Court File and Parties

COURT FILE NO.: CV-24-00721451-00CL DATE: 20240819 SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)

RE: IN THE MATTER OF A PROPOSED ARRANGEMENT OF XPLORE INC. AND 16029167 CANADA INC.

BEFORE: Kimmel J.

COUNSEL: Rob Chadwick / Bradley Wiffen/ Erik Axell for the Applicants, Xplore Inc. and 16029167 Canada Inc. Linc Rogers / Kevin Wu, for Stonepeak Falcon Fibre Inc. Kevin Zych / Joshua Foster, Committee of Consenting Lenders Geoff Hall, UBS AG and Barclays Bank PLC Laura Culleton, for Amynta Surety Solutions Brett Harrison, for DWS Infrastructure Debt Opportunities LLC Alex MacFarlane/Bevan Brooksbank/Nick Hollard/Daphne Chu, for Counsel for Hughes Network Systems LLC Roger Jaipargas/Zev Smith, for Telesat (IOM) Limited

HEARD: August 1, 2024

Endorsement (CBCA Initial Order)

[1] On June 3, 2024 a Preliminary Interim Order was made under s. 192(4) of the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (“CBCA”). see Xplore Inc. (Re), 2024 ONSC 3251, reasons released June 6, 2024 ("Preliminary Order Reasons"). The Preliminary Interim Order was sought and granted on an ex parte basis. [1]

[2] The Preliminary Interim Order included a stay of rights and remedies against the Xplore Entities (defined in the Preliminary Interim Order as collectively, Stonepeak Falcon Guarantor Inc., Xplore Inc., and any direct or indirect affiliate or subsidiary of Xplore Inc.) arising by reason or as a result of this Application having been made, their involvement in these proceedings, or any resulting default or cross-default under any of the Credit Agreements, Satellite Agreements or Surety Indemnity Agreements to which the Xplore Entities are party (the “Stay”). Full come back rights were provided in the Preliminary Interim Order for all interested parties.

[3] This hearing was scheduled for the purposes of allowing certain stakeholders to avail themselves of their comeback rights (the "Comeback Motions"). At the same time, the court scheduled the Applicants' motion for an Interim Order under s. 192(4) of the CBCA for advice and directions to "set the wheels in motion" for a vote and eventual approval hearing for the court to consider a proposed arrangement under s. 192(3) of the CBCA (the "Arrangement"). The Arrangement is in furtherance of a proposed recapitalization transaction (the "Transaction") to be implemented pursuant to a CBCA plan of arrangement.

[4] The Interim Order was signed on Friday August 16, 2024 to facilitate logistics for the Meeting that is to be called to vote on the Arrangement Resolution. At that time, a brief endorsement was provided that indicated the reasons for granting the Interim Order and reasons in respect of the disposition of the Comeback Motions would follow. These are the reasons.

[5] Capitalized terms not otherwise defined in this endorsement shall have the meanings ascribed to them in the affidavit of William E. Aziz sworn July 24, 2024 that provides the evidentiary support for the Applicants' position on these motions, together with the exhibits attached thereto, including the Plan of Arrangement (the "Plan" or "CBCA Plan") attached as Appendix "C" to the draft Disclosure Statement (Exhibit B to the Aziz Affidavit).

Background to these Motions

[6] The following is a recap of the background to this application and some of the terms of the Preliminary Interim Order and Stay that were detailed in the Preliminary Order Reasons.

[7] Xplore Inc. (“Xplore") is the intermediate parent of a group of affiliated privately-held telecommunications companies (collectively, the “Company” or the “Xplore Group”). The Xplore Group is dedicated to providing fast and reliable broadband internet access and related services to residences and businesses in rural communities across Canada (the “Business”).

[8] Founded in 1998, the Xplore Group employs 1,085 employees and provides internet access to more than 300,000 subscribers across Canada over three technology platforms: (a) fixed wireless (the “Fixed Wireless Business”); (b) satellite (the “Satellite Business”); and (c) fibre to premises (the “Fibre Business”).

[9] The Company is in need of both liquidity and capital to support and grow its Business. It has been reviewing its strategic options with the assistance of an independent committee of the board of directors formed in August 2023. Xplore’s current EBITDA is insufficient to satisfy the debt servicing costs associated with its $1.7 billion in secured debt. This constrains the Company's ability to access the liquidity needed to operate its Business and capitalize on growth opportunities.

[10] The immediate liquidity issues prevented the Company from making $44 million in interest payments under its First Lien Term Loan and Second Lien Term Loan (together, the "Secured Debt") when they came due on (and after) March 28, 2024. There are standstill arrangements in place with these lenders (the "Secured Lenders").

[11] The Company has engaged in extensive negotiations with a committee representing a majority of its Secured Lenders (the “Lender Committee”) and with its primary equity holder, Stonepeak Falcon Holdco LP (“Stonepeak”), with a view to creating a more sustainable long-term capital structure for the Company. The proposed Transaction has been designed to substantially deleverage Xplore’s capital structure and reduce its annual interest expenses. It is expected to provide the Company with the liquidity and financial flexibility it requires to operate its Business and pursue its long-term growth objectives, while ensuring that it has the committed funding needed to complete government-sponsored internet projects.

[12] At the time of the Preliminary Interim Order, the framework of the Transaction had been agreed to in principle between the Company, the Lender Committee and Stonepeak Falcon Fibre Inc. (“Stonepeak Fibre”), an affiliate of Stonepeak, Xplore’s controlling shareholder.

[13] The Secured Debt ranks in priority to Xplore's unsecured obligations under its Satellite Agreements. The Transaction contemplates the conversion of more than 80% of the Secured Debt to equity and also involves the addition of new debt and equity financing. The Secured Lenders represented by the Lending Committee that have agreed to the Transaction (the "Consenting Lenders") are not prepared to convert the majority of their Secured Debt to equity, and the Consenting Lenders and Stonepeak are not prepared to advance new debt and equity financing to the Xplore Group, without addressing the uneconomic and unsustainable Satellite Agreements.

[14] Xplore has determined that the Satellite Business is no longer economical given the decline in subscribership (estimated to be down 57% since 2022 with an associated estimated 50% decline in revenues) and given the substantial fixed costs under its agreements with the satellite providers (the "Satellite Agreements"). The continuation of the Satellite Agreements on their current terms would result in Xplore operating the Satellite Business for a prolonged period at significant, continuing losses. These losses would drain the Company's liquidity and deprive it of the funding it needs to service its customers and invest in its Fixed Wireless and Fibre Businesses, which are critical to the long-term value of the Xplore Group. However, there is significant government engagement and concern about maintaining internet services to rural areas in Canada so any transition away from the Company’s Satellite Business would have to happen in an orderly manner.

