Appendix 1: Forest sink covenant

[FOREST SINK COVENANT TERMS AND CONDITIONS]

[These terms and conditions will either be registered under section 155A of the Land Transfer Act 1952 or annexed to the instrument creating a covenant which is registered under the Land Transfer Act 1952]

CONTENTS

1. DEFINITIONS AND INTERPRETATION

2. TERM

3. ESTABLISHMENT OF A FOREST SINK ON THE LAND

4. FELLING RESTRICTION

5. LANDOWNER’S LIABILITY FOR CARBON LOSS

6. ACCESS TO THE LAND

7. LANDOWNER’S INDEMNITY, WARRANTIES AND OTHER OBLIGATIONS

8. CROWN’S OBLIGATIONS

9. CROWN’S LIABILITY

10. TAX

11. TERMINATION

12. ASSIGNMENT

13. DISPUTE RESOLUTION

14. FORCE MAJEURE

15. NOTICES

16. GENERAL PROVISIONS

SCHEDULE 1: Description of the Land

SCHEDULE 2: Description of the forest sink area

SCHEDULE 3: Forest Sink Plan

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions: In this Covenant the following terms have the following meanings:

"Act" means the Forests Act 1949;
"Approved Harvesting Practices" has the meaning given in the Regulations; [This is intended to cover continuous cover forestry, traditional Maori purposes and any other relevant exceptions that may arise]
"Approved Person" has the meaning given in the Regulations;
"Business Day" means a day other than a Saturday or Sunday on which banks are open for business in Wellington (or, for the purposes of clause 15 only, the place to which a notice is sent);
"Carbon Loss" has the meaning given in the Regulations;
"Carbon Measurement Date" means the later of 1 January 2008 and the date on which this Covenant was entered into with the Initial Landowner;
"Carbon Sequestered" has a corresponding meaning to "carbon sequestration", as such term is defined in the Act;
"Change includes, in relation to any change in the Control of a person, any gain of Control where previously there was no Control, and any cessation of Control;
"Control" in relation to a person means the ability of another person to ensure (directly or indirectly) that the activities and business of the first person are conducted in accordance with the wishes of that other person, and a person shall be deemed to have control of a body corporate if that person:
  1. possesses or is entitled to acquire greater than 50% of the issued share capital of the body corporate;
  2. has the ability to ensure that the board of directors of the body corporate is composed in accordance with the wishes of that person; or
  3. has the ability to ensure that greater than 50% of the votes entitled to be cast at general meetings of the body corporate are cast in accordance with the wishes of that person;
"Covenant" means this agreement, including the Schedules to it;
"Effective Date" has the meaning given in clause 2.1(a);
"Eligible" means, in respect of a Forest Sink on the Forest Sink Area, that:
  1. the Forest Sink Area is Eligible Land; and
  2. the Forest Sink on the Forest Sink Area complies with:

(i) all the requirements of a Forest Sink under the Regulations; and
(ii) any other requirements of the Regulations;
"Eligible Land" has the meaning given in the Regulations; [This will define land which is eligible to be a Forest Sink]
"Felling" means cutting down Timber;
"Forest Sink" has the meaning given in the Regulations;
"Forest Sink Area" means the part of the Land identified in Schedule 2;
"Forest Sink Mechanism" means the mechanism relating to the establishment of Forest Sinks set out in the Act, the Regulations and all "forest sink covenants" (as such term is defined in the Act), including this Covenant;
"Forest Sink Plan" means the plan contained in Schedule 3, as amended:
  1. by the written agreement of the parties; or
  2. in accordance with the Regulations;
"Initial Landowner" means the Landowner with whom the Crown first entered into this Covenant;
"Land" means the land identified in Schedule 1;
"Landowner" means the registered owner or owners from time to time of the freehold estate in the Land;
"New Zealand Government" has the meaning given in clause 8.8;
"Performance Security" means a guarantee, payment bond or other form of security for the performance of the Landowner's obligations under this Covenant, and in particular under clause 5, which is satisfactory to the Crown (acting reasonably) in all respects (including as to the provider, the amount (if applicable) and the terms of the security for performance);
"Protocol" has the meaning given in the Climate Change Response Act 2002;
"Registry" has the meaning given in the Climate Change Response Act 2002;
"Regulations" means [the Forest (Permanent Forest Sink) Regulations 2007], the [Forest (Permanent Forest Sink Levy) Order 2007] and any other regulations made by the Crown pursuant to section 67Y of the Act or any other Act relating to the Forest Sink Mechanism;
"Reports" means any reports or returns which the Landowner is required to provide under the Regulations;
"Restricted Period" has the meaning given in the Regulations; [This is intended to cover the period of 99 years from the Effective Date]
"Timber" has the meaning given in the Act; and
"Units" means, in each case, the relevant units prescribed by the Regulations, where "units" has the meaning given in the Climate Change Response Act 2002.

