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Court File No. CV-15-10980-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
IN THE MATTER OF THE COMPANIES' CREDITORSARRANGEMENT ACT, R.S.C., 1985, c.C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE ORARRANGEMENT OF TRAVELBRANDS INC.
Applicant
MOTION RECORD OF THE APPLICANT(MOTION FOR A STAY EXTENSION RETURNABLE JUNE 24,2015)
June 18,2015 osLER, HOSKIN & HARCOURT LLPBaruisters & SolicitorsP. O. Box 501 First Canadian PlaceToronto ON M5X 188
John A. MacDonald (LSUC# 25884R)Tel: 416.862.5672
Marc Wassennan (LSUC#44066M)Tel: 416.862.4908
Michael Delellis (LSUC# 48038U)Tei: 4ï6.862.5997Fax: 416.862.6666
Lawyers for the Applicant
TO
Court File No. CV-15-10980-00CL
ONTARIOSUPERIOR 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 AND ARRANGEMENTOF TRAVELBRANDS INC.
Applicant
SERVICE LIST
OSLER, HOSKIN & HARCOURT LLPBox 50, 1 First Canadian PlaceToronto, ONM5X IB8
Fax: 416.862.6666
John A. MacDonaldTel: 416.862.5672Email : j macdonald@osler. com
Marc WassermanTel: 416.862.4908Email : mwasseÍnan@osler. com
Michael De LellisTel: 416.862.5997Email : [email protected]
Dave RosenblatTel: 416.862.5673Email : drosenblat@osler. com
Lawyers for the Applicant
AND TO: X'rancesco DeMarinisEmail : frank. demarinis@travelbrands. com
Co'Chief Executive Officer of the Applicant
1
AND TO: Enzo DeMarinisEmail : Enzo. DeM arinis@T nvelBrands. com
Co-Chief Executive Officer of the Applicant
AND TO: Joe DeMarinisEmail : j oe.demarinis@travelbrands. com
Co-Chief Executive Officer of the Applicant
AND TO: KPMG INC.333 Bay Street, Suite 4600Bay Adelaide CentreToronto, ONM5H 2S5
Fax: 4t6.7 77.8818
Philip J. ReynoldsTel 416.777 .8415Email : pj reynolds @kpmg.ca
Anamika GadiaTel: 416.777 .3842Email: [email protected]
Monitor
AND TO: STIKEMAN ELLIOTT LLP5300 Commerce Court West199 Bay StreetToronto, ONM5L 189
Fax: 416.947.0866
Ashley John TaylorTel: 416.869.5236Email : ataylor @stikeman.com
Patrick J. CorneyTel: 416.8695668Email : [email protected]
Lawyers for the Monitor
AND TO:
AND TO:
AND TO: TORYS LLP79 Wellington St. W.30th Floor Box270, TD South TowerToronto, ONM5K 1N2
Fax: 416.865.7380
Scott A. BomhofTel: 416.865.7370Emaii: [email protected]
-3 -
GOWLING LAFLEUR HENDERSON LLP1 First Canadian Place100 King Street West, Suite 1600Toronto, ONM5X 1G5
Fax: 416.863.3509
Clifton B. ProphetTel: 416.862.3509Email: [email protected]
Lawyers for the Bank of Montreal
THORNTON GROUT F'INNIGAN LLP100 Wellington Street W.Suite 3200, TD West TowerToronto, ONM5K 1K7
Fax:416-304-1313James H. GroutTel: 416.304.0557Email:[email protected] IqbalTel: [email protected] for 75 Eglinton Avenue East Limited Partnership
Lawyers for Sears Canada Inc.
-4-
AND TO: AIR CANADALaw BranchCP 70000, Succursale de I'aéroportDorval, QC}]4Y IJ2
AND TO:
AND TO:
AND TO: LONGVIEW COMMUNICATIONS25 York Street Suite 612Toronto, ONM5J 2V5
Fax: 416.649.8001
Joel ShafferTel: 416.649.8006Email : j [email protected]
Nick AnstettTel: 416.649.8008Email : [email protected]
Fax: 514.422.5829
Louise-Hélène SénécalTel: 514.422.5826Email : louise-helene. senecal@ aircanada.ca
DAOUST VUKOVICH LLPBarristers & Solicitors20 Queen Street WestSuite 3000Toronto, ONM5H 3R3Fax: 416.597.8897Lucia TedescoTel 416.597 .8668Email : ltedesco@dv-law. comMCMILLAN LLPBrookfield Place181 Bay St, Toronto, ONli45l 2T3
Fax: 416.865.7048
Howard M. DrabinskyTel: 416.307.4033Email : [email protected]
Lawyers for Travel Industry Council of Ontario (TICO)
5
AND TO: F.ASKEN MARTINEAU DUMOULIN800 Place Victoria, Bureau 3700,Montréal, QuébecH4Z TEg
Fax: 514.397 .7600
Alain RiendeauTel: 514.397.7678Email : ariendeau@fasken. com
Brandon FarberTel: 514.397.5179Email : bfarber @fasken. com
Lawyers for Transat Tours Canada Inc.
AND TO: TRANSAT TOURS CANADA INC.
Bernard BussièresTel: 514.987.1660, x: 4520Email : Bernard.bussieres@transat. com
Jean-Emmanuel BeaubrunTel: 5 14.987 .1660, x: 4546Email : Jean-emmanuel.beaubrun@transat. com
AND TO: MCMILLAN LLPBrookfield Placel8l Bay St, Toronto, ONl/d5l 2T3
Fax: 416.865.7048
Brett HarrisonTel: 416.865.7932Email : [email protected]
Erie VallieresTel: 514.987 .5068Email : [email protected]
Lawyers for International Air Transport Association (IATA)
Tab
INDEX
Description
Notice of Motion dated June 18,2015
Schedule "A" Draft Stay Extension Order
Schedule "B" Draft Vesting Order
Schedule "C" Draft Amended and Restated Initial Order
Affrdavit of Joe DeMarinis sworn June 18,2015
Exhibit "A" Initial order
Exhibit "B" Initial Affidavit
Exhibit "C" Email Communications to Employees, Customers andKey Agents
Exhibit "D" Press Release
Exhibit "E" Notice to Creditors
Page No.
I
l1
I4
T6
36
48
70
106
1
A
B
C
2
118
122
1
Court File No. CV-15-1C980-00CL
ONTARIOSUPERIOR COIJRT OF JUSTICE
(COMMERCIAL LIST)
IN THE MATTER OF THE COMPANIES' CREDITORSARRANGEMENT ACT, R.S.C., 1985, c.C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE ORARRANGEMENT OF TRAVELBRANDS INC.
APPLICANT
NOTICE OF MOTION
(RETURNABLE JUNE 24, 2015)
TravelBrands Inc. ("TravelBrands" or the o'Company" or the "Applicanf') will
make a motion to the Court, on the 24th day of June, 20l5,at 10:00 a.m., or as soon after that time
as the motion can be heard, at the Courthouse, 330 University Avenue, Toronto, Ontario.
PROPOSED METrroD oF HEARTNG: The motion is to be heard orally
THE MOTION IS FOR:
An Order substantially in the form of which is attached hereto as Schedule "4":
(a-) alrridging the tinne fbr sen,ice and','alidating the sei-vice of this Notice of N{otion,
the Motion Record, and the First Report of the Monitor, to be filed with the Court,
(the "First Report") so that this Motion is properly returnable June 24,2015 and
dispensing with further proof of service thereof;
I
-2- 2
(b) extending the Stay Period (as defined in paragraph 14 of the Initial Order dated
M.ay 27,2015, the "Initial Order") until and including August 17 ,2015;
(c) deeming that neither a bankruptcy, receivership nor any other occunence
whatsoever shall impact the settlement of any Automatic Clearing House
transactions or Electronic Funds Transfers released by the Bank of Montreal
("BMO") on the Applicant's behalf.
(d) deeming that no motion for the bankruptcy or receivership of the Applicant shall
be made by the Applicant, Red Label or Holdco without two days' advance notice
to BMO; and
(e) approving the pre-filing report of KPMG Inc. ("KpMG") dated May 27,2015 (the
"Pre-Filing Report") and the activities of KpMG described therein;
2. An Order substantially in the form of which is attached hereto as Schedule "8" (the
*Draft Vesting Order') ordering that all right, title and interest of the Applicant in the propefty,
assets and undertaking of TravelBrands located in the Building be and is hereby vested absolutely
in the Landlord free and clear from, inter alia, any and all security interests (whether contractual,
statutory, or otherwise);
3. An Order substantially in the form attached hereto as Schedule "C" (the "Draft
Amended and Restated Initial Order") amending and restating the Initial Order to clariff that the
Charges wiii not appiy to any funds held in trust in any of the Applicant's bank accounts or by
Chase for the purpose of refunding deposits or prepayments by the Applicant's customers in
connection with travel which such customers have not yet taken (collectively, the "Customer
3
4
-3-
Ftrnds"), provided however that, once such travel occurs or a refund is made, the Charges will then
apply to the corresponding Customer Funds; and
such further and other relief as this Honourable court may deem just.
THE GROUNDS FOR THIS MOTION ARE:
5. On May 27,2015, this Honourable Court granted protection to the Applicant under
the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 as amended (the "CCAA") in
the form of the Initial Order;
6. KPMG Inc. was appoiqted in the Initial Order to act as the monitor in the CCAA
proceedings (the "Monitor");
7. The Applicant was authorized to obtain and borrow up to CAD $4 million under
the Commitment Agreement from Red Label;
8. Since the granting ofthe Initial Order, TravelBrands has been operating its business
as a going concem in close consultation with the Monitor;
C ommuni c ations w it h Stakehol der s
9. As part of the continued operations of its business, TravelBrands has developed and
implemented a comprehensive communications plan \¡¡ith the assistance of its communications
consultant in order to inform its stakeholders about the CCAA proceedings and respond to
inquiries;
10. TravelBrands, in close consultation with the Monitor, has been working with and
engaged in communications and discussions with members of its various stakeholder groups;
-4-
I l. TravelBrands has been in contact with its key agents and a number of critical
suppliers to ensure the continued supply of goods and services to the Company;
TICO
12. TravelBrands and the Monitor have met with representatives from TICO and, as
requested by TICO, are working to provide the regulator with extensive continuing and timely
financial reporting, including with respect to trust fi¡nds. TICO continues to closely monitor the
Company's business during the CCAA proceedings, and remains supportive of TravelBrands'
restructuring efforts;
IATA
13. TravelBrands contacted IATA to discuss the CCAA proceedings. IATA is aware
that the Company applied to the Court to iriitiate a restructuring process, and that this process may
or may not include the Sale Process. IATA has reached out to TravelBrands, and the Company
and IATA are in the midst of ongoing communications regarding the restructuring process;
75 Eglínton Lease
14. On May 29, 2015, TravelBrands, with the consent of, the Monitor, delivered a
disclaimer notice to the 75 Eglinton landlord. Since then, the Company and the Monitor have
continued to engage in consensual discussions with the 75 Eglinton landlord to determine a
mutually satisfactory result with respect to the 75 Eglinton Lease. On June 15,2015, the 75
Eglinton landlord obtained a consent order (the "Landlord's Consent Order") to give third parties
and subtenants certainty that they may deal directly with the landlord in respect of the building;
4
55
15. The Cornpany has included provisions in a proposed form of order that it seeks on
this motion whereby all right, title and interest of the Applicant in the property, assets and
undertaking of TravelBrands located at the 75 Eglinton property will be vested absolutely with the
75 Eglinton landlord, free and clear from any encumbrances whatsoever, including, but not limited
to: (i) any encumbrances or charges created under the Initial Order; and (ii) any claims of the
Company or its successors, including claims of any purchaser who purchases any of TravelBrands'
assets in these CCAA proceedings;
Sears Travel
16. Following discussions with Sears Travel, TravelBrands agreed to defer issuing a
disclaimer notice to Sears on the basis that Sears agree to waive daily amounts accruing due under
the Amended Sears Agreement effective June 10, 2015. This consensual agreement enables the
parties to continue discussing innovative solutions in an effort to reach a possible consensual
resolution between the parties to continue their partnership if a viable plan for the Sears Travel
business can be found;
BMO
17. TravelBrands has engaged in a series of discussions with BMO and is working
consensually with BMO to continue operations in the ordinary course. During the course of these
discussions, BMO raised a concern regarding BMO's settlement risk in respect of Automatic
Clearing House ("ACH") transactions and Electronic Fund Transfers ("EFTs':). To provide BMO
with certainty that the settlement of ACH transactions and EFTs do not pose any risk to BMO, the
Company is seeking an order on this motion whereby it will be deemed that neither a bankruptcy,
receivership nor any other occurrence whatsoever shall impact the settlement of any Automatic
-6- 6
Clearing House transactions or Electronic Funds Transfers released by BMO on the Applicant's
behaif;
18. Furthennore, and to provide BMO with even greater certainty, the Company is
seeking an order on this motion that no motion for the bankruptcy or receivership of the Applicant
shall be made by the Applicant, Red Label or Holdco without two days' advance notice to BMO;
The Sale Process
19. The Company has and continues to work to develop a Sale Process, to be conducted
under the supervision of the Monitor, whereby prospective purchasers will have the opportunity
to bid for the Company's assets. This Sale Process is expected to include bidding procedures
incorporating a stalking horse bid from Holdco. The Company also has and continues to work
toward finalizing a stalking horse asset purchase agreement (the "stalking Horse APA");
20. The Company requires time to focus on and ftnalize the Sale Process, and the
extension of the stay of proceedings will ensure that the Company can develop a value-optimizing
Sale Process, levelling the playing field for all creditors and prospective purchasers;
Ongoing Protection of Trust Funds
21. In certain provinces, there are regulations requiring TravelBrands to place all funds
(including deposits and prepayments) received from customers for travel services not yet rendered
into trust accounts for the benefit of such customers in the event that the travel service is not
delivered or the customer cancels the travel service. TravelBrands places all customer prepayments
and deposits in trust accounts even in provinces where there is no regulatory obligation to do so.
Customer trust funds are only released from trust to make payments that are required to be made
7-7 -
prior to the customer's departure to the suppliers of the travel services for which the money was
received or once the customer has received the travel service regardless of whether the customer
booked the travel before or after TravelBrands' CCAA proceedings;
22. In particular, $15 million in cash collateral was provided by the Company to Chase
Paymentech Solutions ("Chase") in connection with the Merchant Agreement under which the
Company is provided with credit card processing services. The cash collateral which has been
provided to Chase is held in a collateral account (the "Chase Collateral Accounf') and is used to
reimburse TravelBrands customers that have prepaid or made a deposit for travel and subsequently
"chargedback" against their credit cards;
23. TravelBrands is seeking to approve an Amended and Restated Initial Order which
clarifies that the Charges will not apply to any funds held in trust in any of the Applicant's bank
accounts or by Chase for the purpose of refunding deposits or prepayments by the Applicant's
customers in connection with travel which such customers have not yet taken (collectively, the
'oCustomer Funds"), provided however that, once such travel occurs or a refund is made, the
Charges will then apply to the corresponding Customer Funds;
The Monitor consents to the above amendments;
Stay Extensíon
25. The Initial Order granted a stay of proceedings until and including June 26,2015,
or such later date as this Court may order;
26. Since the granting of the Initial Order, the Applicant, in close consultation and with
the assistance of the Monitor, has acted and continued to act in good faith and with due diligence;
24
I-8-
27. TravelBrands has made progress in restructuring its business and continuing going
concern operations; however, ongoing issues continue to arise on a daily basis which require the
attention of TravelBrands' management team;
28. An extension of the Stay Period until August 17,2015 is appropriate in the
circumstances to allow for the continued operations of TravelBrands' business and for
TravelBrands to continue to develop and implement a restructuring plan and Sale Process, and to
continue discussions with its stakeholders;
29. It is necessary and in the best interests of TravelBrands and its stakeholders that the
Stay Period be extended and that TravelBrands be afforded the "breathing space" it needs to
engage in an orderly restructuring of its business and continue going concern operations;
30. TravelBrands has sufftcient liquidity to be able to continue operating inthe ordinary
course during the requested Stay Period;
31. The extension of the Stay Period is supported by the Monitor;
32 The provisions of the CCAA and, in particular, Section 11 thereof;
The inherent and equitable jurisdiction of this Honourable Court;
34. Rules 1.04, 1.05, 2.03,3.02,16,37 and 39 of the Rules of Civil Procedure, R.R.O.
1990, Reg. 194, as amended and section 106 of the Courts of Justicelc4 R.S.O . Igg0, c. C. 43,
as amended; anci
35. Such further and other grounds as counsel may advise and this Court may permit.
JJ
36. The following documentary evidence will be used at the hearing of the application:
-9 -
(a) the Affida*¡it of Joe DeMarinis sworn June 18, 2Aß and the exhibits attached
thereto;
(b) the Affrdavit of Francesco DeMarinis sworn }y'ray 26,2015;
(c) the First Report of KPMG, to be filed with the Court.
(d) the Initial Order dated }t/lay 27,2015; and
(e) such further and other evidence as counsel may advise and this Honourable Court
permrts.
9
June 18,2015 OSLER, HOSKIN & HARCOURT LLPBarristers & SolicitorsP. O. Box 50I First Canadian PlaceToronto ON M5X 188
John A. MacDonald (LSUC# 25SS4R)Tel: 416.862.5672
Marc Wasserman (LSUC#44066M)Tel: 416.862.4908
Michael Delellis (LSUC# 48038U)Tel: 416.862.5997Fax: 416.862.6666
Lawyers for the Applicant
OrlIN THE MATTER OF'COMPANIES' CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36,AS AMENDEDAND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF TRAVELBRANDS INC
ApplicantCourt File No. CV-15-10980-00CL
ONTARI('SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
PROCEEDING COMMENCED ATTORONTO
NOTICE OF MOTION
OSLER, HOSKIN & HARCOURT LLPBarristers & SolicitorsP. O. Box 501 First Canadian PlaceToronto ON M5X 188
John A. MacDonald (LSUC#258S4.R)Tel: 4t6.862.5672
Marc Wassennan (LSUC#44066M)Tel: 416.862-4908
Michael Delellis (LSUC# 4S038U)Tel: 416.862.5997Fax: 416.862.6666
Lawyers for the ApplicantMatterNo. 1163346
11
11^.-a D:¡^ \T^ ¡1lf 1 E I ^aìO^ ^^^rvutlll r'llç l\U. \- V -IJ-lU:rôtr-trtrt,l,
ONTARIO
SUPERIOR COURT OF JUSTICE(COMMERCIAL LIST)
THE HONOURABLE MR. WEDNESDAY, THE 24TH
JUSTICE NEWBOULD DAY OF JLTNE, 2OI5
IN THE MATTER OF THE COMPANIES' CREDITORSARRANGEMENT lCZ, R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE ORARRANGEMENT OF TRAVELBRANDS INC. (the"Applicant")
STAY EXTENSION ORDER
THIS MOTION, made by the Applicant, pursuant to the Companies' Creditors
Arrangement Act, R.S.C. 1985, c. C-36, as amended (the "CCAA") for an Order, inter alia: (a)
extending the Stay Period (as defined in paragraph 14 of the lnitial Order dated }y'ray 27,2015,
the "Initial Order") until and including August 17, 2015; (b) granting certain protection in
favour of the Bank of Montreal ("BMO"); and (c) approving the pre-filing report of KPMG Inc.
dated }1lay 27,2015 (the "Pre-X'iling Report") and the activities of KPMG Inc. described
therein;
ON READING the affidavit of Joe DeMarinis sworn June 18, 2015 and the Exhibits
thereto and the first report of KPMG Inc., in its capacity as the court-appointed monitor of the
^^-l:^^-+ /2^ ^..^L ^^..^^i+-, ¿L^ 66¡lt-^-:¿^-tt\ +^ L^ r:1 ^l -- -:.L1^ L1- - ^-
. -r ^-^ t -.- 1- - -..r.- - Ì1- ,ÃI/Prrvo.uL \rlr ùuvrr eúrP4vrry, LIrç lYtutltlul')) LU u9 llltiu wllll [Il9 \-uull,, öIru oll {Igarrllg lnc
submissions of counsel for the Applicant, the Monitor and such other counsel as were present
and on being advised that the Service List was served with the Motion Record herein;
)
)
)
I2|)-z--
SERVICE
1. THIS COURT ORDERS that the time for service of the Notice of Motion and the Motion
Record is hereby abridged and validated so that this Motion is properly returnable today and
hereby dispenses with further service thereof.
EXTENSION OF'THE STAY PERIOD
2. THIS COURT ORDERS that the Stay Period is hereby extended until and including
August 17,2015.
THE BANK OF MONTREAL
3. THIS COURT ORDERS that neither a bankruptcy, receivership nor any other occuffence
whatsoever shall impact the settlement of any Automatic Clearing House transactions or
Electronic Funds Transfers released by the Bank of Montreal ("BMO") on the Applicant's
behalf.
4. THIS COURT ORDERS that no motion for the bankruptcy or receivership of the
Applicant shall be made by the Applicant, Red Label or Holdco without two days' advance
notice to BMO.
MONITOR'S ACTIVITIES
5. THIS COURT ORDERS that Pre-Filing Report and the activities of KPMG Inc.
described therein are hereby approved.
GENERAL
6. THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal,
regulatory or administrative body having jurisdiction in Canada or in the United States, to give
effect to tiús Orcier anci to assist the Appiicant, the Monitor anci their respective agents in
carrying out the terms of this Order. All courts, tribunals, regulatory and administrative bodies
are hereby respectfully requested to make such orders and to provide such assistance to the
Applicant and to the Monitor, as an officer of this Court, as may be necessary or desirable to give
effect to this Order, to grant representative status to the Monitor in any foreign proceeding, or to
-J-
assist the Applicant and the lt4onitor and their respective agents in carrying out the terms of this
Order.
13
I4
Court File No.: CV15-10980-0CCL
ONTARIOSUPERIOR COURT OF' JUSTICE
(COMMERCIAL LIST)
THE HONOURABLE MR. WEDNESDAY, THE 24THDAY
JUSTICE NEV/BOULD OF JI.INE,2015
IN THE MATTER OX'THE COMPANIES' CREDITORSARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE ORARR.A,NGEMENT OF TRAVELBRANDS INC. (the,6Applicant")
VESTING ORDER
THIS MOTION, made by the Applicant for, among other things, an Order vesting all
right, title and interest of the Applicant in the assets located in the building municipally located
at 75 Eglinton Avenue East, Toronto ON (the "Building") to 75 Eglinton Avenue East Limited
Partnership (the "Landlord") was heard this day at 330 University Avenue, in the City of
Toronto.
UPON READING the Affidavit of Joe DeMarinis sworn June 18, 2015, the First Report
of the Monitor, to be filed with the Court, and upon being advised of the consent of the Landlord
and the Applicant and of the support of the Monitor:
1. THIS COURT ORDERS that all right, title and interest of the Applicant in the
Applicant's property, assets and undertaking located in the Building be and is hereby vested
absolutely in the Landlord free and clear from any and all security interests (whether contractual,
)
)
)
152
statutory, or otherrvise), hypothecs, mortgages, trusts or deemed trusts (whether contractual,
statutory, or otherwise), liens, executions, levies, charges, or other financial or monetary claims,
whether or not they have attached or been perfected, registered or filed and whether secured,
unsecured or otherwise including, without limiting the generality of the foregoing: (i) any
encumbrances or charges created under the Initial Order, and (ii) any claims of the Applicant or
its successors, including claims of any purchaser who purchases any of the Applicant's assets in
these CCAA proceedings.
I6
Cout File NIo. CV-15-10980-00CL
ONTARIO
SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
THE HONOURABLE MR. WEDNESD AY,THE 27TH
JUSTICE NEWBOULD DAY OF MAY, 2015
IN THE MATTER OF THE COMPANIES' CREDITORSARRANGEMENT lcf, R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE ORARRANGEMENT OF TRAVELBRANDS INC. (the"Applicant")
AMENDED AND RESTATED INITIAL ORDER
THIS APPLICATION, made by the Applicant, pursuant to the Compønies' Creditors
Arrangement Act, R.S.C. 1985, c. C-36, as amended (the "CCAA") was heard this day at330
University Avenue, Toronto, Ontario.
ON READING the affidavit of Francesco DeMarinis sworn May 26, 2015 (the
"DeMarinis Affidavit") and the Exhibits thereto and the pre-filing report dated May 26,2015 of
KPMG Inc. ("KPMG") in its capacity as the Proposed Monitor of the Applicant (the "Pre-
Filing Report"), and on being advised that the secured creditors who are likely to be affected by
the charges created herein were given notice, and on hearing the submissions of counsel for the
Applicant and KPMG and on reading the consent of I(PMG to act as the Monitor,
)
)
)
t7-2-
str D\/rñü.úÞ¡\ v ta/t,
1. THIS COURT ORDERS that the time for service of the Notice of Application and the
Application Record is hereby abridged and validated so that this Application is properly
returnable today and hereby dispenses with further service thereof
APPLICATION
2. THIS COURT ORDERS AND DECLARES that the Applicant is a company to which
the CCAA applies.
PLAN OF'ARRANGEMENT
3. THIS COURT ORDERS that the Applicant shall have the authority to file and may,
subject to further order of this Court, file with this Court a plan of compromise or arrangement
(hereinafter referred to as the "PIan").
POSSESSION OF PROPERTY AND OPERATIONS
4. THIS COURT ORDERS that the Applicant shall remain in possession and control of its
current and future assets, undertakings and properties of every nature and kind whatsoever, and
wherever situate including all proceeds thereof (the o'Propert¡r"). Subject to further Order of this
Court, the Applicant shall continue to carry on business in a manner c'onsistent with the
preservation of its business (the "Business") and Property. The Applicant is authorized and
empowered to continue to retain and employ the employees, consultants, agents, experts,
accountants, counsel and such other persons (collectively "Assistants") currently retained or
employed by it, with liberty to retain such further Assistants as it deems reasonably necessary or
desirable in the ordinary course of business or for the carrying out of the terms of this Order.
5. THIS COURT ORDERS that the Applicant shall be entitled to continue to utilize the
^^^1^^1 ^^^L -^--^^-^^-^L
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lCS--:L ---unllLr¡x.r ua1örr urinralBçurçrrt öyst(,ltr uull('lrtry IIt Prilug ¡1ö ('lçJulloç(l ut tllç t_,rglvl¿lfllus ¿\trlgavlt uf
replace it with another substantially similar central cash management system (the "Cash
Management System") and that any present or future bank providing the Cash Management
System shall not be under any obligation whatsoever to inquire into the propriety, validity or
legality of any transfer, payment, collection or other action taken under the Cash Management
1B-J-
System, or as to the use or application by the Applicant of funds transferred, paid, collected or
otherwise dealt v¿ith in the Cash Management System, shall be entitled tc prcvide the Cash
Management System without any liability in respect thereof to any Person (as hereinafter
defined) other than the Applicant, pursuant to the terms of the documentation applicable to the
Cash Management System, and shall be, in its capacity as provider of the Cash Management
System, an unaffected creditor under the Plan with regard to any claims or expenses it may suffer
or incur in connection with the provision of the Cash Management System.
