================================================================= EXODUS BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2001 (ISSN XXXX-XXXX) September 27, 2001 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 609-392-0900 FAX 609-392-0040 ----------------------------------------------------------------- EXODUS BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, On an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. Each issue is prepared by Peter A. Chapman, Editor. Subscription rate is US$45 per issue. Copying and re-mailing of EXODUS BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO ORDER A SUBSCRIPTION TO EXODUS BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF EXODUS COMMUNICATIONS [00002] EXODUS' CONSOLIDATED BALANCE SHEET AT JUNE 30, 2001 [00003] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING [00004] EXODUS DEBTORS' CHAPTER 11 DATABASE [00005] CONSOLIDATED LIST OF EXODUS' LARGEST UNSECURED CREDITORS [00006] NASDAQ TRADING HALT CONTINUES PENDING RECEIPT OF INFO [00007] DEBTORS' MOTION TO PAY PRE-PETITION EMPLOYEE OBLIGATIONS KEY DATE CALENDAR ----------------- 09/26/01 Voluntary Petition Date 10/11/01 Deadline for filing Schedules of Assets and Liabilities 10/11/01 Deadline for filing Statement of Financial Affairs 10/11/01 Deadline for filing Lists of Leases and Contracts 10/16/01 Deadline to provide Utilities with adequate assurance 11/26/01 Deadline to make decisions about lease dispositions 12/26/01 Deadline to remove actions pursuant to F.R.B.P. 9027 01/24/02 Expiration of Debtors' Exclusive Plan Proposal Period 03/25/02 Expiration of Debtors' Exclusive Solicitation Period 09/25/03 Deadline for Debtors' Commencement of Avoidance Actions Organizational Meeting with UST to form Committees Bar Date for filing Proofs of Claim First Meeting of Creditors pursuant to 11 USC Sec. 341 ----------------------------------------------------------------- [00000] HOW TO ORDER A SUBSCRIPTION TO EXODUS BANKRUPTCY NEWS ----------------------------------------------------------------- EXODUS BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF EXODUS COMMUNICATIONS ----------------------------------------------------------------- Exodus Communications, Inc. 2831 Mission College Blvd. Santa Clara, CA 95054-1838 Telephone (408) 346-2200 Fax (408) 346-2201 http://www.exodus.net Exodus Communications, Inc. (Nasdaq: EXDS) is the leading provider of Internet infrastructure outsourcing services for enterprises with mission-critical Internet operations. Exodus offers complex web hosting infrastructure services, including Internet data services, networking, storage, content distribution and caching, security, performance measurement, monitoring and testing, professional consulting, managed Web hosting and Web application management. Providing high-end Internet operations outsourcing, the company says it has "solutions [that] span the range of services required by today's leading corporations to boost efficiency, grow revenues and effectively manage the increasingly complex and demanding environment of their Internet operations." Exodus offers a comprehensive set of managed and professional services that go well beyond simple hosting of a corporation's Web site, from designing the Internet operations infrastructure to determining how best to keep mission-critical Internet applications up and running. Exodus delivers a complete outsourced solution, including Internet Data Center space and network connectivity (if required), monitoring and management, security and network services, technical expertise, scalability on demand, and the support and performance required by today's enterprises. Exodus says it is the undisputed leader in the U.S. Web hosting market, pointing to: * a Number One ranking by International Data Corporation * Annual revenues in excess of $1 billion * Approximately $319 million of revenue and over $200 million of gross new annualized, recurring bookings in Q2 2001 * Seasoned management team and skilled, dedicated employees Exodus tells customers is in the best market position to execute and deliver complex Web and managed hosting services through: * Integrated managed services * Solid, best of breed partnerships * Exceptional networking capabilities - peak Internet exchange rate of over 22.5 Gbps as of Q2 2001 * World-class Internet Data Centers: - 44 Exodus IDCs located in: -- North America -- Europe -- Asia -- Australia - 27 of these Exodus IDCs are EBITDA-positive - 5.6 million gross feet of space Exodus serves some 4,500 customers through its Internet Data Centers located in: * Amsterdam * Atlanta * Austin * Boston * Chicago * Dallas * Frankfurt * London * Los Angeles * Melbourne * Miami * New York * Paris * Seattle * Silicon