1.2 Interpretation: In this Covenant:

  1. Clauses and Schedules: a reference to a clause or a Schedule is to a clause or Schedule of this Covenant;
  2. Currency: a reference to any monetary amount is to New Zealand currency;
  3. Documents: a reference to any document, including this Covenant, includes a reference to that document as amended or replaced from time to time;
  4. Headings: headings are included in this Covenant as a matter of convenience and do not affect the construction of this Covenant;
  5. Negative obligations: a reference to a prohibition against doing anything includes a reference to not permitting, suffering or causing that thing to be done;
  6. Person: a reference to a person includes a corporation sole and also a body of persons, whether corporate or unincorporated;
  7. Related terms: where a word or expression is defined in this Covenant, other parts of speech and grammatical forms of that word or expression have corresponding meanings;
  8. Schedules: the Schedules form part of this Covenant;
  9. Singular and plural: the singular includes the plural and vice versa;
  10. Statutes and regulations: a reference to a statute or any regulations is a reference to that statute or those regulations as amended, or to any statute or regulations substituted for that statute or those regulations;
  11. Writing: a reference to "written" or "in writing" includes all modes of presenting or reproducing words, figures and symbols in a tangible and permanently visible form; and
  12. No limitation: the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation".

2. TERM

2.1 Effective Date: Subject to clause 2.2, this Covenant:

  1. comes into effect on the date on which it is registered in accordance with section 67ZD of the Act (the "Effective Date"); and
  2. except to the extent it is terminated or cancelled in accordance with its terms, shall remain in full force and effect in perpetuity.

2.2 Automatic expiry if not registered: This Covenant shall expire automatically without liability to either party if it has not been registered in accordance with section 67ZD of the Act within 180 days of the date on which this Covenant was entered into with the Initial Landowner.

3. ESTABLISHMENT OF A FOREST SINK ON THE LAND

3.1 Forest Sink: Subject to clause 4, the Landowner must establish and maintain, or maintain, (as applicable) a Forest Sink on the Forest Sink Area in accordance with the Forest Sink Plan.

3.2 Compliance with law: The Landowner must:

  1. pay to the Crown (or any person stipulated by the Regulations) any costs, fee, levy or charge in relation to this Covenant or the Forest Sink Mechanism prescribed by the Regulations; and
  2. comply with all applicable law relating to this Covenant, the Forest Sink Mechanism or the Land, including the Act and the Regulations.

3.3 Regulations do not limit Covenant remedies: Unless expressly provided otherwise in the Act or the Regulations, nothing in the Act or the Regulations shall limit any rights of the Crown arising at law or under this Covenant as a result of any breach of this Covenant by the Landowner.

4. FELLING RESTRICTION

4.1 No Felling: Subject to clause 4.2, the Landowner must not Fell any part of the Forest Sink on the Forest Sink Area during the Restricted Period except in accordance with Approved Harvesting Practices.

4.2 Change of use of Land: The Landowner shall not be in breach of clause 4.1 if:

  1. prior to carrying out any such Felling, the Landowner on each separate occasion notifies the Crown of the intention to Fell and, if required by the Crown, either (at the Crown's option):

(i) provides the Crown with Performance Security; or
(ii) without prejudice to clause 5, transfers to the Crown sufficient Units to account for all of the estimated Carbon Loss that will occur as a result of such Felling; and

  1. any Timber that has been Felled is not removed from the Forest Sink Area (other than through burning or any other process which destroys the Timber).

