the benefits of this Agreement.

 

11. Consenting Noteholders’ Termination Events

This Agreement may be terminated by the delivery to the Company and the Advisors of a written notice in accordance with Section 17(q) hereof by Initial Consenting Noteholders holding at least 66 2/3% of the aggregate principal amount of Relevant Notes held by the Initial Consenting Noteholders collectively, in the exercise of their sole discretion, or in the case of Sections 11(j) and (k) by, but only in respect of, any Initial Consenting Noteholder individually, upon the occurrence and, if applicable, continuation uncured (where such event is curable) for three (3) Business Days after receipt of such notice of any of the following events:

 

  (a) failure by the Company to comply with any of the deadlines set forth in Section 5(c) hereof (including if the Implementation Date has not occurred by the Outside Date), as the same may have been amended with the consent of the Initial Consenting Noteholders or the Advisors;

 

  (b) failure by the Company or any of the Direct Subsidiaries to comply in all material respects with, or default by the Company or any of the Direct Subsidiaries in the performance or observance of, any material term, condition, covenant or agreement set forth in this Agreement, which, if capable of being cured, is not cured within five (5) Business Days after the receipt of written notice of such failure or default;

 

  (c) failure by the Company or any of the Direct Subsidiaries to comply with or satisfy any condition precedent set forth in Section 6 or 7 of this Agreement;

 

  (d) if any representation, warranty or other statement of the Company or any of the Direct Subsidiaries made or deemed to be made in this Agreement shall prove untrue in any respect as of the date when made, except where the failure of such representations and warranties or other statements to be so true and correct, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect;

 

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  (e) the issuance of any preliminary or final decision, order or decree by a Governmental Entity, the making of an application to any Governmental Entity, or commencement of an action by any Governmental Entity, in consequence of or in connection with the Transaction, in each case which restrains, impedes or prohibits the Transaction or any material part thereof or requires or purports to require a material variation of the Transaction;

 

  (f) the CCAA Proceedings are dismissed, terminated, or stayed or the Company whether voluntarily or involuntarily, commences or undergoes a receivership, liquidation, bankruptcy, debt enforcement proceeding or a proceeding under the CCAA, the Bankruptcy and Insolvency Act (Canada) or Winding-Up and Restructuring Act (Canada), or under any foreign insolvency law, or any of the Subsidiaries become subject to voluntary or involuntary liquidation proceedings, unless any such event occurs with the prior written consent of the Initial Consenting Noteholders;

 

  (g) the appointment of a receiver, interim receiver, receiver and manager, trustee in bankruptcy, liquidator or administrator in respect of the Company, or any of its Subsidiaries, unless such event occurs with the prior written consent of the Initial Consenting Noteholders;

 

  (h) the amendment, modification or filing of a pleading by the Company, or any of its Subsidiaries, seeking to amend or modify this Agreement, any of the Transaction Terms, the Initial Order, the Sale Process Order, the Sale Process Procedures, the Plan, or any other document related to any of the foregoing or otherwise filed in the CCAA Proceedings, in a manner not acceptable to the Initial Consenting Noteholders, acting reasonably;

 

  (i) if there are any new additions to the board of directors of the Company that are not acceptable to the Initial Consenting Noteholders;

 

  (j) if the Company and the Initial Consenting Noteholders cannot agree on the Person(s) to be appointed by the Company or any of its Subsidiaries pursuant to Section 5(cc) hereof; or

 

  (k) if the Company fails to comply with its obligations under Section 5(h).

 

12. Companies’ Termination Events

 

  (a) This Agreement may be terminated by the delivery to the Consenting Noteholders (with a copy to the Advisors) of a written notice in accordance with Section 17(q) by the Company, in the exercise of its sole discretion, upon the occurrence and continuation of any of the following events:

 

  (i)

the issuance of any preliminary or final decision, order or decree by a Governmental Entity, the making of an application to any Governmental Entity, or commencement of an action by any Governmental Entity, in consequence of or in connection with the Transaction, in each case

 

- 28 -

  which restrains, impedes or prohibits the Transaction or any material part thereof or requires or purports to require a material variation of the Transaction; or

 

  (ii) if the Implementation Date has not occurred on or before the Outside Date;

 

  (b) This Agreement may be terminated as to a breaching Consenting Noteholder (the “ Breaching Noteholder ” ) only, by delivery to such Breaching Noteholder of a written notice in accordance with Section 17(q) by the Company, in the exercise of its sole discretion and provided that the Company is not in default hereunder, upon the occurrence and continuation uncured (where such event is curable) for three Business Days after the receipt of such notice, of any of the following events:

 

  (i) failure by the Breaching Noteholder to comply in all material respects with, or default by the Breaching Noteholder in the performance or observance of, any material term, condition, covenant or agreement set forth in this Agreement which is not cured within five (5) Business Days after the receipt of written notice of such failure or default; or

 

  (ii) if any representation, warranty or other statement of the Breaching Noteholder made or deemed to be made in this Agreement shall prove untrue in any material respect as of the date when made,

and the Breaching Noteholder shall thereupon no longer be a Consenting Noteholder.

 

13. Mutual Termination

This Agreement, and the obligations of all Parties hereunder, may be terminated by mutual agreement among (a) the Company, (b) the Direct Subsidiaries and (c) Initial Consenting Noteholders holding at least 66 2/3% of the aggregate principal amount of Relevant Notes held by the Initial Consenting Noteholders collectively.

 

14. Effect of Termination

 

  (a) Upon termination of this Agreement pursuant to Sections 11(a) to 11(i) Section 12(a) or Section 13 hereof, this Agreement shall be of no further force and effect and each Party hereto shall be automatically and simultaneously released from its commitments, undertakings, and agreements under or related to this Agreement, except for the rights, agreements, commitments and obligations under Sections 9(b), 14, 16 and 17, all of which shall survive the termination, and each Party shall have the rights and remedies that it would have had it not entered into this Agreement and shall, subject to the CCAA Proceedings and the terms of any Court orders made therein, be entitled to take all actions, whether with respect to the Transaction or otherwise, that it would have been entitled to take had it not entered into this Agreement.

 

- 29 -

  (b) Upon termination of this Agreement by the Company and the Direct Subsidiaries with respect to a Breaching Noteholder under Section 12(b), or by an Objecting Noteholder under Section 17(o), or by an individual Initial Consenting Noteholder under Section 11(j) or 11(k) (an “ Individual Noteholder ”) this Agreement shall be of no further force or effect with respect to such Breaching Noteholder, Objecting Noteholder or Individual Noteholder, as applicable, and all rights, obligations, commitments, undertakings, and agreements under or related to this Agreement of or in respect of such Breaching Noteholder, Objecting Noteholder or Individual Noteholder, as applicable, shall be of no further force or effect, except for the rights and obligations under Sections 9(b), 14, 16 and 17, all of which shall survive such termination, and each of the Company, the Direct Subsidiaries and such Breaching Noteholder, Objecting Noteholder or Individual Noteholder, as applicable, shall have the rights and remedies that it would have had it not entered into this Agreement and shall, subject to the CCAA Proceedings and the terms of any Court orders made therein, be entitled to take all actions, whether with respect to the Transaction or otherwise, that it would have been entitled to take had it not entered into this Agreement.

 

  (c) Upon the occurrence of any termination of this Agreement, any and all consents, votes or support tendered prior to such termination by (i) the Consenting Noteholders in the case of termination pursuant to Section 11, Section 12(a) or Section 13 hereof, (ii) the Breaching Noteholder(s) in the case of a termination pursuant to Section 12(b), (iii) the Objecting Noteholder(s) in the case of termination pursuant to Section 17(o), or (iv) the Individual Noteholder in the case of termination pursuant to Section 11(j) or 11(k) shall be deemed, for all purposes, to be null and void from the first instance and shall not be considered or otherwise used in any manner by the Parties in connection with the Transaction, this Agreement, the CCAA Proceedings or otherwise.

 

15. Termination Upon the Implementation Date

This Agreement shall terminate automatically without any further required action or notice on the Implementation Date (immediately following the Effective Time). The Company shall pay the Expense Reimbursement on the Implementation Date (prior to the Effective Time). For greater certainty, the representations, warranties and covenants herein shall not survive and shall be of no further force or effect from and after the Implementation Date, provided that the rights, agreements, commitments and obligations under Sections 9(b), 16 and 17 shall survive the Implementation Date.

 

16. Confidentiality

The Company and each Direct Subsidiary agree, on its own behalf and on behalf of its Representatives and Subsidiaries, to maintain the confidentiality of the identity and, to the extent known, specific holdings of each Consenting Noteholder; provided, however, that such information may be disclosed: (a) to the Company’s directors, trustees, executives, officers, auditors, and employees and financial and legal advisors or other agents (collectively referred to

 

- 30 -

herein as the “ Representatives ” and individually as a “ Representative ” ) and provided further that each such Representative is informed of and agrees to abide by, this confidentiality provision; and (b) to Persons in response to, and to the extent required by, (i) any subpoena, or other legal process, including, without limitation, by the Court or applicable rules, regulations or procedures of the Court, (ii) any Governmental Entity, or (iii) applicable Law; provided that, if the Company or its Representatives are required to disclose the identity or the specific holdings of a Consenting Noteholder in the manner set out in the preceding sentence, the Company shall provide such Consenting Noteholder with prompt written notice of any such requirement so that such Consenting Noteholder may (at the Consenting Noteholder’s expense) seek a protective order or other appropriate remedy or waiver of compliance with the provisions of this Agreement; and provided further, however, that each Consenting Noteholder agrees, (c) to the existence and factual details of this Agreement (other than the identity and, to the extent known, specific holdings of, any Consenting Noteholder) being set out in any public disclosure, including, without limitation, press releases and court materials, produced by the Company in connection with the Transaction and in accordance with this Agreement and the terms of any applicable Noteholder Confidentiality Agreement; and (d) to this Agreement being filed and/or available for inspection by the public to the extent required by law, and in any case in accordance with this Agreement and the terms of any Noteholder Confidentiality Agreement.

 

17. Miscellaneous

 

  (a) Notwithstanding anything herein to the contrary, this Agreement applies only to each Consenting Noteholder’s Debt and to each Consenting Noteholder solely with respect to its legal and/or beneficial ownership of, or its investment and voting discretion over its Debt (and not, for greater certainty, to any other securities, loans or obligations that may be held, acquired or sold by such Consenting Noteholder or any client of such Consenting Noteholder whose funds or accounts are managed by such Consenting Noteholder) and, without limiting the generality of the foregoing, shall not apply to:

 

  (i) any securities, loans or other obligations (including the Notes) that may be held, acquired or sold by, or any activities, services or businesses conducted or provided by, any group or business unit within or affiliate of a Consenting Noteholder (A) that has not been involved in and is not acting at the direction of or with knowledge of the affairs of the Company and/or its Subsidiaries provided by any Person involved in the Transaction discussions or (B) is on the other side of an information firewall with respect to the officers, partners and employees of such Consenting Noteholder who have been working on the Transaction and is not acting at the direction of or with knowledge of the affairs of the Company and/or its Subsidiaries provided by any officers, partners and employees of such Consenting Noteholder who have been working on the Transaction;

 

  (ii) any securities, loans or other obligations that may be beneficially owned by clients of a Consenting Noteholder, including accounts or funds managed by the Consenting Noteholder, that are not Notes or Debt; or

 

- 31 -

  (iii) any securities, loans or other obligations (including Notes) that may be beneficially owned by clients of a Consenting Noteholder that are not managed or administered by the Consenting Noteholder.

 

  (b) Subject to Section 4 hereof with respect to Consenting Noteholders’ Relevant Notes and Dcbt and to the provisions of any applicable Noteholder Confidentiality Agreement, nothing in this Agreement is intended to preclude any of the Consenting Noteholders from engaging in any securities transactions.

 

  (c) This Agreement shall in no way be construed to preclude any Consenting Noteholder from acquiring additional Notes ( “ Additional Notes ” ). If a Consenting Noteholder acquires Additional Notes after the date hereof, the Consenting Noteholder shall be bound by the terms of this Agreement in respect of such Additional Notes, and such Additional Notes shall constitute Relevant Notes for purposes of this Agreement.

 

  (d) At any time, a Noteholder that is not a Consenting Noteholder may agree with the Company and the Direct Subsidiaries to become a Party to this Agreement by executing and delivering to the Company, with a copy to the Advisors, a Joinder Ageement substantially in the form of Schedule C .

 

  (e) The headings of the Sections of this Agreement have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

 

  (f) Unless the context otherwise requires, words importing the singular shall include the plural and vice versa and words importing any gender shall include all genders.

 

  (g) Unless otherwise specifically indicated, all sums of money referred to in this Agreement are expressed in lawful money of the United States.

 

  (h) This Agreement, the Noteholder Confidentiality Agreements and any other agreements contemplated by or entered into pursuant to this Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both oral and written, among the Parties with respect to the subject matter hereof.

 

  (i) The agreements, representations and obligations of the Company and the Direct Subsidiaries are, in all respects, several and not joint and several. The Company and the Direct Subsidiaries acknowledge and agree that any waiver or consent that the Consenting Noteholders may make on or after the date hereof has been made by the Consenting Noteholders in reliance upon, and in consideration for, the covenants, agreements, representations and warranties of the Company and the Direct Subsidiaries hereunder.

 

  (j)

The agreements, representations and obligations of the Consenting Noteholders under this Agreement are, in all respects, several (in proportion to the percentage

 

- 32 -

  of the aggregate principal amount of Notes represented by a Consenting Noteholder’s Relevant Notes) and not joint and several. Each Consenting Noteholder acknowledges and agrees that any waiver or consent that the Company may make on or after the date hereof has been made by the Company in reliance upon, and in consideration for, the covenants, agreements, representations and warranties of the Consenting Noteholders hereunder.

 

  (k) Any Person signing this Agreement in a representative capacity (i) represents and warrants that he/she is authorized to sign this Agreement on behalf of the Party he/she represents and that his/her signature upon this Agreement will bind the represented Party to the terms hereof, and (ii) acknowledges that the other Parties hereto have relied upon such representation and warranty.

 

  (l) Except as otherwise expressly provided herein, for the purposes of this Agreement, any matter requiring the agreement, waiver, consent or approval under this Agreement of (i) the Consenting Noteholders shall require the agreement, waiver, consent or approval of Consenting Noteholders representing at least a majority of the aggregate principal amount of Relevant Notes held by the Consenting Noteholders, and for (ii) the Initial Consenting Noteholders shall require the agreement, waiver, consent or approval of Initial Consenting Noteholders representing at least 66 2/3% of the aggregate principal amount of Relevant Notes held by the Initial Consenting Noteholders. The Company shall be entitled to rely on written confirmation from the Advisors that the Consenting Noteholders or the Initial Consenting Noteholders, as applicable, representing at least the foregoing aggregate principal amount of Relevant Notes held by the Consenting Noteholders or the Initial Consenting Noteholders, as applicable, have agreed, waived, consented to or approved a particular matter.

 

  (m) Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes have agreed, approved or consented to any amendment, waiver or consent to be given under this Agreement or under any documents related thereto, or have directed the taking of any action provided herein or in any of the documents related thereto to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes, Notes directly or indirectly owned by the Company or any of its Subsidiaries shall be deemed not to be outstanding.

 

  (n) This Agreement may be modified, amended or supplemented as to any matter by an instrument in writing signed by the Company, the Direct Subsidiaries and Initial Consenting Noteholders (as determined in accordance with Section 17(l)).

 

  (o) Notwithstanding anything to the contrary herein, if this Agreement is amended, modified or supplemented or any matter herein is approved, consented to or waived: (i) in a manner that materially adversely affects the consideration to be provided to the Noteholders as set forth in Section 1 hereof to be provided to Noteholders; (ii) or that limits an Individual Noteholder’s ability to exercise the termination rights set forth in Sections 11(i) and 11(k) hereof; or (iii) such that

 

- 33 -

  the Outside Date is extended beyond November 30, 2012, then any Consenting Noteholder that objects to any such amendment, modification, supplement, approval, consent or waiver may terminate its obligations under this Agreement upon five (5) Business Days’ written notice to the other Parties hereto (each, an “ Objecting Noteholder ”) and shall thereupon no longer be a Consenting Noteholder. For greater certainty, an Objecting Noteholder shall not be entitled to receive any consideration provided to Consent Date Noteholders hereunder.

 

  (p) Time is of the essence in the performance of the Parties’ respective obligations. Any date, time or period referred to in this Agreement shall be of the essence, except to the extent to which the Parties agree in writing to vary any date, time or period, in which event the varied date, time or period shall be of the essence.

 

  (q) All notices and other communications which may be or are required to be given pursuant to any provision of this Agreement shall be given or made in writing and shall be deemed to be validly given if served personally or by facsimile transmission, in each case addressed to the particular Party:

 

  (i) if to the Company or any Direct Subsidiary:

Sino-Forest Corporation

Room 3815-29 18/F, Sun Hung Kai Centre

30 Harbour Road, Wanchai, Hong Kong

Attention:     Mr. Judson Martin, Executive Vice-Chairman and Chief

                      Executive Officer

Fax:               +852-2877-0062;

with a copy by email or fax (which shall not be deemed notice) to:

Bennett Jones LLP

One First Canadian Place, Suite 3400

Toronto, ON M5X 1A4

Attention:     Kevin J. Zych and Raj S. Sahni

Email:           zychk@bennettjones.com and sahnir@bennettjones.com

Fax:               416-863-1716

 

  (ii) if to the Consenting Noteholders, at the address set forth for each Consenting Noteholder beside its signature hereto;

 

- 34 -

with a copy by email or fax (which shall not be deemed notice) to:

Goodmans LLP

Bay Adelaide Centre

333 Bay Street, Suite 3400

Toronto, Ontario M5H 2S7

Attention:     Robert Chadwick and Brendan O’Neill

Email:           rchadwick@goodmans.ca and boneill@goodmans.ca

Facsimile:     416-979-1234

and with a copy by email or fax (which shall not be deemed notice) to:

Hogan Lovells LLP

11 th Floor, One Pacific Place, 88 Queensway

Hong Kong China

Attention:     Neil McDonald

Email:           neil.mcdonald@hoganlovells.com

Facsimile:     852-2219-0222

or at such other address of which any Party may, from time to time, advise the other Parties by notice in writing given in accordance with the foregoing. The date of receipt of any such notice shall be deemed to be the date of delivery or transmission thereof.

 

  (r) If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the terms of this Agreement remain as originally contemplated to the fullest extent possible.

 

  (s) This Agreement shall be binding upon and enure to the benefit of the Parties hereto and each of their respective successors, assigns, heirs and personal representatives, provided that no Party may assign, delegate or otherwise transfer any of its rights, interests or obligations under this Agreement without the prior written consent of the other Parties hereto, except that each Consenting Noteholder is permitted to assign, delegate or otherwise transfer any of its rights, interests or obligations under this Agreement as set forth in Section 4(c).

 

  (t) This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, without regard to principles of conflicts of law. Each Party submits to the jurisdiction of the courts of the Province of Ontario in any action or proceeding arising out of or relating to this Agreement.

 

- 35 -

  (n) The Parties waive any right to trial by jury in any proceeding arising out of or relating to this Agreement or any of the transactions contemplated by this Agreement, present or future, and whether sounding in contract, tort or otherwise. Any Party may file a copy of this provision with any court as written evidence of the knowing, voluntary and bargained for agreement between the Parties irrevocably to waive trial by jury, and that any proceeding whatsoever between them relating to this Agreement or any of the transactions contemplated by this Agreement shall instead be tried by a judge or judges sitting without a jury.

 

  (v) No director, officer or employee of the Company or any of its Subsidiaries or any of their legal, financial or other advisors shall have any personal liability to any of the Consenting Noteholders under this Agreement. No director, officer or employee of any of the Consenting Noteholders or any of the Advisors shall have any personal liability to the Company or any of its Subsidiaries under this Agreement.

 

  (w) It is understood and agreed by the Parties that money damages would be an insufficient remedy for any breach of this Agreement by any Party and each non-breaching Party shall be entitled to specific performance and injunctive or other equitable relief as a remedy of any such breach including, without limitation, an order of the Court or other court of competent jurisdiction requiring any Party to comply promptly with any of its obligations hereunder.

 

  (x) All rights, powers, and remedies provided under this Agreement or otherwise in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any right, power, or remedy thereof by any Party shall not preclude the simultaneous or later exercise of any other such right, power, or remedy by such Party.

 

  (y) No condition in this Agreement shall be enforceable by a Party if any failure to satisfy such condition results from an action, error or omissions by or within the control of such Party.

 

  (z) Where any representation or warranty of the Company and the Direct Subsidiaries contained in this Agreement is expressly qualified by reference to the knowledge of the Company, it refers to the actual knowledge, after due inquiry, of the Executive Vice Chairman and Chief Executive Officer and the Chief Financial Officer of the Company, and does not include the knowledge or awareness of any other individual or any constructive, implied or imputed knowledge.

 

  (aa) Unless expressly stated herein, this Agreement shall be solely for the benefit of the Parties, and no other person or entity shall be a third-party beneficiary hereof.

 

- 36 -

  (bb) This Agreement may be signed in counterparts, each of which, when taken together, shall be deemed an original. Execution of this Agreement is effective if a signature is delivered by facsimile transmission or electronic (e.g., pdf) transmission.

[Remainder of this page intentionally left blank; next page is signature page]

 

- 37 -

Signature Page to Restructuring Support Agreement

This Agreement has been agreed and accepted on the date first written above.

 

SINO-FOREST CORPORATION
By:   (signed) Judson Martin
 

Name:  Judson Martin

 

Title:    Authorized Signatory

By:    
  Name:
  Title:

 

SINO-PANEL HOLDINGS LIMITED
By:   (signed) Judson Martin
 

Name:  Judson Martin

 

Title:    Authorized Signatory

By:    
  Name:
  Title:

 

SINO-GLOBAL HOLDINGS INC.
By:   (signed) Judson Martin
 

Name:  Judson Martin

 

Title:    Authorized Signatory

By:    
  Name:
  Title:

 

SINO-PANEL CORPORATION
By:   (signed) Judson Martin
 

Name:  Judson Martin

 

Title:    Authorized Signatory

By:    
  Name:
  Title:

Signature Page to Restructuring Support Agreement

 

SINO-WOOD PARTNERS, LIMITED
By:   (signed) Judson Martin
 

Name:  Judson Martin

 

Title:    Authorized Signatory

By:    
  Name:
  Title:

 

SINO-CAPITAL GLOBAL INC.
By:   (signed) Judson Martin
 

Name:  Judson Martin

 

Title:    Authorized Signatory

By:    
  Name:
  Title:

 

SINO-FOREST INTERNATIONAL (BARBADOS) CORPORATION
By:   (signed) Judson Martin
 

Name:  Judson Martin

 

Title:    Authorized Signatory

By:    
  Name:
  Title:

Signature Page to Restructuring Support Agreement

 

SINO-FOREST RESOURCES INC.
By:   (signed) Judson Martin
 

Name:  Judson Martin

 

Title:    Authorized Signatory

By:    
  Name:
  Title:

Signature Page to Restructuring Support Agreement

STRICTLY CONFIDENTIAL

 

 

Name of Consenting Noteholder:  

[Redacted]

  Per:   [Redacted]
    Name: [Redacted]
    Title: [Redacted]
    Jurisdiction of residence for legal
    purposes: [Redacted]
     
    Email: [Redacted]
     
    Address: [Redacted]
     
     
     
     

STRICTLY CONFIDENTIAL

SCHEDULE A

DIRECT SUBSIDIARIES

Sino-Panel Holdings Limited

Sino-Global Holdings Inc.

Sino-Panel Corporation

Sino-Wood Partners, Limited

Sino-Capital Global Inc.

Sino-Forest International (Barbados) Corporation)

Sino-Forest Resources Inc. [Preferred shares held by SFC]

SCHEDULE B

DEFINITIONS

 

Definition

  

Section or Page Number

“Additional Notes”    Section 17(c)
“Agreement”    Page 1 (1 st paragraph)
“Agreement Date”    Page 1 (1 st paragraph)
“Breaching Noteholder”    Section 12(b)
“BVI Timber Diligence Procedures”    Section 5(ee)
“CBCA”    Page 1 (1 st paragraph)
“CCAA”    Page 1 (1 st paragraph)
“CCAA Proceedings”    Section 5(c)(i)
“Company”    Page 1 (1 st paragraph)
“Consent Date Noteholder”    Section 1(b)
“Consenting Noteholder(s)”    Page 1 (1 st paragraph)
“Debt”    Section 2(a)
“Early Consent Consideration”    Section 1(b)
“Effective Time”    Section 7
“Excess Net Proceeds”    Section 1(k)(i)
“FTI HK”    Section 55(bb)
“Funding Amount”    Section 1(h)(i)
“Individual Noteholder”    Section 14(b)
“Muddy Waters”    Section 1(h)(ii)(A)
“Newco”    Section 1(a)(i)
“Newco EV”    Section 1(h)(ii)(B)(II)

Definition

  

Section or Page Number

“NI 45-106”    Section 2(i)
“Objecting Noteholder”    Section 17(o)
“Party” or “Parties”    Page 1 (1 st paragraph)
“Relevant Notes”    Section 2(a)
“Representative(s)”    Section 16
“Restructuring Budget”    Section 5(j)
“Sale Transaction”    Section 1(i)
“Transfer”    Section 4(c)

In addition, the following terms used in this Agreement shall have the following meanings:

“2013 Note Indenture” means the indenture dated as of July 23, 2008, by and between the Company: the entities listed as subsidiary guarantors thereto, and The Bank of New York Mellon, as trustee, as amended, modified or supplemented prior to the date hereof.

“2014 Note Indenture” means the indenture dated as of July 27, 2009 entered into by and between the Company, the subsidiary guarantors thereto, and Law Debenture Trust Company of New York, as trustee, as amended, modified or supplemented prior to the date hereof.

“2016 Note Indentures” means the indenture dated as of December 17, 2009, by and between the Company, the entities listed as subsidiary guarantors thereto, and The Bank of New York Mellon, as trustee, as amended, modified or supplemented prior to the date hereof

“2017 Note Indenture” means the indenture dated as of October 21, 2010, by and between the Company. the subsidiary guarantors thereto, and Law Debenture Trust Company of New York, as trustee, as amended, modified or supplemented prior to the date hereof.

“2013 Notes” means the US$345,000,000 of 5.00% Convertible Senior Notes Due 2013 issued pursuant to the 2013 Note Indenture.

“2014 Notes” means the US$399,517,000 of 10.25% Guaranteed Senior Notes Due 2014 issued pursuant to the 2014 Note Indenture.

“2016 Notes” means the US$460,000,000 of 4.25% Convertible Senior Notes Due 2016 issued pursuant to the 2016 Note Indenture.

“2017 Notes” means the US$600,000,000 of 6.25% Guaranteed Senior Notes Due 2017 issued

pursuant to the 2017 Note Indenture.

“2013 and 2016 Trustee” means The Bank of New York Mellon, in its capacity as trustee for the 2013 Notes and the 2016 Notes.

“2014 and 2017 Trustee” means Law Debenture Trust Company of New York, in its capacity as trustee for the 2014 Notes and the 2017 Notes.

“Accrued Interest” means, in respect of any series of Notes, all accrued and unpaid interest on the Notes, at the regular rates provided therefor pursuant Note Indentures, up to and including the CCAA Filing Date.

“Advisors” means Goodmans and Hogan Lovells, in their capacity as legal advisors to the Initial Consenting Noteholders, and Moelis, in its capacity as financial advisor to the Initial Consenting Noteholders.

“Aggregate Principal Payment Amount” means 85% of the aggregate principal amount of all Notes outstanding as at the CCAA Filing Date.

“AIs” means the authorized intermediaries of the Company and/or any of its Subsidiaries.

“Applicable Securities Laws” means all applicable securities, corporate and other laws, rules, regulations, notices and policies in the Provinces of Canada.

“Business Day” means each day other than a Saturday or Sunday or a statutory or civic holiday that banks are open for business in Toronto, Ontario.

“BVI” means the British Virgin Islands.

“Capital Stock” shall have the meaning given to the term in the Note Indentures, as applicable.

“CCAA Filing Date” means the date on which the Initial Order is granted by the Court in respect of the Company pursuant to the CCAA.

“Claim” means any right or claim of any Person against the Company in any capacity, whether or not asserted, in connection with any indebtedness, liability or obligation of any kind whatsoever of the Company, and any interest accrued thereon or costs payable in respect thereof, whether at law or in equity, including arising by reason of the commission of a tort (intentional or unintentional), any breach of duty (including any legal, statutory, equitable or fiduciary duty), any right of ownership of or title to property or assets or to a trust, constructive trust or deemed trust (statutory, express, implied, resulting, or otherwise) against any property or assets, any taxes and together with any security enforcement costs or legal costs associated with any such claim, whether or not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, unsecured, perfected, unperfected, present, future, known or unknown, by guarantee, by surety, by warranty, or otherwise, and whether or not such right is executory or anticipatory in nature, including any claim arising from or caused by the termination, disclaimer, resiliation, assignment or repudiation by the Company of any contract, lease or other agreement, whether written or oral, any claim made or asserted

against the Company through any affiliate, subsidiary, associated or related person, or any right or ability of any Person to advance a claim for an accounting, reconciliation, contribution, indemnity, restitution or otherwise with respect to any matter, grievance, action (including any class action or proceeding before an administrative tribunal), cause or chose in action, whether existing at present or commenced in the future, and includes, without limitation (i) any other claims of any kind that, if unsecured, would have been claims provable in bankruptcy within the meaning of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 had the Company become bankrupt on the CCAA Filing Date, including any other claims arising from or caused by, directly or indirectly, the implementation of, or any action taken pursuant to, the Initial Order or the CC AA Proceedings, and (ii) Equity Claims.

“Common Shares” means the common shares in the capital of the Company.

“Companies” means, collectively, the Company and all of the Subsidiaries.

“Consent Date” means May 15, 2012.

“Contingent Value Rights” means the rights to be issued by Newco to a trustee on behalf of the Junior Constituents pursuant to the Restructuring Transaction and the Plan, pursuant to which the Junior Constituents will receive the right to receive 15% of any amounts realized in excess of $1.8 billion plus Accrued Interest up to and including the CCAA Filing Date upon a Newco “liquidity event” that occurs, or is deemed to occur, within 7 years of the implementation Date, which rights shall not be transferable. In lieu of paying any cash amount that may be due to the Junior Constituents in respect of the Contingent Value Rights, Newco shall be entitled to elect to pay in securities of Newco (or the form of consideration being paid to the shareholders of Newco in connection with the Newco “liquidity event”). The definitive terms of the Contingent Value Rights, including the definition of a Newco “liquidity event” shall be determined by the Company and the Initial Consenting Noteholders, acting reasonably.

“Court” means the Ontario Superior Court of Justice, Commercial List.

“Creditor” means any Person having a Claim and includes, without limitation, the transferee or assignee of a Claim or a trustee, liquidator, receiver, receiver and manager, or other Person acting on behalf of such Person.

“Data Room” means the virtual data room maintained by the Company through the facilities of Merrill Corporation, as of March 29, 2012, as the same may be supplemented after the Agreement Date on notice to the Advisors.

“Equity Claim” has the meaning set forth in section 2(1) of the CCAA.

“Equity Interest” has the meaning set forth in section 2(1) of the CCAA.

“Excluded Assets” means cash equal to, and for purposes of the Funding Amount, the rights of the Company to be transferred to the Litigation Trust and any other assets and rights of the Company that are not transferred to Newco as determined by the Company and the Initial Consenting Noteholders and identified in the Plan.

“Executive Officers” means Judson Martin, Kai Kit Poon, David J. Horsley, Chen Hua, Zhao Wei Mao, Thomas M. Maradin, Xu Ni, Alfred Hung and George Ho.

“Existing Shares” means the Common Shares of the Company issued and outstanding at any applicable time prior to the Effective Time.

“Expense Reimbursement” the reasonable and documented fees and expenses of the Advisors and Conyers, Dill & Pearman LLP, pursuant to their respective engagement letters with the Company. and other advisors as may be agreed to by the Company.

“Final Order” means the order of the Court approving the Plan, which shall be in form and substance satisfactory to the Company and the Initial Consenting Noteholders, each acting reasonably, and as the same may be amended by the Court or with the consent of the Company and the Initial Consenting Noteholders, each acting reasonably.

“GAAP” means generally accepted accounting principles as applied in Canada.

“Goodmans” means Goodmans LLP.

“Governmental Entity” means any government, regulatory authority, governmental department, agency, commission, bureau, official, minister, Crown corporation, court, board, tribunal or dispute settlement panel or other law, rule or regulation-making organization or entity: (a) having or purporting to have jurisdiction on behalf of any nation, province, territory or state or any other geographic or political subdivision of any of them; or (b) exercising, or entitled or purporting to exercise any administrative, executive, judicial, legislative, policy, regulatory or taxing authority or power.

“Hogan Lovells” means Hogan Lovells LLP.

“Implementation Date” means the date on which the Transaction is implemented.

“Information” means information set forth or incorporated in the Companies’ public disclosure documents filed with the applicable securities regulators under the Securities Legislation, as applicable, since December 31, 2009.

“Initial Consenting Noteholders” means the Consenting Noteholders who executed this Agreement on the date written on the first page of this Agreement.

“Initial Order” means the initial order of the Court to be entered in the CCAA Proceedings, which shall be in form and substance satisfactory to the Company and the Initial Consenting Noteholders, each acting reasonably, and as the same may be amended by the Court or with the consent of the Company and the Initial Consenting Noteholders, each acting reasonably.

“Intellectual Property” means: (i) Canadian and non-Canadian patents, and applications for either including divisional and continuation patents; (ii) registered and unregistered trade-marks, logos and other indicia of origin, pending trade-mark registration applications, and proposed use application or similar reservations of marks, and all goodwill associated therewith; (iii) registered and unregistered copyrights, including all copyright in and to computer software

programs, and applications for and registration of such copyright (including all copyright in and to the Companies’ websites); (iv) world wide web addresses and internet domain names, applications and reservations for world wide web addresses and internet domain names, uniform resource locators and the corresponding internet sites; (v) industrial designs; and (vi) trade secrets and proprietary information not otherwise listed in (i) through (v) above, including all inventions (whether or not patentable), invention disclosures, moral and economic rights of authors and inventors (however denominated), confidential information, technical data, customer lists, corporate and business names. trade names, trade dress, brand names, know-how, formulae, methods (whether or not patentable), designs, processes, procedures, technology, business methods, source codes, object codes, computer software programs (in either source code or object code form), databases, data collections and other proprietary information or material of any type, and all derivatives, improvements and refinements thereof, howsoever recorded, or unrecorded.

“Junior Constituent” means any Person holding a Claim (including an Equity Claim) or right against the Company which is, either pursuant to any contract or otherwise pursuant to any applicable law (including, without limitation, the CCAA) subordinate in priority to the Noteholder Claims or otherwise not entitled to any distribution pursuant to the Plan until the Noteholder Claims have been paid in full, but only in respect of such Claim or right of such Person.

“Law” or “Laws” means any law, statute, order, decree, consent decree, judgment, rule regulation, ordinance or other pronouncement having the effect of law whether in Canada, the United States, Hong Kong, the PRC, or any other country, or any domestic or foreign state, county, province, city or other political subdivision or of any Governmental Entity.

“Litigation Trust” means the litigation trust to be established pursuant to the Plan pursuant to which all claims of the Company and its Subsidiaries against any Person shall be transferred on the Implementation Date, the terms and conditions of which (including without limitation, as to the selection of counsel, the trustee, governance, the allocation of funding among claims to be pursued, and provisions prohibiting claims over or any liability against the Company, its Subsidiaries, Newco or its subsidiaries) shall be satisfactory to the Company and the Initial Consenting Noteholders, acting reasonably.

“Material” means a fact, circumstance, change, effect, matter, action, condition, event, occurrence or development that, individually or in the aggregate, is, or would reasonably be expected to be, material to the business, affairs, results of operations or financial condition of the Companies (taken as a whole).

“Material Adverse Effect” means a fact, event, change, occurrence, circumstance or condition that, individually or together with any other event, change or occurrence, has or would reasonably be expected to have a material adverse impact on the assets, condition (financial or otherwise), business, liabilities, obligations (whether absolute, accrued, conditional or otherwise) or operations of the Companies (taken as a whole); provided, however, that a Material Adverse Effect shall not include and shall be deemed to exclude the impact of any fact, event, change, occurrence, circumstance or condition resulting from or relating to: (A) changes in Laws of general applicability or interpretations thereof by courts or Governmental Entities or regulatory

authorities, which changes do not have a Material disproportionate effect on the Companies (taken as a whole), (B) any change in the forestry industry generally, which does not have a Material disproportionate effect on the Companies (taken as a whole) (relative to other industry participants operating primarily in the PRC), (C) actions and omissions of any of the Companies required pursuant to this Agreement or taken with the prior written consent of the Initial Consenting Noteholders, (D) the effects of compliance with this Agreement, including on the operating performance of the Companies, (E) the negotiation, execution, delivery, performance, consummation, potential consummation or public announcement of this Agreement or the transactions contemplated by this Agreement, (F) any change in U.S. or Canadian interest rates or currency exchange rates unless such change has a Material disproportionate effect on the Companies (taken as a whole), and (G) general political, economic or financial conditions in Canada, the United States, Hong Kong or the PRC, which changes do not have a Material disproportionate effect on the Companies (taken as a whole).

“Meeting Order” means the Order of the Court establishing the procedures for voting on the Plan, which shall be in form and substance satisfactory to the Company and the Initial Consenting Noteholders, each acting reasonably, and as the same may be amended by the Court or with the consent of the Company and the Initial Consenting Noteholders, each acting reasonably.

“Moelis” means, collectively, Moelis & Company LLC and Moelis and Company Asia Limited, in their capacity as financial advisor to the Initial Consenting Noteholders.

“Monitor” means the monitor to be appointed by the Court pursuant to the Initial Order.

“New Management Plan” means the new management incentive plan and director compensation plan in respect of Newco, on terms and conditions acceptable to the Initial Consenting Noteholders.

“Newco Shares” means the common shares of Newco that are issued and outstanding as of the Effective Time.

“Note indentures” means collectively the 2013 Note Indenture, the 2014 Note Indenture, the 2016 Note Indenture, and the 2017 Note Indenture.

“Noteholder Claim” means any Claim of any Person (including, without limitation, any current or former Noteholder or trustee, agent or intermediary) in respect of or in relation to the Notes, including without limitation, all principal, Accrued Interest and any other amounts payable pursuant to the Notes, the Note Indentures and any agreement or instrument pursuant or ancillary thereto (including any security or pledge in respect thereof), and any claims or rights of any Person against any Subsidiary under, pursuant to or in respect of any guarantee, indemnity or similar agreement in respect of the Notes.

“Noteholder Confidentiality Agreements” means, collectively, any and all the confidentiality and non-disclosure agreements that have been entered into and are binding upon a Consenting Noteholder and the Company.

“Noteholders” means, collectively, the holders of the Notes, and “ Noteholder ” means any

individual holder of any of the Notes.

“ Notes ” means, collectively, the 2013 Notes, the 2014 Notes, the 2016 Notes, and the 2017 Notes.

“Ordinary Course” means, with respect to an action taken or to be taken by the Company, or any of its Subsidiaries, that such action is consistent with the past practices of the Company, or the particular Subsidiary or Subsidiaries, as applicable, and was taken or is to be taken in the ordinary course of the normal day-to-day operations of the Company, or those particular Subsidiaries or Subsidiary, as applicable.

“Other Affected Creditors” means any Creditor (for greater certainty, not including Junior Constituents) other than. (i) a Creditor who has a Noteholder Claim, but only in respect of and to the extent of such Noteholder Claim, or (ii) a Creditor who has an Unaffected Claim, but only in respect of and to the extent of such Unaffected Claim.

“Outside Date” means November 30, 2012, as the same may be amended with the consent of the Initial Consenting Noteholders.

“Person” means any individual, sole proprietorship, limited or unlimited liability corporation, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, body corporate, joint venture, trust, pension fund, union, Governmental Entity, and a natural person including in such person’s capacity as trustee, heir, beneficiary, executor, administrator or other legal representative.

“Plan” means the plan of compromise or arrangement to be filed by the Company under the CCAA and, if determined necessary or advisable by the Company in conjunction with the CCAA Plan, and with the consent of the Advisors, the Canada Business Corporations Act for purposes of implementing the Restructuring Transaction or the Sale Transaction, as the case may be and in each case in accordance with the Transaction Terms, and as the same may be amended by the Court or with the consent of the Company and the Initial Consenting Noteholders, each acting reasonably.

“PRC” means the People’s Republic of China.

“Pro Rata” means, unless otherwise defined in the Agreement, (i) in the case of a Noteholder, the principal amount of Notes held by such Noteholder as of the Record Date in relation to the aggregate principal amount of Notes held by all Noteholders as of the Record Date, and (ii) in the in the case of a Consent Date Noteholder, the principal amount of Notes held by such Consent Date Noteholder as of the Record Date in relation to the aggregate principal amount of Notes held by all Consent Date Noteholders as of the Record Date.

“Record Date” means the record date for Noteholder Claims and Claims of Other Affected Creditors to be established in the CCAA Proceedings, which date shall be acceptable to the Company and the Initial Consenting Noteholders, each acting reasonably.

“Restricted Subsidiary” shall have the meaning given to the term in the Note Indentures, as applicable.

“Restructuring Transaction” means the restructuring transaction described by Section 1(a) hereof pursuant to which the restructuring of the Company is to be effectuated pursuant to, and in accordance with, the Plan and this Agreement.

“SAFE” means State Administration of Foreign Exchange (China).

“Sale Process Order ” means the order of the Court approving the Sale Process Procedures, substantially in the form appended as Schedule D hereto, which shall be in form and substance satisfactory to the Company and the Initial Consenting Noteholders, each acting reasonably, and as the same may be amended by the Court or with the consent of the Company and the Initial Consenting Noteholders, each acting reasonably.

“Sale Process Procedures ” means the sale and investor solicitation procedures for the sale of all or substantially all of the assets of the Company appended to the Sale Process Order as Schedule “A” which shall in form and substance be satisfactory to the Initial Consenting Noteholders, acting reasonably, and as the same may be amended by the Court or with the consent of the Company and the Initial Consenting Noteholders.

“Secured Newco Note” means that certain secured note (or other debt instrument) to be issued by Newco on the Implementation Date under an indenture (or other similar instrument), on terms and conditions acceptable to the Initial Consenting Noteholders, and in form and substance satisfactory to the Company, and as the same may be amended in accordance with its terms.

“Securities Legislation” means all applicable Laws, regulations, rules, policies or instruments of any securities commission, stock exchange or like body in Canada, the United States, Hong Kong or the PRC.

“Subsidiaries” means all direct and indirect subsidiaries of the Company (including the Direct Subsidiaries and the subsidiaries thereof), except for Greenheart Group Limited and its subsidiaries.

“Termination Date” means the date on which this Agreement is terminated in accordance with the provisions hereof.

“Transaction” means the Restructuring Transaction or the Sale Transaction, as the case may be.

“Transaction Terms” means the terms set out in Section 1 of this Agreement.

“Trustee” means each of the 2014 and 2017 Trustee and the 2013 and 2016 Trustee.

“Unaffected Claims” means (i) any Claims of any employee, officer or director of the Company in respect of any wages, vacation pay, bonuses or other remuneration payable to such Person by the Company; (ii) any Claims in respect of which a Charge is granted pursuant to the Initial Order; (iii) any Claim required to be paid in priority to Noteholder Claims, including in accordance with section 6(3), (5) or (6) of the CCAA; and (iv) any Claim, other than a Noteholder Claim, which is secured by a lien or encumbrance on the property of the Company, which lien is valid, perfected and enforceable pursuant to applicable law, to the extent of and limited to the value of such property.

“Voting Deadline” means the date on which votes are due in respect of the Plan, as established by the Meeting Order to be entered in the CCAA proceedings, as the same may be amended by Order of the Court or with the consent of the Company and the Initial Consenting Noteholders, each acting reasonably.

SCHEDULE C

JOINDER AGREEMENT

This Joinder to the Support Agreement (this “Joinder Agreement”) is made as of         , 2012, by and among                     (the “ Consenting Party ”), the Company (as defined below) and the Direct Subsidiaries (as defined therein) in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

WITNESSETH:

WHEREAS , reference is made to a certain Support Agreement dated as of March 30, 2012 by and among the Initial Consenting Noteholders (as defined therein), the Direct Subsidiaries (as defined therein) and Sino-Forest Corporation (thc “ Company ” ) , as amended, modified, supplemented or restated and in effect from time to time, the “ Support Agreement ” ) . All capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Support Agreement;

WHEREAS , the Consenting Party desires to become a party to, and to be bound by the terms of, the Support Agreement; and

WHEREAS , pursuant to the terms of the Support Agreement, in order for the Consenting Party to become party to the Support Agreement, the Consenting Party is required to execute this Joinder Agreement;

NOW, THEREFORE , in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1. Joinder and Assumption of Obligations

Effective as of the date of this Joinder Agreement, the Consenting Party hereby acknowledges that the Consenting Party has received and reviewed a copy of the Support Agreement, and hereby:

 

  (a) acknowledges and agrees to:

 

  (i) join in the execution of, and become a party to, the Support Agreement as a Consenting Noteholder thereunder, as indicated with its signature below;

 

  (ii) subject to subsection (iii) below, be bound by all agreements of the Consenting Noteholders under the Support Agreement with the same force and effect as if such Consenting Party was a signatory to the Support Agreement and was expressly named as a party therein; and

 

  (iii)

assume all rights and interests and perform all applicable duties and obligations of the Consenting Noteholders under the Support Agreement

  other than those expressed therein to be solely the rights, interests, duties and obligations of the Initial Consenting Noteholders; and

 

  (b) confirms each representation and warranty of the Consenting Noteholders under the Support Agreement with the same force and effect as if such Consenting Party was a signatory to the Support Agreement and was expressly named as a party therein.

 

2. Binding Effect

Except as specifically amended by this Joinder Agreement, all of the terms and conditions of the Support Agreement shall remain in full force and effect as in effect prior to the date hereof.

 

3. Miscellaneous

 

  (a) This Joinder Agreement may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. Delivery of an executed signature page of this Joinder Agreement by email or facsimile transmission will be effective as delivery of a manually executed counterpart hereof.

 

  (b) This Joinder Agreement expresses the entire understanding of the parties with respect to the transactions contemplated hereby. No prior negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.

 

  (c) Any determination that any provision of this Joinder Agreement or any application hereof is invalid, illegal or unenforceable in any respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provisions of this Joinder Agreement.

 

  (d) This Joinder Agreement shall be governed by, construed and interpreted in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein (excluding any conflict of laws rule or principle which might refer such construction to the laws of another jurisdiction) and all actions or proceedings arising out of or relating to this Joinder Agreement shall be heard and determined exclusively in the courts of the Province of Ontario.

[Signature Pages Follow]

IN WITNESS WHEREOF, each of the undersigned has caused this Joinder Agreement to be duly executed and delivered by its proper and duly authorized officer as of the date first written above.

STRICTLY CONFIDENTIAL

 

Name of Consenting Noteholder:    
  Per:    
    Name:
    Title:
    Jurisdiction of residence for legal purposes:
     
    Email:
     
    Address:
     
     
     
     

 

Securities subject to this

Support Agreement

   6.25%
Notes 		   10.25%
Notes 		   4.25%
Notes 		   5%
Notes

Original Face Amount of Notes on [•], 2012

           

STRICTLY CONFIDENTIAL

STRICTLY CONFIDENTIAL

Accepted and agreed to as of the date first above written.

 

SINO-FOREST CORPORATION
By:    
  Name:
  Title:
By:    
  Name:
  Title:
SINO-PANEL HOLDINGS LIMITED
By:    
  Name:
  Title:
By:    
  Name:
  Title:
SINO-GLOBAL HOLDINGS INC.
By:    
  Name:
  Title:
By:    
  Name:
  Title:
SINO-PANEL CORPORATION
By:    
  Name:
  Title:
By:    
  Name:
  Title:

SINO-WOOD PARTNERS, LIMITED
By:    
  Name:
  Title:
By:    
  Name:
  Title:
SINO-CAPITAL GLOBAL INC.
By:    
  Name:
  Title:
By:    
  Name:
  Title:

SINO-FOREST INTERNATIONAL

(BARBADOS) CORPORATION

By:    
  Name:
  Title:
By:    
  Name:
  Title:
SINO-FOREST RESOURCES INC.
By:    
  Name:
  Title:
By:    
  Name:
  Title:

SCHEDULE D

FORM OF SALE PROCESS ORDER

Court File No.                     

ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

 

THE HONOURABLE MR.    )    FRIDAY, THE 30 th
   )   
JUSTICE MORAWETZ    )    DAY OF MARCH, 2012

IN THE MATTER OF THE COMPANIES’ CREDITORS

ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED

AND IN THE MATTER OF A PLAN OF COMPROMISE OR

ARRANGEMENT OF SINO-FOREST CORPORATION

SALE PROCESS ORDER

THIS APPLICATION, made by Sino-Forest Corporation (the “Applicant”), pursuant to the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (the “CCAA”) was heard this day at 330 University Avenue, Toronto, Ontario.