Valley * Sydney * Tokyo * Toronto * Washington, D.C. Exodus and its domestic debtor-affiliates plan to use the Chapter 11 restructuring process to its maximum advantage in order to: * rationalize their capital structure and enhance long-term profitability; * complete their restructuring initiatives; * maintain and enhance their market leadership position; and * obtain access to additional capital to fund new growth initiatives in the growing Web hosting market. That market for Web hosting services, the Debtors believe, is estimated to grow from $7 billion a year in 2001 to $24.8 billion in 2004. The Debtors have every intention of moving swiftly through their chapter 11 cases to a successful reorganization. Upon emergence, the Debtors expect to be a market leader and well-positioned to take advantage of lucrative opportunities in the fast growing Web hosting industry. ----------------------------------------------------------------- [00002] EXODUS' CONSOLIDATED BALANCE SHEET AT JUNE 30, 2001 ----------------------------------------------------------------- EXODUS COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS At June 30, 2001 (unaudited) Assets Current assets: Cash and cash equivalents $ 616,826,000 Accounts receivable, net of allowance for doubtful accounts of $95,514,000 as of June 30, 2001 272,649,000 Prepaid expenses and other current assets 119,030,000 --------------- Total current assets 1,008,505,000 Property and equipment, net 2,784,606,000 Restricted cash equivalents 74,784,000 Goodwill and other intangible assets 1,706,817,000 Investments 24,440,000 Other assets 390,692,000 --------------- Total assets $ 5,989,844,000 =============== Liabilities and Stockholders' Equity Current liabilities: Current portion of equipment loans, line of credit facilities and other notes payable $ 157,893,000 Current portion of capital lease obligations 61,460,000 Accounts payable 314,165,000 Accrued expenses 113,804,000 Merger and restructuring related accruals 327,628,000 Deferred revenue, deferred benefits and other 40,514,000 Accrued interest payable 107,726,000 --------------- Total current liabilities 1,123,190,000 Equipment loans, line of credit facilities and other notes payable, less current portion 171,983,000 Capital lease obligations, less current portion 69,767,000 Convertible subordinated notes 1,126,961,000 Senior notes 1,929,043,000 Other non-current liabilities 25,172,000 --------------- Total liabilities 4,446,116,000 --------------- Stockholders' equity: Common stock 556,000 Additional paid-in capital 3,286,563,000 Deferred stock compensation (673,000) Accumulated deficit (1,717,523,000) Accumulated other comprehensive loss (25,195,000) --------------- Total stockholders' equity 1,543,728,000 --------------- $ 5,989,844,000 =============== ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING ----------------------------------------------------------------- Exodus Communications Facilitates Financial Restructuring -- Files for Reorganization through Voluntary Chapter 11 Case -- Secures Commitment for $200 Million in 'DIP' Financing -- Assures Uninterrupted Operations and Customer Service -- Focuses on Long-Term SANTA CLARA, California -- September 26, 2001 -- Exodus Communications(R), Inc. (Nasdaq: EXDS) announced today it has filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The filing will enable Exodus(R) to focus on operating its business and serving its customers while it develops a plan of reorganization to provide a suitable capital structure for long-term growth. The company also announced it has received a commitment for up to $200 million in debtor-in-possession (DIP) financing from GE Capital which will be used to fund post-petition operating expenses and supplier and employee obligations. The company filed its voluntary petition in the U.S. Bankruptcy Court for the District of Delaware in Wilmington. The filing includes the company's domestic operations headquartered in Santa Clara, Calif. Exodus Chairman and Chief Executive Officer L. William Krause said the actions allow the company to continue to provide its customers with the highest quality service and support and assure fulfillment of its obligations to them as well as to Exodus employees. "Providing high quality products and services to our customers has been, and continues to be, our number one priority. Our employees have been, and continue to be, our number one asset," Krause said. "We are committed to meeting the needs of both-now and well into the future. This restructuring action ensures we have the wherewithal to do that and our daily operations continue uninterrupted as before. In addition, we will now be able to devote efforts to solidifying and executing on a go-forward