Court File No.: CV-19-00633392-00CL

Date: 2020-07-10

Superior Court of Justice - Ontario

(Commercial List)

Re: IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED

AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF LYDIAN INTERNATIONAL LIMITED, LYDIAN CANADA VENTURES CORPORATION AND LYDIAN U.K. CORPORATION LIMITED

Before: Chief Justice G.B. Morawetz

Counsel: Elizabeth Pillon, Maria Konyukhova, Sanja Sopic, and Nicholas Avis, for the Applicants D. J. Miller and Rachel Bergino, for Alvarez & Marsal Inc. Robert Mason and Virginie Gauthier, for Osisko Bermuda Limited Pamela Huff and Chris Burr, for Resource Capital Fund VI L.P. David Bish and Michael Pickersgill, for Orion Capital Management Alexander Steele, for Caterpillar Financial Services (UK) Limited Bruce Darlington, for ING Bank N.V./Abs Svensk Exportkredit (publ) John LeRoux, Hasan Ciftehan, Mehmet Ali Ekingen and Atilla Bozkay, each in their capacity as a Shareholders of Lydian International Limited

Heard by ZOOM Hearing

and Decided: June 29, 2020

Reasons Released: July 10, 2020

ENDORSEMENT

[1] Lydian International Limited, Lydian Canada Ventures Corporation and Lydian U.K. Corporation Limited (the “Applicants”) bring this motion for an order (the “Sanction and Implementation Order”), among other things:

a) declaring that the Meeting of Affected Creditors held on June 19, 2020 was duly convened and held, all in accordance with the Meeting Order;

b) sanctioning and approving the Applicants’ Plan of Arrangement (the “Plan”) as approved by a requisite majority of Affected Creditors at the Meeting, in accordance with the Plan Meeting Order (each as defined below), a copy of which is attached as Schedule ”A” to the draft Sanction and Implementation Order; and

c) granting various other related relief (as more particularly outlined below).

[2] The Applicants submit that the Plan represents the culmination of the Applicants’ restructuring efforts and allows for the resolution of these CCAA Proceedings. The Monitor and the majority of the Affected Creditors are supportive of the Plan and if sanctioned and implemented, the Plan will provide a path forward for Lydian Canada and Lydian UK as part of a privatized Restructured Lydian Group (as defined in the Plan) and ultimately lead to the termination of these CCAA Proceedings.

[3] Shortly after the conclusion of the hearing on June 29, 2020, which was conducted by Zoom, I granted the motion with reasons to follow.

[4] The facts with respect to this motion are more fully set out in the Affidavit of Edward A. Sellers sworn June 24, 2020 (the “Sellers Sanction Affidavit”), the Affidavit of Edward A. Sellers sworn June 15, 2020 (the “Sellers Meeting Affidavit”) and the Affidavit of Mark Caiger sworn June 11, 2020 (the “BMO Affidavit”). Mr. Sellers and Mr. Caiger were not cross-examined. Capitalized terms used herein but not otherwise defined have the meanings ascribed to them in the Sellers Sanction Affidavit, the Sellers Meeting Affidavit, and the Plan. All references to currency in this factum are references to United States dollars, unless otherwise indicated.

Background

[5] The Applicants are three entities at the top of the Lydian Group. The Lydian Group owns a development-stage gold mine in south-central Armenia through its wholly owned non-applicant operating subsidiary Lydian Armenia. The Applicants contend that they have been unable to access their main operating asset, the Amulsar mine, since June 2018 due to blockades and the associated actions and inactions of the Government of Armenia (“GOA”), and as a result, this has prevented the Applicants from completing construction of the mine and generating revenue in the ordinary course.

[6] The Applicants further contend that the effects of the blockades, amongst other factors, caused the Applicants to seek protection under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (the “CCAA”). An Initial Order was granted on December 23, 2019. Alvarez & Marsal Canada Inc. was appointed as Monitor.

[7] In the two years since the blockades began, the Applicants contend that they have used their best efforts to resolve the factors that led to their insolvency, including engaging in negotiations with the GOA, defending their commercial rights and commencing legal proceedings in Armenia to attempt to remove the blockades but these efforts have yet to result in the Applicants re-gaining access to the Amulsar site.

[8] In early 2018, the Applicants retained BMO to canvass the market for potential refinancing or sale options. BMO has conducted multiple rounds of a sales process to market the Lydian Group’s mining assets. BMO also ran a process to solicit interest in financing the Applicants’ potential Treaty Arbitration. These efforts have not yet resulted in a transaction capable of satisfying the claims of the Applicants’ secured lenders.

