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Executive Summary

ZENITH LABS CHAPTER 11 REORGANIZATION PLAN OKAYED by a Newark, N.J. federal bankruptcy court Oct. 3. The plan provides bank creditors with $ 2 mil. in cash, $ 16 mil. in five-year notes and warrants covertible at 10% of the reorganized company's new common equity. The reorganization, which Zenith expects to complete before year-end, will give unsecured creditors 35› to the dollar "of allowed claims" plus warrants convertible into 2% of the new company's fully diluted equity at an "aggregate purchase price of $ 291,350," Zenith explained in an Oct. 3 release. A $ 6 mil. infusion of new capital will be provided by the investor group Wyvern Partners and Mutual Series Fund, which will purchase a new issue of preferred stock. That stock can be converted into 41.1875% of the fully diluted new stock. The reorganization plan also calls for the cancellation of all current common stock and its replacement with over 5 mil. shares of new common and a proposed offering to raise an additional $ 6 mil. Current shareholders will receive 5.625% of the new company for their shares. Owners of record on the consummation date of the reorganization will receive one share of new common stock for every 75 shares of old stock. The additional $ 6 mil. in new capital is planned to come from an offering allowing shareholders of record (as of July 14) the option to subscribe to one new share for every 10 shares of old stock at a price of $ 2.90 per new share. If the offer is not fully subscribed, the investor group will purchase the remaining shares. Zenith filed the reorganization plan with the federal bankruptcy court in Newark in June after a year in Chapter 11. According to the plan, Zenith is projecting sales of $ 54 mil. by the end of 1990 compared to $ 28.5 mil. last year. ("The Pink Sheet" July 10, p. 8). Zenith, which recently got an okay from FDA in the ongoing inspections of the generic industry, may be one of the beneficiaries of the diminished capacity in the industry caused by the questions raised about a number of the generic firms.

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