Estate Number: 32-1896275 Court File Number: 32-1896275

Estate Number: 32-1896275
Court File Number: 32-1896275
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 ACT,
R.S.C. 1985, c. B-3,
AS AMENDED OF
XS CARGO LIMITED PARTNERSHIP
XS CARGO GP INC.
MOTION RECORD
(Motion for an Order Extending the Stay of Proceedings)
(Returnable on August 29, 2014)
STIKEMAN ELLIOTT LLP
40th Floor
1155 Rene Levesque Blvd. West
Montreal, Canada H3B 3V2
Guy P. Martel
Tel: (514) 397-3163
Fax: (514) 397-3222
5300 Commerce Court
199 Bay St.
Toronto, Canada M5L 1139
Maria Konyukhova LSUC#: 52880V
Tel: (416) 869-5230
Fax: (416) 869-0445
Counsels to the Applicants
#11130190
Estate Number: 32-1896275
Court File Number: 32-1896275
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 ACT,
R.S.C. 1985, c. B-3,
AS AMENDED OF
XS CARGO LIMITED PARTNERSHIP
XS CARGO GP INC.
SERVICE LIST
GENERAL
STIKEMAN ELLIOTT LLP
Guy P. Martel
1155 Rene-Levesque Ouest
40th Floor
Montreal, QC H3B 3V2
Tel:
Fax:
Email:
(514) 397-3163
(514) 397-3493
[email protected]
Danny Duy Vu
Tel:
Fax:
Email:
5300 Commerce Court West
199 Bay Street
Toronto, ON M5L 1B9
Lawyers for XS Cargo GP Inc. and XS Cargo
Limited Partnership
#11130190
(514) 397-6495
(514) 397-5428
[email protected]
Maria Konyukhova
Tel: (416) 869-5230
Fax: (416) 869-0445
[email protected]
Email:
3
PRICEWATERHOUSECOOPERS INC.
1250 Rene-Levesque Blvd. West
Suite 2800
Montreal, QC H3B 2G4
PwC Tower
18 York Street, Suite 2600
Toronto, Ontario
M5J 0B2
Philippe Jordan
Tel:
(514) 205-5232
Email: [email protected]
Gregory Prince
(416) 814-5752
Tel:
Email:
[email protected]
Trustee
Tracey Weaver
Email: [email protected]
FASKEN MARTINEAU DUMOULIN LLP
333 Bay Street,
Suite 2400
Toronto, Ontario M5H 2T6
Stuart Brotman
Tel:
(416) 865-5419
(416) 364-7813
Fax:
Email:
[email protected]
Counsel to the Trustee
AIRD & BERLIS LLP
Ken R. Rosenstein
Brookfield Place, 181 Bay Street
Suite 1800, Box 754
Toronto, ON M5J 2T9
Tel:
Fax:
Email:
Lawyers for the Canadian Imperial Bank of
Commerce
Sam Babe
416.865.7718
Tel:
416.863.1515
Fax:
[email protected]
Email:
KPMG INC.
333 Bay Street, Suite 4600
Bay Adelaide Centre
Toronto, Ontario
Nicholas Brearton
416-777-3768
Tel:
(416) 777-3364
Fax:
Email: [email protected]
416.865.3427
416.863.1515
[email protected]
M5H 2S5
Financial advisor to the Canadian Imperial Bank
of Commerce
Pl'A CODITO ItNoTiiER 1114N C1130
,
"Mezzanine Lenders":
#11130190
William Gray
Tel: 403-266-7639
fax: 403-263-6840
Email: [email protected]
A
4
FAMOUS BRANDS INC.
926 5th avenue SW
Suite 900
Calgary AB T2P ON7
Mike McKenna
Email:
[email protected]
KARPREILLY CAPITAL PARTNERS, L.P.
KARPREILLY GP, LLC
KARPREILLY DIRECT, LLC
104 Field Point Road,
Greenwich CT 06830
William Logan
BUTLER, MARK L.,
1701 Newille Road,
Carlisle Pennsylvania 17013
Mark L. Butler
Email:
[email protected]
BACHYNSKI, GERRY
1030 Skyvalley Crescent
Oakville ON L6M 3L2
Gerry Bachynski
[email protected]
Email:
BRITAIN, SEAN
30 West 63rd Street
New York, NY 10023
Sean Britain
[email protected]
Email:
Email:
[email protected]
Chris Reilly
[email protected]
Email:
CBSC Capital Inc.
100-1235 North Sevice Road
Oakville, ON L6M 2W2
Tel:
Fax:
Email:
011ie's Bargain Outlet, Inc.
6295 Allentown Boulevard,
Suite 1,
Harrisburg PA 17112
Howard Freedman
Tel: 717-657-2300
Fax: 717-901-3064
[email protected]
Email:
Integrated Distribution Systems LP o/a Wajax
Equipment
26313 Township Road, 531A
Acheson AB T7X 5A3
Bobbi-Dawn Hunter
Tel: 780-948-5461
Fax: 780-948-5434
Email:
[email protected]
De Lage Landen Financial Services Canada Inc.
3450 Superior Court,
Unit 1
Oakville ON L6L 0C4
Faseeh Ahmad
Tel: 905-901-6534
Fax: 877-901-6460
[email protected]
Email:
Leggat National Leasing
2207 Fairview St.,
Burlington ON I7R 3Y3
JD Hooper
905 333-3700
Tel:
905 333-0102
Fax:
Email:
[email protected]
r
#11130190
877 523-5515
877 500-5360
[email protected]
5
1
Xerox Canada Ltd.
33 Bloor St. East,
3rd Floor,
Toronto ON M4W 3H1
Vincent Parabelli
Tel:
416-747-1500 ext 310
Fax:
Email:
[email protected]
C. Keay Investments Ltd.
(dba Ocean Trailers)
9076 River Road
Delta, B.C. V4G 1B5
Sid Keay
Email: [email protected]
Ol'HERS,r-
Marianna de Ader
Email: [email protected]
.1.
1
Office of the Superintendent of Bankruptcy of
Canada
Melissa Govy
Tel:
Fax:
Email: [email protected]
BLANEY MCMURTRY LLP
1500 - 2 Queen Street East
Toronto, ON M5C 3G5
John C. Wolf
Tel:
(416) 593-2994
Fax:
(416) 596-2044
Email: [email protected]
Lawyers for the Ambassador Centre Inc. and
Ambassador Centre (2) Inc.
Bradley Philipps
Tel:
(416) 593-3940
Fax:
Email: [email protected]
..:
GOVERNMET AG..NtIES
ti.
