Document 2538970

Court File Number: 32-1896275
Estate Number: 32-1896275
Estate Number: 32-1896278
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE CONSOLIDATED MATTERS OF THE NOTICE OF INTENTION TO MAKE A
PROPOSAL UNDER THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3, AS
AMENDED OF
XS CARGO LIMITED PARTNERSHIP
&
XS CARGO GP INC.
Applicants
FACTUM OF THE APPLICANTS
(Motion returnable September 19, 2014)
Dated September 18, 2014
STIKEMAN ELLIOTT LLP
40th Floor
1155 Réné-Lévesque Blvd. West
Montréal, Canada H3B 3V2
Guy P. Martel
Tel: (514) 397-3163
Fax: (514) 397-3222
5300 Commerce Court
199 Bay St.
Toronto, Canada M5L 1B9
Maria Konyukhova LSUC#: 52880V
Tel: (416) 869-5230
Fax: (416) 869-0445
Counsels to the Applicants
#11138238
Court File Number: 32-1896275
Estate Number: 32-1896275
Estate Number: 32-1896278
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE CONSOLIDATED MATTERS OF THE NOTICE OF INTENTION TO MAKE A
PROPOSAL UNDER THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3, AS
AMENDED OF
XS CARGO LIMITED PARTNERSHIP
&
XS CARGO GP INC.
Applicants
FACTUM OF THE APPLICANTS1
PART I - INTRODUCTION
1.
XS Cargo Limited Partnership ("XS LP") and XS Cargo GP Inc. ("XS GP", together with
XS LP, "XS Cargo" or the "Applicants") bring this motion for orders substantially in the form of
the draft orders included at Tab 3 and 4 of the Motion Record:
(a) abridging the time for delivery of the Notice of Motion and the Motion Record and
declaring that the Motion is properly returnable on the date it is heard by this
Court;
(b) approving the transactions contemplated under an Agency Agreement (the "Agency
Agreement") entered into between the Applicants and Tiger Capital Group, LLC
("Tiger" or the "Agent") on September 15, 2014, referred to in the Affidavit of
Duncan Reith sworn on September 15, 2014 (the "Reith Affidavit"), and granting a
first ranking charge in favour of the Agent over the Applicants’ Merchandise, all
Unless otherwise defined herein, all capitalized terms shall have the meaning attributed to them in the
Affidavit of Duncan Reith sworn September 15, 2014 (the "Third Reith Affidavit").
1
#11138238
-2Proceeds and all proceeds from the sale of FF&E (as such terms are defined in the
Reith Affidavit);
(c) approving the transactions contemplated under an Asset Purchase Agreement (the
"APA") entered into on September 15, 2014 between XS Cargo and 9014454 Canada
Inc. ("Newco" or the "Purchaser");
(d) authorizing XS Cargo to proceed with an interim distribution to the Canadian
Imperial Bank of Commerce ("CIBC") out of the "Initial Guaranty Payment" payable
under the Agency Agreement, as well as a final distribution, if necessary, to CIBC,
upon payment of the balance of the "Guaranteed Amount" payable under the Agency
Agreement;
(e) vesting in the Purchaser the Applicants’ right, title and interest in and to the assets
designated in the APA (collectively, the "Purchased Assets") upon delivery and
filing of a certificate by the Trustee certifying that all closing conditions to the APA
have been me;
(f) assigning to the Purchaser, upon closing of the APA, the rights and obligations of
XS Cargo under the contracts which the Purchaser may elect to assume in
accordance with the APA (collectively, the "Assumed Contracts"), including the
lease agreements related to the Stores (as defined below) which the Purchaser may
decide to continue to operate in accordance with the APA (collectively, the
"Assumed Leases"); and
(g) sealing of the unredacted copy of the Agency Agreement and the APA, including
the schedules thereto.
2.
The Applicants will seek, on September 19, 2014, the issuance of an Approval and
Vesting Order, a draft of which has been attached at Tab 4 of the Motion Record, and will
return to the Court at a later date to be confirmed and announced to the service list in order to
seek the issuance of an Order authorizing the assignment of contracts, a draft of which has
been attached at Tab 4 of the Motion Record.
#11138238
-33.
As further described herein, this Motion is brought following the conduct of a court-
supervised sale, refinancing and investment solicitation process in respect of its assets
(the "SISP") which was approved by the Honourable Justice Penny of the Ontario Superior
Court of Justice (Commercial List) on August 6, 2014.
4.
The transactions contemplated under the Agency Agreement and the APA (collectively,
the "Transactions"), if approved and implemented, will allow, inter alia, the possibility of (i)
keeping a portion of XS Cargo’s business alive by keeping up to 29 Stores (as defined below) in
operation, (ii) preserving the employment of up to approximately 350 employees of XS Cargo,
(iii) maintaining XS Cargo’s business relationship with some of XS Cargo’s landlords and
business partners (iv) while closing down the remaining underperforming Stores and (v)
ensuring the maximization of the recovery for its creditors given the advantageous net
minimum guarantee offered by the Agent.
5.
In the event that this Court does not approve the Transactions, XS Cargo will likely
have to cease operations as it will soon run out of cash – all to the detriment of its employees,
landlords, creditors and other stakeholders.
PART II - THE FACTS
6.
XS Cargo is a Canadian discount retailer that operates through XS LP, a limited
partnership formed between XS GP and XSC Canada Holdings Inc. XS Cargo offers a wide
variety of goods, from furniture, to electronics, to housewares and kitchenware.
Third Reith Affidavit, Motion Record, Tab 2, at para. 3.
7.
XS Cargo operates and leases 50 stores (each a "Store", collectively the "Stores") located
in several Canadian provinces, namely in British Columbia, Alberta, Saskatchewan, Manitoba,
Ontario, New Brunswick, Nova Scotia and Newfoundland. At the time of the filing of the NOIs
(as defined below), XS Cargo employed approximately 650 employees, both full-time and parttime.
Third Reith Affidavit, Motion Record, Tab 2, at para. 4.
#11138238
-4Assets and Indebtedness
8.
As at July 30, 2014, the assets of XS Cargo, which essentially consisted in inventory, had
an estimated book value of $15.8 million (estimated retail value of $29.1 million) whereas the
total value of its indebtedness amounted to approximately $18.6 million, of which $11.3 million
was owed to secured creditors and $7.3 million was owed to unsecured creditors.
Third Reith Affidavit, Motion Record, Tab 2, at para. 7.
Secured Creditors
9.
