/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/010919.mbx T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, September 19, 2001, Vol. 5, No. 183 Headlines 360NETWORKS: Rex Moore Seeks to Enforce Mechanic's Liens AMES DEPARTMENT: Utility Firms Enjoined from Altering Service CARBIDE/GRAPHITE: Bank Group Extends Covenant Waiver to Sept. 21 COMDISCO: GECC Wants Healthcare to Halt Use of Cash Collateral CONTINENTAL AIRLINES: Capacity Cut Ends Service to 10 Cities CORAM HEALTHCARE: Court Extends Lease Decision Period to Jan. 1 COVAD COMMS: UST Seeks Disclosure of Wages & Benefits Amounts COVAD COMMS: Mark A. Richman Named Chief Financial Officer DC DIAGNOSTICARE: Expects to Receive $9-Million Capital Funding DERBY CYCLE: US Trustee Appoints Unsecured Creditors Committee FAMILY GOLF: Court Extends Lease Decision Period to October 31 FINOVA GROUP: The Mall at IV Demands Payment on Admin. Claim FINOVA GROUP: Berkshire Hathaway Invokes Act of War Clause FRUIT OF THE LOOM: Asks to File Fogel Fee Application Under Seal GENESIS HEALTH: Multicare Moves to Abandon VA Pleasant Facility GLENAYRE TECHNOLOGIES: Proposes to Implement Reverse Stock Split GOLDEN BOOKS: Sells Assets to Classic Media & Random House HMG WORLDWIDE: Fails to Comply with Nasdaq Bid Price Requirement HEALTH RISK: Taps Harpeth to Explore Options under Chapter 11 ICG COMMS: Secures 2nd Extension of Exclusive Period to Dec. 10 IMMUCOR INC: Secures Covenant Default Waiver from Senior Lender INTEGRATED HEALTH: Westhaven Seeks Payment on Washoe Lease Claim ITI EDUCATION: Sells Assets to Education Management for $3.2M JAM JOE: Wants Deadline to File Schedules Extended to Sept. 26 KOMAG: Expects Stock Trading in OTCBB After Appeal Withdrawal L.L. KNICKERBOCKER: Court Approves Substantial Sale of Assets LAIDLAW INC: Gets Okay to Set-Up Interim Compensation Procedures LERNOUT & HAUSPIE: Plan's Classification & Treatment of Claims MCMS INC: Files for Chapter 11 Protection in Delaware MCMS INC: Case Summary & 20 Largest Unsecured Creditors MCMS INC: Strikes Deal to Sell Key Assets to MSL for $43.5MM MARINER POST-ACUTE: Court Approves MHG's Disclosure Statement MAXICARE HEALTH: CaliforniaChoice Acts to Protect Members MESA AIR: Slashes Senior Executive Pay and Reduces Operations NATIONAL AIRLINES: Waives Customer Advance Purchase Requirements OWENS CORNING: Making Secret Pension Plan Contributions OWENS CORNING: Net Income Tops $29 Million in Second Quarter PACIFIC GAS: Assumes Amended PPA with QF United Cogen PAYSTAR COMMS: Plan to Make $3.5MM Debt Reduction Underway RELIANCE GROUP: Bank & Creditors Panel Jointly Employ PwC STERLING CHEMICALS: Gets Final Approval of $195MM DIP Financing SUN HEALTHCARE: Moves to Reject Two New Mexico Office Leases US AIRWAYS: Plans to Reduce Capacity by 23%, Workforce by 11,000 U.S. MINERAL: US Trustee Appoints Unsecured Creditors Committee WHEELING-PITTSBURGH: Court Approves Stipulation for IRBs WINSTAR COMMS: Engages Impala Partners as Restructuring Advisor ZANY BRAINY: Hilco Capital LP Completes $115 Million Funding * Meetings, Conferences and Seminars ********* 360NETWORKS: Rex Moore Seeks to Enforce Mechanic's Liens -------------------------------------------------------- Rex Moore Electrical Contractors & Engineers is a licensed contractor under the laws of the State of California. Rex performed work for Howard S. Wright Construction Co., Big D Construction Company and Mortenson, all general contractors under construction contracts with 360networks inc. Jerry M. Kuperstein, Esq., notes that Rex Moore has a lien on the Debtors' properties upon which Rex Moore bestowed labor and furnished materials. And Rex Moore has claimed these liens, which have been noticed by the recording of its mechanic's liens pursuant to the Civil Code of California. According to Mr. Kuperstein, the Debtors have nor may have interest in these real properties subject to Rex Moore's mechanics' liens: (1) 900 Rock Avenue, San Jose, California 95131 - commonly known as the 360networks, San Jose POP; (2) 314 California Avenue, Bakersfield, California 93304, - commonly known as the 360networks, Bakersfield POP; (3) 7620 N. Del Mar, Fresno, California 93711 - commonly known as the 360networks, Fresno POP; (4) 800 N. 10th Street, Sacramento, California 95814 - commonly known as the 360networks, Sacramento POP. Mr. Kuperstein explains that a California Mechanic's Lien claimant is required to continue or maintain the perfection of its mechanics' lien by commencing a foreclosure action upon such lien within 90 days from recording of the lien. However, Mr. Kuperstein notes, 11 U.S.C section 362(a) stays the continuance or maintenance of perfection with regard to any interest of Debtor in the works of improvement. Under these circumstances, Mr. Kuperstein reminds Judge Gropper that 11 U.S.C. section 546(b) requires the perfection must be continued or maintained by giving notice, which notice must expressly indicate an intent to enforce such interest. Thus, Rex Moore gives this notice to serve as Notice of Intent to Enforce its Liens against the Debtors' interest in the works of improvement. (360 Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) AMES DEPARTMENT: Utility Firms Enjoined from Altering Service ------------------------------------------------------------- In connection with the operation of their businesses, Ames Department Stores, Inc. obtain Utility Services, from approximately 620 different utility companies. The Debtors estimate their cost for Utility Services during the next 30 days will be approximately $4,500,000. The Debtors' businesses require that Utility Services continue uninterrupted. Any interruption in Utility Services will cause irreparable harm to the Debtors' ability to conduct their business in an orderly and efficient manner. By its motion, the Debtors request that the Court enter an order: (1) prohibiting the Utility Companies from altering, refusing, or discontinuing Utility Services on account of pre-petition invoices; (2) until further order of this Court or an agreement between any Utility Company and the Debtors, deeming the Utility Companies to be adequately assured of future performance by their entitlement to an administrative expense claim; (3) providing that, within 5 business days from the date the Court grants the requested relief, a copy of the Order granting the relief requested herein shall be served on the Utility Companies; (4) providing that if a Utility Company requests additional adequate assurance which the Debtors believe to be unreasonable, the Debtors shall file a Motion