This letter is our Twenty-Second Report to you regarding the above cases. This case remains open. The main purpose of this letter is to advise that we expect a preliminary distribution to take place in the first half of 2007. 

1.  WARN ACT and Priority Distribution Now Closed.  As you know, the WARN Act priority distribution took place in December 2004. In mid-2005, approximately 195 additional names were added to this list, primarily of employees otherwise eligible for WARN payments with timely claims on file, but which had been missed for various reasons in the initial distribution. All priority claim amounts to employees have now been paid. We reported on this subject to you in September 2005.

At that time, we had hoped to resolve vacation pay and sick leave items by January 2006. We soon discovered however that CF’s records and employee claims were completely different on this subject—often several thousands of dollars apart.  The same was true for sick leave, grievances, out of pocket expenses, and miscellaneous claims. There were also numerous discrepancies in the adjustment of post-petition bonus claims for employees who worked post-bankruptcy to clean out terminals. Finally, many employees made duplicate claims for health, welfare and pension contributions that were already claimed by the various Teamster trust funds.

2.  Projected Unsecured Claim Distribution. There are approximately 13,000 Teamster claims. We have spent the last year attempting to settle as many of these claims as possible. We are now down to a handful of remaining claims that are still in dispute. Assuming we can get court approval of a comprehensive settlement in the fall, we believe that a distribution will be made next Spring (prior to July 1). Like all estimates and predictions, this statement is not a guarantee that members will receive checks on any specific date.

We still believe that the final payment in the case will be approximately 12-20 cents per dollar on a cumulative basis. That is, an employee owed $1000 on the face value of the settlement will receive $120 to $200 actual dollars when all of his or her unsecured distributions are added together. Unsecured distributions are in addition to the priority distribution made in 2004. Please note that the anticipated distribution that will probably take place in mid-2007 will not be the final distribution, and will probably be only for about 7-10 cents per dollar. One or more later distributions will bring the cumulative total up to 12-20 cents.

Also please note that if any employee had a WARN Act amount that was not paid as a priority, any excess will be added automatically to the unsecured amount. That is, and for illustrative purposes only, if an employee had a WARN Act amount of $2150, and received only $1150 of that amount because he or she hit the priority cap in the bankruptcy code, the remaining $1000 that has not been paid will be automatically added to the employee’s unsecured total.

3.  Key Provisions of the Settlement. I summarize the key provisions of the settlement below:

WAGES. Nearly all wages for work performed have already been paid in full. A few thousand dollars of mistakenly unpaid wages for a few employees will be paid. Claims for wages for the duration of the agreement were disallowed because the company had no obligation to stay in business for the duration of the contract.

VACATION PAY. We found that employees claimed wildly different vacation amounts. Some were higher and some were lower than CF’s records showed. In addition, we found that many employees claimed amounts that were impossible to achieve, that is, more than two full vacations, or more than a full vacation plus the maximum prorated amount they could have achieved for 2003, the year following the closing.

To adjust this problem, an independent auditor was hired to recalculate the maximum possible employee vacation claims. To do so, the auditor calculated one full year of vacation plus the maximum pro-rated amount for 2003, and subtracted the actual vacation used in 2002. Unfortunately, this calculation did not agree with either CF’s records of the employee claims.  In most cases, it created a third vacation number.

We resolved this matter in the following way: (1) For employees who filed no vacation claims, they will receive the amount calculated by CF. (2) For employees who did file vacation claims, they will receive in most cases the middle number of the three calculations, which may be their own filed amount, CF’s calculation or the auditor’s calculation. Where we still could not resolve the dispute in this way, we adjusted the middle number by assigning that employee his or her proportional share of the total vacation settlement. The total vacation settlement is the average of the total amount employees requested and the total amount CF calculated.

This method was chosen for three reasons. First, it would be cost-prohibitive to do a precise calculation of the entire vacation pool. In fact, it would cost more than the difference between the employees’ and the company’s amounts. Second, if the disputed cases were brought to hearing, employees would have to travel from all over the country to appear in the bankruptcy court in Riverside, California. In nearly all cases, the loss of time, travel and other expense would exceed the amount the employee would receive as a vacation settlement at 20 cents per dollar. Finally, the time required to try 13,000 individual vacation claims means as a practical matter that it would be many, many more years before we could actually close this case.

While the above is not mathematically precise, it is a reasonable approximation of most employee vacation claims. Some employees will receive more than they claimed, and others less, but we believe that most employees will receive an amount very close to what they actually are owed.

