LIQUIDATING TRUST AGREEMENT

 

This Liquidating Trust Agreement (this “Agreement”) dated as of October 17,
2012, by and between ShengdaTech, Inc. (the “Debtor”), the debtor and debtor in
possession in the Chapter 11 case pending in the United States Bankruptcy Court
for the District of Nevada, Case No. 11-52649 (BTB) (the “Chapter 11 Case”) and
Michael Kang, not individually, but solely in his capacity as liquidating
trustee (together with any successor appointed pursuant to the terms hereof, the
“Liquidating Trustee”). The Debtor and the Liquidating Trustee are referred to
herein collectively as the “Parties” and individually as a “Party”. All
capitalized terms used herein shall have those meanings set forth in Article I
of this Agreement and, if not defined in Article I of this Agreement, the Plan.

 

R E C I T A L S:

 

(A) On August 19, 2011, the Debtor filed a voluntary petition for relief under
chapter 11 of the Bankruptcy Code in the Bankruptcy Court.

 

(B) On September 2, 2011, the Bankruptcy Court confirmed the appointment of
Michael Kang as Chief Restructuring Officer to the Debtor [Docket No. 80].

 

(C) On ________, 2012, the Bankruptcy Court entered the Confirmation Order.
[Docket No. ___]

 

(D) The Plan provides for the creation of a post-confirmation Liquidating Trust
to hold and administer the Liquidating Trust Assets and Reserves and to
distribute the proceeds therefrom to the Liquidating Trust Beneficiaries, in
accordance with the terms of this Agreement and the Plan. This Agreement is
executed to establish the Liquidating Trust and to facilitate the Plan.

 

(E) The Liquidating Trust is created on behalf of, and for the benefit of, the
Liquidating Trust Beneficiaries.

 

(F) The respective powers, authority, responsibilities and duties of the
Liquidating Trustee and the Liquidating Trust Advisory Board shall be governed
by this Agreement, the Plan, the Confirmation Order and other applicable orders
issued by the Bankruptcy Court.

 

(G) This Agreement is intended to supplement, complement and implement the Plan;
provided, however, that except as otherwise expressly stated herein, if any of
the terms and/or provisions of this Agreement conflict with the terms and/or
provisions of the Plan, then the Plan shall govern.

 

(H) The Liquidating Trust is intended to qualify as a “liquidating trust” under
the Internal Revenue Code of 1986 as amended (the “IRC”) and the regulations
promulgated thereunder, specifically Treas. Reg. § 301.7701-4(d), and as a
“grantor trust” for federal income tax purposes pursuant to IRC Section 671677,
with the Liquidating Trust Beneficiaries to be treated as the grantors and
owners of the Liquidating Trust.

 

                                       

 

 

 

(i)The Liquidating Trust is organized for the primary purpose of liquidating the
Liquidating Trust Assets, with no objective to conduct a trade or business
except to the extent reasonably necessary to, and consistent with, the
liquidating purpose of the Liquidating Trust. The Liquidating Trust shall not be
deemed a successor of the Debtor or its Estate;

 

(ii)This Agreement provides that the Liquidating Trust Beneficiaries of the
Liquidating Trust will be treated as the grantors of the Liquidating Trust and
deemed owners of the Liquidating Trust Assets, and, further, requires the
Liquidating Trustee to file returns for the Liquidating Trust as a grantor trust
pursuant to Treas. Reg. §1.671-4(a);

 

(iii)This Agreement provides for consistent valuations of the transferred
property by the Liquidating Trustee and the Liquidating Trust Beneficiaries, and
those valuations shall be used for all federal income tax purposes;

 

(iv)The transfer of the Liquidating Trust Assets to the Liquidating Trust shall
be treated as a deemed transfer of assets from the Debtor to the Liquidating
Trust Beneficiaries, followed by a deemed transfer by such Liquidating Trust
Beneficiaries to the Liquidating Trust for federal income tax purposes.

 

(v)All of the Liquidating Trust’s income is to be treated as subject to tax on a
current basis to the Liquidating Trust Beneficiaries who will be responsible for
payment of any tax due;

 

(vi)This Liquidating Trust contains a fixed or determinable termination date in
that it shall be dissolved as soon as practicable, but in no event later than
the third (3rd) anniversary of the Effective Date; provided, however, that, on
or prior to the date three (3) months prior to such termination, the Bankruptcy
Court, upon motion by a party-in interest, may extend the term of the
Liquidating Trust for a finite period, if such an extension is necessary to
liquidate the Liquidating Trust Assets. Notwithstanding the foregoing, multiple
extensions can be obtained so long as Bankruptcy Court approval is obtained at
least three (3) months prior to the expiration of each extended term; provided,
however, that the Liquidating Trustee receives an opinion of counsel or a
favorable ruling from the Internal Revenue Service that any further extension
would not adversely affect the status of the Liquidating Trust as a grantor
trust for federal income tax purposes. After (a) the final Distribution of the
Reserves and the balance of the assets or proceeds of the Liquidating Trust
pursuant to the Plan, and (b) the Filing by or on behalf of the Liquidating
Trust of a certification of dissolution with the Bankruptcy Court in accordance
with the Plan, the Liquidating Trust shall be deemed dissolved for all purposes
without the necessity for any other or further actions;

  

(vii)The right and power of the Liquidating Trustee to invest the Liquidating
Trust Assets transferred to the Liquidating Trust, the proceeds thereof, or any
income earned by the Liquidating Trust, shall be limited to the right and power
to invest such Liquidating Trust Assets (pending distributions in accordance
with the Plan) as set forth herein and in the Plan; provided, however, the
Liquidating Trust’s right and power to make such investments shall be limited to
the power to invest in demand and time deposits in banks or savings
institutions, or temporary investments such as short term certificates of
deposit or Treasury bills or other investments that a “liquidating trust” within
the meaning of Treasury Regulation Section 301.7701-4(d) may be permitted to
hold, pursuant to the Treasury Regulations or any modification in the IRS
guidelines; and

 

 

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(viii)The Liquidating Trustee is required to distribute at least once per
twelve-month period to the Liquidating Trust Beneficiaries the Liquidating
Trust’s net income plus all net proceeds from the sale or liquidation of the
Liquidating Trust Assets, to the extent appropriate, in his sole discretion, and
except that the Liquidating Trustee may retain an amount of net proceeds or net
income reasonably necessary to maintain the value of the Liquidating Trust
Assets, to satisfy current and projected expenses of the Liquidating Trust, or
to meet Claims and contingent liabilities (including Disputed Claims).

 

NOW, THEREFORE, in consideration of the promises and the mutual covenants and
agreements contained herein and in the Plan, the Parties agree as follows:

 

 

Article I
DEFINITIONS; interpretation

 

1.1Defined Terms.

 

The following terms when used in this Agreement including its preamble and
recitals, shall, except where the context otherwise requires, have the following
meanings:

 

“6.0% Noteholders” shall mean the Holders of the 6.0% Notes as of the
Distribution Record Date.

 

“6.5% Noteholders” shall mean the Holders of the 6.5% Notes as of the
Distribution Record Date.

 

“6.0% Notes” shall mean the unsecured notes issued by the Debtor with an initial
principal balance totaling $115,000,000, an interest rate of 6.0% and a maturity
date of June 1, 2018.

 

 

“6.5% Notes” shall mean the unsecured notes issued by the Debtor with an initial
principal balance totaling $130,000,000 with an interest rate of 6.5% and a
maturity date of December 15, 2015.

 

“A&M” shall mean Alvarez & Marsal North America LLC.

 

 

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“Administrative Claim” shall mean a Claim for costs and expenses of
administration of the Chapter 11 Case allowed under sections 503(b), 507(b) or,
if applicable, 1114(e)(2) of the Bankruptcy Code, including: (a) any
compensation for legal, financial, advisory, accounting and other services and
reimbursement of expenses allowed by the Bankruptcy Court under sections 327,
330, 331, 363 or 503(b) of the Bankruptcy Code to the extent incurred on or
prior to the Effective Date; (b) all fees and charges assessed against the
Debtor’s Estate under section 1930, chapter 123 of title 28 of the United States
Code; and (c) to the extent such payments exist, any payment to be made under
the Plan or otherwise to cure a default on an assumed Executory Contract.

 

“Agreement” shall have the meaning set forth in the first paragraph hereof.

 

“Affiliate” shall mean “affiliate” as defined in section 101(2) of the
Bankruptcy Code.

 

“Allowed” shall mean all of or a portion of a Claim against the Debtor or an
Equity Interest in the Debtor (a) that has been listed by the Debtor in its
Schedules as liquidated in amount and not Disputed or Contingent, and with
respect to which no contrary proof of Claim or proof of Equity Interest has been
filed, (b) as to which no objection or request for estimation has been Filed on
or before the Claims Objection Deadline or the expiration of such other
applicable period fixed by the Bankruptcy Court, (c) as to which any objection
has been settled, waived, withdrawn or denied by a Final Order, or (d) that is
allowed (i) by a Final Order, (ii) by an agreement between the Holder of such
Claim or Equity Interest and the Debtor prior to the Effective Date, or the
Liquidating Trustee on or after the Effective Date or (iii) pursuant to the
terms of the Plan. For purposes of computing Distributions under the Plan, a
Claim or Equity Interest that has been deemed “Allowed” shall not include
interest, costs, fees or charges on such Claim or Equity Interest from and after
the Petition Date, except as provided in section 506(b) of the Bankruptcy Code
or as otherwise expressly set forth in the Plan.

 

“Bank Account” shall mean the checking account currently maintained by the
Debtor with a New York branch of JPMorgan Chase Bank N.A. under Account Number
*****5109.

 

“Bankruptcy Code” shall mean title 11 of the United States Code, 11 U.S.C. §§
101 et seq., and as such title has been, or may be, amended from time to time,
to the extent that any such amendment is applicable to this Chapter 11 Case.

 

“Bankruptcy Court” shall mean the United States Bankruptcy Court for the
District of Nevada.

  

“Bankruptcy Rules” shall mean the Federal Rules of Bankruptcy Procedure, the
Official Bankruptcy Forms or the Local Rules of the Bankruptcy Court, and as
each has been, or may be, amended from time to time, to the extent that any such
amendment is applicable to this Chapter 11 Case.

 

“Business Day” shall mean any day, other than a Saturday, Sunday or a legal
holiday (as that term is defined in Bankruptcy Rule 9006(a)).

 

 

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“Causes of Action” shall mean all Claims, actions, causes of action, choses in
action, suits, debts, dues, damages, defenses, judgments, third-party claims,
counterclaims, and cross claims (including all Claims arising under state,
federal or other non-bankruptcy law, and any avoidance, recovery, subordination
or other actions against Insiders and/or any other Persons or Entities under the
Bankruptcy Code, including any and all Claims and causes of action under
sections 506, 510, 542, 543, 544, 545, 547, 548, 549, 550, 551, and 553 of the
Bankruptcy Code) that are or may be asserted (by lawsuit, demand letter, proof
of claim or otherwise) pending or existing on the Effective Date against any
Person or Entity, based in law or equity, including under the Bankruptcy Code,
whether direct, indirect, known or unknown, derivative, or otherwise and whether
asserted or unasserted that have not been released by the Plan or any other
order of the Bankruptcy Court.

 

“Chapter 11 Case” shall have the meaning set forth in the first paragraph of
this Agreement.

 

“Claim” or “Claims” shall mean a claim or claims against the Debtor, as such
term is defined in section 101(5) of the Bankruptcy Code.

 

“Claims Objection Deadline” shall mean one hundred and eighty (180) days after
the Effective Date, or such later date as may be ordered by the Bankruptcy
Court, provided, however, that the Liquidating Trustee may seek extensions of
this date from the Bankruptcy Court.

 

“Class” shall mean each category or group of Holders of Claims or Equity
Interests that has been designated as a class in Article II of the Plan.

 

“Committee” shall mean the Official Committee of Unsecured Creditors appointed
in the Chapter 11 Case.

 

“Confidential Party” and “Confidential Parties” shall have the meaning set forth
in Article 19.4

 

“Confirmation Date” shall mean the date upon which the Bankruptcy Court enters
the Confirmation Order on the docket of the Chapter 11 Case, within the meaning
of Bankruptcy Rules 5003 and 9021.

 

“Confirmation Order” shall mean the order of the Bankruptcy Court confirming the
Plan pursuant to, among others, section 1129 of the Bankruptcy Code.

 

“Contingent” shall mean, with reference to a Claim, a Claim that has not accrued
or is not otherwise payable and the accrual of which, or the obligation to make
payment on which, is dependent upon a future event that may or may not occur.

 

“Creditor” shall have the meaning ascribed to such term in section 101(10) of
the Bankruptcy Code.

 

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“D&O Policies” shall mean the directors and officers insurance policies
purchased by the Debtor, Faith Bloom and/or the PRC Subsidiaries, whether
purchased prior to or after the Petition Date.