for Determination of Adequate Assurance of Payment and set such motion for hearing at the Court's discretion; (5) providing that any Utility Company that does not timely request additional adequate assurance shall be deemed to have received adequate assurance; (5) providing that, in the event a Determination Motion is filed or a Determination Hearing is scheduled, any objecting Utility Company shall be deemed to have received adequate assurance without the need for payment of additional deposits or other securities until an order of the Court is entered in connection with such Determination Motion or Hearing. David S. Lissy, Esq., Ames' Senior Vice President and General Counsel, proposes to provide adequate assurance of payment, in the form of payment as an administrative expense for Utility Services rendered to the Debtors by the Utility Companies following the Commencement Date. The Debtors also propose that the method of providing adequate assurance be without prejudice to the rights of any Utility Company to move this Court for additional assurance for itself within 30 days from the date of the entry of the Order approving this Motion, and that the burden of proof shall remain unaffected by the Court's approval of the methods proposed herein. Mr. Lissy adds that by proving a material adverse change to Ames after the 30-day period that would justify additional assurances, a Utility Company may obtain such relief on request made after the 30-day period. The Debtors represent that they will continue to pay, in the ordinary course of business, all post-petition bills for Utility Services, as billed and when due. To the best of the Debtors' knowledge, there are few defaults or arrearages of any significance with respect to the Debtors' undisputed Utility Services invoices, other than: (i) certain payment interruptions to telephone service providers in the several months leading up to the Commencement Date and (ii) payment interruptions that may be caused by the commencement of these chapter 11 cases. The Debtors submit that adequate assurance of payment to the Utility Companies is manifestly evident in these cases, given the proposed debtor in possession financing facility, which will provide the Debtors with more than sufficient availability of funds to pay all post-petition charges and other administrative expenses. In short, Mr. Lissy explains, the proposed method of furnishing adequate assurance of payment for post-petition Utility Services is not prejudicial to the rights of any Utility Company, and is in the best interest of the Debtors' estates and creditors. (AMES Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) CARBIDE/GRAPHITE: Bank Group Extends Covenant Waiver to Sept. 21 ---------------------------------------------------------------- The Carbide/Graphite Group, Inc. (Nasdaq: CGGI) reported that the bank group under its $135 million revolving credit facility has extended the expiration date of a previously-issued waiver related to the Company's non-compliance with certain financial covenants during its fiscal year ended July 31, 2000. Such waiver has been extended until September 21, 2001. The Company continues to negotiate with affiliates of Questor Management Company and the Bank Group to reach agreement on an alternate transaction whereby Questor would invest $65 million and the Bank Group would restructure their loans. The Carbide/Graphite Group, Inc. is a leading manufacturer of industrial graphite and calcium carbide products with manufacturing facilities in St. Marys, Pennsylvania; Niagara Falls, New York; Louisville and Calvert City, Kentucky; and Seadrift, Texas. COMDISCO: GECC Wants Healthcare to Halt Use of Cash Collateral -------------------------------------------------------------- General Electric Capital Corporation is a secured lender to Comdisco Healthcare Group, Inc., with a security interest in certain Master Leases, Lease Schedules, Equipment and the rental and other payments due and in the proceeds thereof. Alexander Terras, Esq., at Quarles & Brady, in Chicago, Illinois, relates Comdisco Healthcare entered into a Master Loan and Security Agreement with GECC last February 20, 2001. Under the agreement, Mr. Terras explains, Comdisco Healthcare assigned to GECC a security interest in certain Master Equipment Leases, Equipment, Equipment Lease Schedules, and all rent and other payments due thereunder, and the proceeds thereof. >From time to time, Mr. Terras says, Comdisco Healthcare would enter into a Security Supplement for each of the lease transactions. Under these Security Supplements, Mr. Terras says, Comdisco Healthcare granted GECC a security interest in the Master Lease, Lease Schedule, Equipment and in all rental payments and other charges due or to become due under the Lease. According to Mr. Terras, GECC perfected the security interests granted under the Master Loan and Security Agreement and the Security Supplements by filing the UCC-1 Financing Statements with the Secretary of State of the State of Illinois. As a result, Mr. Terras notes, GECC now has a perfected, non- avoidable security interest in the Master Leases, the Lease Schedules, in the items of Equipment, which are the subject of the Lease Schedules, and in all of the rental payments and other charges due or to become due under the Equipment Lease Schedules. Each equipment lease schedules provides for the payment of periodic rental payments from the lessees to Comdisco Healthcare, Mr. Terras explains. Under section 363(a) of the Bankruptcy Code, Mr. Terras claims, the payments due under each of the master leases and equipment lease schedules constitute the cash collateral of GECC. But GECC does not want the Debtors to use its cash collateral. GECC contends that since Comdisco Healthcare has not obtained Court approval, the Debtors they should be prohibited from using GECC's cash collateral. GECC asks the Court for an order (a) directing Comdisco Healthcare to segregate and separately account for any and all proceeds of the Equipment Lease Schedules, whether received pre- petition or post-petition; (b) ordering Comdisco Healthcare not to use GECC's cash collateral, absent adequate protection of GECC's interest in the GECC cash collateral; and (c) ordering monthly adequate protection payments to GECC in the same amounts as are being paid to the Debtor under the Equipment Lease Schedules. (Comdisco Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) CONTINENTAL AIRLINES: Capacity Cut Ends Service to 10 Cities ------------------------------------------------------------ Continental