Court File and Parties

COURT FILE NO.: CV-24-00717340-00CL DATE: 20240809 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 PRIDE GROUP HOLDINGS INC. and those Applicants listed on Schedule “A” hereto (each, an “Applicant”, and collectively, the “Applicants”)

RE: Pride Group Holdings Inc. et al., Applicants

BEFORE: Peter J. Osborne J.

COUNSEL: Leanne Williams, Rachel Nicholson, Puya Fesharaki and Ines Ferreira, Counsel for the Applicants Raj Sahni, Counsel for the Directors and Officers Patrick Corney, Counsel for CWB Maximum Holdings Jeffrey Levin and Anthony Labib, Counsel for Roynat Inc. and The Bank of Nova Scotia Stuart Brotman and Daniel Richer, Counsel for The Lending Syndicate Shaun Parsons and Matilda Lici, Counsel for TD Equipment Finance Canada Pam Huff, Kelly Bourassa, Chris Burr and Kevin Dowse, Counsel for the Monitor John Salmas, Counsel for Bank of Montreal Blair McRadu, Counsel for Mitsubishi HC Capital Rania Hammad and Lee Nicholson, Counsel for MOVETRUST and Boat Capital LP Elaine Gray, Counsel for Daimler Truck Financial Services Canada Corporation and Daimler Truck Financial Services USA LLC John MacDonald, Marleigh Dick and Tracy Sandler, Counsel for RBC as Financial Service Agent Caroline Descours, Erick Axell and Peter Kolla, Counsel for Regions Bank, Regions Equipment Finance Corporation and Regions Commercial Equipment Finance LLC Heather Meredith, Counsel for National Bank of Canada Thomas Gertner, Counsel for VFS Jessica Chen, Volvo Financial Services Gray Abrahamson, Proposed Receiver Jennifer Stam, Counsel for the Proposed Receiver Justin Limpright, Boat Capital LP (Move Trust) Caitlin Fell and R. Brendan Bissell, Counsel for Versa Finance and Aviator Financial Valerie Cross and Alex MacFarlane, Counsel for RBC – formerly HSBC Bank Canada Laura Culleton, Agent for Lawson Lindell – for Coast Capital Savings Nick Hollard, Counsel for RBC (Bilateral Lender) John Russo, Counsel for Meredian OneCap Credit Corp.

HEARD: August 7, 2024

Endorsement

1. The Applicants seek a number of orders from this Court: a. a Turn-Over Order authorizing the Pride Entities to relinquish servicing and other duties under the securitization Program, or as directed by a Securitization Counterparty in respect of specified assets, where the outcome of the Monitor’s proprietary interest assessment with respect to the ownership entitlement of that Securitization Counterparty is favourable and subject to the recipient Securitized Asian Counterparty providing an Undertaking to account; b. an Order allocating the costs of the review by the Monitor of the Securitization Programs among the Securitized Asian Parties in a fair and reasonable manner, to be determined; c. approval and vesting orders in respect of two Property Transactions: Cornwall and Abbotsford; and d. an approval and vesting order in respect of the factoring portfolio.

2. The approval and vesting relief in respect of the two Properties and the factoring portfolio is not opposed.

3. The Turn-Over Order and the issues addressed to thereby have been the subject of discussions and negotiations between and among the affected parties. That matter was stood down in order that those discussions could continue, and on August 8, 2024, the Court was advised that the affected parties had reached an agreement such that a revised form of order was presented to the Court on the consent of those parties.

4. The Court-appointed Monitor recommends the relief sought by the Applicants.

5. Defined terms in this Endorsement have the meaning given to them in the motion materials, including but not limited to the Reports of the Monitor, unless otherwise stated.

6. I will address the requested orders in turn.

7. The basis and rationale for the Turn-Over Order is fully described in the 10th Report of the Monitor dated July 21, 2024.

8. The Pride Entities administer a fleet of approximately 21,600 trucks and trailers, the majority of which comprise inventory that is leased to customers and of which approximately 13,100 or 61% are subject to Securitization Programs. The Pride Entities are party to 11 separate Securitization Programs.

9. Six of those Securitization Programs are governed by Canadian law and the remaining five are governed by US law. The Securitization Counterparties are those entities that have acquired a transferred interest in securitized assets from a Pride Entity under the respective Securitization Programs.

