Court File and Parties

COURT FILE NO.: CV-24-00722044-00CL DATE: 20240621 ONTARIO - SUPERIOR COURT OF JUSTICE – COMMERCIAL LIST

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 INDIVA LIMITED, INDIVA AMALCO LTD., INDIVA INC., VIEVA CANADA LIMITED, AND 2639177 ONTARIO INC.

RE: Indiva Limited et al., Applicants

BEFORE: Peter J. Osborne J.

COUNSEL: Mike Shakra, Thomas Gray and Milan Singh-Cheema, Counsel for the Applicants Lance Williams and Ashley Bowron, Counsel for SNDL Inc. (secured creditor and proposed DIP lender) Marc Wasserman, Martino Calvaruso and Tiffany Sun, Counsel for PricewaterhouseCoopers Inc. (PwC) Michael McTaggart, PwC, Counsel for Proposed Court Appointed Monitor Laura Culleton, Counsel for the Ontario Securities Commission

HEARD: June 21, 2024

Endorsement

[1] This is the comeback hearing in this CCAA proceeding.

[2] On June 13, 2024, I granted the Applicants certain ten-day relief as set out in the Initial Order of that date, including but not limited to a stay of proceedings until and including June 23, 2024. They return today seeking additional relief, and in particular, an Amended and Restated Initial Order (“ARIO”):

a. extending the Initial Stay Period to and including September 6, 2024; b. increasing the maximum principal amounts that the Applicants can borrow under the DIP Facility; c. increasing the quantum of: i. the Administration Charge to a maximum of $700,000; ii. the DIP Lenders Charge to a maximum principal amount of $2,400,000 plus accrued and unpaid interest, fees and expenses; and iii. the Directors’ Charge to a maximum amount of $2,651,000; d. approving a key employee plan (“KERP”) and granting a related super priority charge, subordinate to the above-noted charges; e. sealing the summary of the KERP filed as a confidential exhibit to the Affidavit of Carmine Neil Marotta sworn June 17, 2024 (the “KERP Summary”); and f. maintaining the status quo of Indiva’s Excise Licence.

[3] The Service List has been served.

[4] No party has filed materials in opposition to the motion, and none appears today to oppose the relief sought. The relief is supported by the DIP Lender, and is recommended by the Court-appointed Monitor.

[5] The Applicants rely upon the Affidavit of Carmine Neil Marotta sworn June 17, 2024, together with Exhibits thereto, as well as the First Report of the Monitor dated June 19, 2024. Defined terms in this Endorsement have the meaning given to them in my Endorsement of June 13, 2024, the motion materials, and/or the Reports of the Monitor.

[6] For the reasons set out below, I am satisfied that the proposed relief should be granted.

[7] With respect to the continued stay of proceedings, I am satisfied that such would preserve the status quo and afford the Applicants the necessary time and breathing space, in the context of stability, required to advance the restructuring and in particular to develop and seek approval of a SISP while continuing the ordinary course operations of the Business.

[8] The Applicants are forecasted, by the cash flow forecast appended to the First Report, to have sufficient liquidity (assuming the proposed ARIO is granted) to fund their obligations and the costs of these proceedings through the end of the Stay Period.

[9] No creditor is expected to suffer material prejudice as a result of the proposed extension of the Stay of Proceedings, and it is supported by the Monitor who is of the view that it is reasonable and appropriate in the circumstances.

[10] The proposed stay extension is granted.

[11] I am also satisfied that the increase in the maximum principal amount available under the DIP Facility and the corresponding increase in the DIP Lender’s Charge should be increased as requested.

[12] Initially, the maximum principal amount that the Applicants were authorized to borrow under the DIP Facility was, quite properly, limited to those amounts necessary for the Initial Stay Period. That is now sought to be increased, as described in the Marotta Affidavit and the First Report, to provide sufficient liquidity to maintain operations of the Business of the Applicants and fund these proceedings through the proposed stay extension period.

[13] The Monitor is supportive of the increase, and the cash flow forecast appended to the First Report reflects that such funds are reasonable and appropriate to achieve these objectives.

[14] In the same way, the DIP Lender’s Charge was initially granted in the amount of $900,000 plus interest, fees and costs which was appropriate as that amount was limited to the amount to be funded under the DIP Facility during the Initial Stay Period.