ON READING the affidavit of W. Judson Martin sworn March 30, 2012 and the Exhibits thereto and the Pre-Filing Report of the Proposed Monitor, FTI Consulting Canada Inc. (“FTI”), and on hearing the submissions of counsel for the Applicant, the Applicant’s board of directors, FTI, the Ad Hoc Noteholders, and no one else appearing for any other party,

DEFINED TERMS

1. THIS COURT ORDERS that unless otherwise defined in this Order, all capitalized terms used in this Order shall have the meanings ascribed to such terms in the Initial Order granted in these proceedings on March 30, 2012.

SERVICE

2. THIS COURT ORDERS that the time for service of the Notice of Application and the Application Record is hereby abridged and validated so that this Application is properly returnable today and hereby dispenses with further service thereof.

SALE PROCESS

3. THIS COURT ORDERS AND DIRECTS that sale process procedures substantially in the form attached hereto as Schedule “A”, together with all schedules, appendices and exhibits thereto (collectively, the “Sale Process Procedures”), are hereby approved and the Applicant, the Monitor and the Financial Advisor are authorized and directed to perform each of their obligations thereunder and to do all things reasonably necessary to perform their obligations thereunder.

4. THIS COURT ORDERS that each of the Monitor and the Financial Advisor, and their respective affiliates, partners, directors, employees, agents and controlling persons shall have no liability with respect to any and all losses, claims, damages or liabilities, of any nature or kind, to any person in connection with or as a result of the Sale Process Procedures, except to the extent such losses, claims, damages or liabilities result from the gross negligence or wilful misconduct of the Monitor or the Financial Advisor, as applicable, in performing its obligations under the Sale Process Procedures (as determined by this Court).

GENERAL

5. THIS COURT ORDERS that the Applicant and the Monitor may from time to time apply to this Court for advice and directions with respect to any matter relating to this Order and the Sale Process Procedures and their powers and duties in relation thereto.

 

2

6. THIS COURT ORDERS that each of the Applicant and the Monitor be at liberty and are hereby authorized and empowered to apply to any court, tribunal, regulatory or administrative body, wherever located, for the recognition of this Order and for assistance in carrying out the terms of this Order.

 

  

 

 

3

Schedule “A”

SING-FOREST CORPORATION

Sale Process Procedures

On March 30, 2012, Sino-Forest Corporation ( “ SFC ”) obtained an initial order (the “Initial Order ” ) under the Companies’ Creditors Arrangement Act ( “ CCAA ” ) from the Ontario Superior Court of Justice (Commercial List) (the “ Court ”).

On March 30, 2012, SFC also obtained a sale process order (the “ Sale Process Order ”) under the CCAA from the Court approving the sale solicitation process (the “Sale Process”) and the procedures to be followed with respect to the Sale Process set forth herein (the “ Sale Process Procedures ”) to determine whether a Successful Bid (as defined herein) can be obtained.

Set forth below are the Sale Process Procedures to be followed with respect to the Sale Process to be undertaken to seek a Successful Bid, and if there is a Successful Bid, to complete the transactions contemplated by the Successful Bid.

All dollar amounts expressed herein, unless otherwise noted, are in United States currency. Unless otherwise indicated herein any event that occurs on a day that is not a Business Day shall be deemed to occur on the next Business Day. Capitalized terms used herein but not otherwise defined herein have the meanings ascribed thereto in Schedule “A”.

Solicitation Process

(1) The Sale Process Procedures set forth herein describe, among other things, (a) the Assets available for sale, (b) the manner in which prospective bidders may gain access to or continue to have access to due diligence materials concerning SFC, the Assets, and the SFC Business, (c) the manner in which bidders and bids become Qualified Bidders and Qualified Bids, respectively, (d) the receipt and negotiation of bids received, (e) the ultimate selection of a Successful Bidder, and (f) the approval thereof by the Court (collectively, the “Solicitation Process ”).

(2) SFC, in consultation with the Financial Advisor, and with oversight by the Monitor, shall conduct the Sale Process Procedures and the Solicitation Process as outlined herein. Certain stages of the Sale Process Procedures may be conducted by SFC simultaneously to the preparation, solicitation or confirmation of a CCAA Plan by SFC. In addition, the closing of any sale may involve additional intermediate steps or transactions to facilitate consummation of such sale, including additional Court filings. If there is disagreement or clarification required as to the interpretation or application of these Sale Process Procedures, the Court will have jurisdiction to hear such matter and provide advice and directions, upon application of the Monitor, SFC or the Initial Consenting Noteholders with a hearing on no less than three (3) Business Days notice.

CCAA Plan

(3) The sale of the Assets to the Successful Bidder, if any, will be completed pursuant to a plan of compromise and arrangement pursuant to the CCAA, such plan to be in form and substance acceptable to SFC and the Initial Consenting Noteholders (the “ CCAA Plan ”).

“As Is, Where Is”

(4) The sale of the Assets will be on an “as is, where is” basis and without surviving representations or warranties of any kind, nature, or description by the Financial Advisor, the Monitor, SFC or any of their respective agents, estates, advisors, professionals or otherwise, except to the extent set forth in a definitive purchase agreement with a Successful Bidder.

Free Of Any And All Claims And Interests

(5) The sale of the Assets to the Successful Bidder, if any, will result in all of the rights, title and interests of SFC in and to the Assets to be acquired being transferred free and clear of all pledges, liens, security interests, encumbrances, claims, charges, options, and interests thereon and there against (collectively, the “ Claims and Interests ”) pursuant to an approval and vesting order made by the Court. Contemporaneously with such approval and vesting order being made, all such Claims and Interests shall attach to the net proceeds of the sale of such property (without prejudice to any claims or causes of action regarding the priority, validity or enforceability thereof), except to the extent otherwise set forth in the relevant definitive purchase agreement with a Successful Bidder.

Publication Notice

(6) Within seven (7) days of the date the Sale Process Order is granted, (i) the Monitor shall cause a notice of the Sale Process to be published in The Globe and Mail and The Wall Street Journal, which notice shall be in substantially similar form as attached hereto as Schedule “B”; and (ii) SEC shall issue a press release regarding the Sale Process through Canada Newswire, designating dissemination in Canada and major financial centers in the United States.

(7) [Intentionally deleted]

Solicitation of Interest

(8) As soon as reasonably practicable after the granting of the Sale Process Order, SFC, in consultation with the Financial Advisor and the Monitor, will prepare (if not already prepared) an initial offering summary (the “Teaser Letter”) notifying prospective purchasers of the Assets (both strategic and financial parties (including existing shareholders and noteholders of SFC and parties proposed by the Noteholder Advisors)) of the existence of the Solicitation Process and inviting prospective purchasers to express their interest in making an offer for the Assets.

 

- 2 -

Participation Requirements

(9) Unless otherwise ordered by the Court, or otherwise determined by SFC (in consultation with the Monitor), in order to participate in the Solicitation Process, each interested person (a “ Potential Bidder ” ) must deliver to the Financial Advisor with a copy to the Monitor and the other parties listed on Schedule “C” at the addresses specified in Schedule “C” (by email), prior to the distribution of any confidential information by the Financial Advisor to a Potential Bidder, the following documents (the “ Participation Materials ” ) :

 

  (a) an executed Confidentiality Agreement;

 

  (b) a specific indication of anticipated sources of capital for the Potential Bidder and, if requested by SFC, in consultation with the Monitor and the Financial Advisor, preliminary evidence of the availability of such capital, or such other form of financial disclosure and credit support or enhancement that will allow SFC, in consultation with the Monitor and the Financial Advisor, to make, in its reasonable business judgment, a determination as to the Potential Bidder’s financial and other capabilities to consummate an acquisition of the Assets; and

 

  (c) a letter setting forth the identity of the Potential Bidder, the contact information for such Potential Bidder and, if requested by SFC, in consultation with the Monitor and the Financial Advisor, full disclosure of the direct and indirect owners of the Potential Bidder and their principals.

(10) If it is determined by SFC, after consultation with the Monitor and the Financial Advisor, that a Potential Bidder (i) has bona fide interest in an acquisition of the Assets; (ii) has the financial capability to consummate such a transaction based on such Potential Bidder’s financial information; and (iii) has provided all of the Participation Materials, such Potential Bidder will be deemed a “ Phase 1 Qualified Bidder ”. The Financial Advisor will promptly notify the Potential Bidder of such determination, and will inform the Noteholder Advisors of any such determination with respect to a Potential Bidder.

(11) The determination as to whether a Potential Bidder is a Phase 1 Qualified Bidder will be made as promptly as practicable after a Potential Bidder delivers all of the Participation Materials.

(12) If there is no Phase l Qualified Bidder by the end of Phase 1, SFC shall, in consultation with the Monitor, the Financial Advisor and the Noteholder Advisors, (a) forthwith terminate the Sale Process; and (b) as soon as reasonably practicable take such steps (including bringing motions, holding meetings of creditors, etc.) as may be necessary to complete the Restructuring Transaction.

(13) If the Sale Process has been terminated as provided in section 12, the Financial Advisor shall notify each Potential Bidder that submitted Participation Materials that the Sale Process has been terminated.

 

- 3 -

Confidential Information Memorandum and Due Diligence for Phase 1 Qualified Bidders

(14) The Confidential Information Memorandum will be made available by the Financial Advisor to Phase 1 Qualified Bidders as soon as practicable after the determination that such party is a Phase 1 Qualified Bidder.

(15) During Phase 1, SFC shall afford each Phase 1 Qualified Bidder (including, for greater certainty, its potential lenders or financiers and its financial and legal advisors, provided however, that such persons have also signed a Confidentiality Agreement (or are representatives for whom the relevant Phase 1 Qualified Bidder is responsible under its Confidentiality Agreement)) access to such due diligence materials and information relating to the Assets and the SFC Business as SFC, in its reasonable business judgment, in consultation with the Monitor and the Financial Advisor, deems appropriate, and which may include discussions with the Financial Advisor and SFC’s legal advisors. Unless otherwise determined by SFC, in consultation with the Monitor and the Financial Advisor, Phase 1 Qualified Bidders will not be provided access to the Data Room.

(16) The Monitor, the Financial Advisor and SFC make no representation or warranty as to the information in the materials provided, except, in the case of SFC, to the extent contemplated under any definitive purchase agreement with a Successful Bidder. A copy of the Confidential Information Memorandum shall be provided to the Noteholder Advisors pursuant to their confidentiality agreements with SFC.

Phase 1

Seeking Letters of Intent by the Phase 1 Qualified Bidders

(17) For the period following the date of the Sale Process Order until the Phase 1 Bid Deadline (as defined below) (“ Phase 1 ”), SFC and the Financial Advisor, under the supervision of the Monitor, will solicit non-binding letters of intent from Phase 1 Qualified Bidder to acquire the Assets from SFC pursuant to a CCAA Plan (each, a “ Letter of Intent ”).

(18) A Phase 1 Qualified Bidder that desires to continue to participate in the Solicitation Process shall deliver written copies of a Letter of Intent to SFC through the Financial Advisor with a copy to the Monitor and the other parties listed on Schedule “C” at the addresses specified in Schedule “C” (by email) so as to be received by all such parties not later than 5:00 p.m. (Toronto time) on June 28, 2012 (the “ Phase 1 Bid Deadline ”).

Qualified Letters of Intent

(19) A Letter of Intent will be considered a Qualified Letter of Intent only if it is submitted on or before the Phase 1 Bid Deadline by a Phase 1 Qualified Bidder and contains the following information (a “ Qualified Letter of Intent ”):

 

  (a) a statement that the Phase 1 Qualified Bidder is offering to acquire the Assets from SFC pursuant to a CCAA Plan for consideration not less than the Qualified Consideration (a “ Sale Proposal ”);

 

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  (b) a specific indication of (i) the purchase price range expressed in United States dollars (including details of liabilities to be assumed by the Phase 1 Qualified Bidder and the projected net proceeds to be received by SFC on closing); (ii) the structure and financing of the transaction (including, but not limited to, the sources of financing for the purchase price, preliminary evidence of the availability of such financing and the steps necessary and associated timing to obtain the financing and consummate the proposed transaction and any related contingencies, as applicable); (iii) an outline of the Phase 1 Qualified Bidder’s plans for the SFC Business for the first 12 months after completion of the transaction; (iv) the Phase 1 Qualified Bidder’s expectations regarding the continued employment of the employees of the direct and indirect subsidiaries of SFC; (v) the general terms of any new agreements or arrangements to be entered into with any current or former employees of SFC and its direct and indirect subsidiaries; (vi) any anticipated corporate, shareholder, internal, regulatory or other approvals required to close the transaction and the anticipated time frame and any anticipated impediments for obtaining such approvals; (vii) a description of any additional due diligence required or desired to be conducted during Phase 2; (viii) any conditions to closing that the Phase 1 Qualified Bidder may wish to impose; and (ix) any other terms or conditions of the Sale Proposal which the Phase 1 Qualified Bidder believes are material to the transaction; and

 

  (c) such other information reasonably requested by SFC, in consultation with the Monitor and the Financial Advisor.

(20) SFC, in consultation with the Monitor and the Financial Advisor, will assess each such Letter of Intent received by the Phase 1 Bid Deadline, if any, and determine whether it is a Qualified Letter of Intent. Such determination will be made as promptly as practicable but no later than seven (7) Business Days after the receipt of any such Letter of Intent. For the purpose of such consultations and assessments, SFC, the Financial Advisor and/or the Monitor may seek clarification from any Phase 1 Qualified Bidder with respect to the terms of such Letter of Intent.

(21) Notwithstanding section 19, in respect of any non-compliant Letter of Intent, SFC may, in consultation with the Monitor and the Financial Advisor, waive compliance with any one or more of the requirements specified herein and deem such non-compliant Letter of Intent to be a Qualified Letter of Intent; provided that, SFC shall not, without the consent of the Monitor and the Initial Consenting Noteholders, waive the requirement that the consideration offered by the Phase 1 Qualified Bidder must be not less than the Qualified Consideration. A Phase 1 Qualified Bidder shall only be deemed a “ Qualified Bidder ” if it submits a Qualified Letter of Intent.

(22) If SFC (a) has received one or more Qualified Letters of Intent prior to the Phase 1 Bid Deadline; and (b) in consultation with the Monitor and the Financial Advisor, determines that there is a reasonable prospect of obtaining a Qualified Bid, the Sale Process will continue until the Phase 2 Bid Deadline in accordance with these Sale Process Procedures (“ Phase 2 ”).

(23) Subject to the terms of the Sale Process Order, SFC shall, in consultation with the Monitor, the Financial Advisor and the Noteholder Advisors, terminate the Sale Process at the end of Phase 1 if:

 

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  (a) no Qualified Letter of Intent was received by SFC by the Phase 1 Bid Deadline;

 

  (b) SFC, in consultation with the Monitor and the Financial Advisor, determines that there is no reasonable prospect that any Qualified Letter of Intent received will result in a Qualified Bid that is likely to be consummated; or

 

  (c) SFC, in consultation with the Monitor and the Financial Advisor, determines that continuing with the Sale Process is not in the best interests of SFC.

(24) If the Sale Process is terminated by SFC in accordance with section 23, or pursuant to an order of the Court, SFC shall, as soon as reasonably practicable, take such steps (including bringing motions, holding meetings of creditors, etc.) as may be necessary to complete the Restructuring Transaction

(25) If the Sale Process has been terminated as provided in section 23, the Financial Advisor shall notify each Phase I Qualified Bidder that submitted a Letter of Intent that the Sale Process has been terminated.

Phase 2

Seeking Qualified Bids by Qualified Bidders

(26) A Qualified Bidder wishing to continue to participate in the Solicitation Process must deliver written copies of a Qualified Bid to SFC through the Financial Advisor with a copy to the Monitor and the other parties listed on Schedule “C” at the addresses specified in Schedule “C” (by email) so as to be received by all such parties not later than 5:00 pm (Toronto time) on September 26, 2012 (the “ Phase 2 Bid Deadline ”).

(27) During Phase 2, SFC shall afford each Qualified Bidder (including, for greater certainty, its potential lenders or financiers and its financial and legal advisors, provided , however, that such persons have also signed a Confidentiality Agreement (or are representatives for whom the relevant Qualified Bidder is responsible under its Confidentiality Agreement)) access to such due diligence materials and information relating to the Assets and the SFC Business as SFC, in its reasonable business judgment, in consultation with the Monitor and the Financial Advisor, deems appropriate, including, as appropriate, meetings with senior management of SFC, access to the Data Room and site tours.

(28) The Monitor, the Financial Advisor and SFC make no representation or warranty as to the information in the materials provided, except, in the case of SFC, to the extent contemplated under any definitive purchase agreement with a Successful Bidder.

Qualified Bids

(29) SFC shall make available to each Qualified Bidder a form of purchase agreement developed by SFC in consultation with the Monitor and the Financial Advisor (the “ Form of Purchase Agreement ”) no later than 20 days after the Phase 1 Bid Deadline.

 

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(30) A bid submitted by a Qualified Bidder will be considered a Qualified Bid only if it complies with all of the following (a “ Qualified Bid ”):

 

  (a) it includes a letter stating that the Qualified Bidder’s bid is irrevocable until the earlier of (x) the approval by the Court of the Successful Bid by the Successful Bidder and (y) the Outside Date, provided that if such Qualified Bidder is selected as the Successful Bidder, its offer shall remain irrevocable until the earlier of (i) the closing of the sale of the Assets to the Successful Bidder and (ii) the Outside Date;

 

  (b) it includes a duly authorized and executed purchase agreement substantially in the form of the Form of Purchase Agreement, including the purchase price, expressed in United States dollars, the net proceeds to be paid to SFC on closing, together with all exhibits and schedules thereto, and such ancillary agreements as may be required by the Qualified Bidder with all exhibits and schedules thereto as well as copies of such materials marked to show those amendments and modifications to the Form of Purchase Agreement and such ancillary agreements;

 

  (c) it provides for the acquisition of the Assets from SFC pursuant to a CCAA Plan for consideration not less than the Qualified Consideration;

 

  (d) it includes written evidence of a firm, irrevocable commitment for all required funding and/or financing to consummate the proposed transaction, including the sources and uses of capital, or other evidence satisfactory to SFC, in consultation with the Monitor and the Financial Advisor that will allow SFC, in consultation with the Monitor and the Financial Advisor, to make a reasonable determination as to the Qualified Bidder’s financial and other capabilities to consummate the transaction contemplated by the bid;

 

  (e) it is not conditioned on (i) the outcome of unperformed due diligence by or on behalf of the Qualified Bidder and/or (ii) obtaining any financing or capital;

 

  (f) it outlines any anticipated regulatory and other approvals required to close the transaction and the anticipated time frame and any anticipated impediments for obtaining such approvals;

 

  (g) it provides a timeline to closing that is no later than the Outside Date, with critical milestones;

 

  (h) it fully discloses the identity of each entity that is bidding or that will be sponsoring, participating or beneficially interested in the bid, and the complete terms of any such sponsorship, participation or beneficial interest;

 

  (i) it includes an acknowledgement and representation that the Qualified Bidder (i) has relied solely upon its own independent review, investigation and/or inspection of the documents andior the assets to be acquired and liabilities to be assumed in making its bid; (ii) did not rely upon any written or oral statements, representations, promises, warranties or guaranties whatsoever, whether express

 

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  or implied (by operation of law or otherwise), regarding the Assets to be acquired or liabilities to be assumed or the completeness of any information provided in connection therewith, except as expressly stated in the purchase agreement; (iii) is a sophisticated party capable of making its own assessments in respect of making its bid; and (iv) has had the benefit of independent legal advice in connection with its bid,

 

  (j) it includes evidence, in form and substance reasonably satisfactory to SFC, in consultation with the Monitor and the Financial Advisor, of authorization and approval from the Qualified Bidder’s board of directors (or comparable governing body) with respect to the submission, execution, delivery and closing of the transaction contemplated by the bid;

 

  (k) it is accompanied by a deposit in the form of a wire transfer (to a bank account specified by the Monitor), or such other form acceptable to SFC and the Monitor, payable to the order of the Monitor, in trust, of US$10 million (or any other currency acceptable to the Monitor) to be held and dealt with in accordance with these Sale Process Procedures (the “ Deposit ”);

 

  (l) if the Qualified Bidder is an entity newly formed for the purpose of the transaction or otherwise has limited net assets and/or operating history, the bid shall contain an equity or debt commitment letter from the parent entity or sponsor, which is satisfactory to SFC, in consultation with the Monitor and the Financial Advisor;

 

  (m) it contains any other information reasonably requested by SFC, in consultation with the Monitor and the Financial Advisor; and

 

  (n) it is received by the Phase 2 Bid Deadline and otherwise in accordance with section 26; provided , however, that SFC reserves the right following the Phase 2 Bid Deadline to conduct negotiations with each Qualified Bidder with respect to the terms and provisions of a bid and any qualifications or modifications that SFC, in consultation with the Monitor and the Financial Advisor, may seek in order for such bid to be classified as a Qualified Bid.

(31) Notwithstanding section 30, in respect of any non-compliant bid, SFC may, with the consent of the Monitor, waive compliance with any one or more of the requirements specified herein; provided , however, if such consent is not obtained, SFC may seek authority from the Court to waive compliance with any one or more of the requirements specified herein, provided that, in no circumstances shall the requirements in Sections (30)(a) (only with respect to the requirement that if such Qualified Bidder is selected as the Successful Bidder, its offer shall remain irrevocable until the earlier of (i) the closing of the sale of the Assets to the Successful Bidder and (ii) the Outside Date), (30)(c), (30)(d), (30)(g), (30)(k) and (30)(n) be waived, without the consent of the Monitor and the Initial Consenting Noteholders.

(32) SFC will, in consultation with the Monitor, the Financial Advisor and the Noteholder Advisors, review each bid received by the Phase 2 Bid Deadline, if any, as set forth herein, and

 

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determine whether it is a Qualified Bid. Such determination will be made as promptly as practicable but no later than seven (7) Business Days after the receipt of any such bid.

No Qualified Bids

(33) If at any point during the Sale Process, SFC determines, in consultation with the Monitor, the Financial Advisor and the Noteholder Advisors, that a Qualified Bid will not be obtained by the Phase 2 Bid Deadline, SFC shall (a) forthwith terminate the Sale Process; and (b) as soon as reasonably practicable take such steps (including bringing motions, holding meetings of creditors, etc.) as may be necessary to complete the Restructuring Transaction.

(34) If the Sale Process has been terminated as provided in section 33, the Financial Advisor shall notify each Qualified Bidder that the Sale Process has been terminated .

Evaluation and Selection of Successful Bid

(35) Evaluation criteria with respect to a Qualified Bid may include, but are not limited to items such as: (a) the purchase price (including assumed liabilities and other obligations to be performed or assumed by the bidder) and the net cash proceeds provided by such bid; (b) the claims likely to be created by such bid in relation to other bids; (c) the counterparties to, and the parties beneficially interested in, the transaction; (d) the proposed revisions to the Form of Purchase Agreement and the terms of the transaction documents (any such revisions to be acceptable to SFC in consultation with the Monitor and the Financial Advisor); (e) other factors affecting the speed, certainty and value of the transaction (including any regulatory or other approvals required to close the transaction); (f) the bidder’s plans for the SFC Business for the first 12 months after completion of the transaction; (g) the bidder’s expectations regarding the continued employment of the employees of the direct and indirect subsidiaries of SFC; (b) the terms of any new agreements or arrangements to be entered into with any current or former employees of the SFC and its direct and indirect subsidiaries; and (i) the likelihood and timing of consummating the transaction.

(36) If one or more Qualified Bids is received, SFC will, after consultation with the Monitor and the Financial Advisor, identify the highest or otherwise most favourable Qualified Bid (the “ Selected Superior Offer ”) by October 5, 2012. SFC shall then finalize a definitive agreement in respect of the Selected Superior Offer by October 17, 2012, conditional upon approval of the Court, a vote of affected creditors (if not already obtained) and on the Selected Superior Offer closing on or before the Outside Date.

(37) Once a definitive agreement has been finalized and settled in respect of the Selected Superior Offer and approved by order of the Court in accordance with the provisions hereof, the Selected Superior Offer shall be the “ Successful Bid ” hereunder and the Qualified Bidder who made the Selected Superior Offer shall be the “ Successful Bidder ” hereunder.

(38) All Qualified Bids (other than the Successful Bid) shall be deemed rejected by SFC on and as of the date of approval of the Successful Bid by order of the Court.

(39) Notwithstanding anything contained herein, SFC, in consultation with the Monitor, the Financial Advisor and the Noteholder Advisors, may terminate the Sale Process at any time and

 

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may reject one or more Qualified Bids, if SFC, in consultation with the Monitor and the Financial Advisor, determines that the Sale Process or any such Qualified Bid is not in the best interests of SFC.

(40) If the Sale Process is terminated by SFC in accordance with section 39, SFC shall as soon as reasonably practicable take such steps (including bringing motions, holding meetings of creditors, etc.) as may be necessary to complete the Restructuring Transaction.

(41) If the Sale Process has been terminated as provided in section 39, the Financial Advisor shall notify each Qualified Bidder that the Sale Process has been terminated.

Approval Motion

(42) The hearing to, among other things, (a) approve the Successful Bid; (b) authorize SFC’s entering into of agreements with respect to the Successful Bid; and (c) authorize SFC’s completing the transaction contemplated thereby including, without limitation, seeking an order directing that a meeting of creditors of SFC be held to consider the CCAA Plan to implement the Successful Bid (the “ Approval Motion ”) will be held on a date to be scheduled by the Court upon application by SFC. Subject to SFC’s covenants under the Support Agreement, the Approval Motion may be adjourned or rescheduled by SFC with the consent of the Monitor, without further notice by an announcement of the adjourned date at the Approval Motion. If the Successful Bid is not, or, in the reasonable determination of SFC, in consultation with the Monitor and the Financial Advisor, is not likely to be, consummated on or before Outside Date, then SFC shall, and any other party in interest may, seek direction from the Court in regard to the Sale Process, after notice and a hearing, subject to the respective rights of SFC and all parties in interest, including the Initial Consenting Noteholders, to be heard regarding such relief.

(43) If following approval of the Successful Bid by the Court, the Successful Bidder fails to consummate the transaction for any reason, SFC shall as soon as reasonably practicable after such failure take such steps (including bringing motions, holding meetings of creditors, etc.) as may be necessary to complete the Restructuring Transaction.

Deposits

(44) All Deposits shall be retained by the Monitor and invested in an interest bearing (if available) trust account. If there is a Successful Bid, the Deposit (plus any accrued interest) paid by the Successful Bidder whose bid is approved at the Approval Motion shall be non-refundable and applied to the purchase price to be paid by the Successful Bidder upon closing of the approved transaction. The Deposits (plus any accrued interest) of Qualified Bidders not selected as the Successful Bidder shall be returned to such bidders within five (5) Business Days of the date upon which the Successful Bid is approved by the Court. If there is no Successful Bid, all Deposits (plus any accrued interest) shall be returned to the bidders within five (5) Business Days of the date upon which the Sale Process is terminated in accordance with these Sale Process Procedures.

(45) If a Successful Bidder breaches its obligations to close the transaction subsequent to the approval by the Court of the Successful Bid, it shall forfeit the Deposit, provided however, that

 

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the forfeit of such Deposit shall be in addition to, and not in lieu of, any other rights in law or equity that SFC has against such breaching entity.

Approvals

(46) For greater certainty, the approvals required pursuant to the terms hereof are in addition to, and not in substitution for, any other approvals required by the CCAA or any other statute or as otherwise required at law in order to implement the Successful Bid.

Amendments/Extensions of Time

(47) There shall be no amendments to this Sale Process, including, for greater certainty the process and procedures set out herein, without the prior written consent of the Monitor and the Initial Consenting Noteholders unless otherwise ordered by the Court upon application and appropriate notice, including to the Initial Consenting Noteholders, the Noteholder Advisors and each of the parties listed in Schedule “C”. Dates or deadlines set forth herein may be amended or extended by SFC with the prior written consent of the Monitor and the Initial Consenting Noteholders, unless otherwise ordered by the Court upon application and appropriate notice, including to the Initial Consenting Noteholders, the Noteholder Advisors and each of the parties listed in Schedule “C”. Notwithstanding the foregoing, SFC may, in consultation with the Monitor and the Financial Advisor, decrease the length of time of Phase 1, and increase or decrease the length of time of Phase 2; provided that in no case shall the number of days in Phases 1 and 2 exceed 180 days in the aggregate.

Consultation

(48) SFC will keep the Noteholder Advisors generally informed regarding the status of the Sale Process and, if determined advisable by SFC in its discretion, may, in consultation with the Monitor and the Financial Advisor, provide the Noteholder Advisors with an opportunity for the Noteholder Advisors to participate in material discussions with interested parties in relation to the Sale Process.

Initial Consenting Noteholder Consent

(49) For the purposes of these Sale Process Procedures, any matter requiring agreement, waiver, consent or approval of the consent of the Initial Consenting Noteholders shall require the agreement, waiver, consent or approval, as the case may be, of Initial Consenting Noteholders representing at least 66 2/3% of the aggregate principal amount of Notes held by the Initial Consenting Noteholders. SFC shall be entitled to rely on written confirmation from the Noteholder Advisors that the Initial Consenting Noteholders representing at least the foregoing percentage of the aggregate principal amount of Notes held by the Initial Consenting Noteholders have agreed, waived, consented to or approved a particular matter.

Further Orders

(50) At any time during the Sales Process, SFC or the Monitor may, following consultation with the Financial Advisor and the Noteholder Advisors, and upon notice to the Initial Consenting Noteholders, the Noteholder Advisors and each of the parties listed in Schedule “C”,

 

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apply to the Court for advice and directions with respect to the discharge of their respective powers and duties hereunder following a hearing. For greater certainty, nothing herein provides any Qualified Bidder with any rights other than as expressly set forth herein.

 

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SCHEDULE “A”

DEFINED TERMS

In these Sale Process Procedures:

“Approval Motion” has the meaning ascribed thereto in section 42;

“Assets” means all of SFC’s right, title and interest in and to its properties, assets and rights of every kind and description (including, without limitation, all restricted and unrestricted cash, contracts, real property, receivables or other debt owed to SFC, intellectual property, the SFC name and all related marks, all of its shares in its subsidiaries (including, without limitation, all of the shares of the Direct Subsidiaries) and all intercompany debt owed to SFC, hy any of its subsidiaries), other than the Excluded Assets;

“Business Day” means a day (other than a Saturday or Sunday) on which banks are generally open for business in Toronto, Ontario and Hong Kong, Special Administrative Region of the People’s Republic of China;

“CCAA” has the meaning ascribed thereto in the recitals to these Sale Process Procedures;

“CCAA Plan” has the meaning ascribed thereto in section 3;

“Claims and Interest” has the meaning ascribed thereto in section 5;

“Confidential Information Memorandum” means the memorandum relating to the SFC Business and the opportunity to acquire the Assets to be distributed to Phase 1 Qualified Bidders as part of the Sale Process;

“Confidentiality Agreement” means an executed confidentiality agreement in favor of SFC, in form and substance satisfactory to the Monitor, the Financial Advisor and SFC, which shall inure to the benefit of SFC and any purchaser of the Assets (including a purchaser pursuant to the Restructuring Transaction);

“Consenting Noteholders” has the meaning ascribed thereto in the Support Agreement;

“Court” has the meaning ascribed thereto in the recitals to these Sale Process Procedures;

“Data Room” means the virtual data room maintained by SFC through the facilities of Merrill Corporation.

“Deposit” has the meaning ascribed thereto in section 30(k);

“Direct Subsidiaries” means Sino-Panel Holdings Limited, Sino-Global Holdings Inc., Sino-Panel Corporation, Sino-Wood Partners, Sino-Capital Global Inc., Sino-Forest International (Barbados) Corporation and Sino-Forest Resources Inc. (BVI);

“Excluded Assets” means cash equal to $20 million, the claims of SFC to be transferred to the Litigation Trust and any other assets and rights of SFC that are not transferred to the Successful Bidder pursuant to the Successful Bid as determined by SFC and the Successful Bidder and identified in the CCAA Plan;

“Financial Advisor” means Houlihan Lokey;

“Form of Purchase Agreement” has the meaning ascribed thereto in section 29;

“Initial Consenting Noteholders” has the meaning ascribed thereto in the Support Agreement;

“Initial Order” has the meaning ascribed thereto in the recitals to these Sale Process Procedures;

“Letter of Intent” has the meaning ascribed thereto in section 17;

“Litigation Trust” means the litigation trust to be established pursuant to the CCAA Plan pursuant to which all claims of SFC and its subsidiaries against any Person shall be transferred on the implementation date of the CCAA Plan.

“Meeting Order” means the order of the Court establishing the procedures for voting on the CCAA Plan, which shall be in form and substance satisfactory to SFC and the Noteholder Advisors, each acting reasonably, as such order may be amended at any time prior to the time the sale transaction that forms part of a Successful Bid is implemented with the consent of SFC and the Noteholder Advisors.

“Monitor” means FTI Consulting Canada Inc., in its capacity as monitor pursuant to the Initial Order and not in its personal or corporate capacity;

“NI 51-102” has the meaning ascribed thereto in section 7;

“Noteholder Advisors” means Goodmans LLP, Hogan Lovells LLP, Moelis & Company LLC and Moelis & Company Asia Limited, in their capacity as advisors to the Initial Consenting Noteholders;

“Notes” means the 5% Convertible Senior Notes due 2013 issued by SFC, the 10.25% Guaranteed Senior Notes due 2014 issued by SFC, the 4.25% Convertible Senior Notes due 2016 issued by SFC and the 6.25% Guaranteed Senior Notes due 2017 issued by SFC;

“Outside Date” means November 30, 2012, as the same may be amended with the consent of the Initial Consenting Noteholders.

“Participation Materials” has the meaning ascribed thereto in section 9;

“Person” means any individual, sole proprietorship, limited or unlimited liability corporation, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, body corporate, joint venture, trust, pension fund, union, governmental entity, and a natural person including in such person’s capacity as trustee, heir, beneficiary, executor, administrator or other legal representative;

 

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“Phase 1” has the meaning ascribed thereto in section 17;

“Phase 1 Bid Deadline” has the meaning ascribed thereto in section 18;

“Phase 1 Qualified Bidder” has the meaning ascribed thereto in section 10;

“Phase 2” has the meaning ascribed thereto in section 22;

“Phase 2 Bid Deadline” has the meaning ascribed thereto in section 26;

“Potential Bidder” has the meaning ascribed thereto in section 9;

“Qualified Bid” has the meaning ascribed thereto in section 30;

“Qualified Bidder” has the meaning ascribed thereto in section 21;

“Qualified Consideration” means cash consideration payable to SFC (or such other form of consideration as may be acceptable to SFC and the Initial Consenting Noteholders) in an amount equal to 85% of the aggregate principal amount of the Notes, plus all accrued and unpaid interest on Notes, at the regular rates provided therefor pursuant to the Note indentures, up to and including March 30, 2012;

“Qualified Letter of Intent” has the meaning ascribed thereto in section 19;

“Restructuring Transaction” means the restructuring transaction contemplated by the Support Agreement in the event a Successful Bid is not obtained and/or SFC does not consummate the sale transaction;

“Sale Process” has the meaning ascribed thereto in the recitals to these Sale Process Procedures;

“Sale Process Order” has the meaning ascribed thereto in the recitals to these Sale Process Procedures;

“Sale Process Procedures” has the meaning ascribed thereto the recitals to these Sale Process Procedures;

“Sale Proposal” has the meaning ascribed thereto in section 19(a);

“Selected Superior Offer” has the meaning ascribed thereto in section 36;

“SFC” has the meaning ascribed thereto in the recitals to these Sale Process Procedures;

“SFC Business” means the business carried on by SFC and its direct and indirect subsidiaries;

“Solicitation Process” has the meaning ascribed thereto in section 1;

“Successful Bid” has the meaning ascribed thereto in section 37;

“Successful Bidder” has the meaning ascribed thereto in section 37;

 

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“Support Agreement” means the support agreement dated March 30, 2012, between SFC and the Initial Consenting Noteholders and the other Consenting Noteholders, as amended from time to time;

“Teaser Letter” has the meaning ascribed thereto in section 8; and

“Voting Deadline” means the deadline for voting on the CCAA Plan, as established by the Meeting Order.

 

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SCHEDULE “B”

FORM OF NOTICE OF SALE PROCESS

TAKE NOTICE THAT pursuant to an order (the “Order”) of the Ontario Superior Court of Justice (the “Court”) issued on March 30, 2012 under the Companies’ Creditors Arrangement Act, Sino-Forest Corporation obtained Court approval to conduct a sale solicitation process (the “Sale Process”).

Pursuant to the Sale Process, Sino-Forest Corporation’s financial advisor, Houlihan Lokey, is soliciting proposals from prospective strategic and financial parties to acquire substantially all of the property, assets and business of Sino-Forest Corporation and its subsidiaries, other than certain excluded assets. Sino-Forest Corporation is a leading commercial forest plantation operator in China. Its principal businesses include the ownership and management of tree plantations, the sale of standing timber and wood logs, and the complementary manufacturing of downstream engineered-wood products.

Interested parties can obtain additional information by contacting Houlihan Lokey at:

Houlihan Lokey

Attention: David Putnam

Telephone: +852.3551.2300

Email: dputnam@hl.com

SCHEDULE “C”

NOTICE PARTIES

 

1. Sino-Forest Corporation

Room 3815-29 38/F, Sun Hung Kai Centre

30 Harbour Road, Wanchai, Hong Kong

Attention: Mr. Judson Martin, Chief Executive Officer

Email: latson-martin@sinoforest.com

 

2. Houlihan Lokey

2101 Two Exchange Square, 8 Connaught Place

Central, Hong Kong

Attention: David Putnam

Email: dputnam@hl.com

 

3. Bennett Jones LLP

One First Canadian Place, Suite 3400, P.O. Box 130

Toronto, Ontario M5X 1A4

Attention: Kevin J. Zych and Raj S. Sahni

Email: zychk@bennettjones.com and sahnir@bennettjones.com

 

4. FTI Consulting Canada Inc.

TD Waterhouse Tower

79 Wellington Street West, Suite 2010, P.O. Box, 104

Toronto, Ontario M5K 1G8

Attention: Greg Watson

Email: greg.watson@fticonsulting.com

FIRST AMENDMENT TO THE RESTRUCTURING SUPPORT AGREEMENT

This First Amendment (this “First Amendment”) dated as of August 14, 2012, among (a) Sino-Forest Corporation (the “Company”), (b) each of the subsidiaries of the Company as listed in Schedule A ( the “Direct Subsidiaries”), and (c) each of the Initial Consenting Noteholders signatories hereto, amends the Restructuring Support Agreement dated as of March 30, 2012, among the Company, the Direct Subsidiaries and the Consenting Noteholders party thereto (the “RSA”) to the extent, and on the terms and conditions, set forth herein. The Initial Consenting Noteholders, the Company and the Direct Subsidiaries are collectively referred to in this First Amendment as the “Parties” and each (including each Initial Consenting Noteholder, individually) is a “Party”.

WHEREAS the Company, the Direct Subsidiaries and the Initial Consenting Noteholders are party to the RSA, pursuant to which the Initial Consenting Noteholders agreed to support a Restructuring Transaction that is to be effected pursuant to a plan of compromise or reorganization under the Companies’ Creditors Arrangement Act (Canada), R.S.C. 1985, c. C-36, as amended (the “CCAA”) and the Canada Business Corporations Act, R.S.C. 1985, c. C-44;

AND WHEREAS the Company commenced proceedings under the CCAA on March 30, 2012 (the “CCAA Proceedings”) and intends to file the Plan pursuant to the terms of the RSA;

AND WHEREAS the version of the Plan to be filed with the Court is appended hereto as Appendix A (the “Plan”);

AND WHEREAS the Parties wish to make certain amendments to the RSA in accordance with the terms thereof and in connection with the Plan to be filed in the CCAA Proceedings;

AND WHEREAS capitalized terms used but not otherwise defined in this First Amendment shall have the meanings ascribed to them in the RSA or the Plan;

AND WHEREAS all paragraphs referenced herein are to the RSA unless stated otherwise.

NOW THEREFORE, for good and valuable consideration, the receipt of which are hereby acknowledged, the Parties hereby amend the RSA as follows:

 

  1. Amendments

(a) Section 1(a)(iii)(A) of the RSA is hereby amended by deleting the words “(subject to any dilution in respect of the New Management Plan)”.

(b) Section 1(a)(iii)(C) of the RSA is hereby amended by deleting the words “(if any)” and by deleting the reference to “Section 1(h)(ii)(B)” and replacing it with a reference to “Section 1(h)(ii)(A)”.

(c) Section 1(a)(iv) of the RSA is hereby deleted in its entirety.

(d) Section 1(b) of the RSA is hereby deleted in its entirety and replaced with the following:

“(b) Each Noteholder (including the Initial Consenting Noteholders) that, (i) (A) as confirmed by the Monitor on June 12, 2012, executed (I) this Agreement, (2) a support agreement with SFC and the Direct Subsidiaries in the form hereof or (3) a Joinder Agreement in the form attached hereto as Schedule C ; (B) provided evidence satisfactory to the Monitor in accordance with Section 2(a) hereof of the Notes held by such Noteholder as at the Consent Date (the “ Early Consent Notes ”), as such list of Noteholders and Notes held has been verified and is maintained by the Monitor on a confidential basis; and (C) continues to hold such Early Consent Notes as at the Distribution Record Date; or (ii) (A) has acquired Early Consent Notes; (B) has signed the necessary transfer and joinder documentation as required by this Agreement and has otherwise acquired such Early Consent Notes in compliance with this Agreement; and (C) continues to hold such Early Consent Notes as at the Distribution Record Date (as defined in the Plan) (each a “ Consent Date Noteholder ”), shall receive on the Implementation Date, as additional consideration for its Notes, its Pro Rata share of 7.5% of the Newco Shares (the “ Early Consent Consideration ”).”

(e) Section 1(c) of the RSA is hereby amended by deleting the word “herein” and replacing it with the words “in the Plan”.

(f) Section 1(d) of the RSA is hereby deleted in its entirety and replaced with the following:

“(d) Pursuant to the Plan and the Final Order in respect of the Plan:

(i) each of the Named Directors and Officers (as defined in the Plan) shall be released from any and all claims against them in their capacities as current or former directors or officers of the Company, except that such release shall not apply to or affect: (A) any claims that cannot be compromised under section 5.1(2) of the CCAA, which claims shall be limited to recovery against any insurance proceeds payable in respect of such claims pursuant to insurance policies held by the Company or its Subsidiaries; or (B) any claims for fraud or criminal conduct.

(ii) none of the Other Directors and Officers (as defined in the Plan) shall be released from claims against them, provided that any Indemnified Noteholder Class Action Claims (as defined in the Plan) against the Other Directors and Officers shall be limited, collectively with any Indemnified Noteholder Class Action Claims

 

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against the Company, to the Indemnified Noteholder Class Action Limit (as defined in the Plan).”

(g) Section 1(e) of the RSA is hereby amended by deleting the words “provided that the aggregate amount of the Claims of the Other Affected Creditors shall not exceed $250,000, without the consent of the Company and the Initial Consenting Noteholders, acting reasonably,”.

(h) Section 1(h) of the RSA is hereby deleted in its entirety and replaced with the following:

“(h) Pursuant to the Plan, the Litigation Trust will be established on the Implementation Date for the benefit of the Affected Creditors (as defined in the Plan) and the Noteholder Class Action Claimants (as defined in the Plan), as follows:

(i) The Litigation Trust shall be funded with a cash amount acceptable to the Company, the Monitor and the Initial Consenting Noteholders (the “Funding Amount”) to be paid by the Company to the Litigation Trustee (as defined in the Plan) for the purposes of funding the Litigation Trust on the Implementation Date;

(ii) The Litigation Trust Interests (as defined in the Plan) to be created in accordance with the Plan and the Litigation Trust shall be allocated as follows:

(A) the Affected Creditors shall be collectively entitled to 75% of such Litigation Tnist Interests; and

(B) the Noteholder Class Action Claimants shall be collectively entitled to 25% of such Litigation Tnist Interests;

(iii) Notwithstanding anything to the contrary in section 1(h)(ii) hereof, if any of the Noteholder Class Action Claims against the Third Party Defendants (as defined in the Plan) are finally resolved (whether by final judgment, settlement or any other binding means of resolution) within two years of the Implementation Date, then the Litigation Trust Interests to which the applicable Noteholder Class Action Claimants would otherwise have been entitled to in respect of such Noteholder Class Action Claims pursuant to section 1(h)(ii)(B) hereof, shall instead be allocated Pro-Rata to the Affected Creditors.”

(i) Section 1(1) of the RSA is hereby deleted in its entirety.

(j) Section 5(c)(iv)(A) is hereby amended by deleting the words “July 16, 2012” and replacing them with the words “August 14, 2012”.

 

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(k) Section 5(c)(iv)(B) is hereby amended by deleting the words “August 27, 2012” and replacing them with the words “October 5, 2012”.

(l) Section 5(c)(iv)(C) is hereby amended by deleting the words “August 31, 2012” and replacing them with the words “October 12, 2012”.

(m) Section 6(a)(ii) of the RSA is hereby amended by deleting the words “and the Contingent Value Rights”.

(n) Section 7(a)(i) of the RSA is hereby amended by deleting the words “August 31, 2012” and replacing them with the words by “October 12, 2012.

(o) Section 7(a)(v) of the RSA is hereby deleted in its entirety and replaced with the following:

“(v) the terms of employment of the senior management and officers of Newco shall be acceptable to the Initial Consenting Noteholders;”

(p) Section 7(a)(vi) of the RSA is hereby amended by deleting the words “and the Contingent Value Rights”.

(q) Schedule B to the RSA is hereby amended by deleting from the table of definitions reference to the following definitions: “Muddy Waters” and “Newco EV”.

(r) Schedule B to the RSA is hereby amended by deleting the definitions of: “Contingent Value Rights” and “Junior Constituent” in their entirety.

(s) Schedule B to the RSA is hereby amended by deleting the definition of “Litigation Trust” in its entirety and replacing it with the following:

“ Litigation Trust ” shall have the meaning ascribed to the term “Litigation Trust” in the Plan.

(t) Schedule B to the RSA is hereby amended by deleting the definition of “Noteholder Claim” in its entirety and replacing it with the following:

“Noteholder Claim” shall have the meaning ascribed to the term “Noteholder Claim” in the Plan.

(u) Schedule B to the RSA is hereby amended by deleting the definition of “Other Affected Creditors” in its entirety and replacing it with the following:

“Other Affected Creditor” shall have the meaning ascribed to the term “Ordinary Affected Creditor” in the Plan.

(v) Schedule B to the RSA is hereby amended by deleting the definition of “Pro Rata” in its entirety and replacing it with the following:

 

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“Pro-Rata” shall have the meaning ascribed to the term “Pro-Rata” in the Plan.

(w) Schedule B to the RSA is hereby amended by deleting the definition of “Unaffected Claims” in its entirety and replacing it with the following

“Unaffected Claims” shall have the meaning ascribed to the term “Unaffected Claims” in the Plan.

2. Company Representations and Warranties . The Company and each of the Direct Subsidiaries hereby represent and warrant, severally and not jointly, to each Initial Consenting Noteholder (and the Company and each of the Direct Subsidiaries acknowledge that each Initial Consenting Noteholder is relying upon such representations and warranties) that:

(a) The execution, delivery and performance by the Company and each of the Direct Subsidiaries of this First Amendment:

(i) are within its corporate, partnership, limited partnership or similar power, as applicable;

(ii) have been duly authorized by all necessary corporate, partnership, limited partnership or similar action, as applicable, including all necessary consents of the holders of its equity or other participating interests, where required; and

(iii) do not (A) contravene its or any of the Subsidiaries’ certificate of incorporation, articles of amalgamation, by-laws or limited partnership agreement or other constating documents, as applicable, (B) violate any judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to it or any of the Subsidiaries, properties or assets, or (C) result in the creation or imposition of any lien or encumbrance upon any of the property of the Company or any of its Subsidiaries.

(b) This First Amendment constitutes a valid and binding obligation of the Company and each of the Direct Subsidiaries enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally or by general principles of equity, whether asserted in a proceeding in equity or law.

(c) The board of directors of the Company has: (i) reviewed this First Amendment; (ii) determined, in its business judgment, that the transactions contemplated by this First Amendment are in the best interests of the Company; and (iii) approved this First Amendment.

3. Initial Consenting Holder Representations and Warranties . Each Initial Consenting Noteholder hereby represents and warrants, severally and not jointly, to the Company arid the Direct Subsidiaries (and acknowledges that each of the Company arid the Direct Subsidiaries are relying upon such representations and warranties) that:

(a) The execution, delivery and performance by the Initial Consenting Noteholder of its obligations under this First Amendment:

 

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(i) are within its corporate, partnership, limited partnership or similar power, as applicable;

(ii) have been duly authorized, by all necessary corporate, partnership, limited partnership or similar action, as applicable, including all necessary consents of the holders of its equity or other participating interests where required; and

(iii) do not (A) contravene its certificate of incorporation, articles, by-laws, membership agreement, limited partnership agreement or other constating documents, as applicable, (B) violate any judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to it or any of its assets, or (C) conflict with or result in the breach of, or constitute a default under, or require a consent under, any contract material to the Initial Consenting Noteholder.

