Sears Canada Employees and Former Employees

In order to distribute the proceeds from the liquidation of the assets of the Sears Canada Entities and the recoveries from the Estate Dividend Litigation, the Monitor has amended its original joint plan of compromise and arrangement, which was accepted for filing by the Court on February 15, 2019 (the “Original Plan”). The Original Plan has now been amended and restated (as may be further amended from time to time, “the Plan”).

What is a Plan of Compromise and Arrangement? Generally speaking, a plan of compromise and arrangement is a proposal that a company under CCAA protection presents to its creditors, which if approved by those creditors and by the supervising court, then governs how various issues between that company and its creditors will be addressed. This typically includes how assets will be distributed, and how the claims of creditors will be compromised and settled in return for the distribution of those assets and other benefits to stakeholders under the plan.

You will be receiving a letter shortly that sets out the important terms of the Plan, including a summary of relevant amendments. We also recommend that you review the Plan FAQ posted in the “Related Documents” on this page.

Please note that that in the event that you have already received compensation for your proven unsecured claim from WEPP, the claim for which you will be entitled to receive recoveries under the Plan will be correspondingly reduced dollar for dollar by the amount of such prior compensation.  Most Employees who received a WEPP payment received an amount that compensated their entire claim. As such, most Employees will not be receiving further funds from the distribution. 

Moreover, the claim for which you will be entitled to receive recoveries under the Plan may be reduced by any overpayments of employment insurance as well as any applicable withholdings taxes.

Stay tuned over the coming months for further updates on the Plan and timelines for any distributions.

We are pleased to report that the actions filed against Sears Holdings Corporation, certain former directors of Sears Canada Inc. and Edward S. Lampert and certain affiliates of ESL Investments, Inc. with respect to the declaration of an extraordinary dividend by the board of directors of Sears Canada on December 6, 2013 (“2013 Dividend Litigation”) are now the subjects of settlement agreements that have been approved by the Court.

The settlements of the 2013 Dividend Litigation will, upon implementation, result in settlement proceeds of $72.5 million to the plaintiff parties in the 2013 Dividend Litigation. 54.6% of those settlement proceeds will be allocated to Sears Canada, with the remaining proceeds allocated to the Sears Canada Pension Plan and the Hometown Dealer Class Action.

These settlements will result in increased pension benefits to retirees, as well as increased recoveries to other creditors, including employees who have not had their claims met under the Wage Earner Protection Program.

Further information on the dividend litigation can be found on the Monitor’s website at: http://cfcanada.fticonsulting.com/searscanada/Estate2013DividendLitigation.htm

Stay tuned for further updates on the voting on and implementation of the plan of compromise or arrangement as we continue to work towards the winding down of the Sears Canada estate.

As previously reported, on February 15, 2019, the Superior Court of Justice (Commercial List) issued an order authorizing the Monitor to hold meetings of the creditors of the Sears Canada Entities (the “Meetings”).

The Meetings were originally scheduled to be held on March 28, 2019 for the purpose of voting on the Sears Canada Entities’ plan of compromise or arrangement (the “Plan”). As also previously reported, the Meetings were adjourned to a later date, time and place to be determined by the Monitor.

The vote on the Plan was delayed in order to allow for the completion of the claims process and other necessary administrative work. The majority of this work has now been completed. The Monitor is working towards making arrangements to hold the vote as soon as is feasible. Given the current COVID-19 pandemic and related restrictions on public gatherings, those arrangements include investigating the possibility of holding the Meetings through video conference.

We will provide a further update with confirmation of the times and dates of the Meetings at the earliest opportunity. Please watch our website for updates.

In addition to the work being done winding down the estate of the Sears Canada Entities, work continues in the lawsuits filed on December 19, 2018 with respect to the declaration of a $509M dividend by the board of directors of Sears Canada on December 6, 2013.

The three lawsuits were filed by the Monitor, the Honourable Douglas Cunningham, Q.C. as Litigation Trustee appointed by the Sears Canada CCAA Court, and Morneau Shepell as Plan Administrator for the Sears Registered Retirement Plan.

UPFH Employee Representative Counsel sits on a Litigation Creditor Committee with other major creditors that regularly meets with the Monitor, Litigation Trustee and Pension Administrator to review the status of the litigation.

The trial of these three lawsuits was originally scheduled to commence on May 19, 2020. However, as a result of court closures due to the COVID-19 pandemic, the trial dates have been adjourned and will be re-scheduled at the earliest opportunity.  

Further information on the dividend litigation can be found on the Monitor’s website at: http://cfcanada.fticonsulting.com/searscanada/Estate2013DividendLitigation.htm

As previously reported, on Friday, August 18, 2017, Employee Representative Counsel was successful in obtaining Court approval of a $500,000 Employee Hardship Fund to assist Former Sears Employees that find themselves in precarious hardship through loss of employment.

Certain terms of the Employee Hardship Fund directed that any payments to Former Employees from the Employee Hardship Fund would be deducted from future distributions on claims that may be allowed in a claims procedure.

As a result of this condition, representatives from the federal Wage Earner Protection Program (“WEPP”) took the position that when a payment is made to a Former Employee under the Employee Hardship Fund, that payment will also be deducted from that Former Employee’s Eligible Wage Claim under WEPP.

Employee Representative Counsel took certain to dispute the way in which Service Canada and the federal Labour Program, which oversee and administer the WEPP, characterized payments from the Employee Hardship Fund with respect to the effect of those payments on a Former Employee’s WEPP entitlement.

One of those steps was to bring a motion before the Court to amend the terms of the Employee Hardship Fund Term Sheet. With the amendments proposed by Employee Representative Counsel, amounts paid in respect of the Employee Hardship Fund would no longer be deducted from distributions paid pursuant to claims approved through the Employee and Retiree Claims Procedure.

Employee Representative Counsel was successful in bringing our motion to amend the terms of the Employee Hardship Fund Term Sheet. Employee Representative Counsel then reached out to Service Canada and the federal Labour Program and provided them with the amended Employee Hardship Fund Term Sheet. As a result of the approved revision, the Labour Program agreed to modify the treatment of Employee Hardship Fund payments for the purposes of WEPP.

Employee Hardship Fund payments will no longer be deducted from Eligible Wage Claims through WEPP and will therefore not affect the amount of the WEPP payment. Service Canada is currently automatically reassessing all affected Employees.

On February 15, 2019, the Superior Court of Justice (Commercial List) issued an order (the “Meetings Order”) authorizing the Monitor to hold meetings of the creditors (the “Meetings”) of the Sears Canada Entities.

The Meetings were originally scheduled to be held on March 28, 2019 for the purpose of voting on the Sears Canada Entities’ plan of compromise or arrangement filed on February 15, 2019 (the “Plan””).

You should have received a letter from us dated February 28, 2019 that provided some details as to how the voting process works and a high level overview of the contents of the Plan.

Please be advised that, in accordance with paragraph 34 of the Meetings Order, the Monitor will be adjourning both Meetings to a later date, time and place to be determined by the Monitor. The new date for the adjourned Meetings, along with details as to venue, will be provided at a later time.

We have been advised by the Monitor that the vote is being delayed in order to allow for the completion of the claims process and other necessary administrative work before a vote can be taken. As always, we will be monitoring the CCAA proceedings to ensure they continue to be handled as efficiently and as expeditiously as possible. We will provide a further update at the earliest opportunity. Please watch our website for updates.

Assuming there are no material changes to the Plan, we will continue to support its approval. If there are any changes that alter our view of the Plan and its benefit to ERC Employees, ERC Employees will be advised accordingly.

We are pleased to announce that eligible employees may apply to receive benefits from the Federal Wage Earner Protection Program (“WEPP”) starting January 7, 2019. If you are eligible to apply for WEPP, you will receive a notice from the Receiver, FTI Consulting Canada Inc. (“FTI”), by email (or by mail if you do not have access to email).

If you do not receive this notice by February 4, 2019 it is important that you contact the Receiver at SearsEmployeeClaimSite@fticonsulting.com, or our office at searscanadaemployees@upfhlaw.ca.

Please note that applications to the WEPP must be received no later than 56 days following the appointment of the Receiver (in this case, the 56-day deadline is March 4, 2019). If you apply outside this deadline, an explanation for the delay must be provided on your WEPP application form.

What is WEPP?

The WEPP is available to employees whose employment has been terminated and their employer has filed for bankruptcy or is the subject of a receivership. The Wage Earner Protection Program Act (“WEPPA”) was enacted by the Federal Government to provide relief to, and compensate former employees for the loss of wages or other eligible amounts, including termination pay and severance pay (“Eligible Wage Claim”), owed to them by an employer that becomes the subject of a receivership order.

On October 29, 2018, amendments to the WEPPA were introduced in the House of Commons. The amendments to WEPPA entail an increase in the maximum payment under the Program to an amount equal to seven times the maximum weekly insurable earnings under the Employment Insurance Act. This means that under the WEPPA, the 2019 maximum amount in respect of Eligible Wage Claims is $7,148.15 with a legislated reduction amount of $487.50, meaning the maximum amount you could receive from WEPP is $6,660.65.

This amendment received Royal Assent on December 13, 2018 and is currently in force.

Click here for more information on WEPP. For a helpful FAQ, please see Service Canada’s website (click here) or FTI’s website (click here).

How do I apply?

If you are eligible to apply for WEPP, you will have to do so through Service Canada. Please see the notice provided to you by FTI Consulting for instructions on how to apply for WEPP.