6. THIS COURT ORDERS that the Applicant shall be entitled but not required to pay the
following expenses whether incurred prior to or after this Order:
(a) all outstanding and future wages, salaries, employee and pension benefits, vacation
pay and expenses payable on or after the date of this Order, in each case incurred in
the ordinary course of business and consistent with existing compensation policies
and anangements;
(b) all outstanding or future commissions, loyalty points, override payments, marketing
funds and amounts owing to travel agents in connection with the Company's sale of
travel products;
(c) the fees and disbursements of any Assistants retained or employed by the Applicant
in respect ofthese proceedings, at their standard rates and charges; and
(d) with the consent of the Monitor and Red Label Vacations Inc. ("Red Label"),
amounts owing for goods and services actually supplied to the Applicant prior to the
date of this order or to obtain the delivery of services contracted for prior to the date
of this order by suppliers of hotel, cruise-line, car rental and airline leisure travel
services that, in the opinion of the Applicant, are critical to the Business; and
t'o\ an.¡ nfhar anafc an¡l avñêñcee l1nqi qrc rlcernerl rlêr.eqeârr¡ fnr fhe nreserwafinn nf fhew/, øuJ vl¡rvr vvÙLÙ srrs v^yvrrÙvÙ
Property and/or Business by the Applicant with the consent of the Monitor and Red
Label.
7. THIS COURT ORDERS that, except as otherwise provided to the contrary herein, the
Applicant shall be entitled but not required to pay all reasonable expenses incurred by the
L9-4-
Applicant in carrying on the Business in the ordinary course after this Order, and in carrying out
the provisions of this Order, which expenses shall include, vrithout limitation:
(a) all expenses and capital expenditures reasonably necessary for the preservation ofthe
Property or the Business including, without limitation, payments on account of
insurance (including directors and officers insurance), maintenance and security
services; and
(b) payment for goods or services actually supplied to the Applicant following the date ofthis Order.
8. THIS COURT ORDERS that the Applicant shall remit, in accordance with legal
requirements, or pay:
(a) any statutory deemed trust amounts in favour of the Crown in right of Canada or of
any Province thereof or any other taxation authority which are required to be
deducted from employees' wages, including, without limitation, amounts in respect of
(i) employment insurance, (ii) Canada Pension Plan, (iii) Quebec Pension Plan, and
(iv) income taxes;
(b) all goods and services or other applicable sales taxes (collectively, "Sales Taxes")
required to be remitted by the Applicant in connection with the sale of goods and
services by the Applicant, but only where such Sales Taxes are accrued or collected
after the date of this Order, or where such Sales Taxes were accrued or collected prior
to the date of this Order but not required to be remitted until on or after the date of
this Order, and
(c) any amount payable to the Crown in right of Canada or of any Province thereof or
any political subdivision thereof or any other taxation authority in respect ofm¡rnini^ql rpqlf.r mtrnininql hrrcinocq nr nfhar fqvoc accaccmanfo ^" lorrioo ^f o-.,rs^vù, sùuvuJrr¡v¡llJ vr ¡v v ¡vJ vI grIJ
nature or kind which are entitled at law to be paid in priority to claims of secured
creditors and which are attributable to or in respect of the carrying on of the Business
by the Applicant.
20-5-
9. THIS COURT ORDERS that until a real property lease is disclaimed or resiliated in
accordance with the CCAA, the Applicant shall pay all amounts constituting rent or payable as
rent under real property leases (including, for greater certainty, common area maintenance
charges, utilities and realty taxes and any other amounts payable to the landlord under the lease)
or as otherwise may be negotiated between the Applicant and the landlord from time to time
("Rent"), for the period commencing from and including the date of this Order, twice-monthly in
equal payments on the first and fifteenth day of each month, in advance (but not in arrears). On
the date of the first of such payments, any Rent relating to the period commencing from and
including the date of this Order shall also be paid.
10. THIS COURT ORDERS that, except as specifically permitted herein, the Applicant is
hereby directed, until further Order of this Court: (a) to make no payments of principal, interest
thereon or otherwise on account of amounts owing by the Applicant to any of its creditors as of
this date; (b) to grant no security interests, trust, liens, charges or encumbrances upon or in
respect of any of its Property; and (c) to not grant credit or incur liabilities except in the ordinary
course of the Business.
RESTRUCTURING
11. THIS COURT ORDERS that the Applicant shall, subject to such requirements ¿$ are
imposed by the CCAA and such covenants as may be contained in the Definitive Documents (as
hereinafter defined), have the right to:
(a), þermanently or temporarily cease, downsize or shut down any of its business or
operations and to dispose of redundant or non-material assets not exceeding $100,000
in any one transaction or $500,000 in the aggregate;
(b) terminate the employment of such of its employees or temporarily lay off such of its
employees as it deems appropriate; and
(c) pursue all avenues of refinancing of its Business or Property, in whole or part, subject
to prior approval of this Court being obtained before any material refinancing;
all of the foregoing to permit the Applicant to proceed with an orderly restructuring of the
Business (the "Restructuring")
2t-6-
!2. THIS COUFJ OB-DERS that the A^pplicant shall provide each of the relevant landlords
with notice of the Applicant's intention to remove any fixtures from any leased premises at least
seven (7) days prior to the date of the intended removal. The relevant landlord shall be entitled
to have a répresentative present in the leased premises to observe such removal and, if the
landlord disputes the Applicant's entitlement to remove any such fixture under the provisions ofthe lease, such fixture shall remain on the premises and shall be dealt with as agreed between any
applicable secured creditors, such landlord and the Applicant, or by further Order of this Court
upon application by the Applicant on at least two (2) days' notice to such landlord and any such
secured creditors. If the Applicant disclaims or resiliates the lease governing such leased
premises in accordance with Section 32 of the CCAA, it shall not be required to pay Rent under
such lease pending resolution of any such dispute (other than Rent payable for the notice period
provided for in Section 32(5) of the CCAA), and the disclaimer or resiliation of the lease shall be
without prejudice to the Applicant's claim to the fixtures in dispute.
13. THIS COURT ORDERS that if a notice of disclaimer or resiliation is delivered pursuant
to Section 32 of the CCAA, then (a) during the notice period prior to the effective time of the
disclaimer or resiliation, the landlord may show the affected leased premises to prospective
tenants during normal business hours, on giving the Applicant and the Monitor 24 hours' prior
written notice, and (b) at the effective time of the disclaimer or resiliation, the relevant landlord
shall be entitled to take possession of any such leased premises without waiver of or prejudiee to
any claims or rights such landlord may have against the Applicant in respect of such lease or
leased premises, provided that nothing herein shall relieve such landlord of its obligation to
mitigate any damages claimed in connection therewith.
NO PROCEEDINGS AGAINST THE APPLICANT OR THE PROPERTY
14. THIS COURT ORDERS that until and including Friday, June26,2015, or such later date
as this Court may order (the "Stay Period"), no proceeding oi enforcement process in any court
or tribunai (each, a "Proceeding") shaii be commenceci or continueci against or in respect of the
Applicant or the Monitor, or affecting the Business or the Property, except with the written
consent of the Applicant and the Monitor, or with leave of this Court, and any and all
Proceedings currently under way against or in respect of the Applicant or affecting the Business
or the Property are hereby stayed and suspended pending further Order of this Court.
22-7 -
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15. THIS COURT ORÐERS that during the Stay Period, all rights and remedies of any
individual, firm, corporation, governmental body or agency, or any other entities (all of the
foregoing, collectively being "Persons" and each being a "Person") against or in respect of the
Applicant or the Monitor, or affecting the Business or the Property, are hereby stayed and
suspended except with the written consent of the Applicant and the Monitor, or leave of this
Court, provided that nothing in this Order shall (i) empower the Applicant to carry on any
business which the Applicant is not lawfully entitled to carry on, (ii) affect such investigations,
actions, suits or proceedings by a regulatory body as are permitted by Section 11.1 of the CCAA,
(iii) prevent the filing ofany registration to preserve or perfect a security interest, or (iv) prevent
the registration of a claim for lien.
NO INTERF'ERENCE WITH RIGHTS
16. THIS COURT ORDERS that during the Stay Period, no Person shall discontinue, fail to
honour, alter, interfere with, repudiate, terminate or cease to perform any right, renewal right,
contract, agreement, licence or permit in favour of or held by the Applicant, except with the
written consent of the Applicant and the Monitor, or leave of this Court.
CONTINUATION OF' SERVICES
17. THIS COURT ORDERS that during the Stay Period, all Persons having oral or written
agreements with the Applicant or statutory or regulatory mandates for the supply of goods and/or
services, including without limitation all computer software, communication and other data
services, centralized banking services, payroll services, insurance, transportation services, utility
or other services to the Business or the Applicant, are hereby restrained until further Order of this
Court from discontinuing, altering, interfering with or terminating the supply of such goods or
services as may be required by the Applicant, and that the Applicant shall be entitled to the
continued use of its current premises, telephone numbers, facsimile numbers, internet addresses
and domain natnes, provided in each case that the normal prices or charges for all such goods or
services received after the date of this Order are paid by the Applicant in accordance with normal
payment practices of the Applicant or such other practices as may be agreed upon by the supplier
23-8-
or service provider and each of the Applicant and the l.lonitor, or as may be ordered by this
Court.
18. THIS COURT ORDERS that during the Stay Period, Chase Paymentech Solutions
("Chase"), Bank of Nova Scotia and JPMorgan Chase Bank (collectively the "Processing
Parties") are hereby restrained until further Order of this Court from discontinuing, altering,
interfering with or terminating the supply of goods or services as may be required by the
Applicant under the Merchant Agreement between Red Label and the Processing Parties, based
on the insolvency of the Company, provided in each case that the normal prices or charges for all
such goods or services received after the date of this Order are paid by in accordance with
normal payment practices or such other practices as may be agreed upon by the Processing
Parties and each of the Applicant, Red Label and the Monitor, or as may be ordered by this
Court.
NON.DEROGATION OF RIGHTS
19. THIS COURT ORDERS that, notwithstanding anything else in this Order, no Person
shall be prohibited from requiring immediate payment for goods, services, use of lease or
licensed property or other valuable consideration provided on or after the date of this Order, nor
shall any Person be under any obligation on or after the date of this Order to advance or re-
advance any monies or otherwise extend any credit to the Applicant. Nothing in this Order shall
derogate from the rights conferred and obligations imposed by the CCAA.
PROCEEDINGS AGAINST DIRECTORS AND OF'F'ICERS
20. THIS COURT ORDERS that during the Stay Period, and except as permitted by
subsection 11.03(2) of the CCAA, no Proceeding may be commenced or continued against any
of the former, current or future directors or officers of the Applicant with respect to any claim
against the directors or officers that arose before the date hereof and that relates to any
obligations of the Applicant whereby the directors or offrcers are alleged under any law to be
liable in their capacity as directors or officers for the payment or performance of such
obligations, until a compromise or arrangement in respect of the Applicant, if one is filed, is
sanctioned by this Court or is refused by the creditors of the Applicant or this Court.
24-9-
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nñD_Lrltf.t]/t- t lr.tf.ù' .¿l.IìL, \r.[ I t1-.[JI1Ð' llìtrt]/lvrr\lr r(-.Ér. r r(rlì frlrr, \-rrô,ñ\rD
21. THIS COURT ORDERS that the Applicant shall indemniff its directors and officers
against obligations and liabilities that they may incur as directors or ofÍicers of the Applicant
after the commencement of the within proceedings, except to the extent that, with respect to any
officer or director, the obligation or liability was incurred as a result of the director's or officer's
gross negligence or wilful misconduct.
22. THIS COURT ORDERS that the directors and officers of the Applicant shall be entitled
to the benefit of and are hereby granted a charge (the "Directors' Charge") on the Property,
which charge shall not exceed an aggregate amount of $4.3 million, as security for the indemnity
provided in paragraph 21 of this Order. The Directors' Charge shall have the priority set out in
paragraphs 39 and 41 herein.
23. THIS COURT ORDERS that, notwithstanding any language in any applicable insurance
policy to the contrary, (a) no insurer shall be entitled to be subrogated to or claim the benefit of
the Directors' Charge, and (b) the Applicant's directors and officers shall only be entitled to the
benefit of the Directors' Charge to the extent that they do not have coverage under any directors'
and officers' insurance policy, or to the extent that such coverage is insufficient to pay amounts
indemnified in accordance with paragraph 21 of this Order.
APPOINTMENT OF MONITOR
24. THIS COURT ORDERS that KPMG Inc. is hereby appointed pursuant to the CCAA as
the Monitor, an offrcer of this Court, to monitor the business and financial affairs of the
Applicant with the powers and obligations set out in the CCAA or set forth herein and that the
Applicant and its shareholders, officers, directors, and Assistants shall advise the Monitor of all
material steps taken by the Applicant pursuant to this Order, and shall co-operate fully with the
Monitor in the exercise of its powers and discharge of its obligations and provide the Monitor
with the assistance that is necessary to enable the Monitor to adequately cany out the Monitor's
functions.
25. THIS COURT ORDERS that the Monitor, in addition to its prescribed rights and
obligations under the CCAA, is hereby directed and empowered to:
25-10-
(a) monitor the Applicant's receipts and disbursements;
(b) 'report to this Court at such times and intervals as the Monitor may deem appropriate
with respect to matters relating to the Property, the Business, and such other matters
as may be relevant to the proceedings herein;
(c) assist the Applicant, to the extent required by the Applicant, in its dissemination, to
Red Label (being a lender to the Applicant pursuant to the Commitment Agreement,
as hereinafter defined), the Bank of Montreal and their respective counsel on a basis
to be agreed upon with each of Red Label and the Bank of Montreal of financial and
other information as agreed to between the Applicant and each of Red Label and the
Bank of Montreal which may be used in these proceedings including reporting on a
basis to be agreed with each of Red Label and the Bank of Montreal;
(d) advise the Applicant in its preparation of the Applicant's cash flow statements and
reporting required by Red Label and the Bank of Montreal, which information shall
be reviewed with the Monitor and delivered to Red Label, the Bank of Montreal and
their respective counsel on a periodic basis agreed to by each of Red Label and the
Bank of Montreal;
(e) advise the Applicant in its development of the Plan and any amendments to the Plan;
assist the Applicant, to the extent required by the Applicant, with the holding and
administering of creditors' or shareholders' meetings for voting on the Plan;
(g) have full and complete access to the Property, including the premises, books, records,
data, including data in electronic form, and other financial documents of the
Applicant, to the extent that is necessary to adequately assess the Applicant's
business and financial aflairs or to perform its duties arising under this Order;
(h) be at liberty to engage independent legal counsel or such other persons as the Monitor
deems necessary or advisable respecting the exercise of its powers and performance
of its obligations under this Order; and
(Ð
26- tl-
(Ð perform such other duties as are required by this Order or by this Court fiom time to
time.
26. THIS COURT ORDERS that the Monitor shall not take possession of the Property and
shall take no part whatsoever in the management or supervision of the management of the
Business and shall not, by fulfilling its obligations hereunder, be deemed to have taken or
maintained possession or control of the Business or Property, or any part thereof.
27. THIS COURT ORDERS that nothing herein contained shall require the Monitor to
occupy or to take control, care, charge, possession or management (separately andlot
collectively, "Possession") of any of the Property that might be environmentally contaminated,
might be a pollutant or a contaminant, or might cause or contribute to a spill, discharge, release
or deposit of a substance contrary to any federal, provincial or other law respecting the
protection, conservation, enhancement, remediation or rehabilitation of the environment or
relating to the disposal of waste or other contamination including, without limitation, the
Canadian Environmental Protection Act, the Ontario Environmental Protection Act,the Ontario
W'ater Resources Act, or the Ontario Occupational Health and Safety Act and regulations
thereunder (the "Environmental Legislation"), provided however that nothing herein shall
exempt the Monitor from any duty to report or make disclosure imposed by applicable
Environmental Legislation. The Monitor shall not, as a result of this Order or anything done in
pursuance of the Monitor's duties and powers under this Order, be deemed to be in Possession of
any of the Property within the meaning of any Environmental Legislation, unless it is actually in
possession.
28. THIS COURT ORDERS thatthatthe Monitor shall provide any creditor of the Applicant
and Red Label with information provided by the Applicant in response to reasonable requests for
information made in writing by such creditor addressed to the Monitor. The Monitor shall not
have any responsibility or liability with respect to the information disseminated by it pursuant to
tiris paragraph. In the case ot information that the Monitor has been aciviseci by the Appiicant is
confidential, the Monitor shall not provide such information to creditors unless otherwise
directed by this Court or on such terms as the Monitor and the Applicant may agree.
29. THIS COURT ORDERS that, in addition to the rights and protections afforded the
Monitor under the CCAA or as an officer of this Court, the Monitor shall incur no liability or
27-12-
obligation as a result of its appointment or the carrying out of the provisions of this Order, save
and except for any gross negligence or wilful misconduct on its part. Nothing in this Order shall
derogate from the protections afforded the Monitor by the CCAA or any applicable legislation.
30. THIS COURT ORDERS that the Monitor, counsel to the Monitor and counsel to the
Applicant shall be paid their reasonable fees and disbursements, in each case at their standard
rates and charges, by the Applicant as part of the costs of these proceedings. The Applicant is
hereby authorized and directed to pay the accounts of the Monitor, counsel for the Monitor and
counsel for the Applicant on a weekly basis and, in addition, the Applicant is hereby authorized
to pay to the Monitor, counsel to the Monitor, and counsel to the Applicant, retainers in the
amounts of $25,000, $25,000 and $50,000, respectively, to be held by them as security for
payment of their respective fees and disbursements outstanding from time to time.
31. THIS COURT ORDERS that the Monitor and its legal counsel shall pass their accounts
from time to time, and for this purpose the accounts of the Monitor and its legal counsel are
hereby referred to a judge of the Commercial List of the Ontario Superior Court of Justice.
32. THIS COURT ORDERS that the Monitor, counsel to the Monitor, if any, and the
Applicant's counsel shall be entitled to the benefit of and are hereby granted a charge (the
"Administration Charge") on the Property, which charge shall not exceed an aggregate amount
of $l million, as security for their professional fees and disbursements incurred at the standard
rates and charges of the Monitor and such counsel, both before and after the making of this Order
in respect of these proceedings. The Administration Charge shall have the priority set out in
paragraphs 39 and4l hereof.
INTERCOMPANY F'INANCING
33. THIS COURT ORDERS that the Applicant is hereby authorized and empowered to
obtain and borrow under a credit facility from Red Label in order to finance the Applicant's
working capital requirements and other general corporate pu{poses and capital expenditures,
provided that borrowings under such credit facility shall not exceed $4 million unless permitted
by fuither Order of this Court.
2B-13-
34. THIS COURT ORDERS THAT sucli tredit facility shall be on the ierms and subject to
the conditions set forth in the Commitment Agreement between the Applicant and Red Label
dated as of May 26,2015 (the "Commitment Agreement") filed.
35. THIS COURT ORDERS that the Applicant is hereby authorized and empowered to
execute and deliver such credit agteements, mortgages, charges, hypothecs and security
documents, guarantees and other definitive documents (collectively, the "Definitive
Documents"), as are contemplated by the Commitment Agreement or as may be reasonably
required by Red Label pursuant to the terms thereof, and the Applicant is hereby authorized and
directed to pay and perform all of its indebtedness, fees, liabilities and obligations to Red Label
under and pursuant to the Commitment Agreement and the Definitive Documents as and when
the same become due and are to be performed, notwithstanding any other provision of this Order.
36. THIS COURT ORDERS that Red Label shall be entitled to the benefit of and is hereby
granted a charge (the "Intercompany Charge") on the Property, which Intercompany Charge
shall not secure an obligation that exists before this Order is made. The Intercompany Charge
shall have the priority set out in paragraphs 39 and 41 hereof.
37. THIS COURT ORDERS that, notwithstanding any other provision of this Order:
(a) Red Label may take such steps from time to time as it may deem necessary or
appropriate to file, register, record or perfect the Intercompany Charge or any of the
Definitive Documents;
(b) Red Label, upon 3 calendar days' notice to the Applicant and the Monitor, may
exercise any and all of its rights and remedies against the Applicant or the Property
under or pursuant to the Commitment Agreement, Definitive Documents and the
Intercompany Charge, including without limitation, to cease making advances to the
Applicant and set off and/or consolidate any amounts owing by Red Label to the
Applicant against the obligations of the Applicant to Red Label under the
Commitment Agreement, the Definitive Documents or the Intercompany Charge, to
make demand, accelerate payment and give oiher notices, or to apply to this Court for
the appointment of a receiver, receiver and manager or interim receiver, or for a
29-14-
bankruptcy order against the Applicant and for the appointment of a trustee in
bankruptcy of the Applicant; and
(c) the foregoing rights and remedies of Red Labet shall be enforceable against any
trustee in bankruptcy, interim receiver, receiver or receiver and manager of the
Applicant or the Property.
38. THIS COURT ORDERS AND DECLARES that Red Label shall be treated as unaffected
in any plan of arrangement or compromise filed by the Applicant under the CCAA, or any
proposal filed by the Applicant under the Banlvuptcy and Insolvency Act of Canada(the "BIA"),
with respect to any advances made under the Definitive Documents.
VALIDITY AND PRIORITY OF CHARGES CREATED BY THIS ORDER
39. THIS COURT ORDERS that the priorities of the Administration Charge, the Directors'
Charge and the Intercompany Charge, as among them, shall be as follows:
First - Administration Charge (to the maximum amount of $1 million);
Second - Directors' Charge (to the maximum amount of $4.3 million); and
Third - Intercompany Charge (to the maximum amount of $4 million).
40. THIS COURT ORDERS that the filing, registration or perfection of the Directors'
Charge, the Administration Charge or the Intercompany Charge (collectively, the "Charges")
shall not be required, and that the Charges shall be valid and enforceable for all purposes,
including as against any right, title or interest filed, registered, recorded or perfected subsequent
to the Charges coming into existence, notwithstanding any such failure to file, register, record or
perfect.
41. THIS COURT ORDERS that each of the Directors' Charge, the Administration Charge
and the Intercompany Charge (all as constituted and defined herein) shall constitute a charge on
the Property and such Charges shall rank in priority to all other security interests, trusts, liens,
charges and encumbrances, claims of secured creditors, statutory or otherwise (collectively,
"Encumbrances") in favour of any Person other than any validly perfected security interest
granted in favour of the Bank of Montreal and Element Fleet Management Inc. and set out in
30-15-
Schedule "A" hereto. For greater certainty. the Charges will not apply to an)¡ funds held in trust
the
prepayments by the Applicant's customers in connection with travel which such customers have
not yet taken (collectively. the "Customer Funds"l. provided however that. once such travel
occurs or a refund is made. the Charges will then apply to the corresponding Customer Funds
that are released from trust.
42. THIS COURT ORDERS that except as otherwise expressly provided for herein, or as
may be approved by this Court, the Applicant shall not grant any Encumbrances over any
Property that rank in priority to, or pari passu with, any of the Directors' Charge, the
Administration Charge or the Intercompany Charge, unless the Applicant also obtains the prior
written consent of the Monitor, Red Label and the beneficiaries of the Directors' Charge and the
Administration Charge, or further Order of this Court.
43. THIS COURT ORDERS that the Directors' Charge, the Administration Charge, the
Commitment Agreement, the Definitive Documents and the Intercompany Charge shall not be
rendered invalid or unenforceable and the rights and remedies of the chargees entitled to the
benefit of the Charges (collectively, the "Chargees") and/or Red Label thereunder shall not
otherwise be limited or impaired in any way by (a) the pendency of these proceedings and the
declarations of insolvency made herein; (b) any application(s) for bankruptcy order(s) issued
pursuant to the BIA, or any bankruptcy order made pursuant to such applications; (c) the filing of
any assignments for the general benefit of creditors made pursuant to the BIA; (d) the provisions
of any federal or provincial statutes; or (e) any negative covenants, prohibitions or other similar
provisions with respect to borrowings, incurring debt or the creation of Encumbrances, contained
in any existing loan documents, lease, sublease, offer to lease or other agreement (collectively,
an "Agreement") which binds the Applicant, and notwithstanding any provision to the contrary
in any Agreement:
neither the creation of the Charges nor the execution, cieiivery, pertèction, registration
or performance of the Commitment Agreement or the Def,rnitive Documents shall
create or be deemed to constitute a breach by the Applicant of any Agreement to
which it is a party;
(a)
31-t6-
(b) none of the Chargees shall have any liab,ility to any Person whatsoever as a result of
any breach of any Agreement caused by or resulting from the Applicant entering into
the Commitment Agreement, the creation of the Charges, or the execution, delivery
or performance of the Definitive Documents; and
(c) the payments made by the Applicant pursuant to this Order, the Commitment
Agreement or the Definitive Documents, and the granting of the Charges,'do not and
will not constitute preferences, fraudulent conveyances, transfers at undervalue,
oppressive conduct, or other challengeable or voidable transactions under any
applicable law.
44. THIS COURT ORDERS that any Charge created by this Order over leases of real
property in Canada shall only be a Charge in the Applicant's interest in such real property leases.
SERVICE AND NOTICE
45. THIS COURT ORDERS that the Monitor shall (i) without delay, publish in the Globe
and Mail a notice containing the information prescribed under the CCAA, (ii) within five days
after the date of this Order, (A) make this Order publicly available in the manner prescribed
under the CCAA, (B) send, in the prescribed manner, a notice to every known creditor who has a
claim against the Applicant of more than $1000, and (C) prepare a list showing the names and
addresses of those creditors and the estimated amounts of those claims, and make it publicly
available in the prescribed manner, all in accordance with Section23(l)(a) of the CCAA and the
regulations made thereunder.
46. THIS COURT ORDERS that the E-Service Protocol of the Commercial List (the
"Protocol") is approved and adopted by reference herein and, in this proceeding, the service of
documents made in accordance with the Protocol (which can be found on the Commercial List
website at
protocoll) shall be valid and effective service. Subject to Rule 17.05 this Order shall constitute
an order for substituted service pursuant to Rule 16.04 of the Rules of Civil Procedure. Subject to
Rule 3.01(d) of the Rules of Civil Procedure and parugraph 2l of the Protocol, service of
documents in accordance with the Protocol will be effective on transmission. This Court fuither
orders that a Case Website shall be established in accordance with the Protocol with the
32-17 -
following URL: http://vw¿w.kpmg.com/Calen/services/Advisori¡/TransactionRestructuring/
CreditorlinkS ites/TravelBrands/Pages/default. aspx.
