Court File and Parties

COURT FILE NO.: CV-23-697283-00CL DATE: 2023-04-14 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT , R.S.C. 1985, c. C-36, AS AMENDED AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF PHOENA HOLDINGS INC., PHOENA INC., ELMCLIFFE INVESTMENTS INC., ELMCLIFFE INVESTMENTS [NO. 2] INC., AND CTI HOLDINGS (OSOYOOS) INC.

BEFORE: Chief Justice G.B. Morawetz

COUNSEL: Kyla Mahar and Gina Rhodes, for the Applicants Rebecca Kennedy and Puya Fesharaki, for Ernst & Young Inc., Monitor Joseph Bellissimo, for Cortland Credit Lending Corporation, the DIP Lender

HEARD: April 14, 2023

Endorsement

[1] The Applicants bring this motion seeking:

(a) An amended and restated initial order (the “ARIO”), among other things: (i) Extending the stay of proceedings (the “Stay Period”) in favour of the Applicants from April 14, 2023, to June 2, 2023 (the “Extended Stay Period”); (ii) Increasing the authorized borrowings under the DIP Term Sheet from the principal amount of $1,200,000 to $3,100,000; (iii) Increasing the amount of the Administration Charge from $200,000 to $400,000; and (iv) Increasing the amount of the Directors’ Charge from $450,000 to $550,000; and

(b) An Order (the “Pinnrz Approval Order”) approving the sale transaction (the “Pinnrz Transaction”) contemplated by an asset purchase agreement (the “Sale Agreement”) between the Phoena and PINNRZ Inc. (the “Pinnrz”) dated April 4, 2023, and vesting in Pinnrz Phoena’s right, title and interest in and to the assets described in the Sale Agreement (the “Purchased Assets”).

[2] The Monitor supports the requested relief and no party opposed the motion.

[3] The facts supporting this Motion are set out in the affidavits of Cornelis Pieter Melissen sworn on April 3, 2023 (the “Melissen Affidavit”) and April 4, 2023 (the “Melissen Supplemental Affidavit”), and the affidavit of Darren Karasiuk sworn on April 11, 2023 (the “Karasiuk Affidavit”).

[4] The Applicants seek to extend the Stay Period to June 2, 2023.

[5] I am satisfied that the Applicants have acted in good faith and with due diligence such that the extension request is reasonable in the circumstances.

[6] The Cash Flow Forecast and the Updated Cash Flow Forecast each demonstrate that the Applicants will have sufficient cash during the Extended Stay Period, subject to the authorized borrowings under the DIP Term Sheet being increased as requested.

[7] In addition, it appears that no creditors will suffer material prejudice as a result of the extension of the Stay Period for the Extended Stay Period. Moreover, the Monitor is of the view that the extension of the Stay Period is appropriate.

[8] The Stay Period is extended to June 2, 2023, is granted.

[9] The Applicants seek to increase the quantum of the authorized borrowings under the DIP Term Sheet from $1,200,000 to $3,100,000 to reflect the financing requirements of the Applicants during the Extended Stay Period.

[10] Having considered the factors set out in s. 11.2(4) of the CCAA and noting that the Monitor recommends approval of the increased borrowing limit, this relief is granted.

[11] I am also satisfied that, having considered s. 11.52 and s. 11.51 of the CCAA, the requested increases to the Administration Charge and the Directors’ Charge should both be approved.

[12] The Applicants also seek approval of the Pinnrz Transaction.

[13] Section 36 of the CCAA provides that a debtor “may not sell or otherwise dispose of assets outside of the ordinary course of business unless authorized to do so by the court.” In considering whether to approve a sale, a court should consider, among other things, the criteria listed in s. 36(3) of the CCAA.

[14] The Applicants submit that the Sale Agreement satisfies the test set out in s. 36(3) of the CCAA and Royal Bank of Canada v. Soundair Corp., (1991), 40 O.R. (3d) 1 (C.A.), and ought to be approved for the following reasons:

(a) the Monitor believes that the Pinnrz Transaction will be more beneficial to creditors than a bankruptcy. (b) the Pinnrz Transaction is the best available option for the Applicants’ wind-down of their business. (c) the Purchase Price is fair and reasonable.

[15] I am also satisfied that the s. 36(3) of the CCAA criteria have been taken into account and that the Pinnrz Transaction is reasonable in the circumstances and should be approved.

[16] The motion is granted and the Orders giving effect to the foregoing have been signed.

Chief Justice G.B. Morawetz Date: April 14, 2023