XS Cargo's first secured creditor is the Canadian Imperial Bank of Commerce ("CIBC")
with whom XS Cargo entered into a Credit Agreement (as, amended on September 24, 2013,
the "CIBC Credit Agreement") pursuant to which the following secured loans were made
available to XS LP:
a) a revolving loan in an aggregate principal amount CDN$18,000,000 (and
CDN$20,000,000 for the month of September to October (inclusive) for 2011 and
2012) (the "Revolving Loan"); and
b) a term loan in an aggregate principal amount of CDN$10,000,000, to be repaid in
quarterly instalments (the "Term Loan").
Affidavit of Duncan Reith sworn August 1, 2014 ("First Reith Affidavit"),
Motion Record, Tab 2, Exhibit "A", at para. 21.
10.
On or about May 12, 2014, CIBC issued notices of default and reservation of rights to XS
Cargo notifying it of the occurrence of certain events of default under the CIBC Credit
Agreement (collectively, the "Specified Events of Default"). As a result of such Specified
Events of Default, CIBC also issued to XS Cargo a letter demanding the full payment of unpaid
principal amount of all obligations outstanding as at that date under the Revolving Loan and
the Term Loan as well as a Notice of Intention to Enforce Security pursuant to subsection 244(1)
of the BIA.
First Reith Affidavit, Motion Record, Tab 2, Exhibit "A", at para. 23.
#11138238
-511.
As at July 30, 2014, the total outstanding amount owed under the CIBC Credit
Agreement amounted to approximately $5.9 million.
First Reith Affidavit, Motion Record, Tab 2, Exhibit "A", at para. 25.
12.
XS Cargo's second secured creditor is a group formed of KarpReilly Direct, LLC,
KarpReilly Capital Partners, L.P., Mark L. Butler, Gerry Bachynski, Sean Britain (collectively,
the "KarpReilly Group") and Famous Brands Inc. ("Famous Brand", collectively with the
KarpReilly Group, the "Mezzanine Lenders") with whom XS Cargo entered into a Loan
Agreement (the "Mezzanine Loan Agreement") pursuant to which advances were made to XS
LP:
a) $3,000,000 advance by the KarpReilly Group (the "KarpReilly Loan"); and
b) $1,000,000 advance by Famous Brands (the "Famous Brands Loan").
First Reith Affidavit, Motion Record, Tab 2, Exhibit "A", at para. 26.
13.
As at July 26, 2014, the total outstanding amount owed under the Mezzanine Loan
Agreement, excluding interest and fees accrued after that date, was $4 million for the
KarpReilly Loan and $1.3 million for the Famous Brands Loan.
First Reith Affidavit, Motion Record, Tab 2, Exhibit "A", at para. 28.
Financial Difficulties
14.
Over the years, several factors have contributed to the deterioration XS Cargo's
financial situation.
15.
For instance, the emergence of new large competitors in the discount retail industry, as
well as the increasing tactical promotional activities of current competitors have made XS
Cargo's economic environment very challenging. Some of XS Cargo's competitors have in
recent years launched extensive advertising and marketing campaigns to consumers, using
print, radio and television and other media. In the face of declining profitability and in light of
#11138238
-6its cash constraints, XS Cargo has not been able to match such campaigns as they required
significant cash expenditures
First Reith Affidavit, Motion Record, Tab 2, Exhibit "A", at para. 35.
16.
In addition, XS Cargo, which operates a cash-driven business given its constant need to
access liquidity to ensure that purchase orders are made in a timely manner, has been severally
impacted because of the diminishing exchange value on the Canadian dollar towards the end
of 2013.
First Reith Affidavit, Motion Record, Tab 2, Exhibit "A", at para. 36.
17.
Despite several restructuring initiatives, XS Cargo has been unable to find its way back
to profitability.
First Reith Affidavit, Motion Record, Tab 2, Exhibit "A", at para. 38.
The Filing of the NOIs
18.
In 2014, XS Cargo witnessed an important decrease in its sales in comparison to
previous years which ultimately led it to default on the CIBC Credit Agreement. As a result, in
the months following XS Cargo's default under the CIBC Credit Agreement, CIBC advised it
that it was no longer willing to continue to finance its operations except in the context of the
SISP.
First Reith Affidavit, Motion Record, Tab 2, Exhibit "A", at paras. 5 and 37.
19.
Since XS Cargo had not been able to secure agreements for a refinancing of its
indebtedness toward CIBC, on July 30, 2014, prior to filing the NOIs, XS Cargo entered into an
Accommodation Agreement (the "Accommodation Agreement") with CIBC pursuant to which
XS Cargo agreed to file the NOIs with a view of conducting a SISP.
Third Reith Affidavit, Motion Record, Tab 2, at para. 8.
#11138238
-720.
On the same day, XS LP and XS GP each filed a Notice of Intention to Make a Proposal
(collectively, the "NOIs") pursuant to section 50.4 of the Bankruptcy and Insolvency Act (the
"BIA") and PricewaterhouseCoopers Inc. was appointed as trustee to the NOIs ("PwC" or the
"Trustee").
Third Reith Affidavit, Motion Record, Tab 2, at para. 5.
21.
On August 6, 2014, the Honourable Justice Penny of the Ontario Superior Court of
Justice (Commercial List) heard and granted a motion by XS LP for, inter alia:
(a) approving an administrative/procedural consolidation of the proposal proceedings
of XS LP and of XS GP;
(b) approving the Accommodation Agreement and ratifying the execution thereof;
(c) approving the SISP and the specific milestones contemplated under the
Accommodation Agreement; and
(d) approving a director’s and officer’s charger, an administrative charge as well as a
charge in favour of certain key employees of XS Cargo (collectively, the "NOI
Charges").
Third Reith Affidavit, Motion Record, Tab 2, at para. 9.
The SISP
22.
Since July 2014, XS Cargo and the Trustee have been actively engaged in conducting the
SISP. As appears from the Trustee's Second Report to the Court dated August 27, 2013 (the
"Trustee's Second Report") which was filed into the court record, the Trustee, inter alia:
a) prepared and sent to 59 potentially interested parties a "teaser" outlining the specific
milestones contemplated under the SISP and summarizing the business and
operations of XS Cargo;
#11138238
-8b) prepared and sent to parties who expressed an interest in participating in the SISP
and who agreed to execute a non-disclosure agreement (each an "NDA") a
confidential information memorandum; and
c) provided and facilitated access to a virtual data room (the "Data Room") to all
parties having signed the NDA;
Third Reith Affidavit, Motion Record, Tab 2, at para. 12.
23.
In total, 29 potentially interested parties executed an NDA in the context of the SISP and
received access to the Data Room. All such parties were informed that all offers would need to
be submitted to the Trustee by no later than August 21, 2014, in accordance with the specific
milestones set forth under the Accommodation Agreement.
Third Reith Affidavit, Motion Record, Tab 2, at para. 13.
24.
