EXHIBIT 2.1

                         UNITED STATES BANKRUPTCY COURT
                              DISTRICT OF DELAWARE

--------------------------------

In re:                             Chapter 11
TV FILME, INC.,                    Case No. 00-342(PJW)

                  Debtor.

-------------------------------



                                  FIRST AMENDED
                              DISCLOSURE STATEMENT
                          PURSUANT TO SECTION 1125 OF
                              THE BANKRUPTCY CODE


February 29, 2000











                            KELLEY DRYE & WARREN LLP
                            Mark I. Bane (MB 4883)
                            Karen Ostad (KO 5596)
                            101 Park Avenue
                            New York, New York 10178
                            212) 808-7800

                            SAUL, EWING, REMICK & SAUL LLP
                            Norman L. Pernick (DE# 2290)
                            222 Delaware Avenue, Suite 1200
                            Wilmington, Delaware 19899
                            (302) 421-6824


                            COUNSEL TO THE DEBTOR AND DEBTOR IN POSSESSION



<PAGE>


                               TABLE OF CONTENTS

I.       INTRODUCTION..........................................................1

         A.       What is Chapter 11?..........................................1

         B.       What is a Plan of Reorganization?............................1

         C.       What is a Disclosure Statement?..............................1

         D.       How Do I Vote?...............................................2

         E.       The Purpose of this Disclosure Statement.....................2

         F.       Representations..............................................3

         G.       Summary of the Plan..........................................3

                  1.       Generally...........................................3

                  2.       Classification and Treatment of
                           Claims and Interests................................4

II.      GENERAL INFORMATION...................................................5

         A.       Background Information.......................................5

                  1.       The Debtor and Its Subsidiaries.....................5

                  2.       Principal Liabilities and Stock Ownership
                           of the Debtor.......................................6

                  3.       Assets of the Debtor................................7

         B.       Significant Events Preceding the Commencement of the
                  Reorganization Case..........................................7

                  1.       The Failed Interest Payment and the Forbearance
                           Agreement...........................................7

                  2.       The Restructuring Agreement.........................8

         C.       Debtor's Chapter 11 Case....................................10

                  1.       Commencement of Chapter 11 Case....................10

                  2.       Other Matters......................................10

III.     GENERAL INFORMATION REGARDING THE PLAN...............................11

         A.       Introduction................................................11

         B.       Description of Individual Classes and the Treatment
                  of Each Class Under the Plan................................12

                  1.       Administrative Expense Claims......................12


                                       i
<PAGE>


                  2.       Priority Tax Claims................................13

                  3.       Class 1-- Priority Non-Tax Claims..................13

                  4.       Class 2-- Senior Secured Claims....................13

                  5.       Class 3-- General Unsecured Claims.................14

                  6.       Class 4-- Equity Interests in the Debtor...........14

         C.       Other Provisions Of The Plan................................14

                  1.       Implementation of the Plan.........................14

                  2.       Transfer and Gains Taxes; Encumbrances.............15

                  3.       Exchange of Secured Notes; Termination
                           of Indenture.......................................15

                  4.       Exchange of Equity Interests.......................15

                  5.       Appointment of Disbursing Agent....................15

                  6.       Distributions Under the Plan.......................16

                  7.       Conditions Precedent to Confirmation
                           of the Plan........................................17

                  8.       Conditions Precedent to the Effective Date
                           of the Plan........................................17

                  9.       Retention of Jurisdiction..........................18

IV.      EFFECTS OF CONFIRMATION OF THE PLAN..................................18

         A.       Discharge of Debtor.........................................18

         B.       Release From Claims and Liabilities.........................19

                  1.       Plan Releasees.....................................19

                  2.       Affiliate Releasees................................19

         C.       Injunction..................................................20

         D.       Possible Objections to Affiliate Releases
                  and Injunction..............................................20

         E.       Vesting of Property in Reorganized Debtor...................21

V.       INFORMATION ABOUT THE CLAIMS ALLOWANCE, OBJECTION AND
         ESTIMATION PROCEDURES................................................21

         A.       Allowance of Claims and Equity Interests....................21

         B.       Objections to Claims and Equity Interests...................21


                                       ii
<PAGE>

         C.       Estimation of Claims for Distribution Purposes..............22

VI.      VOTING PROCEDURES....................................................22

         A.       Vote Required for a Class to Accept the Plan................22

         B.       Who May Vote................................................23

                  1.       Impaired Classes...................................23

                  2.       Classes that are not Impaired......................23

                  3.       Temporary Allowance of Claims or Equity
                           Interests for Voting Purposes......................23

                  4.       One Vote...........................................23

                  5.       Record Date for Voting Purposes....................23

         C.       Voting Procedures...........................................23

                  1.       Ballots............................................23

                  2.       Voting Deadline....................................24

                  3.       Brokerage Firms, Banks and Other Nominees..........24

                  4.       Other Signatories..................................24

                  5.       Waivers of Defects, Irregularities, etc............24

VII.     EXEMPTIONS FROM SECURITIES ACT REGISTRATION..........................25

         A.       The Solicitation............................................25

         B.       Issuance of New Secured Notes and New Equity Interests......25

VIII.    CERTAIN FEDERAL INCOME TAX CONSIDERATIONS............................26

         A.       Tax Consequences to Debtor..................................27

                  1.       Discharge of Indebtedness Income...................27

                  2.       Limitations of NOLs and Other Tax Attributes
                           of the Debtor......................................27

                  3.       Alternative Minimum Tax............................28

         B.       Federal Income Tax Consequences to Holders of Secured Notes
                  and Holders of Equity Interests.............................28

                  1.       Holders of Equity Interests........................28

                  2.       Holders of Secured Notes...........................28


                                      iii
<PAGE>

         C.       Backup Withholding and Information Reporting for U.S.
                  Holders of Secured Notes and Holders of Equity
                  Interests...................................................30


         D.       Importance of Obtaining Professional Tax Assistance.........30

IX.      REQUIREMENTS FOR CONFIRMATION OF THE PLAN............................30

         A.       Section 1129(a).............................................30

                  1.       Classification of Claims and Interests.............30

                  2.       Best Interests of Creditors........................30

                  3.       Feasibility of the Plan............................31

                  4.       Directors of Reorganized Debtor....................31

                  5.       Management of the Reorganized Debtor...............31

                  6.       Acceptance by Impaired Classes.....................31

         B.       Cram Down of the Plan.......................................32

         C.       Risk Factors................................................32

                  1.       Risk of Non-Confirmation of the Plan...............32

                  2.       The New Secured Notes and New Equity Interests.....33

                  3.       Liquidity..........................................33

                  4.       Section 1146(c) Transfer Tax Exemption.............33

                  5.       Brazilian Government Approval......................33

         D.       Alternatives to Confirmation and Consummation of the Plan...33

                  1.       Continuation of the Reorganization Case............34

                  2.       Alternative Plans of Reorganization................34

                  3.       Liquidation Under Chapter 7........................34

X.       CONCLUSION...........................................................35

EXHIBIT 1  PLAN OF REORGANIZATION.............................................36

EXHIBIT 2  FORM 10K...........................................................37

EXHIBIT 3  FORM 10Q...........................................................38

EXHIBIT 4  LIQUIDATION ANALYSIS...............................................39


                                       iv
<PAGE>


I.   INTRODUCTION

     TV Filme,  Inc. (the  "Debtor")  submits this  Disclosure  Statement to the
holders of Claims against the Debtor  (collectively,  the  "Creditors")  and the
holders  of  Equity   Interests  in  the  Debtor  in  connection  with  (i)  the
solicitation  of acceptances or rejections of the proposed First Amended Plan of
Reorganization  dated as of February 29, 2000 (the  "Plan"),  a copy of which is
attached  hereto as Exhibit 1 and (ii) the hearing to consider  confirmation  of
the Plan (the "Confirmation  Hearing") scheduled for April 10, 2000 at 9:30 a.m.
Eastern Time. UNLESS OTHERWISE  DEFINED HEREIN,  ALL CAPITALIZED TERMS CONTAINED
HEREIN SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN THE PLAN.

     The Board of Directors  of the Debtor has approved the Plan and  recommends
that all holders of impaired  Claims and impaired Equity  Interests  entitled to
vote submit ballots accepting the Plan and the transactions contemplated hereby.

     The  Plan is  based  upon a  Restructuring  Agreement  (the  "Restructuring
Agreement") dated as of January 24, 2000, among the Debtor and certain specified
holders ("Specified Holders") of the Debtor's 12-7/8% Senior Notes due 2004 (the
"Secured  Notes").  PURSUANT  TO  THE  RESTRUCTURING  AGREEMENT,  THE  SPECIFIED
HOLDERS,  WHO HOLD OVER 65% OF THE OUTSTANDING  SECURED NOTES, HAVE COMMITTED TO
VOTE IN FAVOR OF THE PLAN AND  UNANIMOUSLY  RECOMMEND THE ACCEPTANCE OF THE PLAN
BY ALL HOLDERS OF THE SECURED NOTES.

A.   WHAT IS CHAPTER 11?

     Chapter 11 is the principal  reorganization chapter of the Bankruptcy Code.
A chapter 11 case can be commenced  in one of two ways:  (i) through a voluntary
petition filed by the debtor,  or (ii) through an involuntary  petition filed by
creditors  of the  debtor.  If the  case is  commenced  through  an  involuntary
petition,  the  involuntary  case can be  converted  to a voluntary  case if the
debtor  consents  to the entry of an order for  relief.  The period  between the
filing of an involuntary  petition and the entry of an order for relief is known
as the "gap period." In a voluntary  case under chapter 11, the debtor becomes a
debtor in possession  and is given a period of time within which to organize its
affairs, to review its assets and obligations and to reorganize its business.

B.   WHAT IS A PLAN OF REORGANIZATION?

     The principal purpose of a chapter 11 case is to facilitate the formulation
of a plan of  reorganization  which provides for the restructuring of a debtor's
liabilities and the treatment of its equity interests.  The Plan proposed by the
Debtor provides for such a restructuring to be accomplished through the issuance
of New Secured Notes and New Equity Interests in the Reorganized Debtor, and the
distribution of Cash to Creditors.

C.   WHAT IS A DISCLOSURE STATEMENT?

     After a plan of  reorganization  has been  proposed,  the holders of claims
against,  or equity  interests  in, the debtor that are impaired by the terms of
the plan and that are to receive  distributions  (in cash,  securities  or other
property)  under the plan are entitled to vote on whether to accept the proposed
plan. The Bankruptcy Code requires  disclosure of "adequate  information" to all
such voting creditors and equity holders by way of a disclosure statement before
the debtor may solicit any votes on a plan. The Bankruptcy  Code provides that a
disclosure statement containing "adequate information" must contain "information
of a kind,  and in sufficient  detail,  as far as is reasonably  practicable  in
light of the nature and  history of the  debtor and  condition  of the  debtor's
books and records, that would enable a hypothetical  reasonable investor typical
of holders of claims or  interests  of the  relevant  class to make an  informed
judgment about the plan."

     The Debtor  presents  this  Disclosure  Statement to the voting  holders of
Allowed Claims  against and Allowed  Equity  Interests in the Debtor in order to
provide each such voting holder with sufficient  information to make an informed
decision  as to whether to accept or reject the Plan.  The Debtor is also making
this Disclosure  Statement  available to the holders of  Administrative  Claims,
Priority  Tax Claims,  and  General  Unsecured  Claims in order to provide  such
holders with additional information to evaluate the Plan.



                                       1
<PAGE>

D.   HOW DO I VOTE?

     Only persons holding Allowed Claims or Allowed Equity  Interests in classes
impaired under the terms of the Plan that are to receive a  distribution  or are
agreeing  to waive  the right to  receive a  distribution  from the  Debtor  are
entitled  to vote.  The  Debtor is  soliciting  the votes of  holders of Allowed
Claims in Class 2 and Allowed Equity Interests in Class 4. The classification of
Claims is discussed in Section I.G.2.  of this Disclosure  Statement.  Under the
Plan,  holders of Allowed Priority Non-Tax Claims and Allowed General  Unsecured
Claims  in  Classes  1 and 3 are  unimpaired  and are,  therefore,  conclusively
presumed to have accepted the Plan without the need for a solicitation  of their
votes. Holders of Senior Secured Claims (Class 2) and Equity Interests (Class 4)
are entitled to vote on the Plan.

     TO VOTE ON THE PLAN, A VOTING HOLDER OF AN ALLOWED CLAIM OR EQUITY INTEREST
MUST COMPLETE THE BALLOT (THE "BALLOT") ENCLOSED WITH THIS DISCLOSURE  STATEMENT
AND MAIL OR DELIVER THE BALLOT SO THAT IT IS RECEIVED BY THE  DEBTOR'S  COUNSEL,
KELLEY DRYE & WARREN LLP, 101 PARK AVENUE,  NEW YORK, NEW YORK 10178,  ATTN: JAY
HEINRICH,  ESQ. (TEL. (212) 808-5073) (THE "VOTING  AGENT"),  NO LATER THAN 4:00
P.M., EASTERN TIME, ON APRIL 6, 2000 (THE "VOTING DEADLINE").

                       FOR A DETAILED DISCUSSION OF VOTING
             PROCEDURES PLEASE REVIEW SECTION VI OF THIS DISCLOSURE
                     STATEMENT ENTITLED "VOTING PROCEDURES".

     Section  1129(a) of the Bankruptcy  Code requires that each class of claims
or  interests  that is  impaired  under a plan  accept the plan,  subject to the
"cramdown"  exception  described  below.  A class of Claims or Equity  Interests
under the Plan will have  accepted  the Plan if the Plan is accepted by at least
two-thirds  in amount and more than one-half in number of the holders of Allowed
Claims or Allowed Equity Interests in such class which actually cast ballots for
acceptance or rejection of the Plan.  Pursuant to the  "cramdown"  exception,  a
plan may be confirmed even if the plan is not accepted by all impaired  classes,
as long as at least one impaired class of claims has accepted the plan. The Plan
may be confirmed  under the cramdown  provisions of the  Bankruptcy  Code if the
Plan (i) does not  discriminate  unfairly,  and (ii) is fair and equitable  with
respect to the classes  which are impaired  under,  and which have not accepted,
the Plan. The Debtor believes that the Plan satisfies these requirements and may
be confirmed  under section  1129(b) of the  Bankruptcy  Code. For more detailed
information  regarding cramdown,  see Section IX.B. of this Disclosure Statement
entitled "Cram Down of the Plan".

E.   THE PURPOSE OF THIS DISCLOSURE STATEMENT.

     The purpose of this  Disclosure  Statement is to provide holders of Allowed
Claims and Allowed  Equity  Interests that are impaired by the terms of the Plan
with adequate  information to make an informed judgment with respect to the Plan
prior to  exercising  their  right to vote to accept or  reject  the Plan.  This
information includes,  among other matters, a brief history of the Debtor, and a
description of the Debtor's assets and liabilities,  the distributions that will
be made under the Plan and an explanation of how the Plan will be implemented.

     THE DISCLOSURE  STATEMENT AND PLAN HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE  BANKRUPTCY  COURT,  THE  SECURITIES  AND EXCHANGE  COMMISSION  OR ANY STATE
SECURITIES COMMISSION. NOR HAS THE BANKRUPTCY COURT, THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF THE PLAN OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THE
DISCLOSURE  STATEMENT.  FURTHERMORE,  ANY SUBSEQUENT  APPROVAL BY THE BANKRUPTCY
COURT OF THIS DISCLOSURE  STATEMENT DOES NOT CONSTITUTE EITHER A GUARANTY OF THE
ACCURACY OR COMPLETENESS OF THE INFORMATION  CONTAINED  HEREIN OR AN ENDORSEMENT
OF THE PLAN BY THE BANKRUPTCY COURT.

     THE  DEBTOR  IS  RELYING  ON,  AMONG  OTHER  THINGS,  SECTION  1145  OF THE
BANKRUPTCY CODE, TO EXEMPT FROM REGISTRATION  PURSUANT TO THE SECURITIES ACT AND
UNDER  APPLICABLE  STATE  SECURITIES  OR "BLUE SKY"  LAWS,  THE OFFER OF THE NEW
SECURED NOTES AND NEW EQUITY  INTERESTS  WHICH MAY BE DEEMED TO BE MADE PURSUANT
TO THE SOLICITATION OF ACCEPTANCES TO THE PLAN.



                                       2
<PAGE>

     ALL CREDITORS AND HOLDERS OF EQUITY  INTERESTS ARE  ENCOURAGED TO READ THIS
DISCLOSURE  STATEMENT AND ITS EXHIBITS  CAREFULLY AND IN THEIR  ENTIRETY  BEFORE
DECIDING TO VOTE EITHER TO ACCEPT OR REJECT THE PLAN. THE  DISCLOSURE  STATEMENT
IS QUALIFIED  IN ITS  ENTIRETY BY  REFERENCE  TO THE MORE  SPECIFIC AND DETAILED
INFORMATION  SET FORTH IN THE PLAN.  ANY PERCEIVED  INCONSISTENCIES  BETWEEN THE
INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT AND THE TERMS OF THE PLAN ARE
TO BE RESOLVED IN FAVOR OF THE ACTUAL TERMS OF THE PLAN AS SET FORTH THEREIN.

     THE ESTIMATES OF CLAIMS SET FORTH HEREIN MAY VARY FROM THE FINAL AMOUNTS OF
CLAIMS  ALLOWED  BY  THE  BANKRUPTCY  COURT.  UNLESS  OTHERWISE  INDICATED,  THE
INFORMATION PRESENTED HEREIN IS UNAUDITED.