[15] Xplore has been reviewing strategic options to address challenges in its Satellite Business. Xplore recognizes that the Satellite Agreements, the unsecured obligations and the indebtedness thereunder need to be addressed, if not on a consensual basis then as part of the Transaction and Arrangement or by some other process. Completion of the Transaction is conditional on the Satellite Agreements being consensually modified or addressed in the manner proposed under the Arrangement or another court process. The Company has been engaged in discussions with certain satellite providers with a view to achieving consensual modifications to the Satellite Agreements that reflect the current circumstances of the Satellite Business.

[16] During this period of negotiation, the Company was not able to pay its unsecured obligations under the Satellite Agreements. The Stay granted under the Preliminary Interim Order restrains satellite providers from terminating, suspending or pursuing default rights under the Satellite Agreements until further order of the Court. In the short term, the Company's rural customers of its Satellite Business depend on the continued supply of the satellite services under the Satellite Agreements.

[17] In conjunction with the Preliminary Interim Order, the Company indicated that it would pay all of its satellite service providers the net profit (revenue less direct and allocated costs) earned by Xplore from subscribers whose internet services are provided by each applicable satellite service provider, respectively (the "Net Profit Payments") for the anticipated short term continued and ongoing provision of satellite services during the period of the Stay. These Net Profit Payments represent what Xplore is able to pay for these satellite services but they are significantly less than the amounts due under the Satellite Agreements (the "Contractual Payments"). The Contractual Payments and other obligations of Xplore under the Satellite Agreements are referred to as the "Satellite Obligations".

[18] Discussions with one of the three satellite service providers have advanced sufficiently that it did not object to the Interim Order and did not appear or take any position on these motions. The other two satellite service providers, Hughes Network Systems, LLC ("Hughes") and Telesat (IOM) Limited ("Telesat") (Hughes and Telesat together, the "Satellite Providers"), objected to the Interim Order and sought relief by their own Comeback Motions.

The Proposed Transaction and Arrangement

[19] Under the proposed Transaction, the Secured Debtholders will exchange the Secured Debt, in the aggregate principal amount of approximately $1.7 billion, for consideration that includes: (a) Substantially all of the common equity of Stonepeak Holdings; (b) Term loans issued by Xplore in the aggregate principal amount of approximately $330 million; and (c) Contingent value rights (the "CVR") entitling holders thereof to certain proceeds that may arise from the Fixed Wireless Business of the Xplore Group.

[20] Implementation of the Transaction will reduce the principal amount of the Company's secured indebtedness by more than $1.2 billion and reduce the Company's annual cash interest costs by approximately $120 million at current interest rates. Completion of the Transaction will also enable Xplore to access up to $600 million of new debt and equity financing from and after implementation, through: (a) the $100 million New Money Term Loans; (b) the New Preferred Equity Issuance for proceeds of up to $350 million; and (c) the New Common Equity Issuance for proceeds of up to $150 million. Once fully funded, the New Common Shares issued pursuant to the New Common Equity Issuance will constitute 51.75% of the issued and outstanding New Common Shares of Stonepeak Holdings (inclusive of the New Common Shares issued to Secured Debtholders in exchange for the Secured Debt).

[21] The Arrangement involves, among other things: (a) the exchange of the First Lien Debt for Takeback Term Loans, 96.373% of the New Class A Common Shares, the CVR, Backstop Consideration and Consenting First Lien Debtholder Consideration; and (b) the exchange of the Second Lien Debt for 3.627% of the New Class A Common Shares and Consenting Second Lien Debtholder Consideration.

[22] On the Effective Date of the CBCA Plan: (a) the Existing Class A Shares of Stonepeak Holdings will be exchanged for one New Class B Common Share of Stonepeak Holdings; (b) the Existing Class B Shares of Stonepeak Holdings shall be redeemed by Stonepeak Holdings for no consideration; and (c) the Affected Equity shall be cancelled without any payment or compensation.

[23] If a consensual contractual resolution with the applicable Satellite Provider has not been reached, the CBCA Plan provides that the applicable Satellite Agreements and Satellite Obligations shall be transferred and assigned to, and shall vest absolutely without recourse in, "ResidualCo". ResidualCo is an entity to be incorporated or designated by the Xplore affiliates participating in the Transaction (the "Xplore Parties"). ResidualCo will not be incorporated under the CBCA. It is expected that ResidualCo will not have any material assets or business operations.

[24] Pursuant to the CBCA Plan, each Satellite Provider shall receive the Satellite Provider Implementation Payment, which is a cash payment of $250,000 to be made by Xplore to each of the three Satellite Providers on the Effective Date. The Satellite Provider Implementation Payment is therefore conditional on the implementation of the CBCA Plan.

[25] The valuations of Xplore and of the overall Company make it clear that there is no residual value for the unsecured obligations of Xplore, including any Satellite Obligations under the Satellite Agreements. Despite these valuations and the priority of the Secured Debt of the First Lien Debtholders and Second Lien Debtholders (collectively, the "Secured Debtholders"), 80% of which will be equitized under the Transaction, the Company, with the support of the Consenting Lenders and Stonepeak, is prepared to retain and assume substantially all of the unsecured obligations of Xplore other than the Satellite Obligations, as part of the Arrangement.

[26] The parties participating in the Arrangement believe that implementation of the Transaction through the Arrangement is a value-maximizing approach that is in the best interests of the Xplore Group and its general body of stakeholders.

The Motions and Objections

[27] The Applicants' motion is for an Interim Order pursuant to s. 192(4) of the CBCA for the approval of certain procedural matters with respect to the calling, holding and conducting of a meeting of Xplore's Secured Debtholders (the "Meeting") to vote on the proposed Arrangement to be implemented pursuant to the CBCA Plan. The Satellite Providers' primary objection to the terms of the proposed Interim Order and the mechanics for the Meeting is that they want there to be a separate class vote on the CBCA Plan for unsecured creditors, including themselves. They have also raised other principled objections to the Meeting taking place at all.

[28] The Satellite Providers are not directly participating in the Arrangement but object to how it is proposed that they will eventually be treated, relative to other unsecured creditors (who are also not participating in the Arrangement). The Satellite Providers also object to not being paid their full Contractual Payments for the satellite services they are providing during the period of the Stay.

[29] In addition to their objection to the Initial Order, each of Hughes and Telesat have brought their Comeback Motions for an order requiring Xplore to make the Contractual Payments in respect of their supply of goods and services from and after June 3, 2024 and for an order requiring Xplore to post security in respect of those Contractual Payments. Hughes also seeks leave of the court to issue an Application for a Bankruptcy Order against Xplore.

[30] These Satellite Providers maintain that Xplore would not be permitted to "short pay" them if the stay had been granted in an insolvency proceeding under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (“CCAA”) or under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”) and that the court should afford them those same protections in the context of the CBCA Stay under the Preliminary Interim Order.