If the Forest Sink on the Forest Sink Area is Felled under this clause 4.2 to the extent that the Forest Sink on the Forest Sink Area ceases to meet the requirements of a Forest Sink under the Regulations, all obligations of the Landowner under clauses 3.1 and 4.1 shall terminate, and the obligations of the Crown under this Covenant shall terminate, in each case from the date on which the Forest Sink on the Forest Sink Area ceases to meet the requirements of a Forest Sink under the Regulations.

4.3 Expiry of initial Felling restriction: Without prejudice to clause 4.2, from the end of the Restricted Period the Landowner may Fell all or part of the Forest Sink on the Forest Sink Area, provided that prior to carrying out any such Felling the Landowner on each separate occasion notifies the Crown of the intention to Fell and, if required by the Crown, either (at the Crown's option):

  1. provides the Crown with Performance Security; or
  2. without prejudice to clause 5, transfers to the Crown sufficient Units to account for all of the estimated Carbon Loss that will occur as a result of such Felling.

5. LANDOWNER'S LIABILITY FOR CARBON LOSS

5.1 Liability for Carbon Loss: From the Carbon Measurement Date the Landowner is responsible in perpetuity for, and must account to the Crown for, any Carbon Loss from the Forest Sink on the Forest Sink Area (excluding, for the avoidance of doubt, any Carbon Loss which relates to Carbon Sequestered on the Forest Sink Area after the date of any termination of the Landowner's obligations under clause 3.1). The Landowner must account for such Carbon Loss by:

  1. transferring Units to the Crown in accordance with the Regulations; or
  2. as otherwise required by the Regulations.

5.2 Crown's right to take action to restore the Forest Sink: Without prejudice to the Crown's other rights and remedies under this Agreement or the Regulations, if the Landowner commits any breach of clauses 3.1, 4.1, 4.3, 5.1 and 11.6 the Crown may at the Landowner's cost enter the Land for the purposes of, and take any action necessary to, restore, replant, replace, reinstate, re-establish, or maintain (in accordance with the Forest Sink Plan or otherwise), any part of the Forest Sink on the Forest Sink Area.

6. ACCESS TO THE LAND

6.1 Access to Land: The Landowner must, subject to the conditions in clause 6.2 being met, grant the Crown and its employees, agents or contractors (including Approved Persons) access to the Land (and where necessary procure access across neighbouring land) to:

  1. verify Reports, and otherwise verify and monitor the quantity of Carbon Sequestered on the Forest Sink Area;
  2. monitor the Landowner's compliance with this Covenant;
  3. investigate any non-compliance with this Covenant;
  4. exercise its rights under clause 5.2; and
  5. undertake any other activities for which access to the Land is required under the Regulations.

6.2 Conditions of access: The conditions referred to in clause 6.1 are that:

  1. the Landowner has been given not less than 48 hours' notice, specifying:

(i) the full name of the person(s) accessing the Land;
(ii) the time and date they will be entering the Land; and
(iii) approximately how long they intend to remain on the Land; and

  1. any person(s) accessing the Land carry and, at the Landowner's request, show, evidence of their identity.

6.3 Landowner's assistance: The Landowner must provide at its own cost all reasonable assistance and co-operation to the Crown to enable the Crown to exercise its rights under clause 6.1 to the fullest extent.

6.4 Rights not affected: Nothing in this clause 6 shall limit any rights the Crown may have at law or any actions the Crown may take in connection with an application for urgent relief before a court.

7. LANDOWNER'S INDEMNITY, WARRANTIES AND OTHER OBLIGATIONS

7.1 Indemnity: The Landowner agrees to indemnify and hold harmless the Crown against all loss, damage, liability or costs (including legal costs on a solicitor-own client basis) suffered or incurred by the Crown or New Zealand as a result of, or in connection with, any breach by the Landowner of this Covenant (including, for the avoidance of doubt, any costs incurred by the Crown in exercising its rights under clause 5.2).

7.2 Initial Landowner's Warranties: The Initial Landowner represents and warrants to the Crown that:

  1. the Initial Landowner has obtained written consent to enter into this Covenant from each person with a registered interest in the Land;
  2. all information provided by the Initial Landowner to the Crown in connection with this Covenant prior to the Effective Date was at the time it was provided, and is at the Effective Date, accurate, complete and not misleading; and
  3. the Initial Landowner will notify the Crown as soon as practicable if the Initial Landowner becomes aware at any time that any of the above warranties are or become untrue.