 

“Debtor” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Disallowed” shall mean with respect to any Claim or portion thereof, any Claim
against or Equity Interest in the Debtor which: (i) has been disallowed, in
whole or part, by a Final Order; (ii) has been withdrawn by agreement of the
Holder thereof and the Debtor or Liquidating Trustee, as applicable, in whole or
in part; (iii) has been withdrawn, in whole or in part, by the Holder thereof;
(iv) if listed in the Schedules as zero or as Disputed, Contingent or
unliquidated and in respect of which a proof of Claim or proof of Equity
Interest has not been timely Filed or deemed timely Filed pursuant to the Plan,
the Bankruptcy Code or any Final Order or other applicable law; (v) has been
reclassified, expunged, subordinated or estimated to the extent that such
reclassification, expungement, subordination or estimation results in a
reduction in the Filed amount of any proof of Claim or proof of Equity Interest;
(vi) is evidenced by a proof of Claim or a proof of Equity Interest which has
been Filed, or which has been deemed to be Filed under applicable law or order
of the Bankruptcy Court or which is required to be Filed by order of the
Bankruptcy Court but as to which such proof of Claim or proof of Equity Interest
was not timely or properly Filed; (vii) is unenforceable to the extent provided
in section 502(b) of the Bankruptcy Code; (viii) where the holder of a Claim is
a Person or Entity from which property is recoverable under sections 542, 543,
550, or 553 of the Bankruptcy Code or that is a transferee of a transfer
avoidable under sections 522(f), 522(h), 544, 545, 547, 548, 549, or 724(a) of
the Bankruptcy Code, unless such Person, Entity or transferee has paid the
amount, or turned over any such Property, for which such Person, Entity or
transferee is liable under section 522(i), 542, 543, 550, or 553 of the
Bankruptcy Code; or (ix) is for reimbursement or contribution that is Contingent
as of the time of allowance or disallowance of such Claim. In each case a
Disallowed Claim or a Disallowed Equity Interest is disallowed only to the
extent of disallowance, withdrawal, reclassification, expungement, subordination
or estimation.

 

“Disbursing Agent” shall mean (a) on or prior to the Effective Date, the Debtor
and (b) after the Effective Date, the Liquidating Trustee; provided that the
Debtor or the Liquidating Trustee may, in their discretion, retain a third party
to act as Disbursing Agent.

 

“Disputed” shall mean any Claim or Equity Interest: (a) which is listed in the
Schedules as disputed, Contingent or unliquidated and for which a proof of Claim
or proof of Equity Interest has been timely filed pursuant to the Plan, the
Bankruptcy Code, or any Final Order of the Bankruptcy Court; (b) which is
objected to in whole or in part on or before the Claims Objection Deadline (or
on or before any deadline for objecting to Equity Interests) or for which a
request for estimation has been Filed in accordance with the Bankruptcy Code and
the Bankruptcy Rules and as to which no Final Order allowing or disallowing such
Claim or Equity Interest has been entered; or (c) for which a motion to approve
a settlement of such Claim or Equity Interest has been Filed in accordance with
the Bankruptcy Code and the Bankruptcy Rules and as to which no Final Order
approving or disapproving such settlement has been entered. To the extent an
objection relates to the allowance of only part of a Claim or Equity Interest,
such Claim or Equity Interest shall be Disputed only to the extent of the
objection.

 

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“Disputed Administrative, Priority Tax, Priority Non-Tax, and Secured Claims
Reserve” shall mean the reserve established pursuant to Article 7.1(a) of the
Plan, which reserve shall contain amounts relating to (i) Disputed
Administrative Claims, Disputed Priority Tax Claims, Disputed Other Priority
Claims and Disputed Secured Claims and (ii) accrued Professional Fee Claims,
which will become payable upon allowance by Final Order of the Bankruptcy Court.

 

“Disputed Equity Interest Reserve” shall mean the reserve established pursuant
to Article 7.1(f) of the Plan, which reserve shall contain amounts relating to
Disputed Equity Interests.

 

“Disputed General Unsecured Claims Reserve” shall mean the reserve established
pursuant to Article 7.1(c) of the Plan, which reserve shall contain amounts
relating to Disputed General Unsecured Claims.

 

“Disputed Noteholders’ Securities Claims Reserve” shall mean the reserve
established pursuant to Article 7.1(d) of the Plan, which reserve shall contain
amounts relating to Disputed Noteholders’ Securities Claims.

 

“Disputed Shareholders’ Securities Reserve” shall mean the reserve established
pursuant to Article 7.1(e), which reserve shall contain amounts relating to
Disputed Shareholders’ Securities Claims.

 

“Distribution” shall mean a delivery of cash or other distributable property by
the Disbursing Agent to the Holders of Allowed Claims or Allowed Equity
Interests pursuant to the Plan.

 

“Distribution Date” shall mean the date on which a Distribution is made pursuant
to the Plan.

 

“Distribution Record Date” shall mean such date or dates as determined by the
Liquidating Trustee, with the approval of the Liquidating Trust Advisory Board,
when there are sufficient Liquidating Trust Assets to distribute under the Plan.

  

“Effective Date” shall mean a date, as determined by the Debtor in consultation
with the Committee, that is no earlier than the first Business Day after the
later of the date on which each of the following conditions are satisfied: (a)
all conditions in Article 10.1 of the Plan have been satisfied or waived in
accordance with Article 10.3 of the Plan and (b) no stay of the Confirmation
Order is in effect.

 

“Entity” shall have the meaning ascribed to such term in section 101(15) of the
Bankruptcy Code.

 

“Estate” shall mean the estate the Debtor created by section 541 of the
Bankruptcy Code on the Petition Date.

 

“Equity Interests” shall mean the legal, equitable, contractual, or other rights
of a Holder of any existing or prospective equity interest in the Debtor (solely
in their capacity as Holder thereof), including any rights of any Person to
purchase or demand the issuance of any interest in the Debtor, including (i)
conversion, exchange, voting, participation, and dividend rights; (ii)
liquidation preferences; (iii) stock options, warrants, and put rights; (iv)
share-appreciation rights; or (v) any other stock, membership, or equity right
pertaining or in any way relating to the Debtor.

 

 

7

 

 

“Executory Contract” shall mean a contract or lease to which the Debtor is a
party that is subject to assumption or rejection under 365 of the Bankruptcy
Code.

 

“Faith Bloom” shall mean Faith Bloom Limited, a company organized under the laws
of the British Virgin Islands and the Debtor’s direct subsidiary.

 

“File,” “Filed,” or “Filing” shall mean, respectively, file, filed, or filing
with the Bankruptcy Court or its authorized designee in this Chapter 11 Case.

 

“Final Order” shall mean an unstayed order, ruling, or judgment of the
Bankruptcy Court or any other court of competent jurisdiction as to which the
time to appeal, petition for certiorari, or request for reargument or rehearing
has expired and as to which no appeal, petition for certiorari, or other
proceedings for reargument or rehearing shall then be pending, or as to which
any right to appeal, petition for certiorari, reargument, or rehearing shall
have been waived in writing in form and substance satisfactory to the Debtor
(prior to the Effective Date) or the Liquidating Trustee (on or after the
Effective Date), or, in the event that an appeal, writ of certiorari, or
reargument or rehearing thereof has been sought, such order of the Bankruptcy
Court or other court of competent jurisdiction shall have been determined by the
highest court to which such order was appealed, or certiorari, reargument or
rehearing shall have been denied and the time to take any further appeal,
petition for certiorari or move for reargument or rehearing shall have expired;
provided, however, that the possibility that a motion under Rule 59 or Rule 60
of the Federal Rules of Civil Procedure, or any analogous rule under the
Bankruptcy Rules or applicable state court rules of civil procedure, may be
Filed with respect to such order, shall not cause such order not to be a Final
Order.

 

“General Unsecured Claim” shall mean all unsecured Claims against the Debtor,
excluding Noteholders’ Securities Claims and Shareholders’ Securities Claims.

 

“Governmental Unit” shall have the meaning ascribed to such term in section
101(27) of the Bankruptcy Code.

 

“Holder” or “Holders” shall mean a Person or an Entity holding a Claim or Equity
Interest.

 

“Indentures” shall mean the indentures between the Debtor and the Indenture
Trustee providing for the issuance of the Notes.

 

“Indenture Trustee” shall mean the Bank of New York Mellon in its capacity as
indenture trustee for the Notes.

 

“Insider” shall have the meaning ascribed to such term in section 101(31) of the
Bankruptcy Code.

 

 

8

 

 

“IRS” shall mean the Internal Revenue Service.

 

“Liquidating Trust” shall mean the liquidating trust established by the Plan and
described in Article 6.2 of the Plan and this Agreement.

 

“Liquidating Trust Advisory Board” shall mean the board comprised of no less
than three (3) and no more than seven (7) members, each of whom will initially
be appointed by the Committee and thereafter by the members of the Liquidating
Trust Advisory Board in accordance with this Agreement, vested with the powers
and responsibilities set forth herein.

 

“Liquidating Trust Assets” shall mean all assets of the Debtor, including (i)
cash in the Debtor’s Bank Account on the Effective Date, (ii) the Debtor’s
Equity Interests in Faith Bloom, (iii) all claims held by the Debtor against
Faith Bloom and Faith Bloom’s subsidiaries, including the PRC Subsidiaries, (iv)
the Debtor’s interest in the D&O Policies, if transferable, and the proceeds
thereof, (v) all Claims and Causes of Action held by the Debtor and (vi) any
other assets of the Debtor that are recovered by the Liquidating Trust and the
proceeds thereof.

 

“Liquidating Trust Beneficiaries” shall mean the Holders of Claims and Equity
Interests under the Plan. Notwithstanding the fact that the Indenture Trustee
has filed an Allowed Claim on behalf of the Noteholders, such Noteholders are
deemed to be Liquidation Trust Beneficiaries, it being understood and agreed
that the Indenture Trustee is not a Liquidating Trust Beneficiary.

 

“Liquidating Trust Expense Reserve” shall mean the reserve established pursuant
to Article 7.1(b) of the Plan by the Liquidating Trustee to hold funds as are
reasonably necessary for the Liquidating Trust to satisfy the expenses of
administering the Liquidating Trust, including the winding down and closing of
the Chapter 11 Case, the Liquidating Trustee’s reasonable fees and expenses, the
Liquidating Trustee’s reasonable professional fees and expenses, the reasonable
fees and expenses of the members of the Liquidating Trust Advisory Board, the
liquidation of Liquidating Trust Assets, including the expenses associated with
the operation of Faith Bloom and the PRC Subsidiaries, the prosecution,
negotiation and settlement of any Causes of Action with respect thereto,
including litigation in the PRC, and the making of Distributions by the
Liquidating Trustee under the Plan.

 

“Liquidating Trust Protected Parties” shall mean collectively the Liquidating
Trustee, the Liquidating Trust Advisory Board and each member thereof, and each
of their respective members, representatives, agents, professionals, employees,
employers, managers, partners, actuaries, financial advisors, investment
bankers, and attorneys (including the Liquidating Trustee Professionals and
Liquidating Trustee Non-Professionals).

 

“Liquidating Trustee” shall have the meaning set forth in the first paragraph of
this Agreement.

 

“Liquidating Trustee Non-Professionals” shall have the meaning set forth in
Article 16.1.

 

“Liquidating Trustee Professionals” shall have the meaning set forth in Article
16.1.

 

 

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“Local Rules” shall mean the Local Rules of Bankruptcy Practice and Procedures
of the United States Bankruptcy Court for the District of Nevada.

 

“Noteholders” shall mean collectively the 6.0% Noteholders and the 6.5%
Noteholders.

 

“Noteholders’ Securities Claims” shall mean any Claim asserted by the purchasers
of the Notes or the current holders of the Notes that arise from the rescission
of a purchase or sale of a security of the Debtor or of an Affiliate of the
Debtor, for damages arising from the purchase or sale of such a security, or for
reimbursement or contribution Allowed under section 502 of the Bankruptcy Code
on account of such Claim.

 

“Notes” shall mean collectively the 6.0% Notes and the 6.5% Notes.

 

“NRS” shall mean the Nevada Revised Statutes.

 

“Objection(s)” shall mean any objection, application, motion, complaint or any
other legal proceeding seeking, in whole or in part, to disallow, determine,
liquidate, classify, reclassify, or establish the priority, expunge,
subordinate, or estimate any Claim.

 

“Other Priority Claim” shall mean any Claim accorded priority in right of
payment under section 507(a) of the Bankruptcy Code, other than a Priority Tax
Claim or an Administrative Claim.

 

“Person” shall have the meaning ascribed to such term in section 101(41) of the
Bankruptcy Code.

  

“Petition Date” shall mean August 19, 2011.

 

“Plan” shall mean the plan of reorganization of the Debtor under chapter 11 of
the Bankruptcy Code, dated August 30, 2012, as it may be altered, amended,
modified, or supplemented with any Plan Supplement from time to time including
in accordance with the Bankruptcy Code or the Bankruptcy Rules. [Docket No. __]

 

“Plan Supplement” shall mean the supplement to the Plan Filed with the
Bankruptcy Court. [Docket No. 591]

 

“PRC Subsidiaries” shall mean Shandong Haize Nanomaterials Co., Ltd., Shandong
Bangsheng Chemical Co., Ltd., Shaanxi Haize Nanomaterials Co., Ltd., Zibo Jiaze
Nanomaterials Co., Ltd. and Anhui Yuanzhong Nanomaterials Co., Ltd, each of
which are (i) direct subsidiaries of Faith Bloom, (ii) indirect subsidiaries of
the Debtor and (iii) organized under the laws of the People’s Republic of China.

 

“Priority Tax Claim” shall mean a Claim of a Governmental Unit of the kind
specified under section 507(a)(8) of the Bankruptcy Code.

 

“Professional” or collectively “Professionals,” shall mean a Person or Entity
employed in accordance with sections 327, 328, or 1103 of the Bankruptcy Code
and entitled to be compensated for services rendered prior to the Effective
Date, pursuant to sections 327, 328, 329, 330, or 331 of the Bankruptcy Code, or
for which compensation and reimbursement has been allowed by the Bankruptcy
Court pursuant to section 503(b)(4) of the Bankruptcy Code, which term expressly
excludes any ordinary course professional retained pursuant to the Order
Authorizing Debtor to Employ Professionals in the Ordinary Course of Business
[Docket No. 198] and any professional not retained on or after the Petition
Date.