47. THIS COURT ORDERS that if the service or distribution of documents in accordance
with the Protocol is not practicable, the Applicant and the Monitor are at liberty to serve or
distribute this Order, any other materials and orders in these proceedings, any notices or other
correspondence, by forwarding true copies thereof by prepaid ordinary mail, courier, personal
delivery or facsimile transmission to the Applicant's creditors or other interested parties at their
respective addresses as last shown on the records of the Applicant and that any such service or
distribution by courier, personal delivery or facsimile transmission shall be deemed to be
received on the next business day following the date of forwarding thereof, or if sent by ordinary
mail, on the third business day after mailing.
GENERAL
48. THIS COURT ORDERS that the Applicant or the Monitor may from time to time apply
to this Court for advice and directions in the discharge of its powers and duties hereunder.
49. THIS COURT ORDERS that nothing in this Order shall prevent the Monitor from acting
as an interim receiver, a receiver, a receiver and manager, or a trustee in bankruptcy of the
Applicant, the Business or the Property.
50. THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal,
regulatory or administrative body having jurisdiction in Canada or in the United States, to give
effect to this Order and to assist the Applicant, the Monitor and their respective agents in
carrying out the terms of this Order. All courts, tribunals, regulatory and administrative bodies
are hereby respectfully requested to make such orders and to provide such assistance to the
Applicant and to the Monitor, as an officer of this Court, as may be necessary or desirable to give
effect to this Order, to grant representative status to the Monitor in any foreign proceeding, or to
assist the Applicant and the Monitor and their respective agents in carrying out the terms of this
Order.
51. THIS COURT ORDERS that each of the Applicant and the Monitor be at liberty and is
hereby authorized and empowered to apply to any court, tribunal, regulatory or administrative
body, wherever located, for the recognition of this Order and for assistance in carrying out the
33-18-
terms of this Order, and that the lMonitor is authorized and empowered to act as a representative
in respect of the within proceedings for the purpose of having these proceedings recognized in a
jurisdiction outside Canada.
52. THIS COURT ORDERS that any interested party (including the Applicant and the
Monitor) may apply to this Court to vary or amend this Order on not less than seven (7) days'
notice to any other party or parties likely to be affected by the order sought or upon such other
notice, if any, as this Court may order.
53. THIS COURT ORDERS that this Order and all of its provisions are effective as of12:01 a.m. Eastern Standard/Daylight Time on the date of this Order.
-19-
c¡^lrE rìrIr [¡ 66
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VVALùUVUD õ
34
=Fil$B$umber..:fi ;' -. ,\ ..- :.
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.Goll$Je{e!,,Dgççqlpttop'
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EqqippentSçrial,Ng. (Ífappllcable)
Juris4iction
ElementFleetManagementInc.
649304379 -200810161950153 17545(10 years)
Equipment, MotorVehicle; GeneralCollateralDescription:Anyvehicles specifiedand any othervehicles ofwhatever year,make or modelincluding afteracquired vehiclesand including anytrailers andlorequipment, andincluding proceedsthereof, providedto the debtorpursuant to a motorvehicle leaseagreement madebetween theparties. No otherassets included.
N/A Ontario
Bank ofMontreal
66630671,1-20101202131315322720(5 years)
Inventory,Equipment,Accounts, Other,Motor Vehicle
N/A Ontario
Bank ofMontreal
686407s4s -20130426r4s21s909482(7 years)
Inventory,Equipment,Accounts, Other,Motor Vehicle
N/A Ontario
Bank ofMontreal
893190F (registeredDecember 2,2010;5years)
All present andafter acquiredpersonal propertyof the debtor and,without limitation,all fìxtures, crops,and licences
N/A BritishColumbia
-20 - 35
Bank ofMontreal
317103H (registeredApril29,2013;7 years)
Allpresent andafter acquired
N/A BritishColumbia
Bank ofMontreal
13-03361 5 1 -0002(registered April29,2013;10 years)
Nature of registration:Movable hypothecwithout delivery
All movableproperty, presentand future,corporeal andincorporeal, ofevery nature andkind andwheresoeverlocated.
N/A Quebec
ElementFleetManagementInc. (lessor)
08-060t273-0001(registered October 20,2008; expiring luly 26,2018)
Nature of registration:Global registrationpertaining to rightsresulting from a lease(master agreement)
The universality ofall vehicles,present and future,provided to thelessee pursuant tothe motor vehiclelease agreementbetween the lessorand the lessee,
including allreplacements,supplements oramendmentsthereto, togetherwith anyreplacement orsupplementaryvehicle provided tothe lessee inaccordance withthe terms of thesaid motor vehiclelease agreement,and including allaccessories andequipment attachedthereto from timeto time.
N/A Quebec
36
ñ^,,-+ D:l^ \T^ ¿.\\/ 1 < l n0an nnl-rTvuulL r llv Iìv. v f - t J' uw/uv-vvv!
ONTARIOSUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
IN THE MATTER OF THE COMPANIES' CREDITORSARRANGEMENT lcf, R.S.C., 1985, c.C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE ORARRANGEMENT OF TRAVELBRANDS INC.
APPLICANT
AF'FIDAVIT OF JOE DEMARINIS(Sworn June 1.8,2015)
I, Joe DeMarinis, of the City of Pickering, in the Province of Ontario, MAKE
OATH AND SAY:
1. I am Joe DeMarinis, Co-Chief Executive Officer of TravelBrands Inc. (referred to
herein as "TravelBrands", the "Company" or the "Applicant"). I am also a Vice President with
Red Label Vacations Inc. ("Red Label"), the ultimate parent corporation of TravelBrands. As
such, I have personal knowledge of the matters deposed to in this Affidavit. Where I have relied
upon other sources of information, I verily believe such information to be true. I swear this
Affidavit in support of the motion brought by TravelBrands seeking an extension of the stay of
proceedings, an order on this motion in relation to the settlement of any Automatic Clearing
House transactions or Electronic Fund Transfers released by BMO on the Applicant's behalf, an
order on this motion in relation to property of TravelBrands located at 75 Eglinton being vested
in the 75 Eglinton landlord, free and clear of encumbrances, and approval of the Amended and
Restated Initial Order, which provides greater clarification fbr the ongoing protection of trust
fimds.
Background2. On May 27,2015, TravelBrands was granted protection under the Companies'
Creditors Arrangement Act, R.S.C. 1985, c. C-36 as amended (the "CCAA") pursuant to an
initial order of the Ontario Superior Court of Justice (Commercial List) (the "Initial Order"). A
copy of the Initial Order is attached as Exhibit "A" to this Affrdavit.
37
4
3. Francesco DeMarinis swore an affidavit on May 26,2A15 (the "Initial Affidavit")
in support of the initial application of TravelBrands. A copy of the Initial Affidavit is attached
without exhibits as Exhibit "8" to this Affrdavit. Capítalized terms contained herein that are not
otherwise defined have the meaning ascribed to them in the Initial Affidavit.
In the Initial Order, the Court, among other things:
(a) granted a stay of proceedings in favour of TravelBrands until and including June
26,2A15, or such later date as the Court may order (the "Stay Period");
(b) authorized TravelBrands to obtain and borrow under a credit facility from Red
Label in order to f,rnance the Company's working capital requirements and other
general corporate purposes and capital expenditures, in an amount not to exceed
CAD$4 million unless permitted by further order of the Court;
(c) appointed KPMG Inc. ("KPMG") as the monitor (the "Monitor");
(d) entitled TravelBrands to pay expenses incurred by TravelBrands prior to or after
the Initial Order, including: \
o payments for critical goods and services supplied to the Company prior to the
date of the Initial Order or to obtain the delivery of services contracted for
prior to the date of the Initial Order by suppliers of hotel, cruise-line, car
rental and airline leisure travel services, with the consent of the Monitor and
Red Label; and
a outstanding or future commissions, loyalty points, override payments,
marketing funds and amounts owing to travel agents in connection with the
Company's sale of travel products following the date of the Initial Order; and
(e) entitie<i TraveiBrancis to continue to utiiize its Cash ivianagement System.
Overview of TravelBrands'Activities Since the lnitial Order
5. As a result of a combination of challenges, TravelBrands faced a liquidity crisis in
,lifay 2015 and sought and received Court protection pursuant to the CCAA.
-3-
6. Since the granting of the Initial Order, there has been no cessation of business, nor
is this contemplated, and TravelBrands is continuing to operate its business as usual pursuant to
the terms of the Initial Order and under the supervision of the Monitor.
7. As part of the continued operation of its business, TravelBrands has, among other
things, developed and executed an extensive communications plan with the assistance of its
communications consultant, Longview Communications Inc. ("Longview"), in order to inform
its stakeholders about the CCAA proceedings. In addition, TravelBrands has engaged with its
various stakeholder groups, all in an effort to continue going concem operations in the ordinary
course and maximize value for its stakeholders.
8. Since the granting of the Initial Order, TravelBrands' financial performance has
been consistent with expectations. As I understand will be more particularly described in the
First Report of the Monitor, to be filed with the Court, the Company continues to operate within
its cash flow forecast and has not had to draw under the Commitment Agreement.
Com m u nication with Stakeholders9. TravelBrands, with the assistance of Longview, has implemented a
comprehensive communications plan to inform its stakeholders about the CCAA proceeding, and
has responded and continues to respond to numerous inquiries from the Company's various
stakeholders.
10. Following the granting of the Initial Order, TravelBrands sent its employees, key
customers and agents email communications providing information about the CCAA
proceedings, and held employee town halls for all of its employees, including Sears Travel
employees. Copies of these communications are attached as Exhibit"C". Furthermore, on May
27 ,2015, the Company issued a press release advising of the CCAA proceedings. A copy of this
press release is attached as Exhibit "D".
11. In addition, in accordance with the Initial Order, on May 28,2015, the Monitor
made the Initial Order publicly available in the manner prescribed under the CCAA. On June 1,
2015, the Monitor sent a notice to all of TravelBrands' known creditors to whom TravelBrands
owed more than CAD$1,000, and made a list of the names, addresses and amounts owing to
3B
39-4-
those creditors, excluding individuals, publically available on its website. A copy of the Notice
to Creditors is attached as Exhibit "E".
Communication with TICO12. Since the granting of the Initial Order, TravelBrands and the Monitor have met
with representatives from TICO and, as requested by TICO, are working to provide the regulator
with extensive continuing and timely financial reporting, including with respect to trust funds.
TICO continues to closely monitor the Company's business during the CCAA proceedings, and
remains supportive of TravelBrands' restructuring efforts. Furthermore, TICO requested and the
Company is seeking changes to the form of Initial Order, as described in paragraphs 14 to 16
below.
Communication with IATA
13. Since the granting of the Initial Order, TravelBrands contacted IATA to discuss
the CCAA proceedings. IATA is aware that the Company applied to the Court to initiate a
restructuring process, and that this process may or may not include the Sale Process. IATA has
reached out to TravelBrands, and the Company and IATA are in the midst of ongoing
communications regarding the restructuring process. Specifically, IATA and the Company have
corresponded regarding the need to potentially increase the Company's letter of credit, which is
currently in the amount of $5.06 million and which was extended for a period of three months
past its original expiration date of May 1,2015.
Ongoing Protection of Trust Funds14. In certain provinces, there are regulations requiring TravelBrands to hold all funds
(including deposits and prepayments) received from customers for travel services not yet
rendered in trust for the benefit of such customers in the event that the travel service is not
¡{eli','er"e¡{ or fhe crstomer c.ancels the travel service- TravelBrands holds a,ll sr-reh er-tstomer
prepayments and deposits in trust even in provinces where there is no regulatory obligation to do
so. As of June 12,2015, TravelBrands held $19.9 million of customer deposits and prepayments
in trust for such purposes. The trust funds are only released from trust to make payments that are
required to be made prior to the customer's departure to the suppliers of the travel services for
which the money was received (payments of this nature are allowed to be made from trust
405
accounts puÍsuant to the applicable regulations) or once the customer has received the travel
service. The majority of the $19.9 million of customer deposits and prepayments are held by
TravelBrands in 27 separate trust accounts. TravelBrands has authority to maintain such
accounts during the CCAA proceedings. In accordance with industry practice, there are certain
funds which are in transit from credit card processors and customer deposits in the form of Sears
credit card payments and/or loyalty points used for redemption that are considered to be held in
trust.l Customer trust funds are only released from trust to make payments that are required to be
made prior to the customer's departure to the suppliers of the travel services for which the monèy
was received or once the customer has received the travel service, regardless of whether the
customer booked the travel before or after TravelBrands' CCAA proceedings.
15. As described in the Initial Affidavit, approximately $15 million in cash collateral
was provided by the Company to Chase Paymentech Solutions ("Chase") in connection with the
Merchant Agreement under which the Company is provided with credit card processing services.
This is in addition to the $19.9 million of customer deposits and prepayments, described above,
held by TravelBrands in27 separate trust accounts. The cash collateral which has been provided
to Chase is held in a collateral account (the "Chase Collateral Account") and is used to reimburse
TravelBrands customers that have prepaid or made a deposit for travel and subsequently
"chargedback" against their credit cards. Reasons for chargebacks include, among other things, a
customer seeking a refund of their purchase or deposit or beeause a payment was made
fraudulently. The Chase Collateral Account is maintained for the sole pu{pose of customer
chargebacks and, in accordance with industry practice, it is the Company's view that the funds
contained therein are being held in trust for the benefit of customers that have not yet travelled.
16. In order to provide greater certainty that the trust arrangements of TravelBrands
are protected by Court order, TravelBrands is seeking to approve an Amended and Restated
Initial Order which clarifies that the Charges will not apply to any funds hetd in trust in any of
the Applicant's bank accounts or by Chase for the pu{pose of reftmding deposits or prepayments
by the Applicant's customers in connection with travel which such customers have not yet taken
(collectively, the "Customer Funds"), provided however that, once such travel occurs or a refund
For clarity, all monies received from credit card processors are put in trust once received, however, if a
customer pays with a Sears credit card, the money is received by TravelBrands from Sears twice a week,deposited in TravelBrands' general account, and then transfened to one ofTravelBrands' trust accounts.
4T-6-
is made, the Charges will then apply to the corresponding Customer Funds that are released from
trust. As noted above, TICO requested these changes to the form of Initial Order and the
Company has no issue confirming them. A copy of the Amended and Restated Initial Order is
attached as Schedule"C" to the Notice of Motion.
Manulife Financial17. On May 29,2015, The Manulife Financial Life Insurance Company and its
wholly owned subsidiary, First North American Insurance Company (collectively, "Manulife
Financial"), issued a notice dealing with the impact of the TravelBrands' CCAA filing on
Default Protection coverage under Trip Cancellation and Interruption Insurance underwritten by
Manulife Financial. Subsequently, the Company, in consultation with the Monitor, worked with
Manulife Financial to provide clarification regarding this notice. Accordingly, an additional
update was subsequently issued by Manulife Financial on June 4,2015 which clarified certain
aspects of the notice, including that a default event had not occurred in respect of TravelBrands
and that "Default Protection coverage under Trip Cancellation and Intemrption Insurance
remains unaffected until further notice".
Employees18. Since the granting of the Initial Order, the Company has been working diligently
to engage in communication with its employees across Canada. As noted above, onMay 27,
2015 TravelBrands sent its employees an email providing information about the CCAA
proceedings (see Exhibit *C"). Furtherrnore, on May 27,2015, TravelBrands held an employee
town hall for all of its employees, including Sears Travel employees. This town hall was held in
Toronto, Ontario, and TravelBrands employees and senior management in its Vancouver, British
Columbia and Quebec, Montreal offrces connected via tele-conference. During this town hall,
TravelBrands emphasizedto its employees its intention to continue its business as usual.
i9. On iune 8, 2015, the Company verbaiiy cieiivereci a seconci empioyee
communication to its senior leadership, who subsequently delivered this communication to their
direct reports. In this communication, the Company re-emphasizedto its employees its intention
to continue paying employee wages in the normal course. Since f,rting for CCAA protection,
-7 - 42
Tra.¿elBrands has nct laid off any employees. TravelBrands will continue to look for synergies
and adjust staffing levels accordingly.
Agents & Suppliers20. Since the granting of the Initial Order, TravelBrands, in close consultation with
the Monitor, has been in contact with a number of its critical suppliers and key agents to ensure
the continued supply of goods and services to TravelBrands.
21. On May 27,2015, TravelBrands sent an email to its key agents to advise them
that it had entered into CCAA proceedings, and of its intention to continue going concern
operations during its restructuring (See Exhibit "C"). FurtheÍnore, in this email, TravelBrands
advised its key agents of its intention, as provided for in the Initial Order, to pay its key agents in
the normal course for all commissions based upon schedules and the terms of their respective
contracts during the ongoing CCAA proceedings. Since the granting of the Initial Order,
TravelBrands has and continues to pay its key agents pre-filing and post-filing amounts in the
normal course.
22. Additionally, the Company, in close consultation with the Monitor, has and
continues to deal with its critical suppliers on an as needed basis to ensure that there will be no
disruption of services to its customers and that business continues as usual. TravelBrands' most
significant suppliers have continued to supply goods to the Company, and, as provided for in the
Initial Order, TravelBrands has and continues to pay its suppliers amounts owing for goods and
services supplied to the Company during the CCAA proceedings.
BMO23. Since the granting of the Initial Order, TravelBrands, in close consultation with
the Monitor, has engaged in a series of discussions with BMO and is working consensually with
BMO to ensure continued operations in the ordinary course. TravelBrands has increased its
weekly and monthly reporting obligations to BMO in relation to matters pertaining to the CCAA
proceedings, and has included provisions in the proposed form of order that it seeks on this
motion (described in greater detail below) that are intended to give BMO greater comfort in the
ongoing relationship between the parties.
43-8-
24. During the course of these discussions, BMO raised a concern regarding BMC's
settlement risk in respect of wires, Automatic Clearing House ("ACH") transactions and
Electronic Fund Transfers ("EFTs"). For background, TravelBrands will issue a wire, EFT or
ACH transaction as a means to make payments to its suppliers. There is no settlement risk in
respect of wire transfers as the money leaves the Company's account on the same day. However,
in respect of EFTs and ACH transactions, there is approximately a24-hour delay from the time
TravelBrands initiates those transactions and the time BMO takes the money out of the
Company's BMO account, representing an intra-bank settlement exposure. BMO advised
TravelBrands that it was specifically concerned with this settlement exposure in the event of a
bankruptcy during this 24-hour delay period. To provide BMO with certainty that the settlement
of ACH transactions and EFTs do not pose any risk to BMO, the Company is seeking an order
on this motion whereby neither a bankruptcy, receivership nor any other occunence whatsoever
shall impact the settlement of any ACH transactions or EFTs released by BMO on the
Applicant's behalf.
25. Furthermore, and to provide BMO with even greater certainty, the Company is
seeking an order on this motion that no motion for the bankruptcy or receivership of the
Applicant shall be made by the Applicant, Red Label or Holdco without two days' advance
notice to BMO.
75 Eglinton26. TravelBrands and the Monitor have engaged in discussions with the 75 Eglinton
landlord and its counsel in respect of these CCAA proceedings.
27. In the Initial Affidavit, it was noted that after the commencement of proceedings
and during the initial stay period, TravelBrands anticipated that it might disclaim the75 Eglinton
Lease due to the strain of the significant financial commitments thereunder. On May 29, 2015,
TravelBrands, with the consent of the Monitor, delivered a disclaimer notice to the 75 Eglinton
landlord. Since then, the Company and the Monitor have continued to engage in consensual
discussions with the 75 Eglinton landlord to determine a mutually satisfactory result with respect
to the 75 Egtinton Lease. The objection period (i.e., the period where any party to the 75
Eglinton Lease may apply to Court for an order that the lease is not to be disclaimed) ended June
44-9 -
t3,2015. The effective date of the disclaimer is June 29,2015 and the period between May 2g,
20L5 and June29,2015 is referred to herein as the "Notice Period,'.
28. Since lday 29, 2015, TravelBrands continued to have discussions with the 75
Eglington landlord. On June 15,2015, the 75 Eglinton landlord obtained, with TravelBrands'
consent, a consent order (the "Landlord's Consent Order") to give third parties and subtenants
certainty that they may deal directly with the landlord in respect of the building during the Notice
Period as the 75 Eglinton landlord seeks to mitigate its loss. In particular, the Landlord's Coisent
Order provides that the 75 Eglinton landlord is authorized and empowered (but not obligated),
without providing notice to or requiring the consent of the Company, to:
(a) offer premises in the building to prospective tenants;
(b) market andlor retain a broker to market the premises to prospective tenants;
(c) have complete and unfettered access to the building; and
(d) deal with the existing subtenants in the building as the landlord sees fit, including
collecting rent, and/or negotiating and entering into extensions, expansions or
reductions of ongoing subleases.
29. Furthermore, the Landlord's Consent Order provides that all subtenants who,
prior to the date of the Initial Order, paid rent to the Company, are directed to pay rent directly to
the 75 Eglinton landlord from and after the effective date of the disclaimer in accordance with
such pa¡rment instructions as may be agreed upon between the 75 Eglinton landlord and such
subtenant.
30. The Company has also included provisions in a proposed form of order (requested
by the 75 Eglinton landlord and consented to by the Company) that it seeks on this motion
whereby all right, title and interest of the Applicant in the property, assets and undertaking ofTravelBrands located at the 75 Eglinton property will be vested absolutely with the 75 Eglinton
landlord, free and clear from any encumbrances whatsoever, including, but not limited to: (i) any
encumbrances or charges created under the Initial Order; and (ii) any claims of the Company or
its successors, including claims of any purchaser who purchases any of TravelBrands' assets in
- 10- 45
these CCAA proceedings. This proposed form of order is being sought now so that notice may
be given to secured creditors and other stakeholders on the service List.
Sears31. TravelBrands and the Monitor have engaged in several discussions with Sears and
its counsel in respect of these CCAA proceedings.
32. In the Initial Affidavit, it was noted that after the commencement of proceedings
and during the initial stay period, TravelBrands anticipated that it might disclaim the Amended
Sears Agreement due to the significant financial strain of the substantial commission and royalty
payments under the Amended Sears Agreement. Following discussions with Sears, TravelBrands
agreed to defer issuing a disclaimer notice to Sears on the basis that Sears agree to waive daily
amounts accruing due under the Amended Sears Agreement effective June 10, 2015.This waiver
period will end on the earlier of (i) the date on which a disclaimer notice is issued by the
Company with respect to the Amended Sears Agreement; or (ii) the day after Sears notifies the
Company that the waiver period has ended. Upon completion of this waiver period, all
obligations arising under the Amended Sears Agreement until the date of the disclaimer notice
will be payable to Sears.
33. This consensual agreement enables the parties to continue discussing innovative
solutions in an effort to reach a possible resolution whereby the parties can continue their
business arrangement if a viable plan for the Sears Travel business can be found.
Sale Process34. As set out in the Initial Affidavit, the Company has and continues to work to
develop a Sale Process, to be conducted under the supervision of the Monitor, whereby
prospective purchasers will have the opportunity to bid for the Company's assets. This Sale
Process is expected to include bidding procedures that include a stalking horse bid from Holdco.
The Company also has and continues to work toward finalizing a stalking horse asset purchase
agreement (the "Stalking Horse APA").
35. The Company requires additional time to focus on and finalize the Sale Process,
and the extension of the stay of proceedings will ensure that the Company can develop a value-
46- 11-
optimizing Sale Process, levelling the playing field for all creditors and prospective purchasers.
The Company expects to be before the Court in early July to seek approval of the Stalking Horse
APA and related bidding procedures.
Stay Extension is Appropriate36. TravelBrands has continued to operate its business in the ordinary course with the
benefit of the stay of proceedings, which has provided stability to the business and alleviated the
liquidity crisis that TravelBrands faced at the time of filing the application for the Initial Order.
37. TravelBrands seeks an extension of the Stay Period up to and including August
17,2015. The extension is necessary and appropriate in the circumstances to allow for the
continued operation of TravelBrands' business and for TravelBrands to continue to develop and
implement a restructuring plan, including the development of a Sale Process, and to continue
discussions with its stakeholders.
38. I believe that TravelBrands has acted and is continuing to act in good faith and
with due diligence in these CCAA proceedings since the granting of the Initial Order. As
described above, TravelBrands has been working diligently with the Monitor to develop a Sale
Process, and has been in discussions with its stakeholders, includingtheT5 Eglinton landlord,
employees, suppliers and creditors.
39. The updated cash flow forecast shows that, with the Commitment Agreement,
TravelBrands has sufflrcient liquidity to fund operations during the requested extension of the
Stay Period. A copy of an updated l3-week cash flow forecast is attached to the First Report ofthe Monitor.
40. Finally, the Monitor has expressed its support for the extension of the Stay Period
to August 17,2015.
-12- 47
SWORN BEFORE lv{E at the City of
Toronto,
June 18,
ln Province of Ontario, on
Joe DeMarinis
WWd*ll*U<úLþb,rùIto
4B
THIS IS EXHIBIT 6'A'' REFERRED TO IN
THE AFFIDAVIT OF JOE DEMARINIS
SWORN BEFORE ON THIS 18th DAY OF JUNE,2015
for Taking Affidavits.
MW'l^lttL|'scküøûto
49
t- / f^- /ê1 fu - Lt-ò c'L-¡'\^-.* D.:l^ \T^\-uulL l'11ú 1\u
ONTARIO
SUPERIOR COURT OF JUSTICE(COMMERCIAL LIST)
THE HONOURABLE MR. WEDNESD AY,THE2TTH
JUSTICE NEWBOULD DAY OF MAY, 2015
IN THE MATTER OF THE COMPANIES' CREDITORSARRANGEMENT lCZ, R.S.C. 1985, c. C-36, AS AMENDED
IN TFIE MATTER OF A PLAN OF COMPROMISE OREMENT OF TRAVELBRANDS INC. (the
pplicant")
IMTIAL ORDER
THIS APPLiCATION, made by the Applicant, pursuant to the Companies' Creditors
Arrangement Act, R.S.C. 1985, c. C-36, as amended (the "CCAA") was heard this day at 330
University Avenue, Toronto, Ontario.
ON READING the affidavit of Francesco DeMarinis swom May 26, 2015 (the
"DeMarinis AffTdavit") and the Exhibits thereto and the pre-filing report dated }l4lay 26,2015 ofKPMG Inc. ("KPMG") in its capacity as the Proposed Monitor of the Applicant (the "Pre-
Filing Report"), and on being advised that the secured creditors who are likely to be affected by
the charges created herein were given notice, and on hearing the submissions of counsel for the
Applicant and KPMG and on reading the consent of KPMG to act as the Monitor,
)
)
)
50-2-
SERVICE
1. THIS COUPJ ORDERS that the time for service of the Notice of Application and the
Application Record is hereby abridged and validated so that this Application is properly
returnable today and hereby dispenses with futher service thereof.
APPLICATION
2. THIS COURT ORDERS AND DECLARES that the Applicant is a company to which
the CCAA applies.
PLAN OF ARRANGEMENT
3. THIS COURT ORDERS that the Applicant shall have the authority to file and may,
subject to further order of this Court, file with this Court a plan of compromise or arrangement
(hereinafter referred to as the "Plan").