[31] The Satellite Providers also assert that, at the time the ex parte Preliminary Interim Order was granted, the court was denied the benefit of full, fair and frank evidence detailing (i) the circumstances and extent of the debts owed to the Satellite Providers, (ii) how the "Net Profit Payments" proposed compared to Xplore's monthly contractual obligations, or (iii) that Telesat had in fact exercised its termination rights prior to the swearing of the evidence adduced to obtain the Preliminary Interim Order. In the latter regard, they contend that a stay or no-default order under the CBCA is not appropriate where it is being used to extinguish third party claims that have already been asserted.

Preliminary Issue Re: Confidential Records

[32] Telesat sought leave to file a Confidential Brief containing certain limited information (the "Information") provided by Xplore to Telesat in respect of the calculation of the Net Profit Payments. The Information had been requested by Telesat from Xplore following the Preliminary Interim Order and was provided by Xplore to Telesat on a confidential and without-prejudice basis because Xplore maintains that the Information is commercially and competitively sensitive. Telesat's proposal was for the court to receive this information under seal and that no other parties or the public have access to it. Xplore was prepared to allow the Confidential Brief to be filed on that basis.

[33] After reviewing the Confidential Brief and the Information contained in it, and hearing submissions from counsel for Telesat and Xplore, it was established that the key information contained in the Confidential Brief that Telesat wished for the court to consider was contained in a July 8, 2024 letter that was included in the Confidential Brief but had not been designated to be confidential or privileged. Accordingly, rather than sealing the Confidential Brief, it was returned to counsel and the July 8, 2024 letter was filed on its own. This letter contains the explanation that Telesat wished for the court to consider regarding the method/formula used to calculate the Net Profit Payments that Xplore has been making to Telesat under the terms of the Preliminary Interim Order and the amounts that had been paid in June and July, 2024.

Issues to be Decided

[34] The following issues have been distilled from the factums filed and submissions made:

a. Should the Preliminary Interim Order be varied or amended or supplemented by a further order to require all Contractual Payments to be made to the Satellite Providers during the Stay period, and to require security to be posted for those payments: 1. Because of a failure by the Applicants to make full, true and plain disclosure of all material facts at the time that ex parte order was made? And/or 2. Because the Satellite Providers are continuing to supply services for Xplore's rural customers of its Satellite Business, and as such they should be receiving the Contractual Payments for any services they provide post-filing? b. Should the Interim Order be granted? 1. Have the Applicants’ complied with the statutory requirements of the CBCA? 2. Have the Applicants acted in good faith in putting forward the Arrangement? 3. Is there no chance that the court will find the Arrangement to be fair and reasonable at the fairness hearing? 4. Are the proposed procedures and voting mechanics under the Interim Order appropriate - should the Satellite Providers be entitled to vote on the Plan? 5. Is it appropriate to grant the requested alternative relief that the Interim Order provides for with respect to the option to "pivot" to a CCAA Plan? c. Should the Stay be lifted to enable Hughes to issue an Application for a Bankruptcy Order against Xplore?

Analysis

[35] I will first address the requests of the Satellite Providers for the Preliminary Interim Order to be varied or amended or supplemented. I will then address the Applicants' request for the Interim Order. Lastly, I will address Hughes' request that the Stay be lifted to enable it to issue a bankruptcy application.

Should the Preliminary Interim Order be Varied or Amended or Supplemented?

The Alleged Undisclosed Facts

[36] The law with respect to full and fair disclosure is well established. On an interlocutory motion made without notice, Rule 39.01(6) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 requires that there be full and fair disclosure of all material facts including the reasons for moving without notice.

[37] The moving party must state his case fairly and must make a balanced presentation of the facts and law including any points of fact or law that favour the opposing party. The moving party is under a heavy onus of candour and disclosure on a motion without notice and a failure to make full disclosure is fatal. On an ex parte motion, the test as to whether full and fair disclosure is made turns on whether the omitted disclosure "might" have impacted the original granting of the order. See also Wang v. Feng, 2023 ONSC 2315, at para. 130 and Hogg v. Wealthsimple Inc. et al., 2023 ONSC 6291, at para. 46, citing Horrocks v. McConville, 2021 ONSC 522, at para. 12.

[38] Hughes alleges that the disclosure by Xplore when it sought the Preliminary Interim Order, was not sufficient because the following facts were not fully or properly disclosed:

a. In May 2023, at Xplore's request, Hughes agreed to amendments that would defer certain of Xplore's monthly lease payments until April 2025. Specifically, it would defer payments in respect of the J1 and J2 Satellites that were otherwise payable during 2023 and 2024, in order to mitigate Xplore's financial concerns (the "J1 Deferral" and "J2 Deferral"). The total "Deferred Amount" is $40 million, plus interest of $4.69 million USD. b. Despite the J1 Deferral and J2 Deferral, since January 13, 2024, Xplore has been in default of its obligations to pay Hughes in respect of certain invoices issued in accordance with the Satellite Agreements. As of June 4, 2024, Hughes had invoiced Xplore for approximately $28.8 million USD. c. As of June 4, 2024, Xplore's monthly payment obligation to Hughes pursuant to the Satellite Agreements was approximately $2,561,000. d. Between March 5, 2024, and May 20, 2024, Hughes delivered several default notices to Xplore, advising that Xplore was in default of its obligations (in total, the outstanding amounts were approximately $8.7 million), and notifying Xplore that Hughes was prepared to suspend services to Xplore and/or terminate one or more of the Satellite Agreements.

[39] Xplore failed to pay Telesat for three consecutive months between February and April 2024. As a result, Telesat issued a Notice of Breach dated May 14, 2024, demanding payment of all outstanding amounts ($3,276,111.96) together with interest (the monthly payment obligation being approximately $1,091,000). This notice of breach was disclosed. However, Telesat is critical that Xplore failed to disclose that on May 29, 2024 it issued a termination notice in respect of its Satellite Capacity and Gateway Service Agreement. Concurrently, Telesat issued a Notice of Suspension in respect of its Smart Hands Support Service Agreement that was also not disclosed to the court prior to the Preliminary Interim Order hearing.

[40] The May 29, 2024 termination notice advised Xplore that Telesat was terminating their contract effective June 19, 2024 (i.e., 20 days following prior written notice), and all associated Satellite Capacity would be discontinued at that time. Thus, Telesat argues that the court was not made aware that the ex parte order sought by Xplore would enjoin the implementation of a termination notice that had already been delivered.

[41] The Satellite Providers are also critical of the disclosure made by Xplore about the Net Profit Payments it was agreeing to make to ameliorate the prejudicial effect of the Stay under the Preliminary Interim Order. The court took that disclosure into account in the Preliminary Order Endorsement, noting that while the proposed payments were "less than the contractual rate", the Stay was warranted. The Satellite Providers argue that this left the court without any frame of reference to evaluate the fairness or proportionality of the Net Profit Payments, relative to the contractually agreed compensation, and its impact on the Satellite Providers.

