Court File and Parties

COURT FILE NO.: CV-24-00717340-00CL DATE: 20241213 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 and Ines Ferreira, for the Applicants Raj Sahni, for the Directors and Officers Kelly Bourassa, Daniel Loberto and Chris Burr, for the Monitor John Salmas, for Bank of Montreal Daniel Richer, for DIP/Syndicate Lenders Steve Brown-Okruhlik, for Roynat Blair McRadu and Sean Stidwill, for Mitsubishi HC Capital Trevor Courtis, for Bennington Financial Corp. Elaine Gray, for Daimler Truck Financial Services Canada Corporation and Daimler Truck Financial Services Ben Muller, for RBC as Financial Services Agent Caroline Descours, for Regions Bank, Regions Equipment Finance Corporation and Regions Commercial Equipment Finance LLC

HEARD: December 13, 2024

Endorsement

[1] The Applicants bring this motion seeking the following orders:

a. approval, vesting and distribution orders in respect of: i. the property at 3375 High Prairie Road, Grand Prairie, Texas and related assets; ii. the property at 34880 Lyndon B Johnson Fwy, Dallas, Texas and related assets; iii. the property at 6111 W. Hanna Avenue, Indianapolis, Indiana and related assets; iv. the property at 4 Street SE Rocky View County, Alberta, (Calgary), and related assets; and v. all of the issued and outstanding shares of 963 Sweetwater Holding Corp. (Sweetwater); b. the PGL Lenders’ Payment Order authorizing the Pride Entities to pay certain lenders of the PGL Entities amounts currently held in trust for their benefit; c. an order authorizing distributions to: i. Roynat, in its capacity as mortgagee, the proceeds of the Roynat AVOs, net of a reserve, as permanent payment of its indebtedness in accordance with the Claims Preservation Protocol; and ii. RBC, first in its capacity as DIP Agent under the DIP Facility of certain Surplus Funds, and second in its capacity as Administrative Agent for the Syndicate Lenders resulting from the sale of certain real property, net of a reserve; d. an order amending the Wind-Down Order to include Mitsubishi HC Capital Canada Inc. and Mitsubishi HC Capital Canada Leasing, Inc. as a Recourse Lender thereunder and clarifying the parties to which notice is to be delivered; e. a Factoring Order authorizing and directing the Syndicate Agent to release to TPine Financial certain funds held in the TPine Financial blocked account as determined by the Monitor to be the property of other persons, to allow TPine Financial to pay such funds to the appropriate factoring company and/or appropriate third-party; and f. an Amended and Restated Lien Discharge Order amending the Lien Discharge Order to provide that any persons asserting possessory liens are directed to turn over vehicles in their possession upon the posting of lien security in accordance with that order and, in the event the Pride Entities receive insurance proceeds in respect of vehicles subject to an unresolved lien, that they are authorized to post a portion thereof as lien security in accordance with the order.

[2] Defined terms in this Endorsement have the meaning given to them in the motion materials, including the affidavits of the Chief Restructuring Officer, Randall Benson, sworn November 7 and December 7, 2024, the 19th Report of the Monitor dated December 10, 2024 and the Supplement thereto dated December 12, 2024, unless otherwise stated.

[3] The Service List has received the motion materials and the Reports of the Monitor. The relief sought today is unopposed, and is strongly recommended by the Court-appointed Monitor as well as the Chief Restructuring Officer.

[4] I am satisfied that the proposed relief should be granted.

[5] First, with respect to the proposed distributions to the PGL Lenders, the Second ARIO permitted the Pride Entities to sell Surplus Assets under certain conditions and with the consent of the Monitor, the DIP Agent and any affected secured lender with the registration under a Personal Property Registry in a Canadian or United States jurisdiction. Proceeds of such sales were held in segregated accounts.

[6] Surplus Assets with aggregate net proceeds of $5,916,400 have now been sold. The amounts are attributable to certain of the PGL Lenders as fully set out in Mr. Benson’s affidavit and the 19th Report, and I am satisfied that the Pride Entities should be, and now are, authorized to distribute those segregated amounts to the relevant PGL Lenders.

[7] Similarly, and pursuant to the Payment Procedure Agreement, the Pride Entities are now in a position to remit the Deferred Equipment Payments in the aggregate approximate amount of $5,214,000, and they are authorized to distribute those amounts to the PGL Lenders.

[8] Second, with respect to the proposed real property transactions, the sales process, offers solicited and/or received, and particulars of the transaction in respect of which approval is sought for each property are fully set out in the materials and the 19th Report. The intended closing date for each is imminent, and therefore consideration of whether the transactions should be approved is time sensitive.

[9] I recognize that certain of the properties to be sold (Grand Prairie, Texas; Dallas, Texas; and Indianapolis, Indiana) are obviously located in the United States with the result that the Pride Entities will schedule as soon as possible a motion before the US Court to seek corresponding approvals in the Chapter 15 Proceedings.

[10] The transactions will yield material net proceeds in respect of the sales given the respective purchase price for each property and related assets as set out in the agreements, as follows:

a. Grand Prairie, Texas: USD $15,850,000; b. Dallas, Texas: USD $7,410,000; c. Indianapolis, Indiana: USD $9,500,000; d. Calgary, Alberta: CDN $11,100,000; and e. Sweetwater: USD $4,425,000 subject to adjustments.

[11] The first four of those transactions represent the sale in each case of real property. The sales process in respect of each is fully described in the materials, the proposed purchaser in each case is unrelated to the Pride Entities or any of their principals, and in each case is, to the best of the knowledge and belief of the Monitor and the CRO, an arm’s-length third-party.