 

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“Professional Fee Claims” shall mean all fees and expenses (including
transaction fees and success fees) for services rendered by Professionals in
connection with the Chapter 11 Case on or prior to the Effective Date.

 

“Pro Rata” shall mean the proportion that an Allowed Claim or Equity Interest in
a particular Class bears to the aggregate amount of (a) Allowed Claims and/or
Equity Interests in such Class as of the date of determination, plus (b)
Disputed Claims and/or Equity Interests in such Class as of the date of
determination, in their aggregate face amounts or such other amount: (i) as
calculated by the Debtor or the Liquidating Trustee, as applicable, on or before
the date of any such Distribution, (ii) as determined by an Order of the
Bankruptcy Court estimating such Disputed Claim or Equity Interest, or (iii) as
directed by a Final Order of the Bankruptcy Court.

 

“Reserves” shall mean, collectively, the Disputed Administrative, Priority Tax,
Priority Non-Tax and Secured Claims Reserve, the Disputed General Unsecured
Claims Reserve, the Disputed Noteholders’ Securities Claim Reserve, the Disputed
Shareholders’ Securities Reserve, the Disputed Equity Interest Reserve and the
Liquidating Trust Expense Reserve.

  

“Schedules” shall mean the schedules of assets and liabilities, schedules of
Executory Contracts and statement of financial affairs Filed by the Debtor
pursuant to section 521 of the Bankruptcy Code and in substantial accordance
with the Official Bankruptcy Forms, as the same may have been amended, modified
or supplemented from time to time [Docket Nos. 141 and 579].

 

“SEC Proof of Claim” shall mean the proof of claim filed in the Chapter 11 Case
on February 15, 2012 by the United States Securities and Exchange Commission, as
the same may be later amended, supplement or otherwise modified.

 

“Secured Claim” shall mean a Claim that is secured by a valid lien on property
in which the Estate has an interest or that is subject to setoff under section
553 of the Bankruptcy Code, to the extent of the value of the Holder of such
Claim’s interest in such property or to the extent of the amount subject to
setoff, as applicable, as determined pursuant to section 506 of the Bankruptcy
Code or, in the case of setoff, section 553 of the Bankruptcy Code.

 

“Shareholders’ Securities Claims” shall mean (i) any Claim asserted by the
Debtor’s current or former shareholders that arises from the rescission of a
purchase or sale of a security of the Debtor or of an Affiliate of the Debtor,
for damages arising from the purchase or sale of such a security, or for
reimbursement or contribution Allowed under section 502 of the Bankruptcy Code
on account of such Claim and (ii) the Claim asserted against the Debtor as
evidenced by the SEC Proof of Claim.

 

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“Solicitation Procedures Order” shall mean the Order (A) Approving the
Disclosure Statement, (B) Establishing Procedures for the Solicitation and
Tabulation of Votes to Accept or Reject the Chapter 11 Plan of Liquidation (C)
Scheduling a Hearing to Consider Confirmation of the Plan of Liquidation, and
(D) Establishing Notice and Objection Procedures in Respect Thereof entered by
the Bankruptcy Court. [Docket No. 545]

 

“Tax” or “Taxes” shall mean all income, gross receipts, sales, use, transfer,
payroll, employment, franchise, profits, property, excise, or other similar
taxes, estimated import duties, fees, stamp taxes, and duties, value added
taxes, assessments, or charges of any kind whatsoever (whether payable directly
or by withholding), together with any interest and any penalties, additions to
tax, or additional amounts imposed by any taxing authority of a Governmental
Unit with respect thereto.

 

“Unclaimed Distributions” shall mean any undeliverable or unclaimed
Distributions.

 

“Voting Deadline” shall mean August 16, 2012, at 5:00 p.m. (prevailing Pacific
time), the date and time by which all ballots to accept or reject the Plan must
be received in order to be counted, as set forth by the Solicitation Procedures
Order.

 

1.2 Principles of Interpretation.

  

a. The definitions in this Agreement shall apply equally to the singular and
plural forms of the terms defined.

 

b. The words “include,” “includes” and “including” are not limiting and shall be
deemed to be followed by the phrase “without limitation”.

 

c. The word “or” is not exclusive.

 

d. Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms.

 

 

Article II
NAME OF TRUST AND LIQUIDATING TRUSTEE

 

 

2.1 Name of Liquidating Trust.

 

The name of the Liquidating Trust is the ShengdaTech Liquidating Trust.

 

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2.2 Initial Liquidating Trustee.

 

 

Michael Kang is hereby appointed to serve as the initial Liquidating Trustee
under the Plan, and hereby accepts this appointment and agrees to serve in such
capacity effective upon the Effective Date of the Plan and pursuant to the terms
of the Plan and this Agreement. A successor Liquidating Trustee shall be
appointed as set forth in Article 13.1 hereof in the event the Liquidating
Trustee is removed or resigns pursuant to this Agreement or if the Liquidating
Trustee otherwise vacates the position.

 

Article III
DUTIES AND POWERS OF THE LIQUIDATING TRUSTEE

 

3.1 Generally

 

Except as otherwise provided in this Agreement, the Plan or the Confirmation
Order, the Liquidating Trustee shall control and exercise authority over the
Liquidating Trust Assets and shall be responsible for liquidating and
administering (or abandoning, as the case may be) the Liquidating Trust Assets
and taking actions on behalf of, and representing, the Liquidating Trust. The
Liquidating Trustee shall have the authority to bind the Liquidating Trust
within the limitations set forth herein, but shall for all purposes hereunder be
acting in the capacity of Liquidating Trustee and not individually.

 

3.2 Scope of Authority of Liquidating Trustee

 

Within the limitations set forth herein, and subject to the oversight provisions
set forth in this Agreement (including the approval rights of the Liquidating
Trust Advisory Board set forth in Article 5.4 below), the responsibilities and
authority of the Liquidating Trustee shall be the following (and activities
reasonably incidental thereto):

 

a. holding legal title (on behalf of the Liquidating Trust as Liquidating
Trustee, but not individually) to and administering the Liquidating Trust
Assets, including the Causes of Action and any rights held by the Liquidating
Trust in any case or proceeding under the Bankruptcy Code, similar state laws,
foreign insolvency laws or otherwise and to receive any distribution therein, in
each case, on any terms and conditions as he may determine in good faith based
on the best interests of the Liquidating Trust Beneficiaries;

 

b. protecting and enforcing the rights to the Liquidating Trust Assets vested in
the Liquidating Trust by the Plan by any method deemed appropriate in his
reasonable business judgment, including by judicial proceedings or pursuant to
any applicable bankruptcy, insolvency, moratorium or similar law and general
principles of equity;

 

c. selling or liquidating the Liquidating Trust Assets subject to Article 6.3 of
the Plan;

 

d. making Distributions as contemplated herein and under the Plan;

 

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e. investing funds (in the manner set forth in Article 3.7 herein), making
distributions and paying any other obligations owed by the Liquidating Trust
from the Liquidating Trust Assets as provided herein and in the Plan;

 

f. conducting an analysis of Administrative Claims, Priority Tax Claims, Other
Priority Claims, Secured Claims, General Unsecured Claims, Noteholders’
Securities Claims, Shareholders’ Securities Claims and Equity Interests, and
prosecuting objections thereto or settling or otherwise compromising such Claims
if necessary and appropriate;

 

g. establishing and maintaining the Reserves in accordance with the terms of the
Plan;

 

h. entering into loans, including from Creditors, and accepting investments,
including from Creditors, and, with the approval of the Liquidating Trust
Advisory Board, repaying such Creditors with, inter alia, interest, fees,
success fees, bonuses, and/or additional percentage recoveries;

 

i. funding (i) Faith Bloom in furtherance of the efforts of Faith Bloom to gain
control of the PRC Subsidiaries and (ii) the PRC Subsidiaries once Faith Bloom
gains control thereof;

 

j. pledging the assets of the Debtor, Faith Bloom and/or the PRC Subsidiaries to
secure loans or back guaranty obligations in connection with the ongoing
litigation in the PRC or otherwise;

 

k. purchasing such insurance coverage as the Liquidating Trustee, in his
reasonable business judgment, deems necessary and appropriate with respect to
the liabilities and obligations of the Liquidating Trustee and the Liquidating
Trust Advisory Board (in the form of an errors and omissions policy, fiduciary
policy or otherwise);

 

l. purchasing such insurance coverage as the Liquidating Trustee, in his
reasonable business judgment, deems necessary and appropriate with respect to
real and personal property which may be or may become Liquidating Trust Assets;

 

m. negotiating buybacks, settlements, liquidations, compromises or other
resolutions of the D&O Policies, the proceeds of which may become Liquidating
Trust Assets, subject to Article 6.3 of the Plan;

 

n. filing appropriate tax returns in the exercise of his fiduciary obligations;

 

o. retaining such professionals as are necessary and appropriate in furtherance
of his fiduciary obligations;

  

p. facilitating the prosecution or settlement of objections to or estimations of
Claims asserted against the Liquidating Trust or the Liquidating Trust Assets;

 

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q. calculating and implementing Distributions to the Liquidating Trust
Beneficiaries in accordance with the Plan and this Agreement;

 

r. withholding from the Distributions such amount as may be sufficient to pay
any tax or other charge which the Liquidating Trustee has determined may be
required to be withheld therefrom under the income tax laws of the United States
or of any state or political subdivision thereof;

 

s. entering into any agreement or executing any document or instrument required
by or consistent with the Plan, the Confirmation Order, or this Agreement and
performing all obligations thereunder;

 

t. taking such actions as are necessary to pursue, prosecute, resolve or
compromise, as appropriate, all Causes of Action;

 

u. filing all required tax and information returns for the Liquidating Trust as
a grantor trust pursuant to Treas. Reg. §1.671-4(a) and making all tax elections
for and on behalf of the Liquidating Trust;

 

v. paying all lawful expenses, debts, charges, taxes and liabilities of the
Liquidating Trust;

 

w. receiving reasonable compensation for performing services as Liquidating
Trustee in accordance with this Agreement and paying the reasonable fees, costs
and expenses of any professionals retained by the Liquidating Trustee in
accordance with the applicable provisions of this Agreement;

 

x. implementing, enforcing, or discharging all of the terms, conditions, and all
other provisions of, and all duties and obligations under, the Plan, the
Confirmation Order, and this Agreement;

 

y. undertaking all administrative function remaining in the Chapter 11 Case,
including the ultimate closing of the Chapter 11 Case;

 

z. taking such actions as are necessary to winddown the Debtor, including,
without limitation, filing tax returns and taking any actions necessary to
dissolve the Debtor under Nevada law; and

 

aa. taking such other actions as are necessary and reasonable to carry out the
purposes of the Liquidating Trust.

 

3.3 Obligations to Liquidating Trust and Beneficiaries

 

In all circumstances, the Liquidating Trustee shall act in the best interests of
the Liquidating Trust Beneficiaries and in furtherance of the purpose of the
Liquidating Trust, and shall use the same degree of care and skill as a prudent
person would use under the circumstances.

 

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Notwithstanding the foregoing, other than the obligations of the Liquidating
Trustee enumerated herein, under the Plan and under the Confirmation Order (and
matters reasonably incidental thereto), the Liquidating Trustee shall have no
duties or obligations of any kind or nature respecting implementation of the
Plan or this Agreement.

 

3.4 General Authority of the Liquidating Trustee

 

Unless specifically stated otherwise herein, the Liquidating Trustee shall not
be required to obtain Bankruptcy Court approval with respect to any proposed
action or inaction: (a) authorized in or contemplated by this Agreement or (b)
authorized in or contemplated by the Plan.

 

3.5 Limitation of Liquidating Trustee’s Authority; No On-Going Business

 

Notwithstanding anything to the contrary under applicable law, this Agreement or
the Plan, the authority of the Liquidating Trustee is limited as follows:

 

(a) The Liquidating Trustee shall have no power or authority except as set forth
in this Agreement or in the Plan.

 

(b) The Liquidating Trustee shall not be authorized to engage in any trade or
business with respect to the Liquidating Trust Assets or any proceeds therefrom
except to the extent reasonably necessary to, and consistent with, the
liquidating purpose of the Liquidating Trust. The Liquidating Trustee shall take
such actions consistent with the prompt, orderly liquidation of the Liquidating
Trust Assets as required by applicable law and consistent with the treatment of
the Liquidating Trust as a liquidating trust under Treas. Reg. § 301.7701-4(d),
to the extent such actions are permitted by this Agreement. The Liquidating
Trustee shall not take, or fail to take, any action that would jeopardize
treatment of the Liquidating Trust as a “liquidating trust” for federal income
tax purposes.

 

3.6 Other Activities

 

The Liquidating Trustee shall be entitled to be employed by third parties while
performing the duties required under the Plan and this Agreement, so long as
such other employment does not involve holding or representing any interest
adverse to the interests of the Liquidating Trust, or otherwise preclude or
impair the Liquidating Trustee from performing his respective duties under the
Plan and this Agreement.

  

3.7 Investment and Safekeeping of Liquidating Trust Assets

 

All monies and other assets received by the Liquidating Trustee shall, until
distributed or paid over as herein provided, be segregated from all other monies
and assets of the Liquidating Trustee, and further, shall be held in trust for
the benefit of the Liquidating Trust Beneficiaries, but need not be segregated
from other Liquidating Trust Assets, unless and to the extent required by the
Plan. The Liquidating Trustee shall promptly invest any such monies in the
manner set forth in this Article 3.7, but shall otherwise be under no liability
for interest or income on any monies received by the Liquidating Trust hereunder
and held for distribution or payment to the Liquidating Trust Beneficiaries,
except as such interest shall actually be received. Investment of any monies
held by the Liquidating Trust shall be administered in accordance with the
general duties and obligations hereunder. The right and power of the Liquidating
Trustee to invest the Liquidating Trust Assets transferred to the Liquidating
Trust, the proceeds thereof, or any income earned by the Liquidating Trust,
shall be limited to the right and power to invest such Liquidating Trust Assets
(pending distributions in accordance with the Plan) as set forth herein;
provided, however, the Liquidating Trust’s right and power to make such
investments shall be limited to the power to invest in demand and time deposits
in banks or savings institutions, or temporary investments such as short term
certificates of deposit or Treasury bills or other investments that a
“liquidating trust” within the meaning of Treasury Regulation Section
301.7701-4(d) may be permitted to hold, pursuant to the Treasury Regulations or
any modification in the IRS guidelines.