[9] Since the blockades began, the Senior Lenders have been funding the Applicants’ efforts to find a solution to the situation caused by the blockades. The Senior Lenders provided additional financial support to the Lydian Group totalling in excess of $43 million.

[10] As of March 31, 2020, the Lydian Group owed its secured lenders more than $406.8 million.

[11] According to the Applicants, the secured lenders are no longer willing to support the Applicants’ efforts to monetize their assets. The Equipment Financiers CAT and ING have taken enforcement steps and Ameriabank has issued preliminary notice of enforcement.

[12] Further, the Applicants point out that the liquidity made available to the Applicants since April 30, 2020 has been conditioned on the Applicants: (i) proposing a restructuring that would be equivalent to the Senior Lenders enforcing their security over the shares of Lydian Canada; and (ii) meeting a deadline to exit the CCAA Proceedings imposed by a majority of the Applicants’ Senior Lenders, or further enforcement steps would be taken.

[13] The Applicants submit that the Plan represents the most efficient mechanism to effect an orderly transition of the Lydian Group’s affairs. The Applicants contend that the Plan minimizes adverse collateral impacts on Lydian Armenia, provides for winding down the proceedings before this court and the Jersey Court and avoids uncoordinated enforcement steps being taken on the Lydian Group’s property to the detriment of the Lydian Group’s stakeholders generally.

The Plan

[14] The Plan recognizes and continues the priority position of the Senior Lenders in the Restructured Lydian Group. The Senior Lenders make up the only class eligible to vote on the Plan and receive a distribution thereunder.

[15] According to the Applicants, secured creditors and unsecured creditors with claims at or below Restructured Lydian will continue to maintain their claims in the Restructured Lydian Group, including Lydian Armenia, with the same priority as they previously had, ranking behind the Senior Lenders. Stakeholders with claims at the Lydian International level will continue to have their claims on the Plan Implementation Date, which are intended to be addressed through the proposed J&E Process in Jersey. Equity claims and unsecured claims against Lydian International will not be assumed by Restructured Lydian as part of the Plan.

[16] The purpose of the Plan is to (a) implement a corporate and financial restructuring of the Applicants, (b) provide for the assignment or settlement of all intercompany debts owing to the Applicants prior to the Effective Time to, among other things, minimize adverse tax consequences to Lydian Armenia and its stakeholders, (c) provide for the equivalent of an assignment of substantially all of the assets of Lydian International to an entity owned and controlled by the Senior Lenders (“SL Newco”), through an amalgamation of Lydian Canada with SL Newco resulting in a new entity (“Restructured Lydian”), and (d) provide a release of all of the existing indebtedness and obligations owing by Lydian International to the Senior Lenders. The Plan will result in the privatization of the Lydian Group to continue as the Restructured Lydian Group.

[17] The steps involved in the Plan’s execution are described in detailed in paragraphs 71 to 74 of the Sellers Meeting Affidavit.

[18] The Plan provides for certain releases. The releases are more fully described in the Sellers Meeting Affidavit at paragraph 83.

[19] Mr. Sellers in the Sellers Sanction Affidavit at para. 16 states that the releases were critical components of the negotiations and decision-making process for the D&Os and Senior Lenders in obtaining support for the Plan and resolving these CCAA Proceedings for the benefit of the Restructured Lydian Group, including Lydian Armenia, and all of its stakeholders.

[20] Mr. Sellers further states that the Released Parties made significant contributions to the Applicants’ restructuring, both prior to and throughout these CCAA Proceedings, which resulted directly in the preservation of the Lydian Group’s business, provided numerous opportunities for the Applicants to seek to monetize their assets for the benefit of stakeholders generally and led to the successful negotiation of the Plan for the benefit of the Restructured Lydian Group.

[21] The Plan provides for a Plan Implementation Date on or prior to June 30, 2020. The majority of the Applicants’ Senior Lenders have agreed to fund the costs associated with implementing the Plan and termination of the CCAA Proceedings and the J&E Process in Jersey, through the DIP Exit Facility Amendment, which will make a DIP Exit Credit Facility available to the Applicants totalling an estimated additional $1.866 million.

[22] The test that a debtor company must satisfy in seeking the Court’s approval for a plan of compromise or arrangement under the CCAA is well established:

a) there must be strict compliance with all statutory requirements;

b) all materials filed and procedures carried out must be examined to determine if anything has been done or purported to be done which is not authorized by the CCAA and prior Orders of the Court in the CCAA proceedings; and

c) the plan must be fair and reasonable.