7.3 Landowner's Warranties: The Landowner represents and warrants to the Crown that:

  1. the Landowner has full capacity, power and authority to enter into and perform this Covenant and has taken all necessary action to authorise the entry into and performance of this Covenant;
  2. once the Covenant is executed, the Landowner's obligations under this Covenant will constitute valid and binding obligations on the Landowner in accordance with this Covenant;
  3. the Landowner is the registered owner of the freehold estate in the Land;
  4. the Landowner will not vary this Covenant without first obtaining the written consent of each person with a registered interest in the Land; and
  5. all information contained in Reports or otherwise provided to the Crown in connection with this Covenant during the term of this Covenant will be, when provided, accurate, complete and not misleading.

7.4 Obligations to notify: The Landowner must notify the Crown as soon as practicable upon becoming aware that:

  1. any material Carbon Loss has occurred or is likely to occur on the Forest Sink Area;
  2. any circumstance has occurred or is likely to occur that will or is likely to make the Landowner unable to comply with its obligations under this Covenant, including by being in breach of any of the warranties contained in clause 7.3; or
  3. any Change in Control of the Landowner (or, where the Landowner consists of more than one owner of the freehold estate in the Land, any such owner) is likely to occur or (without prejudice to clause 12.4) has occurred.

7.5 No double selling: The Landowner must not during the term of this Covenant receive payment, payment in kind, or consideration in any form in respect of Carbon Sequestered on the Forest Sink Area:

  1. after the Effective Date; and
  2. prior to any termination of the Landowner's obligations under clause 3.1,

other than under this Covenant.

7.6 Joint and several liability: Where at any time the Landowner consists of more than one owner of the freehold estate in the Land, each owner of the freehold estate in the Land shall be jointly and severally liable for the obligations and liabilities of the Landowner under this Covenant.

8. CROWN'S OBLIGATIONS

8.1 Obligation to transfer Units: Provided that:

  1. the Forest Sink on the Forest Sink Area is Eligible at all relevant times prescribed in the Regulations;
  2. the Landowner has not committed a breach of this Covenant (other than a breach which has been remedied to the Crown's satisfaction); and
  3. subject to clause 11, the Crown will, in respect of Carbon Sequestered on the Forest Sink Area since the Carbon Measurement Date, transfer to the Landowner 95% of such type and number of Units at such times as are prescribed, in each case, by the Regulations. To avoid doubt, the Crown does not accrue any liability in respect of the transfer of Units until the time prescribed in the Regulations at which the Crown is obliged under this Covenant to transfer such Units. [The full mechanism for calculating the number of Units etc will be set out in the Regulations]

8.2 Return by Landowner of Units transferred in error: Subject to clause 8.3, the Landowner must promptly return to the Crown any Units transferred by the Crown to the Landowner pursuant to clause 8.1 if it is subsequently established that the Landowner was not entitled to those Units.

8.3 Change of interpretation by the Crown: Clause 8.2 shall not require the Landowner to return any Units to the Crown solely as a result of a change in the Crown's interpretation of the criteria for assessing whether or not the Forest Sink on the Forest Sink Area was Eligible at all relevant times prescribed in the Regulations.

8.4 Sole remedy for breach of obligations: The Landowner acknowledges that the Crown's only obligation under this Covenant is the obligation on the Crown to transfer Units contained in clause 8.1. The Landowner agrees that its sole remedy under or in connection with this Covenant for any breach of this obligation by the Crown shall be the Landowner's right to require the Crown to transfer to the Landowner in accordance with the Regulations any Units to which the Landowner is entitled under this Covenant.

8.5 No representations or warranties: The Landowner acknowledges and agrees that the Crown makes no representations or warranties in respect of the subject matter of this Covenant or the Forest Sink Mechanism save as expressly set out in this Covenant.

8.6 Tradeability of Units: The Landowner acknowledges and agrees that the Crown:

  1. makes no representations or warranties or guarantees of any nature to the Landowner or any third party with respect to the value or tradeability of Units; and
  2. accepts no liability whatsoever to the Landowner or any third party for any inability to trade Units or any change in value of Units, including any such inability to trade Units or change in value of Units that is caused directly or indirectly or in whole or in part by any act or omission of the Crown.