 

16

 

 

 

Article IV
TERM AND COMPENSATION FOR LIQUIDATING TRUSTEE

 

4.1 Compensation

 

(a) The Liquidating Trustee is entitled to receive compensation as outlined
below for services rendered on behalf of the Liquidating Trust on an hourly
basis and reimbursement of all reasonable, out-of-pocket expenses which shall be
charged against and paid out of the Liquidating Trust Assets:

 

 

 

Michael Kang

 

$695

 

(b) In addition, when utilizing A&M or their respective personnel as Liquidating
Trustee Professionals and Liquidating Trustee Non-Professionals as set forth in
Article 16.1, A&M shall receive compensation on an hourly basis and
reimbursement of all reasonable, out-of-pocket expenses in accordance with the
terms of its engagement letter, which compensation and expenses shall be charged
against and paid out of the Liquidating Trust Assets as follows:

 

 

 

Paul Forgue

 

$625

Sam Tai

 

$585

Sharon Shen

 

$475

Support Staff (as needed)

 

Various

 

 

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(c) Fees and expenses incurred by the Liquidating Trustee, including fees and
expenses of the Liquidating Trustee’s professionals, shall be paid from the
Liquidating Trust Expense Reserve in accordance with Article VII of the Plan and
Article VI of this Agreement.

 

4.2 Termination

 

The duties, responsibilities and powers of the Liquidating Trustee will
terminate on the date the Liquidating Trust is dissolved under applicable law in
accordance with the Plan, or by an order of the Bankruptcy Court.

 

4.3 No Bond

 

The Liquidating Trustee shall not be obligated to obtain a bond but may do so,
in his reasonable business judgment, in which case the expense incurred by such
bonding shall be paid by the Liquidating Trust.

 

4.4 Removal

 

The Liquidating Trustee may be removed, with or without cause, by the unanimous
vote (at a meeting or by written consent) of the members of the Liquidating
Trust Advisory Board.  Such removal shall become effective on the date specified
in such action by the Liquidating Trust Advisory Board.

 

4.5 Resignation

 

The Liquidating Trustee may resign by giving not less than sixty (60) days’
prior written notice thereof to the Liquidating Trust Advisory Board, the
Bankruptcy Court and any parties in interest requesting notice in the Chapter 11
Case.

 

 

Article V
Liquidating Trust Advisory Board

 

5.1 Appointment of the Liquidating Trust Advisory Board .

 

(a) As of the Effective Date, the Liquidating Trust Advisory Board shall be
appointed to consult with the Liquidating Trustee from time to time on various
matters as set forth herein, and to exercise those rights and the duties set
forth herein. The Liquidating Trust Advisory Board shall be comprised of not
less than three (3) members and no more than seven (7) members, each of whom
will initially be appointed by the Committee and thereafter by the members of
the Liquidating Trust Advisory Board in accordance with the terms of this
Agreement. The initial members of the Liquidating Trust Advisory Board shall be
designated in the Plan Supplement. The number of members initially constituting
the entire Liquidating Trust Advisory Board shall be set forth in the Plan
Supplement. On or after the Effective Date, the number of members of the
Liquidating Trust Advisory Board shall, subject to the parameters set forth in
the second sentence of this Article 5.1(a), be fixed from time to time by the
Liquidating Trust Advisory Board by a vote of the majority of the total number
of members which the Liquidating Trust Advisory Board would have if there were
no vacancies at such time. Without limiting the generality of the foregoing, in
no event shall the number of members of the Liquidating Trust Advisory Board at
any time be decreased to a number less than the number of members in office at
such time.

 

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(b) Each member of the Liquidating Trust Advisory Board shall designate (i) one
or more representatives who shall attend meetings of and participate in other
activities of the Liquidating Trust Advisory Board, and (ii) an alternate
representative to attend meetings and participate in other activities of the
Liquidating Trust Advisory Board when the representatives designated pursuant to
clause (i) above are unavailable.  For the avoidance of doubt, such
representatives shall only be recognized for so long as the member of the
Liquidating Trust Advisory Board who made such designation continues to be a
member of the Liquidating Trust Advisory Board.

 

(c) Notwithstanding anything to the contrary, the Liquidating Trust Advisory
Board shall not take any action that will cause the Liquidating Trust to fail to
qualify as a “liquidating trust” for United States federal income tax purposes.

 

(d) A quorum for meetings of the Liquidating Trust Advisory Board shall consist
of a majority of the non-recused members of the Liquidating Trust Advisory Board
then serving; provided, however, that, for purposes of determining whether a
quorum is present at such a meeting, a member of the Liquidating Trust Advisory
Board shall be deemed present if a representative of the member is attending in
person, by telephone or by proxy, unless such representative is attending solely
to protest the meeting in question.

 

(e) Except as expressly provided herein, the affirmative vote of a majority of
the members of the entire Liquidating Trust Advisory Board then in office shall
be the act of the Liquidating Trust Advisory Board with respect to any matter
that requires the determination, consent, approval or agreement of such
board.  Any or all of the members of the Liquidating Trust Advisory Board may
participate in a regular or special meeting by, or conduct the meeting through
the use of, conference telephone or similar communications equipment by means of
which all persons participating in the meeting may hear each other, in which
case any required notice of such meeting may generally describe the arrangements
(rather than or in addition to the place) for the holding thereof.  Any member
of the Liquidating Trust Advisory Board participating in a meeting by this means
is deemed to be present in person at the meeting.  In all matters submitted to a
vote of the Liquidating Trust Advisory Board, each Liquidating Trust Advisory
Board member shall be entitled to cast one vote, which vote shall be cast
personally by such Liquidating Trust Advisory Board member or by proxy.  In a
matter in which the Liquidating Trustee cannot obtain direction or authority
from the Liquidating Trust Advisory Board, the Liquidating Trustee may file a
motion requesting such direction or authority from the Bankruptcy Court.

  

(f) A Liquidating Trust Advisory Board member and its representative shall be
recused from the Liquidating Trust Advisory Board’s deliberations and votes on
any matters as to which such member has a conflicting interest.   If a
Liquidating Trust Advisory Board member or its representative does not recuse
itself from any such matter, that Liquidating Trust Advisory Board member and
its representative may be recused from such matter by the unanimous vote of the
remaining members of the Liquidating Trust Advisory Board that are not recused
or are required to be recused from the matter.

 

 

19

 

 

(g) Any action required or permitted to be taken by the Liquidating Trust
Advisory Board at a meeting may be taken without a meeting if the action is
taken by unanimous written consent of those Liquidating Trust Advisory Board
members not recused or required to be recused as evidenced by one or more
written consents describing the action taken, signed by the Liquidating Trust
Advisory Board and filed with the minutes or proceedings of the Liquidating
Trust Advisory Board.

 

(h) The authority of the members of the Liquidating Trust Advisory Board shall
be effective as of the Effective Date and shall remain and continue in full
force and effect until the Liquidating Trust is dissolved in accordance with
Article XVII hereof.  The service of the members of the Liquidating Trust
Advisory Board shall be subject to the following:

 

(i) each member of the Liquidating Trust Advisory Board shall serve until the
earlier of (I) such member’s death or resignation pursuant to clause (ii) below,
(II) such member’s Allowed Claims being paid in full, including any postpetition
interest to which such holder may be entitled (if applicable), or (III) such
member’s removal pursuant to clause (iv) below;

 

(ii) a member of the Liquidating Trust Advisory Board may resign at any time by
providing a written notice of resignation to the remaining members of the
Liquidating Trust Advisory Board and the Liquidating Trustee.  Such resignation
shall be effective on the date specified in the notice;

  

(iii) if applicable, a member of the Liquidating Trust Advisory Board shall
promptly notify the other members of the Liquidating Trust Advisory Board and
the Liquidating Trustee of the payment in full of its Allowed Claims;

 

(iv) the members of the Liquidating Trust Advisory Board may be removed by the
unanimous vote of the other members of the Liquidating Trust Advisory Board only
for (I) fraud or willful misconduct in connection with the affairs of the
Liquidating Trust, or (II) cause and shall not be subject to removal without
cause;

 

(v) in the event of a vacancy on the Liquidating Trust Advisory Board for any
reason, a new member may be appointed by the vote of the Liquidating Trust
Advisory Board.  The appointment of a successor member of the Liquidating Trust
Advisory Board shall be evidenced by the filing with the Bankruptcy Court of a
notice of appointment, which notice shall include the name, address and
telephone number of the successor member of the Liquidating Trust Advisory
Board; and

 

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(vi) immediately upon appointment of any successor member of the Liquidating
Trust Advisory Board, all rights, powers, duties, authority and privileges of
the predecessor member of the Liquidating Trust Advisory Board hereunder shall
be vested in and undertaken by the successor member of the Liquidating Trust
Advisory Board without any further act; and the successor member of the
Liquidating Trust Advisory Board shall not be liable personally for any act or
omission of the predecessor member of the Liquidating Trust Advisory Board.

 

5.2 Standard of Care; Business Judgment of the Liquidating Trust Advisory Board

 

The Liquidating Trust Advisory Board shall exercise its business judgment for
the benefit of the Liquidating Trust Beneficiaries in order to maximize the
value of the Liquidating Trust Assets and Distributions, giving due regard to
the cost, risk, and delay of any course of action.

 

5.3 Reports to the Liquidating Trust Advisory Board.

 

Notwithstanding any other provision of this Agreement, the Liquidating Trustee
shall report to the Liquidating Trust Advisory Board on a regular basis, not
less than four (4) times per year. The Liquidating Trustee shall also prepare
and make available such additional reports regarding the Liquidating Trust as
are reasonably requested by the Liquidating Trust Advisory Board.

 

5.4 Actions Requiring Liquidating Trust Advisory Board Approval.

  

The Liquidating Trustee shall submit to the Liquidating Trust Advisory Board for
its review and prior approval (by the non-recused members of the Liquidating
Trust Advisory Board) prior to taking any action regarding any of the following
matters:

 

(a) The commencement, prosecution, settlement, compromise, withdrawal, or other
resolution of any Cause of Action by the Liquidating Trustee where the amount
sought to be recovered in the complaint or other document initiating such Cause
of Action exceeds $50,000;

 

(b) The sale, transfer, assignment, or other disposition of any non-cash
Liquidating Trust Assets having a valuation in excess of $50,000;

 

(c) The abandonment of any non-cash Liquidating Trust Assets having a valuation
of at least $50,000;

 

(d) The prosecution of objections to Claims, or the commencement, settlement,
compromise, withdrawal, or other resolution of any Disputed Claims, wherein the
amount of the asserted Claim exceeds $50,000;

 

(e) The borrowing of any funds by the Liquidating Trustee or the Liquidating
Trust or pledge of any portion of the Liquidating Trust Assets;

 

21

 

 

 

(f) The selection, retention, or termination of any professional Person or
Entity by the Liquidating Trustee after the Effective Date;

 

(g) Any matter which could reasonably be expected to have a material effect on
the amount of Distributions to be made by the Liquidating Trustee;

 

(h) The exercise of any right or action set forth in this Agreement that
expressly requires approval of the Liquidating Trust Advisory Board, unless the
applicable provision expressly requires unanimous approval of the Liquidating
Trust Advisory Board for the exercise of any such right or action, or as
required under this Agreement;

 

(i) All investments authorized to be made by the Liquidating Trustee under this
Agreement;

 

(j) The setting of a Distribution Date or a Distribution Record Date; or

 

(k) Any Distribution to the Liquidating Trust Beneficiaries of cash or other
Liquidating Trust Assets.

5.5 [Intentionally omitted].

 

5.6 Compensation of Liquidating Trust Advisory Board

  

In performance of their duties under this Agreement, members of the Liquidating
Trust Advisory Board shall be entitled to receive reasonable compensation in
connection with their duties, payable quarterly, without further order of the
Bankruptcy Court, in a reasonable amount that the Liquidating Trust Advisory
Board may deem appropriate, plus reimbursement of reasonable out-of-pocket
expenses, which expenses shall be subject to the Liquidating Trustee’s review.
Such compensation and expenses shall be paid from the Liquidating Trust Expense
Reserve.

 

5.7 Confidentiality.

 

Each member of the Liquidating Trust Advisory Board shall at all times hold
strictly confidential and not use for personal gain any material, non-public
information of or pertaining to any entity to which any of the Liquidating Trust
Assets relate or of which such member has become aware in its capacity as a
member of the Liquidating Trust Advisory Board, except as otherwise required by
law.

  

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Article VI
PROVISIONS REGARDING RESERVES AND DISTRIBUTIONS

 

6.1 Establishment of Reserves

 

(a) On the Effective Date and prior to making any Distributions, the Liquidating
Trustee shall establish the Liquidating Trust Expense Reserve, and shall
transfer thereto the amount of cash as deemed necessary by the Liquidating
Trustee to fund the expenses of the Liquidating Trust in accordance with the
provisions of the Plan.