[42] In summary, the Satellite Providers focused their submissions on Xplore's failure to disclose the existence and particulars of the following:

a. The Hughes Deferred Amount and additional pre-filing arrears (over and above the $8.7 million in immediately preceding monthly defaults that were disclosed) – in other words, the amount and full extent of past arrears and accommodations. b. That Telesat had not just demanded payment of arrears on May 14, 2024 but had also delivered a notice on May 29, 2024 that it was terminating its Satellite Agreement and would no longer be providing its satellite services effective June 19, 2024 after the requisite notice period had expired (and had given notice of suspension under another related agreement). c. The amount and full extent of the deficiency between the Net Profit Payments to be made in lieu of the Contractual Payments during the Stay period (the gap between the Net Profit Payments and the Contractual Payments).

The Satellite Providers argue that Xplore’s non-disclosure constitutes grounds for the Preliminary Interim Order to be amended or varied or supplemented to require that Xplore make the Contractual Payments plus post security for those payments retroactively and for the duration of the Stay.

[43] These concerns must be considered in context. The Applicants emphasize that the matters now complained about were disclosed in the Affidavit of Geoff Lowe sworn May 31, 2024 in support of the motion for the Preliminary Interim Order, just not with the level of specificity (particularly with respect to the precise amounts) that the Satellite Providers are now pointing to. There was disclosure in the Applicants' materials about the following matters:

a. The contractual relationships with the Satellite Providers. b. That Xplore was in arrears in its payment obligations to the Satellite Providers, and that it was concerned, based on notices it had received from them, that they may immediately stop providing access to satellite capacity before a Stay could be sought if they received notice of the motion for the Preliminary Interim Order. c. That the Applicants were seeking a Stay in relation to all defaults under the Satellite Agreements, which included significant payment defaults. d. That the Satellite Providers had not agreed to concessions, and had not accepted the Net Profit Payments, which were disclosed to be less than what would be payable under the Satellite Agreements.

[44] This disclosure was all before the court when the determination was made that it was appropriate to grant the Stay at the time of the Preliminary Interim Order. Typically, a stay pending a vote on a proposed CBCA arrangement is for a short term, to allow time for a CBCA Plan to be put forward, considered and voted upon. In this case, it was sought shortly before the Interim Order to ensure that there was no precipitous cessation of internet service to Canadians in rural communities pending the vote on the CBCA Plan and the final approval hearing.

[45] It was disclosed that the effect of the Stay would be to prevent the satellite service providers from terminating the Satellite Agreements or ceasing to supply their goods and services during this interim Stay period. It was disclosed that Xplore had not been paying for these services in the immediately preceding months and was in default and that Xplore would continue to be unable to pay for those services at the prescribed rates under the Satellite Agreements; Xplore, thus, proposed to make the Net Profit Payments, which were more than the Satellite Providers had been receiving in recent months.

[46] The premise of the Net Profit Payments is that the Company does not benefit or "profit" from the continued provisions of services by the Satellite Providers during this Stay period. The calculated profits (revenues less allocated expenses associated with the services to be provided by the Satellite Providers) would be paid to the Satellite Providers to ameliorate the acknowledged deficiency in what would otherwise be payable under their Satellite Agreements. From the court's perspective, this was not about the Satellite Providers paying for the cost of getting their services to end-customers, it was about ensuring that Xplore would not be profiting from the short-term involuntary arrangement under which the Satellite Providers would be continuing to supply their services at below the agreed Contractual Payments.

[47] The bottom line is that the court was made aware that: Xplore was in default of its obligations under the Satellite Agreements, there were significant and continuing payment defaults and pre-filing arrears, the Satellite Providers were in a position to stop providing their satellite services and there was a concern that they might do so imminently. In this latter respect, Xplore explains that the failure to disclose the May 29, 2024 termination letter from Telesat was an oversight (the May 14 default letter having been disclosed); but Xplore also maintains that this oversight was not material when considered in the context of everything else that was disclosed.

[48] Telesat seeks to draw a distinction between a contract having been terminated (that the court cannot reinstate) and an anticipated termination of a contract, noting that some courts have cautioned against using third party stays or no-default orders in the former instance in CBCA debt restructuring arrangements to maintain a status quo in circumstances where the status quo entails an alleged existing default that has triggered remedial action. (see 9171665 Canada Ltd. (Re), 2015 ABQB 633, at para. 27 (4)).

[49] The circumstances of the 9171665 Canada case may not have warranted a stay, but stays are often granted after contractual defaults, and even after claims or other contractual remedies have been asserted. In my view, the situation with the Telesat's Satellite Agreement falls short of the cautionary scenario, insofar as the status quo that the Stay sought to maintain here was a contract (the Telesat Satellite Agreement) that had not yet terminated when the Preliminary Initial Order was sought and made. Following the logic of Telesat's argument, the situation might have been different if the termination notice was not disclosed and the Preliminary Initial Order had been sought after June 19, 2024 termination date; but it was not, and the Stay intervened to delay the effective date of Telesat's termination. As of the date of the Preliminary Interim Order when the Stay came into effect, Telesat was providing its satellite services. That is the status quo that the Stay maintained.

[50] In the circumstances of this case, I do not find there to have been any omitted disclosure (of particulars and details of facts that were disclosed in general terms) that "might" have impacted the original granting of the Preliminary Interim Order in this case. There was no fatal non-disclosure that is fatal to the continuation of the Preliminary Interim Order.

[51] I would add that, although some of the older authorities were not cited by the parties, it has long been recognized that some latitude may be given to the moving party when a matter decided on an ex parte basis comes back before the court with additional disclosure. See United States v. Friedland, [1996] 30 O.R. (3d) 568, at p. 573.

[52] Ex parte motions and applications are, of necessity, brought on an urgent basis, often with little time to prepare supporting materials. In that context, if the judge who granted the original order (or the court of appeal) is satisfied, on a totality of the evidence, that the orders ought to have been made and were supported by the evidence, they need not necessarily be set aside just because there were additional facts that could have been disclosed. see Ontario Realty Corp. v. P. Gabriele & Sons Ltd. (2000), 50 C.P.C. (4th) 300 at 321 to 325 (Ont. S.C.J. - Com. List); Two-Tyme Recycling Inc. v. Woods, at para. 21; Pardhan v. Coca-Cola Ltd., 2003 FCA 11, at para. 26, referring to Robert J. Sharpe, Injunctions and Specific Performance, Looseleaf Edition (Toronto: Canada Law Book, 2001), para. 2.45).