On August 21, 2014, the Trustee and XS Cargo received offers (collectively, the
"Offers") from ten different parties (collectively, the "Offerors") interested in a transaction
involving XS Cargo. As appears from the Trustee's Second Report, the Offers included the
following:
a) one hybrid offer contemplating both the purchase of certain selected assets of XS
Cargo, as a going concern, and the liquidation of the remaining assets of XS Cargo
(the "Hybrid Offer");
b) three offers providing for a bridge financing in favour of XS Cargo;
c) six pure liquidation offers (collectively, the "Liquidation Offers").
Third Reith Affidavit, Motion Record, Tab 2, at para. 14.
25.
In the days following the reception of the Offers, XS Cargo, with the assistance of the
Trustee, reviewed each of them with a view of determining which would provide the
maximum recovery for the benefit of its stakeholders.
#11138238
-9Third Reith Affidavit, Motion Record, Tab 2, at para. 17.
26.
After having set aside the least advantageous Offers, XS Cargo, with the assistance of
the Trustee, pursued parallel discussions and negotiations with two Offerors, one of which had
submitted the Hybrid Offer, whereas the other had submitted one of the Liquidation Offers.
Such parallel discussions and negotiations were aimed at obtaining the best offer under the
circumstances and entering into a binding agreement with one of these Offerors within
reasonable delays.
Third Reith Affidavit, Motion Record, Tab 2, at para. 18.
27.
After due consideration and consultation with the Trustee and CIBC, XS Cargo
determined that the Hybrid Offer constituted the best offer under the circumstances given,
inter alia, the fact that, on the one hand, it allowed to keep a portion of XS Cargo's business
alive, by keeping 29 Stores open, and on the other hand, it afforded XS Cargo the possibility of
closing down the remaining underperforming Stores and liquidating the assets located thereat,
all within a reasonable time-frame, while guaranteeing an advantageous net minimum return
for the sale of such assets.
Third Reith Affidavit, Motion Record, Tab 2, at para. 20.
28.
Accordingly, on September 15, 2014, XS Cargo entered into the following agreements:
a) the Agency Agreement; and
b) the APA.
Third Reith Affidavit, Motion Record, Tab 2, at para. 21.
The Agency Agreement
29.
The material terms of the Agency Agreement are as follows:
a) Subject to the prior approval from this Court of the Agency Agreement, the Agent
will act as XS Cargo’s exclusive agent in the present proceedings for the limited
#11138238
- 10 purpose of conducting a liquidation sale (the "Liquidation") of essentially all of XS
Cargo’s Merchandise (as defined in the Agency Agreement) the located in the
Stores and in XS Cargo’s distribution centers located in Mississauga and in
Edmonton;
b) The Liquidation will begin on the first day following the entry of the Approval and
Vesting Order sought by XS Cargo (the "Sale Commencement Date") and will end
on November 30, 2014;
c) The Agent shall pay XS Cargo a net minimum guarantee amount (the "Guaranteed
Amount") based on a percentage of the cost value of the Inventory located in all of
the Stores - which cost value is to be calculated in accordance with a formula set
forth in the Agency Agreement - as well as a percentage of any and all proceeds
resulting from the Liquidation which exceed the Guaranteed Amount, less the
Expenses and the Agent’s Fees (both terms as defined in the Agency Agreement);
d) Pursuant to the Agency Agreement, a portion of the Guaranteed Amount will be
payable upon issuance of the Order sought herein (the "Initial Guaranty Payment")
whereas the balance thereof will paid on the first business day following the
issuance of the final report (the "Final Inventory Report") by independent inventory
taking service company chosen by XS Cargo and the Agent confirming the
aggregate cost value of the Merchandise, after verification and reconciliation thereof
by Agent and Merchant. The Final Inventory Report shall be completed not later
than thirty (30) days after the Sale Commencement Date;
e) The payment of the balance of the Guaranteed Amount will be secured by an
irrevocable standby letter of credit to be delivered by the Agent (the "Guaranty
L/C") by a Schedule I Canadian bank selected by the Agent and reasonably
acceptable to XS Cargo. Any failure by the Agent to pay such balance in accordance
with the Agency Agreement shall entitle XS Cargo to draw upon the Guaranty L/C
to the extent of such unpaid and undisputed balance; and
f) Substantially all expenses related to the Liquidation will be reimbursed to XS Cargo
by the Agent.
#11138238
- 11 30.
In addition to the foregoing, the Agency Agreement also provides that a charge (the
"Agent’s Charge") must be granted by this Court over the Merchandise to secure the execution
of all obligations of XS Cargo under the Agency Agreement. The Agent’s Charge would rank
ahead of all other security interest affecting the Merchandise, including the NOI Charges.
Agency Agreement, Motion Record, Tab 2, Exhibit "E".
The APA
31.
In conjunction with the Agency Agreement, XS Cargo also entered into the APA with
the Purchaser. The material terms of the APA are as follows:
a) Subject to the prior approval from this Court of the APA, the Purchaser shall have
the option, but not the obligation, to purchase XS Cargo’s Merchandise, as well as
other assets, such as its account receivables, claims, intellectual property, and
contracts relating to up to 29 Stores, all of which are listed in Schedule 1.1(s) of the
APA;
b) The Purchaser shall have until the business day preceding the date of closing (the
"APA Closing Date"), which shall be no later than October 1, 2014, to notify in
writing XS Cargo of the following:
(i)
which of the Stores, if any, it decides to keep in operation for the purpose of
completing the sale transaction contemplated under the APA (collectively,
the "Chosen Stores"). Any Stores which will not have been chosen by the
Purchaser will continue be liquidated in accordance with the terms of the
Agency Agreement;
(ii)
which of XS Cargo’s employees, if any, it has chosen to make offers of
employment to on terms and conditions that are substantially comparable,
in the aggregate, to the terms and conditions of such employees’
employment with XS Cargo immediately prior to the date of the APA with
respect to base wages and/or salary, location and vacation entitlement, save
exception as further set forth in the APA; and
#11138238
- 12 (iii) which contracts relating to XS Cargo’s business, if any, it has decided to
assume (collectively, the "Assumed Contracts"), including the lease
agreements relating the Chosen Stores (collectively, the "Assumed Leases").
32.