[15] As the Applicants are also seeking an increase in the DIP Facility maximum principal amount from $900,000 to $2,400,000, it is appropriate to correspondingly increase the DIP Lender’s Charge, so it continues to attract the maximum amount outstanding under the DIP Facility at the relevant time. The Monitor is supportive of the proposed increase to both the ability of the Applicants to incur additional indebtedness under the DIP Facility as proposed, and to the corresponding increase in the DIP Lender’s Charge.

[16] The Initial Order limited the quantum of the DIP Lender’s Charge to that which was reasonably necessary for the Applicants’ continued operations during the Initial Stay Period in accordance with section 11.001 and subsection 11.2(5) of the CCAA. For the reasons set out in the motion materials and in the First Report, I am satisfied that this relief now sought in the form of the proposed increases is appropriate. Notice has been provided to the secured creditors in accordance with subsection 11.2(1) of the CCAA, and the proposed charge will not secure obligations incurred prior to the commencement of the CCAA proceedings.

[17] The proposed increase in the Administration Charge is also appropriate and is permitted under section 11.52 of the CCAA, the requirements of which have been satisfied here. In addition, the factors set out in CanWest Publishing have been met here: CanWest Publishing Inc., 2010 ONSC 2221 at para. 54. The Administration Charge will assist in securing the involvement of the necessary professionals and achieve the best possible outcome for stakeholders: see Walter Energy (Re), 2016 BCSC 107, at para. 41 (“Walter”); and U.S. Steel Canada Inc, 2014 ONSC 6145 at para. 22 (“U.S. Steel”).

[18] The Directors’ Charge was also initially sized as security for the obligations and liabilities to be incurred or potentially incurred by the Directors and Officers during the Initial Stay Period. As with the Administration Charge, the proposed increase is intended to achieve the same objective during the extension of the Stay Period.

[19] It is important to have the continued involvement of the Directors and Officers in these proceedings. The Monitor and the DIP Lender are supportive of the proposed increase, and I am satisfied that such is appropriate. The Directors and Officers will only be entitled to the benefit of the Directors’ Charge to the extent that existing insurance policies in their favour are unavailable or insufficient. I am satisfied that this relief is appropriate.

[20] The proposed KERP was developed in consultation with the Monitor and DIP Lender, and is intended to authorize retention payments to certain individuals who have been identified as Key Employees of either of Indiva OpCo or Indiva Limited. Jurisdiction to approve a KERP is founded in the general power of the Court under section 11 of the CCAA to make any order it sees fit in a CCAA proceeding.

[21] I am satisfied that the Key Employees are essential to the continued operation of the Business and in particular, will be needed to assist in the SISP and in the closing of the transaction thereunder assuming that occurs.

[22] The proposed maximum of the KERP is $132,100 in the aggregate, and provides that each Key Employee could be entitled to one payment equal to 10% of their current salary upon a KERP Milestone Date, but only if certain conditions are met.

[23] I am satisfied that the KERP, including its terms and conditions, is appropriate. It is supported by the DIP Lender and recommended by the Monitor who is of the view that the terms of the KERP are comparable to the terms of other KERPs that have been approved by this Court. This KERP will provide the necessary incentive for the Key Employees to remain employed and this will in turn benefit not only the Applicants, but all of their stakeholders and maximizing the chances of the success of this restructuring.

[24] While the factors affecting the decision of whether or not a KERP should be approved are fact specific, and vary from case to case, certain factors are generally required, including: the importance of an employee to the restructuring process; whether the employee will consider other employment; whether the KERP was developed in consultation with the Monitor or other professionals; and whether the monitor supports the KERP: see Walter at para. 57 and Re Timminco Limited, 2012 ONSC 2515 at para. 15.

[25] The corresponding KERP Charge is therefore appropriate for the same reasons, and to provide security for the obligations under the KERP.

[26] The ARIO proposes to now provide that all of the Charges, including the KERP Charge, would rank in priority to other Encumbrances. I observe that those parties benefiting from the Encumbrances have been given notice of this motion and the proposed form of the ARIO, and further that the ability to seek this relief on the comeback hearing was expressly provided for in para. 37 of the Initial Order. The affected parties have now been served with notice of this motion, and the proposed form of the ARIO.

[27] The KERP, the KERP Charge and the proposed priority of Charges are approved.

[28] The Applicants seek a sealing order with respect to the KERP Summary. It contains confidential and sensitive information about the identity and compensation of the Key Employees. The sealing relief is limited, proportionate and appropriate. In particular, the ARIO continues to have the comeback provision, and any party may request advice, directions or relief from this Court on notice at any time in this proceeding, including but not limited to relief with respect to the sealing order.