CANADA REVENUE AGENCY
C/O DEPARTMENT OF JUSTICE
The Exchange Tower
130 King Street West, Suite 3400
Toronto, ON M5X 1K6
Diane Winters
(416) 973-3172
Tel:
Fax:
(416) 973-0809
Email:
[email protected]
Attorney General of Canada
MINISTRY OF FINANCE (ONTARIO)
Legal Services Branch
6th Floor, 33 King Street West
Oshawa, ON L1H 8H5
#11130190
Kevin O'Hara
(905) 436-4510
Tel:
Fax:
1-866-888-3850
[email protected]
Email:
s--
6
MINISTRY OF FINANCE (BRITISH COLUMBIA)
C/O MINISTRY OF JUSTICE - LEGAL SERVICES
BRANCH
David Hatter
4th Floor, 1675 Douglas Street
PO Box 9289 Stn Prov Govt
Victoria, BC V8W 9J7
Heather Wellman
[email protected]
Email:
MINISTRY OF FINANCE (ALBERTA)
TREASURY BOARD AND FINANCE
TAX AND REVENUE ADMINISTRATION DIVISION
Ian Ayton
(780) 427-9403
Tel:
(780) 422-0899
Fax:
Email:
[email protected]
Fl. Sir Frederick W. Haultain Building
9811-109 Street
Edmonton, AB
T5k 2L5
2nd
Email:
[email protected]
2350 Albert St, Regina,
SK S4P 4A6
Nancy Perras
Tel:
(306) 787-7785
(306) 798-4035
Fax:
[email protected]
Email:
MINISTRY OF FINANCE (NEW BRUNSWICK)
REVENUE AND TAXATION DIVISION
James Turgeon (Assistant Deputy Minister)
Email:
[email protected]
MINISTRY OF FINANCE (SASKATCHEWAN)
PROVINCIAL SALES TAX BRANCH
Chancery Place
675 King Street
Fredericton, New Brunswick
E3B 1E9
Canada
MINISTRY OF FINANCE (NOVA SCOTIA)
FINANCE AND TREASURY BOARD DIVISION
C/O LEGAL SERVICES BRANCH
PO Box 187,
1723 Hollis St.,
Halifax NS B3J 2N3
Doug Moodie
Tel:
902.424.4295
902.424.4556
Fax:
Email:
[email protected]
NEWFOUNDLAND DEPARTMENT OF FINANCE
Donna Brewer
P.O. Box 8700
Main Floor, East Block Confederation Building
St. John's, NL A1B 4J6
Tel:
Email:
MINISTRY OF FINANCE (MANITOBA)
TAXATION DIVISION
811-155 Carlton Street
Winnipeg, Manitoba R3C 3H8
#11130190
(709) 729-2946
[email protected]
Richard Stevenson
Tel:
Email:
(204) 945-2136
[email protected]
7
Estate Number: 32-1896275
Court File Number: 32-1896275
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 ACT, R.S.C. 1985, c. B-3,
AS AMENDED OF
XS CARGO LIMITED PARTNERSHIP
XS CARGO GP INC.
INDEX
TAB
Document
1.
Notice of Motion of XS Cargo Limited Partnership and of XS Cargo GP Inc.,
returnable on August 29, 2014
2.
Affidavit of Duncan Reith, sworn August 25, 2014
3
A
Exhibit "A" - Affidavit of Duncan Reith sworn on August 1, 2014
B
Exhibit "B" - Order of Justice Penny of the Ontario Superior Court of Justice
(Commercial List) rendered on August 6, 2014
Draft Order
#11 130 190
TAB 1
Estate Number: 32-1896275
Court File Number: 32-1896275
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE CONSOLIDATED MATTERS OF THE NOTICE OF INTENTION TO MAKE A
R.S.C. 1985, c. BPROPOSAL UNDER THE BANKRUPTCY AND INSOLVENCY ACT ACT,
3, AS AMENDED OF
XS CARGO LIMITED PARTNERSHIP
XS CARGO GP INC.
MOTION UNDER SECTION 50.4(9) OF THE BANKRUPTCY AND INSOLVENCY ACT,
R.S.C. 1985,C B-3
NOTICE OF MOTION
(Motion for an Order Extending the Stay of Proceedings)
(Returnable August 29, 2014)
XS Cargo Limited Partnership ("XS LP") and XS Cargo GP Inc. ("XS GP" and together
with XS LP, "XS Cargo" or the "Applicants") the will make a motion to the Court, on August
29, 2014, at 10 am or as soon after that time as the motion can be heard, at 330 University
Avenue, Toronto, Ontario.
PROPOSED METHOD OF HEARING: The motion is to be heard orally.
THE MOTION IS FOR:
1. An Order (the "Extension Order"), substantially in the form attached to the Motion
Record:
(a) Abridging the time for delivery of this Notice of Motion and the Motion
Record herein and declaring that the motion is properly returnable on the
date it is heard by this Honourable Court;
C3130205
#11130205
-2-
(b) extending the period of time for each of the Applicants to file a proposal
under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (the
"BIA") until October 10, 2014; and
2. Such further and other relief as the Applicants may request and this Honourable
Court deems just and appropriate.
THE GROUNDS FOR THE MOTION ARE:
1. On July 30, 2014, XS LP and its general partner, XS GP, each filed a Notice of
Intention to Make a Proposal (collectively, the "NOIs") under section 50.4(1) of the
BIA. PricewaterhouseCoopers Inc. was appointed as proposal trustee (the "Trustee")
for each of the Applicants;
2. The filing of the NOIs were made in a context where XS LP and, de facto, its general
partner, XS GP, had each become insolvent, and XS LP's senior lender, the Canadian
Imperial Bank of Commerce ("CIBC"), had advised it that it was no longer willing to
continue to finance its operations except in the context of a court-supervised sale,
refinancing and investment solicitation process (the "SISP");
3. Neither of the Applicants had been able at that time to secure agreements for a
refinancing of their indebtedness. Therefore, they filed the NOIs with a view of
conducting the SISP, in accordance with the terms of an Accommodation Agreement
entered into on the same day with CIBC (the "Accommodation Agreement") which
provided specific milestones with regards to the SISP;
4. 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 the Accommodation Agreement and ratifying the execution
thereof;
(b) approving the SISP; and
#11130205
#11130205
-3-
(c) approving an administrative/procedural consolidation of the proposal
proceedings of XS LP and of XS GP;
5. Since the filing of the NOIs, the Trustee, with the assistance of the Applicants, has
been actively engaged in conducting the SISP;
6. On August 21, 2014, the Trustee and the Applicants received offers (each an "Offer",
collectively, the "Offers") from several parties (collectively, the "Interested Parties")
interested in a transaction involving either the purchase of the assets of the
Applicants, as a going concern or on a liquidation basis, or the refinancing of the
Applicants' indebtedness with CIBC;
7. As of the date of this motion, the Trustee and Applicants are still in the process of
reviewing the Offers and entertaining discussions with C:18C with regards to same in
order to determine which Offer provides the best recovery for the Applicants'
creditors;
8. The Applicants intend to return shortly before this Court in order have a definitive
and binding agreement in respect of their assets and/or business approved within
the proposed stay extension period;
9. Granting the Extension Order will permit the Applicants to pursue their discussions
and negotiations with both CIBC and the Interested Parties, allow the Applicants to
finalize and execute a definitive and binding agreement in respect of its business
and/or assets, seek Court approval with regards to such agreement, and, if
circumstances permit, prepare and submit to their creditors a viable proposal;
10. The Applicants have been acting and continue to act in good faith and with due
diligence during these proceedings;
11. Once the SISP will be finalized, the Applicants will be in a better position to
determine what the terms of potential proposal may be.
#11130205
#11130205
-4-
12. No creditor of the Applicants will be materially prejudiced by the granting of the
Extension Order as the Applicants have sufficient liquidity to continue operating
during the proposed stay extension period;
13. The Trustee has advised the Applicants that it supports the present motion;
14. It is just and convenient and in the interest of the Applicants and their respective
stakeholders that the Extension Order sought herein be granted.
OTHER GROUNDS
1. Section 50.4(9) of the BIA, and the inherent and equitable jurisdiction of this
Honourable Court;
2. Rules 1.04, 1.05, 2.03, 3.02 and 37 of the Rules of Civil Procedure, R.R.O. 1990 Reg. 194,
as amended; and
3. Such further grounds as counsel may advise and this Honourable Court may permit
THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of the
motion:
1. The Affidavit of Duncan Reith sworn August 25, 2014 and the Exhibits referred to
therein;
2. The Second Report of the Trustee; and
3. Such further and other material as counsel may advise and this Court may permit.
August 25, 2014
STIKEMAN ELLIOTT
LLP
Barristers & Solicitors
40th Floor
1155 Rene Levesque Blvd. West
Montreal, Canada H3B 3V2
Guy P. Martel
Tel: (514) 397-3163
Fax: (514) 397-372?
#11130205
#11130205
-5-
5300 Commerce Court West
199 Bay Street
Toronto, Canada M5L 1B9
Maria Konyukhova LSUC#: 52880V
Tel: (416) 869-5230
Fax: (416) 869-0445
Lawyers for the Applicants
TO:
THE SERVICE LIST
#11130205
#11130205
IN THE MA I - 1'ER 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.
