Court File No.: CV-20-00639000-00CL 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 JAMES E. WAGNER CULTIVATION CORPORATION, JAMES E. WAGNER CULTIVATION LTD., JWC 1 LTD., JWC 2 LTD., JWC SUPPLY LTD. AND GROWTHSTORM INC. Applicants BOOK OF AUTHORITIES OF THE APPLICANTS (Returnable June 2, 2020) May 25, 2020 BENNETT JONES LLP 3400 One First Canadian Place P.O. Box 130 Toronto, ON M5X 1A4 Sean Zweig (LSO# 57307I) Email: [email protected] Mike Shakra (LSO# 64604K) Email: [email protected] Aiden Nelms (LSO# 74170S) Email: [email protected] Tel: (416) 863-1200 Fax: (416) 863-1716 Lawyers for the Applicants INDEX Court File No.: CV-20-00639000-00CL 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 JAMES E. WAGNER CULTIVATION CORPORATION, JAMES E. WAGNER CULTIVATION LTD., JWC 1 LTD., JWC 2 LTD., JWC SUPPLY LTD. AND GROWTHSTORM INC. Applicants INDEX TAB CASES 1. Target Canada Co, Re, 2015 ONSC 1487 2. Re Canwest Publishing Inc, 2010 ONSC 2870 3. Eddie Bauer of Canada Inc, Re (2009), OJ No. 3784 4. Royal Bank v Soundair Corp, [1991] 4 OR (3d) 1 5. Bloom Lake, g.p.l., Re, 2015 QCCS 1920 6. Canwest Global Communications Corp, (September 8, 2010), Toronto, CV-09-8396- 00CL (Approval and Vesting Order) 7. Great Slave Helicopters Ltd, (November 23, 2018), Toronto, CV-18604434-00CL (Approval and Vesting Order) - 2 - 8. Clover Leaf Holdings Company, (January 28, 2020), Toronto, CV-19-631523-00CL (Approval and Vesting Order) 9. Aralez Pharmaceuticals Inc, (December 7, 2018), Toronto, CV-18-603054-00CL (Approval and Vesting Order) TAB 1 2015 ONSC 1487 Ontario Superior Court of Justice Target Canada Co., Re 2015 CarswellOnt 3261, 2015 ONSC 1487, 23 C.B.R. (6th) 314, 252 A.C.W.S. (3d) 9 In the Matter of the Companies' Creditors Arrangement Act, R.S.C., 1985, c. C-36, as Amended In the Matter of a Plan of Compromise or Arrangement of Target Canada Co., Target Canada Health Co., Target Canada Mobile GP Co., Target Canada Pharmacy (BC) Corp., Target Canada Pharmacy (Ontario) Corp., Target Canada Pharmacy Corp., Target Canada Pharmacy (SK) Corp., and Target Canada Property LLC. G.B. Morawetz R.S.J. Heard: March 5, 2015 Judgment: March 5, 2015 Docket: CV-15-10832-00CL Counsel: Jeremy Dacks, Tracy Sandler, Shawn Irving for Applicants, Target Canada Co., Target Canada Health Co., Target Canada Mobile GP Co., Target Canada Pharmacy (BC) Corp., Target Canada Pharmacy (Ontario) Corp., Target Canada Pharmacy Corp., Target Canada Pharmacy (SK) Corp., and Target Canada Property LLC Jay Swartz for Target Corporation D.J. Miller for Oxford Properties Group Inc. Jeff Carhart for Hamilton Beach Corp. et al. Alan Mark, Melaney Wagner for Monitor, Alvarez & Marsal Inc. Leonard Loewith for Solutions 2 Go et al. Aubrey Kauffman for Ivanhoe Cambridge Inc. Ruzbeh Hosseini for Amskor Corporation Sean Zweig for RioCan Management Inc. and Kingsett Capital Inc. Lou Brzezinski, Alexandra Teoderescu for Thyssenkrupp Elevator (Canada) Limited, Advitek, Universal Studios Canada Inc., Nintendo of Canada, Ltd., and Bentall Kennedy (Canada) LP Group Melvyn L. Solmon for ISSI Inc. Related Abridgment Classifications Bankruptcy and insolvency XIX Companies' Creditors Arrangement Act 1 XIX.3 Arrangements XIX.3.b Approval by court XIX.3.b.iv Miscellaneous Headnote Bankruptcy and insolvency --- Companies' Creditors Arrangement Act — Arrangements — Approval by court — Miscellaneous Retail chain store encountered financial difficulties and proceedings were engaged under Companies' Creditors Arrangement Act — Chain entered into agreement under which it was to surrender its interest in eleven leases to landlord entities in consideration for purchase price and certain other benefits — To enter into agreement, leases were withdrawn from auction and sale process — Sublessors, who were creditors, would require payment for breaking leases — Certain parties brought motion to approve sale — Motion granted — No indication debtor acted improvidently — Debtor, financial advisor and monitor felt lease transaction was in best interests of debtors and their stakeholders and that consideration received was reasonable, and this view was entitled to deference by court — Process for achieving sale was fair and reasonable — Actual price under agreement was commercially sensitive, and was ordered sealed. Table of Authorities Cases considered by G.B. Morawetz R.S.J.: Canwest Publishing Inc./Publications Canwest Inc., Re (2010), 68 C.B.R. (5th) 233, 2010 CarswellOnt 3509, 2010 ONSC 2870 (Ont. S.C.J. [Commercial List]) — referred to Royal Bank v. Soundair Corp. (1991), 7 C.B.R. (3d) 1, 83 D.L.R. (4th) 76, 46 O.A.C. 321, 4 O.R. (3d) 1, 1991 CarswellOnt 205 (Ont. C.A.) — referred