(b) This First Amendment constitutes a valid and binding obligation of the Initial Consenting Noteholder enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally or by general principles of equity, whether asserted in a proceeding in equity or law.

4. Full Force and Effect . The RSA shall not be amended or otherwise modified by this First Amendment except as set forth in Section 1 of this First Amendment. Except as amended by this First Amendment, the RSA shall continue to be and shall remain in full force and effect in accordance with its terms. All references to the “Agreement”, “herein”, “hereof’, “hereunder” or words of similar import in the RSA shall be deemed to include the RSA as amended by this First Amendment. In the case of a conflict between the provisions contained in the text of the RSA (as amended hereby) and the Plan, the provisions of the Plan shall govern.

5. Reservation of Rights . Nothing contained in this First Amendment constitutes a waiver of any Default that may heretofore or hereafter occur or have occurred and be continuing under the RSA. Except as expressly provided herein, the execution and delivery of this First Amendment does not: (i) extend the terms of the RSA; (ii) give rise to any obligation on the part of any Party to extend, modify, alter, amend or waive any term or condition of RSA or otherwise prejudice any rights or remedies which any Party now has or may have in the future; or (iii) give rise to any defences, setoffs, reductions or counterclaims to any Party right to enforce, exercise and enjoy the benefits of their respective rights and remedies under the RSA.

6. Effectiveness . The Company shall disclose the existence of this First Amendment to the Court in its motion materials in respect of the Meeting Order. This First Amendment shall become effective immediately on the date that the Meeting Order is granted by the Court.

7. Miscellaneous .

(a) The headings of the Sections of this First Amendment have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

 

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(b) Unless the context otherwise requires, words importing the singular shall include the plural and vice versa and words importing any gender shall include all genders.

(c) This First Amendment shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, without regard to principles of conflicts of law. Each Party submits to the jurisdiction of the courts of the Province of Ontario in any action or proceeding arising out of or relating to this First Amendment.

(d) This First Amendment may be signed in counterparts, each of which, when taken together, shall be deemed an original. Execution of this First Amendment is effective if a signature is delivered by facsimile transmission or electronic (e.g., pdf) transmission.

[Remainder of this page intentionally left blank; signature pages follow)

 

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Signature Page to First Amendment to the Restructuring Support Agreement

 

This First Amendment has been agreed and accepted on the date first written above.

 

SINO-FOREST CORPORATION
By:   (signed) Judson Martin
 

Name: Judson Martin

Title: Authorized Signatory

By:    
  Name:
  Title:
SINO-PANEL HOLDINGS LIMITED
By:   (signed) Judson Martin
  Name: Judson Martin
  Title: Authorized Signatory
By:    
  Name:
  Title:
SINO-GLOBAL HOLDINGS INC.
By:   (signed) Judson Martin
  Name: Judson Martin
  Title: Authorized Signatory
By:    
  Name:
  Title:
SINO-PANEL CORPORATION
By:   (signed) Judson Martin
  Name: Judson Martin
  Title: Authorized Signatory
By:    
  Name:
  Title:

Signature Page to First Amendment to the Restructuring Support Agreement

 

SINO-WOOD PARTNERS, LIMITED

By:

  (signed) Judson Martin
  Name: Judson Martin
  Title: Authorized Signatory

 

By:

   
  Name:
  Title:

 

SINO-CAPITAL GLOBAL INC.

By:

  (signed) Judson Martin
  Name: Judson Martin
  Title: Authorized Signatory

 

By:

   
  Name:
  Title:

 

SINO-FOREST INTERNATIONAL

(BARBADOS) CORPORATION

By:

  (signed) Judson Martin
  Name: Judson Martin
  Title: Authorized Signatory

By:

   
  Name:
  Title:

 

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Signature Page to First Amendment to the Restructuring Support Agreement

 

SINO-FOREST RESOURCES INC.

By:

  (signed) Judson Martin
  Name: Judson Martin
  Title: Authorized Signatory

By:

   
  Name:
  Title:

 

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Signature Page to First Amendment to the Restructuring Support Agreement

STRICTLY CONFIDENTIAL

 

Name of Initial Consenting Noteholder:

  [REDACTED]
  Per:   [REDACTED]
    Name: [Redacted]
    Title: [Redacted]

STRICTLY CONFIDENTIAL

 

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Execution Copy

SECOND AMENDMENT TO THE RESTRUCTURING SUPPORT AGREEMENT

This Second Amendment (this “Second Amendment”) dated as of October 19, 2012, among (a) Sino-Forest Corporation (the “Company”), (b) each of the subsidiaries of the Company as listed in Schedule A (the “Direct Subsidiaries”), and (c) each of the Initial Consenting Noteholders signatories hereto, amends the Restructuring Support Agreement dated as of March 30, 2012, among the Company, the Direct Subsidiaries and the Consenting Noteholders party thereto, as amended by the First Amendment to the Restructuring Support Agreement dated August 14, 2012, and as may be further amended from time to time (the “RSA”) to the extent, and on the terms and conditions, set forth herein. The Initial Consenting Noteholders, the Company and the Direct Subsidiaries are collectively referred to in this Second Amendment as the “Parties” and each (including each Initial Consenting Noteholder, individually) is a “Party”.

WHEREAS the Company, the Direct Subsidiaries and the Initial Consenting Noteholders are party to the RSA, pursuant to which the Initial Consenting Noteholders agreed to support a Restructuring Transaction that is to be effected pursuant to a plan of compromise or reorganization under the Companies’ Creditors Arrangement Act (Canada), R.S.C. 1985, c. C-36, as amended (the “CCAA” ) and the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (the “CBCA”);

AND WHEREAS the Company commenced proceedings under the CCAA on March 30, 2012, filed a Plan of Compromise and Reorganization pursuant to the CCAA and the CBCA concerning, affecting and involving the Company (as such Plan may be amended, restated or varied from time to time, the “Plan”) pursuant to the terms of the RSA on August 14, 2012, and filed a revised Plan on August 27, 2012;

AND WHEREAS the Ontario Superior Court of Justice (Commercial List) (the “Court”) granted a Plan Filing and Meeting Order (as such Order may be amended, restated or varied from time to time, the “Meeting Order”) pursuant to which, among other things, the Company was authorized to file the Plan;

AND WHEREAS the Plan was further amended as of October 19, 2012 (a copy of which is appended hereto as Appendix A) in accordance with the terms thereof and the terms of the Meeting Order;

AND WHEREAS the Parties wish to make certain amendments to the RSA in accordance with the terms thereof and in connection with the amended Plan;

AND WHEREAS capitalized terms used but not otherwise defined in this Second Amendment shall have the meanings ascribed to them in the RSA or the Plan;

AND WHEREAS all paragraphs referenced herein are to the RSA unless stated otherwise.

NOW THEREFORE, for good and valuable consideration, the receipt of which are hereby acknowledged, the Parties hereby amend the RSA as follows:

1. Amendments

(a) Section 1(a) of the RSA is hereby amended by inserting the words “and Section 1(1)” after the words “subject to Section 1(i)”.

(b) Section 1(a)(ii) of the RSA is hereby amended by inserting the words “, but excluding its shares in SFC Escrow Co. (as defined in the Plan)” after the words “including, without limitation, all of the shares of the Direct Subsidiaries”.

(c) Section 1(c) of the RSA is hereby amended by deleting the words “(including Claims of Junior Constituents)”.

(d) Section 1 of the RSA is hereby amended by inserting new Sections 1(l) and 1(m) as follows:

“(1) Pursuant to the Plan, at any time prior to the Plan Implementation Date (as defined in the Plan), whether prior to or after the granting of the Sanction Order (as defined in the Plan), and subject to the prior written consent of the Initial Consenting Noteholders, the Company may complete a sale of all or substantially all of the SFC Assets (as defined in the Plan) on teens that are acceptable to the Initial Consenting Noteholders (an “Alternative Sale Transaction”), provided that such Alternative Sale Transaction has been approved by the Court pursuant to section 36 of the CCAA on notice to the service list.

(m) In the event of an Alternative Sale Transaction, the consideration paid or payable to the Company pursuant to the Alternative Sale Transaction (the “Alternative Sale Transaction Consideration”) will be distributed to the Persons entitled to receive Newco Shares under the Plan, and such Persons shall receive the Alternative Sale Transaction Consideration in the same proportions and subject to the same terms and conditions as are applicable to the distribution of Newco Shares under the Plan.”

(e) Section 4(b)(i) of the RSA is hereby amended by inserting the words “or Alternative Sale Transaction” after the words “the Restructuring Transaction or Sale Transaction”.

(f) Section 5(c) of the RSA is hereby amended by inserting the words “or an Alternative Sale Transaction” after the words “in respect of a Restructuring Transaction or a Sale Transaction”.

(g) Section 5(c)(iv)(B) of the RSA is hereby amended by deleting the words “October 5, 2012” and replacing them with the words “November 29, 2012”.

(h) Section S(c)(iv)(C) of the RSA is hereby amended by deleting the words “October 12, 2012” and replacing them with the words “December 17, 2012”.

(i) Section 5(d) of the RSA is hereby amended by inserting the words “any Alternative Sale Transaction” after the words “any Sale Transaction”.

 

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(j) Section 5(n) of the RSA is hereby amended by inserting the words “or with the written consent of the Initial Consenting Noteholders and pursuant to Section 1(l) hereof’ after the words “in accordance with the Sale Process Procedures”.

(k) Section 6 of the RSA is hereby amended by inserting new Section 6(c) as follows:

“The obligations of the Consenting Noteholders under this Agreement (including, without limitation, the obligation to vote in favour of the Plan) shall be conditional upon the Initial Consenting Noteholders being satisfied with the scope of the releases set out in Section 7.1(h) of the Plan in respect of the advisors to SFC (including the SFC Advisors) and the advisors to the current board of directors of SFC.”

(l) Section 7(a)(i) of the RSA is hereby amended by deleting the words “October 12, 2012” and replacing them with the words by “December 17, 2012”, and by adding the words “or an Alternative Sale Transaction” after the words “in respect of a Restructuring Transaction”.

(m) Section 17(o) of the RSA is hereby amended by deleting “November 30, 2012” as the Outside Date and replacing it with January 15, 2013.

(n) Schedule B to the RSA is hereby amended by adding the following defined terms to the table of definitions:

 

Alternative Sale Transaction

   Section 1(1)

Alternative Sale Transaction Consideration

   Section 1(m)

(o) Schedule B to the RSA is hereby amended by deleting the definition of “Expense Reimbursement” in its entirety and replacing it with the following:

“Expense Reimbursement” means the aggregate amount of (i) the reasonable and documented fees and expenses of the Advisors, and Conyers, Dill & Pearman LLP in its capacity as legal advisor to the Initial Consenting Noteholders, pursuant to their respective engagement letters with the Company, and other advisors as may be agreed to by the Company and the Initial Consenting Noteholders and (ii) the reasonable fees and expenses of the Initial Consenting Noteholders incurred in connection with the negotiation and development of the RSA and the Plan, including in each case an estimated amount for any such fees and expenses expected to be incurred in connection with the implementation of the Plan, including in the case of (ii) above, an aggregate work fee

 

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of up to $5 million (which work fee may, at the request of the Monitor, be paid by any of the Subsidiaries instead of the Company).

(p) Schedule B to the RSA is hereby amended by adding the words “or the Alternative Sale Transaction” after the words “or the Sale Transaction” in the definition of “Transaction”

(q) Schedule B to the RSA is hereby amended by deleting the words “November 30, 2012” and replacing them with the words “January 15, 2013” in the definition of “Outside Date”.

2. Company Representations and Warranties. The Company and each of the Direct Subsidiaries hereby represent and warrant, severally and not jointly, to each Initial Consenting Noteholder (and the Company and each of the Direct Subsidiaries acknowledge that each Initial Consenting Noteholder is relying upon such representations and warranties) that:

(a) The execution, delivery and performance by the Company and each of the Direct Subsidiaries of this Second Amendment:

(i) are within its corporate, partnership, limited partnership or similar power, as applicable;

(ii) have been duly authorized by all necessary corporate, partnership, limited partnership or similar action, as applicable, including all necessary consents of the holders of its equity or other participating interests, where required; and

(iii) do not (A) contravene its or any of the Subsidiaries’ certificate of incorporation, articles of amalgamation, by-laws or limited partnership agreement or other constating documents, as applicable, (B) violate any judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to it or any of the Subsidiaries, properties or assets, or (C) result in the creation or imposition of any lien or encumbrance upon any of the property of the Company or any of its Subsidiaries.

(b) This Second Amendment constitutes a valid and binding obligation of the Company and each of the Direct Subsidiaries enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally or by general principles of equity, whether asserted in a proceeding in equity or law.

(c) The board of directors of the Company has: (i) reviewed this Second Amendment; (ii) determined, in its business judgment, that the transactions contemplated by this Second Amendment are in the best interests of the Company; and (iii) approved this Second Amendment.

3. Initial Consenting Holder Representations and Warranties. Each Initial Consenting Noteholder hereby represents and warrants, severally and not jointly, to the Company and the Direct Subsidiaries (and acknowledges that each of the Company and the Direct Subsidiaries are relying upon such representations and warranties) that:

 

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(a) The execution, delivery and performance by the Initial Consenting Noteholder of its obligations under this Second Amendment:

(i) are within its corporate, partnership, limited partnership or similar power, as applicable;

(ii) have been duly authorized, by all necessary corporate, partnership, limited partnership or similar action, as applicable, including all necessary consents of the holders of its equity or other participating interests where required; and

(iii) do not (A) contravene its certificate of incorporation, articles, by-laws, membership agreement, limited partnership agreement or other constating documents, as applicable, (B) violate any judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to it or any of its assets, or (C) conflict with or result in the breach of, or constitute a default under, or require a consent under, any contract material to the Initial Consenting Noteholder.

(b) This Second Amendment constitutes a valid and binding obligation of the Initial Consenting Noteholder enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally or by general principles of equity, whether asserted in a proceeding in equity or law.

4. Full Force and Effect. The RSA shall not be amended or otherwise modified by this Second Amendment except as set forth in Section 1 of this Second Amendment. Except as amended by this Second Amendment, the RSA shall continue to be and shall remain in full force and effect in accordance with its terms, and the Parties hereto hereby ratify and confirm the RSA in all respects, as amended hereby. All references to the “Agreement”, “herein”, “hereof’, “hereunder” or words of similar import in the RSA shall be deemed to include the RSA as amended by this Second Amendment. In the case of a conflict between the provisions contained in the text of the RSA (as amended hereby) and the Plan, the provisions of the Plan shall govern.

5. Reservation of Rights. Nothing contained in this Second Amendment constitutes a waiver of any Default that may heretofore or hereafter occur or have occurred and be continuing under the RSA. Except as expressly provided herein, the execution and delivery of this Second Amendment does not: (i) extend the terms of the RSA; (ii) give rise to any obligation on the part of any Party to extend, modify, alter, amend or waive any term or condition of RSA or otherwise prejudice any rights or remedies which any Party now has or may have in the future; or (iii) give rise to any defences, setoffs, reductions or counterclaims to any Party right to enforce, exercise and enjoy the benefits of their respective rights and remedies under the RSA.

6. Miscellaneous

(a) The headings of the Sections of this Second Amendment have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

 

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(b) Unless the context otherwise requires, words importing the singular shall include the plural and vice versa and words importing any gender shall include all genders.

(c) This Second Amendment shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, without regard to principles of conflicts of law. Each Party submits to the jurisdiction of the courts of the Province of Ontario in any action or proceeding arising out of or relating to this Second Amendment.

(d) This Second Amendment may be signed in counterparts, each of which, when taken together, shall be deemed an original. Execution of this Second Amendment is effective if a signature is delivered by facsimile transmission or electronic (e.g., pdf) transmission.

[Remainder of this page intentionally left blank; signature pages follow]

 

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Execution Copy

Signature Page to Second Amendment to the Restructuring Support Agreement

This Second Amendment has been agreed and accepted on the date first written above.

 

SINO-FOREST CORPORATION
By:  

(signed) Judson Martin

  Name: Judson Martin
  Title: Authorized Signatory

 

By:  

 

  Name:
  Title:

 

SINO-PANEL HOLDINGS LIMITED

By:

 

(signed) Judson Martin

  Name: Judson Martin
  Title: Authorized Signatory

 

By:  

 

  Name:
  Title:

 

SINO-GLOBAL HOLDINGS INC.
By:  

(signed) Judson Martin

  Name: Judson Martin
  Title: Authorized Signatory

 

By:  

 

  Name:
  Title:

 

SINO-PANEL CORPORATION
By:  

(signed) Judson Martin

  Name: Judson Martin
  Title: Authorized Signatory

 

By:  

 

  Name:
  Title:

Execution Copy

Signature Page to Second Amendment to the Restructuring Support Agreement

 

SINO-WOOD PARTNERS, LIMITED
By:  

(signed) Judson Martin

  Name: Judson Martin
  Title: Authorized Signatory

 

By:  

 

  Name:
  Title:

 

SINO-CAPITAL GLOBAL INC.
By:  

( signed) Judson Martin)

  Name: Judson Martin
  Title: Authorized Signatory

 

By:  

 

  Name:
  Title:

 

SINO-FOREST INTERNATIONAL

(BARBADOS) CORPORATION

By:  

(signed) Judson Martin

  Name: Judson Martin
  Title: Authorized Signatory
By:  

 

  Name:
  Title:

 

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Execution Copy

Signature Page to Second Amendment to the Restructuring Support Agreement

 

SINO-FOREST RESOURCES INC.
By:  

(signed) Judson Martin

  Name: Judson Martin
  Title: Authorized Signatory
By:  

 

  Name:
  Title:

 

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Execution Copy

Signature Page to Second Amendment to the Restructuring Support Agreement

STRICTLY CONFIDENTIAL

 

Name of Initial Consenting Noteholder:  

[REDACTED]

  Per:  

[REDACTED]

    Name: [Redacted]
    Title: [Redacted]

STRICTLY CONFIDENTIAL

 

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Exhibit T3E2

 

LOGO

Court File No. CV-12-9667-00CL

IN THE MATTER OF THE COMPANIES’ CREDITORS

ARRANGEMENT ACT , R.S.C. 1985, c. C-36, AS AMENDED

AND IN THE MATTER OF A PLAN OF COMPROMISE AND

ARRANGEMENT OF SINO-FOREST CORPORATION

PLAN SUPPLEMENT

to the

PLAN OF COMPROMISE AND REORGANIZATION DATED OCTOBER 19, 2012

pursuant to the Companies’ Creditors Arrangement Act

and the Canada Business Corporations Act

concerning, affecting and involving

SINO-FOREST CORPORATION

November 21, 2012

NOTICE OF FILING OF PLAN SUPPLEMENT

PLEASE TAKE NOTICE that, pursuant to a Plan Filing and Meeting Order of the Ontario Superior Court of Justice dated August 31, 2012 (the “Meeting Order”) relating to a meeting (the “Meeting”) to consider a Plan of Compromise and Reorganization dated October 19, 2012 (as such Plan may be modified, amended, varied or supplemented in accordance with its terms, the “Plan”) filed by Sino-Forest Corporation (the “Applicant”) pursuant to the provisions of the Companies’ Creditors Arrangement Act (Canada) and Section 191 of the Canada Business Corporations Act and as set forth in the Meeting Information Statement dated October 20, 2012 pertaining to the Plan (the “Information Statement”), the Applicant must serve and file this Plan supplement (as such Plan supplement may be thereafter modified, amended, varied or supplemented in accordance with the Plan, this “Plan Supplement”), and the Monitor must post the Plan Supplement on the Website, no later than seven (7) days prior to the Meeting. All capitalized terms not otherwise defined in this Plan Supplement shall have the meanings ascribed to them in the Plan.

PLEASE TAKE FURTHER NOTICE that this Plan Supplement supplements the Plan with (A) a summary of the terms of the Litigation Trust, (B) a draft of the Litigation Trust Agreement, (C) a summary of certain information concerning Newco, including information relating to Newco’s governance and management and a summary of the terms of the Newco Shares, (D) a description of the terms of the Newco Notes, (E) a summary of the constitution and governance of SFC Escrow Co., (F) information concerning certain reserves and other amounts relating to the Plan, and (G) a draft of the Plan Sanction Order, each of which is attached hereto as Exhibit A, B, C, D, E, F and G, respectively.

PLEASE TAKE FURTHER NOTICE that you are advised and encouraged to read this Plan Supplement in conjunction with the Information Statement, the Plan and the Meeting Order.

PLEASE TAKE FURTHER NOTICE that a true and complete copy of the Plan Supplement is attached hereto.

PLEASE TAKE FURTHER NOTICE that copies of the Plan Supplement as well as the Plan, the Information Statement and the Meeting Order may be obtained from the Monitor’s website at http://cfcanada.fticonsulting.com/sfc/.

EXHIBIT A

SUMMARY OF TERMS OF LITIGATION TRUST

Overview

The Litigation Trust will be created pursuant to the Plan on the Plan Implementation Date. Pursuant to the agreement governing the Litigation Trust, a draft form of which is attached as Exhibit B to the Plan Supplement (the “ Litigation Trust Agreement ”), the Litigation Trustee will hold the Litigation Trust Claims and the other Litigation Trust Assets for the benefit of the Affected Creditors with Proven Claims and the Noteholder Class Action Claimants entitled to receive Litigation Trust Interests under the Plan (the “ Litigation Trust Beneficiaries ”). Capitalized terms used in this Exhibit A but not otherwise defined herein have the meaning ascribed to such terms in the Litigation Trust Agreement.

Transfer of Assets and Rights to Litigation Trust

On the Plan Implementation Date, each of the Litigation Trust Claims will be transferred to the Litigation Trustee. The “Litigation Trust Claims” to be held by the Litigation Trustee pursuant to the Litigation Trust Agreement are defined in the Litigation Trust Agreement as any and all claims, actions, causes of action, demands, suits, rights, entitlements, litigation, arbitration, proceeding, hearing or complaint, whether known or unknown, reduced to judgment or not reduced to judgment, liquidated or unliquidated, contingent or non-contingent, matured or unmatured, disputed or undisputed, secured or unsecured, assertable directly or derivatively, in law, equity or otherwise, based in whole or in part upon any act or omission or other event occurring at any time, whether before, on or after March 30, 2012, which may be asserted, by or on behalf of (i) SFC against any and all third parties; or (ii) the Noteholders or any representative thereof (including the Trustee) against any and all third parties in connection with any the Notes issued by SFC, other than Noteholder Class Action Claims. However, the Litigation Trust Claims will not include any claim or cause of action that is released pursuant to Sections 7.1 of the Plan. The Litigation Trust Agreement defines “Litigation Trust Assets” as the Litigation Trust Claims, the Litigation Funding Amount, and any other assets acquired by the Litigation Trust on or after the Plan Implementation Date pursuant to the Litigation Trust Agreement or the Plan.

Upon the creation of the Litigation Trust, SFC will transfer the Litigation Funding Amount to the Litigation Trustee to finance the operations of the Litigation Trust. The Litigation Funding Amount is a cash amount acceptable to SFC, the Monitor and the Initial Consenting Noteholders to be contributed by SFC to the Litigation Trustee for purposes of funding the Litigation Trust on the Plan Implementation Date. The parties have not yet determined the amount of the Litigation Funding Amount.

Duties of Litigation Trustee

Subject to the terms of the Litigation Trust Agreement, the Litigation Trustee, upon direction of the Litigation Trust Board (whose decisions, approvals or other actions shall require a majority

vote), in the exercise of its reasonable business judgment, will, in an efficient and responsible manner, prosecute the Litigation Trust Claims and preserve and enhance the value of the Litigation Trust Assets. The efficient and responsible prosecution of the Litigation Trust Claims may be accomplished either through the prosecution, compromise and settlement, abandonment or dismissal of any or all claims, rights or causes of action, or otherwise, as determined by the Litigation Trustee and the Litigation Trustee Board in accordance with the terms of the Litigation Trust Agreement and the exercise of their collective reasonable best judgement. The Litigation Trustee, upon direction by the Litigation Trust Board, and except as set forth in the Litigation Trust Agreement, will have the absolute right to pursue, settle and compromise or not pursue any and all Litigation Trust Claims as it determines is in the best interests of the Litigation Trust Beneficiaries, and consistent with the purposes of the Litigation Trust, and the Litigation Trustee will have no liability for the outcome of any such decision except for any damages caused by its gross negligence, bad faith, wilful misconduct or knowing violation of law.

Litigation Trustee

The Litigation Trustee will be determined by SFC and the Initial Consenting Noteholders prior to the Plan Implementation Date, with the consent of the Monitor, to serve as trustee of the Litigation Trust pursuant to and in accordance with the terms thereof. The Litigation Trustee will be appointed as trustee of the Litigation Trust effective as of the Plan Implementation Date. The parties have not yet determined who will serve as Litigation Trustee.

Litigation Trust Board

A litigation trust board (the “ Litigation Trust Board ”) will be established and consist of three Persons. The three members of the Litigation Trust Board will be appointed to serve in such capacity pursuant to the Sanction Order. The members of the Litigation Trust Board will have the right to direct and remove the Litigation Trustee in accordance with the Litigation Trust Agreement, and will have the right to operate and manage the Litigation Trust in a manner that is not inconsistent with the terms of the Litigation Trust Agreement. No holder of Litigation Trust Interests (except to the extent such holder is a member of the Litigation Trust Board) will have any consultation or approval rights whatsoever in respect of management and operation of the Litigation Trust. The parties have not yet determined who will serve as members of the Litigation Trust Board.

Interests of Holders of Litigation Trust Interests

The ownership of a Litigation Trust Interest will not entitle any holder of Litigation Trust Interests to any title in or to the assets of the Litigation Trust or to any right to call for a partition or division of the assets of the Litigation Trust or to require an accounting. The entitlements of the holders of Litigation Trust Interests (and the beneficial interests therein) will not be represented by certificates, securities, receipts or in any other form or manner whatsoever, except as maintained on the books and records of the Litigation Trust by the Litigation Trustee or the Registrar. No transfer, sale assignment, distribution, exchange, pledge, hypothecation, mortgage or other disposition (each, a “Transfer”) of a Litigation Trust Interest may be effected or made.

 

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However, Transfers of a Litigation Trust Interest may be made pursuant to the Plan or by operation of law or by will or the laws of descent and distribution.

Canada Federal Income Tax Matters Relating to Litigation Trust Interests

The treatment for Canadian federal income tax purposes, pursuant to the Tax Act, of the Litigation Trust and of a Holder’s Litigation Trust Interest, including the holding and disposition thereof and the receipt of distributions is unclear and will depend, in part, on the residence of the Litigation Trust. The residence of the Litigation Trust for purposes of the Tax Act will depend on a number of factors, including the location where the Litigation Trust is managed and controlled. Pursuant to the Tax Proposals, where the management and control of the Litigation Trust is located outside Canada, the Litigation Trust may still be deemed, for certain purposes of the Tax Act, to be resident in Canada.

To the extent the Litigation Trust is, or is deemed to be, a resident of Canada for purposes of the Tax Act, and realizes any income or capital gain with respect to the Litigation Trust Claims transferred to the Litigation Trust, the Litigation Trust may be liable for Canadian federal income tax thereon. Where the Litigation Trust is subject to Canadian federal income tax and is a resident of Canada solely by virtue of being deemed a resident, Canadian Holders of beneficial interests in the Litigation Trust have, jointly and severally, or solidarily, with the Litigation Trust and with each other, the rights and obligations of the Litigation Trust under Divisions I and J of the Tax Act, including in respect of the filing of returns and the payment of income tax payable by the Litigation Trust, and may be subject to administration and enforcement proceedings under Part XV of the Tax Act in respect of those rights and obligations, subject to the recovery limit rules in proposed section 94 of the Tax Act. To the extent that the income or gains of the Litigation Trust are paid or made payable to the beneficiaries of the Litigation Trust in a particular taxation year, the beneficiaries may be liable for Canadian federal income tax in respect of such amounts paid or made payable and a deduction in computing income may be available to the Litigation Trust.

To the extent the Litigation Trust is, or is deemed to be, a resident of Canada for Canadian income tax purposes, net income of the Litigation Trust distributed to non-residents of Canada will be subject to withholding tax under the Canadian Tax Act at a 25% rate, subject to potential reduction under an applicable tax treaty between Canada and the beneficiary’s jurisdiction of residence.

Holders who will receive an interest in the Litigation Trust should consult their own tax advisors with respect to both Canadian and foreign income tax considerations.

 

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EXHIBIT B

DRAFT OF LITIGATION TRUST AGREEMENT

EXHIBIT B

DRAFT OF LITIGATION TRUST AGREEMENT

SINO-FOREST LITIGATION TRUST AGREEMENT

TABLE OF CONTENTS

 

          Page  

ARTICLE 1 ESTABLISHMENT OF THE LITIGATION TRUST

     2   

1.1

   Settling the Litigation Trust and Funding Expenses of the Litigation Trust      2   

1.2

   Establishment of Litigation Trust and Appointment of the Litigation Trustee      2   

1.3

   Transfer of Assets and Rights to the Litigation Trustee      3   

1.4

   Title to Litigation Trust Assets      4   

1.5

   Nature and Purpose of the Litigation Trust      5   

1.6

   Incorporation of Plan      6   

ARTICLE 2 LITIGATION TRUST INTERESTS

     6   

2.1

   Allocation of Litigation Trust Interests      6   

2.2

   Interests Beneficial Only      7   

2.3

   Evidence of Beneficial Interests      7   

2.4

   Securities Law Registration      7   

2.5

   No Transfers      7   

2.6

   Absolute Owners      8   

ARTICLE 3 THE LITIGATION TRUSTEE

     8   

3.1

   Litigation Trust Proceeds      8   

3.2

   Collection of Litigation Trust Proceeds      8   

3.3

   Payment of Litigation Trust Expenses      8   

3.4

   Distributions      9   

3.5

   Tenure, Removal, and Replacement of the Litigation Trustee      9   

3.6

   Acceptance of Appointment by Successor Trustee      11   

3.7

   Regular Meetings of the Litigation Trustee and the Litigation Trust Board      11   

3.8

   Special Meetings of the Litigation Trustee and the Litigation Trust Board      11   

3.9

   Notice of, and Waiver of Notice for Litigation Trustee and Litigation Trust Board Meeting      11   

3.10

   Manner of Acting      12   

3.11

   Role of the Litigation Trustee      12   

3.12

   Authority of Litigation Trustee      12   

3.13

   Limitation of Litigation Trustee’s Authority      14   

3.14

   Books and Records      15   

3.15

   Inquiries into Trustee’s Authority      15   

3.16

   Compliance with Laws      15   

3.17

   Compensation of the Litigation Trustee      15   

3.18

   Reliance by Litigation Trustee      16   

3.19

   Investment and Safekeeping of Litigation Trust Assets      16   

3.20

   Standard of Care; Exculpation      16   

ARTICLE 4 LITIGATION TRUST BOARD

     17   

4.1

   Litigation Trust Board      17   

4.2

   Authority of the Litigation Trust Board      17   

4.3

   Regular Meetings of the Litigation Trust Board      17   

 

(i)

4.4

   Special Meetings of the Litigation Trust Board      17   

4.5

   Manner of Acting      17   

4.6

   Litigation Trust Board’s Action Without a Meeting      18   

4.7

   Notice of, and Waiver of Notice for Litigation Trust Board Meetings      19   

4.8

   Telephonic Communications      19   

4.9

   Tenure, Removal and Replacement of the Members of the Litigation Trust Board      19   

4.10

   Compensation of the Litigation Trust Board      20   

4.11

   Standard of Care; Exculpation      21   

ARTICLE 5 TAX MATTERS

     21   

5.1

   [Federal Income Tax Treatment of the Litigation Trust      21   

5.2

   Allocations of Litigation Trust Taxable Income      23   

5.3

   Canadian Tax Treatment of Distributions by Litigation Trustee      23   

ARTICLE 6 DISTRIBUTIONS

     23   

6.1

   Distributions; Withholding      23   

6.2

   Manner of Payment or Distribution      24   

6.3

   Cash Distributions      24   

ARTICLE 7 INDEMNIFICATION

     24   

7.1

   Indemnification of Litigation Trustee and the Litigation Trust Board      24   

ARTICLE 8 REPORTING OBLIGATIONS OF LITIGATION TRUSTEE

     25   

8.1

   Reports      25   

ARTICLE 9 TERM; TERMINATION OF THE LITIGATION TRUST

     26   

9.1

   Term; Termination of the Litigation Trust      26   

9.2

   Continuance of Trust for Winding Up      26   

ARTICLE 10 AMENDMENT AND WAIVER

     27   

10.1

   Amendment and Waiver      27   

ARTICLE 11 MISCELLANEOUS PROVISIONS

     27   

11.1

   Intention of Parties to Establish the Litigation Trust      27   

11.2

   Laws as to Construction      27   

11.3

   Jurisdiction      27   

11.4

   Severability      28   

11.5

   Notices      28   

11.6

   Fiscal Year      29   

11.7

   Construction; Usage      29   

11.8

   Counterparts; Facsimile; PDF      30   

11.9

   Confidentiality      30   

11.10

   Entire Agreement      31   

11.11

   No Bond      31   

11.12

   Effectiveness      31   

11.13

   Successor and Assigns      31   

11.14

   No Execution      31   

11.15

   Irrevocability      32   

 

(ii)

THIS LITIGATION TRUST AGREEMENT (this “ Agreement ”), dated as of the Effective Date, is entered into by and among:

 

  1. Sino-Forest Corporation (“ SFC ”); and

 

  2. [ — ] , as trustee of the Litigation Trust (the “ Litigation Trustee ”).

PRELIMINARY STATEMENT

SFC has filed that certain Plan of Compromise and Arrangement dated — , 2012 in the Ontario Superior Court of Justice (the “ CCAA Court ”) pursuant to the provisions of the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36 (the “ CCAA ”) (Case No. CV-12-9667-CL) (together with any supplement to such Plan and the exhibits and schedules thereto, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof, the “ Plan ”).

On March 30, 2012 (the “ Filing Date ”), SFC commenced reorganization proceedings under the CCAA before the CCAA Court.

On — , 2012, the CCAA Court entered the Sanction Order approving the Plan.

The Litigation Trust is created in accordance with the laws of Ontario.

The Litigation Trust is created pursuant to this Agreement in order to effectuate certain provisions of the Plan and the Sanction Order and, in accordance therewith, the Litigation Trustee will hold the Litigation Trust Claims and the other Litigation Trust Assets for the benefit of the Litigation Trust Beneficiaries.

In this Agreement, “ Litigation Trust Claims ” means any and all claims, actions, causes of action, demands, suits, rights, entitlements, litigation, arbitration, proceeding, hearing or complaint, whether known or unknown, reduced to judgment or not reduced to judgment, liquidated or unliquidated, contingent or non-contingent, matured or unmatured, disputed or undisputed, secured or unsecured, assertable directly or derivatively, in law, equity or otherwise, based in whole or in part upon any act or omission or other event occurring at any time, whether before, on or after the Filing Date (the “ Causes of Action ”) which may be asserted, by or on behalf of (i) SFC against any and all third parties; or (ii) the Noteholders or any representative thereof (including the Trustees) against any and all third parties in connection with any of the Notes issued by SFC, other than Noteholder Class Action Claims; provided, however, that in no event shall Litigation Trust Claims include any Claim or Cause of Action that is released pursuant to Sections 7.1 of the Plan.

In this Agreement, “ Litigation Trust Assets ” means the Litigation Trust Claims, the Litigation Funding Amount, and any other assets acquired by the Litigation Trust on or after the Effective Date pursuant to this Agreement or the Plan.

The Litigation Trust is established for the sole purpose of liquidating and distributing the Litigation Trust Assets pursuant to the Plan and this Agreement with no objective to continue or engage in the conduct of a trade or business.

The Litigation Trust is established for the (i) benefit of the Affected Creditors with Proven Claims and the Noteholder Class Action Claimants entitled to receive Litigation Trust Interests under the Plan (individually, a “ Litigation Trust Beneficiary ” and collectively, the “ Litigation Trust Beneficiaries ”) and (ii) pursuit of all Litigation Trust Claims.

The Litigation Trustee has been duly appointed pursuant to the Sanction Order and Section 1.2(b) of this Agreement.

Unless the context otherwise requires, capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed to them in the Plan. Schedule A to this Agreement sets forth an index of terms that are defined in this Agreement.

AGREEMENT

NOW, THEREFORE , in consideration of the promises and the mutual covenants and agreements contained herein and in the Plan, SFC, the Litigation Trustee and the Litigation Trust Board, intending to be legally bound, agree as follows:

ARTICLE 1

ESTABLISHMENT OF THE LITIGATION TRUST

1.1 Settling the Litigation Trust and Funding Expenses of the Litigation Trust

SFC shall settle the Litigation Trust and shall transfer the Litigation Funding Amount to the Litigation Trustee by way of a loan or otherwise to finance the operations of the Litigation Trust. The Litigation Trust Claims Transferors shall have no other funding obligations with respect to the Litigation Trust.

1.2 Establishment of Litigation Trust and Appointment of the Litigation Trustee

 

  (a) Pursuant to the Plan, the Litigation Trust is hereby established on the date and at the time set out in section 6.4 of the Plan, and shall be known as the “Sino-Forest Litigation Trust” on behalf of and for the benefit of the Litigation Trust Beneficiaries.

 

  (b) The Litigation Trustee is hereby appointed as trustee of the Litigation Trust effective as of the Plan Implementation Date (the “Effective Date” ) and agrees to accept and hold the Litigation Trust Assets in trust for the Litigation Trust Beneficiaries, subject to the terms of this Agreement. The Litigation Trustee (and each successor trustee thereto serving from time to time hereunder) shall have all the rights, powers and duties set forth herein and pursuant to applicable law for accomplishing the purposes of the Litigation Trust.

 

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1.3 Transfer of Assets and Rights to the Litigation Trustee

 

  (a) On the Effective Date, pursuant to the Plan and the Sanction Order each of the Litigation Trust Claims shall be deemed to be irrevocably transferred, assigned and delivered to the Litigation Trustee (i) rights, title and interests in and to the Litigation Trust Claims (and with respect to the Indenture Trustees, all of the rights, title and interests of the Noteholders in and to the Litigation Trust Claims on behalf of the Noteholders), free and clear of any and all liens, claims (other than claims in the nature of setoff or recoupment), encumbrances or interests of any kind in such property of any other Person, and (ii) all respective rights, title and interests in and to any lawyer-client privilege, work product privilege or other privilege or immunity attaching to any documents or communications (whether written or oral) associated with the Litigation Trust Claims (collectively, the “ Privileges ”) (and with respect to the Indenture Trustees, all of the rights, title and interests of the Noteholders in and to the Privileges on behalf of the Noteholders), all of which shall, and shall be deemed to, vest in the Litigation Trustee for the benefit of the Litigation Trust Beneficiaries. In no event shall any part of the Litigation Trust Claims revert to or be distributed to SFC or the Noteholders (or any representative thereof (including the Trustees). None of the foregoing transfers to the Litigation Trustee shall constitute a merger or consolidation of the respective Litigation Trust Claims, each of which shall retain its separateness following the transfer for all purposes relevant to the prosecution thereof. The Litigation Trustee’s receipt of the Privileges shall be without waiver in recognition of the joint and/or successor interest in prosecuting claims on behalf of the Litigation Trust Claims Transferors.

 

  (b) Subject to Section 1.3(c), after the Effective Date, SFC shall (i) deliver or cause to be delivered to the Litigation Trustee, documents reasonably requested and related to the Litigation Trust Claims (including those maintained in electronic format), whether held by SFC or its employees, agents, advisors, counsel, accountants, or other professionals and (ii) provide reasonable access to such employees, agents, advisors, counsel, accountants or other professionals with knowledge of matters relevant to the Litigation Trust Claims. Where original documents are required, SFC will make reasonable efforts to make such original documents available. For the avoidance of doubt, the rights of the Litigation Trustee pursuant to this Section 1.3(b) shall include the right to demand or compel the production of copies of any such documents or information from any party, committee or person who may have produced such documents for or on behalf of SFC or any committee appointed by SFC or its board of directors.

 

  (c)

Any documents or information delivered by SFC to the Litigation Trustee pursuant to Section 1.3(b) (i) shall be used strictly for the purposes of advancing the Litigation Trust Claims and for no other purpose, (ii) shall not, except as may be required by law, be used for any purpose in relation to any regulatory proceedings involving the Named Directors and Officers, and (iii) shall be subject to the continuation of any privilege attaching to such documents, including but

 

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  not limited to lawyer-client privilege, litigation privilege, and common interest privilege, which privileges the Litigation Trustee agrees to maintain and uphold.

 

  (d) Where documents, information and/or access is requested of third party agents, advisors, lawyers, accountants or other professionals (“Third Party Disclosers”), the Litigation Trustee shall pay such reasonable fees and costs of such Third Party Disclosers as are necessary for them to comply with the requests of the Litigation Trustee.

 

  (e) SFC hereby agrees at any time and from time to time on and after the Effective Date, (i) at the reasonable request of the Litigation Trustee, to execute and/or deliver any instruments, documents, books, and records (including those maintained in electronic format and original documents as may be needed), (ii) to take, or cause to be taken, all such further actions as the Litigation Trustee may reasonably request in order to evidence or effectuate the transfer of the Litigation Trust Claims and the Privileges to the Litigation Trustee contemplated hereby and by the Plan and to otherwise carry out the intent of the parties hereunder, and (iii) to cooperate with the Litigation Trustee in the prosecution of Litigation Trust Claims to the extent reasonable.

 

  (f) The Litigation Trustee agrees that it will accommodate reasonable requests by Named Directors and Officers (and their agents, advisors, lawyers, accountants or other professionals) to access, at their expense, copies or originals of any documents obtained by the Litigation Trustee pursuant to the terms of this Agreement, for the purposes of defending any civil, regulatory or other proceedings involving the Named Directors and Officers or in connection with their financial affairs.

1.4 Title to Litigation Trust Assets

 

  (a) Upon the transfer of the Litigation Trust Claims to the Litigation Trust pursuant to the Plan, the Sanction Order and this Agreement, SFC and any other holders of the Litigation Trust Claims (the “ Litigation Trust Claims Transferors ”) shall have no interest in or with respect to the Litigation Trust Assets, and the Litigation Trustee shall succeed to all of the Litigation Trust Claims Transferors’ rights, title and interests in and to the Litigation Trust Claims.

 

  (b) Notwithstanding anything in the Plan or in this Agreement to the contrary, the transfer of the Litigation Trust Claims to the Litigation Trustee does not diminish, and fully preserves, any defences or privileges a defendant would have if such Litigation Trust Claims had been retained by the Litigation Trust Claims Transferors.

 

  (c)

To the extent that any Litigation Trust Assets cannot be transferred to the Litigation Trustee because of a restriction on transferability under applicable non-bankruptcy law, such Litigation Trust Assets shall be deemed to have been retained by the applicable Litigation Trust Claims Transferors, and the Litigation Trustee shall be deemed to have been designated as a representative of such

 

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  Litigation Trust Claims Transferors to enforce and pursue such Litigation Trust Assets on behalf of such Litigation Trust Claims Transferors, and all proceeds, income and recoveries on account of any such Litigation Trust Assets shall be assets of the Litigation Trust and paid over thereto immediately upon receipt by the Litigation Trust Claims Transferors, or any other Person. Notwithstanding the foregoing, but subject to Sections 1.1 and 3.4 of this Agreement, all net proceeds, income, and recoveries of or on account of such Litigation Trust Assets shall be transferred to the Litigation Trust to be distributed to the holders of the Litigation Trust Interests consistent with the terms of this Agreement.

1.5 Nature and Purpose of the Litigation Trust

 

  (a) Purpose . The Litigation Trust is organized and established as a trust pursuant to which the Litigation Trustee, subject to the terms and conditions contained herein, is to (i) hold the assets of the Litigation Trust and (ii) oversee the efficient prosecution of the Litigation Trust Claims, on the terms and conditions set forth herein.

 

  (b) Actions of the Litigation Trustee . Subject to the terms of this Agreement, the Litigation Trustee, upon direction of the Litigation Trust Board, and the exercise of their collective reasonable business judgment, shall, in an efficient and responsible manner prosecute the Litigation Trust Claims and preserve and enhance the value of the Litigation Trust Assets. The efficient and responsible prosecution of the Litigation Trust Claims may be accomplished either through the prosecution, compromise and settlement, abandonment or dismissal of any or all claims, rights or causes of action, or otherwise, as determined by the Litigation Trustee and the Litigation Trustee Board in accordance with the terms of this Agreement and the exercise of their collective reasonable best judgement. The Litigation Trustee, upon direction by the Litigation Trust Board, and except as set forth in Section 3.12 herein, shall have the absolute right to pursue, settle and compromise or not pursue any and all Litigation Trust Claims as it determines is in the best interests of the Litigation Trust Beneficiaries, and consistent with the purposes of the Litigation Trust, and the Litigation Trustee shall have no liability for the outcome of any such decision except for any damages caused by gross negligence, bad faith, wilful misconduct or knowing violation of law.

 

  (c)

Limitation on Actions Against Named Directors and Officers . From and after the Plan Implementation Date, to the extent that the Litigation Trust Claims include rights of action against a Named Director or Officer, (a) the Litigation Trustee may only commence or prosecute an action for a Non-Released D&O Claim against a Named Director or Officer if the Litigation Trustee has first obtained (i) the consent of the Monitor or (ii) leave of the Court on notice to the applicable Directors and Officers, SFC, the Monitor, the Initial Consenting Noteholders and any applicable insurers; and (b) in connection with any action brought or prosecuted by the Litigation Trustee against a Named Director or Officer asserting a Section 5.1(2) D&O Claim or a Conspiracy Claim, the Litigation Trustee shall, as against the Named Directors and Officers, in relation to such claims, be irrevocably limited to recovery solely from the proceeds of the

 

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  Insurance Policies paid or payable on behalf of SFC or its Directors or Officers, and shall have no right to, and shall not, directly or indirectly, make any claim or seek any recoveries from any of the Named Directors and Officers other than enforcing the Litigation Trustee’s rights to be paid from the proceeds of an Insurance Policy by the applicable insurer(s). Any defined term used in this subparagraph not defined in this Agreement shall be as defined in the Plan.

 

  (d) Relationship . This Agreement is intended to create a trust and a trust relationship and to be governed and construed in all respects as a trust. The Litigation Trust is not intended to be, and shall not be deemed to be or treated as, a general partnership, limited partnership, joint venture, corporation, joint stock company or association, nor shall the Litigation Trustee, or the Litigation Trust Board (or any of its members or ex officio members), or the Litigation Trust Beneficiaries, or any of them, for any purpose be, or be deemed to be or treated in any way whatsoever to be, liable or responsible hereunder as partners or joint venturers. The relationship of the Litigation Trust Beneficiaries, on the one hand, to the Litigation Trustee and the Litigation Trust Board, on the other, shall not be deemed a principal or agency relationship, and their rights shall be limited to those conferred upon them by this Agreement.

 

  (e) No Waiver of Claims . The Litigation Trustee may enforce all rights to commence and pursue, as appropriate, any and all Litigation Trust Claims after the Effective Date. The Litigation Trustee shall have, retain, reserve, and be entitled to assert all such Litigation Trust Claims, rights of setoff, and other legal or equitable defences which the Litigation Trust Claims Transferors had on the Effective Date fully as if the Litigation Trust Claims had not been transferred to the Litigation Trustee in accordance with the Plan, the Sanction Order and this Agreement, and all of the Litigation Trust Claims Transferors’ legal and equitable rights - may be asserted after the Effective Date. Nothing in this Agreement shall be construed in a manner that is inconsistent with the Plan, the Sanction Order or any other orders made by the CCAA Court.

1.6 Incorporation of Plan

The Plan and the Sanction Order are each hereby incorporated into this Agreement and made a part hereof by this reference; provided, however, to the extent that there is conflict between the provisions of this Agreement, the provisions of the Plan, and/or the Sanction Order, each such document shall have controlling effect in the following rank order: (1) the Sanction Order; (2) the Plan; and (3) this Agreement.

ARTICLE 2

LITIGATION TRUST INTERESTS

2.1 Allocation of Litigation Trust Interests

The Litigation Trust Interests shall be allocated pursuant to the Plan.

 

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2.2 Interests Beneficial Only

The ownership of a Litigation Trust Interest shall not entitle any holder of Litigation Trust Interests to any title in or to the assets of the Litigation Trust as such (which title shall be vested in the Litigation Trustee) or to any right to call for a partition or division of the assets of the Litigation Trust or to require an accounting.

2.3 Evidence of Beneficial Interests

The entitlements of the holders of Litigation Trust Interests (and the beneficial interests therein) will not be represented by certificates, securities, receipts or in any other form or manner whatsoever, except as maintained on the books and records of the Litigation Trust by the Litigation Trustee or the Registrar. The death, incapacity or bankruptcy of any Litigation Trust Beneficiary during the term of the Litigation Trust shall not (i) operate to terminate the Litigation Trust, (ii) entitle the representatives or creditors of the deceased party to an accounting, (iii) entitle the representatives or creditors of the deceased party to take any action in the CCAA Court or elsewhere for the distribution of the Litigation Trust Assets or for a partition thereof or (iv) otherwise affect the rights and obligations of any of the Litigation Trust Beneficiaries hereunder.