Court File No. 32-1896275
MOTION OF XS CARGO LIMITED PARTNERSHIP AND OF XS CARGO GP INC. UNDER SECTION 50.4 OF THE
BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3
ONTARIO
SUPERIOR COURT OF JUSTICE
Proceeding commenced at Toronto
NOTICE OF MOTION
(MOTION FOR AN ORDER EXTENDING THE STAY
OF PROCEEDINGS)
(Returnable on August 29, 2014)
STIKEMAN ELLIOTT LLP
Barristers & Solicitors
40th Floor
1155 Rene-Levesque Blvd. West
Montreal, QC H3B 3V2
Guy P. Martel
Tel: (514) 397-3163
Fax: (514) 397-3299
5300 Commerce Court West
199 Bay Street
Toronto, ON M5L 1B9
Maria Konyukhova LSUC#: 52880V
Tel: (416) 869-5230
Fax: (416) 869-0445
Counsels for the Applicants
#11130205
#11130205
TAB 2
-
1Estate Number: 32-1896275
Court File Number: 32-1896275
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 ACT, R.S.C. 1985, c. B-3,
AS AMENDED OF
XS CARGO LIMITED PARTNERSHIP
XS CARGO GP INC.
AFFIDAVIT OF DUNCAN REITH
(sworn August 25, 2014)
I, DUNCAN REITH, of the City of Mississauga, in the Province of Ontario, MAKE
OATH AND SAY:
1.
I am the Chief Executive Officer of XS Cargo Limited Partnership ("XS LP"), and have
been employed in this capacity since January 9, 2012. As such, I am familiar with the business
and affairs of XS LP and of its general partner, XS Cargo GP Inc. ("XS GP", together with XS LP,
"XS Cargo" or the "Applicants").
2.
Except as otherwise indicated herein, the facts set forth in this Affidavit are based upon
my personal knowledge, my review of relevant documents and information provided to me by
employees working under my supervision, or my opinion based upon my experience,
knowledge and information concerning the operations of XS Cargo and the industry in which it
#11130730
-2operates its business. Where I do not possess such personal knowledge, I have stated the source
of my information and, in all such cases, do believe it to be true.
BACKGROUND
3.
On July 30, 2014, 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"). PricewaterhouseCoopers Inc. was appointed as trustee to the NOIs ("PwC" or the
"Trustee").
4.
As further detailed in my affidavit of August 1, 2014, attached hereto as Exhibit A, the
filing of the NOIs were made in a context where XS LP and, de facto, its general partner, XS GP,
had become insolvent, and its senior secured lender, the Canadian Imperial Bank of Commerce
("CIBC"), had advised it that it was no longer willing to continue to finance its operations
except in the context of a court-supervised sale, refinancing and investment solicitation process
in respect of its assets (the "SISP").
5.
Neither of the Applicants had been able at that time to secure agreements for a
refinancing of their indebtedness. Therefore, they filed the NOIs with a view of conducting the
SISP, in accordance with the terms of an Accommodation Agreement entered into on the same
day with CIBC (the "Accommodation Agreement") which provided specific milestones with
regards to the SISP.
6.
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 the Accommodation Agreement ratifying the execution thereof;
#11130730
-3(b) approving the SISP, as set out in the Accommodation Agreement, and in my
affidavit sworn on August 1, 2014 (already attached as Exhibit A); and
(c) approving an administrative/procedural consolidation of the proposal
proceedings of XS LP and of XS GP.
7.
Copy of the order rendered by Justice Penny (along with his endorsement), as issued
and entered by the Court, is attached as Exhibit B hereto.
8.
For the reasons further described herein, XS Cargo hereby seeks from this Court the
issuance of an order extending the period of time for each of XS LP and XS GP to file a proposal
under the BIA until October 10, 2014.
THE SISP
9.
Since the filing of the NOIs, the Trustee, with the assistance of XS Cargo, has been
actively engaged in conducting the SISP with a view of achieving the specific milestones set
forth in the Accommodation Agreement and in my affidavit sworn on August 1, 2014 (already
attached as Exhibit A).
10,
On August 21, 2014, the Trustee and the Applicants received offers (each an ''Offer",
collectively, the "Offers") from several parties (collectively, the "Interested Parties") interested
in a transaction involving either the purchase of the assets of the Applicants, as a going concern
or on a liquidation basis, or the refinancing of the Applicants' indebtedness with CIBC.
11.
Certain details regarding the marketing efforts performed by the Trustee in the context
of the SISP, including the number of parties contacted and and the number of Offers received
will be contained in the second report of the Trustee to be filed prior to the return of this
motion.
#11130730
-412.
As of the date of this affidavit, the Trustee and Applicants are still in the process of
considering the Offers and entertaining discussions with CIBC and the second secured creditors
with regards to same in order to determine which Offer represents the best alternative for the
Applicants' and their creditors.
13.
The Applicants intend to return shortly before this Court in order have a definitive and
binding agreement in respect of their assets and/or business approved within the proposed
stay extension period.
EXTENTION OF THE STAY
14.
In order to complete the SISP and execute a definitive and binding agreement in respect
of their business and/or assets, the Applicants require that the stay of proceedings resulting
from the filing of the NOIs be extended until October 10, 2014.
15.
The Applicants have been acting and continue to act in good faith and with due
diligence during these proceedings.
16.
Once the SISP will be finalized, the Applicants will be in a better position to determine
what the terms of a potential proposal may be.
17.
I believe that no creditor of the Applicants will be materially prejudiced by the granting
of the Extension Order as the Applicants have sufficient liquidity to continue operating during
the period covered by the proposed stay extension period, as evidenced by the Applicants
updated cash-flow forecasts which will be attached to the Trustee's second report to be filed.
18.
The Trustee has advised the Applicants' that it supports the present motion.
#11130730
-5-
CONCLUSIONS
19.
For the reasons set forth above, I believe it is both appropriate and necessary that the
relief being sought be granted. With such relief, XS Cargo will be able to complete the SISP in in
order to attempt to maximize the value of its business and assets for the benefit of its
stakeholders.
20.
This Affidavit is sworn in support of a Motion for an Order Extending the Stay of
Proceedings, and for no other or improper purpose.
SWORN before me in the city of
on this 2..S day of
Tor-c."-ko
2014.
-
,
z_gc, 7Clai
DUNCAN REITH
#11130730
TAB 2A
This is Exhibit "A"
to the affidavit of Duncan Reith,
sworn before me on the 25th day
of August, 2014
Commissioner for Taking Affidavits
Adebola Morolee Adentee.SCOMMINIVINTAlh
Province of Onaulo,Avtde
Expires Apt *AS
Court File No.
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
IN THE MATTER 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
AFFIDAVIT OF DUNCAN REITH
(sworn August 1, 2014)
I, DUNCAN REITH, of the City of Mississauga, in the Province of Ontario, MAKE
OATH AND SAY:
1.
I am the Chief Executive Officer of XS Cargo Limited Partnership ("XS LP"), and have
been employed in this capacity since January 9, 2012. As such, I am familiar with the business
and affairs of XS LP and of its general partner, XS Cargo GP Inc. ("XS GP", together with XS LP,
"XS Cargo").
2.
Except as otherwise indicated herein, the facts set forth in this Affidavit are based upon
my personal knowledge, my review of relevant documents and information provided to me by
employees working under my supervision, or my opinion based upon my experience,
knowledge and information concerning the operations of XS Cargo and the industry in which it
operates its business. Where I do not possess such personal knowledge, I have stated the source
of my information and, in all such cases, do believe it to be true.
BACKGROUND
3.
XS LP and XS GP were formed under the laws of Alberta with their principle place of
business located at 7400 Unit A Bramalea Road, Mississauga, Ontario L5S 1X1.