POSSESSION OF PROPERTY AND OPERATIONS
4. THIS COURT ORDERS that the Applicant shall remain in possession and control of its
current and future assets, undertakings and properties of every nature and kind whatsoever, and
wherever situate including all proceeds thereof (the "Property"). Subject to further Order of this
Court, the Applicant shall continue to carry on business in a manner consistent with the
preservation of its business (the "Business") and Property. The Applicant is authorized and
empowered to continue to retain and employ the employees, consultants, agents, experts,
accountants, counsel and such other persons (collectively "Assistants") currently retained or
employed by it, with tiberry to retain such further Assistants as it deems reasonably necessary or
desirable in the ordinary course of business or for the carrying out of the terms of this Order.
5. THIS COURT ORDERS that the Applicant shall be entitled to continue to utilize the
eentral cash manaqement cvctem c¡rrrentlv in nlaee as deseribed in the DeMarinis Afhdavit or--- f --'-
replace it with another substantially similar central cash management system (the "Cash
Management System") and that any present or fuh¡re bank providing the Cash Management
System shall not be under any obligation whatsoever to inquire into the propriety, validity or -
legality of any transfer, payment, collection or other action taken under the Cash Management
51-J-
System, or as to the use or application by the Applicant of funds transferred, paid, collected or
otherwise dealt with in the Cash Management System, shall be entitled to provide the Cash
Management System without any liability in respect thereof to any Person (as hereinafter
defined) other than the Applicant, pursuant to the terms of the documentation applicable to the
Cash Management System, and shall be, in its capacity as provider of the Cash Management
System, an unaffected creditor under the Plan with regard to any claims or expenses it may suffer
or incur in connection with the provision of the Cash Management System.
6. THIS COURT ORDERS that the Applicant shall be entitled but not required to pay the
following expenses whether incured prior to or after this Order:
(a) all outstanding and future \ryages, salaries, employee and pension benefits, vacation
pay and expenses payable on or after the date of this Order, in each case incurred in
the ordinary course of business and consistent with existing compensation policies
and arrangements;
(b) all outstanding or future commissions, loyalty points, override payments, marketing
funds and amounts owing to travel agents in connection with the Company's sale of
travel products;
(c) the fees and disbursements of any Assistants retained or employed by the Applicant
in respect ofthese proceedings, at their standard rates and charges; and
(d) with the consent of the Monitor and Red Label Vacations Inc. ("Red Label"),
amounts owing for goods and services actually supplied to the Applicant prior to the
date ofthis order or to obtain the delivery ofservices contracted for prior to the date
of this order by suppliers of hotel, cruise-line, car rental and airline leisure travel
services that, in the opinion of the Applicant, are critical to the Business; and
(e) any other costs and expenses that are deemed necessary for the preservation of the
Property and/or Business by the Applicant with the consent of the Monitor and Red
Label.
7 - THIS COURT ORDERS that, except as otherwise provided to the contrary herein, the
Applicant shall be entitled but not required to pay all reasonable expenses incurred by the
52-4-
Applicant in carrying on the Business in the ordina"ry course after this Crder, and in carrying out
the provisions of this Order, which expenses shall include, without limitation:
(a) all expenses and capital expenditures reasonably necessary for the preservation ofthe
Property or the Business including, without limitation, payments on account ofinsurance (including directors and officers insurance), maintenance and security
services; and
payment for goods or services actually supplied to the Applicant following the date ofthis Order.
8. THIS COURT ORDERS that the Applicant shall remit, in accordance with legal
requirements, or pay:
(a) any statutory deemed trust amounts in favour of the Crown in right of Canada or ofany Province thereof or any other taxation authority which are required to be
deducted from employees' wages, including, without limitation, amounts in respect of(i) employment insurance, (ii) Canada Pension Plan, (iii) Quebec Pension Plan, and
(iv) income taxes;
(b) all goods and services or other applicable sales taxes (collectively, "Sales Taxes")
required to be remitted by the Applicant in connection with the sale of goods and
services by the Applicant, but only where such Sales Taxes are accrued or collected
after the date of this Order, or where such Sales Taxes \ryere accrued or collected prior
to the date of this Order but not required to be remitted until on or after the date ofthis Order, and
(c) any amount payable to the Crown in right of Canada or of any Province thereof or
any political subdivision thereof or any other taxation authority in respect ofmunicipal realty, municipal business or other taxes, assessments or levies of any
nature or kind which are entitled at law to be paid in priority to claims of secured
creditors and which are attributable to or in respect of the canying on of the Business
by the Applicant.
(b)
53-5-
g. THIS COURT ORDERS that until a real properiy lease is disclaimed or resiliateC in
accordance with the CCAA, the Applicant shall pay all amounts constituting rent or payable as
rent under real property leases (including, for gteater certainty, common area maintenance
charges, utilities and realty taxes and any other amounts payable to the landlord under the lease)
or as otherwise may be negotiated between the Applicant and the landlord from time to time
("Rent"), for the period commencing from and including the date of this Order, twice-monthly in
equal payments on the first and fifteenth day of each month, in advance (but not in arrears). On
the date of the first of such payments, any Rent relating to the period commencing from and
including the date of this Order shall also be paid.
10. THIS COURT ORDERS that, except as specifically permitted herein, the Applicant is
hereby directed, until further Order of this Court: (a) to make no payments of principal, interest
thereon or otherwise on account of amounts owing by the Applicant to any of its creditors as of
this date; (b) to grant no security interests, trust, liens, charges or encumbrances upon or in
respect of any of its Property; and (c) to not grant credit or incur liabilities except in the ordinary
course of the Business.
RESTRUCTURING
ll. THIS COURT ORDERS that the Applicant shall, subject to such requirements as are
imposed by the CCAA and such covenants as may be contained in the Definitive Documents (as
hereinafter defined), have the right to:
(a) permanently or temporarily cease, downsize or shut down any of its business or
operations and to dispose of redundant or non-material assets not exceeding $100,000
in any one transaction or $500,000 in the aggregate;
(b) terminate the employment of such of its employees or temporarily lay off such of its
employees as it deems appropriate; and
(c) pursue all avenues of refinancing of its Business or Property, in whole or part, subject
to prior approval of this Court being obtained before any material refinancing;
all of the foregoing to permit the Applicant to proceed with an orderly restructuring of the
Business (the "Restructuring").
54-6-
12. THIS COURT ORDERS that the Applicant shall provide each of the relevant landlords
with notice of the Applicant's intention to remove any fixtures from any leased premises at least
seven (7) days prior to the date of the intended removal. The relevant landlord shall be entitled
to have a representative present in the leased premises to observe such removal and, if the
landlord disputes the Applicant's entitlement to remove any such fixture under the provisions of
the lease, such fixture shall remain on the premises and shall be dealt with as agreed between any
applicable secured creditors, such landlord and the Applicant, or by further Order of this Court
upon application by the Applicant on at ieast trvo (2) days' notice to such landlord and any such
secured creditors. If the Applicant disclaims or resiliates the lease governing such leased
premises in accordance with Section 32 of the CCAA, it shall not be required to pay Rent under
such lease pending resolution of any such dispute (other than Rent payable for the notice period
provided for in Section 32(5) of the CCAA), and the disclaimer or resiliation of the lease shall be
without prejudice to the Applicant's claim to the fixtures in dispute.
13. THIS COTIRT ORDERS that if a notice of disclaimer or resiliation is delivered pursuant
to Section 32 of the CCAA, then (a) during the notice period prior to the effective time of the
disclaimer or resiliation, the landlord may show the affected leased premises to prospective
tenants during normal business hours, on giving the Applicant and the Monitor 24 hours' prior
written notice, and (b) at the effective time of the disclaimer or resiliation, the relevant landlord
shall be entitled to take possession of any such leased premises without waiver of or prejudice to
any claims or rights such landlord may have against the Applicant in respect of such lease or
leased premises, provided that nothing herein shall relieve such landlord of its obligation to
mitigate any damages claimed in connection therewith.
NO PROCEEDINGS AGAINST THE APPLICANT OR TIM PROPERTY
14. THIS COURT ORDERS that until and including Friday, June 26, 2015, or such later date
as this Court may order (the "Stay Period"), no proceeding or enforcement process in any court
ortribrrnal (each, a "Proceeding") shall be commenced or continued against or in respect of the
Applicant or the Monitor, or affecting the Business or the Property, except with the written
consent of the Applicant and the Monitor, or with leave of this Court, and any and all
Proceedings currently under way against or in respect of the Applicant or affecting the Business
or the Property are hereby stayed and suspended pending fuither Order of this Court.
55-1-
NO EXERCISE OF RIGHTS OR REiúEDIES
15. THIS COURT ORDERS that during the Stay Period, all rights and remedies of any
individual, firm, corporation, govemmental body or agency, or any other entities (all of the
foregoing, collectively being "Persons" and each being a "Person") against or in respect of the
Applicant or the Monitor, or affecting the Business or the Property, are hereby stayed and
suspended except 'ù/ith the written consent of the Applicant and the Monitor, or leave of this
Court, provided that nothing in this Order shall (i) empower the Applicant to carry on any
business which the Applicant is not lawfully entitled to carry on, (ii) affect such investigations,
actions, suits or proceedings by a regulatory body as are permitted by Section 11.1 of the CCAA,
(iii) prevent the filing of any registoation to preserve or perfect a security interest, or (iv) prevent
the registration of a claim for lien.
NO INTERF'ERENCE \ryITH RIGHTS
16. THIS COURT ORDERS that during the Stay Period, no Person shall discontinue, fail to
honour, alter, interfere with, repudiate, terminate or cease to perform any right, renewal right,
contract, agreement, licence or permit in favour of or held by the Applicant, except with the
written consent of the Applicant and the Monitor, or leave of this Court.
CONTINUATION OF' SERVICES
17. THIS COURT ORDERS that dwing the Stay Period, all Persons having oral or written
agreements with the Applicant or statutory or regulatory mandates for the supply of goods and/or
services, including without limitation all computer software, communication and other data
services, centralized banking services, payroll services, insurance, transportation services, utility
or other services to the Business or the Applicant, are hereby restrained until further Order of this
Court from discontinuing, altering, interfering with or terminating the supply of such goods or
services as may be required by the Applicant, and that the Applicant shall be entitled to the
continued use of its current premises, telephone numbers, facsimile numbers, intemet a<iciresses
and domain names, provided in each case that the normal prices or charges for all such goods or
services received after the date of this Order are paid by the Applicant in accordance with normal
payment practices of the Applìcant or such other practices as may be agreed upon by the supplier
56-8-
or service provider and each of the Applicant and the Monitor, or âs may be ordered by this
Court.
18. THIS COURT ORDERS that during the Stay Period, Chase Paymentech Solutions, Bank
of Nova Scotia and JPMorgan Chase Bank (collectively the "Processing Parties") are hereby
restrained until further Order of this Court from discontinuing, altering, interfering with or
terminating the supply of goods or services as may be required by the Applicant under the
Merchant Agreement between Red Label and the Processing Parties, baseci on the insolvency of
the Company, provided in each case that the normal prices or charges for all such goods or
services received after the date of this Order are paid by in accordance with normal payment
practices or such other practices as may be agreed upon by the Processing Parties and each of the
Applicant, Red Label and the Monitor, or as may be ordered by this Court.
NON-DEROGATION OF' RIGHTS
19. THIS COURT ORDERS that, notwithstanding anything else in this Order, no Person
shatl be prohibited from requiring immediate payment for goods, services, use of lease or
licensed properfy or other valuable consideration provided on or after the date of this Order, nor
shall any Person be under any obligation on or after the date of this Order to advance or re-
advance any monies or otherwise extend any credit to the Applicant. Nothing in this Order shall
derogate from the rights conferred and obligations imposed by the CCAA.
PROCEEDINGS AGAINST DIRECTORS AND OFFICERS
20. THIS COURT ORDERS that during the Stay Period, and except as permitted by
subsection 11.03(2) of the CCAA, no Proceeding may be commenced or continued against any
of the former, current or future directors or officers of the Applicant with respect to any claim
against the directors or officers that arose before the date hereof and that relates to any
obligations of the Applicant whereby the directors or offtcers are alleged under any law to be
r' ¡ -.f:c-- ---- f--- ¿l- ^-.^^-f^-^-^^ ^f ^"^LllaDle 1n tner capaclly as olrectors or olllçEls IUI r-Ire IJayIIruflt ur IJçrrurur¿luuç ul rL.r\,u
obligations, until a compromise or arrangement in respect of the Applicant, if one is filed, is
sanctioned by this Court or is refused by the creditors of the Applicant or this Court.
57-9-
nrñn ^m/'\Tt c! r ^
ÀtT\ ^T¡nrr^rrrT
c, rì\lY\[rì\/fì\TTütTTT A'rl¡.ll\] ^
ì\TT.l lìIr ^
I) ñ,8'lrl-f(ltLIIJI\'J fll\[, \r¡-FI\--flr\tJ lll.l-rl)lYrltI¡'l\-fa¡I\-/I! nlts v¡¡ÕÀ\vs
21. THIS COURT ORDERS that the Applicant shall indemnify its directors and officers
against obligations and liabilities that they may incur as directors or officers of the Applicant
after the commencement of the within proceedings, except to the extent that, with respect to any
officer or director, the obligation or liability was incurred as a result of the director's or officer's
gross negligence or wilful misconduct.
22. THIS COURT ORDERS that the directors and officers of the Applicant shall be entitled
to the benefit of and are hereby granted a charge (the "Directors' Charge") on the Property,
which charge shall not exceed an aggregate amount of $4.3 million,.as security for the indemnity
provided in paragraph 21 of this Order. The Directors' Charge shall have the priority set out in
paragraphs 39 and 41 herein.
23. THIS COURT ORDERS that, notwithstanding any language in any applicable insurance
policy to the contrary, (a) no insurer shall be entitled to be subrogated to or claim the benefit of
the Directors' Charge, and (b) the Applicant's directors and officers shall only be entitled to the
benefit of the Directors' Charge to the extent that they do not have coverage under any directors'
and officers' insurance policy, or to the extent that such coverage is insufficient to pay amounts
indemnified in accordance with paragraph 21 of this Order.
APPOINTMENT OF MONITOR
24. THIS COURT ORDERS that I(PMG lnc. is hereby appointed pursuant to the CCAA as
the Monitor, an officer of this Court, to monitor the business and financial affairs of the
Applicant with the powers and obligations set out in the CCAA or set forth herein and that the
Applicant and its shareholders, officers, directors, and Assistants shall advise the Monitor of all
material steps taken by the Applicant pursuant to this Order, and shall co-operate fully with the
Monitor in the exercise of its powers and discharge of its obligations and provide the Monitor
with the assistance that is necessary io enabie the iv{oniior io adeqtiateiy carry out'tlie lvlonitor's
functions.
25. THIS COURT ORDERS that the Monitor, in addition to its prescribed rights and
obligations under the CCAA, is hereby directed and empowered to:
58-10-
(a) monitor the Applicant's ieceipts and disbursements;
(b) report to this Co'¡rt at such times and intervals as the Monitor may deem appropriate
with respect to matters relating to the Properfy, the Business, and such other matters
as may be relevant to the proceedings herein;
(c) assist the Applicant, to the extent required by the Applicant, in its dissemination, to
Red Label (being a lender to the Applicant pursuant to the Commitment Agreement,
as hereinafter defined), the Bank of Montreal and their respective counsel on a basis
to be agreed upon with each of Red Label and the Bank of Montreal of financial and
other information as agreed to between the Applicant and each of Red Label and the
Bank of Montreal which may be used in these proceedings including reporting on a
basis to be agreed with each of Red Label and the Bank of Montreal;
(d) advise the Applicant in its preparation of the Applicant's cash flow statements and
reporting required by Red Label and the Bank of Montreal, which inforrnation shall
be reviewed with the Monitor and delivered to Red Label, the Bank of Montreal and
their respective counsel on a periodic basis agreed to by each of Red Label and the
Bank of Montreal;
(e) advise the Applicant in its development of the Plan and any amendments to the Plan;
assist the Applicant, to the extent required by the Applicant, v\'ith the holding and
administering of creditors' or shareholders' meetings for voting on the Plan;
(g) have full and complete access to the Property, including the premises, books, records,
data, including data in electronic form, and other financial documents of the
Applicant, to the extent that is necessary to adequately assess the Applicant's
business and financial affai¡s or to perform its duties arising under this Order;
(h) be at liberty to engage inciepencient iegai counsei or such other persons as the lvfonitor
deems necessary or advisable respecting the exercise of its powers and performance
of its obligations under this Order; and
(Ð
- 11 - 59
(i) perform such other duties as are required by this Order or by this Court from time to
tlme.
26. THIS COURT ORDERS that the Monitor shall not take possession of the Property and
shall take no part whatsoever in the management or supervision of the management of the
Business and shall not, by fulfilling its obligations hereunder, be deemed to have taken or
maintained possession or control of the Business or Properfy, or any part thereof.
27. THIS COURT ORDERS that nothing herein contained shall require the Monitor to
occupy or to take control, care, charge, possession or management (separately andl/or
collectively, "Possession") of any of the Property that might be environmentally contaminated,
might be a pollutant or a contaminant, or might cause or contribute to a spill, discharge, release
or deposit of a substance contrary to any federal, provincial or other law respecting the
protection, conservation, enhancement, remediation or rehabilitation of the environment or
relating to the disposal of waste or other contamination including, without limitation, the
Canadian Environmental Protection Act, the Ontario Environmental Protection Act,the Ontario
Water Resources Act, or the Ontario Occupatíonal Health and S"ftty Act and regulations
thereunder (the "Environmental Legislation'), provided however that nothing herein shall
exempt the Monitor from any duty to report or make disclosure imposed by applicable
Environmental Legislation. The Monitor shall not, as a result of this Order or anything done in
pursuance of the Monitor's duties and powers under this Order, be deemed to be in Possession ofany of the Property within the meaning of any Environmental Legislation, unless it is actually in
possession.
28. THIS COURT ORDERS that that the Monitor shall provide any creditor of the Applicant
and Red Label with information provided by the Applicant in response to reasonable requests for
information made in writing by such creditor addressed to the Monitor. The Monitor shall not
have any responsibility or liability with respect to the information disseminated by it pursuant to
Î-tris pa¡aeranh. In the case of infonnation tåat tåe Monitor ha.s heen arl..,ised h-.' the A.nnlicanr is---= r=---9_-r-" "^
confidential, the Monitor shall not provide such information to creditors unless otherwise
directed by this Court or on such terms as the Monitor and the Applicant may agree.
29. THIS COURT ORDERS that, in addition to the rights and protections afforded the
Monitor under the CCAA or as an off,rcer of this Court, the Monitor shall incur no liability or
60-12-
obligation as a result of its appointment or the carrying out of the provisions of thís Order, save
and except for any gross negligence or wilfirl misconduct on its part. Nothing in this order shall
derogare from the protections afforded the Monitor by the CCAA or any applicable legislation'
30. THIS COURT ORDERS that the Monitor, counsel to the Monitor and counsel to the
Applicant shall be paid their reasonable fees and disbursements, in each case at their standard
rates and charges, by the Appiicant as part of the costs of these proceedings. The Applicant is
hereby authorized and directed to pay the accounts of the Monitor, counsel for the Monitor anci
counsei for the Applicant on a weekly basis and, in addition, the Applicant is hereby authorized
to pay to the Monitor, counsel to the Monitor, and counsel to the Applicant, retainers in the
amounts of $25,000, $25,000 and $50,000, respectively, to be held by them as security for
payment of their respective fees and disbursements outstanding from time to time.
31. THIS COURT ORDERS that the Monitor and its legal counsel shall pass their accounts
from time to time, and for this purpose the accounts of the Monitor and its legal counsel are
hereby referred to a judge of the Commercial List of the Ontario Superior Court of Justice'
32. THIS COURT ORDERS that the Monitor, counsel to the Monitor, if any, and the
Applicant,s counsel shall be entitled to the benefit of and are hereby granted a charge (the
..Administration Charge") on the Property, which charge shall not exceed an aggregate amount
of $1 million, as security for their professional fees and disbursements incurred at the standard
rates and charges of the Monitor and such counsel, both before and after the making of this order
in respect of these proceedings. The Administration Charge shall have the priority set out in
paragraphs 39 and 41 hereof.
INTERCOMPAI\IY FINAN CIN G
33. THIS COURT ORDERS that the Applicant is hereby authorized and empowered to
obtain and borrow under a credit facility from Red Label in order to finance the Applicant's
working capital requirements an<i other generai corporate purposes air'J capital expenditures,
provided that borrowings under such credit facility shall not exceed $4 million unless permitted
by further O¡der of this Court.
6I-13-
34. THIS COURT ORDERS THAT such credit facility shall be o¡i the ter-ms and subject tc
the conditions set forth in the Commitment Agreement between the Applicant and Red Label
dated as of May 26,2015 (the "Commitment Agreement") filed'
35. THIS COURT ORDERS that the Applicant is hereby authorized and empowered to
execute and deliver such credit agreements, mortgages, charges, hypothecs and security
documents, guarantees and other definitive documents (collectively, the "Definitive
Documents"), as are contemplated by the commitment Agreement or as may be reasonabiy
required by Red Label pursuant to the terms thereot and the Applicant is hereby authorized and
directed to pay and perform all of its indebtedness, fees, liabilities and obligations to Red Label
under and pursuant to the Commitrnent Aþeement and the Definitive Documents as and when
the same become due and are to be performed, notwithstanding any other provision of this Order.
36. THIS COURT ORDERS that Red Label shall be entitled ro the benefit of and is hereby
granted a charge (the "Intercompany Charge") on the Property, which lntercompany Charge
shall not secure an obligation that exists before this Order is made. The Intercompany Charge
shall have the priority set out in paragraphs 39 and 41 hereof'
THIS COURT ORDERS that, notwithstanding any other provision of this Order:37
(a) Red Label may take such steps from time to time as it may deem necessary or
appropriate to file, register, record or perfect the Intercompany Charge or any of the
Definitive Documents;
(b) Red Label, upon 3 calendar days' notice to the Applicant and the Monitor, may
exercise any and all of its rights and remedies against the Applicant or the Property
under or pursuant to the Commitment Agreement, Definitive Documents and the
Intercompany Charge, including without limitation, to cease making advances to the
Applicant and set off and/or consolidate any amounts owing by Red Label to the
Applicant against the obligations of the Appiicant to Re<i Labei under ihe
Commitment Agreement, the Definitive Documents or the Intercompany Charge, to
make demand, accelerate payment and give other notices, or to apply to this Court for
the appointment of a receiver, receiver and manager or interim receiver, or for a
62-14-
bankruptcy order against the Applicant and for tlie appointment of a trustee in
bankruptcy of the APPlicant; and
(c) the foregoing rights and remedies of Red Label shall be enforceable against any
trustee in bankruptcy, interim receiver, receiver or teceiver and manager of the
Applicant or the ProPertY.
3g. THIS COURT ORDERS AND DECLARES rhar Red Label shall be treated as unaffected
in any plan of arrangement or compromise filed by the Applicant under the CCAA' or any
proposal filed by the Applicant under the Banlvuptcy and Insolvency Act of Canada (the "BIA"'),
with respect to any advances made under the Definitive Documents.
VALIDITY AND PRIORITY OF CHARGES CREATED BY THIS ORDER
39. THIS COURT ORDERS that the priorities of the Administration charge, the Directors'
Charge and the Intercompany Charge, as among them, shall be as follows:
First - Administration Charge (to the maximum amount of $1 million);
Second - Directors' Charge (to the maximum amount of $4.3 million); and
Third - lntercompany Charge (to the maximum amount of $4 million).
40. THIS COURT ORDERS that the filing, registration or perfection of the Directors'
Charge, the Administration Charge or the Intercompany Charge (collectively, the "Charges")
shall not be required, and that the Charges shall be valid and enforceable for all purposes,
including as against any right, title or interest filed, registered, recorded or perfected subsequent
to the Charges coming into existence, notwithstanding any such failure to file, register, record or
perfect.
4I. THIS COURT ORDERS that each of the Directors' charge, the Administration charge
and the Intercompany Charge (all as constituted and defined herein) shall constitute a charge on
the property and such Charges shall rank in priority to all other security interests, trusts, liens,
charges and encumbrances, claims of secured creditors, statutory or otherwise (collectively,
.,Encumbrânces") in favour of any Person other than any validly perfected security interest
63- 15 -
granted in favour of the Bank of Montreal and Elerrrent Fleet Management Inc. and set out in
Schedule "A" hereto.
42. THIS COURT ORDERS that except as otherwise expressly provided for herein, or as
may be approved by this Court, the Applicant shall not grant any Encumbrances over any
Property that rank in priority to, or pari passu with, any of the Directors' Charge, the
Administration Charge or the Intercompany Charge, unless the Applicant also obtains the prior
written consent of the Monitor, Red Label and the beneficiaries of the Directors' Charge and the
Administration Charge, or further Order of this Court.
43. THIS COURT ORDERS that the Directors' Charge, the Administration Charge, the
Commitment Agreement, the Definitive Documents and the Intercompany Charge shall not be
rendered invalid or unenforceable and the rights and remedies of the chargees entitled to the
benefit of the Charges (collectively, the "Chargees") and/or Red Label thereunder shall not
otherwise be limíted or impaired in any way by (a) the pendency of these proceedings and the
declarations of insolvency made herein; (b) any application(s) for bankruptcy order(s) issued
pursuant to the BIA, or any bankruptcy order made pursuant to such applications; (c) the filing of
any assignments for the general benefit of creditors made pursuant to the BIA; (d) the provisions
of any federal or provincial statutes; or (e) any negative covenants, prohibitions or other similar
provisions with respect to borrowings, incurring debt or the creation of Encumbrances' contained
in any existing loan documents, lease, sublease, offer to lease or other agreement (collectively,
an ,.Agreement',) which binds the Applicant, and notwithstanding any provision to the contrary
in any Agreement:
(a) neither the creation of the Charges nor the execution, delivery, perfection, registration
or performance of the Commitment Agreement or the Definitive Documents shall
create or be deemed to constitute a breach by the Applicant of any Agreement to
which it is a ParlY;
(b) none of the Chargees shall have any liability to any Person whatsoever as a resuit of
any breach of any Agreement caused by or resulting from the Applicant entering into
the Commitment Agreement, the creation of the Charges, ot the execution, delivery
or performance of the Definitive Documents; and
64- 16 -
(c) the payments made by the Appiicant puisuânt to this Order, the Commitment
Agreement or the Definitive Documents, and the granting of the Charges, do not and
will not constitute preferences, fraudulent conveyances, transfers at undervalue,
oppressive conduct, or other challengeable or voidable transactions under any
applicable law.