F.   REPRESENTATIONS.

     No representations or other statements concerning the Debtor are authorized
other than those expressly set forth in this Disclosure  Statement and the Plan.
You should not rely upon any  representations or inducements made to secure your
acceptance of the Plan, other than those set forth in this Disclosure  Statement
and the Plan.

     The  information  presented  herein  was  prepared  by the  Debtor  and its
professionals with financial and other information  provided by the Debtor. Each
Creditor  and holder of an Equity  Interest  is urged to review the Plan in full
prior  to  voting  on  it  (if  so  entitled  to  vote)  to  ensure  a  complete
understanding of the Plan and this Disclosure Statement.

     This  Disclosure  Statement  is  intended  for the sole  use of  Creditors,
holders of Equity  Interests,  and other  parties in interest,  and for the sole
purpose of assisting such parties in making an informed decision about the Plan.

     THE  DEBTOR  BELIEVES  THAT THE PLAN  REPRESENTS  THE  BEST  RECOVERIES  TO
CREDITORS AND HOLDERS OF EQUITY INTERESTS. THE DEBTOR, THEREFORE,  BELIEVES THAT
ACCEPTANCE  OF THE PLAN IS IN THE BEST  INTERESTS  OF  CREDITORS  AND HOLDERS OF
EQUITY INTERESTS,  AND RECOMMENDS THAT CREDITORS AND HOLDERS OF EQUITY INTERESTS
VOTE TO ACCEPT THE PLAN.

     THE  SPECIFIED  HOLDERS AND THE DEBTOR HAVE  ENTERED  INTO A  RESTRUCTURING
AGREEMENT WHEREBY SUCH PARTIES HAVE AGREED TO SUPPORT THE PLAN. IF THE REQUISITE
VOTES ARE CAST IN FAVOR OF THE PLAN,  AND THE EFFECTIVE DATE OF THE PLAN OCCURS,
ALL CREDITORS AND HOLDERS OF EQUITY INTERESTS (INCLUDING THOSE WHO DO NOT SUBMIT
BALLOTS  TO  ACCEPT  OR  REJECT  THE  PLAN)  WILL BE  BOUND  BY THE PLAN AND THE
TRANSACTIONS CONTEMPLATED THEREBY.

     IMPORTANT:  THIS DISCLOSURE  STATEMENT  CONTAINS  INFORMATION THAT MAY BEAR
UPON YOUR DECISION TO ACCEPT OR REJECT THE PLAN.  PLEASE READ THIS DOCUMENT WITH
CARE.

G.   SUMMARY OF THE PLAN.

     1.   Generally.

     The following is a brief summary of the Plan.  This summary is qualified in
its entirety by reference to the  provisions  of the Plan.  For a more  detailed
description of the terms and  provisions of the Plan,  see "General  Information
Regarding the Plan" at Section III of this  Disclosure  Statement and review the
Plan itself which is Exhibit 1 hereto.  To implement  the Plan,  the Debtor will
form a new Cayman Islands entity (the "Reorganized  Debtor") to which the Debtor
will  transfer  its Assets and which will be the  successor  in  interest to the


                                       3
<PAGE>

Debtor upon the Effective Date. The Reorganized Debtor will contribute as equity
to its subsidiary,  ITSA, such portion of an existing inter-company note owed to
it by ITSA (the "ITSA  Note")  equal to $105 million less an amount equal to the
amount of the fee, if any,  imposed by the Central Bank of Brazil (the  "Central
Bank") in connection with the Central Bank's approval of the debt  restructuring
contemplated  by the Plan (the "Central  Bank Fee").  The terms of the remaining
amount due on the ITSA Note,  which remaining amount will equal $35 million plus
an amount  equal to the amount of the  Central  Bank Fee,  will be  amended  and
restated,  and new notes ("New Secured Notes") in the aggregate principal amount
of $35 million  plus an amount  equal to the amount of the Central Bank Fee (the
"New Note  Amount")  will be issued to the  Reorganized  Debtor  which will then
assign the New Secured Notes to holders of the Secured Notes,  together with (i)
$25 million in Cash and (ii) 80% of the New Equity  Interests in the Reorganized
Debtor.  Allowed General  Unsecured Claims, if any, will receive payment in full
in Cash, the Debtor's  management  will receive 15% of the New Equity  Interests
and  holders  of  Allowed  Equity  Interests  will  receive 5% of the New Equity
Interests.

     2.   Classification and Treatment of Claims and Interests.

     The  following  is a brief  summary of the  treatment  of holders of Claims
against,  and Equity  Interests  in, the Debtor under the Plan and should not be
relied on for voting purposes.  This summary does not purport to be complete.  A
more  complete  description  of the Plan is provided in Section  III.B.  of this
Disclosure  Statement,  "Description of Individual  Classes and the Treatment of
Each Class Under the Plan."

     The  Bankruptcy  Code does not require  administrative  and  certain  other
priority claims to be classified  under a plan of  reorganization.  Accordingly,
Administrative  Expense Claims and Priority Tax Claims are not classified in the
Plan. The Plan  categorizes  into four (4) classes certain Claims  against,  and
Equity Interests in, the Debtor.  In addition,  the Plan specifies the manner in
which the Claims and Equity  Interests in each class are to be treated.  HOLDERS
OF CLAIMS AGAINST AND EQUITY  INTERESTS IN THE DEBTOR ARE URGED TO READ THE PLAN
AND MAY WISH TO CONSULT WITH LEGAL COUNSEL WITH RESPECT THERETO.

     The table below provides a summary of the  classification  and treatment of
Claims and Equity  Interests under the Plan. Total Claims represent the Debtor's
best  estimate  of  Allowed  amounts.  Since  there  has not yet been a bar date
established  for  Creditors  and  holders  of  Equity  Interests  and any  Claim
estimation  and  reconciliation  procedure  will be an  ongoing  process  in the
Reorganization  Case, the actual amount of the Claims may vary from the Debtor's
estimate.  Reference  should  be  made  to the  terms  and  provisions  of  this
Disclosure  Statement  in their  entirety and the full version of the Plan for a
complete  description of the  classification  and treatment of Claims and Equity
Interests.  The outcome of various  issues  described  herein and  therein  will
affect the  ultimate  Allowed  amounts and  classification  of Claims and Equity
Interests.

Classes and Claim Types                  Treatment of Classes of Claims
Administrative Expense             Paid in full, in Cash, on the Effective Date,
Claims (Unclassified)              unless paid on otherwise agreed terms.    See
Total Claims:                      Section III.B.l.
Approx. $6,500,000

Priority Tax Claims (Unclassified) Paid in full, in Cash, on the Effective Date,
Total Claims:                      unless paid on otherwise agreed terms.    See
Approx. $-0-                       Section III.B.2.

Class 1                            Unimpaired.
Priority Non-Tax Claims            Paid in full, in Cash, on the Effective Date,
Total Claims:                      unless paid on otherwise agreed terms.    See
Approx. $-0-                       Section III.B.3.



                                       4
<PAGE>

Class 2                            Impaired.
Senior Secured Claims              In exchange  for  the  Secured Notes,  on the
Total  Claims:                     Effective Date, as   soon   thereafter  as is
$140,000,000, plus all interest    practicable, each holder  of an Allowed Class
accrued under Indenture from and   2 Senior Secured Claim will receive,    up to
after December 15, 1998 through    the   full  amount  of  its    Allowed Senior
the Petition Date.                 Secured Claim, its   Ratable  Portion  of (a)
                                   $25 million in Cash, (b) New Secured Notes in
                                   the aggregate  principal  amount   of the New
                                   Note Amount  and (c) 80% of the  New   Equity
                                   Interests.  All Deficiency Claims pursuant to
                                   the Secured Notes shall be extinguished under
                                   section 1111(b) (1) (A) (i) of the Bankruptcy
                                   Code.  See Section III.B.4.

Class 3                            Unimpaired
General Unsecured Claims           Unless a holder of an Allowed Unsecured Claim
Total Claims:                      agrees  to  a different treatment,  the  Plan
Approx.  $-0-                      leaves such  Claims  unimpaired  pursuant  to
                                   section  1124(2)  of  theBankruptcy Code. See
                                   Section III.B.5

Class 4                            Impaired.
Equity Interests                   In exchange for the Equity Interests,  on the
                                   Effective  Date, or as soon  thereafter as is
                                   practicable,  each holder of an Allowed Class
                                   4 Equity  Interest  will  receive its Ratable
                                   Portion of 5% of the New Equity Interests See
                                   Section III.B.6.


II.  GENERAL INFORMATION

     This part of the Disclosure  Statement  provides general  information about
the Debtor.

A.   BACKGROUND INFORMATION.

     1.   The Debtor and Its Subsidiaries.

     The  Debtor  is a  corporation  organized  under  the laws of the  State of
Delaware. In connection with an initial public offering of its common stock, the
Debtor was formed in April 1996 to become the holding  company of and  successor
to  ITSA-Intercontinental  Telecomunicacoes Ltda. ("ITSA"), a Brazilian company,
and its subsidiaries. Annexed hereto as Exhibit 2 is a copy of the Debtor's Form
10K for the fiscal  year ended  December  31,  1998 filed with the SEC.  Annexed
hereto as Exhibit 3 is a copy of the  Debtor's  Form 10Q for the  quarter  ended
September 30, 1999 filed with the SEC.

     The Debtor's  interests in ITSA are held as follows:  (i) 29.09% of ITSA is
owned by the Debtor;  (ii) 70.9% of ITSA is owned by the  Debtor's  wholly-owned
subsidiary,  TV Filme of Cayman  Ltd.,  a Cayman  Island  company  ("TV Filme of
Cayman");  and  (iii)  .01%  of  ITSA  is  owned  by the  Debtor's  wholly-owned
subsidiary, TV Filme Sub Inc., a Delaware corporation ("TV Filme Sub").

     ITSA and its subsidiaries  (collectively,  the "Subsidiaries") develop, own
and operate pay television  systems in markets in Brazil.  The Debtor's material
subsidiaries  are as follows:  TV Filme  Brasilia  Servicos de  Telecomunicacoes
Ltda.,  TV Filme Belem  Servicos de  Telecomunicacoes  Ltda.,  TV Filme  Goiania


                                       5
<PAGE>

Servicos de Telecomunicacoes  Ltda. and TV Filme Sistemas Ltda. The Subsidiaries
provide  wireless cable  operating  systems in the cities of Brasilia,  Goiania,
Belem and Campina Grande and hold licenses to operate pay television  systems in
six additional markets in Brazil.

     2. Principal Liabilities and Stock Ownership of the Debtor.

     a. General  Description  of the Secured  Notes.  The  Debtor's  liabilities
consist  principally of the 12-7/8% Senior Notes due 2004 (the "Secured  Notes")
issued in the principal amount of $140 million pursuant to an Indenture dated as
of December 20, 1996 (the "Indenture") between the Debtor and IBJ Schroeder Bank
and Trust Company ("IBJ") as Indenture Trustee. Thereafter, IBJ changed its name
to IBJ Whitehall  Bank and Trust  Company.  On October 6, 1999,  the Bank of New
York  acquired  the  corporate  trust  assets of IBJ and now serves as successor
Indenture Trustee under the Indenture (the "Indenture  Trustee").  The Indenture
governs the issuance of the Secured Notes, the rights of the holders, the rights
and duties of the  Indenture  Trustee,  and the rights  and  obligations  of the
Debtor with respect to the Secured Notes.

     The  Secured  Notes  provide  for the  payment of  interest  at the rate of
12-7/8%  semi-annually  in  arrears  on June  15 and  December  15 of each  year
beginning on June 15, 1997.  The stated  maturity  date of the Secured  Notes is
December  15,  2004.  As of October 31,  1999,  the  outstanding  principal  and
interest due and owing on the Secured Notes was approximately $155,771,875.  The
Secured  Notes  are  the  direct,   unsubordinated,   secured  and  non-recourse
obligations of the Debtor.

     The Indenture contains covenants restricting the Debtor from taking certain
actions such as incurring additional  indebtedness other than the Secured Notes.
The Indenture  also (i) restricts the Debtor from merging into or  consolidating
with any other corporation,  or transferring the Debtor's  properties and assets
to any person or entity  except  certain  Subsidiaries;  (ii)  requires that the
Debtor  cause to be provided to the  Indenture  Trustee the  Debtor's  financial
statements on an annual basis;  and (iii) provides for certain Events of Default
(as defined in the Indenture).  The descriptions herein of the Secured Notes and
the Indenture are qualified in their entirety by reference to the Secured Notes,
the Indenture and the other documents referenced in the Indenture. Copies of the
Indenture  are  available  to the  holders of Secured  Notes from the  Indenture
Trustee  or the  Debtor's  attorneys  upon  request  and at the  expense  of the
requesting holder.

     There is currently no established market for the Debtor's debt securities.

     For a detailed  disclosure of all transactions  between Debtor and insiders
of the  Debtor,  see  Debtor's  Annual  Report on Form  10-K for the year  ended
December 31, 1998, Item 12. "Security Ownership of Certain Beneficial Owners and
Management"  on  page  42  and  Item  13.  "Certain  Relationships  and  Related
Transactions" on page 44. The only relevant update to the information  presented
in Item 12 is that Alvaro J. Aguirre, who is no longer an officer or director of
the Debtor,  has since sold all 9,294  shares of Common Stock and is no longer a
stockholder of the Debtor. The only relevant update to the information presented
in Item 13 is that,  in the year ended  December 31,  1999,  TVA Sistema and its
affiliates derived revenues from Debtor in the aggregated  approximate amount of
$7.6 million. No insiders are party to any material litigation.

     From July 30, 1996 to February 4, 1999,  the Debtor's  common stock,  $0.01
par value per share (the  "Common  Stock"),  was  quoted on the Nasdaq  National
Market  ("Nasdaq")  under the symbol  "PYTV."  Effective  February 4, 1999,  the
Common Stock was delisted from Nasdaq based on the Debtor's  inability to comply
with certain  requirements  for  continued  listing,  including the net tangible
assets and minimum bid price requirements. Following delisting, the Common Stock
has  been  listed  on  the  OTC  Bulletin  Board,  sporadically  traded  in  the
over-the-counter-market  and  reported in the "pink  sheets."  The OTC  Bulletin
Board is a controlled quotation service that offers real-time quotes,  last-sale
prices and volume information in over-the-counter equity securities.



                                       6
<PAGE>

     The OTC Bulletin  Board stock  summaries  are compiled only once a year and
are not updated  throughout the year. The following  table reflects the high and
low sale prices for the Common Stock,  as reported by the OTC Bulletin Board and
Nasdaq, for the periods indicated:

<TABLE>
                                                         High                Low

                                                              (Per Share)
<S>        <C>                                      <C>                 <C>
           OTC Bulletin Board
           1999.....................................$    1-5/8          $    1/8

           Nasdaq National Market

           1998
           Fourth Quarter...........................$    2-1/8          $    1/4
           Third Quarter............................     4                   7/8
           Second  Quarter..........................     5                 1-7/8
           First  Quarter...........................     5-7/8             2-3/4
</TABLE>

     On February 23, 2000,  there were 10,824,594  shares of the Debtor's Common
Stock  outstanding,  and  approximately  17 stockholders of record of the Common
Stock.


     b.  Collateral for the Secured Notes.  The Debtor's  obligations  under the
Secured Notes are secured by the Debtor's pledge of an intercompany  note in the
principal amount of $140 million from ITSA to the Debtor (the "ITSA Note").

     In addition,  the  obligations  under the Secured  Notes are  guaranteed by
ITSA.  ITSA's  guaranty  of the  Secured  Notes is secured by ITSA's  collateral
assignment  of the Pledged  Securities  (as defined in the  Indenture)  owned by
ITSA.

     Each of TV Filme  Brasilia  Servicos de  Telecomunicacoes  Ltda.,  TV Filme
Goiania  Servicos  de  Telecomunicacoes  Ltda.  and TV Filme  Belem  Servicos de
Telecomunicacoes  Ltda. executed and delivered a Subsidiary Guarantee as defined
in the Indenture.

     c. Use of  Proceeds of Secured  Notes.  The  proceeds of the Secured  Notes
($140 million) were loaned by the Debtor to ITSA, as evidenced by the ITSA Note.
Approximately  $33.5  million of such proceeds were used by ITSA to purchase the
Pledged  Securities,  which were comprised of U.S.  government  securities.  The
principal and interest  earned from the Pledged  Securities  was used to pay the
first four scheduled interest payments on the Secured Notes, the last payment of
which occurred on December 15, 1998.

     3. Assets of the Debtor.

     The ITSA Note,  the Debtor's  stock in ITSA,  and the Debtor's stock in the
Subsidiaries  set forth in  Schedule  1 to the Plan,  constitute  the  principal
assets of the Debtor.  As earlier noted, the Indenture Trustee is the collateral
assignee of the ITSA Note.

B.   SIGNIFICANT EVENTS PRECEDING THE COMMENCEMENT OF THE REORGANIZATION CASE.

     1. The Failed Interest Payment and the Forbearance Agreement.

     During 1998 and the first quarter of 1999, the Debtor and its  Subsidiaries
faced  significant  challenges that ultimately  affected the Debtor's ability to
pay interest on the Senior Notes. The Brazilian  government's  delay in granting
wireless cable television  licenses,  the instability in emerging  markets,  the
devaluation of the Brazilian  currency,  the real, and the resulting  decline in


                                       7
<PAGE>

consumer  spending on wireless cable television in the markets in which ITSA and
the Subsidiaries provide services,  significantly impacted the Debtor's business
plan and its  ability  to  service  its  indebtedness  under the  Indenture  and
continue as a going concern.  While the Debtor  decided to commence  discussions
with  holders  of the  Senior  Notes to  pursue a  comprehensive  financial  and
operational  restructuring plan, the Debtor failed to make the required interest
payment on the Secured Notes on June 15, 1999.