SICK LEAVE AND HOLIDAY PAY. Employees will receive the lesser of (a) what they claimed or (b) the maximum amount of sick leave that could be accumulated in one year under their supplemental agreement. In the case of a few supplements that allow banking vacation, the maximum amount banked was used instead of (b). Each employee was also entitled to one holiday (Labor Day) if claimed. Employees who worked within 15 days of a contractual holiday (usually their Birthday or Anniversary day) also received that day. Personal days were not allowed.

MEDICAL EXPENSES and HEALTH, WELFARE AND PENSION CONTRIBUTIONS. Post-bankruptcy fringe benefits or medical expenses were not allowed for employees who did not actually work post-bankruptcy. COBRA was not allowed, because CF had no obligation to continue fringe benefits beyond the date of its closing. Employees who self-paid health and welfare contributions for a month or months in which CF was obligated to pay the contribution but did not in fact pay the contribution will be reimbursed the pro-rated share of their self-payment.

OUT OF POCKET EXPENSES. These were reviewed on a case-by-case basis. In general, claims for notary expenses, bank fees, check charges, etc. were disallowed. Tickets, tolls, tool allowances, and the like were generally allowed. Other issues were resolved on an individual basis given whatever information the employee supplied with the claim.

BONUS CLAIMS. Employees who worked post-bankruptcy and were not properly paid the court-approved bonus program had their bonuses re-calculated. Any adjustment to the amount will be paid. NOTE: Post-bankruptcy bonus claims are not unsecured. They will therefore be paid in cash and in full at the next distribution, not at a reduced percentage as are general claims. This more favorable treatment for post-bankruptcy claims is part of the Bankruptcy Code itself, because work cleaning out terminals is considered to be part of the administration of the bankruptcy itself.

POST-PETITION GRIEVANCES. Like the bonus claims, claims for not being called to work post-bankruptcy are considered to be part of the administration of the bankruptcy. Valid post-petition grievances of this type will be paid. Disputed claims were settled for half of the requested amount.

PRE-BANKRUPTCY GRIEVANCES. Many of these claims were settled at a special meeting called for that purpose and held in Chicago in January 2003. If a grievance was settled at that meeting, the amount agreed upon at that meeting will be added to the employee’s unsecured claim. Other grievances were decided on a case by case basis. Small grievances were generally allowed without further consideration because it is not cost effective to analyze hundreds of tiny claims. Larger cases were reviewed and decided upon the merits.

MISCELLANEOUS CLAIMS. Claims for the Re-weigh program were generally allowed. Scholarship claims were reviewed on a case-by-case basis. Claims for clothing allowances were reviewed on a case-by-case basis. Tiny claims of this type were allowed for the same reason as tiny grievances. Claims for moving expenses were allowed if the move was ordered by a properly-constituted change of operations committee and the amounts were otherwise verifiable. Claims for work as a vendor (lawn-cutting services, etc.) were allowed unless they duplicated a claim for the same service filed as a vendor. Similarly, some insurance claims were disallowed where duplicated by a different claim.

WORKERS COMPENSATION CLAIMS. These are not contractual claims and were not allowed. We did however secure the agreement of CF to treat these claims in the same manner as other valid, workers’ compensation claims.

4.  Other Considerations. Junk Claims. Wherever an employee did not clearly give a date for an expense, and an amount expressed in American dollars, or failed to identify a grievance by docket number, or otherwise submitted a completely unintelligible claim, it was disallowed.

Delay. The above process has taken approximately one year because of the large number of employee claims and their variety, as well as the inadequate state of CF’s records and (frankly) the large number of employee claims that could not be verified or understood. 

Fair Distribution. Employees are getting the same percentage for their claims as all other creditors. That is, if an ordinary creditor receives 18½ cents per dollar, that is what an employee will receive (except as noted above for bonuses). If an ordinary creditor gets only 13 cents per dollar, that is what an employee will receive. These numbers are examples, only. We expect the range to be between 12 and 20 cents.

This case is a liquidation, and whatever funds are there to pay claims have now been collected. The last piece of property to be sold closed in September. The only remaining variable now is the size of the claim pool (there are still many unresolved claims in addition to employee claims). The assets are the numerator and the claims are the denominator. Employees dissatisfied with this result have no recourse—the dividend of 12 or 20 cents or whatever it ultimately comes out to be is a matter of arithmetic, not of negotiation or individual choice.

Principles of Decision. Some employees may be dissatisfied with the decisions made on their claims. All such decisions were based upon (1) the contract, (2) the information provided by the employee and (3) the individual merits of each case. Once approved by the court, the decisions will be final.