to Sierra Club of Canada v. Canada (Minister of Finance) (2002), 287 N.R. 203, (sub nom. Atomic Energy of Canada Ltd. v. Sierra Club of Canada) 18 C.P.R. (4th) 1, 44 C.E.L.R. (N.S.) 161, (sub nom. Atomic Energy of Canada Ltd. v. Sierra Club of Canada) 211 D.L.R. (4th) 193, 223 F.T.R. 137 (note), 20 C.P.C. (5th) 1, 40 Admin. L.R. (3d) 1, 2002 SCC 41, 2002 CarswellNat 822, 2002 CarswellNat 823, (sub nom. Atomic Energy of Canada Ltd. v. Sierra Club of Canada) 93 C.R.R. (2d) 219, [2002] 2 S.C.R. 522, 2002 CSC 41 (S.C.C.) — followed White Birch Paper Holding Co., Re (2010), 2010 CarswellQue 10954, 2010 QCCS 4915, 72 C.B.R. (5th) 49 (C.S. Que.) — referred to White Birch Paper Holding Co., Re (2010), 72 C.B.R. (5th) 74, 2010 CarswellQue 11534, 2010 QCCA 1950 (C.A. Que.) — referred to Statutes considered: Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 s. 36 — considered s. 36(3) — considered G.B. Morawetz R.S.J.: 2 1 On February 11, 2015, Target Canada Co. ("TCC") received Court approval to conduct a real estate sales process (the "Real Property Portfolio Sales Process") to seek qualified purchasers for TCC's leases and other real property, to be conducted by the Target Canada Entities in consultation with their financial advisor, Lazard Fréres & Co., LLC (the "Financial Advisor") and their real estate advisor, Northwest Atlantic (Canada) Co. (the "Broker"), with the supervision and oversight of the Monitor. 2 The Applicants bring this motion to approve a lease transaction agreement (the "Lease Transaction Agreement") that has been negotiated in response to an unsolicited bid by certain landlords (Oxford Properties Corporation ("Oxford") and Ivanhoe Cambridge Inc. ("IC") and certain others, together the "Landlord Entities"). 3 Under the Lease Transaction Agreement, TCC will surrender its interest in eleven leases (the "Eleven Leases") to the Landlord Entities in consideration for the purchase price and certain other benefits. 4 The Target Entities decided, after considering the likely benefits and risks associated with the unsolicited offer by the Landlord Entities, to exercise their right under the terms of the Real Property Portfolio Sales Process to withdraw the applicable leases from the bidding and auction phases of the process. The Target Canada Entities contend that the decision to exercise this right was made based on the informed business judgment of the Target Canada Entities with advice from the Financial Advisor and the Broker, in consultation and with the approval of the Monitor. 5 The Applicants submit that the process by which the decision was made to pursue a potential transaction with the Landlord Entities, and withdraw the Eleven Leases from the bidding and auction phases of the Real Property Portfolio Sales Process, was fair and reasonable in light of the facts and circumstances. Further, they submit that the process by which the benefits of the Lease Transaction Agreement were evaluated, and the Lease Transaction Agreement was negotiated, was reasonable in the circumstances. 6 The Applicants contend that the purchase price being offered by the Landlord Entities is in the high-range of value for the Eleven Leases. As such, the Applicants contend that the price is reasonable, taking into account the market value of the assets. Moreover, the Applicants submit that the estate of the Target Canada Entities will benefit not only from the value represented by the purchase price, but from the release of claims. That includes the potentially material claims that the Landlord Entities may otherwise have been entitled to assert against the estate of the Target Canada Entities, if some or all of the Eleven Leases had been purchased by a third party or disclaimed by the Target Canada Entities. 3 7 The Target Canada Entities submit that it is in their best interests and that of their stakeholders to enter into the Lease Transaction Agreement. They also rely on the Monitor's approval of and consent to the Target Canada Entities entering into the Lease Transaction Agreement. 8 The Target Canada Entities are of the view that the Lease Transaction Agreement secures premium pricing for the Eleven Leases in a manner that is both certain and efficient, while allowing the Target Canada Entities to continue the Inventory Liquidation Process for the benefit of all stakeholders and to honour their commitments to the pharmacy franchisees. 9 The terms of the Lease Transaction Agreement are set out in the affidavit of Mark J. Wong, sworn February 27, 2015, and are also summarized in the Third Report of the Monitor. The Lease Transaction Agreement is also summarized in the factum submitted by the Applicants.