T R O U B L E D C O M P A N Y R E P O R T E R Thursday, June 14, 2001, Vol. 5, No. 116 Headlines AMCAST INDUSTRIAL: Enters Into New Financing Agreement BIG V: Fleet Bank Objects To Extension Of Exclusive Period BRIDGE INFORMATION: Thomson Presses For Decision On Contracts CONVERSE INC.: Jack Boys Leads New Management Team CYCLIX ENGINEERING: Texas Court Gives Go Ahead For Asset Sale DAEWOO INTERNATIONAL: Seeks Approval of Disclosure Statement DIGITAL FUSION: Reports Year End and First Quarter Results E.SPIRE COMM.: Obtains Final Court Nod For $85MM DIP Financing FINOVA GROUP: Committee Taps PwC As Financial Advisors FRUIT OF THE LOOM: Auctioning Six Properties GENESIS HEALTH: Classification & Treatment Of Claims Under Plan GLENOIT CORP.: Extending Employment Agreement with CEO O'Gorman HYBRID NETWORKS: Shares Subject To Nasdaq Delisting IMPERIAL SUGAR: Summary Of Second Amended Disclosure Statement INTEGRATED HEALTH: Rejecting Curative Arrangement Agreement KEVCO INC.: Raises $9.5 Mil From Sale Of Better Bath Division KMART CORP.: Fitch Rates Proposed $400MM Senior Notes At BB+ LECHTERS INC.: Bankruptcy Court Okays $86 Million DIP Financing MADGE NETWORKS: Looking For Buyer Of Madge.web Unit MEDIQ INC.: Effective Date Of Reorganization Plan Is Tomorrow NETSOL: Reschedules Special Shareholders' Meeting to June 19 OUTSOURCE INT'L: Files For Chapter 11 To Restructure Debt PAKISTAN INVESTMENT: Stockholders Approve Liquidation Plan PILLOWTEX CORP.: Seeks Authority To Establish Claims Bar Dates RELIANCE GROUP: Files Chapter 11 Petition in S.D. New York RELIANCE GROUP: Case Summary & Lists Of Unsecured Creditors SAFETY-KLEEN: Enters Into Settlement Agreement With ECDC SENIOR HOUSING: S&P Assigns BB+ Corporate Credit Rating STAFF BUILDERS: Stockholders To Meet On July 24 in New York TECMAR TECHNOLOGIES: Emerges From Chapter 11 Bankruptcy TELENETICS: Resolves Defaulted Notes & Sees Improved Q2 Results THCG INC.: Nasdaq Delists Shares From Trading TOM YOUNG'S: Albuquerque Gym Files For Chapter 7 Bankruptcy UPRIGHT INC.: Files For Chapter 11 Protection in E.D. California VLASIC FOODS: Committee Retains Kramer Levin As Lead Counsel W.R. GRACE: Creditors Move To Amend Employee Obligations Order WHEELING-PITTSBURGH: Wants To Reject Old ESM Pact & Ink New One WHEELING-PITTSBURGH: Senior Note Rating Drops To C From Caa3 ZENITH ELECTRONICS: Posts First Quarter 2001 Results ********* AMCAST INDUSTRIAL: Enters Into New Financing Agreement ------------------------------------------------------ Amcast Industrial Corporation (NYSE:AIZ) announced new financing arrangements and key initiatives aimed at providing an improved financial base for a return to profitable operations during the second half of its next fiscal year, ending August 31, 2002. Leo W. Ladehoff, Chairman of the Board, said, "Amcast has entered into a new credit agreement, which provides additional borrowing capacity for the company, with its bank lending group. At the same time, the members of the bank lending group, as well as the insurance company holders of the company's senior notes, have waived, until the maturity of the new credit agreement, the financial covenants which had caused the company to be out of compliance under the terms of its existing loan agreements." "We have been pleased by the cooperation from our lenders during this trying period. The company can now concentrate on an orderly completion of its strategic plan and reduction of debt," he said. The new agreement, which matures April 15, 2002 (which may be extended if Amcast meets certain conditions), provides for the ability to make new borrowings initially up to $15 million, increasing in stages to a maximum of $35 million (based on the company meeting certain conditions), and provides a primary security interest in the company's assets to the lenders, as well as a subordinated security interest to the members of the bank lending group under the existing agreement and to the holders of the senior notes. The new agreement provides for the payment by the company of certain additional interest payments and fees and the issuance to the insurance companies of warrants for the purchase of 200,000 shares of Amcast stock at current market value and warrants for 255,000 shares to the bank lenders, also at market value as of June 5, 2001. The existing agreement, which has approximately $111 million outstanding currently, matures in August of 2002. If the bank group agrees to extend the maturity of the existing agreement to September 2003, the bank group will receive additional fees and 255,000 additional warrants. "The warrants provide members of the bank lending group and the note holders with the opportunity to share in the company's future success. We are confident that the new agreement provides Amcast with more than adequate liquidity going forward," said Mr. Ladehoff. Byron O. Pond, President and Chief Executive Officer, stated that the Company would recognize an after-tax charge of approximately $15-$19 million during the third and fourth quarters of its fiscal year 2001. The Company anticipates that this unusual charge will consist of approximately 30% of a cash component and approximately 70% of a non-cash component. During the third quarter of fiscal 2001, the new management team conducted a strategic review of its operations in light of the weak manufacturing sector of our economy with a special emphasis on the continuing weak automotive market. As a result of this strategic review, management has decided to dispose of certain underutilized machinery and equipment and scrap certain inventory and tooling, which is slow moving or underutilized in the current economic environment. As a result of the continuing weak manufacturing sector of our economy, the Company will increase its allowance for doubtful accounts for uncollectible and disputed accounts receivable and will establish a valuation allowance for foreign net operating losses that the Company believes it may not use because of the weak economy and weakened results of the Italian subsidiary, Speedline. "The current actions which are resulting in these special charges should strengthen Amcast for the future. Further, our Board of Directors is signaling to investors that the new management team is focused on making important decisions to help achieve the major profit potential inherent in our businesses," Mr. Pond said. Amcast also announced that it has purchased the 40 percent share of Casting Technology Company (CTC of Franklin, Indiana) owned by Izumi Industries of Japan. "The acquisition of the Izumi partnership interest in CTC will enable Amcast to continue to use proprietary squeeze casting technology as a part of its overall strategy to serve the growing market for strong, lighter weight, aluminum vehicle suspension components," Mr. Pond said. The company now has in place a credible turnaround plan, with a concentration on reducing working capital requirements, controlling capital spending, and improving operating performance. Mr. Pond added, "We are reeducating our workforces in lean manufacturing concepts and focusing management on profit drivers that will improve our performance. As these initiatives unfold, operating losses will turn to profits. Further, we anticipate that automotive production will improve in calendar year 2002, which, together with new automotive component orders, will assist Amcast's return to profitability." There will be an Internet Webcast of the company's quarterly conference call at 2 p.m., EDT, Wednesday, June 27, 2001, to discuss fiscal 2001 third quarter results and the restructuring. The Webcast can be accessed through www.amcast.com. Amcast Industrial Corporation is a leading manufacturer of technology-intensive metal products. Its two business segments are brand name Flow Control Products marketed through national distribution channels, and Engineered Components for original equipment manufacturers. The company serves the automotive, construction, and industrial sectors of the economy. BIG V: Fleet Bank Objects To Extension Of Exclusive Period ---------------------------------------------------------- Fleet National Bank objects to Big V Supermarkets Inc.'s request for a 60-day extension of its exclusive period to file a reorganization plan and solicit plan acceptances. Fleet, the administrative agent for Big V's pre-petition lenders, argues that Big V should market and sell itself to a third party. In its objection, filed with the U.S. Bankruptcy Court in Wilmington, Del., on May 25, Fleet said such a sale represents the most cost-effective, efficient and realistic means for maximizing the value of Big V's estate for the benefit of its creditors. (ABI World, June 12, 2001) BRIDGE INFORMATION: Thomson Presses For Decision On Contracts ------------------------------------------------------------- Thomson Global Markets and Worldscope/Disclosure, Thomson Corporation subsidiaries, are party to over 20 different contracts with Bridge Information Systems, Inc. The Thomson Entities provide financial information and related services to Bridge and Telerate, which they in turn distribute over their networks to subscribers. Under four of these contracts, Bridge and Telerate owe the Thomson Entities at least $9,800,000 in pre-petition debt. The Debtors also failed to pay their post-petition obligations, and violated Thomson's contractual right to audit the records of Bridge and Telerate. On top of that, the Debtors are also accumulating over $200,000 per month in administrative expenses to Thomson Entities. By motion, the Thomson Entities want to know whether the Debtors will assume or reject these four contracts: Contract Expiry Date Due Pre-Petition Due Post-Petition -------- ----------- ---------------- ----------------- WD/Bridge 2001 $1,235,560* $130,000 per month* TGM/Telerate 2002 $8,000,000* (can't be determined) WD/Telerate 2001 $ 668,000* $ 70,000 per month* ADP 2002 $ 49,500* $ 5,500 per month* * These are only estimated amounts. The actual obligations are likely to be more than the conservative estimates. Craig A. Smith, Esq., at