8-10-15 - bankruptcy - fukuda - vol. i · tsg reporting - worldwide - 877-702-9580 page 27 1 k....

TSG Reporting - Worldwide - 877-702-9580

7

1 K. Fukuda

2 the next half hour, but --

3 THE WITNESS: Yes. Then we would

4 like to have a break.

5 MR. KRAFT: All right. We are off

6 the record.

7 MR. SMITH: Mr. Fukuda, could I

8 remind you that you are still under oath?

9 Please do not discuss your evidence with

10 anyone during the break.

11 THE WITNESS: Understood.

12 MR. KRAFT: Thank you. We will

13 resume in five minutes.

14 (Recess taken.)

15 MR. KRAFT: Are we ready to resume?

16 THE WITNESS: Fine.

17 MR. SMITH: So, while we were off

18 the record, I reviewed Exhibit N to

19 Mr. Fukuda's affidavit and I can confirm

20 that I did not see any other address for

21 CFI, other than the Davenport, Toronto

22 address.

23 MR. KRAFT: Thank you, Mr. Smith.

24 BY MR. KRAFT:

25 Q At paragraph 42 of your affidavit,

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1 K. Fukuda

2 you state no proposal has been made by CFI to

3 its creditors. Have there been any

4 discussions about the form of a proposal?

5 MR. SMITH: Sorry. Of the form of

6 the proposal?

7 Mr. Kraft? Could you clarify what

8 you mean by "the form of the proposal"?

9 MR. KRAFT: About the outlines of a

10 proposal.

11 MR. SMITH: Mr. Fukuda, do you

12 understand the question?

13 THE INTERPRETER: Excuse me. Could

14 you repeat the statement once again?

15 BY MR. KRAFT:

16 Q Have there been any discussions

17 about the outlines of a proposal?

18 A Our recognition is that we have

19 never received any kind of precise proposal.

20 Q Sorry. Can you repeat that please?

21 You have not received a precise

22 proposal, is that what you just said?

23 A Yes, precise proposal.

24 Q Thank you.

25 THE INTERPRETER: Excuse me. Your

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1 K. Fukuda

2 interpreter would like to correct her

3 expression. Concrete proposal or maybe

4 material proposal.

5 MR. KRAFT: Okay. Thank you.

6 Q In paragraph 45 of your affidavit

7 you state "there is no prospect that CFI can

8 make a viable proposal or that it can make a

9 proposal acceptable to its creditors."

10 Are those your own words?

11 A The words or sentences written here

12 may not be something that I have produced;

13 however, it represents my thought.

14 Q And you state in paragraph 47, "NSU

15 will not support any proposal made by CFI to

16 its creditors," and "the continuation of the

17 proposal proceedings will only delay the

18 inevitable bankruptcy of CFI and degrade

19 CFI's assets through the expenditure of

20 professional fees."

21 That is also your words?

22 A Similar to what I have just

23 answered for the previous paragraph, this is

24 not something that I have directly produced;

25 however, it is the same result or same -- the

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1 K. Fukuda

2 same result or judgment that I have made by

3 referring to the various materials.

4 Q Earlier we had a discussion around

5 your role, and that you were involved in

6 negotiating various agreements, and as I

7 understood your evidence earlier, depending

8 on the level of -- I assume it's the

9 financial amount involved, you would either

10 be the decision maker, or others in your

11 organization would make a decision, but you

12 would be involved; is that correct?

13 A Well, depending on the amount of

14 the case or depending on the substance of the

15 case, I may be the final decision maker; or

16 sometimes, depending on the level, I may have

17 to consult with my supervisors or those above

18 me and get those approval.

19 Q Is this a particular file where you

20 are the decision maker or you have to consult

21 others?

22 A I am uncertain of the final

23 consequence regarding this particular file;

24 however, in any case, the final decision is

25 not delegated to me, personally.

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1 K. Fukuda

2 Q Thank you.

3 In paragraph, going back to

4 paragraph 47, you use the phrase "degrade

5 CFI's assets."

6 Do you see those words?

7 A Yes, I have seen that.

8 Q To your knowledge, what are the

9 assets of CFI?

10 A I judged, based on the cash flow

11 submitted from CFI regarding Cogent.

12 Q Sorry. You just referenced the

13 cash flow. My question is: What are the

14 assets, to your knowledge?

15 A As far as I know, or as far as my

16 knowledge, there is no asset that CFI may be

17 possessing, at least that is my

18 understanding.

19 Q Are you aware of the concept of net

20 operating losses?

21 A Yes.

22 Q Are you aware what would happen to

23 those if Cogent went bankrupt?

24 A What do you mean by "those"?

25 Q Are you aware of what the impact of

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1 K. Fukuda

2 a bankruptcy of Cogent Fibre Inc. would be on

3 the availability of net operating losses?

4 MR. SMITH: Mr. Kraft, can you tell

5 me why that is relevant to the matter

6 that we are undertaking today, which is

7 the cross-examination of Mr. Fukuda on

8 his affidavit?

9 MR. KRAFT: Because net operating

10 losses are an asset and he has testified

11 to the assets.

12 MR. SMITH: Well, no. He has

13 testified that, in paragraph 47, that the

14 continuation of a proposal proceeding

15 would degrade CFI's assets.

16 MR. KRAFT: And I am asking him a

17 question whether or not he is aware of an

18 asset that would be lost in a bankruptcy.

19 MR. SMITH: I think that is a legal

20 argument. I don't think that is a

21 factual question.

22 MR. KRAFT: The question was is he

23 aware of it, not --

24 MR. SMITH: Whether he is aware or

25 not of the impact of a bankruptcy in

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1 K. Fukuda

2 Canada on a particular asset, I can't see

3 that as helpful at all to the court.

4 MR. KRAFT: Are you having him

5 refuse to answer that question?

6 MR. SMITH: I think you can make

7 whatever argument that you want in the

8 alternative, but I think that is a legal

9 question that you are asking him and it

10 is beyond the knowledge of the witness.

11 I'm refusing to have him answer.

12 BY MR. KRAFT:

13 Q Mr. Fukuda, in paragraph 48 you

14 state that continuation of proposal

15 proceedings can only work to the detriment of

16 creditors and, in particular, to NSU. If

17 there are assets that are not available

18 because of a bankruptcy, would that still be

19 a correct statement?

20 MR. SMITH: I'm going to object to

21 that question as well, because it calls

22 for speculation on the part of the

23 witness. You can make that argument, but

24 I'm not going to allow the witness to

25 speculate.

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1 K. Fukuda

2 MR. KRAFT: Has the witness not

3 speculated in paragraph 48?

4 MR. SMITH: No. The statement is

5 his belief.

6 (Reporter clarification.)

7 MR. MIYAZAKI: I think the

8 interpreter is confused as to what the

9 question is and what Mr. Fukuda should

10 answer to.

11 MR. KRAFT: It's been -- your

12 counsel has refused the question. If you

13 wish to repeat it, I'm not sure it needs

14 to be repeated in Japanese.

15 Mr. Smith, do you want it repeated

16 even though it's refused?

17 MR. SMITH: No. I'm instructing

18 the witness not to answer the question.

19 BY MR. KRAFT:

20 Q Mr. Fukuda, we went back earlier

21 and you said you do negotiate agreements, you

22 are involved in negotiations as a matter of

23 your job; that is correct?

24 A When you refer to "agreement," or

25 when you say "agreement," are you referring

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1 K. Fukuda

2 to general business practice?

3 Q Yes.

4 A Then that would be correct.

5 Q And if there was -- if you were

6 convinced that Cogent made you a proposal

7 that was better than you would receive in a

8 bankruptcy, would you consider that?

9 A At this point in time, where I have

10 not seen any concrete proposal from the

11 party, it is unable for me to answer either

12 yes or no.

13 Q The question was: If you were

14 offered something that was -- if NSU, pardon

15 me, was offered in a proposal, a formal

16 proposal, a result that was better than you

17 would receive in a bankruptcy, is that

18 something you would consider?

19 A We cannot assume a condition where

20 the company is bankrupt; therefore, I am

21 unable to answer either yes or no.

22 Q So, you are not answering -- just

23 to be clear, you are neither saying no nor

24 yes at this point?

25 A No. I am only saying that I cannot

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1 K. Fukuda

2 respond or answer to the question that was

3 asked to me; however, I would also like to

4 say basically, at this point in time,

5 whatever the proposal may be, it is

6 unacceptable for us.

7 Q So, you are saying -- I'm not sure

8 I understand that response.

9 A Am I being asked to respond to your

10 question once again?

11 Q No, no. I will ask a different

12 question.

13 Would you agree that if the

14 creditors of Cogent Fibre could be given more

15 in a proposal than they would get in a

16 bankruptcy, that would be a better result for

17 all creditors, yes or no?

18 MR. SMITH: I'm going to let the

19 translator translate the question, but

20 I'm going to object to it. Again, it is

21 speculative.

22 (Question translated.)

23 MR. SMITH: I'm instructing the

24 witness not to answer that question.

25 THE WITNESS: Understood.

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1 K. Fukuda

2 MR. KRAFT: I note the time is, I

3 believe, 9 o'clock in Tokyo, 8 a.m. here.

4 Should we stop for -- I was just going to

5 say we should stop for two minutes and

6 then we can resume, if that's okay.

7 MR. MIYAZAKI: Madam interpreter,

8 is two minutes enough for you?

9 MR. KRAFT: I'm sorry. Five

10 minutes for the interpreter.

11 THE INTERPRETER: Thank you.

12 MR. KRAFT: We will resume in five

13 minutes.

14 (Recess taken.)

15 MR. KRAFT: Are we ready to resume?

16 Okay. Back on the record. Just a few

17 last questions.

18 Q You mentioned earlier in your

19 evidence that you are not likely the final

20 decision maker on this particular matter; is

21 that correct?

22 A From the perspective of the amount

23 involved, I believe that would be the case

24 here.

25 Q Who would be the decision maker?

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1 K. Fukuda

2 A Probably I will be reporting to the

3 president.

4 Q And that is probably where the

5 decision would be made?

6 A That will be the case.

7 MR. KRAFT: All right. Thank you.

8 Those are my questions.

9 MR. SMITH: Thank you. I have no

10 questions in re-examination.

11 (Continued on next page

12 with witness jurat.)

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6 2. To conform to the facts.

7 3. To correct transcription errors.

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2 STATE OF NEW YORK ) Pg. of Pgs.

3 COUNTY OF NEW YORK )

4 I wish to make the following changes

5 for the following reasons:

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7 ____ ____ CHANGE:___________________________

8 REASON:___________________________

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2 C E R T I F I C A T E

3 STATE OF NEW YORK )

4 : SS.

5 COUNTY OF NEW YORK )

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7

8 I, BONNIE PRUSZYNSKI, a Notary

9 Public with and for the State of New York,

10 do hereby certify:

11 That KAZUSHI FUKUDA, the witness

12 whose deposition is hereinbefore set forth,

13 was duly sworn as reflected and that such

14 deposition is a true record of the testimony given

15 by the witness.

16 I further certify that I am not related

17 to any of the parties to this action by

18 blood or marriage, and that I am in no way

19 interested in the outcome of this matter.

20 IN WITNESS WHEREOF, I have hereunto

21 set my hand this 11th of August, 2015.

22

23 ________________________

24 Bonnie Pruszynski

25

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5 Examination by Mr. Kraft 6

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Court of Appeal File No.: C60871 Court File No.: 31-2016058

COURT OF APPEAL FOR ONTARIO

IN THE MATTER OF THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3, AS AMENDED

AND IN THE MATTER OF THE PROPOSAL OF COGENT FIBRE INC.

AFFIDAVIT OF ARTHUR BIRNBAUM (sworn August 23, 2015)

I, Arthur Birnbaum, of the City of Toronto, in the Province of Ontario, MAKE OATH AND SAY:

1. I am a sole practitioner and corporate counsel to Cogent Fibre Inc. ("CFI") and as such I

have personal knowledge of the matters to which I hereinafter dispose. Where I do not possess

such personal knowledge, I have stated the source of my information and, in all such cases, I

verily believe such information to be true.

2. This affidavit is sworn in support of CFI's cross-motion for an order permitting the

introduction of fresh evidence and in response to the motion brought by NS United Kaiun Kaisha

Ltd. ("NSU"), both returnable August 28, 2015, and for no other or improper purpose.

Background

3. On January 23, 2015, a maritime arbitration panel issued a decision in favour of NSU and

awarded damages against CFI in the amount of US$11,606,421 (the "Arbitration Award").

4. In March 2015, NSU commenced a proceeding for confirmation and enforcement of the

Arbitration Award by filing a petition in the United States District Court for the Southern District

of New York (the "District Court"). By order dated July 14, 2015 (the "Confirmation Order"),

the District Court confirmed the Arbitration Award.

Court of Appeal File No.: C60871 Court File No.: 31-2016058

COURT OF APPEAL FOR ONTARIO



AFFIDAVIT OF ARTHUR BIRNBAUM (sworn August 23, 2015)

I, Arthur Birnbaum, of the City of Toronto, in the Province of Ontario, MAKE OATH AND SAY:

1. I am a sole practitioner and corporate counsel to Cogent Fibre Inc. ("CFI") and as such I

have personal knowledge of the matters to which I hereinafter dispose. Where I do not possess

such personal knowledge, I have stated the source of my information and, in all such cases, I

verily believe such information to be true.

2. This affidavit is sworn in support of CFI's cross-motion for an order permitting the

introduction of fresh evidence and in response to the motion brought by NS United Kaiun Kaisha

Ltd. ("NSU"), both returnable August 28, 2015, and for no other or improper purpose.

Background

3. On January 23, 2015, a maritime arbitration panel issued a decision in favour of NSU and

awarded damages against CFI in the amount of US$11,606,421 (the "Arbitration Award").

4. In March 2015, NSU commenced a proceeding for confirmation and enforcement of the

Arbitration Award by filing a petition in the United States District Court for the Southern District

of New York (the "District Court"). By order dated July 14, 2015 (the "Confirmation Order"),

the District Court confirmed the Arbitration Award.

208

-2-

5. On July 15, 2015, CFI filed a Notice of Intention to Make a Proposal (the "NOI") under

the Bankruptcy and Insolvency Act (Canada) (the "BIA").

6. On August 4, 2015, NSU served a motion in the Ontario Superior Court of Justice

pursuant to s. 50.4(11) of the BIA to terminate the time available to CFI to file a proposal. On

August 6, 2015, CFI served a motion pursuant to s. 50.4(9) of the BIA to extend the 30 day time

period within which to file such a proposal. Both motions were returnable August 12, 2015.

7. Subsequent to the filing of the NOI, and prior to the hearing of the two motions, NSU and

CFI engaged in without prejudice settlement discussions. In light of the status of these

discussions leading up to the return date of the motions, it was my expectation that NSU and CFI

would make arrangements to meet in person to negotiate the terms of a proposal.

8. NSU, through its counsel, set certain preconditions for an in-person meeting with the

principals of CFI, which CFI agreed to in good faith.

