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/raid1/www/Hosts/bankrupt/TCR_Public/010906.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, September 6, 2001, Vol. 5, No. 174 Headlines 360NETWORKS: Seeks Approval to Reject Willeys Sale Contract AMES DEPT.: Court Okays Payment on $2.5MM In Shippers' Claims AMF BOWLING: Court Okays Arthur Andersen as Debtor's Accountants ARMSTRONG HOLDINGS: Injury Claimants Tap Tersigni as Advisor AVIATION SALES: Gil West Appointed As New EVP & COO BRANDSELITE: Files Under Canadian Bankruptcy & Insolvency Act BRIDGE INFO: Court Okays Sale of Telerate to Moneyline for $10MM BRIDGE INFORMATION: Moves to Reject 7 Warehouse Leases CHINA CONVERGENT: Violates Nasdaq's Net Tangible Asset Rule COMDISCO: Court Okays Proposed Interim Compensation Procedures CONSUMERS PACKAGING: Court Approves Asset Sale to Owens Illinois CONTINUCARE INCORPORATED: Frost Discloses 50.4% Equity Stake COVAD COMMS: Moves to Set Oct. 29 as Bar Date for Filing Claims DANKA BUSINESS: Annual General Meeting Slated for Oct. 9 ENVISIONET: Sells Assets to Microdyne for $10.7 Million GENESIS HEALTH: Lays-Out Case for Confirmation of Joint Plan GLOBAL TELESYSTEMS: Europe Unit Bank Waiver Extended to Sept. 17 HARNISCHFEGER: Resolves Grade & Corby's SERP-Related Claims HEARME: Annual Stockholders Meeting Moved to September 28 ICG COMMS: NetAhead Moves to Reject 3 Telecommunications Leases LOEWEN GROUP: Court Approves Sale of Assets to Denco for $2.25MM LOOK COMMS: Seeks Protection Under CCAA to Firm Up Refinancing LTV CORP: Court Okays Modified USWA Pact, Subject to Revisions MADGE NETWORKS: Likely to Seek Hearing Before Nasdaq Panel MESA AIR: Inks Deal with Raytheon to Lift Default Status MONTANA POWER: Shareholders Convene to Weigh Options on Sept. 14 NETWORK COMMERCE: Moves Annual Shareholders' Meeting to Nov. 8 OWENS CORNING: National Union Funds Employee Claim Settlement PACIFIC GAS: U.S. Trustee Amends Creditors' Committee Membership PAYLESS CASHWAYS: Negotiations For Liquidation Funding Continue PILLOWTEX: Court Allows Debtor to Pay Pension Benefit Claims PSINET INC: Court Approves Sale of HK Assets for $19 Million RELIANCE GROUP: Insurance Commissioner Targets Deloitte & Touche SACO SMARTVISION: Talks with CIBC on $15MM Loan Workout Collapse SEDONA CORP: Fails to Comply with Nasdaq Capital Requirements UNIFORET: Extends Downtime at Pulp Mill for an Indefinite Period USG CORP: Seeks Extension of Lease Decision Period to Feb. 28 VLASIC FOODS: Requests Exclusive Period Extension to Oct. 29 W.R. GRACE: Property Claimants Gripe About Bar Date Motion WARNACO GROUP: Moves to Assume and Assign Grant Avenue Lease WHEELING-PITTSBURGH: Danieli Seeks Relief to Recover Gas Cleaner ********* 360NETWORKS: Seeks Approval to Reject Willeys Sale Contract ----------------------------------------------------------- Last March 30, 2001, 360networks inc. entered into a land purchase agreement with Raymond E. Willey and Tamara A. Willey. At that time, the Debtors wanted to buy a real estate property located at 1315 10th Street in Modesto, California with an area of 0.96 acres for the sum of $575,000. So they paid the Willeys a deposit of $30,000. But now, Shelley C. Chapman, Esq., at Willkie Farr & Gallagher, relates, the Debtors no longer want to close the Sale Contract. According to the Debtors, the Willeys can sell the Modesto property so long as the Willeys return their Deposit and grant them release from the Sale Contract. By this motion, the Debtors ask Judge Gropper for authority to reject the Sale Contract in order to recover their Deposit and obtain a release. Ms. Chapman argues that the settlement is justified because the Debtors will gain access to $30,000 in cash and obtain a release for rejecting a sale contract that no longer fits in the Debtors' business plan and has no meaningful independent value for assumption and assignment. Ms. Chapman notes that the Settlement Agreement is fair and equitable, in the best interests of the Debtors' estate and creditors, thus, it should be approved by the Court. (360 Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) AMES DEPT.: Court Okays Payment on $2.5MM In Shippers' Claims ------------------------------------------------------------- Ames Department Stores, Inc. presents the Court with a motion seeking authority to satisfy pre-petition claims of certain common carriers and distributors. David H. Lissy, Esq., Senior Vice President and General Counsel of Ames Department Stores, Inc., relates that the Debtors employ a number of common carriers and pay various duties and taxes for their local and imported products to be distributed and delivered to their customers. Mr. Lissy details the Debtors' total pre-petition Carrier Obligations, as of Commencement Date: 1) Freight Forwarder Charges -- $ 80,000 2) Freight Broker Charges -- $ 850,000 3) Foreign Transport Charges -- $ 250,000 4) Common Carrier Charges -- $1,300,000 Mr. Lissy anticipates that the failure to pay any Customs Duties will result in the refusal, by the U.S. Customs Service, to clear any imported but unreleased Foreign Goods. Moreover, without the ability to pay any pre-petition Foreign Transport Charges, Mr. Lissy states that overseas carriers, storage facilities, and port authorities may refuse to release the Foreign Goods, thereby impeding the shipment of merchandise to the Debtors' distribution centers and stores. Similarly, absent payment of any outstanding Freight Broker's Fee, the Freight Brokers likely will refuse to perform the services necessary to effect the release of the Foreign goods to the Debtors. In addition, if the Debtors do not pay the Common Carrier Charges, Customs Duties, Foreign Transport Charges, Freight Broker Charges, and Freight Forwarder Charges, the merchandise held by the Common Carriers, Freight Broker, and Freight Forwarders may be subject to possessory liens under applicable state law. Mr. Lissy relates that typically, state laws grant an entity that furnishes services or materials with respect to goods, such as a common carrier, a possessory lien on such goods to secure payment for such charges and related expenses, if such entity retains possession of the goods at issue. Moreover, Mr. Lissy adds that if the Debtors do not pay the Common Carrier Charges, Foreign Transport Charges, Freight Broker Charges, and Freight Forwarder Charges, the Common Carriers, Freight Broker, and Freight Forwarders likely will refuse to deliver the Debtors' merchandise, thereby disrupting the Debtors' business operations. Mr. Lissy discloses that the Debtors have approximately $56,000,000 of goods currently in transit subject to Common Carrier Charges, Customs Duties, Foreign Transport Charges, Freight Broker Charges, and/or Freight Forwarder Charges. Mr. Lissy contends that the Debtors would be severely prejudiced if they were unable to obtain promptly these goods due to any unpaid Common Carrier Charges, Customs Duties, Foreign Transport Charges, Freight Broker Charges, and/or Freight Forwarder Charges. The Debtors submit that such amounts would be de minimis in comparison to the value that the Debtors' estates will receive from an uninterrupted supply of goods. Finding that the relief requested is necessary and in the best interest of the Debtors and their estates and creditors, Judge Gerber authorized the Debtors to pay a total of $2,480,000 in undisputed pre-petition Common Carrier Charges, Foreign Transport Charges, Freight Broker Charges, and Freight Forwarder Charges in the customary trade terms and conditions. Judge Gerber also orders to discharge the liens, if any, the Common Carriers, Freight Forwarders, Freight Brokers, and U.S. Customs Service have on the goods in their possession. (AMES Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) AMF BOWLING: Court Okays Arthur Andersen as Debtor's Accountants ---------------------------------------------------------------- Judge Adams granted AMF Bowling Worldwide, Inc.'s application to employ Arthur Andersen LLP. He also authorized the Debtors to enter into these modified indemnification agreements and procedures: (a) The Debtors are authorized to indemnify Arthur Andersen for any post-petition claim arising from, or related to its engagement, but not for any claim arising from post- petition services not provided for in the Engagement Agreements. No indemnification of is authorized for any pre-petition claim, but Andersen has the discretion to file a proof of claim in the amount it deems sufficient. (b) The Debtors shall have no obligation to indemnify Andersen for any claim that is either judicially determined to have arisen from Andersen's negligence or settled by the Court not to be valid for reimbursement. (c) If, before filing of reorganization plans and closing of these cases, Andersen believes it is entitled to payment of any engagement and reimbursement amounts, including advancement of defense costs, Andersen must file an application before this Court before approval of such payment. (d) The Debtors shall have no obligation to indemnify Andersen for any claim that is brought by any of the Debtors, or in behalf of the Debtors, by the Official Committee of Unsecured Creditors or the United States Trustee. This provision applies only to those causes of action which derive from or through the Debtor and not to any actual third party claims. (e) The liability of Arthur Andersen is not limited by the amount of its fees or by the type of damages sought. (AMF Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) ARMSTRONG HOLDINGS: Injury Claimants Tap Tersigni as Advisor ------------------------------------------------------------ The Official Committee of Asbestos Personal Injury Claimants of Armstrong Holdings, Inc. asks Judge Farnan to approve, nunc pro tunc to February 1, 2001, the employment of L. Tersigni Consulting PC as accountant and financial advisor to the committee. Tersigni will provide services to the Committee which include: (a) Development of oversight methods and procedures so as to enable the Committee to fulfill its responsibilities to monitor the Debtors' financial affairs; (b) Interpretation and analysis of financial materials, including accounting, tax, statistical, financial; and economic data, regarding the Debtor and other relevant parties; and (c) Analysis and advice regarding additional accounting, financial, valuation and related issues that may arise in the course of these proceedings. Tersigni will be compensated on an hourly basis to be paid by the Debtor. Mr. Tersigni's hourly rate is $395, while the other professionals that Tersigni will employ, if needed, will be compensated on the basis of an hourly rate schedule: Managing Director Level $395 Director Level $300 Senior Manager Level $275 Manager Level $225 Professional Staff Level $150-175 Paraprofessional Level $75 For the period beginning October 16, 2000, and through December 31, 2000, Mr. Tersigni provided services to the committee through his former firm, Goldstein Golub Kessler LLP, a partnership of certified public accountants of which Mr. Tersigni was a principal. Mr. Tersigni assures Judge Farnan and the Committee that he will remit to GGK any portion of the fees generated by services rendered during that period which are payable to GGK. No reason is offered for the requested nunc pro tunc employment. Mr. Loreto T. Tersigni assures Judge Farnan that Tersigni Consulting is a disinterested person, and holds no interest adverse to the Debtor and its estate for the matters for which Tersigni Consulting is to be employed, and has no connection to the Debtor, its creditors, or its related parties. However, Tersigni has and will continue to conduct an ongoing review of its files to ensure that no conflicts or other disqualifying circumstances exist or arise. If any new facts or relationships are discovered, Tersigni will supplement its disclosure to the Court. He says that, effective January 1, 2001, he formed and became the principal of L. Tersigni Consulting PC to provide expert accounting and financial advisory services in bankruptcy and complex litigation matters. (Armstrong Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) AVIATION SALES: Gil West Appointed As New EVP & COO --------------------------------------------------- Aviation Sales Company (NYSE:AVS) announced that Gil West has been appointed Executive Vice President and Chief Operating Officer of the Company, effective immediately. In his new role, Mr. West will oversee the Company's maintenance and repair operations, working closely with the Company's President, Ben Quevedo, and with the senior management of the Company's MR&O operations. Mr. West has recently relocated to Greensboro, North Carolina, where he will oversee the Company's operations from the headquarters of the Company's heavy airframe maintenance operations. Mr. West, age 40, has over 17 years of experience in the aviation industry and, since 1996, has been an executive at Northwest Airlines. In his most recent position as Northwest's Vice President of Engine and Component Technical Operations, Mr. West managed over 2,000 Northwest maintenance employees in Northwest's Minneapolis and Atlanta maintenance facilities, as well as managing outside vendor maintenance operations. Prior to joining Northwest, Mr. West served in various managerial positions with United Airlines, Rohr Industries, Sundstrand Corporation and Boeing Commercial Aircraft. Roy T. Rimmer, Jr., Chairman and CEO of Aviation Sales Company, stated: "We are very excited to have Gil join our Company and our senior management team. Gil brings to our organization significant managerial skills and experience in the operation of MR&O facilities, and we are confident that he will contribute significantly towards the improvement of our operations. We also expect that Gil's prior experiences as a senior executive of a large airline will provide us additional and valuable perspective as we work hard to satisfy the MR&O requirements of our airline customers." Mr. West added: "I am very excited about joining the Company and I look forward to working closely with the Company's employees and management. I believe that with the talent and continued hard work of our employees, we will maintain the Company's position as the leader in the airframe heavy maintenance market, as well as enhance the Company's financial performance by providing industry leading quality and delivery performance." Aviation Sales Company is a leading independent provider of fully integrated aviation maintenance, repair and overhaul (MR&O) services for major commercial airlines and maintenance and repair facilities. The Company currently operates four MR&O businesses: TIMCO, which, with its five locations, is one of the largest independent providers of heavy aircraft maintenance services in North America; Aerocell Structures, which specializes in the MR&O of airframe components, including flight surfaces; Aircraft Interior Design, which specializes in the refurbishment of aircraft interior components; and TIMCO Engine Center, which refurbishes JT8D engines. The Company also operates TIMCO Engineered Systems, which provides engineering services to our MR&O operations and our customers. * * * Standard & Poor's lowered its corporate credit and subordinated debt ratings on Aviation Sales Co. to 'D' from triple-'C'-plus and triple-'C'-minus, respectively, after the Company failed to make the interest payment due on Aug. 15, 2001, on $165 million 8.125% subordinated notes maturing in 2008. The nonpayment, according to the rating agency, was part of an agreement with the holders of a majority of the notes to exchange the principal mostly for new notes, with PIK interest, and 15% of the equity in the restructured company. The terms are significantly different from those of the rated $165 million notes. BRANDSELITE: Files Under Canadian Bankruptcy & Insolvency Act ------------------------------------------------------------- Brandselite International Corporation has announced that it has filed a Notice of Intention to make a proposal under the Bankruptcy and Insolvency Act. The filing, done with the support of its major secured creditor, the Laurentian Bank of Canada, allows the company 30 days to explore restructuring options. "The filing gives us an opportunity to find an equity investor and to ensure the continuation of the business into the future," said Douglas Redhead, Vice President, Finance, and Chief Financial Officer of Brandselite. "We plan to work through this period of restructuring the debt and to carry on serving our customers." Brandselite International Corporation, which was established in 1986 and went public in 1993, is a creator, marketer and distributor of proprietary products on a worldwide basis. It is also a marketer and distributor of premium brand-name fragrances, cosmetics, liquor products and luxury gift items to duty-free retailers. The company is headquartered in Richmond Hill, Ontario and its shares are traded on the Toronto Stock Exchange under the symbol 'BNT'. BRIDGE INFO: Court Okays Sale of Telerate to Moneyline for $10MM ---------------------------------------------------------------- President & CEO Jon Robson and executive team assure Telerate customers of commitment to seamless transition; announce a broad product development strategy to deliver a full range of leading market data and trading applications Jon Robson, CEO of MoneyLine Network, Inc., responding to the approval given by the U.S. bankruptcy court last Friday for MoneyLine's acquisition of the global assets of Telerate, Inc. and Bridge Information Systems, Inc. assets in Europe and Asia Pacific, assured customers of continued service backed by a commitment to the highest standards of support. "Our clients will benefit from a proven technology and a significant global network, combined with one of the richest traditions in financial content aggregation. MoneyLine is built on the belief that in doing business the customer's way, responding to changing industry demands and investing in best- of-breed content and technology, we can enable global institutions to achieve the broadest possible reach to their communities, while at the same time controlling costs," said Robson. Robson also said that part of the company's strategy is to renew Telerate's traditional focus on fixed income, foreign exchange and derivatives content and services for capital markets participants. In addition, MoneyLine will be creating a new generation of content and transactional products combining the two company's competitive advantages. MoneyLine's purchase of Telerate was reached in an agreement with Bridge Information Systems, Inc., (BRIDGE(R)). In the deal, MoneyLine will pay BRIDGE $10 million for the Telerate subsidiary and its assets in Europe and Asia, along with other BRIDGE assets, including Telerate Channel, BRIDGE workstation assets in Europe and Asia, and the Bridge Trading Room System (BTRS). In addition, MoneyLine will contribute $5 million to the operating expenses of these businesses. BRIDGE filed for bankruptcy last February. MoneyLine Network, Inc. is a leading provider of hosted Internet-based transactional services, real-time and historical content, and applications. Content partners include Dow Jones Newswires, GovPX, Garban-Intercapital plc, IFR Thomson, S&P, Interactive Data, Market News International, MCM, and global exchanges. Several major financial services and communications companies including ABN Amro, Bank of America, Garban- Intercapital plc, Global Crossing, Merrill Lynch, and Thomson Financial back MoneyLine. The firm, established in 1998, is headquartered in New York City. With the most advanced and open technologies, Telerate helps financial professionals make informed decisions. Bridge and Telerate offer superior content choices including the most complete and dynamic source of capital markets information. Telerate services are distributed across the Savvis Network, one of the world's largest ATM-managed IP networks. The company's products embody a philosophy of openness and flexibility, providing more choices in a variety of cost-effective solutions BRIDGE INFORMATION: Moves to Reject 7 Warehouse Leases ------------------------------------------------------ Bridge Information Systems, Inc. asks Judge McDonald for authority to reject these warehouse leases: Counterparty Leases ------------ ----- Professional Installers, Inc. 4204 N. Union, St. Louis Missouri Hanover Manhattan Warehouse Maspeth Warehouse Jersey City Warehouse North Bergen Warehouse Brooklyn Warehouse Newark Warehouse According to David M. Unseth, Esq., at Bryan Cave, it is in the Debtors' best interests to reject these leases because the maintenance of these leases is only draining the Debtors $21,500 per month of unnecessary expenditures. Besides, Mr. Unseth notes, these warehouse leases are not essential for the Debtors' successful reorganization. The Debtors can live without these leases, Mr. Unseth says. Aside from authorizing the rejection of these leases, the Debtors also want the Court to require the counterparties of the leases to pay over to the Debtors any and all amounts paid by the Debtors for goods and/or services provided subsequent to the rejection date. Professional Installers Object Professional Installers Inc. (PII) currently warehouses certain property for the Debtors and claims a warehouseman's against the Debtors' property in its possession. If the Court rejects the lease and allow the Debtors to remove the property, Scott Greenberg, Esq., at Sandberg, Phoenix & von Gontard, says PII would lose its lien on any of the property. PII asks Judge McDonald to deny the Debtors' motion. Or, then at least protect PII's warehouseman's lien against the Debtors' property in its possession. (Bridge Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900) CHINA CONVERGENT: Violates Nasdaq's Net Tangible Asset Rule ----------------------------------------------------------- China Convergent Corporation Limited (Nasdaq: CVNG) (Australia: CBC; Frankfurt: OLSA) announced that it received a letter from The Nasdaq Stock Market indicating that as of September 6, 2001 its American Depository Receipts will be subject to formal delisting based upon Marketplace Rules 4300 and 4330(a), unless the Company successfully appeals the determination before a Nasdaq Listing Qualifications Panel. In its letter, the Nasdaq staff concluded that the Company did not have a reasonable basis for including on its balance sheet for the year ended December 31, 2000, its largest asset, which is an approximate US$731 million value attributed to the "know- how" related to the Company's project to provide two-way broadband interactive multimedia technology and services through the public cable television network to users in China. If this asset were to be written off, the Company would not qualify with the minimum US$4 million net tangible assets or minimum $10 million shareholders' equity requirement for continued listing on The Nasdaq National Market. The Company has decided to appeal the decision. The Company's ADRs will continue to be traded on the NNM pending the appeal. There can be no assurance the Panel will grant the Company's request for continued listing. If the appeal is unsuccessful and the Company's ADRs are delisted from the NNM, the Company plans to have such ADRs quoted on the Over-The-Counter Bulletin Board. The decision by Nasdaq will have no effect on the Company's day to day business operations. Hong Kong based China Convergent is a China media investor, which owns a majority interest in the Century Vision Network project, a recently launched multiple system operator of digital IP based interactive broadband cable television networks. CVN has also acquired an interest in the China Digital Broadcast Corporation, a joint venture approved by the State Administration for Radio, Film and Television, China's administrative authority for content, broadcast networks and foreign film imports. The Beijing based joint venture will develop a centralized digital data center and broadcast platform for storing classified state, provincial and city information, as well as sub-centers for the exchange of information using the fiber optic networks of local cable systems throughout China. China Convergent's strategy is to create a national alternative to China's telecom monopoly of providing narrowband Internet access and services by capitalizing on China's 90 percent penetration rate for household television access, cable's two to one penetration advantage over fixed-line telephones and SARFT's broadband network, which is the only network out of China's four national fiber optic networks with extensive last mile connections. China Convergent's shares are also traded on the Australian Stock Exchange (Australia: CBC) and the Frankfurt Stock Exchange. COMDISCO: Court Okays Proposed Interim Compensation Procedures -------------------------------------------------------------- At Comdisco, Inc.'s behest, Judge Barliant put his stamp of approval on an Administrative Order Establishing Procedures for Interim Compensation and Reimbursement of Expenses of Professionals. The Compensation Procedures will permit each professional to present a detailed statement of services rendered and expenses incurred by the professional for the prior month. Under the Administrative Order, all professionals may seek payment of compensation and reimbursement of expenses: a) On or before the last day of the month following the month for which the compensation is sought, each professional will submit a monthly statement to: 1) Debtors at Comdisco, Inc., 6111 North River Road, Rosemont, Illinois, 60018 (Attn: Robert Lackey) 2) Counsel to the Debtors, Skadden, Arps, Slate, Meagher & Flom (Illinois), 333 West Wacker Drive, Suite 2100, Chicago, Illinois 60606 (Attn: John Wm. Butler, Jr.) 3) Counsel to the Debtors' post-petition lenders, Jones, Day, Reavis & Pogue, 77 West Wacker, Chicago, Illinois 60601 (Attn: Richard A. Chesley) 4) Counsel to any official committee appointed in these cases 5) The United States Trustee, 227 West Monroe St., Suite 3350, Chicago, Illinois 60606. Each such person receiving such a statement will have 20 days after the monthly statement date to review the statements. b) At the expiration of the 20-day period, the Debtors will promptly pay 90% of the fees and 100% of the disbursements requested in such statement, except such fees and disbursements as to which an objection has been served. Any professional who fails to submit a monthly statement shall be ineligible to receive further payment of fees and expenses as provided herein until such time as the monthly statement is submitted. The first statements shall be submitted and served by each of the professionals by August 31, 2001 and shall cover the period from the commencement of this case through July 31, 2001. c) In the event that any of the Debtors, the US Trustee, the Debtors' post-petition lenders or the Committee has an objection to the compensation or reimbursement sought in a particular statement, such party shall, within 20 days of the Monthly Statement Date, serve upon the respective professionals and other persons designated to receive monthly statements, a written notice "Notice of Objection to Fee Statement" setting forth the precise nature of the abjection and the amount at issue. Thereafter, the objecting party and the professional whose statement is objected to shall attempt to reach an agreement of the objection within 20 days after the receipt of such objection, the objecting party may file its objection with the Court and serve such objection on the respective professional and other parties designated to receive monthly statements parties listed above and the Court shall consider and dispose of the objection at the nest interim fee application hearing. The Debtors will be required to pay promptly those fees and disbursements that are no the subject of a Notice of Objection to Fee Statement. d) Approximately every 4 months, each professional shall file with the Court and serve on the parties designated to receive monthly statements, on or before the 45th day following the last day of the compensation period for which the compensation is sought, an application for interim court approval and allowance of the compensation and disbursement of expenses requested for 4 prior months. The first such application shall be filed on or before January 14, 2002 and shall cover the period from the commencement of these cases through November 30, 2001. Any professional who fails to file an application when due shall be ineligible to receive further interim payment of fees or expenses as provided herein until such time as the application is submitted. e) The pendency of an application for a Court order for compensation or reimbursement of expenses, and the pendency of any Notice of Objection to Fee Statement or other objection shall not disqualify a professional from the future payment of compensation or reimbursement of expenses set forth above. Neither payment of nor failure to pay, in whole or in part, monthly interim compensation and reimbursement as provided herein shall bind any party- in-interest or this Court with respect to the final allowance of applications for compensation and reimbursement of professionals. (Comdisco Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392- 0900) CONSUMERS PACKAGING: Court Approves Asset Sale to Owens Illinois ---------------------------------------------------------------- Consumers Packaging Inc. (TSE: CGC) announced that Mr. Justice Farley of the Ontario Superior Court of Justice has approved the previously announced sale of substantially all of its Canadian assets to Owens Illinois, Inc. (NY: OI). Closing of the transaction is scheduled for late September, 2001 and remains subject to the receipt of regulatory approvals. The Court also extended its order under the Companies' Creditors Arrangement Act (CCAA), continuing the stay of legal proceedings against the Company in respect of its Canadian operations until October 1, 2001. The Company has been operating since May 23, 2001under the Companies' Creditors Arrangement Act. The Company announced on August 3 that it had signed a letter of intent with OI to sell substantially all of its Canadian glass producing assets for approximately $235 million (Canadian). Under the proposed transaction, OI will assume all liabilities under the pension and employee benefit plans of the Canadian operations. "We intend to restructure or sell all remaining assets of Consumers Packaging before the end of the year," said Brent Ballantyne, Chief Restructuring Officer and Chief Executive Officer. "The proceeds from the OI sale and the remaining assets will not provide sufficient cash to repay secured and unsecured creditors in full, and are not expected to leave the Company's shareholders with any residual value. "Once all assets are sold and all known claims against the Company are verified, the final amount available to unsecured creditors will be known and recovery payments made." The fourth report to the Court by KPMG, which has acted as the monitor, provided a preliminary estimate of the recoveries to various creditors once all assets are sold and certain tax and administrative matters are concluded. In its report, KPMG estimates the cash recoveries of secured creditors will be 45- 52%, while unsecured creditors will receive between 4-10% of outstanding liabilities after all residual assets are sold. "The estimates are subject to quantification of unsecured claims and confirmation of the validation of security held by secured creditors," KPMG says in its report. "Our process to deal with the financial situation was thorough," said Mr. Ballantyne. "We believe that the OI transaction and the sale of the residual assets will provide the maximum recovery that can be achieved at this time, and is in the best interests of all stakeholders of Consumers Packaging. "For creditors, it will mean recoveries higher than could be obtained with other proposals received or through liquidation. For employees, OI has agreed to assume all employees at current wage rates and benefit levels and all liabilities under existing pension arrangements. For suppliers, OI is the largest glass manufacturer in the world with technological leadership in the industry, and will be a great customer for many years to come because of its financial and operating strengths. For customers, OI will be a reliable supplier." Consumers Packaging employs approximately 2,400 people in Canada. It manufactures and sells glass containers for the food and beverage industry. It supplies packaging products for the Canadian juice, food, beer, wines and liquor industries from three plants in Ontario (Toronto, Brampton and Milton), and one each in Quebec (Montreal), New Brunswick (Scoudouc) and British Columbia (Lavington). Visit the company web site at: http://www.consumersglass.com CONTINUCARE INCORPORATED: Frost Discloses 50.4% Equity Stake ------------------------------------------------------------ Dr. Phillip Frost, M.D., Frost-Nevada, Limited Partnership, and Frost-Nevada Corporation beneficially own 50.4% of the outstanding common stock of Continucare, Inc. The aggregate purchase price of the 13,889,755 shares of common stock of Continucare and the $797,162 principal amount of the convertible notes of the Company purchased by the Partnership and the 62,900 shares of common stock of the Company purchased by Phillip Frost, M.D. was $1,395,500.50 and $25,926.94, respectively. The source of funds used by the Partnership and Dr. Frost in making these purchases were working capital and personal funds, respectively. No portion of the consideration used by the Partnership nor Dr. Frost in making the purchases described above was borrowed or otherwise obtained for the purpose of acquiring, holding, trading or voting the shares. As the sole limited partner of the Partnership and the sole shareholder of Frost-Nevada Corporation, the general partner of the Partnership, Dr. Frost may be deemed a beneficial owner of the shares. Record ownership of the shares may be transferred from time to time among any or all of Dr. Frost, the Partnership and Frost-Nevada Corporation. Accordingly, solely for purposes of reporting beneficial ownership of the shares each of Dr. Frost, the Partnership and Frost-Nevada Corporation will be deemed to be the beneficial owner of shares held by any of them. * * * Continucare Corporation (AMEX:CNU), a leader in the field of providing outpatient healthcare services through managed care arrangements and home healthcare services in the Florida market, has concluded a restructuring of its outstanding $10 million 7% Convertible Subordinated Notes due 2002. As a result of the restructuring, $6.2 million of the Notes have been purchased by six investors, including entities controlled by Dr. Frost, a director of the Company, and Spencer Angel, President and CEO of the Company. These repurchased Notes were immediately exchanged for an aggregate amount of 6.2 million shares of the Company's common stock and new notes in the aggregate principal amount of $912,195, which mature October 31, 2005, bear interest at 7% (payable semi-annually) and are convertible into shares of the Company's common stock at a conversion rate of $1.00 per share. The six investors also purchased 9.6 million shares of common stock held by these selling Noteholders. Holders of the remaining $3.8 million of outstanding Notes have agreed to restructure various terms of the Notes which, among other things, extend the maturity date to October 2005, reduce the conversion rate from $2.00 to $1.00 per share, provide for quarterly interest payments, and cure all prior defaults under the Notes. Continucare Corporation, headquartered in Miami, Florida, is a holding company with subsidiaries engaged in the business of providing outpatient physician care and home healthcare services. COVAD COMMS: Moves to Set Oct. 29 as Bar Date for Filing Claims --------------------------------------------------------------- Covad Communications Group, Inc. seeks an order establishing October 29, 2001, as the final date by which all pre-petition creditors must file a proof of claim or proof of interest in the above-captioned chapter 11 case and approving the form and manner of the notice thereof. Laura Davis Jones at Pachulski Stang Ziehl Young & Jones P.C. in Wilmington, Delaware states that the circumstances of this case justify fixing the Bar Date as requested herein as it is essential to ascertain, as soon as possible, the nature, extent and scope of the claims asserted against the Debtor. The Debtor proposes that the Notice of the Deadline will be served by mail on all parties identified on the Debtor's list of creditors promptly after approval of this Motion and also proposes to publish the said Notice. Ms. Jones says that the Deadline would apply to all creditors whose claims arose prior to the Petition Date, and each and every claim assertable by such persons or entities, whether filed as general unsecured, priority, or secured status. The following persons and entities may, but need not file proofs of claim: A. any person who, or entity which, has already properly filed a proof of claim against the Debtor with the Clerk of the Bankruptcy Court for the District of Delaware; B. any person or entity whose claim is listed in the Schedule of Liabilities, to be filed with this Court not later than August 20, 2001, in an amount and/or manner with which such person or entity agrees, and which claim is not listed in the Debtor's Schedule of Liabilities as disputed, contingent or unliquidated; C. Claims previously allowed by order of the Court; D. Claims allowed, as administrative expense. The Deadline, for any person or entity whose claim arises from, or as a consequence of, the rejection of an executory contract or unexpired lease shall be as follows: A. if the Court has entered an Order fixing the date by which such claims must be filed, the Order shall govern; B. if the Court has not entered an Order fixing the date by which such claims must be filed, then the Claims Bar Date shall be the later of (a) the Deadline, or (b) 30 days from the date of service of the Order rejecting said contract or lease. Any person or entity, whose claim: (a) is not listed in the Debtor's Schedule of Liabilities; (b) is listed in the Debtor's Schedule of Liabilities in an incorrect amount; (c) is listed in the Debtor's Schedule of Liabilities as disputed, contingent or unliquidated, or (d) who disputes the amount of the claim as indicated in the Debtor's Schedule of Liabilities, who desires to participate fully in the Debtor's cases and share in any distribution will be required to file a proof of claim on or before the Deadline. Any creditor who fails to do so: A. will not, with respect to any such claim, be treated as a creditor of the Debtor for the purpose of voting and distribution; and B. shall be forever barred from: (1) filing a proof of claim with respect to such claim; (2) asserting such claim against the Debtor and its estate and property; (3) voting on any plan; and (4) participating in any distribution in the Debtor's chapter 11 case on account of such claim. Given the factual complexities of the instant case, the Debtor proposes to provide actual, written notice to the following entities: A. Vendors - all vendors with whom the Debtor has conducted business within the two years before the Petition Date readily identifiable from a review of Debtor's books and records. B. Employees and Unions - all employees and unions who have worked for the Debtor within the last year before the Petition Date readily identifiable from a review of Debtor's books and records. C. Customers - any customer who has conducted business with Debtor within the two years before the Petition Date readily identifiable from a review of Debtor's books and records. D. Parties to any litigation - any party and counsel of record, with whom litigation was pending as of the Petition Date. E. Current and past insurance carriers - any current insurance carrier of the Debtor and all carriers used by the Debtor within the two years before the Petition Date readily identifiable from a review of Debtor's books and records. F. Directors and Officers - any current and past Director and Officer of the Debtor who served within three years before the Petition Date. G. Bondholders and accounts payable creditors - all known pre- petition holders of the Notes and creditors listed on the Debtor's accounts payable ledgers as of the Petition Date. H. Taxing authorities - all taxing authorities for the places where the Debtor conducted business within the three years before the Petition Date readily identifiable from a review of Debtor's books and records. I. Affiliates - all the Debtor's affiliates. Given the period of time contemplated by the Debtor, Ms. Jones claims that creditors and interest holders would have more than sufficient notice, time and opportunity to file their proofs of claim. Ms. Jones asserts that the Bar Date Notice will: (i) advise creditors whether they must file a proof of claim; (ii) alert such creditors to the consequences of failing to timely file a proof of claim; (iii) specify the form to be used in filing a proof of claim; (iv) set forth the Bar Date; (v) set forth the address to which proofs of claim must be sent for filing; and (vi) notify such creditors that proofs of claim must be filed with original signatures and not by facsimile. (Covad Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) DANKA BUSINESS: Annual General Meeting Slated for Oct. 9 -------------------------------------------------------- The 2001 annual general meeting of Danka Business Systems PLC will be held on Tuesday, October 9, 2001 at 11 a.m. (London time) at the Grosvenor House Hotel, Park Lane, London W1K 7TN. The formal business of the meeting, will include resolutions proposing: (1) and (2) re-election of directors; (3) re- appointment of the Company's auditors; (4) authorizations for the Company's directors to allot ordinary shares; (5) authorizations to disapply pre-emption rights; (6) and (7) amendments to Company articles of association; (8) amendments to the 1999 share option plan and (9) approval of a new long term incentive plan, the Danka 2001 Long Term Incentive Plan. Danka's progress will be reported upon and comments made on matters of current interest. The Company is one of the world's largest independent suppliers, by revenue, of photocopiers and office imaging equipment. It primarily markets these products and photocopier services, parts and supplies direct to customers in approximately 30 countries. Most of the products that it distributes are manufactured by Canon, Heidelberg, NexPress, Ricoh and Toshiba. Throughout Europe, the Company also markets private label photocopiers, facsimile machines and related supplies directly to customers under its Infotec trademark. In addition, it markets photocopiers and related parts and supplies on a wholesale basis to independent dealers through our international operations. On June 29, 2001, the Company completed a three part financial restructuring plan that reduced and refinanced our indebtedness to provide us with liquidity on a long-term basis. The three parts of the plan were: . the sale of Danka Services International business, . an exchange offer for its 6.75% convertible subordinated notes due April 1, 2002, and . the refinancing of its senior bank debt. The Company sold DSI to Pitney Bowes Inc. for $290.0 million in cash, subject to adjustment depending on the value of DSI's net assets on closing. The Company used the net proceeds of DSI to repay part of its senior bank debt, to finance cash payable under the exchange offer, to finance the costs of the exchange offer and to finance costs associated with the refinancing of its senior bank debt. The Company accepted tenders from holders of a total of $184.0 million in aggregate principal amount (92%) of the 6.75% convertible subordinated notes pursuant to the exchange offer for $24.0 million in cash and approximately $112.1 million in new notes with extended maturities. It refinanced the remaining balance of its senior bank debt through an amended and restated credit facility with its existing senior bank lenders. The facility consists of $100.0 million revolver, $190.0 million term loan and $30.0 million letters of credit commitments. For the three months ended June 30, 2001, operating earnings from continuing operations decreased to a loss of $1.2 million, compared to earnings of $15.3 million in the prior year comparable quarter. Excluding a $6.0 million charge for the exit of facilities in the current year's first quarter and a $8.2 million credit for the reversal of restructuring reserves in the comparable quarter of the prior year, earnings from operations declined $2.3 million due to lower gross profit margins that were only partially offset by lower operating expenses. The Company has a $320.0 million credit facility with a consortium of international bank lenders through March 31, 2004. The credit facility requires that it complies with minimum levels of adjusted consolidated net worth, cumulative consolidated EBITDA, a ratio of consolidated EBITDA to interest expense, and maximum levels of capital expenditures. The covenants are effective for its second quarter ending September 30, 2001. As of June 30, 2001, it owed approximately $240.0 million under the credit facility. The available unused commitments as of June 30, 2001 are $50.0 million under the revolving credit facility and $2.5 million under the letter of credit facility. The credit facility limits the Company from incurring other significant indebtedness beyond certain agreed upon limits. It was incurring interest on its indebtedness under the credit facility during the first quarter ended June 30, 2001 at a weighted average rate of 7.64% per annum. Effective interest rates under the new credit facility are LIBOR, plus 5 percent. The interest rate will increase by 0.5% on December 29, 2001, June 29, 2001 and quarterly thereafter. The term component of the facility requires, principal installments of $5.0 million in fiscal year 2002, $16.0 million in fiscal year 2003, and $24.0 million in fiscal year 2004, with payment due in full on March 31, 2004. The Company's indebtedness under the credit facility is secured by substantially all of its assets in the United States, Canada, U.K., the Netherlands and Germany. The credit facility contains negative and affirmative covenants which restrict our ability to incur additional indebtedness and create liens, prohibit the payment of dividends, other than payment-in-kind dividends on its participating shares, and require the Company to maintain certain financial ratios. The Company is not permitted to make any acquisitions of businesses, except with the approval of our bank lenders. It cannot dispose of any of its assets outside the ordinary course of business without the approval of bank lenders. On June 30, 2002, it is required to pay its banks a fee equal to 1.5% of the total commitment under the credit facility and on June 30, 2003 a fee equal to 4.0% of the current commitment. ENVISIONET: Sells Assets to Microdyne for $10.7 Million ------------------------------------------------------- RCW Mirus announced that it assisted its client, ENVISIONeT Computer Services, Inc., in a sale to Microdyne Outsourcing Inc. of Torrance, California. ENVISIONeT engaged Mirus after filing for bankruptcy in June. "RCW Mirus did a great job for us," said John Donnelly the CEO of ENVISIONeT. "Their team achieved a very successful outcome under difficult circumstances." "We're pleased that we were able to recover significant value for the creditors," said Jamie Grant, the lead investment banker on the transaction. "Despite ENVISIONeT's situation, we developed significant interest for the Company and were able to secure written offers from eight prospective buyers in the first two weeks. After helping the Company secure short-term financing in July, we ran an orderly sale process which ended successfully this week with the sale to Microdyne." Microdyne Outsourcing Inc. is a subsidiary of L-3 Communications. It paid $10.7 million for the assets of ENVISIONeT, following a bidding process that involved several suitors and lasted for several weeks. RCW Mirus provides investment banking solutions to middle market corporations in targeted technology and manufacturing industries. Mirus delivers merger advisory, private equity raising, fairness opinions and valuation services to middle market entrepreneurs, corporations and professional financial investors. Additional information about the firm is available on Mirus' web site http://www.merger.com GENESIS HEALTH: Lays-Out Case for Confirmation of Joint Plan ------------------------------------------------------------ Genesis Health Ventures, Inc.'s legal team, led by Michael F. Walsh, Esq., and Gary T. Holtzer, Esq., at Weil, Gotshal & Manges LLP, and Multicare's lawyers, led by Marc Abrams, Esq., and Paul V. Shalhoub, Esq., at Willkie Farr & Gallagher, lay-out their case in support of confirmation of the companies' Joint Plan of Reorganization, as Amended. The Debtors and their professionals represent that the Plan should be confirmed because it complies with all applicable provisions of the Bankruptcy Code and the Bankruptcy Rules, and all creditor constituencies overwhelmingly support confirmation of it. The Plan is the culmination of extensive, good faith negotiations among the Debtors and their major creditor constituencies and has the full support of: * the Genesis Creditors' Committee; * the Genesis Senior Lenders; * the Multicare Creditors' Committee; * the Multicare Senior Lenders. The legal team notes that, of the thousands of creditors, shareholders, and parties in interest in these eases, only a handful of substantive and/or technical objections to confirmation of the Plan have been filed, some of which have been consensually resolved. The team presents the Court with the Debtors' Omnibus Response to Objections to Confirmation, concurrently with the Memorandum of Law in support of confirmation. In particular, the team notes that the central issue before the Court in connection with confirmation of the Plan is the valuation of the Genesis enterprise and, to a lesser extent, the Multicare enterprise. GMS and Grimes have asserted that the Debtors have grossly undervalued the Genesis enterprise, the effect of which is to give the Genesis Senior Lenders a greater than 100% recovery under the Plan. Led by the GMS Group LLC and Mr. Charles L. Grimes, the class of claims of holders of public subordinated debt of Genesis, has voted to reject the Plan. The Debtors believe, based upon the current tabulation, that this is the only Class that has voted to reject the Plan (other than Classes with single secured creditors that the Debtors resolved). The Debtors' legal professionals tell the Court that GMS and Grimes are wrong. The value of the Genesis enterprise is $1,325,000,000, the professionals represent, based on the analysis of William C. MeGahan (Vice Chairman of UBS Warburg - the financial advisor for Genesis). This amount is the midpoint in the range of values ($1,200,000,000 to $1,450,000,000) established by UBS Warburg in their most recent valuation analysis, dated August 2001, of the Genesis enterprise. The range of enterprise values