10. As set out in the Fifth and Sixth Reports, the Monitor undertook a review of the ownership in priority entitlements of the Securitization Parties with the objective of making recommendations with respect thereto. The results of that review are fully described in the 10th Report, together with the recommendations of the Monitor based on the results of that review with respect to Turn-Over of the Securitization Assets.

11. I pause to observe that this review does not replace the review and determination of entitlement to Multiple Collateral Vehicles, which are not recommended for Turn-Over and for which entitlements will be determined in accordance with the Entitlement Claims Process Order I granted previously.

12. There is general consensus among the affected parties and the Monitor as well as the Applicants that the Securitization Program Assets should be the subject of implemented Turn-Overs as soon as possible. As described above, that has now been agreed by the affected parties.

13. In my view, the terms of the proposed order are appropriate in the circumstances and for the reasons set out in the 10th Report. I am satisfied that I have jurisdiction to grant the order pursuant to section 11 of the CCAA. The Turn-Over Order is granted.

14. The basis for the transaction approval relief sought is fully set out in the 12th Report.

15. The Cornwall Property was acquired in 2021, at a cost of $5,500,000, primarily for the use of PGL. PGL was already a tenant on the property where it maintained existing operations. A portion of the Cornwall Property was thereafter leased to the Cornwall Purchaser pursuant to a lease entered into earlier this year. Smaller portions of the Cornwall Property were also leased to other arm’s-length tenants, essentially for truck and vehicle storage.

16. I am satisfied that the Cornwall Property was not core to the business of the Pride Group and that the sale will monetize its value, subject to the short-term Lease-Back Provision as described in the 12th Report. It is not included as a purchased asset in the proposed PGL Sale Agreement.

17. The lease entered into with the Cornwall Purchaser in February 2024 included an option to purchase for $7,500,000. That option was exercised on April 8, 2024. As a result of the exercise of the option, the property was not listed or exposed to the open market for sale. However, the Monitor has scrutinized the purchase option price and is of the view that it is reasonable for four principal reasons: a. it is materially greater than the price paid by the Pride Entities for the Cornwall Property in 2021, although that is obviously not determinative; b. the Monitor understands that the Pride Entities consulted with independent real estate agents and appraisers in February, 2024 when agreeing to the Cornwall Purchase Option in the first place, and the feedback received then was to the effect that the option price of $7,500,000 was above market for that time period; c. the Monitor reviewed the offer from the Cornwall Purchaser with a third-party consultant (CBRE), who was of the view that the transaction is favourable to stakeholders, given the current real estate market and the availability of other vacant land in relatively close proximity to the subject property directly from the City of Cornwall; and d. the Monitor understands that the Cornwall Purchaser is not a related party to the Pride Group or its principals.

18. For all of these reasons, the Monitor is of the view that the option price represents a fair and reasonable price, which may be slightly above market, such that any sale or marketing efforts would not be cost beneficial and would not be likely to result in a materially higher offer. Included in that analysis is the factoring in of the possibility (if not probability) that the Cornwall Purchaser may object to any alternative transaction and seek to enforce the Cornwall Purchase Option.

19. As noted above, the proposed purchase includes a Lease-Back Provision in favour of PGL, which grants a right to continue storing commercial vehicles on the property on the terms set out in the materials. That will permit the Pride Group sufficient time to move the trucks and trailers currently on the Cornwall Property to other locations without delaying the closing of the transaction.

20. Roynat (the first secured mortgagee) and RBC (in its capacity as administrative agent and collateral agent) consent to the sale. That consent is a material condition. Closing is to be the later of August 6, 2024 and 22 days after the date on which the approval and vesting order granted.

21. For all of these reasons, I am satisfied that the Cornwall APS represents the highest realization available for the Cornwall Property in the circumstances and should be approved. The Monitor, in consultation with the Pride Entities, has confirmed that the Cornwall Secured Indebtedness is consistent with that as reflected on the books and records of the Pride Entities, with the result that the Monitor supports the request of the Pride Entities for an order directing that an amount equal to the Cornwall Secured Indebtedness be distributed to Roynat in full satisfaction of its mortgage. Cornwall Surplus Proceeds, if any, are governed by the Protocols Order and the Preservation Protocol and an order authorizing the distribution of such proceeds, if any, will be sought at a later time.