2.4 Securities Law Registration

It is intended that the Litigation Trust Interests shall not constitute “securities.” To the extent the Litigation Trust Interests are deemed to be “securities,” the issuance of Litigation Trust Interests to Litigation Trust Beneficiaries hereunder or under the Plan (and any redistribution of any of the foregoing pursuant to the Plan or otherwise) shall be exempt from the prospectus and registration requirements of any applicable provincial laws pursuant to section 2.11 of National Instrument 45-106 – Prospectus and Registration Exemptions. If the Litigation Trustee determines, with the advice of counsel, that the Litigation Trust is required to comply with registration and/or reporting requirements of any applicable securities laws, then the Litigation Trustee shall, after consultation with the Litigation Trust Board, take any and all actions to comply with such registration and reporting requirements, if any, to the extent required by applicable law. Notwithstanding the foregoing, nothing herein shall be deemed to preclude the Litigation Trust Board and the Litigation Trustee from amending this Agreement to make such changes as are deemed necessary or appropriate by the Litigation Trustee, with the advice of counsel, to ensure that the Litigation Trust is not subject to any such registration and/or reporting requirements.

2.5 No Transfers

 

  (a) No transfer, sale assignment, distribution, exchange, pledge, hypothecation, mortgage or other disposition (each, a “ Transfer ”) of a Litigation Trust Interest may be effected or made; provided, that, Transfers of a Litigation Trust Interest may be made by operation of law or by will or the laws of descent and distribution.

 

  (b)

The Litigation Trustee shall appoint a registrar, which may be the Litigation Trustee (the “ Registrar ”), for the purpose of recording entitlement to the Litigation Trust Interests as provided for in this Agreement. The Registrar, if

 

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  other than the Litigation Trustee, may be such other institution acceptable to the Litigation Trust Board. For its services hereunder, the Registrar, unless it is the Litigation Trustee, shall be entitled to receive reasonable compensation from the Litigation Trust as approved by the Litigation Trust Board, as an expense of the Litigation Trust.

 

  (c) The Litigation Trustee shall cause to be kept at the office of the Registrar, or at such other place or places as shall be designated by the Litigation Trustee from time to time, a registry of the holders of Litigation Trust Interests (the “ Trust Register ”) which shall be maintained on a strictly confidential basis by the Registrar. The identity and extent of the Litigation Trust Interests of any Litigation Trust Beneficiary shall not be disclosed to any third party (other than the Litigation Trustee, the Litigation Trust Board and the Registrar, each of them shall maintain any such information in strict confidence), without the prior written consent of such Litigation Trust Beneficiary in each case.

2.6 Absolute Owners

The Litigation Trustee may deem and treat the holder of a Litigation Trust Interest of record in the Trust Register as the absolute owner of such Litigation Trust Interests for the purpose of receiving distributions and payment thereon or on account thereof and for all other purposes whatsoever and the Litigation Trustee shall not be charged with having received notice of any claim or demand to such Litigation Trust Interests or the interest therein of any other Person.

ARTICLE 3

THE LITIGATION TRUSTEE

3.1 Litigation Trust Proceeds

Any and all proceeds, income and/or recoveries obtained on account of or from the Litigation Trust Assets shall be added to the assets of the Litigation Trust (the “ Litigation Trust Proceeds ”, which, for greater certainty, shall not include the Litigation Funding Amount), held as a part thereof and dealt with in accordance with the terms of this Agreement.

3.2 Collection of Litigation Trust Proceeds

The Litigation Trustee shall collect all Litigation Trust Proceeds and title therein shall be vested in the Litigation Trustee, in trust for the benefit of the Litigation Trust Beneficiaries, to be dealt with in accordance with the terms of this Agreement.

3.3 Payment of Litigation Trust Expenses

Subject to Section 3.12 of this Agreement and the obligations of the Litigation Trustee under Sections 1.1 and 3.4 of this Agreement, the Litigation Trustee shall maintain the Litigation Funding Amount, and expend the Litigation Funding Amount (i) as is reasonably necessary to pay reasonable and necessary administrative expenses (including but not limited to, the reasonable costs and expenses of the Litigation Trustee (including reasonable fees, costs, and expenses of professionals retained thereby) and the compensation and the reasonable costs and

 

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expenses of the members of the Litigation Trust Board as contemplated by Section and 4.10 hereof (including the fees of professionals retained by such members as contemplated by Sections 4.2 hereof), any taxes imposed on the Litigation Trust or in respect of the Litigation Trust Assets or reasonable fees and expenses in connection with, arising out of, or related to, the Litigation Trust Assets and litigations associated therewith), (ii) to pay the costs and expenses of the valuations of the Litigation Trust Assets incurred by the Litigation Trust Board and/or the Litigation Trustee in accordance with Section 5.1(c) of this Agreement, (iii) to pay or reimburse amounts in accordance with Article 7 hereof and (iv) to satisfy other liabilities incurred or assumed by the Litigation Trust (or to which the assets of the Litigation Trust are otherwise subject) in accordance with this Agreement.

3.4 Distributions

The Litigation Trustee shall make distributions of Litigation Trust Proceeds in accordance with the provisions of Article 6 of this Agreement.

3.5 Tenure, Removal, and Replacement of the Litigation Trustee

 

  (a) Each Litigation Trustee will serve until the earliest of (i) the completion of all the Litigation Trustee’s duties, responsibilities and obligations under this Agreement, (ii) the Litigation Trustee’s resignation and the appointment of a successor pursuant to Section 3.5(b) of this Agreement, (iii) the Litigation Trustee’s removal pursuant to Section 3.5(c) of this Agreement, (iv) the Litigation Trustee’s death (if applicable) and (v) the termination of the Litigation Trust in accordance with this Agreement.

 

  (b) The Litigation Trustee may resign by giving not less than 90 days’ prior written notice to the Litigation Trust Board. Such resignation will become effective on the later to occur of: (i) the day specified in such written notice and (ii) the appointment of a successor trustee as provided herein and the acceptance by such successor trustee of such appointment in accordance with Section 3.6 of this Agreement. If a successor trustee is not appointed or does not accept its appointment within 90 days following delivery of notice of resignation, the Litigation Trustee may file a motion with the CCAA Court, upon notice and hearing, for the appointment of a successor trustee.

 

  (c) The Litigation Trustee may be removed for any reason by majority vote of the members of the Litigation Trust Board.

 

  (d)

In the event of a vacancy in the position of the Litigation Trustee (whether by removal, resignation, or death, if applicable), the vacancy will be filled by the appointment of a successor trustee by (i) majority vote of the members of the Litigation Trust Board, and by the acceptance of the Litigation Trust by the successor trustee in accordance with Section 3.6 of this Agreement or (ii) an order of the CCAA Court after an opportunity for a hearing (provided, however, that only the Litigation Trust Board shall have standing to seek such an order (and the Litigation Trust Board shall only seek such an order upon a majority vote of the members of the Litigation Trust Board, except as provided in Section 3.5(b) of

 

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  this Agreement). If a successor trustee is appointed as provided in clause (i) or (ii) of the preceding sentence, and such appointment is accepted by the successor trustee in accordance with Section 3.6 of this Agreement, the Litigation Trust Board shall provide notice of such appointment to the holders of the Litigation Trust Interests, which notice will include the name, address, and telephone number of the successor trustee provided, however, that, the provision of such notice shall not be a condition precedent to the vesting in the successor Litigation Trustee of all the estates, properties, rights, powers, trusts, and duties of its predecessor.

 

  (e) Immediately upon the appointment of any successor trustee, all rights, powers, duties, authority, and privileges of the predecessor Litigation Trustee hereunder will be vested in and undertaken by the successor trustee without any further act; and the successor trustee will not be liable personally for any act or omission of the predecessor Litigation Trustee. A successor trustee shall have all the rights, privileges, powers, and duties of its predecessor under this Agreement.

 

  (f) Upon the appointment of a successor trustee, the predecessor Litigation Trustee (or the duly appointed legal representative of a deceased Litigation Trustee) shall, if applicable, when requested in writing by the successor trustee or the CCAA Court, execute and deliver an instrument or instruments conveying and transferring to such successor trustee upon the trust herein expressed all the estates, properties, rights, powers and trusts of such predecessor Litigation Trustee, and shall duly assign, transfer, and deliver to such successor trustee all property and money held hereunder, and all other assets, documents, instruments, records and other writings relating to the Litigation Trust, the Litigation Trust Assets, the Litigation Trust Proceeds, the Litigation Funding Amount, and the Litigation Trust Interests, then in its possession and held hereunder, and shall execute and deliver such documents, instruments and other writings as may be requested by the successor trustee or the CCAA Court to effect the termination of such predecessor Litigation Trustee’s capacity under the Litigation Trust, this Agreement and the Plan and otherwise assist and cooperate, without cost or expense to the predecessor Litigation Trustee, in effectuating the assumption of its obligations and functions by the successor trustee.

 

  (g) During any period in which there is a vacancy in the position of Litigation Trustee, the Litigation Trust Board shall appoint one of its members to serve as interim Litigation Trustee (the “ Interim Trustee ”). The Interim Trustee shall be subject to all the terms and conditions applicable to a Litigation Trustee hereunder. Such Interim Trustee shall not be limited in any manner from exercising any rights or powers as a member of the Litigation Trust Board merely by its appointment as Interim Trustee.

 

  (h) The death, resignation or removal of the Litigation Trustee shall not terminate the Litigation Trust or revoke any existing agency created pursuant to this Agreement or invalidate any action theretofore taken by the Litigation Trustee.

 

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3.6 Acceptance of Appointment by Successor Trustee

Any successor trustee appointed hereunder shall execute an instrument accepting such appointment and assuming all of the obligations of the predecessor Litigation Trustee hereunder and accepting the terms of this Agreement and agreeing that the provisions of this Agreement shall be binding upon and inure to the benefit of the successor trustee and all of its heirs, and legal and personal representatives, successors and assigns, and thereupon the successor trustee shall, without any further act, become vested with all the estates, properties, rights, powers, trusts, and duties of its predecessor Litigation Trustee in the Litigation Trust hereunder with like effect as if originally named herein.

3.7 Regular Meetings of the Litigation Trustee and the Litigation Trust Board

Meetings of the Litigation Trustee, on one hand, and the Litigation Trust Board, on the other, are to be held with such frequency and at such place as the Litigation Trust Board may determine in its sole discretion, but in no event shall such meetings be held less frequently than one time during each quarter of each calendar year.

3.8 Special Meetings of the Litigation Trustee and the Litigation Trust Board

Special meetings of the Litigation Trustee on the one hand, and the Litigation Trust Board, on the other, may be held whenever and wherever called for either by the Litigation Trustee or at least two members of the Litigation Trust Board.

3.9 Notice of, and Waiver of Notice for Litigation Trustee and Litigation Trust Board Meeting

Notice of the time and place (but not necessarily the purpose or all of the purposes) of any regular or special meeting of the Litigation Trust Board will be given to the Litigation Trustee and the members of the Litigation Trust Board in person or by telephone, or via mail, electronic mail, or facsimile transmission. Notice to the Litigation Trustee and the members of the Litigation Trust Board of any such special meeting of the Litigation Trust Board will be deemed given sufficiently in advance when (i) if given by mail, the same is deposited in the mail at least ten calendar days before the meeting date, with postage thereon prepaid, (ii) if given by electronic mail or facsimile transmission, the same is transmitted at least one Business Day prior to the convening of the meeting, or (iii) if personally delivered (including by overnight courier) or given by telephone, the same is handed, or the substance thereof is communicated over the telephone, to the Litigation Trustee and the members of the Litigation Trust Board or to an adult member of his/her office staff or household, at least one Business Day prior to the convening of the meeting. The Litigation Trustee and any member of the Litigation Trust Board may waive notice of any meeting of the Litigation Trust Board and any adjournment thereof at any time before, during, or after it is held, subject to applicable law. Except as provided in the next sentence below, the waiver must be in writing, signed by the Litigation Trustee or the applicable member or members of the Litigation Trust Board entitled to the notice, and filed with the minutes or records of the Litigation Trust. The attendance of the Litigation Trustee or a member of the Litigation Trust Board at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning

 

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of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

3.10 Manner of Acting

The Litigation Trustee or any member of the Litigation Trust Board may participate in a regular or special meeting by, or conduct the meeting through the use of, conference telephone, or similar communications equipment by means of which all persons participating in the meeting may hear each other, in which case any required notice of such meeting may generally describe the arrangements (rather than or in addition to the place) for the holding thereof. The Litigation Trustee or any member of the Litigation Trust Board participating in a meeting by this means is deemed to be present in person at the meeting.

3.11 Role of the Litigation Trustee

In furtherance of and consistent with the purpose of the Litigation Trust, the Litigation Trustee, subject to the terms and conditions contained herein, shall have the power to (i) prosecute, compromise and settle, abandon or dismiss for the benefit of the Litigation Trust Beneficiaries all Litigation Trust Claims transferred to the Litigation Trust (whether such suits are brought in the name of the Litigation Trust, the Litigation Trustee or otherwise), and (ii) otherwise perform the functions and take the actions provided for or permitted in this Agreement. In all circumstances, the Litigation Trustee shall act in the best interests of the Litigation Trust Beneficiaries and in furtherance of the purpose of the Litigation Trust.

3.12 Authority of Litigation Trustee

Subject to any limitations contained herein (including Article 4 hereof and Sections 1.1 and 3.4 of this Agreement) or in the Plan, but in addition to the other powers and authorities granted to the Litigation Trustee and set forth in this Agreement, the Litigation Trustee shall have the following powers and authorities:

 

  (a) to hold legal title to any and all rights of the holders of Litigation Trust Interests in or arising from the Litigation Trust Assets, including collecting, receiving any and all money and other property belonging to the Litigation Trust (including any Litigation Trust Proceeds) and, subject to the approval of the Litigation Trust Board, the right to vote any claim or interest relating to a Litigation Trust Claim in any proceeding and receive any distribution thereon;

 

  (b) in consultation with and subject to the approval of the Litigation Trust Board, to perform the duties, exercise the powers, and assert the rights of a trustee, including commencing, prosecuting or settling causes of action, enforcing contracts or asserting claims, defenses, offsets and privileges;

 

  (c) in consultation with and subject to the approval of the Litigation Trust Board, to protect and enforce the rights to the Litigation Trust Claims by any method deemed appropriate including by judicial proceedings or pursuant to any applicable bankruptcy, insolvency, moratorium or similar law and general principles of equity;

 

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  (d) in consultation with and subject to the approval of the Litigation Trust Board, to obtain reasonable insurance coverage with respect to the liabilities and obligations of the Litigation Trustee and the Litigation Trust Board under this Agreement (in the form of any errors and omissions policy or otherwise);

 

  (e) in consultation with and subject to the approval of the Litigation Trust Board, to obtain insurance coverage with respect to real and personal property that may become assets of the Litigation Trust, if any;

 

  (f) in consultation with and subject to the approval of the Litigation Trust Board, to retain and pay such counsel and other professionals, including any professionals previously retained by the ad hoc committee of Noteholders (the “ Ad Hoc Committee ”) or SFC, as the Litigation Trustee shall select to assist the Litigation Trustee in its duties, on such terms as the Litigation Trustee and the Litigation Trust Board deem reasonable and appropriate, without CCAA Court approval; and subject to the approval of the Litigation Trust Board, the Litigation Trustee may commit the Litigation Trust to and shall pay such counsel and other professionals reasonable compensation for services rendered (including on an hourly, contingency, or modified contingency basis) and reasonable and documented out-of-pocket expenses incurred;

 

  (g) in consultation with and subject to the approval of the Litigation Trust Board, to retain and pay an accounting firm to perform such reviews and/or audits of the financial books and records of the Litigation Trust as may be required by applicable laws (including, if applicable, securities laws) and/or this Agreement, and to prepare and file any tax returns, informational returns or periodic and current reports for the Litigation Trust as required by applicable laws (including, if applicable, securities laws) and/or by this Agreement; subject to the approval of the Litigation Trust Board, the Litigation Trustee may commit the Litigation Trust to and shall pay such accounting firm reasonable compensation for services rendered and reasonable and documented out-of-pocket expenses incurred;

 

  (h) in consultation with and subject to the approval of the Litigation Trust Board, to retain, enter into fee arrangements with and pay such third parties to assist the Litigation Trustee in carrying out its powers, authorities and duties under this Agreement; subject to the approval of the Litigation Trust Board, the Litigation Trustee may commit the Litigation Trust to and shall pay all such Persons reasonable compensation for services rendered and reasonable and documented out-of-pocket expenses incurred, as well as commit the Litigation Trust to indemnify any such Persons in connection with the performance of services (provided that such indemnity shall not cover any losses, costs, damages, expenses or liabilities that result from the gross negligence, bad faith, wilful misconduct or knowing violation of law by such Persons);

 

  (i) in consultation with and subject to the approval of the Litigation Trust Board, to waive any privilege (including the Privileges) or any defence on behalf of the Litigation Trust or, with respect to the Litigation Trust Claims;

 

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  (j) in consultation with and subject to the approval of the Litigation Trust Board, to investigate, analyze, compromise, adjust, arbitrate, mediate, sue on or defend, pursue; prosecute, abandon, dismiss, exercise rights, powers, and privileges with respect to, or otherwise deal with and settle, in accordance with the terms set forth herein, all causes of action in favour of or against the Litigation Trust;

 

  (k) in consultation with and subject to the approval of the Litigation Trust Board, and solely with respect to Litigation Trust Claims, to avoid and recover transfers of SFC’s property as may be permitted by applicable law;

 

  (l) to invest any moneys held as part of the Litigation Trust in accordance with the terms of Section 3.19 of this Agreement;

 

  (m) in consultation with and subject to the approval of the Litigation Trust Board, to request any appropriate tax determination with respect to the Litigation Trust;

 

  (n) subject to applicable securities and other laws, if any, to establish and maintain a website for the purpose of providing notice of Litigation Trust activities in lieu of sending written notice to the holders of the Litigation Trust Interests and other such Persons entitled thereto, subject to providing notice of such website to such holders and other Persons;

 

  (o) in consultation with and subject to the approval of the Litigation Trust Board, to seek the examination of any Person, subject to the provisions of any applicable laws or rules;

 

  (p) to make distributions in accordance with Article 6 of this Agreement; and

 

  (q) to take or refrain from taking any and all other actions that the Litigation Trustee, upon consultation with and subject to the approval of the Litigation Trust Board, reasonably deems necessary or convenient for the continuation, protection and maximization of the Litigation Trust Claims or to carry out the purposes hereof, provided, however, that the Litigation Trustee shall not be required to consult with or obtain approval of the Litigation Trust Board, to the extent such actions are purely ministerial in nature.

3.13 Limitation of Litigation Trustee’s Authority

 

  (a) Notwithstanding anything herein to the contrary, the Litigation Trustee shall not (i) be authorized to engage in any trade or business or (ii) take any such actions as would be inconsistent with the purposes of this Agreement, the preservation of the assets of the Litigation Trust and the best interests of the Litigation Trust Beneficiaries.

 

  (b)

[The Litigation Trust shall not hold 50% or more of the stock (in either vote or value) of any Person that is treated as a corporation for federal income tax purposes, nor be the sole member of a limited liability company, nor have any interest in a Person that is treated as a partnership for federal income tax purposes,

 

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  unless such stock, membership interest, or partnership interest was obtained involuntarily or as a matter of practical economic necessity in order to preserve the value of the Litigation Trust Assets.]

3.14 Books and Records

 

  (a) The Litigation Trustee shall maintain books and records relating to the Litigation Trust Assets and the Litigation Trust Proceeds and the payment of expenses of, liabilities of, and claims against or assumed by, the Litigation Trust in such detail and for such period of time as may be necessary to enable it to make full and proper accounting in respect thereof. Such books and records shall be maintained on a modified cash or other comprehensive basis of accounting necessary to facilitate compliance with the tax reporting and securities law requirements, if any, of the Litigation Trust as well as the reporting requirements set forth in Article 8 and elsewhere in this Agreement. Nothing in this Agreement requires the Litigation Trustee to file any accounting or seek approval of any court with respect to the administration of the Litigation Trust, or as a condition for managing any payment or distribution out of the assets of the Litigation Trust.

 

  (b) Holders of the Litigation Trust Interests and their duly authorized representatives shall have the right, upon reasonable prior written notice to the Litigation Trustee, and in accordance with the reasonable regulations prescribed by the Litigation Trustee, to inspect and, at the sole expense of such holder seeking the same, make copies of the books and records relating to the Litigation Trust on any Business Day and as often as may be reasonably be desired, in each case for a purpose reasonably related to such holder’s Litigation Trust Interests and subject to the confidentiality restrictions set forth in Section 2.5(c) and any other confidentiality restrictions as the Litigation Trustee or the Litigation Trust Board many deem appropriate.

3.15 Inquiries into Trustee’s Authority

Except as otherwise set forth in this Agreement or the Plan, no Person dealing with the Litigation Trust shall be obligated to inquire into the authority of the Litigation Trustee in connection with the protection, conservation or disposition of the Litigation Trust Claims.

3.16 Compliance with Laws

Any and all distributions of assets of the Litigation Trust shall be in compliance with applicable laws, including applicable provincial securities laws.

3.17 Compensation of the Litigation Trustee

Notwithstanding anything to the contrary contained herein, the Litigation Trustee shall be compensated for its services, and reimbursed for its expenses, in accordance with, and pursuant to the terms of, a separate agreement to be negotiated and executed by the Litigation Trust Board, which agreement shall not be subject to any third-party notice or approval.

 

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3.18 Reliance by Litigation Trustee

Except as otherwise provided herein:

 

  (a) the Litigation Trustee may rely on, and shall be protected in acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order or other paper or document reasonably believed by the Litigation Trustee to be genuine and to have been signed or presented by the proper party or parties; and

 

  (b) Persons dealing with the Litigation Trustee shall look only to the assets of the Litigation Trust to satisfy any liability incurred by the Litigation Trustee to such Person in carrying out the terms of this Agreement, and neither the Litigation Trustee nor any member of the Litigation Trust Board shall have any personal obligation to satisfy any such liability.

3.19 Investment and Safekeeping of Litigation Trust Assets

Subject to Sections 1.1 and 3.4 of this Agreement, the Litigation Trustee shall invest all Litigation Trust Assets (other than Litigation Trust Claims), all Litigation Trust Proceeds, the Litigation Funding Amount and all income earned by the Litigation Trust (pending distribution in accordance with Article 6 of this Agreement) only in cash and government securities, and the Litigation Trustee may retain any Litigation Trust Proceeds received that are not cash only for so long as may be required for the prompt and orderly liquidation of such assets into cash.

3.20 Standard of Care; Exculpation

Neither the Litigation Trustee nor any of its duly designated agents or representatives or professionals shall be liable for any act or omission taken or omitted to be taken by the Litigation Trustee in good faith, other than (i) acts or omissions resulting from the Litigation Trustee’s or any such agent’s, representative’s or professional’s gross negligence, bad faith, wilful misconduct or knowing violation of law or (ii) acts or omissions from which the Litigation Trustee or any such agent, representative or professional derived an improper personal benefit. The Litigation Trustee may, in connection with the performance of its functions, and in its sole and absolute discretion, consult with its counsel, accountants, financial advisors and agents, and shall not be liable for any act taken, omitted to be taken, or suffered to be done in accordance with advice or opinions rendered by such Persons. Notwithstanding such authority, the Litigation Trustee shall be under no obligation to consult with its counsel, accountants, financial advisors or agents, and its good faith determination not to do so shall not result in the imposition of liability on the Litigation Trustee, unless such determination is based on gross negligence, bad faith, wilful misconduct or knowing violation of law. No amendment, modification or repeal of this Section 3.20 shall adversely affect any right or protection of the Litigation Trustee or any of its agents, representatives or professionals that exists at the time of such amendment, modification or repeal.

 

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ARTICLE 4

LITIGATION TRUST BOARD

4.1 Litigation Trust Board

A litigation trust board (the “ Litigation Trust Board ”) shall be established and consist of three Persons. The initial Litigation Trust Board members shall consist of the three Persons appointed to serve in such capacity pursuant to the Sanction Order. The members of the Litigation Trust Board shall have the right to direct and remove the Litigation Trustee in accordance with Section 3.5(c) of this Agreement, and shall have such other rights to operate and manage the Litigation Trust as are not inconsistent with the terms of this Agreement. No holder of Litigation Trust Interests (except to the extent such holder is a member of the Litigation Trust Board) shall have any consultation or approval rights whatsoever in respect of management and operation of the Litigation Trust.

4.2 Authority of the Litigation Trust Board

The Litigation Trust Board shall have the authority and responsibility to oversee, review, and guide the activities and performance of the Litigation Trustee and shall have the authority to remove the Litigation Trustee in accordance with Section 3.5(c) of this Agreement. The Litigation Trustee shall consult with and provide information to the Litigation Trust Board in accordance with and pursuant to the terms of this Agreement and the Plan. The Litigation Trust Board shall have the authority to select and engage such Persons, and select and engage such professional advisors, including any professional previously retained by the Ad Hoc Committee or SFC, in accordance with the terms of this Agreement, as the Litigation Trust Board deems necessary and desirable to assist the Litigation Trust Board in fulfilling its obligations under this Agreement. The Litigation Trustee shall pay the reasonable fees of such Persons and firms (including on an hourly, contingency, or modified contingency basis) and reimburse such Persons for their reasonable and documented out-of-pocket costs and expenses consistent with the terms of this Agreement.

4.3 Regular Meetings of the Litigation Trust Board

Meetings of the Litigation Trust Board are to be held with such frequency and at such place as the Litigation Trustee and the members of the Litigation Trust Board may determine in their reasonable discretion, but in no event shall such meetings be held less frequently than one time during each quarter of each calendar year.

4.4 Special Meetings of the Litigation Trust Board

Special meetings of the Litigation Trust Board may be held whenever and wherever called for by the Litigation Trustee or any two members of the Litigation Trust Board.

4.5 Manner of Acting

 

  (a)

A majority of the total number of members of the Litigation Trust Board then in office shall constitute a quorum for the transaction of business at any meeting of the Litigation Trust Board; provided, however, that all decisions or approvals or

 

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  other actions of the Litigation Trust Board shall require the affirmative vote of a majority of all of the members of the Litigation Trust Board, and such an affirmative vote obtained as to any particular matter, decision, approval or other action at a meeting at which a quorum is present shall be the act of the Litigation Trust Board, except as otherwise required by law or as provided in this Agreement.

 

  (b) Voting may, if approved by the majority of all of the members of the Litigation Trust Board, be conducted by electronic mail or individual communications by the Litigation Trustee and each member of the Litigation Trust Board.

 

  (c) Any member of the Litigation Trust Board who is present and entitled to vote at a meeting of the Litigation Trust Board (including any meeting of the Litigation Trustee and the Litigation Trust Board) when action is taken is deemed to have assented to the action taken, subject to the requisite vote of the Litigation Trust Board unless: (i) such member of the Litigation Trust Board objects at the beginning of the meeting (or promptly upon his/her arrival) to holding it or transacting business at the meeting; or (ii) his/her dissent or abstention from the action taken is entered in the minutes of the meeting; or (iii) he/she delivers written notice (including by electronic or facsimile transmission) of his/her dissent or abstention to the Litigation Trust Board before its adjournment. The right of dissent or abstention is not available to any member of the Litigation Trust Board who votes in favour of the action taken.

 

  (d) Prior to the taking of a vote on any matter or issue or the taking of any action with respect to any matter or issue, each member of the Litigation Trust Board shall report to the Litigation Trust Board any conflict of interest such member has or may have with respect to the matter or issue at hand and fully disclose the nature of such conflict or potential conflict (including disclosing any and all financial or other pecuniary interests that such member might have with respect to or in connection with such matter or issue, other than solely as a holder of a Litigation Trust Interest). A member who has or who may have a conflict of interest shall be deemed to be a “conflicted member” who shall not be entitled to vote or take part in any action with respect to such matter or issue (provided, however, such member shall be counted for purposes of determining the existence of a quorum); the vote or action with respect to such matter or issue shall be undertaken only by members of the Litigation Trust Board who are not “conflicted members” and, notwithstanding anything contained herein to the contrary, the affirmative vote of only a majority of the members of the Litigation Trust Board who are not “conflicted members” shall be required to approve of such matter or issue and the same shall be the act of the Litigation Trust Board.

4.6 Litigation Trust Board’s Action Without a Meeting

Any action required or permitted to be taken by the Litigation Trust Board at a meeting of the Litigation Trust Board may be taken without a meeting if the action is taken by unanimous written consent of the Litigation Trust Board as evidenced by one or more written consents

 

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describing the action taken, signed by all members of the Litigation Trust Board and recorded in the minutes or other transcript of proceedings of the Litigation Trust Board.

4.7 Notice of, and Waiver of Notice for Litigation Trust Board Meetings

Notice of the time and place (but not necessarily the purpose or all of the purposes) of any regular or special meeting of the Litigation Trust Board will be given to the members of the Litigation Trust Board in person or by telephone, or via mail, electronic mail, or facsimile transmission. Notice to the members of the Litigation Trust Board of any such special meeting will be deemed given sufficiently in advance when (i) if given by mail, the same is deposited in the United States mail at least ten calendar days before the meeting date, with postage thereon prepaid, (ii) if given by electronic mail or facsimile transmission, the same is transmitted at least one Business Day prior to the convening of the meeting, or (iii) if personally delivered (including by overnight courier) or given by telephone, the same is handed, or the substance thereof is communicated over the telephone to the members of the Litigation Trust Board or to an adult member of his/her office staff or household, at least one Business Day prior to the convening of the meeting. Any member of the Litigation Trust Board may waive notice of any meeting and any adjournment thereof at any time before, during, or after it is held, subject to applicable law. Except as provided in the next sentence below, the waiver must be in writing, signed by the applicable member or members of the Litigation Trust Board entitled to the notice. The attendance of a member of the Litigation Trust Board at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

4.8 Telephonic Communications

Any member of the Litigation Trust Board may participate in a regular or special meeting of the Litigation Trust Board by, or conduct the meeting through the use of, conference telephone, or similar communications equipment by means of which all persons participating in the meeting may hear each other, in which case any required notice of such meeting may generally describe the arrangements (rather than or in addition to the place) for the holding thereof. Any member of the Litigation Trust Board participating in a meeting by this means is deemed to be present in person at the meeting.

4.9 Tenure, Removal and Replacement of the Members of the Litigation Trust Board

The authority of the members of the Litigation Trust Board will be effective as of the Effective Date and will remain and continue in full force and effect until the Litigation Trust is terminated in accordance with Section 8.1 hereof. The service of the members of the Litigation Trust Board will be subject to the following:

 

  (a) The members of the Litigation Trust Board will serve until death or resignation pursuant to Section 4.9(b) of this Agreement, or removal pursuant to Section 4.9(c) of this Agreement.

 

  (b)

A member of the Litigation Trust Board may resign at any time by providing a written notice of resignation to the remaining members of the Litigation Trust

 

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  Board. Such resignation will be effective upon the date received by the Litigation Trust Board or such later date specified in the written notice.

 

  (c) A member of the Litigation Trust Board may be removed by the majority vote of the other members of the Litigation Trust Board, written resolution of which shall be delivered to the removed Litigation Trust Board member; provided, however, that such removal may only be made for Cause. For purposes of this Section 4.9(c), “ Cause ” shall be defined as: (i) such Litigation Trust Board member’s theft or embezzlement or attempted theft or embezzlement of money or tangible or intangible assets or property; (ii) such Litigation Trust Board member’s violation of any law (whether foreign or domestic), which results in an indictable offence or similar judicial proceeding; (iii) such Litigation Trust Board member’s gross negligence, bad faith, wilful misconduct or knowing violation of law, in the performance of his or her duties as a member of the Litigation Trust Board; or (iv) such Litigation Trust Board member’s failure to perform any of his or her other material duties under this Agreement (including the regular attendance at meetings of the Litigation Trust Board and of the Litigation Trustee and the Litigation Trust Board); provided, however, that such Litigation Trust Board member shall have been given a reasonable period to cure any alleged Cause under clauses (iii) (other than bad faith, wilful misconduct or knowing violation of law) and (iv).

 

  (d) In the event of a vacancy on the Litigation Trust Board (whether by removal, death or resignation), the remaining members of the Litigation Trust Board shall appoint a new member to fill such position. In the event that there are no members of the Litigation Trust Board selected or appointed in accordance with the preceding sentence, appointments to fill such vacancies that would have been made in accordance with the preceding sentence shall be made by the Litigation Trustee, following consultation with, and with the consent of, the Monitor. Upon any such appointment of a successor member of the Litigation Trust Board, Litigation Trustee shall provide the holders of the Litigation Trust Interests with notice of the name of the new member of the Litigation Trust Board, provided, however, that the provision of such notice shall not be a condition precedent to the rights and power of the new member of the Litigation Trust Board to act in such capacity.

 

  (e) Immediately upon the appointment of any successor member of the Litigation Trust Board all rights, powers, duties, authority, and privileges of the predecessor member of the Litigation Trust Board hereunder will be vested in and undertaken by the successor member of the Litigation Trust Board without any further act; and the successor member of the Litigation Trust Board will not be liable personally for any act or omission of the predecessor member of the Litigation Trust Board.

4.10 Compensation of the Litigation Trust Board

Each member of the Litigation Trust Board shall be paid by the Litigation Trust the amount of [ $ — ] annually as compensation for his or her services hereunder as a member of the Litigation

 

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Trust Board. In addition, each member of the Litigation Trust Board shall be entitled to be reimbursed from the Litigation Trust for his or her reasonable and documented out-of-pocket expenses incurred in connection with the performance of his or her duties hereunder by the Litigation Trust upon demand for payment thereof.

4.11 Standard of Care; Exculpation

None of the Litigation Trust Board, its respective members, designees, professionals, or duly designated agents or representatives, shall be liable for the act or omission of any other member, designee, professional, agent, or representative of the Litigation Trust Board, nor shall any member of the Litigation Trust Board be liable for any act or omission taken or omitted to be taken by the Litigation Trust Board in good faith, other than for (i) acts or omissions resulting from the Litigation Trust Board’s or any such member’s, designee’s, professional’s, agent’s or representative’s gross negligence, bad faith, wilful misconduct or knowing violation of law or (ii) acts or omissions from which the Litigation Trust Board or such member, designee, professional, agent or representative derived an improper personal benefit. The Litigation Trust Board may, in connection with the performance of its functions, and in its sole and absolute discretion, consult with the Litigation Trust Board’s counsel, accountants, financial advisors and agents, and shall not be liable for any act taken, omitted to be taken, or suffered to be done in good faith in accordance with advice or opinions rendered by such Persons. Notwithstanding such authority, none of the Litigation Trust Board or any of its members shall be under any obligation to consult with the Litigation Trust Board’s counsel, accountants, financial advisors or agents, and their good faith determination not to do so shall not result in the imposition of liability on the Litigation Trust Board or, as applicable, any of its members, designees, professionals, agents or representatives, unless such determination is based on gross negligence, bad faith, wilful misconduct or knowing violation of law. No amendment modification or repeal of this Section 4.11 shall adversely affect any right or protection of the Litigation Trust Board, its members, designees, professional agents or representatives that exists at the time of such amendment, modification or repeal.

ARTICLE 5

TAX MATTERS

5.1 [Federal Income Tax Treatment of the Litigation Trust

 

  (a)

For all federal income tax purposes, all parties (including SFC and the other Litigation Trust Claims Transferors, the Litigation Trustee, the Litigation Trust Board and the Litigation Trust Beneficiaries) shall treat the transfer of the Litigation Trust Assets to the Litigation Trustee for the benefit of the Litigation Trust Beneficiaries as (a) a transfer of the Litigation Trust Assets directly to those Litigation Trust Beneficiaries receiving Litigation Trust Interests (other than to the extent allocable to Unresolved Claims), followed by (b) the transfer by such Litigation Trust Beneficiaries to the Litigation Trustee of the Litigation Trust Assets in exchange for the Litigation Trust Interests (and in respect of the Litigation Trust Assets allocable to the Unresolved Claims, as a transfer to the Unresolved Claims Reserve by the Litigation Trust Claim Transferors). Accordingly, those Litigation Trust Beneficiaries receiving Litigation Trust Interests shall be treated for federal income tax purposes as the grantors and

 

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  owners of their respective shares of the Litigation Trust Assets. The foregoing treatment also shall apply, to the extent permitted by applicable law, for provincial and local income tax purposes.]

 

  (b) [Subject to definitive guidance from the — or a court of competent jurisdiction to the contrary (including receipt by the Litigation Trustee of a private letter ruling if the Litigation Trustee so requests one, or the receipt of an adverse determination by the — , upon audit, or otherwise if not contested by the Litigation Trustee), the Litigation Trustee shall file returns for the Litigation Trust as a grantor trust pursuant to [Treasury Regulation section 1.671-4(a)] and in accordance with this Article 5. The Litigation Trustee shall also annually send to each holder of a Litigation Trust Interest a separate statement setting forth such holder’s share of items of income, gain, loss, deduction, or credit and will instruct all such holders and parties to report such items on their federal income tax returns. The Litigation Trustee also shall file (or cause to be filed) any other statements, returns or disclosures relating to the Litigation Trust that are required by any governmental unit.]

 

  (c) [As soon as possible after the creation of the Litigation Trust, but in no event later than 60 days thereafter, the Litigation Trust Board shall inform, in writing, the Litigation Trustee of the fair market value of the Litigation Trust Assets transferred to the Litigation Trust based on the good faith determination of the Litigation Trust Board, and the Litigation Trustee shall apprise, in writing, the Litigation Trust Beneficiaries of such valuation. The valuation shall be used consistently by all parties (including SFC and the other Litigation Trust Claim Transferors, the Litigation Trustee, the Litigation Trust Board and the Litigation Trust Beneficiaries) for all federal income tax purposes. As soon as possible after the Effective Date, the Litigation Trustee shall make such valuation prepared by the Litigation Trust Board available from time to time, to the extent relevant, and such valuation shall be used consistently by all parties (including SFC and the other Litigation Trust Claim Transferors, the Litigation Trustee, the Litigation Trust Board and the Litigation Trust Beneficiaries) for all federal income tax purposes. In connection with the preparation of the valuation contemplated hereby, the Litigation Trust Board shall be entitled to retain such professionals and advisers as the Litigation Trust Board shall determine to be appropriate or necessary, and the Litigation Trust Board shall take such other actions in connection therewith as it determines to be appropriate or necessary in connection therewith. The Litigation Trust shall bear all of the reasonable costs and expenses incurred in connection with determining such value, including the fees and expenses of any Persons retained by the Litigation Trust Board in connection therewith.]

 

  (d) [The Litigation Trustee may request an expedited determination of taxes of the Litigation Trust for all returns filed for, or on behalf of, the Litigation Trust for all taxable periods through the dissolution of the Litigation Trust.]

 

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  (e) [The Litigation Trustee shall be responsible for payments, out of the Litigation Trust Assets and Litigation Trust Proceeds, of any taxes imposed on the Litigation Trust or the Litigation Trust Assets.]

 

  (f) [The Litigation Trustee may require any of the Litigation Trust Beneficiaries to furnish to the Litigation Trustee its Employer or Taxpayer Identification Number as assigned by the — and the Litigation Trustee may condition any distribution or payment to any of them upon receipt of such identification number.]

5.2 Allocations of Litigation Trust Taxable Income

[Allocations of Litigation Trust taxable income among the holders of the Litigation Trust Interests shall be determined by reference to the manner in which an amount of cash equal to such taxable income would be distributed (without regard to any restrictions on distributions described herein) if, immediately prior to such deemed distribution, the Litigation Trust had distributed all of its other assets (valued at their tax book value) to the holders of the Litigation Trust Interests, in each case up to the tax book value of the assets treated as contributed by such holders, adjusted for prior taxable income and loss and taking into account all prior and concurrent distributions from the Litigation Trust (including all distributions held in escrow pending the resolution of Unresolved Claims). Similarly, taxable loss of the Litigation Trust shall be allocated by reference to the manner in which an economic loss would be borne immediately after a liquidating distribution of the remaining Litigation Trust Assets. The tax book value of the Litigation Trust Assets for this purpose shall equal their fair market value on the Effective Date as determined under Section 5.1(c) above, adjusted in either case in accordance with tax accounting principles prescribed by the [Tax Code], and applicable tax regulations, and other applicable administrative and judicial authorities and pronouncements.]

5.3 Canadian Tax Treatment of Distributions by Litigation Trustee

Amounts distributed by the Litigation Trustee shall be treated as distributions of income or capital for Canadian federal income tax purposes, as determined by the Litigation Trustee. The Litigation Trustee shall be entitled to file any election for tax purposes which it considers desirable or appropriate. The Litigation Trustee may create a legally enforceable right of Litigation Trust Beneficiaries in respect of any particular distribution to enforce payment of that distribution on or before December 31 of the relevant taxation year of the Litigation Trust.

ARTICLE 6

DISTRIBUTIONS

6.1 Distributions; Withholding

Subject to Sections 1.1 and 3.4 of this Agreement, the Litigation Trustee shall distribute, in accordance with this Article 6, to the holders of the Litigation Trust Interests the Litigation Trust Proceeds (including, without limitation, all net cash income plus all net cash proceeds from the liquidation of Litigation Trust Assets (including as cash, for this purpose, all cash equivalents), but excluding, for greater certainty, the Litigation Funding Amount or any remaining portion

 

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thereof); provided, however, that the Litigation Trust may retain and not distribute to holders of the Litigation Trust Interests such amounts as determined by the Litigation Trust Board (i) as are reasonably necessary to meet contingent liabilities of the Litigation Trust during liquidation and (ii) to pay reasonable and necessary administrative expenses incurred in connection with liquidation and any taxes imposed on the Litigation Trust or in respect of the Litigation Trust Assets, and provided further that prior to any distribution of Litigation Trust Proceeds to the holders of the Litigation Trust Interests, the Litigation Trustee shall first pay to Newco an amount in cash equivalent to the Litigation Funding Amount. All distributions and/or payments to be made to the holders of the Litigation Trust Interests pursuant to this Agreement shall be made to the holders of the Litigation Trust Interests pro rata based on the amount of Litigation Trust Interests held by a holder compared with the aggregate amount of the Litigation Trust Interests outstanding, subject, in each case, to the terms of the Plan and this Agreement. The Litigation Trustee may withhold from amounts distributable to any Person any and all amounts, determined in the Litigation Trustee’s reasonable sole discretion, to be required by any law, regulation, rule, ruling, directive or other governmental requirement.

6.2 Manner of Payment or Distribution

All distributions to be made by the Litigation Trustee hereunder to the holders of the Litigation Trust Interests shall be made to a disbursing agent acceptable to the Litigation Trust Board for further distribution to the holders of the Litigation Trust Interests and shall be payable to the holders of Litigation Trust Interests of record as of the 20th day prior to the date scheduled for the distribution, unless such day is not a Business Day, then such day shall be the following Business Day. If the distribution shall be in cash, the Litigation Trustee shall distribute such cash by wire, check, or such other method as the Litigation Trustee deems appropriate under the circumstances.

6.3 Cash Distributions

No cash distributions shall be required to be made to any holders of a Litigation Trust Interest in an amount less than $100.00. Any funds so withheld and not distributed shall be held in reserve and distributed in subsequent distributions. Notwithstanding the foregoing, all cash shall be distributed in the final distribution of the Litigation Trust.

ARTICLE 7

INDEMNIFICATION

7.1 Indemnification of Litigation Trustee and the Litigation Trust Board

 

  (a)

To the fullest extent permitted by law, the Litigation Trust, to the extent of its assets legally available for that purpose, shall indemnify and hold harmless the Litigation Trustee, each of the members of the Litigation Trust Board and each of their respective directors, members, shareholders, partners, officers, agents, employees, counsel and other professionals (collectively, the “ Indemnified Persons ”) from and against any and all losses, costs, damages, reasonable and documented out-of-pocket expenses (including reasonable fees and expenses of counsel and other advisors and any court costs incurred by any Indemnified Person) or liability by reason of anything any Indemnified Person did, does, or

 

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  refrains from doing for the business or affairs of the Litigation Trust, except to the extent that the loss, cost, damage, expense or liability resulted (x) from the Indemnified Person’s gross negligence, bad faith, wilful misconduct or knowing violation of law or (y) from an act or omission from which the Indemnified Person derived an improper personal benefit. To the extent reasonable, the Litigation Trust shall pay in advance or reimburse reasonable and documented out-of-pocket expenses (including advancing reasonable costs of defence) incurred by the Indemnified Person who is or is threatened to be named or made a defendant or a respondent in a proceeding concerning the business and affairs of the Litigation Trust. The indemnification provided under this Section 7.1 shall survive the death, dissolution, resignation or removal, as may be applicable, of the Litigation Trustee, the Litigation Trust Board, any Litigation Trust Board member and/or any other Indemnified Person, and shall inure to the benefit of the Litigation Trustee’s, each Litigation Trust Board member’s and each other Indemnified Person’s heirs, successors and assigns.

 

  (b) Any Indemnified Person may waive the benefits of indemnification under this Section 7.1, but only by an instrument in writing executed by such Indemnified Person.

 

  (c) The rights to indemnification under this Section 7.1 are not exclusive of other rights which any Indemnified Person may otherwise have at law or in equity, including without limitation common law rights to indemnification or contribution. Nothing in this Section 7.1 will affect the rights or obligations of any Person (or the limitations on those rights or obligations) under this Agreement, or any other agreement or instrument to which that Person is a party.

ARTICLE 8

REPORTING OBLIGATIONS OF LITIGATION TRUSTEE

8.1 Reports

 

  (a) The Litigation Trustee shall prepare such reports as the Litigation Trust Board shall request from time to time and shall distribute such reports to the Litigation Trust Board and, if directed by the Litigation Trust Board, to all holders of the Litigation Trust Interests as provided in this Article 8. For the avoidance of doubt, the holders of the Litigation Trust Interests shall not be entitled to any report, financial or otherwise, unless determined by the Litigation Trust Board in its sole discretion.

 

  (b) Without limiting the foregoing, the Litigation Trustee shall timely (i) prepare, file and distribute such statements, reports, tax returns and forms, and submissions as may be necessary to cause the Litigation Trust and the Litigation Trustee to be in compliance with all applicable laws (including any quarterly and annual reports to the extent required by applicable law or in order to gain an exemption from compliance with applicable law) and (ii) prepare and file with the CCAA Court such reports and submissions as may be required by the CCAA Court.

 

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  (c) Any report to be given to the holders of the Litigation Trust Interests at their addresses set forth in the Trust Register and filed with the CCAA Court; provided that the Litigation Trustee may post any report required to be provided to such Persons under this Section 8.1 on a web site maintained by the Litigation Trustee in lieu of actual notice, subject to providing notice of such postings to the Persons listed in Section 11.5 herein and, if required by the Litigation Trust Board in its sole discretion, to the holders of the holders of Litigation Trust Interests.

ARTICLE 9

TERM; TERMINATION OF THE LITIGATION TRUST

9.1 Term; Termination of the Litigation Trust

 

  (a) The Litigation Trust shall commence on the date hereof and terminate no later than the fifth anniversary of the Effective Date; provided, however, that, on or prior to the date that is 90 days prior to such termination, the Litigation Trust Board may extend the term of the Litigation Trust if it is necessary to the efficient and proper administration of the Litigation Trust Assets in accordance with the purposes and terms of this Agreement. Notwithstanding the foregoing, multiple extensions can be obtained so long as each extension is obtained not less than 90 days prior to the expiration of each extended term; and provided, further, that neither this Agreement nor the continued existence of the Litigation Trust shall prevent SFC from terminating the CCAA Proceeding.

 

  (b) The Litigation Trust may be terminated earlier than its scheduled termination if: (i) the Litigation Trustee has administered all Litigation Trust Assets and performed all other duties required by this Agreement and the Litigation Trust; or (ii) if the Litigation Trustee, in consultation with and subject to the approval of the Litigation Trust Board, determines that it is not in the best interests of the Litigation Trust Beneficiaries to continue pursuing the Litigation Trust Claims. Upon termination of the Litigation Trust pursuant to subsection (ii) hereof, any and all remaining portion of the Litigation Funding Amount shall be paid to Newco in cash by wire, check, or such other method as agreed to by the Litigation Trustee and Newco.

9.2 Continuance of Trust for Winding Up

After the termination of the Litigation Trust and for the purpose of liquidating and winding up the affairs of the Litigation Trust, the Litigation Trustee shall continue to act as such until its duties have been fully performed. Prior to the final distribution of all of the remaining assets of the Litigation Trust and upon approval of the Litigation Trust Board, the Litigation Trustee shall be entitled to reserve from such assets any and all amounts required to provide for its own reasonable costs and expenses, in accordance with Section 3.17, until such time as the winding up of the Litigation Trust is completed. Upon termination of the Litigation Trust, the Litigation Trustee shall retain for a period of two years the books, records, lists of the holders of the Litigation Trust Interests, the Trust Register, and other documents and files that have been delivered to or created by the Litigation Trustee. At the Litigation Trustee’s discretion, all of such records and documents may, but need not, be destroyed at any time after two years from the

 

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completion and winding up of the affairs of the Litigation Trust. Except as otherwise specifically provided herein, upon the termination of the Litigation Trust, the Litigation Trustee shall have no further duties or obligations hereunder.