specified in the April Valuation was $1,000,000,000 to $1,250,000,000 (midpoint of $1,125,000,000). The professionals demonstrate to the Court that, at that valuation, the Genesis Senior Lenders will receive only an 82.36% recovery on their claims. The 78.89% recovery for the Genesis Senior Lenders specified in the Disclosure Statement did not include postpetition interest as part of the claims of those lenders. The enterprise value required to provide a 100% recovery to the Genesis Senior Lenders under the terms of the Plan is approximately $1,548,000,000, the professionals demonstrate to the Court. Thus, the magnitude of the shortfall is almost $225 million. The valuation of the Genesis and Multicare enterprises is also central to the objections lodged by certain personal injury claimants, who contend the Plan unfairly discriminates against them by subordinating a portion of their claims - their punitive damage claims only - to other unsecured claims. They also are wrong, the Debtors' professionals tell the Court. The enterprise value of the Genesis Debtors and the Multieare Debtors is insufficient to satisfy the Claims of the Genesis Senior Lenders and the Multicare Senior Lenders. Under the absolute priority rule, general unsecured creditors are not entitled to receive any distribution, the legal team represents. Notwithstanding that rule, the team argues, the Genesis Senior Lenders and the Multicare Senior Lenders have allocated a portion of their respective distributions under the Plan to Classes G4 and M4 (Genesis General Unsecured Claims and Multicare General Unsecured Claims, respectively) and Classes G5 and MS (Genesis Senior Subordinated Note Claims and Multicare Senior Subordinated Note Claims, respectively) in settlement of all issues relating to confirmation. The fact that the senior secured lenders of the Debtors chose not to allocate a portion of their recovery to unsecured, contingent, punitive damage claims does not constitute unfair discrimination under section 1129(b), the legal team argues. The unresolved objections (including those of GMS and Grimes), being singularly devoid of merit, should be overruled, and the Plan should be confirmed, the legal team represents. The Plan has three fundamental premises, the legal team tells the Court. First, it significantly reduces the amount of debt in the Debtors' capital structures by distributing most of the value under the Plan in the form of common stock. This deleveraging will allow the Debtors to maximize the return on the Plan Securities. It will also assure that the Debtors' future cash flows are sufficient to handle the proposed debt burden. Second, the Plan provides for value - in the form of common stock and warrants - to be distributed to the holders of allowed unsecured claims. Under the rule of absolute priority, no enterprise value would be available to provide any distribution to unsecured classes. The Plan represents a negotiated settlement among the Debtors, the Genesis Creditors' Committee, the Genesis Senior Lenders, the Multicare Creditors' Committee, and the Multicare Senior Lenders, which provides significant recoveries for holders of allowed unsecured claims. Finally, the proposed merger of Genesis and Multicare is intended to accomplish several objectives. Most importantly, the Genesis Debtors and the Multicare Debtors currently benefit from significant operating synergies because of the contractual management and service agreements between them. The proposed merger will "lock in" those values by assuring that Genesis and Multicare will not be split in the future. The merger also allows the Debtors to distribute a single equity security of a larger overall enterprise to their respective creditors. The Debtors believe such an equity security will be more liquid and will attract more interest in the public markets from investors and research analysts. The improved trading market should benefit those creditors who do not want to hold common stock. The proposed merger also has made it easier to arrange the significant amount of exit financing that is required in these chapter 11 cases. Inasmuch as the administrative claims at the Genesis Debtors far exceed those at the Multicare Debtors, the merger provides additional benefit to the estates of the Genesis Debtors, the legal team represents on behalf of the Debtors. In particular, the Debtors represent that the Plan fully complies with all applicable requirements of the Bankruptcy Code. The Memorandum addresses each requirement in seriatim as follows: I. Burden of Proof under Section 1129 To obtain confirmation of the Plan, the Debtors must demonstrate that the Plan satisfies the provisions of section 1129(a) of the Bankruptcy Code by a preponderance of the evidence. The Debtors represent that the preponderance of evidence they presented show that all the subsections of section 1129 of the Bankruptcy Code have been satisfied with respect to the Plan. II. Merger of Genesis and Multicare Pursuant to the Plan, Multicare will merge with a newly-created, indirect subsidiary of Genesis ("Newsub"). Both Multicare and Newsub are Delaware corporations. Sections 303(a) and (b), in conjunction with section 251, of the Delaware General Corporation Law provide that any corporation may make fundamental corporate changes, including a merger or consolidation, without further action of its directors or shareholders, so long as such changes are pursuant to a plan of reorganization approved by order of a court of competent jurisdiction. Del. Code Ann. tit. 8, sections 251, 303. In addition, the Plan provides for the creditors of Genesis who will receive common stock of Genesis and the creditors of Multicare who would otherwise receive the common stock of Multicare to become shareholders of Multicare immediately before the merger occurs. By voting for the Plan, those creditors are consenting to the merger. The merger, which will take place on the Effective Date, is governed by the Plan of Merger. The effect of the merger will be an immediate exchange of the new common stock of Multicare for cash and Restructuring Securities of Genesis (New Senior Notes, New Convertible Preferred Stock, New Common Stock, and New Warrants). Based on the votes received to accept the Plan, all Delaware corporate law requirements have been met. III. Section 1129 of the Bankruptcy Code (A) Section 1129(a) of the Bankruptcy Code (1) The Plan Complies with All Applicable Provisions of the Bankruptcy Code Under section 1l29(a)(1) of the Bankruptcy Code, a plan must "compl[y] with the applicable provisions of [the Bankruptcy Code]." 11 U.S.C. section 1l29(a)(l). As demonstrated below, the Plan complies fully with the requirements of both sections, as well as with all other provisions of the Bankruptcy Code. (a) Classification of Claims and Interests Section 1122 of the Bankruptcy Code authorizes multiple classes of claims or interests as long as each claim or interest within a class is substantially similar to other claims or interests in that class. 11 U.S.C. section 1122. The legislative history of section 1129(a)(l) explains that this provision encompasses the requirements of sections 1122 and 1123 governing classification of claims and contents of the plan, respectively. The Plan provides for separate classification of Claims and Equity Interests in 19 Classes based upon differences in the legal nature and/or priority of such Claims and Equity interests. Debtor in Possession Credit Agreement Claims, Other Administrative Expense Claims, and Priority Tax Claims are not classified and are separately treated. Each of the Claims or Equity Interests in each particular Class is substantially similar to the other Claims or Equity Interests in such Class. (b) Contents of Plan Section 1123(a) of the Bankruptcy Code sets forth seven requirements with which every chapter 11 plan must comply. The Plan fully complies with each such requirement: -- Section 3 of the Plan designates Classes of Claims and Classes of Equity Interests as required by section 1123(a)(l). -- Under the Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims need not be classified and must only be designated. Accordingly, Administrative Expense Claims, Priority Tax Claims, and Claims under the Debtors' Revolving Credit and Guaranty Agreement are designated in Section 2 of the Plan. -- Section 4 of the Plan specifies the Classes of Claims that are not impaired under the Plan and the treatment of each Class of Claims and Equity Interests as required by sections 1123(a)(2) and 1123(a)(3), respectively. -- The treatment of each Claim or Equity Interest in each particular Class is the same as the treatment of each other Claim or Equity Interest in such Class as required by section 1l23(a)(4). -- Sections 5, 6, 7, 8, and 10 and various other provisions of the Plan set forth the means for implementation of the Plan as required by section 1123(a)(S), including the deemed consolidation of the Genesis Debtors and the Multicare Debtors, and the merger of Genesis and Multicare. -- Section 5.13 of the Plan provides that the Amended Certificate of incorporation for Reorganized Genesis and the amended certificates of incorporation for each of the other Reorganized Debtors that are corporations shall prohibit the issuance of nonvoting equity securities, to ensure compliance with section 1123(a)(6). -- Section 5.12 of the Plan contains provisions with respect to the manner of selection of directors of the Reorganized Debtors that are consistent with the interests of creditors, equity security holders, and public policy in accordance with section 1123(a)(7). Section 1123(b) sets forth the permissive provisions that may be incorporated into a chapter 11 plan. Each provision of the Plan is consistent with section 1123(b). The Plan provides in Section 4 that, Classes G1-1 through G1- 12, G3, G6, M1-1 through M1-6, M3, and M6 are rendered unimpaired and Classes G1-13 through Gl-17, G2, G4, G5, G7, G8, G9, G10, G1l, Ml-7, M2, M4, M5, M7, and M8 are impaired, as contemplated by section 1123(b)(2). Section 8 of the Plan provides for the assumption, assumption and assignment, or rejection, as appropriate, of the executory contracts and unexpired leases of the Debtors not previously assumed, assumed and assigned, or rejected (or for which the motions for assumption or rejection are pending) under section 365 of the Bankruptcy Code as contemplated by section 1123(b)(2). Sections 5.15 and 5.16 of the Plan provide for compromises and settlements, pursuant to Bankruptcy Rule 9019, of (i) claims by the United States of America, acting through the United States Department of Health and Human Services, the Centers for Medicare and Medicaid Services f/k/a the Health Care Financing Administration, the Office of Inspector General, the Department of Justice, and other agencies or departments of the United States against the Genesis Debtors and (ii) claims between the Genesis Debtors and the Multicare Debtors, respectively. (c) Deemed Consolidation Section 5.1 of the Plan provides that, for purposes of distributions to Classes G2, G4, and G5, the Genesis Debtors will be considered to be a single legal entity. Similarly, for purposes of distributions to Classes M2, M4, and M5, the Multicare Debtors will be considered to be a single legal entity (although separate from the Genesis Debtors). (The Plan does not consolidate the Genesis Debtors with the Multicare Debtors. The Plan of Merger combines the two companies once each company has been recapitalized consistent with its own enterprise value.) This "deemed" consolidation has three major effects. First, it eliminates the Genesis Intercompany Claims and the Multicare Intercompany Claims from the treatment scheme. Second, it eliminates guaranties of the obligations of one Genesis Debtor by another Genesis Debtor and one Multicare Debtor by another Multicare Debtor. Finally, each claim filed in Classes G2, G4, and G5 against any of the Genesis Debtors or in Classes M1, M4, and M5 against any of the Multicare Debtors would be considered to be a single claim against the consolidated Genesis Debtors or the consolidated Multicare Debtors, respectively. Notably, the deemed consolidation will not affect the legal organizational structure of the Reorganized Debtors, the modification or reinstatement of Claims in Classes Gl and Ml, guaranties or the grants of collateral in connection with any financing entered into, or New Senior Notes issued, on the Effective Date or pursuant to any contract or lease that is assumed under the Plan, or distributions out of any insurance policies or proceeds of policies. The deemed consolidation of their respective estates is warranted in light of the criteria established by the courts in ruling on the propriety of substantive consolidation in other cases. The two critical factors considered in assessing the entitlement to substantive consolidation are (i) whether creditors dealt with the Genesis Debtors or the Multicare Debtors as a single economic unit and did not rely on their separate identity in extending credit or (ii) whether the affairs of the Genesis Debtors or the Multicare Debtors are so entangled that consolidation will benefit all creditors. the United States Bankruptcy Court for the District of Delaware rendered an unpublished letter decision in 1996 with respect to a motion for substantive consolidation in the chapter 11 cases of Smith Corona Corp., et al, Ch. 11 Case No. 95-788 (HSB) (Bankr. D. Del. Oct. 18, 1996). The court also referenced the "entanglement" and "substantial identity" factors adopted by the Second Circuit in Augie/Restivo and stated that the factors to consider include: (i) the necessity of consolidation due to the interrelationship among the debtors; (ii) whether the benefits from consolidation outweigh the harm to creditors; and (iii) prejudice resulting from not consolidating the debtors. 962 F.2d at 799. (i) Substantial Identity/Interrelationship/Entanglement The instant facts demonstrate a substantial identity and an extensive interrelationship, interdependence, and entanglement between and among the Genesis Debtors, considering the integrated healthcare networks with little correlation between the names of the centers and the names of the legal entities that technically own such facilities, the organization of their books and records, the filing with the Bankruptcy Court of their statement of financial affairs, schedules of assets and liabilities, and schedules of executory contracts and unexpired leases on a partially consolidated basis, the large amount of intercompany claims that are difficult to reconcile and the lack of formality of separate corporate entities between business units. As such, the Genesis Debtors participate in a unified cash management system (which includes non-Debtor subsidiaries) which would make it extremely difficult to confirm a plan of reorganization for individual Genesis Debtors. Other than the fact that Genesis has an institutional pharmacy business and Multicare does not, all the factors concerning substantial identity, interrelationship, and entanglement set forth as to the Genesis Debtors apply with equal force to the Multicare Debtors. (ii) Harm or Prejudice to Creditors/Reliance Upon Separate Credit The vast majority of the Claims against the Genesis Debtors are at the parent level - i.e., all the Claims in Classes G2 and G5, as well as the majority of the Claims in Class G4. The Claims of the Genesis Senior Lenders (Class G2) are also at substantially all the other Genesis Debtors and are secured by substantially all the assets of those entities. Therefore, as to each of these Genesis Debtors, no economic value would remain for individual unsecured creditors. The Genesis Senior Lenders and the Multicare Senior Lenders dealt with the Genesis Debtors as a single economic unit and the Multicare Debtors as a single economic unit, respectively, and did not rely on the separate identities of the individual Debtor entities in extending credit. The secured claims of the Genesis Senior Lenders at each of these subsidiary Genesis Debtors would leave no value for any Genesis General Unsecured Claims against such subsidiary Genesis Debtor. These courses of dealing and the expectations of the holders of the Genesis Senior Lender Claims and the Multicare Senior Lender Claims justify consolidation in the chapter 11 cases. Moreover, all financial information disseminated to the public by the Genesis Debtors and the Multicare Debtors is prepared and presented on a consolidated basis. As a result, creditors cannot demonstrate that they relied upon the separate identity of one or more Debtors in extending credit. Having relied upon the creditworthiness of the Genesis Debtors and the Multicare Debtors, respectively, each as a unit, such creditors should be entitled to satisfaction of their claims from two single pools of assets. Absent deemed consolidation, the Genesis Debtors and the Multicare Debtors would be required to disentangle their respective operations and businesses, which would be costly. Moreover, absent deemed consolidation, creditors would only be entitled to receive equity of each individual Debtor entity (if anything at all). Under the Plan, creditors are receiving equity in Genesis which will trade publicly and allow creditors to realize value more readily. (iii) Deemed Consolidation is Solely for Purposes of the Plan, Without Which the Debtors and Creditors Would Be Unduly Prejudiced Following confirmation of the Plan, the legal and corporate structures of Genesis, Multicare, and their Debtor and non- Debtor subsidiaries will remain intact and unaffected. A limited consolidation, for plan purposes only, is necessary to avoid adverse tax consequences that a permanent consolidation could entail. Lastly, deemed consolidation in these chapter 11 cases will promote judicial economy and ease of administration and minimize the costs of administration of the Debtors' chapter 11 cases. (2) The Debtors Have Complied With the Provisions of the Bankruptcy Code Section 1129(a)(2) of the Bankruptcy Code requires that the plan proponents "compl[y] with the applicable provisions of [the Bankruptcy Code]." 11 U.S.C. section 1129(a)(2). The Debtors submit that they have complied with the applicable provisions of title 11, including the provisions of sections 1125 and 1126 regarding disclosure and plan solicitation: -- the Disclosure Statement was approved by order, dated July 13, 2001 (the "Solicitation Order"), -- each holder of a Claim or Equity interest received the solicitation materials required by the Solicitation Order, as set forth in the Declaration of Laura DiBiase Certifying the Acceptances and Rejections of the Debtors' Joint Plan of Reorganization (the "Voting Certification"), -- The Debtors did not solicit acceptance of the Plan by any creditor or equity interest holder prior to the transmission of the Disclosure Statement. -- Under section 1126, only holders of Allowed Claims in impaired Classes of Claims that will receive or retain property under the Plan on account of such Claims may vote to accept or reject the Plan. In accordance with section 1126 of the Bankruptcy Code, the Debtors solicited acceptances of the Plan from the holders of all Allowed Claims in each Class of impaired Claims that are to receive distributions under the Plan. (3) The Plan Has Been Proposed in Good Faith and Not by Any Means Forbidden by Law Section 1129(a)(3) of the Bankruptcy Code requires that a plan be "proposed in good faith and not by any means forbidden by law." The good faith standard requires that the plan be "proposed with honesty, good intentions and a basis for expecting that a reorganization can be effected with results consistent with the objectives and purposes of the Bankruptcy Code." In the "context of a chapter 11 plan, courts have held [that] a plan is to be considered in good faith 'if there is a reasonable likelihood that the plan will achieve a result consistent with the standards prescribed under the [Bankruptcy] Code." In re PPI Enters. (US,), Inc., 228 B.R. 339 (Bankr D. Del. 1998) (quoting In re Toy & Sports Warehouse, Inc., 37 B.R. at 149)). The primary goal of chapter 11 is to promote the restructuring of the debt obligations of a debtor. Congress has recognized that the continuation of the operation of a debtor's business as a viable entity benefits the national economy through the preservation of jobs and continued production of goods and services). The Plan accomplishes this goal by providing the means through which the Debtors may continue to operate as a viable entity. In addition to fulfilling the rehabilitative function of the Bankruptcy Code, the Plan also allows creditors and equity interest holders to realize the highest possible recoveries under the circumstances. The Plan is the result of extensive arm's-length negotiations among the Debtors, the Genesis Senior Lenders, the Multicare Senior Lenders, the Genesis Creditors' Committee, the Multicare Creditors' Committees, and other parties in interest. The support of the Plan by the Genesis Creditors' Committee and Multicare Creditors' Committee reflects their acknowledgment that the Plan provides fundamental fairness to general unsecured creditors. Inasmuch as the Plan promotes the rehabilitative objectives and purposes of the Bankruptcy Code, the Plan has been filed in good faith and the requirements of section 1l29(a)(3) are satisfied. (4) The Plan Provides that Payments Made by the Debtors for Services or Costs and Expenses are Subject to Court Approval Section 1l29(a)(4) requires that certain professional fees and expenses paid by the plan proponent, the debtor, or a person receiving distributions of property under the plan, be subject to approval by the Court as reasonable. 11 U.S.C. section 1129(a)(4). Section 1129(a)(4) has been construed to require that all payments of professional fees which are made from estate assets be subject to review and approval as to their reasonableness by the Court. See River Village Assocs., 161 B.R. at 141; Resorts Int'l, 145 B.R. at 475; Elsinore Shore, 91 B.R. at 267-68. Pursuant to the interim application procedures established under section 331 of the Bankruptcy Code, the Court authorized and approved the payment of certain fees and expenses of professionals retained in the Reorganization Cases. All such fees and expenses, as well as all other accrued fees and expenses of professionals through the Effective Date, remain subject to final review for reasonableness by the Court under section 330. In addition, pursuant to sections 503(b)(3) and (4), the Court must review any application for substantial contribution to ensure compliance with the statutory requirements and that the fees requested are reasonable. Lastly, all payments to be made in connection with the Effective Date or which otherwise are required to be disclosed, including any amounts to be paid to officers and directors, will be disclosed at the Confirmation Hearing. (5) The Debtors Have Disclosed or Will Disclose All Necessary information Regarding Directors, Officers, and Insiders Section 1l29(a)(5) of the Bankruptcy Code requires that the plan proponent disclose the identity and affiliations of the proposed officers and directors of the reorganized debtors; that the appointment or continuance of such officers and directors be consistent with the interests of creditors and equity security holders and with public policy; and that there be disclosure of the identity and compensation of any insiders to be retained or employed by the reorganized debtors. 11 U.S.C. section 1129(a)(5). The employment of officers and directors by Reorganized Genesis, as described above, is consistent with the interests of creditors and equity security holders and, indeed, is essential to the ongoing viability of the Debtors' businesses. The current and continuing officers of the Debtors are intimately familiar with the businesses of the Debtors and are needed to maintain critical business relationships with lenders, suppliers, customers, and other parties. In fact, the employment of officers and directors by Reorganized Genesis as contemplated by the Plan has the support of the holders of the Genesis Senior Lender Claims and the Multicare Senior Lender Claims, the Genesis Creditors' Committee, and the Multicare Creditors' Committee. The Debtors have disclosed the identity of the individuals to serve on the initial board of directors of the Reorganized Debtors. The Debtors have disclosed that senior management of Genesis immediately prior to the Effective Date will continue their positions in Reorganized Genesis. The Debtors have also disclosed the nature of the compensation currently paid to their officers and directors. (6) The Plan Does Not Contain Rate Changes Subject to the Jurisdiction of Any Governmental Regulatory Commission Section 1129(a)(6) of the Bankruptcy Code requires that any regulatory commission having jurisdiction over the rates charged by the reorganized debtor in the operation of its businesses approve any rate change provided for in the plan. 11 U.S.C. section 1129(a)(6). This provision is inapplicable in the instant case. The Plan does not provide for rate changes subject to the jurisdiction of any governmental regulatory agency by the Reorganized Debtors. Hence, regulatory approval is unnecessary under the terms of the statute. (7) The Plan Is in the Best Interests of A11 Creditors of and Interest Holders in the Debtors Section 1129(a)(7) of the Bankruptcy Code requires that a plan be in the best interests of creditors and stockholders. The best interests test focuses on individual dissenting creditors rather than classes of claims. See Bank of Am. Nat'l Trust & Sav. Ass'n v. 203 N. LaSalle St. P'ship, 526 U.S. 434 (1999). It requires that each holder of a claim or equity interest either accepts the plan or will receive or retain under the plan property having a present value, as of the effective date of the plan, not less than the amount such holder would receive or retain if the debtor were liquidated under chapter 7 of the Bankruptcy Code. Under the best interests test, the court "must find that each [non-accepting] creditor will receive or retain value that is not less than the amount he would receive if the debtor were liquidated." 