44. THIS COURT ORDERS that any Charge created by this Order over leases of real
property in Canada shall only be a Charge in the Applicant's interest in such real property leases'
SER\rICE AND NOTICE
45. THIS COURT ORDERS that the Monitor shall (i) without delay, publish in the Globe
and Mail a notice containing the information prescribed under the CCAA, (ii) within five days
after the date of this Order, (A) make this Order publicty available in the manner prescribed
under the CCAA, (B) send, in the prescribed manner, a notice to every known creditor who has a
claim against the Applicant of more than $1000, and (C) prepare a list showing the names and
addresses of those creditors and the estimated amounts of those claims, and make it publicly
available in the prescribed marmer, all in accordance with Section 23(1Xa) of the CCAA and the
regulations made thereunder.
46. THIS COURT ORDERS that the E-Service Protocol of the Commercial List (the
..protocol,,) is approved and adopted by reference herein and, in this proceeding, the service of
documents made in accordance with the Protocol (which can be found on the Commercial List
website at
protocoÐ shall be valid and effective service. Subject to Rule 17.05 this Order shall constitute
an order for substituted service pursuant to Rule 16.04 of the Rules of Civil Procedure. Subject to
Rule 3.01(d) of the Rules of Civil Procedure and paragraph 2i of the Protocol, service of
documents in accordance with the Protocol will be effective on transmission. This Court further
orders that a Case Website shall be established in accordance with the Protocol with the
following URL: http://www.kpmg-corn/Calen/services/AdvisoryiTransactionRestructuring/
CreditorlinkS ites/TravelBrand sÆa ges/default. aspx'
47. THIS COURT ORDERS that if the service or distribution of documents in accordance
with the protocol is not practicable, the Applicant and the Monitor are at liberty to serve or
65-n-
distdbute this Order, any other materials and orders in these proceedings, any notices or other
correspondence, by forwarding true copies thereof by prepaid ordinary mail, courier, personal
delivery or facsimile transmission to the Applicant's creditors or other interested parties at their
respective addresses as last shown on the records of the Applicant and that any such service or
distribution by courier, personal delivery or facsimile transmission shall be deemed to be
received on the next business day following the date of forwarding thereof, or if sent by ordinary
mail, on the third business day after mailing.
GENERAL
48. THIS COURT ORDERS that the Applicant or the Monitor may from time to time apply
to this Court for advice and directions in the discharge of its powers and duties hereunder.
49. THIS COURT ORDERS that nothing in this Order shall prevent the Monitor from acting
as an interim receiver, a receiver, a receiver and manager, or a trustee in bankruptcy of the
Applicant, the Business or the Property.
50. THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal,
regulatory or administrative body having jurisdiction in Canada or in the United States, to give
effect to this Order and to assist the Appticant, the Monitor and their respective agents in
carrying out the terms of this Order. All courts, tribunals, regulatory and administrative bodies
are hereby respectfully requested to make such orders and to provide such assistance to the
Applicant and to the Monitor, as an officer of this Court, as may be necessary or desirable to give
effect to this Order, to grant representative status to the Monitor in any foreign proceeding, or to
assist the Applicant and the Monitor and their respective agents in carrying out the terms of this
Order.
51. THIS COURT ORDERS that each of the Applicant and the Monitor be at liberty and is
hereby authorized and empowered to apply to any court, tribunal, regulatory or administrative
r, - -r-.- .-r - - -- r- --¿^J f--- ¿1^^ --^^^^-^i¿i^- ^1 +L'-^ ^-J^- ^-J f^- ^^^:^+^-^^ :- ^^*.':-^ n"+ fl.a
DOCty, Wngfgvgl. lOOatCU, IUI tllg IgL;UBIlltlUil Ul tlllt \-rluçl ¡allLl ltjt aùòlùLcul\.ç Irr \,(ulJurË uuL Lrrv
terms of this Order, and that the Monitor is authorized and empowered to act as a representative
in respect of the within proceedings for the purpose of having these proceedings recognized in a
jurisdiction outside Canada.
66-18-
52. THIS COURT ORÐERS that any interested party (includirrg ttie Applicant and the
Monitor) may apply to this Court to vary or amend this Order on not less than seven (7) days'
notice to any other party or parties likely to be affected by the order sought or upon such other
notice, if any, as this Court may order.
53. THIS COURT ORDERS rhat this order and all of its provisions are effective as of
12:01 a.m. Eastern Standard/Daylight Time on the date of this Order.
J
Éî.¡TER-¿D AT i ìNSCÊIT À TOÊONTO
:) i S.Î-"JËïÉG ì3r R E No :
, MÀY 27 ?01å
trì
67-19-
SCIIEDULE ('A''
N/A OntarioEquipment, MotorVehicle; GeneralCollateralDescription: Anyvehicles specifiedand any othervehicles ofwhatever year,make or modelincluding afteracquired vehiclesand including anytrailers and/orequipment, andincluding proceeds
thereof, providedto the debtorpursuant to a motorvehicle leaseagreement madebetween theparties. No otherassets included.
ElementFleetManagementInc.
649304379 -2008i0161 9s0r5317545(10 years)
OntarioN/AInventory,Equipment,Accounts, Other,Motor Vehicle
666306711 -20101202131315322720(5 years)
Bank ofMontreal
OntarioInventory,Equipment,Accounts, Other,Motor Vehicle
N/ABank ofMontreal
68640754s -20t30426145215909482(7 years)
BritishColumbia
AII present anci
after acquiredpersonal propertyof the debtor and,without limitation,all fixtures, crops,and licences
NlaBank ofMontreal
893i90F (registeredDecember 2,2010;5years)
-20 - 6B
Bank ofMontreal
317103H (registeredApril29,2013;7 years)
AII present andafter acquiredpersonal property
N/A BritishColumbia
Bank ofMontreal
r 3-03361 5 1-0002(registered April29,2013;10 years)
Nature of registration:Movable hypothecwithout delivery
All movableproperty, presentand future,corporeal andincorporeal, ofevery nafure andkind andwheresoeverlocated.
N/A Quebec
ElementFleetManagementInc. (lessor)
08-0601273-0001(registered October 20,2008; expiring h:üy 26,201 8)
Natrue of registrati on :
Global registrationpertaining to rightsresulting from a lease(master agreement)
The universality ofall vehicles,present and future,provided to thelessee prusuant tothe motor vehiclelease agreementbetween the lessorand the lessee,including allreplacements,supplements oramendmentsthereto, togetherwith anyreplacement orsupplementaryvehicle provided tothe lessee inaccordance withthe terms of thesaid motor vehiclelease agreement,and including allaccessories andequipment attachedthereto fr'orn timeto time.
N/A Quebec
IN THE MATTER oF'COMPANIES' CREDITORS ARRANGEMENT ACT, R.s.c. 1985, c. c-!6,AS AMENDEDAND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF TRAVELBRANDS INC.t-/ç- [/ fulicant
ONTARIOSUPERIOR COURT OF JUSTICE
(COMMERCTAL LrST)
PROCEEDING COMMENCED ATTORONTO
osLER, HOSKIN & H.{RCOURT LLPBarristers & SolicitorsP. O. Box 501 First Canadian PlaceToronto ON M5X lBB
John A. MacDonald (LSUC#25884R)Tel: 416.862.5672
Marc Wasserman (LSUC#44066M)Tei: 416.862-4908
Michael Deleilis (LSUC# 4803SU)Tel:Fax:
4t6.862.5997416.862.6666
Or\o
Lawyers for the ApplicantMatter No. 1163346
70
SV/ORN
THIS IS EXHIBIT É68" REFERRED TO IN
THE AFFIDAVIT OF JOE DEMARINIS
ON THIS 18th DAY OF JUNE,2O15
Affidavits.
WWd^ttr,lß^Y/Hrrc\w
]ICourt File No.
ONTARIOSUPERIOR COURT OF' JUSTICE
(COMMERCIAL LIST)
IN THE MATTER OF THE COMPANIES' CREDITORSARRANGEMENTICT, R.S.C., 1985, c.C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE ORARRANGEMENT OF TRAVELBRANDS INC.
APPLICANT
AFFIDAVIT OF FRANCESCO DEMARINIS(Sworn l.l.ay26,2015)
I, Francesco DeMarinis, of the City of Kleinburg, in the Province of Ontario, the
Co-Chief Executive Officer of TravelBrands Inc. (formerly Thomas Cook Canada Inc. and
referred to herein as "TravelBrands", the "Company" or the "Applicilt"), MAKE OATH AND
SAY:
1. This affidavit is made in support of an Application by TravelBrands for certain
relief under the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (the
"ccAA").
2. I am Francesco DeMarinis and have been Co-Chief Executive Officer of
TravelBrands since June 2013. I also hold the position of Vice President with Red Label
Vacations Inc., operating as Red Tag Vacations ("Red Label'), the ultimate parent corporation of
TravelBrands. As such, I have personal knowledge of the matters deposed ïo in this Afflrdavit.
Where I have relied upon other sources of information, I yerily believe such information to be
true.
3. In preparing this affrdavit, I have consulted with legal, fìnancial and other
advisors of TravelBrands and Red Label, and other members of the senior management team of
TravelBrands and Red Labe!.
- ¿-
12lntroduction4. TravelBrands is a leading Canadian operator of wholesale travel services
(including, among others, Holiday House, FunSun Vacations, Sunquest, Encore Cruises,
Boomerang Tours, ALBATours, Exotik Tours, lntair, Network and Carte Postale) and retail
travel agencies (including, among others, BelAir Travel, Sears Travel, Last Minute Club,
Wholesale Travel Group and Sunquest).
5. Red Label, the ultimate parent of TravelBrands, was founded in 2004. It is a
leading Canadian provider of online retail travel agency services, and owns and operates RedTag
Vacations (with its online website being www.RedTag.ca). In August 2012, Red Label became
aware that the Thomas Cook Group plc (the "Thomas Cook Group"), a leading international
leisure travel company, was considering a sale of its North American wholesale and retail travel
operations. At the time, Red Label was primarily operating in the retail online travel agency
sector, with only a small wholly owned subsidiary (Total Vacations) operating as a wholesaler.
6. Anticipating structural changes and a further secula¡ decline in the entire
Canadian leisure travel industry, Red Label determined that the acquisition of the Thomas Cook
Group's North American operations, including its Canadian retail and wholesale havel business,
was an opportunity to enter the Canadian wholesale leisure travel market and to position Red
Label to mærimize synergies and profitability.
7. Accordingly, in May 2013, Red Label indirectly purchased the Company by
acquiring Thomas Cook Group's North American operations. More specifically, Red Label
acquired 100% of the outstanding shares of Thomas Cook USA Holdings,Inc. and Thomas Cook
Financial Services Inc. (which changed its name to 2224855 Ontario Inc. on April 23, 2014 and
is referred to herein as "Holdco"). Thomas Cook USA Holdings, Inc. and Holdco together
owned all of the outstanding shares of Thomas Cook Canada Inc. at the time of this transaction.
In November 2013, Thomas Cook Canada Inc. changed its name to TravelBrands Inc.
8. At the time of the acquisition, the Company was unprofitable, losing in excess of
$25 million per year. Red Label recognized that post-acqusition, the Company would need to
undergo a significant operational restructuring in order to maximize synergies and profitability.
Furthermore, Red Label recognized that the Company would need to address certain legâcy
contracts which were materially impairing the financial performance of the Company, namely:
-J-
73(a) a seven-year revenue sharing arrangement with Sears Canada Inc. ("Sears") for the operation
of Sears Travel, entered into in 2011 (the "Sears Agreement"); and (b) a lease of a property
located at 75 Eglinton Avenue, Toronto, Ontario (the "75 Eglinton Lease"), which is for an entire
seven-floor building that has remained largely vacant since December 2013
9. Post-acquisition, the Company actively engaged in negotiations with Sears and
with the 75 Eglinton landlord seeking to achieve a consensual resolution that would be for the
benefit of the Company and its contractual counterparties over the long term. Although the
negotiations with Sears resulted in an amendment to the Sears Agreement in 2014 (the
"Amended Sears Agreement"), no material relief of the Company's obligations under the 75
Eglinton Lease has been achieved.
10. The Sears Travel business has continued to generate losses for the Company
notwithstanding the Amended Sears Agreement terms, which were entered into to address the
decline in the Sears Travel business between 2013 and 2014, but which do not add¡ess the
continued decline of the Sears Travel business in 2015. As well, the 75 Eglinton property
continues to remain largely vacant at considerable expen'se to the Company. This situation has
been exacerbated by an overall decline in the gross sales, net margins and overall revenues in the
Sears Travel retail business which has compounded the Company's financial issues.
11. Although the Company was somewhat successful in streamlining overhead and
reducing its costs by realigning its operating divisions post-acquisition, in 2014 the Company
experienced net operating losses in the order of $5 million. These losses were primarily
attributable to the impact of under-performance of the Company's fully-inclusive tour ("FIT")
business (operated under the Holiday House division), as well as losses generated in the
Company's retail, cruise and ALBATouT brands/divisions, the Amended Sears Agreement and
the 75 Eglinton Lease. Under the status quo, the 2014 netoperating loss experience is expected
to continue and worsen for the foreseeable future.
12. Pre-acquisition, the Company's operations were materially supported through
financial support provided by its former parent company. It is my understanding that this support
included, inter alia, cash funding, guarantees of certain material merchant and credit card
processing agreements, guarantees of third party bank debt, administrative support and other
credit support.
-4-
1413. For the Company to continue operations post-acquisition, it was necessary for
Red Label to provide ongoing material financial support to the Company. The Company's
financial situation made it impossible to obtain credit ¿urangements with third party lenders
independent of Red Label's support and assistance. This support includes the provision by Red
Label of a back-stop credit facilify, occasional direct funding, Red Label being the signatory on
several key nierchant and credit card processing agreements, and adminishative support. The
Company is especially dependent on this funding and financial support during the summer
season, when sales in the Canadian leisure havel industry are traditionally poor.
14. Following a thorough consideration of TravelBrands' continuing financial losses,
I was advised by Red Label's senior management that as of May 26,2015,Red Label's board of
directors is not prepared to continue funding and financially supporting the Company in its
current circumstances on the same basis that it has provided support in the past.
15. In the absence of Red Label funding and financial support, the Company is unable
to meet its liabilities as they become due (which include, without limitation, its lease obligations
under the 75 Eglinton Lease and financial comminnents urder the Amended Sears Agreement)
without immediately compromising its ability to pay other financial obligations that are due and
payable and compromising the Company's abilþ to meet the working capital requirements as
set out by the regulators undçr which TravelBrands is registered or accredited. Therefore, the
Company is insolvent.
16. TravelBrands believes that a stay of proceedings and supervision by this
Honourable Court with the assistance of a monitor is the only practical method to ensure a fair
and orderly consideration of the Company's options for continuing the business for the benefit of
its stakeholders.
17. The granting by this Honourable Court of the relief sought will provide the
Company an opportunity to further pusue consensual arrangements to address the disconnect
between its financial obligations under the Amended Sears Agreement and the 75 Eglinton
L,ease, on the one hand, and the Compan¡r's continuing operational losses which are anticipated
to continue for the foreseeable future under the status quo. If necessary, the Company will have
to explore the potential disclaimer of the Amended Sears Agreement and the 75 Eglinton Lease
in the short term.
-5-
7518. Furthermore, the Company is contemplating a sales process whereby prospective
purchasers will have the opportunity to bid for all of the Company's assets. The Company
requires an opportunity to finalize this process with the objective of enabling the Company's
business to continue in the ordinary course, uninterrupted and without any impact to itscustomers.
19. Red Label is supportive of these initiatives and most recently re-advanced $9.3M
to TravelBrands on April 30, 2015 in order to ensure that TravelBrands was able to continue to
meet its working capital requirements in the ordinary course. Moreover, and as further evidence
of its support of TravelBrands' restructuring initiatives, Red Label has not yet requested the
repayment of any of the most recent $9.3M re-advance since that date to ensure that the
Company has sufficient cash and working capital during the requested stay of proceedings. This
will permit TravelBrands to continue operations in the ordinary course while pursuing its
restrucfuring initiatives. Red Label has also entered into a Commitment Agreement dated May
26,2015 (the "Commitment Agreement"), attached as Exhibit "A" to this affrdavit, as part of its
pledge of continuing financial support to TravelBrands.
Gorporate Structure20. TravelBrands is incorporated under the Business Corporations Act (Ontario). The
Company is an indirect wholly-owned subsidiary of Red Label. Red Label is incorporated under
the Canada Business Corporations Act.
21. Following the acquisition of the Company, Red Label reorganized its corporate
structure. Red Label now has two wholly-owned direct subsidiaries, being Holdco and
TravelBrands USA Holdings, Inc., 'who in turn each have a number of wholly-owned
subsidiaries:
(a) through Holdco, Red Label wholly-owns TravelBrands, which in turn owns 3103-
6197 Quebec Inc., which in turn holds 69.77% of the issued and outstanding
.L^--- ^f eL,,l:-I. \/^,,^^^- r-^. ^-tJttqvù vt uÃ/rua Y wJ4évù lIIv, culu
(b) through TravelBrands USA Holdings, Inc., Red Label wholly-owns Lifestyle
Vacation Incentives, LLC and D-FW Travel Arrangements, Inc.
-o-
This structure is reflected in a simplified corporate structure chart attached as Exhibit "B" to this
affidavit.
22. Neither TravelBrands USA Holdings, lnc. nor its subsidiaries have any rnaterial
assets, liabilities, or relationship to the Company's operations. Accordingly, TravelBrands USA
Holdings, Inc. and its subsidiaries are not included in the Company's request for relief under the
CCAA. 3103-6197 Quebec Inc. and Skylink Voyages Inc. are also not included in the
Company's request for relief.
23. TravelBrands' registered office and corporate headquarters are located at 5450
Explorer Dr., Suite 300, in the city of Mississauga, Ontario. Additionally, the Company has
regional offices in (a) Montreal, Quebec; (b) Quebec City, Quebec; and (c) Vancouver, British
Columbia.
24 There are currently just under 1,000 TravelBrands employees.
76
The Ganadian Travel lndustry25. According to the Conference Board of Canada, the Canadian consumer leisure
travel industry generated $24 billion in annual revenue during 20l4.It is a higbly competitive
and seasonal indushy, and is primarily comprised of three segments: (a) direct dishibution (i.e.
transactions in which a consumer purchases havel products from a supplier, such as an airline,
cruise-line or hotel ("Suppliers")); (b) retail direct distribution (i.e. where retail travel agencies
purchase products and/or services directly from Suppliers); and (c) wholesale distribution (1.e.,
retail distribution where travel products are purchased from wholesalers and not directly from
Suppliers).
26. TravelBrands operates several wholesale dishibution and retail direct distribution
brands/divisions. The major competitors to TravelBrands for vacation packages include WestJet
Vacations, Air Canada Vacations, Air Transat, and SunWing. The Company also competes with
direct sellers, niche travel providers who focus on intemational destinations, Iarge multinational
online travel companies such as Expedia, Crbitz, Priseline and Booking.cotn, anC srnaller
Canadian independent travel retailers, such as Flight Network and iTravel.
- t-
7727. The Canadia¡r leisure travel industry relies heavily on a business-to-business-to-
consumer ("B2B2C) model (i.e. there is a "wholesale" layer between business partners). This is
unlike the US, where generally the wholesale layer is less prevalent. Over the past several ye¿us,
there has been a shift in the Canadian leisu¡e travel industry resulting in the erosion of wholesale
margins and market share as Suppliers increasingly focus on direct offerings to consumers.
28. TravelBrands market share of the Canadian leisure travel industry varies by sector
(i.e., air, hotels, vacation packages, etc.). Based on travel estimates from the Conference Board
of Canada, TravelBrands market share ranges from 4o/o to 60/o of the total consumer spend on
leisure travel in Canada.
Travel Industry Council of Ontario
29. As a retailer offering travel services for sale within Ontario, TravelBrands is
required to be registered with the Travel Industry Council of Ontario ('TICO"). TICO is an
organization mandated by the Ontario govenrment to administer and enforce the Trøvel Industry
Act,2002 (the "TIA"), which regulates travel retailers and wholesalers in Ontario. TICO also
administers the Travel Industry Compensation Fund (the "Fund"), which reimburses consumers
for paid travel services not provided by either an agent, airline or other travel service provider.
The Fund is frnanced by Ontario travel industry registrants, such as TravelBrands, tbrough
contributions based on sales revenues.
30. In order to maintain its TICO regishation, TravelBrands must meet certain TIA
financial criteri4 which include maintaining a specified minimum level of working capitall and
making financial contributions to the Fund based on actual sales. Based on TravelBrands' 2014
sales, the Company is required to maintain a minimum working capital level of $100,000.
TravelBrands is also required to make contributions to the Fund fwice a yeÍì.r (once within 90
days of the half-fiscal year mark and again within 90 days of the end of the fiscal year). For the
periods November 2013 to April 2014, and May 2014 to October 2014, respectively,
As deflned by TICO, "working capital" is the ability to nneet cu!-rent obligations as they corne due and iscalculated by subtracting current liabilities from current assets. It is calculated in accordance with generallyaccepted accounting principles with the exception that related party balances are excluded as well as the valueof security that TICO holds in relation to the $10,000 security from all new registrants. Where, as is the cårSe
with TravelBrands, sales are more than $20,000,000 in Ontario in the previous year, a minimum working capitalof $ 100,000 is required.
-ö-
TravelBrands contributed $39,388 and $25,983 to the Fund. For the fust half of the 2015 fiscal
year, TravelBrands estimates it will have to pay $37,565.
3l . As part of the TICO regime, TravelBrands is required to operate trust accounts for
customer requests regarding deposits received from customers for travel services not yet
rendered. As of April 30,2015, TravelBrands held $11.276 million in frust for such purposes.
These funds are only released from TravelBrærds' trust accounts on completion of its travel
obligations.
32. Since acquiring TravelBrands, Red Label has provided the necessary financial
support by way of cash advances on an as needed basis to ensure that TravelBrands satisfied
TICO's working capital and Fund contribution requirements.
33. Pursuant to and in accordance with the Commitnent Agreement, Red Label has
likewise committed to provide continuing financial support to TravelBrands to ensure continuing
compliance with TICO's statutory requirements during the pendency of this proposed CCAA
proceeding. In addition, the Company will continue to treat and honour its tn¡st account
obligations in the ordinary course and in a manner consistent with the TIA.
The International Air Transport Associatíon
34. The Intemational Air Transport Association ("IATA") is an airline industry
organization with over 250 "member airlines" worldwide. IATA's "accredited agents" have the
ability to sell, issue and print airline tickets within Canada on behalf of IATA's member airlines.
Additionally, accredited agents can sell international and,/or domestic tickets on behalf of
member airlines and have access to IATA's Billing and Settlement Plan, an efficient interface for
invoicing and payment between the agent, airlines and transport providers.
35. Although travel agents and wholesalers are not legally required to be accredited
by IATA, accreditation is necessary as a practical matter since having individual agreements
with every airline would be logistically unwieldy. As a result, TravelBrands is accredited.
36. In order to maintain its IATA registration, TravelBrands must meet cerüain
financial criteria. TravelBrands is also required to pay IATA fees on an annual basis. ln20l4,
these fees totalled $39,430.68.
7B
-v-
7937. TravelBrands, with Red Label's support in the form of cash advances on an as
needed basis, is of the view that it is presently compliant with IATA's financial requirements and
turr.nt on the payment of IATA fees. However, TravelBrands is currently in consensual
discussions with IATA regarding these financial requirements. While discussions are ongoing,
the Company, with Red Label's support, has extended the term of a letter of credit in the amount
of $5.06 million which was to expire May 1, 2015 (initially required by IATA in conjunction
with the Purchase Tiansaction) for a period of three months.
38. As with the continuing financial obligations associated with TICO, Red Label has
committed to provide TravelBrands with the necessary financial working capital to satisfu its
IATA financial obligations during the pendency of this proposed CCAA proceeding pursuant to
and in accordance with the Commitment Agreement.
overview of TravelBrands Retail and Wholesale Business39. TravelBrands includes the following leisure travel related services:
(a) ten . tour operator wholesale brands serving destinations across the world
(including Sunquest, Holiday House, FunSun Vacations, Encore Cruises,
Boomerang Tours, ALBATours, Exotik Torus, lntair, Network, and Carte
Postale);
(b) f,rve retail online travel agency and call-centre brands, including BelAir Travel,
Sears Travel Oy way of operating searstravel.ca pursuant to the Amended Sears
Agreement), Wholesale Travel Group, Last Minute Club and Sunquest; and
(c) one retail travel agency brand, being the store-front component of the Sears
Travel business that operates in conjunction with searstravel.ca.
40. TravelBrands' core business is its wholesale brands and/or divisions.
TravelBrands also currently operates 88 store locations for Sears Travel across Canada, as well
as the Sea¡s Tra.vel website, pursuant to the Sears Agreement, v','hich was subsequently amendeä
and restated effective February 20l4by way of the Amended Sears Agreement.
-IU-
41. Retail travel agency brands with physical store locations, like Sears Travel, are no
longer part of TravelBrands' core strategy due to their high operating costs and intense price
competition across the Canadian leisure travel industry.
42. Roughly 350 TravelBrands employees are dedicated to the operation of the Sears
Travel business. The typical format for a Sears Travel retail location is a small store-front in a
Sears department store (located in a well-positioned power cente or shopping centre), which is
generally open during department store hours and staffed by two or more TravelBrands
emplôyees. It is my understanding that the Sears Travel employees are non-unionized, however,
there are th¡ee Sears Travel retail locations in Peterborough, Fairview, and Oakville, Ontario,
where the employees have unionized.
43. Finally, Sears Travel employees contribute to a contributory defrned contribution
pension plan (the "Plan"). The Plan was established July l, 2008, and is a registered pension plan
for Sears Travel employees.2 TravelBrands is the sponsor and legal administrator of the Plan, and
is responsible for its overall management. The Plan is cunent and fully funded.
Cash Management System
44. TravelBrands uses a cenftalized cash management system (the "Cash
Management System"). The Cash Management System is administered from TraveiBrands'
corporate headquarters.
45. TravelBrands' bank accounts a¡e maintained and conholled by way of cash
management systems established at the Bank of Montreal (Canadian funds and payroll), Bank of
Montreal Hanis (US dollars) and Barclays Bank @uro, Pound Sterling and other currencies).
TravelBrands maintains four general accounts, 27 trust accounts (described further, below) and
one pledge account.
46. TravelBrands collects payments by way of cheque, Electronic Funds Transfer,
Automated Clearing House, wire transfer or, most commonly, credit card. Credit card payments
are deposited to one of TravelBrands' trust accounts by its credit card processing company,
Chase Paymentech Solutions ("Chase"). However, other forms of payment are initially
The Plan is registered with the Financial Services Commission of Ontario under the regisFation number1235 I 00 and is subject to the provisions of the Ontario Pension Benefìts Act and the Income Tax Act (Canada).