ARTICLE 10

AMENDMENT AND WAIVER

10.1 Amendment and Waiver

The Litigation Trustee, with the prior approval of the majority of the members of the Litigation Trust Board, may amend, supplement or waive any provision of, this Agreement, without notice to or the consent of the holders of the Litigation Trust Interests or the approval of the CCAA Court; provided, that such amendment, supplement or waiver shall not adversely affect the payments and/or distributions to be made under this Agreement to (or on behalf or for the account of) any of the holders of the Litigation Trust Interests: (i) to cure any ambiguity, omission, defect or inconsistency in this Agreement; (ii) to comply with any requirements in connection with the tax status of the Litigation Trust; (iii) to comply with any requirements in connection with maintaining that the Litigation Trust is not subject to registration or reporting requirements; (iv) to make the Litigation Trust a reporting entity and, in such event, to comply with any requirements in connection with satisfying any applicable registration or reporting requirements; (v) to evidence and provide for the acceptance of appointment hereunder by a successor trustee in accordance with the terms of this Agreement; and (vi) to achieve any other purpose that is inconsistent with the purpose and intention of this Agreement.

ARTICLE 11

MISCELLANEOUS PROVISIONS

11.1 Intention of Parties to Establish the Litigation Trust

[This Agreement is intended to create a liquidating trust for federal income tax purposes and, to the extent provided by law, shall be governed and construed in all respects as such a trust and any ambiguity herein shall be construed consistent herewith and, if necessary, this Agreement may be amended in accordance with Section 10.1 to comply with such federal income tax laws, which amendments may apply retroactively.]

11.2 Laws as to Construction

This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federals laws of Canada applicable therein, without regard to whether any conflicts of law would require the application of the law of another jurisdiction.

11.3 Jurisdiction

Without limiting any Person’s right to appeal any order of the CCAA Court with regard to any matter, (i) the CCAA Court shall retain exclusive jurisdiction to enforce the terms of this Agreement and to decide any claims or disputes which may arise or result from, or be connected with, this Agreement, any breach or default hereunder, or the transactions contemplated hereby, and (ii) any and all actions related to the foregoing shall be filed and maintained only in the

 

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CCAA Court, and the parties, including the holders of the Litigation Trust Interests, and holders of Claims, hereby consent to and submit to the jurisdiction and venue of the CCAA Court.

11.4 Severability

If any provision of this Agreement or the application thereof to any Person or circumstance shall be finally determined by a court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement, or the application of such provision to Persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and such provision of this Agreement shall be valid and enforced to the fullest extent permitted by law.

11.5 Notices

All notices, requests or other communications to the parties hereto shall be in writing and shall be sufficiently given only if (i) delivered in person; (ii) sent by electronic mail or facsimile communication (as evidenced by a confirmed fax transmission report); (iii) sent by registered or certified mail, return receipt requested; or (iv) sent by commercial delivery service or courier. Until a change of address is communicated, as provided below, all notices, requests and other communications shall be sent to the parties at the following addresses or facsimile numbers:

 

        If to the Litigation Trustee:

  

[Address]

Telephone: Facsimile: Attn:

  

[ — ]

[ — ]

[ — ]

  

        (with a copy to)

  

[Address] Telephone:

Facsimile:

Attn:

  

[ — ]

[ — ]

[ — ]

  

        If to SFC:

  

[Address] Telephone:

Facsimile:

Attn:

  

[ — ]

[ — ]

[ — ]

  

        (with a copy to)

  

[Address] Telephone:

Facsimile:

Attn:

  

[ — ]

[ — ]

[ — ]

  

        If to the Litigation Trust

        Board Members:

  

[Address] Telephone:

Facsimile:

Attn:

  

[ — ]

[ — ]

[ — ]

  

 

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        (with a copy to)

  

[Address] Telephone:

Facsimile:

Attn:

  

[ — ]

[ — ]

[ — ]

  

        If to a holder of a

        Litigation Trust Interest:

   To the name and address set forth on the Trust Register.

All notices shall be effective and shall be deemed delivered (i) if by personal delivery, delivery service or courier, on the date of delivery; (ii) if by electronic mail or facsimile communication, on the date of receipt or confirmed transmission of the communication; and (iii) if by mail, on the date of receipt. Any Person from time to time may change his, her or its address, facsimile number, or other information for the purpose of notices to that Person by giving notice specifying such change to the Litigation Trustee and the Persons who are at the time of such notice members of the Litigation Trust Board.

11.6 Fiscal Year

The fiscal year of the Litigation Trust will begin on the first day of January and end on the last day of December of each calendar year.

11.7 Construction; Usage

 

  (a) Interpretation . In this Agreement, unless a clear contrary intention appears:

 

  (i) the singular number includes the plural number and vice versa;

 

  (ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

 

  (iii) reference to any gender includes each other gender;

 

  (iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;

 

  (v) reference to any applicable law means such applicable law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any applicable law means that provision of such applicable law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

 

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  (vi) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof;

 

  (vii) reference to Articles, Sections, Schedules or Exhibits herein shall be deemed to be references to the Articles, Sections, Schedules and Exhibits to this Agreement unless otherwise specified;

 

  (viii) “including” means including without limiting the generality of any description preceding such term; and

 

  (ix) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

 

  (b) Legal Representation of the Parties . This Agreement was negotiated by the parties and beneficiaries hereto with the benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party hereto shall not apply to any construction or interpretation hereof.

 

  (c) Headings . The headings contained in this Agreement are for the convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

11.8 Counterparts; Facsimile; PDF

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. Any facsimile or portable document format copies hereof or signature hereon shall, for all purposes, be deemed originals.

11.9 Confidentiality

The Litigation Trustee and each successor trustee and each member of the Litigation Trust Board and each successor member of the Litigation Trust Board (each a “ Covered Person ”) shall, during the period that they serve in such capacity under this Agreement and following either the termination of this Agreement or such individual’s removal, incapacity, or resignation hereunder, hold strictly confidential and not use for personal gain any material, non-public information of or pertaining to any Person to which any of the assets of the Litigation Trust relates or of which it has become aware in its capacity (the “ Information ”), including without limitation, the identity of any Holder of Litigation Trust Interests and the extent of their holdings thereof, except to the extent disclosure of any such information is required by applicable law, order, regulation or legal process. In the event that any Covered Person is requested or required (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigation, demand or similar legal process) to disclose any Information, such Covered Person shall notify the Litigation Trust Board reasonably promptly (unless prohibited by law) so that the Litigation Trust Board may seek an appropriate protective order or other appropriate remedy or, in its discretion, waive compliance with the terms of this Section 11.9 (and if the Litigation Trust

 

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Board seeks such an order, the relevant Covered Person will provide cooperation as the Litigation Trust Board shall reasonably request). In the event that no such protective order or other remedy is obtained, or that the Litigation Trust Board waives compliance with the terms of this Section 11.9 and that any Covered Person is nonetheless legally compelled to disclose the Information, the Covered Person will furnish only that portion of the Information, which the Covered Person, advised by counsel, is legally required and will give the Litigation Trust Board written notice (unless prohibited by law) of the Information to be disclosed as far in advance as practicable and exercise all reasonable efforts to obtain reliable assurance that confidential treatment will be accorded the Information.

11.10 Entire Agreement

This Agreement (including the Recitals), the Plan, and the Sanction Order constitute the entire agreement by and among the parties hereto and there are no representations, warranties, covenants or obligations except as set forth herein or therein. This Agreement, the Plan and the Sanction Order supersede all prior and contemporaneous agreements, understandings, negotiations, discussions, written or oral, of the parties hereto, relating to any transaction contemplated hereunder. Except as otherwise specifically provided herein, in the Plan or in the Sanction Order, nothing in this Agreement is intended or shall be construed to confer upon or to give any Entity or Person other than the parties hereto and their respective heirs, administrators, executors, permitted successors, or permitted assigns any right to remedies under or by reason of this Agreement, except that (i) the Persons identified in Article 7 hereof are intended third party beneficiaries of Article 7 hereof and shall be entitled to enforce the provisions thereof as if they were parties hereto and (ii) the members (and former members) of the Litigation Trust Board are intended third party beneficiaries of Article 4 hereof and shall be entitled to enforce the provisions thereof as if they were parties hereto.

11.11 No Bond

Notwithstanding any state or federal law to the contrary, the Litigation Trustee (including any successor trustee) shall be exempt from giving any bond or other security in any jurisdiction.

11.12 Effectiveness

This Agreement shall become effective on the Effective Date.

11.13 Successor and Assigns

This Agreement shall inure to the benefit of the parties hereto and the intended third party beneficiaries identified in Section 11.10 hereof (to the extent specified therein), and shall be binding upon the parties hereto, and each of their respective successors and assigns to the extent permitted by this Agreement and applicable law.

11.14 No Execution

All funds in the Litigation Trust shall be deemed in custodia legis until such times as the funds have actually been paid to or for the benefit of a holder of a Litigation Trust Interest, and no holder of a Litigation Trust Interest or any other Person can execute upon, garnish or attach the

 

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assets of the Litigation Trust in any manner or compel payment from the Litigation Trust except by an order of the CCAA Court. Distributions from the Litigation Trust will be governed solely by the Plan and this Agreement.

11.15 Irrevocability

The Litigation Trust is irrevocable, but is subject to amendment and waiver as provided for in this Agreement.

[SIGNATURE PAGE FOLLOWS]

 

- 32 -

IN WITNESS WHEREOF , the parties hereto have either executed and acknowledged this Agreement, or caused it to be executed and acknowledged on their behalf by their duly authorized officers all as of the date first above written.

 

SINO-FOREST CORPORATION:

 

SINO FOREST CORPORATION

(on behalf of itself and the direct and indirect subsidiaries listed in Schedule A)

By:

   
 

Name:

Title:

 

LITIGATION TRUSTEE:

 

[ — ]

By:

   
 

Name:

Title:

[Signature Page to Litigation Trust Agreement]

SCHEDULE A

Index of Defined Terms

 

Term

  

Location

2013 and 2016 Note Indenture Trustee

   Introduction

2014 and 2017 Note Indenture Trustee

   Introduction

Ad Hoc Committee

   Section 3.12(f)

Agreement

   Introduction

Cause

   Section 4.9(c)

CCAA

   Preliminary Statement

CCAA Court

   Preliminary Statement

Companies

   Introduction

Covered Person

   Section 11.9

Effective Date

   Section 1.2(b)

Exchange Act

   Section 2.4

Filing Date

   Preliminary Statement

Indemnified Persons

   Section 7.1(a)

Indenture Trustees

   Introduction

Information

   Section 11.9

Interim Trustee

   Section 3.5(g)

Investment Company Act

   Section 2.4

Litigation Trust Assets

   Preliminary Statement

Litigation Trust Beneficiary

   Preliminary Statement

Litigation Trust Board

   Section 4.1

Litigation Trust Claims

   Preliminary Statement

Litigation Trust Claims Transferors

   Preliminary Statement

Litigation Trust Proceeds

   Section 3.1

Litigation Trustee

   Introduction

Plan

   Preliminary Statement

Privileges

   Section 1.3(a)

Registrar

   Section 2.5(a)

SEC

   Section 2.4

Securities Act

   Section 2.4

SFC

   Introduction

Sino-Forest Litigation Trust

   Section 1.2(a)

Subsidiaries

   Introduction

Transfer

   Section 2.5(a)

Trust Indenture Act

   Section 2.4

Trust Register

   Section 2.5(c)

[Schedule A to Litigation Trust Agreement]

EXHIBIT C

INFORMATION REGARDING NEWCO

The information concerning Newco contained herein is based upon information provided by the Noteholder Advisors. Although the Company has no knowledge that would indicate that any statements contained herein relating to Newco are untrue or incomplete, the Company and its directors or officers disclaim any responsibility for the accuracy or completeness of such information, or for any failure by the Company to disclose events or facts that may have occurred or which may affect the significance or accuracy of any such information, but which are unknown to the Company. Defined terms capitalized but not otherwise defined in this Plan Supplement shall have the meanings given them in the Information Statement.

Newco will be incorporated as an exempt company under the laws of the Cayman Islands pursuant to the Plan. Newco will be formed and organized in a manner acceptable to the Initial Consenting Noteholders and in form and substance satisfactory to SFC and the Monitor. It is expected that Newco will be formed shortly before the Plan Implementation Date.

Newco Shares

Newco will have share capital consisting of a single class of voting shares, being the Newco Shares. The Newco Shares issued on the Plan Implementation Date will be fully paid and non-assessable.

In the event that the share capital of Newco is subsequently divided into different classes of shares, the rights attached to any class may be varied by a shareholders’ resolution passed at a separate meeting of the holders of shares of that class by at least 66 2/3% of the votes cast at such meeting. In addition, with the consent of the holders of at least 66 2/3% of the votes cast at a shareholders’ meeting, Newco may issue equity securities having a preference over the Newco Shares. According to the law of the Cayman Islands, such issuances and variances of rights will not generally give rise to dissent rights (as that term is understood under Canadian law).

Newco is not, and will not be following the Plan Implementation Date, a reporting issuer (or equivalent) in any jurisdiction and the Newco Shares will not be listed on any stock exchange or quotation service on the Plan Implementation Date.

Dividends

Subject to preferences for the receipt of dividends that may be accorded to holders of any other classes of shares of Newco ranking senior to the Newco Shares that may be authorized from time to time holders of Newco Shares are entitled to receive, if, as and when declared by the board of directors of Newco, such dividends as may be declared thereon by the board from time to time in equal amounts per share on the Newco Shares at the time outstanding, without preference or priority.

Shareholder Meetings

Newco will hold its first annual general meeting of shareholders not earlier than 12 months following the Plan Implementation Date, with subsequent annual general meetings to be held annually thereafter. At any time after the expiry of the first 12-month period following the Plan Implementation Date, an extraordinary general meeting may be requisitioned by Newco shareholders holding 10% or more of the issued and outstanding Newco Shares.

Quorum for any annual or extraordinary general meeting of shareholders shall be two or more persons present in person and representing in person or by proxy in excess of 33 1/3% of the issued and outstanding shares entitled to vote at a general meeting.

Board of Directors

The board of directors of Newco will initially consist of up to five directors, who will be satisfactory to the Initial Consenting Noteholders, and may be expanded to include up to ten directors. Although Cayman law and Newco’s articles of association permit corporations to serve as directors, all of the directors on the Newco board as of the Plan Implementation Date will be individuals. A director is entitled to appoint an alternate or a proxy to attend board meetings (in person or by telephone) in the director’s absence.

Commencing with the first annual general meeting of Newco shareholders following the Plan Implementation Date, any shareholder that (i) was an Initial Consenting Noteholder and (ii) owns (individually or together with its affiliates) shares representing 10.0% or more of the shares then issued and outstanding that carry the right to vote at general meetings (excluding for the purposes of such calculation any shares held at such time by SFC Escrow Co.) (a “ 10% Position ”) and has either (A) owned (beneficially or as a registered shareholder) such 10% Position continuously since the Plan Implementation Date, or (B) acquired such 10% Position from a prior 10%+ Shareholder (each a “ 10%+ Shareholder ”) shall be entitled to appoint one director to the board. The remaining directors shall be elected by the Newco shareholders as a group. A Newco shareholder must be the registered owner of its 10% Position in order to exercise any rights it may have as a 10%+ Shareholder.

A 10%+ Shareholder’s board appointment right shall be transferable only in connection with its sale of a 10% Position to another person. No person that acquires a 10% Position after the Plan Implementation Date, other than in connection with an acquisition of a 10% Position from a 10%+ Shareholder, shall be entitled to appoint a director to the Newco board. In the event a 10%+ Shareholder ceases to own a 10%+ Position, the director appointed by it shall resign and such 10%+ Shareholder will lose its right to appoint a director to the Newco board.

Directors (other than any director appointed by a 10%+ Shareholder) will be elected by shareholders on an annual basis at the Newco annual general meeting. Any director appointed by a 10%+ Shareholder may only be removed by that 10%+ Shareholder and a 10%+ Shareholder shall be entitled to appoint another director in his place.

Prior to the first annual general meeting, a director may only be removed with the support of shareholders holding at least 66-2/3% of the votes cast at the meeting. On or following the first annual general meeting, a director (other than a director appointed by a 10%+ Shareholder) may be removed with the support of shareholders holding more than 50% of the votes cast at the meeting.

Information Rights

Newco will deliver to each shareholder: (a) copies of Newco’s annual financial statements within 180 days of each fiscal year end; and (b) copies of Newco’s semi-annual financial statements within 90 days of the end of each financial half-year. The board of directors of Newco will have the discretion whether or not to obtain an audit of the annual financial statements. Upon reasonable request, Newco will also deliver to any shareholder, at the cost and expense of such shareholder, such tax-related information, reports and statements relating to Newco and its

 

- 2 -

subsidiaries as are reasonably necessary for the filing of any tax return or the making or implementing of any election related to taxes.

Pre-emptive Rights

If Newco wishes to issue equity securities (or any securities convertible into or exchangeable for equity securities of Newco, including convertible debt) other than (a) pursuant to an initial public offering, (b) equity incentive awards to directors, officers or employees of Newco, which awards represent in the aggregate less than 10% of the outstanding Newco Shares (or such higher limit as may be approved by shareholders), or (c) in respect of share splits, share dividends or similar capital reorganizations, it shall offer such securities to each shareholder pro rata in proportion to the number of Newco Shares held by such shareholder at the time of the offer prior to selling such securities to non-shareholders.

Redemption

Newco may redeem Newco Shares in accordance with applicable Cayman law, provided that such shares are redeemed on a pro rata basis.

Drag-Along Rights

In the event holders of at least 66-2/3% of the outstanding Newco Shares wish to sell all of their Newco Shares to a third party, they will have the right to force the other shareholders to sell all of their Newco Shares on the same terms, thereby enabling a sale of the entire company.

Shareholder Approval Rights

In addition to certain other matters requiring approval by special resolution under applicable Cayman law (including amendment of Newco’s memorandum or articles of association and a voluntary winding-up of Newco), other than as specified in the Plan Newco may not undertake any of the following fundamental actions without the prior approval of shareholders holding at least 66-2/3% of the Newco Shares present and voting at the meeting:

 

  •  

any reorganization, recapitalization, amalgamation, merger or consolidation of or involving Newco;

 

  •  

issuance of (i) any equity securities having a preference over the Newco Shares, or (ii) equity incentive awards to directors, officers or employees, which awards represent in the aggregate in excess of 10% of the outstanding Newco Shares;

 

  •  

the sale of all or substantially all of Newco’s assets (on a consolidated basis);

 

  •  

any material change in the nature of Newco’s business;

 

  •  

affiliated or related party transactions (other than transactions between Newco and its wholly-owned subsidiaries); and

 

  •  

a voluntary liquidation, dissolution or winding up of Newco or any of its material Subsidiaries (other than in connection with an internal restructuring).

 

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Management

The ad hoc committee of Noteholders, together with its advisors, is reviewing potential candidates for appointment to the Newco board of directors and to serve as senior management of Newco. It is intended that the directors and senior management of Newco will be appointed on or prior to the Plan Implementation Date.

Newco II

Prior to the Plan Implementation Date, it is intended that Newco will organize a wholly-owned subsidiary as an exempt company under the laws of the Cayman Islands (“Newco II”) for the purpose of acquiring from Newco the SFC Assets to be transferred by SFC to Newco on implementation of the Plan. As the SFC Assets consist primarily of the shares of the six Direct Subsidiaries of SFC (which are incorporated in multiple different jurisdictions), holding the SFC Assets through a single, wholly-owned subsidiary of Newco is intended to facilitate the resolution of any tax, jurisdictional or other issues that may arise out of a subsequent sale of all or substantially all of Newco’s assets. It is intended that the memorandum and articles of association of Newco II will be in a form customary for a wholly-owned subsidiary and that the initial board of directors of Newco II will consist of the same individuals appointed as the directors of Newco on or prior to the Plan Implementation Date.

Newco Names

Newco will be named Evergreen China Holdings Ltd. and Newco II will be named Evergreen China Holdings II Ltd.

 

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EXHIBIT D

DESCRIPTION OF NEWCO NOTES

EXHIBIT D

DESCRIPTION OF NEWCO NOTES

For purposes of this “Description of the Notes,” the term “Company,” “we” and “our” refers to Evergreen China Holdings Ltd., and any successor obligor on the Notes, and not to any of its Subsidiaries. Each Subsidiary of the Company which Guarantees the Notes is referred to as a “Subsidiary Guarantor,” and each such Guarantee is referred to as a “Subsidiary Guarantee.”

The Notes are to be issued under an Indenture, to be dated as of the Original Issue Date, among the Company, the Subsidiary Guarantors, as guarantors, Computershare Trust Company, N.A., as trustee (the “Trustee”) and Computershare Trust Company, N.A., as collateral trustee (the “Security Trustee”).

The following is a summary of certain material provisions of the Indenture, the Notes and the Subsidiary Guarantees. This summary does not purport to be complete and is qualified in its entirety by reference to all of the provisions of the Indenture, the Notes and the Subsidiary Guarantees. It does not restate those agreements in their entirety. Whenever particular sections or defined terms of the Indenture not otherwise defined herein are referred to, such sections or defined terms are incorporated herein by reference. Copies of the Indenture will be available on or after the Original Issue Date at the corporate trust office of the Trustee in Colorado and on the website maintained by the Monitor at the following web address: http://cfcanada.fticonsulting.com/sfc.

Brief Description of the Notes

General

The Notes are limited in aggregate principal amount to US$300 million. After the Original Issue Date, the Company may at any time and from time to time issue (a) Additional Notes under the Indenture in one or more series that share Liens on the Collateral on a pari-passu basis with the Notes (and without regard to any restrictions or limitations set forth under the covenants entitled “Limitation on Indebtedness and Disqualified or Preferred Stock” and “Limitation on Liens”), provided that the aggregate principal amount of the Notes and Additional Notes outstanding at any time may not exceed $400 million; (b) in connection with the payment of PIK Interest (as defined below) (and without regard to any restrictions or limitations set forth under the covenants entitled “Limitation on Indebtedness and Disqualified or Preferred Stock” and “Limitation on Liens”), increase the outstanding principal amount of the Notes or issue additional notes (the “PIK Notes”) under the Indenture on the same terms and conditions as the Notes issued on the Original Issue Date. The Notes, any Additional Notes and any PIK Notes subsequently issued under the Indenture will be treated as a single series for all purposes under the Indenture; and (c) Permitted Priority Secured Indebtedness that is secured by Liens on the Collateral ranking senior in priority to the Liens granted to secure payment of the Notes, Additional Notes and PIK Notes (and without regard to any restrictions or limitations set forth under the covenants entitled “Limitation on Indebtedness and Disqualified or Preferred Stock” and “Limitation on Liens”), provided that the aggregate principal amount of such Permitted Priority Secured Indebtedness outstanding at any time may not exceed the Permitted Priority Secured Indebtedness Cap. Unless the context requires otherwise, references to “Notes” for all purposes of the Indenture and this “Description of the Notes” include any Additional Notes and any PIK Notes that are actually issued.

The Notes are:

 

  •  

general obligations of the Company;

 

  •  

guaranteed by the Subsidiary Guarantors on a senior basis, subject to the limitations described below under the caption “—The Subsidiary Guarantees,

 

  •  

senior in right of payment to any existing and future obligations of the Company expressly subordinated in right of payment to the Notes;

  •  

at least pari passu in right of payment with all other unsecured, unsubordinated Indebtedness of the Company (subject to any priority rights of such unsubordinated Indebtedness pursuant to applicable law); and

 

  •  

effectively subordinated to all existing and future obligations of the Non-Guarantor Subsidiaries.

In addition, the Notes will be secured by pledges, mortgages and/or charges of the Collateral as described below under the caption “—Security” and will:

 

  •  

effectively rank, with respect and to the extent of the value of the Collateral, subject to Permitted Liens, pari passu with any Additional Notes issued in compliance with the Indenture;

 

  •  

effectively rank, with respect and to the extent of the value of the Collateral, junior to all future obligations of the Company in respect of any Permitted Priority Secured Indebtedness that are secured on a first priority basis by the Collateral; and

 

  •  

rank effectively senior in right of payment to unsecured obligations of the Company with respect to the value of the Collateral pledged, mortgaged or charged by the Company securing the Notes (subject to any priority rights of such unsecured obligations pursuant to applicable law).

Maturity and Interest

The Notes will mature 7 years from the Original Issue Date, unless earlier redeemed pursuant to the terms thereof and the Indenture. The Indenture allows additional Notes to be issued from time to time (the “Additional Notes”), subject to certain limitations described under “—Further Issues.” Unless the context requires otherwise, references to the “Notes” for all purposes of the Indenture and this “Description of Notes” include any Additional Notes and PIK Notes that are actually issued.

Interest on the Notes will be payable in cash or, at the Company’s election (a “PIK Election”) from time to time, partially in cash and partially in payment in kind notes, or entirely in PIK Notes (“PIK Notes”). In all cases, interest shall be payable on a semi-annual basis in arrears on the last day of the month which is the sixth month following the Original Issue Date and the twelfth month following the Original Issue Date of each year (each an “Interest Payment Date”), commencing on the last day of the month which is the sixth month following the Original Issue Date, to holders of record of the Notes at the close of business on the immediately preceding fifteenth day of such sixth or twelfth month, respectively (each, a “Record Date”) notwithstanding any transfer, exchange or cancellation thereof after a Record Date and prior to the immediately following Interest Payment Date.

Interest on the Notes will accrue from the later of the Original Issue Date or the most recent date to which interest has been paid, as applicable. Interest on the Notes will be calculated on the basis of a 360-day year comprised of twelve 30-day months.

Interest will accrue at a rate of 6% per annum if the interest for such interest period is paid fully in cash. In the event that the Company makes a PIK Election in accordance with the Indenture, the cash interest portion (if any) of interest payable will accrue and be paid for such interest period at a rate of 6% per annum and the interest paid-in-kind portion (“PIK Interest”) of interest paid through the issuance of PIK Notes will accrue for such interest period at a rate of 8% per annum. The Company must elect the form of interest payment with respect to each interest period by delivering a written notice to the Trustee on or prior to the Record Date in respect of the relevant Interest Payment Date. In the absence of such an election for any interest period, interest on the Notes shall be payable according to the election for the previous interest period.

From and after the occurrence of an Event of Default, overdue principal and interest on the Notes will bear interest payable in cash at the rate of an additional 2% per annum

 

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In any case in which the date of the payment of principal of or interest on the Notes shall not be a Business Day in the relevant place of payment, then payment of principal or interest need not be made in such place on such date but may be made on the next succeeding Business Day in such place.

Any payment made on such Business Day shall have the same force and effect as if made on the date on which such payment is due, and no interest on the Notes shall accrue for the period after such date.

The Notes will be issued only in fully registered form, without coupons, in minimum denominations of US$2,000 of principal amount and integral multiples of US$1,000 in excess thereof. No service charge will be made for any registration of transfer or exchange of Notes, but the Company or the Trustee may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith.

All payments on the Notes will be made in U.S. dollars by the Company at the office or agency of the Company maintained for that purpose (which initially will be the corporate trust administration office of the Trustee, currently located at 350 Indiana Street, Suite 750, Golden, CO 80401), and the Notes may be presented for registration of transfer or exchange at such office or agency; provided that, at the option of the Company, payment of interest may be made by check mailed to the address of the Holders as such address appears in the Note register. Interest payable on the Notes held through DTC will be available to DTC participants (as defined herein) in accordance with DTC’s applicable procedures.

The Subsidiary Guarantees

The Subsidiary Guarantee of each Subsidiary Guarantor:

 

  •  

is a general obligation of such Subsidiary Guarantor;

 

  •  

is senior in right of payment to all future obligations of such Subsidiary Guarantor expressly subordinated in right of payment to such Subsidiary Guarantee; and

 

  •  

ranks at least pari passu with all other unsecured, unsubordinated Indebtedness of such Subsidiary Guarantor (subject to priority rights of such unsubordinated Indebtedness pursuant to applicable law).

In addition, subject to the limitations described therein, the Subsidiary Guarantee of each Subsidiary Guarantor Pledgor (as defined below) will:

 

  •  

effectively rank, with respect and to the extent of the value of the Collateral owned by such Subsidiary Guarantor Pledgor, subject to Permitted Liens, pari passu with any future Additional Notes issued in compliance with the Indenture;

 

  •  

effectively rank, with respect and to the extent of the value of the Collateral owned by such Subsidiary Guarantor Pledgor, junior to all future Permitted Priority Secured Indebtedness of such Subsidiary Guarantor Pledgor that is secured by Liens on the Collateral owned by such Subsidiary Guarantor Pledgor in favour of the holders of the Permitted Priority Secured Indebtedness; and

 

  •  

will rank effectively senior in right of payment to the unsecured obligations of such Subsidiary Guarantor Pledgor with respect to the value of the Collateral securing such Subsidiary Guarantee (subject to priority rights of such unsecured obligations pursuant to applicable law).

Under the Indenture, each of the Subsidiary Guarantors will jointly and severally Guarantee the due and punctual payment of the principal of, premium, if any, and interest on, and all other amounts payable under, the Notes, the Indenture and the Security Documents. The Subsidiary Guarantors have (1) agreed that their obligations under the Subsidiary Guarantees will be enforceable irrespective of any invalidity, irregularity or unenforceability of the Notes or the Indenture and (2) waived their right to require the Trustee to pursue or exhaust its legal or equitable remedies against the Company prior to exercising its rights under the Subsidiary Guarantees. Moreover, if at any time any amount paid under a Note is rescinded or must otherwise be restored, the rights of the Holders under the

 

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Subsidiary Guarantees will be reinstated with respect to such payments as though such payment had not been made. All payments under the Subsidiary Guarantees will be made in U.S. dollars.

The initial Subsidiary Guarantors that will execute the Indenture on the Original Issue Date will be Sino-Capital Global Inc., Sino-Panel Holdings Limited (BVI), Sino-Global Holdings Inc. (BVI), Sino-Wood Partners, Limited (HK), Grandeur Winway Ltd. (BVI), Sinowin Investments Ltd. (BVI), Sinowood Limited (Cayman Islands), Sino-Forest Bio-Science Limited (formerly known as: Sino-Two Limited) (BVI), Sino-Forest Resources Inc. (BVI), Sino-Plantation Limited (HK), Suri-Wood Inc. (BVI), Sino-Forest Investments Limited (BVI), Sino-Wood (Guangxi) Limited (HK), Sino-Wood (Jiangxi) Limited (HK), Sino-Wood (Guangdong) Limited (HK), Sino-Wood (Fujian) Limited (HK), Sino-Panel (Asia) Inc. (BVI), Sino-Panel (Guangxi) Limited (BVI), Sino-Panel (Yunnan) Limited (BVI), Sino-Panel (North East China) Limited (BVI), Sino-Panel (Xiangxi) Limited (formerly known as: Rich Base Worldwide Limited) (BVI), Sino-Panel (Hunan) Limited (formerly known as Comtech Universal Limited) (BVI), SFR (China) Inc. (BVI), Sino-Panel (Suzhou) Limited (formerly known as: Pacific Harvest Holdings Limited) (BVI), Sino-Panel (Gaoyao) Ltd. (BVI), Sino-Panel (Guangzhou) Limited (BVI), Sino-Panel (North Sea) Limited (BVI), Sino-Panel (Guizhou) Limited (BVI), Sino-Panel (Huaihua) Limited (BVI), Sino-Panel (Qinzhou) Limited (formerly known as Sino-Panel (Jiayu) Ltd.) (BVI), Sino-Panel (Yongzhou) Limited (BVI), Sino-Panel (Fujian) Limited (BVI), Sino-Panel (Shaoyang) Limited (BVI), Amplemax Worldwide Limited (BVI), Ace Supreme International Limited (BVI), Express Point Holdings Limited (BVI), Glory Billion International Limited (BVI), Smart Sure Enterprises Limited (BVI), Expert Bonus Investment Limited (BVI), Dynamic Profit Holding Limited (BVI), Alliance Max Limited (BVI), Brain Force Limited (BVI), General Excel Limited (BVI), Poly Market Limited (BVI), Prime Kinetic Limited (BVI), Trillion Edge Limited (BVI), Sino-Panel (China) Nursery Limited (BVI), Sino-Wood Trading Limited (BVI), Homix Limited (BVI), Sino-Panel Trading Limited (BVI), Sino-Panel (Russia) Limited (BVI), Sino-Forest International (Barbados) Corporation (Barbados), Sino-Global Management Consulting Inc. (BVI), Value Quest International Limited (BVI), Well Keen Worldwide Limited (BVI), Harvest Wonder Worldwide Limited (BVI), Cheer Gold Worldwide Limited (BVI), Regal Win Capital Limited (BVI), Rich Choice Worldwide Limited (BVI), Mandra Forestry Holdings Limited (BVI), Mandra Forestry Finance Limited (BVI), Mandra Forestry Anhui Limited (BVI), Mandra Forestry Hubei Limited (HK) and Elite Legacy Limited.

Not all of the Company’s Restricted Subsidiaries will guarantee the Notes. None of the Company’s over 40 significant current operating or other PRC Subsidiaries, or our Initial Unrestricted Subsidiaries (as defined herein), will provide a Subsidiary Guarantee. Each of the Company’s Subsidiaries that does not guarantee the Notes is referred to as a “Non-Guarantor Subsidiary.” In addition, no future Subsidiaries of the Company that may be organized under the laws of the PRC or another jurisdiction that prohibits such Subsidiary from guaranteeing the payment of the Notes will provide a Subsidiary Guarantee, such Subsidiaries referred to herein as “Foreign Subsidiaries.” In the event of a bankruptcy, liquidation or reorganization of any Non-Guarantor Subsidiary, the Non-Guarantor Subsidiary will pay the holders of its debt and its trade creditors before it will be able to distribute any of its assets to the Company or a subsidiary of the Company, as the case may be. The Subsidiary Guarantors are primarily either holding companies that operate through subsidiaries or entities that directly hold property and assets and/or engage in business operations and generate income. Although under the accounting standards applicable to us and our Subsidiaries, such Subsidiary Guarantors recognize a significant portion of our income and hold a significant portion of our assets on a consolidated basis, most of such property and assets are physically located, and most of such income is earned and held, in the PRC and denominated in Renminbi. As a result, even though such Subsidiary Guarantors have agreed to guarantee the obligations of the Company under the Notes, their assets and cash are unlikely to be available to service our obligations under the Notes due to PRC foreign currency exchange controls or uncertainties in the PRC legal system and/or payments from them may be delayed or subject to PRC tax regimes.

In addition, our Subsidiaries that do not guarantee the Notes hold significant amounts of our assets and/or generate a significant portion of our income and the portion of assets held or income generated by Subsidiary Guarantors may decrease in the future. We are a holding company and payments with respect to the Notes are structurally subordinated to liabilities, contingent liabilities and obligations of certain of our Subsidiaries.

The Company will cause each of its future Restricted Subsidiaries (other than Subsidiaries organized under the laws of the PRC or Foreign Subsidiaries), immediately upon becoming a Restricted Subsidiary, to execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary will become a Subsidiary Guarantor and will Guarantee the payment of the Notes.

 

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Under the Indenture, and any supplemental indenture thereto, as applicable, each Subsidiary Guarantee will be limited in an amount not to exceed the maximum amount that can be guaranteed by the applicable Subsidiary Guarantor without rendering the Subsidiary Guarantee, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to insolvency, fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally or the ability of related parties to provide guarantees. If a Subsidiary Guarantee were to be rendered void or voidable, it could be rendered ineffective or subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the applicable Subsidiary Guarantor, and, depending on the amount of such indebtedness, a Subsidiary Guarantor’s liability on its Subsidiary Guarantee could be reduced to zero.

Release of the Subsidiary Guarantees

A Subsidiary Guarantee given by a Subsidiary Guarantor may be released in certain circumstances, including:

 

  •  

upon repayment in full of the Notes;

 

  •  

upon a defeasance as described under “—Defeasance;”

 

  •  

upon the designation by the Company of a Subsidiary Guarantor as an Unrestricted Subsidiary in compliance with terms of the Indenture; or

 

  •  

upon the sale of a Subsidiary Guarantor in compliance with the terms of the Indenture (including the covenants under the captions “Certain Covenants—Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries,” “Certain Covenants—Limitation on Asset Sales” and “Consolidation, Merger and Sale of Assets”) resulting in such Subsidiary Guarantor no longer being a Restricted Subsidiary, so long as (1) such Subsidiary Guarantor is simultaneously released from its obligations in respect of any of the Company’s other Indebtedness or any Indebtedness of any other Restricted Subsidiary and (2) the proceeds from such sale or disposition are used for the purposes permitted or required by the Indenture.

Limitations on Subsidiary Guarantees and Enforcement of Security

The obligations of each Subsidiary Guarantor under its respective Subsidiary Guarantee and the enforceability of the Collateral granted in respect of such Subsidiary Guarantees of the Subsidiary Guarantor Pledgors may be limited, or possibly invalid, under applicable laws. Certain of the Subsidiary Guarantors have significant loans or other obligations due to other subsidiaries within the Sino-Forest group. The guarantee by a Subsidiary Guarantor may be voided or subject to review under applicable insolvency or fraudulent transfer laws, or subject to a lawsuit by or on behalf of creditors of such Subsidiary Guarantor. In addition, the Subsidiary Guarantees may be challenged under applicable insolvency or fraudulent transfer laws, which could impair the enforceability of the Subsidiary Guarantees.

Unrestricted Subsidiaries

As of the date of the Indenture, all of the Company’s Subsidiaries (except Greenheart Group Limited and its Subsidiaries (the “Initial Unrestricted Subsidiaries”)) will be “Restricted Subsidiaries.” Additionally, under the circumstances described below under the caption “—Certain Covenants—Designation of Restricted and Unrestricted Subsidiaries,” the Company will be permitted to designate certain of its other Subsidiaries as “Unrestricted Subsidiaries.” The Company’s Unrestricted Subsidiaries (including the Initial Unrestricted Subsidiaries) will not be subject to many of the restrictive covenants in the Indenture. The Company’s Unrestricted Subsidiaries (including the Initial Unrestricted Subsidiaries) will not Guarantee the Notes.

 

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Security

Subject to the arrangements described under the caption “—Intercreditor Agreement—” below, Company has agreed, for the benefit of the Holders of the Notes, to pledge, mortgage or charge, or cause the initial Subsidiary Guarantor Pledgors to pledge, mortgage or charge, as the case may be, all property and assets of the Company and the initial Subsidiary Guarantors (including the Capital Stock of the initial Subsidiary Guarantors) (the “Collateral”) on a first priority basis (subject to Permitted Liens) on the Original Issue Date in order to secure the obligations of the Company under the Notes and the Indenture and of such initial Subsidiary Guarantor Pledgors under their respective Subsidiary Guarantees.

The initial Subsidiary Guarantor Pledgors will be Sino-Forest Investments Limited (BVI), Sino-Capital Global Inc. (BVI), Mandra Forestry Holdings Limited (BVI), Mandra Forestry Finance Limited (BVI), Mandra Forestry Anhui Limited (BVI), Sino-Global Holdings Inc. (BVI), Sino-Wood Partners, Limited (HK), Sinowood Limited (Cayman Islands), Sino-Plantation Limited (HK), Suri-Wood Inc. (BVI), Sino-Panel (Asia) Inc. (BVI), Sino-Panel Holdings Limited (BVI), Dynamic Profit Holdings Limited (BVI) and Sino-Forest International (Barbados) Corporation (Barbados).

The Company has also agreed, for the benefit of the Holders of the Notes, to pledge, mortgage or charge, or cause each Subsidiary Guarantor to pledge, mortgage or charge, all property and assets (including the Capital Stock owned by the Company or such Subsidiary Guarantor) of any Person that is a Restricted Subsidiary or becomes a Restricted Subsidiary (other than Persons organized under the laws of the PRC or any other jurisdiction that prohibits such property and assets of such Restricted Subsidiaries from being pledged, mortgaged or charged, to secure the obligations of the Company or such Subsidiary Guarantor) after the Original Issue Date, promptly upon such Person becoming a Restricted Subsidiary, to secure the obligations of the Company under the Notes and the Indenture, and of such Subsidiary Guarantor under its Subsidiary Guarantee, in the manner described above.

The value of the Collateral securing the Notes and the Subsidiary Guarantees of the Subsidiary Guarantor Pledgors may not be sufficient to satisfy the Company’s and each of the Subsidiary Guarantor Pledgors’ obligations under the Notes, and the Subsidiary Guarantees of the Subsidiary Guarantor Pledgors, and the Collateral securing the Notes and such Subsidiary Guarantees may be reduced or diluted under certain circumstances, including the enforcement of the priority Liens granted over the Collateral as security for the payment of any Permitted Priority Secured Indebtedness and any Permitted Priority Subsidiary Guarantees, the issuance of Additional Notes and the disposition of assets comprising the Collateral, subject to the terms of the Indenture.

No appraisals of the Collateral have been prepared in connection with this offering of the Notes. There can be no assurance that the proceeds of any sale of the Collateral, in whole or in part, pursuant to the Indenture and the Security Documents following an Event of Default, would be sufficient to satisfy amounts due on the Notes or the Subsidiary Guarantees of the Subsidiary Guarantor Pledgors. By its nature, some or all of the Collateral will be illiquid and may have no readily ascertainable market value. Accordingly, there can be no assurance that the Collateral would be sold in a timely manner or at all.

So long as no Default has occurred and is continuing, and subject to the terms of the Security Documents, the Company and the Subsidiary Guarantor Pledgors, as the case may be, will be entitled to exercise any and all voting rights and to receive and retain any and all cash dividends, stock dividends, liquidating dividends, non-cash dividends, shares or stock resulting from stock splits or reclassifications, rights issues, warrants, options and other distributions (whether similar or dissimilar to the foregoing) in respect of Capital Stock constituting Collateral.

Permitted Priority Secured Indebtedness

The Company and each Subsidiary Guarantor Pledgor may create Liens on the Collateral ranking senior to the Lien for the benefit of the Holders to secure Permitted Priority Secured Indebtedness of the Company and any Permitted Priority Subsidiary Guarantee of a Subsidiary Guarantor Pledgor; provided that (i) the principal amount of such Permitted Priority Secured Indebtedness may not exceed the amount of the Permitted Priority Secured Indebtedness Cap, (ii) the holders of such Indebtedness (or their representative) become party to an Intercreditor Agreement, as referred to below, (iii) the instrument or agreement creating such Indebtedness contains provisions with respect to releases of Collateral and such Permitted Priority Subsidiary Guarantee substantially similar to and no more restrictive on the Company and such Subsidiary Guarantor Pledgor than the provisions of the Indenture and

 

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the Security Documents and (iv) the Company and such Subsidiary Guarantor Pledgor deliver to the Security Trustee an Opinion of Counsel with respect to corporate and collateral matters in connection with the Security Documents, in form and substance as set forth in the Security Documents. The Trustee and the Security Trustee will be permitted and authorized, without the consent of any Holder, to enter into any amendments to the Security Documents or the Indenture and take any other action necessary to permit the creation and registration of Liens on the Collateral to secure Permitted Priority Secured Indebtedness in accordance with this paragraph (including, without limitation, the appointment of any collateral agent or trustee under the Intercreditor Agreement referred to below to hold the Collateral on behalf of the Holders and the holders of Permitted Priority Secured Indebtedness).

Except for certain Permitted Liens and the Permitted Priority Secured Indebtedness, the Company and its Restricted Subsidiaries will not be permitted to issue or Incur any other Indebtedness secured by all or any portion of the Collateral without the consent of each Holder of the Notes then outstanding.

Intercreditor Agreement

As of the Original Issue Date, the Collateral will be pledged, mortgaged or charged, to secure the obligations of the Company and the Subsidiary Guarantors under the Notes and the Subsidiary Guarantees, pursuant to the terms of the Security Documents. After the Original Issue Date, to the extent that the Company issues Permitted Priority Secured Indebtedness in accordance with the terms of the Indenture, the holders of such Permitted Priority Secured Indebtedness (or the agent, trustee or representative thereof) (the “Permitted Priority Trustee”) will be required to enter into an intercreditor agreement (the “Intercreditor Agreement”) with the Trustee and the Security Trustee, and acknowledged by the Company, providing, among other things, (1) that the Liens in and to the Collateral securing the Notes shall rank second only to the Liens in and to the Collateral securing the Permitted Priority Secured Indebtedness in favour of the Permitted Priority Trustee, all to the extent and in the manner set forth in such Intercreditor Agreement and containing the additional terms set forth in the Indenture (the “Pre-Agreed Intercreditor Terms”) (2) for the conditions under which the parties thereto will consent to the release of or granting of any Lien on such Collateral; and (3) for the conditions under which the parties thereto will enforce their rights with respect to such Collateral and the Indebtedness secured thereby. The Collateral securing the obligations of the Company and the Subsidiary Guarantors in favour of the Holders of any Permitted Priority Secured Indebtedness shall in no event be comprised of any collateral in addition to the Collateral securing the obligations of the Company and the Subsidiary Guarantors in respect of the Notes unless such additional collateral is also granted to the Trustee and the Security Trustee for the benefit of the Holders.

Each Holder of Notes shall be bound by the provisions of the Indenture and any intercreditor agreement entered into by the Trustee which contains terms and conditions substantially the same as the Pre-Agreed Intercreditor Terms, and the Trustee and the Security Trustee shall be authorized and directed pursuant to the terms of the Indenture to enter into any such Intercreditor Agreement with the Permitted Priority Trustee for the holders of any such Permitted Priority Secured Indebtedness.

The Intercreditor Agreement will also provide that when the property and assets (including the Capital Stock) of any Person that is or becomes a Restricted Subsidiary (other than Persons organized under the laws of the PRC or any other jurisdiction that prohibits such Restricted Subsidiaries from guaranteeing the payment of the Notes) is delivered as security as described in the third paragraph of “—Security” above, such property and assets (including the Capital Stock) would also be deemed to be Collateral, and subject to the sharing of interest in such security, under the terms of the Intercreditor Agreement.

Enforcement of Security

The Liens securing the Notes and the Subsidiary Guarantees of the Subsidiary Guarantor Pledgors will be granted to the Security Trustee. The Security Trustee will hold such Liens and security interests in the Collateral granted pursuant to the Security Documents with sole authority as directed by the Secured Parties (or their respective representatives) to exercise remedies under the Security Documents. The Security Trustee will agree to act as secured party on behalf of the Secured Parties (or their respective representatives) under the applicable Security Documents, to follow the instructions provided to it by the Secured Parties (or their respective representatives) under the Indenture and to carry out certain other duties. The Trustee will give instructions to the Security Trustee in accordance with instructions it receives from the Holders under the Indenture.

 

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The Indenture and/or the Security Documents will principally provide that, at any time while the Notes are outstanding, the Security Trustee will have the exclusive right to manage, perform and enforce the terms of the Security Documents relating to the Collateral and to exercise and enforce all privileges, rights and remedies thereunder according to its direction, including to take or retake control or possession of such Collateral and to hold, prepare for sale, process, lease, dispose of or liquidate such Collateral, including, without limitation, following the occurrence of a Default under the Indenture.

All payments received and all amounts held by the Security Trustee in respect of the Collateral under the Security Documents will be applied, subject to the terms of any Intercreditor Agreement, as follows:

first , to the Security Trustee to the extent necessary to reimburse the Security Trustee for any expenses incurred in connection with the collection or distribution of such amounts held or realized or in connection with expenses incurred in enforcing its remedies under the Security Documents and preserving the Collateral and all amounts for which the Security Trustee is entitled to indemnification or otherwise owed under the Indenture and/or the Security Documents;

second , to the Trustee for its benefit and the benefit of Holders, to the Paying Agent and Registrar, all pursuant to the terms of the Indenture; and

third , any surplus remaining after such payments will be paid to the Company or the Subsidiary Guarantor Pledgors or to whomever may be lawfully entitled thereto.

The Security Trustee may decline to foreclose on, or enforce the security interest created over, the Collateral or exercise remedies available if it does not receive indemnification to its satisfaction. In addition, the Security Trustee’s ability to foreclose on, or enforce the security interest created over, the Collateral may be subject to lack of perfection, the consent of third parties, prior Liens and practical problems associated with the realization of the Security Trustee’s Liens on the Collateral. Neither the Security Trustee nor any of its officers, directors, employees, attorneys or agents will be responsible or liable for the existence, genuineness, value or protection of any Collateral securing the Notes, for the legality, enforceability, effectiveness or sufficiency of the Security Documents, for the creation, perfection, priority, sufficiency, maintenance or protection of any of the Liens, or for any defect or deficiency as to any such matters, or for any failure to demand, collect, foreclose or realize upon or otherwise enforce any of the Liens or Security Documents or any delay in doing so.

The Indenture and/or the Security Documents will provide that the Company and the Subsidiary Guarantor Pledgors will Indemnify the Security Trustee for all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind imposed against the Security Trustee arising out of the Security Documents or the Indenture except to the extent that any of the foregoing are finally judicially determined to have resulted from the gross negligence or willful misconduct of the Security Trustee.