203 N. LaSalle, 526 U.S. at 440; United States v. Reorganized CF&I Fabricators, Inc., 518 U.S. 213, 228 (1996). As section 1129(a)(7) makes clear, the liquidation analysis applies only to nonaccepting impaired claims or equity interests. If a class of claims or equity interests unanimously accepts the plan, the best interests test automatically is deemed satisfied for all members of that class. In the instant case, the best interests test is satisfied as to each impaired Claim and Equity interest. As to Classes which have unanimously accepted the Plan, the best interests test is automatically deemed satisfied for all holders of Claims of such Classes. A chapter 7 liquidation of the Debtors' estates would result in zero distribution to unsecured creditors and equity interest holders in the Reorganization Cases. Under the Plan, however, Claims in Classes G4, G5, M4, and M5 will receive New Common Stock and New Warrants, with an estimated recovery of over 12% based on the most recent valuations of the Debtors. As set forth in the Liquidation Analyses, the value of the Debtors' assets in a chapter 7 case would be substantially eroded as a result of the liquidation of such assets that might be required under chapter 7 and its "forced sale" atmosphere. Moreover, the increased costs associated with a liquidation under chapter 7 would substantially reduce the proceeds available for distribution. These costs would include, among other things, administrative fees and costs payable to a trustee in bankruptcy and professional advisors to such trustee and substantial increases in claims which would be satisfied on a priority basis or on parity with creditors in the Reorganization Cases. In the context of the erosion of the asset values and the increased costs and delay associated with a chapter 7 case, confirmation of the Plan provides each rejecting creditor and interest holder with a recovery that is not less than such holder would receive in a chapter 7 liquidation of the Debtors. (8) Voting Results Section 1129(a)(8) of the Bankruptcy Code requires that each class of impaired claims or interests accept the plan, as follows: "With respect to each class of claims or interests - (A) such class has accepted the plan; or (B) such class is not impaired under the plan." 11 U.S.C. section 1129(a)(8). The Debtors believe that the Plan has been accepted by creditors holding well in excess of two-thirds in amount and one-half in number in each of the Classes entitled to vote under the Plan, except for Class G5. (9) The Plan Provides for Payment in Full of All Allowed Priority Claims Section 1129(a)(9) of the Bankruptcy Code requires that persons holding allowed claims entitled to priority under section 507(a) receive specified cash payments under the plan. Unless the holder of a particular claim agrees to a different treatment with respect to such claim, section 1129(a)(9) of the Bankruptcy Code sets forth the treatment the plan must provide. 11 U.S.C. section 1129(a)(9). Pursuant to Sections 2 and 4 of the Plan, and in accordance with sections 1129(a)(9)(A) and (B), the Plan provides that all A1lowed Administrative Claims under section 503(b) of the Bankruptcy Code and all Allowed Genesis Priority Non-Tax Claims and Allowed Multicare Priority Non-Tax Claims under section 507(a) (excluding Priority Tax Claims under section 507(a)(8) described below) will be paid in full, in Cash, on the later of the Effective Date and the date such Claims become Allowed Claims, or as soon thereafter as is practicable. Pursuant to Section 2 of the Plan, Allowed Administrative Claims representing liabilities incurred in the ordinary course of business by the Debtors, including tax liabilities, or liabilities arising under loans or advances to or other obligations incurred by the Debtors, to the extent authorized and approved by the Court if such authorization and approval was required under the Bankruptcy Code, shall be paid in full and performed by the Reorganized Debtors in the ordinary course of business in accordance with the terms and subject to the conditions of any agreements governing, instruments evidencing, or other documents relating to, such transactions. Thus, the requirements of section 1129(a)(9)(B) of the Bankruptcy Code are satisfied. Lastly, the Plan satisfies the requirements of section 1129(a)(9)(C) of the Bankruptcy Code in respect of the treatment of Priority Tax Claims under section 507(a)(8). (10) At Least One Class of Impaired Claims Has Accepted the Plan Section 11 29(a)( 10) of the Bankruptcy Code requires the affirmative acceptance of the Plan by at least one Class of impaired Claims, "determined without including any acceptance of the plan by any insider." 11 U.S.C. section 1129(a)(l0). The Plan clearly satisfies this requirement. (11) The Plan is Not Likely to be Followed by Liquidation or the Need for Further Financial Reorganization Section 1129(a)(11) of the Bankruptcy Code requires that the Court determine that the Plan is feasible as a condition precedent to confirmation. The feasibility test set forth in section 1129(a)(l1) requires the Court to determine whether the Plan is workable and has a reasonable likelihood of success. The purpose of the feasibility test is to protect against visionary or speculative plans. However, just as speculative prospects of success cannot sustain feasibility, speculative prospects of failure cannot defeat feasibility. The mere prospect of financial uncertainty cannot defeat confirmation on feasibility grounds. Applying the above standards of feasibility, courts have identified the following factors as probative: (1) the adequacy of the capital structure; (2) the earning power of the business; (3) economic conditions; (4) the ability of management; (5) the probability of the continuation of the same management; and (6) any other related matters which will determine the prospects of a sufficiently successful operation to enable performance of the provisions of the plan. Based on the Debtors' analysis of their ability to fulfill their obligations under the Plan, the Debtors have prepared projections of their financial performance for each of the five fiscal years in the period ending fiscal year 2006. Based on the Projections and the Exit Financing Facility in place, the Debtors will be able to fulfill all their obligations under the Plan. The Debtors will be able to make all payments required pursuant to the Plan and sustain a viable operating entity. The Debtors are confident that they will be able to repay or refinance any and all of the then-outstanding indebtedness under the Plan at or prior to the maturity of such indebtedness. Accordingly, confirmation of the Plan is not likely to be followed by liquidation or the need for further reorganization of the Debtors. (12) All Statutory Fees Have Been or Will He Paid Section 1129(a)(12) requires the payment of" [a]ll fees payable under section 1930 [title 28, the United States Code], as determined by the court at the hearing on confirmation of the plan." 11 U.S.C. section 1129(a)(12). Section 507 of the Bankruptcy Code provides that "any fees and charges assessed against the estate under [section 1930,] chapter 123 of title 28" are afforded priority as administrative expenses. In accordance with sections 507 and 1129(a)(12) of the Bankruptcy Code, the Plan provides that all such fees and charges payable will be paid in Cash on the Effective Date and thereafter as may be required. The United States Trustee has objected to the Plan based upon, inter cilia, the Debtors' failure to pay fees allegedly due under section 1930 of title 28. The Omnibus Response addresses this objection. (13) The Plan Adequately and Properly Treats Retiree Benefits Section 1129(a)(13) of the Bankruptcy Code requires a plan to provide for retiree benefits at levels established pursuant to section 1114 of the Bankruptcy Code. The Plan provides that, on and after the Effective Date, the Reorganized Debtors will continue to pay all "retiree benefits" (as defined in section 1114(a) of the Bankruptcy Code), at the level established pursuant to section 1114(e)(1)(B) or 1114(g) at any time prior to confirmation of the Plan, for the duration of the period the Debtors have obligated themselves to provide such benefits. Accordingly, the Plan satisfies the requirements of section 1129(a)(l3) of the Bankruptcy Code. (14) The Plan Satisfies The "Cram Down" Requirements Under Section 1129(b) of the Bankruptcy Code Section 1129(b) of the Bankruptcy Code provides a mechanism (known colloquially as 'cram down") for confirmation of a plan of reorganization in the circumstances where the plan is not accepted by all impaired classes of claims. Under section 1129(b), the court may "cram down" a plan over the dissenting vote of an impaired class or classes of claims or interests as long as the plan does not "discriminate unfairly" and is "fair and equitable" with respect to such dissenting class or classes. (i) The Plan Does Not Discriminate Unfairly Section 1129(b)(1) does not prohibit discrimination between classes. Rather, it prohibits discrimination that is unfair. The weight of judicial authority holds that a plan unfairly discriminates in violation of section 1129(b) of the Bankruptcy Code only if similar claims are treated differently without a reasonable basis for the disparate treatment. As between two classes of claims or two classes of equity interests, there is no unfair discrimination if (i) the classes are comprised of dissimilar claims or interests, or (ii) taking into account the particular facts and circumstances of the case, there is a reasonable basis for such disparate treatment. Under these standards, the Plan does not "discriminate unfairly" with respect to impaired Classes of Claims and Equity Interests that have voted or are deemed to reject the Plan. * Classes G5 and M5 Class G5, which is comprised of Genesis Senior Subordinated Note Claims, and Class M5 which is comprised of Muiticare Senior Subordinated Note Claims, are separately classified because, pursuant to the subordination provisions of the respective indentures, recoveries on such Claims must be distributed to holders of Genesis Senior Lender Claims in Class G2 and Multicare Senior Lender Claims in Class M2 (collectively, the "Senior Lender Claims"), respectively, until such holders are paid in full plus interest. As holders of Senior Lender Claims are not paid in full under the Plan, holders of Claims in Classes G5 and M5 would not be entitled to receive any distributions under the Plan, absent agreement by the holders of the Senior Lender Claims. Additionally, the treatment afforded holders of Claims in Classes G5 and M5 minors the treatment afforded holders in Classes G4 (Genesis General Unsecured Claims) and M4 (Multicare General Unsecured Claims). The holders of the Genesis Senior Lender Claims and Multicare Senior Lender Claims have agreed to provide a portion of the value to which they would otherwise be entitled to holders of unsecured claims in Classes G4 and G5 and Classes M4 and M5, respectively. Pursuant to this agreement, as set forth in the Plan, the holders of Claims in Class G5 will share 4.12% of the New Common Stock and 62.19% of the New Warrants with the holders of Claims in Class G4, such that both Class G4 and Class G5 will receive an estimated recovery of 12.38%. Similarly, the holders of Claims in Class M5 will share 2.50% of the New Common Stock and 37.81% of the New Warrants with the holders of Claims in Class G4, such that both Class M4 and Class M5 will receive an estimated recovery of 12.38%. Thus, not only does the Plan does not discriminate unfairly with respect to the impaired Classes G5 and M5, but it does not discriminate at all with respect to these Classes. * Classes G7 and M7 The Plan provides that no property will be distributed to the holders of allowed Claims in Classes G7 (Genesis Punitive Damage Claims) and M7 (Multicare Punitive Damage Claims). However, for two reasons, such treatment does not constitute unfair discrimination. First, based on the valuation analyses performed by the financial advisors for the Debtors and a strict application of the absolute priority rule, no recovery would be available for any unsecured classes. However, as a negotiated matter, the Genesis Senior Lenders have agreed to give up a portion of the value that they would receive if absolute priorities were enforced to the holders of unsecured claims in Classes G4 and G5. Similarly, the Multicare Senior Lenders have agreed to give a portion of their value to the holders of unsecured claims in Classes M4 and M5. Neither the Genesis Senior Lenders nor the Multicare Senior Lenders have agreed to give up value for the benefit of entities asserting punitive damage claims against the Debtors (Classes G7 and M7). Nothing in the Bankruptcy Code prohibits one class of creditors from giving a portion of its recovery to some, but not all, other classes. The prohibition on unfair discrimination applies to the Debtors, not to creditors. Second, assuming, arguendo, that general unsecured creditors were entitled to receive some recovery under the Plan, which they are not, there is a rational basis for the disparate treatment of Classes G7 and M7 from Classes G4 and M4, respectively. Punitive Damage Claims are dissimilar from other general unsecured claims. General unsecured claims in Classes G4 and M4 (including litigation claims) are claims based upon actual compensatory loss, while Punitive Damage Claims in Classes G7 and M7 are intended to punish or make an example of a wrongdoer. Because the enforcement of punitive damages against an insolvent debtor in chapter 11 will diminish the return to other unsecured creditors rather than punish the debtor, disparate treatment of Punitive Damage Claims in Classes G7 and M7 claims is eminently reasonable. Accordingly, while the Plan "discriminates" against Classes G7 and M7, it does not "discriminate unfairly." * Classes G8, G9, GlO, G1l, and M8 The Plan provides that holders of Equity Interests in Classes G8, G9, GlO, and G1l will receive no property and will be cancelled on the Effective Date. Because each Class of Equity Interests will be treated identically, the Plan does not unfairly discriminate against these Classes. Class M8 is the only Class consisting of the common equity interests in Multicare. Holders of Equity interests in Class M8 also will receive no property and will be cancelled on the Effective Date. Inasmuch as Class M8 represents the only Equity Interests of Multicare classified under the Plan, the Plan, a fortiori, does not discriminate unfairly as between any holders of the Equity Interests of Multicare. Based upon the foregoing, the Plan does not "discriminate unfairly" with respect to any impaired Classes of Claims or Equity Interests. (ii) The Plan is Fair and Equitable Section 1129(b) of the Bankruptcy Code sets forth the definition of the phrase "fair and equitable." 11 U.S.C. section 1129(b)(2). In addition to the requirements enumerated in section 1129, cases have interpreted the "fair and equitable" standard to include the requirement that no class senior to the dissenting class can receive more than a 100% recovery on its allowed claims. Class G5 voted to reject the Plan and various classes are deemed to reject. Based on the section 1129 standards and the facts in the affidavits submitted in support of confirmation of the Plan, the Plan satisfies the "fair and equitable" test for each of those Classes. * Class G5 Under the Plan, holders of Genesis Senior Subordinated Note Claims in Class G5 will receive a proportionate allocation of (i) 1,689,147 shares of New Common Stock and (ii) New Warrants to purchase 2,835,645 shares of New Common Stock, based on the aggregate amount of Allowed Claims in Classes G4 and G5. The shares of New Common Stock allocated to Classes G4 and G5 represent approximately 4.12% of the total shares of New Common Stock to be issued and outstanding on the Effective Date, subject to dilution from stock issuances after the Effective Date. Under the Plan, each class of claims or interests that are junior in right of priority to the claims in Class G4 receive no property on account of their claims or interests. Subclass G1- 16, which also voted against the Plan, is a subclass of Genesis Other Secured Claims consisting solely of THCI Mortgage Holding Company LLC. THCI has objected to confirmation of the Plan. The Debtors have resolved THCI's objection to the Plan for purposes of confirmation of the Plan as to all creditors other than THCI. The resolution is addressed more particularly in the Omnibus Response. Therefore, the Plan satisfies the test specified by section 1129(b)(2)(B)(ii). In addition, no class senior to Class G5 will receive more than a 100% recovery. Genesis would have to have an enterprise value that exceeds $1,548,000,000 - the value at which holders of claims in Class G2 would receive a 100% recovery. This amount is approximately $225 million higher than the midpoint of the range of enterprise values for Genesis and is approximately $100 million greater than the highpoint of that range of values. * Classes Deemed to Reject the Plan The "fair and equitable" rule is satisfied as to each holder of a Claim or Equity Interest in the Classes deemed to have rejected the Plan (Classes G7, G8, G9, GlO, G1l, M7, and M8). Classes G7 and M7 are comprised of holders of Punitive Damage Claims. No creditor or equity interest holder junior in right of priority to holders of Punitive Damage Claims will receive or retain any property on account of their Claims or Equity Interests. Accordingly, the requirements of section 1129(b)(2)(B) are satisfied with respect to Classes G7 and M7. Classes G8, G9, G10, and G1l, and Class M8 are comprised of Equity interests in Genesis and Multicare, respectively. As the holders of Claims against the Debtors will not be paid in full pursuant to the Plan, holders of Equity Interests will receive or retain no property under the Plan on account of their equity interests. Inasmuch as no other equity interest holder will receive or retain any property under the Plan, the Plan satisfies the absolute priority rule of section 1129(b)(2)(C) of the Bankruptcy Code with respect to holders of Equity Interests. Finally, in determining whether a plan is "fair and equitable," courts consider additional factors to those set forth in section 1129(b). For example, courts look to whether the holders of claims that are senior to the claims of a dissenting class are receiving more than 100% of their claims. In the instant case, the holders of Claims in Classes G2 (Genesis Senior Lender Claims) and M2 (Multicare Senior Lender Claims) are receiving an approximate recovery of 82.36% of their Claims. Moreover, Classes G4, G5, M4, and M5 are receiving an approximate recovery of 12.43% of their Claims. On this basis, the Plan is "fair and equitable" in all respects. IV. The Genesis/Multicare Settlement The Plan incorporates two significant settlements under Bankruptcy Rule 9019: (a) a "Government Settlement" among the Genesis Debtors and the United States of America acting through the United States Department of Health and Human Services, the Centers for Medicare and Medicaid Services f/k/a the Health Care Financing Administration, the Office of the Inspector General, the Department of Justice, and other agencies or departments of the United States concerning the resolution of certain claims asserted by such agencies against the Genesis Debtors; and (b) the "Genesis/Multicare Settlement," between Genesis and its direct and indirect subsidiaries, on the one hand, and Multicare and its direct and indirect subsidiaries, on the other hand, regarding any and all claims against each other. Pursuant to Section 5.16 of the Plan, the Debtors are seeking approval of the Genesis/Multicare Settlement in connection with confirmation of the Plan. The Government Settlement was finalized only recently. Therefore, in order to give parties an opportunity to review that settlement, the Debtors intend to file a motion for its approval following the Confirmation Hearing. (a) The Genesis/Multicare Settlement (1) Relationship between Genesis and Multicare Prior to October 1997, The Muiticare Companies, Inc. was publicly-owned and not affiliated with the Genesis Debtors. Genesis, The Cypress Group, L.L.C., TPG Partners II, L.P., and Nazem, Inc. formed Genesis ElderCare Corp. (GEC) to acquire The Multicare Companies, Inc. Through a tender offer and merger transaction, GEC, one of the Multicare Debtors, acquired 100% of the outstanding stock of The Multicare Companies, Inc. Genesis owns 43.6% of the common stock of GEC. Genesis ElderCare Network Services, Inc. ("Genesis Network"), a Genesis Debtor, manages GEC pursuant to a management services agreement, dated as of October 7, 1997 (the "Management Agreement"). The Management Agreement provides, inter alia, that Multicare is obligated to pay Genesis Network a Management Fee of 6% of Multicare's net revenues for services provided under the Management Agreement, provided that payment of such fee in respect of any month in excess of the greater of (i) $1,991,667 and (ii) 4% of Multicare's consolidated net revenues for such month, shall be subordinate to the satisfaction of Multicare's senior and subordinate debt obligations and/or not be payable at all if there is a default under such obligations (such excess, the "Subordinated Management Fee"). Services provided by Genesis to Multicare under such agreements include operational oversight and management of Multicare's inpatient facilities, rehabilitation, pharmacy, medical supply, and other operational services, as well as accounting and financial and corporate administrative services. The Genesis Debtors also provide other essential services to the Multicare Debtors pursuant to a series of agreements between the Debtors. In accordance with the understandings between Genesis and Multicare's then independent boards, the prices under the ancillary agreements were to be adjusted each year to reflect changes in the marketplace and the market median rate charged by Genesis for similar goods and services provided to other parties. In addition to the management services agreement, Genesis (through Genesis ElderCare Rehabilitation Services, Inc., a Genesis Debtor) is the predominant provider of inpatient and outpatient rehabilitation services for Multicare's facilities; Genesis also is currently the predominant provider of institutional pharmacy services for Multicare's facilities. In November 1999, as part of an overall restructuring of the financial obligations of Genesis and Multicare, Genesis became the effective controlling shareholder of Multicare. On November 15, 1999, a stockholders agreement was amended to provide, among other things, that all shareholders in Multicare other than Genesis will grant to Genesis an irrevocable proxy to vote their shares of common stock of Multicare on all matters to be voted on by shareholders, including the election of directors and omit the requirement that specified significant actions receive the approval of at least one designee of each of Cypress, TPG, and Genesis. At that time, the independent members of the board of directors of Multicare resigned. At no time since that change in control were any changes made to the management services and other agreements that were beneficial to Genesis. Within seven months after the change in control, both Genesis and Multicare filed these chapter 11 cases. As Multicare has no corporate infrastructure and relies upon Genesis to provide operational oversight and accounting, financial, and corporate administrative services, the independent Director was hired in April 2000 to review and evaluate Multicare's relationships with Genesis. Multicare's board of directors now consists of two members of Genesis's board of directors (Messrs. Michael Walker and Richard Howard), one Genesis officer (Mr. George Hager), and one independent director and officer unaffiliated with Genesis (Ms. Beverly Anderson or the "Independent Director"). Each of Multicare's officers (other than the Independent Director) is also an officer of or affiliated with Genesis. To assist the Independent Officer in performing its duties, Multicare retained Ernst & Young and E&Y Capital Advisers to conduct a comprehensive review and analysis of the related party transactions between Genesis and Multicare. The Independent Director, utilizing the findings and recommendations of E&Y, thereafter engaged in negotiations with Genesis management regarding the terms of the related party relationships to reflect current market conditions. Ultimately, Multicare and Genesis agreed to modifications of the related party business and contractual relationships that resulted in an annualized cost savings to the Multicare Debtors of approximately $l2 million. However, new contracts have not actually been entered into due to the proposed merger of Genesis and Multicare. (2) Claims Between and Against the Genesis Debtors and the Multicare Debtors As of the Commencement Date approximately $36 million in Subordinated Management Fees and approximately $57 million on account of