Suelthaus & Walsh, in St. Louis, Missouri, asks Judge McDonald to compel the Debtors to make the decision as soon as possible or within 10 days after the court grants this motion. Thomson also seeks an order compelling Debtors to pay their post-petition obligations pending the assumption or rejection of the contracts; to provide the required royalty statements; and to permit Thomson to audit the records of Bridge and Telerate to determine the actual amounts due them under the contracts. Mr. Smith noted it is important for Thomson to verify the exact amount due pre-petition to enable Thomson to file accurate proofs of claim by the June 29 bar date. WD/Bridge Contract Bridge entered into a Distributor License Agreement with WD in November 1994. Under this agreement, Bridge agreed to provide authorized customers to access WD's proprietary information through Bridge's electronic delivery system. Telerate/TGM Contract Telerate entered into an Optional Service Agreement with TGM on May 1998. Under the agreement, Telerate agreed to redistribute TGM's proprietary information to authorized customers through its electronic delivery system. Telerate billed customers for the use of TGM's proprietary information directly and collected the payments from those customers on TGM's behalf. Telerate was authorized to deduct a royalty (30 percent in 2000, 25 percent in 2001) on all charges it billed and collected. TGM was required to remit the rest to TGM on a monthly basis. Telerate enjoys a whopping $250,000 royalty per month based on the revenues generated under this contract. Telerate/WD Telerate entered into an oral Distributor License Agreement with WD under the same terms of the WD/Bridge Contract. Telerate also earns significant monthly income by transmitting WD's proprietary information, which cannot be obtained elsewhere. ADP ADP, a predecessor-in-interest to Bridge, entered into a Master Data Base Agreement with a predecessor to WD on January 1985. Under the agreement, ADP agreed to redistribute proprietary information on a non-exclusive basis to authorized customers through its electronic delivery system. Bridge assumed this agreement in November 1998. Bridge bills for the use of WD's proprietary information directly and collects the payments from those customers on WD's behalf. Bridge is authorized to deduct a 50 percent royalty on all charges it bills and collects, and must remit the remaining 50 percent to WD on a monthly basis by no later than 45 days after the end of the month during which the applicable service was rendered. Since the Debtors are still using Thomson's products, Mr. Smith contended, it is only fair for Bridge and Telerate to pay for it. While the Debtors obtained a debtor-in-possession financing order, Mr. Smith doubts if $30 million of the funds advanced to the Debtors to continue operations will be sufficient to pay all administrative expenses that will accumulate. Thomson also anticipates that the proceeds of the sale of the Debtors' assets will go to the Debtors' pre-petition lenders. So unless the Debtors paid or committed to pay the substantial administrative expenses accumulating under the contracts or elect to assume and assign such agreements at the request of a prospective purchaser, the obligations due to Thomson could remain unpaid. (Bridge Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) CONVERSE INC.: Jack Boys Leads New Management Team -------------------------------------------------- Some things are worth saving. When investor group Footwear Acquisition, Inc., acquired the Converse athletic brand in late April 2001 from a company in Chapter 11 bankruptcy, the new owners bought a historical symbol deeply imbedded in American popular culture. Determined to maintain the legendary Converse spirit and to successfully compete in a global business economy, new co-chairmen William Simon and Marsden Cason recently announced the company's new all-star executive team and set a plan in motion to re-ignite the brand. The new team is led by chief executive officer Jack Boys, an athletic shoe and sporting goods industry veteran, recognized for his marketing leadership that put The North Face Inc. on the map in the late 1990s. Boys, a one-time Converse employee, created the successful line of basketball products that were launched with the memorable "Grandma-ma" campaign in the early 1990's. He then led marketing at Avia Athletic Footwear before being recruited by Simon and Cason to drive marketing at The North Face. Boys intends to quickly develop new product leadership and branding strategies and reconstruct Converse into a new economy company by rebuilding its infrastructure from the ground up. His priority is to uphold the brand's image and quality by creating a worldwide product design and development center that will provide footwear and related products for the worldwide marketplace. Founded in 1908, Converse gained notoriety among basketball players and fans with its canvas All Star(R) basketball shoes that took on the name of 1920s basketball hero Chuck Taylor. In the past 93 years Chuck Taylor(R) shoes have become the world's most popular athletic shoe, selling more than 750 million pairs. The brand expanded into multiple sports categories and reached cult status in the '70s, '80s and '90s through its association with pop icons such as Happy Days, grunge band Nirvana, and sports legends Magic Johnson, Jimmy Connors and Larry Bird. "Converse is an icon that is revered and as much a part of the cultural fabric as Coca-Cola and Levi's," Simon said. "It is distinctly American and encompasses the individualistic American spirit. The new executive team will capitalize on that foundation and drive the brand to new levels." In May, Boys, Simon and Cason assembled an MVP cast of executives with more than a century's-worth of product leadership and branding expertise to carry out the new vision, including: * Lisa Kempa, Vice President Finance -- a strategic planning and financial leader, most recently with The North Face Inc. * Laura Kelley, Vice President Legal -- an eleven-year Converse executive with responsibility for the corporation's legal activities. * Jim Stroesser, Vice President Sales -- recently director of sales for Oakley Inc. and a successful sales leader for Nike, LA Gear, Kaepa and New Balance. * David Maddocks, Vice President Marketing and Product Development - a big-picture marketing strategist formerly with RealNetworks, K2 and Avia. * Tim Ouellette, Vice President Licensing -- a long-time international licensing, business development, sales and marketing executive with past ties to Le Coq Sportif, Deckers Outdoor Corp., Donnay and other prominent sports-related marketing organizations. * Lloyd Wallsten, Vice President Distribution -- a 24-year distribution management expert who formerly developed systems for major e-commerce start-ups and sporting goods companies such as The North Face. * Jerry Lan, Managing Director of Far East Operations -- a former director for Pou Chen Manufacturing overseeing the production of high-end, technical products for Timberland and Nike, Inc. Mr. Lan has also led development for adidas, K-Swiss, and Diadora. * Ellen Garvey, Director of Information Technology, who brought Converse corporate offices and distribution centers into the digital age when she joined the company in 1987. Immediately the management team intends to fully staff its corporate offices and focus on delivering previously written product orders. Once the systems are in place, product teams will focus on expanding Converse's reach across several sports categories. "Consumers made Converse into a world-class brand. Nothing will ever change that," Boys said. "Some of the greatest athletes in the world performed legendary feats in Converse products. The brand has a legitimacy that will continue to be validated through premier performance products." About Converse Inc. Footwear Acquisition, Inc. was incorporated on February 22, 2001 and changed its name to, Converse Inc. on May 21, 2001. Converse is led by Marsden Cason, William Simon and Perseus Acquisition/Recapitalization Fund, L.L.C. Cason and Simon have extensive experience owning and operating branded sporting goods companies. Perseus Acquisition/ Recapitalization Fund, L.L.C. is a private equity fund formed to back successful management teams and make substantial investments in leveraged acquisitions and recapitalizations of operating companies. CYCLIX ENGINEERING: Texas Court Gives Go Ahead For Asset Sale ------------------------------------------------------------- The Honorable Harold C. Abramson, US Bankruptcy Court, Northern District of Texas entered an order on May 25, 2001 authorizing and approving the motion of the debtors, Cyclix Engineering Corp. and PC Service Source, Inc. to sell the assets of Cyclix to Teleplan Services Texas, Inc., purchaser. The purchase price for the assets comprises $3.85 million subject to certain adjustments; a promissory note in the amount of $881,756, subject to adjustments; a promissory note in the amount of $2.25 million maturing on the last day of the 39th full calendar month following the Closing Date; and two warrants for the purchase of 37,500 shares of Teleplan International N.V. at an exercise price of 35.00 Euro, having a term of 4 years and the assumption of certain Assumed Obligations. DAEWOO INTERNATIONAL: Seeks Approval of Disclosure Statement ------------------------------------------------------------ Daewoo International (America) Corp., seeks entry of an order approving its Disclosure Statement dated May 4, 2001 and scheduling a hearing on September 6, 2001, to consider confirmation of the plan. DIGITAL FUSION: Reports Year End and First Quarter Results ---------------------------------------------------------- IBS Interactive, Inc. d/b/a Digital Fusion (Pink Sheets:IBSX), an Information Technology and e-Business professional services provider, announced its results for the quarter ended December 31, 2000 ("Fourth Quarter") and the quarter ended March 31, 2001 ("First Quarter"). Revenues for the