Cygnal Technologies Corporation Announces Intention to Seek Court Order



    MARKHAM, ON, Jan. 29 /CNW/ - Cygnal Technologies Corporation ("Cygnal")
(TSX: CYN) today announced that Cygnal and its wholly-owned subsidiaries,
Cygnal Technologies Ltd. ("Cygnal Quebec") and Accord Communications Ltd.
("Accord" and together with Cygnal and Cygnal Quebec, the "Applicants"),
working with their counsel, the Monitor and other interested parties, have
finalized a joint plan of arrangement to be dated January 29, 2008 (the
"Plan") and intend to file the Plan with the Ontario Superior Court of Justice
(the "Court") in the Applicants' proceedings under the Companies' Creditors
Arrangement Act (the "CCAA Proceedings").
    Cygnal also announced that it intends to seek orders from the Court to,
among other things: (i) extend to March 21, 2008 the period of the
Court-ordered stay of proceedings against the Applicants in their CCAA
Proceedings; (ii) establish a further process to supplement the existing
Court-ordered process by which certain creditors of the Applicants must prove
their claims in the CCAA Proceedings; and (iii) set the date for the
Applicants' creditor meetings to consider and approve the Plan. In addition,
Cygnal announced that PricewaterhouseCoopers Inc. (the "Monitor") filed its
third report (the "Monitor's Third Report") to the Court.

    Plan of Arrangement

    If authorized by the Court, the Applicants intend to present the Plan to
affected creditors for their consideration at the creditor meetings. The
Applicants may at any time before and during the meetings of affected
creditors amend, modify or supplement the Plan, provided that such amendments
are made available to affected creditors at or prior to the meetings. The
purpose of the Plan is to provide for the distribution of cash and, if
applicable, promissory notes to affected creditors in compromise and
settlement of their claims; the cancellation, in effect, of all existing
common shares of Cygnal pursuant to articles of reorganization (the
"Articles"); and the issuance of new common shares in the capital of Cygnal to
an affiliate of Laurus Master Fund, Ltd. ("Laurus"), Cygnal's principal
secured lender, in consideration for the funds needed to make the cash
distributions to affected creditors under the Plan. For the purposes of voting
on the Plan, creditor claims will be divided into three classes: affected
claims against Cygnal, affected claims against Cygnal Quebec and affected
claims against Accord. At the effective time of the Plan, each affected claim
will be compromised and thereafter each affected creditor will receive a
distribution of cash and/or promissory notes on the following basis: an
affected creditor may elect to receive (i) the lesser of the amount of its
claim and $2,500 (the "Small Claims Amount"), (ii) the amount of its pro rata
share (the "Pro Rata Share") of approximately $1,947,553 (after payment of all
Small Claim Amounts and subject to adjustment in certain circumstances), and
(iii) 75% of its Pro Rata Share and a promissory note issued by the applicable
Applicant in a principal amount equal to 75% of its Pro Rata Share. An
affected creditor that fails to make an election will be deemed to have
elected to receive, in the case of a claim of less than $25,000, the Small
Claims Amount, and in the case of any other claim, its Pro Rata Share (as
described in item (ii) above).
    Under the Plan, all of Cygnal's issued common shares and warrants and
options to purchase common shares of Cygnal, that are outstanding immediately
prior to the effective time of the Plan will, in effect, be cancelled without
payment of any consideration.
    Implementation of the Plan is subject to the satisfaction of certain
conditions, including approval of the Plan by affected creditors of each
class; issuance of a sanction order by the Court; and arrangements having been
made with Laurus to repay the Applicant's obligations under its pre-filing
credit agreement with Laurus and the DIP term sheet. As soon as practicable
after the satisfaction of the conditions, Cygnal will file articles of
reorganization and seek to obtain a certificate of amendment with respect
thereto. Under the terms of the Plan, Cygnal maintains the right to exclude
one or both of Cygnal Quebec and Accord from the Plan, including if the
affected creditors of either subsidiary do not approve the Plan. In that
event, affected creditors of the applicable subsidiary will not receive any
distribution under the Plan.
    As of the effective time, all affected creditors will be deemed to
release the Applicants;, the former and current directors, officers and
employees of the Applicants; any person who might claim contribution or
indemnification against or from the Applicants; and the current and former
legal counsel and other professional advisors of the Applicants and each of
their former and current directors, officers and employees from any claims
relating to the Applicants, the Plan or the CCAA Proceedings.
    The Plan is the result of more than two months of review and analysis in
which management has been assisted by the Monitor. Negotiations were held with
various key parties, including representatives of Laurus and certain large
affected creditors. Management has concluded that it is unable to identify any
purchasers for the business or assets of the Applicants as an alternative to
the Plan.
    The Board of Directors of Cygnal has reviewed the Plan and believes that
it represents a fair and equitable treatment of the affected creditors of the
Applicants given their relative priorities and the limited alternatives. The
Board believes that if the Plan is not approved the likely result will be a
liquidation of the Applicants' assets by a receiver and/or a trustee pursuant
to the Bankruptcy and Insolvency Act (Canada). The Monitor has also confirmed
that it is of the view that the alternative to implementation of the Plan is
likely receivership or bankruptcy. In the Monitor's view, the Plan will
produce a more favourable result, overall, for the affected creditors of the
Applicants than a liquidation of Applicants' assets based upon a range of
estimated recoveries.

    Monitor's Third Report

    The Monitor's Third Report informs the Court of the Monitor's and the
Applicant's activities since the Monitor's report dated December 10, 2007.
Copies of the Monitor's Third Report are available online at
www.pwc.com/car-cygnal.

    About Cygnal

    Cygnal Technologies is in the business of providing network
communications solutions including the design, integration, installation,
maintenance and management of wired and wireless solutions and networks.
Cygnal Technologies has expertise in voice, video and data solutions over
traditional and next generation converged technologies. Cygnal Technologies
Corporation is headquartered in Markham, Ontario.

    This press release contains forward-looking statements. Forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of Cygnal
Technologies to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements,
including the risks, uncertainties and other factors discussed in this press
release, risks associated with Cygnal Technologies' restructuring process and
the risks, uncertainties and other factors discussed in Cygnal Technologies'
filings with securities regulatory authorities. Actual results and
developments are likely to differ, and may differ materially, from those
expressed or implied by the forward-looking statements contained in this press
release. Cygnal Technologies specifically disclaims any obligation to update
these forward-looking statements. These forward-looking statements should not
be relied upon as representing Cygnal Technologies' views as of any date
subsequent to the date of this press release.

    %SEDAR: 00000748E




For further information:

For further information: Jeff Codispodi, Investor Relations, The Equicom
Group Inc., (416) 815-0700 ext. 261, jcodispodi@equicomgroup.com

Organization Profile

CYGNAL TECHNOLOGIES CORPORATION

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