[12] The transaction in respect of Sweetwater relates to the sale of the issued and outstanding shares of Sweetwater. It is a single-purpose Delaware company and an Applicant in this CCAA Proceeding, the only asset of which is a house located in Boca Raton, Florida. Sweetwater and one of the principals of the Pride Entities, Sulakhan Johal, are co-borrowers under a mortgage with RBC Bank, Georgia, N.A., which holds a registered first charge, the validity and enforceability of which has been confirmed by the Monitor. The transaction is structured as a share sale to maintain the mortgage facility and terms. There is no prejudice to the stakeholders with respect to such a structure, in the view of the Monitor and CRO.

[13] Given the obvious conflict of interest in respect of Sweetwater, the Applicants were not involved in the sales process conducted and overseen by the Monitor with the assistance of US real estate brokers. As noted, the first registered mortgage has been confirmed by the Monitor to be valid and enforceable. Counsel for the Monitor confirmed to the Court that the proposed purchaser of Sweetwater is unrelated to the Pride Entities or any of the principals thereof, and is, to the best of the knowledge and belief of the Monitor and the CRO, an arm’s-length third-party.

[14] I am satisfied that the transactions should be approved, and that in each case, the factors set out in s. 36(3) of the CCAA as well as the Soundair Principles have been satisfied. I am further satisfied that the terms of the proposed approval and vesting order in each case, are appropriate. Each proposed transaction represents the highest and best offer received for each property and related assets (or, in the case of Sweetwater, the shares and related assets) and each transaction represents the highest and best value and is therefore in the best interests of the Pride Entities, their creditors and other stakeholders.

[15] Accordingly, the transactions are approved. The Sweetwater approval and vesting order would also have the effect of removing Sweetwater as an Applicant in this CCAA Proceeding, which is appropriate given that Sweetwater is a single-purpose entity, the only asset of which is the Boca Raton, Florida property.

[16] I observe the Foreign Representative also intends to file a motion to dismiss the Chapter 15 Case in respect of Sweetwater (only) after the closing of that transaction.

[17] Third, the proposed distributions to Roynat are appropriate. Various transactions in respect of real property subject to mortgages in its favour have already been approved, including in respect of the following properties: Chehalis, Washington; Cornwall, Ontario; Abbotsford, British Columbia; and Monroe, Michigan.

[18] Security reviews by the Monitor have now been completed in respect of all of those properties, except for the Chehalis, Washington property, all as described in the 19th Report. Accordingly, distributions to Roynat in respect of the net proceeds related to those properties are authorized and approved. The Monitor is working diligently to complete its security review with respect to the Chehalis, Washington property, and counsel for Roynat has expressed, not for the first time, its strong desire to have those net proceeds distributed as soon as possible. That approval will be the subject of a future motion.

[19] Fourth, the amendments to the Wind-Down Order, principally to address the Mitsubishi parties, are appropriate and are approved. Mitsubishi has advised the Monitor that it would like to withdraw from the Monitor’s Validation Mandate (as defined in the 10th Report), and that Mitsubishi is content to accept a turnover of the Mitsubishi Repossessed Assets on the terms of the Wind-Down Order and similar in scope and approach to that applicable to Bennington Financial Corp. and those assets in respect of which it has an interest.

[20] This requires an amendment to the Wind-Down Order to include Mitsubishi within the definition of “Recourse Lender” as fully described in the 19th Report with the effect of extending the successful Recourse Lender turnover framework to Mitsubishi and eliminate existing uncertainty about the treatment of Mitsubishi Repossessed Assets.

[21] Finally with respect to the Wind-Down Order, and as a more clerical matter, it is proposed to be amended to ensure that reporting to be delivered by the Recourse Lenders relating to the receipt of proceeds is delivered to the proper parties as specified therein. That is also appropriate, practical, and is approved.

[22] Fifth, the proposed amendments to the Lien Discharge Order are appropriate to address ongoing issues faced by the Pride Entities in respect of certain vehicles. In particular, two complications have arisen since the Lien Discharge Order was made. First, possessory liens are preventing the Pride Entities from being able to ascertain the physical units from third parties for the turnover of subject vehicles in accordance with the Lien Discharge Order. Second, liens registered against vehicles subject to insurance claims in which the insurance proceeds cannot be released until the relevant lien is discharged, have also arisen.

[23] To address these two scenarios, the Lien Discharge Order is proposed to be amended to permit the Pride Entities to address the subject vehicles while protecting the interests of the relevant Lien Claimants. The proposed amendments do that, and they are approved. I am satisfied that, as recommended by the CRO and Monitor, the proposed relief represents the most efficient path forward to continue the sale of vehicles impacted by RSLA Liens that are otherwise not capable of being sold while preserving lien rights.

[24] Sixth and finally, the proposed amendments in respect of the Factoring Order to deal with the TPine blocked accounts are appropriate, principally for the reasons set out in the 19th Report at paragraphs 53 – 56 and the CRO’s affidavit filed in respect of this motion.

[25] In addition to the jurisdiction found in s. 36(3) of the CCAA and informed by application of the Soundair Principles in respect of the real property dispositions described above, I am satisfied that this Court has the jurisdiction to grant all of the above relief pursuant to the discretion found in s. 11 of the CCAA.

[26] Orders to go in the form signed by me today to give effect to the above relief. The orders are effective immediately and without the necessity of issuing and entering.

Osborne J.