BO
2
- ll -
81deposited into a control account. Such payments are then grouped on a daily basis and debited to
TravelBrands' general account. In some instances, the customer deposit is in the form of a Sears
credit card and/or loyalty points are used for redemption. ln those cases, TravelBrands will book
the associated travel services with its supplier using a TravelBrands credit card because suppliers
often will not accept other forms of payment.
47. TICO requires TravelBrands to holds funds in trust equal to the net customer
deposits associated with bookings from customers that have yet travelled. Accordingly,
TravelBrands maintains 27 trust accounts which conespond with such factors as the province in
which payments are made, the division payments are made to and the credit card used to make
such payments. After a customer has travelled, or after TravelBrands fulfills its obligation to a
supplier, the corresponding deposit is transferred from the trust account to one of TravelBrands'
general accounts. TravelBrands makes such hansfers on a weekly basis. As indicated, the
Company will continue to treat and honour its tn¡st account obligations in the ordinary course
and in a manner consistent with the TIA.
48. TravelBrands is seeking in the draft Initial Order that it be permitted to continue
to use the Current Cash Management System. This relief is required and appropriate in order for
TravelBrands to successfully complete the CCAA Proceedings.
Red Label Purchases TravelBrands49. Red Label entered into a purchase agreement (the "Purchase Agreement"), as
amended and restated on May 1,2013 and attached as Exhibit "C" to this affrdavit, between Red
Label, the Thomas Cook Group (the "Vendor Parent") and Blue Seas Overseas Investments Ltd.,
Thomas Cook Group Treasury Limited, Buzzard Leisure Limited, MyTravel North America
Limited and Buzzard US LLC (together, the "Vendors") for the indirect acquisition of the
Comþany (the "Purchase Transaction"). Pursuant to the Purchase Agreement, Red Label
purchased Thomas Cook USA Holdings, lnc. and Holdco for $5.6 million.3
This figure is comprised of: (a) 55,259,999 million forthe purchase of Thomas Cook USA Holdii'rgs, Inc.; (b)
an additional 5340,000 paid pre-closing in connection with the purchase of Thomas Cook USA Holdings, Inc.
in relation to a cancellation fee on a legacy merchant agreement entered into by the Company pre-acquisition;
and (c) $l for the purchase of Holdco.
3
-12-
B250. The Purchase Agreement contemplated a pre-closing rcorganization (the "Pre-
Closing Reorganization"). As part of the Pre-Closing Reorganization, each Vendor that was
holding shares or indebtedness of the Company transferred those sha¡es or indebtedness to
Holdco in exchange for common shares of that entity. Prior to the Pre-Closing Reorganization,
$65.5 million in unsecu¡ed demand loans had been advanced by Thomas Cook Group Treasury
Limited to the Company under a Credit Facility Agreement dated April20,2012 (the "Credit
Facility Agreement"), tr amended on November 28, 20124 and attached as Exhibit "D" to this
afFrdavit.s Therefore, following the Pre-Closing Reorganization, the Applicant was indebted to
Holdco in the amount of $65.5 million (the "lntercompany Indebtedness").
51. In light of the Applicant's significant indebtedness and its inability to obtain
credit amangements with third party lenders, the Purchase Agreement required Red Label to
enter into a support agreement with the Company whereby Red Label would provide credit
support to the Company. The Company had previously required extensive financial support from
the Vendor Parent and Red Label was effectively required to step into the shoes of the Vendor
Paren! failing which the Company could notcontinue operations.
The Support Agreement52. Prior to the Purchase Transaction, the Company relied on the Thomas Cook
Group and the Vendors to provide financial support, including guarantees and indemnities in
respect of operating liabilities or obligations of the Company. For the Company to continue
operations after the Purchase Transaction, it was necessary to substifute replacement and, in
some cases, additional guarantees and indemnities in respect of continuing operational liabilities
or obligations of the Company's business.
53. Pursuant to the Purchase Agreement, on May l, 2A13, Red Label and Holdco
entered into a support agreement (the "support Agreement") with the Company whereby Red
Label and/or Holdco agreed to provide credit support and forbear on the Intercompany
T-.¡^L+^l-^^^ /: ^ +L^ QÁ( < *:ll:^- :- 'l^L+ ^."^,{ l..' +Lo Â-^li^o-f fn ffnl¡ln^ f^llntt.i-c fhe Þrp-IUtlçI LC;\lIrgùù \r.U. ttlv (J'VJ.J urllll\,tl llr \!v(/L vwvu vJ rrrv nl/y¡rvqrr !v ¡¡v¡uvv rvrrvrvrr¡èl
By way of the November 28, 2012 amendment, the amount available under the Credit Facility Agreement was
increased from $60 to S75 million.The Credit Facility Agreement allowed the Applicant to borrow up to $75 million with interest accruing on
advance at a rate equivalent to LIBOR plus 250 basis points. Advances under the Credit Facility Agreementwere repayable on demand with all outstanding advances repayable on September 30,2014.
4
5
-lJ-
B3Closing Reorganization), in exchange for a general securify agreement by the Applicant in
favour of Red Label and Holdco, attached as Exhibit "E" to this affidavit.
54. The Support Agreement required that the general security agreement provide a
security interest over all of the Applicant's assets, including future-acquired propetry, as
continuing collateral security for any and all indebtedness, including the Intercompany
Indebtedness, and any futue advances to the Company by Red Label and/or Holdco.
Credit Support Provided to TravelBrands from RelatedCompanies
(a) Assistance with Cash Collateralization of the BMO Agreement
Company Debt Prior to the Purchase Transaction
55. Prior to the Purchase Transaction, the Company was party to an agreement (the
"BMO Agreement") with the Bank of Montreal ('BMO") whereby BMO made the following
facilities available to the Company:
(a) a revolving credit facility for the issuance of letters of credit;
(b) a corporate MasterCard facility; and
(c) a treasury facility
56. The repayment obligations of the Company under the BMO Agreement were
secured by a guarantee (the "Vendor Guarantee") of the Vendor Parent (i.e. the Thomas Cook
Group) in favour of BMO in the amount of $41,250,000.
57. Prior to the Purchase Transaction, $29,047,677.54, $500,000 and $750,000 had
been advanced by way of the letters of credit issued under the revolving credit facility (the
"Letters of Credit'), the credit card facility and with respect to forward exchange contracts,
respectively. The Letters of Credit were in favour of multiple pafies, including various hoteis,
airlines, and cruise-lines, that the Company had dealt with. Attached as Exhibit "F" to this
affidavit is a summary of the value of each of these Letters of Credit and the beneficiaries
thereof.
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Amendment to the BMO Agreement and the Red Label Loan
58. The BMO Agreement was amended on April 23, 2013 tn anticipation of the
Purchase Transaction to provide for the removal of the Vendor Guarantee and for the addition of
Red Label guaranteeing the obligations thereunder.
59. In connection with the amendment, the Company granted BMO a general security
agreement (the "BMO GSA") dated May 1, 2013, attached as Exhibit "G" to this affidavit, over'
all of the Applicant's present and aftpr-acquired property. The BMO GSA secured all of the
Company's debts, liabilities and obligations, present and future, to BMO.
B4
60 BMO has registered security interests:
(a) under Ontario's Personal Property Security Registry against the Company's
inventory, equipment, accounts, motor vehicles and other personal property on
December 2,2010 and again on April 26,2013;
(b) under British Columbia's Personal Property Security Registry against the
Company's present and after-acquired personal property on December 2, 2010
and April 29,2013; and
(c) under Quebec's Register of Personal and Moveable Real Rights against the
Company's present and future personal property on April 29,2013.
61. Following the Purchase Transaction, each of the above mentioned registrations
were ¿ìmended to reflect Thomas Cook Canada's new name: "TravelBrands lnc." A copy of the
results of searches conducted in the Ontario Personal Property Secwity Regishy, the British
Columbia Personal Property Security Registry and the Quebec Personal Property Registry are
attached as Exhibits "H", "I", and "J", respectively, to this afFldavit.
62. Additionally, in the absence of the Vendor Guarantee, and in light of anticipateci
capital requirements for the Company, BMO required cash collateral equal to the full value
drawn or drawable under the BMO Agreement. At the time, the Company did not have suffrcient
cash to collateralize the full amount of the BMO Agreement and therefore, BMO required that
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Red Label provide the Company with the remaining required cash collateral. Accordingly, Red
Label advanced $2,614,750 and $10,000,000 to Holdco, on April 30,2013 and May 1,2013,
respectively (the "Red Label Loan"). Holdco in turn advanced these funds to the Applicant on
April 30,2013 and May 1,2013, respectively. The Red Label Loan advances were directed to
bank accounts of the Applicant at BMO, designating Red Label as the trustee.
63. In turn, Red Label, as trustee of the Applicant's bank accounts, entered into a
Pledge of Fluctuating Cash Collateral Agreement with BMO, as amended on June 11,2014 (the
"Pledge Agreement") and attached as Exhibit "K" to this affrdavit. Pursuant to the Pledge
Agreement, Red Label pledged the Applicant's bank accounts to BMO in May zll3,thereby
fully cash collateralizing the BMO Agreement.
64. The funds in these pledged accounts totalled $12,509,822.79 as of May 1,2013
and included the Red Label Loan.6
65. On May 1,2013, and in connection with the advance of the Red Label Loan:
(a) Holdco issued a promissory note to Red Label, attached as Exhibit "L" to this
affidavit, promising to pay Red Label the sum of $12,614,822, on demand and
without interest; and
(b) The Company issued a promissory note (the "Intercompany Note"), attached as
Exhibit "M" to this affidavit, to Holdco, promising to pay Holdco the sum of
$78,114,822, being 512,614,822 plus the $65.5 million in debt owed by the
Company to Holdco, on demand and without interest.
B5
66.
Label Loan:
Furthermore, on May 1, 2013 and in connection with the advance of the Red
6
(a) H'oldco granted Red Label a general security agreement dated May l, 2013,
attached as Exhibit "N" to this affrdavit, over all of Holdco's present and after-
-----:.- -t --.-- - a I ' I t ^Tr
t t t I I ¡ l' I 't'¡' IaL:qurreq propeny, wrucn agreement secures alr oI rloloco's oeDls, ltaDllllles ano
obligations, present and future, to Red Label; and
As at April 30,2015, the accounts pledged by TravelBrands hold, in aggregate, $'1,278,615, being the totalobligation of TravelBrands to BMO under the BMO Agreement as of that time.
-lÕ-
86(b) The Company granted Holdco a general security agreement dated May 1,2013
pursuant to the Support Agreement (the "Holdco GSA"), aftached as Exhibit "O"
to this affidavit, over all of its present and after-acquired property, which
agreement secures all of the Company's debts, liabilities and obligations, present
and future, to Holdco, including, inter alia, the Intercompany Note.
67. Holdco's securþ interests in the Company's personal property were registered
under Ontario's Personal Property Security Registry against the Company's inventory,
equipment, accounts, motor vehicles and other personal property on April 26, 2013. This
registration was subsequently amended to reflect the Company's new n¿une) "TravelBrands
Inc.", on January 27, 2014. Holdco recently discovered that its security interests in the
Company's personal property were not registered in British Columbia. Accordingly, Holdco
registered this interest under British Columbia's Personal Property Security Registry against the
Company's present and after-acquired personal property on May 25,2015.
68. The Company intended to grant a hypothec in favour of Holdco, in connection
with the Red Label Loan, on all of the Compiiny's movable property, present and future, as
collateral security for the fulfillment of its obligations to Holdco in accordance with Quebec law.
While preparing for its Application for relief under the CCAA, the Company discovered that it
had not executed a movable hypothec required to grant'such a hypothec with Holdco.
Accordingly, and congruent with the terms of the Holdco GSA, a movable hypothec agreement
was entered into between Holdco and TravelBrands on May 26,2015. This hypothec was
registered under Quebec's Register of Personal and Moveable Real Rights against the
Company's present and future personal property on May 26,2015.
69. As at April 30, 2015, $4.7 million has been repaid by the Company and
approximately $73.4 million remains owing under the Intercompany Note.
(b) Merchant Agreement70- In anticipation of the Purchase Transaction, the Company approached its
merchant credit card processing service provider, First Data, and requested that First Data
consent to the Èurchase Transaction and release the Vendor Parent from its guarantee. First Data
advised that it would only provide such a release of the Vendor Parent if the Company provided
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87$45 million in cash collateral as security for the default risk. Unable to meet this dernand, the
Company was forced to seek out an altemate merchant credit card processing service provider.
71. The Company and Red Label subsequently approached Chase. Chase was only
willing to be the merchant credit card processing service provider for the Company if Red Label,
rather than the Company, was the signatory to the merchant services agreement and therefore
liable for the associated default risk.
72. As such, pursuant to its agreement to provide credit support to the Company, Red
Label entered into a Merchant Agteement (the "Merchant Agreement") attached as Exhibit "P"
to this affidavit, with Chase, Bank of Nova Scotia and JPMorgan Chase Bank (collectively, the
"Processing Parties"). The credit card processing services provided pursuant to the Merchant
Agreement are for the sole use and benefit of the Company.
73. Based on the value of transactions processed under the Merchant Agreement by
the Company, Red Label is exposed to a default risk of approximately $45 million in liability to
the Processing Parties, which represents the maximum exposure under the Merchant Agreement.
Over the six months following execution of the Merchant Agreement, approximately $15 million
in cash collateral was provided by the Company to Chase by way of a portion of each processed
hansaction being directed towards a collateral account. Red Label's continuing maximum
exposure under the Merchant Agreement is therefore approximately $30 million.
74. It \^/ill also be important that the Processing Parties continue to provide goods and
services under the Merchant Agreement, given that the Merchant Agreement was executed by
Red Label. However, the goods and services provided to the Company under the Merchant
Agreement are necessary to the continued operation of its business given that most of its revenue
is generated by way of credit card payments. Accordingly, the Company is seeking an extension
of the proposed stay of proceedings whereby the Processing Parties will be restrained from
discontinuing, altering, interfering with or terminating the supply of goods or services to
TravelBrands under the Merchant Agreement based on the insolvency of the Company.
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(c) Ongoing Support
75. Since the Purchase Transaction, Red Label has been required to provide
TravelBrands with sufficient funds for its working capital and cash flow needs. On an as-needed
basis, TravelBrands makes informal requests for funds from Red Label to satisfu the working
capital requirements established by TICO and IATA and to meet cash flow needs.
76. This ongoing support is particularly critical during the summer season, when sales
in the Canadian leisure travel industry are traditionally poor. Red Label provides this ongoing
support by: (a) advancing funds from an operating facility (the "Operating Facility"); and (b)
incurring expenses on TravelBrands' behalf.
The Operating Facílity
77. The Operating Facility is a $10 million demand revolving credit facility available
to Red Label from BMO. The firll $10 million of the Operating Facility was advanced to the
Company'as part of the Red Label Loan.
78. Following the Purchase Transaction, TravelBrands periodically repaid portions of
the Red Label Loan. When these repayments were made, Red Label was able to withdraw
additional amounts from the Operating Facility for the benefit of TravelBrands. Since the
Purchase Transaction, Red Label has used the Operating Facility for the sole purpose of
providing TravelBrands with funds periodically on an as-needed basis. As at Aprit 30, 2015, $8.2
million has been advanced to TravelBrands from the Operating Facility and remains outstanding.
Such advances are included in the portion owed under the Intercompany Note that is in addition
to the lntercompany Indebtedness.
79 Pwsuant to the Operating Facility:
(a) Red Label provided BMO with a general security agteement dated May 1,2013
over all of Red Label's present and after-acquirqd property, which agreement
^ll ^f D^,t T ^l-.ol ,- ¡oL+o liôhili+ioo o-rl nhlicofinnc nrecpnf anrl filllrre fn
¡,çty(Jl çìt Cll¡ W.l, IW\f LTqVWL ù uvvlù, ¡lqv¡¡¡L¡vù qru vu¡r6sL^vr¡st I/¡ vsv
BMO, attached as Exhibit "Q" to this affidavit; and
BB
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(b) The Compily, âs guarantor of Red Label's obligations under the Operating
Facility, granted BMO the BMO GSA?.
Expense Support
80. Following the Pu¡chase Transaction, Red Label has funded certain operating
expenses of TravelBrands. When able, TravelBrands repays Red Label for such expenses it
funds on TravelBrands' behalf. These transactions are recorded on Red Label's inter-company
account which is included in the Intercompany Note.
(d) Summary of Funding and Ongoing Support Provided by RedLabel to TravelBrands
81. Red Label has therefore, directly and indirectly through Holdco, provided
TravelBrands with significant and ongoing frrnding and support in connection with and since the
Purchase Transaction, which includes but is not limited to: (a) indirectly assuming the
Intercompany Indebtedness ($65.5 million); (b) guaranteeing the Company's obligations under
the BMO Agreement and providing the Company withthe Red Labçl Loan ($12,614,822)to
cash collatenlize the BMO Agreement; (c) entering into the Merchant Agreement (initially
exposing Red Label to $45,000,000 in default risk, which has since reduced to $30,000,000); (d)
utilizing the Operating Facility after its initial advance as part of the Red Label Loan (to a cap of
$10,000,000) to advance funds to the Company or_r an as-needed basis for its working capital and
regulatory requirements; and (e) iontinuing to provide ongoing expense support through an inter-
company account.
OTHER SECURED CREDITOR RELATIONSHIPS
(a) Element Fleet Management lnc.82. The Company has leased various vehicles from Element Fleet Management lnc.
("Element"). The Company has paid Element approximately $57,653 for the period May 1,2014
to April 30, 2015 under these leases and is current on its obligations thereunder.
83 Element has registered security interests against the Company as follows:
89
7 The BMO GSA was granted pursuant to both the BMO Agreement and the Operating Facility
-¿v-
(a) under Ontario's Personal Property Security Registry against specific leased
vehicles and equipment on October 16, 2008; and
(b) under Quebec's Personal Property Security Regishy against specific leased
vehicles on October 20,2008.
These registrations were made prior to those of the Bank of Montreal and Holdco
MATERIAL AGREEMENTS
(a) Sears License Agreement85. TravelBrands manages a Canadian retail online and store-front leisure travel
agency business under the Sears Travel brand pursuant to the terms of the Amended Sears
Agreement, which business includes the Sears website as well as 88 retail outlets in Sears
Canada stores. The Amended Sears Agreement ends on January 27, 2018, unless renewed or
terminated in accordance with the terms thårein. It contemplates a revenue-sharing arrangement
between the parties whereby Sears has granted TravelBrands the exclusive right and license to
utilize the Sears Trademark (as defined in the Amended Sears Agreement)'across Canada, in
association with the marketing and sale of services through Sears Travel retail outlets and the
Sears website.
86. The terms of the Amended Sears Agreement are the result of eight months of
negotiations between TravelBrands and Sears following the Pwchase Transaction in 2013. As a
result of these negotiations the Company, inter alia:
(a) reduced its advertising commiûnents;
(b) adopted more flexible store hours;
(c) reduced the annual percentage ofgross revenue payable as royalties;
(d) reduced its minimum annual commission payments by 27o/o; and
90
84
(e) reduced annual lease payments for common area charges by 13%.
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91(b) 75 Eglinton Lease87. Prior to the Purchase Transaction, the Company entered into the 75 Eglinton
Lease with 75 Eglinton Avenue East Limited Partnership on March 28, 2009, which was
subsequently amended on April 23,2009, attached as Exhibit "R" to this affidavit.
88. Under the 75 Eglinton Lease, the Company leased over 80,000 square feet for a
twenty-year term (i.e. 7 floors, or the entire building), subject to the term being extended in
accordance with the 75 Eglinton Lease. The 75 Eglinton Lease provided for payments of
$130,408.41 per month in the first year of the term, with rental payments due under the 75
Eglinton Lease increasing gradually, eventually reaching $184,023.44lmonth by year twenty.
Additionally, the 75 Eglinton Lease provided for the payment of additional rent, being the
Company's share of, inter alia, property taxes and operating costs. The Company presently pays
$3,666,015.00 per year comprised of annual rent and additional rent payments.
89. The 75 Eglinton property has been almost wholly vacant since December 2013.
TravelBrands has been able to sublet certain floors of the property on a short-term basis to
various commercial parties (the "Sublease Agreements", attached at Exhibit "S" to this
affidavit). The Landlord provided its consent to the subleases under the Sublease'Agreements,
which are particula¡ized below:
(a) TravelBrands entered into a Sublease dated Ma¡ch 14,2014 for approximately
25,506 square feet (i.e. the 6th and 7ú floors) of the property located at 75
Eglinton with Canada Goose Inc. (the "Canada Goose Sublease"). The Canada
Goose Sublease was for an initial term commencing March 17,2014 and expiring
on July 17,2014 (with an option to extend). Pursuant to the terms of the Canada
Goose Sublease Agreement, Canada Goose was obliged to pay 595,647.s}/month
in rent to TravelBrands for a total of $382,590 for the initial sublease term þlusapplicable taxes). TravelBrands recovered $390,242 in basic rent under the
Canada Goose Sublease;
TravelBrands entered into a Sublease dated August 18,2014 for approximately
12,734 square feet (i.e. the 6ú floor) of the properfy located at 75 Eglinton with
Environics Communications Inc. (the "Environics Sublease"). The Environics
Sublease was for an initial term commencing September 1,2014 and expiring
(b)
- ¿¿-
92Novembe¡ 30,2014 (with an option to extend the term for all or part of the month
of December 2014). Pursuant to the terms of the Environics Sublease, Environics
was obliged to pay $33,750/month in rent to TravelBrands, for a total of $101,250
in rent for the initial sublease term þlus applicable taxes). TravelBrands
recovered $101,235 in basic rent under the Environics Sublease;
(c) TravelBrands entered into a Sublease dated October 31, 2014 for approximately
12,753 square feet (i.e. the 5th floor) of the property located at 75 Eglinton with
S&P Data LLC (the "S&P Sublease"). The S&P Sublease is for a term
commencing November I,2014 and expiring on February 29,2016. Pursuant to
the terms of the S&P Sublease, S&P is obliged to pay $32,945.25lmonth in rent
þlus applicable taxes) to TravelBrands. As of April 30, 2015, TravelBrands has
recovered 8197,667 in basic rent under the S&P Sublease;
(d) TravelBrands entered into a Sublease on December 1,2014 for the 6th floor of the
property located at 75 Eglinton with S&P Data LLC (the "Second S&P
Sublease"). The Second S&P Sublease is for a term commencing January 1,2014
and expiring on May 31,2015 and was entered into on the exact same terms as
the S&P Sublease, except on a month to month basis. TravelBrands was provided
verbal consent by the landlord to this Sublease, and a Lease Amended Agreement
was created but not executed. As of April 30, 2015, TravelBrands has recovered
$131,570 in basic rent under the Second S&P Sublease; and
(e) TravelBrands entered into an Offer to Sublease on February 12, 2015 for
approximately 12,753 square feet (i.e. the 7th floor) of the propertt located at 75
Eglinton with Birmingham College of Canada (the "Birmingham Sublease"). The
Birmingham Sublease is for a term of three months, commencing March 1,2015
and terminating May 31, 2015. Pursuant to the terms of the Birmingham
Sublease, Birmingham is obliged to pay an estimated $37,196.25lmonth in gross
rent (plus applicable taxes) to TravelBrands. As of April 30, 2015, TravelBrands
has recovered $74,393 in basic rent under the Birmingharn Sublease.
90. As of April 30,2015, TravelBrands has received, in aggregate, $895,106 in rent
recovery under the Sublease Agreements.
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(c) Guy Street Lease91. Prior to the Purchase Transaction, the Company entered into a lease agreement
with Penguy Properties, Limited Partners and Penguy Properties [nc. on March 20,2009 (the
"Guy Street Lease") for a property located at 1257-159 Guy Street in the City of Montreal,
attached as Exhibit "T" to this afüdavit.
92. Under the Guy Street Lease, the Company leased 42,650 square feet (i.e. the 2nd
and 3'd floor of the building) for a 15 year term. The Guy Street Lease provided for anriual rent
of $5.86 per square foot until May 31, 2010, with rental payments increasing gradually,
eventually reaching an annual rent of $15.59 p.ì rqu*. foot. Pursuant to the terms of the Guy
Street Lease, since June 1,2014, the Company is obliged to pay an average of $622,263.50 in
annual rent (plus applicable taxes), as defined under the Guy Street Lease, per year. Additionally,
the Guy Street Lease provides for the payment of additional rent, being the Company's share of,
inter alia, property taxes and operating costs. The Company presently pays $1,078,507.27 per
year comprised of annual rent and additional rent payments.
93. While TravelBrands currently utilizes both the 2nd and 3'd floors of the property,
the Company does not need this space and could consolidate its employees onto one floor of the
property.
EROSION OF FINANCIAL POSITION94. The Company's profitability has been severely constrained since the Purchase
Transaction by (a) dwindling margins in the Canadian retail and wholesale travel industry; (b)
the Amended Sears Agreement obligations; and (c) the 75 Eglinton Lease obligations.
(a) Dwindling Margins in the Canadian Leisure Travel lndustry95. As noted, there has been a dramatic shift in the Canadian leisure travel industry
whereby wholesale margins have faced increasing pressure based on the pricing of direct
Suppliers (i.e. cruise lines, hotels, airlines). Furthermore, the trend of online purchasing has
eroded the viability of a store-front travel saies operation. Coiiectiveiy, in<iustry-wicie changes
have materially impaired the Company's margins over the past several years. In most cases,
revenue and margins generated by each TravelBrands' business unit have declined year over
year. This has resulted in predominantly a loss of margins across the board for most TravelBrand
93
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business units. The Company forecasts that profitability will continue to decline over the 2015
fiscal year. In fiscal year 2014, the Company's net operating loss was $4.5 million. The
Company's forecast for fiscal year 2015, assuming the status quo, is a net operating loss of $11.6
million.
(b) The Amended Sears Agreement96. Gross sales and net margins through Sears Travel retail locations have faced an
ongoing decline. This reflects, among other things, the closure of various Sears locations, a
corollary reduction in the number of customers using Sears credit cards to make purchases from
Sears Travel, the conversion of certain Sears stores to outlets and an industry-wide shift towa¡ds
purchasing travel online. The expense of operating a store-front operation, coupled with the
decreased revenue associated with such operations, has caused a significant strain on
TravelBrands' profitability. Furthermore, as noted above, store-front operations, like Sears
Travel, are not a core part of TravelBrands' business due to their high operating c'osts coupled
with intense price competition across the Canadian leisure travel industry.
