Court File and Parties

COURT FILE NO.: CV-12-9761-00CL

DATE: 2012-07-06

SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)

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

RE: IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF NORTHSTAR AEROSPACE, INC., NORTHSTAR AEROSPACE (CANADA) INC., 2007775 ONTARIO INC. AND 3024308 NOVA SCOTIA COMPANY, Applicants

BEFORE: MORAWETZ J.

COUNSEL: A. J. Taylor and D. Murdoch, for Northstar Craig Hill, for Ernst & Young Inc., Monitor Clifton Prophet, for Boeing Capital Loan Corporation Steven Weisz and Chris Burr, for Fifth Third Bank as DIP Agent and Agent for Existing Lenders Paul Guy, for Former Directors and Officers of Northstar Grant Moffat, for FTI Consulting Inc., Chief Restructuring Officer

HEARD & ENDORSED: JUNE 14, 2012

REASONS: July 6, 2012

Endorsement

[1] Northstar Aerospace, Inc. (“Northstar Inc.”), Northstar Aerospace (Canada) Inc. (“Northstar Canada”), 2007775 Ontario Inc. (“2007775”) and 3024308 Nova Scotia Company (3024308”), together with Northstar Inc., Northstar Canada and 2007775, (the “CCAA Entities”) seek relief under the Companies’ Creditors Arrangement Act (“CCAA”).

[2] Certain of Northstar Canada’s direct and indirect U.S. subsidiaries (the “Chapter 11 Entities”) are expected to file voluntary petitions (“Chapter 11 Proceedings”), pursuant to Chapter 11 of the United States Bankruptcy Code (the “U.S. Bankruptcy Code”) in the United States Bankruptcy Court for the Delaware (the “U.S. Court”) concurrently with the CCAA applications. The CCAA Entities and the Chapter 11 Entities are sometimes collectively referred to as “Northstar”.

[3] Northstar manufactures components and assemblies for military and commercial aircraft. Northstar is facing severe liquidity issues as a result of, among other things: low to negative profit margins on significant customer contracts; decreases in defence spending and a resulting stretch out of deliveries of backlog orders and decline in new business orders placed; and the inability to secure additional funding.

[4] The record establishes that the CCAA Entities are unable to meet various financial and other covenants with their secured lenders and do not have the liquidity needed to meet their ongoing payment obligations.

[5] I accept that, without the protection of the CCAA, a shutdown of operations is inevitable, which would be extremely detrimental to the employees, customers, suppliers and creditors of Northstar.

[6] I accept the submission of counsel that CCAA protection will allow the CCAA Entities to maintain operations, while giving them the necessary time to complete the remaining steps in a marketing process for the sale of their business and assets and provide a going concern outcome for the CCAA Entities’ stakeholders.

[7] The facts with respect to the application are fully set out in the affidavit of Mr. Craig A. Yuen, sworn June 11, 2012 in support of this filing. They are also summarized in the comprehensive factum filed by counsel and, therefore, are not repeated in this endorsement.

[8] Northstar Inc., Northstar Canada and 2007775 are all corporations established under the laws of Ontario and 3024308 is a corporation established under the laws of Nova Scotia. The CCAA Entities are, therefore, “companies” within the definition of the CCAA.

[9] I am satisfied that the record establishes that the CCAA Entities do not have the liquidity necessary to meet their obligations to creditors as they come due and have failed to pay certain obligations as they came due. The total claims against the CCAA Entities are in excess of $147 million. Therefore, the CCAA Entities are “debtor companies” to which the CCAA applies.

[10] I am also satisfied that the CCAA Entities require the protection of the CCAA, including a stay of proceedings, to allow them to maintain operations while giving them the necessary time to complete the sales process and maximize recovery for the CCAA Entities’ stakeholders. In my view, circumstances exist that make an order granting protection under the CCAA appropriate.

[11] As set out in the affidavit of Mr. Yuen, the directors of Northstar Inc., Northstar Canada and 2007775 intend to resign effective on the granting of the Initial Order. Counsel to the Applicants advised that, in order to ensure ongoing corporate governance, the CCAA Entities entered into an engagement letter with FTI Consulting Canada Inc. (“FTI Consulting”) dated June 6, 2012 (the “CRO Agreement”) and therefore seek an order appointing FTI Consulting as the CRO and approving the terms of the CRO Agreement nunc pro tunc.