-24.
On July 30, 2014, 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"). A copy of the NOIs are attached hereto as Exhibit A.
5.
The filing of the NOIs were made in a context where XS Cargo had become insolvent,
and its senior secured lender, the Canadian Imperial Bank of Commerce ("CIBC"), had advised
it that it was no longer willing to continue to finance its operations except in the context of a
court-supervised sale, refinancing and investment solicitation process in respect of its assets (the
"SISP").
6.
On July 30, 2014, prior to filing the NOIs, XS Cargo entered into an Accommodation
Agreement (the "Accommodation Agreement") with CIBC pursuant to which the latter agreed
to forbear from enforcing its rights as secured creditor against XS LP, XS GP and XSC Canada
Holdings Inc. ("Holdings"), and to provide further financing to XS LP under certain conditions,
which included the filing by XS LP and by XS GP of the NOIs and the conduct of the SISP in the
context of these proceedings. A copy of the Accommodation Agreement (excluding the cashflow which will be filed under seal) is attached hereto as Exhibit B.
7.
Considering the fact that XS 12 had become insolvent (as it is was no longer able to meet
its obligations as they became due) and the fact that despite discussions and negotiations with
existing and potential lenders, XS LP had not yet been able to secure agreements for a
refinancing of its indebtedness, XS LP had been left with no other choice than to file an NOT
with a view of conducting the SISP, in accordance with the terms of the Accommodation
Agreement. Since XS GP had no assets of its own, other than its interest in XS 12, and was and
#11114862
-3remain ultimately liable for XS 12's debt, XS GP had also become insolvent and, as such, has
also been left with no other choice than to file an NOI as well.
8.
Under the circumstances, it was and still is believed that, in comparison with a forced
sale or a sale by a receiver, the conduct of the SISP in the context of these proceedings
constitutes the best option for the realization of its assets and the maximization of their value for
the benefit of its stakeholders. The filing of the NOls will allow XS Cargo to preserve the value
of its business and assets as a whole by minimizing any disruption while completing the SISP
which will ensure that XS Cargo's creditors will be able to maximize their recovery. All
stakeholders generally, including creditors, will benefit from these proceedings.
9.
In the event of a liquidation under a bankruptcy scenario where all operations would be
terminated, or even a sale by a third party receiver in control of the business and operations of
XS LP, the value of the assets of the latter would be substantially reduced. It is expected that the
SISP in the context of the present proceedings will yield better results than any conceivable "godark" scenario or sale by a receiver.
10.
Accordingly, XS LP, with the assistance of PricewaterhouseCoopers Inc., trustee to the
NOIs ("PwC" or the "Trustee"), intends to set the wheels in motion for the solicitation of
potential purchasers or liquidators for its assets, and if circumstances permit, to subsequently
submit to its creditors a proposal under the BIA.
11.
For the reasons further described herein, XS Cargo hereby seeks from this Court the
issuance of an order ratifying or approving, as the case may be:
(a)
the SISP;
(b)
the Accommodation Agreement;
#11114882
-4(c)
the continuation of all cash management and banking arrangements presently in
existence between XS LP and CIBC;
(d)
the administrative/procedural consolidation of XS LP and XS GP's NOI
proceedings under one title of proceedings;
(e)
the Administrative Charge (as defined below);
(f)
the D&O Charge (as defined below); and;
(g)
the KERP (which will be filed separately from this Affidavit) and the KERP
Charge (as defined below); and
(h)
the sealing of XS Cargo's financial statements, cash-flow projections and the
unredacted version of the KERP.
2.
DESCRIPTION OF XS CARGO'S BUSINESS AND AFFAIRS
2.1.
Overview
12.
XS Cargo is a Canadian discount retailer that operates through XS LP, a limited
partnership formed between XS GP and XSC Canada Holdings Inc. ("Holdings"). XS Cargo
offers a wide variety of goods, from furniture, to electronics, to housewares and kitchenware.
13.
XS Cargo currently 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.
111114862
-52.2.
Employees
14.
As at July 19, 2014, XS Cargo employed approximately 650 employees, of which 195 are
employed full-time and 455 are employed part-time. Approximately 556 employees are
associates in the Stores and 48 are either corporate personnel considered under XS Cargo's head
office or regional district managers and 46 are employed at XS Cargo's distribution center
located both in Edmonton and Mississauga. Of the 24 employees working at XS Cargo's
distribution center in Mississauga, 22 are unionized. In addition, XS Cargo also hires additional
temporary staff at its Stores and at its distribution centers during the peak fourth quarter sales
season.
15.
XS Cargo's gross payroll obligations for the fiscal years 2012 and 2013 amounted to
approximately $14.9 million and $16.2 million, respectively.
16.
XS Cargo's employees are paid on a bi-weekly basis, one week in arrears. XS Cargo has
been and will remain current in the payment of salaries to its employees. Deductions from
employee salaries are made, as required in various jurisdictions, and these deductions are
remitted to the appropriate governmental authorities, where applicable and are also current.
3.
ASSETS
17.
As at July 28, 2014, the principal assets of XS Cargo' essentially consisted in the
following:
1
2
Nature
Estimated. Book Value
Inventory (perpetual value)
$15.8 rnillion2
As mentioned, aside from its interest in XS LP, XS GP has no assets of its own.
Retail value is estimated at approximately $29.1 million
#11114862
-6Other Debts owing from certain entities
18.
$152,000
Considering that XS LP and XS GP are private companies with no disclosure obligations,
copies of XS Cargo's unaudited consolidated financial statements for the years ended December
28, 2013 and June 28, 2014, including their balance sheet, will be provided to the Court and filed
under seal of confidentiality as Exhibit C.
4.
INDEBTEDNESS
19.
As appears from the List of Creditors annexed to each of the NOIs (Exhibit A), the total
indebtedness of XS LP amounted to approximately $18,697,686. Of that amount, the claims of
unsecured creditors totaled approximately $7,358,699, whereas the main secured claims can be
described as follows:
Secured Claims
Amount of Indebtedness
CIBC Loan
$5,932,375
Mezzanine Loan
$5,406,612
Total: $11,338,987
4.1.
The CIBC Credit Agreement
20.
On June 3, 2011, XS LP, as borrower and XS GP and Holdings, as guarantors, entered
into a Credit Agreement (as, amended on September 24, 2013, the "CIBC Credit Agreement")
with CIBC Asset-Based Lending Inc. ("CIBC ABL"), as revolving lender and agent and
Canadian Imperial Bank of Commerce ("CIBC"), as term lender.
#11114862
-721.
Pursuant to the CIBC Credit Agreement, the following 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").
22.
The obligations of XS LP under the CIBC Credit Agreement are stated to be guaranteed
by each of XS GP and Holdings, and secured by several security agreements further described
in Schedule A of the Accommodation Agreement, including general security agreements
entered on June 3, 2011 by each of XS LP, XS GP and Holdings in favour of CIBC.
23.
On or about May 12, 2014, CIBC, in its own capacity and its capacity as successor to
CIBC ABL, issued notices of default and reservation of rights to XS LP 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
letters to each of XS LP, XS GP and Holdings demanding the full payment of unpaid principal
amount of all obligations outstanding as at that date under the Revolving Loan and the Term
Loan, which amounted to CDN$5,511,753 and CDN$9,354,992 (including all interest accrued),
respectively. Such demand letters were also accompanied by a Notice of Intention to Enforce
Security pursuant to subsection 244(1) of the BIA.
24.
Following the issuance of the demand letters sent by CIBC, XS LP was advised that
CIBC would no longer provide it with any extension of credit during the ten-day demand
011114862
-8period in excess of the Revolving Loan balance specified in such demand letters, or any such
extension or accommodation of credit thereafter.
25.