If after you have reviewed the instructions you still have any questions about the WEPP or how to file a WEPP claim, please contact Service Canada by telephone at:

Toll-Free:     1.866.683.6516
TTY:            1.800.926.9105

or by visiting their website at: https://www.canada.ca/en/employment-social-development/services/wage-earner-protection.html

You will need the following information to apply for WEPP. Note that this information is available in Exhibit A of your WEPP notice received from FTI Consulting:

1. Social Insurance Number
2. Sears Canada Entities’ Estate ID: 999999999 (no hyphen)
3. Receiver Corporate Name: FTI Consulting Canada Inc.
4. Name of Debtor: Sears Canada Inc.
5. Address of Debtor: 180 John Street, Suite 520, Toronto, ON, M5T1X5
6. Effective date of receivership: January 7, 2019
7. Date your employment ended
8. WEPPA Eligible Wage Claim Amount: the total amount on your Termination Claim Statement from FTI Consulting

Why should I apply?

This is a reminder to all Former Sears Employees of the existence of the Employee Hardship Fund.

If you were terminated on or after June 22, 2017, or if you were in receipt of salary continuance from Sears and that stopped on June 22, 2017, you fall under the definition of Former Employee and you are eligible to apply for the Fund.

We would encourage all Former Employees experiencing any sort of financial hardship to consider applying to the Fund. If you have applied in the past and been denied, and your circumstances have changed, you might also wish to consider applying again.

Please make sure to be as detailed as possible in your application to outline the circumstances of your hardship. If you are claiming hardship due to medical expenses please include the approximate monthly cost of your medical expenses for yourself and your family. The more details you can provide in your application, the better.

The application form can be found on our website here (for English) and here (for French) or on the Monitor’s website here. Please note from the instructions that Application Forms are to be sent directly to the Monitor at searscanada@fticonsulting.com.

We anticipate initiating a receivership that will allow access to the Wage Earner Protection Program (“WEPP”) for former Sears Canada employees in early 2019. At that time, FTI Consulting Canada, acting as the Receiver, will send former Sears Canada employees a letter by email or mail with more details about the WEPP and how to apply. There will be information about the steps that former Sears Canada employees must take to apply for WEPP. We will also post additional information about the WEPP on our website.

Note that in order to trigger access to WEPP, a Receivership Certificate signed by FTI Consulting Canada and Employee Representative Counsel will be served to the Sears Canada Service List. To learn more about the Receivership Certificate process, please see the update on the Receivership Motion below. Please also continue to check our website for further updates.

Remember: No notices will be sent until early 2019. Only once the Receivership Certificate is served will a notice from FTI Consulting Canada, acting as the Receiver, be sent to all former employees who may be are eligible for WEPP payments with further details. Stay tuned for further updates in January 2019.  

On October 16, 2018, Ursel Phillips Fellows Hopkinson LLP, in its capacity as Employee Representative Counsel, sought a Receivership Order in the Ontario Superior Court of Justice (Commercial List) allowing for the appointment at a later date of FTI Consulting Canada Inc. as Receiver over a limited amount of property belonging to Sears Canada and related entities that formerly employed individuals, including the former Corbeil, the former S.L.H. and Sears Contact Services.

A Receiver is a third party appointed by a court to take possession of and secure certain assets of a debtor company, and sell those assets for the benefit of creditors (parties that the debtor owes money to).

The purpose of seeking the Receivership Order is to put in place a mechanism to allow Former Employees to access payments from the Wage Earner Protection Program (“WEPP”). As we explained in our update of February 26, 2018, below, WEPP is only available to employees whose employer filed for bankruptcy under the Bankruptcy and Insolvency Act (“BIA”), or became subject of a receivership. Sears Canada filed for protection under the Companies’ Creditors Arrangement Act (“CCAA”), and therefore Employees have not yet been eligible to receive WEPP payments.

While we now have a Receivership Order that puts in place a mechanism to trigger WEPP, we have not yet activated that trigger. As we have previously reported, in the 2018 Federal Budget, the Government of Canada proposed a change to the maximum payment under WEPP to seven weeks of Employment Insurance insurable earnings from four. Currently, that is an increase from $3,976.92 to $6,959.61. We do not want to trigger WEPP until these legislative amendments increasing maximum payouts under WEPP are enacted. 

We are working with the relevant federal agencies to ensure these enhancements are available to Employees as soon as possible.

The Receivership Order allows Employee Representative Counsel and FTI Consulting to trigger WEPP as soon as enhancements are enacted by the legislature or at some other time that would be most beneficial to the employees.

You may review the ERC motion materials seeking the Receivership Order on the Monitor’s website, here. For more information on WEPP, click here.

We understand this has been a long and stressful process for Employees. We are working to provide the maximum recovery available to Employees, and we thank you for your patience throughout these proceedings.

On August 20, 2018, we sent a letter to Ministers Patty Hajdu, Minister of Employment, Workforce Development and Labour, and Jean-Yves Duclos, Minister of Families Children and Social Development, regarding the Wage Earner Protection Program (“WEPP”). WEPP was established by the Federal Government to provide for the payment of outstanding eligible wages to individuals whose employer is bankrupt or subject to a receivership, which includes amounts owing for termination or severance pay.  For more information on WEPP, please see our post below, dated June 6, 2018.

On February 27th of this year, the Government of Canada put forth its budget plan – Equality+Growth: A Strong Middle Class. The budget proposes significant enhancements to WEPP entitlements. Most importantly, it proposes a change to the maximum payment under WEPP to seven weeks of Employment Insurance insurable earnings from four. As of now, that is an increase from $3976.92 to $6959.62.

Our letter requests that the Ministers consider passing legislative amendments that would apply these WEPP increases to Sears employees.

We will continue to work on your behalf to ensure you receive as much of what you are owed as possible.

We have posted our letter to the Ministers for you to download and read (click here). We also encourage you to call and write to your Member of Parliament so that WEPPA amendments are made a top priority on September 17, when the legislature resumes.

Follow this link to find your Member of Parliament and their contact information: https://www.ourcommons.ca/parliamentarians/en/constituencies/FindMP

Update on Mediation

On May 9, 2018, the Court approved a process for the mediation of certain significant outstanding issues in the Sears Canada CCAA proceedings. As the Monitor noted in the Eighteenth Report, the Sears Canada CCAA proceedings are at a critical stage. Liquidation of assets at retail locations is completed, all retail locations are closed, and significant claims bar dates have passed. The only major assets that remain to be sold are the remaining real estate assets. As a result, the court has agreed that now is the right time to attempt to mediate a plan of compromise under the CCAA.

The mediation will take place on June 13 and 14, 2018, and will focus on the allocation of recoveries in the CCAA proceedings. The goal of the mediation is to achieve consensus on key issues to allow Sears Canada Entities to pursue a CCAA plan. This essentially means that the purpose of the mediation is to reach an agreement to divide and distribute estate proceeds among creditors as efficiently as possible.

The Court has appointed the Honourable Regional Senior Justice Morawetz to act as mediator. Justice Morawetz is highly experienced in CCAA matters.

What does this mean for distributions to employees?

We do not know at this time when employees will receive distributions from the estate. We anticipate it will be at least a few months before distributions are made. We thank you for your patience during this time, and urge you to continue checking our website for updates.

The Monitor anticipates rates of recovery will be between 0 and 10% of claims. This means that you may only receive 0% - 10% of the amount indicated on your Termination Claim Statement out of the estate.  

Please note that we continue to work with the Monitor and Federal Government representatives from the Wage Earner Protection Program (“WEPP”) and related agencies to ensure former Sears Canada employees receive the maximum entitlement possible under WEPP. Please see our news item below regarding WEPP.

We write to provide an update on developments regarding the Wage Earner Protection Plan (“WEPP”). See below for our previous update providing background on WEPP.

The Federal Government indicated in its 2018 budget that it would propose legislation that would increase its maximum payments to seven weeks of Employment Insurance insurable earnings from four (see here).  These enhancements have not been proposed in the legislature yet and may not be until the fall. However, they would provide a significant increase in WEPP benefits to a material number of former Sears employees.

We continue to have discussions with WEPP representatives and other members of the Federal Government in order to maximize WEPP benefits available to former employees of Sears. We will post updates as soon as we have more information as to when WEPP may be available. 

We would like to remind all current and former employees of the Sears Canada Entities of the upcoming May 7, 2018 deadline to submit a Request for Correction to your personal information to the Monitor. If you disagree with any of the information on your Termination Claim Statement, you must submit a request to have the information corrected on or before May 7, 2018 at 5:00 p.m.

The personal information you may request to have corrected includes:

• The start date or end date of your employment;
• Your average hourly wage or salary;
• The amount of working notice you received;
• Whether you resigned or were terminated for cause.

If any of the above information is incorrect, it is important to submit a request for correction as it may impact the value of your claim.

How do I make a request for correction?

You may submit a Request for Correction by correcting your Personal Information directly on the Monitor’s Claim Website after logging in using the username and password provided to you in an email or letter from the Monitor. If you have not received an email or letter from the Monitor with this information, please contact the Monitor by email at the following address: SearsEmployeeClaimSite@fticonsulting.com

If you are unable to access the Monitor’s Claim Website, you may email the Monitor at the above-noted email, or email us at SearsCanadaEmployees@upfhlaw.ca, and we will send you a PDF Request for Correction form.

When you submit the form, please include any documentation that substantiates your request. For example, if you are requesting a correction to your average hourly wage, including past pay stubs could help support your request.

