January 20, 2004
IMPORTANT BULLETIN
If you have not received our reporting letter of September 19, 2003 which
enclosed your claim summary, please contact our office immediately at
1-888-502-7460.
INTRODUCTION
This website has been developed by Koskie Minsky LLP
for the exclusive use of former employees of Cotton Ginny in order to provide
general information on issues affecting you during the Companies' Creditors
Arrangement Act proceedings of Cotton Ginny. On January 15, 2003,
Cotton Ginny applied to court and obtained protection from its creditors.
Richter & Partners Inc. was appointed the Monitor of Cotton Ginny. On April
9, 2003, Mr. Justice Farley of the Ontario Superior Court of Justice issued an
order appointing Janette Sasso, a former employee of Cotton Ginny, as the
Employees' Representative and our firm as Employees' Representative Counsel in
the insolvency proceedings. To view the order, please
click here. We have posted the Monitor's reports, together with the
exhibits. To view the reports, please click on the "Monitor's
Reports" button to the left of this page.
STATUS OF EMPLOYEE CLAIMS
The Company had initially calculated amounts owing to employee claims in the
range of $2 - 2.5 million. Our claim calculations for employees total
$3,760,472.95. After some discussion with Richter & Partners (the claims
administrator), the vast majority of employee claims have now been accepted.
Under the terms of the Plan of Compromise or Arrangement (the "Plan") approved
by the creditors of Cotton Ginny and Mr. Justice Farley, it was initially
anticipated that the employees would receive dividend payments in the range of
22 cents on the dollar. However, the range has since increased to 26.4 cents on
the dollar.
On December 22, 2003, we were informed by Richter that the first of two
dividend cheques had been released to the employees at a rate of 13.2 cents on
the dollar of each employees' claim amount. The next dividend payment is
expected to be released on or before August 31, 2004 at the same rate, that is,
13.2 cents on the dollar. The Schedule of the First Dividend Payment is set out
in the Fourteenth Report of the Monitor. To view the Schedule,
please click "Monitor's Reports" in the left margin.
Human Resource Development Canada ("HRDC") must pre-approve all dividend
payments to employees in order to avoid any overpayment of Employment Insurance
benefits. The law states that terminated employees cannot receive amounts
relating to termination of employment and collect Employment Insurance benefits
for the same period of time. If you received Employment Insurance benefits
after being terminated, your dividend payment will be reduced accordingly and
Richter & Partners will make a payment directly to HRDC on your behalf.
It is imperative we have your current address. If you move, Richter will make
no effort to locate you. To protect your privacy, we cannot take changes of
address by telephone. If you have a change of address, please write, e-mail or
fax our office. Our address is 900 - 20 Queen Street W., Toronto, ON M5H 3R3.
If you have any questions please call us at 1 888-502-7460 or send us an e-mail
at cottonginny@kmlaw.ca.
Our fax number is 416 204-2897.
HIGHLIGHTS OF THE INSOLVENCY PROCEEDINGS:
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On January 15, 2003, Cotton Ginny applied for and received protection from
creditors under the Companies' Creditors Arrangement Act (CCAA).
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After January 15, 2003, all Cotton Ginny stores were closed and approximately
2300 Employees were let go across Canada.
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On April 4, 2003, Cotton Ginny, as part of its restructuring, sold 95 of the
205 stores to Continental Saxon Asset Management Limited and Continental
subsequently began to rehire certain employees and re-open Cotton Ginny stores.
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On May 22, 2003, Tabi International Corporation (formerly Cotton Ginny Limited)
and the Monitor mailed out a copy of its Proposed Plan of Compromise and
Arrangement to its creditors. The Plan was formally presented to the creditors
at a meeting on June 19, 2003 for a vote. To view the Plan,
please see the Tenth Report of the Monitor. According to the CCAA,
in order for a Plan to be accepted, a majority of creditors in number
representing 2/3 in value of the creditors, or class of creditors, must vote in
favour of the plan either by voting in person or by proxy. We attended the
meeting with Janette Sasso, the Employees' Representative, who voted on all
employees' behalf to support the Plan. The Plan was adopted by the vast
majority of creditors.
Click here to view the letter from counsel to the Monitor reporting the
results of the vote.
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One creditor of Cotton Ginny, Vikeda Industries Inc., brought a motion in court
for an order to exclude another creditor, Arbos Company Limited, from voting on
the Plan of Compromise and Arrangement on the grounds that Arbos is the sole
shareholder of Cotton Ginny and the largest unsecured creditor and thus its
participation in the Plan would result in the Company effectively voting on its
own reorganization. Before that motion could proceed, an "agreement" was
reached between the Company, Arbos and certain other creditors that required
Vikeda to withdraw its motion and agree to vote in favour of the Cotton Ginny
Plan in exchange for certain concessions with respect to the claims being
asserted by Vikeda and the other creditors. A dispute erupted over the terms of
that "agreement". On May 27, 2003, Vikeda's motion to exclude Arbos was
scheduled to proceed, however, Mr. Justice Farley held a hearing and determined
that the agreement was valid and binding and refused to allow Vikeda's motion
to proceed. Vikeda filed a Notice of Motion for leave to appeal that decision
to the Ontario Court of Appeal and then moved on June 13, 2003 for an order to
expedite the leave motion and an order to cancel the June 19th creditors'
meeting.
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It was critical to the Company that the creditors' meeting on June 19th proceed
and that the Plan be accepted by the creditors, otherwise, the Company would
have very likely run out of cash and be forced into bankruptcy, where recovery
for unsecured creditors, including employees, would be less than in the Plan.
After a day in court on June 13, Madam Justice Charron of the Court of Appeal
refused to stop the creditor's meeting from proceeding as scheduled on June 19,
2003.
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According to the CCAA, a Plan must be approved by the court at a "sanction
hearing" which was scheduled for June 26, 2003. Once approved by the court, the
Plan is implemented and dividend distributions will start to creditors.
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On June 3, 2003, we filed the Employee Omnibus Proof of Claim on behalf of all
terminated employees with the Company and Richter for amounts owing to
employees from Cotton Ginny for severance, health benefits and other amounts.
To calculate the claim for lost health benefits (such as prescription drugs,
hospital, dental and life insurance benefits) during each employees' notice
period, we retained the actuarial firm of Eckler Partners Ltd. to calculate the
present value of such benefits To view the Eckler Report dated June 3, 2003,
please click "Claims" in the left margin.
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On June 26, 2003, we attended the sanction hearing before Mr. Justice Farley.
We are pleased to report that the Plan was approved by the court.
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On December 22, 2003, the first of two dividend payments were released to the
employees by Richter, the claims administrator, at a rate of 13.2 cents on the
dollar. The second dividend payment is expected to be released to the employees
on or before August 31, 2004.
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Pursuant to the court order of Mr. Justice Farley of April 9, 2003, a portion
of employees' legal fees was applied to each dividend payment pro rata and paid
to our firm.
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