Release of Security

The security created in respect of the Collateral granted under the Security Documents may be released in certain circumstances, subject to the terms of the Security Documents and any Intercreditor Agreement, including:

 

  •  

upon repayment in full of the Notes;

 

  •  

upon defeasance and discharge of the Notes as provided below under the caption “—Defeasance”;

 

  •  

upon certain dispositions of the Collateral in compliance with the covenants under the captions “—Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries” or “—Limitation on Asset Sales” or in accordance with the provision under the caption “—Consolidation, Merger and Sale of Assets”;

 

  •  

with respect to security granted by a Subsidiary Guarantor Pledgor, upon the release of the Subsidiary Guarantee of such Subsidiary Guarantor Pledgor in accordance with the terms of the Indenture; and

 

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  •  

with respect to all or any part of the Collateral, by the Security Trustee in connection with any enforcement of its Liens pursuant to the terms of the Security Agreement.

Further Issues

The Company may, from time to time, without notice to or the consent of the Holders (and without regard to any restrictions or limitations set forth under the “Limitation on Indebtedness and Disqualified or Preferred Stock” covenant described below), create and issue Additional Notes having the same terms and conditions as the Notes (including the benefit of the Subsidiary Guarantees) in all respects (or in all respects except for issue date, issue price, and the first payment of interest on them and, to the extent necessary, certain temporary securities law transfer restrictions) so that such subsequently issued debt securities may be consolidated and form a single series with the previously outstanding Notes; provided that any Additional Notes must be treated as part of the same issue as the Notes for U.S. federal income tax purposes and provided further that in connection with the payment of PIK Interest, the Company is entitled to, without the consent of the Holders (and without regard to any restrictions or limitations set forth under the “Limitation on Indebtedness and Disqualified or Preferred Stock” covenant described below), issue PIK Notes under the Indenture on the same terms and conditions as all other issued Notes (except for issue date, issue price, and the first payment of interest on them and, to the extent necessary, certain temporary securities law transfer restrictions). All PIK Notes will be pari passu in right of payment with all other issued Notes, will be guaranteed on a pari passu basis by each Subsidiary Guarantor and will be secured equally and ratably with all other issued Notes by Liens on the Collateral held by the Security Trustee for as long as the Notes and the Subsidiary Guarantees are secured by the Collateral, subject to the covenants contained in the Indenture.

Optional Redemption

At any time and from time to time on or after the fourth anniversary date of the Original Issue Date, the Company may redeem the Notes, in whole or in part, at a redemption price equal to the percentage of the principal amount set forth below plus accrued and unpaid interest to the redemption date if redeemed during the twelve-month period beginning on the anniversary date of the Original Issue Date of the years indicated below:

 

12- month period commencing in the year

   Redemption Price

2017

   103.125%

2018

   101.563%

2019 and thereafter

   100.000%

At any time prior to the fourth anniversary date of the Original Issue Date, the Company may at its option redeem the Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount of the Notes plus the Applicable Premium as of, and accrued and unpaid interest, if any, to the redemption date.

At any time prior to the third anniversary date of the Original Issue Date, the Company may redeem up to 35% of the principal amount of the Notes with the Net Cash Proceeds of one or more sales of its Common Stock in an Equity Offering at a redemption price of 106.25% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to the redemption date; provided that at least 65% of the aggregate principal amount of the Notes originally issued on the Original Issue Date remains outstanding after each such redemption and any such redemption takes place within 60 days after the closing of the related sale of Capital Stock.

The Company will give not less than 30 days’ nor more than 60 days’ notice of any redemption. If less than all of the Notes are to be redeemed, selection of the Notes for redemption will be made on a pro rata basis, or if the Notes are issued in global form, in accordance with applicable DTC procedures (subject, in all cases, to compliance with the rules of any national securities exchange on which the Notes may be listed).

However, no Note of US$1,000 in principal amount or less shall be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note will state the portion of the principal amount to be redeemed. A new Note in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note.

 

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Mandatory Redemption of Notes upon an Entire Sale Transaction

Within 10 days of the occurrence of an Entire Sale Transaction, the Company shall issue (by publication and mail) a notice to all Holders to redeem all of the Notes then outstanding (an “Entire Sale Transaction Mandatory Redemption”) at a redemption price equal to 100% of their principal amount plus accrued and unpaid interest, if any, to the Payment Date (the “Entire Sale Transaction Redemption Price”). Such notice will give not less than thirty (30) days’ nor more than sixty (60) days’ notice of the Entire Sale Transaction Mandatory Redemption. All Notes that are so redeemed will be cancelled.

Pending the application of the proceeds from an Entire Sale Transaction to the Entire Sale Transaction Redemption Price, the Company shall invest such proceeds in a deposit account or securities account, which account shall be subject to a first priority Lien in favour of the Security Trustee, on behalf of the Trustee, and constitute additional Collateral for the benefit of the Holders, and which account shall not be subject to any other Lien whatsoever.

Repurchase of Notes Upon a Change of Control Triggering Event

The Company must commence, within 30 days of the occurrence of a Change of Control Triggering Event, and consummate an Offer to Purchase for all Notes then outstanding (a “Change of Control Offer”), at a purchase price equal to 101% of their principal amount plus accrued and unpaid interest, if any, to the Payment Date.

Except as described above with respect to a Change of Control Triggering Event or as described below with respect to an Entire Sale Transaction, the Indenture does not contain provisions that permit or require the Company to repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. Holders may not be entitled to require the Company to purchase their Notes in certain circumstances involving a significant change in the composition of Board of Directors.

If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the purchase price for all the Notes that might be tendered by the Holders seeking to accept the Change of Control Offer. In the event that the Company purchases Notes pursuant to a Change of Control Offer, the Company expects that it would seek third party financing to the extent it does not have available funds to purchase the Notes. However, there can be no assurance that the Company would be able to obtain such financing.

In order to repurchase the Notes in an Offer to Purchase, the Company will, unless consents are obtained, be required to repay all Indebtedness then outstanding which by its terms would prohibit such Note repurchase, either prior to or concurrently with such Note repurchase.

Sinking Fund

There will be no sinking fund payments for the Notes.

Additional Amounts

All payments of, or in respect of, principal of, and premium (if any) and interest (including PIK Interest) in respect of the Notes (including PIK Notes) or the Subsidiary Guarantees will be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Company, a Surviving Person (as defined under the caption “—Consolidation, Merger and Sale of Assets”) or the applicable Subsidiary Guarantor is organized or resident for tax purposes (or any political subdivision or taxing authority thereof or therein) (each a “Relevant Jurisdiction”), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction is so required, the Company, a Surviving Person or the applicable Subsidiary Guarantor, as the case may be, will pay such additional amounts (“Additional Amounts”) as will result in receipt by the Holder of each Note or the Subsidiary Guarantees, as the case may be, of such amounts as would have been received by such Holder had no such withholding or deduction been required, except that no Additional Amounts shall be payable:

 

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  (a) for or on account of:

 

  (i) any tax, duty, assessment or other governmental charge that would not have been imposed but for:

 

  (A) the existence of any present or former connection between the Holder of such Note and the Relevant Jurisdiction other than merely holding such Note, including such Holder being or having been a national, domiciliary or resident of or treated as a resident thereof or being or having been physically present or engaged in a trade or business therein or having or having had a permanent establishment therein;

 

  (B) the presentation of such Note (in cases in which presentation is required) more than 30 days after the later of the date on which the payment of the principal of, premium, if any, and interest on, such Note became due and payable pursuant to the terms thereof or was made or duly provided for, except to the extent that the Holder thereof would have been entitled to such Additional Amounts if it had presented such Note for payment on any date within such 30 day period;

 

  (C) the failure of the Holder, despite being required by law, to comply with a timely request of the Company addressed to the Holder or beneficial owner to provide information concerning such Holder’s nationality, residence, identity or connection with any Relevant Jurisdiction, if and to the extent that due and timely compliance with such request would have reduced or eliminated any taxes as to which Additional Amounts would have otherwise been payable to such Holder; or

 

  (D) the presentation of such Note (where presentation is required) for payment in the Relevant Jurisdiction, unless such Note could not have been presented for payment elsewhere;

 

  (ii) any estate, inheritance, gift, sale, transfer, personal property or similar tax, assessment or other governmental charge;

 

  (iii) any withholding or deduction that is imposed or levied on a payment to an individual and is required to be made pursuant to European Council Directive 2004/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of November 26-27, 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directives; or

 

  (iv) any combination of taxes, duties, assessments or other governmental charges referred to in the preceding clauses (i), (ii) and (iii);or

 

  (b) with respect to any payment of the principal of, or any premium, if any, or interest on, such Note or any payment under any Subsidiary Guarantee to the Holder, if such Holder is a fiduciary, partnership or person other than the sole beneficial owner of any payment to the extent that such payment would be required to be included in the income under the laws of the Relevant Jurisdiction, for tax purposes, of a beneficiary or settlor, with respect to the fiduciary, or a member of that partnership or a beneficial owner who would not have been entitled to such Additional Amounts had that beneficiary, settlor, partner, person or beneficial owner been the registered Holder thereof.

Whenever there is mentioned in any context the payment of principal, any premium or interest, in respect of any Note or Subsidiary Guarantee, such mention shall be deemed to include payment of Additional Amounts provided for in the Indenture to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof.

 

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Redemption for Taxation Reasons

The Notes may be redeemed, at the option of the Company or Surviving Person, as a whole but not in part, at any time, upon giving not less than 30 days nor more than 60 days notice to the Holders (which notice shall be irrevocable), at a redemption price equal to 100% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date fixed by the Company for redemption (the “Tax Redemption Date”) if, as a result of:

 

  (1) any change in, or amendment to, the laws (or any regulations or rulings promulgated thereunder) of a Relevant Jurisdiction affecting taxation; or

 

  (2) any change in the existing official position or the stating of an official position regarding the application or interpretation of such laws, regulations or rulings (including a holding, judgment, or order by a court of competent jurisdiction),

which change, amendment, application or interpretation (a) in the case of the Company, Surviving Person and any initial Subsidiary Guarantor becomes effective on or after the Original Issue Date and (b) in the case of any successor to a Subsidiary Guarantor or a future Subsidiary Guarantor becomes effective after such Subsidiary Guarantor assumes the obligations under the Indenture or becomes a Subsidiary Guarantor, with respect to any payment due or to become due under the Notes or the Indenture, the Company, Surviving Person or a Subsidiary Guarantor, as the case may be, is, or on the next interest payment date would be, required to withhold or deduct any tax, duty, assessment or other governmental charge imposed, levied, collected, withheld or assessed by a Relevant Jurisdiction and to pay Additional Amounts, and in each case, such requirement to withhold or deduct cannot be avoided by the taking of reasonable measures by the Company, Surviving Person or a Subsidiary Guarantor; provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Company, Surviving Person or a Subsidiary Guarantor, as the case may be, would be obligated to pay such Additional Amounts if a payment in respect of the Notes was then due.

Prior to the publication and mailing of any notice of redemption of the Notes pursuant to the foregoing, the Company or Surviving Person will deliver to the Trustee (a) a certificate signed by a duly authorized officer stating that the Company or Surviving Person is entitled to effect the redemption under the Indenture and stating that the conditions precedent to the right of redemption have occurred and (b) an Opinion of Counsel or tax consultant of recognized standing stating that the circumstances referred to in the prior paragraph exist. The Trustee shall accept such Opinion as sufficient evidence of the satisfaction of the conditions precedent described above, in which event it shall be conclusive and binding on the Holders.

Any Notes that are redeemed will be cancelled.

Certain Covenants

Set forth below are summaries of certain covenants contained in the Indenture.

Limitation on Indebtedness and Disqualified or Preferred Stock

 

  (a) The Company will not Incur any Indebtedness or Disqualified Stock, provided that the Company may Incur Indebtedness if, after giving effect to the Incurrence of such Indebtedness and the receipt and application of the proceeds therefrom, the Fixed Charge Coverage Ratio would be not less than 2.0 to 1.0. The Company will not permit any Restricted Subsidiary to Incur any Indebtedness (including Acquired Indebtedness), Disqualified Stock or Preferred Stock (other than Disqualified Stock or Preferred Stock of Restricted Subsidiaries held by the Company or a Subsidiary Guarantor, so long as it is so held).

Notwithstanding the foregoing, the Company and, to the extent provided below, any Restricted Subsidiary may Incur each and all of the following (“Permitted Indebtedness”):

 

  (1) Indebtedness under the Notes (including any PIK Notes and any Additional Notes), and each Subsidiary Guarantee;

 

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  (2) Any Permitted Priority Secured Indebtedness and any Permitted Priority Subsidiary Guarantees;

 

  (3) Indebtedness of the Company or any Restricted Subsidiary outstanding on the Original Issue Date excluding Indebtedness permitted under clause (4);

 

  (4) Indebtedness of the Company or any Restricted Subsidiary owed to the Company or any Wholly-Owned Restricted Subsidiary; provided that (x) any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or any Wholly-Owned Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (4) and (y) if the Company or any Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness must expressly be subordinated in right of payment to the Notes, in the case of the Company, or the Subsidiary Guarantee of such Subsidiary Guarantor, in the case of a Subsidiary Guarantor;

 

  (5) Indebtedness issued in exchange for, or the net proceeds of which are used to refinance or refund, then outstanding Indebtedness Incurred under the immediately preceding paragraph or clauses (1) or (2)of this covenant and any refinancings thereof in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that (a) Indebtedness the proceeds of which are used to refinance or refund the Notes or Indebtedness that is subordinated in right of payment to, the Notes or a Subsidiary Guarantee shall only be permitted under this clause (5) if (x) in case the Notes are refinanced in part, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining Notes or such Subsidiary Guarantee, or (y) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes or a Subsidiary Guarantee, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes or such Subsidiary Guarantee at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes or such Subsidiary Guarantee, (b) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded, (c) Indebtedness the proceeds of which are used to refinance or refund Permitted Priority Secured Indebtedness would otherwise be entitled be Incurred as Permitted Priority Secured Indebtedness pursuant to the terms of the Indenture, and (d) in no event may Indebtedness of the Company or any Subsidiary Guarantor be refinanced pursuant to this clause (5) by means of any Indebtedness of any Restricted Subsidiary that is not a Subsidiary Guarantor;

 

  (6) the Incurrence by the Company or any Restricted Subsidiaries of Indebtedness under Commodity Agreements, Interest Rate Agreements and Currency Agreements entered into in the ordinary course of business and designed solely to protect the Company or any of its Restricted Subsidiaries from fluctuations in interest rates, currencies or the price of commodities and not for speculation;

 

  (7) Indebtedness Incurred by the Company or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit, trade guarantees or similar instruments issued in the ordinary course of business to the extent that such letters of credit or trade guarantees are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than 90 days following receipt by the Company or such Restricted Subsidiary of a demand for reimbursement;

 

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  (8) (i) Guarantees by the Company or any Subsidiary Guarantor of Indebtedness of the Company or any Restricted Subsidiary that was permitted to be Incurred by another provision of this covenant, or (ii) Guarantees by any Restricted Subsidiary of Indebtedness of another Restricted Subsidiary that was permitted to be Incurred under clause (6) or (7) above; and

 

  (9) Indebtedness Incurred after the Original Issue Date by any Restricted Subsidiary organized under the laws of the PRC which, when taken together with the total amount of all other Indebtedness Incurred under this clause (9), will not exceed US$100 million.

 

  (b) For purposes of determining compliance with this “Limitation on Indebtedness and Disqualified or Preferred Stock” covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Indebtedness described in part (a) above (other than the Notes, Additional Notes or PIK Notes, which shall be treated as Incurred pursuant to clause (a)(1) above), including under the proviso in the first paragraph of part (a), the Company, in its sole discretion, shall classify, and from time to time may reclassify one or more times, such item of Indebtedness, and such item of Indebtedness will, upon such classification or reclassification (as the case may be) be treated as having been Incurred in accordance with only one of such clauses or in accordance with the proviso in the first paragraph of part (a).

 

  (c) The Company will not Incur, and will not permit any Subsidiary Guarantor to Incur, any Indebtedness if such Indebtedness is subordinate in right of payment to any other Indebtedness of the Company or such Subsidiary Guarantor, as the case may be, unless such Indebtedness is also subordinate in right of payment to the Notes or the applicable Subsidiary Guarantee, on substantially identical terms. This does not apply to distinctions between categories of Indebtedness that exist by reason of any Liens or Guarantees securing or in favor of some but not all of such Indebtedness.

Limitation on Restricted Payments

The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly (the payments or any other actions described in clauses (1) through (4) below being collectively referred to as “Restricted Payments”):

 

  (1) declare or pay any dividend or make any distribution on or with respect to the Company’s or any of its Restricted Subsidiaries’ Capital Stock (other than dividends or distributions payable solely in shares of the Company’s or any of its Restricted Subsidiaries’ Capital Stock (other than Disqualified Stock or Preferred Stock) or in options, warrants or other rights to acquire shares of such Capital Stock) held by Persons other than the Company or any Wholly-Owned Restricted Subsidiary;

 

  (2) purchase, call for redemption or redeem, retire or otherwise acquire for value any shares of Capital Stock of the Company or any Restricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock, but excluding any Indebtedness of the Company or any Restricted Subsidiary that is not subordinated in right of payment to the Notes or any Subsidiary Guarantee that is convertible into Capital Stock of the Company) held by any Persons other than the Company or any Wholly-Owned Restricted Subsidiary;

 

  (3) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness that is subordinated in right of payment to the Notes or any of the Subsidiary Guarantees (excluding any intercompany Indebtedness between or among the Company and any of its Wholly-Owned Restricted Subsidiaries); or

 

  (4) make any Investment, other than a Permitted Investment, in any Person;

 

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if, at the time of, and after giving effect to, the proposed Restricted Payment:

 

  (a) a Default shall have occurred and be continuing;

 

  (b) the Company could not Incur at least US$1.00 of Indebtedness under the proviso in the first paragraph of part (a) of the covenant under the caption “—Limitation on Indebtedness and Disqualified or Preferred Stock;” or

 

  (c) such Restricted Payment, together with the aggregate amount of all Restricted Payments made by the Company and its Restricted Subsidiaries after the Measurement Date, shall exceed the sum of

 

  (1) 50% of the aggregate amount of the Consolidated Net Income of the Company (or, if the Consolidated Net Income is a loss, minus 100% of the amount of such loss) accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the fiscal half-year immediately following the Measurement Date and ending on the last day of the Company’s most recently ended fiscal half-year for which consolidated financial statements of the Company (which the Company shall use its best efforts to compile in a timely manner) are available and have been provided to the Trustee at the time of such Restricted Payment; plus

 

  (2) 100% of the aggregate Net Cash Proceeds received by the Company after the Measurement Date as a capital contribution or from the issuance and sale of its Capital Stock (other than Disqualified Stock) to a Person who is not a Restricted Subsidiary of the Company, including any such Net Cash Proceeds received upon (x) the conversion of any Indebtedness (other than Subordinated Indebtedness) of the Company into Capital Stock (other than Disqualified Stock) of the Company, or (y) the exercise by a Person who is not a Restricted Subsidiary of the Company of any options, warrants or other rights to acquire Capital Stock of the Company (other than Disqualified Stock) in each case after deducting the amount of any such Net Cash Proceeds used to redeem, repurchase, defease or otherwise acquire or retire for value any Subordinated Indebtedness or Capital Stock of the Company; plus

 

  (3) an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) that were made after the Measurement Date in any Person resulting from (a) payments of interest on Indebtedness, dividends or repayments of loans or advances, in each case to the Company or any Restricted Subsidiary (except, in each case, to the extent any such payment or proceeds are included in the calculation of Consolidated Net Income), or (b) from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries, not to exceed, in each case, the amount of Investments made by the Company or a Restricted Subsidiary after the Measurement Date in any such Person.

The foregoing provision shall not be violated by reason of:

 

  (1) the payment of any dividend or redemption of any Capital Stock within 60 days after the related date of declaration or call for redemption if, at said date of declaration or call for redemption, such payment or redemption would comply with the preceding paragraph;

 

  (2)

the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness of the Company or any of the Subsidiary Guarantors that is subordinated in right of payment to the Notes or to any Subsidiary Guarantee with the Net Cash Proceeds

 

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  of, or in exchange for, Indebtedness Incurred under clause (5)(y) of the second paragraph of part (a) of the covenant under the caption “—Limitation on Indebtedness and Disqualified or Preferred Stock;”

 

  (3) the redemption, repurchase or other acquisition of Capital Stock of the Company or any Subsidiary Guarantor (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the Net Cash Proceeds of a capital contribution or a substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, shares of Capital Stock (other than Disqualified Stock) of the Company or any Subsidiary Guarantor (or options, warrants or other rights to acquire such Capital Stock); provided that the amount of any such Net Cash Proceeds that are utilized for any such Restricted Payment will be excluded from clause (c)(2) of the preceding paragraph;

 

  (4) the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness of the Company or any of the Subsidiary Guarantors that is subordinated in right of payment to the Notes or to any Subsidiary Guarantee in exchange for, or out of the Net Cash Proceeds of, a substantially concurrent offering of, shares of the Capital Stock (other than Disqualified Stock) of the Company or any of the Subsidiary Guarantors (or options, warrants or other rights to acquire such Capital Stock); provided that the amount of any such Net Cash Proceeds that are utilized for any such Restricted Payment will be excluded from clause (c)(2) of the preceding paragraph;

 

  (5) the payment of any dividends or distributions declared, paid or made by a Restricted Subsidiary payable on a pro rata basis to all holders of any class of Capital Stock of such Restricted Subsidiary, a majority of which is held, directly or indirectly, through Restricted Subsidiaries by the Company;

 

  (6) any Investment in Greenheart Group Limited and its Subsidiaries;

 

  (7) any Investment in an Unrestricted Subsidiary (other than Greenheart Group Limited and its Subsidiaries) that is engaged in a Permitted Business which, when taken together with the total amount of all other Investments made pursuant to this clause (7), will not exceed US$25   million (or the Dollar Equivalent thereof);

 

  (8) any Investment in a Joint Venture (other than Greenheart Group Limited and its Subsidiaries) which, when taken together with the total amount of all other Investments made pursuant to this clause (8), will not exceed US$25   million (or the Dollar Equivalent thereof); or

 

  (9) Restricted Payments, if, at the time of the making of such payments, and after giving effect thereto (including, without limitation, the incurrence of any Indebtedness to finance such payment) and giving effect to the pro forma adjustment set forth in clauses (A) through (E) of the definition of “Fixed Charge Coverage Ratio,” the Leverage Ratio would not exceed 2.0:1.0;

provided that , no Default shall have occurred and be continuing or would occur as a consequence of the actions or payments set forth therein.

Each Restricted Payment permitted pursuant to clauses (1), (5), (7), (8), and (9) of the preceding paragraph shall be included in calculating whether the conditions of clause (c) of the first paragraph of this “Limitation on Restricted Payments” covenant have been met with respect to any subsequent Restricted Payments.

The amount of any Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or the Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The value of any assets or securities that are required to be valued by this covenant will be the Fair Market Value.

 

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The Board of Directors’ determination of the Fair Market Value of a Restricted Payment or any such assets or securities must be based upon an opinion or appraisal issued by an appraisal or investment banking firm of international standing if the Fair Market Value exceeds US$5.0   million (or the Dollar Equivalent thereof).

Not later than the date of making any Restricted Payment in an amount in excess of US$5.0   million (or the Dollar Equivalent thereof), the Company will deliver to the Trustee an Officer’s Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this covenant under the caption “—Limitation on Restricted Payments” were computed, together with a copy of any fairness opinion or appraisal required by the Indenture.

Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

The Company will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (1) pay dividends or make any other distributions on any Capital Stock of such Restricted Subsidiary owned by the Company or any other Restricted Subsidiary, (2) pay any Indebtedness owed to the Company or any other Restricted Subsidiary, (3) make loans or advances to the Company or any other Restricted Subsidiary or (4) sell, lease or transfer any of its property or assets to the Company or any other Restricted Subsidiary.

The foregoing provisions shall not restrict any encumbrances or restrictions:

 

  (1) in the Notes, the Subsidiary Guarantees, the Indenture, the Security Documents, or under any Permitted Priority Secured Indebtedness of the Company or any Subsidiary Guarantor Pledgor or Permitted Priority Subsidiary Guarantee of any Subsidiary Guarantor, and any extensions, refinancings, renewals, supplements, amendments or replacements of any of the foregoing agreements; provided that the encumbrances and restrictions in any such extension, refinancing, renewal, supplement, amendment or replacement, taken as a whole, are no less favorable in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed, supplemented, amended or replaced;

 

  (2) existing under or by reason of applicable law;

 

  (3) existing with respect to any Person or the property or assets of such Person acquired by the Company or any Restricted Subsidiary, existing at the time of such acquisition and not incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired, and any extensions, refinancings, renewals or replacements thereof; provided that the encumbrances and restrictions in any such extension, refinancing, renewal or replacement, taken as a whole, are no less favorable in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced;

 

  (4) in the case of clause (4) of the first paragraph of this covenant, that (i) restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract or similar property or asset, or (ii) exist by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by the Indenture or (iii) arise or are agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Company or any Restricted Subsidiary in any manner material to the Company or any Restricted Subsidiary;

 

  (5)

with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary that is permitted by the “—Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries,”

 

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  “—Limitation on Indebtedness and Disqualified or Preferred Stock” and “—Limitation on Asset Sales” covenants.

Limitation on Sales and Issuances of Capital Stock in Restricted Subsidiaries

The Company will not sell, and will not permit any Restricted Subsidiary, directly or indirectly, to issue or sell any shares of Capital Stock of a Restricted Subsidiary (including options, warrants or other rights to purchase shares of such Capital Stock) except:

 

  (1) to the Company or a Wholly-Owned Restricted Subsidiary;

 

  (2) to the extent such Capital Stock represents director’s qualifying shares or is required by applicable law to be held by a Person other than the Company or a Wholly-Owned Restricted Subsidiary;

 

  (3) for the sale of shares of all the Capital Stock of a Restricted Subsidiary if permitted under, and made in accordance with, the “—Limitation on Asset Sales” covenant; and

 

  (4) the issuance and sale of Capital Stock of a Restricted Subsidiary (which remains a Restricted Subsidiary after any such issuance or sale); provided that the Company or such Restricted Subsidiary applies the Net Cash Proceeds of such issuance or sale in accordance with the “—Limitation on Asset Sales” covenant.

Limitation on Issuances of Guarantees by Restricted Subsidiaries

The Company will not permit any Restricted Subsidiary which is not a Subsidiary Guarantor, directly or indirectly, to Guarantee any Indebtedness (“Guaranteed Indebtedness”) of the Company or any other Restricted Subsidiary, unless (1) (a) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for an unsubordinated Subsidiary Guarantee of payment of the Notes by such Restricted Subsidiary and (b) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee until the Notes have been paid in full or (2) such Guarantee and such Guaranteed Indebtedness are permitted by clauses (a) (2), (3), (4) or (8)(ii) (other than, in the case of clause (8)(ii), a Guarantee by a Restricted Subsidiary organized under the laws of the PRC of the Indebtedness of a non-PRC Restricted Subsidiary) under the caption “—Limitation on Indebtedness and Disqualified or Preferred Stock.”

If the Guaranteed Indebtedness (A) ranks pari passu in right of payment with the Notes or any Subsidiary Guarantee, then the Guarantee of such Guaranteed Indebtedness shall rank pari passu in right of payment with, or subordinated to, the Subsidiary Guarantee or (B) is subordinated in right of payment to the Notes or any Subsidiary Guarantee, then the Guarantee of such Guaranteed Indebtedness shall be subordinated in right of payment to the Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated to the Notes or the Subsidiary Guarantee.

Limitation on Transactions with Shareholders and Affiliates

The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction or arrangement (including, without limitation, the purchase, sale, lease or exchange of property or assets, or the rendering of any service) with (x) any holder (or any Affiliate of such holder) of 5% or more of any class of Capital Stock of the Company or (y) with any Affiliate of the Company or any Restricted Subsidiary (each an “Affiliate Transaction”), unless:

 

  (1) the Affiliate Transaction is on fair and reasonable terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or the relevant Restricted Subsidiary with an unrelated Person; and

 

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  (2) the Company delivers to the Trustee:

 

  (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of US$5.0   million (or the Dollar Equivalent thereof), a Board Resolution set forth in an Officer’s Certificate certifying that such Affiliate Transaction complies with this covenant and such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors; and

 

  (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of US$10.0   million (or the Dollar Equivalent thereof), an opinion as to the fairness to the Company or such Restricted Subsidiary of such Affiliate Transaction from a financial point of view issued by an Independent Financial Advisor.

The foregoing limitation does not limit, and shall not apply to:

 

  (1) the payment of reasonable and customary regular fees to directors of the Company who are not employees of the Company;

 

  (2) transactions between or among the Company and any of its Wholly-Owned Restricted Subsidiaries or between or among Wholly-Owned Restricted Subsidiaries;

 

  (3) issuances or sales of Capital Stock (other than Disqualified Stock) of the Company or options, warrants or other rights to acquire such Capital Stock;

 

  (4) transactions or payments pursuant to any employee, officer or director compensation or benefit plans or similar arrangements entered into in the ordinary course approved by a majority of the Board of Directors of the Company in good faith; and

 

  (5) any Restricted Payment of the type described in clauses (1),(2), or (3) of the first paragraph of the covenant described above under the caption “—Limitation on Restricted Payments” if permitted by that covenant.

In addition, the requirements of clause (2) of the first paragraph of this covenant shall not apply to (i) transactions between or among the Company and any of its Restricted Subsidiaries that is not a Wholly-Owned Restricted Subsidiary to the extent entered into in the ordinary course of business, (ii) Investments (other than Permitted Investments) not prohibited by the “—Limitation on Restricted Payments” covenant, (iii) transactions pursuant to agreements in effect on the Original Issue Date and described in this Plan Supplement or in the Information Circular of Sino Forest Corporation dated October 20, 2012, or any amendment or modification or replacement thereof, so long as such amendment, modification or replacement is not more disadvantageous to the Company and its Restricted Subsidiaries than the original agreement in effect on the Original Issue Date; provided that , in the case of (iii) such transaction is entered into in the ordinary course of business.

Limitation on Liens

The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist any Lien on the Collateral (other than Permitted Liens).

The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of its assets or properties of any kind (other than the Collateral), now owned or hereafter acquired, except Permitted Liens, unless the Notes are equally and ratably secured by such Lien.

 

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Limitation on Sale-Leaseback Transactions

The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any Sale and Leaseback Transaction.

Limitation on Entire Sale Transaction and on Asset Sales

The Company will not, and will not permit any Restricted Subsidiary to, enter into or consummate an Entire Sale Transaction unless, as a condition thereof, the consideration received consists of net cash proceeds to the Company of not less than an amount sufficient to pay the Entire Sale Transaction Redemption Price in full and without restriction.

The Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless:

 

  (1) no Default shall have occurred and be continuing or would occur as a result of such Asset Sale;

 

  (2) the consideration received by the Company or such Restricted Subsidiary, as the case may be, is at least equal to the Fair Market Value of the assets sold or disposed of;

 

  (3) in the case of an Asset Sale that constitutes an Asset Disposition, the Company could Incur at least US$1.00 of Indebtedness under the proviso in the first paragraph of part (a) of the covenant under the caption “—Limitation on Indebtedness and Disqualified or Preferred Stock” after giving pro forma effect to such Asset Disposition; and

 

  (4) at least 75% of the consideration received consists of cash, Temporary Cash Investments or Replacement Assets; provided that in case of an Asset Sale in which the Company or such Restricted Subsidiary receives Replacement Assets (i) the Company delivers to the Trustee an Officer’s Certificate stating that (a) the Company’s chief executive officer or chief financial officer has approved such Asset Sale, (b) such Asset Sale is on fair and reasonable terms on an arm’s length basis, and (c) the Fair Market Value of the Replacement Assets, together with any cash consideration is no less than the Fair Market Value of the assets subject to such Asset Sale, and (ii) with respect to any such Asset Sale involving an aggregate consideration with a Fair Market Value in excess of US$25.0   million (or the Dollar Equivalent thereof), the Company shall deliver to the Trustee an opinion as to the fairness to the Company or such Restricted Subsidiary of such Asset Sale from a financial point of view issued by an Independent Financial Advisor. For purposes of this provision, each of the following will be deemed to be cash:

 

  (a) any liabilities, as shown on the Company’s most recent consolidated balance sheet prepared in accordance with IFRS, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are actually assumed by the transferee of any such assets pursuant to a customary, assumption, assignment, novation or similar agreement that fully and unconditionally releases the Company or such Restricted Subsidiary from further liability; and

 

  (b) any securities, notes or other obligations received by the Company or any Restricted Subsidiary from such transferee that are contemporaneously, subject to ordinary settlement periods, converted by the Company or such Restricted Subsidiary into cash, to the extent of the cash received in that conversion.

Within 360 days after the receipt of any Net Cash Proceeds from an Asset Sale, the Company (or the applicable Restricted Subsidiary, as the case may be) may apply such Net Cash Proceeds to:

 

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  (1) permanently repay Senior Indebtedness of the Company or any Restricted Subsidiary (and, if such Senior Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto) in each case owing to a Person other than the Company or a Restricted Subsidiary; or

 

  (2) make an Investment in Replacement Assets, provided that such Investment occurs within 360 days following the receipt of such Net Cash Proceeds.

Pending the final application of any Net Cash Proceeds from an Asset Sale in excess of $10 million, the Company shall invest such Net Cash Proceeds in a deposit account or securities account, which account(s) shall (except if prohibited by applicable laws) be subject to a first priority Lien in favour of the Security Trustee and constitute additional Collateral for the benefit of the Holders or the other Secured Parties, and which account(s) shall not be subject to any other Lien whatsoever.

Any Net Cash Proceeds from Asset Sales that are not applied or invested as provided in the second paragraph of this covenant will constitute “Excess Proceeds.” Excess Proceeds of less than US$5   million (or the Dollar Equivalent thereof) will be carried forward and accumulated. When the aggregate amount of Excess Proceeds exceeds US$10   million (or the Dollar Equivalent thereof), within 10 days thereof, the Company must make an Offer to Purchase to all Holders (and, with respect to indebtedness of the Company, that ranks equally with or senior to, the Notes, containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets, to the holders of such Indebtedness, including any Permitted Priority Secured Indebtedness) to purchase the maximum principal amount of Notes (and any such other pari passu Indebtedness) that may be purchased out of the Excess Proceeds. The offer price in any Offer to Purchase will be equal to 100% of the principal amount plus accrued and unpaid interest to the date of purchase, and will be payable in cash.

Notwithstanding the foregoing, the Company will not, and will not permit any Restricted Subsidiary to sell, transfer or otherwise dispose of any shares of Capital Stock of Sino-Forest (China) Investments Limited or of any Restricted Subsidiary that owns directly or indirectly any shares of Capital Stock of Sino-Forest (China) Investments Limited.

If any Excess Proceeds remain after consummation of an Offer to Purchase, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes (and any other pari passu or senior Indebtedness) tendered in such Offer to Purchase exceeds the amount of Excess Proceeds, the Trustee will select the Notes (and such other pari passu or senior Indebtedness) to be purchased on a pro rata basis or in accordance with applicable DTC procedures. Upon completion of each Offer to Purchase, the amount of Excess Proceeds will be reset at zero.

Limitation on the Company’s Business Activities

The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, engage in any business other than Permitted Businesses; provided , however, that the Company or any Restricted Subsidiary may own Capital Stock of an Unrestricted Subsidiary or joint venture or other entity that is engaged in a business other than Permitted Businesses as long as any Investment therein was not prohibited when made by the covenant under the caption “—Limitation on Restricted Payments.”

Designation of Restricted and Unrestricted Subsidiaries

The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary, unless a Subsidiary of such Restricted Subsidiary is a Restricted Subsidiary (and is not concurrently being designated as an Unrestricted Subsidiary); provided that (i) Sino-Forest (China) Investments Limited shall always be a Restricted Subsidiary, (ii) such designation would not cause a Default, (iii) a Restricted Subsidiary cannot be a Subsidiary of an Unrestricted Subsidiary and (iv) the Investment deemed to have been made thereby in such newly-designated Unrestricted Subsidiary would be permitted to be made by the covenant described under “—Limitation on Restricted Payments.”

 

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The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that (i) such designation shall not cause a Default, (ii) any Indebtedness of such Unrestricted Subsidiary outstanding at the time of such designation which will be deemed to have been Incurred by such newly-designated Restricted Subsidiary as a result of such designation would be permitted to be Incurred by the covenant described under the caption “—Limitation on Indebtedness and Disqualified or Preferred Stock;” (iii) any Lien on the property of such Unrestricted Subsidiary at the time of such designation which will be deemed to have been incurred by such newly-designated Restricted Subsidiary as a result of such designation would be permitted to be incurred by the covenant described under the caption “—Limitation on Liens;” (iv) such Unrestricted Subsidiary is not a Subsidiary of another Unrestricted Subsidiary (that is not concurrently being designated as a Restricted Subsidiary), (v) if such Restricted Subsidiary is not organized under the laws of the PRC and is not a Foreign Subsidiary, such Restricted Subsidiary shall upon such designation execute and deliver to the Trustee a supplemental indenture by which such Restricted Subsidiary shall become a Subsidiary Guarantor, and (vi) if such Restricted Subsidiary is not organized under the laws of the PRC or any other jurisdiction that prohibits the Capital Stock of such Restricted Subsidiary from being pledged to secure the obligations of the Company or a Subsidiary Guarantor, all Capital Stock of such Restricted Subsidiary owned by the Company or any other Restricted Subsidiary shall be pledged, mortgaged or charged as required under “—Security.”

Government Approvals and Licenses; Compliance with Law

The Company will, and will cause each Restricted Subsidiary to, (i) obtain and maintain in full force and effect all governmental approvals, authorizations, consents, permits, concessions and licenses as are necessary to engage in the Permitted Businesses, (ii) preserve and maintain good and valid title to its properties and assets (including land use rights) free and clear of any Liens other than Permitted Liens and (iii) comply with all laws, regulations, orders, judgments and decrees of any governmental body, except to the extent that failure to so obtain, maintain, preserve and comply would not reasonably be expected to have a material adverse effect on (A) the business, results of operations or prospects of the Company and its Restricted Subsidiaries taken as a whole or (B) the ability of the Company or any Subsidiary Guarantor to perform its obligations under the Notes, the relevant Subsidiary Guarantee or the Indenture.

Provision of Financial Statements and Reports

The Company will file with the Trustee and provide the holders of the Notes with copies of all financial statements or reports that are distributed by the Company to its members from time to time.

As of the Original Issue Date, the Memorandum and Articles of Association of the Company will provide that the Board of Directors will cause to be delivered to each member: (i) as soon as available, but not later than 180 days after the end of each financial year of the Company, a copy of the consolidated balance sheet of the Company as of the end of such financial year and the related consolidated statements of income, changes in equity and cash flows for such financial year, setting forth in each case in comparative form the figures for the previous year, all in reasonable detail and accompanied by a management summary and analysis of the operations for the Company for such financial year; and (ii) as soon as available, but not later than 90 days after the end of each financial half-year of the Company, a copy of the consolidated balance sheet of the Company as of the end of such financial half-year and the related consolidated statements of income, changes in equity and cash flows for such financial half-year, and accompanied by a management summary and analysis of the operations for the Company for such financial half-year. In the event that this provision of the Memorandum and Articles of Association of the Company is amended after the Original Issue Date, the Company shall provide notice of such amendment to the Trustee as soon as practicable following the enactment of such amendment.

Delivery of such reports and information to the Trustee is for informational purposes only and the Trustee’s receipt of them will not constitute constructive notice of any information contained therein or determinable from information contained therein (including the Company’s compliance with any of it covenants under the Indenture as to which the Trustee is entitled to rely exclusively on an Officer’s Certificate).

 

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Events of Default

The following events will be defined as “Events of Default” in the Indenture:

 

  (a) default in the payment of principal of (or premium, if any, on) the Notes when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise;

 

  (b) default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days;

 

  (c) default in the performance or breach of the provisions of the covenants described under “—Consolidation, Merger and Sale of Assets,” “—Limitation on Indebtedness and Disqualified or Preferred Stock,” “—Limitation on Restricted Payments,” “—Limitation on Liens,” the failure by the Company to make or consummate an Offer to Purchase in the manner described under the captions “—Repurchase of Notes upon a Change of Control Triggering Event” or “—Limitation on Asset Sales”, the failure by the Company to redeem the Notes in the manner described under the caption “—Mandatory Redemption of Notes upon an Entire Sale Transaction” or the failure by the Company to create, or cause its Restricted Subsidiaries to create a First Priority Lien on the Collateral (subject to any Permitted Liens) in accordance or otherwise comply with the covenant described under the caption “—Security;”

 

  (d) the Company or any Restricted Subsidiary defaults in the performance of or breaches any other covenant or agreement in the Indenture or under the Notes (other than a default specified in clause (a), (b) or (c) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes;

 

  (e) there occurs with respect to any Indebtedness of the Company or any Restricted Subsidiary having an outstanding principal amount of US$50.0   million (or the Dollar Equivalent thereof) or more in the aggregate for all such Indebtedness of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (A) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and/or (B) the failure to make a principal payment when due;

 

  (f) any final judgment or order for the payment of money in excess of US$50.0   million (or the Dollar Equivalent thereof) in the aggregate for all such final judgments or orders shall be rendered against the Company or any Restricted Subsidiary and shall not be paid or discharged for a period of 60 days during which a stay of enforcement of such final judgment or order shall not be in effect;

 

  (g)

a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company or any Restricted Subsidiary in an involuntary case or proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (including any proceeding under any corporate law seeking an arrangement of, or stay of proceedings to enforce, some or all of its debts), (B) appointment of a receiver, liquidator, assignee, custodian, monitor, trustee, sequestrator or similar official of the Company or any Restricted Subsidiary or for all or substantially all of the property and assets of the Company or any Restricted Subsidiary or (C) the winding up or liquidation of the affairs of the Company or any Restricted Subsidiary and, in each case, such

 

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  decree or order shall remain unstayed and in effect for a period of 60 consecutive days;

 

  (h) the Company or any Restricted Subsidiary (A) commences a voluntary case or proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (including any proceeding under any corporate law seeking an arrangement of, or stay of proceedings to enforce, some or all of its debts), or consents to the entry of an order for relief in an involuntary case or proceeding under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, monitor, trustee, sequestrator or similar official of the Company or any Restricted Subsidiary or for all or substantially all of the property and assets of the Company or any Restricted Subsidiary or (C) effects any general assignment for the benefit of creditors;

 

  (i) any Subsidiary Guarantor repudiates its obligations under its Subsidiary Guarantee or, except as permitted by the Indenture, any Subsidiary Guarantee is determined to be unenforceable or invalid or shall for any reason cease to be in full force and effect;

 

  (j) any default by the Company or any Subsidiary Guarantor Pledgor in the performance of any of its obligations under the Security Documents or the Indenture, which adversely affects the enforceability, validity, perfection or priority of the applicable Lien on the Collateral or which adversely affects the condition or value of the Collateral, taken as a whole, in any material respect; or

 

  (k) the Company or any Subsidiary Guarantor Pledgor repudiates its obligations under any Security Document or, other than in accordance with the Indenture and the Security Documents, any Security Document ceases to be or is not in full force and effect or the Trustee ceases to have a first priority Lien in the Collateral (subject to any Permitted Liens).

If an Event of Default (other than an Event of Default specified in clause (g) or (h) above) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes, then outstanding, by written notice to the Company (and to the Trustee if such notice is given by the Holders), may, and the Trustee at the request of such Holders shall, declare the principal of, premium, if any, and accrued and unpaid interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium, if any, and accrued and unpaid interest shall be immediately due and payable. In the event of a declaration of acceleration because an Event of Default set forth in clause (e) above has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default triggering such Event of Default pursuant to clause (e) shall be remedied or cured by the Company or the relevant Restricted Subsidiary or waived by the holders of the relevant Indebtedness within 60 days after the declaration of acceleration with respect thereto. If an Event of Default specified in clause (g) or (h) above occurs with respect to the Company or any Restricted Subsidiary, the principal of, premium, if any, and accrued and unpaid interest on the Notes then outstanding shall automatically become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Holders of at least a majority in principal amount of the outstanding Notes by written notice to the Company and to the Trustee, may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if (x) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived, (y) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction, and (z) the Company has paid to the Trustee all fees, expenses and amounts owed to the Trustee in connection with such Event of Default. For information as to the waiver of defaults, see “—Amendments and Waiver.”

If an Event of Default occurs and is continuing, the Trustee may, and shall upon request of Holders of at least 25% in aggregate principal amount of outstanding Notes, instruct the Security Trustee to foreclose on the

 

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Collateral in accordance with the terms of the Security Documents and take such further action on behalf of the Holders of the Notes with respect to the Collateral as the Trustee is instructed by such Holders. See “—Security.”

The Holders of at least a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or the Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders not joining in the giving of such direction and may take any other action it deems proper that is not inconsistent with any such direction received from Holders. A Holder may not pursue any remedy with respect to the Indenture or the Notes unless:

 

  (1) the Holder gives the Trustee written notice of a continuing Event of Default;

 

  (2) the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to pursue the remedy;

 

  (3) such Holder or Holders offer the Trustee indemnity reasonably satisfactory to the Trustee against any costs, liability or expense;

 

  (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and

 

  (5) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is inconsistent with the request.

However, such limitations do not apply to the right of any Holder to receive payment of the principal of, premium, if any, or interest on, such Note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, which right shall not be impaired or affected without the consent of the Holder.

Officers of the Company, one of whom must be the Company’s principal executive officer, principal financial officer or principal accounting officer, must certify in an Officer’s Certificate, on or before a date not more than 120 days after the end of each fiscal year, that a review has been conducted of the activities of the Company and its Restricted Subsidiaries and the Company’s and its Restricted Subsidiaries’ performance under the Indenture and that the Company has fulfilled all obligations thereunder, or, if there has been a default in the fulfillment of any such obligations, specifying each such default and the nature and status thereof. The Company will also be obligated to notify the Trustee of any default or defaults in the performance of any covenants or agreements under the Indenture.

Consolidation, Merger and Sale of Assets

The Company will not consolidate with, merge with or into another Person, permit any Person to merge with or into it, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and its Restricted Subsidiaries’ properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions), unless:

 

  (1) the Company shall be the continuing Person, or the Person (if other than it) formed by such consolidation or merger or that acquired or leased such property and assets (the “Surviving Person”) shall be an exempted company limited by shares organized and validly existing under the laws of the Cayman Islands and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, all the obligations of the Company under the Indenture, the Notes and the Security Documents, as the case may be, and the Indenture, the Notes and the Security Documents, as the case may be, shall remain in full force and effect;

 

  (2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

 

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  (3) immediately after giving effect to such transaction on a pro forma basis, the Company or the Surviving Person, as the case may be, shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction;

 

  (4) immediately after giving effect to such transaction on a pro forma basis the Company or the Surviving Person, as the case may be, could Incur at least US$1.00 of Indebtedness under the first paragraph of the covenant under the caption “—Limitation on Indebtedness and Disqualified or Preferred Stock;”

 

  (5) the Company delivers to the Trustee (x) an Officer’s Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (3) and (4)) and (y) an Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with; and

 

  (6) each Subsidiary Guarantor, unless such Subsidiary Guarantor is the Person with which the Company has entered into a transaction described under the caption “—Consolidation, Merger and Sale of Assets,” shall execute and deliver a supplemental indenture confirming that its Subsidiary Guarantee shall apply to the obligations of the Company or the Surviving Person in accordance with the Notes and the Indenture.

No Subsidiary Guarantor will consolidate with, merge with or into another Person, permit any Person to merge with or into it, or sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and its Restricted Subsidiaries’ properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions) to another Person (other than the Company or another Subsidiary Guarantor), unless:

 

  (1) such Subsidiary Guarantor shall be the continuing Person, or the Person (if other than it) formed by such consolidation or merger or that acquired or leased such property and assets shall be the Company, another Subsidiary Guarantor or shall become a Subsidiary Guarantor concurrently with the transaction;

 

  (2) immediately after giving effect to such transaction, no Default shall have occurred and be continuing;

 

  (3) immediately after giving effect to such transaction on a pro forma basis, the Company shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction;

 

  (4) immediately after giving effect to such transaction on a pro forma basis, the Company could Incur at least US$1.00 of Indebtedness under the first paragraph of the covenant under the caption “—Limitation on Indebtedness and Disqualified or Preferred Stock”; and

 

  (5) the Company delivers to the Trustee (x) an Officer’s Certificate (attaching the arithmetic computations to demonstrate compliance with clauses (3) and (4)) and (y) Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with;

provided that this paragraph shall not apply to any Entire Sale Transaction, which transaction shall be subject to and governed by the provisions that require the Company to redeem all of the Notes in the manner described under the caption “-Mandatory Redemption of Notes upon an Entire Sale Transaction”, and shall not otherwise apply to any other sale or other disposition that complies with the “Limitation on Asset Sales” covenant or any Subsidiary Guarantor whose Subsidiary Guarantee is unconditionally released in accordance with the provisions described under “— Release of the Subsidiary Guarantees.”