What do I do if my personal information is correct?

If your personal information on your Termination Claim Statement is correct, no further action is needed. The claim will be submitted on your behalf.

We would like to remind all current and former employees of the Sears Canada Entities of the upcoming April 9, 2018 deadline for Other Employee Claims against Sears Canada Entities and the Directors and Officers of Sears Canada Entities. If you have a claim against the Sears Canada Entities for something that is NOT a Termination Claim, Lifetime Discount Claim, or Warranty Claim, you must complete and file a Proof of Claim Form so that it is received by the Monitor on or before April 9, 2018 at 5:00pm.

Claims due April 9, 2018 against Sears Canada Entities might include:

• a claim for damaged property;
• a claim for outstanding expenses; or
• if you commenced a court or tribunal claim against Sears before June 22, 2017, such as a human rights or Small Claims Court action, you will need to submit the amount as a claim on a Proof of Claim Form.

Claims due April 9, 2018 against Directors and Officers of Sears Canada Entities might include:

• unpaid wages;
• unpaid vacation pay; or
• unpaid overtime.

For more information on filing a Proof of Claim against Sears Canada Entities or the Directors and Officers of Sears Canada Entities, please download our FAQ here and see in particular pages 7 - 9.

Ursel Phillips Fellows Hopkinson LLP in its capacity as Employee Representative Counsel (“ERC”) hosted Webinar presentations for current and former employees of the Sears Canada Entities on March 22 and 23, 2018. The Webinars were recorded and are available for viewing by following the links posted below.

The Webinars covered background information about the employment-related claims of employees pursuant to Employee and Retiree Claims Procedure, how your Termination Claim was calculated, whether you need to take any action to move your claim forward, and important deadlines.

To view the archived webinar, please follow these instructions after clicking the link below:

1. Select “click here if you are a Guest”;
2. Enter your email address when prompted;
3. Enter the requested information on the registration page. You may put your Sears job title in the “position” field, “Sears” as the company, and “retail” as the industry sector.

English Webinar Archive Link:

Ursel Phillips Fellows Hopkinson LLP in its capacity as Employee Representative Counsel (“ERC”) will be hosting Webinar presentations for current and former employees of the Sears Canada Entities.

The Webinars will cover background information about the employment-related claims of employees pursuant to Employee and Retiree Claims Procedure, how your Termination Claim was calculated, whether you need to take any action to move your claim forward, and important deadlines.

There will also be an opportunity to ask questions to ERC and the Monitor during the Webinar.

English Webinars will be held the following dates:

• Thursday, March 22, 2018, 12 pm – 2 pm EDT
• Thursday, March 22, 2018, 6 pm – 8 pm EDT

A French Webinar will be held Friday, March 23, 4 pm – 6pm EDT.

To join a webinar, please click on the link below that corresponds to the time you are viewing, and follow the instructions:

Thursday, March 22, 2018 12pm-2pm EDT (EN)
Participant Link
https://mp126803.cdn.mediaplatform.com/126803/wc/mp/4000/7319/34396/101276/Lobby/default.htm

Thursday, March 22, 2018 6pm-8pm EDT (EN)
Participant Link
https://mp126803.cdn.mediaplatform.com/126803/wc/mp/4000/7319/34396/101277/Lobby/default.htm

Friday, March 23, 2018 4pm-6pm EDT (FR)
Participant Link
https://mp126803.cdn.mediaplatform.com/126803/wc/mp/4000/7319/34396/101278/Lobby/default.htm

Court has approved employee claims process 

On February 22, 2018, Justice Hainey approved the Employee and Retiree Claims Procedure Order. All employees of the Sears Canada Entities whose email addresses are on file with Sears Canada will receive an Employee Claims Package by email by March 5, 2018 and anyone for whom Sears Canada does not have an email address will have their claims packages mailed to them by March 5, 2018. The Employee Claims Packages will contain detailed instructions about the claims process.

Click here to see the Notice to Claimants and click here for a blank copy of the Employee Claims Package.

Click here for more information on the Monitor’s website.

Please continue monitoring this website, as we will be posting answers to frequently asked questions, as well as a PowerPoint presentation, to support employees in understanding the claims process.

We have been receiving inquiries from former employees of Sears Canada Entities (“Sears”) regarding the Wage Earner Protection Program (“WEPP”).

What is WEPP?

The WEPP is available to employees whose employment has been terminated and their employer has filed for bankruptcy or is the subject of a receivership. WEPP provides employees with payment of outstanding eligible wages and/or termination pay, up to a maximum amount equal to four times the maximum weekly insurable earnings in the Employment Insurance Act, subject to deductions under the WEPP Regulations. For 2018, the maximum amount is $3,976.92. With the applicable deductions, the maximum you may receive is approximately $3,705.69.

Click here for more information on WEPP.

Availability of the WEPP for Sears employees

Under the legislation, the WEPP is only available to employees whose employer filed for bankruptcy under the Bankruptcy and Insolvency Act (“BIA”), or became subject of a receivership. Sears Canada has filed for protection under the Companies’ Creditors Arrangement Act (“CCAA”), and therefore former Sears employees are not eligible for the WEPP at this time.

However, Ursel Phillips Fellows Hopkinson LLP has been working in its capacity as Representative Counsel (“Representative Counsel”), together with Sears and the Monitor, to try to make the WEPP available to former Sears employees as soon as possible.

On December 15, 2017, Representative Counsel attended a meeting with ministries from the Federal Government regarding WEPP. The Monitor, counsel to the Monitor, and counsel to Sears were also in attendance. The purpose of the meeting was to try to identify ways to provide employees access to the WEPP.

We continue to work with the Monitor, Sears and with government representatives to explore ways to make this program available to former Sears employees.

Next steps

We continue to work with the Monitor, Sears and the Federal Government to try to make WEPP available to Sears employees. We will post a further news item if and when former employees of Sears Canada become eligible.

On Thursday, February 22, 2018, Employee Representative Counsel will attend the Ontario Superior Court of Justice (Commercial Court) to support the motion filed by the Sears Canada Entities for Court approval of the Employee and Retiree Claims Procedure Order.

For the last three months, with weekly or more frequent consultation with the Employee Representatives, Employee Representative Counsel has worked closely with the Monitor and negotiated extensively with the Sears Canada Entities to successfully arrive at a Termination Claims Methodology and a Common Law Severance Formula that are appropriate and which take into account all applicable statutory minimum entitlements, as well as enhanced entitlements pursuant to the employment policies of the Sears Canada Entities and also relevant case law.

Employee Representative Counsel is pleased to report that the employees whom we represent will be entitled to a Termination Claim that is based on a “best of” methodology, which will take into account the best possible result from applicable employment standards legislation; pre- and post-2016 Sears’ Severance Policies; enhanced individual contractual entitlements, where such are known to exist; and a negotiated common law severance formula.

It is important to bear in mind that the claims process will generate a claim on an employee’s behalf, but the distribution of the estate of the Sears Canada Entities is many months away, and employees should be aware that the determination of claims in this process will not result in the payment to employees of 100% of the value of proven claims. We ask that all Sears employees pay close attention to their emails and mailboxes in the coming weeks as more information will be provided by the Monitor shortly.

For more details on the Employee and Retiree Claims Process, please see the Monitor’s 13^th report here.

Dear Active and Former Employees of Sears Canada:

We are writing to provide you with an update on our activities on behalf of Active and Former Employees of Sears Canada and the other applicants in this CCAA matter (“Sears Canada”).

These have been exceptionally difficult months for you all, and while much work remains to be done in order to advance your interests, we would like to take this opportunity to give some details about what we have been working on for you.

As you are aware, Sears Canada has proceeded over the past weeks with liquidation of all its assets. This majority of this liquidation activity is expected to continue until late January or early February 2018. As store liquidations are completed, the stores are being closed and either sold or the leases otherwise dealt with. Inventory is being sold through the stores, or where possible, directly to those interested in purchasing large quantities of inventory. Other assets held by the company, such as furniture, fixtures and equipment are also in the process of being sold.

The value realized through this liquidation is known as the “estate”. The estate will be distributed to creditors of Sears after all the claims of the creditors are ascertained by the Monitor. Employees are creditors of Sears Canada and will be entitled to make a claim for loss of employment against the estate.

As you may know, the court has approved a General Claims Process for trade creditors and others. You can see our report about that process under the December 12, 2017 What's New link here. 

Employees and Pensioners/Members of the Pension Plans will each have their own separate claims process. For information about the Pension process, please see Pension Representative Counsel’s website, here.

As Employee Representative Counsel, we are continuing to work on developing an Employee Claims Process in conjunction with Sears Canada, the Monitor, Pension Representative Counsel, and others. Meetings and work on this have proceeded throughout November and December and are continuing. As we have previously advised, the General Claims Process is underway but all employee claims will be dealt with in this separate process.

Employee claims encompass items like termination and severance pay, compensation for loss of benefits and other claims arising out of your loss of employment. We are working with the other parties to develop a fair and appropriate format for making your claims for these things.

We will be able to provide more information regarding the employee claims process in January. We anticipate asking for court approval of the employee claims process in late January. Please watch our website for additional information in January, 2018.

As the liquidation of the Sears Canada stores and remaining asset sales continue, we remain focused also on monitoring the liquidation and sale of assets with a view to enhancing the return to the estate in order to maximize the ultimate distribution of the estate to Sears Canada employees.  