As at July 30, 2014, the total outstanding amount owed under the CIBC Credit
Agreement was as follows:
Term Loan
Outstanding principal & interest:
$5,538,425
Revolving Loan
Outstanding principal (adjusted for rent & interest):
Total
$393,951
$5,932,375
4.2.
The Mezzanine Loan Agreement
26.
On June 3, 2011, XS LP, as borrower, and XS GP and Holdings, as guarantors, entered
into a Mezzanine Loan Agreement (the "Mezzanine Loan Agreement") with 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 "Subordinated Lenders"), pursuant to which the Subordinated
Lenders agreed to make subordinated secured loans to XS LP as follows:
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").
27.
The obligations of XS LP under the Mezzanine Loan Agreement are stated to be
guaranteed by a guarantee by XS GP and Holdings, and secured by a general security
agreement executed by each of XS LP, XS GP and Holdings.
p11114862
-928.
As at July 26, 2014, the total outstanding amount owed under the Mezzanine Loan
Agreement, excluding interest and
fees
accrued after that date, is $4,054,959 for the KarpReilly
Loan, and $1,351,653 for the Famous Brands Loan.
4.3.
Suppliers and other creditors
29.
As at July 30, 2014, an amount of approximately $7,358,699 was owing by XS Cargo to
trade creditors.
4.4.
Employee Obligations
30.
As at the date hereof, XS Cargo maintains no employee pension or retirement plans.
31.
As at July 30, 2014, the gross accrued normal pay obligations totaled approximately
$475,000. Normal pay obligations are paid every two (2) weeks, one week in arrears to XS
Cargo's employees with the next pay day being August 8, 2014.
32.
XS Cargo provides vacation time to its employees as a paid time-off benefit. The
duration of vacation benefits varies based on the employee's location, position, amount of time
employed. The estimated amount of accrued, unused vacation time as at July 25, 2014 was
approximately $310,000.
5.
FINANCIAL DIFFICULTIES
33.
Several factors over the years have materially contributed to the deterioration XS
Cargo's financial situation.
34.
For instance, in the past year, XS Cargo began noticing an important decrease in its
revenues due to a variety of factors, which induded, inter alia, the diminution in spending from
•11114862
-
10 -
its customers in general, including its price conscious customers, the difficult weather in
Canada during winter as well as the increased competition.
35.
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 its cash
constraints, XS Cargo has not been able to match such campaigns as they required significant
cash expenditures.
36.
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, was becoming
severally impacted because of the diminishing exchange value on the Canadian dollar towards
the end of 2013.
37.
During the first quarter of 2014, XS Cargo, began suffering an immense pressure on its
cash-flow and anticipated that it would soon reach its limit on its borrowing availability with
(ABC. In addition, in the following months, 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.
38.
Despite several restructuring initiatives, which included, inter alia, the reduction or
postponement of purchase orders, as well as a warehouse sale in May 2014, which purpose was
to clear out inventory and provide access to liquidities, XS Cargo has been unable to find its
way back to profitability.
*11114862
39.
For the fiscal years ended December 28, 2013, and June 28, 2014, XS Cargo recorded a
total comprehensive net loss of approximately $6.4 million and $5.1 million, respectively.
40.
As of the date hereof, XS Cargo is no longer able to continue its operations and to meet
its obligations in the ordinary course, and, as such, has become insolvent.
41.
A copy of XS Cargo's cash flow forecast will be provided to the Court and filed under
seal of confidentiality as Exhibit D.
6.
THE SISP
42.
In accordance with the terms set forth in the Accommodation Agreement entered into
with CIBC, the Trustee, with the assistance of XS LP, intends to conduct the SISP and achieve
the following milestones as follows:
c) by no later than July 30, 2014, the Trustee shall have established a list of: (A) potential
going concern purchasers (both financial and strategic) for substantially all its assets; (B)
potential purchasers for specific assets or blocks of assets; (C) potential purchasers from
whom offers for the liquidation of its inventory and furniture and fixtures (the
"Inventory") will be sought on a fee and equity basis; and (D) potential debt and/or
equity investors or re-financiers;
d) by no later than July 31, 2014, the Trustee shall have sent out a solicitation of offer and
non-disclosure agreement to potential purchasers or liquidators indicating that all offers
must be submitted by no later than August 21, 2014;
e) by no later than July 31, 2014, the Trustee shall have established an electronic data room
suitable to facilitate due diligence for participants in the SISP;
#11114862
-12f) by no later than August 21, 2014, the Trustee expects to receive one or more bona fide
offers acceptable to it and to the CIBC;
g) by no later than August 28, 2014, provided that one or more bona fide offers acceptable
to XS LP and the CIBC are received, the Trustee expects that XS LP will have executed
and delivered one or more definitive, unconditional, binding agreements (subject only to
Court approval of the same) satisfactory to CIBC, in its sole discretion, for either (A) a
going concern sale of its assets and/or sales of specific assets or asset blocks, or the
liquidation of the Inventory (collectively, the "Purchase Agreement"), or (B) an equity
and/or debt refinancing of the Borrower (the "Investment/Refinancing Agreement"),
provided that, prior to accepting any offer, XS LP shall have obtained prior approval by
(IBC;
h) by no later than September 9, 2014 (provided that an extended cash-flow is provided to
CIBC by September 7, 2014), if the foregoing milestones are met, the Trustee will expect
XS LP to seek Court approval of any Purchase Agreement or, if applicable, any
Investment/Refinancing Agreement which will have then been executed; and
i) by no later than September 12, 2014 (provided that an extended cash-flow is provided to
CIBC by September 7, 2014), the Trustee will expect XS LP to close the transaction
contemplated by the Purchase Agreement or Investment/Refinancing Agreement and, if
applicable, make an interim distribution to CIBC, from the proceeds of sale or otherwise,
toward the repayment of the outstanding obligations under the CIBC Credit Agreement.
43.
XS Cargo and the Trustee expect to report back to the Court on the progress
accomplished in respect with the foregoing on or before its first stay extension request.
X11114862
- 13 7.
RELIEF SOUGHT
7.1. Ratification of the Accommodation Agreement, Approval of the SISP and
Maintenance of all cash management and banking arrangements presently in
existence between XS LP and CIBC
44.
XS LP seeks, in accordance with the terms and conditions set forth
in the
Accommodation Agreement, an order ratifying and approving the Accommodation Agreement,
the SISP and the maintenance of all cash management and banking arrangements presently in
existence between XS LP and CIBC.
45.
The Accommodation Agreement will provide XS Cargo with the necessary funding in
order to continue its operations while the SISP is carried out, which, in turn, will provide a
means for testing the market, gauging interest in XS LP and/or its assets and determining
whether a transaction is available that is advantageous to XS LP and its stakeholders in
comparison to a bankruptcy liquidation.
46.
With regards to XS Cargo's cash management system, all of its banking and financial
affairs, including the collection, movement and disbursement of funds is administered through
its bank accounts with CIBC. To facilitate the continuation of XS Cargo's operations with
minimal impact during the period of NOI it is necessary to maintain the status quo of existing
banking practices.
7.2.
Administrative/Procedural Consolidation
47.
XS LP seeks an order administratively consolidating XS LP's and XS GP's NOI
proceedings in order to avoid a multiplicity of proceedings and filing of two sets of motion
materials.
*11114862
- 147.3.
Administration Charges
48.
In order to secure the full and complete payment of the reasonable fees and expenses of
XS Cargo's legal advisors, the Trustee and its advisors, XS LP seeks a charge (the
"Administration Charge") over the Property in the amount of $260,000.
49.
XS LP requests that the Administration Charge rank in priority to the claims of all
secured and unsecured creditors, including the D&O Charge and the KERP Charge. Each of the
professionals whose fees are to be secured by the Administration Charge has played and will
continue to play a critical role in these proceedings.
7.4.
Director's Charge
50.