pharmacy, rehabilitation, and other ancillary services provided by Genesis to the Multicare Debtors remained outstanding. Since the Commencement Date, Multicare paid all management fees due and owing under the Management Agreement as well as all claims relating to Genesis's provision of pharmacy, rehabilitation, and other ancillary services to the Genesis Debtors. The Multicare Debtors have not paid any of the Subordinated Management Fee, as such portion is subject to the prior payment in full of the Multicare's prepetition senior and subordinated debt which are not being paid in full under the Plan. In connection with the Independent Director's investigation and evaluation of all the relationships between the Genesis Debtors and the Multicare Debtors, the Multicare Debtors, with the assistance of their legal and financial advisors, evaluated various defenses to the claims asserted by Genesis, including that, with respect to: (a) the Subordinated Management Fees, such claims are not valid obligations and/or are subordinate to the prior satisfaction of Multicare's senior and subordinated debt obligations, and (b) the claims related to the pharmacy, rehabilitation, and other ancillary services provided by Genesis to Multicare, such claims constitute an equity contribution rather than a debt obligation by virtue of the control exercised by Genesis over Multicare. The Multicare Debtors also evaluated potential claims held by Multicare against Genesis (including claims based on, among other things, (i) the virtual control exercised by Genesis over the Multicare Debtors and the allegation that Genesis operated Multicare for its own rather than Multicare's benefit, and (ii) the theory that transactions between and services provided Genesis to Multicare may be tainted with a conflict of interest and that Multicare may have been charged by the Genesis at rates in excess of market). The Multicare Debtors also evaluated many of the claims and allegations made by the Multicare Committee in its motion requesting the appointment of a trustee in the Multicare Debtors' cases, in which the Multicare Committee asserted, inter alia, that based upon its and its financial and legal advisors' review of the Genesis and Multicare relationships: (a) a gross conflict of interest existed and that Multicare is being run by Genesis for Genesis and (b) Genesis overcharges Multicare by approximately $27 million on an annual basis (approximately $15 million more than the cost reductions negotiated by Genesis and Multicare). The Debtors and the Multicare Committee consensually resolved the Trustee Motion, which has been withdrawn pending the Court's consideration of the Plan. Part and parcel of the Multicare Committee's agreement to support the Plan and withdraw the Trustee Motion was the agreement of the Genesis Debtors and the Multicare Debtors to waive and release claims against one another. (3) Summary of the Genesis/Multicare Settlement Pursuant to the Settlement, the Genesis Debtors and the Multicare Debtors will setoff their claims against one another and waive and release any and all claims against one another that they may have as of the date of the settlement agreement in excess of such setoff. The Debtors believe that the Genesis/Multicare Settlement represents a fair and equitable settlement of the claims between the parties and satisfies the standards for approval of settlements under Bankruptcy Rule 9019 and applicable law. One of the reasons is that, litigating the claims between the two estates would not provide any meaningful benefit to the creditors of the winning side. This results from the fact that such claims would share pro rata with hundreds of millions of dollars of other prepetition unsecured claims against the losing debtor (including, in a nonconsensual restructuring, the deficiency claims of the Genesis and Multicare Senior Lenders) and the recoveries under the Plan provide for a relatively small stock and warrant distribution. Given the small recovery that would be available to the prevailing party, the Debtors do not believe that the significant expense and delay in litigation could be justified. Indeed, in these cases, there is not enough enterprise value to provide a full recovery to the holders of the Genesis and Multicare Senior Lender Claims. Thus, in the absence of a consensual restructuring, the absolute priority rule would preclude the distribution of any value to junior classes, including to holders of unsecured claims. However, in order to facilitate a consensual restructuring under the Plan (which includes the terms of the Genesis/Multicare Settlement), the Genesis and Multicare Senior Lenders have agreed to permit a relatively small percentage of value to which they are entitled to be made available to junior classes. This value would not be available in the event the Plan were not confirmed. With respect to the substance of the claims, the Management Agreement itself provides that the Subordinated Management Fee is not payable unless Multicare's senior and subordinated debt obligations are paid in full. Full payment of these claims obviously is not occurring in these cases, thus it cannot reasonably be argued that approximately half of Genesis's claims against Multicare are not valid. With respect to the balance of Genesis's claims against Multicare, the Multicare Debtors have asserted numerous defenses and counterclaims. Although the total amount of the counterclaims is difficult to quantify, at least with respect to the allegation of overcharging, that the Genesis Debtors and the Multicare Debtors renegotiated the terms of the agreements is evidence that the contracts were well above-market. Importantly, the Genesis/Multicare Settlement is an integral component of the largely consensual plan that has been negotiated in these cases. Here, the settlement is supported by each of the major constituencies in these cases. It is supported by the Genesis Committee and the Multicare Debtors. The settlement also is supported by the Genesis Senior Lenders and the Multicare Senior Lenders. In fact, only GMS has objected to the reasonableness of the proposed Genesis/Multicare Settlement and, even then, only in a passing reference to it in a footnote to GMS's objection to the Plan. Indeed, as set forth above, the settlement was one of the primary components of the Debtors' settlement of the Trustee Motion. (Genesis/Multicare Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBAL TELESYSTEMS: Europe Unit Bank Waiver Extended to Sept. 17 ---------------------------------------------------------------- Global TeleSystems, Inc. (OTC:GTLS; NASDAQ; EUROPE:GTSG; Frankfurt:GTS) announced that Deutsche Bank, Dresdner Bank and Bank of America, which are providing financing to GTS's Global TeleSystems Europe Holdings B.V. subsidiary, have agreed to further extend the waiver of any defaults under their facility caused by GTS's election to not make interest payments on GTS Europe's publicly-traded debt while the company works toward a debt restructuring plan with bondholders. The current waiver has now been extended through 17 September 2001. GTS and the Bank Group continue their discussions, aimed at replacing the current financing agreement with a longer-term financing facility. HARNISCHFEGER: Resolves Grade & Corby's SERP-Related Claims ----------------------------------------------------------- Jeffrey T. Grade and Francis M. Corby each filed claims against Harnischfeger Industries, Inc. based on the respective Termination and Release Agreements. The parties agreed on certain of the claims filed but were previously in dispute over the amounts due Grade and Corby under the SERP. Grade filed Claim No. 5429 as a general unsecured claim against HII in the amount of $9,322,388.00. Corby filed Claim No. 5437 as a general unsecured claim against HII in the amount of $4,434,402.20. The Debtors contended that Claim No. 5429 should be a general unsecured prepetition claim against HII in the amount of $5,341,967.80, and Claim No. 5437 should be a general unsecured prepetition claim against HII in the amount of $2,963,767.80 The contention was related to amounts under the SERP. While Grade asserted an amount of $5,919,563.00 and Corby asserted an amount of $2,046,086.50 due under the Supplemental Retirement and Stock Funding Plan (SERP), the Debtors reckoned the maximum amount of Grade's SERP-related claim at $2,491,842.80 and that of Corby at $889,979.80. The dispute arises from the value of the HII stock used in the calculation and the methodology in calculation. On May 24, 1999, the date of departure of Grade and Corby, HII stock traded at nearly $10 per share. At the time of distribution in October 1999, HII stock had a value of $1.25 per share. After much negotiation, briefing, and a hearing before the Court, the Parties have agreed that Claim No. 5429 should be reduced and allowed in the amount of $5,416,267.80 against HII and Claim 5437 should be reduced and allowed in the amount of $3,018,067.80 against HII. Pursuant to the Parties' stipulation and agreement, which has been approved by the Court: (a) The portion of Claim No. 5429 relating to the LTCP is $3,254,425.00. The Debtors and Corby agree that the portion of Claim No. 5437 relating to the LTCP is $2,278,087.50. (b) That portions of Claim No. 5429 and Claim No. 5437 relating to the SERP should be calculated according to the terms of the SERP upon termination of employment for "Good Reason." (c) The portions of Claim No. 5429 and Claim No. 5437 relating to the SERP consist of the "Stock Benefit Supplement" due to Grade and Corby. The Stock Benefit Supplement is the Projected Benefit Obligation minus the "Market Value" of the "Stock Benefits" and the "Schedule A Stock." -- The PBO for Grade under the SERP is $7,333,559. The PBO for Corby under the SERP is $2,225,989. These PBOs are the result of actuarial calculations conducted by Towers Perrin. -- The Stock Benefits for Grade are the 405,974 shares of stock that were held in a Rabbi Trust in Grade's name as of May 24, 1999. The Stock Benefits for Corby are the 115,330 shares of stock that were held in a Rabbi Trust in Corby's name as of May 24, 1999. -- The Schedule A Stock for Grade is the 103,498 shares of stock distributed to Grade in October 1998. The Schedule A Stock for Corby is the 28,409 shares of stock distributed to Corby in October 1998. -- The Market Value of each share of stock comprising the Stock Benefits and the Schedule A Stock is $9.5034 and is based on the average closing price of HII's stock on the New York Stock Exchange Composite Tape for the thirty calendar day period immediately preceding May 24, 1999. (d) Numerically, the SERP-related portion of Claim No. 5429 (Grade) is calculated as $7,333,559 - ($9.5034 x (405,974 + 103,498))= $2,491,842.80. Numerically, the SERP-related portion of Claim No. 5437 (Corby) is calculated as $2,255,989 - ($9.5034 x (115,330 + 28,409)) = $889,979.80. (e) In addition to the amounts relating to the SERP and the LTCP, the Debtors and Grade agree that he is due $70,000 relating to other benefits owed to him under the Termination and Release Agreement. Similarly, the Debtors and Corby agree that he is due $50,000 relating to other benefits owed to him under the Termination and Release Agreement. (f) Grade has received a lump sum payment of $400,000 pursuant to Section 2(d) of the Termination and Release Agreement. This payment is credited against the amounts due. Corby has received a lump sum payment of $200,000 pursuant to Section 2(d) of the Termination and Release Agreement. This payment is credited against the amounts due. (g) Thus, the Debtors and Grade agree that Claim No. 5429 is reduced and allowed as a general unsecured claim against HII in the amount of $5,416,267.80. (h) The Debtors and Corby agree that Claim No. 5437 is reduced and allowed as a general unsecured claim against HII in the amount of $3,018,067.80. (i) The distribution procedures set out in the Plan apply to Claim No. 5429 and Claim No. 5437. The Debtors and Grade and Corby also agree that these amounts are the entire amounts owed to Grade and Corby. Grade and Corby agree not to bring any further claims against any Reorganizing Debtor for compensation arising from their employment or services rendered prior to the effective date, including but not limited to, amounts due under the SERP and the LTCP. In summary, the Debtors and Grade and Corby agree that: (A) Claim No. 12242 is expunged. (B) Claim No. 12243 is expunged. (C) Claim No. 5429 is an allowed general unsecured claim against HII in the amount of $5,416,267.80. (D) Claim No. 5437 is an allowed general unsecured claim against HII in the amount of $3,018,067.80. (E) Neither Grade nor Corby may file a claim against HII or any other Reorganizing Debtor relating to compensation arising from their employment or services rendered prior to the effective date, including but not limited to, amounts due under the SERP and the LTCP. The Reorganizing Debtors have determined that further litigation of this dispute would be time consuming and costly and that the outcome is uncertain. Therefore, the Reorganizing Debtors believe that entry into the Stipulation is in the best interests of their estates and creditors. The Reorganizing Debtors note that the Beloit Liquidating Trust has filed a Complaint against Grade and Corby seeking to void certain portions of the pre-petition Termination and Release Agreements with Grade and Corby. HII believes this Complaint has no merit and that it is appropriate to enter this stipulation notwithstanding the pendency of the Complaint. (Harnischfeger Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 609/392-0900) HEARME: Annual Stockholders Meeting Moved to September 28 --------------------------------------------------------- HearMe (OTCBB:HEAR.OB), announced that it plans to hold its Annual Meeting of Stockholders, previously scheduled for August 30, 2001, on Friday, September 28, 2001. At the meeting HearMe will, among other matters, seek approval of the Company's Plan of Liquidation and Dissolution, which was recently unanimously approved by the Board of Directors. The Annual Meeting of Stockholders is scheduled to take place at 10:00 AM PDT in the Sheraton Sunnyvale Hotel, 1100 N. Mathilda Avenue, Sunnyvale, California. HearMe has filed a definitive proxy statement with the Securities and Exchange Commission outlining details of the plan and the Company's timeline for a wind down of normal business operations. Due to the adjourned meeting, the record date for the meeting remains June 1, 2001, and stockholders of record as of such date will be entitled to notice of and to vote at the meeting or by proxy and should receive a copy of the proxy materials via mail. On July 30, 2001, HearMe announced plans for an orderly wind down of business operations, including a potential sale of the assets and settlement of liabilities, with the objective of returning any remaining capital to stockholders. As part of the wind down efforts, the Company recently announced that it would not pursue a 10-for-1 reverse stock split and a withdrawal of its request for review of a NASD staff determination to discontinue trading of the Company's common stock on the Nasdaq National Market based on the Company's minimum bid price. HearMe common stock is now trading on the OTC Bulletin Board under the symbol HEAR.OB. HearMe (Nasdaq:HEAR) develops VoIP application technologies that deliver increased productivity and flexibility in communication via next generation communications networks. The Company's PC- to-phone, phone-to-phone, and PC-to-PC VoIP application platform offers innovative technology and turnkey applications that simplify the process of bringing differentiated, enhanced communications services to market. Communications services supported or enhanced by HearMe technology include VoIP-based conferencing, VoIP Calling, and VoIP-enabled customer relationship management (CRM). Founded in 1995, HearMe is located in Mountain View, California, and is located on the Internet at http://www.hearme.com. ICG COMMS: NetAhead Moves to Reject 3 Telecommunications Leases --------------------------------------------------------------- ICG NetAhead, Inc., asks that Judge Walsh permit them to reject 3 leases of commercial real property used for telecommunications sites, effective on August 31, 2001, the date on which the Motion is filed. The Debtor says it has determined that these sites are not necessary to its ongoing operations, but nonetheless remain currently obligated under these respective leases and/or executory contracts. In the Debtor's business judgment, it is no longer necessary or in the Debtor's best interests to maintain these sites. The rent and other expenses due under these agreements constitute an unnecessary drain on the Debtor's cash flow. The rent and expenses for the leases and contracts included in this Motion total approximately $2,208.56 per month. By rejecting these leases and/or contracts, the Debtor can minimize administrative expenses. Moreover, the Debtor does not believe that it can obtain any value for the leases and/or contracts by assignment to third parties, so that rejection of these leases/contracts is in the estates', the creditors' and the interest holders' best interests. The Debtor seeks to cause the rejection to be effective as of the date of the filing of this Motion and waives any right to withdraw the Motion. As of the filing of the Motion, the Debtor has sent a letter to each landlord or contracting party stating, among other things, that the premises are abandoned. The Debtor promises it will pay any postpetition amounts due within ten days of entry of an Order granting this Motion. The leases to be rejected are: Site Address Notice Address Debtor ------------ -------------- ------ 3475 West Shaw Regulator Properties ICG NetAhead Suite 105 P. O. Box 9086 Fresno, CA San Rafael, CA 60 S. Redwood Road Diamond Properties ICG NetAhead Suite 201 c/o CB Richard Ellis Salt Lake City, UT 2755 E. Cottonwood Pkwy #100 Salt Lake City, UT 400/402 BNA Drive Highwoods Properties ICG NetAhead Suite 108 2120 West End Avenue Nashville, TN Suite 100 Nashville, TN (ICG Communications Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) LOEWEN GROUP: Court Approves Sale of Assets to Denco for $2.25MM ---------------------------------------------------------------- The motion by DMA Corporation and other Debtors to sell assets related to 11 Sale Locations in Tennessee was granted with modifications after Judge Walsh entertained both the Debtors' request and the objection by John G. and Betty S. Smith seeking to protect their interest in certain pledged real property that is part of the whole package to be sold. The Sale Locations are: Funeral Homes: (1) Burris Funeral Home, Inc., Highway 127 South, Crossville, TN 38555; (2) Family Service Group, Inc., 1017 Oak Ridge, TN 37830; (3) Johnson Funeral Home of Church Hill, Inc., 320 Grandview Street, Church Hill, TN 37642; (4) Weaver Funeral Home, Inc., 20059 North Alberta Avenue, Oneida, TN 37841; (5) Weaver Funeral Home, Inc., 101 Alberta Avenue, Oneida, TN 37841; Cemeteries: (1) DMA Corporation, doing business as Dandridge Memorial Gardens (5528), Highway 70, Dandridge, TN 37725; (2) DMA Corporation, doing business as McMinn Memory Gardens (2043), 1739 County Road 561, Athens, TN 37303; (3) Family Funeral Service Group, Inc., doing business as Anderson Memorial Gardens & Chapel Mausoleum (2071), 640, Oliver Springs Highway, Clinton, TN 37716; (4) Kingston Memorial Gardens, Inc., doing business as Roane Memorial Gardens, Inc. (5854), Lawnville Road, Kingston, TN 37763; (5) Sweetwater Valley Memorial Park, Inc., doing business as Sweetwater Memory Gardens, Inc. (5741), 1838 Highway 11 North Sweetwater, TN 37874. The Selling Debtors, all Tennessee corporations, are: (1) Burris Funeral Home, Inc. (2) Family Funeral Service Group, Inc. (3) Johnson Funeral Home of Church Hill, Inc. (4) Weaver Funeral Home, Inc. (5) DMA Corporation (6) Kingston Memorial Gardens, Inc. (7) Roane Memorial Gardens, Inc. (8) Sweetwater Valley Memorial Park, Inc. The Smiths assert claims against Debtor Burris Funeral Home, Inc. secured by certain real property owned by Burris proposed to be sold pursuant to the motion. Specifically, the Smiths told Judge Walsh that at the time they sold Burris Funeral Home to the Debtors in 1996, the parties agreed that $600,000 would be due at closing and the other half would be paid in monthly installements of $5,000 over 10 years in connection with a covenant not to compete. At the same time, Mr. Smith also entered into a consulting agreement with the Debtors. As security for the Debtor's obligations under the covenant not to compete and the consulting agreement, debtor Burris Funeral Home, Inc. conveyed by deed of trust to Thomas E. Hale, Esquire as trustee the BFHI Real Property sold by the Smiths in connection with the sale of the business. According to the Smiths, the BFHI Real Property was valued at $740,000 in an appraisal commissioned by the Debtors shortly before closing and they were owed by the Debtors $410,000 on the covenants not to compete and $6,000 on Mr. Smith's consulting agreement as of the petition date, so their claims total approximately $575,000. However, at a purchase price of $2.25 million for all five funeral home businesses and six cemeteries, and the lack of allocation of any specified portion of the Purchase Price to the Business, the Smiths believe it is unlikely that the value ultimately allocated to the BFHI Real Property will match the value of the BFHI Real Property on a stand alone basis. The Smiths are concerned that as a result they are not provided with adequate protection for their interest in the BFHI Real Property. The Smiths challenge the justification for the Debtors to sell the BFHI Real Property free and clear of liens and the Debtors' business judgment in selling the Business in a bulk sale. Accordingly, the Smiths assert that the Debtors should not be permitted to use any of the sale proceeds without first adequately protecting the Smiths' interest in the proceeds. Short of an immediate payoff, the Smiths suggest that the only way to adequately protect the Smiths' interest is to place a portion of the sale proceeds in a separate escrow account, pending allowance and payment of the Smiths' claims, in an amount sufficient to pay the Smiths' claims plus a sufficient cushion to cover interest, late fees and costs (including attorneys' fees) to accrue in the future. As requested by the Debtors, the Court authorized the 8 Selling Debtors to sell the Assets to Denco Holdings, Inc. (the Initial Bidder) for $2,250,000 (the Purchase Price), free and clear of all liens, claims and encumbrances and other interests asserted in or against the Sale Locations, and to assume and assign 59 Assignment Agreements to the Purchaser upon the closing of the proposed sale of the Sale Locations. In connection with the sale, Neweol would sell and the Initial Bidder would purchase certain accounts receivable related to the Sale Locations pursuant to a purchase agreement between Neweol and the Initial Bidder. The amount of the Neweol Allocation will be determined immediately prior to closing in the manner set forth in the Neweol Purchase Agreement and will be paid to Neweol at closing, subject to certain procedures in sending notice. Judge Walsh makes it clear that the Purchaser is not relieved of the obligations, if any, that it would have under applicable nonbankruptcy law outside bankruptcy with respect to prepaid funeral contracts being acquired from the Selling Debtors. Addressing the Smith's objection, Judge Walsh directs that: "Notwithstanding the sale of the Burris Property as part of a sale of multiple assets of the Debtors, for purposes of determining the amount of the Smiths' allowed secured claims, the value of the Burris Property will be determined on a stand alone basis in accordance with the terms in the Court's Order with respect to this motion; The Debtors and the Smiths will separately and at their own expense, obtain an appraisal of the Burris Property, to be completed within 28 days after the date of the Order, conducted by each party's selected appraiser who is a licensed appraiser holding an M.A.T. designation issued by the Appraisal Institute. Upon completion of such appraisal, the Appraisers will issue to the respective pary an unqualified appraisal report for the Burris Property prepared in accordance with the Uniform Standards for Professional Appraisal Practice. Upon receipt of the Appraisal Report, each party will transmit a copy of the report to counsel to the other party by telecopier or overnight service. If the respective appraised values of the Burris Property set forth in the Appraisal Reports differ, the Debtors and the Smiths will promptly negotiate in good faith to resolve the difference and attempt to mutually agree upon an appraised value of the Burris Property. No later than seven days after the later to occur of delivery of the Debtors' Appraisal Report to counsel to the Smiths and delivery of the Smiths' Appraisal Report to counsel to the Debtors, counsel to the Debtors will file a notice, in form reasonably acceptable to the Smiths, setting forth: (a) whether the Debtors and the Smiths have agreed on the Appraised Value; (b) if an agreement has been reached, the amount of the agreed Appraised Value; and (c) if an agreement has not been reached, a hearing will be conducted before the Court on September 12, 2001 at 1:30 p.m. to determine the Appraised Value, Subject to the provisions in the Court's Order, the Selling Debtors are authorized to comply with the Net Asset Sale Proceeds Procedures with respect to the net