quarter ended December 31, 2000 and year ended December 31, 2000 were $5,671,000 and $23,363,000 respectively. Gross profit for the Fourth Quarter was $1,042,000 representing 18% of revenue. Selling, general and administrative costs for the Fourth Quarter decreased $186,000 to $3,084,000 compared to the quarter ended September 30, 2000. Net loss for the quarter was $5,709,000 and loss from the Company's continuing operations before interest, taxes, depreciation and amortization adjusted to exclude merger, severance, and restructuring charges and loss on sale of business ("Adjusted EBITDA") was $1,917,000. The net loss for the quarter ended December 31, 2000 included $2,736,000 in restructuring costs, merger expenses and disposal of discontinued operations. Revenue for the quarter ended March 31, 2001 was $5,059,000, a decrease of $612,000 from the Fourth Quarter. Gross profit for the First Quarter was $1,051,000 representing 21% of revenue, an increase in gross profit percent of 3% from the previous quarter. The First Quarter's gross profit improvement was primarily related to the restructuring efforts made in the Fourth Quarter, including the closing of the Company's Washington DC operation and New Jersey network services division. Additionally, in April 2001, the Company sold its New Jersey-based web hosting operation and closed its Detroit operation. Selling, general and administrative costs for the First Quarter decreased $1,005,000 to $2,079,000 compared to the quarter ended December 31, 2000 primarily from the Fourth Quarter restructuring. Net loss for the quarter ended March 31, 2001 was $1,916,000 and Adjusted EBITDA loss from the Company's continuing operations was $845,000. Nicholas R. Loglisci, Jr., Digital Fusion's CEO commented, "Excluding one-time costs, our EBITDA for the First Quarter of this year improved by almost $1 million as compared with the Fourth Quarter of 2000. We believe this improvement in our performance was due to our intense efforts to restructure our operations and realign our service offerings to meet our prime goal of becoming cash-flow positive." Current assets on December 31, 2000 and March 31, 2001 were $5,630,000 and $5,271,000 respectively. The Company has continued to meet its ongoing working capital needs in 2001 from a combination of approaches, namely, continued improvements in the operational performance of ongoing business lines, consistent collections of accounts receivable, cost savings realized from prior restructurings, the sale of its web hosting business and the curtailment of payments of certain debts associated with discontinued business units, restructuring efforts and the termination of the Infonautics merger. Karen Surplus, Digital Fusion's Chief Financial Officer said "During 2001, the Company is focusing on reducing its non-essential costs and accounts receivable days sales outstanding to optimize its cash balances." With the April 2001 restructuring, the Company believes it has taken the steps necessary to become cash flow positive from its continuing operations during the second half of 2001. However, the Company expects to receive a going concern opinion because of its previous losses and significant liabilities related to its discontinued business units, restructuring efforts and the termination of the Infonautics merger. The ability of the Company to continue as a going concern is dependent upon restructuring certain liabilities and obtaining cash flow from external sources. In order for the Company to execute its current plan to raise additional capital, it will have to negotiate with certain creditors to reduce these liabilities and this process has already begun. If the Company is successful in obtaining agreements with its creditors to reduce these liabilities, the Company believes it will be able to raise capital to pay down the restructured liabilities as well as fund the Company's ongoing capital needs. If the Company cannot restructure the liabilities related to its discontinued operations, restructuring and Infonautics merger termination, it will be required to re-examine its current business and capitalization plans. April 2001 Adjusted EBITDA for the Company's continuing operations was approximately breakeven. Additionally, the percentage of time the Company's revenue generating consultants billed (consultant utilization) for April and May 2000 were at 12-month highs. "The success of the aggressive moves we made starting late last year are clear and obvious," said Roy Crippen, President and Chief Operating Officer. "We have successfully reduced cash burn from continued operations by over a million dollars a month, we have successfully shifted the revenue of the company to primarily professional services, we have successfully moved our corporate headquarters and reduced corporate overhead, we have successfully increased our pipeline of new business, we have successfully maintained our high level of customer satisfaction and we have successfully improved employee morale." Mr. Crippen concluded, "We now have to work very hard on achieving similar success in restructuring our legacy debt." About Digital Fusion Digital Fusion provides comprehensive e-Business and information technology (IT) solutions to businesses, organizations and public sector institutions in the Eastern U.S. We have over 10 years of experience designing, developing, and integrating complex business systems, providing a range of services, including strategy, development, desktop support, network, and education services. For additional information regarding Digital Fusion's services, visit the Company web site at http://www.digitalfusion.com E.SPIRE COMM.: Obtains Final Court Nod For $85MM DIP Financing -------------------------------------------------------------- e.spire Communications, Inc. (OTC Bulletin Board: ESPIQ) announced that the Bankruptcy Court of the District of Delaware approved the remaining $45 million of the $85 million debtor-in- possession financing committed by a group led by Foothill Capital and Ableco Finance, LLC. The group includes e.spire Chairman George Schmitt, who personally invested $10 million in the DIP financing. The Court previously approved $25 million of the financing on April 10 and an additional $15 million on May 16. "While we are pleased to have this DIP financing available to us, we plan to use as little of it as possible while we continue to negotiate for funding to take us out of Chapter 11," said Schmitt. "We hope to have exit financing and a restructuring plan in place soon and to have a Court-set emergence date as soon as possible." e.spire expects that the Court-ordered emergence date will occur approximately two months after the restructuring plan is submitted to the Court. e.spire Communications, Inc. is a leading integrated communications provider, offering traditional local and long distance, dedicated Internet access, and advanced data solutions, including ATM and frame relay. e.spire also provides Web hosting, dedicated server, and colocation services through its Internet subsidiary, CyberGate, Inc., and its subsidiary ValueWeb. e.spire's subsidiary, ACSI Network Technologies, Inc., provides third parties, including other communications concerns, municipalities, and corporations, with turnkey fiber-optic design, construction, and project management expertise. More information about e.spire is available at e.spire's Web site, http://www.espire.net FINOVA GROUP: Committee Taps PwC As Financial Advisors ------------------------------------------------------ The Official Committee of Unsecured Creditors in The FINOVA Group, Inc.'s chapter 11 cases, moved the Court for entry of an order under section 1103(a) of the Bankruptcy Code, authorizing the employment and retention of the accounting and consulting firm of PricewaterhouseCoopers LLP as financial advisors to the Creditors' Committee nunc pro tunc March 7, 2001. The Creditors' Committee told the Court it is familiar with the professional standing and reputation of PricewaterhouseCoopers. PricewaterhouseCoopers has a wealth of experience in providing accounting, tax and financial advisory services in restructurings and reorganizations and enjoys an excellent reputation for services it has rendered in large and complex chapter 11 cases on behalf of debtors and creditors throughout the United States, the Committee represented. Moreover, the firm has an extensive understanding of the Debtors through its previous retention as financial advisors to the Bank Steering Committee. PricewaterhouseCoopers was retained in this capacity in June 2000 and has developed considerable knowledge of the Debtors' internal financial operations, the Committee notes. The Committee represented that the services of PricewaterhouseCoopers are necessary to enable the Creditors' Committee to assess and monitor the efforts of the Debtors and their professional advisors to maximize the value of their estates and to reorganize successfully. The Committee believes that the knowledge and experience developed by PricewaterhouseCoopers will be invaluable to the successful reorganization of the Debtors in connection with the proposed employment and retention. The Committee contemplates that PricewaterhouseCoopers will provide such consulting and advisory services as the firm and the Creditors' Committee, including its legal advisors, deem appropriate and feasible, including assistance and/or advise to the Committee in: (1) the review of financial related disclosures required by the Court, including the Schedules of Assets and Liabilities, the Statement of Financial Affairs and Monthly Operating Reports; (2) a review of the Debtors' short-term cash management procedures; (3) a review of the Debtors' proposed key employee retention and other critical employee benefit programs; (4) the Debtors' identification of core business assets and the disposition of assets or liquidation of unprofitable operations; (5) a review of the Debtors' performance of cost/benefit evaluations with respect to the affirmation or rejection of various executory contracts