     The Indenture  provides that failure to pay interest on the Secured  Notes,
if not cured  within 30 days of such  failure,  constitutes  an Event of Default
under Section  6.1(b) of the  Indenture.  Section 6.2 of the Indenture  provides
that upon the  occurrence  of an Event of  Default,  holders  of at least 25% in
principal  amount of the  outstanding  Secured  Notes  may  declare  the  unpaid
principal  of, and any accrued  interest on, all the Secured Notes to be due and
payable immediately.

     Shortly  after June 15, 1999,  the Debtor  requested a meeting with certain
holders of the Secured Notes. The Debtor also requested that pending discussions
on the  possible  restructuring  of the Debtor's  obligations  under the Secured
Notes,  such holders  forbear from enforcing any right to accelerate the amounts
due on the Secured Notes and from  enforcing any other rights and remedies under
the  Indenture.   Such  agreements  to  forbear  were  originally  evidenced  by
forbearance  agreements  among the Debtor and three holders of the Secured Notes
who collectively  held  approximately 54% of the principal amount of the Secured
Notes and who together with certain other holders of the Secured Notes formed an
unofficial  committee of Noteholders  (the "Ad Hoc  Noteholders'  Committee") to
represent the interests of the holders of the Secured Notes.

     2. The Restructuring Agreement

     After negotiations  between the Debtor, the Ad Hoc Noteholders'  Committee,
and  other   interested   parties   regarding   restructuring  of  the  Debtor's
obligations,  the Debtor and the Specified  Holders entered into a Restructuring
Agreement, a copy of which is annexed to the Plan as Exhibit B. In addition, the
Specified Holders who are signatories to the Restructuring Agreement have agreed
that so long as the Debtor is in compliance with the terms of the  Restructuring
Agreement,  they will forbear (and cause the Indenture  Trustee to forbear) from
exercising their rights under the Secured Notes,  the Indenture,  applicable law
or  otherwise,  with respect to any default in  existence  or arising  under the
Secured Notes or the Indenture during the term of the  Restructuring  Agreement.
The holders of the Secured Notes who participated in negotiations leading to the
Restructuring  Agreement and are signatories to the Restructuring  Agreement are
Resurgence Asset Management LLC and Romulus Holdings, Inc. Both the pre-petition
and  post-petition  fees  and  expenses  of  the  professionals  for  the Ad Hoc
Noteholders'  Committee  are being paid by the Debtor.  The Ad Hoc  Noteholders'
Committee  retained  Jones Day Reavis & Pogue as  counsel,  and  Chanin  Capital
Partners as financial  advisors.  Prior to the Debtor's  bankruptcy  filing, the
Debtor  paid  approximately  $1,165,232.30  in  professional  fees and  expenses
incurred  on  behalf  of the  Ad Hoc  Noteholders'  Committee.  Pursuant  to the
pre-petition  agreement entered into by the Debtor with Chanin Capital Partners,
upon  confirmation  of the Plan,  Chanin Capital  Partners will be entitled to a
success fee of 0.75% of the face amount of the Debtor's existing debt securities
that are restructured,  against which any fees it has received (except the first
$300,000), or will receive, will be applied. In addition, the Plan provides that
all reasonable  post-petition  fees and expenses  incurred by Jones Day Reavis &
Pogue and Chanin Capital Partners on behalf of the Ad Hoc Noteholders' Committee
will be paid by the Debtor.  The Debtor had retained BT Alex Brown, (now Deutche
Banc Alex  Brown),  which was later joined by Lazard  Freres & Co.,  LLC, as the
Debtor's  financial  advisors.  Under the terms of such retention,  the Debtor's
financial  advisors will be entitled to a success fee of 1.5% of the face amount
of the Debtor's existing debt securities that are restructured.



                                       8
<PAGE>

     The Plan and the  Disclosure  Statement,  and the  Restructuring  Agreement
discussed  below,  have been reviewed and  negotiated  extensively by the Debtor
with the Ad Hod Noteholders' Committee.  The Indenture Trustee has also reviewed
and  commented  on  these  documents  but  played  no  substantive  role  in the
formulation  of the Plan or  related  documents.  While the Ad Hoc  Noteholders'
Committee and its counsel act solely on behalf of the members of such committee,
it has been  the view of the  Debtor  that the Ad Hoc  Noteholders'  Committee's
views and positions are generally  representative of those of the holders of the
Secured Notes.

     The  Debtor has been  advised  that the  holders of Secured  Notes who have
executed the  Restructuring  Agreement own at least sixty-five  percent (65%) of
the Secured Notes, and thus these holders alone  practically  satisfy the dollar
portion of the  requisite  majority  necessary for Plan approval by the Class of
holders of Secured Notes. There is no assurance,  however,  that the Debtor will
obtain votes in sufficient  number and dollar amount from the holders of Secured
Notes,  as  required  by  section  1126 (c) of the  Bankruptcy  Code,  to obtain
acceptance  of the Plan by such Class or otherwise  to satisfy the  requirements
for confirmation of the Plan under section 1129(a) of the Bankruptcy Code.

     The interests of shareholders in reaching the  Restructuring  Agreement was
represented by the insider shareholders, who comprise approximately ninety (90%)
percent  of the old  shares  of the  Debtor.  Non-insider  shareholders  did not
participate in any negotiations.

     ALL HOLDERS OF CLAIMS AND EQUITY  INTERESTS  ARE  ENCOURAGED  TO REVIEW THE
RESTRUCTURING AGREEMENT IN ITS ENTIRETY.

     The Restructuring Agreement provides, among other things:

     (i) The Specified  Holders  approve of and agree to support the  Bankruptcy
Court's approval of the form and substance of the Plan and Disclosure  Statement
and the exhibits thereto;

     (ii) Upon  Bankruptcy  Court  approval of the  adequacy  of the  Disclosure
Statement, the Specified Holders agree to vote in favor of the Plan;

     (iii) Unless the  Termination  Event occurs (which is defined as failure by
the Debtor to obtain  confirmation  of the Plan within 120 days of the  Petition
Date), the Specified  Holders and their assignees agree to forbear (and to cause
the Indenture Trustee to forbear) from enforcing their rights and remedies under
the Secured Notes and the Indenture;

     (iv) Upon the Effective Date, the Specified Holders agree to underwrite and
ensure the  availability  of a $10  million  secured  line of credit  (the "Exit
Financing") to the  Reorganized  Debtor.  The terms of the Exit Financing are as
follows:

o    Maturity: twelve months from the Effective Date of the Plan.

o    Interest: 15% annual interest rate, payable monthly, in cash.

o    Fees:

          (a)  $400,000  (U.S.)  up-front  underwriting  fee to be  paid  on the
               Effective Date of the Plan pro rata to the Specified Holders,  as
               underwriters;

          (b)  $100,000  (U.S.)  up-front  administration  fee to be paid on the
               Effective Date of the Plan to Resurgence Asset Management LLC, as
               administrator of the Exit Financing; and

          (c)  $300,000  (U.S.)  facility  fee to be paid only upon the  initial
               draw down, payable to the Exit Financiers on a pro rata basis.

o    Each draw down on the Exit Financing will require the prior approval of the
     board of directors of the Reorganized Debtor.

o    Security: The Exit Financing will be secured on a pari passu basis with the
     New Secured Notes.

o    Participation:  Each holder of in excess of $1 million in principal  amount
     of Secured Notes may  participate on a pro rata basis in the Exit Financing


                                       9
<PAGE>

     if such party  commits to do so in writing at least five (5) business  days
     prior to the Confirmation  Hearing.  Participating holders of Secured Notes
     who commit to and  actually  loan the Debtor a pro rata portion of the Exit
     Financing are referred to as the "Exit Financiers."

o    Documentation:  The loan, security and other documentation  relating to the
     Exit  Financing will be negotiated and finalized by the parties on or prior
     to the hearing on confirmation of the Plan.

     (v) The Specified Holders agree to the terms of employment agreements to be
entered by the  Reorganized  Debtor and certain key  employees on the  Effective
Date, which agreements are annexed as exhibits to the Restructuring Agreement;

     (vi) The Debtor agrees to  restrictions  on incurring  indebtedness  and on
certain transfers of its assets; and

     (vii)  The  Debtor  agrees  to use its  best  efforts  to seek  expeditious
approval of the Disclosure Statement and confirmation of the Plan.

C.   DEBTOR'S CHAPTER 11 CASE.

     1. Commencement of Chapter 11 Case.

     On January  26,  2000,  (the  "Petition  Date") the  Debtor  commenced  the
Reorganization  Case by filing with the  Bankruptcy  Court a petition for relief
under chapter 11 of the Bankruptcy Code.

     a. First-Day  Orders.  On or about the Petition Date, the Debtor  submitted
the following motions and orders for Bankruptcy Court approval:

          o    Motion for Order Fixing Bar Date for Filing Proofs of Claim.

          o    Motion  for Order  Fixing  Date,  Time and Place for a Hearing to
               Consider   Approval   of   Disclosure   Statement,   Solicitation
               Procedures and Confirmation of Plan of Reorganization.

          o    Motions for Orders Authorizing Retention of Professionals for the
               Debtor.

     b.  Retention of  Professionals.  The  Bankruptcy  Code  provides  that the
retention  of  attorneys  and  other  professionals  must  be  approved  by  the
Bankruptcy  Court.  Prior to, or  shortly  after,  approval  of this  Disclosure
Statement,   the  Debtor  has  retained  or  intends  to  retain  the  following
professionals in the Reorganization Case:

          (i)  Kelley Drye & Warren LLP as bankruptcy counsel;

          (ii) Saul  Ewing  Remick  & Saul LLP as local  bankruptcy  counsel  in
               Delaware;

          (iii) Financial advisors to the Debtor;

          (iv) Accountants for the Debtor; and

          (v)  Such other  professionals  as the Debtor  may deem  necessary  or
               appropriate.

     In addition,  the Debtor  anticipates  that the United  States  Trustee may
eventually appoint an Official Committee of Creditors  ("Creditors'  Committee")
in this case which will  likely  submit its own "first day  orders,"  along with
supporting applications,  to the Bankruptcy Court on or after the Petition Date.
These orders would possibly include,  among others, (i) an order authorizing the
retention of Jones,  Day, Reavis & Pogue as counsel to the Creditors'  Committee
and (ii) an order  authorizing  the  retention  of Chanin  Capital  Partners  as
financial advisor to the Creditors' Committee. As set forth in the Restructuring
Agreement,  the  Specified  Holders  have agreed to use their best efforts to be
appointed to the Creditors' Committee. At this point, however, the United States
Trustee has indicated that it will not appoint a Creditors' Committee.

     2. Other Matters.

     a.  Executory  Contracts and Unexpired  Leases.  The Plan  constitutes  and
incorporates a motion by the Debtor to reject, as of the Confirmation  Date, all


                                       10
<PAGE>

executory  contracts and unexpired leases to which the Debtor is a party, except
for any executory contract or unexpired lease that (a) is identified on Schedule
2 to the Plan (which  executory  contracts  and  unexpired  leases are expressly
assumed);  (b) has previously been assumed  pursuant to a Final Order, or (c) is
the subject of a separate  motion filed by the Debtor pursuant to section 365 of
the Bankruptcy Code which is pending on the Effective Date.

     b. Schedules, Bar Date and Objections to Claims.

     (i)  Schedules.  On or about  the  Petition  Date,  the  Debtor  filed  the
Schedules with the Bankruptcy Court.  Subsequent amendments of the Schedules may
be necessary throughout the pendency of the Reorganization Case.

     (ii) Bar Date. The Bankruptcy  Court has entered an order (the "Bar Order")
establishing  February 28, 2000 as the last date by which all proofs of claim or
proofs of interest  must be filed (the "Bar  Date").  Pursuant to the Bar Order:
(a) proofs of claim need not be filed by  Creditors  whose  Claims are listed on
the Debtor's  Schedules in the correct dollar amount and  classification  (i.e.,
secured, unsecured,  priority) and are not listed as "disputed," "contingent" or
"unliquidated;"  and (b)  proofs of  interest  need not be filed by  holders  of
Equity  Interests whose interests are registered in the official  records of the
Debtor's stock transfer agent. The Indenture  Trustee will file a proof of claim
on behalf of all  holders of the  Secured  Notes  based upon the  principal  and
interest due on the Secured Notes.

     (iii)  Objections to Claims and Equity  Interests.  As soon as  practicable
after  the Bar  Date,  a notice of  dispute  shall be sent by the  Debtor to the
holders of any Claims or Equity Interests that the Debtor believes should not be
Allowed, in whole or in part. The Debtor will evaluate all filed proofs of claim
to  determine  whether a notice of  dispute  should  be sent.  Unless  otherwise
provided herein or by order of the Bankruptcy Court, all objections to Claims or
Equity  Interests shall be filed and served on or before the  Confirmation  Date
(except with respect to any claim filed by a  governmental  unit which  deadline
for the filing of any  objections  thereto  shall be two  hundred ten (210) days
after the Effective Date). The Debtor or the Reorganized  Debtor, as applicable,
shall have the authority (i) to file and litigate  objections to Disputed Claims
and (ii) to settle or withdraw  any  objections  to Claims and Equity  Interests
upon approval of the Bankruptcy Court under Rule 9019 of the Bankruptcy Rules.

III. GENERAL INFORMATION REGARDING THE PLAN

A.   INTRODUCTION.

     The  following is qualified in its entirety by reference to the  provisions
of the Plan, a copy of which is annexed to this Disclosure  Statement as Exhibit
1 (together with Exhibits A and B thereto).

     In general,  a chapter 11 plan of  reorganization  (i)  divides  claims and
equity  interests into separate  classes,  (ii) specifies the property that each
class is to  receive  under  the  plan,  and  (iii)  contains  other  provisions
necessary to the  reorganization of the debtor.  For purposes of this Disclosure
Statement,  the terms "Creditor" and "holder of an Equity Interest" refer to the
holder of a "Claim" or "Equity  Interest,"  respectively,  in a particular class
under the Plan.  This  Disclosure  Statement (and the related  Ballots and other
materials  delivered  together herewith) are being furnished to impaired classes
of Creditors and holders of Equity Interests that are entitled to vote to accept
or reject the Plan.  Classes 2 and 4 are impaired classes under the Plan and are
entitled to vote.

     A chapter  11 plan may  specify  that  certain  classes of claims or equity
interests  are to remain  unchanged by the  reorganization  effectuated  by such
plan. Such classes are referred to as "unimpaired" and because of such favorable


                                       11
<PAGE>

treatment are deemed to accept the plan.  Accordingly,  under section 1126(f) of
the Bankruptcy Code it is not necessary to solicit  acceptances from the holders
of  claims or  equity  interests  in such  unimpaired  classes.  Under the Plan,
Classes 1 and 3 are unimpaired and,  therefore,  are not entitled to vote on the
Plan. A chapter 11 plan also may specify  that certain  classes will not receive
any distribution of property. Under section 1126(g) of the Bankruptcy Code, such
classes are deemed to reject the plan and,  therefore,  need not be solicited to
vote to accept or reject  the plan.  Under the Plan,  no Class is deemed to have
rejected the Plan.

     The Effective Date of the Plan will occur on the later of eleven days after
the Confirmation Date if no stay of the Confirmation Order is then in effect, or
such other date as is fixed from time to time after the Confirmation Date by the
Debtor by filing a notice  thereof with the  Bankruptcy  Court;  but in no event
shall  the  Effective  Date  occur  earlier  than the  date on which  all of the
conditions  precedent  to the  occurrence  of the  Effective  Date set  forth in
Section 11.2 of the Plan have been satisfied or waived.

B.   DESCRIPTION OF INDIVIDUAL CLASSES AND THE TREATMENT OF EACH CLASS UNDER THE
     PLAN.

     Section 1122 of the Bankruptcy Code provides that a plan of  reorganization
must designate classes of claims and interests,  each of which must contain only
substantially similar claims or interests.  The Plan provides for the payment of
certain  Administrative  Expense Claims and Priority Tax Claims that, consistent
with section  1123(a) (1) of the Bankruptcy  Code, are not included in any Class
of Claims or Equity Interests.

     The treatment of  Administrative  Expense  Claims,  Priority Tax Claims and
each of the Classes under the Plan is described below.  Distributions to holders
of Allowed Claims are in full  settlement,  release and discharge of such Claims
and all other  Claims of such  holders  and any  rights of  subordination  among
Creditors,   directly  or   indirectly   relating  to  or  arising  out  of  the
transactions, agreements or instruments upon which such Claims were based.

     A brief  description,  qualified  in all  respects by reference to the Plan
itself, of Administrative Expense Claims,  Priority Tax Claims and each Class of
Claims and Equity Interests and their respective  treatment under the Plan is as
follows:

     1. Administrative Expense Claims.

     Administrative  Expense  Claims  are  Claims  that  are  accorded  priority
treatment  pursuant  to section  503(b) (1) of the  Bankruptcy  Code.  These are
Claims arising in connection  with the actual and necessary  costs of preserving
the assets of the Debtor's  estate.  The Plan provides  that all  Administrative
Expense Claims, which consist primarily of compensation for services rendered in
connection with the Reorganization Case and liabilities incurred in the ordinary
course of the Debtor's business during the  Reorganization  Case,  accrued on or
prior to, but unpaid as of, the Effective  Date, will be entitled to be paid, in
Cash,  in  full  on  the  Effective  Date.  All  requests  for  compensation  or
reimbursement for services rendered and expenses incurred prior to the Effective
Date must be  approved  by the  Bankruptcy  Court  after a hearing  on notice as
provided under the Bankruptcy Code.