operating plan that is based on tough-minded fiscal discipline and focuses on managing Exodus to profitability." Debtor-in-Possession Financing To enhance its liquidity, Exodus has obtained a commitment for up to $200 million in DIP financing from GE Capital. This financing, as well as cash from operations will be used to fund post-petition operating expenses and supplier and employee obligations. Funding of the DIP financing is subject to condition precedents normal and customary with respect to facilities of this type, including, but not limited to, obtaining Bankruptcy Court approval. "With a commitment for DIP financing in place and the protections provided under the Bankruptcy Code for post-petition purchases, we are confident our suppliers will continue to support us as we complete our restructuring," Krause said. Focus on Long-Term Profitable Growth Exodus, as a market leader in complex Web hosting and Internet operations outsourcing services, enjoyed first-mover status in its category, building one of the world's largest privately-managed data networks and locating dozens of state-of- the-art Internet Data Centers (IDCs) in more high-demand locations than any other hosting service provider. The company had 17 consecutive quarters of double-digit sequential growth and attained market leadership by expanding rapidly to stay ahead of demand from customers for the highest quality service and best solutions, according to Krause. "We sacrificed profitability in exchange for growth and market share, over-expanding in some areas in advance of demand, not anticipating the decline as the dot.com bubble burst and the economy weakened," Krause said. "But the investments made in IDCs, state-of-the-art operations, customer support, and enhanced products and service offerings are greatly valued by our customers. While we address our balance sheet issues, it is these assets that form the strong base from which we will restore Exodus to financial stability. Our top priority is to serve our existing customers, better than ever, so they entrust us with more of their business. Our goal is to run a profitable business without sacrificing any of the unique value we bring to customers and the marketplace." Krause said the company is in a good position to take advantage of a market opportunity that continues to grow, albeit at a slower pace than once predicted. According to the industry research firm International Data Corporation, which ranks Exodus as number one in the U.S. web hosting market, the demand for such services will reach $24.8 billion by 2004, up from $7 billion in 2001. "Exodus is a viable business in a growing market. We've got world-class IDC operations and a premier suite of managed hosting, network management, security, storage and content delivery services," Krause said. "We intend to emerge from the restructuring process with a more appropriate capital structure, sufficient cash to fund on-going operations and the ability to access additional capital if needed to fund new growth initiatives. We determined, after careful consideration of our various options, that reorganization through the Chapter 11 process presents the best mechanism to complete our restructuring in a timely manner and retain our current leadership position." About Exodus Communications Exodus Communications is the leading provider of managed hosting services for enterprises with mission-critical Internet operations. The company offers sophisticated system and network management solutions along with professional services to provide optimal performance for customers' Internet infrastructures. Exodus manages its network infrastructure via a worldwide network of Internet Data Centers (IDCs) located in North America, Europe and Asia Pacific. More information about Exodus can be found at http://www.exodus.net ----------------------------------------------------------------- [00004] EXODUS DEBTORS' CHAPTER 11 DATABASE ----------------------------------------------------------------- Lead Debtor: Exodus Communications, Inc. 2831 Mission College Boulevard Santa Clara, CA 95054 Debtor affiliates filing separate chapter 11 petitions: Area Systems, Inc. American Information Systems, Inc. Cohesive Technology Solutions, Inc. GlobalCenter, Inc. GlobalCenter Holding, Co. KeyLabs, Inc. Planet, Inc. Service Metrics Chapter 11 Petition Date: September 26, 2001 Court: United States Bankruptcy Court District of Delaware 824 Market Street, 5th Floor Wilmington, DE 19801 (302) 252-2900 Bankruptcy Case Nos.: 01-10539 through 01-10551, inclusive Debtors' Counsel: J. Gregory Milmoe, Esq. D. J. Baker, Esq. Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 (212) 735-3000 - and - John K. Lyons, Esq. Skadden, Arps, Slate, Meagher & Flom (Illinois) 333 West Wacker Drive Chicago, Illinois 60606-1285 (312) 407-0700 - and - Mark S. Chehi, Esq. David R. Hurst, Esq. Skadden, Arps, Slate, Meagher & Flom LLP One Rodney Square P.O. Box 636 Wilmington, Delaware 19899 (302) 651-3000 Debtors' Financial Advisor: Lazard Freres & Co., LLC 30 Rockefeller Plaza New York, NY 10020 (212) 632-6000 U.S. Trustee: Patricia A. Staiano United States Trustee (Region 3) Frederic J. Baker, Assistant U.S. Trustee 601 Walnut Street, Room 950W Philadelphia, PA 19106 (215) 597-4411 ----------------------------------------------------------------- [00005] CONSOLIDATED LIST OF EXODUS' LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature Of Claim Claim Amount ------ --------------- ------------ HSBC Bank USA Trustee of $1,000,000,000 Todd Niemy 11.625% Senior 140 Broadway Notes due 2010 New York, NY 10005 Tel: (212) 525-1343 Fax: (212) 525-1300 HSBC Bank USA Trustee of $575,000,000 Todd Niemy 3.25% Convertible 140 Broadway Subordinated New York, NY 10005 Notes due 2008 Tel: (212) 525-1343 Fax: (212) 525-1300 HSBC Bank USA Trustee of $500,000,000 Todd Niemy 4.75% Convertible 140 Broadway Subordinated New York, NY 10005 Notes due 2008 Tel: (212) 525-1343 Fax: (212) 525-1300 HSBC Bank USA Trustee of $375,000,000 Todd Niemy 10.75% Senior 140 Broadway Notes due 2009 New York, NY 10005 Tel: (212) 525-1343 Fax: (212) 525-1300 HSBC Bank USA Trustee of $275,000,000 Todd Niemy 11.25% Senior 140 Broadway Notes due 2008 New York, NY 10005 Tel: (212) 525-1343 Fax: (212) 525-1300 HSBC Bank USA Trustee of EUR200,000,000 Todd Niemy 11.375% Euro 140 Broadway Denominated New York, NY 10005 Senior Notes Tel: (212) 525-1343 due 2008 Fax: (212) 525-1300 Legg Mason Capital Mgmt. public debt $127,250,000 Victoria Schwatka 100 Light St., 31st Fl Baltimore, MD 21202 Tel: (410) 454-5646 Fax: (410) 454-3154 HSBC Bank USA Trustee of EUR125,000,000 Todd Niemy 10.75% Euro 140 Broadway Denominated New York, NY 10005 Senior Notes Tel: (212) 525-1343 due 2009 Fax: (212) 525-1300 Fidelity Management & public debt $88,550,000 Research Robert Pozen 82 Devonshire Street Boston, MA 02109 Tel: (617) 563-7703 Fax: (617) 476-3931 Janus Capital Corporation public debt $81,635,000 Sandy Rufenacht 100 Fillmore Street, Suite 400 Denver, CO 80206 Tel: (303) 333-3863 Fax: (617) 482-2450 Loomis, Sayles & Co. LP public debt $80,949,000 Daniel Fuss 1 Financial Center, 34th Fl. Boston MA 02111 Prudential Global Asset public debt $76,092,000 Management 100 Mulberry Street 2 Gateway Center Newark, NJ 07102 Tel: (973) 367-1366 Fax: (973) 367-8555 Putnam Investments public debt $74,439,000 Edward D'Alelio 1 Post Office Square 7th Floor Boston, MA 02109 Wellington Management public debt $72,550,000 Company LLP 75 Stale Street, 19th Fl. Boston, MA 02109 Tel: (617)951-5038 Brookside Capital Mgmt/ public debt $71,900,000 Bain Capital, Inc. Neal Reiner Two Copley Place Boston, MA 02116 Tel: (617) 516-2000 Fax: (617) 516-2010 T. Rowe Price Associates public debt $70,100,000 William Reynolds 100 East Pratt Street Baltimore, MD 21202 Tel: (410) 345-5703 Fax: (410) 345-4771 Goldman, Sachs public debt $58,828,500 International Annika Bjorkhand Peterborough Court, 133 Fleet Street Tel: 44-207-774-6376 Fax: 44-207-552-7371 Lehman Brothers public debt $53,671,000 Eric Treiling 101 Hudson Street Jersey City, NJ 07302 Tel: (212) 526-7000 Fax: (212) 526-3738 HSBC Bank USA Trustee of 5% $52,800,000 Todd Niemy Convertible 140 Broadway Subordinated New York, NY 10005 Notes due 2006 Tel: (212) 525-1343 Fax: (212) 525-1300 Smith Barney Asset public debt $45,390,000 Management Virgil Cumming 100 1st Stanford Place Stanford, CT 09602 Capital Research & public debt $42,500,000 Management Company Abner Goldstein 11100 Santa Monica Boulevard, 15th Floor Los Angeles, CA Tel: (310) 996-6118 Fax: (310) 996-6518 Oppenheimer Funds public debt $42,500,000 Jerry Webman PO Box 5270 Denver, CO 80217-5270 Tel: (201) 728-5600 The TCW Group public debt $42,195,000 856 South Figueroa Street, 18th Floor Los Angeles, CA 90017 Tel: (213) 244-0065 Fax: (213) 244-0492 Morgan Stanley Dean Witter public debt $37,187,000 Rajesh Gupia 1221 Ave. of America New York, NY 10020 Tel: (212) 761-4000 Fax: (212) 762-9023 K. Capital Partners public debt $36,000,000 Robert Needham 75 Park Plaza Boston, MA 02116 Tel: (617) 646-7715 Fax: (617) 646-7777 Eaton Vance Management Inc. public debt $35,690,000 Mark Venezia 255 State Street Boston, MA 02109 Tel: (617) 598-8563 Fax: (617) 482-4572 Northwestern Investment public debt $35,250,000 Management Company Jefferson DeAngelis 720 Wisconsin Avenue Milwaukee, WI 53202 Tel: (414) 665-5291 Fax: (414) 665-4414 RBC Dominion Securities public debt $33,010,000 Mark Standish One Liberty Plaza 