Airlines (NYSE: CAL) announced preliminary details of its previously announced long-term schedule reduction, which is being taken as a direct result of the current and anticipated drop in demand for air travel. Overall Continental and Continental Express are reducing capacity by 20 percent on a system-wide available seat mile basis. "These painful steps are necessary for the long-term survival of Continental," said Chairman and CEO Gordon Bethune. "Although these schedule reductions will hurt communities and those who have come to rely on us, we have no choice." The 18 percent reduction in flights results in a 20 percent reduction in available seat mile capacity. Continental also announced that it will be temporarily suspending service between Cleveland and London/Gatwick. Nonstop service from NY/Newark to Rio de Janeiro is being suspended, although service to Rio de Janeiro will continue to be offered via Sao Paulo. The changes will take effect on various dates between now and October 1. Continental will not implement service to Montego Bay and Kingston, Jamaica, which was planned to take effect at the end of this year. Most of the total capacity reduction is generated by modifying flight frequencies (for example, reducing flying from five times per day to four times per day on a particular route) on dozens of additional routes that will be specified at a later date. Included in the planned changes is the suspension of all DC-10 flying effective Oct. 1. Also subject to temporary grounding are approximately 31 Continental standard-body aircraft and 14 Continental Express turboprops. In a Reuters report, Continental Chief Executive Gordon Bethune was quoted as saying that the carrier could possibly file for bankruptcy protection by late October, should the U.S. Congress fail to extend aid to the entire American airline industry. CORAM HEALTHCARE: Court Extends Lease Decision Period to Jan. 1 --------------------------------------------------------------- Judge Mary Walrath extends the period within which Coram Healthcare Corporation must decide whether to assume or reject unexpired leases of non-residential property up to January 1, 2002. Coram convinced the Court the company would not be in a position to evaluate their leases until the plan process has been completed. Judge Walrath agrees with Coram that the extension of the lease decision period will facilitate the confirmation of the company's plan of reorganization and minimize administrative expenses. Coram is confident that their landlords and sub-tenants will not be prejudiced by the extension. COVAD COMMS: UST Seeks Disclosure of Wages & Benefits Amounts ------------------------------------------------------------- Patricia A. Staiano, the United States Trustee, Objects to Certain Provision of Order Authorizing, but not Requiring, Payment of Certain Covad Communications Group, Inc. Pre-Petition Wages, Salaries, and Other Compensation, Employee Medical and Similar Benefits, Reimbursable Employee Expenses, and Workers' Compensation Benefits. Joseph J. McMahon, Jr., Esq., attorney for the US Trustee, tells the Court that to date, the Debtor has made no disclosure regarding: A. the identity of the employees to whom the bonus amounts are being paid; B. the bonus amount due each employee; and C. the terms of the Debtor's agreement to pay bonuses to the employees. Absent disclosure of this information, Mr. McMahon claims it is difficult to evaluate the reasonableness and propriety of the relief sought. Furthermore, Mr. McMahon contends that it is clear that the amounts, in combination with other relief sought in the Motion, will vastly exceed the priority claim cap established in the Bankruptcy Code. (Covad Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) COVAD COMMS: Mark A. Richman Named Chief Financial Officer ---------------------------------------------------------- Covad Communications (OTCBB:COVD), the leading national broadband services provider utilizing DSL (Digital Subscriber Line) technology, announced that Mark A. Richman joins the company today as chief financial officer. Richman brings over 18 years of financial management experience to Covad. He joins the company from MainStreet Networks where he was vice president and CFO, and built the finance, accounting and IT functions into departments. Prior to MainStreet, Richman held senior management positions at Adecco S.A. where he was vice president of finance and administration for Adecco U.S., a $3 billion operating division. He was also vice president and corporate treasurer at the parent company where he raised over $3 billion in funding through various debt and equity transactions. He also worked for Merisel, Inc., a global computer hardware and software distributor, and was primarily based in London as European finance director. Prior to Merisel, Richman had held various banking positions with ING Capital, Manufacturers Hanover Trust Company and Wells Fargo Bank. Richman holds a bachelor of science degree in managerial economics from the University of California at Davis and a master of business administration degree from the Anderson School at UCLA. Richman will be responsible for all aspects of Covad's finance organization, including strategic and financial planning and analysis, financing, investor relations, accounting and treasury. "Mark brings proven experience and leadership in a broad range of financial operations and in the development and management of strong operating controls and processes," said Charles E. Hoffman, Covad president and chief executive officer. "He also brings in-depth experience in areas imperative to Covad, such as financing activities and bond transactions." Covad is the leading national broadband service provider of high-speed Internet and network access utilizing Digital Subscriber Line (DSL) technology. It offers DSL, IP and dial-up services through Internet Service Providers, telecommunications carriers, enterprises, affinity groups, PC OEMs and ASPs to small and medium-sized businesses and home users. Covad services are currently available across the United States in 94 of the top Metropolitan Statistical Areas. Covad's network currently covers more than 40 million homes and business and reaches approximately 40 to 45 percent of all US homes and businesses. Corporate headquarters is located at 4250 Burton Drive, Santa Clara, CA 95054. Telephone: 888/GO-COVAD. Web Site: http://www.covad.com DC DIAGNOSTICARE: Expects to Receive $9-Million Capital Funding --------------------------------------------------------------- DC DiagnostiCare