     As set forth in Section II.C. of this Disclosure Statement,  the Debtor and
the  Creditors'  Committee,  if any,  will  seek to retain  attorneys  and other
professionals  to assist  them  during  the course of the  Reorganization  Case.
Pursuant to section 330 of the Bankruptcy  Code, the Bankruptcy  Court may allow
payment  to  these   professionals  for  the  services  performed  by  them  and
reimbursement of expenses incurred in connection therewith.  Pursuant to section
503(b) (1) of the Bankruptcy Code, the Claims of such  professionals for payment
constitute Administrative Expense Claims. Additionally,  under section 503(b) of
the  Bankruptcy  Code,  Creditors and their counsel who have made a "substantial
contribution" in the  Reorganization  Case may seek  reimbursement of their fees
and expenses from the Debtor's estate by applying to the Bankruptcy Court.

     Also included among the Administrative Expense Claims are the Claims of the
Indenture Trustee for any actual and necessary fees and expenses incurred by the
Indenture  Trustee  pursuant  to the  Indenture  (whether  before  or after  the
Petition Date) through and including the Effective Date, to the extent that such
amounts have not been paid to the Indenture  Trustee  during the  Reorganization
Case, as well as the  post-Petition  Date fees and expenses of the professionals
retained by the Ad Hoc Noteholders' Committee.


                                       12
<PAGE>

     Pursuant to section 1129(a)(9)(A) of the Bankruptcy Code, each holder of an
Administrative  Expense  Claim  accrued  on or prior to,  but  unpaid as of, the
Effective Date which is allowed by the Bankruptcy Court will be paid in full, in
Cash,  on the  Effective  Date,  unless the holder of such a Claim has agreed to
different  treatment.  Allowed  Administrative  Expense Claims will be paid from
Distributable Cash.

     Administrative   Expense  Claims  are  estimated  to  total   approximately
$6,500,000.00.

     2. Priority Tax Claims.

     Priority Tax Claims are  unsecured  tax Claims that are  accorded  priority
pursuant to section 507(a)(8) of the Bankruptcy Code. The taxes entitled to such
priority are (i) taxes on income or gross  receipts  that meet the  requirements
set forth in Bankruptcy Code section  507(a)(8)(A);  (ii) property taxes meeting
the requirements of Bankruptcy Code section 507(a)(8)(B);  (iii) taxes that were
required to be  collected  or withheld by the Debtor and for which the Debtor is
liable in any  capacity as described in  Bankruptcy  Code section  507(a)(8)(C);
(iv) employment  taxes on wages,  salaries,  or commissions that are entitled to
priority pursuant to Bankruptcy Code section 507(a)(3),  to the extent that such
taxes also meet the  requirements of Bankruptcy Code section  507(a)(8)(D);  (v)
excise taxes of the kind specified in Bankruptcy Code section 507(a)(8)(E); (vi)
customs  duties  arising out of the  importation  of  merchandise  that meet the
requirements  of Bankruptcy  Code section  507(a)(8)(F);  and (vii)  prepetition
penalties  related  to  any of the  foregoing  tax  Claims  to the  extent  such
penalties  constitute  compensation for actual pecuniary loss as provided for in
Bankruptcy Code section 507(a)(8)(G).

     Pursuant to section 1129(a) (9) (C) of the Bankruptcy  Code, each holder of
a Priority  Tax Claim which is allowed by the  Bankruptcy  Court will be paid in
full, in Cash, on the Effective Date, unless the holder of such Claim has agreed
to a different treatment.

     The Debtor does not believe that there are any Priority Tax Claims.

     3. Class 1 -- Priority Non-Tax Claims.

     Priority  Non-Tax  Claims are Claims  entitled  to priority  under  section
507(a)  of  the  Bankruptcy  Code,  other  than  Administrative  Expense  Claims
described in section  507(a)(1) of the  Bankruptcy  Code and Priority Tax Claims
described in section 507(a)(8) of the Bankruptcy Code.  Priority Non-Tax Claims,
to the extent that such Claims are entitled to priority  under section 507(a) of
the Bankruptcy Code,  include Claims for wages,  salaries and commissions (up to
$4,300 per individual) earned within 90 days before the Petition Date.

     The Plan  provides  that Allowed  Priority  Non-Tax  Claims will be paid in
full, in Cash, on the Effective Date.

     Priority Non-Tax Claims are unimpaired.

     The Debtor does not believe that there are any Priority Non-Tax Claims.

     4. Class 2 -- Senior Secured Claims.

     Senior  Secured Claims are Secured  Claims  governed by, arising under,  or
related to, the Indenture or evidenced by any of the Secured Notes. The Debtor's
obligation  to holders of the Senior  Secured  Claims is secured by the Debtor's
assignment of the ITSA Note.

     The Plan provides that:

     a. By virtue of an affirmative vote in favor of the Plan, holders of Senior
Secured Claims will be making an election pursuant to section  1111(b)(2) of the
Bankruptcy  Code to treat their  entire  claim as a Senior  Secured  Claim.  The
Senior Secured Claims against the Debtor shall be deemed to be Allowed Claims as
of the  Petition  Date in an  amount  equal to  $140,000,000  plus all  interest
accrued from and after December 15, 1998 through the Petition Date. By operation
of section  1111(b) (1) (A) (i) of the Bankruptcy  Code,  any  Deficiency  Claim
relating to the Senior Secured Claims shall be extinguished.



                                       13
<PAGE>

     b. On the Effective Date or as soon as practicable thereafter,  in exchange
for the Secured Notes,  each holder of a Secured Note shall received its Ratable
Portion of (i) $25  million in Cash,  (ii) New  Secured  Notes in the  aggregate
principal  amount of the New Note Amount;  and (iii) eighty percent (80%) of the
New Equity Interests of the Reorganized  Debtor.  Since the New Equity Interests
are being issued by the Reorganized  Debtor, a Cayman Island entity, and the New
Secured  Notes are  issued by a  Brazilian  entity,  holders  of the New  Equity
Interests  and the New  Secured  Notes may not enjoy  under  Cayman  Islands and
Brazilian law the same degree of disclosure,  and identical legal rights, as did
the holders of the Equity  Interests  and the Secured  Notes.  Distributions  to
holders of Secured Notes shall be made by the Disbursing  Agent to the Indenture
Trustee for the benefit of the holders of Secured Notes.  The Indenture  Trustee
shall in turn make distributions under the Plan to holders of the Secured Notes.
Subsequent  distributions  to holders of the New  Secured  Notes will be made in
accordance with the terms of the New Indenture.

     The form of New Secured  Notes is annexed as Exhibit A to the New Indenture
and should be reviewed in its entirety for the terms thereof. The following is a
description  of the material  terms of the New Secured  Notes,  all of which are
subject to the terms of the New Indenture:

     o    Maturity: 5 years from Effective Date.

     o    Interest:  12% per annum,  payable in cash or in kind as determined by
          the board of directors of the Reorganized Debtor.

     o    Collateral:  Secured by (1) first  priority lien on all assets of ITSA
          and the  Subsidiaries  and the proceeds thereof and (2) pledges of the
          capital stock of ITSA and the  Subsidiaries,  to the extent  permitted
          under applicable law.

     o    Guaranty: Guaranteed by all of the subsidiaries of ITSA.

     o    Ranking:  Senior to all other indebtedness of the Reorganized  Debtor,
          except the Exit Financing and certain  exceptions set forth in the New
          Indenture.

     Senior Secured Claims are impaired.

     5. Class 3 -- General Unsecured Claims.

     General  Unsecured  Claims are all Claims which are not Secured  Claims and
are not Administrative Expense Claims,  Priority Tax Claims, or Priority Non-Tax
Claims. The Plan provides that Allowed General Unsecured Claims shall, except to
the  extent  that a holder of an Allowed  General  Unsecured  Claim  agrees to a
different  treatment,  be unimpaired in accordance  with section  1124(2) of the
Bankruptcy Code.

     The Debtor believes that General  Unsecured  Claims,  other than Deficiency
Claims of Class 2 Creditors which are to be extinguished  under the Plan,  total
approximately $0.

     6. Class 4 -- Equity Interests in the Debtor.

     Class 4 consists of the Equity Interests in the Debtor.

     The Plan provides that on the Effective  Date, all Equity  Interests in the
Debtor shall be  extinguished.  All options or warrants held by Equity  Interest
holders  shall  also  be  extinguished.  On the  Effective  Date  or as  soon as
practicable  thereafter,  holders of Allowed  Equity  Interests  shall receive a
Ratable  Portion  of  five  percent  (5%)  of the New  Equity  Interests  in the
Reorganized Debtor.

     Class 4 Equity Interests are impaired.

C.   OTHER PROVISIONS OF THE PLAN.

     1. Implementation of the Plan.

     To implement the Plan,  the Debtor will form a new Cayman Islands entity as
the Reorganized  Debtor.  The Reorganized Debtor will not be incorporated in the


                                       14
<PAGE>

United States because none of the assets or operations of the Reorganized Debtor
are located in the United States.  Moreover,  the perceived access to the United
States capital  markets that compelled the 1996  incorporation  of the Debtor in
the United States is no longer necessary or appropriate.  On the Effective Date,
the Debtor will transfer all of the Debtor's  Assets to the  Reorganized  Debtor
and the Reorganized  Debtor will become the successor in interest to the Debtor.
Upon the Effective Date, the Reorganized Debtor will contribute as equity to its
subsidiary,  ITSA,  $105  million  of the ITSA Note less an amount  equal to the
amount of any Central  Bank Fee.  The terms of the  remaining  amount due on the
ITSA Note,  which  amount  shall equal $35 million  plus an amount  equal to the
amount of the Central Bank Fee, will be amended and restated.  In addition,  New
Secured Notes in the aggregate  principal  amount of the New Note Amount will be
issued to the Reorganized  Debtor,  which will then assign the New Secured Notes
to holders of the Secured Notes,  together with (i) $25 million in Cash and (ii)
80% of the New Equity Interests in the Reorganized  Debtor. On or about the date
that the Court approves the adequacy of this  Disclosure  Statement,  the Debtor
will be filing a form T-3  regarding  the New  Indenture,  pursuant to the Trust
Indenture Act of 1939, as amended.

     2. Transfer and Gains Taxes; Encumbrances.

     The Plan provides that the Assets will be transferred free and clear of all
Claims  of  Creditors  and all  Equity  Interests,  except as may  otherwise  be
provided  under  the  Plan.  The  Confirmation   Order  will  provide  that  all
instruments of transfer to be executed or delivered under the Plan in connection
with any  transfer  of the Assets  shall be free and clear of, and  without  the
payment of, any and all transfer,  stamp,  and similar taxes pursuant to section
1146(c) of the Bankruptcy Code.

     3. Exchange of Secured Notes; Termination of Indenture.

     The Indenture will terminate as of the Effective  Date. As of the Effective
Date,  the Secured Notes and the Indenture and all other  documents  executed or
delivered in  connection  with the  aforesaid  documents  shall be of no further
force or effect,  except that the holders of the Secured Notes shall be entitled
to the New Secured Notes, the protections afforded under the New Indenture,  the
New Equity  Interests  and the Cash  distributions  payable to Class 2 Creditors
under the Plan. The Debtor will have no further  obligations under the Indenture
and will be  relieved of all  obligations  under the  Indenture  relating to the
Secured  Notes.  Termination  of the Indenture will not impair the rights of the
holders of Senior  Secured  Claims to receive  distributions  on account of such
Claims  pursuant  to the Plan,  and will not impair the rights of the  Indenture
Trustee  to enforce  its  charging  lien,  created  in law,  under the Plan,  or
pursuant to the Indenture,  against property that would otherwise be distributed
to holders of Senior Secured Claims.

     4. Exchange of Equity Interests.

     The Equity Interests in the Debtor shall be of no force or effect as of the
Effective  Date,  except that the  holders of Allowed  Equity  Interests  in the
Debtor  shall be entitled to receive  New Equity  Interests  as set forth in the
Plan.  Holders of Allowed  Equity  Interests  in the Debtor shall be entitled to
receive their Ratable Portion of 5% of the New Equity  Interests as set forth in
ss. 4.4 of the Plan.

     5. Appointment of Disbursing Agent.

     The Plan provides that the Reorganized  Debtor or such Entity designated by
the Debtor  and  approved  in the  Confirmation  Order will serve as  Disbursing
Agent,  and shall make all  distributions  under the Plan,  unless otherwise set
forth in the Plan. The  Disbursing  Agent shall not be required to give any bond
or surety or other security for the  performance of its duties unless  otherwise
ordered by the Bankruptcy Court.

     a.  Exculpation.  Under the Plan, the Disbursing  Agent, from and after the
Effective  Date,  will be exculpated  by all Entities,  including all holders of
Claims and Equity  Interests  and other  parties in  interest,  from any and all
claims,  causes of action and other assertions of liability (including breach of


                                       15
<PAGE>

fiduciary  duty)  arising out of the discharge by such  Disbursing  Agent of the
powers and duties  conferred  upon it by the Plan or any order of the Bankruptcy
Court entered  pursuant to or in  furtherance  of the Plan,  or applicable  law,
except  solely for actions or omissions  arising out of the gross  negligence or
willful  misconduct of such Disbursing  Agent. No holder of a Claim or an Equity
Interest or other  party in interest  shall have or pursue any claim or cause of
action against the Disbursing  Agent for making  payments in accordance with the
Plan or for implementing the provisions of the Plan.

     b. Powers of the Disbursing  Agent.  The Plan empowers the Disbursing Agent
to (a) effect all actions and execute all instruments and documents necessary to
implement the Plan,  (b) make all  distributions  contemplated  by the Plan, (c)
liquidate property as required to make  distributions  contemplated by the Plan,
(d)  comply  with  the  Plan  and  the   obligations   thereunder,   (e)  employ
professionals  to  represent it with  respect to its  responsibilities,  and (f)
exercise such other powers as may be vested in the Disbursing  Agent pursuant to
an order of the  Bankruptcy  Court,  pursuant  to the Plan,  or as deemed by the
Disbursing  Agent to be necessary and proper to implement the  provisions of the
Plan.

     c. Expenses  Incurred on or After the Effective  Date.  Except as otherwise
ordered by the Bankruptcy  Court, the amount of any reasonable fees and expenses
incurred  by the  Disbursing  Agent on or after the  Effective  Date  (including
reasonable  fees  and  expenses  of  counsel)  shall  be  paid  in  Cash  by the
Reorganized Debtor.

     6. Distributions Under the Plan.

     On the Effective Date, the Disbursing Agent, shall out of the Distributable
Cash, (a) fund the Claims Reserve, and (b) make Cash distributions to holders of
Allowed  Administrative  Expense Claims,  Allowed  Priority Tax Claims,  Allowed
Priority  Non-Tax  Claims,  Allowed Senior Secured  Claims,  and Allowed General
Unsecured Claims.  Pursuant to the terms of the Restructuring  Agreement, on the
Effective  Date,  and prior to and in addition to the issuance of 80% of the New
Equity  Interests  to the holders of the Secured  Notes and 5% of the New Equity
Interests to the Holders of the Equity  Interests,  members of the management of
the Reorganized Debtor, through their designees, will be receiving fifteen (15%)
percent of the equity of the  Reorganized  Debtor in partial  consideration  for
their future services to the Reorganized  Debtor.  Management will pay a nominal
par value for these New Equity  Interests.  The persons  who will be  beneficial
owners of the  management-owned  New Equity Interests in the Reorganized  Debtor
are set forth below:

Name                                   Percentage
----                                   ----------
Hermano Albuquerque                    6.5%
Carlos Albuquerque                     6.5%
Ari Lisboa                             0.35%
Geraldo Mello                          0.35%
Carlos Souza                           0.35%
Veronica Albuquerque                   0.35%
Dilton Caldas                          0.35%
Robespierre M. Sa                      0.25%

Of  the above-listed  persons,  only Hermano  Albuquerque and Carlos Albuquerque
are currently shareholders of the Debtor, each owning approximately 2.48% of the
Equity Interests of the Debtor and, therefore,  they will also receive their pro
rata share of the 5% of the New Equity  Interests to be issued to the holders of
the Equity Interests.

     If any  distribution  to any Creditor or Equity Interest holder is returned
to the Disbursing Agent as undeliverable, then such distribution or the proceeds
thereof  shall be set  aside  and,  in the case of  Cash,  held in a  segregated
interest  bearing account to be maintained by the Disbursing  Agent on behalf of
such  person.  If the  Creditor  or Equity  Interest  holder  fails to claim the
distribution  within one (1) year of the Effective  Date,  any unclaimed Cash or
property will be paid to the Reorganized Debtor and the Claim or Equity Interest
of such  Creditor or Equity  Interest  holder  shall be  discharged  and forever
barred.

     As a condition to receiving any  distribution  or property  pursuant to the
Plan,  each  holder  of an  Allowed  Class 2 Claim  and  Allowed  Class 4 Equity
Interest must surrender its respective  Secured Note(s) or Equity Interest(s) to
the Disbursing Agent for cancellation (or establish the  unavailability  thereof
to the  satisfaction  of the  Disbursing  Agent and  provide  such  security  or


                                       16
<PAGE>

indemnity  as may be required by the  Disbursing  Agent) and shall  deliver such
other documents as are necessary to effectuate the Plan, including any tax forms
required by the Disbursing Agent, in all cases, in proper form for transfer. The
Disbursing Agent shall make  distributions  only to holders of Secured Notes and
Equity Interests who surrender their instruments for cancellation. Any holder of
an Allowed  Class 2 Claim or an  Allowed  Class 4 Equity  Interest  who fails to
surrender its Secured Note(s) or Equity Interest(s) within one (1) year from the
Effective  Date shall be deemed to have  forfeited all rights under such Secured
Note(s) or Equity Interests and will not participate in any  distribution  under
the Plan.