[53] I am not in any way diminishing the importance of full, plain and frank disclosure when ex parte orders are sought. However, in the circumstances of this case, I am also satisfied that the same decision would have been made to grant the Preliminary Interim Order if the additional particulars and details now complained of had been disclosed.

Revisiting the Requirement that the Satellite Providers Continue to Provide Services for Less than the Contractual Payments

[54] Notably, the Satellite Providers are not asking that the Preliminary Interim Order be set aside or that the Stay be lifted so that they can terminate their Satellite Agreements. What they want is to be paid their Contractual Payments during the Stay period.

[55] Independent of the alleged non-disclosures, the Satellite Providers argue that the terms of the Stay effectively and improperly require them to continue to supply services for Xplore's rural customers of its Satellite Business post-filing, without being paid the Contractual Payments to which they are entitled for those services. They say it is unprecedented in insolvency proceedings for service providers to be required to continue to supply services without being paid what their contracts provide for.

[56] I have considered the additional authorities and submissions made by the Satellite Providers and the Applicants on this point. Nothing new has been raised that causes me to revisit or change the determination made at first instance that the court has the jurisdiction within its broad discretion under s. 194(2) of the CBCA to grant a Stay that prevents a critical supplier from ceasing to provide services even if they are not being paid in accordance with their contractual terms, when the circumstances warrant it. This is not re-writing their Supply Agreements. The contractual obligations remain intact; rather, it is a means of addressing a short term need for the continued supply of a critical service (and eventual transition, if need be) to protect other stakeholders in the highly regulated industry in which Xplore operates.

[57] The authority to grant or continue a stay of proceedings on appropriate terms is squarely within the jurisdiction and discretion of the court. This authority was canvassed in the Preliminary Order Reasons and will not be repeated in these reasons. The breadth and scope of stays varies from case to case, as is demonstrated by the summary of stay provisions appended at Schedule C to the Satellite Providers' joint factum. Xplore points out that some are broader and some are narrower than the Stay in this case.

[58] The Satellite Providers direct the court to the CCAA and the BIA by analogy to support their assertion that a supplier that continues to provide services is entitled to be paid. They point to Concordia (Re), 2017 ONSC 6357 at paras. 48 and 49 to say that, where the CBCA is silent, CCAA structures or processes can and should be incorporated by analogy in dealing with affected parties.

[59] However, the analogy, if apt, must be considered fully, including for example that s. 11.01 of the CCAA does not specify that suppliers must be paid at their contractual rates post CCAA filing; only that they should not be required to supply goods or services without receiving "due payment" for such goods or services going forward. Further, s. 11.4(2) of the CCAA provides that critical suppliers (which the Satellite Providers are) can be required to continue to supply on "any terms or conditions that the court considers appropriate" (e.g. not necessarily in accordance with their strict contractual terms). See Soccer Express Trading Corp. (Re), 2020 BCSC 749, at paras. 62 and 70.

[60] The Net Profit Payments that Xplore has determined it can pay to the Satellite Providers for their continued provision of Satellite services during the short Stay period anticipated while this CBCA Plan is under consideration are consistent with these other CCAA provisions. The CCAA analogy to critical suppliers is more apt in this case than to other cases relied upon by the Satellite Providers that did not involve or consider the critical supplier provisions. See, for example, Quest University Canada (Re), 2020 BCSC 921, at paras. 94 and 101-102 and Allarco Entertainment Inc. (Re), 2009 ABQB 503 (at paras. 46 and 61).

[61] The Satellite Providers argue that there is no precedent for the court exercising its discretion to pay a service provider less than its contractual entitlement during the period of a stay, even under the sections of the CCAA that allow for that. The Applicants argue that a precedent is not needed, but point to Essar Steel Algoma Inc. et al (Re), 2017 ONSC 2585 as a precedent for the court requiring a contractual counterparty to continue performing its contractual obligations under a Cargo Handling Agreement during the stay period, even though it was not being paid.

[62] The court's discretion and authority under s. 192(4) is broad and flexible, as it is under s. 11 of the CCAA. The limits that the courts impose on this discretion are fact driven. For example, the Satellite Providers point to examples of cases where the court declined to exercise its discretion under the Business Corporations Act (British Columbia) ("BCBCA") to grant third party releases in the context of an arrangement under that statute, even though they are sometimes granted under the broad discretion of s. 11 of the CCAA (see iAnthus Capital Holdings, Inc., 2020 BCSC 1442, at paras. 67-70). Notably, the discretion under s. 192(4) of the CBCA is broader than the discretion under the BCBCA.

[63] The fact that an order precisely of this nature (temporarily staying the contractual recourse of a trade creditor said not to be affected by the CBCA Plan and proposed Arrangement, knowing that the Company is not able to pay them their full Contractual Payments) has never been made before does not mean that the court did not have the authority to make the Preliminary Interim Order. There is always a first time for orders to be made in the appropriate circumstances within the framework and spirit of the applicable legislation. See Canadian Red Cross (Re), [1998] O.J. No. 3306, at para. 45.

[64] The Satellite Providers do not assert otherwise, but they maintain that this was not an appropriate case in which to make such an order. I found that it was at the time of the Preliminary Interim Order and remain of that view.

[65] The Satellite Business of Xplore is uniquely situated for the Net Profit Payments that have been provided for. This business line has a discrete revenue stream and expenses that can be identified and allocated based on the customers and associated satellite service provider. The Satellite Providers acknowledge that the Information and other disclosures provided by Xplore confirm that Xplore has done what it said it would do with respect to the Net Profit Payments (revenue minus direct costs minus allocated costs). Further, Xplore has left the door open for continuing dialogue about the calculations to ensure that the Satellite Providers are satisfied that this is, in fact, what they are being paid.

[66] I remain satisfied that I had the jurisdiction to grant the Stay to prevent that the Satellite Providers from precipitously ceasing to provide their critical satellite services to rural Canadians who depend on them. I am not persuaded that the court can or should require Xplore to pay the full Contractual Payments to the Satellite Providers from and after June 3, 2024 (and provide security for those payments) in the immediate short term. According to its unchallenged evidence, Xplore does not have the ability to do so.

[67] That said, Xplore confirmed during the hearing of these motions that if the Satellite Providers are concerned about the continuation of the Stay beyond the Final Approval Hearing (which will take place on September 19, 2024) then notwithstanding the Stay, Xplore will not object or oppose the Satellite Providers giving written notice on or after August 16, 2024 that the termination of the Satellite Agreements will be effective 60 days from the date of such notice, to allow rural customers reasonable time to make alternative arrangements for internet services.

[68] This is a reasonable compromise, and the terms of the Stay contained in the Preliminary Initial Order shall be amended to allow for this. Since these reasons are being released on August 19, 2024, the Satellite Providers shall have the ability to provide this notice on or after August 20, 2024.

Should the Interim Order be Granted?