8.7 Rights of Crown not affected: The Landowner acknowledges and agrees that nothing in this Covenant shall in any way affect, or be construed in such a way as to affect, the rights and powers of the New Zealand Government, as such term is defined in clause 8.8. For the avoidance of doubt and without prejudice to the foregoing, the Landowner acknowledges and agrees that nothing in this Covenant shall restrict, prevent or limit, or be construed in such a way as to restrict, prevent or limit, the New Zealand Government from promoting, enacting, implementing, repealing, replacing or amending any legislation (including the Act and the Regulations) or procuring or attempting to do the same, adopting any policy or position, making any election, or taking any decision, in respect of the Protocol, the Forest Sink Mechanism, New Zealand's international obligations relevant to the permanent forest sink initiative, or in respect of climate change issues generally, including in relation to:

  1. elections under the Protocol;
  2. administrative, operational or technical decisions in relation to the Protocol;
  3. any dispute resolution or tribunal relating to the Protocol or New Zealand's international obligations, whether in relation to climate change or otherwise;
  4. negotiations for a new commitment period (or equivalent) under the Protocol, or for any other international climate change agreement;
  5. any decision whether or not to remain a party to, or comply with, the Protocol, or to join any other international climate change agreement; and
  6. any other position the New Zealand Government may adopt or any other action or decision the New Zealand Government may choose to take in any international forum.

8.8 Definition of New Zealand Government: In this Covenant, the "New Zealand Government" means:

  1. Her Majesty in right of New Zealand; and
  2. all Ministers of the Crown and all Government Departments,

but does not include an Office of Parliament, where:

"Government Departments" means any department or instrument of the executive government of New Zealand, or any branch or division of any such department or instrument, but does not include an Office of Parliament; and

"Office of Parliament" means the Parliamentary Commissioner for the Environment (and that Commissioner's office), the Office of Ombudsmen, the Auditor-General and the Parliamentary Counsel Office.

9. CROWN'S LIABILITY

9.1 Limitation of liability for breach: To the maximum extent permitted by law, the Crown's liability for any breach by the Crown of its obligations under this Covenant shall be limited as set out in clause 8.4. Without prejudice to clause 8.4, in no circumstances shall the Crown be liable to the Landowner, whether in contract, tort (including negligence and breach of duty) or otherwise at law or in equity, for any business interruption, loss of use, loss of profits, loss of contracts, loss of a chance or an opportunity, loss of production or revenue, failure to make anticipated savings, or for any special, consequential or indirect loss or damage of any kind (even if the Crown knew or should have known of the possibility of such loss or damage), in each case arising under or in connection with this Covenant.

9.2 No liability for actions of the New Zealand Government: Without prejudice to clause 9.1, the Landowner acknowledges and agrees that the Crown shall have no liability to the Landowner or any third party under or in connection with this Covenant as a result of any exercise by the New Zealand Government of any of the rights and powers or other matters referred to in clause 8.7.

10. TAX

10.1 [                          ]

11. TERMINATION

11.1 Default termination rights: The Crown may terminate its obligations under this Covenant together with the obligations of the Landowner under clause 3.1 immediately on written notice to the Landowner if the Landowner (or, where the Landowner consists of more than one owner of the freehold estate in the Land, any such owner):

  1. commits a breach of this Covenant and, where such breach is capable of being remedied, fails to remedy such breach within 30 Business Days of being required to do so by the Crown in writing;
  2. is placed into bankruptcy, liquidation, administration, receivership or statutory management or if an official assignee, liquidator, receiver, trustee, manager, administrator, statutory manager or similar is appointed in respect of the Landowner or all or any of the Landowner's business or property;
  3. is unable, or presumed to be unable, to pay its debts as they fall due;
  4. enters into an assignment for the benefit of, or enters into or makes any arrangement or composition with, the Landowner's creditors;
  5. is subject to a resolution or any proceeding for winding up or liquidation (whether on a voluntary or involuntary basis) other than for a bona fide solvent reconstruction; or
  6. is subject to any event which is analogous to those listed in sub-clauses (b) to (e).