     7. Conditions Precedent to Confirmation of the Plan.

     Confirmation of the Plan is subject to:

     a. Entry of  Confirmation  Order.  The Clerk of the Bankruptcy  Court shall
have entered the Confirmation Order of the Bankruptcy Court, which shall:

          (i) decree that the transfers  contemplated  to be made under the Plan
shall be free  and  clear of all  Claims,  Liens  and  encumbrances,  except  as
expressly provided herein, or in the Implementation Documents;

          (ii) approve the terms of the Restructuring Agreement and the exhibits
thereto,  including  the New Indenture and the  employment  agreements  with key
management  personnel of the Reorganized  Debtor,  approve the terms of the Exit
Financing and authorize and direct the Debtor,  the Indenture  Trustee,  the New
Indenture   Trustee  and  the  Disbursing  Agent  to  execute  and  deliver  the
Implementation  Documents,  and decree that all of the Implementation  Documents
shall constitute legal, valid and binding agreements,  instruments or documents,
as applicable;

          (iii)  decree  that  the   Confirmation   Order  shall  supersede  any
Bankruptcy  Court  orders  issued  prior to the  Confirmation  Date  that may be
inconsistent with the Confirmation Order;

          (iv) authorize the  implementation  of the Plan in accordance with its
terms;

          (v) provide that any transfers to be effected  under the Plan shall be
and are exempt from  transfer  taxes,  and any  applicable  stamp or similar tax
under section 1146(c) of the Bankruptcy Code;

          (vi)  authorize  the  formation  of the  Reorganized  Debtor  and  the
issuance of the New Secured Notes and New Equity Interests;

          (vii) decree that the New Secured  Notes and New Equity  Interests are
exempt from registration  pursuant to sections 1125(e),  1126(b) and 1145 of the
Bankruptcy Code and other applicable law; and

          (viii) confirm the Plan.

     b. Form of Confirmation Order. The Clerk of the Bankruptcy Court shall have
entered  the  Confirmation  Order in such form and  substance  as is  reasonably
acceptable to the Debtor, the Specified Holders, and the Creditors' Committee.

     8. Conditions Precedent to the Effective Date of the Plan.

     The occurrence of the Effective Date of the Plan is subject to satisfaction
of the following conditions precedent:

     a. Finality of the  Confirmation  Order.  The Clerk of the Bankruptcy Court
shall have entered the Confirmation  Order and the Confirmation Order shall have
become a Final Order.

     b. Governmental  Approvals.  ITSA and the Subsidiaries  shall have received
all necessary approvals to implement the structure contemplated by the Plan from
Brazilian government regulatory agencies having jurisdiction with respect to the
licenses held by ITSA or the Subsidiaries.

     c. Approval of the Central Bank. All required approvals of the Central Bank
shall have been received in form and substance  reasonably  satisfactory  to the
Debtor, the Creditors' Committee and the Specified Holders.


                                       17
<PAGE>

     d.  Distributions.  The Disbursing Agent shall have fully funded the Claims
Reserve.  The  Disbursing  Agent shall have received the  Distributable  Cash in
existence on the Effective Date.

     e. Execution of Documents.  All other actions and documents,  including the
Implementation  Documents,  necessary to implement  the  provisions  of the Plan
shall have been, respectively, effected or executed and delivered.

     Each of the  conditions  precedent  to  Confirmation  of the  Plan  and the
Effective  Date may be  waived,  in whole or in  part,  by the  Debtor  with the
consent of the Indenture  Trustee.  Any such waiver may be effected at any time,
on two  (2)  Business  Days'  notice  to the  Entities  that  are  party  to the
Restructuring  Agreement,  without  leave or order of the  Bankruptcy  Court and
without any formal action other than  proceeding  to confirm or  consummate  the
Plan.

     9. Retention of Jurisdiction.

     The Bankruptcy Court may retain  jurisdiction,  and if the Bankruptcy Court
exercises its retained jurisdiction,  shall have exclusive jurisdiction,  of all
matters  arising out of, and related  to, the  Reorganization  Case and the Plan
pursuant to, and for the purposes of, sections 105(a) and 1142 of the Bankruptcy
Code and for, among other things, the following purposes:

     a. To hear  and  determine  pending  applications  for  the  assumption  or
rejection of executory  contracts or unexpired leases,  if any are pending,  and
the allowance of Claims resulting therefrom;

     b. To  determine  any  and  all  adversary  proceedings,  applications  and
contested matters;

     c. To  ensure  that   distributions  to  holders  of  Allowed  Claims  are
accomplished as provided herein;

     d. To hear and determine any timely  objections to  Administrative  Expense
Claims or to proofs of claim and equity interests  filed,  both before and after
the Confirmation  Date,  including any objections to the  classification  of any
Claim or Equity Interest,  and to allow or disallow any Disputed Claim, in whole
or in part;

     e. To enter and implement  such orders as may be  appropriate  in the event
the Confirmation Order is for any reason stayed, revoked, modified, or vacated;

     f. To issue  such  orders in aid of  execution  of the Plan,  to the extent
authorized by section 1142 of the Bankruptcy Code;

     g. To  consider  any  modifications  of the  Plan,  to cure any  defect  or
omission,  or reconcile any  inconsistency in any order of the Bankruptcy Court,
including the Confirmation Order;

     h. To hear and determine all  applications  for awards of compensation  for
services rendered and  reimbursement of expenses related to  implementation  and
consummation of the Plan;

     i. To hear and  determine  any  disputes  regarding  the fees and  expenses
incurred by the Disbursing Agent;

     j.  To  hear  and  determine   disputes  arising  in  connection  with  the
interpretation, implementation, or enforcement of the Plan;

     k. To hear and determine matters  concerning state, local and federal taxes
in accordance with sections 346, 505 and 1146 of the Bankruptcy Code; and

     l. To enter a final decree closing the Reorganization Cases.

IV.  EFFECTS OF CONFIRMATION OF THE PLAN

A.   DISCHARGE OF DEBTOR.

     The  rights  afforded  under the Plan and the  treatment  of all Claims and
Equity Interests  provided  therein,  including the  consideration  provided for


                                       18
<PAGE>

therein,  shall,  to the fullest extent  permitted  under  applicable law, be in
complete  release,  satisfaction  and  discharge,  effective as of the Effective
Date,  of all Claims and Equity  Interests  of any nature  whatsoever,  known or
unknown,  including any interest or expenses incurred thereon from and after the
Petition  Date,  against the Debtor,  its estate,  properties,  or  interests in
property at any time before the Effective  Date. As of the Effective  Date,  all
Claims against and Equity Interests in the Debtor will be satisfied, discharged,
and released in full  exchange for the  consideration  provided  under the Plan,
regardless of whether a proof of claim or interest  therefor was filed,  whether
the Claim or Interest is Allowed,  or whether the holder thereof votes to accept
the Plan. All Entities will be precluded  from  asserting  against the Debtor or
any of its assets or properties,  any other Claims based upon any act, omission,
transaction,  promissory  activity or other  activity of any kind or nature that
occurred prior to the Effective Date.

B.   RELEASE FROM CLAIMS AND LIABILITIES.

     1. Plan Releasees.

     Upon consummation of the Plan, the Indenture Trustee, the Specified Holders
and  members  of  the  and  the  Creditors'  Committee,   and  their  respective
successors,  predecessors,  assignors, and assignees, together with all of their
current and former partners or owners, officers, directors, trustees, employees,
agents, attorneys, counsel, accountants,  financial advisors, investment bankers
and appraisers (collectively, the "Plan Releasees") are released and discharged,
which release and  discharge  will be binding on all Creditors of and holders of
Equity  Interests  in the  Debtor,  from any and all costs,  expenses,  actions,
causes of action, suits, controversies,  damages, claims, liabilities or demands
of any nature,  whether known or unknown,  foreseen or  unforeseen,  existing or
hereinafter  arising,  liquidated  or  unliquidated,  matured  or  not  matured,
contingent  or direct,  whether  arising at common law, in equity,  or under any
statute,  based in whole or in part upon any act or omission or other occurrence
taking place on or prior to the Effective Date (the  "Liabilities")  relating to
the Assets,  the Secured Notes, the Debtor,  the Indenture,  the  Reorganization
Case or the Plan including, without limitation,  specifically any claims arising
from, inter alia:

          (i)  the   undertaking  by  the  Plan  Releasees  to  restructure  the
obligations  governed by the  Indenture  and  evidenced  by the  Secured  Notes,
including any actions taken or not taken in respect of formulating,  negotiating
and implementing the Plan;

          (ii) all actions effected or not effected by the Indenture  Trustee or
the Specified  Holders,  or their  respective  advisors,  under the Indenture or
under any other agreements, instruments or documents, relating to the Debtor;

          (iii)  the  preparation  by any of the  Plan  Releasees  of  financial
statements,  appraisals,  or other  reports  or  certificates  in respect of the
Debtor or the Subsidiaries or their properties;

          (iv) the actions,  payments,  and  obligations  required of any of the
Plan Releasees under, among other things, the Indenture,  the Secured Notes, and
all agreements,  instruments and documents executed and delivered pursuant to or
in connection with any of the foregoing;

          (v) the use of proceeds by any of the Plan  Releasees from the Secured
Notes or the revenues of property of the Subsidiaries.

     This release  shall not include (a) any  defenses of the Plan  Releasees to
any Liability or (b) any  obligations  of the Plan  Releasees  arising under the
Plan or the Implementation Documents.

2.   Affiliate Releasees.

     On the Effective Date, the Debtor is released from all  Liabilities  except
those expressly preserved under the Plan. The Debtor, all the Subsidiaries,  and
their respective successors,  predecessors,  assignors, assignees, together with
all their current and former partners,  members or owners, officers,  directors,


                                       19
<PAGE>

trustees,  employees,  agents,  attorneys,   counsel,   accountants,   financial
advisors,  investment  bankers,  and  appraisers  (collectively,  the "Affiliate
Releasees")  are released and  discharged,  which release and discharge  will be
binding on all Creditors and holders of Equity Interests in the Debtor, from any
and all Liabilities  relating to the Secured Notes,  the Debtor,  the Indenture,
the Reorganization Case or the Plan including, without limitation,  specifically
any claims arising from, inter alia:

          (i) the offer,  sale,  purchase,  resale or  ownership  of the Secured
Notes or the  Equity  Interests,  any sales  brochure,  registration  statement,
preliminary prospectus,  prospectus, offering memorandum or circular, appraisal,
report or  inspection,  or any  disclosure  or  omission  related  to any of the
foregoing, and any engagement,  underwriting, placement agency or other role of,
or services rendered by, any Entity in connection with any of the foregoing;

          (ii) the involvement of any of the Affiliate  Releasees in or with the
sale of the Secured Notes;

          (iii) the  ownership,  management and operation of any property by any
of the Affiliate Releasees;

          (iv) the  preparation  by any of the Affiliate  Releasees of financial
statements,  appraisals,  or other  reports  or  certificates  in respect of the
Debtor or the other Subsidiaries;

          (v) the  actions,  payments  and  obligations  required  of any of the
Affiliate Releasees under, among other things, the Indenture, the Secured Notes,
and all agreements, instruments and documents executed and delivered pursuant to
or in connection with any of the foregoing;

          (vi) the use of proceeds by any of the  Affiliate  Releasees  from the
Secured Notes or revenues of the property of the Subsidiaries; and

          (vii) the  undertaking by the Affiliate  Releasees to restructure  the
obligations  governed by the  Indenture  and  evidenced  by the  Secured  Notes,
including any actions taken or not taken in respect of formulating, negotiating,
soliciting acceptances to and implementing the Plan.

     This release shall not release (a) any defenses of the Affiliate  Releasees
to any Liability or (b) any obligations of the Affiliate Releasees arising under
the Plan or the Implementation Documents.

C.   INJUNCTION.

     The  Confirmation  Order shall be an injunction to  permanently  enjoin and
restrain all Entities from asserting against the Affiliate Releasees or the Plan
Releasees or their respective assets or properties or interests in property, any
Liabilities  that are released by the Plan Releases or any Claims based upon any
act or  omission,  transaction  or other  activity  of any kind or  nature  that
occurred  prior to the  Effective  Date (other than actions  provided for by the
Plan). The Confirmation  Order shall also be an injunction to enjoin permanently
and restrain all Entities from taking any of the following  actions  (other than
actions  brought to enforce any right or  obligation  provided  for by the Plan)
against  the  Affiliate  Releasees  or the Plan  Releasees  or their  respective
properties or interests in property:

          (i) the commencement or continuation of any action or proceeding;

          (ii) the enforcement, attachment, collection or recovery by any manner
or means of any judgment, award, decree or order;

          (iii) creating,  perfecting, or enforcing any encumbrance of any kind;
and

          (iv)  asserting any right of setoff,  subrogation or recoupment of any
kind against any obligation due from any such party.

D.   POSSIBLE OBJECTIONS TO AFFILIATE RELEASES AND INJUNCTION.

     It is possible that, prior to confirmation of the Plan,  objections will be
filed to the proposed  releases of all or certain of the Affiliates,  as well as


                                       20
<PAGE>

to the proposed injunction.  If such objections are sustained, the Plan may have
to be slightly  modified.  The Debtor  believes that the affiliate  releases and
injunctions are wholly appropriate. The corporate affiliates of the Debtor to be
released  under the Plan are entering into new terms under the New Secured Notes
and the New Indenture,  which terms provide substantial benefit to the creditors
of the Debtor.  The  agreement by the  corporate  affiliates to these terms is a
critical  component  of the Plan,  and the grant of a release  to the  corporate
affiliates is a necessary  prerequisite  to the ability and  willingness  of the
corporate  affiliates to agree to the terms of the New Secured Notes and the New
Indenture. Similarly, one of the foundations of the Restructuring Agreement that
underlies  the Plan is the agreement of the Debtor's  management,  board members
and  personnel to continue to operate and support the  Reorganized  Debtor.  The
release of these individuals, and the injunction, are both appropriate to induce
these  individuals'  consent to continue to support the Reorganized  Debtor,  as
well as to ensure these  individuals'  future focus on the operations and growth
of the Reorganized Debtor.  Finally, the Debtor notes that these individuals are
currently not the target of any claim, or threat of claim,  with regard to their
affiliation with the Debtor.

E.   VESTING OF PROPERTY IN REORGANIZED DEBTOR.

     Effective  as of the  Effective  Date,  all Assets of the  Debtor  shall be
transferred to and shall vest in the Reorganized Debtor,  including the Debtor's
right to prosecute  any avoidance or recovery  actions under  sections 544, 545,
547, 548, 549,  550, 551 and 553 of the  Bankruptcy  Code or any other Causes of
Action, that belong to the Debtor.

V.   INFORMATION ABOUT THE CLAIMS ALLOWANCE, OBJECTION AND ESTIMATION PROCEDURES

     This Section describes (i) the procedure for objecting to claims,  and (ii)
how this procedure affects the allowance of Claims.

A.   ALLOWANCE OF CLAIMS AND EQUITY INTERESTS.

     A Claim is  Allowed if (a) proof  thereof  was filed,  if  required,  on or
before  the date  designated  by the  Bankruptcy  Court as the Bar Date or on or
before such date as may be  specifically  authorized  for such proof of claim or
equity interest by Final Order of the Bankruptcy Court, or, if no proof of claim
is filed,  such Claim is listed by the Debtor in its  Schedules as liquidated in
amount and not disputed or  contingent  and, in either case,  as to which either
(i) no  objection  to the  allowance  thereof  has been  interposed  within  the
applicable  period of limitation  fixed in the Plan,  the  Bankruptcy  Code, the
Bankruptcy  Rules, the Local Bankruptcy Rules or a Final Order of the Bankruptcy
Court or (ii) an objection has been  interposed  and such Claim has been allowed
in whole or in part by a Final Order to the extent  allowed by such Final Order,
or (b) such Claim is a Claim  against  the Debtor  arising  pursuant  to section
502(h) of the Bankruptcy Code. Unless otherwise  specified in the Plan or in the
Final Order of the Bankruptcy  Court allowing a Claim,  an "Allowed Claim" shall
not  include  interest  on the amount of such Claim from and after the  Petition
Date.

     An Equity  Interest  is  Allowed  if such  interest  is  registered  in the
official  records of the Debtor's stock transfer agent, or if the holder of such
Equity Interest files a proof of interest by the Bar Date and as to which either
(i) no  objection  to the  allowance  thereof  has been  interposed  within  the
applicable  period of limitation  fixed in the Plan,  the  Bankruptcy  Code, the
Bankruptcy  Rules, the Local Bankruptcy Rules or a Final Order of the Bankruptcy
Court or (ii) an objection has been interposed and such Equity Interest has been
allowed in whole or in part by a Final Order to the extent allowed by such Final
Order.

B.   OBJECTIONS TO CLAIMS AND EQUITY INTERESTS.

     Under the provisions of the  Bankruptcy  Code, a debtor and any other party
in interest may object, on appropriate  grounds,  to the allowance of Claims and
Equity Interests filed with the Bankruptcy  Court.  Under section 502 (a) of the
Bankruptcy Code, a party in interest may object to a claim if the debtor refuses
to do so. All such objections  will be litigated to Final Order,  unless settled
or withdrawn.