and leases; (6) the valuation of the present level of operations and identification of areas of potential cost savings, including overhead and operating expense reductions and efficiency improvements; (7) the review of financial information distributed by the Debtors to creditors and others, including, but not limited to, cash flow projections and budgets, cash receipts and disbursement analysis, analysis of various asset and liability accounts, and analysis of proposed transactions for which Court approval is sought; (8) attendance at meetings and assistance in discussions with the Debtors, the Official Bank Group Steering Committee, potential investors, banks and other secured lenders in the FINOVA chapter 11 case, the U.S. Trustee, other parties in interest and professionals hired by the same, as requested; (9) the review and/or preparation of information and analysis necessary for the confirmation of a Plan of Reorganization; (10) the evaluation and analysis of avoidance actions, including fraudulent conveyances and preferential transfers; (11) litigation advisory services with respect to accounting and tax matters, along with expert witness testimony on case related issues as required by the Creditors' Committee; (12) such other general business consulting or such other assistance as the Creditors' Committee or its counsel may deem necessary; (13) the review and analysis of the Berkadia, LLC transaction and any alternatives; and (14) updating of the Bank Steering Committee on financial or operational matters of the Debtors to the extent approved by the Creditors Committee. Terms of Retention The customary hourly rates, subject to periodic adjustments, charged by PricewaterhouseCoopers' personnel anticipated to be assigned to this case are: Partners / Managing Directors $ 500 - $ 595 Directors 430 - 525 Managers 370 - 430 Senior Associates 265 - 375 Associates / Paraprofessionals 160 - 265 Administrative 70 - 100 The Creditors' Committee understands that PricewaterhouseCoopers intends to apply to the Court for allowances of compensation and reimbursement of expenses for its financial advisory support services in accordance with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, corresponding local rules, orders of this Court and guidelines established by the United States Trustee. Disinterestedness and Eligibility PricewaterhouseCoopers has informed the Creditors' Committee that, except as may be set forth in the Affidavit of David R. Williams, a Partner in PricewaterhouseCoopers LPP, it does not hold any interest adverse to the Creditors' Committee and believes it is eligible to represent the Creditors' Committee under Section 1103(b) of the Bankruptcy Code. The Committee also noted that PricewaterhouseCoopers will conduct an ongoing review of its files to ensure that no conflicts or other disqualifying circumstances exist or arise and will supplement its disclosure to the Court if any new facts or circumstances are discovered. Other than with its own partners and employees, PricewaterhouseCoopers has agreed not to share with any person or firm the compensation to be paid for professional services rendered in connection with these cases. Mr. Williams, in his affidavit, advised that PricewaterhouseCoopers has provided and likely will continue to provide significant services unrelated to the Debtors' case to Berkshire Hathaway, Inc., Leucadia National Corp., and Gibson, Dunn & Crutcher LLP, attorneys to the Debtors. In addition, PricewaterhouseCoopers has retained and will likely continue to retain Gibson, Dunn & Crutcher LLP to represent PricewaterhouseCoopers in matters unrelated to the Debtors' case. PricewaterhouseCoopers, from time to time, has also represented certain Debtors in the analysis of certain loan workout situations. Specifically, PricewaterhouseCoopers Canada, a Canadian affiliate, assisted FINOVA Canada, a subsidiary of FINOVA Capital Corporation, with such analysis. This engagement has been completed. The firm does not believe these matters create a situation adverse to the creditors of the Debtors or the Debtors themselves. Mr. Williams also revealed that PricewaterhouseCoopers was involved in a matter adverse to John W. Teets, a member of the Debtors' Board of Directors but PricewaterhouseCoopers is no longer involved in this matter. In addition, PricewaterhouseCoopers has provided and likely will continue to provide services unrelated to the Debtors' case for the following entities, none of which represented more than 1% of PricewaterhouseCoopers' United States annual revenue for the prior fiscal year: Audit Clients ------------- Allfirst Bank, Bank of America, Bank of Montreal, Bank of Nova Scotia, The Berkshire Hathaway, Inc., BNP-Paribas, Chase Manhattan Bank, CIBC/CIBC Oppenheimer, Citibank N.A/Citicorp Securities, Commerzbank AG, Credit Industriel et Commercial, Dai-Ichi Kangyo Bank Ltd., Firstar Bank, N.A., Fuji Bank, Ltd., Goldman Sacks, KBC, Leucadia National Corp., Mitsubishi Trust and Banking Corporation, Royal Bank of Canada, San Paolo Bank, US Bank Other Tax-Related Clients ------------------------- ABN AMRO, Allfirst Bank, Bank of Amenca, Bank of Montreal, Bank of Nova Scotia, The Bank One, BNP-Paribas, Chase Manhattan Bank, CIBC/CIBC Oppenheimer, Citibank N.A/Citicorp Securities, Comnerzbank AG, Credit Industriel et Commercial, CSFB, Den Danske Bank Aktieselskab, Dresdner Bank AG, Goldman Sachs, KBC, Leucadia National Corp., Mitsubishi Trust and Banking Corporation, Royal Bank of Canada, US Bank, Yasuda Trust & Banking Consulting Support Clients -------------------------- ABN AMRO, Allfirst Bank, Banca di Roma, Bank Hapoalim, B.M., Bank of America, Bank of Montreal, Bank of New York, Bank of Nova Scotia, The Bank One, Banque Nationale de Paris, Banque Paribas, Bayerische Landesbank, BNP-Paribas, Chase Manhattan Bank, CIBC/CIBC Oppenheimer, Citibank N.A/Citicorp Securities, Clifford Chance Rogers & Wells, Commerzbank AG, Credit Agricole Indosuez, Credit Lyonnais, CSFB, Den Danske Bank Aktieselskab, Deutsche Bank AG, Dresdner Bank AG, First Union Capital Markets, Fuji Bank, Ltd., Gibson, Dunn & Crutcher LLP, Goldman Sachs Imperial Bank, John W. Teets, KBC, Mayer Brown & Platt, Mitsubishi Trust and Banking Corporation, Royal Bank of Canada, San Paolo Bank, Sanwa Bank, Ltd., Societe Generale, US Bank, Wells Fargo Bank, Yasuda Trust & Banking. Furthermore, PricewaterhouseCoopers has in the past, may currently and will likely in the future be working with or against other professionals involved in the FINOVA cases in matters unrelated to the Debtors and these cases. Mr. Williams represents that, based on the firm's current knowledge of the professionals involved, and to the best of his knowledge, none of these business relationships create interests materially adverse to the Debtors herein in matters upon which PricewaterhouseCoopers is to be employed, and none are in connection with this case. Mr. Williams recognizes that it is likely that certain employees of PricewaterhouseCoopers, including Partners, hold equity securities. Mr. Williams believes this does not render PricewaterhouseCoopers ineligible to represent the Committee under section 1103 of the Bankruptcy Code. Mr. Williams submitted that, based on the results of the relationship search conducted to date, PricewaterhouseCoopers insofar as he has been able to ascertain, is a "disinterested person" as that term is defined in section 101(14) of the Bankruptcy Code, as modified by section 1107(b) of the Bankruptcy Code. According to PricewaterhouseCoopers' books and records, during the ninety-day period prior to the Debtors' petition date, PricewaterhouseCoopers received $1,657,728.24 from the Debtors for professional services performed and expenses incurred. There are no outstanding prepetition invoices as of the petition date. Dispute Resolution Provisions The Creditors' Committee and PricewaterhouseCoopers have agreed, subject to the Court's approval, that: (1) Any controversy or claim with respect to, in connection with, arising out of, or in any way related to this Application or the services provided by PricewaterhouseCoopers to the Creditors' Committee as outlined in this Application, including any matter involving a successor in interest or agent of the Creditors' Committee or of PricewaterhouseCoopers, shall be brought in the Bankruptcy Court or the District Court for the District of Delaware if such District Court withdraws the reference; (2) PricewaterhouseCoopers and the Creditors' Committee and any and all successors and assigns thereof, consent to the jurisdiction and venue of such court as the sole and exclusive forum (unless such court does not have or retain jurisdiction over such claims or controversies) for the resolution of such claims, causes of actions or lawsuits; (3) PricewaterhouseCoopers and the Creditors' Committee, and any and all successors and assigns thereof, waive trial by jury, such waiver being informed and freely made; (4) If the Bankruptcy Court, or the District Court if the reference is withdrawn, does not have or retain jurisdiction over the claims and controversies in question, PricewaterhouseCoopers and the Creditors' Committee, and any and all successors and assigns thereof, will submit first to non-binding mediation, and if mediation is not successful, then to binding arbitration, in accordance with the dispute resolution procedures; and (5) Judgment on any arbitration award may be entered in any court having proper jurisdiction. Further, PricewaterhouseCoopers has agreed not to raise or assert any defense based upon jurisdiction, venue, abstention or otherwise to the jurisdiction and venue of the Bankruptcy Court or the District Court for the District of Delaware (is such District Court withdraws the reference) to hear or determine any controversy or claims with respect to, in connection with, arising out of, or in any way related to the Application or the services provided under it. (Finova Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) FRUIT OF THE LOOM: Auctioning Six Properties -------------------------------------------- Pursuant to Judge Walsh's order, under 11 U.S.C. 105(a), 363 and 1146(c), Fruit of the Loom, Ltd. and its affiliated debtors are authorized to consummate an auction of non-operating real property without further Court approval. Debtor gives notice of the proposed auction dates and locations for the following assets: (A) June 11, 2001, 10 a.m., property located at #7 Cannon Street, York, South Carolina; (B) June 12, 2001, 10a.m., property located at 135 Mallard Road, Winfield, Alabama; (C) June 13, 2001, 10 a.m., property located at One Fruit of the Loom Drive, Greenville, Mississippi; (D) June 14, 2001, 10 a.m., property located at 1425 Ohlendorf Road, Osceola, Arkansas; (E) June 19, 2001, 9 a.m., property located at 1101 Greenburg Road, Campbellsville, Kentucky; and (F) June 19, 2001, 3 p.m., property located at U.S. 421 South, Frankfurt, Kentucky. For further information regarding the assets, directions or a copy of the bidding and auction procedures, contact the auctioneer at (410) 653-4000 or (800) 722-3334. (Fruit of the Loom Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) GENESIS HEALTH: Classification & Treatment Of Claims Under Plan --------------------------------------------------------------- Unless otherwise specified, the information in the following tables and in the sections below are based on calculations as of June 30, 2001. The estimation of recoveries makes the following assumptions: -- The new debt instruments to be issued under Genesis Health Ventures, Inc. & The Multicare Companies, Inc.'s Plan of Reorganization have a value equal to their face amounts. -- The enterprise value for the Debtors is $1,525,000,000 (including cash on hand). This amount, less cash on hand of $25,000,000, is the mid-point of the range of valuations for the Genesis Debtors and the Multicare Debtors. -- The aggregate amount of allowed secured claims against the Genesis Debtors (excluding the Genesis Senior Lender Claims) is $115,077,000 and against the Multicare Debtors (excluding the Multicare Senior Lender Claims) is $26,318,000. -- The aggregate amount of Genesis Senior Lender Claims is $1,198,460,000 (excluding postpetition interest and before giving effect to postpetition payments) and the aggregate amount of the Multicare Senior Lender Claims is $443,400,000 (excluding postpetition interest). -- The aggregate amount of general unsecured claims against the Genesis Debtors is $467,494,000 (excluding the claims of the Multicare Debtors against the Genesis Debtors) and the aggregate amount of the general unsecured claims against the Multicare Debtors is $284,256,000 (excluding the claims of the Genesis Debtors against the Multicare Debtors). -- For purposes of the recovery estimate, no current value is included for the New Warrants because they are priced at the approximate projected value of the New Common Stock. However, under a Black-Scholes analysis, the New Warrants would have a value between $8,500,000 and $12,100,000. Treatment of Genesis Creditors and Shareholders Class/ Estimated Voting Description Treatment Recovery ------ ----------- --------- --------- -- Debtor in Possession Payment of all amounts 100% No Credit Agreement outstanding, and cash Claims collateralization or replacement of outstanding L/Cs by L/Cs issued under the exit facility. -- Other Administrative Paid in full. 100% No Expense Claims -- Priority Tax Paid in full or with 100% No Claims interest over a period not to exceed 6 years from the date of assessment of the tax. G1 Other Secured See separate descriptions See See Claims below. below Below G2 Senior Lender $195,979,000 in cash* 79.14% Yes Claims $99,923,000 in New Senior Notes $31,000,000 in New Conv Preferred Stock 74.58% of New Common Stock. *cash payments through June 30, 2001 G3 Priority Non-Tax Paid in full. 100% No Claims G4 General Unsecured Uninsured claims: 67% 6.94% Yes Claims of the New Common Stock (exclusive 17.25% of New Warrants. of value of New Insured claims: Paid in Warrants) ordinary course of business from and to the extent of insurance proceeds; any portion not covered by insurance will be treated in same manner as uninsured claims. G5 Senior Subordinated 3.22% of New Common Stock 6.94% Yes Note Claims 82.75% of New Warrants. (exclusive of value of New Warrants) G6 Intercompany Claims Unimpaired. 100% No G7 Punitive Damage No distribution (except None No Claims to the extent covered by insurance). G8 Series G Preferred No distribution. None No Stock Interests G9 Series H Preferred No distribution. None No Stock Interests G10 Series I Preferred No distribution. None No Stock Interests G11 Common Stock No distribution. None No Interests Treatment of Subclasses Class/ Estimated Voting Description Treatment Recovery ------ ----------- --------- --------- G1-1 Broad Street Office $1,600,000 mortgage 100% No Building reinstated 148 West State Street, Kennett Square, Pa. (Pa. IDA) G1-2 Broad Street Office $985,039 mortgage 100% No Building reinstated 148 West State Street, Kennett Square, Pa. (Pa. IDA) G1-3 Pleasant View Center $8,864,446 mortgage 100% No (HUD) reinstated G1-4 Country Village $1,810,259 mortgage 100% No Center (HUD) reinstated G1-5 Abington Manor $3,475,000 mortgage 100% No (Lackawanna County reinstated IDA) G1-6 Silver Lake Center $2,155,000 mortgage 100% No (Del. EDA Bonds) reinstated G1-7 River Street Center $2,430,000 mortgage 100% No (Luzerne County IDA) reinstated G1-8 Kresson View Center $5,535,000 mortgage 100% No (NJEDA Refunding reinstated Bonds) G1-9 Mifflin Court $2,474,000 mortgage 100% No (ElderTrust) reinstated (as previously reduced and approved by the Bankruptcy Court) G1-10 Oaks Center $3,500,086 mortgage 100% No (ElderTrust) reinstated (as previously reduced and approved by the Bankruptcy Court) G1-11 Coquina Assisted $1,400,000 mortgage 100% No Living (ElderTrust) reinstated (as previously reduced and approved by the Bankruptcy Court) G1-12 Homestead Center $19,325,829 mortgage 100% No Kimberly Hall South reinstated Center Kimberly Hall North Center Seaford Center Milford Center Windsor Center (U.S. Bank, N.A., as trustee for the "Bradford Bonds") G1-13 Brakeley Park New secured note maturing 100%* Yes Center (HUD) on January 1, 2033, in $7,985,079 principal amount with annual interest at 8.5% and level monthly payments of principal and interest G1-14 North Cape Center New secured note maturing 100%* Yes (HUD) on March 1, 2036, in $5,573,020 principal amount with annual interest at 8.0% and level monthly payments of principal and interest G1-15 Oak Hill Center Return the collateral 100%* Yes (HUD) G1-16 Rittenhouse Pine New secured 10 year note 100%* Yes Center (Meditrust) in $5,000,000 principal amount with annual interest at 8% and level monthly payments of principal and interest based on a 25-year amortization schedule (unsecured deficiency of $1,690,441) G1-17 Atlantis Center New secured 5-1/2 year 100%* Yes Bowmans Center note in $45,000,000 Fairway Center principal amount with annual Oakwood Center interest at LIBOR plus 5% Riverwood Center and no amortization before Tierra Center maturity (secured deficiency Willimsburg Center of $33,236,000) Windham Center Woodmont Center (synthetic lease lenders) * Based on a valuation of the collateral securing these claims. Section 506(a) of the Bankruptcy Code provides that a claim is secured only to the extent of the value of the underlying collateral. The deficiency claims of the holders of claims in Class G1-16 are part of Class G4 (Genesis General Unsecured Claims). The obligations of the Genesis Debtors under the synthetic lease (Class G1-17) are secured by the property identified above and by all the property of the Genesis Debtors that secures the claims in Class G2. Therefore the deficiency claims of the holders of claims in Class G1-17 are part of Class G2 (Genesis Senior Lender Claims). In addition to subclasses G1-1 through G1-17, there are other subclasses of miscellaneous secured claims of approximately $3,536,000 against the Genesis Debtors, each of which will be treated as a separate class. This class also includes certain contingent claims of Bank of America, N.A. in connection with a guaranty by Genesis of the obligations of the Age Institute. Under the Plan of Reorganization, either these claims will be reinstated or the Reorganized Debtors will return the property securing such claim. These claims are not impaired and the holders are not entitled to vote to accept or reject the Plan of Reorganization. Treatment of Multicare Creditors and Shareholders Class/ Estimated Voting Description Treatment Recovery ------ ----------- --------- --------- -- Debtor in Payment of all amounts 100% No Possession outstanding, and cash Credit Agreement collateralization or Claims replacement of outstanding L/Cs by L/Cs issued under the exit facility. -- Other Administrative Paid in full. 100% Expense Claims -- Priority Tax Claims Paid in full or with 100% No interest over a period not to exceed 6 years from the date of assessment of the tax. M1 Other Secured See separate See See Claims descriptions below. below below M2 Senior Lender $25,000,000 in cash 81.68% Yes Claims $147,682,000 in New Senior Notes $11,600,000 in New Conv Preferred Stock 21.35% of New Common Stock. M3 Priority Non-Tax Paid in full. 100% No Claims M4 General Unsecured Uninsured: 0.18% of 5.67% Yes Claims New Common Stock. Insured: Paid in ordinary course of business from and to the extent of insurance proceeds; any portion of not covered by insurance will be treated in same manner as uninsured claims. M5 Senior Subordinated No distribution. 0.00% No Note Claims M6 Intercompany Claims Unimpaired. 