 

(b) On the Effective Date and prior to making any Distributions, the Liquidating
Trustee shall establish the Disputed Administrative, Priority Tax, Priority
Non-Tax, and Secured Claims Reserve and shall transfer thereto the amount of
cash as deemed necessary by the Liquidating Trustee to fund the Disputed
Administrative, Priority Tax, Priority Non-Tax, and Secured Claims Reserve in
accordance with the provisions of the Plan.

 

(c) As soon as reasonably practicable, but prior to making any Distribution to
Holders of General Unsecured Claims, the Liquidating Trustee shall establish the
Disputed General Unsecured Claims Reserve and shall reserve thereto the amount
of cash as deemed necessary by the Liquidating Trustee to fund the Disputed
General Unsecured Claims Reserve in accordance with the provisions of the Plan.

 

(d) If and when appropriate, and in all events prior to making any Distribution
to Holders of Noteholders’ Securities Claims, the Liquidating Trustee shall
establish the Disputed Noteholders’ Securities Claims Reserve and shall reserve
thereto the amount of cash as deemed necessary by the Liquidating Trustee to
fund the Disputed Noteholders’ Securities Claims Reserve in accordance with the
provisions of the Plan.

  

(e) If and when appropriate, and in all events prior to making any Distribution
to Holders of Shareholders’ Securities Claims, the Liquidating Trustee shall
establish a reserve to fund the Disputed Shareholders’ Securities Claims in
accordance with the provisions of the Plan.

 

(f) If and when appropriate, and in all events prior to making any Distribution
to Holders of Equity Interests, the Liquidating Trustee shall establish a
reserve to fund the Disputed Equity Interests in accordance with the provisions
of the Plan.

 

6.2 Funding of Reserves

 

(a) With respect to the Liquidating Trust Expense Reserve, the amount of cash
deposited into such reserve shall be equal to the amount of cash necessary to
fund the expenses expected to be incurred by the Liquidating Trust as
determined, in the Liquidating Trustee’s discretion with the approval of the
Liquidating Trust Advisory Board.

 

(b) With respect to the Disputed Administrative, Priority Tax, Priority Non-Tax
and Secured Claims Reserve, the Disputed General Unsecured Claims Reserve and
the Disputed Noteholders’ Securities Claims Reserve, the amount of cash
deposited into each of the foregoing reserves shall be equal to the percentage
of cash or other distributable property that Holders of Disputed Claims in each
reserve would be entitled under the Plan if such Disputed Claims were Allowed
Claims in the amount of such Disputed Claim or such lesser amount as authorized
in Article 7.2(c) of the Plan and Article 6.2(c) hereof. To the extent that the
Liquidating Trustee determines, in his discretion, to establish one or more
reserves for Shareholders’ Securities Claims or Equity Interests, such reserves
would be similarly funded.

 

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(c) For the purposes of effectuating the provisions of Article VII of the Plan
and Article VI hereof and the Distributions to Holders of Allowed Claims, the
Liquidating Trustee may, at any time and regardless of whether an objection to a
Disputed Claim has been brought, request that the Bankruptcy Court estimate,
set, fix, or liquidate the amount of such Disputed Claims pursuant to section
502(c) of the Bankruptcy Code, in which event the amounts so estimated, fixed,
or liquidated shall be deemed the Allowed amounts of such Claims for purposes of
Distribution under the Plan and establishment of the necessary Reserve. In lieu
of estimating, fixing or liquidating the amount of any Disputed Claims or
Disputed Equity Interests, the Bankruptcy Court may determine the amount to be
reserved for such Disputed Claims or Disputed Equity Interests (singularly or in
the aggregate), or such amount may be fixed by an agreement in writing by and
between the Liquidating Trustee and the Holder of such Disputed Claims or
Disputed Equity Interests. The amount at which a Disputed Claim or Disputed
Equity Interest is fixed based upon an estimation or reserve established by the
Bankruptcy Court under this Article 6.2(c) shall be the cap on the amount the
Holder of such Claim or Equity Interest may recover on account of such Claim or
Equity Interest under the Plan.

  

(d) Notwithstanding the foregoing, nothing in the Plan or the Confirmation
Order, or any related document, agreement, instrument or order shall prohibit
the Liquidating Trustee from using Liquidating Trust Assets and other reserve
amounts to fund Liquidating Trust Expense Reserve.

 

6.3 Disbursing Agent. The Debtor shall be the Disbursing Agent on the Effective
Date and thereafter the Liquidating Trustee shall be the Disbursing Agent. In
his discretion, the Liquidating Trustee may employ or contract with other
Persons or Entities to assist in or make the Distributions required by the Plan.

 

6.4 Distributions by Liquidating Trustee. Within the time periods provided in
Article 7.6 of the Plan and Article 6.6 hereof, the Liquidating Trustee shall,
if necessary in his reasonable judgment, make periodic and final distributions
of the proceeds of the Liquidating Trust Assets in accordance with the terms of
the Plan. The Liquidating Trustee may withhold from amounts distributable to any
Person any and all amounts, determined in the Liquidating Trustee’s reasonable
sole discretion, to be required by any law, regulation, rule, ruling, directive
or other governmental requirement.

 

The Liquidating Trustee intends to make Distributions directly to Noteholders
and Shareholders holding Allowed Claims and Equity Interests, as applicable.
Prior to making any such Distributions, the applicable Noteholders and/or
Shareholders may receive notice of such Distributions and requests for
information from such Noteholders and/or Shareholders, and the Liquidating
Trustee may condition any Distribution to any Noteholder or Shareholder upon
receipt of such information.

 

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In addition, the Liquidating Trustee shall require any Liquidating Trust
Beneficiary or other distributee to furnish to the Liquidating Trustee in
writing an Employer Identification Number or Taxpayer Identification Number as
assigned by the IRS, and the Liquidating Trustee may condition any Distribution
to any Liquidating Trust Beneficiary or other distributee upon receipt of such
identification number.

 

Five (5) Business Days prior to the making of any Distributions contemplated
hereunder to holders of Allowed Claims or Allowed Interests, the Liquidating
Trustee shall file with the Bankruptcy Court written notice of any such
Distribution, which notice shall include a summary of the aggregate amounts to
be distributed.

 

6.5 Distributions on Account of Allowed Shareholders’

      Securities Claims and Allowed Equity Interests.

   

Pursuant to section 510(b) of the Bankruptcy Code, a Holder of an Allowed
Shareholders’ Securities Claim and/or an Allowed Equity Interest shall not
receive any Distribution under the Plan unless and until all Allowed
Administrative Claims, Allowed Priority Tax Claims, Allowed Other Priority
Claims, Allowed Secured Claims, Allowed General Unsecured Claims and Allowed
Noteholders’ Securities Claims have been satisfied in full.

 

6.6 Timing of Distributions.

 

(a) The Debtor, or the Liquidating Trustee as applicable, shall pay each Allowed
Administrative Claim, Allowed Priority Tax Claim, Allowed Other Priority Claim,
and Allowed Secured Claim on or as soon as practicable after the latest of:

 

1. the Effective Date of the Plan,

 

2. the date on which such Claim becomes an Allowed Claim by Final Order,

 

3. the date on which, in the ordinary course of business, such Allowed Claim
becomes due, and

 

4. such other date as may be agreed upon by the Debtor or the Liquidating
Trustee, as applicable, and the Holder of such Allowed Claim.

 

(b) As soon as reasonably practicable after the payment in full of all Allowed
Administrative Claims, Allowed Priority Tax Claims, Allowed Other Priority
Claims, and Allowed Secured Claims, the Liquidating Trustee shall make an
initial Distribution of the available cash and other distributable property
component of the Liquidating Trust Assets in accordance with the provisions of
the Plan and the Confirmation Order, to the extent practicable in the reasonable
discretion of the Liquidating Trustee, with the approval of the Liquidating
Trust Advisory Board, to the Holders of Allowed General Unsecured Claims. The
Liquidating Trustee shall make periodic Distributions thereafter to Holders of
Allowed General Unsecured Claims, as appropriate, in his discretion.

 

25

 

 

 

(c) As soon as reasonably practicable after the payment in full of all Allowed
Administrative Claims, Allowed Priority Tax Claims, Allowed Other Priority
Claims, Allowed Secured Claims, and Allowed General Unsecured Claims and in
accordance with the terms of Article 7.4 of the Plan, the Liquidating Trustee
shall make an initial Distribution of the available cash or other distributable
property component of the Liquidating Trust Assets in accordance with the
provisions of the Plan and the Confirmation Order, to the extent practicable in
the reasonable discretion of the Liquidating Trustee, with the approval of the
Liquidation Trust Advisory Board, to the Holders of Allowed Noteholders’
Securities Claims. The Liquidating Trustee shall make periodic Distributions
thereafter to Holders of Allowed Noteholders’ Securities Claims, as appropriate,
in his discretion.

  

(d) In accordance with Article 7.5 of the Plan and Article 6.5 hereof, after all
Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Other
Priority Claims, Allowed Secured Claims, Allowed General Unsecured Claims and
all Allowed Noteholders’ Securities Claims have been satisfied, the Liquidating
Trustee shall make periodic distributions of then available cash or other
distributable property to Holders of Allowed Shareholders’ Securities Claims and
Allowed Equity Interests.

 

(e) Any cash remaining in the applicable Reserves after all Disputed
Administrative Claims, Disputed Priority Tax Claims, Disputed Other Priority
Claims, Disputed Secured Claims, Disputed General Unsecured Claims, Disputed
Noteholders’ Securities Claims, Disputed Shareholders’ Securities Claims and
Disputed Equity Interests have been resolved, and paid, as appropriate, and the
costs and expenses of the Liquidating Trust have been fully paid, shall be
available for Distributions in accordance with the Plan.

 

(f) Once all Disputed Administrative Claims, Disputed Priority Tax Claims,
Disputed Other Priority Claims and Disputed Secured Claims have been resolved,
the Disputed Administrative, Priority Tax, Priority Non-Tax and Secured Claims
Reserve shall be dissolved. Once the Disputed General Unsecured Claims have been
resolved, the Disputed General Unsecured Claims Reserve shall be dissolved. Once
the Disputed Noteholders’ Securities Claims have been resolved, the Disputed
Noteholders’ Securities Claims Reserve shall be dissolved. To the extent that
reserves are established for Disputed Shareholders’ Securities Claims and
Disputed Equity Interests, once all Disputed Shareholders’ Securities Claims and
Disputed Equity Interests are resolved, such reserves shall be dissolved. Once
all costs and expenses of the Liquidating Trust have been paid in full in cash
and the Liquidating Trust has been dissolved, the Liquidating Trust Expense
Reserve shall be dissolved. No further action or order shall be necessary for
such dissolution to be effective.

 

6.7 Distributions upon Allowance of Disputed Claims or Disputed Interests. The
Holder of a Disputed Claim or a Disputed Equity Interest that becomes an Allowed
Claim or an Allowed Equity Interest subsequent to the Effective Date shall
receive a Distribution from the Liquidating Trust, if applicable, as soon as
reasonably practicable following the date on which such Disputed Claim or
Disputed Equity Interest becomes an Allowed Claim or an Allowed Equity Interest
pursuant to a Final Order or by agreement of the parties in accordance with
Article VII of the Plan. Such Distributions shall be made in accordance with the
Plan based upon the Distributions that would have been made to such Holder under
the Plan if the Disputed Claim had been an Allowed Claim or an Allowed Equity
Interest on or prior to the Effective Date. No Holder of a Disputed Claim or a
Disputed Equity Interest shall have any Claim against the Liquidating Trustee,
the Liquidating Trust, the Debtor or the Estate with respect to such Disputed
Claim or Disputed Equity Interest until such Disputed Claim or Disputed Equity
Interest becomes an Allowed Claim or an Allowed Equity Interest, and no Holder
of a Disputed Claim or a Disputed Equity Interest shall have any right to
interest, dividends or other Distributions on such Disputed Claim or Disputed
Equity Interest except as provided in the Plan.

 

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6.8 Undeliverable and Unclaimed Distributions

 

 (a) Holding Undeliverable and Unclaimed Distributions. If the Distribution to
any Holder of an Allowed Claim or Allowed Equity Interest is returned to the
Liquidating Trustee as undeliverable or is otherwise unclaimed, no additional
Distributions shall be made to such Holder unless and until the Liquidating
Trustee is notified in writing of such Holder’s then-current address. Nothing
contained in the Plan or this Agreement shall require the Debtor or the
Liquidating Trustee to attempt to locate any Holder of an Allowed Claim or an
Allowed Equity Interest.

 

(b) After Distributions Become Deliverable. The Liquidating Trustee shall make
all Distributions that have become deliverable or have been claimed on and after
the Distribution Date as soon as reasonably practicable after such Distribution
has become deliverable or has been claimed.

 

(c) Failure to Claim Unclaimed/Undeliverable Distributions. Any Holder of an
Allowed Claim or Allowed Equity Interest that does not assert a Claim pursuant
to the Plan for an undeliverable or unclaimed Distribution (including uncashed
checks) within six (6) months after the Distribution Date shall be deemed to
have forfeited its right to such undeliverable or unclaimed Distribution and any
subsequent Distribution on account of its Allowed Claim or Allowed Equity
Interest and shall be forever barred and enjoined from asserting any such claim
for an undeliverable or unclaimed Distribution or any subsequent Distribution on
account of its Allowed Claim or Allowed Equity Interest against the Debtor, its
Estate, the Liquidating Trust or their property. In such cases, Unclaimed
Distributions shall be paid to Holders of Allowed Claims and/or Allowed Equity
Interests on a Pro Rata basis according to the parameters set forth in Article
IV of the Plan within the time periods provided in Article 7.6 of the Plan and
Article 6.6 hereof, free of any restrictions thereon and notwithstanding any
federal or state escheat laws to the contrary.

