Court File No.: CV-17-11846-00CL 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 SEARS CANADA INC., 9370-2751 QUEBEC INC., 191020 CANADA INC., THE CUT INC., SEARS CONTACT SERVICES INC., INITIUM LOGISTICS SERVICES INC., INITIUM COMMERCE LABS INC., INITIUM TRADING AND SOURCING CORP., SEARS FLOOR COVERING CENTRES INC., 173470 CANADA INC., 2497089 ONTARIO INC., 6988741 CANADA INC., 10011711 CANADA INC., 1592580 ONTARIO LIMITED, 955041 ALBERTA LTD., 4201531 CANADA INC., 168886 CANADA INC., and 3339611 CANADA INC. ((each an "Applicant", and collectively, the "Applicants" or "Sears Canada") MOTION RECORD (Motion by Retirees re: Deemed Trust and distribution to the pension plan) July 20, 2018 KOSKIE MINSKY LLP 20 Queen Street West, Suite 900, Box 52 Toronto, ON M5H 3R3 Andrew J. Hatnay (LSUC# 31885W) Tel: 416-595-2083 / Fax: 416-204-2872 Email: [email protected] Demetrios Yiokaris LSUC#: 45852L Tel: 416-595-2130/ Fax: 416-204-2810 Email: [email protected] Amy Tang - LSUC #70164K Tel: 416-542-6296 / Fax: 416-204-4936 Email: [email protected] Representative Counsel for the Retirees of Sears Canada TABLE OF CONTENTS TAB DESCRIPTION PAGE NOS. 1. Notice of Motion dated July 20, 2018 1-12 2. Affidavit of William B. Turner (to be sworn) 13-27 Exhibit "A": Media Articles describing involvement of Lampert and ESL and Sears Canada: "Sears Canada Announces Change in Ownership of Controlling Shareholder", Form 51-102F3 Material Change Report Sears Canada Inc. dated March 24, 2005; 28-38 Constance L. Hays, "Kmart Takeover of Sears Is Set; $11 Billion Deal, The New York Times (18 November 2004); and, Yuval Rosenberg, "The man behind the deal", CNN Money (17 November 2004) Exhibit "B": Sears Holdings' Pre-Recorded Conference Call Transcripts, dated February 27, 2014 39-59 Exhibit "C": Sears Holdings' Pre-Recorded Conference Call Transcripts, dated May 22, 2014 60-75 Exhibit "D": Sears Holdings' Pre-Recorded Conference Call Transcripts, dated August 21, 2014 76-94 Exhibit "E": "SCC.CA Dividend History & Description – Sears Canada" Dividend Channel 95-98 online:<http://www.dividendchannel.com/symbol/scc.ca/ Exhibit "F": Sears Canada Director/Dividend Timeline 99-100 Exhibit "G": Sears Canada Inc. Registered Retirement Plan 101-335 Exhibit "H": SRPP Actuarial Valuation Report as at December 31, 2015 336-404 Exhibit "I": Proof of Claim of Pension Representatives for Wind-up Deficit 405-411 TAB DESCRIPTION PAGE NOS. Exhibit "J": The Steps Taken by SCRG to Protect Sears Retirees Pension and Benefits 412-415 Exhibit "K" : SISP Approval Order dated July 13, 2017 416-430 Exhibit "L": First Liquidation Process Order dated July 18, 2017 431-462 Exhibit "M": Superintendent's Notice of Intended Decision to Wind-up the SRRP 463-468 Exhibit "N": Superintendent's Order to Wind-up the SRRP, dated March 29, 2018 469-474 Exhibit "O": Letter from Koskie Minsky to the Service List, dated October 26, 2017 475-477 Exhibit "P": Letter from Morneau Shepell to Non- Ontario Members of SRRP, dated June 1, 2018 478-481 Exhibit "Q": Letter from Morneau Shepell to Ontario Members of SRRP, dated June 1, 2018 482-486 Exhibit "R" : 2015 Annual Information Return for SRRP 487-492 Exhibit "S" : Sears Supplemental Retirement Plan 493-538 3. Affidavit of William Turner, sworn on August 11, 2017 539-549 Exhibit "A": Timeline setting out steps taken by SCRG 550-553 to protect the pension and benefits of Sears retirees Exhibit "B": Letter from SCRG to Sears Canada Inc. 554-559 dated January 30, 2013 Exhibit "C": Letter from Koskie Minsky to Torys LLP 560-583 dated January 20, 2014 Exhibit "D": Letter from Koskie Minsky to Torys LLP 584-586 dated November 6, 2014 Exhibit "E": Letter from Torys LLP to Koskie Minsky 587-586 dated November 21, 2014 TAB DESCRIPTION PAGE NOS. Exhibit "F": Letter from Koskie Minksy to FSCO dated 589-593 February 27, 2015 Exhibit "G": Letter from Koskie Minsky to FSCO dated 594-597 May 4, 2015 Exhibit "H": Letter from Koskie Minsky to FSCO dated 598-605 June 5, 2015 Exhibit "I": Letter from FSCO to Torys LLP dated June 606-607 11, 2015 Exhibit "J": Letter from FSCO to Koskie Minsky dated 608-609 June 11, 2015 Exhibit "K": Letter from Torys LLP to FSCO dated 610-613 June 22, 2015 Exhibit "L": Letter from FSCO to Koskie Minsky dated 614-615 June 23, 2015 Exhibit "M": Letter from Koskie Minsky to FSCO 616-630 dated July 7, 2015 Exhibit "N": Letter from FSCO to Koskie Minsky dated 631-632 July 30, 2015 Exhibit "O": Letter from Koskie Minsky to FSCO dated 633-634 November 3, 2015 Exhibit "P": Letter from FSCO to Torys