proceeds of the proposed sale of the Sale Locations. In the event that the Sale is consummated under the Purchase Agreement, a portion of the net proceeds of the sale transaction evidenced by the Purchase Agreement will be held in the Net Asset Sale Proceeds Account to satisfy any allowed secured claims held by the Smiths against Burris (the Smith Reserve) in an amount as follows: (a) the amount of the Appraised Value if such an Appraised Value has been determined in accordance with the terms of the Court's order, (b) if the Appraised Value has not yet been determined in accordance with the terms of the Court's Order, $625,000. Until the allowed amounts of the Smith Secured Claims have been determined and such amounts have been paid, the Smith Reserve will not be utilized to repay amounts under the Debtors' DIP financing facility or for any other purpose. If the Appraised Value has not been determined at the time that the Smith Reserve is established and $625,000 is therefore set aside in the Smith Reserve, the amount of the Smith Reserve will be reduced or increased to the Appraised Value when the Appraised Value is determined in accordance with the terms of the Court's Order. The allowed amounts of the Smith Secured Claims shall be paid from the Smith Reserve within 10 business days after the latest to occur of: (a) the closing of the transactions contemplated by the Motion, (b) the determination of the Appraised Value of the Burris Property in accordance with the terms of this Order and (c) the allowance of the Smith Secured Claims. Any excess in the Smith Reserve not paid to the Smiths will be released from the Smith Reserve at the time of payment. The allowed amount of the Smith Secured Claims will not exceed the amount of the Appraised Value as determined in accordance with the terms of the Court's Order. Judge Walsh makes it clear that nothing in the Order will be deemed an adjudication of the nature, validity or amount of the Smith Secured Claims. (Loewen Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 609/392-0900). LOOK COMMS: Seeks Protection Under CCAA to Firm Up Refinancing -------------------------------------------------------------- Look Communications Inc. (CDNX: LKC) announces it has voluntarily sought and obtained protection under the Companies' Creditors Arrangement Act (CCAA) pursuant to an Order from the Ontario Superior Court of Justice. The initial Order, as is customary in these matters, is for a period of 30 days. "We have taken this step in order to provide the Company with the time and flexibility necessary to attempt to finalize ongoing negotiations with potential new investors to secure the required financing for a fully funded business plan, as well as to work towards restructuring the Company's current debt," said Michael Cytrynbaum, Chairman of the Board and interim CEO. "Look's objective is to file a plan of arrangement for approval by the Court with a view to beginning meetings with creditors and trade suppliers as soon as possible." Look's customers will remain unaffected by this announcement and the Company confirmed that it will have sufficient funds on hand to enable it to continue normal operations during the Initial Order period and to make payments to suppliers and others for authorized goods and services received after the Initial Order was issued. Look is committed to maintaining high service levels to customers during this period. "The support and encouragement we have received from our customers in recent months is extremely gratifying and demonstrates clearly that there is room in the Canadian market for an alternative provider of Internet and video services," added Mr. Cytrynbaum. Look also announces the appointment of Paul Lamontagne as President of the Company. Mr. Lamontagne will be responsible for planning and implementing the re-launch of its activities and for its current ongoing operations. Mr. Lamontagne has extensive experience in the telecommunications and media sectors and served in the past as Executive Vice President and Chief Operating Officer of Look's Quebec and Eastern Ontario region during the company's commercial launch in 1998. "Today's announcement should reassure our employees, our customers and our suppliers that Look can emerge from the current period as a strong competitor in both the Internet and digital television distribution spaces and will be capable of serving the current and future needs of customers in both the residential and the small and medium-sized business segments. We are most anxious to re-launch our sales and marketing activities after being in a defensive posture for almost a year," said Mr. Lamontagne. Financial Results The Company also reported its financial and operating results for the second quarter and first six months of 2001. Revenue was $19.6 million for the second quarter 2001 and $42 million for the year-to-date, up 19% and 38%, respectively, compared to $16.5 million and $30.5 million for the corresponding periods in 2000. The Company generated negative EBITDA of $1.8 million for the second quarter compared to negative EBITDA of $17.6 million for the second quarter of 2000. Year-to-date 2001, the Company posted negative EBITDA of $0.6 million compared to negative EBITDA of $26.9 million for the same period in 2000. Of the total revenue of $42.0 million for the first six months of 2001, broadcast distribution services contributed $20.3 million, while Internet access and Web-related services accounted for $21.7 million. The Company's subscriber base declined in the second quarter of 2001 to approximately 251,000, or 10.0% for the quarter and 15% since the beginning of 2001. This decline reflects mainly normal churn that has not been offset by new customer activations due to a lack of investment in sales and marketing. Look anticipates a continued decline in customer counts for the balance of 2001. At June 30, 2001, the Company had 79,300 television subscribers, an increase of 19,200 or 32% over the same period in 2000. Internet services subscribers totaled 171,600, comprised of 147,800 residential dial-up subscribers, 7,900 high-speed service subscribers and 15,900 business subscribers. As a result of the lower customer count, second quarter 2001 revenue declined 13% from the first quarter of 2001. Costs and expenses decreased to $67.4 million for the six months to June 30, 2001, compared to $103.0 million for the same period in 2000. This decline is due to the restructuring plan announced and implemented in December 2000 and to the reduction in the subscriber base. "We want to continue to lower our costs and improve our productivity in order to be ready for the eventual re-launch of the company," said Louis Villeneuve, Chief Financial Officer of Look. Amortization and write down of capital assets and deferred charges increased to $24.7 million for the six months ended June 30, 2001, compared to $9.4 million for the same period in 2000. This is attributable to the increase in capital assets related to network expansion and to the more than 200% increase in the number of television subscriber installations performed since January 1, 2000. Net loss for the second quarter of 2001 was $15.9 million compared to a net loss of $45.2 million for the same period last year. For the first six months of 2001, net loss was $30.8 million (before a gain on the sale of the Company's interest in Inukshuk Internet Inc.) compared to a net loss of $79.8 million last year. Reflecting the gain on the sale of the Inukshuk interest, net earnings for the first six months of 2001 were $114.2 million compared to a net loss of $79.8 million for the six months ended June 30, 2000. Subsequent Events On July 31, 2001, Microcell paid the outstanding balance of sale of $50 million for the Company's interest in Inukshuk. This sum was used to repay portions of Tranches A and B of the credit facility. Following such repayments, a total of $98.3 million was outstanding under the facility. This amount was due and payable but was not paid on August 2, 2001. The Company's banks called the loan on August 9, 2001 and on August 16, 2001, BCE Inc. and Telesystem Ltd, the guarantors of the facility, paid the entire sum to the banks. BCE and Telesystem received an assignment of the banks' rights under the credit agreement and the security thereunder, and agreed to subordinate their security to any other lender under a financing arrangement with Look that is reasonably acceptable to them. The deadline for payment by the Company of all amounts owing by it was extended to August 25, 2001 and, subsequently, for a last and final time, until September 7, 2001. On August 20, 2001, the Company terminated the employment of approximately 125 employees to reduce costs. This measure will assist the Company in its efforts to return to a positive EBITDA position in the future. In view of its current and anticipated financial position, the state of negotiations with new investors and the impending September 7, 2001 deadline for the repayment of amounts owing to BCE and Telesystem, the Company made the decision to file for protection under the CCAA. There can be no assurance that Look will successfully conclude current negotiations with new investors or reach agreement with creditors and trade suppliers under a plan of arrangement. In view of the CCAA filing, Look will postpone the Annual Meeting of Shareholders scheduled for September 14, 2001. Look Communications (CDNX: LKC) is a leading wireless broadband carrier, delivering a full spectrum of communications services including digital television distribution, high-speed and dial- up Internet access and Web-related services. Through its advanced MDS technology (Multipoint Distribution System) Look provides superior digital entertainment services to homes across Quebec and Ontario. Look's Internet service has established itself as one of Canada's largest independent service providers offering both high speed and dial-up Internet access, in addition to other Web-based applications, to consumers and businesses throughout Canada. For more information on Look, visit the company's Web site at http://www.look.ca LTV CORP: Court Okays Modified USWA Pact, Subject to Revisions -------------------------------------------------------------- Represented by Michael Yetnikoff and Rosanne Ciambrone of the Chicago firm of Bell Boyd & Lloyd LLC, and Jonathon M. Yarger of the Cleveland office of Korhman Jackson & Krantz, the Official Committee of Equity Security Holders objects to the Debtors' Motion for approval of a Modified Labor Agreement with the United Steel Workers of America. The Committee tells Judge Bodoh that the MLA is a watershed event in this case which would, if approved, significantly affect distributions to creditors and equity holders in this case. Indeed, the Committee contends, the MLA would provide the USWA with a 20% ownership interest in reorganized LTV, as well as 20% of its cash flow, thus dictating the terms of any plan of reorganization, with the protections of the Bankruptcy Code. The Committee complains that the MLA would also grant the USWA significant corporate governance rights without compliance with the Debtors' Certificate of Incorporation, By-Laws or Delaware law. Moreover, while the Debtors state that: Modification to the parties' collective bargaining agreements and retiree benefit plans" are necessary to allow the Debtors to restructure, the Debtors do not explain why this is so and have failed to quantify in the MLA Motion either the costs of the MLA or the benefits the MLA confers on the estates. For these reasons, the MLA should not be approved. The Committee argues that the MLA is a "sub rosa" plan. The Code does not authorize the debtor to short-circuit the requirements of a reorganization plan by establishing the terms of the plan in connection with a proposed transaction. Where a transaction dictates the terms of a reorganization plan, the parties and the court must scale the hurdles as erected in chapter 11, including disclosure requirements, voting, the best interests of creditors test, and the absolute priority rule. Further, the MLA grants the USWA the right to designate two board members. It also grants the USWA representation on all committees and approval rights over certain investments. In granting the USWA such extensive corporate governance rights, the MLA contravenes the Debtors' bylaws, the Debtors' Certificate of Incorporation, and Delaware law. The Official Committee of Noteholders Objects Too Represented by Joseph McDonough and James McLean of the Pittsburgh firm of Manion McDonough & Lucas, PC, and joined by Lisa G. Beckerman and Robert J. Stark of the New York office of Akin Gump Strauss Hauer & Feld LLP, the Official Committee of Noteholders makes a limited objection to the Debtors' Motion for a modified labor agreement with the United Steelworkers of America. The Noteholders Committee says it applauds the Debtors and the Official Committee of Unsecured Creditors for their "yeoman's effort towards consensual resolution" of the Debtors' earlier Motion to reject the CBAs and modify retirement benefits. The Noteholders Committee also acknowledges the complexity of the Debtors' compensation/benefits issues and the tireless efforts of those who worked so hard to find creative solutions to these issues. That said, . . . Since the proposed settlement with the USWA was shared with the Noteholders' Committee, the Committee has tried to meet the efforts of the settling parties by laboring to fully understand the terms of the settlement. This is not an easy task. The Noteholders' Committee did not participate in the negotiations or the financial modeling that went into the formulation of the settlement and therefore it does not have the knowledge base to fully appreciate the economic ramifications of the settlement - a complex and far-reaching agreement - or the revisions to the Debtors' original business plan necessitated by the settlement. Although the Noteholders' Committee's financial advisor and counsel have been working with the Debtors and their professionals, hoping to become more comfortable with the terms of the settlement, it will not be in a position to truly understand the economic impact of the settlement and the Debtors' revised business plan for some time in the future. Preliminary information provided to the Noteholders' Committee by the Debtors reveals that the settlement materially deviates (by $318 million) from the cost-savings thought to have been necessary under the Debtors' original business plan simply to maintain enterprise viability. The Noteholders' Committee was under the impression that the Debtors were compelled to achieve at least the compensation/benefits cost-savings provided for in the original business plan because the Debtors have thus far failed to achieve some of the other cost-savings initiatives provided for under the original business plan. Indeed, the Debtors previously made the point time and again, in pleadings with this Court and during discussions with the Noteholders' Committee, that they had to strictly adhere to the original business plan as a matter of life or death. As a more immediate matter, however, there are aspects of the settlement that are facially inappropriate and should not be sustained by the Court. These provisions do not directly relate to the Debtors' pension and benefits issues, but rather appear to be value "kickers" to "incentivize" the Union to settlement the Debtors' previous Motion. In particular, under the settlement: (a) The Debtors' hourly employees under the Union CBA will be entitled to a distribution of 20% of the reorganized Debtors' common stock under any plan of reorganization; (b) The Debtors' hourly employees under the Union CBA will be entitled to 20% of the reorganized Debtors' quarterly profits on an on-going basis; (c) The Union will be entitled to a distribution of "special preferred stock" with the right to designate two members of the reorganized Debtors' board of directors and ensure that all committees of the board have at least one Union-designated director (except where such director would have a conflict of interest); (d) The Union will have consent rights (ergo, corporate governance rights) respecting any investment of the reorganized Debtors outside the steel industry and/or any investment exceeding $20 million outside of basic steel; and (e) The Union is afforded consent rights regarding any plan of reorganization for the Debtors and may terminate the settlement if the Debtors propose a plan without the Union's consent, even if the plan is otherwise accepted by every part in interest and confirmed by the Court. More than simply overreaching, these are terms that, under the Bankruptcy Code, may only be provided to the Union in connection with a plan of reorganization. The settlement, therefore, incorporates terms that inappropriately effectuate a "creeping" or sub rosa plan. Accordingly, the Committee asks Judge Bodoh to deny approval of the settlement, at least to the extent that it seeks approval of a sub rosa plan for the Debtors. The Debtors Respond The MLA is the product of months of difficult, arms' length negotiations among the Debtors, the USWA, and the Official Committee of Unsecured Creditors, and represents an important step in the Debtors' ongoing reorganization efforts. First, the Committees question the Debtors' business judgment in agreeing to the MLA, and in particular, whether the terms of the MLA will permit the Debtors to achieve a successful reorganization for the benefit of their estates and stakeholders. At the MLA hearing, the Debtors say they will present testimony and evidence demonstrating that the Debtors' execution and implementation of the MLA represents an appropriate exercise of their business judgment. Among other things, the Debtors will demonstrate that the resolution of disputes with the USWA on the terms embodied in the MLA is the best alternative under the circumstances and provides the best opportunity for a successful reorganization because it: (a) will help avoid immediate and potentially irreparable harm to the Debtors' integrated steel businesses, particularly in light of (i) the USWA's threatened work stoppage if the Rejection Motion were pursued and granted, and (ii) the Debtors' need to achieve cost savings and other benefits contained in the MLA; and (b) will permit the Debtors to move the restructuring process forward in a productive manner to implement the remainder of the restructuring plan, obtain the government loan, and address the various other outstanding reorganization issues in these cases. The MLA is not a sub rosa plan. The MLA in no way binds creditors or other parties in interest to the terms of a plan of reorganization. The provisions cited by the Committees are nothing more than agreements with the USWA regarding certain terms that would be contained in a future plan of reorganization to be proposed by the Debtors. Any plan containing terms regarding future stock distribution would be subject to the approval of stakeholders and the satisfaction of the Bankruptcy Code's confirmation standards. The MLA states that the profit- sharing provisions is based on a calculation of corporate profits (not cash flow) and, in any event, may be paid in equity contributions to the Hourly Employee Stock Plan, rather than in cash. The Union's approval of a plan filed by the Debtors may not be unreasonably withheld. Even without this provision of the MLA, the Debtors intend to seek the approval of all major constituencies in these cases, including the USWA, to the terms of a plan of reorganization, with the goal of proposing a fully consensual pan. Nothing in the MLA prohibits the Debtors from proposing any particular plan of reorganization, or limits the terms of such a plan. If the USWA does not approve the plan, it may terminate the MLA, and the Debtors could propose a non-consensual plan taking that risk into account. The Official Unsecured Committee Responds Too The Official Committee of Unsecured Creditors of LTV Steel Company, Inc., through its counsel, Paul M. Singer, Eric A. Schaffer and David Ziegler of the Pittsburgh firm of Reed Smith LLP, responds to the objections to the MLA too. The Committee reports that it conducted several weeks of intense, virtually continuous negotiations with the USWA which ultimately resulted in a proposal that the Committee believed would meet the Debtors' restructuring needs on terms acceptable to the USWA. That proposal is embodied in the MLA now before the Court. The Committee reminds Judge Bodoh that Congress created a framework for modification or, if necessary, rejection of collective bargaining agreements in order to facilitate the reorganization process. A key element of that framework is the requirement that a debtor "confer in good faith" with employee representatives in an attempt to reach an agreement on mutually satisfactory modifications to CBAs. Viewed in context, the objectors' complaints all relate to modifications to existing rights and benefits under the CBAs that have been reached after good faith negotiations among the Debtors, the Committee and the USWA. Approval of the MLA, negotiated in accord with the Bankruptcy Code, is wholly consistent with the policies underlying the Bankruptcy Code's provisions on CBAs. While the objectors focus on modifications enhancing certain existing rights of the USWA, they ignore the fact that the USWA has agreed to significant concessions regarding other rights under the CBA. Obviously, the collective bargaining process requires some give and take, and it is wrong to suggest that the Debtors cannot modify rights in favor of the USWA in exchange for concessions that the Debtors need to survive. As an example of how the objectors ignore the context in which the MLA is presented, their complaint that the MLA includes a profit-sharing program and provides for issuing stock to the USWA ignores the fact that the existing CBA already included a provision issuing stock to employees under an Employee Investment Program. Similarly, while the objectors complain that the MLA will permit the USWA to elect two members of the Board of Directors, the current CBA gives the USWA a right to select a member of the Board. The objectors' argument that these provisions of the MLA constitute a sub rosa plan is misplaced. The issues presented relate to collective bargaining. The MLA is not a disguised plan, but rather an important stepping-stone on the Debtors' path to reorganization. Nothing in the MLA will deprive the objectors or any other parties in interest of the rights and protections of the Bankruptcy Code with respect to any such plan. But even if the MLA was a sub rosa plan, it should be approved under the circumstances of this case. No party in interest has suggested that a new agreement with the USWA is not absolutely critical to the Debtors' survival. The MAL is the result of extremely difficult and protracted negotiations among the Debtors, the Committee and the USWA. Even if there were more time to continue negotiations -- which there is not -- the Committee strongly believes that the MLA is the best available agreement for the Debtors, the USWA and the Debtors' creditors. Given that the Debtors' continued existence as an operating entity depends on entering into the MLA, there clearly is a sound business purpose for authorizing the Debtor to do so at this time. On the facts before this Court evidencing the Debtors' critical need to resolve these issues, there is only one sound course of action: approve the MLA now. Judge Bodoh Agrees: Now is the Time Judge Bodoh agrees that the only thing to do is to approve the MLA, and does so by Order, subject to any additional modifications that may be agreed to by the parties in the context of completing final documentation. He orders that a final copy of the MLA is to be presented to him under seal and delivered to the Committees subject to confidentiality restrictions. (LTV Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-00900) MADGE NETWORKS: Likely to Seek Hearing Before Nasdaq Panel ---------------------------------------------------------- Madge Networks N.V. (NASDAQ NM: MADGF), a global supplier of advanced networking product solutions, announced that on August 29, 2001 it received a Nasdaq Staff Determination indicating that the Company fails to comply with either the net tangible assets or the shareholders' equity requirements for continued listing under Marketplace Rule 4450(a)(3) and that its securities are, therefore, subject to delisting from The Nasdaq National Market. In addition, on June 7, 2001, Nasdaq Staff notified the Company that the bid price of its common shares had closed below $1.00 for 30 consecutive days and no longer complied with Marketplace Rule 4450(a)(5). The Company was granted 90 days, or until September 5, 2001, to achieve compliance with the bid price requirement or request a hearing. The Company will request an oral hearing before the Nasdaq Listing Qualifications Panel to review the Nasdaq Staff Determination. During the review process the delisting will be stayed pending the Panel's decision and the Company's common shares will continue to be listed on The Nasdaq National Market. In parallel, the Company also intends to make an application to list its securities on The Nasdaq Small Cap Market in the event that the appeal against the Staff Determination fails. There can be no assurance the Panel will grant the Company's request for continued listing on The Nasdaq National Market or that the Company's application for listing on The Small Cap Market will be successful. Madge Networks N.V. (NASDAQ NM: MADGF), through its Madge.connect subsidiary, is a global supplier of advanced networking