 

(d) Charitable Contribution. If there are any residual Unclaimed Distributions
or De Minimis Distributions (as defined in Article 6.17 below) at the time of
the dissolution of the Liquidating Trust, such residual Unclaimed Distributions
and De Minimis Distributions shall be donated to a charitable organization as
selected by the Liquidating Trustee with the approval of the Liquidating Trust
Advisory Board, free of any restrictions thereon and notwithstanding any federal
or state escheat laws to the contrary.

 

27

 

 

 

6.9 Interest. Unless otherwise specifically provided for in the Plan or this
Agreement, the Confirmation Order, or required by applicable bankruptcy law,
post-petition interest shall not accrue or be paid on any Claims, and no Holder
of a Claim shall be entitled to interest accruing on or after the Petition Date
on any Claim; provided, however, that Holders of Claims shall be entitled to
reasonable interest as applicable under the agreement underlying such Claims
before Holders of Noteholders’ Securities Claims, Shareholders’ Securities
Claims and Equity Interests may receive a Distribution.  The reasonableness of
the rate of interest shall be determined by the Liquidating Trustee in
consultation with the Liquidating Trust Advisory Board, or by the Bankruptcy
Court pursuant to an order.

  

6.10 No Distribution in Excess of Allowed Amount of Claim. Notwithstanding
anything to the contrary herein, no Holder of an Allowed Claim will receive, in
respect of such Claim, Distributions under the Plan in excess of the Allowed
amount of such Claim.

 

6.11 Means of Cash Payment. Cash payments made pursuant to the Plan and this
Agreement shall be in U.S. funds, by the means, including by check or wire
transfer, determined by the Disbursing Agent, unless otherwise determined or
agreed to by the Disbursing Agent.

 

6.12 Delivery of Distribution Except as otherwise set forth in the Plan or this
Agreement, Distributions to Holders of Allowed Claims and Allowed Equity
Interests shall be made (a) at the addresses set forth on the proofs of Claim
Filed by such Holders (or at the last known addresses of such Holders if no
proof of Claim is Filed or if the Disbursing Agent has been notified of a change
of address), (b) at the addresses set forth in any written notices of address
changes delivered to the Disbursing Agent, or (c) if no proof of Claim has been
Filed and the Disbursing Agent has not received a written notice of a change of
address, at the addresses reflected in the Schedules, if any.

 

6.13 Record Date for Distributions. The Disbursing Agent will have no obligation
to recognize the transfer of, or the sale of any participation in, any Allowed
Claim or Allowed Equity Interest that occurs after the close of business on the
Distribution Record Date, and will be entitled for all purposes herein to
recognize and distribute only to those Holders of Allowed Claims or Allowed
Equity Interests that are Holders of such Claims, or participants therein, as of
the close of business on the Distribution Record Date. The Disbursing Agent
shall instead be entitled to recognize and deal for all purposes under the Plan
or this Agreement with only those record holders stated on the official claims
register as of the close of business on the Distribution Record Date.

 

6.14 No Distributions Pending Allowance. Notwithstanding any other provision of
the Plan or this Agreement, no payments or Distributions by the Disbursing Agent
shall be made with respect to all or any portion of a Disputed Claim or Disputed
Equity Interest unless and until all Objections to such Disputed Claim or
Disputed Equity Interest have been settled or withdrawn by agreement of the
parties or have been determined by Final Order, and the Disputed Claim or
Disputed Equity Interest has become an Allowed Claim or an Allowed Equity
Interest; provided, however, that the Debtor or the Liquidating Trustee, may in
their discretion, pay any undisputed portion of a Disputed Claim or Disputed
Equity Interest.

 

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6.15 Withholding and Reporting Requirements. In connection with the Plan and all
Distributions hereunder, the Disbursing Agent shall, to the extent applicable,
comply with all tax withholding and reporting requirements imposed by any
federal, state, local, or foreign taxing authority, and all Distributions
hereunder shall be subject to any such withholding and reporting requirements.
The Disbursing Agent shall be authorized to take any and all actions that may be
reasonably necessary or appropriate to comply with such withholding and
reporting requirements. Each Holder of an Allowed Claim or Allowed Equity
Interest shall be required to provide any information necessary to affect
information reporting and the withholding of such taxes. Notwithstanding any
other provision of the Plan or this Agreement, each Holder of an Allowed Claim
or an Allowed Equity Interest that is to receive a Distribution pursuant to the
Plan shall have sole and exclusive responsibility for the satisfaction and
payment of any tax obligations imposed by any Governmental Unit, including
income, withholding and other tax obligations, on account of such Distribution.

 

6.16 Setoffs. The Debtor or the Liquidating Trustee, as applicable, may, but
shall not be required to, setoff against any Claim or Equity Interest and the
payment or other Distribution to be made pursuant to the Plan and this Agreement
in respect of such Claim or Equity Interest, claims of any nature whatsoever
that the Debtor may have against the Holder of such Claim or Equity Interest;
provided, however, neither the failure to do so nor the allowance of any Claim
or Equity Interest hereunder shall constitute a waiver or release by the
Disbursing Agent of any such claim that the Disbursing Agent may have against
such Holder, unless otherwise agreed to in writing by such Holder and the Debtor
or the Liquidating Trustee, as applicable.

 

6.17 De Minimis Distributions. Notwithstanding any provision in the Plan or this
Agreement to the contrary, no payment of less than twenty-five dollars ($25.00)
shall be made on account of any Allowed Claim or Allowed Equity Interest. All
Distributions not made pursuant to this Article 6.17 shall be treated as
Unclaimed Distributions and are subject to Article 6.8 hereof.

 

6.18 Extensions of Time. The Liquidating Trustee may File a motion to extend any
deadlines for the making of Distributions hereunder prior to the occurrence of
any such deadlines, to the extent necessary, which deadlines shall be deemed
automatically extended after the Filing of such motion, and pending the entry of
an order by the Bankruptcy Court extending any such deadline.

 

Article VII
TRUST FUNDING

7.1 Trust Funding

 

 

The Reserves shall be established and funded in accordance with Article VI of
this Agreement and Article VII of the Plan. The costs and expenses of the
Liquidating Trust, including the compensation to and reimbursement of expenses
to the Liquidating Trustee, the compensation to and reimbursement of expenses to
the Liquidating Trust Advisory Board and the fees, costs and expenses of all
professionals retained by the Liquidating Trustee in connection with the
performance of the Liquidating Trustee’s duties in connection with this
Agreement, shall be paid from the Liquidating Trust Expense Reserve in
accordance with Article VII of the Plan and Article VI hereof. The Liquidating
Trust Expense Reserve shall not be subject to charge for claims against the
Liquidating Trust, the Liquidating Trustee, the Liquidating Trust Advisory Board
or the Debtor’s Estate. Any funds remaining in the Liquidating Trust Expense
Reserve after completion of the Liquidating Trustee’s activities and full
payment of all costs and expenses of the Liquidating Trust including the fees,
costs and expenses of the Liquidating Trustee and the professionals retained by
the Liquidating Trustee, shall be paid to the Liquidating Trust Beneficiaries
according to the terms of the Plan and this Agreement.

29

 

 

 

Article VIII
PROVISIONS FOR CLAIMS OBJECTIONS AND ESTIMATION OF CLAIMS

 

8.1 Claims Objection Deadline; Prosecution of Claims Objections.

 

Except as otherwise provided for in the Plan or this Agreement, as soon as
reasonably practicable after the Effective Date, but in no event later than the
Claims Objection Deadline (unless extended, after notice to those Creditors who
requested notice in accordance with Bankruptcy Rule 2002, by an Order of the
Bankruptcy Court), the Liquidating Trustee shall File Objections to Claims and
serve such Objections upon the Holders of each of the Claims to which Objections
are made. Subject to the rights of the Independent Directors set forth in
Article 6.3 of the Plan and subject to the approval rights of the Liquidating
Trust Advisory Board set forth in Article 5.4, the Liquidating Trustee shall
have the exclusive authority to file objections to, and to settle, compromise,
withdraw or litigate to judgment in the Bankruptcy Court, or such other court
having competent jurisdiction, objections to any and all Disputed Claims without
approval of the Bankruptcy Court or notice to any party.

 

8.2 Estimation of Claims.

 

The Disbursing Agent may, at any time, request that the Bankruptcy Court
estimate any Contingent or unliquidated Claim pursuant to section 502(c) of the
Bankruptcy Code regardless of whether the Debtor, the Committee, or the
Liquidating Trustee previously objected to such Claim or whether the Bankruptcy
Court has ruled on any such Objection. The Bankruptcy Court will retain
jurisdiction to estimate any Claim at any time during litigation or a hearing
concerning any objection to any Claim, including during the pendency of any
appeal relating to any such Objection. Subject to the provisions of section
502(j) of the Bankruptcy Code, in the event that the Bankruptcy Court estimates
any Contingent or unliquidated Claim, the amount so estimated shall constitute
the maximum allowed amount of such Claim. If the estimated amount constitutes
the maximum allowed amount of such Claim, the Debtor or the Liquidating Trustee,
as applicable, may pursue supplementary proceedings to object to the allowance
of such Claim. All of the aforementioned Objection, estimation and resolution
procedures are intended to be cumulative and not necessarily exclusive of one
another. Claims may be estimated and subsequently compromised, settled,
withdrawn, or resolved by any mechanism approved by the Bankruptcy Court.

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Article IX
LIABILITY AND EXCULPATION PROVISIONS

 

9.1 Liability, Indemnification of the Liquidating Trust Protected Parties

 

The Liquidating Trust Protected Parties shall not be liable for any act or
omission of any other member, designee, agent, or representative of such
Liquidating Trust Protected Parties, nor shall such Liquidating Trust Protected
Parties be liable for any act or omission taken or not taken in their capacity
as Liquidating Trust Protected Parties other than for specific acts or omissions
resulting from such Liquidating Trust Protected Parties’ willful misconduct,
gross negligence or fraud, or any conduct for which such Liquidating Trust
Protected Party cannot be relieved from liability under NRS § 163.160 to the
extent it is found in a final judgment by a court of competent jurisdiction (not
subject to further appeal). The Liquidating Trustee and the Liquidating Trust
Advisory Board, and each member thereof, may, in connection with the performance
of his or its functions, and in his or its sole and absolute discretion, consult
with his or its, as applicable, attorneys, accountants, and financial advisors,
and shall not be liable for any act taken, omitted to be taken, or suffered to
be done in good faith in accordance with advice or opinions rendered by any such
professionals, regardless of whether such advice or opinions are provided in
writing. The Liquidating Trustee and the Liquidating Trust Advisory Board, and
each member thereof, shall not be under any obligation to consult with his or
its attorneys, accountants and financial advisors, and his or its determination
not to do so shall not result in the imposition of liability on the Board or the
Liquidating Trust Protected Parties, unless such determination is based on
willful misconduct, gross negligence, or fraud, or any conduct for which such
Liquidating Trust Protected Party cannot be relieved from liability under NRS §
163.160.

 

The Liquidating Trust shall indemnify and hold harmless the Liquidating Trust
Protected Parties from and against and in respect of all liabilities, losses,
damages, claims, costs, and expenses (including reasonable attorney’s fees,
disbursements, and related expenses), which such Liquidating Trust Protected
Parties may incur or to which such Liquidating Trust Protected Parties may
become subject to in connection with any action, suit, proceeding, or
investigation brought by or threatened against such Liquidating Trust Protected
Parties arising out of or due to their acts or omissions or consequences of such
acts or omissions, with respect to the implementation or administration of the
Liquidating Trust or the Plan or the discharge of their duties hereunder;
provided, however, that no such indemnification will be made to such Liquidating
Trust Protected Parties for actions or omissions as a result of their willful
misconduct, gross negligence, or fraud, or any other conduct for which such
Liquidating Trust Protected Party cannot be relieved from liability under NRS §
163.160. Any claim of any Liquidating Trust Protected Party to be indemnified or
held harmless shall be satisfied solely from the Liquidating Trust Assets or any
applicable insurance coverage.  Notwithstanding any provision herein to the
contrary, the Liquidating Trust Protected Parties shall be entitled to obtain
advances from the Liquidating Trust to cover their reasonable expenses of
defending themselves in any action brought against them as a result of the acts
or omissions, actual or alleged, of a Liquidating Trust Protected Party in its
capacity as such; provided, however, that the Liquidating Trust Protected
Parties receiving such advances shall repay the amounts so advanced to the
Liquidation Trust upon the entry of a final judgment by a court of competent
jurisdiction (not subject to further appeal) finding that such Liquidating Trust
Protected Parties were not entitled to any indemnity under the provisions of
this Article 9.1.  The foregoing indemnity in respect of any Liquidating Trust
Protected Party shall survive the termination of such Liquidating Trust
Protected Party from the capacity for which they are indemnified.

 

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9.2 Reliance by Liquidating Trustee and Liquidating Trust Advisory Board

 

Except as otherwise provided herein:

 

(a) the Liquidating Trustee and each member of the Liquidating Trust Advisory
Board may conclusively rely, and shall be protected from liability in acting
upon or failing to act upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, or other paper or document
reasonably believed by the Liquidating Trustee or such member to be genuine and
to have been signed or presented by the properly authorized party or parties;

 

(b) neither the Liquidating Trustee nor any member of the Liquidating Trust
Advisory Board shall be liable for any action reasonably taken or not taken by
it in reasonable reliance upon the advice of a Trustee Professional or Trustee
Non-Professional;

 

(c) persons providing services to the Liquidating Trustee and the Liquidating
Trust Advisory Board shall look only to the Liquidating Trust Expense Reserves
to satisfy any liability incurred by the Liquidating Trustee and the Liquidating
Trust Advisory Board to such person in carrying out the terms of this Agreement,
and neither the Liquidating Trustee nor any member of the Liquidating Trust
Advisory Board shall have any personal obligation to satisfy any such liability,
except to the extent that actions taken or not taken after the Effective Date by
the Liquidating Trustee and the Liquidating Trust Advisory Board or its members
are determined by a Final Order to be solely due to the Liquidating Trustee’s,
or the Liquidating Trust Advisory Board’s, or such member’s own gross
negligence, willful misconduct, fraud or breach of fiduciary duty, other than
negligence, or any other conduct for which such Liquidating Trust Protected
Party cannot be relieved from liability under NRS § 163.160; and

 

(d) the Liquidating Trustee shall have no liability for any act or omission
taken in good faith which has been approved by the Liquidating Trust Advisory
Board.