The APA provides that the purchase price payable thereunder shall be paid as follows:
a) the Purchaser shall assume payment of the Merchandise located in the Chosen
Stores (the "Chosen Store Merchandise") by:
(i)
reimbursing the Agent, on the APA Closing Date, the portion of the Initial
Guaranty Payment relating to the Chosen Store Merchandise only, in
accordance with a direction of payment signed by XS Cargo in favour of the
Agent (given that XS Cargo will have already received the Initial Guaranty
Payment); and by
(ii)
paying XS Cargo the balance of the Guaranteed Amount related to the Chose
Store Merchandise only, within the same delays as set forth under
paragraph 29d) hereof. Such balance will be secured by an irrevocable
standby letter of credit in favour of XS Cargo which shall be issued by a
Schedule I Canadian Bank selected by the Purchaser and reasonably
acceptable to XS Cargo. Any failure by the Purchaser to pay such balance in
accordance with the APA shall entitle XS Cargo, to draw upon the Guaranty
L/C to the extent of such unpaid and undisputed balance following a five
day prior notice to the Purchaser;
b) the Purchaser shall pay XS Cargo, on the APA Closing Date:
(i)
an amount equal in value to a percentage of the amounts that have been prepaid by XS Cargo under purchase orders for inventory in respect of which a
deposit was paid by XS Cargo prior to the date of the APA; and
(ii)
an amount equal to the cash in the tills at the at the Chosen Stores; and
(iii) an amount equal to all prepaid expenses relating to XS Cargo’s business and
listed in Schedule 2.2(g) of the APA, less any delinquent payments that have
#11138238
- 13 not been made by XS Cargo in respect of operating costs related to the
Chosen Stores which are due and payable prior to the APA Closing Date;
c) the Purchaser shall also deliver to the Mezzanine Lenders (as defined in the APA),
on the APA Closing Date, the share certificates representing 20% of the voting
power and economic value of the Purchaser’s equity, calculated on a fully-diluted
basis immediately following the APA Closing Date, which share certificates will be
issued as fully paid and non-assessable shares of the Purchaser.
33.
Except to the extent specifically set forth in the APA, the Purchaser shall not assume
any liability, debt or obligation of XS Cargo whatsoever, and XS Cargo shall retain
responsibility for all liabilities, debts and obligations accrued or incurred on or prior to the
APA Closing Date, whether or not relating to the XS Cargo’s business or from its operation of
its business, the Chosen Stores or otherwise in connection with the Purchased Assets.
34.
Other notable closing conditions under the APA also include, inter alia, the issuance of
the Order sought herein by this Court, and the fact that the Purchaser must receive sufficient
financing to complete the transaction contemplated in the APA on terms and conditions
satisfactory to the Purchaser. XS Cargo understands that the Purchaser will use its best efforts
to provide XS Cargo with a commitment letter providing for the necessary financing to
purchase the Purchased Assets by September 18, 2014.
APA, Motion Record, Tab 2, Exhibit "F".
The Assumed Contracts
35.
As mentioned, pursuant to the APA, the Purchaser shall have until the business day
preceding the date of closing (the "APA Closing Date"), which shall be no later than October 1,
2014 to notify XS Cargo which contracts (collectively, the "Assumed Contracts"), including
which leases (collectively, the "Assumed Leases") relating to XS Cargo’s business, if any, it has
decided to assume.
Third Reith Affidavit, Motion Record, Tab 2, at para. 25.
#11138238
- 14 36.
The APA provides that XS Cargo’s obligation with regards to the Assumed Contracts
(except the Assumed Leases) shall be limited to cooperating with the Purchaser and using
commercially reasonable efforts to either: (i) obtain all required consents to the assignment of
these contracts; or (ii) obtain an order of the Court authorizing the assignment of any such
contracts. However, with respect to the Assumed Leases, the APA provides that closing shall
be conditional upon Purchaser having received consents from the counterparties to the
Assumed Leases to assign those Assumed Leases to the Purchaser or an order from this Court
authorizing same.
Third Reith Affidavit, Motion Record, Tab 2, at paras. 28 and 29.
37.
As such, XS Cargo intends to distribute consent agreements to all counterparties to the
Assumed Contracts, including the Assumed Leases, to the extent that such contracts require
consent to assignment. XS Cargo or the Trustee will also communicate directly with these
counterparties in an attempt to procure executed consent agreements.
Third Reith Affidavit, Motion Record, Tab 2, at para. 41.
38.
However, in the event that XS Cargo is unable to obtain the required consent to assign
any of the Assumed Contracts, XS Cargo will need to seek and obtain, prior to the APA Closing
Date, the authorization from this Court to assign those agreements pursuant to section 84.1(1)
and 66(1.1) of the BIA.
Third Reith Affidavit, Motion Record, Tab 2, at para. 42.
PART III - ISSUES
39.
The issues on this Motion which will be presented to this Court on September 19, 2014
are whether the Court should approve:
a) the Agency Agreement and the APA and the vesting in the Purchaser of the assets
designated in the APA, free and clear of all claims and restrictions;
b) the proposed Agent’s Charge;
#11138238
- 15 c) the proposed distributions to CIBC; and
d) the sealing of the unredacted copies of the Agency Agreement and of the APA.
PART IV - LAW AND ARGUMENT
1.
THE AGENCY AGREEMENT AND THE APA SHOULD BE APPROVED
A)
The Jurisdiction of the Court
40.
The jurisdiction of this Court to approve a sale of assets outside of the ordinary course
of business is contained in section 65.13 of the BIA.
BIA, s. 65.13.
See, Re Outdoor Broadcast Networks, Inc., 2010 ONSC 5647, Tab 1 of the
Applicant's Book of Authorities (the "BOA") and Re Hypnotic Clubs Inc.,
2010 ONSC 2987, Tab 2 of the BOA.
41.
Such sale of assets outside of the ordinary of business may be approved by the Court
even when the debtor has not yet presented a proposal to its creditors.
Re Komtech Inc., 2011 ONSC 3230 at paras. 25, 33, Tab 3 of the BOA.
42.
In fact, Courts have approved on several occasions, either in the context of BIA or
CCAA proceedings, or in the context of receivership proceedings, the sale of a debtor
company’s assets outside of the ordinary course of business, including when such sale was
made by an agent through a liquidation process.
In the matter of Hart Stores Inc., (October 19, 2011), Qc. No. 500-11-041238110 (Qc. S.C.), Tab 10 of the BOA; In the Matter of Bombay & Co. Inc.,
Bowing & Co. Inc. and Benix & Co. Inc., (August 22, 2014), Ont. No. CV-1410659-00CL (Ont. S.C.J.), Tab 18 of the BOA, In the matter of the
Receivership of Premium Products Inc., (January 23, 2012), Ont. No. CV-119343-00CL (Ont. S.C.J.), Tab 19 of the BOA; In the matter of KK Precision
Inc., (August 5, 2014), Ont. No. CV-14-10573-00CL (Ont. S.C.J.), Tab 20 of
the BOA.
#11138238
- 16 B)
Criteria for Approval of the Sale Outside the Ordinary Course of Business
43.