                                       21
<PAGE>

     The Plan provides that,  unless otherwise  ordered by the Bankruptcy Court,
the Debtor  shall  notify in writing  each holder of a Claim or Equity  Interest
filed  with the  Bankruptcy  Court with  respect  to which the  Debtor  disputes
liability in whole or in part on such Claim or Equity Interest. Unless otherwise
provided by the Plan or by order of the  Bankruptcy  Court,  all  objections  to
Claims or Equity  Interests  shall be served and filed no later than the date of
the Confirmation  (except with respect to any claim filed by a governmental unit
which deadline for the filing of any objections thereto shall be two hundred ten
(210) days after the Effective Date) or such later date as may be ordered by the
Bankruptcy  Court by either  the  Debtor  or,  after  the  Effective  Date,  the
Reorganized  Debtor. Any objection must be in writing,  must set out the name of
the Creditor or Equity  Interest holder who filed the proof of claim or interest
and specify the grounds for the objection.  The objection must be filed with the
Bankruptcy  Court and served in accordance  with Bankruptcy Rule 3007. A copy of
the  objection  must be served  upon the  attorney  of record  (if any) for such
Creditor or Equity Interest  holder or upon such party directly,  if the same is
not  represented  by an attorney.  The Debtor or, after the Effective  Date, the
Reorganized Debtor, may compromise and settle any objections to Claims or Equity
Interests filed by it.

     If an objection to a Claim or Equity Interest is filed,  the holder of such
Claim or Equity  Interest must file a response to any such objection  within the
time period set by the Bankruptcy Court. Copies of such responses must be served
upon  counsel  for the  Debtor.  Failure to timely  file a response  is deemed a
consent to the objection and the Bankruptcy Court may enter an order disallowing
such Claim or Equity Interest without further notice or hearing.

     Notwithstanding  any other provision of the Plan, if any portion of a Claim
or Equity  Interest  is a  Disputed  Claim or Equity  Interest,  no  payment  or
distribution  provided  under the Plan  shall be made on  account  of such Claim
unless and until such Disputed Claim becomes Allowed. Payments and distributions
to each  holder of a  Disputed  Claim to the extent  that such Claim  ultimately
becomes  Allowed,  shall be made in accordance  with the  provisions of the Plan
governing  the class in which such Claim or Equity  Interest is  classified.  As
soon as practicable  after the date that the order or judgment of the Bankruptcy
Court  allowing any Disputed Claim becomes a Final Order,  the Disbursing  Agent
shall  distribute  to the holder of such  Allowed  Claim or Equity  Interest any
payment or property that would have been distributed to such holder if the Claim
or Equity Interest had been Allowed on the Effective Date.

C.   ESTIMATION OF CLAIMS FOR DISTRIBUTION PURPOSES.

     Creditors  holding  Claims that are  contingent  or  unliquidated  will not
receive any distribution until the allowance and amount of the Claim is resolved
through the Claims objection  procedure.  In accordance with the Bankruptcy Code
and under the provisions of the Plan,  the Debtor or, after the Effective  Date,
the Reorganized Debtor may file a request that the Bankruptcy Court estimate for
purposes of distribution the amount of any contingent or unliquidated  Claim, if
liquidation of the Claim would unduly delay administration of the Reorganization
Case. A request for estimation may be made  regardless of whether such Claim has
been  objected  to or  whether  the  Bankruptcy  Court  has  ruled  on any  such
objection.  The Plan provides for the Bankruptcy Court to retain jurisdiction to
estimate any such contingent or unliquidated Claim at any time during litigation
concerning any objection to any Claim. The Creditor holding such a contingent or
unliquidated  Claim will receive a distribution  based on the Allowed amount, if
any, as is determined by Final Order resolving the request for estimation.

VI.  VOTING PROCEDURES

A.   VOTE REQUIRED FOR A CLASS TO ACCEPT THE PLAN.

     The  Bankruptcy  Code provides that a plan is accepted by a class of claims
if the plan is  accepted  by holders of at least  two-thirds  in amount and more
than  one-half in number of the claims of the class which  actually cast ballots
for acceptance or rejection of the plan. Similarly, a class of interests accepts
a plan  of  reorganization  only if the  holders  of  two-thirds  in  amount  of
interests of the class which  actually cast ballots for  acceptance or rejection
of the plan vote to accept the plan.


                                       22
<PAGE>

B.   WHO MAY VOTE.

     1. Impaired Classes.

     Only classes that are  "impaired"  under the Plan and that are to receive a
distribution  under the Plan are entitled to vote on  acceptance or rejection of
the Plan. As a condition to confirmation, the Bankruptcy Code requires that each
impaired  class of claims or interests  accept a plan (subject to the "cramdown"
exception  described  below).  A class is "impaired"  under a plan unless,  with
respect to each claim or interest of such class,  (i) the plan leaves  unaltered
the legal,  equitable  and  contractual  rights to which such claim or  interest
entitles the holder of such claim or  interest;  or (ii) all defaults are cured,
the original  maturity of the claim or interest is  reinstated  and the claim or
interest is otherwise treated as provided in clause (i) of this sentence. Claims
and Equity Interests in Classes 2 and 4 are impaired under the Plan.

     2. Classes that are not Impaired.

     Classes of Claims and Equity  Interests that are not  "impaired"  under the
Plan are deemed to have accepted the Plan and are not entitled to vote.  Classes
1 and 3 are not  impaired  under  the  Plan  and,  therefore,  are  conclusively
presumed to have accepted the Plan. 3.  Temporary  Allowance of Claims or Equity
Interests for Voting Purposes.

     Under the  Bankruptcy  Code,  a creditor or interest  holder is entitled to
vote only if either (i) its claim or interest  has been  scheduled by the debtor
as not  disputed,  contingent or  unliquidated,  or (ii) it has filed a proof of
claim or interest before the last day set by the Bankruptcy  Court. Any claim or
interest  to which an  objection  is pending is not  entitled to vote unless the
creditor  or  interest  holder has  obtained  an order of the  Bankruptcy  Court
temporarily  allowing  its claim or  interest  for the  purpose of voting on the
plan. The creditor or interest holder holding such a claim or interest will vote
the claim or interest in the amount,  if any,  that is determined by Final Order
resolving the request for temporary allowance.

     All  known  holders  of Class 2 Claims  and Class 4 Equity  Interests  will
receive solicitation materials. Prior to the Confirmation Hearing, any party who
believes  that it is a Creditor  of the Debtor in Class 2 or an Equity  Interest
holder  in  Class 4 and did not  receive  a Ballot  may  file a motion  with the
Bankruptcy  Court  seeking  to have its  Claim or  Equity  Interest  temporarily
allowed for voting  purposes  and to be  permitted  to cast a late Ballot on the
Plan in respect of such Claim or Equity Interest.

     4. One Vote.

     If a beneficial  holder of a Claim or Equity  Interest  holds more than one
Claim or Equity Interest in a particular  class,  all of such holder's Claims or
Equity Interests will be aggregated and such holder will be entitled to one vote
in the amount of such  holder's  aggregated  Claims or Equity  Interests in such
class.

     5. Record Date for Voting Purposes.

     Only  holders of record of Claims and Equity  Interests  as of January  10,
2000 that are otherwise entitled to vote under the Plan will receive Ballots and
may vote on the Plan.

C.   VOTING PROCEDURES.

     1. Ballots.

     A Ballot is enclosed  herewith for each Creditor and Equity Interest holder
eligible to vote on the Plan.  The Debtor  encourages you to vote to confirm the
Plan by checking the appropriate  box.  Please follow the directions  printed on
the Ballot.



                                       23
<PAGE>

     2. Voting Deadline.

     Ballots may not be  transmitted  orally or by facsimile.  In order for your
vote on the Plan to be counted,  your  Ballot must BE RECEIVED at the  following
address of the Voting  Agent no later  than the  Voting  Deadline  of 4:00 p.m.,
Eastern Standard Time, on Arpil 6, 2000.

          KELLEY  DRYE & WARREN  LLP
          101 PARK  AVENUE
          NEW YORK,  NEW YORK 10178
          ATTN: JAY HEINRICH, ESQ.
          (212) 808-5073

     DO NOT RETURN YOUR  SECURED  NOTES OR EQUITY  INTERESTS TO THE VOTING AGENT
WITH YOUR BALLOT.

     3. Brokerage Firms, Banks and Other Nominees.

     If you are a beneficial  owner of Secured Notes or Equity  Interests  which
are registered in the name of a broker, bank or other nominee (collectively, the
"Nominee"), please complete a Ballot and return it to your Nominee in sufficient
time so as to enable such Nominee to complete a Master Ballot and to return such
Master Ballot to the Voting Agent prior to the Voting Deadline.

     ONLY BENEFICIAL  OWNERS OF CLASS 2 CLAIMS AND CLASS 4 EQUITY  INTERESTS ARE
ENTITLED TO VOTE ON THE PLAN.  NEITHER THE  INDENTURE  TRUSTEE NOR A NOMINEE CAN
VOTE ON THE PLAN ON BEHALF OF HOLDERS OF SECURED NOTES OR EQUITY INTERESTS.

     A  beneficial  owner of  Secured  Notes or  Equity  Interests  may  receive
multiple mailings  containing  Ballots,  especially  beneficial owners that hold
such  securities  through more than one Nominee.  Each  beneficial  owner should
complete  and return all  Ballots  received  by it to its  Nominee in the return
envelope  provided  with  each such  Ballot.  Any  beneficial  owner who has not
received a Ballot should contact his, her or its Nominee, or the Voting Agent.

     4. Other Signatories.

     If a Ballot is  signed by a  trustee,  executor,  administrator,  guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or  representative  capacity,  such person  should  indicate  such capacity when
signing and, if requested by the Debtor or the Voting Agent,  must submit proper
evidence satisfactory to the Debtor or the Voting Agent, of authority to so act.

     5. Waivers of Defects, Irregularities, etc.

     The Debtor may, in its sole discretion,  reject any Ballot or Master Ballot
as invalid  and,  therefore,  decline to utilize it in  connection  with seeking
confirmation of the Plan by the Bankruptcy  Court,  unless such Ballot or Master
Ballot is properly completed and timely submitted.

     Any  executed  Ballot  received by the Voting  Agent that does not indicate
either an  acceptance  or rejection of the Plan shall be deemed to constitute an
acceptance  of the Plan.  All questions as to the  validity,  form,  eligibility
(including time of receipt), acceptance, and revocation or withdrawal of Ballots
or Master Ballots will be determined by the Debtor in its sole discretion, which
determination will be final and binding.  The Debtor reserves the absolute right
to contest  the  validity  of any  revocation  or  withdrawal.  The Debtor  also
reserves the right to reject any and all Ballots or Master Ballots not in proper
form,  the  acceptance  of which  would,  in the  opinion  of the  Debtor or its
counsel, be unlawful. The Debtor further reserves the right to waive any defects
or  irregularities  or  conditions  of delivery as to any  particular  Ballot or


                                       24
<PAGE>

Master Ballot. The interpretation  (including of the Ballot or Master Ballot and
the respective instructions thereto) by the Debtor, unless otherwise directed by
the Bankruptcy Court,  will be final and binding on all parties.  Unless waived,
any defects or irregularities in connection with deliveries of Ballots or Master
Ballots  must be cured  within such time as the Debtor  determines.  Neither the
Debtor nor any other  person will be under any duty to provide  notification  of
defects  or  irregularities  with  respect  to  deliveries  of,  or  notices  of
revocation  or  withdrawal  of,  Ballots or Master  Ballots nor will any of them
incur any liabilities for failure to provide such notification. Delivery of such
Ballots  or Master  Ballots  will not be deemed  to have  been made  until  such
irregularities  have been cured or waived.  Ballots or Master Ballots previously
furnished (and as to which any irregularities have not theretofore been cured or
waived) will be invalidated.

VII. EXEMPTIONS FROM SECURITIES ACT REGISTRATION

A.   THE SOLICITATION.

     The Debtor is relying on section 1145 of the Bankruptcy Code to exempt from
the registration requirements of the Securities Act (and of any equivalent state
securities  or "blue sky" laws) the offer to  exchange  securities  which may be
deemed to be made by the Debtor pursuant to the solicitation.

     The  Debtor  has  received  assurances  that no  person  will  provide  any
information to holders of the Secured Notes relating to the  solicitation of the
Plan  other  than to refer  holders  of the  Secured  Notes  to the  information
contained in this  Disclosure  Statement and in the Ballots  delivered  together
herewith.

B.   ISSUANCE OF NEW SECURED NOTES AND NEW EQUITY INTERESTS.

     It is expected that the issuance on the  Effective  Date of (a) New Secured
Notes and New Equity  Interests in exchange for Secured Notes and (b) New Equity
Interests  in  exchange  for the  Equity  Interests  will  be  exempt  from  the
registration  requirements  of the  Securities  Act  (and  of  equivalent  state
securities  laws or "blue  sky"  laws) by reason  of an  exemption  provided  by
section 1145(a) (1) of the Bankruptcy  Code.  Generally,  Section 1145(a) (1) of
the  Bankruptcy  Code exempts the issuance of securities  from the  registration
requirements  of the Securities Act and  equivalent  state  securities and "blue
sky" laws if the following  conditions  are  satisfied:  (i) the  securities are
issued by a debtor (or an affiliate of the debtor  participating  in a Plan with
the debtor or a successor to the debtor)  under a plan of  reorganization;  (ii)
the  recipients of the  securities  hold a claim  against,  an interest in, or a
claim  for  an  administrative  expense  against,  the  debtor;  and  (iii)  the
securities are issued entirely in exchange for the recipient's  claim against or
interest  in the  debtor,  or are  issued  "principally"  in such  exchange  and
"partly" for cash or other property.

     The Debtor  believes  that the New Secured  Notes and New Equity  Interests
could be determined to be "securities" as such term is defined in the Securities
Act. If the New Secured Notes or New Equity  Interests were determined not to be
"securities"  as such term is defined in the Securities Act, then the Securities
Act would not be applicable to the New Secured Notes and New Equity Interests.

     If the New Secured  Notes and New Equity  Interests  were  determined to be
"securities"  as such term is defined in the Securities Act, the Debtor believes
that the New  Secured  Notes and New Equity  Interests  issued in  exchange  for
Secured  Notes and  Equity  Interests  will be exempt  from  registration  under
section  1145(a)(1)  of the  Bankruptcy  Code.  The  Debtor  believes  that  the
Reorganized  Debtor will be deemed to be a "successor"  to the Debtor within the
meaning of section 1145 (a) (1) of the  Bankruptcy  Code.  Thus,  it is expected
that the Bankruptcy Court in the Confirmation  Order will expressly confirm that
the  exchange of (a) the Secured  Notes for the New  Secured  Notes,  New Equity
Interests  and Cash and (b) the exchange of the Equity  Interests for New Equity
Interests  satisfies the  requirements  of section  1145(a)(1) of the Bankruptcy
Code.

     In the event  that the  Bankruptcy  Court  were to  determine  that the New
Secured Notes and New Equity  Interests are securities which are not exempt from
registration  under  section  1145(a)  (1) of the  Bankruptcy  Code,  the Debtor
expressly  reserves  the right to modify  the Plan or seek to  register  the New
Secured  Notes  and New  Equity  Interests  with  the  Securities  and  Exchange
Commission ("SEC").



                                       25
<PAGE>

     The  Debtor  believes  that the  issuance  of New Equity  Interests  to the
members of the management of the Reorganized  Debtor in accordance with the Plan
and Restructuring Agreement will not be subject to the registration requirements
of the  Securities  Act. The staff of the  Securities  and  Exchange  Commission
maintains  that New Equity  Interests to be  distributed  to management  are not
exempt from registration pursuant to section 1145 of the Bankruptcy Code. In any
event,  the Debtor is not  relying  on the  applicability  of section  1145 with
respect  to the  securities  to be issued to  management.  The  issuance  of the
securities to management is exempt from  registration  because these  securities
will be issued to one or more  management-owned  Cayman Islands  entities,  each
entity will be owned exclusively by a respective member of the management of the
Reorganized  Debtor,  all of the  beneficial  owners will be  non-United  States
persons  residing  outside the United  States,  and the securities are not being
issued as part of a public  offering.  The  securities  issued to the members of
management may be deemed "restricted  securities" which may not be resold in the
United States unless registered under the Securities Act, or unless an exemption
from the  registration  requirements of the Securities Act is available for such
resale.

     Due to the fact that securities  issued  pursuant to section  1145(a)(1) of
the Bankruptcy Code are deemed, pursuant to section 1145(c), to have been issued
in a "public  offering"  within the  meaning  of the  Securities  Act,  such New
Secured  Notes and New Equity  Interests  may be resold by the  holders  thereof
without restriction unless any such holder is deemed to be an "underwriter" with
respect to such securities, as such term is defined in section 1145(b)(1) of the
Bankruptcy Code. Generally, section 1145(b)(1) of the Bankruptcy Code defines an
"underwriter,"  among other  things,  to include a person who  purchases a claim
against a debtor  with a view to  distribution  to others of any  security to be
received in exchange for such claim, or who offers to buy securities  offered or
sold under a chapter  11 plan from  holders  of such  securities  with a view to
distribution to others of such securities  under an agreement made in connection
with the plan, the consummation thereof or the offer or sale of securities under
the plan,  and also  includes  an  "issuer"  as defined by section  2(11) of the
Securities  Act.  Section 2(11) of the  Securities Act includes as "issuers" all
persons  who,  directly  or  indirectly,  through  one or  more  intermediaries,
control,  are  controlled  by, or are under common  control  with,  an issuer of
securities.