[29] I am satisfied that the test as articulated by the Supreme Court of Canada in Sierra Club and refined in Sherman Estate has been met here. Jurisdiction to grant a sealing order is found in section 137(2) of the Courts of Justice Act. The proposed sealing order is approved in respect of Confidential Exhibit D to the Marotta Affidavit, pending further order of this Court. The Applicants should file a copy of that document with the Commercial List Office in a sealed envelope marked: “Confidential and not to form Part of the Public Record subject to further order of this Court” to ensure completeness of the Record.

[30] With respect to the Excise Licences, Indiva OpCo holds certain licences with Health Canada and the CRA that are critical to the continued operations of its business. While Indiva OpCo’s licences with Health Canada are not at risk of expiry in the near term, its cannabis licence with the CRA (the “Excise Licence”) will expire on July 11, 2024.

[31] The Applicants submit that if the Excise Licence is allowed to expire, or be cancelled or revoked, Indiva OpCo would not be able to use its existing stock of cannabis excise stamps or continue obtaining an ongoing supply of cannabis excise stamps, which would in turn destroy the ability of the Company to continue to operate as a going concern.

[32] For these reasons, the Applicants seek an order preserving and maintaining the Excise Licence during the Stay Period for the benefit of the Company and its stakeholders.

[33] Section 11.1 of the CCAA specifically addresses the applicability of a stay to a regulatory body (defined in section 11.1(1) (sometimes referred to as a “regulatory stay”). Section 11.1(2) provides that, subject to subsection (3), no order made under section 11.02 (i.e., a stay of proceedings) affects a regulatory body’s investigation in respect of the debtor company or an action, suit or proceeding that is taken in respect of the company by or before the regulatory body, other than the enforcement of a payment ordered by the regulatory body or the court.

[34] The exceptions enumerated in subsection (3) provide that the court may order that subsection (2) not apply in respect of one or more of the actions, suits or proceedings taken by or before the regulatory body if in the court’s opinion: a) a viable compromise or arrangement could not be made in respect of the company if that subsection were to apply; and b) it is not contrary to the public interest that the regulatory body be affected by the order made under section 11.02. However, notice to the regulatory body and to the persons who are likely to be affected by the order is required.

[35] In this particular case, the Affidavit of Service filed reflects that the Service List includes the Department of Justice representing both the CRA and Health Canada. Accordingly, I am satisfied that those parties are on notice of the relief requested.

[36] Moreover, counsel for the Applicants confirms that they have had discussions with counsel for the DOJ as recently as yesterday, specifically about the relief requested in the form of the ARIO, and that the DOJ does not oppose the relief sought, specifically including the regulatory stay to maintain the status quo and ensure that the Excise Licence will not expire. Counsel to the Court-appointed Monitor confirms that both they and the Monitor itself were involved in those discussions. The Monitor supports and recommends the relief sought in this respect: see paras. 34 – 37 of the First Report.

[37] Accordingly, and in the circumstances, I am satisfied that it is not contrary to the public interest that the stay of proceedings apply so as to continue, pending and concurrent with the stay of proceedings, the Excise Licence. It is necessary for the Applicants to continue their ongoing business operations, and the suspension, cancellation or revocation of the Excise Licence would, I am satisfied, cause the immediate ceasing of business operations of the Applicants, have a materially detrimental effect on the value of their assets, and therefore be materially detrimental to the ultimate success of this proceeding and recovery for all stakeholders.

[38] This relief is consistent with the relief that has been granted by other CCAA courts: see Tantalus Labs Ltd. (Re), 2023 BCSC 1450 at para 39; In the Matter of a Plan or Compromise of Arrangement of Aleafia Health Inc., (22 August 2023) Toronto, ONSC [Commercial List], CV-23-00703350-00CL (SISP Approval Order) (“Aleafia”); and BZAM Ltd. Plan of Arrangement, 2024 ONSC 1645 at paras. 46 – 49.

[39] Finally, the Ontario Securities Commission appears today to request that the ARIO include the language that has been endorsed by the Commercial List in many CCAA proceedings relating to the effect of the ARIO on the jurisdiction of securities regulatory authorities. The proposed language here is consistent with that previously endorsed language, is consented to by the Applicants and recommended by the Monitor. It is appropriate, and is approved.

[40] Order to go in the form signed by me today which is effective immediately and without the necessity of issuing and entering.

Osborne J.