9. I fully expected, as a result of CFI's positive response to NSU's demands, that NSU

would not proceed with its motion and the proposal proceedings would continue to allow time

for the principals of CFI and NSU to have an in-person meeting. If NSU was not prepared to

meet with CFI, I anticipated that NSU would advise CFI of same on or before August 11, 2015.

10. In reliance on the representations of NSU, made through its counsel, CFI expected in

good faith and that a meeting with NSU would be held. As a result of this expectation, CFI did

not instruct its counsel to file a proposal in advance of the August 12, 2015 court hearing.

11. I was surprised to learn, only minutes before the commencement of the August 12, 2015

court hearing, that NSU was not prepared to meet in person.

12. Had NSU or its counsel advised CFI before August 12, 2015 that NSU was not agreeable

to an in-person meeting, CFI would have instructed its counsel to file the proposal before the

return date of the motions.

13. In light of NSU's last minute notice of its intention not to meet in person, the two

motions before the Ontario Superior Court of Justice proceeded.

-2-

5. On July 15, 2015, CFI filed a Notice of Intention to Make a Proposal (the "NOI") under

the Bankruptcy and Insolvency Act (Canada) (the "BIA").

6. On August 4, 2015, NSU served a motion in the Ontario Superior Court of Justice

pursuant to s. 50.4(11) of the BIA to terminate the time available to CFI to file a proposal. On

August 6, 2015, CFI served a motion pursuant to s. 50.4(9) of the BIA to extend the 30 day time

period within which to file such a proposal. Both motions were returnable August 12, 2015.

7. Subsequent to the filing of the NOI, and prior to the hearing of the two motions, NSU and

CFI engaged in without prejudice settlement discussions. In light of the status of these

discussions leading up to the return date of the motions, it was my expectation that NSU and CFI

would make arrangements to meet in person to negotiate the terms of a proposal.

8. NSU, through its counsel, set certain preconditions for an in-person meeting with the

principals of CFI, which CFI agreed to in good faith.

9. I fully expected, as a result of CFI's positive response to NSU's demands, that NSU

would not proceed with its motion and the proposal proceedings would continue to allow time

for the principals of CFI and NSU to have an in-person meeting. If NSU was not prepared to

meet with CFI, I anticipated that NSU would advise CFI of same on or before August 11, 2015.

10. In reliance on the representations of NSU, made through its counsel, CFI expected in

good faith and that a meeting with NSU would be held. As a result of this expectation, CFI did

not instruct its counsel to file a proposal in advance of the August 12, 2015 court hearing.

11. I was surprised to learn, only minutes before the commencement of the August 12, 2015

court hearing, that NSU was not prepared to meet in person.

12. Had NSU or its counsel advised CFI before August 12, 2015 that NSU was not agreeable

to an in-person meeting, CFI would have instructed its counsel to file the proposal before the

return date of the motions.

13. In light of NSU's last minute notice of its intention not to meet in person, the two

motions before the Ontario Superior Court of Justice proceeded.

209

-3-

14. Pursuant to the Order of the Honourable Justice Penny, dated August 12, 2015 (the

"Order"), CFI's motion to extend was denied and NSU's motion to terminate was granted. A

copy of the Order is attached hereto as Exhibit "A".

15. On August 12, 2015, CFI served a Notice of Appeal in respect of the Order on all parties.

16. On August 17, 2015, Justice Penny released his written Reasons for granting the Order. A

copy of Justice Penny's Reasons are attached hereto as Exhibit "B".

17. On August 21, 2015, CFI served an Amended Notice of Appeal.

Fresh Evidence

(A) U.S. Notice of Appeal

18. On August 13, 2015, subsequent to the granting of the Order, CFI filed a Notice of

Appeal (the "U.S. Notice of Appeal") in respect of the Confirmation Order. A copy of the U.S.

Notice of Appeal is attached hereto as Exhibit "C".

19. The U.S. Notice of Appeal was filed in good faith, and concerns the quantum of damages

and legal fees awarded in favour of NSU. The arbitration panel consisted of three arbitrators,

who split two (2) to one (1) on the underlying legal issues applied to determine the amount of

damages and legal fees. If the appeal is successful on these issues, it is my understanding, based

on discussions with Tony Mavronicolas, U.S. counsel to CFI in respect of the U.S. appeal, that

NSU would be awarded nothing for legal fees and less than approximately $500,000 in damages.

20. It is also my understanding, based on discussions with Ken Pearl of The Fuller Landau

Group Inc., that a consequence of the filing of the U.S. Notice of Appeal is that NSU's claim

against CFI (as represented by the Arbitration Award), or a significant portion thereof, is

contingent.

21. Indeed, if CFI's appeal of the Confirmation Order is successful, the amount of NSU's

claim will be substantially reduced and may result in NSU not having a determining vote in

respect of the Amended Proposal (as defined below).

-3-

14. Pursuant to the Order of the Honourable Justice Penny, dated August 12, 2015 (the

"Order"), CFI's motion to extend was denied and NSU's motion to terminate was granted. A

copy of the Order is attached hereto as Exhibit "A".

15. On August 12, 2015, CFI served a Notice of Appeal in respect of the Order on all parties.

16. On August 17, 2015, Justice Penny released his written Reasons for granting the Order. A

copy of Justice Penny's Reasons are attached hereto as Exhibit "B".

17. On August 21, 2015, CFI served an Amended Notice of Appeal.

Fresh Evidence

(A) U.S. Notice of Appeal

18. On August 13, 2015, subsequent to the granting of the Order, CFI filed a Notice of

Appeal (the "U.S. Notice of Appeal") in respect of the Confirmation Order. A copy of the U.S.

Notice of Appeal is attached hereto as Exhibit "C".

19. The U.S. Notice of Appeal was filed in good faith, and concerns the quantum of damages

and legal fees awarded in favour of NSU. The arbitration panel consisted of three arbitrators,

who split two (2) to one (1) on the underlying legal issues applied to determine the amount of

damages and legal fees. If the appeal is successful on these issues, it is my understanding, based

on discussions with Tony Mavronicolas, U.S. counsel to CFI in respect of the U.S. appeal, that

NSU would be awarded nothing for legal fees and less than approximately $500,000 in damages.

20. It is also my understanding, based on discussions with Ken Pearl of The Fuller Landau

Group Inc., that a consequence of the filing of the U.S. Notice of Appeal is that NSU's claim

against CFI (as represented by the Arbitration Award), or a significant portion thereof, is

contingent.

21. Indeed, if CFI's appeal of the Confirmation Order is successful, the amount of NSU's

claim will be substantially reduced and may result in NSU not having a determining vote in

respect of the Amended Proposal (as defined below).

210

RTHUR BIRNBAUM

- 4 -

(B) Proposal

22. On August 13, 2015, subsequent to the Order and the filing of the Notice of Appeal with

this Honourable Court, CFI filed a proposal to its creditors (the "Proposal").

23. The Proposal was subsequently amended and, on August 17, 2015, CFI filed an amended

proposal to its creditors dated August 17, 2015 (the "Amended Proposal"). A copy of the

Amended Proposal is attached hereto as Exhibit "D".

24. A meeting of creditors to consider and vote on the Amended Proposal has already been

scheduled for September 2, 2015.

25. On August 21, 2015, The Fuller Landau Group Inc., in its capacity as the Proposal

Trustee, sent its Report on the Amended Proposal (the "Report") to all creditors. The Report

states that, based on all of the information that has come to the Proposal Trustee's attention to

date, the Proposal Trustee recommends the acceptance of the Amended Proposal as it provides

for an overall greater recovery for CFI's unsecured creditors than would otherwise be achieved

in a bankruptcy. A copy of the Report is attached hereto as Exhibit "E".

26. I make this affidavit in support of CFI's cross-motion returnable August 28, 2015 and in

response to NSU's motion returnable August 28, 2015, and for no other or improper purpose.

SWORN be ore me at the City of Toronto, in the Pro e of Ontario, this 23rd day of August

A Co oner for taking affidavits, etc. Vay.

RTHUR BIRNBAUM

- 4 -

(B) Proposal

22. On August 13, 2015, subsequent to the Order and the filing of the Notice of Appeal with

this Honourable Court, CFI filed a proposal to its creditors (the "Proposal").

23. The Proposal was subsequently amended and, on August 17, 2015, CFI filed an amended

proposal to its creditors dated August 17, 2015 (the "Amended Proposal"). A copy of the

Amended Proposal is attached hereto as Exhibit "D".

24. A meeting of creditors to consider and vote on the Amended Proposal has already been

scheduled for September 2, 2015.

25. On August 21, 2015, The Fuller Landau Group Inc., in its capacity as the Proposal

Trustee, sent its Report on the Amended Proposal (the "Report") to all creditors. The Report

states that, based on all of the information that has come to the Proposal Trustee's attention to

date, the Proposal Trustee recommends the acceptance of the Amended Proposal as it provides

for an overall greater recovery for CFI's unsecured creditors than would otherwise be achieved

in a bankruptcy. A copy of the Report is attached hereto as Exhibit "E".

26. I make this affidavit in support of CFI's cross-motion returnable August 28, 2015 and in

response to NSU's motion returnable August 28, 2015, and for no other or improper purpose.

SWORN be ore me at the City of Toronto, in the Pro e of Ontario, this 23rd day of August

A Co oner for taking affidavits, etc. Vay.

211

Exhibit "A" to the Affidavit of Arthur Birnbaum, sworn before me this 23rd day of August, 2015.

A Commissi for taking affidavits, etc.

Exhibit "A" to the Affidavit of Arthur Birnbaum, sworn before me this 23rd day of August, 2015.

A Commissi for taking affidavits, etc.

212

Court File No. 31-2016058 Estate No.: 31-2016058

ONTARIO SUPERIOR COURT OF JUSTICE

(IN BANKRUPTCY AND INSOLVENCY) [COMMERCIAL LIST]

THE HONOURABLE

WEDNESDAY, THE 12th DAY

MR JUSTICE PENNY

OF AUGUST, 2015



ORDER

1.?-1€1.94. THIS MOTION made by NS United Kaiun Kaisha, Ltd. ("NSU"), a creditor, for an

Order pursuant to section 50.4(11) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as

amended (the "BIA") terminating the thirty day period for Cogent Fibre Inc. ("CFI") to file a

proposal and the motion by CFI for an Order pursuant to section 50.4(9) of the BIA to extend the

time to file a proposal (the "Motions") were heard this day at 330 University Ave, Toronto,

Ontario.

UPON READING the Notices of Motion, the Affidavit of Kazushi Fukuda sworn

August 6, 2015, the Affidavit of Robert Mantrop sworn August 6, 2015, the First Report of The

Fuller Landau Group Inc. (the "Proposal Trustee") dated August 10, 2015 and the

Supplemental Report to the First Report of the Proposal Trustee dated August 11, 2015 and upon

hearing submissions of counsel for NSU, counsel for CFI and counsel for the Proposal Trustee,

and on reading the Affidavits of Service of Brittney Pereira sworn August 6, 2015 and Joanna

Lewandowska sworn August 6, 2015,

Court File No. 31-2016058 Estate No.: 31-2016058


(IN BANKRUPTCY AND INSOLVENCY) [COMMERCIAL LIST]

THE HONOURABLE

WEDNESDAY, THE 12th DAY

MR JUSTICE PENNY

OF AUGUST, 2015



ORDER

1.?-1€1.94. THIS MOTION made by NS United Kaiun Kaisha, Ltd. ("NSU"), a creditor, for an

Order pursuant to section 50.4(11) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as

amended (the "BIA") terminating the thirty day period for Cogent Fibre Inc. ("CFI") to file a

proposal and the motion by CFI for an Order pursuant to section 50.4(9) of the BIA to extend the

time to file a proposal (the "Motions") were heard this day at 330 University Ave, Toronto,

Ontario.

UPON READING the Notices of Motion, the Affidavit of Kazushi Fukuda sworn

August 6, 2015, the Affidavit of Robert Mantrop sworn August 6, 2015, the First Report of The

Fuller Landau Group Inc. (the "Proposal Trustee") dated August 10, 2015 and the

Supplemental Report to the First Report of the Proposal Trustee dated August 11, 2015 and upon

hearing submissions of counsel for NSU, counsel for CFI and counsel for the Proposal Trustee,

and on reading the Affidavits of Service of Brittney Pereira sworn August 6, 2015 and Joanna

Lewandowska sworn August 6, 2015,

213

2

1. THIS COURT ORDERS that the time for service of the Notices of Motion and the

Motion Records herein is hereby abridged so that these Motions are properly returnable today

and any requirement for further service of the Notices of Motion and the Motion Records is

hereby dispensed with.

2. THIS COURT ORDERS AND DECLARES that CFI's motion for an extension of time

to file a proposal pursuant to subsection 50.4(9) of the BIA be and is hereby dismissed.

3. THIS COURT ORDERS AND DECLARES that the thirty day period for CFI to file a

proposal be and is hereby terminated pursuant to subsection 50.4(11) of the BIA.

2

1. THIS COURT ORDERS that the time for service of the Notices of Motion and the

Motion Records herein is hereby abridged so that these Motions are properly returnable today

and any requirement for further service of the Notices of Motion and the Motion Records is

hereby dispensed with.

2. THIS COURT ORDERS AND DECLARES that CFI's motion for an extension of time

to file a proposal pursuant to subsection 50.4(9) of the BIA be and is hereby dismissed.

3. THIS COURT ORDERS AND DECLARES that the thirty day period for CFI to file a

proposal be and is hereby terminated pursuant to subsection 50.4(11) of the BIA.

214

0

O O 1:64

0

E-q

0

O O 1:64

0

E-q

215

- 6 -

Exhibit "B" to the Affidavit of Arthur Birnbaum, sworn before me this 23rd day of August, 2015.

A Co iffeer for taking affidavits, etc. 11

- 6 -

Exhibit "B" to the Affidavit of Arthur Birnbaum, sworn before me this 23rd day of August, 2015.

A Co iffeer for taking affidavits, etc. 11

216

CITATION: In the Matter of the Proposal of Cogent Fibre Inc., 2015 ONSC 5139 COURT FILE NO.: 31-2016058

DATE: 20150817

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: NS United Kaiun Kaisha, Ltd., Moving Party (Respondent in the Proposal)

AND:

Cogent Fibre Inc.,-Responding Party (Applicant in the Proposal)

BEFORE: Penny J.

COUNSEL: Doug Smith and Roger• Jaipargas for NS United Kaiun Kaisha, Ltd.

Ken Kral and Sara-Ann Van Allen for Cogent Fibre Inc.

Sam Babe for the Proposal Trustee

HEARD: August 12, 2015

ENDORSEMENT

[1] In a brief handwritten endorsement of August 12, 2015, 1 dismissed the motion of the debtor, Cogent Fibre Inc., for an extension of the 30- day stay under s. 50.4(9) of the Bankruptcy and insolvency Act and allowed the motion of the judgment creditor, NS United Kaiun Kaisha, Ltd. for an order terminating the 30-day stay under s. 50.4(11) of the BIA, with reasons to follow. These are those reasons.