[12] I am satisfied that the appointment of FTI Consulting as CRO is appropriate in the circumstances and it is also appropriate that they be afforded the protections outlined in the draft Initial Order. In the circumstances, I have been persuaded that it is appropriate to approve the CRO Agreement nunc pro tunc.

[13] The CCAA Entities also seek an Administration Charge to secure the fees and disbursements of counsel to the CCAA Entities, the Monitor, the Monitor’s counsel, the CRO, the CRO’s counsel and independent counsel to Northstar Inc.’s board of directors (the “Administration Charge”). The legal basis for the appointment is set out at paragraphs 72-78 of the factum, which statements I accept.

[14] I have been persuaded that it is appropriate to grant the Administration Charge for the reasons set out in the factum.

[15] The CCAA Entities also seek a Critical Supplier Charge. The basis for creating such a charge is set out at paragraphs 79-85 of the factum.

[16] With the assistance of the CRO, the CCAA Entities have identified a number of suppliers which they consider to be critical to the ongoing operations of their business. A complete listing of the suppliers for the CCAA Entities considered critical (the “Critical Suppliers”) is attached as Schedule “A” to the proposed Initial Order.

[17] I am satisfied that it is appropriate to grant the Critical Suppliers’ Charge on the terms set out in the draft order. I am also mindful of the priority issue raised at paragraph 85 of the factum.

[18] The CCAA Entities also seek a Directors’ Charge in the amount of $1,750,000. The basis for the Directors’ Charge is set out at paragraphs 86-92 of the factum.

[19] I accept these submissions and have concluded that the granting of the Directors’ Charge is appropriate in the circumstances.

[20] The CCAA Entities also seek approval of a DIP Facility up to a principal amount of $3 million and a DIP Lenders’ Charge. The terms of the Charge are summarized in the factum commencing at paragraph 94 and the basis for the granting of the Charge is set out at paragraphs 94-98.

[21] I am satisfied that, for reasons set out in the factum, it is appropriate to authorize the DIP Facility and to grant the DIP Lenders’ Charge.

[22] The Chapter 11 Entities are also seeking approval of DIP Financing from the DIP Lenders and from an affiliate of Boeing. The provision of the U.S. $7,500,000 financing from Boeing to the Chapter 11 Entities (the “U.S. Boeing DIP Agreement”) is a condition to the continued availability of the DIP Facility. The U.S. Boeing DIP Agreement requires a guarantee by the CCAA Entities of the obligations of the Chapter 11 Entities (the “Boeing Guarantee”) and a priority charge as part of the DIP Lenders’ Charge. This issue is fully set out in the factum at paragraphs 99-102. I have been persuaded, by the submissions, that it is appropriate to approve the Cross-Border Guarantee.

[23] The Applicants also seek approval of a Cross-Border Protocol, which they submit will facilitate communication and cooperation between the U.S. Court and the Canadian court in respect of the issues arising in the Sales Process, the DIP Facility and any other issues which may arise at a later date. The basis for approving the Cross-Border Protocol is set out at paragraphs 103-108 of the factum.

[24] Cross-border protocols have been approved and implemented by courts across Canada in CCAA proceedings where parallel U.S. proceedings have been commenced under Chapter 11. In particular, cross-border protocols have been adopted where “it is clear that there are issues of overlapping jurisdiction that would make a form of cross-border protocol appropriate”. See Calpine Canada Energy Limited (Re), 2006 ABQB 743, 2006 A.B.Q.B. 743 and Nortel Networks Corporation (Re) (2009), 2009 726 (ON SC), 50 C.B.R. (5th) 77 S.C.J.

[25] I am satisfied that it is appropriate to approve the Cross-Border Protocol.

[26] Finally, the CCAA Entities request approval of a Notice Process for approval of the Boeing Release. This issue is covered at paragraphs 109-112 of the factum. I am satisfied that it is appropriate in these circumstances for the court to approve the proposed process for giving notice to creditors and shareholders of the motion to seek approval of the Boeing Release.

[27] In the result, the relief requested by the CCAA Entities is granted and the Initial Order has been signed in the form presented.

MORAWETZ J.

Date: July 6, 2012