Inc. (TSE: DCE) announced that it expects to receive approximately $9 million in grants to replace diagnostic imaging equipment within its Ontario clinics. This announcement follows an announcement earlier by the Ontario Health and Long- Term Care Minister Tony Clement. The precise terms of the funding arrangements are expected to be announced imminently. However, the funds will be restricted for use in Ontario where DiagnostiCare operates 113 clinics and will be made available to reimburse the Company for qualifying expenditures. DiagnostiCare will use the funds to replace existing diagnostic imaging equipment in those clinics with more modern equipment, which will provide enhanced image quality and improved productivity. "Following the recent approval of a restructured credit facility, DiagnostiCare had announced its intention to invest in revitalizing clinic infrastructure as part of its overall restructuring plan. The grants announced [Monday] allow DiagnostiCare to significantly accelerate its revitalizing efforts in Ontario where a substantial portion of the Company's operations are centered," said Brock Armstrong, President and CEO. "For our patients and referring physicians, the investment in new equipment will translate into improved and more timely results," he added. Based in Edmonton, DC DiagnostiCare Inc. provides a comprehensive suite of medical imaging services through a network of over 140 diagnostic imaging centers across Canada. DERBY CYCLE: US Trustee Appoints Unsecured Creditors Committee -------------------------------------------------------------- The United States Trustee appoints these members to the Committee of Unsecured Creditors in connection with the bankruptcy cases of Derby Cycle Corporation: A. Romano I. Peluso, The Bank of New York 101 Barclay St., 21W, New York, New York 10286 Phone: (212) 815-3251 Fax: (212) 815-3466 B. Robert M. Paine, Putnam Investments One Post Office Square, Boston, Massachusetts 02109 Phone: (617) 292-1000 Fax: (617) 760-8639 C. Joseph M. Deignan, CFSC Wayland Advisors, Inc. 12700 Whitewater Drive, Minnetomka, Minnesota 55343 Phone: (952) 984-3709 Fax: (952) 984-3913 FAMILY GOLF: Court Extends Lease Decision Period to October 31 -------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York granted Family Golf Centers, Inc.'s motion to extend its deadline to decide whether to assume, assume and assign, or reject its office lease to October 31, 2001. The Court agreed that the size and complexity of the Company's chapter 11 cases justifies the extension, without which the Company would have to vacate their offices without securing a new office space. FINOVA GROUP: The Mall at IV Demands Payment on Admin. Claim ------------------------------------------------------------ The Mall at IV Group Properties, LLC, is the ground lessee of a retail center located on Route 4 in Paramus, New Jersey. L. Jason Cornell, Esq., at Agostini, Levistky, Isaacs & Kulesza, in Wilmington, Delaware, relates that The Mall at IV entered into a Loan Agreement with Finova Realty Capital last year. Under the Loan Agreement, Finova Realty agreed to make a loan to The Mall at IV in the original principal amount of $10,527,000. To evidence the Loan, Mr. Cornell says, The Mall at IV executed a promissory Note in the amount of $10,527,000 in Finova Realty's favor. According to Mr. Cornell, the Note delineates the terms and conditions of repayment of the Loan and other obligations agreed to by the parties. To secure repayment of the Note, Mr. Cornell explains, the Mall at IV executed a Leasehold Mortgage in Finova Realty's favor. It is undisputed, Mr. Cornell emphasizes, that The Mall at IV had been and remained current on all of its obligations to Finova Realty under the Loan Documents. According to Mr. Cornell, the Loan Agreement provides that -- if neither an event of default nor an incipient default exists and the cash flow from the Property is insufficient to make the interest payments due under the Note, then Finova Realty shall disburse funds to The Mall at IV from an Interest Reserve Fund for monthly interest billings on the Loan until the Interest Reserve Fund has been exhausted. Upon exhaustion of the Interest Reserve Fund, Mr. Cornell tells Judge Walsh that The Mall at IV was required to pay Finova Realty the monthly installments of interest due under the Note. Last April, Mr. Cornell relates that The Mall at IV wrote Finova Realty requesting a draw from the Interest Reserve Account in the amount of $514,130. However, Mr. Cornell notes, Finova Realty failed and refused to honor The Mall at IV's disbursement request, thereby breaching the Loan Agreement. The original Maturity Date of the Note was July 1, 2001, with an option to extend for 2 additional 6-month periods. The Mall at IV wrote Finova Realty that it wants to exercise its right to extend the Maturity Date of the Note to Jan. 1, 2002. According to Mr. Cornell, Mr. Patrick Brown of Finova Realty assured The Mall at IV that the Maturity Date would be extended in accordance with the request. But just 3 business days before the Maturity date, Mr. Cornell relates, Mr. Brown orally advised The Mall at IV that certain financial conditions required for the extension may not have been satisfied, and that The Mall at IV should take such action as it deemed appropriate under the circumstances. During subsequent discussions with Finova Realty's representatives, Mr. Cornell notes that it became obvious that Finova Realty had no intention of living up to its obligations under the Loan Documents. So, Mr. Cornell says, The Mall at IV issued notices of default to Finova Realty. As a result of Finova Realty's bad faith refusal to extend the Maturity Date, Mr. Cornell relates that The Mall at IV was forced to scramble to locate new financing. Luckily, Mr. Cornell says, The Mall at IV successfully obtained a replacement loan. But despite this development, Mr. Cornell tells Judge Walsh that The Mall at IV already incurred extensive damages -- in the amount of $774,473.13 -- as a result of Finova Realty's breach of the Loan Documents. Since the Court earlier preserved their administrative claim against the Debtors, The Mall at IV now asks Judge Walsh to grant their request for allowance and payment of an administrative expense claim in the amount of $774,473.13. (Finova Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900) FINOVA GROUP: Berkshire Hathaway Invokes Act of War Clause ---------------------------------------------------------- Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) announced that