We have also been working on your access to the Federal Wage Earner Protection Program (WEPP), which is designed to provide some payments in respect of your termination and severance pay. For more general information about the WEPP, please see the program’s website here.

On December 15, 2017, we met with representatives from the federal agencies Employment and Social Development Canada and Service Canada regarding WEPP. Representatives from Sears Canada and the Monitor were also in attendance. The meeting took place to ensure early on in the process that Sears employees would have the best access to WEPP funds and to establish a cooperative approach with the federal agencies’ staff. We were pleased that the meeting resulted in agreements to cooperate and assist each other. Certain legal and procedural steps need to be taken under the Wage Earner Protection Program Act in order to give Sears employees access to the program. We are working with Sears Canada, the Monitor and other parties to take those steps. We will provide further updates on our website as to when the program will become accessible to Sears employees, the details of what the program offers, and what you will need to do to personally access it. Please watch our website for further updates about this.

Please continue to contact us with any questions you may have as this process continues. We endeavour to provide timely explanations and answers. We will continue to update you in January and the coming months.

We have been advised by Sun Life Financial that it is their general policy to allow employees to have 90 days from the date of their termination to submit any benefit claims relating to claims that took place prior to termination.

Please make sure to submit all outstanding benefit claims to Sun Life Financial as soon as possible following your termination, and to make sure claims are submitted within 90 days of your termination.   

If you have any questions, please contact Sun Life Financial directly at Sun Life Financial at 1-888-206-4570.

This is a reminder to all Former Sears Employees of the existence of the Employee Hardship Fund.

If you were terminated on or after June 22, 2017, or if you were in receipt of salary continuance from Sears and that stopped on June 22, 2017, you fall under the definition of Former Employee and you are eligible to apply for the Fund.

We would encourage all Former Employees experiencing any sort of financial hardship to considering applying to the Fund.

If you have applied in the past and been denied, and your circumstances have changed, you might also wish to consider applying again.

Please make sure to be as detailed as possible in your application to outline the circumstances of your hardship. If you are claiming hardship due to medical expenses please include the approximate monthly cost of your medical expenses for yourself and your family. The more details you can provide in your application, the better.

The application form can be found on our website here (for English) and here (for French) or on the Monitor’s website here. Please note from the instructions that Application Forms are to be sent directly to the Monitor at searscanada@fticonsulting.com.

On December 8, 2017, the Company returned to the Superior Court of Justice, Commercial Court, to seek approval of three motions:

• the Claims Procedure Order;
• the Omnibus Approval and Vesting Order; and
• the Approval and Vesting Order for Viking Trade-Marks.

Motion to Approve the Claims Procedure Order

Please note that this general Claims Procedure Order does not apply to the Employee Claims Procedure that is being developed for claims of Active and Former Employees. Employee Representative Counsel, the Monitor, and the Company are still working on the details of the Employee Claims Procedure. This Employee Claims Procedure will be the subject of a separate approval by the Court. We will provide updates on the Employee Claims Process as they are available.

The Motion for the Claims Procedure Order had been discussed in detail with the stakeholders, including Employee Representative Counsel, resulting in several amendments to the ultimate Order. As a result, the Motion was unopposed and the Court was satisfied that it should be approved.

The Court approved the Company’s motion with respect the Claims Procedure Order, which establishes the Claims Procedure for the identification and quantification of certain creditor claims against the Company and former directors and officers of the Company. Counsel for the Company advised the Court that this process will be run by the Monitor, in consultation with the Company, to ensure fairness and transparency.

The Claims Procedure will solicit and quantify the following types of General Creditor claims:

• Pre-Filing Claims;
• Post-Filing Claims;
• Restructuring Period Claims;
• Directors and Officers Claims but not those of employees, pensioners and other specifically excluded claims; and
• Intercompany Claims

This process includes Trade Creditors’ Claims,  Construction Claims, Landlord Claims and Warranty Claims.

As noted above, the Claims Procedure established in the Claims Procedure Order does not apply to Employee Claims and Pensioner Claims. The Company intends to return to Court in the New Year to seek approval of two subsequent claims processes to deal specifically with Employee Claims and Pensioner Claims. The two subsequent claims processes shall be developed in consultation with Employee Representative Counsel, Pension Representative Counsel, the Pension Plan Administration, the Superintendent and the Monitor. The parties are currently considering the development of the formulae that will be used to determine the quantum of those Claims.

The Order states that by December 20, 2017, the Monitor will send out a letter to all Employees to advise employees that this Claims Procedure does not apply to them and that further details of the Employee Claims Procedure are still being established and will be subject to further court approval. This letter is in the process of being mailed out now. You should expect to see it shortly. You can view the English version by clicking here, and the French version by clicking here.

The Claims Procedure Order also expands the mandates of Representative Counsel to permit them to assist in the establishment and implementation of an Employee Claims Procedure and a Pensioner Claims Procedure. It expands the mandate of Employee Representative Counsel to represent all Employees hired by the Company during the Restructuring Period. The Order also states that Darrin Whitney shall replace Sara Sawyer as an Employee Representative in these CCAA Proceedings.

Timing and Process of the General Claims Process

The Order states that by December 20, 2017, the Monitor will send out the General Creditor Claims Packages to any potential claimant and in response the claimant must file a Proof of Claim with the Monitor. The Order states that all General Creditor Claims for the Pre-Filing Period must be filed by March 2, 2018, and Claims for the Post-Filing Period must be filed by April 2, 2018. Any General Creditor Claims for the Restructuring Period must be filed within 45 days after the date on which the Monitor sends out the Claims Package.

The Monitor, in consultation with the Company, will review each Proof of Claim and shall accept, revise or reject each Claim. The Monitor will notify the claimant if the Monitor intends to revise or reject a Claim, by providing a written Notice of Revision or Disallowance by no later than July 31, 2018. Any Claimant can dispute the Monitor’s decision by submitting written notice to the Monitor within 30 days of receiving the Notice of Revision or Disallowance. The Monitor can refer the dispute to a Claims Officer or the Court for adjudication.

General Creditor Claims: Special Provisions

A Notice to General Creditor Claimants will be posted on the Monitor’s website on December 13, 2017, and will inform holders of gift cards and Sears Loyalty Points that that all gift cards and Sears Loyalty Points will no longer be accepted by the Sears Canada Entities after January 21, 2018. This Notice will also inform potential General Creditor Claimants (that are not Sears Suppliers) with potential claims below $1,000 that they will not be provided with a General Creditor Claims Package and should obtain one from the Monitor’s website.

Construction Claims

The Monitor will send Notices of Construction Claims to all known Construction Claimants advising them of the quantum of their Claim based on the books and records of the Sears Canada Entities by December 20, 2017. The Construction Contractors will have until February 15, 2018 to dispute the amount of their claim. Each Construction Contractor will also be sent a Construction Contractor Instruction Letter directing them to send to all Sub-Contractors they have a contractual relationship with an Instruction Letter and Notice of Construction Claim.

Warranty Claims

Any holder of a Warranty is not required to file a Proof of Claim and their claim will be deemed to be submitted on behalf of each Warranty holder based on Sears Canada’s books and records. Holders of Warranties who may have potential Warranty Claims do not need to take any action at this time.

Intercompany Claims

The Monitor will prepare a report detailing all Intercompany Claims and each claim shall be deemed to have been properly submitted through a Proof of Claim.

Landlord Claims

Any Landlord Claimant must file a Proof of Claim with the Monitor before the later of 45 days after the date on which the Monitor sends a General Creditor Claims Package, and April 2, 2018.

Motion to Approve the Omnibus Approval and Vesting Order

The Court also approved the Company’s motion with respect to the Omnibus Approval and Vesting Order, which provided a sale protocol for the liquidation of the remaining assets (the “Residual Assets”), with the exception of owned and leased real property, and the assets (including inventory) that are the subject of the Phase II Liquidation Order.

The Residual Assets include office furniture, merchandising/food service/photo studio equipment, customer databases, trade-marks, intellectual property and other miscellaneous items.

Counsel for the Company advised the Court that the Omnibus Approval and Vesting Order would permit Sears Canada to efficiently enter into and close transactions for the Residual Assets, preventing unnecessary court hearings and reducing the costs associated with these transactions. The Monitor will oversee this process and for any Residual Assets exceeding $5 million the Company will be required to obtain Court approval.

The Omnibus Approval and Vesting Order requires the Company to provide a Transaction Notice to the Service List upon entering into a transaction and any person is given an opportunity to object to the Transaction within 7 days of receiving the Transaction Notice. Counsel for the Company advised the Court that any objections will be dealt with consensually or the matter will be brought to the Court for determination. The Monitor will retain the proceeds of each transaction.

The Motion was unopposed and the Court was satisfied that this Motion should be approved.

Motion to Approve the Approval and Vesting Order for Viking Trade-Marks

Finally, the Court approved the Company’s motion with respect to the Approval and Vesting Order for Viking Trade-Marks, which approved the Asset Purchase Agreement between Sears Canada Inc. (the “Seller”) and Viking Range, LLC (the “Purchaser”) and The Middleby Corporation (“Middleby”). Middleby will acquire the Assets via its wholly owned subsidiary, Viking Range, LLC.

On September 29, 2017, Sears Canada entered into an Asset Purchase Agreement (“APA”) with Canadian Tire Corporation relating to Sears Canada’s trademarks relating to the “Viking” trademark and brand.

On November 9, 2017, Sears Canada was ordered to provide Middleby with a copy of the Canadian Tire Corporation APA, as Middleby had a right of first refusal (“ROFR”) with respect to the assets contemplated in the APA. Middleby advised Sears Canada of its intention to exercise the ROFR, and this was approved by the court on November 24, 2017.