Pursuant to 65.13(4) of the BIA, the following list of non-exhaustive factors may be
considered by the Court to determine whether or not to approve a debtor's sale of assets
outside the ordinary course of business:
(a) Whether the process leading to the proposed sale or disposition was reasonable in
the circumstances;
(b) Whether the trustee approved the process leading to the proposed sale or
disposition;
(c) Whether the trustee filed with the court a report stating that in their opinion the sale
or disposition would be more beneficial to the creditors than a sale or disposition
under a bankruptcy;
(d) The extent to which the creditors were consulted;
(e) The effects of the proposed sale or disposition on the creditors and other interested
parties; and
(f) Whether the consideration to be received for the assets is reasonable and fair, taking
into account their market value.
BIA, s. 65.13(4).
44.
These criteria are substantially identical to the criteria contained in s. 36 of the
Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (the "CCAA"), which
governs the sale of assets outside the ordinary course in CCAA proceedings. CCAA courts
have noted that the s. 36 criteria (and therefore, the s. 65.13(4) criteria) largely correspond with
Soundair principles for approval of a sale of assets in an insolvency scenario, being:
(a)
Whether sufficient effort has been made to obtain the best price and that the
debtor has not acted improvidently;
(b)
The interests of all parties;
#11138238
- 17 (c)
The efficacy and integrity of the process by which offers have been obtained;
and
(d)
Whether there has been unfairness in the working out of the process
Re Canwest Publishing Inc. (2010), 68 C.B.R. (5th) 233 (Ont. S.C.J. [Comm.
List]) at para. 13, Tab 4 of the BOA.
Royal Bank v. Soundair Corp. (1991), 4 O.R. (3d) 1 (C.A.) at para. 16, Tab 5
of the BOA.
45.
In the Soundair case, the Court stated that absent clear evidence that a proposal is
improvident or that there has been an abuse of process, the Court must grant deference to the
business decision of a receiver (in this case, the debtor) to sell the debtor’s assets. The Court
should place a good deal of confidence in the actions taken and the opinions formed by the
receiver (in this case, the debtor and the Trustee), and should be reluctant to second-guess the
business decisions taken. Only in exceptional circumstances will the Court intervene.
46.
In the case-at-hand, it is respectfully submitted that each of the criteria set forth in
section 65.13(4) of the BIA, as well as those set forth in the Soundair case have been met.
(i)
Whether the process leading to the proposed sale or disposition was reasonable
in the circumstances
47.
The Agency Agreement and the APA are the culmination of a court-approved
solicitation process undertaken by the Trustee during which it canvassed the market for
potential purchasers and/or investors.
Third Reith Affidavit, Motion Record, Tab 2, at para. 31.
48.
Although the SISP approved by Justice Penny on August 6, 2014 was to be conducted
within a condensed time-frame, it is important to note that CIBC had agreed to provide
financial support to XS Cargo during these NOI proceedings only under the terms and
conditions set forth in the Accommodation Agreement. At the time of filing of the NOIs, no
other party had offered to provide alternative support. Accordingly, the timeline for
#11138238
- 18 conducting the SISP was limited to the time constraints set forth in the Accommodation
Agreement.
Third Reith Affidavit Motion Record, Tab 2, at para 32.
49.
Despite such time constraints, several offers in respect of XS Cargo and/or assets were
submitted, all of which were duly considered and analyzed, with a view of finalizing the most
advantageous transaction for XS Cargo’s stakeholders under the circumstances.
Third Reith Affidavit Motion Record, Tab 2, at para 33.
50.
As described above, the Trustee identified, with CIBC’s input, 59 potential purchasers
to whom a "teaser" containing information regarding XS Cargo and the SISP was provided. Of
those potential purchasers, 29 signed a non-disclosure agreement which gave them access to a
confidential information memorandum and a virtual data room containing further and more
detailed information regarding XS Cargo.
Third Reith Affidavit, Motion Record, Tab 2, at paras. 12 and 13.
51.
On August 21, 2014, the Trustee and XS Cargo received a total of ten Offers. After a
thorough review of each of them, XS Cargo, with the assistance of the Trustee, pursued parallel
discussions and negotiations with two Offerors, one of which had submitted the Hybrid Offer
and the other which had submitted a Liquidation Offer. Such parallel discussions and
negotiations were aimed at obtaining the best offer under the circumstances, within reasonable
delays.
Third Reith Affidavit, Motion Record, Tab 2, at para. 14.
52.
After due consideration and consultation with the Trustee and CIBC, XS Cargo
determined that the Hybrid Offer constituted the best offer under the circumstances given,
inter alia, the fact that, on the one hand, it would allow the possibility to preserve a portion of
XS Cargo's business alive by keeping up to 29 Stores open, and on the other hand, it would
allow the possibility for XS Cargo to close down the remaining underperforming Stores and
#11138238
- 19 liquidate the assets located thereat, all within a reasonable time-frame, the whole while
guaranteeing an advantageous net minimum return for the sale of such assets.
Third Reith Affidavit, Motion Record, Tab 2, at para. 20.
(ii)
Whether the trustee approved the process leading to the proposed sale or
disposition
53.
As appears from the Trustee’s First Report to the Court, although the Trustee noted that
the proposed time-frame for conducting the SISP was condensed, the Trustee nonetheless
supported XS Cargo’s request for approval of the SISP from this Court, which approval was
granted on August 6, 2014 by Justice Penny.
Trustee’s First Report to the Court dated August 1, 2014, at paras. 38 to 40.
(iii)
Whether the Trustee filed with the court a report stating that in its opinion the
sale or disposition would be more beneficial to the creditors than a sale or
disposition under a bankruptcy
54.
XS Cargo understands that the Trustee will file with the Court, prior to the hearing on
this Motion, a report which will provide a detailed and thorough analysis on the Transactions.
(iv)
55.
The Extent to Which Creditors were Consulted
At all times relevant, XS Cargo’s secured creditors were kept appraised of all
developments with regards to the SISP, including CIBC which received regular updates and
reports on the SISP in accordance with the terms of the Accommodation Agreement.
Third Reith Affidavit, Motion Record, Tab 2, at para. 22.
(v)
The effects of the proposed sale or disposition on the creditors and other
interested parties
56.
It is expected that the Transactions will allow the reimbursement in full of all
indebtedness owed to CIBC under the CIBC Credit Agreement. In fact, should the proposed
#11138238
- 20 distributions requested by XS Cargo be approved, a substantial portion of the indebtedness
owed under the CIBC Credit Agreement will be repaid upon the issuance of the Approval and
Vesting Order sought. Also, with regards to the Mezzanine Lenders (as defined in the APA), it
is expected that a portion of their indebtedness will be repaid upon closing of the Agency
Agreement and of the APA, both in cash and in equity. They have been actively involved in the
negotiation of the Agency Agreement and of the APA and have informed XS Cargo that they
consent to the transactions contemplated thereunder.