product solutions to large enterprises, and is the market leader in Token Ring. Madge Networks also has an associate company, Red-M(TM), a leading supplier of Bluetooth(TM) wireless networking product solutions. The Company's main business centers are located in Wexham Springs, United Kingdom and Milpitas, California. Information about Madge's complete range of products and services can be accessed at http://www.madge.com. MESA AIR: Inks Deal with Raytheon to Lift Default Status -------------------------------------------------------- Mesa Air Group, Inc. (Nasdaq: MESA) has signed a letter of intent with Raytheon Aircraft Company (NYSE: RTN) and Raytheon Aircraft Credit Corporation to resolve outstanding issues related to its Beech1900D aircraft fleet financed with Raytheon. In the letter of intent, which is subject to definitive documentation, Raytheon has agreed to assist Mesa in reducing Mesa's 1900D operating expenses. Mesa and Raytheon have also come to an agreement under which Mesa is no longer in default under the outstanding loan agreements. Mesa currently operates 55 Beech 1900D aircraft at its wholly owned subsidiary Air Midwest, Inc., of which 47 are financed by Raytheon. "We are delighted to have reached this agreement with Raytheon as this was imperative to the continued viability of our B1900D operation. Rural communities across America have witnessed the reduction or elimination of air services as increased government regulation has dramatically increased operating costs for small aircraft such as the B1900D," said Jonathan Ornstein, Chairman and CEO of Mesa Air Group. "Our agreement with Raytheon culminates our efforts to reduce operating costs to offset the impact of significantly increased federal regulation imposed over the past five years. The future of rural aviation is now truly in the hands of our federal government." Mesa Air Group was the recipient of the Professional Pilot Magazine's Pilot & Management Teamwork Award in 1999. Air Midwest, a wholly owned subsidiary of Mesa, has received the Federal Aviation Administration Certificate of Excellence Diamond Award. Mesa currently operates 126 aircraft with 1,100 daily system departures to 120 cities, 36 states, Canada and Mexico. It operates in the west and mid-west as America West Express, the midwest and east as US Airways Express, in partnership with Midwest Express out of Kansas City and in New Mexico under the independent Mesa Airlines. In addition, the company has 51 regional jets in service, 57 RJs on firm order and holds options on another 164 aircraft. The Company, which was founded in New Mexico in 1982, has approximately 4,000 employees. MONTANA POWER: Shareholders Convene to Weigh Options on Sept. 14 ---------------------------------------------------------------- With increased awareness locally and nationally of Montana Power's (NYSE: MTP) transition to a broadband telecommunications company under Touch America, the company has received numerous inquiries about its Special Meeting of Shareholders to be held September 14 in Butte. "The majority of all inquiries seek to find out the format of the Special Shareholders' Meeting and how it will differ from the company's Annual Meeting of Shareholders normally held in May of each year," said Patrick T. Fleming, Montana Power's corporate secretary. "From inquiries received by our Shareholder Services Department, we realize some people are confused about the focus and scope of these two very different meetings, particularly since our May meeting was not held this year," he said. Special meetings are held for significant corporate actions that require a shareholder vote. They are very different in scope and format from a company's Annual Meeting of Shareholders. Montana Power's annual meeting has historically been a community event with a prominent guest speaker, displays of the company's products and services, and a post-meeting social, all of which were open to the public. That is not the case with this Special Shareholders' Meeting. "The sole purpose of Montana Power's Special Shareholders' Meeting is to vote on and tabulate the votes for or against the restructuring of the company, the sale of the utility, as well as the redemption of two issues of preferred stock," Fleming said. "The Special Meeting is restricted to shareholders of the company," he said, adding that the votes will be counted at the meeting and the results announced. "While the votes are being tabulated, Bob Gannon, Montana Power's chairman and chief executive officer, will address shareholders and respond to questions, bringing them up to date on the company's transformation," Fleming explained. "Shareholders need to understand the point of the meeting and decide if they want to cast their votes by telephone, by computer, by signing and returning their postage-free proxy card, or in person," he said. Fleming added that he does not want shareholders to travel large distances believing they will be attending a traditional annual meeting, when, in fact, they will be traveling to attend what should be a quick and efficient meeting. To focus on telecommunications, the company has sold its Montana power plants, its independent power projects, its oil and gas assets, and its coal-mining operations, and it's selling its electricity and natural gas distribution operations (to NorthWestern). Montana Power's Touch America subsidiary offers voice, data, video, and Internet services over its 18,000-mile fiber-optic network, which covers the western half of the US. Touch America has acquired 250,000 long-distance customers from Qwest. It has joined the Baby Bell in a digital PCS joint venture that operates in the western US. As of June 30, 2001, the Company's current assets amount to $418.2 million, as opposed to its current liabilities of $555 million. NETWORK COMMERCE: Moves Annual Shareholders' Meeting to Nov. 8 --------------------------------------------=----------------- Network Commerce Inc. (OTCBB:NWKC), the technology infrastructure and services company, announced that the company will host its annual shareholder meeting Thursday, November 8, 2001 at 2:00 p.m. PT at the Doubletree Hotel, 300 112th Avenue, S.E., Bellevue, Wash. 98004. This revises the previously announced date. Established in 1994, Network Commerce Inc. (OTCBB:NWKC) is the technology infrastructure and services company. Network Commerce provides a comprehensive technology and online business services platform that includes domain registration, hosting, commerce, and online marketing services. Network Commerce is headquartered in Seattle, Wash. More information is available at www.networkcommerce.com. Network Commerce Inc. (Nasdaq:NWKC), the technology infrastructure and online business services company, has been undertaking common stock trading on the OTC Bulletin Board since August 29, 2001. The company's common stock was delisted from the Nasdaq National Market when the market opened on Aug. 29, 2001. The Nasdaq delisting occurred because the company did not meet the minimum bid price requirement of one dollar per share for continued listing set forth in Marketplace Rule 4450(a)(5). The company would continue to trade as a publicly traded company under the new trading symbol "NWKC.OB." Network Commerce has restructured its online business services. In doing so, its current focus is on growth in revenues and customers, reduction of expenses and liabilities, as well as pushing towards profitability and positive cash flows. OWENS CORNING: National Union Funds Employee Claim Settlement ------------------------------------------------------------- Owens Corning sought and obtained an order from the Court approving the Release and Settlement Agreement with Claimant Theodore A. Little, Jr. Norman L. Pernick, Esq., at Saul Ewing LLP in Wilmington, Delaware discloses that the settlement arose from the injuries sustained by Mr. Little as a result of negligence of an employee of the Debtors. On April 4, 2001, Mr. Pernick adds that claimant executed a release and settlement agreement with the Debtors and National Union Fire Insurance Company (NUFIC) without resorting to litigation, the basic terms of which are: a) Within ten days of an entry of an order of the Court approving the settlement agreement which has become final and non-appealable, NUFIC shall pay the claimant $280,000. b) Beginning one year after NUFIC tenders the payment to claimant, NUFIC or its qualified assignee will pay the claimant $916.67 per month for ten years pursuant to a ten-year warranty. c) Ten years after NUFIC tenders the payment to Claimant, NUFIC or its qualified assignee will pay the claimant $50,000. Mr. Pernick states that the foregoing payments are to be in full satisfaction and settlement of all present and future claims by the Claimant against the Debtors and NUFIC. The Debtors believe that these factors weigh in favor of the approval of the settlement agreement: a) probability of success in litigation; b) difficulty in collecting any judgment which may be obtained; c) complexity of litigation involved and expenses, inconvenience and delay necessarily attendant to it; d) interest of creditors and stockholders with a proper deference to their reasonable views of the settlement; The Debtors believe that the settlement agreement is favorable to the estate because: a) Settlement agreement releases the Debtors and present and former insurers, directors, officers, agents, employees, successors and assigns from all future liability on account of the Claimants' alleged injury; b) Debtors' estates are not depleted because all funds to be aid to the Claimant are paid by NUFIC or its qualified assignee, not by the Debtors; c) Certain of the issues regarding the claimants alleged injury are factually complex and would require significant litigation to resolve and could cause the Debtors to incur potentially substantial legal fees, costs and expenses. (Owens Corning Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFIC GAS: U.S. Trustee Amends Creditors' Committee Membership ---------------------------------------------------------------- Linda Ekstrom Stanley, the United States Trustee for Region 17, pursuant to 11 U.S.C. Secs. Sections 1102(a) and 1102(b)(1), makes her THIRD AMENDMENT of the list of appointments to the Official Committee of Unsecured Creditors in Pacific Gas and Electric Company's chapter 11 case: (1) Kenneth E. Smith PE-Berkeley, Inc. P.O. Box 776 Berkeley, CA 94701 Phone: 949/650-6301 fax: 949/650-8412 email: ksmith@deltapower.com (2) Michael A. Tribolet Enron Corp. & Affiliates 1400 Smith Street, EB 2855 Houston TX 77002 Phone:713/853-3820 fax: 713/646-8525 email: michael.tribolet@enron.com (3) John C. Herbert Dynegy Power Marketing Inc. 1000 Louisiana Street, Suite 5800 Houston TX 77002 phone: 713/507-6832 fax: 713/507-6788 email: john.c.herbert@dynegy.com (4) Grant Kolling City of Palo Alto 250 Hamilton Avenue P.O. Box 10250 Palo Alto, CA 94303 Phone: 650/329-2171 ext.3953 fax: 650/329-2646 email: grant_kolling@city.palo-alto.ca.us (5) Tom Milne State of Tennessee 11th Floor, Andrew Jackson Bldg. Nashville, TN 37243 phone: 615/532-1167 fax: 615/734-6441 email: tmilne@mail.state.tn.us (6) David E. Adante The Davey Tree Co. 1500 North Maniva Kent, OH 44240 Phone: 330/673-9511 fax: 330/673-7089 email: david.adante@davey.com (7) Duane H. Nelsen GWF Power Systems 4300 Railroad Ave. Pittsburg, California 94565 phone: 925/431-1441 fax: 925/431-0518 email: dnelsen@gwfpower.com (8) Michael E. Lurie Merrill Lynch 2 World Financial Center, #7 New York, NY 10281-6100 phone: 212/236-6480 fax: 212/236-6460 email: mlurie@exchange.ml.com (9) Clara Strand Bank of America, N.A. CA9-706-11-21 555 South Flower Street, 11th Fl Los Angeles, CA 90071-2385 phone: 213/228-6400 fax: 213/228-6003 email: clara.strand@bankofamerica.com (10) Anna Fallon Vice President Morgan Guaranty 60 Wall Street, 19th Floor New York, NY 10260 Phone: 212/648-9746 Fax: 212-648-648-5005 E-mail: fallon_annamarie@jpmorgan.com (11) Raymond G. Kennedy Pacific Investment Management Company LLC 840 Newport Center Drive Suite 360 Newport Beach, California 92660 Phone: 949/720-6378 Fax: 949/720-6363 Email: behenna@pimco.com Accordingly, Gary S. Bush, V.P. at The Bank of New York has left the Committee and Raymond G. Kennedy takes his seat. Patricia Cutler is the Assistant United States Trustee assigned to PG&E's chapter 11 case, represented by Trial Attorneys Stephen L. Johnson, Esq., and Edward G. Myrtle, Esq., in San Francisco. (Pacific Gas Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900) PAYLESS CASHWAYS: Negotiations For Liquidation Funding Continue --------------------------------------------------------------- Payless Cashways, Inc. (OTC: PCSH) officials have announced that the company is currently in discussions with its secured lenders as to the appropriate course of action to fund the orderly liquidation of the company. The company expects to reach an agreement within the next few days. As of June 4, 2001, the company has been operating as a debtor- in-possession, pursuant to a voluntarily filed petition to reorganize under Chapter 11 of the Bankruptcy Code, in an attempt to reorganize the company's business and to restructure its debt and other liabilities. Despite all of its efforts to obtain adequate trade credit support, attract outside sources of capital and/or find a viable buyer for either the company or its assets, the company was unable to do so and does not expect to be able to do so in the future. As a result of this and the continued deterioration of overall borrowing availability and sales, the company has determined that the most prudent course of action is an orderly liquidation under Chapter 11 of the Bankruptcy Code. PILLOWTEX: Court Allows Debtor to Pay Pension Benefit Claims ------------------------------------------------------------ Prior to the Petition date, Pillowtex Corporation paid certain on-going pension benefits to approximately 72 retirees or their spouses. These retirees were formerly lower-level, non- executive, union employees at the Debtors' Thompsonville, Connecticut plant, which closed in 1971. Eric D. Schwartz, Esq., at Morris, Nichols, Arsht & Tunnell, in Wilmington, Delaware, discloses that the monthly benefits payable to the Pension Beneficiaries total approximately $4,875. Although the amount of monthly benefits paid to each Pension Beneficiary is relatively small, many of the Pension Beneficiaries rely on this monthly stipend to meet basic needs, and termination of the Pension Benefits may constitute a grave hardship for these individuals. Furthermore, the Debtors believe that authority to pay the Pension Benefits to the Pension Beneficiaries is important to the morale of their current employees. Employee morale and support is critical to the success of the Debtors' reorganization efforts during this early period of the Debtors' chapter 11 cases, according to Mr. Schwartz. Convinced by the arguments presented, Judge Robinson granted the Debtors' motion to pay in their sole discretion the Pension benefits owed to the Pension Beneficiaries. (Pillowtex Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) PSINET INC: Court Approves Sale of HK Assets for $19 Million ------------------------------------------------------------ Winstar Communications Hong Kong Limited tells the Court that, under certain conditions of the Winstar Agreements, Winstar agreed to buildout a multi-million dollar wireless network for PSINet Wireless, and PSINet HK is obligated to pay for such work under certain performance bonds and other agreements. Winstar objects to the motion on the basis that approval of the Purchase Agreement prompts breaches of an Agreement Relating to Hong Kong (the HK Agreement), between Winstar, Winstar Hong Kong NDMO Limited and Winstar Asia NDMO Pte., Ltd., on the one hand, and PSINet, PSINet HK and PSINet Wireless, on the other hand, dated as of September 30, 2000, under which PSINet HK is prohibited from selling or otherwise transferring its shares in PSINet Wireless prior to September 15, 2002. Since the HK Agreement includes an indemnification by PSINet in favor of Winstar for all damages Winstar may incur from "any default in the performance of any of the agreements or obligations of any PSINet Company [including PSINet Wireless, PSINet HK and PSINet], if the Purchase Agreement is approved, Winstar will have a claim against PSINet for $45 million for damages arising from the breach of the HK Agreement and the other related agreements. Such a claim, Winstar alleges, will substantially diminish the Debtors' estates if the Sale Motion is granted. Winstar notes that pursuant to the Purchase Agreement, PSINet releases all obligations of PSINet HK to PSINet with respect to the LMDS Licence, any finance facility in respect of the LMDS License, and the security provided by PSINet for the LMDS License or any such facility or bond and the Winstar Agreements. Therefore, Winstar complains, by seeking approval of the Purchase Agreement, the Debtors are effectively requiring the termination of several substantial obligations of PSINet HK, which will be detrimental to Winstar. Winstar also notes that, by seeking approval of the Sale free and clear of all interests pursuant to the Purchase Agreement, the Debtors appear to be seeking an order which would waive Winstar's claims or estop Winstar from asserting claims it has as a result of the breaches of the HK Agreement as contemplated by the Sale. Winstar submits that section 363(f)(2) - (5) are not applicable to the instant situation, and that since the proposed Sale requires breaches of the pre-existing HK Agreement, and purports to void Winstar's indemnity claim against PSINet, it does not comply with section 363(f) of the Bankruptcy Code and should be denied. Winstar also requests that the deny the Debtors' request to eliminate the automatic 10-day stay pursuant to Bankruptcy Rule 6004(g) because the purpose of Bankruptcy Rule 6004(g) is to provide sufficient time for an objecting party to request a stay pending appeal before the order can be implemented and the 10- day period can only be eliminated in cases where there is no objection to the proposed sale. The Court's Order After due deliberation at the Sale Hearing, the Court determined that a sale of the Shares at this time to Purchaser pursuant to 11 U.S.C. section 363(b) is the only viable alternative to preserve the value of the Shares, and maximizes the Debtors' estates for the benefit of all constituencies, that time is of the essence, and the relief requested is in the best interests of the Debtors, their estates, their creditors and other parties-in-interest, and granted the Debtors' Motion in all respects. Judge Gerber makes it clear that no transfer of any license or right of the Debtors to use any software of Cisco Systems, Inc. or its affiliates, or any equipment leased by Cisco to the Debtors or equipment of the Debtors financed by Cisco is accomplished by this Order. Pursuant to the Court's order, the Debtors must comply with the provisions of Sections 363 and/or 365 of the Bankruptcy Code in the event the Debtors seek to assign to any third party any rights in software licensing agreements between the Debtors and Cisco or to transfer such equipment. The Court's order expressly says that the provisions in it do not prejudice the rights of Cisco, the Debtors or the Debtors' non-debtor affiliates under any license agreements or lease or financing agreements in existence among such parties. Pursuant to 11 U.S.C. section 363(b), the Purchase Agreement, the Escrow Agreement, the Global Strategic Marketing Agreement, the License Agreement, the Network Services Agreement and the Strategic Network Agreement, respectively, are approved in all respects. All objections to the Motion that are not withdrawn are overruled or denied. Accordingly, pursuant to 11 U.S.C. sections 363(b) and 363(f), upon the Completion Date, under the Purchase Agreement and the Strategic Agreements, the Shares and the Assets will be transferred to the Purchaser free and clear of all Interests and all Claims, with all such Interests and Claims to attach to the net proceeds of the sale of the Shares and the Assets. Except as expressly permitted by the Purchase Agreement and the Strategic Agreements, as of the Completion Date, all persons and entities are forever barred, estopped, and permanently enjoined from asserting against Purchaser or its affiliates, successors or assigns, their property, the Escrow Account, the Shares, or the Assets, any Interests or Claims relating to the Debtors, the Shares, the Assets, the operation of the Debtors' businesses or the sale of the Shares and the Assets to Purchaser. The transfer of the Shares pursuant to the Purchase Agreement is a transfer pursuant to 11 U.S.C. section 1146(c) and, accordingly, may not be taxed under any law imposing a stamp, transfer, recording or similar tax. In addition, the Court authorizes and directs PSINA to assume the Assumed Agreements, in accordance with 11 U.S.C. sections 363 and 365. (PSINet Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) RELIANCE GROUP: Insurance Commissioner Targets Deloitte & Touche ---------------------------------------------------------------- In connection with the retention of Deloitte & Touche by Reliance Group Holdings, Inc., for audit and tax services, M. Diane Koken, Insurance Commissioner of the Commonwealth of Pennsylvania, shows the bankruptcy court a copy of her letter dated July 10, 2001, advising Deloitte, among other things: "The Rehabilitator has neither been asked to consent, nor consented to Deloitte's participation in the bankruptcy, nor has the Rehabilitator waived any objections to Deloitte's conflicts in this matter. The Rehabilitator does not intend at the time to become a party to the proceedings in the Bankruptcy Court, and therefore does not intend to file a formal objection. However, the Rehabilitator objects to Deloitte's participation in the Bankruptcy proceedings, and asks that Deloitte bring this letter containing the Rehabilitator's objection to the attention of the Bankruptcy Court immediately." The Rehabilitator also indicates that it is investigating D&T's role as auditor to RGH and RIC and raises the possibility that claims could be brought by the Rehabilitator against D&T. Pursuant to the Rehabilitator's request, Deloitte Partner Robert J. Bass confirms, D&T has ceased providing audit services to Reliance Insurance. (Reliance Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) SACO SMARTVISION: Talks with CIBC on $15MM Loan Workout Collapse ---------------------------------------------------------------- Saco Smartvision Inc. announces that it was unable to reach an agreement with the Canadian Imperial Bank of Commerce with respect to the restructuring of Saco's loan in the amount of approximately $15 million. Accordingly, the Canadian Imperial Bank of Commerce today filed a petition for a receiving order against Saco before the Superior Court (Quebec). In light of its failure to reach an agreement with the CIBC, Saco consented to the issuance of the receiving order. As a result, the Superior Court (Quebec) issued a receiving order against Saco and appointed a trustee in bankruptcy, effective immediately. Saco's shares are listed on the Toronto Stock Exchange. SEDONA CORP: Fails to Comply with Nasdaq Capital Requirements ------------------------------------------------------------- SEDONA(R) Corporation (Nasdaq:SDNA) -- http://www.sedonacorp.com -- the leading provider of Internet-based Customer Relationship Management (CRM) solutions for small and mid-sized financial services companies, announced that it has received a Nasdaq Staff Determination, dated August 28, 2001, indicating that the Company fails to comply with the minimum market capitalization listing requirement of the Nasdaq SmallCap Market set forth in Marketplace Rule 4310, and that its securities are, therefore, subject to delisting. The Company has requested a hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination. There can be no assurance, however, that the Panel will grant the Company's request for continued listing. Should the Company be unsuccessful in its appeal, its common stock would commence trading on the NASD Electronic OTC Bulletin Board. SEDONA(R) Corporation (Nasdaq:SDNA) is the leading provider of Customer Relationship Management (CRM) solutions for small and mid-sized financial services companies. SEDONA's Internet-based software, Intarsia(TM), and supporting Marketing Solution Services enable the entire financial institution to help identify, acquire, foster, and retain loyal, profitable customers. With its affordable, quick, and easy implementation, SEDONA helps clients rapidly increase their ability to acquire and retain customers and to improve product pricing, packaging, and cross-selling opportunities, and to increase operational efficiency aimed towards improving overall profitability. SEDONA markets Intarsia together with leading solution providers such as IBM(R) Corporation and Acxiom(R) Corporation. UNIFORET: Extends Downtime at Pulp Mill for an Indefinite Period ---------------------------------------------------------------- Unifor^t has announced that the downtime in production at its Port-Cartier pulp mill which started on February 16 is extended again for an indefinite period of time. This measure is seen as necessary because of the weak conditions that persist on the pulp world market. Some 120 jobs are directly affected by the suspension. Port- Cartier sawmill operations will not be affected by the extended suspension of production at the pulp mill. Unifor^t Inc. is an integrated forest products company that manufactures softwood lumber and bleached chemi-thermomechanical