100% No M7 Punitive Damage No distribution (except None No Claims to the extent covered by insurance). M8 Common Stock No distribution. None No Interests (Genesis/Multicare Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLENOIT CORP.: Extending Employment Agreement with CEO O'Gorman --------------------------------------------------------------- Glenoit Corporation and its debtor affiliates seek to extend the services of Thomas O'Gorman as President and CEO from June 29, 2001 through December 31, 2001, at a base salary of $200,000 for the extended period. O'Gorman has already received a $300,000 severance payment. The debtors requested that the court authorize and approve the terms of O'Gorman's continued employment. The debtors are represented by Neal Batson, Matthew W. Levin and Mark I. Duedall of Alston & Bird LLP, Atlanta Georgia and Joel A. Waite and Edmon Morton of Young Conaway Stargatt & Taylor LLP, Wilmington, DE. A hearing on the motion will be held on June 15, 2001 at 11:30 AM, US Bankruptcy Court, District of Delaware. HYBRID NETWORKS: Shares Subject To Nasdaq Delisting --------------------------------------------------- Hybrid Networks Inc. (Nasdaq: HYBR), the worldwide leader in high-capacity MMDS fixed broadband wireless Internet access systems, has received a Staff Determination letter dated June 7, 2001, from the Nasdaq National Market stating that Hybrid has failed to comply with the minimum market capitalization requirement for continued listing set forth in Marketplace Rule 4450(b)(1)(A) and that Hybrid's application for transfer to the Nasdaq SmallCap Market has been denied. Hybrid will request a hearing before the Nasdaq Listing Qualifications Panel to review the Staff Determination. This hearing will defer the delisting of Hybrid's securities pending the Listing Qualification Panel's decision. About Hybrid Networks Headquartered in San Jose, Calif., Hybrid Networks Inc. designs, develops, manufactures and markets fixed broadband wireless systems that enable telecommunications companies, wireless systems operators and network providers to offer high-speed Internet access to businesses and residences. Hybrid was first to market with patented two-way wireless products that focus on the MMDS and WCS spectrum in the United States. Hybrid's customers include Sprint, WorldCom, Look Communications, Thomcast Communications and Andrew Corp. With systems in use in 75 markets across six continents, Hybrid is part of more fixed broadband wireless deployments than all of its competitors combined. IMPERIAL SUGAR: Summary Of Second Amended Disclosure Statement -------------------------------------------------------------- Headed by Jack L. Kinzie and Brenda T. Rhoades of the Dallas office of Baker Botts LLP, together with Tony M. Davis of the Houston office of that firm, and with James L. Patton, Jr., and Brenda Linehan Shannon as local counsel of the firm of Young Conaway Stargatt & Taylor, LLP, Imperial Sugar Company has moved beyond the stage of "talking drafts" of a Disclosure Statement into one which has been approved by Judge Robinson. Although the final form of the Disclosure Statement is not yet available as amendments were made in the course of the recent hearing, the broad outlines of the Disclosure Statement have not been modified to any significant extent as a result of the outcome of the hearing on its adequacy. This Plan is promoted by Mark Q. Huggins, Managing Director and Chief Financial Officer of Imperial Sugar Company, and by William F. Schwer in his capacities of President of Imperial Distributing Co., Senior Vice President of Imperial Holly Corp., Senior Vice President of Savannah Molasses & Specialty Company, the general partner of Imperial-Savannah LP, Senior Vice President of Imperial Sweeteners, and similar capacities for the other debtor subsidiaries. With the recent approval of the Disclosure Statement, Imperial Sugar Company and its debtor subsidiaries announced they are now beginning to soliciting acceptances, and have begun procedural steps to that end. This solicitation is conducted in order to obtain sufficient acceptances to enable the Plan to be confirmed by the Bankruptcy Court under the terms of the Bankruptcy Code. Mr. Kinzie reminded Judge Robinson that the purpose of a Disclosure Statement is to set forth (i) the history of the Debtors, their businesses, and their reorganization cases; (ii) information concerning the Plan and alternatives to the Plan; (iii) information for the holders of Claims and Interests regarding their rights under the Plan; (iv) information to assist the holders of Claims and Interests in making an informed judgment regarding whether they should vote to accept or reject the Plan; and (v) information to assist the Bankruptcy Court in determining whether the Plan complies with the provisions of the Bankruptcy Code and should be confirmed. Voting in General Under the Bankruptcy Code only classes of claims or interests which are (i) impaired by the Plan, and entitled to receive a distribution under the Plan are entitled to vote on the Plan. Any holder of a claim or interest in an impaired class whose claim or interest has not been disallowed by order of the Bankruptcy court and whose claim or interest is not disputed is entitled to vote to accept or reject the Plan if either (i) the holder's claim or interest has been scheduled by the Debtors (and the claim or interest is not scheduled as disputed, contingent, or unliquidated), or (ii) the holder has filed a Proof of Claim by the bar date of April 23, 2001, and provided that no objection has been filed to the Proof of Claim. Unless otherwise permitted by the terms of the Plan, any holder of a disputed claim is not entitled to vote with respect to the disputed claim, unless the Bankruptcy court, upon application by the holder, temporarily allows the disputed claim for the limited purpose of voting to accept or reject the Plan. Any such application must be heard and determined by the Bankruptcy court fifteen days before the confirmation haring. A vote on the Plan may be disregarded if the Bankruptcy Court determines, after notice and a hearing, that the vote was not solicited or procured in good faith or in accordance with the provisions of the Bankruptcy Code. Under the Plan, only claims and interests in Classes 2A, 2B, 2C, 2D, 5A, 5B and 9 are impaired, and, accordingly the holders of claims and interests in those classes are the only holders of claims or interests entitled to vote to accept or reject the Plan. Claims in Classes 1, 3, 4, 6A, 6B, 7A, 7B and 8 are unimpaired by the Plan, and the holders of Claims or Interests in such Classes are conclusively presumed by operation of the Bankruptcy Code to have accepted the Plan. The Debtors have provided questions and answers to certain matters in the Disclosure Statement as a guide to voting creditors and interest holders. For example, the Debtors explain that under the Trust Indenture Act and the documents governing Imperial Senior Subordinated Notes, the Indenture Trustee for holders of Imperial Senior Subordinated Notes is not permitted to vote on behalf of the holders of such securities. All holders must submit their own Ballot in accordance with the voting instructions accompanying the Ballot if their vote is to be counted. The Debtors further reminded the holders that ballots are not to be sent to the Indenture Trustee. Return of Ballots The person to whom ballots are sent depends on each voting party's class and, for holders of public securities, Imperial Senior Subordinated Notes and existing common stock, on whether the holder receives a copy of solicitation materials through a broker, bank, nominee or other proxy intermediary holding securities in the holder's behalf in its name. Other than persons who are the beneficial holders of Imperial Senior Subordinated Notes and/or existing common stock whose securities are held in the name of a broker, bank, nominee, or other proxy intermediary, or in common parlance, in a "street name", all holders of claims of the Bank Group (Classes 2A, 2B, 2C and 2D) are to return their signed and completed ballot to: Chapman & Butler Attn: James E. Spiottio 111 West Monroe Street Chicago, Illinois 60603-4080 Tel: (312) 845-3000 For all (i) holders of Claims and Interests in Classes 5A, 5B and 9 (other than persons whose securities are hold in a street name), and (ii) brokers, banks, nominees, and other proxy intermediaries casting master ballots on behalf of beneficial owners of Imperial Senior Subordinated Notes and/or existing common stock, signed and completed ballots are to be returned to: D. F. King & Co., Inc. Attn: Tom Long 77 Water Street 20th Floor New York, New York 10005 Tel: 800-628-8510 (toll-free within US) 212-269-5550 (toll-free collect (i.e., reverse charge) from outside US) If a party holds a claim or interest entitled to vote on the Plan, or is a bank, broker, nominee or other proxy intermediary responsible for casting a master ballot on behalf of beneficial owners of Imperial Senior Subordinated Notes, and does not receive a ballot, receives a damaged Ballot, or loses the Ballot, the Balloting Agent for that party's class should be contacted. The beneficial holders of Imperial Senior Subordinated Notes and/or existing common stock held in a street name must return the ballots to the broker, bank, nominee, or other proxy intermediary holding legal title to the securities, and that party is then to complete a master ballot and submit it to the Balloting Agent. If a party receives more than one Ballot, the party may hold claims and/or interests in different classes and may be entitled to vote in more than one class. Deadline for Voting In order to be counted for voting purposes Ballots accepting or rejecting the Plan, including master ballots, must be received by the appropriate balloting agent no later than 5:00 p.m. on the date set by the Court in its Order, not yet available. If solicitation materials are received through an intermediary such as a broker, bank, nominee, or proxy, the claim or interest holder must ensure that the Ballot is returned to the intermediary sufficiently far in advance of the voting deadline so that a master ballot may be prepared and submitted timely. To ensure what the Debtors describe as the integrity of the voting process, the Bankruptcy Court has ordered that ballots may not be submitted by fax or by email. All ballots must be submitted as originals and bear an original signature in order to be