[2] Cogent is in the woodchip business. It had a five-year shipping contract with NS United. There was a dispute which became the subject of an arbitration commenced in February 2012. An arbitral award was made against Cogent for Cdn$15.3 million in January 2015. In July 2015, the District Court for the Southern District of New York confirmed the award. The day after the release of the confirming judgment, Cogent filed its NOL

[3] In an affidavit sworn in collateral bankruptcy proceedings in New York, Mr. Montrop, a director of Cogent, deposed that Cogent's management decided to wind down Cogent's business well before the release of the arbitral award or confirming judgment. It did so, he said, on the basis not only of pending maritime arbitrations but other factors including a "hostile market."

[4] Mr. Montrop's evidence is, however, that Cogent was prompted to file its NOI on the basis of its "belief' that NS United "will expeditiously seek to record the judgment and proceed with collection actions."

[5] The evidence is that Cogent currently has assets of approximately $261,000 and has no operations, revenues or cash flow. The professional fees of these proceedings are being paid by its parent corporation.

CITATION: In the Matter of the Proposal of Cogent Fibre Inc., 2015 ONSC 5139 COURT FILE NO.: 31-2016058

DATE: 20150817

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: NS United Kaiun Kaisha, Ltd., Moving Party (Respondent in the Proposal)

AND:

Cogent Fibre Inc.,-Responding Party (Applicant in the Proposal)

BEFORE: Penny J.

COUNSEL: Doug Smith and Roger• Jaipargas for NS United Kaiun Kaisha, Ltd.

Ken Kral and Sara-Ann Van Allen for Cogent Fibre Inc.

Sam Babe for the Proposal Trustee

HEARD: August 12, 2015

ENDORSEMENT

[1] In a brief handwritten endorsement of August 12, 2015, 1 dismissed the motion of the debtor, Cogent Fibre Inc., for an extension of the 30- day stay under s. 50.4(9) of the Bankruptcy and insolvency Act and allowed the motion of the judgment creditor, NS United Kaiun Kaisha, Ltd. for an order terminating the 30-day stay under s. 50.4(11) of the BIA, with reasons to follow. These are those reasons.

[2] Cogent is in the woodchip business. It had a five-year shipping contract with NS United. There was a dispute which became the subject of an arbitration commenced in February 2012. An arbitral award was made against Cogent for Cdn$15.3 million in January 2015. In July 2015, the District Court for the Southern District of New York confirmed the award. The day after the release of the confirming judgment, Cogent filed its NOL

[3] In an affidavit sworn in collateral bankruptcy proceedings in New York, Mr. Montrop, a director of Cogent, deposed that Cogent's management decided to wind down Cogent's business well before the release of the arbitral award or confirming judgment. It did so, he said, on the basis not only of pending maritime arbitrations but other factors including a "hostile market."

[4] Mr. Montrop's evidence is, however, that Cogent was prompted to file its NOI on the basis of its "belief' that NS United "will expeditiously seek to record the judgment and proceed with collection actions."

[5] The evidence is that Cogent currently has assets of approximately $261,000 and has no operations, revenues or cash flow. The professional fees of these proceedings are being paid by its parent corporation.

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- Page 2 -

[6) Cogent currently has one material, non-contingent creditor — NS United. There are no secured creditors. Another maritime shipping company, NYK, also instituted arbitration proceedings against Cogent. NYK alleges it is owed about $10.9 million. There has been no hearing and there is, obviously, no decision or award. Those proceedings are currently stayed. The NYK claim is entirely contingent. There is no evidence that NYK it at all interested in whatever it is that Cogent has discussed. I was advised that NYK takes no position on the motions before me. It is conceded by Cogent that NS United has a veto over any proposal.

The Cogent Motion to Extend

[7] Section 50.4(9) sets out three-pant, conjunctive test fof the grant of an extension of the— -30-day stay. The court may grant an extension, not to exceed 45 days, if satisfied on the evidence tendered in the application that:

(i) the insolvent person has acted, and is acting, in good faith and with due diligence;

(ii) the insolvent person would likely be able to make a viable proposal if the extension being applied for were granted; and

(iii) no creditor would be materially prejudiced if the extension being applied for were granted

[8] There is no doubt that the intent of the BIA proposal sections is to give the insolvent person an opportunity to put forward a plan. The purpose of the legislation is rehabilitation, not liquidation. Insolvent companies should have the chance to put forward their proposal.

[9] 1 am not satisfied, however, on the evidence provided by Cogent that it has acted and is acting in good faith and with due diligence. I am also not satisfied on the evidence provided by Cogent that it would likely be able to make a viable proposal if the extension being applied for were granted.

[10) I say this principally of the basis of the vague, somewhat vacuous, affidavit evidence of Mr. Montrop filed in support of the Cogent motion and in response to the NS United motion.

[11] His evidence amounts to this:

(a) Cogent has engaged in settlement discussions with NYK with a view to making a proposal to NYK;

(b) Cogent has offered to meet with NS United;

(c) Cogent is working towards a proposal; and

(d) Cogent requires additional time to continue discussions with NYK and NS United.

[12] There is not a hint of what Cogent has to offer NYK and not a hint of what kind of proposal Cogent has in mind. Counsel for Cogent argues that because the settlement discussions

- Page 2 -

[6) Cogent currently has one material, non-contingent creditor — NS United. There are no secured creditors. Another maritime shipping company, NYK, also instituted arbitration proceedings against Cogent. NYK alleges it is owed about $10.9 million. There has been no hearing and there is, obviously, no decision or award. Those proceedings are currently stayed. The NYK claim is entirely contingent. There is no evidence that NYK it at all interested in whatever it is that Cogent has discussed. I was advised that NYK takes no position on the motions before me. It is conceded by Cogent that NS United has a veto over any proposal.

The Cogent Motion to Extend

[7] Section 50.4(9) sets out three-pant, conjunctive test fof the grant of an extension of the— -30-day stay. The court may grant an extension, not to exceed 45 days, if satisfied on the evidence tendered in the application that:

(i) the insolvent person has acted, and is acting, in good faith and with due diligence;

(ii) the insolvent person would likely be able to make a viable proposal if the extension being applied for were granted; and

(iii) no creditor would be materially prejudiced if the extension being applied for were granted

[8] There is no doubt that the intent of the BIA proposal sections is to give the insolvent person an opportunity to put forward a plan. The purpose of the legislation is rehabilitation, not liquidation. Insolvent companies should have the chance to put forward their proposal.

[9] 1 am not satisfied, however, on the evidence provided by Cogent that it has acted and is acting in good faith and with due diligence. I am also not satisfied on the evidence provided by Cogent that it would likely be able to make a viable proposal if the extension being applied for were granted.

[10) I say this principally of the basis of the vague, somewhat vacuous, affidavit evidence of Mr. Montrop filed in support of the Cogent motion and in response to the NS United motion.

[11] His evidence amounts to this:

(a) Cogent has engaged in settlement discussions with NYK with a view to making a proposal to NYK;

(b) Cogent has offered to meet with NS United;

(c) Cogent is working towards a proposal; and

(d) Cogent requires additional time to continue discussions with NYK and NS United.

[12] There is not a hint of what Cogent has to offer NYK and not a hint of what kind of proposal Cogent has in mind. Counsel for Cogent argues that because the settlement discussions

218

- Page 3 -

are without prejudice, it cannot disclose them. I do not find that argument persuasive. Nothing prevents Cogent from describing its plan or what it hopes to achieve in a proposal.

[13] Although Cogent has offered to meet with NS United, NS United has no interest in meeting with Cogent and has not done so.

[14] Cogent says it is working towards a proposal but, in the face of this motion, has not provided even a hint of what that proposal might look like. At its highest, it involves talking to the two shipping companies and hoping to make a deal. Counsel made submissions about possible„tax losses.whichmay have value but there was not a mote of evidence to this effect.

[15] In this case, the 30-day stay expires at midnight on August 14, 2015. Cogent has taken the position, on these motions, that if its request for an extension is denied, it will file a proposal of some kind on Monday, August 17, 2015. That, it suggests, would automatically extend the stay for another 21 days.

[16] I find it difficult to understand how Cogent could plan to file a proposal on Monday, August 17 but was unable to provide at least the outline of this proposal on Wednesday, August 12. There was no explanation given for this apparent contradiction.

[17] In effect, Cogent says it needs more time to continue discussions with its two major creditors when at least one of those creditors (a creditor with veto power) has not engaged in any discussions with Cogent and has no intention of doing so. Cogent's position is, I find, entirely tautological.

[18] In his facttun and in oral submissions, counsel for Cogent emphasized the rehabilitative nature of the proposal sections. He relied heavily on recent Ontario and B.C. authority to the effect that a veto-empowered creditor's statement that it will never agree to a proposal is not dispositive of whether to terminate or refuse to extend a stay. I quite agree with this position and the supporting law. Creditors often, for strategic reasons, say they will never agree.

[19] Nevertheless, it seems to me there must be a certain forthrightness on the part of the debtor about what is sought to be achieved. There must also be an air of reality about the likelihood of any proposal being viable.

[20] The 30-day stay (or any extension thereof) is meant to give the debtor time to deal with multiple parties, many moving pieces and potentially complex business and financial arrangements. Here, there is no active business. There are no complex financial a►rangements. There are no assets. There are only two material creditors, at least one of which, NS United, has a veto over any proposal. There are, in effect, almost no moving pieces. In the face of a motion to terminate the stay, one would have thought the debtor would be motivated to come up with the best evidence it could of what its proposal might be and, specifically, why an extension is necessary to further the development of that proposal. Yet the debtor has chosen to put forward no concrete evidence but to rely on vague, conclusory assertions.

[21] It is this failure to give even a hint of what a proposal might look like, or to provide any content for the bald and conclusory statement that more time is needed to further negotiations (particularly where it is unclear that there are any negotiations), which leads me to the conclusion

- Page 3 -

are without prejudice, it cannot disclose them. I do not find that argument persuasive. Nothing prevents Cogent from describing its plan or what it hopes to achieve in a proposal.

[13] Although Cogent has offered to meet with NS United, NS United has no interest in meeting with Cogent and has not done so.

[14] Cogent says it is working towards a proposal but, in the face of this motion, has not provided even a hint of what that proposal might look like. At its highest, it involves talking to the two shipping companies and hoping to make a deal. Counsel made submissions about possible„tax losses.whichmay have value but there was not a mote of evidence to this effect.

[15] In this case, the 30-day stay expires at midnight on August 14, 2015. Cogent has taken the position, on these motions, that if its request for an extension is denied, it will file a proposal of some kind on Monday, August 17, 2015. That, it suggests, would automatically extend the stay for another 21 days.

[16] I find it difficult to understand how Cogent could plan to file a proposal on Monday, August 17 but was unable to provide at least the outline of this proposal on Wednesday, August 12. There was no explanation given for this apparent contradiction.

[17] In effect, Cogent says it needs more time to continue discussions with its two major creditors when at least one of those creditors (a creditor with veto power) has not engaged in any discussions with Cogent and has no intention of doing so. Cogent's position is, I find, entirely tautological.

[18] In his facttun and in oral submissions, counsel for Cogent emphasized the rehabilitative nature of the proposal sections. He relied heavily on recent Ontario and B.C. authority to the effect that a veto-empowered creditor's statement that it will never agree to a proposal is not dispositive of whether to terminate or refuse to extend a stay. I quite agree with this position and the supporting law. Creditors often, for strategic reasons, say they will never agree.

[19] Nevertheless, it seems to me there must be a certain forthrightness on the part of the debtor about what is sought to be achieved. There must also be an air of reality about the likelihood of any proposal being viable.

[20] The 30-day stay (or any extension thereof) is meant to give the debtor time to deal with multiple parties, many moving pieces and potentially complex business and financial arrangements. Here, there is no active business. There are no complex financial a►rangements. There are no assets. There are only two material creditors, at least one of which, NS United, has a veto over any proposal. There are, in effect, almost no moving pieces. In the face of a motion to terminate the stay, one would have thought the debtor would be motivated to come up with the best evidence it could of what its proposal might be and, specifically, why an extension is necessary to further the development of that proposal. Yet the debtor has chosen to put forward no concrete evidence but to rely on vague, conclusory assertions.

[21] It is this failure to give even a hint of what a proposal might look like, or to provide any content for the bald and conclusory statement that more time is needed to further negotiations (particularly where it is unclear that there are any negotiations), which leads me to the conclusion

219

- Page 4 -

that Cogent has not met its onus of proving, on a balance of probabilities, that it has acted in good faith and with due diligence and that it is likely to be able to make a viable proposal if only it is given more time.

[22] I am also driven to the conclusion that Cogent's emphasis on so-called "rehabilitation" is empty rhetoric in this case. The evidence filed by Cogent in the New York bankruptcy court makes it clear that there is no ongoing effort to "rehabilitate" this company. Management had already decided to wind down its operations before the NS United arbitration award was granted. The summary balance sheets filed by the proposal trustee indicate that Cogent is already well under way with its Ntind-down."- It went _from $3.27 million in assets in 2013 to $5.024 million in 2014 to $261,476 in 2015.

[23] Counsel for the debtor submitted in oral argument that perhaps the company could be restarted. There is no evidence whatsoever to support such a contention — indeed, all of the evidence is very much to the contrary.

[24] For these reasons the debtor's motion to extend the stay under s. 50.4(9) is dismissed.

The NS United Motion to Terminate

[25] Section 50.4(11) of the BIA provides that where a debtor files a notice of intention to make a proposal, a creditor can apply to the court to terminate the initial 30-day stay on one or more of four disjunctive grounds:

(i) the insolvent person has not acted, or is not acting, in good faith and with due diligence;

(ii) the insolvent person will not likely be able to make a viable proposal before the expiration of the 30-day period;

(iii) the insolvent person will not likely to be able to make a proposal, before the expiration of the 30-day period that will be accepted by the creditors; or

(iv) the creditors as a whole would be materially prejudiced if the application to terminate was rejected by the court.

[26] NS United took the position that Cogent had not discharged its onus of proving it was acting in good faith and with due diligence on the motion to extend but did not positively assert this ground on the motion to terminate. NS United relies on the second and third grounds of s. 50.4(11).

[27] It is clear from the very existence of s. 50.4(11), as well as judicial authority, that while au insolvent debtor is entitled to an automatic stay simply by filing a notice of intention to make a proposal, the BIA does not guarantee an insolvent person a stay without review. There is no absolute immunity from creditors. Section 50.4(11) of the BIA empowers the court to terminate the 30-day stay where the statutory conditions for doing so are met.

- Page 4 -

that Cogent has not met its onus of proving, on a balance of probabilities, that it has acted in good faith and with due diligence and that it is likely to be able to make a viable proposal if only it is given more time.