[69] On an application for approval of the Arrangement under s. 192 of the CBCA, the Applicants must satisfy the Court that (a) the statutory requirements under the CBCA have been fulfilled; (b) the Arrangement is put forward in good faith; and (c) the Arrangement is fair and reasonable.

[70] On an interim motion the court generally limits its analysis to:

a. the Applicants’ compliance with the statutory requirements of the CBCA; and b. the Applicants’ good faith in putting forward the Arrangement.

See Concordia (Re), 2017 ONSC 6357, at para. 24, citing Re 8440522 Canada Inc., 2013 ONSC 2509, at para. 41 [Mobilicity] and 45133541 Canada Inc., Re, 2009 QCCS 6444, at para. 53.

[71] These are the first two of the five issues that have been raised for the court to determine in deciding whether to grant the requested Interim Order (as outlined above):

i. Have the Applicants’ complied with the statutory requirements of the CBCA? ii. Have the Applicants acted in good faith in putting forward the Arrangement? iii. Is there no chance that the court will find the Arrangement to be fair and reasonable at the fairness hearing? iv. Is the proposed process and voting under the Interim Order appropriate? v. Is it appropriate to grant the requested alternative relief with respect to a CCAA Plan?

Have the Applicants Complied with the CBCA Statutory Requirements?

[72] The Satellite Providers appear in parts of their written submissions to concede that the first branch of the test is met, and that the statutory requirements under the CBCA have been satisfied. However, some of the arguments they made suggest that they continue to challenge this. The Satellite Providers are entitled to ask the court to re-examine the statutory requirements since they were not present at the time the Preliminary Interim Order was granted.

[73] The statutory requirements of the CBCA for the approval of an arrangement require the Applicants to establish that:

a. the Arrangement constitutes an “arrangement” within the meaning of s. 192(1) of the CBCA; b. the Applicants are not “insolvent” within the meaning of s. 192(2) of the CBCA; c. it is not practicable for the Applicant to effect a fundamental change in the nature of the Arrangement under any other provision of the CBCA; and d. the Applicants have given the Director appointed under s. 260 of the CBCA (the “CBCA Director”) notice of this Application.

[74] I remain satisfied that the Applicants have fulfilled the statutory requirements of the CBCA. The reasons for this remain as outlined in the Preliminary Order Reasons (as further elaborated upon in the Applicant's factum on this motion). The only substantive change since the Preliminary Interim Order was granted that is relevant to the satisfaction of the statutory requirements is that there is now a specific Arrangement to be considered.

[75] Having regard to the Arrangement, the statutory requirements are satisfied in the following respects:

a. The proposed Arrangement falls within the broad definition of an "arrangement" under s. 192. This is because the Arrangement involves, among other things, (a) the exchange of securities of a corporation (the Secured Debt of Xplore) for securities of the corporation (the Takeback Term Loans) and securities of another body corporate (the New Class A Common Shares to be issued by Stonepeak Holdings), (b) an amalgamation of two corporations (Xplore and 16029167 Canada Inc. (“ArrangeCo”)); and (c) the division of the Satellite Business and the Fixed Wireless Business. Canadian courts have previously approved CBCA arrangements involving non-CBCA entities, including where such non-CBCA entities (a) were guarantors of debt obligations being affected under the arrangement; or (b) issued securities in connection with the arrangement. See Concordia (Re), 2017 ONSC 6357; Ayr Wellness et al. CV-23-00709606-00CL, Endorsement of Kimmel J. dated December 19, 2023; RGL Reservoir Management Inc. (Re), 2017 ONSC 7302, at paras. 42 and 43; Essar Steel Canada Inc. (Re), 2014 ONSC 4285, at paras. 30-32. b. In terms of the solvency requirement, nothing has changed in respect of the entities that are part of the Arrangement. As noted in the Preliminary Order Reasons, ArrangeCo does not have any liabilities and is solvent. That is sufficient to satisfy the solvency requirement under s. 192(3) of the CBCA for purposes of this Preliminary Interim Order. ResidualCo is an entity to be incorporated or designated by the Xplore Parties. ResidualCo will not be a corporation subject to the CBCA, it will not form part of the Applicants' future business and is not part of the Arrangement. Accordingly, ResidualCo is not subject to the solvency requirement under s. 192(3) of the CBCA. Furthermore, as was noted in the Preliminary Order Reasons (with respect to the potential insolvency of Xplore), Canadian courts have determined that use of the arrangement provisions of the CBCA is not limited to cases where all the corporations involved are solvent. See Concordia (Re), 2017 ONSC 6357, at para. 30, citing Savage v. Amoco Acquisition Co. 1988 ABCA 148, 87 A.R. 321 (C.A.), at para. 5, and paras. 33-35; Re Essar Steel, 2014 ONSC 4285, at paras. 36–39; Mobilicity, 2013 ONSC 2509, at para. 53. c. The purpose of the Arrangement is to effect the Transaction, which will involve the numerous steps set out in Article 4 of the CBCA Plan. The exchange of the Secured Debt pursuant to the Transaction, which forms a critical part of the overall Transaction, could not be completed without the consent of 100% of the First Lien Debtholders and 100% of the Second Lien Debtholders outside of a CBCA arrangement. As a result, any alternative structure to that which is contemplated by the Arrangement would increase the risk of non-completion in light of the impracticality of obtaining 100% consent and it is, thus, impracticable for the Applicants to pursue the Arrangement under any other provision of the CBCA. d. The CBCA Director was given notice of the Interim Order sought in respect of the Arrangement and did not consider it necessary to appear, according to the July 31, 2024 letter filed.

Are the Applicants Putting Forward the Arrangement in Good Faith?

[76] The Preliminary Order Reasons concluded that the Transaction now contemplated by the Arrangement was in furtherance of the following valid business purposes:

a. Reducing the Company’s outstanding indebtedness and its annual interest costs; b. Improving The Company’s capital structure; and c. Putting the Company on a strong financial footing in order to execute on its business plan moving forward.

An application is considered to have been brought in good faith when there is a valid purpose for the arrangement, such as this: see Concordia (Re), 2017 ONSC 6357, at para. 40.

[77] The Satellite Providers believe that the CBCA Plan and the Arrangement are being used to unfairly prejudice their commercial and contractual rights rather than for the stated business purposes. That is a myopic view of this otherwise complex and multi-faceted Arrangement. Unquestionably, one of the consequences or effects of the Arrangement, if it is approved and if it proceeds, will be to bring an end to the Satellite Agreements prematurely and with limited recourse for the Satellite Providers. But the suggestion that prematurely ending and leaving behind Xplore's obligations under the Satellite Agreements is the purpose, or even one of the primary purposes, of the Arrangement is speculative and ignores the commercial realities and complexities of the circumstances of the Xplore Group.