22. The Abbotsford Property was acquired in 2022, with the intention of expanding the dealership network of Pride Truck Sales into the British Colombia market. Its dealership business has operated from that location since the date of purchase. Like the Cornwall Property, the Abbotsford Property is not considered core to the business of the Pride Group and is being sold to monetize its value.

23. The Abbotsford Property was already listed for sale as of the date of the commencement of the CCAA Proceedings. The marketing and sale process undertaken by the Pride Group has been followed by the Monitor since its appointment. The Abbotsford Property was listed for sale by CBRE on January 30, 2024 which listing ultimately resulted in three offers, of which one was that of the Abbotsford Purchaser. It was accepted following several rounds of negotiations.

24. The Monitor understands that the Abbotsford Purchaser is not related to the Pride Group or its principals. The listing and marketing process was undertaken in accordance with the Real Estate Monetization Plan, which was approved by this Court as part of the Amended and Restated Protocols Order. The Monitor is of the view that the listing sufficiently exposed the property to market, as illustrated by the multiple offers that were in fact received.

25. In addition, the Monitor is advised by CBRE that the price per acre represented by the offer from the Abbotsford Purchaser is a record high for comparable properties, notwithstanding a softened market, and CBRE highly recommends the deal to the Monitor.

26. The Monitor is of the view that any additional sale or marketing efforts would not be cost beneficial and would be unlikely to result in a materially better offer than the Abbotsford Purchaser’s offer.

27. The proposed purchase price is $15,500,000, satisfied by the assumption of the Assumed Obligations and payment on closing of the Cash Purchase Price, subject to adjustments. Closing is contemplated 45 days following the granting of an approval and vesting order.

28. For all of these reasons, the Monitor recommends, and I agree, that the sale should be approved. I also observe that the basis for the approval of the sale of these properties is the same as that in respect of the sale of the Chehalis, Washington property by approval earlier for the reasons set out in that Endorsement, which apply equally here.

29. The Abbotsford Property is also subject to a mortgage in favour of Roynat. The Monitor accepts that this is a first priority interest. Given that the Abbotsford Secured Indebtedness is $13,350,325.98 as of July 9, 2024 to which is added per diem interest that continues to accrue, that will be paid out first and the Abbotsford Surplus Proceeds will also be governed by the Protocols Order and the Preservation Protocol just as will be the Cornwall Surplus Proceeds.

30. Finally, the Applicants also seek approval of the Factoring Transaction, the basis and rationale for which are described in the Benson Factoring Affidavit and in the Ninth Report of the Monitor.

31. Tpine Financial provides factoring and other financial services to customers of the Pride Entities. The book value of the factoring portfolio has diminished since the commencement of the CCAA Proceedings as customers make routine payments and the onboarding of new customers has been suspended. Administration costs related to the factoring portfolio, however, continue. All of this has resulted in the desirability to complete the Factoring Transaction in order that Tpine Financial can monetize its factoring portfolio and eliminate the costs associated with this business that is winding down in any event.

32. The Monitor is of the view that the transactions are beneficial to the Pride Entities and their stakeholders and ought to be approved. This motion was originally returnable before me on July 16, 2024, at which time Tpine Financial sought an order approving the Factoring Transaction and directing that the proceeds be held by the Monitor in trust, subject to a further order of the Court regarding distribution and entitlement thereto.

33. At the strong request of Mitsubishi, and as reflected in my Endorsement relating to that motion on that date, I adjourned the motion in order to provide Mitsubishi additional time to respond and develop its position. Fundamentally, Mitsubishi based its adjournment request on its argument that Tpine Financial was selling assets owned by it (Mitsubishi), and that, whether or not the issue of relative priority entitlement to net sale proceeds was reserved to be determined at a later date, Mitsubishi was potentially prejudiced by the sale.

34. I am advised today that the form of proposed order, which effectively approves the Factoring Transaction, vests title to the assets sold in the proposed purchase, free and clear of any claims of either Tpine or Mitsubishi, and reserves the issue of priority entitlement to net proceeds to another day, pending which the funds will be held by the Monitor in trust, has the consent of all affected parties.

35. For the reasons fully set out in the Ninth Report, and exercising my discretion under section 11 of the CCAA, I am satisfied that the Factoring Transaction should be approved.

36. Orders to go in the form signed by me which are effective immediately and without the necessity of issuing and entering.

Osborne J.