Issues

[23] The issues for determination on this motion are whether:

a) the Plan is fair and reasonable and should be sanctioned;

b) the releases contemplated by the Plan are appropriate;

c) the increase to the DIP Charge to capture the amounts to be advanced under the DIP Exit Credit Facilities is appropriate;

d) the Stay Period should be extended;

e) the unredacted Sellers Sanction Affidavit should be sealed; and

f) the Monitor’s activities, as detailed in the Fifth Report, Sixth Report and Seventh Report, should be approved and the fees of Monitor and its counsel through to June 23, 2020 should be approved.

LAW AND ANALYSIS

Approval of the Plan

[24] To determine whether there has been strict compliance with all statutory requirements, the court considers factors such as whether: (a) the applicant meets the definition of a “debtor company” under section 2 of the CCAA; (b) the applicant has total claims against it in excess of C$5 million; (c) the notice calling the creditors’ meeting was sent in accordance with the order of the court; (d) the creditors were properly classified; (e) the meeting of creditors was properly constituted; (f) the voting was properly carried out; and (g) the plan was approved by the requisite majority.

[25] The Applicants submit that they have complied with the procedural requirements of the CCAA, the Initial Order, the Amended and Restated Initial Order, the Meeting Order and all other Orders granted by this Court during these CCAA Proceedings. In particular:

a) at the time the Initial Order was granted, the Applicants were found to be “debtor companies” to which the CCAA applied and that the Applicants’ liabilities exceeded the C$5 million threshold amount under the CCAA;

b) the classification of the Applicants’ Senior Lenders into one voting class (namely, the Affected Creditors class) was approved pursuant to the Meeting Order. This classification was not opposed at the hearing to approve the Meeting, nor was the Meeting Order appealed; the Applicants properly effected notice in accordance with the Meeting Order prior to the Meeting. In addition, the Applicants issued a press release on June 15, 2020 announcing their intention to seek an Order of the Court to file the Plan and call, hold and conduct a meeting of the Senior Lenders;

c) the Meeting was properly constituted and the voting on the Plan was carried out in accordance with the Meeting Order; and

d) the Plan was approved by the Required Majority.

[26] Sections 6(3), 6(5) and 6(6) of the CCAA provide that the Court may not sanction a plan unless the plan contains certain specified provisions concerning Crown claims, employee claims and pension claims. The Applicants’ submit that these provisions of the CCAA are satisfied by the Plan. Crown claims and employee claims are treated by the Plan as Unaffected Claims, meaning that such claims, if any, are not compromised or otherwise affected. The Applicants do not maintain any pension plans, and thus section 6(6) of the CCAA does not apply. In compliance with s. 6(8) of the CCAA, the Plan does not provide for any recovery to equity holders.

[27] I accept the foregoing submissions. I am satisfied that the statutory prerequisites to approval of the Plan have been satisfied, and that there has been strict compliance with all statutory requirements.

[28] The Applicants submit that no unauthorized steps have been taken in these CCAA Proceedings and throughout the entirety of these CCAA Proceedings, they have kept this Court and Monitor appraised of all material aspects of the Applicants’ conduct, activities, and key issues they have worked to resolve. I accept this submission.

[29] The Applicants’ submit that when considering whether a plan of compromise and arrangement is fair and reasonable, the court should consider the relative degree of prejudice that would flow from granting or refusing to grant the relief sought. Courts should also consider whether the proposed plan represents a reasonable and fair balancing of interests, in light of the other commercial alternatives available (see: Re Canadian Airlines Corp, 2000 ABQB 442 at paras. 3, 94, 96, and 137 – 138; and Re Canwest Global Communications Corp, 2010 ONSC 4209).

[30] The CCAA permits the filing of a Plan by an Applicant to its secured creditors. The Applicants’ submit the fact that unsecured creditors may receive no recovery under a proposed plan of arrangement does not, of itself, negate the fairness and reasonableness of a plan of arrangement (Anvil Range Mining Corp. (Re), 2002 42003 (ONCA); and 1078385 Ontario Ltd., (Re), 2004 55041 (ONCA) at paras 30-31, affirming 2004 66329 (ONSC)).

[31] The Plan was presented to the Senior Lenders, who are the Applicants’ only secured creditors and they voted on the Plan as a single class. The Senior Lenders voted in favour of the Plan by the Required Majority. The value of the claims of Orion and Osisko, who voted in favour of the Plan comprise 77.8% of the total value of the Affected Creditors who were present and voting.