Third Reith Affidavit, Motion Record, Tab 2, at para. 35.
57.
Finally, with regards to the unsecured creditors of XS Cargo, although it is presently
premature to determine whether or not XS Cargo will eventually be in a position to submit a
BIA proposal to them, XS Cargo does not exclude such possibility. Indeed, it should be noted
that the APA provides that XS Cargo and the Purchaser will, assuming the APA is approved,
begin negotiations in relation with the acquisition by the Purchaser of certain tax losses accrued
in connection with XS Cargo’s business (the "Tax Loss Agreement"). Such Tax Loss Agreement,
if entered into, could potentially allow XS Cargo to submit to its creditors a proposal under the
BIA.
Third Reith Affidavit, Motion Record, Tab 2, at para. 36.
(vi)
Whether the consideration to be received for the assets is reasonable and fair,
taking into account their market value
58.
In the judgment of XS Cargo’s management, the Hybrid Offer represents the best
possible transaction in the circumstances for the benefit of XS Cargo and its stakeholders,
including its employees, landlords and contractual parties. Not only is the consideration
received under the Hybrid Offer reasonable and fair, but also, as previously mentioned, it
allows the possibility to preserve a portion of XS Cargo’s business alive by keeping up to 29
Stores open, as well as the possibility for XS Cargo to close down the remaining
underperforming Stores and liquidate the assets located thereat, all within a reasonable timeframe, the whole while guaranteeing an advantageous net minimum return for the sale of such
#11138238
- 21 assets. Currently, there are approximately 325 employees located at the 29 Stores in question,
whose employment could be preserved if the Hybrid Offer is approved.
Third Reith Affidavit, Motion Record, Tab 2, at para. 34.
#11138238
- 22 (vii)
59.
Additional Criteria for Approval under Section 65.13 of the BIA
In addition to the factors set out above, subsection 65.13(8) of the BIA sets out the
following restrictions on disposition of assets within NOI proceedings:
The court may grant the authorization only if the court is satisfied that the company can
and will make the payments that would have been required under paragraphs 60.13(a)
and (1.5)(a) if the court had approved the proposal.
BIA, s. 65.13(8).
60.
XS Cargo will reserve sufficient amounts to ensure that the payments required under
section 60(1.3)(a) of the BIA are made. Since XS Cargo does not participates in a prescribed
pension plan for the benefit of its employees, no payment in accordance with section 60(1.5)(a)
of the BIA is required.
Third Reith Affidavit, Motion Record, Tab 2, at para. 37.
2.
THE AGENT’S CHARGE
61.
XS Cargo also seeks, in accordance with the terms of the APA, a charge in favour of the
Agent over the Merchandise to secure the execution of all obligations of XS Cargo under the
Agency Agreement. This charge is to rank ahead of all other security interest affecting the
Merchandise, including the NOI Charges.
62.
While there is no express statutory jurisdiction in the BIA for the Court to approve a
priority charge in favour of an agent/liquidator, the Ontario Superior Court has recognized
that in dealing with bankruptcy and insolvency legislation, a technical or stringent
interpretation should not be applied. The BIA has to be flexible to deal with the numerous
situations and variations from which may arise from time to time. To take a technical approach
to the BIA would defeat its whole purpose.
Re N.T.W. Management Group Ltd., (1994), 29 C.B.R. (3d) 139 (Ont. Gen. Div.Bankruptcy), at para. 13, Tab 6 of the BOA
#11138238
- 23 63.
As such, priority charges similar to the one requested herein in favour of an
agent/liquidator have been granted by the Courts in either BIA or CCAA proceedings.
See, In the matter of the Notice of Intention to make a Proposal of Movie Gallery
Canada, Inc., (June 11, 2010), Ont. No. CV-10-00008742-00CL (Ont. S.C.J.), at para.
13, Tab 7 of the BOA; HSBC Bank Canada v. Canadian Petcetera Limited Partnership
and Canadian Petcetera Warehouse Inc., (June 23, 2009), Vancouver No. S-094458
(B.C.S.C.) at paras. 17 and 18, Tab 8 of the BOA; Callidus Capital Corporation v.
Tabi International Corporation, (March 30, 2011), Ont. No. CV-11-9108-00CL (Ont.
S.C.J.), at para. 13, Tab 9 of the BOA; In the matter of Hart Stores Inc., (October 19,
2011), Qc. No. 500-11-041238-110 (Qc. S.C.) at paras 19-22, Tab 10 of the BOA; In
the matter of Effigi Inc., (April 5, 2013), Qc. No. 500-11-044334-130 (Qc. S.C.) at
para. 15, Tab 11 of the BOA; In the matter of Sterling Shoes Inc. and Sterling Shoes
GP Inc, (December 9, 2011), Vancouver No. S117081 (B.C. S.C.) at paras. 19 and
30, Tab 12 of the BOA.
64.
Indeed, a Court may, under certain circumstances, exercise its inherent jurisdiction in
order to grant certain relief sought by the debtor company, including the approval of certain
priority charges not expressly authorized by the BIA.
65.
For instance, in the present matter, this Court has relied on its inherent jurisdiction to
grant a KERP Charge over the assets of XS Cargo, even though there was no express provision
under the BIA allowing it to do so.
66.
Also, a parallel can be made with the granting of DIP charge in BIA proceedings.
Indeed, prior to the amendments to the BIA allowing for the Courts to grant DIP charges,
Courts relied on the business judgment of the directors of the debtor company as well as on
their inherent jurisdiction to grant such charges.
See, Bearcat Explorations Ltd. (Re), [2004], A.J. No. 1593, at paras. 5 to 8, Tab 13 of
the BOA; Re Manderley Corp, (2005), 10 C.B.R. (5th) 48 (Ont. S.C.J.) at para. 25, Tab
14 of the BOA; FarmPure Seeds Inc. (Re), [2008], S.J. No. 647, at paras. 12 to 15 Tab
15 of the BOA.
67.
In the case at-hand, the Agency Agreement is conditional upon, inter alia, the Agent
being granted the Agent’s Charge over the Merchandise, all Proceeds and all proceeds from the
sale of FF&E (as such terms are defined in the Agency Agreement) in order to secure the
payment of XS Cargo’s obligations under the Agency Agreement. Absent the Agent’s Charge,
#11138238
- 24 there is a possibility that the Agent will not be willing to act as XS Cargo’s agent in accordance
with the Agency Agreement, which will in turn prevent the Transactions to be completed, to
the detriment of XS Cargo's stakeholders. The beneficiary of the D&O Charge, the
Administration Charge and most of the beneficiary of the KERP Charge have informed XS
Cargo that they consent to the Agent’s Charge.
3.
THE PROPOSED DISTRIBUTION TO CIBC
68.