97. TravelBrands shoulders substantial commission and royalty payments under the
Amended Sears Agreement, as well as rent and operational costs related to the staffing of 88
Sears Travel retail locations. The iompany's frxed costs are payable regardless of the revenues
achieved under Jhe Sears Agreement and the Amended Sears Agreement. The decline in
revenues commencing in 2011 has been dramatic, with an overall 27To decline between the years
2011 and 2014. A firther 10% decline is projected for the fiscal year 2014 revenues. This
precipitous drop in revenues under the Sears Agreement and the Amended Sears Agreement is
illustrated in the chart below:
FY20ll Fv20t2 FY20l3 FY20t4 FY20l5
(forecasted)
277,070,392 265,594,853 245,055,661 200,845,035 183,000,000
98. Following the Purchase Transaction, TravelBrands renegotiated certain terms of
the Sears Agreement effective February 2014 to address the decline in revenues between fiscal
year 2013 and 2014. At the time of these renegotiations, Sears was aware that TravelBrands
94
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95would return to seek further concessions if revenues continued to decline. Since the 2014
renegotiations, TravelBrands has committed significant effort and financial resources towards
making its operation of the Sears Travel business viable, including:
(a) investing more than $200,000 in the redesign of searstravel.ca in response to
consumer travel purchasing shifting online;
(b) creating a national call centre for Sears Travel to accommodate after hours
business that was previously not being captured by the travel agency, and
updating the Sears Travel phone system;
(c) increasing in-store staffrng for Sears Travel retail locations; and
(d) launching a major advertising campaign in the fall of 2014 to kick-off the travel
season. TravelBrands invested more than $2 million in this advertising campaign,
far in excess of its required advertising commitments under the Amended Sears
Agreement.
99. Despite these effortS, sales continued to decline after the fall of 2014. The Sears
Travel business continues to fail to generate sufficient revenues to offset the Company's ongoing
financial commitments under the Amended Sears Agreement, ffid the following amounts
(illustrated in the chart below) are outstanding and owing under the Amended Sears Agreement:
Amounts Outstanding and Owing under the Amended Sears Agreement as at April 30, 2015
Post-Amendment Top-
Up Payment February 2015 March 2015 April2015
$1,967.619.03 s847,422.00 $657,304.00 $583,984.00
Total Ampunt Outstanding 4,0561329.03
(c) 75 Eglinton Lease100. The property at 75 Eglinton has largely stood vaeant sinee December 2013.
TravelBrands made significant efforts to lease the building and procured several offers to sublet
portions of the building to ameliorate the ongoing lease obligations of the Company. The
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majority of these proposals were verbally declined by the landlord as either unsuitable or
contrary to the landlord's long-term business goals.
l0l. Red Label also proposed to acquire the property from the landlord at a purchase
price of $32 million, based on an appraisal of the property at $28 million. Attached as Exhibit
"t-f is a copy of the letter of intent (which was ultimately executed) that required acceptance no
later than June I1,2014, outlining this proposal. This proposal was not accepted by the landlord.
Subsequent to this, Red Label's real estate broker advised the landlord that Red Label would be
willing to increase its purchase price if the landlord was willing to engage in a discussion
regarding the acquisition of the property.
1,02. Most recently, TravelBrands secured an offer to sublease the entire building (with
a potential lessee who was willing to honour ongoing subleases at the property) but the financial
terms of this proposal were ultimately not acceptable as TravelBrands was still liable to the
landlord for approximately $ l0- l I million dollars over the course of the 75 Eglinton Lease. The
Company could not absorb this financial hit given its continuing losses form global operations.
103. The Company remains saddled with lease commitnnents which are stifling its
viability as a going concern. TravelBrands has only been able to realize a modest offset of its
lease financial obligations through the Sublease Agreements.
Financial Statements104. As mentioned previously, at the time of acquisition in May 2013, TravelBrands
\ryas severely unprofitable. In the fiscal year ended October 31, 2013, the Company had net
operating losses of approximately $25.2 million. The Compmy'.s internal unaudited financial
statements for the fiscal year ended October 31, 2013 are attached as Exhibit "V" to this
affidavit.
105. Although the Company was successful in achieving a significant reduction in
overhead costs through its operational restructuring efforts following the Purchase Transaction
an<i renegotiating certain terms of the Sears Agreement, these actions were not enough to
completely address the Company's profitability issues. In the fiscal year ended October 31,2014,
TravelBrands experienced net operating losses of approximately $4.5 million. The Company's
96
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97audited financial statements for the fiscal year ended October 31,2014 are attached as Exhibit
"'W" to this affidavit..
106. Since the Purchase Transaction, the revenue generated by the majority of
TravelBrands' banners has remained relatively flat or declined year-over-year; however, the
margins across all operating divisions have faced significant erosion year-over-year. Of
particular concern, the gross sales and net margins of the Sears Travel business have faced a very
significant ongoing decline over the last few years.
107. As at April 30, 2015, TravelBrands had total consolidated assets with a net book
value of $115.8 million. The consolidated assets consisted of, inter alìa: operating cash of $20.1
million; restricted cash of $21.9 million; cash intrust of $11.3 million, accounts receivable of
$9.6 million and prepaid tour costs and deposits of $41.6 million. Restricted cash is not available
for general use by the Company as it is held as collateral against letters of credit issued in favou¡
of certain suppliers and IATA. The cash in trust represents deposits from customers which a¡e
held in separate trust bank accounts until a custorner has travelled, at which point the net balance
is transferred to the Company's operating cash. Prepaid tour costs and deposits are amounts
which have been paid to suppliers in relation to bookings for customers that have yet to travel.
Accordingly, only the operating cash of $20.1 million is immediately available to the Company
to pay existing or new obligations. Any collections of accounts receivable may also be used by
the Company to satisfu its liabilities.
108. As of April 30,2015, the Company had total consolidated liabilities of $179.5
million. These liabilities consisted of, inter alia: accowtts payable and accrued liabilities of $47.4
million, customer deposit liability of $54.8 million and $73.4 million owing under the
lntercompany Note.. The customer deposit liabiiity is mostly covered by the cash being held in
trust by TravelBrands or the prepaid tour costs and deposits which have been paid by the
Company in relation to these customer bookings. The remaining liabilities must be serviced from
the operating cash available to the Company.
109. Under the current c.ircumstances, TravelBrands' overall. fi.naneial position
continues to erode and is expected to continue to worsen for the foreseeable future. The
Company's forecast net operating losses for fiscal year2015, assuming the status quo, is $11.6
million due to anticipated losses in a number of the TravelBrands' operating divisions (including
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Sears Travel). The Company's interim unaudited financial statements for the monthly periods of
November 2014 to April 2015 are attached as Exhibit "X" to this affidavit.
RECENT DEVELOPMENTSll0. TravelBrands has been proactive in taking steps to address its liquidity issues
including attempting to negotiate a consensual resolution with its contractual counterparties. In
particular, the Company made efforts to internally restructure the business to maximize synergies
and profitability, renegotiated the Sears Agreement in an effort to reflect the decline in revenues
from the operation of the Sears Travel business, and explored options to reduce or eliminate its
financial obligations relating to the vacant property under the 75 Eglinton Lease. These efforts
were ultimately not entirely successful and the Company's continuing operating losses have
si gnificantly compromised its future f,rnancial prospects.
1 I 1. TravelBrands was already in a precarious position at the beginning of 2015. Faced
with a significant drop in the Canadian dollar in the past year, the Company has experienced
further declines in its wholesale sales margins which has put a süanglehold on the Company's
ability to sustain operations and to meet its commiünents under the Amended Sears Agreement
and the 75 Eglinton Lease. While the Canadian leisure travel industry has increased pricing to
counteract this, the wholesale industry has been unable to increase pricing commensurate with
the overall decline in the Canadian dollar due to competitive pressures.
1,12. Furthermore, of the $47.4 million in accounts payable and accrued liabilities of
the Company, $16.5 million was due and owing as at April 30, 2015, and $43.6 million will be
due and owing by May 31,2015.
113. Adding to the issues above, in February 2015, a notice of application was filed in
the Ontario Superior Court of Justice against TravelBrands and the Thomas Cook Group by
Gibralt Capital Corporation ("Gibralt")8 alleging, inter alia, that TravelBrands and the Thomas
Cook Group are jointly and severally liable to indemniû and/or pay Gibralt $3.75 million, plus
, t I ñ I t' t ñ A L L- -l: ¡^ l--r-----lnlerest anq gxpenses, un(ler a ùuoorqtnauon an(r rosrponemenr frgrcernenr snrcrç(¡ lnru uçlwççu
Gibralt Capital Corporation v. Trø,elBrands Inc. (ormerly known as Thomas Cook Canada Inc.) and ThomasCookGroup PLC, Cowl File No. CV-15-10893-00CL, Notice of Application filed February 24,2015 intheOntario Superior Court of Justice (Commercial List).
9B
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99Gibralt and the Company dated February 12,2010. This dispute is in the preliminary stage of
litigation. As such, whether a loss will ultimately result from this dispute is not determinable at
this juncture.
ll4. In early }l4ay 2015, TravelBrands was contacted by the 75 Eglinton Lease
landlord regarding TravelBrands' outstanding rent payment for May 2015. TravelBrands
requested that the landlord apply an overpayment of operating costs owing to TravelBrands
(related to fiscal year 2014 and in the amount of $314,181.95) to offset the Company's May
2015 rent. The landlord agreed to this offset, however, TravelBrands still owes a rent balance of
844,982.56 to the 75 Eglinton landldrd for May 2015, which is due by May 31,2015.
115. On May 10, 2015, the Company received a default notice from Pamela Murphy,
Vice-President, Speciality Services, Travel, B2B and Home Improvements, Sears, requesting
immediate payment of all outstanding amounts ($3,416,582.95) owing under the Amended Sears
Agreement by Friday May 15, 2015. Attached as Exhibit "Y" to this affrdavit is a copy of the
default notice from Sears dated May 10, 2015.
116. On May 12, 2015,I met with Pamela Murphy, Gail Galea and Ronald Boire,
CEO, Sears, to discuss the amounts owing and outstanding under the Amended Sears
Agreement, as well as the ongoing viability of the Sears Travel business and partnership between
TravelBrands and Sea¡s Travel. These discussions remain ongoing.
ll7. On May i5, 2015, TravelBrands provided Sea¡s Travel an email response to their
demand letter which outlined TravelBrands' commitment to undertake an assessment of the
ongoing viability of the Sears Travel business and the partnership between TravelBrands and
Sears Travel, as discussed at the meeting of May 12,2015. This email response is attached as
Exhibit "Z" to this affidavit.
118. As noted above, Red Label's senior management advised that, as of May 26,
2015, Red Label's board of directors is not prepared to continue funding and financially
crrnnnr{in¡ lha fr^,-na-.r i- ilo nrr*onf ¡i.nrr*ofan^o. 'T}.o 'rioLili+., ^f 'l-ro"olDro-rlo oc o -^i-nùUI/PV¡ rr¡¡ó u¡v vv¡rrl/qrJ r¡¡ ¡tù vw¡w¡¡r w¡tvqrlJa4¡vwJ. r ¡¡w Ylqvr¡¡tJ vI I ¡qvvtu¡4rgù q9 q 6v¡¡¡ó
concem business is in jeopardy at this juncture in the absence of a CCAA restructuring.
TravelBrands acknowledges its financial obligations under the Amended Sears Agreement and
the 75 Eglinton Lease which are crurently due and owing, and that it cannot satisfu them in the
-30-
100absence of continuing financial support from Red Label. The inability of TravelBrands to satis$
these payments has rendered the Company insolvent.
REQUIREMENT FOR RELIEF REQUESTEDStay of Proceedings
119. An urgent stay of proceedings is required to permit TravelBrands to continue its
business for the benefit of its stakeholders. Furthermore, it is necessary that this stay ofproceedings also apply to the Processing Parties, as relates to the Merchant Agreement and the
goods and services provided to TravelBrands thereunder.
120. If granted CCAA protection, the Company will explore opportunities to
ameliorate the adverse financial impact of the Amended Sears Agreement and the 75 Eglinton
Lease. If these efforts are not fi:uitful in the short term, the Company will consider a disclaimer
of these contracts to enable Travel Brands to continue as a viable business.
l2l. The Company is developing a sale process (the "Sale Process") whereby
prospective purchasers will have the,opportunity to bid for all of the Company's assets. Among
other things, the Sale Process is expected to include bidding procedures incorporating a stalking
horse bid from Holdco. Accordingly, the Company is in the process of finalizing a stalking horse
asset purchase agreement (the "stalking Horse APA") pursuant to which Holdco would acquire
substantially all of the assets of the Company.
122. The Stalking Horse AFA is anticipated to be in the form of a credit bid. The
Company has discussed this with KPMG (the "Proposed Monitor"), which has reviewed
Holdco's security over the Company's assets. I understand that KPMG will report to the Court
regarding the Stalking Horse APA and Holdcols security prior to the expiry of the stay being
sought, should such a stay be granted by the Court and KPMG is appointed as monitor.
123. The Company requires an opporrunity to focus on and develop the Sale Process.
A stay of proceedings will ensure that the Company can develop a value-optimizing Sale Proeess
and a "level playing field" for all creditors and prospective purchasers. It is contemplated that the
Sale Process and the aforementioned credit bid wilt be used to effectuate a balance sheet and an
operational restrucfuring.
- 3t -
Payments during this CCAA Proceeding
124' Dwing the course of this CCAA proceeding, the Company intends to makepayments for goods and services supplied post-filing in the ordinary course, as set out in the cash
flow projections described below and as permitted by the draft Initial Order. Furthermore, theCompany has $4 million of committed funding from Red Label to fulfil rhis commitment, as
evidenced by the Commitment Agreement. As noted above, ttris financial support will also helpTravelBrands to ensure that it continues to comply with TICo's statutory requirements and
IATA's financial requirements.
125' The Company is also proposing in the draft Initial Order that it be authorized,with the consent of the Proposed Monitor, but not required, to make certain payments, includingpayments owing in arrears, to certain third parties that provide goods or services that are criticalto the Company's ability to operate during, and implement, its restructuring under theseproceedings including certain key suppliers providing hotel, cruise-line, airline and car rentalservices- Furthermore, the Company is also proposing in the draft Initial Order that it beauthorized, but not required, to make certain payments, including payments owing in arrears, toits travel agents.
Key Suppliers
126' The Company's business is heavily reliant on leisure travel products and onservices that it purchases from various third party suppliers, including hotel, cruise-line, airlineand car rental suppliers and other suppliers that operate across the world. Continued supply fromthese suppliers is crucial to the success of this restructu¡ing and the future success of theCompany's business model. Furthermore, it is the Company's intention to maintain close contact
with its key suppliers throughout these CCAA proceedings.
127 ' The Company anticipates that certain of its critical international suppliers will nothonour their contractual obligations if pre-filing amounts owing in arrears are not paid in the^-,{:-^-., r-- -.-t. ,vr''rrlrilry uuursç' ul oroer to ensure conünued supply from these critical suppliers during theCCAA proceedings, the Company is therefore seeking the right, but not the obligation, to paypre-filing amounts owing in arrea¡s to these suppliers with the consent of the proposed Monitorand Red Label. This will serve to safeguard and protect the Company's customers from the risk
101
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of services being refused by the Company's critical suppliers and therefore preserve the
Company's enterprise value.
Travel Agents
I28' As discussed above, the Company's core business is its wholesale
brands/divisions. The sale of wholesale travel products occurs wholly through travel agents (r.e.,
the travel agents are the gateway to the consumer). In other words, without the travel agents -there is no wholesale business. The havel agents buy wholesale travel products fromTravelBrands in two ways: (l) commission-based sales, whereby TravelBrands specifies a priceto sell wholesale travel products and the travel agent is provided a commission in relation tosales made; and (2) net-based sales, where the travel agent buys a wholesale havel product fromTravelBrands outright and, being the owner of the wholesale travel product, keeps any profitfrom a subsequent mark-up of their choosing.
129. The Company is heavily reliant on the goodwill and loyalty of travel agents forthe continued flow of its wholesale business and anticipates that certain of its travel agents whopurchase wholesale travel products from TravelBrands on a commission-basis will not continue
to sell its wholesale travel products if pre-filing commission, Ioyalty points, ovenide payments
and marketing funds are not paid in the ordinary course. In order to ensure the continued sale ofwholesale travel products through these travel agents during the CCAA proceedings, the
Company is therefore seeking the right, but not the obligation, to pay pre-filing amounts owingin arrears to these travel agents. This will serve to safeguard the Company's core wholesale
brands/divisions and therefore preserve the Company's enterprise value.
Cash Flow Statements
130. In preparation for this proceeding, TravelBrands has prepared cash flows which
are attached as Exhibit "2çq" to this affidavit. The cash flows established that TravelBrands has
sufficient liquidity to continue operations during the initial stay period on the basis noted. Withrespect to the i3 Week Cash Fiow Statement tbr the period May 16, 2015 to August 14,Z0l5.lconfirm that:
(a) the 13 Week Cash Flow Statement and the underlying assumptions are the
responsi bility of TravelBrands;
r02
-JJ-
(b) all material information relative to the 13 Week Cash Flow Statement and to the
underlying assumptions has been made to KPMG, the Proposed Monitor; and
(c) management has taken all actions that it considers necessary to ensure: (a) that the
individual assumptions underlying the 13 Week füsh Flow Statement are
appropriate in the circumstances; and (b) that the individual assumptions
underlying the 13 V/eek Cash FIow Statement, taken as a whole, are appropriate
in the circumstances.
Monitor
l3l' KPMG has agreed to act as TravelBrands' monitor in these proceedings, subjectto Court approval. A copy of the executed consent is attached as Exhibit "BB" to this affidavit.
132- KPMG is a trustee within the meaning of section 2 of the Banlvuptcy andInsolvency lcr, R.S.C. 1985, c. B-3, as amended, and is not subject to any of the restrictions onwho may be appointed as monitor set out in section ll.7(z)of the ccAA.
Administration Charge
133. In connection with its appointment, it is proposed that the Proposed Monitor,along with its counsel and counsel to the Applicant be granted a Court-ordered charge over all ofthe present and fi¡tue assets, properly and undertaking of the Applicant (the ..property',)
as
security for their respective fees and disbursements relating to services rendered in respect of the
Applicant up to a maximum of $l million (the "Administration charge,').
Directors' and Oflìcers' Protection
134. A successful restructwing of TravelBrands will only be possible with the
continued participation of its board of directors (the "Directors"), management and employees.
These persormel are essential to the viability of TravelBrands' continuing business.
135. I am advised by Marc Wassennan of Osler, Hoskin & Harcourt LLp, counse! forTravelBrands, and believe that, in certain circumstances, directors can be held liable for certain
obligations of a company owing to employees and government entities. TravelBrands has
estimated, with assistance of KPMG, that the obligations for which the directors could be liable
103
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104could include unpaid accrued wages of $2.1 million, uruemitted source deductions of $0.3million, unpaid accrued vacation pay of $1.7 million, unpaid sales and service taxes of $0.1
million, unpaid employee health tax of $0.05 million and unpaid workers' compensation of $0.01
million, for total potential director riability of approxim ately $4.26million.
136' The Directors have indicated that their continued service and involvement in thisrestructuring is conditional upon the granting of an Order under the CCAA which grants a charge
in favour of the directors and officers of TravelBrands in the amount of $4.3 million on theProperty (the "Directors' Charge"). The Directors' Cha¡ge would be subordinate to theproposed Administration Charge to be created in favour of the Proposed Monitor, the proposed
Monitor's counsel and counsel to the Applicant. The Directors' Charge would act as security forindemnification obligations for the Directors' potential liabilities as set out above.
137 - TravelBrands maintains directors' and officers' liability insurance (the .,D&O
Insurance") for the directors and officers of TravelBrands. The current D&O Insurance policy,
renewed on April 30,2015, provides $5 million in coverage plus $2,250,000 in excess coverage
(comprised of $l million in supplemental personal indemnification coverage, $l million inadditional defence coverage and $250,000 in investigation expense coverage).
138' The Directors' Charge is necessary so that TravelBrands may benefit from itsdirectors' and offïcers' experience with the business and the üavel industry and so that
TravelBrands' directors and officers can guide its.restructuring efforts.
Intercompany Charge
139- Subject to certain terms and conditions, Red Label has agreed to provide
TravelBrands with up to $4 million on a revolving basis, interest free and with no commitment
fees, pursuant to the Commitment Agreement. This financial support will help TravelBrands to
ensure that it (a) continues to comply with TICO's statutory requirements during the pendency ofthis proposed CCAA proceeding; (b) continues to comply with IATA's working capital and
tangibie net worth requirements; and (c) continues to operate its business in the ordina¡y eourse,
uninterrupted and without any impact to its customers during the pendency of this proposed
CCAA proceeding.
-35-
I40- It is proposed that advances under the Commitment Agreement be secured by a
Court-ordered charge in the amount of $4 million on the Property (the "Intercompany Charge').
The Intercompany charge would be subordinate to the Administration Charge and the Directors'
Charge. The Commitment Agreement requires that the lntercompany Charge be granted before
any advances are made thereunder.
l4l. The draft Initial Order provides that the Adminishation Charge, Directors' Charge
and Intercompany Charge (collectively, the "Chæges") will rank in priority to all other security
interests, trusts, liens, charges and encumbrances, claims of secured creditors, statutory or
otherwise (collectively, "Encumbrances") in favour of any person, notwithstanding the order ofperfection or attachment, except for any validly perfected security interest held by BMO or
Element. The only secured creditor that will be affected by the Charges, being Holdco, has been
given notice of these CCAA proceedings and the relief being requested in the draft Initial Order.
142. TravelBrands has exhausted all of its options in attempting to build a profitable
enterprise capable of exploiting growth opportunities in the Canadian retail and wholesale leisure
travel industry. I am confident that granting the Initial CCAA Order sought by the Applicant is in
the best interests of its stakeholders. The Company requires an inunediate and realistic dialogue
with its contractual counterparties to preserve the value of the business a1d provide continuing
employment for its employees. The granting of the requested'stay of proceedings will maintain
the "status quo" and permit an orderly restrucfuring and analysis of the Applicant's affairs, with
minimal short-term disruptions to the Company's business.
143. This affidavit is swom in support of an Application under the CCAA and not for
any improper purpose.
SWORN BEFORE ME at the City of
Toronto, in Province of Ontario, on
105
a,
May 26,2
L, I
tsu c+6ñ+tD
106
THIS IS EXHIBIT "C" REFERRED TO IN
THE AFFIDAVIT OF JOE DEMARINIS
SV/ORN BEFO ME ON THIS 1 JLTNE,2Ol5
for Taking Affidavits.
løW*d^þfti-WukbørlP
107
TravelBrands lnc.Employee Email re: CCAA Announcement
^r^1^. E^^t, 1^ A^ ^^À1 1^ ^tt ^^^I^..^^^,alJav. Etrtart Lv tJë Ðtttr¿ aLr ctil ettrPtvyëcJ
Dear colleague,
As we just announced, TravelBrands has commenced a restructuring under the Companies'Creditors Arrangement Act (the CCAA), details of which are outlined in the press releaseattached to this email. I wanted to reach out directly to reassure you and your colleagues that itis business as usual for our brands.
Over the coming weeks and months, TravelBrands will be working behind the scenes toaddress some isolated legacy issues that TravelBrands inherited when its parent companyacquired what was then Thomas Cook Canada. The Company has made and continues tomake a significant effort to negotiate these legacy issues and is hopeful that it will ultimately besuccessful in reaching agreements. However, we have concluded that these issues can only besufficiently addressed within the confines of the CCAA legislation.
The purpose of the CCAA process is to provide TravelBrands the necessary time and stability torestructure while maintaining business as usual. We will emerge from CCAA as a stronger,more competitive company.
There are no plans to adjust employee staffing levels as a result of the CCAA process., howeverwe routinely review all business processes and practices to find greater efficiencies. This effortwill continue while TravelBrands moves through the restructuring process.
There may be some change to our Sears Travel business but that is yet to be determined.There is an existing contract that defines our partnership with Sears, and we are committed tocontinuing to work with Sears to pursue a long-term agreement that will be mutually beneficial.We'll update Sears Travel employees as developments warrant, but I'm sorry that I don't havemore details for you now.
As we work through the restructuring process, it will be business as usual. TravelBrands hassufficient funds to continue operating the business. As always, we expect to provide ourcustomers the same excellent service that they have come to expect from our brands, and weappreciate your continued focus on and commitment to that effort. I also encourage you toreview the employee Q&A document for further questions you may have at this time.
I also want to remind you that in the event that you receive an inquiry from the media, asalways, please refer them to [name].
On behalf of my brothers and l, thank you for your ongoing efforts and understanding. We willkeep employees updated throughout this process as developments warrant.
Regards,
Frank DeMarinis
108
TravelBrands lnc.Courrielaux employés au sujet de I'annonce de la procédure en vertu de la LACC
Note : Courriel devant être envoyé à tous les employés
Cher/chère collègue,
Comme nous venons de l'annoncer, TravelBrands a engagé une procédure de restructuration de sesactivités en vertu de la Loisur /es arrangements avec les créanciers des compagnies (la < LACC u), quiest décrite en détail dans le communiqué joint au présent courriel. Je tenais à vous écrirepersonnellement pour vous rassurer, vous et vos collègues, et vous dire que les affaires se poursuiventcomme à l'habitude pour nos marques.
Au cours des prochaines semaines et des prochains mois, TravelBrands travaillera dans l'ombre pourrégler certains problèmes isolés dont elle a hérité lorsque sa société mère a acquis I'entreprise quis'appelait alors Thomas Cook Canada. La Société a déployé et maintient des efforts importants pourrégler ces problèmes et a espoir de réussir ultimement à conclure des ententes à cet égard. Cependant,nous en sommes venus à la conclusion que ces problèmes ne pouvaient être abordés de façonappropriée que dans le cadre de la LACC.
La procédure en vertu de la LACC a pour but de fournir à TravelBrands le temps et la stabiliténécessaires pour procéder à une restructuration tout en poursuivant ses activités comme à l'habitude.Notre Société émergera de la procédure en vertu de la LACC plus forte et plus concurrentielle.
Nous ne prévoyons pas ajuster le niveau des effectifs par suite de la procédure en vertu de la LACC.Cependant, nous examinons régulièrement les processus et pratiques d'entreprise afin de les rendre plusefficients. Nous maintiendrons ces efforts pendant la procédure de restructuration de TravelBrands.
ll se pourrait que nous apportions certains changements à Voyages Sears, mais rien n'a encore étédéterminé. Un contrat définit notre partenariat avec Sears et nous nous engageons à continuer detravailler avec Sears pour maintenir une entente à long terme qui nous sera mutuellement avantageuseNous tiendrons au courant les employés de Voyages Sears des développements. Cependant, je suisdésolé de ne pas pouvoir vous donner plus de détails à ce sujet pour I'instant.
Tout au long du processus de restructuration, les affaires se poursuivront comme à I'habitude.TravelBrands dispose de suffisamment de fonds pour poursuivre ses activités. Comme toujours, nousprévoyons fournir à nos clients le même excellent service que celui auquel ils s'attendent de nos marqueset nous apprécions vos efforts et vos engagements continus à cet égard. Je vous encourage également àlire le document de questions et réponses destiné aux employés afin d'obtenir des réponses à certainesquestions supplémentaires que vous pourriez vous poser.