[32] RCF, a secured lender and 32% shareholder, did not vote in favour of the Plan. RCF has advised that it “does not intend at this time to propose or fund an alternative to the Plan, and in the absence of such an alternative we expect that the Court will have no choice but to issue the Sanction and Implementation Order.”

[33] I have been advised that an issue as between the Senior Lenders and ING has been resolved and for greater certainty this Plan does not compromise any claim that ING may have in respect of proceeds from a successfully-asserted arbitration claim. In addition, the Senior Lenders have agreed that, after payment of all claims of the Senior Lenders to proceeds from a successfully-asserted arbitration claim whether on account of: (i) claims of the Senior Lenders prior to the Plan Implementation Date; or (ii) further advances made by the Senior Lenders (or their affiliates) after the Plan Implementation Date, (whether such further advances are made as equity, secured debt or unsecured debt), the proceeds will be paid to Lydian Armenia in an amount sufficient and to be used to pay ING’s claims against Lydian Armenia prior to any further monies being returned to equity holders.

[34] The Applicants submit that the structure and the nature of the releases in the Plan recognizes and continues the priority position of the Senior Lenders. Secured creditors and unsecured creditors with claims at or below Restructured Lydian will continue to maintain their claims in the Restructured Lydian Group, including Lydian Armenia, with the same priority as they previously had, ranking behind the Senior Lenders.

[35] The Applicants state that they have considered and believe the Plan is the best available outcome for the Applicants, and the interests of the stakeholders generally in the Lydian Group.

[36] As noted in the BMO Affidavit, despite multiple rounds of the SISP and the Treaty Arbitration financing solicitation process, the Applicants submit that no transaction which would satisfy the Lydian Group’s secured obligations is currently available to the Applicants.

[37] The Applicants submit that the monetization of Treaty Arbitration is also not open to the Applicants at this time, and if initiated would require an extended period to litigate and significant additional financial resources.

[38] The Applicants submit that for the purposes of valuing an estate at a plan sanction hearing, the “value has to be determined on a current basis. […] It is inappropriate to value the assets on a speculative or (remote) possibility basis.” A relevant consideration in this analysis is the scope and extent of previous sale or capital raising efforts undertaken by the company and any financial advisors. In support of this submission, the Applicants reference: Anvil Range Mining Corp. (Re), 2002 42003 (ONCA), para 36; Philip Services Corp., Re, 1999 15012 (ONSC) at para 9 1078385 Ontario Ltd., (Re), 2004 55041 (ONCA) at paras 30-31, affirming 1078385 Ontario Ltd. (Re), 2004 66329 (ONSC).

[39] The Applicants submit that the outcome of the Plan, that being the distribution of the Applicants’ estates to the Senior Lenders, is essentially identical to what would be achieved with any other options available in the circumstances. Without the Plan, the Senior Lenders could (a) privatize the Applicants’ assets through the enforcement of share pledges and other security, or (b) could credit bid their debt to acquire the shares or assets; or (c) enforce their secured positions following the Applicants filing for bankruptcy, administration, or liquidation proceedings across multiple jurisdictions. In each scenario (as with the Plan), the Applicants’ assets are transitioned to the Senior Lenders.

[40] The foregoing submissions were not challenged.

[41] The Monitor supports the Plan. As noted in the Monitor’s Seventh Report, “it is the Monitor’s view that the Plan represents a better path forward than any other alternative that is available to the Applicants and is fair and reasonable.”

[42] I am aware that concerns with respect to the fairness of the Plan have been raised by numerous shareholders of Lydian International and oral submissions were made by John LeRoux, Hasan Ciftehan, Mehmet Ali Ekingen and Atilla Bozkay.

[43] In addition, a number of emails were sent directly to the court, which were forwarded to counsel to the Monitor. In addition, certain emails were sent to the Monitor. None of the emails were in a proper evidentiary form.

[44] The concerns of the shareholders included criminal complaints of activities in Armenia, the content of certain press releases and the impact of the COVID-19 pandemic. Some shareholders requested a delay of three months in these proceedings.

[45] As previously noted, equity claims and unsecured claims against Lydian International will not be assumed by Restructured Lydian as part of the Plan. Simply put, the shareholders of Lydian International will not receive any compensation for their shareholdings. This is a reflection of the insolvency of the Applicants and the priority position afforded to shareholders by the CCAA.

[46] I recognize that the shareholders’ monetary loss will be crystalized if the Plan is sanctioned. However, a monetary loss resulting from the ownership, purchase or sale of their equity interest is an “equity claim” as defined in s. 2(1) of the CCAA. This definition is significant as s. 6(8) of the CCAA provides:

6(8) Payment – equity claims – No compromise or arrangement that provides for the payment of an equity claim is to be sanctioned by the court unless it provides that all claims that are not equity claims are to be paid in full before the equity claim is to be paid.