In order to continue to carry on business during these proceedings and in order to
complete the SISP, XS LP requires the active and committed involvement and continued
participation of XS GP's directors and officers, who, de facto, manage XS Cargo's business,
commercial activities and internal affairs (collectively, the "D&Os").
51.
Considering the risk to which the D&Os may be exposed to in assisting XS Cargo during
the SISP, the D&Os require XS Cargo to indemnify them of all liabilities which they may incur
in the context of their employment after the filing of these proceedings.
52.
While XS GP currently maintains an insurance policy for its D&Os, such policy is
scheduled to expire on August 3, 2014. Considering its insolvency, XS Cargo is not in a position
to renew the current insurance policy already in place or provide the D&Os with a new
insurance policy that would cover all of the potential personal liabilities which may arise in
connection with the present proposal proceedings.
011114862
- 15 53.
Accordingly, XS LP seeks a Court-ordered charge (the "D&O Charge") in the amount of
$1,571,000 over its assets, property and undertaking (the "Property") to indemnify the D&Os in
respect of all claims relating to any obligations or liabilities they may incur after the filing of the
NOis in relation to their respective capacities as directors or officers for: (a) goods and services
tax and all other amounts payable under Part IX the Excise Tax Act (Canada) (the "ETA") or any
similar legislation in any other jurisdiction of Canada, including the Quebec sales tax imposed
pursuant to an Act Respecting the Quebec Sales Tax and any amount payable as harmonized sales
tax in any applicable province under the ETA, (b) all other provincial taxes payable under any
provincial jurisdiction of Canada, (c) wages and vacation pay not already covered by Section
81.3 of the BIA, and (d) for severance obligations for XS LP's current employees in the Province
of Saskatchewan up to a maximum of $41,397, except where such obligations or liabilities were
incurred as a result of such directors' or officers' gross negligence, willful misconduct or gross
or intentional fault. XS LP requests that the D&O Charge rank after the Administration Charge,
but in priority to the claims of all other secured and unsecured creditors, including the KERP
Charge.
7.5.
KERP Charge
54.
XS Cargo has determined that the services of 14 key employees (the "Key Employees") is
critical to the implementation of the SISP and eventually, if circumstances permit, the filing of a
proposal.
55.
Therefore, in order to incentivize the Key Employees to remain under XS Cargo's
employment during the SISP, XS Cargo has prepared and intends to seek from the Court the
ratification of a Key Employee Retention Program (the "KERP") which will provide for the
payment of specific amounts to such Key Employees upon the completion of a transaction with
*11114862
-16an offeror who submitted an offer in the context of the SISP. The KERP will provide however
that no payment shall be made if such Key Employee resigns prior to the above transaction
being completed, or if his or her employment is terminated by either XS Cargo prior to August
28, 2014 (whether with or without cause), or by a receiver at any date (with cause).
56.
In addition, in order to secure the full and complete payment of XS Cargo's obligations
under the KERPs, XS Cargo also seeks a $380,000 charge over XS LP's Property (the "KERP
Charge"). XS LP will, request that the KERP Charge rank after the Administration Charge and
the DeeD Charge, but in priority to the claims of all other secured and unsecured creditors.
57.
Given that disclosure of the information set forth in the KERP would cause significant
harm to the Key Employees, by disclosing personal, confidential and proprietary information
regarding these Key Employees and their compensation and that such disclosure could provide
competitors with the necessary information to attempt to secure employment of these Key
Employees, XS Cargo will request that the unredacted copies of the KERPs be filed under seal of
confidentiality. Copies of the KERPs (redacted and unredacted) will be filed separately from
this Affidavit.
7.6.
Sealing Order
58.
Finally, XS Cargo will seek the sealing of the financial statements and cash-flow to be
filed with this Court, as well as the unredacted versions of the KERP which will be filed
separately from this Affidavit.
#11114862
- 17 8.
CONCLUSIONS
59.
For the reasons set forth above, I believe it is both appropriate and necessary that the
relief being sought be granted. With such relief, XS Cargo will be able to conduct the SISP in a
manner such to maximize the value of its business and assets for the benefit of its stakeholders.
60.
This Affidavit is sworn in support of a motion for an order approving priority charges
and certain other ancillary relief, and for no other or improper purpose.
SWORN before me in the city of
I cizoN-rv on this 1 day of
-A,2.1„54 , 2014.
)
)
14-6.0c)34 K
=
•11114B62
)
DUNCAN REITH
TAB 2B
This is Exhibit "B"
to the affidavit of Duncan Reith,
sworn before me on the 25th day
of August, 2014
Commissioner for Taking Affidavits
Adebola Morolake Addli1111, a 6111111111111.
Province d 0011114
la •
11011011MWAS
Court File No. 32-1896275
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
THE HONOURABLE Akt-.
JUSTICE
WEDNESDAY, THE 6th
)
DAY OF AUGUST, 2014
IN THE MATTER OF THE BANKRUPTCY AND INSOLVENCY ACT,
AS AMENDED
R.S.0 1985, c. 13-3,
IN THE MATTER OF THE NOTICE OF INTENTION TO MAKE A PROPOSAL OF XS
CARGO LIMITED PARTNERSHIP
ORDER
THIS MOTION, made by XS Cargo Limited Partnership ("XS LP"), pursuant to, inter
alia, sections 64.1, 64.2 and 183 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as
amended (the "BIA") was heard this day at 330 University Avenue, Toronto, Ontario.
ON READING the affidavit of Duncan Reith sworn August 1, 2014 and the exhibits
thereto (the "Reith Affidavit"), and on hearing the submissions of counsel for XS LP and XS
Cargo GP Inc. ("XS GP, together with XS LP, "XS Cargo"), counsel for the Canadian Imperial
Bank of Commerce ("CIBC") and of PricewaterhouseCoopers Inc., in its capacity as trustee to
the Notices of Intention to Make a Proposal (collectively, the "NOIs") of each of XS LP and
XS GP (the "Trustee"), and on being advised that the secured creditors who are likely to be
affected by the charges created herein were given notice:
1 1114865 v9
-2-
SERVICE
1.
THIS COURT ORDERS that the time for service of the Notice of Motion and the
Motion Record is hereby abridged and validated so that this Motion is properly returnable
today and hereby dispenses with further service thereof.
ADMINISTRATIVE CONSOLIDATION
2.
THIS COURT ORDERS that the proposal proceedings of XS LP (estate number: 32-
1896275) and XS GP (estate number 32-1896278) (collectively, the "Proposal Proceedings")
are hereby administratively consolidated and the Proposal Proceedings are hereby
authorized and directed to continue under the following joint title of proceedings:
Estate Number: 32-1896275
Court File Number: 32-1896275
IN THE MATTER OF THE NOTICE OF INTENTION TO MAKE A PROPOSAL OF XS
CARGO LIMITED PARTNERSHIP
Estate Number: 32-1896278
Court File Number: 32-1896278
IN THE MATTER OF THE NOTICE OF INTENTION TO MAKE A PROPOSAL OF XS
CARGO GP INC
3.
THIS COURT ORDERS that all further materials in the Proposal Proceedings shall
be filed with the Commercial List Office only in the XS LP estate and court file, estate
number 32-1896275 and court file number 32-1896275.
APPROVAL OF SISP
4.
THIS COURT ORDERS that the sale, refinancing and investment solicitation process
in respect of XS Cargo's assets (the "SISP"), as set out in the Reith Affidavit, be and is hereby
11114865 v9
-3-
approved and that the Trustee is hereby authorized and empowered to take such steps as are
necessary or desirable to carry out the SISP, provided that any definitive agreement to be
executed by XS Cargo in respect of the sale of all or part of the Property (as defined below)
shall require further approval of this Court.
ACCOMMODATION AGREEMENT
5.
THIS COURT ORDERS that the Accommodation Agreement (Exhibit B to
the Reith
Affidavit) (the "Accommodation Agreement"), is hereby approved, the execution thereof is
hereby ratified and that XS Cargo is hereby authorized and empowered to perform its
obligation thereunder.
