Court File and Parties

COURT FILE NO.: CV-23-697285-00CL DATE: 2023-05-12 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. Applicants

BEFORE: Chief Justice Geoffrey B. Morawetz

COUNSEL: Kyla Mahar and Gina Rhodes, for the Phoena Holdings Inc., Phoena Inc., Elmcliffe Investments Inc., Elmcliffe Investments [No. 2] Inc., and Citi Holdings (Osoyoos) Inc. Rebecca Kennedy and Puya Fesharaki, for the Monitor Ernst & Young Inc. Joseph Bellissimo and Noah Goldstein, for the DIP Lender, Cortland Credit Lending Corporation

HEARD: May 12, 2023

Endorsement

[1] The Applicants bring this motion for an Order:

(a) approving an Exclusive Sales Listing Agreement between Elmcliffe Investments Inc. (“Elmcliffe”) and CBRE Limited (“CBRE”) dated May 4, 2023 (the “Listing Agreement”);

(b) approving an Auction Services Agreement between Infinity Asset Solutions Inc. and Long Drive Inc. (collectively, “Infinity JV”) and Phoena Inc. (“Phoena”) dated May 8, 2023 (the “Auction Agreement”);

(c) approving a key employee retention plan (the “KERP”), authorizing the Applicants to make payments in accordance with the terms of the KERP, and granting a priority charge in favour of the employees entitled to the KERP (“KERP Charge”); and

(d) extending the stay of proceedings (the “Stay Period”) in favour of the Applicants from June 2, 2023, to and including October 31, 2023 (the “Extended Stay Period”).

[2] The evidentiary support for requested relief is set out in the affidavits of Darren Karasiuk sworn April 11, 2023, and May 8, 2023, and in the Second Report of Ernst & Young Inc. (the “Monitor:).

[3] The Applicants, with the assistance of the Monitor, contacted several real estate brokers and obtained three listing proposals in respect of the Pelham Property. The Applicants prefer the Listing Agreement.

[4] The Monitor recommends approval of the Listing Agreement.

[5] As part of the Liquidation Solicitation Process, the Applicants, with the assistance of the Monitor, contacted several professional third-party liquidators in respect of the liquidation of the equipment and fixtures located in and/or forming part of the Applicants’ Property.

[6] The Applicants, in consultation with the Monitor and the DIP Lender, selected the proposal put forward by Infinity JV and entered into the Auction Agreement on May 5, 2023, subject to Court approval.

[7] Pursuant to the Auction Agreement, Infinity JV will: (a) sell/re-sell the Assets located at the Langstaff Premises as set out in Schedule A of the Auction Agreement (the “Langstaff Assets”); and (b) conditional on Phoena exercising its option under the Auction Agreement, sell/re-sell the Assets located at the Pelham Premises as set out in Schedule B of the Auction Agreement (the “Pelham Assets”).

[8] The Auction Agreement allows the Applicants until July 31, 2023, to decide whether it will have Infinity JV sell the Pelham Assets (the “Pelham Option”). The Pelham Option has been built into the Auction Agreement to allow the Pelham Property to be marketed by CBRE for a period of time to see if interested parties are interested in the Pelham Property for the same or similar use and, therefore, would like the Pelham Assets included with the sale of the Pelham Property.

[9] The Monitor is of the view that the auction process was broadly canvassed and recommends approval of the Auction Agreement.

[10] The Applicants, with the assistance of the Monitor, have developed the KERP to facilitate and encourage the continued participation of three key management employees holding the positions of Chief Financial Officer, Chief Operating Officer and Vice President Sales (collectively, the “KERP Participants”).

[11] The maximum amount that would be paid under the KERP is in the aggregate sum of $60,000. The KERP Charge in the maximum amount of $60,000 is intended to secure the KERP entitlements, which charge would rank behind the other Charges.

[12] The Monitor is of the view that the quantum of the amounts payable to the KERP Participants are reasonable in the circumstances. The Monitor is of a view that the KERP will incentivize the KERP Participants to participate as long as their services are necessary to maximizing the recovery from these CCAA Proceedings.

[13] The Stay Period currently expires on June 2, 2023 and the Applicants seek to extend the Stay Period to October 31, 2023 to allow the Applicants to continue the orderly wind-down of the business.

[14] The Applicants contend that they have acted and continue to act in good faith and with due diligence. The cash flow statement in the Monitor’s Report indicates that the Applicants have sufficient liquidity during the period of the requested extension.

[15] The motion was not opposed and the Monitor supports the position of the Applicants as does the DIP Lender.

[16] The legal basis for the requested relief is set out in the factum filed by counsel to the Applicants.

[17] I accept the submissions of counsel.

[18] I am satisfied that all of the requested relief is appropriate in the circumstances.

[19] The motion is granted and the Order has been signed.

Chief Justice Geoffrey B. Morawetz Date: May 12, 2023