[47] The Plan does not provide for payment in full of claims that are not equity claims. Consequently, equity claimants are not in the position to receive any compensation.

[48] The economic reality facing the shareholders existed prior to the COVID-19 pandemic. The Applicants were insolvent when they filed these proceedings on December 23, 2019. The financial situation facing the Applicants has not improved since the filing. In fact, it has declined. The mine is not operating with the obvious result that it is not generating revenues and interest continues to accrue on the secured debt. The fact that shareholders will receive no compensation is unfortunate but is a reflection of reality which does not preclude a finding that the Plan is fair and reasonable for the purposes of this motion.

[49] The Senior Lenders have voted in sufficient numbers in favour of the Plan. I am satisfied that there are no viable alternatives, and, in my view, it is not feasible to further delay these proceedings.

[50] Section 6.6 of the Plan provides for full and final releases in favour of the Released Parties, who consist of (a) the Applicants, their employees, agents and advisors (including counsel) and each of the members of the Existing Lydian Group’s current and former directors and officers; (b) the Monitor and its counsel; and (c) the Senior Lenders and each of their respective affiliates, affiliated funds, their directors, officers, employees, agents and advisors (including counsel) (collectively, the “Ancillary Releases”). A chart setting out the impact of the releases is attached as Schedule “A” to these reasons.

[51] The Applicants submit that the releases apply to the extent permitted by law and expressly do not apply to, among other things:

a) Lydian Canada’s, Lydian UK’s or the Senior Lenders’ obligations under the Plan or incorporated into the Plan;

b) obligations of any Existing Lydian Group member other than Lydian International under the Credit Agreement and Stream Agreement, and any agreements entered into relating to the foregoing, from and after the Plan Implementation Date;

c) any claims arising from the willful misconduct or gross negligence of any applicable Released Party; and

d) any Director from any Director Claim that is not permitted to be released pursuant to section 5.1(2) of the CCAA.

[52] Unsecured creditors’ claims, other than the Ancillary Releases in favour of the Directors, are not compromised or released and remain in the Restructured Lydian Group.

[53] The Applicants submit that it is accepted that there is jurisdiction to sanction plans containing releases if the release was negotiated in favour of a third party as part of the “compromise” or “arrangement” where the release reasonably relates to the proposed restructuring and is not overly broad. There must be a reasonable connection between the third-party claim being compromised in the plan and the restructuring achieved by the plan to warrant inclusion of the third-party release in the plan (see: Re Canadian Airlines Corp, 2000 ABQB 442 at para 92 CCAA at s. 5(1); Re Metcalfe & Mansfield Alternative Investments II Corp., 2008 ONCA 587 at paras 61 and 70; Re Canwest Global Communications Corp, 2010 ONSC 4209 at para 28-30; and Re Kitchener Frame Ltd, 2012 ONSC 234 at paras 85-88.

[54] The Applicants submit that in considering whether to approve releases in favour of third parties, courts will consider the particular circumstances of the case and the objectives of the CCAA. While no single factor will be determinative, the courts have considered the following factors:

a) Whether the parties to be released from claims were necessary and essential to the restructuring of the debtor;

b) Whether the claims to be released were rationally connected to the purpose of the plan and necessary for it;

c) Whether the plan could succeed without the releases;

d) Whether the parties being released were contributing to the plan; and

e) Whether the release benefitted the debtors as well as the creditors generally.

[55] The Applicants submit that the releases were critical components of the decision-making process for the Applicants’ directors and officers and Senior Lenders’ participation in these CCAA Proceedings in proposing the Plan and the Applicants submit that they would not have brought forward the Plan absent the inclusion of the releases.

[56] The Applicants also submit that the support of the Senior Lenders is essential to the Plan’s viability. Without such support, which is conditional on the releases, the Plan would not succeed.

[57] The Applicants submit that the Released Parties made significant contributions to the Applicants’ restructuring, both prior to and throughout these CCAA Proceedings. The extensive efforts of the Applicants’ directors and officers and the Senior Lenders and Monitor resulted in the negotiation of the Plan, which forms the foundation for the completion of these CCAA Proceedings. The Senior Lenders financial contributions through forbearances, additional advances and DIP and Exit Financing were instrumental.