11.2 Protocol and other termination rights: The Crown may terminate its obligations under this Covenant together with the obligations of the Landowner under clauses 3.1 and 4.1 immediately on written notice to the Landowner if any of the following events occur:

  1. New Zealand withdraws from the Protocol;
  2. the Protocol ceases to exist or be in force;
  3. Forest Sinks no longer qualify to earn Units under the Protocol, including without limitation due to any election made by the New Zealand Government under the Protocol;
  4. without prejudice to clause 8.2, the Crown becomes aware that the Forest Sink on the Forest Sink Area is not Eligible;
  5. the New Zealand Government is in breach of its obligations under the Protocol for a period in excess of [60] days; or
  6. performance of the Crown's obligations under this Covenant is or would be, in the Crown's opinion, in breach of New Zealand's international obligations, including its obligations in relation to the World Trade Organisation's rules on illegal subsidies; or
  7. any event prescribed by the Regulations that gives the Crown the right to terminate its obligations under this Covenant together with the obligations of the Landowner under clauses 3.1 and 4.1,

including, in each case, where such event occurs wholly or in part, or directly or indirectly, as a result of any act, omission or decision of the New Zealand Government (whether of a type described in clause 8.7 or otherwise).

11.3 Automatic suspension of Crown's liability: From the date on which a right to terminate the Crown's obligations under this Covenant arises under clause 11.2, the Crown's liability in respect of its obligations under this Covenant is automatically suspended, whether such liability is accrued at such date or arises subsequently. The Crown may bring an end to the suspension of all (but not part) of such liability at any time on written notice to the Landowner, and from the date of such notice all of such liability shall resume in full force and effect, provided that:

  1. the Crown shall have no additional liability to the Landowner as a result of any delay in the transfer of Units caused by the period of such suspension; and
  2. if the Crown has not ended such suspension within [6 months] from the commencement of such suspension, the Landowner may terminate its obligations under clauses 3.1 and 4.1, in which case all of the Crown's obligations under this Covenant shall also be terminated.

11.4 Termination by Landowner for Crown's default: Save as provided in clauses 4.2 and 11.3, the Landowner has no right under this Covenant to terminate this Covenant or any of the obligations of either party under this Covenant. Any right of the Landowner to terminate this Covenant at law shall be limited to a right to terminate the Landowner's obligations under clauses 3.1 and 4.1 together with all of the obligations of the Crown under this Covenant.

11.5 Effect of termination on Crown's obligations: Termination of the Crown's obligations under clause 11.2 shall also terminate all accrued liabilities of the Crown under this Covenant. In all other cases, termination of the Crown's obligations under this Covenant shall not affect any accrued liabilities of the Crown under this Covenant.

11.6 Pre-conditions to Felling after termination: On termination of the Crown's obligations under this Covenant together with the Landowner's obligations under clauses 3.1 and 4.1 pursuant to clauses 11.2, 11.3 or 11.4, the Landowner must not Fell any or all of the Forest Sink on the Forest Sink Area other than in accordance with Approved Harvesting Practices unless, prior to carrying out any Felling, the Landowner on each separate occasion notifies the Crown of the intention to Fell and, if required by the Crown, either (at the Crown's option):

  1. provides the Crown with Performance Security; or
  2. without prejudice to clause 5, transfers to the Crown sufficient Units to account for all of the estimated Carbon Loss that will occur as a result of such Felling.

11.7 Crown's accrued rights not affected: Any termination of any of the Landowner's obligations under this Covenant shall be without prejudice to any accrued liabilities of the Landowner to the Crown.

11.8 Cancellation following full accounting for Carbon Loss: If:

  1. any of the obligations of the parties under this Covenant have been terminated pursuant to clauses 4.2 or 11;
  2.  the Landowner has accounted to the Crown in accordance with clause 5.1 for Carbon Loss (or potential Carbon Loss) which amounts or relates to loss of the total stock of Carbon Sequestered on the Forest Sink Area at the date on which the obligations referred to in (a) were terminated; and
  3. there are no other outstanding obligations on either party under this Covenant (including, if any Felled Timber from the Forest Sink on the Forest Sink Area remains on the Forest Sink Area, the obligation contained in clause 4.2(b)),

the Landowner shall give the Crown notice that this is the case and, unless the Crown notifies the Landowner of any reasonable objections the Crown has to the cancellation of this Covenant within [90] days of receipt of such notice, this Covenant shall be deemed to be cancelled in accordance with clause 16.3 [90] days from the date of the Crown's receipt of the Landowner's notice.