On December 6, 2017, Sears Canada entered into the Middleby APA for Sears Canada’s trademarks relating to the “Viking” trademark and brand.

At the hearing on December 8, 2017, Counsel for Sears Canada advised the Court that the purchase price for the Middleby APA was the same as the Canadian Tire APA, and that the transaction was anticipated to close 5 days after all of the conditions in Article 6 of the APA were satisfied or waived.

The Motion was unopposed and the Court was satisfied that this Motion should be approved.

On October 27, 2017, the Company returned to the Superior Court of Justice – Commercial Court, with a single motion seeking the approval of the Agreement of Purchase and Sale (the “ASP”) between Sears Canada Inc. and Oxford Properties Retail Holdings II Inc. and CPPIB Upper Canada Mall Inc. (collectively the “Purchaser”). Specifically, the motion related to the approval of the ASP for the sale of the Newmarket Home Store (the “Property”) between the Company and the Purchaser.

On October 4, 2017, the Company entered into an Agreement of Purchase and Sale with Serruya Private Equity Inc. (the “Serruya APS”) relating to the Property. The Serruya APS provided for a termination fee (“breaking fee”) payable to Serruya in the amount of approximately 8% of the purchase price in the event that Serruya APS was terminated as a result of the Purchaser – being the registered owner of the neighbouring lands to the Property – exercising a right of first refusal (“ROFR”) in respect of the Property.  On October 19, 2017, the Purchaser provided notice of its intent to exercise its ROFR, and by doing so provided notice of their intention to Purchase the Property.

The Court approved the APS between the Company and Purchaser, as well as the payment of the breaking fee to Serruya – despite verbal submissions made by the Purchaser (and payor of the breaking fee) regarding the breaking fee. A sealing order was also issued regarding certain commercially sensitive material and documents included in an appendix to the Sixth Report of the Monitor. 

On October 18, 2017, the Company returned to the Superior Court of Justice – Commercial Court, with a single motion seeking approval of the Court to amend the key employment retention plan (“KERP”).

Counsel for the Company began by indicating that the Company and the Monitor have been working on an amended KERP to respond to the current circumstances of the Company as it prepares for liquidation and to wind down.

In the Initial Order, the Court approved a KERP, granting a charge up to $9.2 million as security for payments under that KERP. The initial KERP contemplated that $7.6 million in payments to certain key senior management and other employees (“HQ Employees”). To date, $3.9 million of the HQ Employee KERP payments have not been paid out.

The Company sought, through this motion, to amend the KERP to reallocate up to $2.8 million of the unpaid HQ Employee KERP payments to provide payments to 36 members of management and staff, in order to incentivize them to remain with the Company as it proceeds through the liquidation process. That is to say that the amended KERP will be paid out of the unpaid portion of the original KERP – no new funds will be allocated to the amended KERP.

This motion and amendment did not deal with store level employees. Justice Hainey questioned what, if any, impact the proposed amendment had on store level employee KERPs, and the Company clarified that store level employees are covered by the Second Agency Agreement and therefore have the possibility to earn retention bonuses under that agreement.

The Company also sought to have information that is confidential, commercially sensitive and personal sealed from the public record. This information is contained in a confidential appendix to the Fifth Report of the Monitor, which relates to the amended KERP.

On October 13, 2017, the Company returned to the Superior Court of Justice - Commercial Court, to seek Court approval of four motions:

1. The motion to approve the Amended and Restated Agency Agreement (the “Liquidation Agreement”), between Sears Canada and a joint venture comprised of Gordon Brothers, Merchant Retail Solutions, Tiger Group and GA Retail (together, the “Syndicated Agent”);
2. The motion to approve the Lease Surrender Agreement regarding the Promenade Mall, Thornhill;
3. The motion to approve the ninth amendment to the Term DIP Credit Agreement; and,
4. The motion to approve extending the Stay Period until January 22, 2018.

In the introduction, Counsel for the Company began by providing the Court with a summary of events leading up to the Company seeking full liquidation. Counsel for the Company noted that the Company and the Monitor, in consultation with the Employee Representative Counsel, Representative Counsel for Pensions, and various other stakeholders worked tirelessly in attempts to achieve a going concern solution. Counsel for the Company noted that unfortunately a viable going concern deal could not be made and in accordance with an amendment made to the DIP Credit Agreement, the Company was required to seek court approval of the Liquidation Agreement by October 13, 2017.

Employee Representative Counsel advised the Court that they had supported discussions for the going concern deal and will continue to do so should anything emerge in the coming week. Employee Representative Counsel began by acknowledging that Sears Canada has touched the lives of generations of Canadians and for employees and their families Sears represented not just a source of livelihood, but a source of community, comradery and pride. Employee Representative Counsel noted the professionalism and support shown by Sears employees throughout this difficult process and asked the Court to recognize this in the endorsement issued for these motions. Employee Representative Counsel also recognized the contributions of the Employee Representative Committee, noting that these five people have gone above and beyond what was required of them in this role. The Judge immediately acknowledged the work and contributions of the employees from the Bench.

Motion to Approve the Liquidation Agreement

The Court approved the Liquidation Agreement, which contemplates that liquidation sales may run from October 19, 2017 to January 21, 2018. Sears will provide employees to the Syndicated Agent, but the employees will remain employed by Sears throughout the liquidation process.

Counsel for the Company advised the Court about the process involved in selecting the Syndicated Agent to conduct the liquidation. Counsel for the Company noted that the terms agreed to in the Liquidation Agreement were more favourable to Sears and were reached after continued negotiations. These terms include a 4% agency fee, that Sears Canada will receive a net minimum guarantee of 83% of aggregate cost value of full line merchandise, and the remaining proceeds will be shared 25% to the Agent and 75% to Sears. The Syndicated Agent was ultimately selected because of their experience in conducting liquidations of this type, their familiarity with Sears liquidations in particular, the success of the first round of liquidations, and the ability to maximize value for the estate.

Counsel for the Company noted that the Liquidation Agreement provides an option for Sears to terminate the agreement, with the approval of the Monitor and the Court, at any time prior to 5:00 p.m. on the date immediately prior to the Sale Commencement Date for the purposes of pursuing a going concern transaction. The Syndicated Agent will be entitled to receive a $2.5 million break fee and expense reimbursements of up to a maximum of $2.05 million.

Representative Counsel for Pensions and Post-Retirement Benefits advised the Court that they had actively engaged in the going concern discussions and will remain ready and willing to assist should anything emerge. Representative Counsel for Pensions did not oppose the liquidation but made note of the various concerns facing retirees, including the loss of benefits in September and the pension plan deficit.

Counsel for the Monitor noted that Sears Canada has had a history of 65 years in Canada. He recognized that many people worked hard to find a viable alternative to liquidation but that no executable proposal has emerged. The Monitor was in support of the Liquidation Agreement. Justice Hainey noted that he was satisfied that the order should be made on the advice of the Monitor and as there was no viable going concern solution.

Motion to Approve the Lease Surrender Agreement at Promenade Mall, Thornhill

The Court approved the Company's motion with respect to the Lease Surrender Agreement at Promenade Mall, Thornhill.  The agreement allows Sears access to the upper level of the store for 15 weeks to conduct liquidation, and access to the lower level of the store for 6 weeks to move inventory to the upper level of the store.

The order provided that an amount equal to the lien claim on the property will be set aside with the Monitor. Any other amounts will go to repay DIP ABL and Term Credit Agreements.

Motion to Approve the Ninth Amendment to the Term DIP Credit Agreement

The Court approved the Company's motion with respect to the ninth amendment to the Term DIP Credit Agreement. The amendment allows Sears to access $67.7 million of additional credit and requires Sears to pay the DIP lenders an amendment fee of $587,500.

Motion for Stay Extension

The Court approved the Company’s motion to extend the stay until January 22, 2018, which is the projected date for the end of the liquidation sale period.

Hardship Fund and Key Employee Retention Plan (KERP) Payments

Employee Representative Counsel was advised by the Monitor, and the Company confirmed that the $200,000 owed to the Hardship Fund would be paid.

Counsel for the Company advised that they would be returning to Court next week to deal with the issue of KERP payments for the next phase of the liquidation. Employee Representative Counsel will be in attendance for this matter and will report on the results.

On October 4, 2017, the Company returned to the Superior Court of Justice - Commercial Court, with 15 different motions to seek Court approval of certain successful bids under the Sales and Investment Solicitation Process (the “SISP”), as well as to seek an extension of the Stay granted under CCAA until November 7, 2017.

Counsel for the Company began by providing the Court with a summary of each motion, noting that there was no general opposition to any of the motions. Counsel for the Company provided the Court with an update on the going concern bid put forward by Brandon Stranzl, Sears Canada’s executive chairman, on August 31, 2017. Counsel for the Company noted that further amendments to the going concern bid were received by the Company on October 3, 2017, to adjust for the removal of the assets to which the Company was seeking orders for at the October 4th hearing. The amended bid is being considered and evaluated by the Company and the Monitor.

Counsel for the Company also advised the Court that the Company is operating under significant financial constraints and is facing serious liquidity issues. Counsel advised that a seventh amendment to the DIP Credit Agreement was entered into on October 3, 2017, with the following terms:

• An agreement with a liquidator to liquidate the remaining Sears Canada locations must be entered into by October 7, 2017;
• The liquidation agreement must be approved by the Court no later than October 13, 2017; and
• The liquidation agreement must provide for the commencement of liquidation of the remaining Sears Canada locations by October 19, 2017, with a possible extension to October 26, 2017.