[78] The uncontested commercial realities of this case are that (a) the Secured Debt exceeds the enterprise value of Xplore by $1 billion or more; (b) there is no value for the unsecured obligations under the Satellite Agreements; (c) the Satellite Agreements are unsustainable and must be addressed consensually or terminated; and (d) Xplore does not have the liquidity to pay the aggregate Contractual Payments to the Satellite Providers.

[79] The Satellite Providers argued that the CBCA structure is being used to avoid the "guardrails" or protections available to creditors under a CCAA restructuring in what is, in reality, an insolvency situation that the CBCA is not intended to be used for. The Applicants provided a detailed schedule appended to their factum of 34 cases involving debt restructurings under CBCA arrangements, including some of a similar magnitude to Xplore. While every case is different, it is clear that CBCA plans and arrangements have been used to restructure the debt of companies in financial distress in appropriate circumstances.

[80] The analysis and conclusions in the Preliminary Order Reasons regarding the Applicants' good faith in putting forward the Arrangement continue to apply.

Is there no Chance that the Court will Find the Arrangement to be Fair and Reasonable?

[81] The fairness and reasonableness of the Arrangement are generally not considered when an Initial Order is sought. The critical question as to whether the proposed Plan of Arrangement is procedurally and substantively "fair and reasonable" is determined at the return of the application, at the fairness hearing. At the interim order stage, the court need only be satisfied that "there is sufficient indication of fairness to warrant the matter proceeding to a vote and fairness hearing". see Manitou Gold Inc. and Alamos Gold Inc., 2023 ONSC 2485, at para. 16.

[82] The Satellite Providers contend that they are being unfairly singled out for different and unfair treatment. They argue that they are the only unsecured creditors whose debts will not be paid and whose contracts will be left behind under the proposed Transaction, as the Arrangement structure contemplates a reverse vesting order ("RVO") with the obligations to them being left in ResidualCo.

[83] The Satellite Providers say that RVOs are the exception rather than the norm in CCAA arrangements and are unprecedented in CBCA arrangements. That is true.

[84] The primary argument advanced at this stage for the court to block the Arrangement and the Plan from proceeding to a vote at the Meeting of Secured Debtholders and to be thereafter considered by the court is that an RVO structure has never been used in a CBCA plan and, they say, it has no chance of being approved in this case because it is manifestly unfair to them, so the court might as well put a stop to this now rather than awaiting the fairness hearing.

[85] The parties presented extensive written and oral arguments on the RVO fairness point. I am not prepared to pre-determine the fairness of the Arrangement at this stage. The arguments made at this hearing, and any others raised, will be considered at the Final Approval Hearing. I am satisfied based on the written and oral submissions made on these motions that the novelty of the RVO structure in the CBCA context does not foreclose the possibility of a finding that the proposed Arrangement is fair and reasonable. The issues are sufficiently nuanced and complex that a full blown fairness hearing is warranted in this case.

[86] The Satellite Providers also argue that the proposed Transaction and Arrangement structure offends the pari passu principle that requires ratable and equal treatment of creditors within the same class when it comes to the distribution of assets of an insolvent debtor. However, there is no proposed or contemplated distribution under the Arrangement. Further, they appear to be operating under the misapprehension that equityholders and the Secured Debtholders are somehow benefitting at the expense of the Satellite Providers. That misapprehension ignores the significant compromises that those other stakeholders are making in order to support the Arrangement that cannot succeed under the continuing burden of uneconomic Satellite Agreements. These arguments do not change my view that that there is sufficient indication of fairness with respect to the CBCA Plan and Arrangement to warrant the matter proceeding to a vote and fairness hearing.

[87] To be clear, the appropriateness of the RVO and other terms and conditions of the CBCA Plan and/or the Transaction all remain subject to the court's further review and consideration at the Final Approval Hearing. The Applicants have said that they will satisfy the court that the Arrangement to be implemented by the CBCA Plan is fair and reasonable and that any other terms that they seek the court's approval of in the Final Order (for example, third party releases) are appropriate. All of that is still to be determined.

Who Should be Allowed to Vote on the Arrangement?

[88] The Satellite Providers challenge the voting provisions of the Interim Order because it only proposes to have the class of Secured Debtholders vote on it. They say this is unfair to them. They say that they are securityholders (unsecured creditors) whose legal contractual rights stand to be affected by the Transaction and the Arrangement, so they should be permitted to vote. see BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, at para. 131 [BCE (Re)].

[89] Xplore argues that the legal rights of the Satellite Providers are not being arranged so there is nothing for them to vote on within the framework of the CBCA. A vote is one way for a stakeholder to make its views about something known and taken into consideration.

[90] Voting is a convenient way of ascertaining the views of a large and dispersed class of stakeholders and binding the minority to the majority vote, as the Applicants propose to do in this case in relation to the Secured Debtholders. However, not all plans are voted on. As the Supreme Court of Canada observed in BCE (Re), 2008 SCC 69, at para. 151: "Where there has been no vote, courts may consider whether an intelligent and honest business person, as a member of the class concerned and acting in his or her own interest, might reasonably approve of the plan: Citing Re Alabama, New Orleans, Texas and Pacific Junction Railway Co., [1891] 1 Ch. 213 (C.A.); and Trizec Corp., Re (1994), 21 Alta. L.R. (3d) 435 (Q.B.).

[91] The two Satellite Providers do not need the court to create a special voting class for unsecured creditors in order for them to make their views known regarding the CBCA Plan and the Arrangement. They will be given the opportunity to make their views known to the court by submissions they make at the Final Approval Hearing. They do not need a vote to express their opposition to the Arrangement and the CBCA Plan if that remains their position at the Final Approval Hearing.

[92] In contrast, the voting for the Secured Debtholders serves an entirely different and practical purpose, which is to ensure there is a requisite majority vote in favour of the Arrangement under the CBCA Plan before binding what is otherwise a disparate group of similarly situated creditors whose rights are very clearly being arranged through the various exchanges of securities (described above in the "arrangement" section of this endorsement).

[93] Nor is the outcome of any vote on the CBCA Plan determinative of whether it will be approved in any event. It is one among many fact-specific factors that will be considered at the fairness hearing. See BCE (Re), 2008 SCC 69, at paras. 127, 150-154.

[94] I am satisfied that the voting provisions of the Interim Order are appropriate in the circumstances and that they need not be changed to allow the Satellite Providers to vote on the Arrangement. They will have the opportunity to make their views known at the Final Approval Hearing. The Interim Order makes it clear who will have standing to participate.

Should the Interim Order Allow for a Pivot to a CCAA Plan?

[95] The Interim Order, like the Preliminary Interim Order, preserves the ability of the Xplore Entities to pivot to a CCAA proceeding if a transaction cannot be effectuated under the CBCA, although the CBCA is the preferred route at this time.