     Rule 144A  promulgated  under the Securities  Act provides a  non-exclusive
safe harbor exemption from the  registration  requirements of the Securities Act
for  resales  of the New  Secured  Notes and New  Equity  Interests  to  certain
"qualified institutional buyers" of securities which are "restricted securities"
within the meaning of the Securities Act,  irrespective of whether the seller of
such  securities  purchased his or its securities  with a view toward  reselling
such securities under the provisions of Rule 144A.

     In addition, to the extent that Rule 144A is unavailable to holders who are
deemed to be "underwriters" or  "subsidiaries,"  such holders may, under certain
circumstances,  be able to resell their securities  pursuant to the more limited
resale  provisions of Rule 144 under the  Securities  Act.  Generally,  Rule 144
provides that, if certain conditions are met (e.g., volume  limitations,  manner
of sale,  availability of current information about the issuer, etc.), specified
persons who resell  "restricted  securities" or who resell  securities which are
not restricted but who are  "affiliates" of the issuer of the securities  sought
to be  resold,  will not be deemed to be  "underwriters"  as  defined in section
2(11) of the Securities Act.

     THE  FOREGOING  SUMMARY  DISCUSSION  HAS BEEN  INCLUDED IN THIS  DISCLOSURE
STATEMENT  SOLELY  FOR  GENERAL  INFORMATIONAL  PURPOSES.  THE  DEBTOR  MAKES NO
REPRESENTATIONS  CONCERNING,  AND DOES NOT HEREBY  PROVIDE ANY OPINION OR ADVICE
WITH RESPECT TO, THE SECURITIES LAW AND BANKRUPTCY LAW MATTERS  DESCRIBED ABOVE.
EACH HOLDER OF CLAIMS AND EQUITY INTERESTS SHOULD CONSIDER CAREFULLY AND CONSULT
WITH HIS, HER OR ITS OWN LEGAL ADVISOR(S) WITH RESPECT TO SUCH (AND ANY RELATED)
MATTERS.

VIII.CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

     THE  FOLLOWING  DISCUSSION IS A SUMMARY OF CERTAIN  SIGNIFICANT,  POTENTIAL
FEDERAL INCOME TAX  CONSEQUENCES  OF THE PLAN TO THE DEBTOR,  HOLDERS OF SECURED


                                       26
<PAGE>

NOTES AND HOLDERS OF EQUITY  INTERESTS,  AND IS BASED UPON THE INTERNAL  REVENUE
CODE OF 1986, AS AMENDED (THE "TAX CODE"),  THE LAWS,  REGULATIONS,  RULINGS AND
COURT DECISIONS NOW IN EFFECT, ALL OF WHICH ARE SUBJECT TO CHANGE, POSSIBLY WITH
RETROACTIVE EFFECT.

     THE FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF SECURED NOTES AND HOLDERS
OF EQUITY INTERESTS MAY VARY BASED ON THE PARTICULAR  CIRCUMSTANCES OF EACH SUCH
HOLDER OF ALLOWED  CLAIMS.  THIS  SUMMARY  DOES NOT  ADDRESS  ASPECTS OF FEDERAL
INCOME TAXATION APPLICABLE TO HOLDERS WHICH ARE SUBJECT TO SPECIAL TREATMENT FOR
FEDERAL  INCOME  TAX  PURPOSES   INCLUDING,   BUT  NOT  LIMITED  TO,   FINANCIAL
INSTITUTIONS,  TAX EXEMPT ENTITIES, INSURANCE COMPANIES, AND FOREIGN INDIVIDUALS
AND ENTITIES.  MOREOVER,  THE FEDERAL INCOME TAX CONSEQUENCES OF CERTAIN ASPECTS
OF THE PLAN ARE UNCERTAIN DUE TO A LACK OF DEFINITIVE LEGAL AUTHORITY. NO RULING
HAS BEEN OBTAINED OR WILL BE REQUESTED  FROM THE INTERNAL  REVENUE  SERVICE (THE
"IRS") WITH RESPECT TO ANY OF THE FEDERAL INCOME TAX ASPECTS OF THE PLAN, AND NO
OPINION OF COUNSEL  HAS BEEN OR WILL BE  OBTAINED  BY THE  DEBTOR  WITH  RESPECT
THERETO.  THIS  SUMMARY  ALSO DOES NOT ADDRESS  ANY STATE,  LOCAL OR FOREIGN TAX
CONSEQUENCES OF THE PLAN.

     THIS SUMMARY  ASSUMES THAT THE PLAN  CONSTITUTES A TAX-FREE  REORGANIZATION
WITHIN  THE  MEANING  OF  SECTION   368(a)(1)(E)   OF  THE  TAX  CODE  (I.E.,  A
RECAPITALIZATION). IN ADDITION, THE SUMMARY ASSUMES THE HOLDERS OF SECURED NOTES
AND EQUITY INTERESTS HELD THEIR SECURED NOTES AND EQUITY INTERESTS,  AS THE CASE
MAY BE, AS CAPITAL  ASSETS  WITHIN THE  MEANING OF SECTION  1221 OF THE TAX CODE
(GENERALLY  PROPERTY HELD FOR INVESTMENT).  FURTHERMORE,  IT IS ASSUMED THAT THE
SECURED NOTES QUALIFY AS TRUE  INDEBTEDNESS (AND NOT AS EQUITY OR AN INTEREST IN
STOCK) FOR ALL FEDERAL INCOME TAX PURPOSES.

     EACH  HOLDER OF AN ALLOWED  CLAIM AND EQUITY  INTEREST  HOLDER IS  STRONGLY
URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR  REGARDING  THE FEDERAL,  STATE
AND LOCAL INCOME AND OTHER TAX CONSEQUENCES OF THE PLAN.

A.   TAX CONSEQUENCES TO DEBTOR.

     1. Discharge of Indebtedness Income.

     A  taxpayer  generally  must  include  in gross  income  the  amount of any
discharge  of  indebtedness  income  realized  during the taxable  year,  unless
payment of such  liability  would have given rise to a  deduction.  Discharge of
indebtedness income is realized to the extent that the amount of an indebtedness
discharged exceeds the amount of cash and the fair market value of property paid
to satisfy such indebtedness.  An exception exists to this rule, however, if the
discharge of  indebtedness  income  arises in a case under the  Bankruptcy  Code
pursuant to a confirmed  bankruptcy plan. Under this bankruptcy  exception,  the
taxpayer does not include in income the discharge of indebtedness  income,  but,
instead,  must reduce  certain tax  attributes  (including  net  operating  loss
carryovers  ("NOLs"),  capital losses and loss  carryovers,  certain tax credits
and, subject to certain limitations,  the tax basis of property).  The reduction
in tax attributes,  however, is made after the tax for the year of discharge has
been determined, and, with respect to the reduction of tax basis, upon the first
day of the taxable year following the year of the discharge.

     2. Limitations of NOLs and Other Tax Attributes of the Debtor.

     The Debtor's  federal income tax return for the taxable year ended December
31,  1998,  is expected to show NOLs for regular tax  purposes of  approximately
$1,019,970. Generally, under section 382 of the Tax Code, a corporation's annual
taxable  income for periods  after an  "ownership  change" may be offset by NOLs
attributable  to periods prior to such an "ownership  change" only to the extent
of the product of the fair market value of the  corporation's  stock immediately


                                       27
<PAGE>

before the  "ownership  change" and the long-term  tax-exempt  interest rate (as
announced  each  month by the  Treasury  Department)  for the month in which the
"ownership  change"  occurs.  For this  purpose,  "ownership  change" is defined
generally as an increase by at least fifty  percentage  points over a three-year
period  in  the  ownership   percentage  of  the  corporation's  stock  held  by
shareholders  who  own  at  least  5% of  the  corporation's  stock,  over  such
shareholders' smallest percentage ownership of such stock during such three-year
period.  Certain broad  attribution  rules apply in determining the ownership of
the  corporation's  stock.  The  provisions  of section  382 of the Tax Code are
extremely complex,  and their application is uncertain in many respects.  If the
Plan results in an "ownership change," the Debtor's ability to use its NOLs will
be subject to limitations.

     3. Alternative Minimum Tax.

     In  general,   an   alternative   minimum  tax  ("AMT")  is  imposed  on  a
corporation's  alternative  minimum  taxable  income at a 20% rate to the extent
such tax exceeds the  corporation's  regular federal income tax. For purposes of
computing  taxable  income for AMT purposes,  certain tax  deductions  and other
beneficial allowances are modified or eliminated.  In particular,  even though a
corporation  might otherwise be entitled to offset all of its taxable income for
regular tax  purposes by available  NOLs,  only 90% of a  corporation's  taxable
income for AMT purposes may be offset by available  NOLs (as  recomputed for AMT
purposes),  thus ensuring that companies may not totally eliminate all corporate
tax liability on recognized income through the use of NOLs. Accordingly,  in the
case of the Debtor,  even if NOLs are available,  any income  recognized will be
taxable at an effective rate of at least 2% (i.e., 10% of the 20% AMT tax rate).

B.   FEDERAL INCOME TAX  CONSEQUENCES TO HOLDERS OF SECURED NOTES AND HOLDERS OF
     EQUITY INTERESTS.

     THE  SUMMARY   BELOW   ASSUMES  THAT  THE  PLAN   CONSTITUTES   A  TAX-FREE
REORGANIZATION WITHIN THE MEANING OF SECTION 368(a)(1)(E) OF THE TAX CODE (I.E.,
A  RECAPITALIZATION).  EACH HOLDER IS URGED TO CONSULT  HIS,  HER OR ITS OWN TAX
ADVISOR REGARDING THE STATUS OF HIS, HER OR ITS CLAIM.

     1. Holders of Equity Interests.

     Holders of Equity  Interests  who receive New Equity  Interests in exchange
for their Equity  Interests will not recognize any gain or loss on the exchange.
A holder's tax basis in such holder's  Equity Interest will carryover to the New
Equity Interest received.  In addition,  such holder's holding period in the New
Equity  Interest  will  generally  include such holder's  holding  period in the
exchanged Equity Interest.

     2. Holders of Secured Notes.

     a. Qualification of the Secured Notes and New Secured Notes as "Securities"
for Federal Income Tax Purposes.

     The federal  income tax  consequences  to holders of Secured  Notes arising
from  the  Plan  may  vary  depending  upon,  among  other  things,  the type of
consideration  received by the Creditor in exchange for its Allowed  Claim,  and
whether the Secured Notes,  and New Secured Notes,  constitute  "securities" for
federal income tax purposes.  The term "security" is not defined in the Tax Code
or in Treasury  regulations issued thereunder,  and has not been clearly defined
by court decisions. As such, generally,  whether a debt instrument constitutes a
"security"  depends  upon an  overall  evaluation  of the  debt,  including  its
original  maturity,  the degree of participation and continuing  interest in the
business of the issuer, and the purpose of the issuance of the debt.  Generally,
corporate debt  instruments  with maturities when issued of less than five years
are not considered  "securities," and corporate debt instruments with maturities
when  issued  of ten  years  or more  are  considered  "securities."  While  the
treatment of debt instruments,  such as the Secured Notes and New Secured Notes,
with  maturities  between five and ten years is uncertain,  this summary assumes
that for federal  income tax purposes,  (i) the Secured Notes are  "securities,"
and (ii) the New Secured Notes will not be "securities."

     b. Income, Gain or Loss on Payment of Claims.

     If the  Secured  Notes are  treated as  "securities,"  the  exchange of the
Secured Notes for New Equity  Interests will be treated as a tax-free  exchange.


                                       28
<PAGE>

However,  holders of the Secured Notes will  recognize  gain (but not loss),  if
any,  equal to the fair market value of the New Secured  Notes and the amount of
cash received in the exchange. As a result, for federal income tax purposes:

     i.   A holder  of  Secured  Notes  will not  recognize  gain or loss on the
          exchange  of the  Secured  Notes  solely  for shares of the New Equity
          Interest  (other  than  with  respect  to any  shares  of  New  Equity
          Interests  which are  allocable to interest  accrued on such  holder's
          Secured  Notes  during  such   holder's   holding   period   ("Accrued
          Interest"));

     ii.  A holder of Secured Notes will recognize gain (but not loss),  if any,
          equal to the fair market value of the New Secured Notes and the amount
          of cash received pursuant to the Plan;

     iii. A holder of Secured Notes will recognize ordinary income to the extent
          any New Equity  Interests are allocable to any Accrued  Interest which
          was not previously included in such holder's taxable income; and

     iv.  A holder of Secured Notes that acquired the Secured Notes at a "market
          discount"  (i.e.,  at a price less than their  adjusted issue price at
          the time of purchase)  may be required to  recognize  income under the
          market  discount  rules (as  discussed  in "Accrued  Market  Discount"
          below).

     c. Basis in New Equity Interests and New Secured Notes.

     The aggregate tax basis of the New Equity Interests received by a holder of
Secured  Notes  pursuant to the Plan will equal the  aggregate  tax basis of the
Secured  Notes  exchanged  decreased by the fair market value of the New Secured
Notes and the  amount of cash  received,  and  increased  by the  amount of gain
recognized  by a holder of Secured  Notes  pursuant  to the Plan.  However,  the
aggregate tax basis of the New Equity Interests  received which are attributable
to Accrued Interest will be equal to the fair market value of such shares of New
Equity Interests.

     The basis of the New Secured  Notes  received by a holder of Secured  Notes
pursuant to the Plan will equal the fair market value of the New Secured Notes.

     d. Holding Period in New Equity Interests and New Secured Notes.

     The holding period of the shares of New Equity  Interests in the hands of a
holder of Secured  Notes will  include the holding  period of the Secured  Notes
exchanged  therefore,  except  that the holding  period of New Equity  Interests
attributable  to Accrued  Interest,  if any, will generally begin the date after
the date of issuance.

     The  holding  period of the New  Secured  Notes in the hands of a holder of
Secured Notes will begin the day after the date of issuance.

     e. Accrued Market Discount

     A holder who acquired a Note subsequent to its original  issuance with more
than a "de minimus"  amount of "market  discount"  will be subject to the market
discount rules of the Tax Code. Under those rules,  assuming that no election to
include  market  discount in income on a current basis has been made by a holder
of Secured  Notes  with  respect to any  market  discount  instrument,  any gain
recognized on the exchange of a Note would be  characterized  as ordinary income
to the extent of the accrued  market  discount on such Note.  Holders of Secured
Notes that may have been  acquired  with  market  discount  are urged to consult
their own tax advisors.

     f. If the Secured Notes Do Not Qualify as "Securities."

     If the Secured  Notes do not qualify as  "securities,"  then the Plan would
constitute  a  taxable  exchange  of the  Secured  Notes  for the  consideration
received (i.e.,  the Cash, New Equity  Interests and New Secured Notes),  and in
general  (i) a holder  would  recognize  gain or loss  equal  to the  difference
between the fair market value of the  consideration  received (Cash,  New Equity
Interests  and  New  Secured  Notes),   except  for  any  New  Equity  Interests


                                       29
<PAGE>

attributable to Accrued Interest and Accrued Market  Discount,  and the adjusted
tax basis of the Secured Notes,  (ii) the tax basis of the New Equity  Interests
and New Secured  Notes  would be their fair  market  value and (iii) the holding
period  of the New  Equity  Interests  and New  Secured  Notes in the hands of a
holder of Secured  Notes  would begin the day after the date of  issuance.  Such
gain or loss  generally  will be  treated  as  capital  gain or loss and will be
long-term  if the Secured  Notes are capital  assets in the hands of such holder
and have been held for more than one year. However,  any gain recognized will be
treated as  ordinary  income to the extent of any  Accrued  Interest  or Accrued
Market Discount on the Secured Notes.

C.   BACKUP WITHHOLDING  AND  INFORMATION REPORTING  FOR U.S. HOLDERS OF SECURED
     NOTES AND HOLDERS OF EQUITY INTERESTS.

     Payors of  interest,  dividends,  and  certain  other  reportable  payments
generally  are required to withhold  31% of such  payments if the payee fails to
furnish his or her  correct  taxpayer  identification  number  (social  security
number or employer  identification  number) to the payor.  Certain  shareholders
(including,  among  others,  corporations)  are  generally  exempt from  back-up
withholding and reporting requirements.  The Disbursing Agent may be required to
withhold  a portion  of any  payments  made to a holder of  Secured  Notes and a
holder of Equity  Interests  which does not provide its taxpayer  identification
number.  Accordingly,  every  holder  of  Secured  Notes  and  holder  of Equity
Interests is urged to complete and return to the  Disbursing  Agent any relevant
tax forms sent to such holder.

     Amounts paid as backup  withholding do not constitute an additional tax and
will be credited against such holder's  federal income tax liabilities,  so long
as the required information is provided to the IRS.

D.   IMPORTANCE OF OBTAINING PROFESSIONAL TAX ASSISTANCE.

     THE  FOREGOING IS INTENDED AS A SUMMARY ONLY,  AND IS NOT A SUBSTITUTE  FOR
CAREFUL TAX  PLANNING  WITH A TAX  PROFESSIONAL.  THE  FEDERAL,  STATE AND LOCAL
INCOME AND OTHER TAX  CONSEQUENCES  OF THE PLAN ARE COMPLEX  AND, IN SOME CASES,
UNCERTAIN. SUCH CONSEQUENCES MAY ALSO VARY BASED ON THE PARTICULAR CIRCUMSTANCES
OF EACH  HOLDER OF SECURED  NOTES AND HOLDER OF EQUITY  INTERESTS.  ACCORDINGLY,
EACH HOLDER OF SECURED  NOTES OR EQUITY  INTERESTS IS STRONGLY  URGED TO CONSULT
WITH HIS,  HER OR ITS OWN TAX ADVISOR  REGARDING  THE  FEDERAL,  STATE AND LOCAL
INCOME AND OTHER TAX CONSEQUENCES OF THE PLAN.