Justice Hainey indicated that he was eager to hear from Employee Representative Counsel. Employee Representative Counsel advised the Court that it supported the asset purchase agreements sought for S.L.H. Transport Inc./Transports S.L.H. Inc. and Corbeil Electrique Inc., as both sales provided significant opportunities for employees to have continued employment. Regarding the orders sought for Confort, Garden City and Canadian Tire, Employee Representative Counsel was in support of those motions as they provided additional value to the estate for employee creditors. Employee Representative Counsel advised the Court that they were taking no position in regard to the various lease transactions sought by the Company.

Employee Representative Counsel noted that they understand the position of the Company regarding their liquidity issues, and they remain interested in negotiations and support of the going concern bid.

Employee Representative Counsel raised concerns with default fees under the DIP agreement in the amount of 1.5 million dollars, as set out in the Supplement to the Third Report of the Monitor, available here, requesting that no further payments be made in this regard without prior Court approval.

Additionally, Employee Representative Counsel raised the issue regarding further payments into the Hardship Fund from the second tranche of the Key Employee Retention Plan (“KERP”) payments, which was noted in the Third Report of the Monitor.  Employee Representative Counsel requested that no further KERPs be paid until this matter could be resolved and this request was ordered by the Court, noting that if there was a deficiency in the Hardship Fund, the Company would require Court approval before further KERP payments could be made.

Various counsel representing different stakeholder groups addressed the Court, including counsel for the going concern bidder, Brandon Stranzl, who noted that they were working hard to try to achieve a viable going concern bid. Counsel for the Monitor advised the Court that with the coming holiday season, the Company needs to assess the viability of the going concern bid or proceed with liquidation under the terms of the seventh amendment to the DIP agreement.

The Court proceeded to endorse the Company's orders with respect to the asset purchase agreements and the lease transactions and also endorsed the order to approve the extension of the stay until November 7, 2017.

On October 4, 2017, the Company will be seeking Court approval of certain successful bids under the Sales and Investment Solicitation Process (the “SISP”), as well as an extension of the Stay granted under CCAA until November 7, 2017.

There are 15 different motions being brought by Sears Canada. In each motion, Sears has requested that commercially sensitive information and documents be sealed from the public. Additionally, each motion is approved or supported by the Monitor.

Employee Representative Counsel will be reviewing these materials with the Employee Representative Committee and our Financial Advisor. We will be appearing in Court on the motions on October 4, 2017 and will provide an update on the outcome of the proceedings.

Below please find a brief description of each motion, as well as a link to the motion materials on the Monitor’s website.

Motion for Stay Extension

Sears Canada is seeking an extension of the Stay Period until and including November 7, 2017. Although Sears is moving for the Court to approve certain successful bids, submitted and negotiated through the SISP, the Sale Advisor, BMO, has advised that it is continuing to pursue other bids and proposals. In order to complete the proposed transactions and finalize additional transactions, Sears Canada is requesting an extension of the current Stay Period.

The Motion Record is available here.

Motion for Approval of Asset Purchase Agreement with S.L.H. Transport Inc./Transports S.L.H. Inc.

This is a motion for an approval and vesting order approving the Asset Purchase Agreement (“APA”) entered into on September 29, 2017 between S.L.H. Transports Inc./Transports S.L.H. Inc. (“SLH”) (as seller), 8507597 Canada Inc. (“8507597”) (as buyer), Sears Canada and 168886 Canada Inc. (“168886”) (a wholly-owned subsidiary of SLH).

SLH is a stand-alone trucking and logistics company that provides logistics services and is responsible for transporting merchandise to Sears Canada’s stores, catalogue/internet merchandise pick-up locations, and to various third-party customers.  SLH currently employs 329 people in Ontario and Quebec and 168886 employs 243 employees in other provinces. There are also, according to the motion materials, 185 independent contractors who own and operate their own trucks.

8507597 is assuming many of SLH’s contracts and will continue to provide transitional services to Sears Canada while a going concern bid is considered. As part of the APA, 8507597 will assume certain employees of SLH and 168886. 8507597 will be “making firm offers of employment to at least the majority of the Employees.” 8507597 will also be assuming liabilities and obligations relating to Employees.

The Motion Record is available here.

Motion for Approval of Asset Purchase Agreement with Am-Cam Electromenagers Inc. and Distinctive Appliances Inc. in respect of Corbeil Assets

This is a motion for an approval and vesting order approving the APA entered into as of October 1, 2017 between Corbeil Electrique Inc. (“Corbeil”) (as seller), Am-Cam Electromenagers Inc. (as buyer), Distinctive Appliances Inc. (the “Guarantor”) and Sears Canada Inc. (“Sears Canada”) (as intervenor).

Corbeil is a wholly-owned subsidiary of Sears Canada, but operates as an independent business with stores located throughout Quebec, the Greater Toronto Area and Eastern Ontario.

The Corbeil transaction will result in the Corbeil business continuing as a going concern, and will result in at least 90% of Corbeil’s current employees in the 14 corporate locations that are being assumed as part of the transaction (as well as head office and warehouse employees) receiving offers of employment from the buyer. The transaction is also intended to result in the continued operation of Corbeil’s franchise network, and therefore the continued employment of the employees of these franchisees.

This material is currently not available on the Monitor’s website.

Motion for Approval of Asset Purchase Agreement with Confort Expert Inc. in respect of Home Improvements Business Assets

This is a motion for an order approving the APA entered into as of September 28, 2017 between Sears Canada and Confort Expert Inc. (“Confort”). Sears Canada has agreed to sell Confort substantially all of the assets associated with the three businesses currently provided under Sears Canada Home Improvements brands, namely Sears Oil Service business, the Sears Hearing and Cooling business, and the Sears Duct Cleaning Services business. 

The assets Confort is acquiring consist principally of the customer list, contracts for the Home Improvement Business in certain Designated Markets and related rental equipment. It is not clear from the motion materials whether any employees of Sears Canada will be affected by the transaction.

The Motion Record is available here.

Motion for Approval of Further Amended Agreement of Purchase and Sale with 1562903 Ontario Limited Garden City Mall Winnipeg (Store #1424)

This is a motion for an order approving the Further Amended Agreement of Purchase and Sale (“APA”) dated September 27, 2017 between Sears Canada and 1562903 Ontario Limited (“1562903”).  On September 28, 2017, Sears Canada entered into the APA with 1562903 to purchase Sears Canada’s lands and buildings located at the Garden City Shopping Centre in Winnipeg, Manitoba where Sears Canada currently operates an outlet store. The consideration to be paid in the transaction is greater than the consideration that was to be paid by the proposed purchaser in the Original Garden City APA (WCRE Investments Ltd.).

Sears Canada is currently in the process of conducting a liquidation sale of this store and they have the right to extend the Closing Date to no later than October 16, 2017 to allow for completion of the liquidation.

The Motion Record is available here.

Motion for Approval of Approval of the Asset Purchase Agreement with Canadian Tire Corporation, Limited

This is a motion for an order approving the APA entered into on September 29, 2017 between Sears Canada and Canadian Tire Corporation, Limited (“Canadian Tire”). The APA states that Canadian Tire shall purchase all of Sears Canada’s right, title, and interest in and to all of Sears Canada’s trademarks exclusively related to the “Viking” trademark and brand.  Viking is a brand name associated with appliances and household items.

The Motion Record is available here.

Motion for Approval of Lease Surrender Agreement with Fairmall Leaseholds Inc. and Fairview Pointe-Claire Leaseholds Inc. Fairview Mall (Store #1322) and Pointe Claire (Store #1305)

This is a motion for an order approving the Lease Surrender Agreement made as of September 27, 2017 between Sears Canada and Fairmall Leaseholds Inc. and Fairview Point-Claire Leaseholds in respect of the Full Line Stores located at CF Fairview Mall (North York, ON) and CF Pointe Claire (Pointe Claire, QC). Sears Canada or an agent authorized by a Liquidation Sale Approval Order will be permitted to conduct a Sale (as defined in the liquidation Sale Order) until December 15, 2017.

The proposed order provides that an amount equal to the aggregate of amounts claimed by certain lien claimants will be set aside with the Monitor to address any dispute between the lien claimants and other parties regarding their entitlement to parts of the proceeds of the transaction.

The Motion Record is available here.

Motion for Approval of Lease Surrender Agreement with Orchard Park Shopping Centre Holdings Inc. Kelowna Full Line Store (Store #1827) and Kelowna Home Store (Store #1376)

This is a motion for an order approving the Lease Surrender Agreement made as of September 22, 2017 between Sears Canada and Orchard Park Shopping Centre Holdings Inc. (“Orchard Park”) in respect of the Full Line Store and Home Store at the Orchard Park Shopping Centre (Kelowna, B.C.).

Sears Canada and its agents will have access to the Premises for a period of 15 weeks following closing in order to remove any of the Excluded Assets and/or to conduct a liquidation sale.

The Motion Record is available here.

Motion for Approval of Lease Surrender Agreement with Scarborough Town Centre Holdings Inc. Scarborough Town Centre Store (Store #1308)

This is a motion for an order approving the Lease Surrender Agreement made as of September 27, 2017 between Sears Canada and Scarborough Town Centre Holdings Inc. (“STCHI”) in respect of the Scarborough Town Centre Store (Toronto, ON). Sears Canada and its agents will have access to the Premises for a period of 15 weeks following closing in order to remove any of the Excluded Assets and/or to conduct a liquidation sale.