XS Cargo also requests the authorization to proceed with an interim distribution to
CIBC of an amount equal to the lower of $5,000,000 and the actual amount owing to CIBC, out
of the Initial Guaranty Payment, as well as a final distribution to CIBC upon payment of the
balance of the Guaranteed Amount, to the extent that any amounts remain owing to CIBC.
69.
CIBC holds a first ranking security over all assets of XS Cargo, subject only to the NOI
Charges. The beneficiary of the D&O Charge, the Administration Charge and most of the
beneficiary of the KERP Charge, who all rank before CIBC’s charge, have informed XS Cargo
that they consent to the Agent’s Charge.
Third Reith Affidavit, Motion Record, Tab 2, at para. 48.
4.
THE SEALING OF THE UNREDACTED COPIES OF THE AGENCY AGREEMENT
AND THE APA
70.
XS Cargo requests that the Court seal the unredacted copies of the Agency Agreement
and of the APA.
71.
Pursuant to the Ontario Courts of Justice Act, this Court has the discretion to order that
any document filed in a civil proceeding be treated as confidential, sealed and not form part of
the public record.
Courts of Justice Act, R.S.O. 1990, c. C.43, s. 137(2).
72.
In Sierra Club of Canada v. Canada (Minister of Finance) Iacobucci J. adopted the following
test to determine when a sealing order should be made:
#11138238
- 25 A confidentiality order under Rule 151 should only be granted when:
(a) such an order is necessary in order to prevent serious risk to an important interest,
including a commercial interest, in the context of litigation because reasonable
alternative measures will not prevent the risk; and
(b) the salutary effects of the confidentiality order, including the effects on the right of
civil litigants to a fair trial, outweigh the deleterious effects, including the effects on
the right to free expression, which in this context includes the public interest in open
and accessible court proceedings.
Sierra Club of Canada v. Canada (Minister of Finance), [2002] 2 S.C.R. 522 at para.
53, Tab 16 of the BOA.
73.
Morawetz J. applied the Sierra Club test in considering whether or not to seal a
confidential supplements containing an unreacted asset purchase agreement in the matter of
Elleway Acquisition Ltd.. There, his Honour found that the agreements contained highly
sensitive commercial information which, if disclosed prior to the closing of the sale, could pose
a serious risk to the sales process in the event that the sales did not close. As the sealing order
was the only reasonable method of preventing the information from becoming publicly
available, Morawetz J. granted the order.
Elleway Acquisitions Ltd. v. 4358376 Canada Inc., 2013 ONSC 7009 at
paras. 46-48, Tab 17 of the BOA.
74.
In the case at-hand, it is respectfully submitted that the unredacted copies of the APA
and of the Agency Agreement contain highly sensitive commercial information. Disclosure
thereof could harm all stakeholders of XS Cargo by undermining the integrity of the SISP and
by impairing XS Cargo’s efforts to remarket its assets should the Transactions not close for any
reason. This constitutes an important commercial interest that should be protected and there is
no reasonable alternative to the requested sealing order that would prevent this information
from becoming publicly available.
75.
The salutary effects of maintaining the confidential nature of the Agency Agreement
and of the APA greatly outweighs the deleterious effects resulting from the sealing order
sought.
#11138238
SCHEDULE "A"
LIST OF AUTHORITIES
TAB
DOCUMENT
1
Re Outdoor Broadcast Networks, Inc., 2010 ONSC 5647
2
Re Hypnotic Clubs Inc., 2010 ONSC 2987
3
Re Komtech Inc., 2011 ONSC 3230
4
Re Canwest Publishing Inc. (2010), 68 C.B.R. (5th) 233 (Ont. S.C.J. [Comm. List])
5
Royal Bank v. Soundair Corp. (1991), 4 O.R. (3d) 1 (C.A.)
6
Re N.T.W. Management Group Ltd., (1994), 29 C.B.R. (3d) 139 (Ont. Gen. Div.Bankruptcy)
7
In the matter of the Notice of Intention to make a Proposal of Movie Gallery Canada,
Inc., (June 11, 2010), Ont. No. CV-10-00008742-00CL (Ont. S.C.J.)
8
HSBC Bank Canada v. Canadian Petcetera Limited Partnership and Canadian
Petcetera Warehouse Inc., (June 23, 2009), Vancouver No. S-094458 (B.C.S.C.)
9
Callidus Capital Corporation v. Tabi International Corporation, (March 30, 2011), Ont.
No. CV-11-9108-00CL (Ont. S.C.J.)
10
In the matter of Hart Stores Inc., (October 19, 2011), Qc. No. 500-11-041238-110 (Qc.
S.C.)
11
In the matter of Effigi Inc., (April 5, 2013), Qc. No. 500-11-044334-130 (Qc. S.C.)
12
In the matter of Sterling Shoes Inc. and Sterling Shoes GP Inc, (December 9, 2011),
Vancouver No. S117081 (B.C. S.C.)
13
Bearcat Explorations Ltd. (Re), [2004], A.J. No. 1593
14
Re Manderley Corp, (2005), 10 C.B.R. (5th) 48 (Ont. S.C.J.)
15
FarmPure Seeds Inc. (Re), [2008], S.J. No. 647
16
Sierra Club of Canada v. Canada (Minister of Finance), [2002] 2 S.C.R. 522
17
Elleway Acquisitions Ltd. v. 4358376 Canada Inc., 2013 ONSC 7009
#11138238
-218
In the Matter of Bombay & Co. Inc., Bowing & Co. Inc. and Benix & Co. Inc., (August 22,
2014), Ont. No. CV-14-10659-00CL (Ont. S.C.J.)
19
In the matter of the Receivership of Premium Products Inc., (January 23, 2012), Ont. No.
CV-11-9343-00CL (Ont. S.C.J.)
20
In the matter of KK Precision Inc., (August 5, 2014), Ont. No. CV-14-10573-00CL (Ont.
S.C.J.)
#11138238
SCHEDULE "B"
RELEVANT STATUTES
Bankruptcy and Insolvency Act
R.S.C. 1985, c. B-3
Proposals by employers
60 (1.3) No proposal in respect of an employer shall be approved by the court unless
(a) it provides for payment to the employees and former employees,
immediately after court approval of the proposal, of amounts at least equal to
the amounts that they would be qualified to receive under paragraph 136(1)(d)
if the employer became bankrupt on the date of the filing of the notice of
intention, or proposal if no notice of intention was filed, as well as wages,
salaries, commissions or compensation for services rendered after that date and
before the court approval of the proposal, together with, in the case of travelling
salespersons, disbursements properly incurred by them in and about the
bankrupt's business during the same period
…
Restriction on disposition of assets
65.13 (1) An insolvent person in respect of whom a notice of intention is filed under
section 50.4 or a proposal is filed under subsection 62(1) may not sell or otherwise
dispose of assets outside the ordinary course of business unless authorized to do so by a
court. Despite any requirement for shareholder approval, including one under federal
or provincial law, the court may authorize the sale or disposition even if shareholder
approval was not obtained.