it has terminated its offer to purchase for cash up to $500,000,000 aggregate principal amount of the 7.5% Senior Secured Notes Maturing 2009 with Contingent Interest Due 2016 of The FINOVA Group Inc. Berkshire terminated its offer for the Notes pursuant to the conditions of the offer which, among other things, provided that Berkshire shall not be required to accept for payment or pay for any tendered Notes and may terminate the offer if on or prior to the expiration date (September 26, 2001) there shall have occurred (i) any general suspension of trading in securities on any national securities exchange or in the over- the-counter market or (ii) a commencement of a war or armed hostilities or other national or international calamity directly or indirectly involving the United States. Any Notes that have been tendered will be redelivered to the tendering party. Berkshire Hathaway is a holding company owning subsidiaries engaged in a number of diverse business activities. The most important of these is the property and casualty insurance business conducted on both a direct and reinsurance basis through a number of subsidiaries. FRUIT OF THE LOOM: Asks to File Fogel Fee Application Under Seal ---------------------------------------------------------------- In accordance with section 107(b)(1) of the Bankruptcy Code and Bankruptcy Rule 9018, Fruit of the Loom, Ltd. and the law firm Fogel, Feldman, Ostrov, Ringler & Klevens, asks Judge Walsh for permission to file their first and final Application For Allowance Of Compensation For Services Rendered And Reimbursement Of Expenses under seal so that the information contained therein may be disclosed only to the Court and the parties described below, as applicable. Larry R. Feldman, Esq., Robert M. Turner Esq., of FFORK and Luc A. Despins, Esq., of Milbank Tweed, tell Judge Walsh that subject to existing confidentiality agreements, if requested, the Movants will make the FFORK Fee Application available to the Creditors' Committee, Fruit of the Loom's pre-petition secured bank group, the informal committee of secured noteholders, and, if requested, to the U.S. Trustee. The FFORK Fee Application seeks the entry of an order allowing FFORK compensation and reimbursement of expenses in connection with FFORK's representation of FOTL in prosecuting and negotiating a settlement of certain claims arising from professional services rendered to FOTL in connection with a litigation, captioned LMP Corporation, et al. v. Universal Manufacturing Corp., Alamada County, Case No. 590001-7. The Movants submit that such relief is warranted due to the sensitive nature of the contents of the FFORK Fee Application, which details the terms of the proposed settlement with certain parties relating to the LMP Litigation. A copy of the FFORK Fee Application has been provided to the Court for its review, in an envelope marked "Confidential Exhibit - Document To Be Kept Under Seal". It must be noted that the LMP Litigation has been settled and is no longer pending. Because FFORK's proposed compensation is based on a contingency fee arrangement, the FFORK Fee Application details the proposed settlement between FOTL and a law firm, which agreement by its terms is to be held in confidence by the parties. Thus, the Movants file this motion to preserve the confidence of the settlement agreement as negotiated by and between the parties. FOTL submits that the disclosure of such information would be prejudicial to Fruit of the Loom and the settling law firm since it contains certain confidential trade and commercial information. See Orion Pictures Corp. v. Video Software Dealers Assoc., 21 F.3d 24 (2d Cir. 1994)("When Congress addressed the secrecy problem in Sec. 107(b) of the Bankruptcy Code it imposed no requirement to show 'good cause' as a condition to sealing confidential commercial information."). This Court has previously established confidentiality procedures when the terms of a proposed transaction were confidential except to limited identified parties. See, e.g., In re: Foxmeyer Corporation, et al., Case Nos. 96-1329 through 96-1334, McCullough, J., Order,(Bankr.D.Del.) (July 10, 1998) (order allowing Trustee to file motions for approval of settlement of recovery actions under seal). (Fruit of the Loom Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 609/392-0900) GENESIS HEALTH: Multicare Moves to Abandon VA Pleasant Facility --------------------------------------------------------------- The Multicare Companies, Inc. seeks the Court's authority for Point Pleasant Haven Limited Partnership, one of the Debtors, to abandon a 68-bed skilled nursing care facility in Mason County, West Virginia, because the Debtors believe that the value of the Facility is substantially less than the secured debt, in principal amount of approximately $1.5 million, that encumbers it. The Facility, owned and operated by Point Pleasant, is encumbered by a certain Deed of Trust and Security Agreement (the OVB Deed of Trust) among Point Pleasant, as grantor, Stephen P. Goodwin and Richard D. Owen, collectively, as grantee, and One Valley Bank, N.A. (OVB), as indenture trustee. The Bank of New York, N.A., as successor indenture trustee, has succeeded to OVB's rights under the OVB Deed of Trust. The OVB Deed of Trust was granted in connection with the issuance of $2,055,000 aggregate principal amount of Mason County West Virginia First Mortgage Revenue Bonds (Point Pleasant Haven Limited Partnership Project) Series 1995. The Bonds were issued pursuant to an indenture dated as of December 1, 1985. The proceeds of the bonds were loaned to Point Pleasant, which simultaneously executed a loan agreement in the same amount, which was immediately assigned to the Indenture Trustee. Pursuant to the terms of a Promissory Note, dated as of December 1, 1995, between the Issuer, as Lender, and the Debtor, as Borrower, the Debtor is obligated to make monthly payments of principal and interest to the Indenture Trustee. The Note is secured by a letter of credit issued for the benefit of the Indenture Trustee by Huntington National Bank, as successor to Huntington National Bank West Virginia. Point Pleasant's obligation to reimburse Huntington for amounts drawn under the Letter of Credit is secured by a Credit Line Deed of Trust, which is subordinate to the OVB Deed of Trust. The Debtors believe that the Indenture Trustee's security interest in the Facility is valid and not subject to avoidance. As of the Petition Date, there was approximately $1.5 million in principal amount outstanding under the Loan Agreement. Since