IX.  REQUIREMENTS FOR CONFIRMATION OF THE PLAN

A.   SECTION 1129(A).

     At the Confirmation  Hearing,  the Bankruptcy Court will determine  whether
the  requirements  of section  1129(a) or (b) of the  Bankruptcy  Code have been
satisfied,  and if they are deemed  satisfied the Bankruptcy Court will enter an
order  confirming the Plan.  Section  1129(a) of the  Bankruptcy  Code requires,
among  other  things,  that the Plan be proposed in good faith and that the Plan
comply with the  applicable  provisions  of chapter  11.  Section  1129(a)  also
requires that  confirmation of the Plan be not likely to be followed by the need
for further financial reorganization. The requirements are as follows:

     1. Classification of Claims and Interests.

     The  Bankruptcy  Code  requires  that a plan of  reorganization  place each
creditor's claim and each equity holder's  interest in a class with other claims
and interests  which are  "substantially  similar." The Debtor believes that the
Plan meets the classification requirements of the Bankruptcy Code.

     2. Best Interests of Creditors.

     In order to confirm  the Plan,  the  Bankruptcy  Court  must  independently
determine that the Plan is in the best interests of all Classes of Creditors and
holders of Equity  Interests  impaired by the Plan.  The "best  interests"  test
requires  that  the  Bankruptcy  Court  find  under  section  1129(a)(7)  of the
Bankruptcy  Code that the plan  provides,  with  respect to impaired  classes of


                                       30
<PAGE>

claims or equity  interests,  that each holder of an impaired  claim or impaired
equity interest either (i) has accepted the plan, or (ii) will receive or retain
under the plan cash or  property  of a value,  as of the  effective  date of the
plan,  that is not less than the value that such holder would  receive or retain
if the  debtor  were  liquidated  under  chapter  7. The  Bankruptcy  Court will
determine whether the distributions  under the Plan to holders of Allowed Claims
equal  or  exceed  the  value  that  would be  allocated  to such  holders  in a
liquidation of the Debtors under chapter 7 (the "Best Interests Test").

     To estimate what members of each impaired Class of Creditors and holders of
Equity  Interests  would receive if the Debtor were  liquidated,  the Bankruptcy
Court  must  first  determine  the  value  of the  consideration  that  would be
generated from the Debtor's assets if the Reorganization  Case were converted to
a chapter 7 case under the Bankruptcy  Code and the assets were  liquidated by a
trustee in bankruptcy (the  "Liquidation  Value").  The Liquidation  Value would
consist of the net proceeds from the disposition of the property of the Debtor.

     The Debtor believes that the most likely outcome of liquidation proceedings
would be the rule of absolute  priority of  distributions.  Under that rule,  no
junior creditor of a debtor receives any distribution until all senior creditors
have  been  paid in  full  and no  equity  interest  holder  would  receive  any
distribution until all creditors have been paid in full with interest.

     The  Debtor  believes  that  the  value  of the  recoveries  that  would be
available  to  holders  of  Allowed  Claims  if this  Reorganization  Case  were
converted to a case under chapter 7 of the Bankruptcy Code is substantially less
than  the  recoveries   available   under  chapter  11  pursuant  to  the  Plan.
Accordingly,  the value of the distributions under the Plan to Class 2 Creditors
and  Class 4 Equity  Interest  holders  will be  greater  than the  value of the
distributions  that such Creditors or Equity Interest holders would receive in a
chapter  7  liquidation  of  the  Debtor.  Annexed  hereto  as  Exhibit  4  is a
liquidation  analysis  estimating  what  Creditors  would receive in a chapter 7
liquidation of the Debtor.

     3. Feasibility of the Plan.

     The  Bankruptcy  Code  requires  that,  in order to confirm  the Plan,  the
Bankruptcy  Court  must find that  confirmation  of the Plan is not likely to be
followed by liquidation or the need for further financial  reorganization of the
Debtor,  unless such liquidation or  reorganization is proposed in the Plan (the
"Feasibility   Test").   The  Debtor  believes  and  intends  to  prove  at  the
Confirmation  Hearing that the Reorganized  Debtor will be capable of satisfying
the payments  required to the holders of the New Secured Notes and that the Exit
Financing will enhance the Reorganized  Debtor's future viability and value as a
going concern.

     4. Directors of Reorganized Debtor.

     Pursuant to the  Restructuring  Agreement,  the Board of  Directors  of the
Reorganized  Debtor  will  consist of seven  directors.  The  holders of the New
Secured Notes are entitled to nominate four  directors who will be identified at
or prior to the hearing on  confirmation  of the Plan.  In  addition,  the other
three  directors  will be Hermano  Studart Lins de  Albuquerque  (currently  the
Debtor's  Chief  Executive  Officer),  Carlos Andre Studart Lins de  Albuquerque
(currently the Debtor's Chief  Operating  Officer),  and another  director to be
designated by the Debtor's management at or prior to the hearing on confirmation
of the Plan.

     5. Management of the Reorganized Debtor.

     Hermano   Studart  Lins  de   Albuquerque   and  Carlos   Studart  Lins  de
Alburquerque,  both of whom are currently part of the Debtor's  management team,
will  be  employed  by  the  Reorganized  Debtor,  pursuant  to  the  employment
agreements attached as Exhibit D to the Restructuring Agreement.

     6. Acceptance by Impaired Classes.

     Section  1129(a) of the Bankruptcy  Code requires that each class of claims
or  interests  that is impaired  under a plan  accept that plan  (subject to the
"cramdown"  exception  described  below).  A class of Claims under the Plan will
have  accepted  the Plan if the Plan is accepted  by more than fifty  percent in
number and at least  two-thirds  in amount of the  holders of Allowed  Claims in


                                       31
<PAGE>

such class that actually vote on the Plan. A class of Equity Interests under the
Plan will have  accepted  the Plan if the Plan is  accepted by holders of Equity
Interests  that hold at least  two-thirds  in amount  of the  holders  of Equity
Interests that actually vote on the Plan.  Holders of Claims or Equity Interests
that fail to vote are not counted as either  accepting or rejecting  the Plan. A
class  that is not  "impaired"  under a plan is  conclusively  presumed  to have
accepted a plan.  Solicitation of acceptances from that class is not required. A
class which will not receive or retain any  property  or  distributions  under a
plan, is deemed to have rejected the plan. Solicitation of acceptances from that
class is not required.

B.   CRAM DOWN OF THE PLAN.

     The Bankruptcy Code contains  provisions for confirmation of a plan even if
the plan is not  accepted  by all  impaired  classes,  as long as at  least  one
impaired class of claims has accepted it. A plan may be confirmed under the cram
down provisions if, in addition to satisfying the other  requirements of section
1129 of the Bankruptcy Code, it (i) "does not  discriminate  unfairly," and (ii)
is "fair and equitable" with respect to each class of Claims or Equity Interests
that  is  impaired  under,  and  has  not  accepted,  the  plan.  As used by the
Bankruptcy  Code, the phrases  "discriminate  unfairly" and "fair and equitable"
have narrow and specific meanings unique to bankruptcy law.

     The  requirement  that a plan  not  "discriminate  unfairly"  means  that a
dissenting  class must be treated  equally with respect to other  classes  whose
legal rights are related to the legal rights of the non-accepting class and that
no class  receives  more than it is legally  entitled to receive for its claims.
The Debtor believes that the Plan does not "discriminate  unfairly" with respect
to any  class of  Claims  or  Equity  Interests  because  no  class is  afforded
treatment which is  disproportionate  to the treatment afforded other classes of
equal rank and no class receives more than it is legally entitled to.

     The "fair and  equitable"  standard,  also known as the "absolute  priority
rule," has a different  meaning for Secured Claims,  Unsecured Claims and Equity
Interests.

     Secured  Creditors.  Either (i) each impaired  secured creditor retains its
liens securing its secured claim and it receives on account of its secured claim
deferred cash payments having a present value equal to the amount of its allowed
secured claim,  (ii) each impaired  secured  creditor  realizes the  indubitable
equivalent  of its allowed  secured  claim,  or (iii) the property  securing the
claim is sold free and clear of liens, with such liens to attach to the proceeds
and the treatment of such liens on proceeds is as provided in clause (i) or (ii)
of this subparagraph.

     Unsecured  Creditors.  Either (i) each impaired unsecured creditor receives
or retains under the plan property of a value equal to the amount of its allowed
claim or (ii) the holders of claims and interests  that are junior to the claims
of the  dissenting  class  will  not  receive  any  property  under  the plan of
reorganization,  subject  to the  applicability  of  the  judicial  doctrine  of
contributing new value.

     Holders of Equity  Interests.  Either (i) each equity  interest holder will
receive or retain under the plan of reorganization  property of a value equal to
the greater of (a) the fixed liquidation preference or redemption price, if any,
of such  stock or (b) the value of the stock or (ii) the  holders  of  interests
that are junior to the stock will not  receive  any  property  under the plan of
reorganization,  subject  to the  applicability  of  the  judicial  doctrine  of
contributing new value.

     The Debtor believes that the Plan may be confirmed under section 1129(b) of
the Bankruptcy Code.

C.   RISK FACTORS.

     There are a number risk factors which could materially  impact the Debtor's
ability to confirm  the Plan or to  implement  the Plan as well as the timing of
Creditor  distributions  under the Plan.  Each Creditor  entitled to vote on the
Plan should carefully consider the risk factors enumerated or referred to below,
as well  as all of the  information  contained  in  this  Disclosure  Statement,
including the exhibits  hereto,  in determining  whether to accept or reject the
Plan.

     1. Risk of Non-Confirmation of the Plan.

     Although  the  Debtor  believes  that  the  Plan  will  satisfy  all of the
requirements necessary for confirmation by the Bankruptcy Court, there can be no


                                       32
<PAGE>

assurance that the Bankruptcy Court will reach the same conclusion. There can be
no  assurance  that   modifications  to  the  Plan  will  not  be  required  for
confirmation or that such modifications would not necessitate the resolicitation
of votes.

     2. The New Secured Notes and New Equity Interests.

     If the Bankruptcy  Court were to determine that the  Reorganized  Debtor is
not a successor or an affiliate who is participating in a plan of reorganization
with the Debtor,  the New Secured  Notes and New Equity  Interests  would not be
exempt from registration with the SEC under section 1145 of the Bankruptcy Code.
The failure of the New Secured Notes and New Equity  Interests to qualify for an
exemption from registration  under section 1145 means that, in order for (a) the
New Secured Notes and New Equity  Interests to be  distributed to the holders of
Allowed Senior Secured Claims, and (b) New Equity Interests to be distributed to
holders of Equity Interests and to be freely transferable, the New Secured Notes
and New  Equity  Interests  would  have to be  registered  with the SEC.  Such a
registration  would delay the  receipt of the New  Secured  Notes and New Equity
Interests  by holders of  Allowed  Class 2 Claims and Class 4 Equity  Interests,
respectively,  may reduce  the  amount of Cash  available  for  distribution  to
Creditors  under the Plan by the cost of such  registration,  and may  otherwise
affect the  feasibility  of the Plan.  Alternatively,  the Debtor  might seek to
modify the Plan.

     3. Liquidity.

     There  currently  is no existing  market for the New Secured  Notes and New
Equity  Interests and there can be no assurance  that an active  trading  market
will  develop or as to the  degree of price  volatility  in any such  particular
market.  Accordingly,  no  assurance  can be given that a holder of New  Secured
Notes  and New  Equity  Interests  will be able to sell such  securities  in the
future or as to the price at which such sale may occur.  If such  market were to
exist,  the  liquidity  of the market for such New Secured  Notes and New Equity
Interests  and the prices at which such  securities  will trade will depend upon
many factors.

     4. Section 1146(c) Transfer Tax Exemption.

     The Debtor  believes that all of the transfers to be effectuated  under the
Plan will be exempt from transfer taxes, and any stamp or similar tax,  pursuant
to section 1146(c) of the Bankruptcy  Code.  Section 1146(c)  provides that "the
issuance,  transfer,  or exchange of a security, or the making or delivery of an
instrument of transfer under a plan confirmed  under section 1129 of this title,
may not be taxed under any law imposing a stamp tax or similar tax."

     5. Brazilian Government Approval.

     Agencia Nacional de Telecomunicacoes  ("ANATEL"),  the Brazilian government
agency which regulates telecommunication services in Brazil, has jurisdiction to
approve  the  transfer  of control  of the  multi-channel  distribution  systems
licenses held by ITSA and the  Subsidiaries.  Since  implementing  the Plan will
result in a redistribution of the equity ownership of ITSA's parent,  the Debtor
intends  to have  ITSA  and  the  Subsidiaries  seek  ANATEL's  approval  of the
structure  contemplated by the Plan.  While the Debtor believes such approval by
ANATEL is likely to be obtained within a reasonable  time, there is no assurance
that  ANATEL  will  approve  such  redistribution  of equity or that ANATEL will
render its decision within a reasonable time.

     In addition,  the Central Bank must approve the restructuring  contemplated
by the Plan. In the process of reviewing the proposed restructuring, the Central
Bank may examine the  original  approvals  granted  when the Secured  Notes were
issued and there is a risk that the Central  Bank may impose a Central Bank Fee,
which may  include  charges or  additional  taxes with  respect to the  original
transaction  relating to the Secured Notes.  There is no assurance that approval
of the restructuring  will be given or as to whether any charges or taxes may be
imposed Moreover, charges or taxes imposed by the Central Bank may result in the
Plan not  being  feasible,  inasmuch  as the Plan  provides  that the  aggregate
principal  amount of the New Secured  Notes will be increased by an amount equal
to the amount of the Central Bank Fee.

D.   ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN.

     The  Debtor  believes  that  the  reorganization  contemplated  by the Plan
provides the highest and most expeditious recovery to holders of Allowed Claims.


                                       33
<PAGE>

However,  if the Plan is not confirmed by the Bankruptcy  Court and consummated,
the alternatives to the Plan include an alternative plan of  reorganization  and
the liquidation of the Debtor under chapter 7 of the Bankruptcy Code.

     The Debtor believes that the Plan provides all Classes of Claims and Equity
Interests with the potential for the greatest realization on the Debtor's assets
and,  therefore,  is in the best  interests  of  Creditors  and Equity  Interest
holders.  If the Plan is not confirmed,  however,  the Reorganization Case could
continue,   alternative  plans  of  reorganization   could  be  proposed  and/or
confirmed,  the  Debtor's  estate  could be  liquidated  under  chapter 7 of the
Bankruptcy  Code or the  Reorganization  Case  could  be  dismissed.  All of the
alternatives  discussed  herein  may be  further  limited  by the  terms  of the
Restructuring Agreement.

     1. Continuation of the Reorganization Case.

     If the  Debtor  remains in chapter  11, it may be able to  continue  for an
unspecified period of time to operate its business as debtor in possession,  but
it would remain subject to the  restrictions  imposed by the Bankruptcy Code and
to the operating and financial constraints associated with bankruptcy cases, and
would incur continuing significant  Administrative Expenses associated with such
case.

     2. Alternative Plans of Reorganization.

     If the Plan is not  confirmed,  the Debtor or any other  party in  interest
could attempt to formulate,  propose and solicit acceptances to a different plan
or plans of  reorganization.  Such  plans  might  involve a  reorganization  and
continuation of the Debtor's  businesses or a liquidation of its assets.  If the
Plan is not confirmed and one or more alternative  plans of  reorganization  for
the Debtor are  proposed,  there exists a  substantial  risk that  recoveries to
holders of Allowed Claims will be significantly delayed. Such delays will reduce
the  value  of  recoveries  to  Creditors   when  compared  to  the   recoveries
contemplated by the Plan.

     3. Liquidation Under Chapter 7.

     If the Plan is not confirmed,  it is possible that the Reorganization  Case
may be converted to a case under chapter 7, pursuant to which a trustee would be
elected or appointed to liquidate the assets of the Debtor for  distribution  to
Creditors in accordance  with the priorities  established  and recognized by the
Bankruptcy  Code.  The Debtor  believes that  liquidation  under chapter 7 would
result in substantially  smaller  distributions being made to holders of Allowed
Claims than those  provided  for in the Plan because of the  increased  fees and
expenses  associated  with a liquidation  under chapter 7. Moreover,  the Debtor
believes that holders of Equity  Interests  would receive no  distribution  in a
chapter 7 liquidation and their Equity Interests would be extinguished.



                                       34
<PAGE>

X.   CONCLUSION

     The  Debtor  believes  that,  as  compared  to  any  alternative   plan  of
reorganization or liquidation,  the Plan has the greatest chance to be confirmed
and consummated and provides the greatest and most expeditious return to holders
of Claims and Equity Interests.

     The Debtor  believes that the Plan is in the best  interests of all holders
of Claims and Equity  Interests  and urges all such  holders who are entitled to
vote on the Plan to vote to accept the Plan.

Dated:  February 29, 2000
                                   Respectfully submitted,

                                   TV FILME, INC.

                                   By: s/ Hermano Albuquerque
                                       ----------------------
                                       Name: Hermano Albuquerque
                                       Title:  President and CEO

<PAGE>

                                    EXHIBIT 1

                             PLAN OF REORGANIZATION





<PAGE>


                                    EXHIBIT 2

                                    FORM 10K



<PAGE>


                                    EXHIBIT 3

                                    FORM 10Q



<PAGE>


                                    EXHIBIT 4

                              LIQUIDATION ANALYSIS