[22] I am also driven to the conclusion that Cogent's emphasis on so-called "rehabilitation" is empty rhetoric in this case. The evidence filed by Cogent in the New York bankruptcy court makes it clear that there is no ongoing effort to "rehabilitate" this company. Management had already decided to wind down its operations before the NS United arbitration award was granted. The summary balance sheets filed by the proposal trustee indicate that Cogent is already well under way with its Ntind-down."- It went _from $3.27 million in assets in 2013 to $5.024 million in 2014 to $261,476 in 2015.

[23] Counsel for the debtor submitted in oral argument that perhaps the company could be restarted. There is no evidence whatsoever to support such a contention — indeed, all of the evidence is very much to the contrary.

[24] For these reasons the debtor's motion to extend the stay under s. 50.4(9) is dismissed.

The NS United Motion to Terminate

[25] Section 50.4(11) of the BIA provides that where a debtor files a notice of intention to make a proposal, a creditor can apply to the court to terminate the initial 30-day stay on one or more of four disjunctive grounds:

(i) the insolvent person has not acted, or is not acting, in good faith and with due diligence;

(ii) the insolvent person will not likely be able to make a viable proposal before the expiration of the 30-day period;

(iii) the insolvent person will not likely to be able to make a proposal, before the expiration of the 30-day period that will be accepted by the creditors; or

(iv) the creditors as a whole would be materially prejudiced if the application to terminate was rejected by the court.

[26] NS United took the position that Cogent had not discharged its onus of proving it was acting in good faith and with due diligence on the motion to extend but did not positively assert this ground on the motion to terminate. NS United relies on the second and third grounds of s. 50.4(11).

[27] It is clear from the very existence of s. 50.4(11), as well as judicial authority, that while au insolvent debtor is entitled to an automatic stay simply by filing a notice of intention to make a proposal, the BIA does not guarantee an insolvent person a stay without review. There is no absolute immunity from creditors. Section 50.4(11) of the BIA empowers the court to terminate the 30-day stay where the statutory conditions for doing so are met.

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- Page 5 -

[28] With respect to the probability of filing a viable proposal at all, I again refer to the paucity of evidence about what a proposal might look like. The debtor has utterly failed to provide even a hint of its plan for a proposal. The facts before the court, from Cogent management's own sworn statement, are that Cogent was already being "wound down" before the arbitral award prompted its filing of a NOI. The evidence before the court, therefore, is that management's plan is not to "rehabilitate" this company.

[29] As mentioned earlier, Cogent's stated intention to file a proposal of some sort on the last day, in order to buy another 21 days, seems to me not only disingenuous but to highlight the lack of any concrete proposal. There is-simply no evidence-to suggest there is any plan in the offing at all, much less one that would probably appear reasonable to a reasonable creditor.

[30] Cogent's gambit boils down to this: its proposal depends on negotiating a compromise with its only material, non-contingent creditor. That creditor, however, will not, and is under no obligation to, negotiate any compromise with Cogent.

[31] On the second ground, likely to be acceptable to creditors, I agree with Cogent that the mere fact that NS United has a veto power over any proposal is not dispositive on a motion to terminate under s. 50.4(11), It is, however, one factor to be taken into account.

[32] What adds credibility to NS United's position that it will, under no circumstances, agree to any proposal is the complete paucity of evidence that any plan is even possible, much less viable and likely to be accepted by creditors.

[33] Counsel for Cogent sought to distinguish between the "harsher" line taken by the Ontario courts in cases such as Cumberland Trading Inc. and the more "liberal" approach taken in B.C. and other provinces in cases like Contrail Coach Lines and Enirgi Group Corp. Counsel argued that the more liberal approach is more in keeping with the rehabilitative purpose of the proposal sections of the BIA and current views of how these provisions should be applied.

[34] I am not convinced these cases are in conflict. The exercise of the discretion under ss. 50.4(9) and (11) of the BIA is highly fact dependent. Cumberland, for example, was a case where a proposal had already been filed; the issue was whether to terminate the 21-day stay. The facts of Contrail and Enirgi can also be readily distinguished from the present case. In Contrail, the debtor presented evidence of a pending proposal under which the objecting creditor might be paid out in fill. In Enirgi, likewise, there was evidence that the debtor had significant assets — in other words, the debtor had something to work with.

[35] 1 lere, the debtor has essentially nothing to work with, which might explain why it has been so reluctant to come forward with anything concrete. Cogent has no active business, no revenue, no cash flow and effectively no assets. The inference to be drawn from the complete absence of any hint of a concrete proposal is, in these circumstances, that there is no basis for a viable plan and certainly no basis for a conclusion, on a balance of probabilities, that there is likely to be any proposal that would be acceptable to the veto-empowered creditor NS United.

[36] Lax J. said in Janodee Investments Ltd. v. Pellegrini (April 12, 2001), "the proposal sections of the BM are intended to give a debtor some breathing room. They are not intended to create an obstacle course for creditors."

- Page 5 -

[28] With respect to the probability of filing a viable proposal at all, I again refer to the paucity of evidence about what a proposal might look like. The debtor has utterly failed to provide even a hint of its plan for a proposal. The facts before the court, from Cogent management's own sworn statement, are that Cogent was already being "wound down" before the arbitral award prompted its filing of a NOI. The evidence before the court, therefore, is that management's plan is not to "rehabilitate" this company.

[29] As mentioned earlier, Cogent's stated intention to file a proposal of some sort on the last day, in order to buy another 21 days, seems to me not only disingenuous but to highlight the lack of any concrete proposal. There is-simply no evidence-to suggest there is any plan in the offing at all, much less one that would probably appear reasonable to a reasonable creditor.

[30] Cogent's gambit boils down to this: its proposal depends on negotiating a compromise with its only material, non-contingent creditor. That creditor, however, will not, and is under no obligation to, negotiate any compromise with Cogent.

[31] On the second ground, likely to be acceptable to creditors, I agree with Cogent that the mere fact that NS United has a veto power over any proposal is not dispositive on a motion to terminate under s. 50.4(11), It is, however, one factor to be taken into account.

[32] What adds credibility to NS United's position that it will, under no circumstances, agree to any proposal is the complete paucity of evidence that any plan is even possible, much less viable and likely to be accepted by creditors.

[33] Counsel for Cogent sought to distinguish between the "harsher" line taken by the Ontario courts in cases such as Cumberland Trading Inc. and the more "liberal" approach taken in B.C. and other provinces in cases like Contrail Coach Lines and Enirgi Group Corp. Counsel argued that the more liberal approach is more in keeping with the rehabilitative purpose of the proposal sections of the BIA and current views of how these provisions should be applied.

[34] I am not convinced these cases are in conflict. The exercise of the discretion under ss. 50.4(9) and (11) of the BIA is highly fact dependent. Cumberland, for example, was a case where a proposal had already been filed; the issue was whether to terminate the 21-day stay. The facts of Contrail and Enirgi can also be readily distinguished from the present case. In Contrail, the debtor presented evidence of a pending proposal under which the objecting creditor might be paid out in fill. In Enirgi, likewise, there was evidence that the debtor had significant assets — in other words, the debtor had something to work with.

[35] 1 lere, the debtor has essentially nothing to work with, which might explain why it has been so reluctant to come forward with anything concrete. Cogent has no active business, no revenue, no cash flow and effectively no assets. The inference to be drawn from the complete absence of any hint of a concrete proposal is, in these circumstances, that there is no basis for a viable plan and certainly no basis for a conclusion, on a balance of probabilities, that there is likely to be any proposal that would be acceptable to the veto-empowered creditor NS United.

[36] Lax J. said in Janodee Investments Ltd. v. Pellegrini (April 12, 2001), "the proposal sections of the BM are intended to give a debtor some breathing room. They are not intended to create an obstacle course for creditors."

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[37] Cogent admits that its only hope for a proposal is to negotiate a compromise with NS United; yet NS United has no interest, and no obligation to engage, in that negotiation.

[38] Even applying what counsel for Cogent describes as the more "liberal" or debtor-friendly approach, on the evidence, NS United has discharged its burden under s. 50.4(11). NS United has, I find, proven on a balance of probabilities that it is not likely that Cogent will be able to make a viable proposal and, even if that were likely, the proposal will not likely be accepted by the requisite level of creditor support.

[39] For these reasons, NS United's motion to terminate the 30-day stay is granted.

[40] No order as to costs.

Date: August 17, 2015

- Page 6 -

[37] Cogent admits that its only hope for a proposal is to negotiate a compromise with NS United; yet NS United has no interest, and no obligation to engage, in that negotiation.

[38] Even applying what counsel for Cogent describes as the more "liberal" or debtor-friendly approach, on the evidence, NS United has discharged its burden under s. 50.4(11). NS United has, I find, proven on a balance of probabilities that it is not likely that Cogent will be able to make a viable proposal and, even if that were likely, the proposal will not likely be accepted by the requisite level of creditor support.

[39] For these reasons, NS United's motion to terminate the 30-day stay is granted.

[40] No order as to costs.

Date: August 17, 2015

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Exhibit "C" to the Affidavit of Arthur Birnbaum, sworn before me this 23rd day of August, 2015.

A Commissi r taking affidavits, etc.

- 7 -

Exhibit "C" to the Affidavit of Arthur Birnbaum, sworn before me this 23rd day of August, 2015.

A Commissi r taking affidavits, etc.

223

Case 1:15-cv-01784-PAE Document 17 Filed 08/13/15 Page 1 of 1

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

NS UNITED KAIUN KAISHA, LTD.,

(List the full name(s) of the plaintiff(s)/petitioner(s).)

-against-

COGENT FIBRE INC.,

15 CV 1784 ( PAE )(

NOTICE OF APPEAL

(List the full name(s) of the defendant(s)/respondent(s).)

Notice is hereby given that the following parties: COGENT FIBRE INC.

(list the names of all parties who are filing an appeal)

in the above-named case appeal to the United States Court of Appeals for the Second Circuit

from the judgment order entered on: Order 7.14.15 and Judgment 7.16.15 (date that judgment or order was entered on docket)

that: granted NS United Kaiun Kaisha's petition to confirm arbitration award pursuant to 9 U.S.C. § 9

and denying Cogent Fibre's cross-motion to vacate the award. (If the appeal is from an order, provide a brief description above of the decision in the order.)

August 13, 2015 /s/ Anthony J. Mavronicolas Dated Signature

Mavronicolas, Anthony, J , Mavronicolas & Dee LLP, counsel for Cogent Fibre Inc. Name (Last, First, MI)

415 Madison Ave. Fl 18 New York NY 10017 Address City State Zip Code

646.770.0024 [email protected] Telephone Number E-mail Address (if available)

Each party filing the appeal must date and sign the Notice of Appeal and provide his or her mailing address and telephone

number, EXCEPT that a signer of a pro se notice of appeal may sign for his or her spouse and minor children if they are parties to the case. Fed. R. App. P. 3(c)(2). Attach additional sheets of paper as necessary.

Rev. 12/23/13

Case 1:15-cv-01784-PAE Document 17 Filed 08/13/15 Page 1 of 1

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

NS UNITED KAIUN KAISHA, LTD.,

(List the full name(s) of the plaintiff(s)/petitioner(s).)

-against-

COGENT FIBRE INC.,

15 CV 1784 ( PAE )(

NOTICE OF APPEAL

(List the full name(s) of the defendant(s)/respondent(s).)

Notice is hereby given that the following parties: COGENT FIBRE INC.

(list the names of all parties who are filing an appeal)

in the above-named case appeal to the United States Court of Appeals for the Second Circuit

from the judgment order entered on: Order 7.14.15 and Judgment 7.16.15

(date that judgment or order was entered on docket)

that: granted NS United Kaiun Kaisha's petition to confirm arbitration award pursuant to 9 U.S.C. § 9

and denying Cogent Fibre's cross-motion to vacate the award.

(If the appeal is from an order, provide a brief description above of the decision in the order.)

August 13, 2015 /s/ Anthony J. Mavronicolas

Dated Signature

Mavronicolas, Anthony, J , Mavronicolas & Dee LLP, counsel for Cogent Fibre Inc.

Name (Last, First, MI)

415 Madison Ave. Fl 18 New York NY 10017

Address City State Zip Code

646.770.0024 [email protected]

Telephone Number E-mail Address (if available)

Each party filing the appeal must date and sign the Notice of Appeal and provide his or her mailing address and telephone

number, EXCEPT that a signer of a pro se notice of appeal may sign for his or her spouse and minor children if they are parties to the case. Fed. R. App. P. 3(c)(2). Attach additional sheets of paper as necessary.

Rev. 12/23/13

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- 8 -

Exhibit "D" to the Affidavit of Arthur Birnbaum, sworn before me this 23rd day of August, 2015.

A Commis r for taking affidavits, etc.

- 8 -

Exhibit "D" to the Affidavit of Arthur Birnbaum, sworn before me this 23rd day of August, 2015.

A Commis r for taking affidavits, etc.

225

Court File No. 31-2016058


(IN BANKRUPTCY AND INSOLVENCY)

IN THE MATTER OF THE PROPOSAL OF COGENT FIBRE INC.

AMENDED PROPOSAL

Cogent Fibre Inc. ("CFI"), hereby submits the following Proposal pursuant to the provisions of Bankruptcy and Insolvency Act (Canada), R.S.C. 1985, c. B-3.

PART I Interpretation

Definitions

1.1 In this Proposal unless otherwise stated or the context otherwise requires, capitalized terms shall have the following meanings:

(a) "Act" means Bankruptcy and Insolvency Act (Canada), R.S.C. 1985, c. B-3, as it may be amended from time to time;

(b) "Administrative Fees and Expenses" means the proper fees and expenses of the Trustee, including all legal fees and disbursements incurred by the Trustee, arising from or related to, (i) the preparation, presentation, consideration and implementation of the Proposal and any amendments thereto, and (ii) the proceedings, transactions and agreements contemplated by the Proposal or arising therefrom;

(c) "Approval Order" means an Order of the Court approving this Proposal pursuant to the provisions of the Act,

(d) "Business Day" means a day, other than a Saturday, Sunday or a day observed as a holiday under the laws of the Province of Ontario or the federal laws of Canada applicable therein on which banks are generally open for business in Toronto, Ontario;

(e) "Claim" means any right of any person against CFI in connection with any indebtedness, liability, or obligation of any nature whatsoever of CFI to any person, whether liquidated, unliquidated, fixed, contingent, matured, legal, equitable, secured, unsecured, present, future, known or unknown, and whether

Court File No. 31-2016058



IN THE MATTER OF THE PROPOSAL OF COGENT FIBRE INC.

AMENDED PROPOSAL

Cogent Fibre Inc. ("CFI"), hereby submits the following Proposal pursuant to the provisions of Bankruptcy and Insolvency Act (Canada), R.S.C. 1985, c. B-3.