CASH MANAGEMENT
6.
THIS COURT ORDERS that all cash management and banking arrangements
presently in existence between XS LP and CIBC shall be maintained during these
proceedings.
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND CHARGE
7.
THIS COURT ORDERS that XS Cargo shall indemnify its directors and officers
(collectively, the "D&Os") against obligations and liabilities that they may incur as directors
or officers of XS Cargo after the filing of the NOIs, except to the extent that, with respect to
any of the D&Os, the obligation or liability was incurred as a result of the such D&O's gross
negligence or wilful misconduct.
8.
THIS COURT ORDERS that the D&Os of XS Cargo shall be entitled to the benefit of
and are hereby granted a charge (the "D&O Charge") on all of XS Cargo's current and future
11114865 v9
-4-
assets, undertakings and properties of every nature and kind whatsoever, and wherever
situate including all proceed thereof (the "Property"), which charge shall not exceed an
aggregate amount of $1,571,000, as security for all claims relating to any obligations or
liabilities the D&Os may incur after the filing of the NOIs in relation to their respective
capacities as directors or officers for: (a) goods and services tax and all other amounts
payable under Part IX the Excise Tax Act (Canada) (the "ETA") or any similar legislation in
any other jurisdiction of Canada, including the Quebec sales tax imposed pursuant to an Acf
Respecting the Quebec Sales Tax and any amount payable as harmonized sales tax in any
applicable province under the ETA, (b) all other provincial taxes payable under any
provincial jurisdiction of Canada, (c) wages and vacation pay not already covered by Section
81.3 of the BIA, and (d) for severance obligations for XS LP's current employees in the
Province of Saskatchewan up to a maximum of $41,397, except where such obligations or
liabilities were incurred as a result of such directors' or officers gross negligence, willful
misconduct or gross or intentional fault. The D&O Charge shall have the priority set out in
paragraphs 15 and 17 herein.
9.
THIS COURT ORDERS that, notwithstanding any language in any applicable
insurance policy to the contrary, (a) no insurer shall be entitled to be subrogated to or claim
the benefit of the D&O Charge, and (b) the D&Os shall only be entitled to the benefit of the
D&O Charge to the extent that they do not have coverage under any director& and officers'
insurance policy, or to the extent that such coverage is insufficient to pay amounts
indemnified in accordance with paragraph 8 of this Order.
11114865 v9
-5-
ADMINISTRATION CHARGE
10.
THIS COURT ORDERS that the Trustee, counsel to the Trustee and counsel to XS
Cargo shall be paid their reasonable fees and disbursements, in each case at their standard
rates and charges, by XS Cargo as part of the costs of these proceedings. XS Cargo is hereby
authorized and directed to pay the accounts of the Trustee, counsel for the Trustee and
counsel for XS Cargo as such accounts are rendered.
11.
THIS COURT ORDERS that the Trustee and its legal counsel shall pass their
accounts from time to time, and for this purpose the accounts of the Trustee and its legal
counsel are hereby referred to a judge of the Commercial List of the Ontario Superior Court
of Justice.
12.
THIS COURT ORDERS that the Trustee, counsel to the Trustee and counsel to XS
Cargo shall be entitled to the benefit of and are hereby granted a charge (the
"Administration Charge") on the Property, which charge shall not exceed $260,000, as
security for their professional fees and disbursements incurred at the standard rates and
charges of the Trustee and such counsels, after the filing of the NOIs in respect of these
proceedings. The Administration Charge shall have the priority set out in paragraphs 15 and
17 herein.
KERP CHARGE
13.
THIS COURT ORDERS that the Key Employee Retention Plans (the "KERP") filed
with the Court are hereby ratified and that XS Cargo is hereby authorized and empowered to
perform its obligation thereunder and to make the payments in accordance with the terms
set out in said KERP.
11114865 v9 •
-6-
14.
THIS COURT ORDERS that the employees eligible under the KERP shall be entitled
to the benefit of and are hereby granted a charge (the "KERP Charge") on the Property,
which charge shall not exceed $380,000, as security for payment of the obligations set forth
under the KERP. The KERP Charge shall have the priority set out in paragraphs 15 and 17
herein.
VALIDITY AND PRIORITY OF CHARGES CREATED BY THIS ORDER
15.
THIS COURT ORDERS that the priorities of the D&O Charge, the Administration
Charge, the KERP Charge, as among them, shall be as follows:
First - Administration Charge (to the maximum amount of $260,000);
Second - D&O Charge (to the maximum amount of $1,571,000); and
Third - KERP Charge (to the maximum amount of $380,000).
16.
THIS COURT ORDERS that the filing, registration or perfection of the D&O Charge,
the Administration Charge or the KERP Charge (collectively, the "Charges") shall not be
required, and that the Charges shall be valid and enforceable for all purposes, including as
against any right, title or interest filed, registered, recorded or perfected subsequent to the
Charges coming into existence, notwithstanding any such failure to file, register, record or
perfect.
17.
THIS COURT ORDERS that the Charges shall constitute a charge on the Property
and such Charges shall rank ahead in priority to all other security interests, trusts, liens,
charges and encumbrances, claims of secured creditors, statutory or otherwise (collectively,
"Encumbrances") in favour of any person, except for the Encumbrances in favour of those
11114865 v9
-7-
that have not been served with notice of this application. XS Cargo and the beneficiaries of
the Charges shall be entitled, if necessary, to seek priority ahead of any Encumbrances in
favour of any person that have not been served with notice of this application and that are
likely to be affected by such priority.
18.
THIS COURT ORDERS that except as otherwise expressly provided for herein, or as
may be approved by this Court, XS Cargo shall not grant any Encumbrances over any
Property that rank in priority to, or pari passu with, any of the Charges, unless XS Cargo also
obtains the prior written consent of the Trustee, the beneficiaries of the Charges, or further
Order of this Court.
19.
THIS COURT ORDERS that the Charges shall not be rendered invalid or
unenforceable and the rights and remedies of the chargees entitled to the benefit of the
Charges (collectively, the "Chargees") thereunder shall not otherwise be limited or impaired
in any way by (a) the pendency of these proceedings and the declarations of insolvency
(expressly or impliedly) made herein; (b) any motion(s) for bankruptcy order(s) issued
pursuant to BIA, or any bankruptcy order made pursuant to such motion(s); (c) any
assignments for the general benefit of creditors made or deemed to have been made
pursuant to the BIA; (d) the provisions of any federal or provincial statutes; or (e) any
negative covenants, prohibitions or other similar provisions with respect to borrowings,
incurring debt or the creation of Encumbrances, contained in any existing loan documents,
lease, sublease, offer to lease or other agreement (collectively, an "Agreement") which binds
XS Cargo, and notwithstanding any provision to the contrary in any Agreement:
11114865 v9
-8-
(a)
neither the creation of the Charges nor the payments made in accordance with the
KERP shall create or be deemed to constitute a breach by XS Cargo of any
Agreement to which it is a party;
(b)
none of the Key Employees (as defined in the Motion) or Chargees shall have any
liability to any Person whatsoever as a result of any breach of any Agreement
caused by or resulting from XS Cargo making payments in accordance with the
KERP, the creation of the Charges, or the execution, delivery or performance of
any related documents; and
(c)
the payments made by XS Cargo pursuant to this Order, and the granting of the
Charges, do not and will not constitute preferences, fraudulent conveyances,
transfers at undervalue, oppressive conduct, or other challengeable or voidable
transactions under any applicable law.
20.
THIS COURT ORDERS that any Charge created by this Order over leases of real
property in Canada shall only be a Charge in XS Cargo's interest in such real property leases.
CONFIDENTIALITY
21.