[96] Counsel for the Applicants advised the court that this type of alternative CCAA provision has been approved in other cases to enable an applicant to pivot to a CCAA proceeding if necessary to complete a recapitalization transaction, giving as examples: Mobilicity, 2013 ONSC 2509, at para. 30 and Concordia (Re), 2017 ONSC 6357, at para. 47; see also Concordia International Corp. (Re), 2018 ONSC 4165 at para. 26.

[97] The Applicants explain that a CCAA pivot would only arise if the CBCA Plan is not approved at the Final Approval Hearing. While implementing the Transaction through a CCAA process is not the preferred path as it would result in greater risk and disruption to the Business and worse outcomes for many stakeholders (including, according to the Applicants, the Satellite Providers), the Applicants believe the relief is nevertheless important to enable them to efficiently implement the Transaction through a CCAA proceeding if that becomes necessary.

[98] In that event, the Applicants want the ability to rely on the vote of the Secured Debtholders for the CBCA Plan for purposes of the same plan that they would put forward under the CCAA. That is a reasonable, efficient, cost effective and proportionate way to proceed, assuming the material terms of the plan are not changed in this pivot to an alternative CCAA plan. It does not make sense to require that same class of securityholders to vote again on the same plan within a short timeframe.

[99] I do not read the proposed Interim Order as pre-determining that, if there is a CCAA pivot, stakeholders (including the Satellite Providers) who did not vote on the CBCA Plan will not be afforded the opportunity to vote on a CCAA Plan. As I read the Interim Order (at paragraph 33), it only deals with the votes cast by the Secured Debtholders in respect of the Arrangement Resolution, deeming them to be votes cast in respect of the Alternative CCAA Plan without requiring the Applicants to conduct a meeting of the Secured Debtholders in such CCAA proceeding for purposes of voting on the Alternative CCAA Plan.

[100] The Satellite Providers were not granted a class vote on the CBCA Plan because it was determined not to be necessary, having regard to the nature of these proceedings under the CBCA and that their views can be considered even if they do not vote (the vote simply being indicative of the views of the voting securityholders and not determinative of the court's approval of the CBCA Plan and the Arrangement).

[101] CCAA voting may entail different considerations for them, starting with whether they would be entitled to vote on a CCAA plan at all. The CCAA has its own provisions dealing with classification of creditors for voting purposes. The Applicants indicated that they do not intend to do a plan for unsecured creditors if they pivot to an Alternative CCAA Plan. Some submissions were made about the weight that the Satellite Providers' votes would carry in any class of unsecured creditors voting on a CCAA Plan, if that were to be prescribed. The court is not addressing the voting rights and mechanics under a CCAA plan at this time and I make no findings or determinations about that now.

Other Terms of the Interim Order

[102] Concerns were raised about paragraph 37 of the draft Interim Order, that allowed for the Applicants to file materials up to one day before the Final Order Hearing. It was agreed that this paragraph would be removed from the initial Order.

[103] The Satellite Providers indicated at the conclusion of the full day hearing on August 1, 2024 that they might have other comments or concerns about the proposed terms of the Interim Order. They suggested that they would provide them in a further round of written submissions, which the court was not able to accommodate. The interested parties were expected to have addressed all comments and concerns about the Initial Order at the hearing of the motion for its approval. Those comments and concerns have been addressed.

Should the Stay be lifted to enable Hughes to issue an Application for a Bankruptcy Order against Xplore?

[104] In November 2023, Xplore entered into the "Intercompany Transfer Transaction" pursuant to which Xplore "transferred certain assets" related to its Fixed Wireless and Fibre Business to Xplore Fibre L.P. ("Xplore Fibre"), a subsidiary of Xplore. The Satellite Providers wish to preserve their ability to challenge this as a preference or transaction at undervalue in the event of bankruptcy, but are concerned that the look back period may expire while these proceedings are ongoing.

[105] Hughes seeks an Order lifting the Stay to permit it to issue the Application for Bankruptcy so it can crystalize the look back date for any potential challenges to this Intercompany Transfer Transaction within a year of when the transaction was concluded.

[106] Xplore is concerned that a premature bankruptcy petition will undermine the "business as usual" premise of the CBCA Arrangement that it is pursuing and will interfere with Xplore's customers and suppliers in the continuing lines of business that will be essential to its future success under the CBCA Plan, if approved.

[107] As a compromise, it was suggested that this request at least be delayed until the Final Approval Hearing and the court's determination regarding the proposed CBCA Plan and Arrangement. That makes good sense and will not prejudice Hughes as long as it can bring this back before the court in advance of the one year anniversary of the Intercompany Transfer Transaction. Accordingly, this aspect of Hughes’ motion is adjourned to the fairness hearing on September 19, 2024.

[108] In the meantime, Xplore is encouraged to provide what it can to satisfy Hughes that this was not a preference or transaction at undervalue (as it has said it can do). If Hughes is persuaded, then its motion can be withdrawn. If not, then the interested parties should update the court regarding their positions on this issue at the Final Approval Hearing on September 19, 2024 and further directions may be provided by the court at that time.

Summary of Orders and Directions

[109] The following orders and directions are made:

a. The Applicants' motion for an Interim Order is granted. The Interim Order was signed on August 16, 2024, in advance of the release of these reasons. The form of order signed removed what was paragraph 37 of the draft, to address the concern raised that it allowed for service of materials by the Applicants for the Final Approval Hearing on one day's notice, which all agreed would not be reasonable given the anticipated opposition to the final approval order. b. The Final Approval Hearing is scheduled for a full day on September 19, 2024, before me if my schedule permits. The participating parties shall agree upon a timetable for the pre-hearing steps such that all materials shall have been served, filed and uploaded into Case Center (formerly known as CaseLines) by no later than September 18, 2024 at 12:30 p.m., together with a proposed schedule for the time that each participating party will be allocated at the hearing. If the parties cannot agreed on a timetable for these steps a case conference may be arranged before me through the Commercial List scheduling office. c. The terms of the Stay in the Preliminary Interim Order shall be revised to allow for the termination of the Satellite Agreements (and related contracts) by the Satellite Providers on or after August 20, 2024, upon 60 days written notice to the Company. d. Hughes' request for the Stay to be lifted so it can issue the Application for Bankruptcy is adjourned to September 19, 2024 to be spoken to at that time.

KIMMEL J. Date: August 19, 2024

[1] Some interested parties, including a Lenders' Committee representing a majority of the secured lenders and an affiliate of Xplore's primary equity holder, were given advance notice and appeared at the hearing on June 3, 2024. However, the Applicants were concerned that unsecured creditors, specifically certain Satellite Providers, might take unilateral steps with potential negative consequences for some Xplore Entities and their customers between the time they received notice of the preliminary interim motion and the time it took the Applicants to get to court and ask for the Stay, so not all interested stakeholders were given notice.