the Petition Date, the Debtors have made no payments of either principal or interest to the Indenture Trustee on account thereof. The Facility is not profitable and, in fact, has been generating net losses before debt service (which has not been made) of approximately $21,500/mo. in the six-month period ended March 31, 2001. The Debtors believe that the long-term prospects for the Facility are very poor, and that it is unlikely the Facility can be restored to profitability given current market and regulatory conditions. For these reasons, and based upon their understanding of the current market for properties such as the Facility, the Debtors are confident that the value of the Facility is substantially less than the secured debt that encumbers it, and the abandonment of the Facility is therefore in the best interests of their respective estates. Accordingly, pursuant to section 554 of the Bankruptcy Code, the Debtors seek an order of this Court authorizing Point Pleasant to abandon the Facility at the earliest possible date, subject only to applicable federal and state law requirements governing closure of the Facility. The Debtors assure the Court that they recognize their obligations to Facility residents under applicable law, and intend to comply with all applicable federal and state laws and regulations in connection with the abandonment of the Facility and only once the Facility has been closed pursuant to applicable law will they abandon the Facility. (Genesis/Multicare Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLENAYRE TECHNOLOGIES: Proposes to Implement Reverse Stock Split ---------------------------------------------------------------- Glenayre Technologies Inc. (NASDAQ: GEMS), a leading provider of enhanced services and unified communications systems for service providers worldwide, announced that its Board of Directors has approved a reverse stock split with alternate ratios of one-for- three, one-for-five, one-for-eight and one-for-ten. The reverse stock split is subject to approval by the company's stockholders. Stockholder approval of the alternate ratios is being sought to give the Board of Directors the flexibility to deal with market conditions at the time the reverse stock split is actually implemented. The proposed reverse stock split will be submitted to Glenayre's stockholders for their consideration at a special meeting called for November 14, 2001. Glenayre will file a preliminary proxy statement with the Securities and Exchange Commission in the near future. Glenayre is pursuing a reverse stock split in order to meet the minimum $1.00 bid price requirement for continued trading on the NASDAQ National Market. The company reported that although NASDAQ has not yet notified the company that its common stock may be subject to delisting, it is taking actions now to ensure compliance with NASDAQ's continued listing requirements. The company currently meets all of the other NASDAQ National Market trading requirements. "Although our stock price has been negatively impacted by the continuing volatility of the telecommunications sector, Glenayre is well positioned to fund both its continuing operations and the exit of the paging business," stated Eric Doggett, president and CEO of Glenayre. "At the end of the second quarter we reported that we had $63 million in cash and no debt. We currently project that we will end the third quarter of this year with over $80 million in cash, following disbursements of $18 million of approximately $58 million of cash costs associated with the previously announced restructuring and business exit. Of the remaining $40 million, we anticipate disbursements of approximately $14 million in the fourth quarter of this year, $21 million during 2002, and $5 million in 2003 and beyond. "We are continuing the program we embarked upon in late 1999 with the sale of our Charlotte headquarters facility to divest our remaining real estate holdings. This program could generate as much as $30 million in additional cash over the next year. Continuing operations should use approximately $3 million in cash in the fourth quarter of this year and become cash flow positive by the second quarter of 2002. Overall we remain comfortable with analysts' consensus earnings estimates for the second half of 2001, although the tragic events of last week may impact the timing of certain sales." Doggett continued, "Over the course of the last eight months Glenayre and its Board of Directors have taken a series of aggressive actions to position the company for future growth in our core enhanced services and unified communications business. We have exited paging, a mature market. We are concentrating our resources on the enhanced services and unified communications market where we have a history of innovation and significant market position coupled with excellent growth prospects. Should the current economic conditions persist, Glenayre is positioned to be competitive and profitable in a flat market. Our outlook is still that the enhanced services/unified communications market will return to growth in the second half of 2002. Glenayre will be well positioned to have significant cash generation and earnings leverage with even modest growth. "We believe market demand for our enhanced services and new unified communications solutions will grow, explained Doggett Glenayre has an installed base of more than 1200 enhanced services and unified communications platforms, and our customer base continues to grow. We have over 200 service provider customers in more than 60 counties, and our platforms provide key services to over 58 million subscribers. For the remainder of this year, Glenayre projects it will displace over 1.5 million competitor mailboxes. Moving forward, Glenayre will continue leveraging our enhanced services and unified communication solutions through standards-based platforms with open APIs and IP-centric technologies. We understand the challenges of this dynamic market, and are delivering solutions that help our customers drive revenue by using innovative products such as Voice Activated Services, Short Messaging services and in the future, MultiMedia Messaging Services." In the fourth quarter of 2001, Glenayre will complete commercial deployment of its first Large Solution platform, which supports 6,000 ports and up to 5 million subscribers. This is expected to increase its addressable market over 40 percent in the voice messaging market alone, increasing it from approximately $950 million to over $1.3 billion. Glenayre's Large Solution platform