pulp (BCTMP). The company operates in Quebec through its subsidiaries located in Port-Cartier (pulp mill and sawmill) and in the P,ribonka region (sawmill). Unifor^t Class A Subordinate Voting shares are listed on the Montreal and Toronto stock exchanges under the symbol UNF.A, along with Series A Debentures under the symbol UNF.DB. USG CORP: Seeks Extension of Lease Decision Period to Feb. 28 ------------------------------------------------------------- Pursuant to 11 U.S.C. Sec. 365(d)(4), USG Corporation asks the Court an order extending, through and including February 28, 2002, the deadline for them to assume or reject any unexpired nonresidential real property lease under which they are a lessee. Paul E. Harner, Esq., at Jones, Day, Reavis & Pogue, explains that the Debtors have approximately 225 Real Property Leases. Almost 200 of the Real Property Leases are with Debtor L & W Supply Corporation. L & W is the USG subsidiary that conducts all of the USG Companies' domestic distribution activities. L & W stocks construction materials, delivers less-than- truckload quantities of construction materials to job sites and places them where they are needed, reducing or eliminating the need for contractors to deal with them. Mr. Harner goes on to explain that L & W operates through centers in 37 states. Most of the centers are leased through third parties. Busy with completion of a smooth transition to operations in chapter 11, and meeting various administrative and reporting obligations, the Debtors have been unable to devote time to Real Property Lease analysis or discussing them with the relevant creditors. Since the Real Property Leases are important to the operations and the number of leases involved is high, the Debtors submit it would be unwise to hold them to the original 60-day period in which to assume or reject the Real Property Leases. So, the Debtors request the extension through February 28, 2002, without prejudice to the right of the Debtors to seek further extensions. Mr. Harner elaborates that courts routinely grant extensions under section 365(d)(4) of the Bankruptcy Code in Delaware and extensions are uniformly granted in large and complex chapter 11 cases such as these, and in some instances up to the time of plan or reorganization. Mr. Harner states the Debtors will continue to perform all of their Real Property Leases' obligations arising from and after the Petition Date, including payment of postpetition rent due, as required by section 365(d)(3) of the Bankruptcy Code. There should be little or no prejudice to the Lessors as a result of the extension request. The amount of prepetition arrearages under the Real Property Leases is relatively small, as rent under many of the leases is paid in advance. Mr. Harner sums up by saying there was only a minimal amount of accrued but unpaid rent under such leases. Judge Newsome will entertain the Debtors' request at a hearing on September 20, 2001. By application of Local Rule 9006-1, the deadline by which the Debtors must make lease-related decisions is automatically extended through the conclusion of that hearing. (USG Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) VLASIC FOODS: Requests Exclusive Period Extension to Oct. 29 ------------------------------------------------------------ Vlasic Foods International, Inc. asks Judge Walrath for another extension of the exclusive periods. This time, they want 60 days added to their current deadlines. The Debtors seek to extend: (i) their exclusive period during which to file a plan of reorganization through and including October 29, 2001. (ii) their exclusive period during which to solicit acceptances of that plan through and including December 28, 2001. The Debtors' current exclusive period to file a plan expires on August 29, 2001 while their current exclusive period to solicit acceptances of a plan expires on October 29, 2001. The Debtors believe that a 60-day extension of the Exclusive Periods should be sufficient to permit them to prepare, file and solicit acceptances of the Plan. Robert A. Weber, Esq., Skadden, Arps, Slate, Meagher & Flom, reports that the Debtors have made extraordinary progress in these cases in the six months since Petition Date. During this short period, Mr. Weber says, the Debtors have already marketed and sold their pickles, sauce and frozen foods businesses. In addition, Mr. Weber relates, the Debtors' non-debtor European subsidiaries have completed sales of substantially all of their assets. According to Mr. Weber, the sales of these businesses and assets constitute the basis for the plan, which the Debtors anticipate will provide a sizable distribution to unsecured creditors. At the same time, Mr. Weber notes that the Debtors have also aggressively prosecuted their chapter 11 cases. Mr. Weber reminds Judge Walrath that the Debtors already filed an initial version of their proposed plan of distribution last June 12, 2001. The Debtors anticipate that they will be filing an amended plan of distribution very soon. Together with the plan, the Debtors will be also be submitting a disclosure statement. Right after that, the Debtors will be seeking the approval and confirmation of the plan. Mr. Weber says the Debtors have extensively negotiated the Plan with the Official Committee of Unsecured Creditors. Once the Plan is completed, the Debtors expect to get the Committee's full support. The Debtors are also presently engaged in conducting an orderly wind-down of the Debtors' business operations, including employee benefit plans, Mr. Weber adds. The Debtors contend that the Court should grant them a 60-day extension of each of the Exclusive Periods because, among other things: (a) the Debtors' cases are large and complex; (b) the Debtors have made significant progress in resolving issues facing their estates; and (c) an extension of the Exclusive Periods will facilitate negotiations among the various constituencies without prejudicing any party-in-interest. Mr. Weber explains that the requested extension of the Exclusive Periods will facilitate the Debtors' restructuring efforts by allowing the Debtors to negotiate an amended plan to fairly and efficiently treat the Debtors' thousands of creditors. Also, Mr. Weber claims, the requested extension of the Exclusive Periods will not prejudice the interests of any creditors or other parties-in-interest. Instead, Mr. Weber says, such extension will substantially further the Debtors' efforts to maximize the value of their estates. The hearing for this motion is scheduled on September 6, 2001. The Court expects all objections and responses to be filed by August 28, 2001. By application of Del.Bankr.LR 9006-2, the current deadline is automatically extended through the conclusion of the September 6 hearing. (Vlasic Foods Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) W.R. GRACE: Property Claimants Gripe About Bar Date Motion ---------------------------------------------------------- The Official Committee of Property Damage Claimants of W. R. Grace & Co. asks Judge Farnan to continue the hearing on the Debtors' Motion and to extend the response date, pointing out that a mere three and one-half months after the case commenced, the Debtors ask Judge Farnan to: (a) set a bar date for claims of April 1, 2002; (b) approve a notification plan purportedly designed to "provide 96.9% of all men over the age of 65 years of age with 5.3 opportunities to see the notice and 95.4% of all adults over the age of 35 with 4.3 opportunities to see the notice"; (c) approve "unprecedented" proof of claim forms; (d) establish triple-track discovery periods that last until July, 2003; (e) empower at least two so-called 'Litigation Committees' to "supplant claimants' existing counsel"; (f) schedule multiple Daubert hearings to challenge scientific evidence relating to asbestos claims; (g) schedule multiple bench trials in lieu of jury trials or more traditional claims resolution facilities under a confirmed plan of reorganization; (h) schedule bench trials and hearings on motions for summary judgment as far out as August 2003; and (i) confer the right to "pick and choose property damage claims to be remanded to other courts". Complaining that notice of this Motion was received late, the Committee says that the Debtors have agreed to adjourn the hearing and extend the response date. Saying acidly that the PD Committee has "formed the impression that the case management motions are ill conceived and imprudent generally, the PD Committee says it needs more time to object to the Debtors' Motion and to present its own "vision" for the conduct and management of these chapter 11 cases specifically. Although the Debtors claim that these procedures are used in other cases, those other cases didn't involve property damage claims. So, to prevent manifest injustice, a continuance is appropriate. (W.R. Grace Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) WARNACO GROUP: Moves to Assume and Assign Grant Avenue Lease ------------------------------------------------------------ Authentic Fitness Retail Inc, one of the Debtors, operates a swimwear retail store at 39 Grant Avenue, San Francisco. AFC rents the 1,766 square feet of ground floor space from Grant Building Partnership. Their lease agreement is yet to expire on January 31, 2010. J. Ronald Trost, Esq., at Sidley Austin Brown & Wood, relates that AFC's swimwear business is not so good, the store is currently operating on a "break even" basis. According to Mr. Trost, the Debtors' real estate consultants - Keen Realty LLC - has been working to review and evaluate all leasehold interests of the Debtors, particularly with respect to leases underlying the Debtors' retail store locations. With Keen's help, the Debtors identified Grant Avenue Lease as: (i) unprofitable and unnecessary for the Debtors' business operations, and (ii) having potential value for the Debtors estates if assumed and assigned. Thus, Mr. Trost notes, the Debtors and Keen extensively advertised the availability of the Grant Avenue Lease to potential interested parties in order to obtain the optimal price. Mr. Trost outlines the efforts exerted by the Debtors and Keen to advertise the availability of the Grant Avenue Lease: (a) engaged in extensive telephone and in-person marketing and solicitation over the past several weeks; (b) sent 3,700 flyers announcing the availability of the Grant Avenue Lease via facsimile to a customized, targeted list of prospective users and brokers; (c) (then) made direct calls to 100 potential users of the space. (d) forwarded a lease abstract with basic lease information to all parties expressing an interest in the space, and if requested, a copy of the Grant Avenue Lease; (e) continued to make follow-up calls with all prospects on a regular basis to answer any questions or provide additional information as necessary; and (f) caused an advertisement concerning the Grant Avenue Lease to be run on four different days in both the San Francisco and the San Jose Mercury News between the period of July 18, 2001 and July 31, 2001. Of the more than 100 parties contacted by Keen, Mr. Trost informs Judge Bohanon that 35 parties responded to the solicitation and expressed interest in obtaining further information. So last August 29, 2001, the Debtors held a telephonic auction of the Grant Avenue Lease. Keen sent notices of the auction to the Interested Parties, but only two attended - Camper Atlantic Corporation and Aerogroup Retail Holdings, Inc. Camper bid $160,000 while Aerogroup offered $155,000 for the Grant Avenue Lease. Camper was proclaimed the ultimate winner and the Debtors accepted Camper's bid of $160,000 as the highest offer, which offer is conditioned on obtaining the consent of the Landlord to the assignment of the Grant Avenue Lease. Shortly afterwards, AFC executed an Assumption and Assignment Agreement with Camper. Under the agreement, AFC will assign all of its right, title and interest to the Grant Avenue Lease to Camper. According to Mr. Trost, Camper Atlantic Corporation is a large European retailer of high fashion shoes and related accessories. After conducting an investigation on the financial condition of Camper, the Debtors have have concluded that Camper is financially capable of meeting the obligations under the Grant Avenue Lease. They also contend that the financial condition of Camper is enough adequate assurance to the Landlord that Camper will be able to satisfactorily comply the lessee's obligations under the Grant Avenue Lease. The Debtors promise to provide the Landlord with the information regarding Camper's financial condition and Camper's ability to perform its obligations under the Grant Avenue Lease before the hearing of this motion. According to the Debtors' books and records, Mr. Trost explains $6,323.89 (plus any accrued but unpaid post-petition rent) is required to cure all existing defaults under the Grant Avenue Lease. If the Court approves the Assumption and Assignment Agreement, Camper will assume all of AFC's obligations under the Grant Avenue Lease and will pay AFC $160,000. At the same time, the Debtors will satisfy the Cure Amount out of the Purchase Price paid by Camper. By this motion, the Debtors seek a Court order granting AFC authority to assume and assign its entire interest as lessee in the Grant Avenue Lease to Camper Atlantic Corporation. Mr. Trost tells the Court that the Debtors will definitely profit from the sale of the Grant Avenue Lease. The assumption and assignment of the Grant Avenue Lease will also allow the Debtors to avoid substantial unsecured claims in connection with rejecting the lease, Mr. Trost adds. (Warnaco Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) WHEELING-PITTSBURGH: Danieli Seeks Relief to Recover Gas Cleaner ---------------------------------------------------------------- On January 27, 2000, Hoogovens Technical Services, Inc., entered into an agreement with Wheeling-Pittsburgh Steel Corporation for the design, fabrication, assembly and delivery of a new Bischoff gas cleaning system for the Debtor's plant located at Mingo Junction, Ohio. All rights and interests of Hoogovens Technical Services under the Agreement were assigned to Danieli Corus Canada, Inc. The Agreement provided for the Debtors to pay an aggregate purchase price of $3,123,220. Title to the equipment was to pass to the Debtor to the extent that the Debtor paid for the equipment. The equipment was delivered to the Debtor in accordance with the Agreement, and Danieli has fulfilled all of its obligations under the Agreement, says Mr. Robert E. Dauer, Jr., of the Pittsburgh firm of Meyer, Unkovic & Scott LLP. However, the Debtor has not made the required payments. The unpaid balance due to Danieli under the Agremenet is $303,457.31. Title to the delivered equipment, which the Debtor has not paid for, remains with Danieli, Mr. Dauer insists. The Debtor has rejected the agreement and has informed Danieli that the equipment is not necessary for its reorganization. Danieli is therefore entitled to relief from the stay. Danieli does not have, and has not been offered, adequate protection for its interests in the equipment. Accordingly, cause exists for relief from the stay. Further, the Debtor has no interest in the equipment as title to the equipment has not passed to the Debtor in accordance with the agreed upon terms in the Agreement, so that the Debtor does not have any equity in the property. WPSC Says No, No This suggestion by Danieli of absence of title and abandonment of use does not stop WPSC from opposing the Motion for relief from the stay. WPSC has paid more than $2.8 million of the sums owed under the Agreement, leaving a balance due as stated by Danieli. However, Section 11.1 of the Agreement provides that "Supplier hereby irrevocably waives any rights it may now have or which it may acquire in the future to file liens or charges against Purchaser or its property with respect to Supplier's or Purchaser's performance hereunder. Section 11.3 provides further that "Supplier warrants that the equipment shall be delivered free and clear of all liens, claims and encumbrances whatsoever." Under the terms of this Agreement, WPSC says Danieli didn't obtain or retain, and expressly waived, any liens or security interest in the equipment or other property of WPSC. In addition, WPSC also is not aware okf any U.C.C.Rep.Serv.(CBC) filings or other actions by Danieli Corus, prior to the Petition Date, to perfect any asserted security interest in any property of WPSC. The only liens and security interests that have attached to the equipment and related software are the liens and security interests that were granted to secure the obligations that WPSC owes to Citibank and other lends under the DIP facility. Section 4.1 of the Agreement provided that WPSC acquired legal title to the equipment in proportion to the extent to which WPSC made payment for the equipment. Danieli Corus has contended that it has retained some partial legal title to the equipment under this provision, based on WPSC's failure to make full payment of all sums due under the Agreement. However, legal title is only one indicia of ownership. The Agreement makes clear that the real economic ownership of the equipment, and the risk of loss, belonged fully to WPSC. Thus, Section 4.1 of the Agreement provided that possession, and the risk of loss, passed to WPSC upon delivery of the equipment to WPSC's Mingo Junction, Ohio, site. WPSC also was required to obtain and pay for all permits, licenses, and taxes associated with the equipment. In addition, Exhibit A to the Agreement (which was not attached to the moving papers, but which is part of the copy of the Agreement WPSC includes) sets forth the timetable for completion of the design, fabrication, delivery and start-up of the equipment, along with the corresponding schedule of payments. Exhibit A makes clear, WPSC says, that WPSC's prepetition payments constituted full payment for the design, fabrication and delivery of the equipment itself. WPSC's remaining obligations of $303,457.31 related exclusively to software development and start-up costs. Thus, full payment has been made for the equipment, and Danieli Corus has not retained even partial legal title under Section 4.1. Having attacked Danieli's claim to title, the Debtor now turns to the stay relief. In this case, by Danieli Corus' admission, the unpaid debt to Danieli Corus pales in comparison to the value of the equipment of over $3 million. Plainly there is equity in the equipment above and beyond any asserted claim by Danieli Corus. In addition, Danieli Corus holds no liens on the equipment and no secured interests in the equipment. In fact, Danieli Corus waived any of its right to file liens or charges against WPSC or its property. In this regard, Danieli Corus waived the very relief that it now seeks through its motion. At most, Danieli Corus' possible retention of some legal title under Section 4.1 of the Agreement merely creates the potential for a secured claim. However, Danieli Corus failed to take any of the steps required under Wet Virginia law to perfect any secured claim. Any unperfected security interest that Danieli Corus theoretically might have retained is therefore voidable and unenforceable under the Bankruptcy Code. In addition, WPSC reminds Judge Bodoh again that Danieli waived the assertion of any liens or charges. WPSC also cites West Virginia law, saying that the statutes of that state provide that any retention or reservation by the seller of title in goods shipped or delivered to the buyer is limited to a reservation of a security interest. WPSC needs this equipment as part of its reorganization efforts! Indeed, any attempt to remove the equipment would lead to a shutdown in WPSC's operations, and would immediately thwart reorganization efforts. The relief sought by Danieli Corus would also interfere with the superior rights of the DIP lenders, who have first priority, fully perfected liens and security interests in the relevant property. The requested relief would also give preferential treatment to Danieli Corus' general unsecured claim in relation to the claims of other general unsecured creditors. All these results would be contrary to the language and the purpose of the relevant provisions of the automatic stay. If Judge Bodoh were to allow Danieli Corus relief from the stay to take possession of the equipment, then assets of the WPSC estate would be diverted to the preferential payment of Danieli Corus' unsecured claim, to the prejudice of the teat and other creditors. There is no "cause" for the granting of this relief. Danieli Corus' unsecured claim should be addressed through the normal claim procedures in this Court, and Danieli Corus should await such distribution as may ultimately be provided to unsecured creditors under a plan of reorganization. The Unsecured Trade Creditors' Committee Objects Too The Official Committee of Unsecured Trade Creditors of Pittsburgh Canfield Corporation, appearing through Joseph C. Lucci and Michael A. Gallo of the Youngstown firm of Nadler Nadler & Burman Co., LPA, along with Marc E. Richards of the New York firm of Balnk Enzer Greenblatt LLP as lead counsel, objects to Danieli Corus' Motion on the same grounds as those raised by the Debtors. Danieli Fires Back! Danieli replies to the Debtor's and Committee's citation of West Virginia law appearing to limit retention of title to a security interest, saying that the argument ignores the remainder of the statute, the official comment to that section, and the import of the Agreement, and other provisions of the U.C.C. The cited provision is expressly authorized to be varied by agreement, as Danieli argues happened here. Further, the Debtor and Danieli expressly negated any intent to reserve or retain a security interest. Thus, to the extent the statute cited by the Debtor is applicable, its provisions have been expressly altered by the unambiguous language of the Agreement as permitted by West Virginia law. Accordingly, Danieli has not retained or reserved a security interest, but has expressly agreed with the Debtor under what conditions title to the equipment would pass to the Debtor. The argument of the Debtor and the Committee ignores West Virginia law and the clear and unambiguous language of the Agreement. Further, the Debtor and the Committee are said by Danieli to ignore the remaining provisions of West Virginia law and the official comments to that U.C.C. section. The statute further provides that subject to these provisions and the provisions of the article on secured transactions, title to goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed on by the parties. In the present case, Danieli and the Debtor expressly agreed that title would pass conditioned upon payment of the agreed-upon purchase price. The Debtor and the Committee ignore the express agreed-upon condition for the passage of title to the equipment. The Official Comment to this statute provides that the article deals with issues between seller and buyer in terms of step by step performance or nom-performance under the contract for sale and not in terms of whether or not "title" to the goods has passed. A second portion of this statute provides that when payment is due and demanded on the delivery to a buyer of goods the buyer's right as against the seller to retain or dispose of them is conditional upon his making the payment due. Thus, in addition to the Agreement, the Uniform Commercial Code, as adopted by the State of West Virginia, expressly provides that the buyer's right or ability to retain goods is conditioned upon payment to the seller. The Debtor Wants the Last Word In a supplemental brief, WPSC seeks the last word on the dispute with Danieli Corus. The Debtor says that it is an "uncontroverted fact" that the equipment is essential to the operation of WPSC's blast furnace No. 5, one of only two blast furnaces currently being operated by WPSC, and it would be impossible for WPSC to operate the blast furnace without the equipment. WPSC also says it is an uncontroverted fact that the equipment is vital to the effective reorganization of WPSC and the Debtors, and that the equipment was sold to WPSC with a partial reservation of title by Hoogovens Technical Services. The Debtor admits that WPSC and Danieli Corus disagree over the legal effect of Danieli Corus' partial reservation of title under the Agreement. Citing again the West Virginia Code law previously quoted, WPSC says that as a matter of law Danieli Corus' partial retention of title to the equipment constitutes only a reservation of a security interest in the equipment, not a retention of ownership rights to the equipment. Since no financing statement was recorded, Danieli Corus has no perfected line on the equipment, is not a secured creditor, and is, rather, the holder of a general, unsecured claim. WPSC points out that if Danieli Corus is entitled to relief from the stay, it would, "a general unsecured creditor of WPSC", tae priority over the perfected first-priority security interest of the DIP lenders in the equipment. To Danieli Corus' oral suggestion that it should be permitted to repossess certain parts of the equipment which it selects having an aggregate value up to the balance due under the Agreement, the Debtor says it needs all of the equipment to operate the blast furnace. Even if Danieli Corus did have an interest in the equipment, its interest is in a small portion in the undivided whole. It does not, even under its own incorrect interpretation of the law, have a 100% interest inn selected parts of the equipment. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. 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