LLP dated 635-640 November 6, 2015 Exhibit "Q": Letter from Torys LLP to FSCO dated 641-644 December 9, 2015 Exhibit "R": Letter from FSCO to Torys LLP dated 645-647 January 15, 2016 Exhibit "S": Letter from Torys LLP to FSCO dated 648-653 February 16, 2016 Exhibit "T": Letter from Koskie Minsky to FSCO dated 654-660 March 1, 2016 TAB DESCRIPTION PAGE NOS. Exhibit "U": Email from Koskie Minsky to FSCO dated 661-662 March 10, 2016 Exhibit "V": Letter from Koskie Minsky to FSCO dated 663-665 September 12, 2016 Exhibit "W": Letter from Koskie Minsky to FSCO 667-668 dated October 20, 2016 Exhibit "X": Letter from Koskie Minsky to Osler LLP 669-671 dated May 19, 2017 Exhibit "Y": Letter from Osler LLP to Koskie Minsky 672-674 dated June 5, 2017 TAB 1 1 Court File No.: CV-17-11846-00CL 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 SEARS CANADA INC., 9370-2751 QUEBEC INC., 191020 CANADA INC., THE CUT INC., SEARS CONTACT SERVICES INC., INITIUM LOGISTICS SERVICES INC., INITIUM COMMERCE LABS INC., INITIUM TRADING AND SOURCING CORP., SEARS FLOOR COVERING CENTRES INC., 173470 CANADA INC., 2497089 ONTARIO INC., 6988741 CANADA INC., 10011711 CANADA INC., 1592580 ONTARIO LIMITED, 955041 ALBERTA LTD., 4201531 CANADA INC., 168886 CANADA INC., and 3339611 CANADA INC. (each an "Applicant", and collectively, the "Applicants" or "Sears Canada") NOTICE OF MOTION (Motion by Retirees re: Deemed Trust and distribution to the pension plan) Representative Counsel to the court-appointed Representatives of employees and retirees with respect to pensions and post-retirement benefits of the Applicants (collectively, the "Retirees") will make a motion to a Judge presiding over the Commercial List on a date to be established by the Commercial List Office at 330 University Avenue, Toronto, Ontario. PROPOSED METHOD OF HEARING: The motion is to be heard: orally. THE MOTION IS FOR: 1. A DECLARATION that the amount of the pension plan wind up deficit (the "Wind Up Deficit") as determined in the actuarial wind up report, that is owing by Sears - 2 - 2 Canada to the Sears Canada Inc. Registered Retirement Plan, Registration No. 0360065; the "Sears Canada Plan") is deemed to be held in trust (the "Deemed Trust") for the beneficiaries of the Sears Canada Plan among the assets in the estate of Sears Canada, in accordance with section 57(4) of the Pension Benefits Act R.S.O. c. P. 8 (“PBA”); 2. A DECLARATION that the amount subject to the Deemed Trust has priority ahead of the claims of all other creditors of Sears Canada, and that such amount is not distributable to such other creditors (other than the CCAA court-ordered charges described at paragraphs 47 and 50 of the Amended and Restated Initial Order, dated June 22, 2017 (the "CCAA Charges")); 3. AN ORDER directing the Monitor (or any subsequent trustee in bankruptcy or receiver) to pay the amount of Wind Up Deficit from the assets in the estate of Sears Canada into the fund of the Sears Canada Plan, after reasonable reserves in respect of the CCAA Charges; 4. A DECLARATION that the plan administrator that was appointed by the Ontario Superintendent of Financial Services for the Sears Canada Plan, Morneau Shepell, ("Morneau" or the "Administrator"), has a lien and charge under section 57(5) of the PBA for the same amount of the Wind Up Deficit (the "Administrator's Lien and Charge"); 5. A DECLARATION that the above declarations and orders survive any future bankruptcy or receivership of the Applicants; and, KM-3365103v8 - 3 - 3 6. Such further and other relief as counsel may request and this Honourable Court permit. THE GROUNDS FOR THE MOTION ARE: Background of the Sears Canada CCAA proceeding 1. In 2005, Sears Canada came under the control of Edward Lampert ("Lampert") and his firm, ESL Investments ("ESL"), a hedge fund, both based in the United States. Lampert is the Chief Executive Officer of ESL. The path to control of Sears Canada commenced on or about January 22, 2002 when Kmart Corporation filed for Chapter 11 bankruptcy protection. It emerged from Chapter 11 as a subsidiary of the newly formed Kmart Holding Corporation ("Kmart"), which began trading on the NASDAQ stock exchange on June 10, 2003. Through debt purchases made by ESL during the Kmart Chapter 11 proceedings, ESL became the majority shareholder of Kmart, controlling 53% of the stock of the new company. 2. On March 24, 2005, Kmart acquired Sears, Roebuck and Co. to form Sears Holdings Corporation ("Sears Holdings"). Sears Roebuck and Co. owned approximately 54.3% of the shares of Sears Canada.