 

9.3 Liquidating Trustee’s Delegation Powers

 

The Liquidating Trustee may execute any of his powers or duties hereunder either
directly or by or though agents or attorneys (including Liquidating Trustee
Professionals and Liquidating Trustee Non-Professionals) and the Liquidating
Trustee shall not be responsible for any misconduct or negligence on the party
of any such agent or attorney appointed by him with due care.

 

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9.4 Liquidating Trustee’s Funds

 

No provision of this Agreement or the Plan shall require the Liquidating Trustee
to expend or risk his own funds or otherwise incur any financial liability in
the performance of any of his duties as Liquidating Trustee hereunder or under
the Plan, or in the exercise of any of his rights or powers, if the Liquidating
Trustee shall have reasonable grounds for believing that repayment of funds or
adequate indemnity or security satisfactory to him against such risk or
liability is not reasonably assured to him.

 

Article X
ESTABLISHMENT OF THE LIQUIDATING TRUST

 

10.1 Transfer of Assets to Liquidating Trust; Assumption of Liabilities

 

Pursuant to the Plan, the Debtor and the Liquidating Trustee hereby establish
the Liquidating Trust on behalf of and for the benefit of the Liquidating Trust
Beneficiaries to be treated as the grantors and deemed owners of the Liquidating
Trust Assets, and the Debtor hereby transfers, assigns, and delivers to the
Liquidating Trustee on behalf of and for the benefit of the Liquidating Trust
Beneficiaries all of its right, title, and interest (whether legal, beneficial
or otherwise) in and to the Liquidating Trust Assets, including Claims and
Causes of Action of the Debtor, other than any Claims and Causes of Action
expressly waived, exculpated or released in accordance with the provisions of
the Plan, notwithstanding any prohibition of assignability under applicable
non-bankruptcy law. Such transfer includes all rights to assert, waive or
otherwise exercise any attorney-client privilege, work product protection or
other privilege, immunity, or confidentiality provision vested in, or controlled
by, the Debtor. The Liquidating Trustee (solely in his capacity as such) agrees
to accept and hold the Liquidating Trust Assets for the benefit of the
Liquidating Trust Beneficiaries, subject to the terms of the Plan and this
Agreement.

 

10.2 Title to Assets

 

(a) Notwithstanding any prohibition of assignability under applicable
non-bankruptcy law, on the Effective Date and periodically thereafter if
additional Liquidating Trust Assets become available, the Debtor shall be deemed
to have automatically transferred to the Liquidating Trust all of its right,
title, and interest in and to all of the Liquidating Trust Assets, and in
accordance with section 1141 of the Bankruptcy Code, all such assets shall
automatically vest in the Liquidating Trust free and clear of all Claims and
liens, subject only to the Allowed Claims or Allowed Interests of the
Liquidating Trust Beneficiaries as set forth in the Plan and the expenses of the
Liquidating Trust as set forth in the Plan and in this Agreement. Thereupon, the
Debtor shall have no interest in or with respect to the Liquidating Trust Assets
or the Liquidating Trust.

  

(b) For all federal income tax purposes, all Parties and Liquidating Trust
Beneficiaries shall treat the transfer of the Liquidating Trust Assets by the
Debtor to the Liquidating Trust, as set forth in this Article X and in the Plan,
as a transfer of such assets by the Debtor to the Liquidating Trust
Beneficiaries entitled to distributions under this Agreement, followed by a
transfer by such Liquidating Trust Beneficiaries to the Liquidating Trust. Thus,
the Liquidating Trust Beneficiaries shall be treated as the grantors and owners
of a grantor trust for federal income tax purposes.

 

 

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10.3 Valuation of Assets

 

As soon as reasonably practicable after the Effective Date, the Liquidating
Trustee (to the extent that the Liquidating Trustee deems it necessary or
appropriate in his reasonable discretion) shall value the Liquidating Trust
Assets based on the good faith determination of the value of such Liquidating
Trust Assets. The valuation shall be used consistently by all Parties and the
Liquidating Trust Beneficiaries for all federal income tax purposes. The
Bankruptcy Court shall resolve any dispute regarding the valuation of the
Liquidating Trust Assets.

 

10.4 Issuance of Beneficial Interests in Liquidating Trust

 

On the Effective Date, the Holders of Claims and Interests in Classes 1 through
6 under the Plan will be entitled to beneficial interests in the Liquidating
Trust, which entitle them to those distributions set forth in the Plan.
Notwithstanding the foregoing or anything herein to the contrary, on the
Effective Date, and subject to the paragraph below, the Liquidating Trust will
only issue beneficial interests in the Liquidating Trust to the Holders of Class
1 Claims, Class 2 Claims or Class 3 Claims. Beneficial interests in the
Liquidating Trust will be issued to the Holders of Claims in Classes 4, 5 and 6
when the Liquidating Trustee determines, with the approval of the Liquidating
Trust Advisory Board, that such Holders of Claims in Classes 4, 5 or 6 are
entitled to Distributions from the Liquidating Trust.

 

Notwithstanding the foregoing or anything to the contrary in the Plan, the
Confirmation Order or this Liquidating Trust Agreement, the Liquidating Trust
shall not issue any beneficial interests in the Liquidating Trust unless and
until the Liquidating Trust receives a favorable ruling from the Division of
Corporation Finance of the United States Securities and Exchange Commission, in
a form acceptable to the Liquidating Trustee and the Liquidating Trust Advisory
Board in their sole discretion, which provides that, among other matters, the
Division of Corporation Finance of the United States Securities and Exchange
Commission would not recommend enforcement action if such beneficial interests
are not registered under Section 12(g) of the Securities Exchange Act of 1934;
provided, however, the Liquidating Trustee, with the approval of the Liquidating
Trust Advisory Board, may waive the requirement of such a ruling or “no
objection” communication, as applicable, in their sole discretion.

 

Article XI
BENEFICIARIES

 

11.1 Identification of Beneficiaries

 

In order to determine the actual names and addresses of the Liquidating Trust
Beneficiaries, the Liquidating Trustee shall be entitled to conclusively rely on
the names and addresses as determined in accordance with Articles 6.12 and 6.13
herein. Each Liquidating Trust Beneficiary’s right to distribution from the
Liquidating Trust, which is dependent upon such Liquidating Trust Beneficiary’s
classification under the Plan, shall be that accorded to such Liquidating Trust
Beneficiary under the Plan.

 

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Article XII
ADMINISTRATION

 

12.1 Purpose of the Liquidating Trust.

 

The Liquidating Trust shall be established for the primary purpose of
liquidating its assets, in accordance with Treas. Reg. § 301.7701-4(d), with no
objective to continue or engage in the conduct of a trade or business, except to
the extent reasonably necessary to, and consistent with, the liquidating purpose
of the Liquidating Trust. Accordingly, the Liquidating Trustee shall, in an
expeditious but orderly manner, liquidate and convert to cash the Liquidating
Trust Assets, including the Causes of Action, make timely distributions to the
Liquidating Trust Beneficiaries and not unduly prolong its duration. The
Liquidating Trust shall not be deemed a successor-in-interest of the Debtor for
any purpose other than as specifically set forth in the Plan or in this
Agreement.

 

12.2 Books and Records

 

The Liquidating Trustee shall maintain books and records relating to the
administration of the Liquidating Trust Assets and the distribution by the
Liquidating Trustee of the proceeds therefrom in such detail and for such period
of time as may be necessary to make full and proper accounting in respect
thereof and to comply with applicable provisions of law. The Liquidating Trustee
shall also maintain books and records relating to the income and expenses of the
Liquidating Trust, and the payment of expenses of and liabilities of, claims
against or assumed by, the Liquidating Trust in such detail and for such period
of time as may be necessary to make full and proper accounting in respect
thereof and to comply with applicable provisions of law. Except as otherwise
provided herein or in the Plan, nothing in this Agreement requires the
Liquidating Trustee to file any accounting or seek approval of any court with
respect to the administration of the Liquidating Trust, or as a condition for
making any payment or distribution out of the Liquidating Trust Assets. Subject
to all applicable privileges, the Liquidating Trust Beneficiaries shall have the
right, in addition to any other rights they may have pursuant to this Agreement,
under the Plan or otherwise, upon twenty (20) days’ prior written notice to the
Liquidating Trustee, to conduct a reasonable inspection of the books and records
held by the Liquidating Trustee during normal business hours, provided that, all
costs associated with such inspection shall be paid in advance by such
requesting Liquidating Trust Beneficiary, and further, if so requested, such
Liquidating Trust Beneficiary shall have entered into a confidentiality
agreement satisfactory in form and substance to the Liquidating Trustee, and
make such other arrangements as may be reasonably requested by the Liquidating
Trustee. The Liquidating Trustee shall provide any member of the Liquidation
Trust Advisory Board with access to the books and records held by the
Liquidating Trustee during normal business hours as may be reasonably requested
upon at least three (3) Business Days’ prior written notice.

 

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12.3 Compliance with Laws

 

Any and all distributions of Liquidating Trust Assets shall comply with all
applicable laws and regulations, including applicable federal and state tax and
securities laws.

 

 

Article XIII
SUCCESSOR LIQUIDATING TRUSTEE

 

13.1 Successor Liquidating Trustee

 

In the event the Liquidating Trustee is removed or resigns pursuant to this
Agreement or the Liquidating Trustee otherwise vacates his position, the
Liquidating Trust Advisory Board shall designate a successor Liquidating Trustee
who shall be subject to the approval of the Bankruptcy Court. Thereupon, such
successor Liquidating Trustee shall, without any further act, become vested with
all the estate, properties, rights, powers, trusts and duties of his/her
predecessor in the Liquidating Trust with like effect as if originally named
herein; provided, however, that a removed or resigning Liquidating Trustee
shall, nevertheless, when requested in writing by the successor Liquidating
Trustee, execute and deliver any reasonable instrument or instruments conveying
and transferring to such successor Liquidating Trustee all the estate,
properties, rights, powers, and trusts of such removed or resigning Liquidating
Trustee.

 

 

Article XIV
REPORTING

 

14.1 Federal Income Tax

 

(a) Grantor Trust Status. Subject to definitive guidance from the IRS or a court
of competent jurisdiction to the contrary (including the issuance of applicable
Treasury Regulations, the receipt by the Liquidating Trustee of a private letter
ruling if the Liquidating Trustee so requests one, or the receipt of an adverse
determination by the IRS upon audit if not contested by the Liquidating
Trustee), the Liquidating Trustee shall file returns for the Liquidating Trustee
as a grantor trust pursuant to Treas. Reg. § 1.671-4(a).

 

(b) Allocations of Liquidating Trust Taxable Income. Subject to the provisions
of Article 14.1(a) hereof, allocations of Liquidating Trust taxable income shall
be determined by reference to the manner in which an amount of cash equal to
such taxable income would be distributed (without regard to any restriction on
distributions described herein) if, immediately prior to such deemed
distribution, the Liquidating Trust had distributed all of its other assets
(valued for this purpose at their tax book value) to Liquidating Trust
Beneficiaries (treating any Holder of a Disputed Claim, for this purpose, as a
current Liquidating Trust Beneficiary entitled to distributions), taking into
account all prior and concurrent distributions from the Liquidating Trust
(including any distributions held in reserve pending the resolution of Disputed
Claims). Similarly, taxable losses of the Liquidating Trust will be allocated by
reference to the manner in which an economic loss would be borne immediately
after a liquidating distribution of the remaining Liquidating Trust Assets. The
tax book value of the Liquidating Trust Assets for this purpose shall equal
their fair market value on the Effective Date or, if later, the date such assets
were acquired by the Liquidating Trust, adjusted in either case in accordance
with tax accounting principles prescribed by the Internal Revenue Code, the
Treasury Regulations and other applicable administrative and judicial
authorities and pronouncements.

 

 

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14.2 Other

 

The Liquidating Trustee shall file (or cause to be filed) any other statement,
returns or disclosures relating to the Liquidating Trust or the Liquidating
Trust Assets, that are required by any Governmental Unit.

 

 

Article XV
TRANSFER OF LIQUIDATING TRUST BENEFICIARIES’ INTERESTS

 

15.1 Transfer of Liquidating Trust Beneficiaries’ Interests

 

The interests of the Liquidating Trust Beneficiaries in the Liquidating Trust,
which are reflected only on the records of the Liquidating Trust maintained by
the Liquidating Trustee, are not negotiable and shall not be assignable
voluntarily. The beneficial interests of the Liquidating Trust Beneficiaries in
the Liquidating Trust may not be transferred in any manner whatsoever
(including, without limitation, by sale, exchange, gift, pledge or creation of a
security interest), except by operation of law upon death of a Liquidating Trust
Beneficiary. Neither the Liquidating Trustee, the Liquidating Trust Advisory
Board nor the Liquidating Trust Protected Parties shall take any action to
facilitate or encourage trading in the beneficial interests in the Liquidating
Trust or in any instrument tied to the beneficial interests (or the value
thereof). In the case of a deceased individual Liquidating Trust Beneficiary,
his or her executor or administrator shall succeed to such decedent’s interests.
The Liquidating Trustee shall not be required to record any transfer in favor of
any transferee that, in the sole discretion of the Liquidating Trustee, is or
might be construed to be ambiguous or to create uncertainty as to the holder of
the interest in the Liquidating Trust. Until a transfer is in fact recorded on
the books and records maintained by the Liquidating Trustee for the purpose of
identifying Liquidating Trust Beneficiaries, the Liquidating Trustee, whether or
not in receipt of documents of transfer or other documents relating to the
transfer, may nevertheless make distributions and send communications to
Liquidating Trust Beneficiaries, as though it has no notice of any such
transfer, and in so doing the Liquidating Trustee shall be fully protected and
incur no liability to any purported transferee or any other Entity.