165 Broadway 4th Floor New York, NY 10006 Tel: (646) 229-3868 ----------------------------------------------------------------- [00006] NASDAQ TRADING HALT CONTINUES PENDING RECEIPT OF INFO ----------------------------------------------------------------- WASHINGTON, D.C. -- September 26, 2001 -- The Nasdaq Stock Market(R) announced today that the trading halt status in Exodus Communications, Inc., (Nasdaq: EXDS) was changed to "additional information requested" from the company. Trading in the company had been halted today at 7:47 a.m. Eastern Time for News Pending at a last sale price of .17. Trading will remain halted until Exodus Communications, Inc. has fully satisfied Nasdaq's request for additional information. For news and additional information about the company, please contact the company directly or check under the company's symbol using InfoQuotes(SM) on the Nasdaq Web site. For more information about The Nasdaq Stock Market, visit the Nasdaq Web site at http://www.nasdaq.com or the Nasdaq Newsroom(SM) at http://www.nasdaqnews.com * * * "It is in the sole discretion of the NASDAQ as to whether the stock will continue to trade throughout the restructuring," Exodus notes in an investor fact sheet prepared following its chapter 11 filing. "The value of the shares will be determined by market factors and developments in the Chapter 11 case," the company adds. ---------------------------------------------------------------- [00007] DEBTORS' MOTION TO PAY PRE-PETITION EMPLOYEE OBLIGATIONS ---------------------------------------------------------------- Exodus Communications and its debtor-affiliates sought and obtained approval of their Emergency Motion seeking interim authority, pending a formal "First Day" hearing, to honor and pay all employee-related pre-petition obligations to or for the benefit of their employees and independent contractors. The Court recognizes that Exodus must hand-out paychecks and sales commission checks to its Employees this week or, in short, the Company's workforce will walk and the chapter 11 restructuring will be over. Payments under this Emergency Motion are capped at $4,350 per Employee. Mark S. Chehi, Esq., at Skadden Arps Slate Meagher & Flom LLP, relates that the Debtors' workforce consisted of approximately 2,600 full-time employees, 25 part-time employees and 25 independent contractors, who are all paid bi-weekly in the ordinary course of the Debtors' business. If pre-petition compensation and benefits are not honored and paid in the ordinary course of business, Mr. Chehi contends, Exodus' employees will suffer extreme personal hardship and in many cases will be unable to meet their basic living expenses. This clearly would severely erode Employee morale and result in unmanageable Employee turnover during the critical early stages of the Debtors' chapter 11 cases, Mr. Chechi adds. The Debtors submit that any significant deterioration in morale at this time will substantially and adversely impact the Debtors and their ability to reorganize, thereby resulting in immediate and irreparable harm to the Debtors and their estates. Thus, to retain the Employees and maintain their morale under the difficult circumstances imposed by chapter 11, the Debtors seek authority to satisfy the Pre-petition Employee Obligations and to continue to provide the Employee Benefits, on an interim basis, pending a hearing on the Debtors' "first-day" motions in these cases. Prior to the Petition Date, the Debtors offered Employees many standard employee benefits, including: A. medical and mental health coverage under the Debtors' group health care plan, B. dental and vision coverage, C. COBRA, D. basic term life and supplemental life insurance, E. accidental death and dismemberment, F. disability insurance, G. business travel accident and disability insurance, H. an employee assistance program, I. flexible spending accounts, J. a 401(K) plan, K. incentive awards, L. tuition reimbursement, M. an employee stock purchase program and N. miscellaneous other benefits provided to the Employees in the ordinary course of business Within ninety days prior to the Petition Date, Mr. Chehi relates, that there have been no extraordinary increases in compensation, bonuses of benefits for which the Debtors seek authority to pay by this Motion. Furthermore, Mr. Chehi assures, Exodus has not prepaid any Employee-related obligations that this Motion is intended to ratify. In sum, the Debtors submit that the relief requested herein is appropriate and necessary. Mr. Chehi stresses that the Debtors would suffer substantial and significant harm if they failed to meet their Pre-Petition Employee Obligations in the first week of their chapter 11 cases. *** End of Issue No. 1 ***