[58] The Applicants also submit that the releases are an integral part of the CCAA Plan which provides an orderly and effective alternative to uncoordinated and disruptive secured lender enforcement proceedings. The Plan permits unsecured creditors future potential recovery in the Restructured Lydian Group, which may not exist in bankruptcy (Re Metcalfe &Mansfield Alternative Investments II Corp., 2008 ONCA 587 at paras 71; and Re Kitchener Frame Ltd, 2012 ONSC 234 at paras 80-82.

[59] The Applicants submit that this Court has exercised its authority to grant similar releases, including in circumstances where the released claims included claims of parties who did not vote on the plan and were not eligible to receive distributions (Target Canada Co. et al. (2 June 2016), Toronto CV-15-10832-00CL (Ont. Sup. Ct. [Comm. List]) Sanction and Vesting Order at Schedule “B” art. 7 (Monitor’s website); Rubicon Minerals Corporation et al. (8 December 2016), Toronto CV-16-11566-00CL (Ont. Sup. Ct. [Comm. List]) Sanction Order at Schedule “A” art. 7 (Monitor’s website); and Nortel Networks Corporation et al. (30 November 2016), Toronto 09-CL-7950 (Ont. Sup. Ct. [Comm. List]) Plan of Compromise and Arrangement at art. 7 (Monitor’s website)).

[60] Full disclosure of the releases was made in (a) the draft Plan that was circulated to the Service List and filed with this Court as part of the Applicants’ Motion Record (returnable June 18, 2020); and (b) the Plan attached to the Meeting Order. The Applicants also issued the Press Releases. This notification process ensured that the Applicants’ stakeholders had notice of the nature and effect of the Plan and releases.

[61] The foregoing submissions with respect to the releases were not challenged.

[62] In my view, each of the Released Parties has made a contribution to the development of the Plan. In arriving at this determination, I have taken into account the activities of the Released Parties as described in the Reports of the court-appointed Monitor. I am satisfied that it is appropriate for the Plan to include the releases in favour of the Released Parties.

[63] The development of this Plan has been challenging and as the Monitor has stated, “the Plan represents a better path forward than any other alternative that is available to the Applicants and is fair and reasonable”.

[64] I accept this assessment and find that the Plan is fair and reasonable in the circumstances.

DIP Charge

[65] The terms of the DIP Exit Facility Amendment are described in the Sellers Sanction Affidavit. The DIP Exit Facility Amendment provides for exit financing totalling $1.866 million to assist in implementing the Plan and taking the necessary ancillary steps to terminate the CCAA Proceedings and support the J&E Process.

[66] This Court has the jurisdiction to authorize funding in the context of a CCAA restructuring pursuant to s. 11.2(1) and 11.2(2) of the CCAA. In considering whether to approve DIP financing, the Court is to consider the non-exhaustive list of factors set out in s. 11.2(4) of the CCAA. These same provisions of the CCAA provide this Court with the authority to approve amendments to a DIP agreement and secure all obligations arising from the amended DIP loans with an increased DIP charge.

[67] The Applicants submit that, based on the following, the DIP Amendment should be approved and the increase to the DIP Facility should be secured by the DIP Charge:

a) the DIP Exit Credit Facility is necessary to enable the Applicants to implement the Plan;

b) the Monitor is supportive of the DIP Exit Facility Amendment;

c) the DIP Exit Facility Amendment is not anticipated to give rise to any material financial prejudice; and

d) the DIP Lenders are the majority of Senior Lenders.

[68] I am satisfied that the requested relief in respect to the DIP Amendment is reasonably necessary and appropriate in the circumstances.

Sealing Request

[69] The Applicants seek to seal the unredacted Sellers Sanction Affidavit on the basis that the redacted portions of the Sellers Sanction Affidavit contain commercially sensitive information, the disclosure of which could be harmful to stakeholders.

[70] The redactions currently being sought are consistent with previous Orders in these CCAA Proceedings. In my view, the documents in question contain sensitive commercial information. Having considered the principles set out in Sierra Club of Canada v. Canada (Minister of Finance), 2002 Sec. 41 at para. 53 I am satisfied that the request for a sealing order is appropriate and is granted.

Stay Period

[71] On the Plan Implementation Date, the CCAA Proceedings with respect to Lydian UK and Lydian Canada will be terminated, such that Lydian International will be the only remaining Applicant in the CCAA Proceedings. The Applicants are requesting an extension of the Stay Period for Lydian International until and including the earlier of (i) the issuance of the Monitor’s CCAA Termination Certificate and (ii) December 21, 2020 to enable the remaining Applicant and the Monitor to take the steps necessary to implement the Plan and terminate the CCAA Proceedings and initiate the J&E Process. The Applicants are also requesting an extension of the Stay Period for the Non-Applicant Stay Parties (other than Lydian US) until and including the earlier of the issuance of the Monitor’s Plan Implementation Certificate.