combines the advantages of a modular, distributed architecture with the efficiencies of a common database, centralized SS7 administration, large virtual trunk groups, and new services deployment. It is designed to provide central office grade network reliability, and scales to allow carriers to support from 200,000 up to 5 million subscribers. Glenayre's has several customers, both domestic and international, planning commercial launch of unified messaging services using Glenayre's Unified Messaging platform during the fourth quarter. The company's Unified Messaging platform allows subscribers to manage voice mail, e-mail, fax and alphanumeric messages from multiple devices through a single, unified mailbox. In addition to Voice Activated Services using advanced speech recognition technology, subscribers have the option to view this mailbox from a Web interface or any WAP handset, and they can hear all of their messages, including e-mail, from any phone. The Glenayre platform allows users to send, forward, and reply to voice messages via e-mail as a .wav file attachment. This cross-modal, device-independent approach to messaging gives users more control over their communications, while maintaining simplicity in the user interface. In a recent report industry analysts at Frost and Sullivan forecast that the carrier-grade unified messaging solutions U.S. market alone would grow from a base of over $75 million in 2000 at close to a 50% CAGR through 2005. Glenayre is a leader of enhanced services and unified communications solutions for service providers including wireless, fixed network, ISP and broadband. Glenayre systems are designed on open platforms with a standards-based architecture supporting IP and traditional telephony networks for a graceful evolution from 2G to 2.5G and 3G services. More than 200 service providers in over 60 countries have deployed Glenayre messaging solutions for voice, fax and e-mail messaging, including one-number services, voice navigation and voice dialing, mailbox out-dialing and one-touch call return. Glenayre, headquartered in Atlanta, Georgia, has been providing carrier-grade communications solutions for the global market for over 40 years. For more information, please visit http://www.Glenayre.com GOLDEN BOOKS: Sells Assets to Classic Media & Random House ---------------------------------------------------------- Golden Books Family Entertainment, Inc., one of the world's largest publishers of children's books and family related entertainment products, announces that the Bankruptcy Court has approved the bid of Classic Media, Inc. and Random House, Inc., to purchase substantially all of their assets. Classic Media and Random House were found by the Court to have submitted the highest and best offer for the purchased assets -- $79,300,000 in cash plus the assumption of certain scheduled liabilities. The bid was higher than the initial Asset Purchase Agreement entered into by the Company with DIC Entertainment Corporation, a leading producer of animated and live-action television programs. DIC's initial bid for the Company was $69,000,000 in cash plus $7,000,000 in notes and $3,000,000 in assets. HMG WORLDWIDE: Fails to Comply with Nasdaq Bid Price Requirement ---------------------------------------------------------------- HMG Worldwide Corporation (Nasdaq:HMGC), a world class in-store and online marketing pioneer with a 35-year heritage of creating award-winning store and online environment and brand identity solutions for the Fortune 1000, announced that on September 10, 2001 it received a Nasdaq Staff Determination indicating the Company's failure to comply with the $1.00 minimum bid price requirement for continued listing set forth in Marketplace Rule 4310(c)(4), and, therefore, that its securities are subject to delisting from the Nasdaq SmallCap Market. The Company has requested an oral hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination. A hearing date has not been set. The Company intends to present evidence at the hearing that it believes justifies a temporary waiver of the bid price requirement and will present its plan for regaining compliance with the continued listing requirements. However, there can be no assurance that the Panel will grant the Company's request for waiver and continued listing after the hearing. The Company has been advised by Nasdaq that its stock will continue to be listed on the Nasdaq SmallCap Market during the appeal process. In the event the Panel determines to delist the Company's common stock, the Company will not be notified until the delisting has become effective. The Company's common stock would then be traded on the OTC bulletin board market. Headquartered in New York City with operations in Reading, Pennsylvania, Chicago and Toronto, HMG Worldwide Corporation has spent the past 35 years committed to creating in-store merchandising programs for many of the world's largest consumer goods manufacturers and retailers, including Walgreens, CVS, Wal-Mart, Kmart, Target, Home Depot, Lowes, Procter & Gamble, Nestle, Chanel, Krispy Kreme, Bristol-Meyers Squibb, Sony, Microsoft, Walden Books, Just For Feet, Sara Lee Foods, L'eggs (invented original `egg' displays), Pillsbury, Astoria Federal Bank, KPN Quest, Mstyle and many others. Through the unique integration of point-of-purchase marketing services, traditional and digital design services and online branding solutions, HMG provides its clients with insights, solutions and opportunities that create results wherever purchase decisions are made. Through its wholly owned subsidiary Zeff Design, HMG offers a broad range of store, branding, and digital design services as well as web branding, web consulting and new media services that create exciting, engaging and creative retail and online environments. For more information, please visit the Company's Web sites at http://www.hmgworldwide.comand http://www.zeffdesign.com HEALTH RISK: Taps Harpeth to Explore Options under Chapter 11 ------------------------------------------------------------- Harpeth Capital Atlanta, LLC, an Atlanta-based mid-market investment banking firm, announced that it has been retained by Health Risk Management, Inc. (HRM) (OTC:HRMI) to explore strategic options including a potential sale of two divisions: HRM Claim Management, Inc. and other corporate assets which comprise HRM's 4 Your Care third-party administration (TPA) business, and the Institute for Healthcare Quality, Inc. (IHQ), which provides products and services under the name Quality Firstr. Health Risk Management, Inc. and three