The proposed order provides that an amount equal to the aggregate of amounts claimed by certain lien claimants will be set aside with the Monitor to address any dispute between the lien claimants and other parties regarding their entitlement to parts of the proceeds of the transaction.

The Motion Record is available here.

Motion for Approval of Lease Surrender Agreement with Shape Brentwood Limited Partnership, Brentwood Towncentre Limited Partnership and 08622223 B.C. Ltd. - Brentwood Mall Burnaby (Store #1836)

This is a motion for an order approving the Lease Surrender Agreement made as of September 20, 2017 between Sears Canada and Shape Brentwood Limited Partnership, Brentwood Towncentre Limited Partnership and 08622223 B.C. Ltd. (“Shape”) in respect of the Brentwood Mall Store (Burnaby, B.C.).

Sears Canada and its agents will have access to the Premises for a period of 15 weeks following closing in order to remove any of the Excluded Assets and/or to conduct a liquidation sale.

The Motion Record is available here.

Motion for Approval of Lease Surrender Agreement with Shape Properties (Nanaimo) Corp., NNTC Equities Inc. and 1854 Holdings Ltd. Nanaimo North Town Centre (Store #1823)

This is a motion for an order approving the Lease Surrender Agreement made as of September 20, 2017 between Sears Canada and Shape Properties (Nanaimo) Corp., NNTC Equities Inc. and 1854 Holdings Ltd. (“Shape”) in respect of the Nanaimo North Town Centre (Nanaimo, B.C.).

Sears Canada and its agents will have access to the Premises for a period of 15 weeks following closing in order to remove any of the Excluded Assets and/or to conduct a liquidation sale.

The proposed order provides that an amount equal to the aggregate of amounts claimed by certain lien claimants will be set aside with the Monitor to address any dispute between the lien claimants and other parties regarding their entitlement to parts of the proceeds of the transaction.

The Motion Record is available here.

Motion for Approval of Lease Termination Agreement with RioCan Holdings (Oakville Place) Inc. Oakville Place Mall (Store #1321)

This is a motion for an order approving the Lease Termination Agreement made as of September 27, 2017 between Sears Canada and RioCan Holdings (Oakville Place) Inc. in respect of the Oakville Place Shopping Mall (Oakville, ON). Sears Canada and its agents will have access to the Premises until December 31, 2017 in order to conduct a liquidation sale.

The proposed order provides that an amount equal to the aggregate of amounts claimed by certain lien claimants will be set aside with the Monitor to address any dispute between the lien claimants and other parties regarding their entitlement to parts of the proceeds of the transaction.

The Motion Record is available here.

Motion for Approval of Lease Transfer Agreement with Indigo Books & Music Inc. and Certain Ancillary Assets - Calgary DC

This is a motion for an order approving the Lease Transfer Agreement made as of September 28, 2017 between Sears Canada and Indigo Books & Music Inc. in respect of the Sears Canada distribution centre located at 79^th Avenue SE in Calgary, Alberta. The Subject Assets assigned by Sears Canada include a software license and client support agreement.

There is no provision providing post-closing access to Sears Canada as the entire inventory has already been removed and access is not necessary.

The Motion Record is available here.

Motion for Approval of Lease Amending Agreement with Crombie Developments Limited Avalon Mall, St. John’s (Store #1639)

This is a motion for an order approving the Lease Amending Agreement entered into as of September 25, 2017 between Sears Canada and Crombie Developments Limited in which Sears Canada has agreed to amend the Term of Lease so as to expire on February 28, 2018 in respect of the Avalon Mall (St. John’s, NL).

Sears Canada will be entitled to carry out a liquidation sale until the termination date.

The Motion Record is available here.

Motion for Approval of Lease Surrender Agreement with CF/Realty Holdings Inc. and Ontrea Inc. - CF Lime Ridge Mall and CF Polo Park (Stores #1093 and 1112)

This is a motion for an order approving the Lease Surrender Agreement dated September 27, 2017 between Sears Canada and CF/Realty Holdings Inc. and Ontrea Inc. in respect of the Full Line Stores located at CF Polo Park (Winnipeg, MB) and CF Lime Ridge (Hamilton, ON). Sears Canada and its agents will have access to the Premises until December 15, 2017 in order to conduct a liquidation sale.

The proposed order provides that an amount equal to the aggregate of amounts claimed by certain lien claimants will be set aside with the Monitor to address any dispute between the lien claimants and other parties regarding their entitlement to parts of the proceeds of the transaction.

The Motion Record is available here.

On Friday, August 18, 2017, lawyers from Ursel Phillips Fellows Hopkinson LLP (“UPFH”), Employee Representative Counsel of non-unionized Active and Former Employees of Sears, made a motion to the Court for approval of the $500,000 Employee Hardship Fund to assist Former Sears Employees that find themselves in precarious hardship through loss of employment.  

UPFH is pleased to announce that the Court endorsed the proposed order and also commended the parties on their successful negotiation of this unique agreement.

The application form for former Sears employees who are experiencing hardship can be found on our website here (for English) and here (for French) or on the Monitor’s website here. Please note from the instructions that Application Forms are to be sent directly to the Monitor at searscanada@fticonsulting.com. 

On Friday August 18, 2017, the Employee Representatives Committee will seek Court approval of an Employee Hardship Fund providing up to $500,000 of financial assistance to Former Employees of the Sears Canada Entities who find themselves in precarious hardship through loss of employment. The Committee has been able, through lengthy negotiations with the Company and with the assistance of the Monitor, to achieve this Fund. Monies for the Fund will come from earned and foregone executive Key Employee Retention Plan (“the KERP”) payments. The Committee is pleased to advise that the Company and the Monitor fully support the creation and implementation of this Fund.

The Employee Hardship Fund will be available to Former Employees (including employees terminated after today’s date) of the Sears Canada Entities whose entitlement to receive certain payments from the Sears Canada Entities has been stayed or suspended as a result of these CCAA proceedings, provided that the Former Employee meets prescribed eligibility criteria.

The Employee Hardship Fund will be solely funded by earned but foregone executive payment entitlements under the KERP approved by the Court pursuant to the Amended and Restated Initial Order dated June 22, 2017 (the “Amended and Restated Initial Order”) in these CCAA proceedings and that are secured by the KERP Priority Charge (as defined in the Amended and Restated Initial Order). 

The Employee Hardship Fund shall be in a maximum amount of $500,000 unless certain specified criteria are met and a further order of the Court is obtained.  Because the Employee Hardship Fund is funded through voluntary contributions by KERP beneficiaries of amounts otherwise owed to those KERP beneficiaries on a priority secured basis, no creditors of the Sears Canada Entities will be prejudiced by the Employee Hardship Fund.  The funds that are to be contributed to the Employee Hardship Fund would not have been available for distribution to creditors other than the KERP beneficiaries.

If approved by the Court, certain Former Employees, upon completing an application and demonstrating hardship and meeting the prescribed eligibility criteria, could qualify for a distribution from the Employee Hardship Fund, subject to stipulated maximum amounts as set out in the Employee Hardship Fund Term Sheet.   The Monitor shall assess completed applications and make an initial determination to approve or reject each such application.

Any distributions to Former Employees from the Employee Hardship Fund shall be deducted from any payments on claims that may be allowed to each such Former Employee in any claims process conducted by the Sears Canada Entities in these CCAA proceedings.

The Employee Representatives Committee is pleased to have reached an agreement with Sears Canada, whose leadership have taken an important, responsible step in the face of a difficult situation. The Committee would also like to recognize the concerted efforts of other stakeholders and the Court-appointed Monitor, in reaching this accord. While this Fund will not make former employees whole in regards to payments they would have normally been entitled to outside of the CCAA Proceeding, it will help those in the most precarious financial situations.

If you are interested in finding out more, you can review our motion materials (here), and our media release (here). 

A number of employees have notified us that there are errors on their Record of Employment (ROE) issued by the Company.

We wrote to the Company to find out where Former Employees with ROE issues should direct their inquiries.

The Company has advised us that any Former Employees that have questions or concerns regarding their ROE should direct those inquiries to questions@sears.ca. They have also advised us that their expected response time for addressing inquires related to ROE matters is generally one to two business days.

The Company’s Motion regarding its proposed Liquidation Sales Process proceeded on July 18, 2017 at the Ontario Superior Court of Justice (Commercial List) in Toronto, before Justice Conway. The proposed process was approved by Justice Conway and the Liquidation Sale Approval Order is available here on the Monitor’s website. The materials relied upon by the Company in support of this Order are also available on the Monitor’s website, under the heading Motion Materials.

Employee Representative Counsel was in attendance at this Motion. The Company opened its submissions by reviewing the current status of stores scheduled to close, advising the Court that the Company intends to close 59 retail stores, while approximately 150 stores will remain open and will be part of the Company’s Sales and Investment Solicitation Process (SISP).

With respect to the closing stores, the Company indicated that there are approximately 2500 employees at these stores who were given notice of their termination approximately one month ago on June 22, 2017, and who have been asked to continue working until store closures are complete. The Company indicated that it anticipates it will take until mid-October to complete the store closure process. Finally, the Company advised the Court that 2500 employees in closing stores will not be displaced by employees of the Agent responsible for the liquidation sales process.