[72] I am satisfied that the Applicants in requesting the extension of the Stay Period have demonstrated that circumstances exist that make the order appropriate; and that they have acted and are acting in good faith and with due diligence such that the request is appropriate.

Approval of Monitor’s Activities

[73] The Applicants are seeking an order approving the Monitor’s activities to date, as detailed in the Fifth Report, Sixth Report and the Seventh Report (collectively, the “Reports”). This Court has already approved the activities of the Monitor that were detailed in its previous reports. There was no opposition to the request.

[74] I am satisfied that the Reports and the activities described therein should be approved. The Reports were prepared in a manner consistent with the Monitor’s duties and the provisions of the CCAA and in compliance with the Initial Order. The Reports are approved in accordance with the language provided in the draft order.

Approval of Monitor’s Fees

[75] The Applicants further seek approval of the fees and disbursements of (i) the Monitor for the period April 14, 2020 to June 23, 2020, inclusive, and (ii) counsel to the Monitor for the period April 16, 2020 to June 23, 2020. The Applicants have reviewed the fees of the Monitor and its counsel and support the payment of the same.

[76] I am satisfied that the fee requests are appropriate in the circumstances and they are approved.

DISPOSITION

[77] The Applicants’ motion is granted. The Plan is sanctioned and approved. The ancillary relief referenced in the motion is also granted and an Order reflecting the foregoing has been signed.

Chief Justice Geoffrey B. Morawetz

Date: July 10, 2020

SCHEDULE “A”

Lydian International Limited et al.

Impact of the Releases Described in s. 6.6 of the Plan

Lydian Jersey

Type of Claim

Plan Reference

Senior Lender Claims Held by RCF, Orion and Osisko

Released

Section 6.3(n)

Unsecured Guarantee of Equipment Lessors ING, CAT, Ameriabank

Not Released. Addressed in the J&E Process in Jersey

Section 6.6 (carve-out (E))

Other Unsecured Claims Includes Maverix Metals claim against Lydian Jersey

Not Released. Addressed in the J&E Process in Jersey.

Section 6.6 (carve-out (E))

Equity Claims Held by RCF, Orion, and public Shareholders

Not Released. Addressed in the J&E Process in Jersey.

Section 3.5

D&O Claims Claims against the Directors and their legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Claims against Monitor Claims against the Monitor, and Monitor’s legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Claims against Senior Lenders Claims against the Senior Lenders and their legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Intercompany Claims Claims by Lydian Jersey against Lydian Canada and other subsidiaries

Assigned to Lydian Canada

Section 6.3(h)

Priority Claims Admin Charge, DIP Lender’s Charge, Transaction Charge, D&O Charge

Transaction Charge and D&O Charge to be terminated on Plan Implementation Date Admin Charge and DIP Lender’s Charge to be terminated on CCAA Termination Date

Section 5.2(i)

Lydian Canada

Type of Claim

Plan Reference

Senior Lender Claims Held by RCF, Orion and Osisko

Not Released

Section 6.6

Unsecured Claims of Equipment Lessors1 ING, CAT, Ameriabank

Not Released

Section 6.6 (carve-out (E))

Other Unsecured Claims

Not Released

Section 6.6 (carve-out (E))

Equity Claims Shareholdings of Lydian Jersey in Lydian Canada

Not Released (but subject to amalgamation with SL Newco)

Section 3.5

D&O Claims Claims against the Directors and their legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

1 This includes contractual rights as outlined in the Waiver and Consent Agreement between Lydian Jersey, Lydian Canada, Lydian UK and Lydian Armenia dated November 26, 2018 (the “Waiver”).

Claims against Monitor Claims against the Monitor, and Monitor’s legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Claims against Senior Lenders Claims against the Senior Lenders and their legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Priority Claims Admin Charge, DIP Lender’s Charge, Transaction Charge, D&O Charge

Transaction Charge and D&O Charge to be terminated on Plan Implementation Date Admin Charge and DIP Lender’s Charge to be terminated on CCAA Termination Date

Section 5.2(i)

Lydian UK

Type of Claim

Plan Reference

Senior Lender Claims Held by RCF, Orion and Osisko

Not Released

Section 6.6

Unsecured Claims of Equipment Lessors ING, CAT, Ameriabank2

Not Released

Section 6.6 (carve-out (E))

Other Unsecured Claims

Not Released

Section 6.6 (carve-out (E))