 

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The foregoing provisions would not necessarily afford holders of the Notes protection in the event of highly leveraged or other transactions involving the Company that may adversely affect holders of the Notes.

No Payments for Consents

The Company will not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indentures or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

Defeasance

Defeasance and Discharge

The Indenture will provide that the Company will be deemed to have paid and will be discharged from any and all obligations in respect of the Notes on the 365th day after the deposit referred to below, and the provisions of the Indenture and the Security Documents will no longer be in effect with respect to the Notes (except for, among other matters, certain obligations to register the transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes, to maintain paying agencies and to hold monies for payment in trust, and certain obligations owed to the Trustee and the Security Trustee) if, among other things:

 

  (a) the Company has deposited with the Trustee, in trust, money and/or U.S. Government Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient (in the case of U.S. Government Obligations, in the opinion of a reputable firm of certified accountants) to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of the Indenture and the Notes,

 

  (b) the Company has delivered to the Trustee (1) either (x) an Opinion of Counsel to the effect that, as a result of a change occurring after the Original Issue Date in applicable U.S. federal income tax law, Holders will not recognize income, gain or loss for United States federal income tax purposes as a result of the Company’s exercise of its option under this “Defeasance” provision and will be subject to United States federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred or (y) a ruling directed to the Trustee received from the U.S. Internal Revenue Service to the same effect as the aforementioned Opinion of Counsel and (2) an Opinion of Counsel to the effect that the creation of the defeasance trust does not violate the U.S. Investment Company Act of 1940, as amended, and after the passage of 365 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law, and

 

  (c) immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both would become an Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 365th day after the date of such deposit, and such defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company or any of its Restricted Subsidiaries is a party or by which the Company or any of its Restricted Subsidiaries is bound.

In the case of either discharge or defeasance of the Notes, the Subsidiary Guarantees will terminate.

 

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Defeasance of Certain Covenants

The Indenture further will provide that the provisions of the Indenture will no longer be in effect with respect to clauses (3), (4) and (5)(x) under the first paragraph and clauses (3), (4) and (5)(x) under the second paragraph under “Consolidation, Merger and Sale of Assets” and all the covenants described herein under “Covenants,” clause (c) under “Events of Default” with respect to such clauses (3), (4) and (5)(x) under the first paragraph and clauses (3), (4) and (5)(x) under the second paragraph under “Consolidation, Merger and Sale of Assets,” clause (d) under “Events of Default” with respect to such other covenants and clauses (e), (f), (i), (j) and (k) under “Events of Default” shall be deemed not to be Events of Default upon, among other things, the deposit with the Trustee, in trust, of money and/or U.S. Government Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of the Indenture and the Notes, the satisfaction of the provisions described in clause (b)(2) of the preceding paragraph and the delivery by the Company to the Trustee of an Opinion of Counsel to the effect that, among other things, the Holders will not recognize income, gain or loss for United States federal income tax purposes as a result of such deposit and defeasance of certain covenants and Events of Default and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred.

As a condition to the Company exercising its right to discharge or defease the Notes or to defease the covenants as provided in the immediately preceding paragraphs, the Company shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to such discharge and/or defeasance have been complied with.

Defeasance and Certain Other Events of Default

In the event the Company exercises its option to omit compliance with certain covenants and provisions of the Indenture with respect to the Notes as described in the immediately preceding paragraph and the Notes are declared due and payable because of the occurrence of an Event of Default that remains applicable, the amount of money and/or U.S. Government Obligations on deposit with the Trustee will be sufficient to pay amounts due on the Notes at the time of their Stated Maturity but may not be sufficient to pay amounts due on the Notes at the time of the acceleration resulting from such Event of Default. However, the Company will remain liable for such payments.

Amendments and Waiver

Amendments Without Consent of Holders

The Indenture or any Security Document may be amended, without the consent of any Holder, to:

 

  (1) cure any ambiguity, defect or inconsistency in the Indenture, the Notes or any Security Document;

 

  (2) comply with the provisions described under “Consolidation, Merger and Sale of Assets;”

 

  (3) evidence and provide for the acceptance of appointment by a successor Trustee;

 

  (4) add any Subsidiary Guarantor or any Subsidiary Guarantee or release any Subsidiary Guarantor from any Subsidiary Guarantee as provided or permitted by the terms of the Indenture;

 

  (5) provide for the issuance of Additional Notes (including PIK Notes) in accordance with the limitations set forth in the Indenture;

 

  (6) add any Subsidiary Guarantor Pledgor or release any Subsidiary Guarantor Pledgor as provided or permitted by the terms of the Indenture;

 

  (7) add additional Collateral to secure the Notes or any Subsidiary Guarantee;

 

  (8) effect any change to the Indenture in a manner necessary to comply with the procedures of DTC;

 

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  (9) permit Permitted Priority Secured Indebtedness (including, without limitation, permitting the Trustee to enter into any amendments to the Security Documents or the Indenture and take any other action necessary to permit the creation and registration of Liens on the Collateral to secure Permitted Priority Secured Indebtedness, in accordance with the Indenture); or

 

  (10) make any other change that would provide additional rights or benefits to the Holders or that does not adversely affect the rights of any Holder.

Amendments with Consent of Holders

Amendments of the Indenture or any Security Document may be made by the Company, the Subsidiary Guarantors and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Notes; provided, however,

 

  (a) that no such modification or amendment may, without the consent of each Holder affected thereby:

 

  (1) change the Stated Maturity of the principal of, or any installment of interest on, any Note;

 

  (2) reduce the principal amount of, or premium, if any, or interest on, any Note;

 

  (3) change the currency of payment of principal of, or premium, if any, or interest on, any Note;

 

  (4) impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the redemption date) of any Note;

 

  (5) reduce (i) the above stated percentage of outstanding Notes, or (ii) the stated percentage of outstanding Notes referred to in clause (b) below, the consent of whose Holders is necessary to modify or amend the Indenture;

 

  (6) waive a default in the payment of principal of, premium, if any, or interest on the Notes;

 

  (7) reduce the percentage or aggregate principal amount of outstanding Notes the consent of whose Holders is necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults; or

 

  (8) amend, change or modify any provision of the Indenture or the related definition affecting the ranking of the Notes or any Subsidiary Guarantee in a manner which adversely affects the Holders, and

 

  (b) that no such modification or amendment may, without the consent of the Holders of not less than 80% in aggregate principal amount of the outstanding Notes affected thereby:

 

  (1) release any Subsidiary Guarantor from its Subsidiary Guarantee, except as provided in the Indenture;

 

  (2) release any Collateral, except as provided in the Indenture and the Security Documents;

 

  (3) amend, change or modify any Subsidiary Guarantee in a manner that adversely affects the Holders;

 

  (4) amend, change or modify any provision of any Security Document, or any provision of the Indenture relating to the Collateral, in a manner that adversely affects the Holders, except in accordance with the other provisions of the Indenture;

 

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  (5) change the redemption date or the redemption price of the Notes from that stated under the captions “Optional Redemption” or “Redemption for Taxation Reasons;”or

 

  (6) amend, change or modify the obligation of the Company or any Subsidiary Guarantor to pay Additional Amounts.

Unclaimed Money

Claims against the Company for the payment of principal of, premium, if any, or interest, on the Notes will become void unless presentation for payment is made as required in the Indenture within a period of six years.

No Personal Liability of Incorporators, Stockholders, Members, Officers, Directors or Employees

No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company or any of the Subsidiary Guarantors in the Indenture, or in any of the Notes or the Subsidiary Guarantees or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator, stockholder, member, officer, director, employee or controlling person of the Company or of any of the Subsidiary Guarantors or of any successor Person thereof. Each Holder, by accepting the Notes, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes and the Subsidiary Guarantees. Such waiver may not be effective to waive liabilities under the federal securities laws.

Concerning the Trustee and the Paying Agent

Computershare Trust Company, N.A. is to be appointed as Trustee under the Indenture and Computershare Trust Company, N.A. is to be appointed as registrar and paying agent (the “Paying Agent”) with regard to the Notes. Except during the continuance of a Default, the Trustee will not be liable, except for the performance of such duties as are specifically set forth in the Indenture. If an Event of Default has occurred and is continuing, the Trustee will use the same degree of care and skill in its exercise of the rights and powers vested in it under the Indenture as a prudent person would exercise under the circumstances in the conduct of such person’s own affairs.

The Indenture contains limitations on the rights of the Trustee, should it become a creditor of the Company or any of the Subsidiary Guarantors, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Trustee is permitted to engage in other transactions; provided, however, that if it acquires any conflicting interest, it must eliminate such conflict or resign.

Computershare Trust Company, N.A. will initially act as Security Trustee under the Security Documents in respect of the Security over the Collateral. The Security Trustee, acting in its capacity as such, shall have such duties with respect to the Collateral pledged, mortgaged or charged pursuant to the Security Documents as are set forth in the Indenture and the Security Documents. Under certain circumstances, the Security Trustee may have obligations under the Security Documents that are in conflict with the interests of the Holders. The Trustee and the Security Trustee will be under no obligation to exercise any rights or powers conferred under the Indenture or any of the Security Documents for the benefit of the Holders unless such Holders have offered to the Trustee and the Security Trustee indemnity or security reasonably satisfactory to the Trustee and the Security Trustee against any loss, liability or expense.

Furthermore, each Holder, by accepting the Notes will agree, for the benefit of the Trustee and the Security Trustee, that it is solely responsible for its own independent appraisal of and investigation into all risks arising under or in connection with the Security Documents and has not relied on and will not at any time rely on the Trustee or the Security Trustee in respect of such risks.

Book-Entry; Delivery and Form

The certificates representing the Notes will be issued in fully registered form without interest coupons. Notes will initially be represented by one or more permanent global notes in definitive, fully registered form without

 

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interest coupons (each a “Global Note”) and will be deposited with the Trustee as custodian for, and registered in the name of a nominee of, DTC.

Each Global Note (and any Notes issued for exchange therefor) will be subject to certain restrictions on transfer set forth therein as described under “Transfer Restrictions.”

Ownership of beneficial interests in a Global Note will be limited to persons who have accounts with DTC (“participants”) or persons who hold interests through participants. Ownership of beneficial interests in a Global Note will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants).

So long as DTC, or its nominee, is the registered owner or holder of a Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Global Note for all purposes under the Indenture and the Notes. No beneficial owner of an interest in a Global Note will be able to transfer that interest except in accordance with DTC’s applicable procedures, in addition to those provided for under the Indenture.

Payments of the principal of, and interest on, a Global Note will be made to DTC or its nominee, as the case may be, as the registered owner thereof. Neither the Company, nor any of the Subsidiary Guarantors, the Trustee nor any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

The Company expects that DTC or its nominee, upon receipt of any payment of principal or interest in respect of a Global Note, will credit participants’ accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Note as shown on the records of DTC or its nominee. The Company also expects that payments by participants to owners of beneficial interests in such Global Note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants.

Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in same-day funds.

The Company expects that DTC will take any action permitted to be taken by a Holder (including the presentation of Notes for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in a Global Note is credited and only in respect of such portion of the aggregate principal amount of Notes as to which such participant or participants has or have given such direction. However, if there is an Event of Default under the Notes, DTC will exchange the applicable Global Note for Certificated Notes, which it will distribute to its participants and which may be legended as set forth under the heading “Transfer Restrictions.”

Although DTC is expected to follow the foregoing procedures in order to facilitate transfers of interests in a Global Note among participants of DTC, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Company, any of the Subsidiary Guarantors, the Trustee or any Paying Agent will have any responsibility for the performance by DTC or its participants or indirect participants of its obligations under the rules and procedures governing its operations.

If DTC is at any time unwilling or unable to continue as a depositary for the Global Notes and a successor depositary is not appointed by the Company within 90 days, the Company will issue Certificated Notes in registered form, which may bear the legend referred to under “Transfer Restrictions,” in exchange for the Global Notes. Holders of an interest in a Global Note may receive Certificated Notes, which may bear the legend referred to under “Transfer Restrictions,” in accordance with the DTC’s rules and procedures in addition to those provided for under the Indenture.

 

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The Clearing System

General

DTC has advised the Company as follows:

DTC . DTC is a limited-purpose trust company organized under the laws of the State of New York, a “banking organization” within the meaning of New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities of its participants and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of securities certificates. DTC’s participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of whom own DTC, and may include the dealer manager. Indirect access to the DTC system is also available to others that clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly. Transfers of ownership or other interests in Notes in DTC may be made only through DTC participants. In addition, beneficial owners of Notes in DTC will receive all distributions of principal of and interest on the Notes from the Trustee through such DTC participant.

Deposit and Holding of Notes; Settlement

All Notes issued in the form of global notes will be deposited with the Trustee as custodian for DTC. Investors’ interests in Notes held in book-entry form by DTC will be represented through financial institutions acting on their behalf as direct and indirect participants in DTC.

Investors holding their Notes through DTC must follow the settlement practices applicable to United States corporate debt obligations. The securities custody accounts of investors will be credited with their holdings against payment in same day funds on the settlement date.

Secondary Market Trading

Because the purchaser determines the place of delivery, it is important to establish at the time of trading of any Notes where both the purchaser’s and seller’s accounts are located to ensure that settlement can be made on the desired value date.

Trading between DTC Participants . Secondary market trading between DTC participants will occur in the ordinary way in accordance with DTC rules and will be settled using the procedures applicable to United States corporate debt obligations in same-day funds using DTC’s Same Day Funds Settlement System.

The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC participant, a cross-market transaction will settle no differently than a trade between two DTC participants.

None of the Company, the Trustee or any Paying Agent will have any responsibility for the performance by DTC or its respective participants or indirect participants of its obligations under the rules and procedures governing their operations.

Notices

All notices or demands required or permitted by the terms of the Notes or the Indenture to be given to or by the Holders are required to be in writing and may be given or served by being sent by prepaid courier or by being deposited, first-class postage prepaid, in the United States mail (if intended for the Company or any Subsidiary Guarantor or the Trustee) addressed to the Company, such Subsidiary Guarantor or the Trustee, as the case may be, at the corporate trust office of the Trustee; and (if intended for any Holder) addressed to such Holder at such Holder’s last address as it appears in the Note register.

 

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Any such notice or demand will be deemed to have been sufficiently given or served when so sent or deposited and, if to the Holders, when delivered in accordance with the applicable rules and procedures of DTC. Any such notice shall be deemed to have been delivered on the day such notice is delivered to DTC or if by mail, when so sent or deposited.

Consent to Jurisdiction; Service of Process

The Company and each of the Subsidiary Guarantors will irrevocably (i) submit to the non-exclusive jurisdiction of any U.S. Federal or New York State court located in the Borough of Manhattan, The City of New York in connection with any suit, action or proceeding arising out of, or relating to, the Notes, any Subsidiary Guarantee, the Indenture or any transaction contemplated thereby and (ii) designate and appoint a reputable professional service company in New York City, New York for receipt of service of process in any such suit, action or proceeding.

Governing Law

Each of the Notes, the Subsidiary Guarantees and the Indenture provides that such instrument will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby.

Definitions

Set forth below are defined terms used in the covenants and other provisions of the Indenture.

Reference is made to the Indenture for other capitalized terms used in this “Description of the Notes” for which no definition is provided.

“Acquired Indebtedness” means Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary or Indebtedness of a Restricted Subsidiary assumed in connection with an Asset Acquisition by such Restricted Subsidiary.

“Adjusted Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield in maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

“Affiliate” means, with respect to any Person, any other Person (i) directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person or (ii) who is a director or officer of such Person or any Subsidiary of such Person or of any Person referred to in clause (i) of this definition. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Applicable Premium” means with respect to an Note at any redemption date, the greater of (1) 1.00% of the principal amount of such Note and (2) the excess of (A) the present value at such redemption date of (x) the redemption price of such Note at the fourth anniversary date of the Original Issue Date (such redemption price being set forth in the table appearing under the caption “—Optional Redemption”), plus (y) all required remaining scheduled interest payments due on such Note (but excluding accrued and unpaid interest to the redemption date) through the fourth anniversary date of the Original Issue Date, computed using a discount rate equal to the Adjusted Treasury Rate plus 50 basis points, over (B) the principal amount of such Note on such redemption date.

“Asset Acquisition” means (1) an investment by the Company or any of its Restricted Subsidiaries in any other Person pursuant to which such Person shall become a Restricted Subsidiary or shall be merged into or consolidated with the Company or any of its Restricted Subsidiaries, or (2) an acquisition by the Company or any of

 

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its Restricted Subsidiaries of the property and assets of any Person other than the Company or any of its Restricted Subsidiaries that constitute substantially all of a division or line of business of such Person.

“Asset Disposition” means the sale or other disposition by the Company or any of its Restricted Subsidiaries (other than to the Company or another Restricted Subsidiary) of (1) all or substantially all of the Capital Stock of any Restricted Subsidiary or (2) all or substantially all of the assets that constitute a division or line of business of the Company or any of its Restricted Subsidiaries.

“Asset Sale” means any sale, transfer or other disposition (including by way of merger, consolidation or Sale and Leaseback Transaction) of any of its property or assets (including Capital Stock of a Restricted Subsidiary) in one transaction or a series of related transactions by the Company or any of its Restricted Subsidiaries to any Person other than the Company or any Wholly-Owned Restricted Subsidiary; provided that “Asset Sale” shall not include:

 

  (a) sales or other dispositions of inventory, receivables and other current assets (including, but not limited to wood chips, logs, lumber, and manufactured wood and wood panel products) or standing timber in the ordinary course of business,

 

  (b) any disposition that constitutes a Change of Control or an Entire Sale Transaction;

 

  (c) sales, transfers or other dispositions of assets constituting a Permitted Investment or Restricted Payment permitted to be made under the “Limitation on Restricted Payments” covenant,

 

  (d) sales, transfers or other dispositions of assets with a Fair Market Value not in excess of US$5.0   million (or the Dollar Equivalent thereof) in any transaction or series of related transactions,

 

  (e) any sale, transfer, assignment or other disposition of any property, or equipment that has become damaged, worn out, obsolete or otherwise unsuitable for use in connection with the business of the Company or its Restricted Subsidiaries,

 

  (f) any, transfer, assignment or other disposition deemed to occur in connection with creating or granting any Permitted Lien, or

 

  (g) a transaction covered by the covenant under the caption “—Consolidation, Merger and Sale of Assets.”

“Average Life” means, at any date of determination with respect to any Indebtedness, the quotient obtained by dividing (1) the sum of the products of (a) the number of years from such date of determination to the dates of each successive scheduled principal payment of such Indebtedness and (b) the amount of such principal payment by (2) the sum of all such principal payments.

“Board of Directors” means the board of directors elected or appointed by the members of the Company to manage the business of the Company or any committee of such board duly authorized to take the action purported to be taken by such committee.

“Board Resolution” means any resolution of the Board of Directors taking an action which it is authorized to take and adopted at a meeting duly called and held at which a quorum of disinterested members (if so required) was present and acting throughout or adopted by written resolution executed by every member of the Board of Directors.

“Business Day” means any day which is not a Saturday, Sunday, legal holiday or other day on which banking institutions in The City of New York, United States, the city in which the Corporate Trust Office of the Trustee is located, Hong Kong or the Cayman Islands (or in any other place in which payments on the Notes are to be made) are authorized by law or governmental regulation to close.

 

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“Capital Stock” means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) in equity of such Person, whether outstanding on the Original Issue Date or issued thereafter, including, without limitation, all Common Stock and Preferred Stock, but excluding any debt securities convertible into such equity.

“Capitalized Lease” means, with respect to any Person, any lease of any property (whether real, personal or mixed) which, in conformity with IFRS, is required to be capitalized on the balance sheet of such Person.

“Capitalized Lease Obligations” means the discounted present value of the rental obligations under a Capitalized Lease.

“Change of Control” means the occurrence of one or more of the following events:

 

  (1) the merger, amalgamation, or consolidation of the Company with or into another Person or the merger or amalgamation of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person (other than an Entire Sale Transaction);

 

  (2) any “person” or “group” (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as such term is used in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company;

 

  (3) the majority of the directors of the Company are not Continuing Directors; or

 

  (4) the adoption of a plan relating to the liquidation or dissolution of the Company.

“Change of Control Triggering Event” means the occurrence of a Change of Control.

“Collateral” means all collateral securing, or purported to be securing, directly or indirectly, the Company’s obligations under the Indenture, the Security Documents and the Notes, any Subsidiary Guarantee, Permitted Priority Secured Indebtedness or any Permitted Priority Subsidiary Guarantee, pursuant to the Security Documents, and shall initially consist of all property and assets (including Capital Stock) of the Company and the initial Subsidiary Guarantors held by the Company or a Subsidiary Guarantor Pledgor, and may include all property and assets (including any other Capital Stock of any Person) owned by the Company or any Subsidiary Guarantor Pledgor that becomes a Restricted Subsidiary (other than those organized under the laws of the PRC, or which are a Foreign Subsidiary) as may be pledged, mortgaged or charged by the Company or the Subsidiary Guarantor Pledgors from time to time pursuant to the section “Security.”

“Commodity Agreement” means any forward contract, commodity swap agreement, commodity option agreement or other similar agreement or arrangement.

“Common Stock” means, with respect to any Person, any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common stock or ordinary shares, whether or not outstanding at the date of the Indenture, and include, without limitation, all series and classes of such common stock or ordinary shares.

“Comparable Treasury Issue” means the U.S. Treasury security selected by a Reference Treasury Dealer having a comparable maturity to the fourth anniversary date of the Original Issue Date that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the fourth anniversary date of the Original Issue Date.

 

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“Comparable Treasury Price” means, with respect to any redemption date, as calculated by a Reference Treasury Dealer:

 

  (1) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statistical release (of any successor release) published by the Federal Reserve Bank of New York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities;” or

 

  (2) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (a) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (b) if fewer than three such Reference Treasury Dealer Quotations are available, the average of all such quotations.

“Consolidated EBITDA” means, for any period, Consolidated Net Income for such period plus, to the extent such amount was deducted in calculating such Consolidated Net Income:

 

  (1) Consolidated Interest Expense,

 

  (2) income taxes (other than income taxes attributable to extraordinary and non-recurring gains (or losses) or sales of assets),

 

  (3) depreciation expense, amortization expense and all other non-cash items reducing Consolidated Net Income (other than depletion of timber holdings or non-cash items in a period which reflect cash expenses paid or to be paid in another period), less all non-cash items increasing Consolidated Net Income,

all as determined on a consolidated basis for the Company and its Restricted Subsidiaries in conformity with IFRS, provided that if any Restricted Subsidiary is not a Wholly-Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in accordance with IFRS) by an amount equal to (A) the amount of the Consolidated Net Income attributable to such Restricted Subsidiary multiplied by (B) the percentage ownership interest in the income of such Restricted Subsidiary not owned on the last day of such period by the Company or any of its Restricted Subsidiaries.

“Consolidated Fixed Charges” means, for any period, the sum (without duplication) of (i) Consolidated Interest Expense for such period and (ii) all cash and non cash dividends, accrued or accumulated during such period on any Disqualified Stock or Preferred Stock of the Company or any Restricted Subsidiary held by Persons other than the Company or any Wholly-Owned Restricted Subsidiary.

“Consolidated Interest Expense” means, for any period, the amount that would be included in gross interest expense on a consolidated income statement prepared in accordance with IFRS for such period of the Company and its Restricted Subsidiaries, plus, to the extent not included in such gross interest expense, and to the extent incurred or paid during such period by the Company and its Restricted Subsidiaries, without duplication, (i) interest expense attributable to Capitalized Lease Obligations, (ii) amortization of debt issuance costs and original issue discount expense and non cash interest payments in respect of any Indebtedness, (iii) the interest portion of any deferred payment obligation, (iv) all commissions, discounts and other fees and charges with respect to letters of credit or similar instruments issued for financing purposes or in respect of any Indebtedness, (v) the interest equivalent costs associated with Interest Rate Agreements, (vi) interest actually paid by the Company or any Restricted Subsidiary on Indebtedness of any other Person that is Guaranteed by the Company or any Restricted Subsidiary and (vii) any capitalized interest, provided that interest expense attributable to interest on any Indebtedness bearing a floating interest rate will be computed on a pro forma basis as if the rate in effect on the date of determination had been the applicable rate for the entire relevant period.

“Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the net income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in

 

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conformity with IFRS; provided that the following items shall be excluded in computing Consolidated Net Income (without duplication):

 

  (1) the net income (or loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting except to the extent of the amount of dividends or similar distributions actually paid in cash to the specified Person or a Restricted Subsidiary of the Person during such period;

 

  (2) the net income (and loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any of its Restricted Subsidiaries or all or substantially all of the property and assets of such Person are acquired by the Company or any of its Restricted Subsidiaries;

 

  (3) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary;

 

  (4) the cumulative effect of a change in accounting principles will be excluded;

 

  (5) any net after tax gains (or losses) realized on the sale or other disposition of (A) any property or assets of the Company or any Restricted Subsidiary which is not sold in the ordinary course of its business or (B) any Capital Stock of any Person (including any gains by the Company realized on sales of Capital Stock of the Company or other Restricted Subsidiaries);

 

  (6) any translation gains and losses due solely to fluctuations in currency values and related tax effects; and

 

  (7) any net after-tax extraordinary or non-recurring gains (or losses).

“Consolidated Net Worth” means, at any date of determination, stockholders’ equity or members’ equity as set forth on the most recently available semi-annual or annual consolidated balance sheet of the Company and its Restricted Subsidiaries, plus, to the extent not included, any Preferred Stock of the Company, less any amounts attributable to Disqualified Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock or shares and the principal amount of any promissory notes receivable from the sale of the Capital Stock of the Company or any of its Restricted Subsidiaries, each item to be determined in conformity with IFRS.

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors of the Company who:

 

  (1) was a member of such Board of Directors on the Original Issue Date;

 

  (2) was designated by any shareholder entitled to designate a director under the Company’s Memorandum and Articles of Association; or

 

  (3) was elected or appointed to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such director’s nomination or election.

“Currency Agreement” means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement.

“Default” means any event that is, or after notice or passage of time or both would be, an Event of Default.

“Disqualified Stock” means any class or series of Capital Stock of any Person that by its terms or otherwise is (1) required to be redeemed prior to the Stated Maturity of the Notes, (2) redeemable at the option of the holder of

 

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such class or series of Capital Stock at any time prior to the Stated Maturity of the Notes or (3) convertible into or exchangeable for Capital Stock referred to in clause (1) or (2) above or Indebtedness having a scheduled maturity prior to the Stated Maturity of the Notes; provided that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an “asset sale” or “change of control” occurring prior to the Stated Maturity of the Notes shall not constitute Disqualified Stock if the “asset sale” or “change of control” provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in “Limitation on Asset Sales” and “Repurchase of Notes upon a Change of Control Triggering Event” covenants and such Capital Stock specifically provides that such Person will not repurchase or redeem any such Capital Stock pursuant to such provision prior to the Company’s repurchase of such Notes as are required to be repurchased pursuant to the “Limitation on Asset Sales” and “Repurchase of Notes upon a Change of Control Triggering Event” covenants.

“Dollar Equivalent” means, with respect to any monetary amount in a currency other than U.S. dollars, at any time for the determination thereof, the amount of U.S. dollars obtained by converting such foreign currency involved in such computation into U.S. dollars at the base rate for the purchase of U.S. dollars with the applicable foreign currency as quoted by the Federal Reserve Bank of New York on the date of determination.

“DTC” means The Depository Trust Company, a New York corporation, and its successors.

“Entire Sale Transaction” means an Asset Disposition by the Company (other than to a Restricted Subsidiary) of all or substantially all of the Capital Stock of all Subsidiaries owned by the Company and/or of all or substantially all of the assets of the Company.

“Entire Sale Transaction Mandatory Redemption” has the meaning under the heading “ Mandatory Redemption of Notes upon an Entire Sale Transaction ”.

“Entire Sale Transaction Redemption Price” has the meaning under the heading “ Mandatory Redemption of Notes upon an Entire Sale Transaction ”.

“Equity Offering” means any primary private or public offering of Common Stock of the Company after the Original Issue Date.

“Fair Market Value” means the price that would be paid in an arm’s length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution; provided, however, that for purposes of clause (4)(a) under the caption “—Certain Covenants—Limitation on Asset Sales,” such determination may instead be made by the Company’s Chief Executive Officer or Chief Financial Officer.

“Fixed Charge Coverage Ratio” means, on any Transaction Date, the ratio of (1) the aggregate amount of Consolidated EBITDA for the then most recent two fiscal half-years prior to such Transaction Date for which consolidated financial statements of the Company (which the Company shall use its best efforts to compile in a timely manner) are available and have been provided to the Trustee (the “Two Half-Year Period”) to (2) the aggregate Consolidated Fixed Charges during such Two Half-Year Period. In making the foregoing calculation:

 

  (A) pro forma effect shall be given to any Indebtedness, Disqualified Stock or Preferred Stock Incurred, repaid or redeemed during the period (the “Reference Period”) commencing on and including the first day of the Two Half-Year Period and ending on and including the Transaction Date (other than Indebtedness Incurred or repaid under a revolving credit or similar arrangement (or under any predecessor revolving credit or similar arrangement) in effect on the last day of such Two Half-Year Period), in each case as if such Indebtedness, Disqualified Stock or Preferred Stock had been Incurred, repaid or redeemed on the first day of such Reference Period;

 

  (B)

Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the Transaction Date (taking into account any Interest Rate

 

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  Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period;

 

  (C) pro forma effect shall be given to the creation, designation or redesignation of Restricted and Unrestricted Subsidiaries as if such creation, designation or redesignation had occurred on the first day of such Reference Period;

 

  (D) pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition) that occur during such Reference Period as if they had occurred and such proceeds had been applied on the first day of such Reference Period; and

 

  (E) pro forma effect shall be given to asset dispositions and asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into the Company or any Restricted Subsidiary during such Reference Period and that would have constituted Asset Dispositions or Asset Acquisitions had such transactions occurred when such Person was a Restricted Subsidiary as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such Reference Period;

provided that to the extent that clause (D) or (E) of this sentence requires that pro forma effect be given to an Asset Acquisition or Asset Disposition (or asset acquisition or asset disposition), such pro forma calculation shall be based upon the two full fiscal half-years immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed for which financial information is available.

“Foreign Subsidiary” means any Restricted Subsidiary of the Company organized under the laws of a jurisdiction that prohibits such Subsidiary from guaranteeing payments under the Notes.

“Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.

“Holder” means the Person in whose name a Note is registered in the Note register.

“IFRS” means International Financial Reporting Standards as adopted by the International Accounting Standards Board, applied on a consistent basis. All ratios and computations contained or referred to in the Indenture shall be computed in conformity with IFRS applied on a consistent basis.

“Incur” means, with respect to any Indebtedness or Capital Stock, to incur, create, issue, assume, Guarantee or otherwise become liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness or Capital Stock; provided that (1) any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary will be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary and (2) the accretion of original issue discount shall not be considered an Incurrence of Indebtedness. The terms “Incurrence,” “Incurred” and “Incurring” have meanings correlative with the foregoing.

 

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“Indebtedness” means, with respect to any Person at any date of determination (without duplication):

 

  (1) all indebtedness of such Person for borrowed money;

 

  (2) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

 

  (3) all obligations of such Person in respect of letters of credit, bankers’ acceptances or other similar instruments;

 

  (4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except Trade Payables;

 

  (5) all Capitalized Lease Obligations;

 

  (6) all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (A) the Fair Market Value of such asset at such date of determination and (B) the amount of such Indebtedness;

 

  (7) all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such Person; and

 

  (8) to the extent not otherwise included in this definition, obligations under Commodity Agreements, Currency Agreements and Interest Rate Agreements.

The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, provided

 

  (A) that the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with IFRS,

 

  (B) that money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be “Indebtedness” so long as such money is held to secure the payment of such interest, and

 

  (C) that the amount of Indebtedness with respect to any Commodity Agreements, Currency Agreements and Interest Rate Agreements shall be equal to the net amount payable if such agreements terminated at that time due to default by such Person.

“Independent Financial Advisor” means an investment banking firm or accounting firm of national reputation in the United States of America or in Hong Kong (i) which does not, and whose directors, officers, employees and affiliates do not, have a direct or indirect financial interest in the Company or any of its Affiliates, and (ii) which, in the judgement of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged.

“Intercreditor Agreement” has the meaning set forth under “Security”.

“Interest Rate Agreement” means any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement, option or future contract or other similar agreement or arrangement.

 

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“Investment” means:

 

  (i) any direct or indirect advance, loan or other extension of credit (other than Trade Payables that are, in conformity with IFRS, recorded as accounts receivable, prepaid expenses or deposits on the balance sheet of the Company or its Restricted Subsidiaries) to another Person,

 

  (ii) capital contribution to another Person (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others),

 

  (iii) any purchase or acquisition of Capital Stock, Indebtedness, bonds, notes, debentures or other similar instruments or securities issued by another Person, or

 

  (iv) any Guarantee of any obligation of another Person;

provided that an acquisition of assets, Capital Stock or other securities by the Company or a Subsidiary for consideration to the extent such consideration consists of common equity securities of the Company shall not be deemed to be an Investment.

For the purposes of the provisions of the “Designation of Restricted and Unrestricted Subsidiaries” and “Limitation on Restricted Payments” covenants: (i) the Company will be deemed to have made an investment in an Unrestricted Subsidiary in an amount equal to the Fair Market Value of the assets (net of liabilities owed to any Person other than the Company or a Restricted Subsidiary and that are not Guaranteed by the Company or a Restricted Subsidiary) of a Restricted Subsidiary that is designated an Unrestricted Subsidiary at the time of such designation, and (ii) any property transferred to or from any Person shall be valued at its Fair Market Value at the time of such transfer, as determined in good faith by the Board of Directors.

“Joint Venture” means any Person engaged in a Permitted Business of which the Company, together with its Restricted Subsidiaries, directly holds or, as a result of the respective Investment, will hold, at least 50.1% of its Capital Stock.

“Leverage Ratio” means, as at the time of determination, the aggregate principal amount of Indebtedness of the Company and the Restricted Subsidiaries outstanding at such time determined on a consolidated basis, divided by the Consolidated EBITDA of the Company for the two fiscal half-years immediately preceding the date of determination for which consolidated financial statements of the Company are available and have been provided to the Trustee.

“Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof or any agreement to create any mortgage, pledge, security interest, lien, charge, easement or encumbrance of any kind).

“Measurement Date” means the first day of fiscal half-year period of the Company immediately preceding the Original Issue Date.

“Moody’s” means Moody’s Investors Service and its affiliates.

“Net Cash Proceeds” means:

 

  (a) with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of

 

  (i) brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale;

 

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  (ii) provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to the consolidated results of operations of the Company and its Restricted Subsidiaries, taken as a whole;

 

  (iii) payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (x) is secured by a Lien on the property or assets sold or (y) is required to be paid as a result of such sale;

 

  (iv) appropriate amounts to be provided by the Company or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with IFRS; and

 

  (b) with respect to any issuance or sale of Capital Stock, the proceeds of such issuance or sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of attorney’s fees, accountants’ fees, underwriters’ or placement agents’ fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof.

“Offer to Purchase” means an offer to purchase Notes by the Company from the Holders commenced by the Company mailing a notice by first class mail, postage prepaid, to the Trustee and each Holder at its last address appearing in the Note register stating:

 

  (1) the covenant pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis;

 

  (2) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the “Payment Date”);

 

  (3) that any Note not tendered will continue to accrue interest pursuant to its terms;

 

  (4) that, unless the Company defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Payment Date;

 

  (5) that Holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled “Option of the Holder to Elect Purchase” on the reverse side of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Business Day immediately preceding the Payment Date;

 

  (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Payment Date, a facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased; and

 

  (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of US$2,000 or integral multiples of US$1,000.

 

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On the Payment Date, the Company shall (a) accept for payment on a pro rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (b) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so accepted; and (c) deliver, or cause to be delivered, to the Trustee all Notes or portions thereof so accepted together with an Officer’s Certificate specifying the Notes or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail or wire to the Holders so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of US$2,000 or integral multiples of US$1,000. The Company will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Company is required to repurchase Notes pursuant to an Offer to Purchase.

The offer is required to contain or incorporate by reference information concerning the business of the Company and its Subsidiaries which the Company in good faith believes will assist such Holders to make an informed decision with respect to the Offer to Purchase, including a brief description of the events requiring the Company to make the Offer to Purchase, and any other information required by applicable law to be included therein. The offer is required to contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Offer to Purchase.

“Officer” means one of the executive officers of the Company, or, in the case of a Subsidiary Guarantor, one of the directors or officers of such Subsidiary Guarantor.

“Officer’s Certificate” means (i) a certificate signed by two Officers or (ii) in the event the relevant entity has one appointed Officer only, a certificate signed by such Officer or (iii) in the event the relevant entity has no appointed Officer, a certificate signed by either its sole director or two directors if such entity has more than one director.

“Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Trustee.

“Original Issue Date” means the date on which the Notes are originally issued under the Indenture.

“Permitted Businesses” means the Permitted Forestry Plantation Business and the manufacturing of wood and wood-based products and related businesses and activities incidental to such activities.

“Permitted Forestry Plantation Business” means the operation of forestry plantations and production and processing facilities, the processing, sale, distribution, transportation, cultivation and development of wood fibers and logs, and other similar wood and wood-based products, including bio-fuels, the operation of plantation nurseries, and the sale and distribution of seeds and saplings, inputs and similar products, or intermediate products and by-products used or produced in connection with such activities, the planting of saplings and trees in city greening and urban landscaping projects, including the design and implementation of such projects, the import and export of logs, lumber and other wood and wood-based products, trading agency activities related to the foregoing, and related businesses and activities incidental to any of the foregoing activities.

“Permitted Investment” means:

 

  (1) any Investment in the Company or a Restricted Subsidiary that is primarily engaged in a Permitted Forestry Plantation Business or a Person which will, upon the making of such Investment, become a Restricted Subsidiary that is primarily engaged in a Permitted Forestry Plantation Business or be merged or consolidated with or into or transfer or convey all or substantially all its assets to, the Company or a Restricted Subsidiary that is primarily engaged in a Permitted Forestry Plantation Business;

 

  (2) Temporary Cash Investments;

 

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  (3) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with IFRS;

 

  (4) an Investment in an Unrestricted Subsidiary consisting solely of an Investment in another Unrestricted Subsidiary;

 

  (5) Commodity Agreements, Interest Rate Agreements and Currency Agreements designed solely to protect the Company or any Restricted Subsidiary against fluctuations in commodity prices, interest rates or foreign currency exchange rates;

 

  (6) receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms;

 

  (7) any securities, non-cash consideration or other Investments received as consideration in, or retained in connection with, sales or other dispositions of property or assets, including Asset Dispositions made in compliance with the covenant described under “—Limitation on Asset Sales;”

 

  (8) pledges or deposits (x) with respect to leases or utilities provided to third parties in the ordinary course of business or (y) otherwise described in the definition of “Permitted Liens” or made in connection with Liens permitted under the covenant described under “—Limitation on Liens;”

 

  (9) loans or advances to employees made in the ordinary course of business and consistent with past practices of the Company or past practices of a Restricted Subsidiary, as the case may be, in an aggregate amount outstanding not to exceed at any one time US$500,000 (or the Dollar Equivalent thereof); and

 

  (10) loans to employees, directors and officers not exceeding the amount required to exercise an option to purchase the Company’s Capital Stock held by such individual, provided that the Capital Stock issued upon exercise of such option is pledged, mortgaged and/or charged to the Company as security for such loan.

“Permitted Liens” means:

 

  (1) Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal or administrative proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with IFRS shall have been made;

 

  (2) statutory and common law Liens of landlords and carriers, warehousemen, mechanics, suppliers, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal or administrative proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with IFRS shall have been made;

 

  (3) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers’ acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money);

 

  (4) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company and its Restricted Subsidiaries, taken as a whole;

 

  (5) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or its Restricted Subsidiaries relating to such property or assets;

 

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  (6) any interest or title of a lessor in the property subject to any operating lease;

 

  (7) Liens on property of, or on shares of Capital Stock or Indebtedness of, any Person existing at the time such Person becomes, or becomes a part of, any Restricted Subsidiary; provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets acquired;

 

  (8) Liens in favor of the Company or any Wholly-Owned Restricted Subsidiary;

 

  (9) Liens arising from the rendering of a final judgment or order against the Company or any Restricted Subsidiary that does not give rise to an Event of Default;

 

  (10) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof;

 

  (11) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

 

  (12) Liens encumbering customary initial deposits and margin deposits, and other Liens that are within the general parameters customary in the industry and incurred in the ordinary course of business, in each case, securing Indebtedness under Commodity Agreements, Interest Rate Agreements and Currency Agreements designed solely to protect the Company or any of its Restricted Subsidiaries from fluctuations in interest rates, currencies or the price of commodities;

 

  (13) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business in accordance with the past practices of the Company and its Restricted Subsidiaries prior to the Original Issue Date;

 

  (14) Liens existing on the Original Issue Date;

 

  (15) Liens on real property, trees or current assets securing Indebtedness which is permitted to be Incurred under clause (7) of the second paragraph of the “Limitation on Indebtedness and Disqualified or Preferred Stock” covenant;

 

  (16) Liens securing Indebtedness which is Incurred to refinance secured Indebtedness which is permitted to be Incurred under clause (5) of the second paragraph of the “Limitation on Indebtedness and Disqualified or Preferred Stock” covenant; provided that such Liens do not extend to or cover any property or assets of the Company or any Restricted Subsidiary other than the property or assets securing the Indebtedness being refinanced;

 

  (17) Liens under the Security Documents; and

 

  (18) Liens securing any Permitted Priority Secured Indebtedness that complies with each of the requirements set forth under “Security—Permitted Priority Secured Indebtedness.”

“Permitted Priority Secured Indebtedness” means Indebtedness of the Company which, in the instrument creating or evidencing the same, is expressly stated to be secured by a lien over the Collateral ranking in priority to the Lien over the Collateral granted to the Holders of the Notes, and all guarantees thereof by any of the Subsidiary Guarantors provided that:

 

  (a)

on or before the date on which such Indebtedness is Incurred, the Company, in an Officer’s Certificate delivered to the Trustee and the Security Trustee designates such Indebtedness as “Permitted Priority Secured Indebtedness” for the purposes of the Indenture, such Indebtedness is certified in such Officer’s Certificate as having been incurred in compliance with the terms of the

 

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  Indenture and no Default or Event of Default under the Indenture has occurred and is continuing; and

 

  (b) such additional Indebtedness, together with all other outstanding Permitted Priority Secured Indebtedness does not exceed the amount of the Permitted Priority Secured Indebtedness Cap;

“Permitted Priority Secured Indebtedness Cap” means $200 million, less any mandatory pre-payments or repurchases of any Permitted Priority Secured Indebtedness made pursuant to the terms of the instrument or agreement creating such Permitted Priority Secured Indebtedness or any agreements entered into in connection therewith.

“Permitted Priority Subsidiary Guarantee” means a guarantee by any Subsidiary Guarantor of Permitted Priority Secured Indebtedness.

“Permitted Priority Subsidiary Guarantor” means any Subsidiary Guarantor guaranteeing the obligations of the Company in respect of the Permitted Priority Secured Indebtedness.

“Permitted Priority Subsidiary Guarantor Pledgor” means any Subsidiary Guarantor which is required to pledge, mortgage or charge Collateral to secure the obligations of the Company in respect of any Permitted Priority Secured Indebtedness.

“Permitted Priority Trustee” has the meaning under the heading “ Intercreditor Agreement ”.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.

“Preferred Stock” as applied to the Capital Stock of any Person means Capital Stock of any class or classes that by its term is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.

“Reference Treasury Dealer” means each of any three investment banks of recognized standing that is a primary U.S. Government securities dealer in The City of New York, selected by the Company in good faith.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average as determined by the Company of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Company by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date.

“Replacement Assets” means, on any date, property or assets (other than current assets) of a nature or type or that are used in a Permitted Business and shall include Capital Stock of any Person holding such property or assets, which is primarily engaged in a Permitted Business and will upon the acquisition by the Company or any of its Restricted Subsidiaries of such Capital Stock, become a Restricted Subsidiary.

“Restricted Subsidiary” means any Subsidiary of the Company other than an Unrestricted Subsidiary.

“S&P” means Standard & Poor’s Ratings Group and its affiliates.

“Sale and Leaseback Transaction” means any direct or indirect arrangement relating to property (whether real, personal or mixed), now owned or hereafter acquired whereby the Company or any Restricted Subsidiary transfers such property to another Person and the Company or any Restricted Subsidiary leases it from such Person.

“Secured Party” means the (i) Holders, including (without limitation) any holders of Additional Notes and PIK Notes, and the Trustee and the Security Trustee, and (ii) if and when any Permitted Priority Secured Indebtedness is Incurred, the holders of any Permitted Priority Secured Indebtedness Incurred in compliance with the covenant “Limitation on Indebtedness and Disqualified or Preferred Stock”, or the Permitted Priority Trustee or Security Trustee on their behalf.

 

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“Security Documents” means, collectively, the pledge agreements, equitable mortgages, charges over shares, fixed and floating charges, or other agreements or instruments that may evidence or create any Lien in favor of the Security Trustee, the Trustee and/or any Holders in any or all of the Collateral.

“Senior Indebtedness” of the Company or a Subsidiary Guarantor, as the case may be, means all Indebtedness of the Company or the Subsidiary Guarantor, as relevant, whether outstanding on the Original Issue Date or thereafter created, except for Indebtedness which, in the instrument creating or evidencing the same, is expressly stated to be not senior in right of payment to the Notes or, in respect of such Subsidiary Guarantor, its Subsidiary Guarantee; provided that Senior Indebtedness does not include (i) any obligation to the Company or any Restricted Subsidiary, (ii) trade payables or (iii) Indebtedness Incurred in violation of the Indenture.

“Stated Maturity” means, (1) with respect to any Indebtedness, the date specified in such debt security as the fixed date on which the final installment of principal of such Indebtedness is due and payable as set forth in the documentation governing such Indebtedness and (2) with respect to any scheduled installment of principal of or interest on any Indebtedness, the date specified as the fixed date on which such installment is due and payable as set forth in the documentation governing such Indebtedness.

“Subordinated Indebtedness” means any Indebtedness of the Company which is subordinated or junior in right of payment to the Notes pursuant to a written agreement to such effect.

“Subsidiary” means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such Person and one or more other Subsidiaries of such Person.

“Subsidiary Guarantee” means any Guarantee of the obligations of the Company under the Indenture and the Notes by any Subsidiary Guarantor.

“Subsidiary Guarantor” means any initial Subsidiary Guarantor named herein and any other Restricted Subsidiary which is required to guarantee the payment of the Notes pursuant to the Indenture and the Notes; provided that Subsidiary Guarantor will not include any Person whose Subsidiary Guarantee has been released in accordance with the Indenture and the Notes.

“Subsidiary Guarantor Pledgor” means any initial Subsidiary Guarantor Pledgor named herein and any other Subsidiary Guarantor which is required to pledge, mortgage or charge Collateral to secure the obligations of the Company under the Notes and the Indenture and of such Subsidiary Guarantor under its Subsidiary Guarantee; provided that a Subsidiary Guarantor Pledgor will not include any person whose pledge, mortgage or charge under the Security Documents has been released in accordance with the Security Documents, the Indenture and the Notes.

“Temporary Cash Investment” means any of the following:

 

  (1) direct obligations of the United States of America or any agency thereof or obligations fully and unconditionally Guaranteed by the United States of America or any agency thereof, in each case maturing within 12 months;

 

  (2) time deposit accounts, certificates of deposit and money market deposits maturing within 12 months of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof, or Hong Kong, and has outstanding debt which is rated “A” (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money market fund sponsored by a registered broker dealer or mutual fund distributor;

 

  (3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank or trust company meeting the qualifications described in clause (2) above;

 

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  (4) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any state thereof with a rating at the time as of which any investment therein is made of “P-2” (or higher) according to Moody’s or “A-2” (or higher) according to S&P;

 

  (5) securities with maturities of 12 months or less from the date of acquisition issued or fully and unconditionally Guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least “A” by S&P or Moody’s;

 

  (6) any money market fund that has at least 95% of its assets continuously invested in investments of the types described in clauses (1) through (5) above; and

 

  (7) time deposit accounts, certificates of deposit and money market deposits with (i) Bank of China, Industrial Commercial Bank of China, Construction Bank of China, Shanghai Pudong Development Bank, Bank of Shanghai, (ii) any other bank or trust company organized under the laws of the PRC whose long term debt is rated as high or higher than any of those banks or (iii) any other bank organized under the laws of the PRC, provided that, in the case of clause (iii), such deposits do not exceed US$2.5 million (or the Dollar Equivalent thereof) with any single bank or US$5 million (or the Dollar Equivalent thereof) in the aggregate, at any date of determination.

“Trade Payables” means, with respect to any Person, any accounts payable or any other indebtedness or monetary obligation to trade creditors created, assumed or Guaranteed by such Person or any of its Subsidiaries arising in the ordinary course of business in connection with the acquisition of goods or services.