THIS COURT ORDERS that XS Cargo' financial statements (Exhibit C to the Reith
Affidavit) and the unredacted versions of the KERP filed with the Court shall be kept
confidential and under seal with the Court until, as the case may be, further order of this
Court.
11114865 v9
-9-
SERVICE AND NOTICE
22.
THIS COURT ORDERS that the E-Service Protocol of the Commercial List (the
"Protocol") is approved and adopted by reference herein and, in this proceeding, the service
of documents made in accordance with the Protocol (which can be found on the Commercial
List website at http://www.ontariocourts.ca/scypractice/praciice-directions/ toronto/ eservice-protocol!) shall be valid and effective service. Subject to Rule 17.05 this Order shall
constitute an order for substituted service pursuant to Rule 16.04 of the Rules of Civil
Procedure. Subject to Rule 3.01(d) of the Rules of Civil Procedure and paragraph 21 of the
Protocol, service of documents in accordance with the Protocol will be effective on
transmission. This Court further orders that a Case Website shall be established in
accordance with the Protocol with the following
23.
URL'www.pwc.com/car-xscargo'.
THIS COURT ORDERS that if the service or distribution of documents in
accordance with the Protocol is not practicable, the Receiver is at liberty to serve or distribute
this Order, any other materials and orders in these proceedings, any notices or other
correspondence, by forwarding true copies thereof by prepaid ordinary mail, courier,
personal delivery or facsimile transmission to XS Cargo's creditors or other interested parties
at their respective addresses as last shown on the records of XS Cargo and that any such
service or distribution by courier, personal delivery or facsimile transmission shall be
deemed to be received on the next business day following the date of forwarding thereof, or
if sent by ordinary mail, on the third business day after mailing.
- 10 -
GENERAL
24.
THIS COURT ORDERS that the Trustee shall not take possession of the Property
and shall take no part whatsoever in management or supervision of the management of the
business of XS Cargo and shall not, in carrying out the SISP or otherwise fulfilling its
obligations hereunder or under the BIA, be deemed to have taken possession or control of
the Business or Property, or any part thereof.
25.
THIS COURT ORDERS that, in addition to the rights and protections afforded the
Trustee under the BIA or as an officer of this Court, the Trustee shall incur no liability or
obligation as a result of its appointment or the carrying out of the SISP or the provisions of
this Order, save and except for any gross negligence or wilful misconduct on its part.
Nothing in this Order shall derogate from the protections afforded the Trustee by the BIA or
any applicable legislation
26.
THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal,
regulatory or administrative body having jurisdiction in Canada or in the United States, to
give effect to this Order and to assist XS Cargo, the Trustee and their respective agents in
carrying out the terms of this Order. All courts, tribunals, regulatory and administrative
bodies are hereby respectfully requested to make such orders and to provide such assistance
to XS Cargo and to the Trustee, as an officer of this Court, as may be necessary or desirable to
give effect to this Order, to grant representative status to the Trustee in any foreign
proceeding, or to assist XS Cargo and the Trustee and their respective agents in carrying out
the terms of this Order.
11114865 v9
27.
THIS COURT ORDERS that each of XS Cargo and the Trustee be at liberty and is
hereby authorized and empowered to apply to any court, tribunal, regulatory or
administrative body, whereby located, for the recognition of this Order and for assistance in
carrying out the terms of this Order, including the enforcement of any Charge established
hereby.
28.
THIS COURT ORDERS that any interested party (including XS Cargo and the
Trustee) may apply to this court to vary or amend this Order on not less than seven (7) days
notice to any other party or parties likely to be affected by the order sought or upon such
other notice, if any as this court may order.
11114365.9
Court File Number:
;
Superior Court of Justice
Commercial List
FILE/DIRECTION/ORDER
L
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Plaintiff(s)
AND
Defendant(s)
Case Management ❑ Yes ❑ No by Judge:
Counsel
Telephone No:
Facsimile No:
❑ Order
❑ Direction for Registrar (No formal order need be taken out)
Above action transferred to the Commercial List at Toronto (No formal order need be taken out)
❑ Adjourned to:
❑ Time Table approved (as follows):
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❑ Additional Pages
1
ic
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.
MOTION OF XS CARGO LIMITED PARTNERSHIP AND OF XS CARGO GP INC. UNDER SECTION 50.4(9) OF
THE BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3
Court File No. 32-1896275
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
Proceedings commenced at Toronto
AFFIDAVIT OF DUNCAN REITH
(SWORN ON AUGUST 25, 2014)
STIKEMAN ELLIOTT LLP
40th Floor
1155 Rene Levesque Blvd. West
Montreal, 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 6820
-
Fax: (416) 947 0866
-
Counsels for the Applicants
#11130730
TAB 3
Court File No. 32-1896275
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
THE HONOURABLE
FRIDAY, THE 29th
JUSTICE
DAY OF AUGUST, 2014
IN THE CONSOLIDATED MATTERS OF THE NOTICE OF INTENTION TO MAKE A
PROPOSAL UNDER THE BANKRUPTCY AND INSOLVENCY ACT ACT, R.S.C. 1985, c. B3, AS AMENDED OF
XS CARGO LIMITED PARTNERSHIP
XS CARGO GP INC.
ORDER
THIS MOTION, made by XS Cargo Limited Partnership ("XS LP") and XS Cargo GP
Inc. ("XS GP", collectively with XS LP, "XS Cargo" or the "Applicants"), pursuant to, inter
alia, section 50.4(9) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (the
"BIA") was heard this day at 330 University Avenue, Toronto, Ontario.
ON READING the Notice of Motion of the Applicants, the affidavit of Duncan Reith
sworn August 25, 2014 and the Second Report of PricewaterhouseCoopers Inc., in its
capacity as proposal trustee of each of the Applicants (the "Trustee") and on hearing from
counsel for the Applicants and the Trustee and such other counsel as were present, no one
else appearing although duly served as appear from the affidavit of service, filed.
#11131640
-2-
1.
THIS COURT ORDERS that the time for service of the Notice of Motion and the
Motion Record is hereby abridged and validated so that this Motion is properly returnable
today and hereby dispenses with further service thereof.
2.
THIS COURT ORDERS that the time for the filing of a proposal by the Applicants is
hereby extended in accordance with section 50.4(9) of the BIA until October 10, 2014.
#11131640
IN THE CONSOLIDATED MAI lERS 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 XS
CARGO GP INC.
Court File No: 32-1896Z
MOTION OF XS CARGO LIMITED PARTNERSHIP AND XS CARGO GP INC. UNDER SECTION 50.4(9) OF THE
BANKRUPTCY AND INSOLVENCY ACT, R.S.C. 1985, c. B-3
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
Proceeding commenced at Toronto
ORDER
STIKEMAN ELLIOTT LLP
40th Floor
1155 Rene Levesque Blvd. West
Montreal, 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) 869-6820
Fax: (416) 947-0866
Counsels for the Applicants
#11131640
E
c7,
Court File No. 32-1896275
IN THE CONSOLIDATED MATTERS OF THE NOTICE OF INTENTION TO MAKE A
R.S.C. 1985, c. B-3 OF XS
PROPOSAL UNDER THE BANKRUPTCY AND INSOLVENCY ACT,
CARGO LIMITED PARTNERSHIP AND OF XS CARGO GP INC.
MOTION OF XS CARGO LIMITED PARTNERSHIP AND OF XS CARGO GP INC. UNDER
R.S.C. 1985, c. B-3
SECTION 50.4 OF THE BANKRUPTCY AND INSOLVENCY ACT,
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
Proceedings commenced at Toronto
MOTION RECORD
(Motion for an Order Extending the Stay of
Proceedings)
(Returnable on August 29, 2014)
STIKEMAN ELLIOTT LLP
40th Floor
1155 Rene-Levesque Blvd. West
Montreal, QC H3B 3V2
Guy P. Martel
Tel.: (514) 397-3163
Fax: (514) 397-3297
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
#11 130 190