Equity Claims Shareholdings of Lydian Canada in Lydian UK

Not Released

Section 3.5

D&O Claims Claims against the Directors and their legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Claims against Monitor Claims against the Monitor, and Monitor’s legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Claims against Senior Lenders Claims against the Senior Lenders and their legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Priority Claims Admin Charge, DIP Lender’s Charge, Transaction Charge, D&O Charge

Transaction Charge and D&O Charge to be terminated on Plan Implementation Date Admin Charge and DIP Lender’s Charge to be terminated on CCAA Termination Date

Section 5.2(i)

2 This includes the contractual rights outlined in the Waiver.

11910728 Canada Inc. (“DirectorCo”)

Type of Claim

Plan Reference

Senior Lender Claims Held by RCF, Orion and Osisko

Not Released

Section 6.6

Unsecured Claims

Not Released

Section 6.6 (carve-out (E))

Equity Claims Shareholdings of Lydian Canada in DirectorCo

Not Released

Section 3.5

D&O Claims Claims against the Directors and their legal cousnel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii) of the Plan

Claims against Monitor Claims against the Monitor, and Monitor’s legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Claims against Senior Lenders Claims against the Senior Lenders and their legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Lydian International Holdings Limited, Lydian Resources Armenia Limited, and Lydian Resources Kosovo Limited

Type of Claim

Plan Reference

Senior Lender Claims Held by RCF, Orion and Osisko

Not Released

Section 6.6

Other Secured Claims Includes claim of Maverix Metals in shares of Lydian Resources Armenia Limited, which is subordinated to claims of Senior Lenders

Not Released

Section 6.6

Unsecured Claims Includes Maverix Metals claim against Lydian International Holdings Limited

Not Released

Section 6.6 (carve-out (E))

Equity Claims Shareholdings of Lydian UK in Lydian International Holdings Limited, and shareholdings of Lydian International Holdings Limited in Lydian Resources Armenia (“BVI”) and Lydian Resources Kosovo Limited Includes Maverix Metals’ share pledge in BVI

Not Released

Section 6.6 (carve-out (E))

D&O Claims Claims against the Directors and their legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii) of the Plan

Claims against Monitor Claims against the Monitor, and Monitor’s legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Claims against Senior Lenders Claims against the Senior Lenders and their legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Lydian Armenia

Type of Claim

Plan Reference

Senior Lender Claims Held by RCF, Orion and Osisko

Not Released

Section 6.6

Equipment Lessor Secured Claims ING, CAT and Ameriabank (to the extent secured by their collateral)

Not Released

Section 6.6 (carve-out (E))

Equipment Lessor Unsecured Claims ING, CAT and Ameriabank (unsecured deficiency claims)

Not Released

Section 6.6 (carve-out (E))

Other Unsecured Claims e.g. Trade creditors

Not Released

Section 6.6 (carve-out (E))

Equity Claims Shareholdings held by BVI / DirectorCo (as sole shareholder representative of BVI

Not Released

Section 3.5

D&O Claims Claims against the Directors

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6 (i) and (ii)

Claims against Monitor Claims against the Monitor, and Monitor’s legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Claims against Senior Lenders Claims against the Senior Lenders and their legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Lydian US Lydian Zoloto, Lydian Resources Georgia Limited (“Lydian Georgia”) and Georgian Resource Company LLC (“Lydian GRC”, and collectively with Lydian US, Lydian Zoloto and Lydian Georgia, the “Released Guarantors” under the Plan)

Type of Claim

Plan Reference

Senior Lender Claims Held by RCF, Orion and Osisko

Released

Section 6.3(n)

Unsecured Claims

Not Released

Section 6.6

Equity Claims (a) Shareholdings of Lydian Jersey in Lydian US, Lydian Georgia and Lydian Zoloto; and (b) Shareholdings of Lydian Georgia in Lydian GRC

(a) Not Released. Per s. 6.4 of the Plan, Lydian US and Lydian Zoloto to be wound-up and dissolved pursuant to the laws of Colorado and Armenia, respectively. (b) Lydian Georgia shares held by Lydian Jersey to be transferred to Lydian Georgia Purchaser on Plan Implementation Date. (b) Shares of Lydian GRC held by Lydian Georgia not released. See note re: Lydian Georgia above.

Section 3.5 and section 6.4

D&O Claims, Claims against the Directors and their legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Claims against Monitor Claims against the Monitor, and Monitor’s legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)

Claims against Senior Lenders Claims against the Senior Lenders and their legal counsel

Released (subject to s. 5.1(2) of the CCAA)

Section 6.6(i) and (ii)