Individuals
(2) In the case of an individual who is carrying on a business, the court may authorize
the sale or disposition only if the assets were acquired for or used in relation to the
business.
Notice to secured creditors
(3) An insolvent person who applies to the court for an authorization shall give notice
of the application to the secured creditors who are likely to be affected by the proposed
sale or disposition.
Factors to be considered
(4) In deciding whether to grant the authorization, the court is to consider, among other
things,
#11138238
-2(a) whether the process leading to the proposed sale or disposition was
reasonable in the circumstances;
(b) whether the trustee approved the process leading to the proposed sale or
disposition;
(c) whether the trustee filed with the court a report stating that in their opinion
the sale or disposition would be more beneficial to the creditors than a sale or
disposition under a bankruptcy;
(d) the extent to which the creditors were consulted;
(e) the effects of the proposed sale or disposition on the creditors and other
interested parties; and
(f) whether the consideration to be received for the assets is reasonable and fair,
taking into account their market value.
Additional factors — related persons
(5) If the proposed sale or disposition is to a person who is related to the insolvent
person, the court may, after considering the factors referred to in subsection (4), grant
the authorization only if it is satisfied that
(a) good faith efforts were made to sell or otherwise dispose of the assets to
persons who are not related to the insolvent person; and
(b) the consideration to be received is superior to the consideration that would
be received under any other offer made in accordance with the process leading
to the proposed sale or disposition.
Related persons
(6) For the purpose of subsection (5), a person who is related to the insolvent person
includes
(a) a director or officer of the insolvent person;
(b) a person who has or has had, directly or indirectly, control in fact of the
insolvent person; and
(c) a person who is related to a person described in paragraph (a) or (b).
Assets may be disposed of free and clear
(7) The court may authorize a sale or disposition free and clear of any security, charge
or other restriction and, if it does, it shall also order that other assets of the insolvent
person or the proceeds of the sale or disposition be subject to a security, charge or other
#11138238
-3restriction in favour of the creditor whose security, charge or other restriction is to be
affected by the order.
Restriction — employers
(8) The court may grant the authorization only if the court is satisfied that the insolvent
person can and will make the payments that would have been required under
paragraphs 60(1.3)(a) and (1.5)(a) if the court had approved the proposal
…
Advance notice
244. (1) A secured creditor who intends to enforce a security on all or substantially all of
(a) the inventory,
(b) the accounts receivable, or
(c) the other property
of an insolvent person that was acquired for, or is used in relation to, a business carried
on by the insolvent person shall send to that insolvent person, in the prescribed form
and manner, a notice of that intention.
Companies' Creditors Arrangement Act
R.S.C. 1985, c. B-3
Restriction on disposition of business assets
36. (1) A debtor company in respect of which an order has been made under this Act
may not sell or otherwise dispose of assets outside the ordinary course of business
unless authorized to do so by a court. Despite any requirement for shareholder
approval, including one under federal or provincial law, the court may authorize the
sale or disposition even if shareholder approval was not obtained.
Notice to creditors
(2) A company that applies to the court for an authorization is to give notice of the
application to the secured creditors who are likely to be affected by the proposed sale or
disposition.
Factors to be considered
(3) In deciding whether to grant the authorization, the court is to consider, among other
things,
#11138238
-4(a) whether the process leading to the proposed sale or disposition was
reasonable in the circumstances;
(b) whether the monitor approved the process leading to the proposed sale or
disposition;
(c) whether the monitor filed with the court a report stating that in their opinion
the sale or disposition would be more beneficial to the creditors than a sale or
disposition under a bankruptcy;
(d) the extent to which the creditors were consulted;
(e) the effects of the proposed sale or disposition on the creditors and other
interested parties; and
(f) whether the consideration to be received for the assets is reasonable and fair,
taking into account their market value.
Additional factors — related persons
(4) If the proposed sale or disposition is to a person who is related to the company, the
court may, after considering the factors referred to in subsection (3), grant the
authorization only if it is satisfied that
(a) good faith efforts were made to sell or otherwise dispose of the assets to
persons who are not related to the company; and
(b) the consideration to be received is superior to the consideration that would
be received under any other offer made in accordance with the process leading
to the proposed sale or disposition.
Related persons
(5) For the purpose of subsection (4), a person who is related to the company includes
(a) a director or officer of the company;
(b) a person who has or has had, directly or indirectly, control in fact of the
company; and
(c) a person who is related to a person described in paragraph (a) or (b).
Assets may be disposed of free and clear
(6) The court may authorize a sale or disposition free and clear of any security, charge
or other restriction and, if it does, it shall also order that other assets of the company or
the proceeds of the sale or disposition be subject to a security, charge or other restriction
in favour of the creditor whose security, charge or other restriction is to be affected by
the order.
#11138238
-5Restriction — employers
(7) The court may grant the authorization only if the court is satisfied that the company
can and will make the payments that would have been required under paragraphs
6(4)(a) and (5)(a) if the court had sanctioned the compromise or arrangement
Courts of Justice Act
R.S.O. 1990, c C-43
Documents public
137(1) On payment of the prescribed fee, a person is entitled to see any document filed
in a civil proceeding in a court, unless an Act or an order of the court provides
otherwise.
Sealing documents
(2) A court may order that any document filed in a civil proceeding before it be treated
as confidential, sealed and not form part of the public record.
Court lists public
(3) On payment of the prescribed fee, a person is entitled to see any list maintained by a
court of civil proceedings commenced or judgments entered.
Copies
(4) On payment of the prescribed fee, a person is entitled to a copy of any document the
person is entitled to see.
#11138238
Court File No. 32-1896275
IN THE CONSOLIDATED MATTERS OF THE NOTICE OF INTENTION TO MAKE A PROPOSAL UNDER THE
BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3 OF XS CARGO LIMITED PARTNERSHIP AND OF XS
CARGO GP INC.
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
Proceeding commenced at Toronto
FACTUM OF THE APPLICANTS
(MOTION RETURNABLE SEPTEMBER 19, 2014)
STIKEMAN ELLIOTT LLP
40th Floor
1155 René-Lévesque Blvd. West
Montréal, QC H3B 3V2
Guy P. Martel
Tel: (514) 397-3163
Fax: (514) 397-3222
5300 Commerce Court
199 Bay Street
Toronto, ON M5L 1B9
Maria Konyukhova LSUC#: 52880V
Tel: (416) 869-5230
Fax: (416) 869-0445
Counsels to the Applicants
#11138238