Counsel for the Company described the process it engaged in with respect to the liquidation of these stores. In late June, the Company began a process of soliciting proposals from third party liquidators to assist it with the liquidation of inventory, furniture, fixtures and other store equipment (“FF&E”) at 45 of the 59 retail store locations scheduled to close.

The remaining 14 stores are known as Hometown Dealer Stores and were excluded from the Liquidation Sales Process due to their independent ownership and operation. These stores will run their own liquidation. A list of the 14 Hometown Dealer Stores is available at Schedule D to the Liquidation Sales Approval Order on the Monitor’s website.

From the Company’s submissions, we understand that the 45 stores affected by the liquidations sales process fall into the following categories:

• 20 Full-Line Stores (see Schedule B to the Liquidation Sales Approval Order);
• 15 Home Stores (see Schedule C to the Liquidation Sales Approval Order); and
• 10 Liquidation Stores (see Schedule C to the Liquidation Sales Approval Order)

The Company and the Monitor, after reviewing the 5 proposals they received in the June solicitation process, selected the joint venture proposal of Gordon Brothers Canada ULC and Merchant Retail Solution ULC (together the “Agent”) as the most favorable of the bids submitted.

Under the Sales Guidelines, liquidation sales will begin at affected stores on Friday, July 21, 2017 and conclude no later than October 12, 2017.

Under the Liquidation Agreements which were approved by the Court, the Agent may terminate the liquidation sales process at any store by providing 21 days’ written notice of its intention to do so. Employee Representative Counsel will be closely monitoring this situation with the Company, Monitor and Agents throughout the Liquidation Sales Process to determine if any early termination of liquidation sales will occur and how the process generally will impact on the interests of Current Employees. 

On Tuesday, July 18, 2017 at 10:00 am, the Company will bring a Motion to the Ontario Superior Court of Justice Commercial List in Toronto before Justice Conway, seeking approval of the Liquidation Process for the fifty-nine closing stores. 

Employee Representative Counsel will be in attendance. Details of the proposed Liquidation Process can be found in the Monitor’s First Report here.

Please check this site for regular updates on the CCAA proceeding.  

The Company’s Comeback Motion proceeded on July 13, 2017 at the Ontario Superior Court of Justice (Commercial List) in Toronto, before Justice Hainey.

The Employee Representative Counsel Order has now been signed by Justice Hainey. It defines the terms of the mandate of Ursel Phillips Fellows Hopkinson LLP (UPFH) as Employee Representative Counsel and appoints the Employee Representative Committee. That Order is available here and will be available on the Monitor’s website. More information about the Order and the Committee is in our news item entitled, July 13, 2017 - Employee Representative Counsel Order is Issued by the Court on July 13, 2017.  

At the outset of the Motion, Employee Representative Counsel addressed the Court to advise Justice Hainey that an Employee Representative Committee has been established. Counsel also advised that the Monitor has been assisting in discussions between Employee Representative Counsel and the Company regarding hardship experienced by employees caused by the loss of termination and severance pay, health and dental benefits, and life insurance. The discussions will also canvass possible mechanisms to alleviate these hardships.

Counsel for the Monitor referred the Court to the Monitor’s Report, available here, which sets out these discussions, including:

• the potential to establish an “Employee Hardship Fund”; and
• possible avenues to obtain early access to the Wage Earners Protection Program.

The Monitor advised the Court that they will continue to facilitate discussions between Employee Representative Counsel and the Company and will report to the Court on the outcome of these discussions.

On the balance of the issues set out in the Employee Representative Counsel materials, including issues regarding health and dental benefits, the Key Employee Retention Plan (“KERP”) and the Director’s Charges, the Court was advised that the parties would continue to engage in discussions on these issues. Employee Representative Counsel advised the Court that our right to make further arguments on these points was expressly reserved.

Employee Representative Counsel advised the Court that we have arrived at a settlement with the Company and other stakeholders for a mechanism to provide appropriate information about the Sale and Investor Solicitation Process (“SISP”) to Counsel and the Committee.

The means by which Employee Representative Counsel and the Employee Representative Committee will obtain information about the SISP is set out in the Term Sheet found at Appendix “A” of the Supplement to the First Report of the Monitor, available here. Information will be provided to Counsel and the Committee on a necessarily confidential basis and will help inform decisions about steps on behalf of the employees and former employees in these proceedings.

In exchange for the agreement reached regarding information and in light of the ongoing discussions, Employee Representative Counsel agreed not to oppose the orders sought by the Company on July 13, 2017 approving the Debtor In Possession (“DIP”) financing, the terms of the proposed amended and restated Initial Order, and the SISP. 

Pension and post-retirement benefits matters were also dealt with at the Comeback Motion and information about these matters is available here, from the Representative Counsel for pension matters.

The balance of the day on the Comeback Motion was spent dealing with technical amendments to the Initial Order, Court approval of the DIP financing, and the terms of the SISP. The SISP Order will be available on the Monitor’s website shortly.

Please note, the Motion with respect to the Liquidation Process for the fifty-nine stores is now scheduled for Tuesday, July 18, 2017 at the Ontario Superior Court of Justice (Commercial List) in Toronto.  Employee Representative Counsel will be attending.  Details of the proposed Liquidation Process can be found in the Monitor’s First Report here.

Please check this site for regular updates on the CCAA proceeding.  

On July 13, 2017, in the Chambers of Justice Hainey of the Ontario Superior Court (Commercial List), the Employee Representative Counsel Order was issued. A copy of the Order will be available shortly on the Monitor’s website here.

The Order defined the mandate of Employee Representative Counsel as acting for non-unionized Active and Former Employees with respect to the CCAA proceedings. “Active Employees” is defined as all non-union employees of Sears Canada employed as of June 22, 2017, including such employees on authorized leaves of absence; “Former Employees” is defined as all non-union employees of Sears Canada who (i) received notice of termination of employment dated June 22, 2017; or (ii) received notice of cessation of severance payments dated June 22, 2017; excluding the senior management of Sears Canada.

The Court was also provided with an Affidavit of Ashley Schuitema, affirmed on July 12, 2017, advising the Court that an Employee Representative Committee has been established. A copy of the Affidavit can be found here.

The Employee Representative Committee is composed of five Active and Former Employees from across Canada with a variety of experience and credentials.  Our Committee Members are: Paul Webber, Nancy Demeter, Sara Sawyer, Sheena Wrigglesworth and Barb Wilser.

If you are interested in being considered for the Employee Representative Committee in future, please complete the Questionnaire available here. In the event of a vacancy on the Committee, it will be very helpful for us to have these expressions of interest.

UPFH would like to thank everyone who had reached out to them for their patience as the Employee Representative Order was finalized and issued. Please check this site for regular updates on the CCAA proceeding. 

Employee Representative Counsel filed materials for the Sears Canada Comeback Motion on July 12, 2017.  These materials can be viewed on our website.

These materials address the following:

• the hardships faced by former employees, including the loss of termination and severance pay, and the loss of health and dental benefits;
• issues that we have identified with the Key Employee Retention Plan (“KERP”), including the excessive amounts provided, the short time horizon of the KERP, and that the KERP is not sufficiently tailored to create incentives to preserve and enhance the value of the Company;
• the priority of the Directors’ Charge, including that the Directors’ Charge should take precedence over the KERP charge; and
• Discussions with the Monitor and the Company about these matters in an attempt to find resolution to these matters, including discussions allowing us a “window” into the Sale and Investor Solicitation Process (“SISP”), and an agreement for ongoing discussions with the Monitor and the Company regarding potential mechanisms to relieve the hardships suffered by former employees.

Employee Representative Counsel will appear before Justice Hainey on July 13, 2017 at the Comeback Motion and make submissions in relation to this filed material and the discussions with the Monitor and the Company. 

Update on the Comeback Motion Scheduled for July 13, 2017

Materials for Sears Canada’s Comeback Motion were served on all parties to the proceedings on July 5, 2017. They can be reviewed on the Monitor’s website.

An application for an Initial Order in a Companies’ Creditors Arrangement Act (“CCAA”) proceeding is typically brought on limited notice to key stakeholders, as happened here. For this reason, the Initial Order generally contains a “comeback” provision which allows stakeholders to come back to court to request amendments to the Initial Order and to allow the company to present next steps in the proceeding.

The Comeback Motion in Sears Canada is scheduled for July 13, 2017 before Justice Hainey of the Superior Court of Justice Commercial List.  The Comeback Motion will deal with the following matters:

1. The suspension of special payments into the Sears Canada Inc. Registered Retirement Plan in respect of the defined benefit component of the plan during these CCAA proceedings; the suspension of the supplemental retirement plan payments; and the suspension of payment of the post-retirement benefits for retirees (the “PRB Plan”). For more information about aspects of the motion that deal with pensions, please visit the website of the Representative Counsel for Retirees;
2. An extension of the stay of proceedings granted in the Initial Order from July 22, 2017 until October 4, 2017 in order to allow the Company to proceed with the Sale and Investor Solicitation Process (the “SISP”);
3. The approval of the Sale and Investor Solicitation Process (the “SISP”). The purpose of the SISP is to seek out proposals for the acquisition of or investment in the Company’s business, property and/or leases, and to implement one or a combination of such proposals; and
4. Any amendments to the Initial Order required to do the above noted things, as requested by the stakeholders.

Employee Representative Counsel will be filing motion materials raising issues of concern for the Active and Former Employees including the issue of termination and severance payments. These materials will be available on our website shortly.

Other stakeholders will also be filing materials and these materials will be available on the Monitor’s website.