 

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Article XVI
LIQUIDATING TRUSTEE PROFESSIONALS AND NON-PROFESSIONALS

 

16.1 Retention of Trust Professionals and Non-Professionals.

 

(a) The Liquidating Trustee is empowered from available funds in the Liquidating
Trust Reserve: (i) to elect, appoint, engage, retain and employ any persons as
professionals and advisors (“Liquidating Trustee Professionals”) or as
non-professionals (including employees, independent contractors and other
agents, “Liquidating Trustee Non-Professionals”) in one or more capacities as is
reasonably necessary to enable the Liquidating Trustee to implement this
Agreement and the Plan or to assist the Liquidating Trustee in performing his
duties hereunder; (ii) subject to Article 16.2 below, to pay fees to and to
reimburse the expenses of those employees, agents or independent contractors
elected, appointed, engaged, retained or employed by the Liquidating Trustee;
and (iii) in consultation with the Liquidating Trust Advisory Board, to
indemnify the Liquidating Trustee’s agents, professionals and employees from any
loss (including reasonable attorneys’ fees) incurred in connection with the
execution and implementation of the Plan or their duties to the Liquidating
Trust and/or the Liquidating Trustee other than a loss due to the indemnified
party’s willful misconduct, gross negligence, or fraud. The Liquidating Trustee
shall not be responsible for the misconduct of those appointed, engaged,
retained, or employed by the Liquidating Trustee with due care. Such persons so
retained need not be “disinterested” as that term is defined in the Bankruptcy
Code and may include the Liquidating Trustee, counsel, interim management and
financial advisors of the Debtor and of the Committee as well as employees,
independent contractors or agents of the Debtor, the Committee or the
Liquidating Trustee.

 

16.2 Payment to Liquidating Trustee Professionals and Non-Professionals

 

(a) After the Effective Date, the Liquidating Trustee Professionals shall be
required to submit reasonably detailed invoices on a monthly basis to the
Liquidating Trustee, including in such invoices a description of the work
performed, who performed such work, and if billing on an hourly basis, the
hourly rate of each such person, plus an itemized statement of expenses. The
Liquidating Trustee shall pay those invoices within ten (10) days after receipt,
without Bankruptcy Court approval, unless the Liquidating Trustee or the
Liquidating Trust Advisory Board objects. If there is a dispute as to a part of
an invoice, the Liquidating Trustee shall pay the undisputed portion and the
Bankruptcy Court shall resolve any disputed amount if the Liquidating Trustee
Professionals and the Liquidating Trustee or the Liquidating Trust Advisory
Board cannot otherwise reach agreement.

  

(b) After the Effective Date, the Liquidating Trustee Non-Professionals shall be
required to submit to the Liquidating Trustee periodic invoices containing
information with sufficient detail to assess the reasonableness of the fees and
charges. The Liquidating Trustee shall pay those invoices within ten (10) days
after receipt, without Bankruptcy Court approval, unless the Liquidating Trustee
or the Liquidating Trust Advisory Board objects. If there is a dispute as to a
part of an invoice, the Liquidating Trustee shall pay the undisputed portion and
the Bankruptcy Court shall resolve any disputed amount if the Liquidating
Trustee Non-Professionals and the Liquidating Trustee or the Liquidating Trusts
Advisory Board cannot otherwise reach agreement.

 

 

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(c) All payments to Liquidating Trustee Professionals and Liquidating Trustee
Non-Professionals shall be paid out of the Liquidating Trust Expense Reserve.

 

 

Article XVII
TERMINATION OF LIQUIDATING TRUST

 

17.1 Duration and Extension.

 

The Liquidating Trust shall be dissolved at the earlier of (even if the
Liquidating Trust Beneficiaries have not been paid in full) (i) all of the
Liquidating Trust Assets having been distributed pursuant to the Plan and this
Agreement, (ii) the Liquidating Trustee determining, in his reasonable business
judgment, and with the consent of the Liquidating Trust Advisory Board, that the
administration of the Liquidating Trust Assets is not likely to yield sufficient
additional proceeds to justify further pursuit, or (iii) all distributions
required to be made by the Liquidating Trustee under the Plan and this Agreement
having been made; provided, however, that in no event shall the Liquidating
Trust be dissolved later than three (3) years from the Effective Date unless the
Bankruptcy Court, upon motion by a party-in interest within the three (3) months
prior to the third (3rd) anniversary (or at least three (3) months prior to the
end of an extension period), determines that a fixed-period extension is
necessary to facilitate or complete the recovery and liquidation of the
Liquidating Trust Assets. Notwithstanding the foregoing, multiple extensions can
be obtained so long as Bankruptcy Court approval is obtained at least three (3)
months prior to the expiration of each extended term; provided, however, that
the Liquidating Trustee receives an opinion of counsel or a favorable ruling
from the Internal Revenue Service that any further extension would not adversely
affect the status of the Liquidating Trust as a grantor trust for federal income
tax purposes.

 

17.2 Diligent Administration

 

The Liquidating Trustee shall (a) not unduly prolong the duration of the
Liquidating Trust; (b) at all times endeavor to resolve, settle or otherwise
dispose of all claims that constitute Liquidating Trust Assets; and (c) effect
the liquidation and distribution of the Liquidating Trust Assets to the
Liquidating Trust Beneficiaries in accordance with the terms of the Plan and
this Agreement.

  

17.3 Winding Up of the Trust and Termination.

 

After the dissolution of the Liquidating Trust and for the purpose of
liquidating and winding up the affairs of the Liquidating Trust, the Liquidating
Trustee shall continue to act as such until its duties have been fully
performed.  Upon dissolution of the Liquidating Trust, the Liquidating Trustee
shall retain for a period of six (6) years the books, records, lists of the
Liquidating Trust Beneficiaries, the register of Liquidating Trust Beneficiaries
and certificates and other documents and files which shall have been delivered
to or created by the Liquidating Trustee that were not already disposed of as
provided in Article 12.2.  Subject to the consent of the Liquidating Trust
Advisory Board, at the Liquidating Trustee’s discretion, all of such records and
documents may, but need not, be destroyed at any time after six (6) years from
the completion and winding up of the affairs of the Liquidating Trust; provided,
however, that the Liquidating Trustee shall seek approval of the Bankruptcy
Court before disposing of any books and records that pertain to pending
litigation to which either the Debtor or its current or former officers or
directors are a party.

 

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Article XVIII
AMENDMENT AND WAIVER

 

18.1 Amendment and Waiver

 

Any substantive provision of this Agreement may be materially amended or waived
only by the Liquidating Trustee with the consent of Liquidating Trust Advisory
Board and the approval of the Bankruptcy Court; provided, however, that no
change may be made to this Agreement that would adversely affect the federal
income tax status of the Liquidating Trust as a “grantor trust.” Technical or
non-material amendments to or waivers of portions of this Agreement may be made
as necessary to clarify this Agreement or to enable the Liquidating Trust to
effectuate the terms of this Agreement, by the Liquidating Trustee with the
consent of the Liquidating Trust Advisory Board, but without the approval of the
Bankruptcy Court.

 

 

Article XIX
MISCELLANEOUS PROVISIONS

 

19.1 Intention of Parties to Establish Grantor Trust

 

This Agreement is intended to create a grantor trust for United States federal
income tax purposes and, to the extent provided by law, shall be governed and
construed in all respects as a grantor trust.

 

19.2 Preservation of Privilege

  

In connection with the vesting and transfer of the Liquidating Trust Assets,
including rights and Causes of Action, any attorney-client privilege,
work-product protection, or other privilege or immunity attaching or relating to
any documents or communications (of any kind, whether written or oral,
electronic or otherwise) held by the Debtor shall be transferred to the
Liquidating Trust and shall vest in the Liquidating Trustee in his capacity as
such. Accordingly, in connection with the prosecution and/or investigation of
the Causes of Action by the Liquidating Trustee, any and all directors,
officers, employees, counsel, agents, or attorneys-in-fact of the Debtor, cannot
assert any attorney-client privilege, work product protection, or other
privilege or immunity attaching or relating to any documents or communications
(of any kind, whether written or oral, electronic or otherwise) held by the
Debtor or otherwise prevent, hinder, delay, or impede production or discussion
of documents or communications requested by the Liquidating Trustee in discovery
(whether formal or informal, and including depositions, written discovery, and
interviews). The Debtor and the Liquidating Trustee shall take all necessary
actions to protect the transfer of such privileges, protections and immunities.

 

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19.3 Prevailing Party

 

The prevailing party in a dispute regarding the provisions of this Agreement or
the enforcement thereof shall be entitled to collect any and all costs, expenses
and fees, including attorneys’ fees, from the nonprevailing party incurred in
connection with such dispute or enforcement action.

 

19.4 Confidentiality

 

The Liquidating Trustee and each of his respective employees, members, agents,
representatives, professionals and advisors, including the Liquidating Trustee
Professionals and Liquidating Trustee Non-Professionals, (each a “Confidential
Party” and collectively the “Confidential Parties”) shall hold strictly
confidential and not use for personal gain any material, non-public information
of which they have become aware in their capacity as a Confidential Party, of or
pertaining to the Liquidating Trust; provided, however, that such information
may be disclosed if (a) it is now or in the future becomes generally available
to the public other than as a result of a wrongful disclosure by the
Confidential Parties in violation of this Agreement, or (b) the Confidential
Party is advised by its counsel that such disclosure is required of the
Confidential Parties pursuant to legal process, including subpoena or other
court order or other applicable laws or regulations or (c) in the case of the
Liquidating Trustee, he deems it reasonably necessary to execute his obligations
hereunder and/or advance the interests of the Liquidating Trust or (d) in the
case of any Confidentiality Party other than the Liquidating Trustee, as
permitted by the Liquidating Trustee so long as the Liquidating Trustee
reasonably determines that it in the best interests of the Liquidating Trust. In
the event that any Confidential Party is requested to divulge confidential
information pursuant to clause (b) above, such Confidential Party shall
promptly, in advance of making such disclosure, provide reasonable notice of
such required disclosure to the Liquidating Trustee to allow him sufficient time
to object to or prevent such disclosure through judicial or other means and
shall cooperate reasonably with the Liquidating Trustee in making any such
objection, including appearing in any judicial or administrative proceeding in
support of any objection to such disclosure.

  

19.5 Laws as to Construction

 

This Agreement shall be governed by and construed in accordance with the laws of
the State of Nevada, without giving effect to rules governing the conflict of
law.

 

19.6 Severability

 

Except with respect to provisions herein that are contained in the Plan, if any
provision of this Agreement or the application thereof to any Person or
circumstance shall be finally determined by a court of competent jurisdiction to
be invalid or unenforceable to any extent, the remainder of this Agreement, or
the application of such provision to Persons or circumstances other than those
as to which it is held invalid or unenforceable, shall not be affected thereby,
and shall be valid and enforceable to the fullest extent permitted by law.

 

 

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19.7 Notices

 

Any notice or other communication hereunder shall be in writing and shall be
deemed to have been sufficiently given, for all purposes, if delivered by
facsimile (at the number set forth below with proof of confirmation) and mailed
by certified mail, with return receipt requested at the address as set forth
below, or such other addresses as may be filed with the Bankruptcy Court:

 

As to the Liquidating Trustee:

 

Michael Kang

Alvarez & Marsal North America LLC 100 Pine Street Suite 900 San Francisco, CA
94111  

19.8 Notices if to a Liquidating Trust Beneficiary

 

Any notice or other communication hereunder shall be in writing and shall be
deemed to have been sufficiently given, for all purposes, if deposited, postage
prepaid, in a post office or letter box addressed to the person for whom such
notice is intended to the name and address as determined in accordance with
Articles 6.12 and 6.13 of this Agreement.

 

19.9 Survivability

  

Notwithstanding any provision of the Plan to the contrary, the terms and
provisions of this Agreement shall remain fully binding and enforceable
notwithstanding any vacancy in the position of the Liquidating Trustee.

 

19.10 Headings

 

The Article headings contained in this Agreement are solely for the convenience
of reference and shall not affect the meaning or interpretation of this
Agreement or of any term or provision hereof.

 

19.11 Conflicts with Plan Provisions

 

Except as otherwise expressly stated herein, if any of the terms and/or
provisions of this Agreement conflict with the terms and/or provisions of the
Plan, then the Plan shall govern.

 

 

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IN WITNESS WHEREOF, the Parties hereto have either executed and acknowledged
this Agreement, or caused it to be executed and acknowledged on their behalf by
their duly authorized officers all as of the date first above written.

 

Dated: October 17, 2012

 

 

ShengdaTech, Inc.

Debtor and Debtor-in-Possession

 

By: /s/ Michael Kang

Michael Kang

Chief Restructuring Officer

 

 

   

[Signature Page to Liquidating Trust Agreement]

 

 

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Michael Kang, not individually, but solely in his capacity as Liquidating
Trustee

 

 

              By: /s/ Michael Kang     Michael Kang

 

 

 

[Signature Page to Liquidating Trust Agreement]