12. ASSIGNMENT

12.1 Restriction on transfer of Land: The Landowner may not transfer the Landowner's interest in the Land unless the Crown is satisfied, acting reasonably, that:

  1. the transferee is:

(i) capable of establishing and maintaining, or maintaining, a Forest Sink on the Land (as applicable), or procuring that a Forest Sink be established and maintained, or maintained, on the Land (as applicable); and
(ii) capable of meeting any liabilities that would be owed by the transferee to the Crown under this Covenant; or

  1. the transferee has provided a guarantor, or put in place insurance or other arrangements, which are an adequate alternative to the Crown being satisfied under (a),

(such a transferee being an "Approved Transferee").

12.2 Restriction on assignment of Covenant: Subject to clause 12.3, the Landowner may not transfer or assign any of the Landowner's rights, interests and obligations under this Covenant.

12.3 Automatic transfer of Landowner's right and obligations: Without prejudice to clause 12.1, the rights and obligations of the Landowner under this Covenant automatically transfer to a transferee of the Landowner's interest in the Land, and from the time of such transfer the transferee shall be the "Landowner" for the purposes of this Covenant.

12.4 Change of control: If the Landowner (or, where the Landowner consists of more than one owner of the freehold estate in the Land, any such owner) is not a natural person, any transfer of shares or other arrangement which results in a Change in the Control of that Landowner (or owner) is deemed to be an assignment or transfer subject to clause 12.2, provided that this clause 12.4 shall not apply to any Change in Control which occurs as result of a transfer of shares in a body corporate if any shares in that body corporate are quoted on a registered exchange (as such term is defined in the Securities Markets Act 1988) or any reputable securities exchange outside New Zealand that is regulated as a securities exchange.

12.5 Liability provisions of the Act: The parties acknowledge that the provisions of section 67ZF of the Act shall apply to any person who has a landholding (as such term is defined in the Act) in the Land.

12.6 No Contrary Intention: For the purposes of sections 67ZF(1)(a) and 67ZF(2)(a) of the Act, nothing in this Covenant shall be construed as indicating a contrary intention to the full operation of those provisions.

13. DISPUTE RESOLUTION

13.1 Dispute resolution procedure: The obligations of each party under this Covenant shall remain in full force and effect during the period of any dispute resolution procedure (whether prescribed by the Regulations or otherwise).

13.2 Urgent relief: Unless expressly stated otherwise, nothing contained in any dispute resolution procedure prescribed by the Regulations shall preclude either party from taking immediate steps to seek urgent relief before a court.

14. FORCE MAJEURE

14.1 Force majeure: Subject to clause 14.2, neither party will be liable to the other for any failure to perform its obligations under this Covenant by reason of any cause or circumstance beyond the party's reasonable control including acts of God, communication line failures, power failures, terrorism, riots, strikes, labour disputes, fires, war, flood, earthquake or other disaster ("event of force majeure"), provided that the party affected:

  1. notifies the other party in writing as soon as is practicable and provides full information concerning the event of force majeure, including an estimate of the time likely to be required to overcome that event;
  2. uses its best endeavours to overcome the event of force majeure and minimise the loss to the other party; and
  3. continues to perform its obligations under this Covenant as far as practicable.

14.2 Certain obligations excepted: Clause 14.1 shall not apply to the obligations of the Landowner under clauses 4, 5 and 11.6.

15. NOTICES

15.1 Notice must be in writing and addressed correctly: Subject to clause 15.4, any notice or other communication to be given under this Covenant must be in writing addressed to the recipient at the address or facsimile number from time to time notified by that party in writing to the other party. Until a change is so notified, the address and facsimile number of each party are those set out in this clause:

The Crown  
Address: Ministry of Agriculture and Forestry
Indigenous Forestry Unit
PO Box 25-022
Christchurch
Facsimile No: [insert]
Attention: [insert relevant job title]
   
The Landowner  
Address: [full name of the Landowner]
[full postal address]
Facsimile No: [insert]
Attention: [insert]

15.2 Delivery: Subject to clause 15.4, delivery may be effected by hand, or by post with postage prepaid, or by facsimile. Subject to clauses 15.3 and 15.4, a notice or other communication will be deemed to have been received:

  1. in the case of hand delivery, at the time of actual delivery to the recipient's address;
  2. in the case of delivery by pre-paid post, on the second Business Day after posting; or
  3. in the case of delivery by facsimile, at the time of transmission specified in a transmission report from the sending machine which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient.

