1743122 Ontario Inc., 3851168 Canada Inc. and 798862 Ontario Limited (formerly known as Kraus Inc., Kraus Canada Inc.,and Strudex Fibres Limited respectively), and 538626 B.C. Ltd.

Interim Receivership

This page is for information purposes only and you should consult your professional adviser if you have any questions or are uncertain as to your rights or obligations.

On May 28, 2012, pursuant to an application by Pinnacle Capital Resources Limited in its capacity as general partner of Red Ash Capital Partners II Limited Partnership ("Red Ash"), the Ontario Superior Court of Justice (Commercial List) (the "Court") granted an Order pursuant to section 46(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c.B-3, as amended (the "BIA") appointing PricewaterhouseCoopers Inc. ("PwC") as interim receiver in respect of Kraus Inc., Kraus Canada Inc., and Strudex Fibres Limited (collectively the "Companies"). A copy of the Order can be found in the Court Orders section of this website.

PwC understands Red Ash brought applications for bankruptcy orders in respect of Kraus Inc. and Strudex Fibres Limited, which shall be returnable and heard by the Court on June 11, 2012, at 9:30 a.m. PwC understands that a separate application has been made before the Court of the Queen's Bench in Winnipeg, Manitoba by Red Ash for a bankruptcy order in respect of Kraus Canada Inc. A copy of the applications for bankruptcy orders in respect of each of the Companies can be found in the Motion Materials section of this website (under part 5 of 5 of the Applicant's Motion Record).

PwC understands that an application has been made in these proceedings by Red Ash for an order appointing PwC as receiver pursuant to section 243(1) of the BIA over the assets, undertakings and property of Kraus Inc., Kraus Canada Inc., Strudex Fibres Limited, and 538626 B.C. Ltd.

On May 28, 2012, pursuant to the Order, PwC as interim receiver in respect of the Companies sent a notice of its appointment and the scheduled hearing on June 11, 2012 to the following parties:

• Beneficiaries of the Canadian Commercial Workers Industry Pension Plan for Kraus Inc. and Strudex Fibres Limited;
• Beneficiaries of Kraus Canada Inc.'s Registered Pension Plan;
• Beneficiaries of the Pension Plan for Employees of Kraus Inc. and Strudex Fibres Limited;
• Beneficiaries of the Pension Plan for Executive Employees of Kraus Inc.; and
• Beneficiaries of the Pension Plan for Union Employees of Kraus Inc.

A copy of the notice can be found in the Notices section of this website.

Status of file as of June 11, 2012

On June 10, 2012, the Interim Receiver and the Proposed Receiver filed its second report with the Court to:

1. provide the Court with a summary of the Interim Receiver’s actions since its appointment, including its interactions with stakeholders;
2. report on the Companies’ business operations since the appointment of the Interim Receiver: and
3. provide the Court with updated information regarding the Sale Transaction and to provide the Court with the Interim Receiver’s comments on the Asset Purchaser Agreement between the Receiver and Kruas Brands LP (the “Purchaser”) (the “KB APA”) including;
   1. minor amendments to the KB APA;
   2. update on Priority Claims, BIA Charges, Source Deduction Claim and Assumed Liabilities (all as defined in the KB APA);
   3. an update on the assumption of Real Estate Leases and Contracts (all as defined in the KB APA); and
   4. an update on the status of conditions precedent in the KB APA.

Status of file as of June 8, 2012

On June 7, 2012, the Applicants filed a supplementary application record for the motion to be heard on June 11, 2012, for:

1. the administrative consolidation of the bankruptcy application in respect of Kraus Canada Inc. (“Kraus Canada”), originally brought in the Manitoba Court of Queen’s Bench with the already-consolidated bankruptcy applications of Kraus Inc.(“Kraus”) and Strudex Fibres Limited (“Strudex”) (collectively the “Operating Companies”);
2. The granting of bankruptcy orders against the Operating Companies; and
3. The appointment of PricewaterhouseCoopers Inc. as receiver of all of the Operating Companies.

Status of file as of June 6, 2012

On June 5, 2012, The Queen’s Bench Winnipeg Centre In Bankruptcy issued an order to transfer proceedings in the matter of the Bankruptcy of Kraus Canada Inc. to the Ontario Superior Court of Justice (Commercial List) in Bankruptcy & Insolvency, Toronto. A copy of the order is posted under the Court Orders tab.

Status of file as of May 30, 2012

On May 29, 2012 PwC, in its capacity as Interim Receiver and Proposed Receiver filed its first report to the Court to support a motion to be heard subsequent to the hearing for the applications for bankruptcy orders on June 11, 2012 to, among other things, determine:

1. whether the Companies should be adjudged bankrupt;
2. whether PwC should be appointed Receiver over the Companies' assets and the assets of 538626 B.C. Ltd ("Kraus BC" and together with the Companies the "Group"); and
3. whether a sale of the assets of the Group as a going concern to Kraus Brands LP (a limited partnership which is related to Red Ash) should be approved by the Court.

A copy of PwC's first report can be found in the Reports section of this website. A copy of the motion record can also be found in the Motion Materials section of this website.

This Web site will be updated as information becomes available.