Je tiens également à vous rappeler que les demandes de renseignements provenant des médias doiventêtre transmises à [nom]
Au nom de mes frères et en mon nom personnel, je vous remercie de vos efforts continus et de votrecompréhension. Nous tiendrons les employés informés des développements tout au long de ceprocessus.
Veuillez agréer, cher/chère collègue, I'expression de mes sentiments les meilleurs.
Frank DeMarinis
109
TravelBrands lnc.Key Customers Email re: CCAA Announcement
Draft#1 assumes outreach by each brand's relationship manager
ffi[trffiEarlier today our parent company, TravelBrands, announced it has commenced a restructuringunder the CCAA regulations, the details of which are outlined in the press release attached tothis email. I wanted to reach out to you to reiterate that in spite of this news it remains businessas usual for TravelBrands.
The restructuring is needed to deal with two legacy issues that are associated with theacquisition of Thomas Cook Canada. The CCAA process provides TravelBrands with thenecessary time and stability to restructure behind the scenes while maintaining business asusual for TravelBrands' customers.
The Company has liaised with the various regulatory bodies to ensure that they are aware ofdevelopments at TravelBrands, and I can confirm that the Company has sufficient cash tocontinue operations as usual under CCAA protection.
Once again, there is absolutely no change to the service and support you have come to expectfrom us at [specific brand] and we value your commitment to our padnership as TravelBrandsworks behind the scenes on these isolated legacy matters.
Please let me know if you have any additional questions.
Draft#2 assumes outreach by TravelBrands corporate sales
Earlier today TravelBrands announced it had commenced a restructuring under the CCAAregulations, details of which are outlined in the press release attached to this email. I wanted toreach out to you to reiterate that it is business as usual for all of our customers and partners.
The restructuring is intended to deal with two legacy issues that are associated with theacquisition of Thomas Cook Canada. The CCAA process provides TravelBrands with thenecessary time and stability to restructure behind the scenes while maintaining business asusual for TravelBrands' customers, suppliers and vendors.
The Company has liaised with the various regulatory bodies to ensure that they are aware ofl--..^t-...----¡- -r T--..-th---J- --l I --- ---¡:--- ¡L-¡ ¡L --.. L-- --.4i-i- .-L ---L ¡-uevgt()Pffleft[5 irt tfavgtÞtaftus, afrL¡ r uail uuililrfil Lfral Ure v(,ilrpafty il45 5uillÇteftt çasft tucontinue operations as usuai under CCAA protection.
Once again, there is absolutely no change to the service and support you have come to expectfrom us and we value your commitment to our partnership as we work behind the scenes on thiscorporate initiative.
111
TravelBrands lnc.Gourriel aux clients clés au sujet de l'annonce de la procédure en vertu de la LACC
Projet no 7 reposant sur l'hypothèse selon laquelle le responsaþle des relations dechaque marque communiquera avec les clients clés
[Formule d'appel]
Notre société mère, TravelBrands, a annoncé aujourd'hui qu'elle a engagé une procédure derestructuration en vertu de la LACC, qui est décrite en détail dans le communiqué joint auprésent courriel. Je tenais à vous écrire pour vous répéter qu'en dépit de cette nouvelle, les
affa i res se po u rs u ivent cam noeiihaþüude chez Trave I B ra nds.
La restructuration a pour but de régler deux problèmes hérités dans le cadre de I'acquisition deThomas Cook Canada. La procédure en vertu de la LACC procure à TravelBrands le temps etla stabilité nécessaires pour procéder dans I'ombre à une restructuration tout en poursuivantses activités comme à l'habitude auprès de ses clients et fournisseurs.
La Société a communiqué avec les divers organismes de réglementation pour s'assurer qu'ilssont au courant des développements chez TravelBrands, et je peux vous confirmer que la
Société dispose de suffisamment de liquidités pour poursuivre ses activités comme à l'habitudesous la protection de la LACC.
Une fois de plus, aucun changement ne sera apporté au service et au soutien auxquels vousvous attendez de notre part chez [marque particulière] et nous apprécions votre engagementà maintenir notre partenariat pendant que TravelBrands travaille dans I'ombre pour régler lesproblèmes isolés dont elle a hérité.
N'hésitez pas à communiquer avec moi si vous avez besoin de renseignementssupplémentaires.
[Formule de salutation et signature]
Projet no 2 reposant sur t'hypothèse se/on laquelle le seruice des venúes de TravelBrandscommuniquera avec les clienús c/és
IFormule d'appel]
TravelBrands a annoncé aujourd'hui qu'elle a engagé une procédure de restructuration en vertude la LACC, qui est décrite en détail dans le communiqué joint au présent courriel. Je tenais àvous écrire pour vous répéter que les affaires se poursuivent comme à I'habitude pour tous nosclients et partenaires.
La restructuration a pour but de régler deux problèmes hérités dans le cadre de l'acquisition deThomas Cook Canada. La procédure en vertu de la LACC procure à TravelBrands le temps etla stabilité nécessaires pour procéder dans I'ombre à une restructuration tout en poursuivantses activités comme à I'habitude auprès de ses clients et fournisseurs.
La Société a communiqué avec les divers organísmes de réglementation pour s'assurer qu'ils
sont au courant des développements chez TravelBrands, et je peux vous confirmer que la
LONGVIf'WCOMMUNICATIONS INC
Société dispose de suffisamment de liquidités pour poursuivre ses activités comme à l'habitudesous la protection de la LACC.
Une fois de plus, aucun changement ne sera apporté au service et au soutien auxquels vousvous attendez de notre part et nous apprécions votre engagement à maintenir notre partenariatpendant que nous travaillons dans I'ombre sur cette mesure.
N'hésitez pas à communiquersupplémentaires.
avec moi si vous avez besoin de renseignements
[Formule de salutation et signature]
2
113
TravelBrands lnc.Key Agents Email re: CCAA Announcement
IGreetings]
Earlier today, TravelBrands announced it will be working through a Court-monitored process,called CCAA, to restructure certain isolated legacy issues facing the business. I wanted to reachout to you to reiterate that it is business as usual for TravelBrands and there is no impact on theday{o-day operations for our partners or customers.
As we move through the restructuring process at the corporate level, we will continue to offerthe same level of service and support you have come to expect from us across all of our brands.
As detailed in the documents filed with the Gourt this morning, we have madearrangements to continue to pay all commissions based upon our schedule and theterms of our contract. There is no risk to you or your customers.
The restructuring is intended to deal with two legacy issues that are associated withTravelBrands' acquisition of Thomas Cook Canada, which are unrelated to the rest of thebusiness, including all of the brands that you deal with on a day{o-day basis. The purpose ofthe CCAA process is to provide TravelBrands the necessary time and stability to deal with bothof these issues while maintaining business as usual for all of our customers, suppliers andvendors. TravelBrands will emerge from CCAA financially stronger and well positioned for thefuture.
We truly value our partnership and have made comprehensive plans to ensure that, as far asyour business is concerned, you will not notice a single change as our parent company worksbehind the scenes on these legacy matters.
I'd be more than happy to talk more about this and additional questions you may have at yourconvenience. For your benefit, I've also included a few answers to some important questionsabout the CCAA process.
[Regards and signature line]
l(ey Questions
1. What does this mean for your business with TravelBrands?
There is no change. We are informing you out of courtesy and to proactively put to rest anypotential rumors. lt remains business as usual for all of the brands that you deal with, and asdetailed in the documents filed with the Court this morning, we have made arrangements tocontinue to pay all commissions based upon our schedule and the terms of our contract.There is no risk to ¡lou or our clients. TravelBrands operating businesses will continue tooperate as normalwhile the parent company addresses legacy issues in the background.
2. What is CCAA?
CCAA is the Companies' Creditors Arrangement Act which allows financially challenged
companies the opportunity to restructure their affairs. Securing an order approving a
LONGVIIVYCOMMUNICATIONS INC
CCAA application provides a company with time and protection from its creditors to
operate and maintain business "in the ordinary course," while it restructures its affairs.
3. Why is TravelBrands filing for protection under CCAA?
TravelBrands needs to restructure certain areas of its business as a result of two legacyissues related to when it was Thomas Cook Group plc. TravelBrands made significant effortto address these legacy issues but has concluded that they can only be sufficientlyaddressed within the confines of the CCAA process. Operating under CCAA providesTravelBrands with the necessary time and stability to restructure - ideally via consensualarrangements - while maintaining business as usual for customers, suppliers and vendorsacross its operating businesses. TravelBrands will emerge from CCAA financially strongerand well positioned for the future.
4. What happens during the CCAA process?
Once a company applies for Court proteclion, the Court usually issues an initial order
giving the company 30 days of protection, also referred to as a Stay of Proceedings. This
Stay provides a company protection from its creditors to operate and maintain business
"in the ordinary course," while the company restructures its affairs.
ln this case, TravelBrands will address legacy issues it inherited from a previous incarnationof the business and will emerge from CCAA financially stronger and well positioned for thefuture.
5. What exactly will you do to restructure?
TravelBrands have made significant effort to address a number of legacy issues when thebusiness was Thomas Cook Group plc., but those that still remain, can only be sufficientlyaddressed within the confines of the CCAA process. ln all cases, we wÍll work with theappropriate stakeholders to determine the next steps with an eye to continuing ourrelationships over the longer term.
6. How long will the restructuring take?
TravelBrands is in initial stages of restructuring. As typical in all CGAA filings, the Courtgranted TravelBrands a Stay of Proceedings for 30 days, the maximum period permitted onan initial application, during which the Company has protection from creditors while itattempts to restructure its affairs. lf the Company is not successful in resolving its two legacyissues in that time, the Company will likely seek an extension in advance of the expiry of theinitial 30-day Stay of Proceedings.
The length of a CCAA process varies, but TravelBrands plans to move quickly through theprocess. We will keep stakeholders upto-date on the proceedings.
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TravelBrands lnc.Gourriel aux représentants clés concernant l'annonce de la procédure en vertu de laLACC
TravelBrands a annoncé aujourd'hui qu'elle engagera une procédure supervisée par le tribunalappelée procédure en vertu de la LACC afin de régler certains problèmes isolés dont elle ahérité. Je voulais vous écrire pour vous répéter que les affaires se poursuivent comme àl'habitude chez TravelBrands et que cette procédure n'aura aucune incidence sur les activitésquotidiennes de nos partenaires ou clients
Tout au long du processus de restructuration, nous continuerons de vous offrir le même niveaude service et de soutien que celui auquel vous vous attendez de nous pour l'ensemble de nosmarques.
Gomme il est décrit en détail dans les documents que nous avons déposés auprès dutribunal ce matin, nous avons pris des arrangements qui nous permettent de versertoutes les commissions conformément à notre calendrier et aux modalités de notrecontrat. Vous et vos clients ne courez aucun risque.
La restructuration vise à nous permettre de régler deux problèmes dont nous avons hérité dansle cadre de I'acquisition de Thomas Cook Canada par TravelBrands et qui n'ont aucun lien avecle reste des activités, y compris I'ensemble des marques avec lesquelles vous travaillezquotidiennement. La procédure en vertu de la LACC a pour but de procurer à TravelBrands letemps et la stabilité nécessaires pour régler ces problèmes tout en poursuivant ses activitéscomme à I'habitude à l'avantage de tous ses clients et fournisseurs. TravelBrands émergera dela procédure en vertu de la LACC plus forte sur le plan financier et mieux positionnée pourI'avenir.
Nous accordons une très grande valeur à notre partenariat et avons établi des plans exhaustifspour nous assurer que la restructuration n'aura aucune incidence sur vos activités pendant quenotre société mère travaille dans I'ombre pour régler les problèmes dont elle a hérité.
Je serais heureux de pouvoir discuter avec vous de cette procédure de restructuration etd'autres questions que vous pourriez avoir au moment qui vous conviendra. À titre informatif,j'ai également fourni ci-après les réponses à certaines questions importantes au sujet de laprocédure en vertu de la LACC.
Questions clés
1. Qu'est-ce que cela signifie pour vos activités avec TravelBrands?
ll n'y a aucun changemenú. Nous vous informons de cette procédure par courtoisie et envue de faire taire de façon proactive toute rumeur potentielle. Les affaires se poursuiventcomme à l'habitude à l'égard de toutes les marques avec lesquelles vous travaillez etcomme il est indiqué en détail dans les documents déposés auprès du tribunal ce matin,nous avons pris des arrangements qui nous permettent de verser toutes les commissionsconformément à notre calendrier et aux modalités de notre contrat. Vous et vos clients ne
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courez aucun r¡sque. Les entreprises en exploitation de TravelBrands poursuivront leursactivités comme à l'habitude pendant que la société mère travaillera dans I'ombre pourrégler les problèmes dont elle a hérité.
2. Qu'est-ce que la LACC?
La LACC désigne la Loi sur les arrangements avec les créanciers des compagnies, qui
permet aux sociétés en difficulté financière de restructurer leurs affaires. L'obtention
d'une ordonnance approuvant une demande de protection en vertu de la LACC procure
à une société le temps et la protection contre ses créanciers dont elle a besoin pour
exercer et maintenir ses activités, ., dans le cours ordinaire de ses affaires >> tout en
restructurant ses affaires.
3. Pourquoi TravelBrands a-t-elle déposé une demande de protection en vertu dela LACC?
TravelBrands a besoin de restructurer certains secteurs de son entreprise en raison dedeux problèmes dont elle hérité lorsqu'elle exerçait ses activités sous le nom de ThomasCook Group plc. TravelBrands a déployé des efforts importants pour régler ces problèmes,mais elle en est venue à la conclusion qu'elle ne pouvait aborder ceux-ci de façonappropriée que dans le cadre de la LACC. Le fait d'exercer ses activités sous la protectionde la LACC procure'à TravelBrands le temps et la stabilité nécessaires pour restructurer sesaffaires - idéalement aux termes d'arrangements consensuels - tout en poursuivant sesactivités comme à I'habitude à I'avantage de ses clients et fournisseurs dans I'ensemble deses entreprises en exploitation. TravelBrands émergera de la procédure en vertu de laLACC plus forte sur le plan financier et mieux positionnée pour l'avenir.
4. Que se passera-t-il durant la procédure en vertu de la LAGC?
Une fois qu'une société a demandé la protection du tribunal, le tribunal rend
habituellement une ordonnance initiale, également appelée suspension d'instance, qui
confère à la société une protection contre ses créanciers pendant 30jours afin de lui
permettre d'exercer et de maintenir ses activités .. dans le cours normal de ses affaires "tout en restructurant ses affaires.
Dans ce cas-ci, TravelBrands réglera les problèmes dont elle a hérité d'une incarnationantérieure de I'entreprise et émergera de la procédure en vertu de la LACC plus forle sur leplan financier et mieux positionnée pour I'avenir.
5. Que ferez-vous exactement pour restructurer les activités?
TravelBrands a déployé des efforts importants pour régler un cerlain nombre de problèmesdont elle a hérité lorsqu'elle exerçait ses activités sous le nom de Thomas Cook Group plc,mais les problèmes qui subsistent ne peuvent être abordés de façon appropriée que dans le
2
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cadre de la procédure en vertu de la LACC. Quoi qu'il en soit, nous travaillerons avec lesparties prenantes appropriées pour établir les étapes suivantes en vue de maintenir nosrelations à long terme.
6. Gombien de temps la restructuration durera-t-elle?
TravelBrands en est aux premières étapes de sa restructuration. Comme c'estgénéralement le cas pour les procédures en vertu de la LACC, le tribunal a octroyé àTravelBrands une suspension d'instance pendant 30 jours, soit la période maximaleautorisée pour une première demande, durant laquelle la Société jouira d'une protectioncontre ses créanciers pendant qu'elle tente de restructurer ses affaires. Si la Société n'arrivepas à résoudre les deux problèmes dont elle a hérité à l'intérieur de ce délai, elledemandera une prolongation de cette suspension d'instance avant I'expiration de la périodeinitiale de 30 jours.
La durée des procédures en vertu de la LACC varie, mais TravelBrands prévoit agirrapidement. Nous tiendrons les parties prenantes informées de la procédure.
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THIS IS EXHIBIT 66D" REFERRED TO IN
THE AFFIDAVIT OF JOE DEMARINIS
SWORN BEFORE ON THIS ISth DAY OF JTINE,2Ol5
Affidavits.A
l,ØrttYwD tt)
119
TRAVELBRANDS TO RESTRUCTURE CERTAIN AREAS OF ITS BUSINESS UNDERCREDITOR PROTECTION
- Busíness as usual for virtually all wholesale and retail brands -
- Customers of TravelBrands óuslnesses will see no change in level of service andsuppotf -
TORONTO, May 27,2015 - TravelBrands lnc. ("TravelBrands" or the "Company"), a leadingCanadian 'super-distribution' network comprised of ten tour operator wholesale and five retailtravel brands, announced today that it has obtained an Order from the Ontario Superior Court ofJustice (Commercial Division) granting it creditor protection under Íhe Companies' CreditorsArrangemenú Act ("CCAA")(the "lnitial Order").
TravelBrands commenced these proceedings under the CCAA to provide it with the necessarytime and stability to restructure certain isolated areas of its business. After acquiring what wasthen Thomas Cook Canada lnc., the Company made significant effort to address challengesassociated with the business - and has been largely successful. There are certain remainingisolated legacy issues that are significantly impacting TravelBrands' financial performance thatcan only be sufficiently addressed within the confines of CCAA legislation.
"Our customers are not affected by this announcement," said Frank DeMarinis, Chief ExecutiveOfficer of TravelBrands. "Our wholesale and retail brands remain open for business and there willbe absolutely no change to the service and support our customers have come to expect from us.As far as our external partners are concerned, it's business as usual."
The Company has liaised with the various regulatory bodies to ensure that they are aware ofdevelopments at TravelBrands. The Company has suffTcient cash to continue operations as usualunder CCAA protection.
DeMarinis added, "TravelBrands enters CCAA with the support of its creditors and investors. Wewill emerge from creditor protection financially stronger, more competitive and well-positioned forthe future."
Under the lnitial Order, among other things, TravelBrands was granted a stay of proceedings,staying creditor claims against the Company and its subsidiaries during the CCAA process.KPMG has been appointed by the Court as the monitor (the "Monito/') of the Company in theproceedings. The Stay of Proceedings granted under the lnitial Order will last for 30 days,although the Company may apply for an extension to the Stay in the normal course and at anypoint during the 30-day period.
Additional information regarding the Company's CCAA proceedings, including court materials, willbe made publicly available on the Monitor's website athttp://www.kpmg.com/Calen/services/Advisory/TransactionRestructuring/CreditorlinkSites/TravelBrands/Pages/default.aspx. TravelBrands will provide further updates throughout its restructuringprocess.
AþOUI I ravelEranqs tnc
TravelBrands operates under several wholesale and retail brands, including, among others:Sunquest, BelAir Travel, Wholesale Travel Group, Last Minute Club, Holiday House, FunSunVacations, Encore Cruises, Boomerang Tours, ALBATours, Exotik Tours, lntair, Network andCarte Postale. The Company does not anticipate changes to the operations of these businessesas a result of the CCAA proceedings.
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For more information:
Company
Frank DeMarinisChief Executive Officer,TravelBrands lnc.905-283-6027
Media
English - Joel Shaffer, Longview Communícations, 416-649-8006
French - Daniel Larouche, 514-286-4882
T2T
TRAVELBRANDS RESTRUCTURE CERTAINS SECTEURS DE SON ENTREPRISEEN VERTU D'UNE PROCÉDURE DE PROTECTION CONTRE SES CRÉANCIERS
- Les affaires se poursuivent comme à I'habitude pour Ia quasí-totalité, des marques de gros et de détail -
- Les clíents des entrepríses de TravelBrands obtiendrontIe même niveau de service et de soutien -
TORONTO, le 27 mai2015 - TravelBrands lnc. (< TravelBrands ) ou la < Société >), réseau de( super distribution > canadien de premier plan constitué de 10 marques de gros de voyagistes etde cinq marques de voyage de détail, a annoncé aujourd'hui qu'elle a obtenu une ordonnance dela Cour supérieure de justice de I'Ontario (Division commerciale) lui accordant la protectioncontre ses créanciers en vertu de la Loi sur /es arrangements avec les créanciers descompagnies (( LACC >>) (l'< ordonnance initiale >).
TravelBrands a engagé cette procédure en vertu de la LACC afin de se donner le temps et lastabilité nécessaires pour restructurer certains secteurs isolés de son entreprise. Après avoiracquis l'entrepríse qui s'appelait alors Thomas Cook Canada lnc., la Société a déployé desefforts importants pour surmonter les difficultés associées à celle-ci et y est largement parvenue.Cependant, certains problèmes isolés hérités de cette entreprise subsistent et ont une incidenceimportante sur le rendement financier de TravelBrands, et ils ne peuvent être abordésadéquatement que dans le cadre de la LACC.
< Nos clients ne sont pas touchés par cette annonce >, a déclaré Frank DeMarinis, chef de ladírection de TravelBrands. << Nos marques de gros et de détail poursuivent leurs activités etabsolument aucun changement ne sera apporté au service et au soutien que nos clientss'attendent à recevoir de nous. En ce qui concerne nos partenaires externes, les affaires sepoursuivent comme à I'habitude. >
La Société a communiqué avec les divers organismes de réglementation pour s'assurer qu'ilssont au courant des développements chez TravelBrands. Elle dispose de suffisamment deliquidités pour poursuivre ses activités comme à I'habitude sous la protection de la LACC.
< TravelBrands se place sous la protection de la LACC avec le soutien de ses créanciers etinvestisseurs. Nous émergerons de cette procédure plus solides sur le plan financier, plusconcurrentiels et mieux positionnés pour I'avenir >, a ajouté M. DeMarinis.
En vertu de I'ordonnance initiale, TravelBrands a notamment obtenu une suspension d'instanceen vertu de laquelle les créanciers ne sont pas autorisés à présenter des réclamations contre laSociété et ses filiales durant la procédure en vertu de la LACC. Le tribunal a nommé KPMG entant que contrôleur (le < contrôleur >) de la Société dans le cadre de la procédure. La suspensiond'instance octroyée en vertu de I'ordonnance initiale sera d'une durée de 30 jours. Cependant, laSociété peut demander qu'elle soit prolongée dans le cours normal des activités et à tout momentdurant cette période de 30 jours.
Des renseignements supplémentaires au sujet de la procédure en vertu de la LACC engagée paria Sociéié, y compris ies cjocuments jucliciaires, seront posiés sur ie site Web ou controieur, àhttp:llwww.kpmg.com/Calenlservices/ncivisorylTransactionRestructuringlCrecjitorlinkSites/TraveiBrands/Pagesidefault.aspx. TravelBrands communiquera d'autres mises à jour tout au long de ceprocessus de restructuration.
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THIS IS EXHIBIT "E)) REFERRED TO IN
THE AFFIDAVIT OF JOE DEMARINIS
SWORN BEFORE ON THIS I Sth DAY
for Taking Affidavits.
2015
Lü. Ønc¿j^ÁVløffilroúto
123
KPMG lnc.Bay Adelaide Centre333 Bay Street Suite 4600Toronto ON MsH 2S5Canada
FaxTelephone
lnternet
(4161 777-8500(4161 777-3364www.kpmg.ca
Court File: CV-l 5- 10980-00CLJune 1,2015
NOTICE TO CREDITORS
Re: TravelBrands Inc. ("TravelBrands" or the,.Company")
On May 27,2015, TravelBrands was granted an order (the "Initial Order") by the OntarioSuperior Court of Justice (Commercial List) (the "Court") under the Companies' CreditorsArrangement Act, R.S.C. 1985, c. C-36, as amended (the .,CCAA").
KPMG Inc. has been appointed as monitor in the company's ccAA proceedings (the"Monitor") pursuant to the Initial Order of the Court dated May 27,2015.
The Initial Order provides for, among other things , a stay of proceedings until June 26,2015 (the"Stay Period"). The Stay Period may be extended by the Court from time to time. TheCompany is continuing to operate in the ordinary course pursuant to provisions of the InitialOrder.
A copy of the Initial Order as well as the other materials filed in the CCAA proceedings may beobtained at http://www.kpmg.com/ca./travelbrands.
Pursuant to the Initial Order, all persons having oral or written agreements with the Company orstatutory or regulatory mandates for the supply ofgoods and/or services, are hereby restraineduntil further Order of this Court from discontinuing, altering, interfering with or terminating thesupply of such goods or seryices as may be required by the Company, provided that the normalprices or charges for all such goods or services received after the date of this Initial Order are paidby the Company in accordance with normal payment practices of the Company or such otherpractices as may be agreed upon by the supplier or service provider and each of the Company andthe Monitor, or as may be ordered by this Court.
The Initial Order prohibits the Company from making payments relating to the supply of goods orservices prior to iN4ay 27,2015, other than payments to ceftain parties specified in the InitialOrder and in accordance with the Initial Order.
During the Stay Period, all parties are prohibited from commencing or continuing legal orenforcement actions against the Company and all rights and remedies of any parly against or ins^^^^^a^f+L^ fr^*- Ll^^:- ^^-^L- I ---S ----,--,-l-t --.---- t r,t- ztreòPçvL rrr rllir \-u¡uP¿ily ur r.lrrirl alssçrs ar(, stayg(I aflu suspclr(¡9(l çx!:cp[ wlln tnç wtttlen conseruof the Company and the Monitor, or ieave of the Court.
To date, no claims procedure has been approved by the Court and creditors are therefore notrequired to file a proof of claims at this time.
KPMG lnc. is a subs¡d¡ary of KPMG LLP, a Canadian lim¡ted l¡ab¡t¡ty partnershipand a rember f¡rm of the KPMG network of ¡ndependent member firms aff¡l¡atedwith KPMG lnternational Cooperative {"KPMG lnternat¡onal") I Swiss entity.
r24ITTÐ,TJE
Page2
If you have any questions regarding the foregoing or require further information, please consultthe Monitor's website (http://www.kpmg.com/caltravelbrands) or should you wish to speak to arepresentative of the Monitor, please contactMarcel Réthoré by telephoneat416-777-3775 orbyemail at [email protected].
Yours very truly,
KPMG Inc.In its capacity as the Court-appointed Monitor of TravelBrands Inc.
Per: Philip J. ReynoldsSenior Vice President
IN THE MATTER OF COMPANIES' CREDITORS AI{RANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF TRAVELBRANDS INC.Applicant
Court File lrto. CV-15-10980-00CL
ONTARIOSUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
PROCEEDING COMMENCED ATTORONTO
MOTION RECORD OF TIìIE APPLICANT(MOTION FOR A STAY EXTEN|SION RETURNABLE
JUNE 24,2015)
osLER, HOSKIN & HARCOURI] LLPBarristers & SolicitorsP. O. Box 50I First Canadian PlaceToronto ON M5X 188
John A. MacDonald (LSUC#25884R)Tel: 416.862.5672
Marc WasserTnan (LSUC#44066M)Tel: 416.362.4908
Michael Delellis (LSUC# 48038U)Tel: 416.862.5997Fax: 416.862.6666
Lawyers for the Applicant