counted. New Common Stock Prior to the Petition Date, Imperial's existing common stock was listed and traded on the American Stock Exchange. However, in December 2000, AMEX notified Imperial that trading in Imperial's existing common stock was being halted until further notice from AMEX, and in February 2001, Imperial received notice from AMEX that AMEX had filed an application with the SEC to strike the listing and registration of Imperial's existing common stock on the grounds that he company no longer net listing guidelines. Imperial has notified AMEX that it would not object to the delisting of its existing common stock, and that stock since has been delisted. Under the Plan, the existing common stock and warrants, options and rights to acquire existing common stock will be cancelled, with need for any corporate or shareholder action, on the Effective Date. The Plan provides, however, that holders of existing common stock may elect, as a Class, to receive a distribution of new common stock and Reorganized Imperial warrants by voting, as a Class, to accept the Plan; provided that such election will be effective only if impaired unsecured creditors under Classes 5A and 5B of the Plan also vote, as a Class, to accept the Plan. No distributions will be made to holders of existing common stock if either the holders of existing common stock or impaired unsecured creditors treated under Classes 5A or 5B vote, as a Class, to reject the Plan. Current Board of Directors & Relationships The Board of Directors of Imperial currently consists of 10 members serving staggered three-year terms: John D. Curtin, Jr. David D. Dilger Edward O. Gaylord Gerald Grinstein Ann O. Hamilton Robert L. Harrison James C. Kempner Harris L. Kempner, Jr. I. H. Kempner III Daniel K. Thorne The terms of Mr. Curtin, I. H. Kempner, James Kempner, and Mr. Thorne run through the 2001 annual meeting, while the terms of Mr. Dilger, Mr. Gaylord, Mr. Grinstein, and Mr. Harrison run through 2002, and the terms of Ms. Hamilton and Harris Kempner expire in 2003. James Kempner also serves as President and Chief Executive Officer of Imperial. In addition, James Kempner, Harris Kempner, Jr., I. H. Kempner III, Ms. Hamilton, and Mr. Thorne are each descendants of H. Kempner, a Galveston entrepreneur who died in 1984. Prior to Imperial becoming a publicly traded company in 1988, the Kempner family collectively owned substantially all of the equity of Imperial. I. H. Kempner and Imperial also are parties to a renewable one- year Independent Consulting Agreement providing Mr. Kempner will provide consulting services to Imperial concerning sugar industry-related matters, and that for such services Imperial will pay Mr. Kempner a monthly retainer of $3,500 and a per diem amount for each day of travel on company business. Mr. Dilger is chief executive officer and a director of Greencore Group plc, Imperial's single largest shareholder. Each of the directors of the wholly-owned subsidiaries is an employee of Imperial or one of its subsidiaries. In addition to other compensation, non-employee directors of Imperial are eligible to participate in the Imperial Sugar Company Retirement Plan for Non-employee Directors, which provides monthly retirement benefits to retired directors of Imperial who never served as employees of any of the Debtors. Under this retirement plan, former non-employee directors receive payments, commencing at age 65 or retirement, equal to the annual retainer received by the director (or the cash equivalent thereof) at the date of the director's retirement for up to ten years after retirement (based on years of service), provided that a director has completed at least three years of service. Death benefits equal to 50% of the retirement benefit are paid to a surviving spouse. Imperial's obligations under this retirement plan to current directors are executory obligations and will be assumed by Reorganized Imperial under the Plan. Claims of former directors of Imperial under this plan are unsecured claims and will be treated as Inactive Non-Qualified Benefits Convenience Claims. Current Executive Officers James C. Kempner President and Chief Executive Officer Douglas W. Ehrendranz Executive Vice President William F. Schwer Executive Vice President & General Counsel Roger W. Hill Managing Director, President & CEO of Holly Benjamin A. Oxnard, Jr. Managing Director, President & CEO of Savannah Foods Peter C. Carrothers Managing Director Mark Q. Huggins Managing Director and CFO John A. Richmond Managing Director & VE-Operations W. J. "Duffy" Smith Managing Director Mark S. Flegenheimer Vice President & President of Michigan Sugar H. P. Mechler Vice President - Accounting Karen L. Mercer Vice President and Treasurer Alan K. Lebsock Controller Roy L. Cordes, Jr. Secretary & Deputy General Counsel In March 2000 Imperial entered into employment agreements with 11 executive officers which, as currently in effect, provide for the following annual salaries: Mr. Kempner - $530,000; Mr. Ehrendranz - $315,000; Mr. Schwer - $305,000; Mr. Smith - $300,000; Mr. Flegenheimer - $205,000; Mr. Carrothers - $280,000; Mr. Huggins - $275,000; Mr. Oxnard - $280,000; Mr. Richmond - $206,000; and Ms. Mercer - $158,400, and Walter Lehneis - $225,000. Separately, in February 1998, Imperial entered into an employment agreement with Mr. Hill which, as amended, provides for an annual salary of $150,000. Each of these agreements provided for an initial term of one year, and automatically renew for additional one-year periods unless Imperial or the respective executive notifies the other party of its intention not to extend the term at least 60 days prior to the end of the then current term. In addition to providing for compensation, all of the employment contracts except for the contracts of Mr. Hill, Mr. Flegenheimer, Mr. Richmond, and Ms. Mercer, originally provided for each executive to receive change-of-control payments equal to two or three times the employee's salary in the event the executive ceased to be employed by the company after a change- of-control. However, as a condition to the Debtors' assumption of the executive employment contracts under the Bankruptcy Code after the commencement of these cases, the executive have been required, as a condition of assumption, to enter into a written agreement waiving all change-of-control payments and otherwise limiting severance payments to a maximum of two years' base salary. All of the executives subject to this requirement have executed such agreements. Change-of-control agreements with Mr. H. P. Mechler and Alan Lebsock are being rejected under the Plan. Imperial has also agreed to provide lump sum supplemental retirement and death benefits to participants in a salary continuation plan implemented by Imperial (Mr. James Kempner, Jr. Hill, Mr. Schwer, Mr. Richmond, and Mr. Carrothers). If the employment of an executive in he salary continuation plan is terminated prior to retirement for any reason other than death, disability or cause, the participant would be entitled to receive, upon attainment of age 55, if his termination was before that birth date, the actuarial equivalent of the payment he would have received had he retired at age 62; provided, however, that no amounts will be due under the salary continuation plan to a participant who is terminated for cause. Mr. Hill received payments of $255,784 in fiscal 2000, and $515,713 in fiscal 2001 under the plan. AS of the Petition Date, the estimated amounts which would be payable upon retirement at or after age 62 is $1,562,818 for Mr. James Kempner, $598,349 for Mr. Schwer, $254,942 for Mr. Richmond, and $157,731 for Mr. Carrothers (assuming in Mr. Carrothers' case a retirement at or after age 65). Finally, Imperial also has established an executive benefits trust which may be used to fund its obligations under certain otherwise unfounded benefit, retirement and deferred compensation plans providing benefits to executive officers of Imperial in the event of a change of control. The Ad Hoc SERP/DC Committee 86 of the Debtors' former executives, employees or survivors holding Inactive Non-qualified Benefits Claims participated in the Debtors' bankruptcy cases as an informal committee in the Debtors' cases and through their counsel, James L. Paul of Chamberlain, Hrdlicka, White, Williams & Martin, and Neil B. Glassman of The Bayard Firm, negotiated with the Debtors, the Ad Hoc Bondholder Committee, and various other constituencies over the treatment of inactive non-qualified benefits claims. These negotiations resulted in the treated described under the Plan. The Debtors believe that the work performed by the Ad Hoc SERP/DC Committee and its counsel resulted in a substantial contribution to the Debtors' reorganization efforts, and accordingly the Plan provides for allowance of reasonable attorneys' fees and expenses incurred by this Committee. Operational Status of Processing Plants As of the date of the Disclosure Statement, the Debtors' three sugar cane refineries in Georgia, Louisiana and Texas are operating at or above levels anticipated in the Debtors' business plan and are sufficiently supplied with raw material inputs to permit them to continue operating at this level for the foreseeable future. The Debtors' sugar beet factories in Michigan and in Sidney, Montana, Worland, Wyoming, Torrington, Wyoming, Mendota, California, and Brawley California also generally are operating on schedule. The Debtors do not anticipate any raw material supply issues at these factories, although all of the Debtors' factories and in particular, factories in California, have been adversely affected by the cost of energy and related increases in the costs of other essential inputs, such as transportation. To date, the Debtors have entered into contracts with beet growers to supply beets for the Debtors' beet factories during the 2001 growing season: Target Current Contracted Refinery Acreage Acreage -------- ------- ------------------ Brawley California 26,700 Fully contracted Mendota, California 28,607 Fully contracted