PART I Interpretation

Definitions

1.1 In this Proposal unless otherwise stated or the context otherwise requires, capitalized terms shall have the following meanings:

(a) "Act" means Bankruptcy and Insolvency Act (Canada), R.S.C. 1985, c. B-3, as it may be amended from time to time;

(b) "Administrative Fees and Expenses" means the proper fees and expenses of the Trustee, including all legal fees and disbursements incurred by the Trustee, arising from or related to, (i) the preparation, presentation, consideration and implementation of the Proposal and any amendments thereto, and (ii) the proceedings, transactions and agreements contemplated by the Proposal or arising therefrom;

(c) "Approval Order" means an Order of the Court approving this Proposal pursuant to the provisions of the Act,

(d) "Business Day" means a day, other than a Saturday, Sunday or a day observed as a holiday under the laws of the Province of Ontario or the federal laws of Canada applicable therein on which banks are generally open for business in Toronto, Ontario;

(e) "Claim" means any right of any person against CFI in connection with any indebtedness, liability, or obligation of any nature whatsoever of CFI to any person, whether liquidated, unliquidated, fixed, contingent, matured, legal, equitable, secured, unsecured, present, future, known or unknown, and whether

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by guarantee, surety or otherwise, incurred or arising or relating to the period prior to the Filing Date, and "Claims" has a corresponding meaning;

(f) "Claims Bar Date" has the meaning set forth in Section 5.3;

(g) "Court" means the Ontario Superior Court of Justice in Bankruptcy and Insolvency;

(h) "Creditor" means any person who holds one or more Claims, including Secured Creditors, Preferred Creditors and Unsecured Creditors, and "Creditors" has a corresponding meaning;

"Creditors' Meeting" means a meeting of the Creditors called for the purpose of considering and voting on the Proposal;

"Effective Date" means the date that all conditions set out in Part VIII have been satisfied;

(k) "Employees" means the employees and former employees of CFI, not including independent commissioned sales agents or contractors;

"Filing Date" means the date of filing the Notice of Intention, being July 15, 2015;

(m) "Fuller Landau" means The Fuller Landau Group Inc.;

(n) "Notice of Intention" means the notice of intention to make a proposal pursuant to the BIA filed by CFI with the Official Receiver on July 15, 2015;

(o) "Preferred Creditor" means a Creditor with a Proven Claim that is entitled to receive payment thereof without interest in priority to other Creditors as provided for in Section 136 of the Act;

(a) "Proposal" means this Proposal and any amendments thereto;

(b) "Proof of Claim" means the proof of claim required by the Act to be provided to each known Creditor prior to the Creditors' Meeting;

(c) "Proven Claim" means the value of any Claim as accepted by the Trustee and proven in accordance with Section 135 of the Act;

(d) "Secured Creditor" means any person holding a mortgage, hypothec, pledge, charge, lien, encumbrance, security interest or privilege on or against the property of CFI or any part thereof as security for a Claim, and "Secured Creditors" has a corresponding meaning;

-2

by guarantee, surety or otherwise, incurred or arising or relating to the period prior to the Filing Date, and "Claims" has a corresponding meaning;

(f) "Claims Bar Date" has the meaning set forth in Section 5.3;

(g) "Court" means the Ontario Superior Court of Justice in Bankruptcy and Insolvency;

(h) "Creditor" means any person who holds one or more Claims, including Secured Creditors, Preferred Creditors and Unsecured Creditors, and "Creditors" has a corresponding meaning;

"Creditors' Meeting" means a meeting of the Creditors called for the purpose of considering and voting on the Proposal;

"Effective Date" means the date that all conditions set out in Part VIII have been satisfied;

(k) "Employees" means the employees and former employees of CFI, not including independent commissioned sales agents or contractors;

"Filing Date" means the date of filing the Notice of Intention, being July 15, 2015;

(m) "Fuller Landau" means The Fuller Landau Group Inc.;

(n) "Notice of Intention" means the notice of intention to make a proposal pursuant to the BIA filed by CFI with the Official Receiver on July 15, 2015;

(o) "Preferred Creditor" means a Creditor with a Proven Claim that is entitled to receive payment thereof without interest in priority to other Creditors as provided for in Section 136 of the Act;

(a) "Proposal" means this Proposal and any amendments thereto;

(b) "Proof of Claim" means the proof of claim required by the Act to be provided to each known Creditor prior to the Creditors' Meeting;

(c) "Proven Claim" means the value of any Claim as accepted by the Trustee and proven in accordance with Section 135 of the Act;

(d) "Secured Creditor" means any person holding a mortgage, hypothec, pledge, charge, lien, encumbrance, security interest or privilege on or against the property of CFI or any part thereof as security for a Claim, and "Secured Creditors" has a corresponding meaning;

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(e) "Termination Order" means the order of the Court, dated August 12, 2015, terminating the time for CFI to file a proposal pursuant to Section 50.4(11) of the Act;

"Trustee" means Fuller Landau, or its duly appointed successor, in its capacity as trustee acting under the Proposal;

(g) "Unsecured Creditor" means a Creditor with a Proven Claim that is not a Secured Creditor or a Preferred Creditor and "Unsecured Creditors" has a corresponding meaning.

(h) "Voting Letter" shall mean the voting letter required by subsection 51(1) of the Act to be mailed or sent by electronic transmission to each known Creditor prior to the Creditors' Meeting.

Headings

1.2 The division of this Proposal into Parts and Sections and the insertion of headings are for the convenience of reference only and do not affect the construction or interpretation of this Proposal. The terms "this Proposal", "hereof", "hereunder" and similar expressions refer to this entire Proposal and not to any particular Part, Section or other portion hereof and include any agreement supplemental hereto. Unless something in the subject matter or context is inconsistent herewith, references herein to Parts and Sections are to Parts and Sections of this Proposal.

Extended Meanings

1.3 In this Proposal words importing the singular number only include the plural and vice versa, words importing any gender include all genders and words importing persons include individuals, partnerships, associations, trusts, unincorporated organizations and corporations.

Date for Any Action

1.4 If any date on which any action required to be taken hereunder by any of the parties is not a Business Day, such action must be taken on the next succeeding day which is a Business Day unless precluded by statute.

PART II Classification of Creditors

Classes of Creditors

2.1 For the purposes of voting on the Proposal, the Creditors of CFI shall be composed of one class consisting of all Preferred Creditors and Unsecured Creditors.

- 3 -

(e) "Termination Order" means the order of the Court, dated August 12, 2015, terminating the time for CFI to file a proposal pursuant to Section 50.4(11) of the Act;

"Trustee" means Fuller Landau, or its duly appointed successor, in its capacity as trustee acting under the Proposal;

(g) "Unsecured Creditor" means a Creditor with a Proven Claim that is not a Secured Creditor or a Preferred Creditor and "Unsecured Creditors" has a corresponding meaning.

(h) "Voting Letter" shall mean the voting letter required by subsection 51(1) of the Act to be mailed or sent by electronic transmission to each known Creditor prior to the Creditors' Meeting.

Headings

1.2 The division of this Proposal into Parts and Sections and the insertion of headings are for the convenience of reference only and do not affect the construction or interpretation of this Proposal. The terms "this Proposal", "hereof", "hereunder" and similar expressions refer to this entire Proposal and not to any particular Part, Section or other portion hereof and include any agreement supplemental hereto. Unless something in the subject matter or context is inconsistent herewith, references herein to Parts and Sections are to Parts and Sections of this Proposal.

Extended Meanings

1.3 In this Proposal words importing the singular number only include the plural and vice versa, words importing any gender include all genders and words importing persons include individuals, partnerships, associations, trusts, unincorporated organizations and corporations.

Date for Any Action

1.4 If any date on which any action required to be taken hereunder by any of the parties is not a Business Day, such action must be taken on the next succeeding day which is a Business Day unless precluded by statute.

PART II Classification of Creditors

Classes of Creditors

2.1 For the purposes of voting on the Proposal, the Creditors of CFI shall be composed of one class consisting of all Preferred Creditors and Unsecured Creditors.

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PART III Proposal

Purpose and Implementation of Proposal

3.1 The purpose of this Proposal is to provide for a distribution to Creditors and the assignment of the balance of their Claims to Cogent Biomass Inc., on the expectation that all Creditors will derive a greater benefit from payment of their Claims pursuant to the terms of the Proposal than would result from a forced liquidation of CFI's assets.

3.2 CFI will pay a total of USD $1,025,000 to the Trustee, pursuant to the schedule set out below, for distribution amongst the Creditors as set forth in the Proposal:

(a) on the Business Day next following the issuance of the Approval Order, CFI will pay USD $500,000 to the Trustee;

(b) on each anniversary of the Approval Order, CFI will pay an additional $175,000 to the Trustee, up to a maximum of USD $525,000.

3.3 The due and timely payment of all amounts payable by CFI pursuant to Section 3.2 are guaranteed by Cogent Biomass Inc. A copy of the Guarantee from Cogent Biomass Inc. is attached hereto as Schedule "A".

PART IV Treatment of Creditors

Payment of Administrative Fees and Expenses

4.1 All of the Administrative Fees and Expenses shall be paid from the funds paid to the Trustee under Section 3.2 prior to all Claims and shall be a first charge thereon.

4.2 The Trustee may take interim draws of its fees and disbursements, including the Trustee's legal fees and disbursements, from the funds paid under Section 3.2 of this Proposal as follows:

(a) interim draws may be taken based on actual time and charges at normal billable rates plus applicable taxes as funds become available; and

(b) all draws are subject to final taxation by the Court.

Payment of Levy

4.3 All payments contemplated by the Proposal shall be net of any applicable levy payable to the Office of the Superintendent of Bankruptcy as required by the Act.

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PART III Proposal

Purpose and Implementation of Proposal

3.1 The purpose of this Proposal is to provide for a distribution to Creditors and the assignment of the balance of their Claims to Cogent Biomass Inc., on the expectation that all Creditors will derive a greater benefit from payment of their Claims pursuant to the terms of the Proposal than would result from a forced liquidation of CFI's assets.

3.2 CFI will pay a total of USD $1,025,000 to the Trustee, pursuant to the schedule set out below, for distribution amongst the Creditors as set forth in the Proposal:

(a) on the Business Day next following the issuance of the Approval Order, CFI will pay USD $500,000 to the Trustee;

(b) on each anniversary of the Approval Order, CFI will pay an additional $175,000 to the Trustee, up to a maximum of USD $525,000.

3.3 The due and timely payment of all amounts payable by CFI pursuant to Section 3.2 are guaranteed by Cogent Biomass Inc. A copy of the Guarantee from Cogent Biomass Inc. is attached hereto as Schedule "A".

PART IV Treatment of Creditors

Payment of Administrative Fees and Expenses

4.1 All of the Administrative Fees and Expenses shall be paid from the funds paid to the Trustee under Section 3.2 prior to all Claims and shall be a first charge thereon.

4.2 The Trustee may take interim draws of its fees and disbursements, including the Trustee's legal fees and disbursements, from the funds paid under Section 3.2 of this Proposal as follows:

(a) interim draws may be taken based on actual time and charges at normal billable rates plus applicable taxes as funds become available; and

(b) all draws are subject to final taxation by the Court.

Payment of Levy

4.3 All payments contemplated by the Proposal shall be net of any applicable levy payable to the Office of the Superintendent of Bankruptcy as required by the Act.

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Employees

4.4 Immediately following the granting of the Approval Order, CFI shall pay all Employees the amounts that they are qualified to receive under subsection 136(1)(d) of the Act.

Her Majesty in Right of Canada or a Province

4.5 Within six months following the granting of the Approval Order, CFI shall pay in full to Her Majesty in Right of Canada or a Province all amounts that were outstanding as of the Filing Date and are of a kind that could be subject to a demand under:

(a) subsection 244(1.2) of the Income Tax Act (Canada);

(b) any provision of the Canada Pension Plan or of the Employment Insurance Act that refers to subsection 244(2.2) of the Income Tax Act (Canada) and provides for the collection of a contribution, as defined in the Canada Pension Plan, or an employee's premium, or employer's premium, as defined in the Employment Insurance Act, and of any related interest, penalties or other amounts; or

(c) any provision of provincial legislation that has a similar purpose to subsection 244(1.2) of the Income Tax Act (Canada), 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 Income Tax Act (Canada); 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;

Secured Creditors

4.6 Secured Creditors will be paid in accordance with existing or future agreements between CFI and each Secured Creditor. All Claims of Secured Creditors and security held by Secured Creditors in respect of such Claims shall be unaffected by this Proposal.

4.7 All Secured Creditors who are related to CFI (as such term is defined in the Act) are not entitled to any distributions under the Proposal.

Distribution To Preferred Creditors

4.8 The Proven Claims of Preferred Creditors are to be paid in full in priority to all claims of Unsecured Creditors in accordance with the scheme of distribution set forth in the Act.

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Employees

4.4 Immediately following the granting of the Approval Order, CFI shall pay all Employees the amounts that they are qualified to receive under subsection 136(1)(d) of the Act.

Her Majesty in Right of Canada or a Province

4.5 Within six months following the granting of the Approval Order, CFI shall pay in full to Her Majesty in Right of Canada or a Province all amounts that were outstanding as of the Filing Date and are of a kind that could be subject to a demand under:

(a) subsection 244(1.2) of the Income Tax Act (Canada);

(b) any provision of the Canada Pension Plan or of the Employment Insurance Act that refers to subsection 244(2.2) of the Income Tax Act (Canada) and provides for the collection of a contribution, as defined in the Canada Pension Plan, or an employee's premium, or employer's premium, as defined in the Employment Insurance Act, and of any related interest, penalties or other amounts; or

(c) any provision of provincial legislation that has a similar purpose to subsection 244(1.2) of the Income Tax Act (Canada), 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 Income Tax Act (Canada); 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;

Secured Creditors

4.6 Secured Creditors will be paid in accordance with existing or future agreements between CFI and each Secured Creditor. All Claims of Secured Creditors and security held by Secured Creditors in respect of such Claims shall be unaffected by this Proposal.

4.7 All Secured Creditors who are related to CFI (as such term is defined in the Act) are not entitled to any distributions under the Proposal.

Distribution To Preferred Creditors

4.8 The Proven Claims of Preferred Creditors are to be paid in full in priority to all claims of Unsecured Creditors in accordance with the scheme of distribution set forth in the Act.

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Distribution To Unsecured Creditors

4.9 The balance of the funds paid by CFI pursuant to Section 3.2, after payment of Administrative Fees and Expenses, any payments made pursuant to Sections 4.3 and 4.4, and payment of the Proven Claims of Preferred Creditors, shall be distributed by the Trustee pro rata among all of the Unsecured Creditors to the extent of their Proven Claims.

Claims Against Directors

4.10 Any Claims against CFI by any Creditor that are also Claims against the directors and officers of CFI that relate to obligations of CFI where directors are under any law liable in their capacity as directors for the payment of such obligations shall be, and upon Court approval of this Proposal, are hereby, to the extent permitted by the Act, compromised and released and forever discharged as against the directors of CFI upon acceptance of this Proposal by the Creditors and approval by the Court.

Interest on Claims

4.11 No Creditors shall be entitled to claim interest accruing on their Claim after the Filing Date.

Post Filing Claims

4.12 All Claims arising after the Filing Date are unaffected by this Proposal.

Timing of Distributions

4.13 The first distribution to Creditors pursuant to the Proposal shall be paid by the Trustee within sixty (60) Business Days of receipt of funds or as determined by the Trustee. All subsequent distributions to Creditors shall be paid by the Trustee within sixty (60) Business Days of receipt of funds or as determined by the Trustee.