15.3 Next Business Day: If a notice or other communication is received or deemed to have been received after 5 p.m. on a Business Day in the place to which it is sent, or on a day which is not a Business Day in that place, it will be deemed not to have been received until the next Business Day in that place.

15.4 General notices: Notwithstanding the other provisions of this clause 15, the Crown may give a notice or other communication to be given to the Landowner under this Covenant in any form permitted by the Regulations, and such notice or other communication will be deemed to have been received at the time provided for in the Regulations.

16. GENERAL PROVISIONS

16.1 Variation: Subject to clause 16.2, this Covenant may only be amended or varied by agreement in writing signed by the parties.

16.2 Variation by the Crown: The Crown may vary this Covenant in any manner on 90 days' written notice to the Landowner provided that such variation is necessary, in the light of any change in New Zealand's international rights and obligations related to the Forest Sink Mechanism or climate change, to retain or restore the balance of benefits and burdens intended by the parties as at the date on which this Covenant was entered into with the Initial Landowner.

16.3 Cancellation: The parties may by agreement in writing cancel this Covenant and all obligations contained in it at any time.

16.4 Set off: Either party may set off any obligation it has under or in connection with this Covenant and/or the Regulations to transfer Units against any right it has under or in connection with this Covenant and/or the Regulations to receive Units.

16.5 No privity: The parties acknowledge for the purposes of the Contracts (Privity) Act 1982 that none of the provisions of this Covenant confer a benefit on, or are intended to be enforceable by, any third party.

16.6 Further assurances: Each party agrees to execute and deliver any documents and to do all things as may reasonably be required by the other party to obtain the full benefit of this Covenant.

16.7 Severability: If any part of this Covenant is held by any court or administrative body of competent jurisdiction to be illegal, void or unenforceable, such determination shall not impair the enforceability of the remaining parts of this Covenant.

16.8 No waiver:

  1. A waiver of any provision of this Covenant shall not be effective unless given in writing, and then it shall be effective only to the extent that it is expressly stated to be given.
  2. A failure, delay or indulgence by any party in exercising any power or right in relation to this Covenant shall not operate as a waiver of that power or right. A single exercise or partial exercise of any such power or right shall not preclude further exercises of that power or right or the exercise of any other power or right.

16.9 No partnership, joint venture or agency relationship: Nothing in this Covenant shall evidence or be deemed to constitute a partnership or joint venture between the parties, nor will either party constitute an agent of the other party.

16.10 Entire agreement: This Covenant:

  1. constitutes the entire understanding and agreement of the parties relating to the matters dealt with in it; and
  2. supersedes and extinguishes all prior agreements and understandings between the parties relating to those matters.

16.11 Governing law and jurisdiction:

  1. This Covenant shall be governed by and construed in accordance with New Zealand law.
  2. Subject to clause (c) below, each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of New Zealand for the purpose of hearing and determining any disputes or proceedings arising out of or in connection with this Covenant ("Proceedings").
  3. The Landowner agrees not to bring or attempt to bring any Proceedings against the Crown in any court outside New Zealand.

SCHEDULE 1: Description of the Land

[This should be the whole title]

SCHEDULE 2: Description of the forest sink area

SCHEDULE 3: Forest Sink Plan

Contact for Enquiries

Indigenous Forestry Unit
Ministry of Agriculture and Forestry

14 Sir William Pickering Drive
PO Box 20 280
Bishopdale
Christchurch 8053
NEW ZEALAND

Tel: 64 3 943 3700
Fax: 64 3 943 3701

Te Papa Tipu Innovation Park
99 Sala Street
PO Box 1340
Rotorua
NEW ZEALAND

Tel: 64 7 921 3400
Fax: 64 7 921 3402

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