Michigan (aggregate) 115,000 Fully contracted Sidney, Montana 47,500 47,000 Torrington, Wyoming 21,000 21,200 Worland, Wyoming 19,500 18,944 The Debtors expect that the remaining acreage required to bring the Sidney, Worland, Torrington and Michigan factories to full targeted acreage will be contracted shortly. Results of Operations - Second Quarter/Fiscal 2001 Net sales decreased $55.6 million or 13.2% for the three months, and $96.7 million, or 10.8%, fort the six months ending March 31, 2001, compared to 2000 due to lower sales prices for refined sugar, as well as a decline in refined sugar volumes. Such decreases, which affected both the sugar and foodservice segment, were partially offset by higher non-sugar prices in he foodservice segment. Cost of sales decreased $42.8 million, or 10.9%, for the three months, and $69.8 million, or 8.6%, for the six months ending March 31, 2001, resulting in a decrease in gross margin as a percent of sales from 8.5% to 6.1% for the three months and from 9.0% to 6.7% for the six months periods. By segment for the quarter, sugar gross margin as a percent of sales decreased from 8.0% to 3.2% and the foodservice gross margin as a percent of sales increased from 10.2% to 14.7%. The increase in gross margin for the foodservice segment was primarily due to higher non-sugar sales prices and a decrease in raw sugar costs. The decrease in gross margin for the sugar segment is primarily due to higher energy and other manufacturing costs, as well as significantly lower sales prices for refined sugar,, which more than offset the benefits from lower raw sugar costs. Higher energy costs accounted for approximately $4.6 million of the decline in the sugar segment for the quarter. The Decline in refined sugar prices reduced margins significantly in the Debtors' sugarbeet processing operations, where the Debtors share in the net revenues from refined sugar with the growers. The effect on the California sugarbeet factories of extended campaign operations in the first quarter, resulting from large, but low quality sugarbeet crop, also increased manufacturing costs. Additionally, the California operations experienced interruptions in processing as a result of rain delays and one factory was temporarily shut down a number of days due to high energy costs. Selling, general and administrative costs decreased $3.2 million, or 14.3%, for the three months, and $1 million, or 2.4% for the six months ending March 31, 2001, compared to 2000 due to cost savings initiatives. The six months ended March 31, 2001, also included $3.2 million of costs incurred prior to January 16, 2001, relating to the Debtors' preparation to file the reorganized cases. Interest expense decreased $4.8 million for the three months, and $7.2 million for the six months ending march 31, 2001, compared to 2000. However, interest on imperial Senior Subordinated Notes since January 16m 2001, totaling $5.1 million, has not been accrued. Contractual interest cost increased $0.2 million for the three months and decreased $2.1 million for the six months ending March 31, 2001, as a result of higher interest rates and lower overall borrowing levels resulting from the sale of marketable securities and lower inventory levels. The DIP Facility and modified Receivables Purchase Agreement provide for increase in interest rate basis during the bankruptcy period. Accordingly, interest cost in he future may continue to be higher. The Debtors adopted SFAS 133 on October 1, 2000. In accordance with the transition provisions of SFAS 133, the Debtors recorded a cumulative effect of an accounting change, net of tax, to net income of approximately $2.4 million to recognize the fair value of the Debtors' interest rate swaps which are not eligible for hedge accounting under SFAS 133. The fair value of the interest rate swaps declined $4.0 million for the three months and $7.2 million for the six months ending March 31, 2001. Other income increased $2.6 million for the three months and $4.5 million for the six months ending March 31, 2001, compared to 2000 primarily due to realized gains on the settlement of certain trade liabilities in the second quarter, and gains from selling certain emissions reduction creditors from non-operating facilities in California in the first quarter. Corporate Governance On and after the Effective Date, the corporate affairs of Reorganized Imperial will occur in accordance with and under the Amended and Restated Articles of Incorporation of Reorganized Imperial, and the Amended and Restated Bylaws of Reorganized Imperial. The Amended and Restates Articles will provide that the board of directors of Reorganized Imperial will consist of seven members. The initial board of directors will consist of James C. Kempner and those six individuals selected by the Creditors Committee and individuals identified in a document to be filed by the Debtors not later than 15 days before the date of the confirmation hearing. Approval of the Plan will constitute ratification of the directors of Reorganized Imperial without need for any further corporate action. Reorganized Imperial's executive positions on the Effective Date will be filled by the current executive officers of Imperial under the terms of their existing employment contracts, unless the Debtors have rejected such employment contract, at or before the confirmation hearing and terminated the employment of such executive or the employment of such executive otherwise terminates by agreement or applicable nonbankruptcy law. Although decisions about management after the Effective Date will be made by the board of directors of Reorganized Imperial, it is the expectation of the Debtors that substantially all of their prepetition management team will remain in place after the Effective Date. Such decisions, however, will be in the discretion of the board of directors of Reorganized Imperial. The business plan currently developed and adopted by the Debtors' management anticipates that the reorganized Debtors will continue to conduct their businesses, after the Effective Date, in substantially the same manner as is presently being conducted except with an improved balance sheet as a result of the restructuring being implemented by the Plan. The Debtors' management anticipates that the business of the Debtors will continue to focus on their core competency of refining, distributing, and marketing refined sugar and sugar products, with a continuation of the shift that has occurred in recent years toward more value-added functions, such as marketing and distributing. As a part of this focus, the Debtors may explore the sale of non-core assets which do not fit as well as others with the sugar-focused and value- added plan. Management will also continue to consider, and if appropriate, to implement, other steps to ensure that the reorganized Debtors are able to respond to a competitive environment. Substantive Consolidation The Plan is premised upon substantive consolidation of the Debtors' estates for purposes of confirmation, voting on the Plan, and distributions to creditors impaired under the Plan. Under this consolidation, all obligations of the Debtors created under the Plan will be joint and several obligations of all of the Debtors. The Plan will not substantively consolidate the Debtors with respect to unimpaired Classes and creditors in those Classes will continue to be able to look only for repayment from those entities who would have been obligated on such debt as of the Petition Date. (Imperial Sugar Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392- 0900) INTEGRATED HEALTH: Rejecting Curative Arrangement Agreement ----------------------------------------------------------- The Integrated Health Services, Inc. Debtors including IHS Acquisition No. 172 Inc. d/b/a IHS Hospital of Lubbock moved the Court for authority, pursuant to sections 105(a), 365(a) and (g)(1) and 502(g) of the Bankruptcy Code, and rule 6006 of the Bankruptcy Rules, to reject an executory contract, by and between the Hospital and Curative Health Services, Inc. nunc pro tunc as of February 1, 2000. Under the Contract, dated as of July 15, 1999, Curative manages and staffs the Wound Center on behalf of the Hospital. The Hospital pays Curative in accordance with the fee schedule set forth in the Contract and then submits requests primarily to Medicare, for reimbursement in the amount of such payments. Nearly all of the Hospital's Wound Center related reimbursement emanates from Medicare, which, prior to the Petition Date, implemented the Outpatient Prospective Payment System (the "OPPS"). Under OPPS the Hospital's aggregate annual reimbursement for Wound Center services is significantly less than the aggregate annual fees it pays to Curative under the Contract, which was negotiated prior to the implementation of OPPS. The Hospital proposed a fee reduction sufficient to allow the Hospital to realize a modest profit, but Curative was unreceptive to such proposal. The Debtors submitted that the Hospital is capable of operating the Wound Center without Curative. Eliminating the outsourcing costs associated with Curative will significantly reduce the cost of operating the Wound Center. Accordingly. the Debtors submit that it is in the best interests of their estates to continue operating the Wound Center without the assistance of Curative. The Debtors also requested that the Rejection Deadline be thirty days from the date of the notice of entry of an order granting the instant motion. The Debtors proposed that a holder of a claim allegedly arising from the rejection of the Contract who fails to timely file a proof of claim on or prior to the expiration of the Rejection Claims Deadline be: (a) forever barred from asserting such claim against any of the Debtors or their estates; (b) forever barred from sharing in any distribution of the Debtors' estates or assets under any plan or reorganization confirmed in the IHS chapter 11 cases or order of the Court authorizing distributions from the Debtors' estates; and (c) bound by the terms of any such