PART V Procedure For Validation and Valuation of Claims

Allowance or Disallowance of Claims by the Trustee and CFI

5.1 Upon receipt of a completed Proof of Claim, the Trustee and CFI shall examine the Proof of Claim and shall deal with each Claim in accordance with the provisions of the Act.

Valuation of Claims

5.2 The procedure for valuing Claims of Creditors and resolving disputes with respect to such Claims will be as provided for in the Act. The Trustee and CFI reserve the right to seek the assistance of the Court in valuing any Claim of a Creditor and in respect of any other matter as may be required.

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Distribution To Unsecured Creditors

4.9 The balance of the funds paid by CFI pursuant to Section 3.2, after payment of Administrative Fees and Expenses, any payments made pursuant to Sections 4.3 and 4.4, and payment of the Proven Claims of Preferred Creditors, shall be distributed by the Trustee pro rata among all of the Unsecured Creditors to the extent of their Proven Claims.

Claims Against Directors

4.10 Any Claims against CFI by any Creditor that are also Claims against the directors and officers of CFI that relate to obligations of CFI where directors are under any law liable in their capacity as directors for the payment of such obligations shall be, and upon Court approval of this Proposal, are hereby, to the extent permitted by the Act, compromised and released and forever discharged as against the directors of CFI upon acceptance of this Proposal by the Creditors and approval by the Court.

Interest on Claims

4.11 No Creditors shall be entitled to claim interest accruing on their Claim after the Filing Date.

Post Filing Claims

4.12 All Claims arising after the Filing Date are unaffected by this Proposal.

Timing of Distributions

4.13 The first distribution to Creditors pursuant to the Proposal shall be paid by the Trustee within sixty (60) Business Days of receipt of funds or as determined by the Trustee. All subsequent distributions to Creditors shall be paid by the Trustee within sixty (60) Business Days of receipt of funds or as determined by the Trustee.

PART V Procedure For Validation and Valuation of Claims

Allowance or Disallowance of Claims by the Trustee and CFI

5.1 Upon receipt of a completed Proof of Claim, the Trustee and CFI shall examine the Proof of Claim and shall deal with each Claim in accordance with the provisions of the Act.

Valuation of Claims

5.2 The procedure for valuing Claims of Creditors and resolving disputes with respect to such Claims will be as provided for in the Act. The Trustee and CFI reserve the right to seek the assistance of the Court in valuing any Claim of a Creditor and in respect of any other matter as may be required.

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Claims Bar Date

5.3 In order to receive a distribution under the Proposal, all Proofs of Claim must be delivered by the Creditors and received by the Trustee within fifteen (15) days of the issuance of the Approval Order (the "Claims Bar Date"). Any and all Creditors who do not file a Proof of Claim by the Claims Bar Date shall not be entitled to any distributions under the Proposal.

PART VI Meetings of Creditors

Creditors' Meetings

6.1 The Trustee will call the Creditors' Meeting in order for the Creditors' Meeting to be held 21 days after the filing of the Proposal with the Official Receiver on such date, time and at such place as may be agreed upon by the Trustee and CFI.

Notice of Creditors' Meetings

6.2 The Trustee shall provide the Creditors with notice of the time and place of the Creditors' Meeting by mail pursuant to the Act. All Proofs of Claim shall be delivered in accordance with the provisions of the Proposal, the Act and any order which may be issued by the Court in respect of the procedure governing the Creditors' Meeting.

Conduct of Creditors' Meetings

6.3 The Official Receiver, or any nominee thereof, shall preside as the chair of the Creditors' Meeting and will decide all matters relating to the conduct of the Creditors' Meeting. The only persons entitled to attend the Creditors' Meeting are those persons (including the holders of proxies) entitled to vote at the Creditors' Meeting and the officers, directors and legal counsel of CFI together with such representatives of the Trustee as the Trustee may appoint in its discretion. Any other persons may be admitted on invitation of the chair of the Creditors' Meeting or with the consent of the Creditors.

Adjournment of Meeting

6.4 The Creditors' Meeting may be adjourned in accordance with Section 52 of the Act.

Voting by Creditors

6.5 To the extent provided for herein, each Creditor will be entitled to vote at the Creditors' Meeting to the extent of the amount which is equal to the Proven Claim of such Creditor as allowed by the Act.

Approval by Creditors

6.6 In order for the Proposal to be binding on all of the Creditors, it must first be accepted by the Creditors by a majority in number of the Creditors with Proven Claims who actually

7

Claims Bar Date

5.3 In order to receive a distribution under the Proposal, all Proofs of Claim must be delivered by the Creditors and received by the Trustee within fifteen (15) days of the issuance of the Approval Order (the "Claims Bar Date"). Any and all Creditors who do not file a Proof of Claim by the Claims Bar Date shall not be entitled to any distributions under the Proposal.

PART VI Meetings of Creditors

Creditors' Meetings

6.1 The Trustee will call the Creditors' Meeting in order for the Creditors' Meeting to be held 21 days after the filing of the Proposal with the Official Receiver on such date, time and at such place as may be agreed upon by the Trustee and CFI.

Notice of Creditors' Meetings

6.2 The Trustee shall provide the Creditors with notice of the time and place of the Creditors' Meeting by mail pursuant to the Act. All Proofs of Claim shall be delivered in accordance with the provisions of the Proposal, the Act and any order which may be issued by the Court in respect of the procedure governing the Creditors' Meeting.

Conduct of Creditors' Meetings

6.3 The Official Receiver, or any nominee thereof, shall preside as the chair of the Creditors' Meeting and will decide all matters relating to the conduct of the Creditors' Meeting. The only persons entitled to attend the Creditors' Meeting are those persons (including the holders of proxies) entitled to vote at the Creditors' Meeting and the officers, directors and legal counsel of CFI together with such representatives of the Trustee as the Trustee may appoint in its discretion. Any other persons may be admitted on invitation of the chair of the Creditors' Meeting or with the consent of the Creditors.

Adjournment of Meeting

6.4 The Creditors' Meeting may be adjourned in accordance with Section 52 of the Act.

Voting by Creditors

6.5 To the extent provided for herein, each Creditor will be entitled to vote at the Creditors' Meeting to the extent of the amount which is equal to the Proven Claim of such Creditor as allowed by the Act.

Approval by Creditors

6.6 In order for the Proposal to be binding on all of the Creditors, it must first be accepted by the Creditors by a majority in number of the Creditors with Proven Claims who actually

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vote upon the Proposal (whether in person or by proxy) at the relevant Creditors' Meeting or by a Voting Letter, representing two-thirds in value of the Proven Claims of the Creditors who actually vote upon the Proposal (whether in person or by proxy) at the relevant Creditors' Meeting or by a Voting Letter.

PART VII Inspectors

7.1 At the Creditors' Meeting, the Creditors will be entitled to appoint one or more, but not exceeding five, Inspectors whose powers shall be as follows:

(a) advising the Trustee in respect of such matters as may be referred to the Inspectors by the Trustee;

(b) advising the Trustee concerning any dispute that may arise as to the validity of the Claims of Creditors under this Proposal;

(c) exercising all powers given to the Inspectors of a bankrupt estate appointed pursuant to the provisions of the Act; and

(d) altering or extending the time for payments to be made pursuant to this Proposal, as recommended by the Trustee, but not the total amount paid.

PART VIII Conditions Precedent to Implementation of the Proposal

8.1 As provided for in the Act, the arrangements set out in this Proposal will not take effect unless the conditions set forth below are satisfied:

(a) all approvals and consents to the Proposal that may be required have been obtained;

(b) the Approval Order has been issued and the appeal period in respect of such order has expired; and

(c) no order or decree restraining or enjoining the consummation of the transactions contemplated by this Proposal has been issued.

PART IX Miscellaneous

Effect of Payment

9.1 Upon the delivery of the certificate of performance contemplated by Section 9.3 of the Proposal, the balance of all Claims shall, automatically, be irrevocably and unconditionally assigned to Cogent Biomass Inc., without any further action required on the part of CFI, Cogent Biomass Inc., the Trustee or any Creditor.

8

vote upon the Proposal (whether in person or by proxy) at the relevant Creditors' Meeting or by a Voting Letter, representing two-thirds in value of the Proven Claims of the Creditors who actually vote upon the Proposal (whether in person or by proxy) at the relevant Creditors' Meeting or by a Voting Letter.

PART VII Inspectors

7.1 At the Creditors' Meeting, the Creditors will be entitled to appoint one or more, but not exceeding five, Inspectors whose powers shall be as follows:

(a) advising the Trustee in respect of such matters as may be referred to the Inspectors by the Trustee;

(b) advising the Trustee concerning any dispute that may arise as to the validity of the Claims of Creditors under this Proposal;

(c) exercising all powers given to the Inspectors of a bankrupt estate appointed pursuant to the provisions of the Act; and

(d) altering or extending the time for payments to be made pursuant to this Proposal, as recommended by the Trustee, but not the total amount paid.

PART VIII Conditions Precedent to Implementation of the Proposal

8.1 As provided for in the Act, the arrangements set out in this Proposal will not take effect unless the conditions set forth below are satisfied:

(a) all approvals and consents to the Proposal that may be required have been obtained;

(b) the Approval Order has been issued and the appeal period in respect of such order has expired; and

(c) no order or decree restraining or enjoining the consummation of the transactions contemplated by this Proposal has been issued.

PART IX Miscellaneous

Effect of Payment

9.1 Upon the delivery of the certificate of performance contemplated by Section 9.3 of the Proposal, the balance of all Claims shall, automatically, be irrevocably and unconditionally assigned to Cogent Biomass Inc., without any further action required on the part of CFI, Cogent Biomass Inc., the Trustee or any Creditor.

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Amendment to Proposal

9.2 This Proposal may be amended by CFI with the consent of the Trustee at any time prior to the conclusion of the Creditors' Meeting called to consider the Proposal, provided that any amendment made pursuant to this section shall not reduce the rights and benefits given to the Creditors under the Proposal before any such amendment, and provided further that any and all amendments shall be deemed to be effective as of the filing date of the Proposal.

Performance Certificate

9.3 The Trustee will give CFI and the Official Receiver a certificate of performance, contemplated by Section 65.3 of the Act, following the Trustee being satisfied that all distributions to Creditors contemplated herein are complete.

Court Approval

9.4 After the Creditors' acceptance of the Proposal, the Trustee will proceed to seek the Approval Order from the Court pursuant to Section 58 of the Act.

Binding Effect

9.5 The provisions of this Proposal will be binding on the Creditors, CFI, and their respective heirs, executors, administrators, successors and assigns, upon the Effective Date.

Reviewable Transactions

9.6 Sections 95 to 101 of the Act do not apply to this Proposal.

Outstanding Appeals

9.7 On August 12, 2015, the Court granted the Termination Order. On that same date, CFI served a Notice of Appeal of the Termination Order as well as a Notice of Appeal of the Order of the United States District Court for the Southern District of New York, dated July 14, 2015, which confirmed an arbitration award granted in favour of NS United Kaiun Kaisha Ltd.

9.8 The appeals described in Section 9.7 may affect the timing of the Creditors' Meeting, the granting of the Approval Order and/or the distributions to Creditors contemplated by the Proposal.

Notices

9.9 Any notices or communication to be made or given hereunder shall be in writing and shall refer to this Proposal and may be given by personal delivery, fax or by email addressed to the respective parties as follows:

- 9 -

Amendment to Proposal

9.2 This Proposal may be amended by CFI with the consent of the Trustee at any time prior to the conclusion of the Creditors' Meeting called to consider the Proposal, provided that any amendment made pursuant to this section shall not reduce the rights and benefits given to the Creditors under the Proposal before any such amendment, and provided further that any and all amendments shall be deemed to be effective as of the filing date of the Proposal.

Performance Certificate

9.3 The Trustee will give CFI and the Official Receiver a certificate of performance, contemplated by Section 65.3 of the Act, following the Trustee being satisfied that all distributions to Creditors contemplated herein are complete.

Court Approval

9.4 After the Creditors' acceptance of the Proposal, the Trustee will proceed to seek the Approval Order from the Court pursuant to Section 58 of the Act.

Binding Effect

9.5 The provisions of this Proposal will be binding on the Creditors, CFI, and their respective heirs, executors, administrators, successors and assigns, upon the Effective Date.

Reviewable Transactions

9.6 Sections 95 to 101 of the Act do not apply to this Proposal.

Outstanding Appeals

9.7 On August 12, 2015, the Court granted the Termination Order. On that same date, CFI served a Notice of Appeal of the Termination Order as well as a Notice of Appeal of the Order of the United States District Court for the Southern District of New York, dated July 14, 2015, which confirmed an arbitration award granted in favour of NS United Kaiun Kaisha Ltd.

9.8 The appeals described in Section 9.7 may affect the timing of the Creditors' Meeting, the granting of the Approval Order and/or the distributions to Creditors contemplated by the Proposal.

Notices

9.9 Any notices or communication to be made or given hereunder shall be in writing and shall refer to this Proposal and may be given by personal delivery, fax or by email addressed to the respective parties as follows:

234

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(a) If to CFI:

do Arthur Birnbaum 208-90 Eglinton Ave East Toronto Ontario M4P 2Y3

Fax: 416-483-2737 Email: arthur.birnbaum@,rogers.blackberry.net

Copy to:

Dentons Canada LLP 77 King Street West, Suite 400 Toronto, ON M5K OA 1

Attention: Ken Kraft Fax: 416-863-4592 Email: [email protected]

(b) If to the Trustee:

The Fuller Landau Group Inc. 151 Bloor Street West, 12th Floor Toronto, ON M5S 1S4

Attention: Ken Pearl Fax: 416-645-6501 Email: [email protected]

(c) If to an Unsecured Creditor, to the address, fax number or email for such Unsecured Creditor specified in their Proof of Claim filed by such Unsecured Creditor or, if no Proof of Claim has been filed, to such other address, email or fax number at which the notifying party may reasonably believe that the Unsecured Creditor may be contacted;

or such other address as any party may from time to time notify the others in accordance with this Section. All such notices and communications will be deemed to have been received, in the case of notice by fax, email or delivery prior to 5:00 p.m. on a Business Day, when received or if received after 5:00 p.m. on a Business Day or at any time on a non-Business Day, on the next following Business Day. Any unintentional failure to give a notice contemplated hereunder to any particular Creditor will not invalidate this Proposal or any action taken by any person pursuant to this Proposal, including CFI.