“Transaction Date” means, with respect to the Incurrence of any Indebtedness, the date such Indebtedness is to be Incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made.

“Unrestricted Subsidiary” means (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided herein; and (2) any Subsidiary of an Unrestricted Subsidiary.

“U.S. Government Obligations” means securities that are (1) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally Guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the Company thereof at any time prior to the Stated Maturity of the Notes, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt.

“Voting Stock” means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.

“Wholly-Owned” means, with respect to any Subsidiary of any Person, the ownership of all of the outstanding Capital Stock of such Subsidiary (other than any director’s qualifying shares or Investments by foreign nationals mandated by applicable law) by such Person or one or more Wholly-Owned Subsidiaries of such Person.

 

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EXHIBIT E

INFORMATION REGARDING SFC ESCROW CO.

SFC Escrow Co. will be incorporated prior to the Plan Implementation Date under the laws of the Cayman Islands or such other jurisdiction as may be agreed by SFC, the Monitor and the Initial Consenting Noteholders. SFC Escrow Co. will be a wholly-owned subsidiary of SFC, and the sole director of SFC Escrow Co. will be Codan Services (Cayman) Limited, or such other Person as may be agreed by SFC, the Monitor and the Initial Consenting Noteholders. At the time that SFC Escrow Co. is incorporated, SFC Escrow Co. will issue one share (the “ SFC Escrow Co. Share ”) to SFC, as the sole shareholder of SFC Escrow Co. and SFC will be deemed to hold the SFC Escrow Co. Share solely for the purpose of facilitating the Restructuring Transaction. The sole share of SFC Escrow Co. is an “Excluded Asset” under the Plan and will therefore not be transferred to Newco pursuant to the Plan and will remain the property of SFC to hold in accordance with the Plan. SFC Escrow Co. will have no assets other than any assets that it is required to hold in escrow pursuant to the terms of the Plan, and it will have no liabilities other than its obligations as set forth in the Plan.

The sole activities and function of SFC Escrow Co. will be to perform the obligations of the Unresolved Claims Escrow Agent and to administer Undeliverable Distributions, in each case as set forth in the Plan. SFC Escrow Co. will not carry on any other activities or issue any shares or other securities (other than the SFC Escrow Co. Share to be held by SFC).

Unresolved Claims Escrow Agent

SFC Escrow Co. will act as the Unresolved Claims Escrow Agent unless otherwise agreed by agreed by SFC, the Monitor and the Initial Consenting Noteholders. Distributions in respect of any Unresolved Claim in existence at the Plan Implementation Date will be held in escrow by the Unresolved Claims Escrow Agent in the Unresolved Claims Reserve until settlement or final determination of the Unresolved Claim in accordance with the Claims Procedure Order, the Meeting Order, the Plan or otherwise, as applicable. To the extent that Unresolved Claims become Proven Claims or are finally disallowed, the Unresolved Claims Escrow Agent will release from escrow and deliver (or in the case of Litigation Trust Interests, cause to be registered) from the Unresolved Claims Reserve the applicable distributions to Affected Creditors with Proven Claims, in each case as set forth in sections 5.5(c) and 5.5(d) the Plan.

During the time that Newco Shares, Newco Notes and/or Litigation Trust Interests are held in escrow in the Unresolved Claims Reserve, any income or proceeds received therefrom or accruing thereon will be added to the Unresolved Claims Reserve by the Unresolved Claims Escrow Agent and no Person will have any right to such income or proceeds until such Newco Shares, Newco Notes or Litigation Trust Interests, as applicable, are distributed (or in the case of Litigation Trust Interests, registered) in accordance with sections 5.5(c) and 5.5(d) of the Plan, at which time the recipient thereof is entitled to any applicable income or proceeds therefrom.

The Unresolved Claims Escrow Agent will have no beneficial interest or right in the Unresolved Claims Reserve. The Unresolved Claims Escrow Agent will not take any step or action with

respect to the Unresolved Claims Reserve or any other matter without the consent or direction of the Monitor or the direction of the Court.

Each of SFC, the Monitor and the Initial Consenting Noteholders have reserved all their rights to seek or obtain an Order, whether before or after the Plan Implementation Date, directing that any Unresolved Claims should be disallowed in whole or in part or that such Unresolved Claims should receive the same or similar treatment as is afforded to Equity Claims under the terms of this Plan. SFC will seek relief in the Sanction Order confirming that SFC, the Monitor, the Initial Consenting Noteholders and each of the parties with Unresolved Claims will have standing in any Court hearing or other proceeding with respect to the resolution or determination of Unresolved Claims, including the classification of any Unresolved Claims as Equity Claims for purposes of the Plan.

Undeliverable Distributions

SFC Escrow Co. will hold any Undeliverable Distributions in escrow and administer them in accordance with the Plan. No distributions in respect of an Undeliverable Distribution will be made unless and until SFC and the Monitor are notified by the Person entitled to receive the Undeliverable Distribution of its current address and/or registration information, as applicable, at which time the Monitor will direct SFC Escrow Co. to make all such distributions to such Person, and SFC Escrow Co. will make all such distributions to such Person. All claims for Undeliverable Distributions must be made on or before the date that is six months following the final Distribution Date, after which date the right to receive distributions under the Plan in respect of such Undeliverable Distributions shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred, without any compensation therefor, at which time any such Undeliverable Distributions held by SFC Escrow Co. will be deemed to be cancelled without consideration. No interest is payable in respect of an Undeliverable Distribution.

Other Restrictions

SFC Escrow Co. will not make any sale, distribution, transfer or conveyance of any Newco Shares, Newco Notes or any other assets or property that it holds unless it is directed to do so by an Order of the Court or by a written direction from the Monitor. SFC is not permitted to sell, transfer or convey the SFC Escrow Co. Share nor effect or cause to be effected any liquidation, dissolution, merger or other corporate reorganization of SFC Escrow Co. unless it is directed to do so by an Order of the Court or by a written direction from the Monitor. SFC Escrow Co. is not permitted to exercise any voting rights (including any right to vote at a meeting of shareholders or creditors held or in any written resolution) in respect of Newco Shares or Newco Notes held in the Unresolved Claims Reserve. SFC Escrow Co. will not receive any compensation for the performance of its obligations under the Plan.

 

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EXHIBIT F

RESERVES AND OTHER AMOUNTS RELATING TO THE PLAN

As set out in the Plan, certain reserves and other amounts must be established on or prior to the Plan Implementation Date in accordance with the provisions of the Plan. Capitalized terms used but not defined herein have the meanings ascribed to such terms in the Plan.

Indemnified Noteholder Class Action Limit

The Indemnified Noteholder Class Action Limit has been established as $150 million.

Unresolved Claims Reserve

The Unresolved Claims Reserve will contain Newco Shares, Newco Notes and Litigation Trust Interests in respect of any Unresolved Claims. The Unresolved Claims as at the Plan Implementation Date are expected to consist of contingent and unresolved indemnity claims against SFC in respect of (1) monetary penalties that may be imposed by the Ontario Securities Commission against third parties seeking indemnity from SFC, (2) the Indemnified Noteholder Class Action Claims, which claims and related indemnity claims are limited to a maximum of $150 million by operation of the Indemnified Noteholder Class Action Limit, and (3) reimbursement of defence costs of third parties seeking indemnity from SFC. No consideration will be paid in respect of Unresolved Claims unless, until and then only to the extent that such Unresolved Claims are ultimately determined to be Proven Claims.

Each of SFC, the Monitor and the Initial Consenting Noteholders have reserved all their rights to seek or obtain an Order, whether before or after the Plan Implementation Date, directing that any Unresolved Claims should be disallowed in whole or in part or that such Unresolved Claims should receive the same or similar treatment as is afforded to Equity Claims under the terms of this Plan. SFC will seek relief in the Sanction Order confirming that SFC, the Monitor, the Initial Consenting Noteholders and each of the parties with Unresolved Claims will have standing in any Court hearing or other proceeding with respect to the resolution or determination of Unresolved Claims, including the classification of any Unresolved Claims as Equity Claims for purposes of the Plan.

Other Reserves

The amount of the Administration Charge Reserve, the Directors’ Charge Reserve, the Unaffected Claims Reserve and the Monitor’s Post-Implementation Reserve will be determined prior to the Plan Implementation Date.

EXHIBIT G

DRAFT PLAN SANCTION ORDER

Please see attached.

Court File No. CV-12-9667-00CL

ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

 

THE HONOURABLE MR.    )    MONDAY, THE 10 th
JUSTICE MORAWETZ    )    DAY OF DECEMBER, 2012

IN THE MATTER OF THE COMPANIES’ CREDITORS

ARRANGEMENT ACT , R.S.C. 1985, c. C-36, AS AMENDED

AND IN THE MATTER OF A PLAN OF COMPROMISE OR

ARRANGEMENT OF SINO-FOREST CORPORATION

PLAN SANCTION ORDER

THIS MOTION , made by Sino-Forest Corporation (“ SFC ”), for an order (i) pursuant to the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36, as amended (the “ CCAA ”), sanctioning the plan of compromise and reorganization dated October 19, 2012, which Plan is attached as Schedule “ A ” hereto, as supplemented by the plan supplement dated November — , 2012 previously filed with the Court, as the Plan may be further amended, varied or supplemented from time to time in accordance with the terms thereof (the “ Plan ”), and (ii) pursuant to the section 191 of the Canada Business Corporations Act , R.S.C. 1985, c. C-44, as amended (the “ CBCA ”), approving the Plan and amending the articles of SFC and giving effect to the changes and transactions arising therefrom, was heard on December 7, 2012 and December 10, 2012 at 330 University Avenue, Toronto, Ontario.

ON READING the Notice of Motion, the Affidavit of W. Judson Martin sworn — , 2012 (the “ Martin Affidavit ”), the — Report of FTI Consulting Canada Inc. in its capacity as monitor of SFC (the “ Monitor ”) dated — , 2012 (the “ Monitor’s — Report ”) and the supplemental report to the Monitor’s — Report (the “ Supplemental Report ”) and on hearing the submissions of counsel for SFC, the Monitor, the ad hoc committee of Noteholders (the “ Ad Hoc

Noteholders ”), and such other counsel as were present, no one else appearing for any other party, although duly served with the Motion Record as appears from the Affidavit of Service, filed.

DEFINED TERMS

1. THIS COURT ORDERS that any capitalized terms not otherwise defined in this Plan Sanction Order shall have the meanings ascribed to such terms in the Plan and/or the Plan Filing and Meeting Order granted by the Court on August 31, 2012 (the “ Plan Filing and Meeting Order ”), as the case may be.

SERVICE, NOTICE AND MEETING

2. THIS COURT ORDERS that the time for service of the Notice of Motion, the Motion Record in support of this motion, the Monitor’s — Report and the Supplemental Report be and are hereby abridged and validated so that the motion is properly returnable today and service upon any interested party other than those parties served is hereby dispensed with.

3. THIS COURT ORDERS AND DECLARES that there has been good and sufficient notice, service and delivery of the Plan Filing and Meeting Order and the Meeting Materials (including, without limitation, the Plan) to all Persons upon which notice, service and delivery was required.

4. THIS COURT ORDERS AND DECLARES that the Meeting was duly convened and held, all in conformity with the CCAA and the Orders of this Court made in the CCAA Proceeding, including, without limitation, the Plan Filing and Meeting Order.

5. THIS COURT ORDERS AND DECLARES that: (i) the hearing of the Plan Sanction Order was open to all of the Affected Creditors and all other Persons with an interest in SFC and that such Affected Creditors and other Persons were permitted to be heard at the hearing in respect of the Plan Sanction Order; and (ii) prior to the hearing, all of the Affected Creditors and all other Persons on the Service List in respect of the CCAA Proceeding were given adequate notice thereof.

 

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SANCTION OF THE PLAN

6. THIS COURT ORDERS that the relevant class of Affected Creditors of SFC for the purposes of voting to approve the Plan is the Affected Creditors Class.

 

7. THIS COURT ORDERS AND DECLARES that:

 

  (a) the Plan has been approved by the Required Majority in conformity with the CCAA and the Plan Filing and Meeting Order;

 

  (b) SFC has complied with the provisions of the CCAA and the Orders of the Court made in the CCAA Proceeding in all respects;

 

  (c) SFC has acted and is acting in good faith and with due diligence, and has not done or purported to do (nor does the Plan do or purport to do) anything that is not authorized by the CCAA; and

 

  (d) the Plan, and all the terms and conditions thereof, and matters and transactions contemplated thereby, are fair and reasonable.

 

8. THIS COURT ORDERS that the Plan is hereby sanctioned and approved pursuant to section 6 of the CCAA.

PLAN IMPLEMENTATION

9. THIS COURT ORDERS AND DECLARES that the Plan and all associated steps, compromises, releases, discharges, cancellations, transactions, arrangements and reorganizations effected thereby are approved and shall be deemed to be implemented, binding and effective in accordance with the provisions of the Plan as of the Plan Implementation Date at the Effective Time, or at such other time, times or manner as may be set forth in the section 6.4 or 6.5 of the Plan, and shall enure to the benefit of and be binding upon SFC, the other Released Parties, the Affected Creditors and all other Persons and parties named or referred to in, affected by, or subject to the Plan, including, without limitation, their respective heirs, administrators, executors, legal representatives, successors, and assigns.

 

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10. THIS COURT ORDERS that each of SFC and the Monitor are authorized and directed to take all steps and actions, and to do all things, necessary or appropriate to implement the Plan in accordance with its terms and to enter into, execute, deliver, complete, implement and consummate all of the steps, transactions, distributions, deliveries, allocations, instruments and agreements contemplated pursuant to the Plan, and such steps and actions are hereby authorized, ratified and approved. Furthermore, neither SFC nor the Monitor shall incur any liability as a result of acting in accordance with terms of the Plan and the Plan Sanction Order.

11. THIS COURT ORDERS that SFC, the Monitor, Newco, the Litigation Trustee, the Trustees, DTC, the Unresolved Claims Escrow Agent, all Transfer Agents and any other Person required to make any distributions, deliveries or allocations or take any steps or actions related thereto pursuant to the Plan are hereby directed to complete such distributions, deliveries or allocations and to take any such related steps and/or actions in accordance with the terms of the Plan, and such distributions, deliveries and allocations, and steps and actions related thereto, are hereby approved.

12. THIS COURT ORDERS that upon the satisfaction or waiver, as applicable, of the conditions precedent set out in section 9.1 of the Plan in accordance with the terms of the Plan, as confirmed by SFC and Goodmans LLP to the Monitor in writing, the Monitor is authorized and directed to deliver to SFC and Goodmans LLP a certificate in the form attached hereto as Schedule “ B ” (the “ Monitor’s Certificate ”) signed by the Monitor, certifying that the Plan Implementation Date has occurred and that the Plan and this Plan Sanction Order are effective in accordance with their terms. Following the Plan Implementation Date, the Monitor shall file the Monitor’s Certificate with this Court.

13. THIS COURT ORDERS AND DECLARES that the steps, compromises, releases, discharges, cancellations, transactions, arrangements and reorganizations to be effected on the Plan Implementation Date are deemed to occur and be effected in the sequential order contemplated in sections 6.4 and 6.5 of the Plan, without any further act or formality, beginning at the Effective Time.

14. THIS COURT ORDERS that SFC, the Monitor and the Ad Hoc Noteholders are hereby authorized and empowered to exercise all such consent and approval rights in the manner set forth in the Plan, whether prior to or after implementation of the Plan.

 

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15. THIS COURT ORDERS that from and after the Plan Implementation Date, and for the purposes of the Plan only, (i) if SFC does not have the ability or the capacity pursuant to Applicable Law to provide its agreement, waiver, consent or approval to any matter requiring SFC’s agreement, waiver, consent or approval under this Plan, such agreement, waiver consent or approval may be provided by the Monitor; and (ii) if SFC does not have the ability or the capacity pursuant to Applicable Law to provide its agreement, waiver, consent or approval to any matter requiring SFC’s agreement, waiver, consent or approval under this Plan, and the Monitor has been discharged pursuant to an Order, such agreement, waiver consent or approval shall be deemed not to be necessary.

COMPROMISE OF CLAIMS AND EFFECT OF PLAN

16. THIS COURT ORDERS AND DECLARES that, pursuant to and in accordance with the terms of the Plan, on the Plan Implementation Date, any and all Affected Claims shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred, subject only to the right of the applicable Persons to receive the distributions and interests to which they are entitled pursuant to the Plan.

17. THIS COURT ORDERS AND DECLARES that, pursuant to and in accordance with the terms of the Plan, on the Plan Implementation Date and at the time specified in Section 6.4 of the Plan, all accrued and unpaid interest owing on, or in respect of, or as part of, Affected Creditor Claims (including any Accrued Interest on the Notes and any interest accruing on the Notes or any Ordinary Affected Creditor Claim after the Filing Date) shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred for no consideration and no Person shall have any entitlement to any such accrued and unpaid interest.

18. THIS COURT ORDERS AND DECLARES that, on the Plan Implementation Date, the ability of any Person to proceed against SFC or the Subsidiaries in respect of any Released Claims shall be forever discharged, barred and restrained, and all proceedings with respect to, in connection with, or relating to any such matter shall be permanently stayed.

19. THIS COURT ORDERS that each Affected Creditor is hereby deemed to have consented to all of the provisions of the Plan, in its entirety, and each Affected Creditor is hereby

 

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deemed to have executed and delivered to SFC all consents, releases, assignments and waivers, statutory or otherwise, required to implement and carry out the Plan in its entirety.

20. THIS COURT ORDERS that, on the Plan Implementation Date and at the time specific in Section 6.4 of the Plan, the SFC Assets (including for greater certainty the Direct Subsidiary Shares, the SFC Intercompany Claims and all other SFC Assets assigned transferred and conveyed to Newco pursuant to section 6.4 of the Plan) shall vest in the Person to whom such assets are being assigned, transferred and conveyed, in accordance with the terms of the Plan, free and clear of and from any and all Charges, Claims (including, notwithstanding anything to the contrary herein, any Unaffected Claims), D&O Claims, D&O Indemnity Claims, Section 5.1(2) D&O Claims, Conspiracy Claims, Continuing Other D&O Claims, Non-Released D&O Claims, Affected Claims, Class Action Claims, Class Action Indemnity Claims, claims or rights of any kind in respect of the Notes or the Note Indentures, and any right or claim that is based in whole or in part on facts, underlying transactions, causes of action or events relating to the Restructuring Transaction, the CCAA Proceedings or any of the foregoing, and any guarantees or indemnities with respect to any of the foregoing. Any Encumbrances or claims affecting, attaching to or relating to the SFC Assets in respect of the foregoing are and shall be deemed to be irrevocably expunged and discharged as against the SFC Assets, and no such Encumbrances or claims shall be pursued or enforceable as against Newco or any other Person.

21. THIS COURT ORDERS that any securities, interests, rights or claims pursuant to the Plan, including the Newco Shares, the Newco Notes and the Litigation Trust Interests, issued, assigned, transferred or conveyed pursuant to the Plan will be will be free and clear of and from any and all Charges, Claims (including, notwithstanding anything to the contrary herein, any Unaffected Claims), D&O Claims, D&O Indemnity Claims, Affected Claims, Section 5.1(2) D&O Claims, Conspiracy Claims, Continuing Other D&O Claims, Non-Released D&O Claims, Class Action Claims, Class Action Indemnity Claims, claims or rights of any kind in respect of the Notes or the Note Indentures, and any right or claim that is based in whole or in part on facts, underlying transactions, causes of action or events relating to the Restructuring Transaction, the CCAA Proceedings or any of the foregoing, and any guarantees or indemnities with respect to any of the foregoing.

 

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22. THIS COURT ORDERS that the Litigation Trust Agreement is hereby approved and deemed effective as of the Plan Implementation Date, including with respect to the transfer, assignment and delivery of the Litigation Trust Claims to the Litigation Trustee which shall, and are hereby deemed to, occur on and as of the Plan Implementation Date.

23. THIS COURT ORDERS that section 36.1 of the CCAA, sections 95 to 101 of the BIA and any other federal or provincial Law relating to preferences, fraudulent conveyances or transfers at undervalue, shall not apply to the Plan or to any payments, distributions, transfers, allocations or transactions made or completed in connection with the restructuring and recapitalization of SFC, whether before or after the Filing Date, including, without limitation, to any and all of the payments, distributions, transfers, allocations or transactions contemplated by and to be implemented pursuant to the Plan.

24. THIS COURT ORDERS that the articles of reorganization to be filed by SFC pursuant to section 191 of the CBCA, substantially in the form attached as Schedule “ C ” hereto, are hereby approved, and SFC is hereby authorized to file the articles of reorganization with the Director (as defined in the CBCA).

25. THIS COURT ORDERS that on the Equity Cancellation Date, or such other date as agreed to by the Monitor, SFC and the Initial Consenting Noteholders, all Existing Shares and other Equity Interests shall be fully, finally and irrevocably cancelled.

26. THIS COURT ORDERS AND DECLARES that the Newco Shares shall be and are hereby deemed to have been validly authorized, created, issued and outstanding as fully-paid and non-assessable shares in the capital of Newco as of the Effective Time.

27. THIS COURT ORDERS AND DECLARES that the issuance and distribution of the Newco Shares, the Newco Notes and, to the extent they may be deemed to be securities, the Litigation Trust Interests, and any other securities to be issued pursuant to the Plan shall be exempt from all prospectus and registration requirements of any applicable securities, corporate or other law, statute, order, decree, consent decree, judgment, rule, regulation, ordinance, notice, policy or other pronouncement having the effect of law applicable in the provinces and territories of Canada.

 

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28. THIS COURT ORDERS AND DECLARES that upon the Plan Implementation Date the initial Newco Share in the capital of Newco held by the Initial Newco Shareholder shall be deemed to have been redeemed and cancelled for no consideration.

29. THIS COURT ORDERS AND DECLARES that it was advised prior to the hearing in respect of the Plan Sanction Order that the Plan Sanction Order will be relied upon by SFC and Newco as an approval of the Plan for the purpose of relying on the exemption from the registration requirements of the United States Securities Act of 1933, as amended, pursuant to section 3(a)(10) thereof for the issuance of the Newco Shares, Newco Notes and, to the extent they may be deemed to be securities, the Litigation Trust Interests, and any other securities to be issued pursuant to the Plan.

STAY OF PROCEEDINGS

30. THIS COURT ORDERS that all obligations, agreements or leases to which (i) SFC remains a party on the Plan Implementation Date, or (ii) Newco becomes a party as a result of the conveyance of the SFC Assets to Newco on the Plan Implementation Date, shall be and remain in full force and effect, unamended, as at the Plan Implementation Date and no party to any such obligation, agreement or lease shall on or following the Plan Implementation Date, accelerate, terminate, refuse to renew, rescind, refuse to perform or otherwise disclaim or resiliate its obligations thereunder, or enforce or exercise (or purport to enforce or exercise) any right or remedy under or in respect of any such obligation, agreement or lease, (including any right of set-off, dilution or other remedy), or make any demand against SFC, Newco, any Subsidiary or any other Person under or in respect of any such agreement with Newco or any Subsidiary, by reason:

 

  (a) of any event which occurred prior to, and not continuing after, the Plan Implementation Date, or which is or continues to be suspended or waived under the Plan, which would have entitled any other party thereto to enforce those rights or remedies;

 

  (b) that SFC sought or obtained relief under the CCAA or by reason of any steps or actions taken as part of the CCAA Proceeding or this Plan Sanction Order or prior orders of this Court;

 

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  (c) of any default or event of default arising as a result of the financial condition or insolvency of SFC;

 

  (d) of the completion of any of the steps, actions or transactions contemplated under the Plan, including, without limitation, the transfer, conveyance and assignment of the SFC Assets to Newco; or

 

  (e) of any steps, compromises, releases, discharges, cancellations, transactions, arrangements or reorganizations effected pursuant to the Plan.

31. THIS COURT ORDERS that from and after the Plan Implementation Date, any and all Persons shall be and are hereby stayed from commencing, taking, applying for or issuing or continuing any and all steps or proceedings, including without limitation, administrative hearings and orders, declarations or assessments, commenced, taken or proceeded with or that may be commenced, taken or proceed with to advance any Released Claims.

RELEASES

32. THIS COURT ORDERS that, subject to section 7.2 of the Plan, all of the following shall be fully, finally, irrevocably and forever compromised, released, discharged, cancelled and barred on the Plan Implementation Date at the time or times and in the manner set forth in section 6.4 of the Plan:

 

  (a) all Affected Claims, including, without limitation, all Affected Creditor Claims, Equity Claims, D&O Claims (other than Section 5.1(2) D&O Claims, Conspiracy Claims, Continuing Other D&O Claims and Non-Released D&O Claims), D&O Indemnity Claims (except as set forth in section 7.1(d) of the Plan) and Noteholder Class Action Claims (other than the Continuing Noteholder Class Action Claims);

 

  (b) all Claims of the Ontario Securities Commission or any other Governmental Entity that have or could give rise to a monetary liability, including, without limitation, fines, awards, penalties, costs, claims for reimbursement or other claims having a monetary value;

 

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  (c) all Class Action Claims (including, without limitation, the Noteholder Class Action Claims) against SFC, the Subsidiaries or the Named Directors or Officers of SFC or the Subsidiaries (other than Class Action Claims that are Section 5.1(2) D&O Claims, Conspiracy Claims or Non-Released D&O Claims);

 

  (d) all Class Action Indemnity Claims (including, without limitation, related D&O Indemnity Claims), other than any Class Action Indemnity Claim by the Third Party Defendants against SFC in respect of the Indemnified Noteholder Class Action Claims (including, without limitation, any D&O Indemnity Claim in that respect), which shall be limited to the Indemnified Noteholder Class Action Limit pursuant to the releases set out in section 7.1(f) of the Plan and the injunctions set out in section 7.3 of the Plan;

 

  (e) any portion or amount of or liability of the Third Party Defendants for the Indemnified Noteholder Class Action Claims (on a collective, aggregate basis in reference to all Indemnified Noteholder Class Action Claims together) that exceeds the Indemnified Noteholder Class Action Limit;

 

  (f) any portion or amount of, or liability of SFC for, any Class Action Indemnity Claims by the Third Party Defendants against SFC in respect of the Indemnified Noteholder Class Action Claims to the extent that such Class Action Indemnity Claims exceed the Indemnified Noteholder Class Action Limit;

 

  (g)

any and all demands, claims, actions, causes of action, counterclaims, suits, debts, sums of money, accounts, covenants, damages, judgments, orders, including, without limitation, for injunctive relief or specific performance and compliance orders, expenses, executions, Encumbrances and other recoveries on account of any liability, obligation, demand or cause of action of whatever nature which any Person may be entitled to assert, whether known or unknown, matured or unmatured, direct, indirect or derivative, foreseen or unforeseen, existing or hereafter arising, against Newco, the directors and officers of Newco, the Noteholders, members of the ad hoc committee of Noteholders, the Trustees, the Transfer Agent, the Monitor, FTI Consulting Canada Inc., FTI HK, counsel for the current Directors of SFC, counsel for the Monitor, counsel for the Trustees, the SFC Advisors, the Noteholder Advisors, and

 

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  each and every member (including, without limitation, members of any committee or governance council), partner or employee of any of the foregoing, for or in connection with or in any way relating to: any Claims (including, without limitation, notwithstanding anything to the contrary herein, any Unaffected Claims); Affected Claims; Section 5.1(2) D&O Claims; Conspiracy Claims; Continuing Other D&O Claims; Non-Released D&O Claims; Class Action Claims; Class Action Indemnity Claims; any right or claim in connection with or liability for the Notes or the Note Indentures; any guarantees, indemnities, claims for contribution, share pledges or Encumbrances related to the Notes or the Note Indentures; any right or claim in connection with or liability for the Existing Shares, Equity Interests or any other securities of SFC; any rights or claims of the Third Party Defendants relating to SFC or the Subsidiaries;

 

  (h)

any and all demands, claims, actions, causes of action, counterclaims, suits, debts, sums of money, accounts, covenants, damages, judgments, orders, including, without limitation, for injunctive relief or specific performance and compliance orders, expenses, executions, Encumbrances and other recoveries on account of any liability, obligation, demand or cause of action of whatever nature which any Person may be entitled to assert, whether known or unknown, matured or unmatured, direct, indirect or derivative, foreseen or unforeseen, existing or hereafter arising, against Newco, the directors and officers of Newco, the Noteholders, members of the ad hoc committee of Noteholders, the Trustees, the Transfer Agent, the Monitor, FTI Consulting Canada Inc., FTI HK, the Named Directors and Officers, counsel for the current Directors of SFC, counsel for the Monitor, counsel for the Trustees, the SFC Advisors, the Noteholder Advisors, and each and every member (including, without limitation, members of any committee or governance council), partner or employee of any of the foregoing, based in whole or in part on any act, omission, transaction, duty, responsibility, indebtedness, liability, obligation, dealing or other occurrence existing or taking place on or prior to the Plan Implementation Date (or, with respect to actions taken pursuant to the Plan after the Plan Implementation Date, the date of such actions) in any way relating to, arising out of, leading up to, for, or in connection with the CCAA Proceeding, RSA, the Restructuring Transaction, the Plan, any

 

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  proceedings commenced with respect to or in connection with the Plan, or the transactions contemplated by the RSA and the Plan, including, without limitation, the creation of Newco and the creation, issuance or distribution of the Newco Shares, the Newco Notes, the Litigation Trust or the Litigation Trust Interests, provided that nothing in this paragraph shall release or discharge any of the Persons listed in this paragraph from or in respect of any obligations any of them may have under or in respect of the RSA, the Plan or under or in respect of any of Newco, the Newco Shares, the Newco Notes, the Litigation Trust or the Litigation Trust Interests, as the case may be;

 

  (i)

any and all demands, claims, actions, causes of action, counterclaims, suits, debts, sums of money, accounts, covenants, damages, judgments, orders, including, without limitation, for injunctive relief or specific performance and compliance orders, expenses, executions, Encumbrances and other recoveries on account of any liability, obligation, demand or cause of action of whatever nature which any Person may be entitled to assert, whether known or unknown, matured or unmatured, direct, indirect or derivative, foreseen or unforeseen, existing or hereafter arising, against the Subsidiaries for or in connection with any Claim (including, without limitation, notwithstanding anything to the contrary herein, any Unaffected Claim); any Affected Claim (including, without limitation, any Affected Creditor Claim, Equity Claim, D&O Claim, D&O Indemnity Claim and Noteholder Class Action Claim); any Section 5.1(2) D&O Claim; any Conspiracy Claim; any Continuing Other D&O Claim; any Non-Released D&O Claim; any Class Action Claim; any Class Action Indemnity Claim; any right or claim in connection with or liability for the Notes or the Note Indentures; any guarantees, indemnities, share pledges or Encumbrances relating to the Notes or the Note Indentures; any right or claim in connection with or liability for the Existing Shares, Equity Interests or any other securities of SFC; any rights or claims of the Third Party Defendants relating to SFC or the Subsidiaries; any right or claim in connection with or liability for the RSA, the Plan, the CCAA Proceedings, the Restructuring Transaction, the Litigation Trust, the business and affairs of SFC and the Subsidiaries (whenever or however conducted), the administration and/or management of SFC and the Subsidiaries, or any public filings,

 

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  statements, disclosures or press releases relating to SFC; any right or claim in connection with or liability for any indemnification obligation to Directors or Officers of SFC or the Subsidiaries pertaining to SFC, the Notes, the Note Indentures, the Existing Shares, the Equity Interests, any other securities of SFC or any other right, claim or liability for or in connection with the RSA, the Plan, the CCAA Proceedings, the Restructuring Transaction, the Litigation Trust, the business and affairs of SFC (whenever or however conducted), the administration and/or management of SFC, or any public filings, statements, disclosures or press releases relating to SFC; any right or claim in connection with or liability for any guaranty, indemnity or claim for contribution in respect of any of the foregoing; and any Encumbrance in respect of the foregoing; and

 

  (j) all Subsidiary Intercompany Claims as against SFC (which are assumed by Newco pursuant to the Plan).

33. THIS COURT ORDERS that nothing in the Plan shall waive, compromise, release, discharge, cancel or bar any of the claims listed in section 7.2 of the Plan.

34. THIS COURT ORDERS that, for greater certainty, nothing in the Plan shall release any obligations of the Subsidiaries owed to (i) any employees, directors or officers of those Subsidiaries in respect of any wages or other compensation related arrangements, or (ii) to suppliers and trade creditors of the Subsidiaries in respect of goods or services supplied to the Subsidiaries.

35. THIS COURT ORDERS that any guarantees, indemnities, Encumbrances or other obligations owing by or in respect of SFC relating to the Notes or the Note Indentures shall be and are hereby deemed to be released, discharged and cancelled.

36. THIS COURT ORDERS that the Trustees are hereby authorized and directed to release, discharge and cancel any guarantees, indemnities, Encumbrances or other obligations owing by or in respect of any Subsidiary relating to the Notes or the Note Indentures.

37. THIS COURT ORDERS that any claims against the Named Directors and Officers in respect of Section 5.1(2) D&O Claims or Conspiracy Claims shall be limited to recovery from any insurance proceeds payable in respect of such Section 5.1(2) D&O Claims or Conspiracy

 

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Claims, as applicable, pursuant to the Insurance Policies, and Persons with any such Section 5.1(2) D&O Claims against Named Directors and Officers or Conspiracy Claims against Named Directors and Officers shall have no right to, and shall not, make any claim or seek any recoveries from any Person, (including SFC, any of the Subsidiaries or Newco), other than enforcing such Persons’ rights to be paid from the proceeds of an Insurance Policy by the applicable insurer(s).

38. THIS COURT ORDERS that all Persons are permanently and forever barred, estopped, stayed and enjoined, on and after the Effective Time, with respect to any and all Released Claims, from (i) commencing, conducting or continuing in any manner, directly or indirectly, any action, suits, demands or other proceedings of any nature or kind whatsoever (including, without limitation, any proceeding in a judicial, arbitral, administrative or other forum) against the Released Parties; (ii) enforcing, levying, attaching, collecting or otherwise recovering or enforcing by any manner or means, directly or indirectly, any judgment, award, decree or order against the Released Parties or their property; (iii) commencing, conducting or continuing in any manner, directly or indirectly, any action, suits or demands, including without limitation, by way of contribution or indemnity or other relief, in common law, or in equity, breach of trust or breach of fiduciary duty or under the provisions of any statute or regulation, or other proceedings of any nature or kind whatsoever (including, without limitation, any proceeding in a judicial, arbitral, administrative or other forum) against any Person who makes such a claim or might reasonably be expected to make such a claim, in any manner or forum, against one or more of the Released Parties; (iv) creating, perfecting, asserting or otherwise enforcing, directly or indirectly, any lien or encumbrance of any kind against the Released Parties or their property; or (v) taking any actions to interfere with the implementation or consummation of this Plan; provided, however, that the foregoing shall not apply to the enforcement of any obligations under the Plan.

THE MONITOR

39. THIS COURT ORDERS that the Monitor, in addition to its prescribed rights and obligations under the CCAA and the powers provided to the Monitor herein and in the Plan, shall be and is hereby authorized, directed and empowered to perform its functions and fulfill its obligations under the Plan and this Plan Sanction Order to facilitate the implementation of the Plan.

 

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40. THIS COURT ORDERS that: (i) in carrying out the terms of this Plan Sanction Order and the Plan, the Monitor shall have all the protections given to it by the CCAA, the Initial Order, the Order of this Court dated April 20, 2012 expanding the powers of the Monitor, and as an officer of the Court, including the stay of proceedings in its favour; (ii) the Monitor shall incur no liability or obligation as a result of carrying out the provisions of this Plan Sanction Order and/or the Plan, save and except for any gross negligence or wilful misconduct on its part; (iii) the Monitor shall be entitled to rely on the books and records of SFC and any information provided by SFC without independent investigation; and (iv) the Monitor shall not be liable for any claims or damages resulting from any errors or omissions in such books, records or information.

41. THIS COURT ORDERS that upon completion by the Monitor of its duties in respect of SFC pursuant to the CCAA, the Plan and the Orders, the Monitor may file with the Court a certificate stating that all of its duties in respect of SFC pursuant to the CCAA, the Plan and the Orders have been completed and thereupon, FTI Consulting Canada Inc. shall be deemed to be discharged from its duties as Monitor and released of all claims relating to its activities as Monitor.

42. THIS COURT ORDERS that in no circumstances will the Monitor have any liability for any of SFC’s tax liabilities, if any, regardless of how or when such liabilities may have arisen.

43. THIS COURT ORDERS that, subject to the due performance of its obligations as set forth in the Plan and subject to its compliance with any written directions or instructions of the Monitor and/or directions of the Court in the manner set forth in the Plan, SFC Escrow Co. shall have no liabilities whatsoever arising from the performance of its obligations under the Plan.

RESERVES AND OTHER AMOUNTS

44. THIS COURT ORDERS AND DECLARES that the amount of each of the Indemnified Noteholder Class Action Limit, the Litigation Funding Amount, the Unaffected Claims Reserve, the Administration Charge Reserve, the Directors’ Charge Reserve, the Monitor’s Post-Implementation Reserve and the Unresolved Claims Reserve, is as provided for in the Plan, the Plan Supplement or in Schedule “ D ” hereto.

 

15

45. THIS COURT ORDERS AND DECLARES that, on the Plan Implementation Date, at the time or times and in the manner set forth in section 6.4 of the Plan, each of the Charges shall be discharged, released and cancelled, and any obligations secured thereby shall be satisfied pursuant to section 4.2(b) of the Plan, and from and after the Plan Implementation Date: (i) the Administration Charge Reserve shall stand in place of the Administration Charge as security for the payment of any amounts secured by the Administration Charge; and (ii) the Directors’ Charge Reserve shall stand in place of the Directors’ Charge as security for the payment of any amounts secured by the Directors’ Charge.

46. THIS COURT ORDERS that any Unresolved Claims that exceed $1 million shall not be accepted or resolved without further Order of the Court. All parties with Unresolved Claims shall have standing in any proceeding with respect to the determination or status of any other Unresolved Claim. Counsel to the Ad Hoc Noteholders, Goodmans LLP, shall continue to have standing in any such proceeding on behalf of the Ad Hoc Noteholders, in their capacity as Affected Creditors with Proven Claims.

EFFECT, RECOGNITION AND ASSISTANCE

47. THIS COURT ORDERS that nothing in this Plan Sanction Order or as a result of the implementation of the Plan shall affect the standing any Person has at the date of this Plan Sanction Order in respect of the CCAA Proceeding or the Litigation Trust.

48. THIS COURT ORDERS that the transfer, assignment and delivery to the Litigation Trustee pursuant to the Litigation Trust of (i) rights, title and interests in and to the Litigation Trust Claims and (ii) all respective rights, title and interests in and to any lawyer-client privilege, work product privilege or other privilege or immunity attaching to any documents or communications (whether written or oral) associated with the Litigation Trust Claims, regardless of whether such documents or copies thereof have been requested by the Litigation Trustee pursuant to the Litigation Trust Agreement (collectively, the “ Privileges ”) shall not constitute a waiver of any such Privileges, and that such Privileges are expressly maintained.

49. THIS COURT ORDERS that the current directors of SFC shall be deemed to have resigned on the Plan Implementation Date. The current directors of SFC shall have no liability in such capacity for any and all demands, claims, actions, causes of action, counterclaims, suits,

 

16

debts, sums of money, accounts, covenants, damages, judgments, orders, including, without limitation, for injunctive relief or specific performance and compliance orders, expenses, executions, Encumbrances and other recoveries on account of any liability, obligation, demand or cause of action of whatever nature which any Person may be entitled to assert, whether known or unknown, matured or unmatured, direct, indirect or derivative, foreseen or unforeseen, arising on or after the Plan Implementation Date.

50. THIS COURT ORDERS that SFC and the Monitor may apply to this Court for advice and direction with respect to any matter arising from or under the Plan or this Plan Sanction Order.

51. THIS COURT ORDERS that this Plan Sanction Order shall have full force and effect in all provinces and territories of Canada and abroad as against all persons and parties against whom it may otherwise be enforced.

52. THIS COURT HEREBY REQUESTS the aid and recognition of any court or any judicial, regulatory or administrative body having jurisdiction in Canada, the United States, Barbados, the British Virgin Islands, Cayman Islands, Hong Kong, the People’s Republic of China or in any other foreign jurisdiction, to give effect to this Plan Sanction Order and to assist SFC, the Monitor and their respective agents in carrying out the terms of this Plan Sanction Order. All courts, tribunals, regulatory and administrative bodies are hereby respectfully requested to make such orders and to provide such assistance to SFC and to the Monitor, as an officer of this Court, as may be necessary or desirable to give effect to this Plan Sanction Order, to grant representative status to the Monitor in any foreign proceeding, or to assist SFC and the Monitor and their respective agents in carrying out the terms of this Plan Sanction Order.

53. THIS COURT ORDERS that each of SFC and the Monitor shall, following consultation with Goodmans LLP, be at liberty, and is hereby authorized and empowered, to make such further applications, motions or proceedings to or before such other courts and judicial, regulatory and administrative bodies, and take such steps in Canada, the United States of America, the British Virgin Islands, Cayman Islands, Hong Kong, the People’s Republic of China or in any other foreign jurisdiction, as may be necessary or advisable to give effect to this Plan Sanction Order and any other Order granted by this Court, including for recognition of this

 

17

Plan Sanction Order and for assistance in carrying out its terms.

54. THIS COURT ORDERS that this Plan Sanction Order shall be posted on the Monitor’s Website at http://cfcanada.fticonsulting.com/sfc and only be required to be served upon the parties on the Service List and those parties who appeared at the hearing of the motion for this Plan Sanction Order.

 

       

 

18

Schedule “A”

 

19

Schedule “B”

 

20

Schedule “C”

 

21

Schedule “D”

 

22

IN THE MATTER OF THE COMPANIES CREDITORS’ ARRANGEMENT ACT , R.S.C. 1985, c. C-36, AS AMENDED AND IN THE MATTER OF A PLAN OR COMPROMISE OR ARRANGEMENT OF SINO-FOREST CORPORATION

 

 

 

Court File No. CV-12-9667-00CL

 

 

ONTARIO

SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)

 

Proceedings commenced in Toronto

 

 

 

PLAN SANCTION ORDER

 

 

 

BENNETT JONES LLP

One First Canadian Place

Suite 3400, P.O. Box 130

Toronto, Ontario

M5X 1A4

 

Rob Staley (LSUC #27115J)

Kevin Zych (LSUC #33129T)

Derek Bell (LSUC #43420J)

Jonathan Bell (LSUC #55457P)

Tel: 416-863-1200

Fax: 416-863-1716

 

Lawyers for Sino-Forest Corporation

EXHIBIT T3F

CROSS-REFERENCE TABLE

 

Trust Indenture Act Section

   Indenture Section

310(a)(1)

   7.11

      (a)(2)

   7.11

      (a)(3)

   N.A.

      (a)(4)

   N.A.

      (b)

   7.11

      (b)(1)

   7.11

      (b)(9)

   N.A.

      (c)

   N.A.

311(a)

   7.12

      (b)

   7.12

      (c)

   N.A.

312(a)

   N.A

      (b)

   12.02

      (c)

   12.02

313(a)

   7.06

      (b)(1)

   7.06

      (b)(2)

   7.06

      (c)

   7.06

      (d)

   7.06

314(a)

   4.19

      (b)

   10.03.

      (c)(1)

   12.05

      (c)(2)

   12.05

      (c)(3)

   N.A.

      (d)

   N.A.

      (e)

   12.06

      (f)

   N.A.

315(a)

   7.01; 7.02

      (b)

   7.05

      (c)

   7.01

      (d)

   7.01; 7.02

      (e)

   6.12

316(a) (last sentence)

   N.A.

      (a)(1)(A)

   6.05

      (a)(1)(B)

   6.04

      (a)(2)

   N.A.

      (b)

   6.07

      (c)

   N.A.

317(a)(1)

   6.08

      (a)(2)

   6.09

      (b)

   4.01

318(a)

   1.02

Exhibit 25.1

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM T-1

 

 

STATEMENT OF ELIGIBILITY

UNDER THE TRUST INDENTURE ACT OF 1939

OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

 

¨ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)

 

 

COMPUTERSHARE TRUST COMPANY, NATIONAL ASSOCIATION

(Exact name of trustee as specified in its charter)

 

 

 

National Banking Association   04-3401714

(Jurisdiction of incorporation or

organization if not a U.S. national bank)

 

(I.R.S. Employer

Identification Number)

 

250 Royall Street, Canton, MA   02021
(Address of principal executive offices)   (Zip Code)

John Wahl, Trust Officer

350 Indiana St., Suite 750,

Golden, Colorado 80401

(303) 262-0707

(Name, address and telephone number of agent for services)

 

 

EMERALD PLANTATION HOLDINGS LIMITED

(Exact name of obligor as specified in its charter)

 

 

 

Cayman Islands   Not applicable

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

Cricket Square, Hutchins Drive, P.O. Box 2681

Grand Cayman KY1-1111

Cayman Islands

 
(Address of principal executive offices)   (Zip Code)

 

 

Guaranteed Senior Notes

(Title of the indenture securities)

 

 

 

Item 1. General Information. Furnish the following information as to the trustee:

 

  (a) Name and address of each examining or supervising authority to which it is subject.

Comptroller of the Currency

340 Madison Avenue, 4 th Floor

New York, NY 10017-2613

 

  (b) Whether it is authorized to exercise corporate trust powers.

The trustee is authorized to exercise corporate trust powers.

 

Item 2. Affiliations with the obligor. If the obligor is an affiliate of the trustee, describe such affiliation.

None.

 

Item 16. List of exhibits. List below all exhibits filed as a part of this statement of eligibility.

1. A copy of the articles of association of the trustee. (See Exhibit 1 to Form T-1 filed with Registration Statement No. 333-179383)

2. A copy of the certificate of authority of the trustee to commence business. (See Exhibit 2 to Form T-1 filed with Registration Statement No. 333-179383)

3. See exhibits 1 and 2.

4. A copy of the existing bylaws of the trustee, as now in effect. (See Exhibit 4 to Form T-1 filed with Registration Statement No. 333-179383)

6. The consents of United States institutional trustees required by Section 321(b) of the Act. (See Exhibit 6 to Form T-1 filed with Registration Statement No. 333-179383)

7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority.

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939 the trustee, Computershare Trust Company, National Association, a national banking association, organized and existing under the laws of the United States, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Golden, and State of Colorado, on the 9th day of January, 2013.

Computershare Trust Company, National Association

 

By:  

/s/ John Wahl

  John Wahl
  Trust Officer

EXHIBIT 7

Consolidated Report of Condition of

COMPUTERSHARE TRUST COMPANY, NATIONAL ASSOCIATION

250 Royall Street, Canton, MA 02021

at the close of business September 30, 2012.

 

     Dollar Amounts In Thousands  

ASSETS

  

Cash and balances due from depository institutions:

  

Noninterest-bearing balances and currency and coin

     -0-   

Interest-bearing balances

     -0-   

Securities:

  

Held-to-maturity securities

     -0-   

Available-for-sale securities

     14,305   

Federal funds sold and securities purchased under agreements to resell:

  

Federal funds sold in domestic offices

     -0-   

Securities purchased under agreements to resell

     -0-   

Loans and lease financing receivables:

  

Loans and leases held for sale

     -0-   

Loans and leases, net of unearned income

     -0-   

LESS: Allowance for loan and lease losses

     -0-   

Loans and leases, net of unearned income and allowance

     -0-   

Trading assets

     -0-   

Premises and fixed assets (including capitalized leases)

     -0-   

Other real estate owned

     -0-   

Investments in unconsolidated subsidiaries and associated companies

     -0-   

Direct and indirect investments in real estate ventures

     -0-   

Intangible assets:

  

Goodwill

     7,756   

Other intangible assets

     -0-   

Other assets

     625   
  

 

 

 

Total assets

     22,686   
  

 

 

 

LIABILITIES

  

Deposits:

  

In domestic offices

     -0-   

Noninterest-bearing

     -0-   

Interest-bearing

     -0-   

Federal funds purchased and securities sold under agreements to repurchase:

  

Federal funds purchased in domestic offices

     -0-   

Securities sold under agreements to repurchase

     -0-   

Trading liabilities

     -0-   

Other borrowed money: (includes mortgage indebtedness and obligations under capitalized leases)

     -0-   

Not applicable

  

Not applicable

  

Subordinated notes and debentures

     -0-   

Other liabilities

     1,424   
  

 

 

 

Total liabilities

     1,424   
  

 

 

 

EQUITY CAPITAL

  

Perpetual preferred stock and related surplus

     0   

Common stock

     500   

Surplus (exclude all surplus related to preferred stock)

     17,011   

Retained earnings

     3,751   

Accumulated other comprehensive income

     -0-   

Other equity capital components

     -0-   

Total bank equity capital

     21,262   

Noncontrolling (minority) interests in consolidated subsidiaries

     -0-   

Total equity capital

     21,262   
  

 

 

 

Total liabilities and equity capital

     22,686   
  

 

 

 

I, Robert G. Marshall, Assistant Controller of the above named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief.

 

/s/ Robert G. Marshall

Robert G. Marshall
Assistant Controller