- 10 -

(a) If to CFI:

do Arthur Birnbaum 208-90 Eglinton Ave East Toronto Ontario M4P 2Y3

Fax: 416-483-2737 Email: arthur.birnbaum@,rogers.blackberry.net

Copy to:

Dentons Canada LLP 77 King Street West, Suite 400 Toronto, ON M5K OA 1

Attention: Ken Kraft Fax: 416-863-4592 Email: [email protected]

(b) If to the Trustee:

The Fuller Landau Group Inc. 151 Bloor Street West, 12th Floor Toronto, ON M5S 1S4

Attention: Ken Pearl Fax: 416-645-6501 Email: [email protected]

(c) If to an Unsecured Creditor, to the address, fax number or email for such Unsecured Creditor specified in their Proof of Claim filed by such Unsecured Creditor or, if no Proof of Claim has been filed, to such other address, email or fax number at which the notifying party may reasonably believe that the Unsecured Creditor may be contacted;

or such other address as any party may from time to time notify the others in accordance with this Section. All such notices and communications will be deemed to have been received, in the case of notice by fax, email or delivery prior to 5:00 p.m. on a Business Day, when received or if received after 5:00 p.m. on a Business Day or at any time on a non-Business Day, on the next following Business Day. Any unintentional failure to give a notice contemplated hereunder to any particular Creditor will not invalidate this Proposal or any action taken by any person pursuant to this Proposal, including CFI.

235

Na~ne:'Z•ki r Title: c

I have authority to bind the corporation

PART X Trustee

10.1 Fuller Landau, shall be the Trustee under this Proposal and all monies payable under this Proposal shall be paid over to the Trustee who shall make the payment of all dividends in accordance with the terms of this Proposal.

10.2 Fuller Landau is acting in its capacity as Trustee and not in its personal capacity and no officer, director, employee or agent of Fuller Landau shall incur any obligations or liabilities in connection with this Proposal or in respect of the business or liabilities of CFI.

10.3 Upon payment by the Trustee of the amounts contemplated in Part N of this Proposal, the Trustee shall have discharged its duties as Trustee, and the Trustee shall be entitled to apply for its discharge as Trustee hereunder.

10.4 For greater certainty, the Trustee will not be responsible or liable for any obligations of CFI and will be exempt from any personal liability in fulfilling any duties or exercising any powers conferred upon it by the Proposal unless such acts have been carried out in bad faith and constitute a willful or wrongful act or default.

Dated at , Ontario this fl day of August, 2015.

COGENT FIBRE INC.

Name: A..12ar.ir Title: t. e_444-


Agreed to this 1.1day of August, 2015

COGENT BIOMASS INC.

Na~ne:'Z•ki r Title: c


PART X Trustee

10.1 Fuller Landau, shall be the Trustee under this Proposal and all monies payable under this Proposal shall be paid over to the Trustee who shall make the payment of all dividends in accordance with the terms of this Proposal.

10.2 Fuller Landau is acting in its capacity as Trustee and not in its personal capacity and no officer, director, employee or agent of Fuller Landau shall incur any obligations or liabilities in connection with this Proposal or in respect of the business or liabilities of CFI.

10.3 Upon payment by the Trustee of the amounts contemplated in Part N of this Proposal, the Trustee shall have discharged its duties as Trustee, and the Trustee shall be entitled to apply for its discharge as Trustee hereunder.

10.4 For greater certainty, the Trustee will not be responsible or liable for any obligations of CFI and will be exempt from any personal liability in fulfilling any duties or exercising any powers conferred upon it by the Proposal unless such acts have been carried out in bad faith and constitute a willful or wrongful act or default.

Dated at , Ontario this fl day of August, 2015.

COGENT FIBRE INC.

Name: A..12ar.ir Title: t. e_444-


Agreed to this 1.1day of August, 2015

COGENT BIOMASS INC.

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SCHEDULE A GUARANTEE

TO: The Creditors of Cogent Fibre Inc. (the "Creditors")

FROM: Cogent Biomass Inc. ("Guarantor")

WHEREAS Cogent Fibre Inc. ("CFI") has made a Proposal to its Creditors pursuant to the provisions of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, dated as of today's date (the "Proposal");

AND WHEREAS all capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Proposal;

AND WHEREAS the Guarantor has agreed to guarantee the financial obligations of CFI pursuant to the Proposal;

NOW THEREFORE THIS GUARANTEE WITNESSETH that in consideration for the benefits to the Guarantor of CFI making a Proposal to its Creditors:

I . Guarantee. The Guarantor hereby unconditionally, absolutely and irrevocably guarantees, as a primary obligor and not merely as surety, the due and timely payment of all amounts payable by CFI pursuant to Section 3.2 of the Proposal (the "Obligations"). In the event that CFI fails to make the payments contemplated by Section 3.2 of the Proposal, the Guarantor will make such payments to the Trustee within five (5) Business Days of a request in writing delivered to the Guarantor by the Trustee or any Creditor.

2. Governing Law. This Guarantee shall be construed and enforced in accordance with, and shall be governed by, the laws of the Province of Ontario and the laws of Canada applicable therein (without application of any conflict of laws rules).

DATED the 1,4%-day of August, 2015

COGENT BIOMASS INC.

By:___ _ Name: R6144tr4 Joe 1:4 Title:

- 12 -

SCHEDULE A GUARANTEE

TO: The Creditors of Cogent Fibre Inc. (the "Creditors")

FROM: Cogent Biomass Inc. ("Guarantor")

WHEREAS Cogent Fibre Inc. ("CFI") has made a Proposal to its Creditors pursuant to the provisions of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, dated as of today's date (the "Proposal");

AND WHEREAS all capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Proposal;

AND WHEREAS the Guarantor has agreed to guarantee the financial obligations of CFI pursuant to the Proposal;

NOW THEREFORE THIS GUARANTEE WITNESSETH that in consideration for the benefits to the Guarantor of CFI making a Proposal to its Creditors:

I . Guarantee. The Guarantor hereby unconditionally, absolutely and irrevocably guarantees, as a primary obligor and not merely as surety, the due and timely payment of all amounts payable by CFI pursuant to Section 3.2 of the Proposal (the "Obligations"). In the event that CFI fails to make the payments contemplated by Section 3.2 of the Proposal, the Guarantor will make such payments to the Trustee within five (5) Business Days of a request in writing delivered to the Guarantor by the Trustee or any Creditor.

2. Governing Law. This Guarantee shall be construed and enforced in accordance with, and shall be governed by, the laws of the Province of Ontario and the laws of Canada applicable therein (without application of any conflict of laws rules).

DATED the 1,4%-day of August, 2015

COGENT BIOMASS INC.

By:___ _ Name: R6144tr4 Joe 1:4 Title:

237

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Exhibit "E" to the Affidavit of Arthur Birnbaum, sworn before me this 23rd day of August, 2015.

A Co er or taking affidavits, etc.

- 9 -

Exhibit "E" to the Affidavit of Arthur Birnbaum, sworn before me this 23rd day of August, 2015.

A Co er or taking affidavits, etc.

238

District of ONTARIO Division No. 09 - Toronto COURT NO: 31- 2016058 ESTATE NO: 31- 2016058



IN THE MATTER OF THE PROPOSAL OF COGENT FIBRE INC. Of the City of Toronto,

in the Province of Ontario

TO THE CREDITORS OF COGENT FIBRE INC. (the "Debtor", the "Company" or "CFI")

The Debtor filed a Notice of Intention to Make a Proposal ("Nor) under the Bankruptcy and Insolvency Act ("BIA") on July 15, 2015 and The Fuller Landau Group Inc. consented to act as trustee under the proposal (the "Proposal Trustee") in the administration of the proposal proceedings (the "Proposal Proceedings").

A proposal to creditors was filed with the Official Receiver on August 13, 2015 (the "August 13th Proposal"), and an amended proposal was filed with the Official Receiver on August 17, 2015 (the "August 17th Proposal" or the "Proposal"). We enclose herewith the following documents:

• a formal notice of meeting of creditors; • a copy of the Proposal; • the Statement of Affairs, including a list of creditors; • a proof of claim form and general proxy; and • a voting letter in the event you wish to vote in advance of the meeting of creditors.

A creditors' meeting will be held to consider the Proposal on September 2, 2015, at 2:00 p.m. at the offices of The Fuller Landau Group Inc. 151 Bloor Street West, 12th Floor, Toronto, Ontario, M5S 1S4.

In order to be eligible to vote, either at or before the meeting, the Proposal Trustee must receive prior to the meeting a properly executed proof of claim, together with your Statement of Account, attached thereto as Schedule "A". If you intend to have an individual represent you at the upcoming meeting, you must properly complete the proxy form attached to the proof of claim, and therein name the individual representing you. All companies must name a proxy. For your convenience, you may vote in advance of the meeting by returning to us the attached voting letter with your completed proof of claim.

District of ONTARIO Division No. 09 - Toronto COURT NO: 31- 2016058 ESTATE NO: 31- 2016058



IN THE MATTER OF THE PROPOSAL OF COGENT FIBRE INC. Of the City of Toronto,

in the Province of Ontario

TO THE CREDITORS OF COGENT FIBRE INC. (the "Debtor", the "Company" or "CFI")

The Debtor filed a Notice of Intention to Make a Proposal ("Nor) under the Bankruptcy and Insolvency Act ("BIA") on July 15, 2015 and The Fuller Landau Group Inc. consented to act as trustee under the proposal (the "Proposal Trustee") in the administration of the proposal proceedings (the "Proposal Proceedings").

A proposal to creditors was filed with the Official Receiver on August 13, 2015 (the "August 13 th Proposal"), and an amended proposal was filed with the Official Receiver on August 17, 2015 (the "August 17 th Proposal" or the "Proposal"). We enclose herewith the following documents:

• a formal notice of meeting of creditors; • a copy of the Proposal; • the Statement of Affairs, including a list of creditors; • a proof of claim form and general proxy; and • a voting letter in the event you wish to vote in advance of the meeting of creditors.

A creditors' meeting will be held to consider the Proposal on September 2, 2015, at 2:00 p.m. at the offices of The Fuller Landau Group Inc. 151 Bloor Street West, 12th Floor, Toronto, Ontario, M5S 1S4.

In order to be eligible to vote, either at or before the meeting, the Proposal Trustee must receive prior to the meeting a properly executed proof of claim, together with your Statement of Account, attached thereto as Schedule "A". If you intend to have an individual represent you at the upcoming meeting, you must properly complete the proxy form attached to the proof of claim, and therein name the individual representing you. All companies must name a proxy. For your convenience, you may vote in advance of the meeting by returning to us the attached voting letter with your completed proof of claim.

239

Please send any documents you are forwarding to the Proposal Trustee to the attention of Ken Pearl by facsimile at 416-645-6501 or by email to: [email protected].

If the Proposal is accepted by the statutory majority of creditors, and approved by the Ontario Superior Court of Justice (In Bankruptcy and Insolvency) (the "Court"), the Proposal will become legally binding on the Debtor and all of its creditors.

The purpose of this report of the Proposal Trustee (the "Proposal Trustee's Report to Creditors") is to provide creditors with the necessary information they need to make a well-informed decision on the acceptance or refusal of the Proposal.

For reference purposes, any capitalized terms not otherwise defined in this report shall have the meanings ascribed to them in the Proposal.

BACKGROUND AND CAUSES OF FINANCIAL DIFFICULTIES

CF1 is a privately held company and the wholly owned subsidiary of Cogent Biomass, Inc. ("Biomass"). CFI was originally incorporated in 2006 as Cogent Fibre, LLC, pursuant to the laws of the State of Delaware. In 2011 CFI changed its name to "Cogent Fibre Inc.", continued pursuant to the federal laws of Canada and extra-provincially registered in Ontario. Its head office is located in Toronto, Ontario.

Although based in Canada, CFI carried on business exporting woodchips from the eastern seaboard of the United States (North Carolina and Georgia) primarily to customers in Europe, mainly in Turkey, where the woodchips were used in manufacturing of particleboard and medium-density fiberboard as well as to generate clean, renewable energy at biomass-fired power plants. Biomass was CFI's sole source of financing, and has been periodically funding CFI's operations on a secured basis.

CFI primarily shipped its products under contracts with NS United Kaiun Kaisha, Ltd. ("NSU") and Nippon Yusen Kaisha ("NYK"), two Japanese shipping companies. As a result of the economic slowdown of 2008, there was depressed demand for CFI's products and CFI was unable to generate sufficient sales to meet the quotas under its agreements with NSU and NYK. Disputes arose with NSU, which resulted in complex and expensive maritime arbitrations in New York, commencing in early 2012.

Recently, CFI lost an arbitration decision in favour of NSU. On January 23, 2015, the arbitration panel issued its findings and awarded damages in favour of NSU in the total amount of US$11,606,421 (the "Arbitration Award"). In March, 2015, NSU commenced a proceeding for confirmation and enforcement of the Arbitration Award against Cogent by filing a petition in the United States District Court for the Southern District of New York (the "District Court"). On July 14, 2015 the District Court confirmed the Arbitration Award (the "Confirmation Order").

In addition, NYK claims to be owed a total of approximately US$10.9 million, which amount has not been agreed to by CFI who claims that approximately US$8 million of this

2

Please send any documents you are forwarding to the Proposal Trustee to the attention of Ken Pearl by facsimile at 416-645-6501 or by email to: [email protected].

If the Proposal is accepted by the statutory majority of creditors, and approved by the Ontario Superior Court of Justice (In Bankruptcy and Insolvency) (the "Court"), the Proposal will become legally binding on the Debtor and all of its creditors.

The purpose of this report of the Proposal Trustee (the "Proposal Trustee's Report to Creditors") is to provide creditors with the necessary information they need to make a well-informed decision on the acceptance or refusal of the Proposal.

For reference purposes, any capitalized terms not otherwise defined in this report shall have the meanings ascribed to them in the Proposal.

BACKGROUND AND CAUSES OF FINANCIAL DIFFICULTIES

CF1 is a privately held company and the wholly owned subsidiary of Cogent Biomass, Inc. ("Biomass"). CFI was originally incorporated in 2006 as Cogent Fibre, LLC, pursuant to the laws of the State of Delaware. In 2011 CFI changed its name to "Cogent Fibre Inc.", continued pursuant to the federal laws of Canada and extra-provincially registered in Ontario. Its head office is located in Toronto, Ontario.

Although based in Canada, CFI carried on business exporting woodchips from the eastern seaboard of the United States (North Carolina and Georgia) primarily to customers in Europe, mainly in Turkey, where the woodchips were used in manufacturing of particleboard and medium-density fiberboard as well as to generate clean, renewable energy at biomass-fired power plants. Biomass was CFI's sole source of financing, and has been periodically funding CFI's operations on a secured basis.

CFI primarily shipped its products under contracts with NS United Kaiun Kaisha, Ltd. ("NSU") and Nippon Yusen Kaisha ("NYK"), two Japanese shipping companies. As a result of the economic slowdown of 2008, there was depressed demand for CFI's products and CFI was unable to generate sufficient sales to meet the quotas under its agreements with NSU and NYK. Disputes arose with NSU, which resulted in complex and expensive maritime arbitrations in New York, commencing in early 2012.

Recently, CFI lost an arbitration decision in favour of NSU. On January 23, 2015, the arbitration panel issued its findings and awarded damages in favour of NSU in the total amount of US$11,606,421 (the "Arbitration Award"). In March, 2015, NSU commenced a proceeding for confirmation and enforcement of the Arbitration Award against Cogent by filing a petition in the United States District Court for the Southern District of New York (the "District Court"). On July 14, 2015 the District Court confirmed the Arbitration Award (the "Confirmation Order").

In addition, NYK claims to be owed a total of approximately US$10.9 million, which amount has not been agreed to by CFI who claims that approximately US$8 million of this

2

240

amount is contingent. At the time of filing of the NO1, NYK and CFI were in the early stages of an arbitration proceeding. The only other known creditor of CFI is Canada Revenue Agency for income tax debt of approximately $50,000.

Given that most of CFI's creditors are located outside Canada, and due to the Confirmation Order, CFI commenced proceedings in order to seek recognition of the NO) Proceedings pursuant to chapter 15 of title II of the United States Code (the "Chapter 15 Proceedings"). By an order of this Court dated July 17, 2015, CFI was appointed as the foreign representative in respect of the NO1 Proceedings (the "Foreign Representative").

On July 17, 2015, the Foreign Representative filed a petition for recognition of the NO1 Proceedings (the "Petitioner's Verified Petition") with the United States Bankruptcy Court for the Southern District of New York (the "US Bankruptcy Court"). The US Bankruptcy Court issued an order dated July 20, 2015, which stays all proceedings against CFI, pending further order of the Canadian Court, until the US Bankruptcy Court enters a final ruling on the Petitioner's Verified Petition.

On August 4, 2015, NSU filed a motion record which asks the Ontario Court to terminate the NO1 Proceedings and states that NSU will oppose any request by Cogent for an extension to file a proposal (the "NSU Motion"). On August 5, 2015, each of NSU and NYK filed objections to the Chapter 15 Proceedings with the US Bankruptcy Court.

On August 6, 2015, Cogent filed a motion record to request that the Court issue an order approving a 45 day extension from August 14, 2015 to September 28, 2015 (the "Request for Extension Motion") to file a proposal. On August 10, 2015, the US Bankruptcy Court stayed the Chapter 15 Proceedings pending the outcome of the NSU Motion and the Request for Extension Motion.

On August 12, 2015 the Court heard the NSU Motion and the Request for Extension Motion. By an order of Mr. Justice Penny dated August 12, 2015 (the "August 12th Order"), the Request for Extension Motion was dismissed and the Proposal Proceedings were terminated, which would mean that CFI would be deemed bankrupt. However, during the afternoon of August 12, 2015 CFI filed a Notice of Appeal of the August 12th Order, which stayed the August 12th Order and the deemed bankruptcy. In order to comply with the thirty day deadline of August 14, 2015, CFI filed the August 13th Proposal with the Proposal Trustee.

On August 20, 2015, NSU asked Mr. Justice Penny to issue an order that the Proposal Proceedings be stayed and that the Proposal Trustee be relieved of its obligations under the BIA arising from CF1 filing the August 13th Proposal, pending a disposition by the Court of appeal commenced by CFI of the August l 2th Order. A meeting with Mr. Justice Penny has been scheduled for the morning of August 25, 2015. Subject to any further orders of the Court, the Proposal Trustee has an obligation to continue to carry out its duties pursuant to the BIA, which include sending the Proposal Trustee's Report to Creditors and scheduling a meeting of creditors for the purpose of voting on the August 17th Proposal.

amount is contingent. At the time of filing of the NO1, NYK and CFI were in the early stages of an arbitration proceeding. The only other known creditor of CFI is Canada Revenue Agency for income tax debt of approximately $50,000.

Given that most of CFI's creditors are located outside Canada, and due to the Confirmation Order, CFI commenced proceedings in order to seek recognition of the NO) Proceedings pursuant to chapter 15 of title II of the United States Code (the "Chapter 15 Proceedings"). By an order of this Court dated July 17, 2015, CFI was appointed as the foreign representative in respect of the NO1 Proceedings (the "Foreign Representative").

On July 17, 2015, the Foreign Representative filed a petition for recognition of the NO1 Proceedings (the "Petitioner's Verified Petition") with the United States Bankruptcy Court for the Southern District of New York (the "US Bankruptcy Court"). The US Bankruptcy Court issued an order dated July 20, 2015, which stays all proceedings against CFI, pending further order of the Canadian Court, until the US Bankruptcy Court enters a final ruling on the Petitioner's Verified Petition.

On August 4, 2015, NSU filed a motion record which asks the Ontario Court to terminate the NO1 Proceedings and states that NSU will oppose any request by Cogent for an extension to file a proposal (the "NSU Motion"). On August 5, 2015, each of NSU and NYK filed objections to the Chapter 15 Proceedings with the US Bankruptcy Court.

On August 6, 2015, Cogent filed a motion record to request that the Court issue an order approving a 45 day extension from August 14, 2015 to September 28, 2015 (the "Request for Extension Motion") to file a proposal. On August 10, 2015, the US Bankruptcy Court stayed the Chapter 15 Proceedings pending the outcome of the NSU Motion and the Request for Extension Motion.

On August 12, 2015 the Court heard the NSU Motion and the Request for Extension Motion. By an order of Mr. Justice Penny dated August 12, 2015 (the "August 12th Order"), the Request for Extension Motion was dismissed and the Proposal Proceedings were terminated, which would mean that CFI would be deemed bankrupt. However, during the afternoon of August 12, 2015 CFI filed a Notice of Appeal of the August 12th Order, which stayed the August 12th Order and the deemed bankruptcy. In order to comply with the thirty day deadline of August 14, 2015, CFI filed the August 13th Proposal with the Proposal Trustee.

On August 20, 2015, NSU asked Mr. Justice Penny to issue an order that the Proposal Proceedings be stayed and that the Proposal Trustee be relieved of its obligations under the BIA arising from CF1 filing the August 13th Proposal, pending a disposition by the Court of appeal commenced by CFI of the August l 2th Order. A meeting with Mr. Justice Penny has been scheduled for the morning of August 25, 2015. Subject to any further orders of the Court, the Proposal Trustee has an obligation to continue to carry out its duties pursuant to the BIA, which include sending the Proposal Trustee's Report to Creditors and scheduling a meeting of creditors for the purpose of voting on the August 17th Proposal.

241

FINANCIAL POSITION AND EVALUATION OF ASSETS

A summary of the book value of CH's assets and liabilities as reported on the Company's statement of affairs dated August 13, 2015 is as follows:

Cash in bank $ 18,743 Unsecured liabilities $ 19,309,933

$ 18,743 $ 19,309,933

CFI has treated the claims of NSU and NYK as contingent in its financial records. A summary of CFI's internal balance sheets as at December 31, 2011, 2012, 2013, 2014, and July 15, 2015 is as follows:

Alsets July 15/15 Dec 31/14

Balance Sheets As At

Dec 31/13 Dec 31/12 Dec 31/11 Cash 20,665 122,086 4,242 246,160 645,969 Accounts receivable 108,783 7,242 4,433,406 479,260 Inventory 0 3,059,523 1,747,141 4,607,010 4,382,570 Prepaid expenses and deposits 0 9,108 71,935 98,963 29,067 Miscellaneous 0 1,033 3,884

20,665 3300,533 1,830,560 9,385,539 5,540,750

Shareholder - Cogent Biomass- see Note 240,811 1,723,526 1,439,969 887,060 1,864,457 240,811 1,723,526 1,439,969 887,060 1,864,457 261,476 5,024,059 3,270,529 10,272,599 7,405,207

Liabilities Accounts payable 1,120,000 3,267,401 2,788,985 8,638,233 5,286,741 Accrued liabilities 95,308 368,948 1,131,294 271,772 Corporate tax payable 50,000 50,000 50,000 50,000 451,118 Loan Payable - CFP 1,500,000

1,170,000 4,912,709 3,207,933 9,819,527 6,009,631 Share capital 1 1 1 Retained earnings (908,525) 111,349 62,595 453,071 1,395,575

(908,524) 1 I 1,350 62,596 453,072 1,395,576 261,476 5,024,059 3,270,529 10,272,599 7,405,207

Note - since July 15, 2015, Biomass has repaid the shareholder loan by funding CFI's professional fees for the Proposal Proceedings and the Chapter 15 Proceedings.

A search of the Personal Property Security Act (Ontario) dated July 21, 2015 shows that Biomass and CFP International Inc, (both related parties to CFI) had financing charges registered on December 12, 2011 against CFI, however at the date of filing of the NOI, no amounts were owing to either party. A legal opinion has not been obtained on the validity of any registered charges.

4

FINANCIAL POSITION AND EVALUATION OF ASSETS

A summary of the book value of CH's assets and liabilities as reported on the Company's statement of affairs dated August 13, 2015 is as follows:

Cash in bank $ 18,743 Unsecured liabilities $ 19,309,933

$ 18,743 $ 19,309,933

CFI has treated the claims of NSU and NYK as contingent in its financial records. A summary of CFI's internal balance sheets as at December 31, 2011, 2012, 2013, 2014, and July 15, 2015 is as follows:

Alsets July 15/15 Dec 31/14

Balance Sheets As At

Dec 31/13 Dec 31/12 Dec 31/11 Cash 20,665 122,086 4,242 246,160 645,969 Accounts receivable 108,783 7,242 4,433,406 479,260 Inventory 0 3,059,523 1,747,141 4,607,010 4,382,570 Prepaid expenses and deposits 0 9,108 71,935 98,963 29,067 Miscellaneous 0 1,033 3,884

20,665 3300,533 1,830,560 9,385,539 5,540,750

Shareholder - Cogent Biomass- see Note 240,811 1,723,526 1,439,969 887,060 1,864,457 240,811 1,723,526 1,439,969 887,060 1,864,457 261,476 5,024,059 3,270,529 10,272,599 7,405,207

Liabilities Accounts payable 1,120,000 3,267,401 2,788,985 8,638,233 5,286,741 Accrued liabilities 95,308 368,948 1,131,294 271,772 Corporate tax payable 50,000 50,000 50,000 50,000 451,118 Loan Payable - CFP 1,500,000

1,170,000 4,912,709 3,207,933 9,819,527 6,009,631 Share capital 1 1 1 Retained earnings (908,525) 111,349 62,595 453,071 1,395,575

(908,524) 1 I 1,350 62,596 453,072 1,395,576 261,476 5,024,059 3,270,529 10,272,599 7,405,207

Note - since July 15, 2015, Biomass has repaid the shareholder loan by funding CFI's professional fees for the Proposal Proceedings and the Chapter 15 Proceedings.

A search of the Personal Property Security Act (Ontario) dated July 21, 2015 shows that Biomass and CFP International Inc, (both related parties to CFI) had financing charges registered on December 12, 2011 against CFI, however at the date of filing of the NOI, no amounts were owing to either party. A legal opinion has not been obtained on the validity of any registered charges.

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CFI has wound down its operations and currently has no operating business. CFI has not prepared external financial statements or filed income tax returns for the fiscal years ended December 31, 2012, 2013 and 2014.

SUMMARY OF PROPOSAL

The purpose of the August 17th Proposal is to provide a distribution to creditors, which will be of greater benefit than what creditors would receive from a liquidation of CFI's remaining assets. The following summarizes key points of the August 17th Proposal. All amounts referred to are in Canadian dollars unless otherwise noted. For reference purposes, any capitalized terms not otherwise defined shall have the meanings ascribed to them in the August 17th Proposal.

• Funding

The funding of the August 17th Proposal, which has been guaranteed by Biomass, consists of a total of US$1,025,000 (the "Proposal Funds"), which will be paid to the Proposal Trustee over a three year term as follows:

(a) on the Business Day next following the issuance of the Approval Order (as defined in the August 17th Proposal), CFI will pay US$500,000 to the Proposal Trustee; and

(b) on each anniversary of the Approval Order, CFI will pay an additional US$175,000 to the Trustee, up to a maximum of US$525,000.

• Distributions to Creditors

The Proposal Funds, net of Administrative Fees and Expenses (fees and disbursements and legal fees and disbursements of the Proposal Trustee related to the preparation and implementation of the Proposal) will be distributed to creditors who have filed Proof of Claims by the Claims Bar Date (which are accepted as Proven Claims) according to the following scheme of distribution as set forth in the B1A:

(a) Source deduction liabilities (including interest and penalties), if any - CFI advises that there are no outstanding source deduction liabilities, however Canada Revenue Agency has contacted the Proposal Trustee to arrange for an audit.

(b) Wages and Vacation pay owing to Employees pursuant to section 136(1) of the BIA, if any - CFI advises that there are no wages or vacation pay amounts owing.

(c) Secured Creditors' claims will be paid in accordance with existing agreements and secured claims of related parties will not be entitled to any distributions - CFI advises that there are no amounts owing to secured creditors who are not related to CFI.

(d) Preferred Creditors are to be paid in full - CFI advises that there are no amounts owing to Preferred Creditors.

(e) Unsecured Creditors.

5

CFI has wound down its operations and currently has no operating business. CFI has not prepared external financial statements or filed income tax returns for the fiscal years ended December 31, 2012, 2013 and 2014.

SUMMARY OF PROPOSAL

The purpose of the August 17th Proposal is to provide a distribution to creditors, which will be of greater benefit than what creditors would receive from a liquidation of CFI's remaining assets. The following summarizes key points of the August 17th Proposal. All amounts referred to are in Canadian dollars unless otherwise noted. For reference purposes, any capitalized terms not otherwise defined shall have the meanings ascribed to them in the August 17th Proposal.

• Funding

The funding of the August 17th Proposal, which has been guaranteed by Biomass, consists of a total of US$1,025,000 (the "Proposal Funds"), which will be paid to the Proposal Trustee over a three year term as follows:

(a) on the Business Day next following the issuance of the Approval Order (as defined in the August 17th Proposal), CFI will pay US$500,000 to the Proposal Trustee; and

(b) on each anniversary of the Approval Order, CFI will pay an additional US$175,000 to the Trustee, up to a maximum of US$525,000.

• Distributions to Creditors

The Proposal Funds, net of Administrative Fees and Expenses (fees and disbursements and legal fees and disbursements of the Proposal Trustee related to the preparation and implementation of the Proposal) will be distributed to creditors who have filed Proof of Claims by the Claims Bar Date (which are accepted as Proven Claims) according to the following scheme of distribution as set forth in the B1A:

(a) Source deduction liabilities (including interest and penalties), if any - CFI advises that there are no outstanding source deduction liabilities, however Canada Revenue Agency has contacted the Proposal Trustee to arrange for an audit.

(b) Wages and Vacation pay owing to Employees pursuant to section 136(1) of the BIA, if any - CFI advises that there are no wages or vacation pay amounts owing.

(c) Secured Creditors' claims will be paid in accordance with existing agreements and secured claims of related parties will not be entitled to any distributions - CFI advises that there are no amounts owing to secured creditors who are not related to CFI.

(d) Preferred Creditors are to be paid in full - CFI advises that there are no amounts owing to Preferred Creditors.

(e) Unsecured Creditors.

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