subsidiaries filed for Chapter 11 Bankruptcy on August 7, 2001 in the United States Bankruptcy Court for the District of Minnesota. Harpeth Capital is pleased to represent the Debtors' in striving to recapitalize these two operating companies. We intend to move as rapidly as possible to recapitalize or sell these operations, either separately or together, commented Jeffrey C. Villwock, Harpeth Capital Atlanta's Managing Partner. HRM's TPA business provides claim adjudication, excess risk underwriting and care management services for approximately 290,000 employees representing 640,000 members. It administers 800 medical and 350 dental plans, for 85 entities. Unlike most TPAs that have regional customer bases, HRM Claim Management's clients are Fortune 500 companies, self-insured employers, unions, government entities, insurance companies, and preferred provider organizations that are located across the United States. The IHQ subsidiary is an information management company that designs, develops, and markets healthcare content to businesses servicing the at-risk healthcare market. This subsidiary has developed a PC-based medical risk management system to support treatment and resource medical management decisions for a specific diagnosis. IHQ provides the most current scientific evidence-based clinical content in an easy to use format to ensure that healthcare consumers receive the right care, at the right time, for optimal outcomes. IHQ generated $4.7 million in revenue in 2000. Harpeth Capital is preparing and will make available Information Memorandums on both operations to potential buyers. The estate has asked the Court to expedite the sales process with an initial due date for qualifying bids of September 26, 2001. Memorandums can be obtained by contacting Harpeth Capital at 404/365-0000, or by emailing Mr. Villwock at jvillwock@harpethcapital.com Harpeth Capital is a Nashville, TN based middle-market investment banking firm formed in March, 2000. It's healthcare investment banking affiliate, Harpeth Capital Atlanta (HCA), was formed in January 2001 by Jeffrey C. Villwock (former head of healthcare research for The Robinson-Humphrey Company and two- time Wall Street Journal All-Star Analyst) and Michael Dickson (founder of American HomePatient). HCA's Atlanta based partners include Geoffrey Faux (former president of Orthodontic Centers of America and head of southeast investment banking for Prudential Securities). HCA specializes in healthcare banking, including mergers and acquisition advisory and capital raising assignments. Among its current engagements, HCA is working on six M&A assignments and four capital raises. HCA has recently completed assignments for Iasis Healthcare, HealthMont, Surginet, Le@P Technology and the Tenet Shareholder Committee. Harpeth Capital is affiliated with Clayton Associates, LLC, a private equity firm with over $50 million invested in southeastern based companies. ICG COMMS: Secures 2nd Extension of Exclusive Period to Dec. 10 --------------------------------------------------------------- Judge Walsh granted the motion of IC Communications, Inc. for a second extension of the time within which they have the exclusive right to file a plan and solicit acceptances of that plan. To the behest of the Debtors, Judge Walsh extended their exclusive period during which to propose and file a plan of reorganization through and including December 10, 2001, and granted concomitant extension of their exclusive solicitation period through February 8, 2002. (ICG Communications Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392- 0900) IMMUCOR INC: Secures Covenant Default Waiver from Senior Lender --------------------------------------------------------------- Immucor, Inc. (Nasdaq: BLUD), the global leader in providing automated instrument-reagent systems to the blood transfusion industry, reported it had reached agreement with its senior lender for a waiver of defaults of certain loan covenants and a reset of future covenants. As a result of this waiver the Company's independent auditors issued an unqualified (clean) audit opinion. Immucor filed its annual report on Form 10-K for the year ended May 31, 2001 with the U.S. Securities and Exchange Commission on September 13, 2001. In addition, Immucor reported financial results for the fourth quarter and year-ended May 31, 2001. As expected the Company generated operating income for the fourth quarter, but reported a net loss. Financial highlights of the quarter include: Reagent sales increased $1.2 million, or 7.3%, to $17.6 million from $16.4 million in the fourth quarter of 2000. The increase was due primarily to price increases and new national contracts that became effective in the fourth quarter of fiscal year 2001. Instrument sales declined $0.7 million to $1.1 million from $1.8 million in the fourth quarter of 2000, due to slowness in sales of the ABS 2000 related to the impact of the previously-reported safety alert. The Company generated operating income of $0.5 million during the quarter compared with $0.2 million in the same period last year. The increase is attributed to higher sales and cost-saving initiatives that became effective during the final month of the fourth quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $2.3 million versus $1.6 million in the fourth quarter of 2000. During the fourth quarter, the Company elected to record a valuation allowance in the amount of $1.2 million, which contributed $0.17 per share to the net loss. Effectively, this non-cash allowance reflects the elimination of deferred taxes as a balance sheet asset and will have no impact on Immucor's ability to utilize these amounts to reduce future taxes in profitable periods. Without the valuation allowance, the Company's net loss per share was $0.02, compared with a loss of $0.09 per share in the same period last year. With the valuation allowance, the Company's net loss for the fourth quarter this fiscal year ended was $0.19 per share. Edward L. Gallup, chairman and chief executive officer, stated, "We are pleased to reach agreement with the bank. It is satisfying to know that our major lender supports our Company's prospects and our management. Fiscal 2001 was a big transition year for Immucor, Inc. Our management team has responded very positively to the challenge of turning the Company around and is poised to take advantage of new opportunities in 2002. The entire Company is marching to our two goals for the year: a return to sustainable profitability and the placement of a substantial number of instruments in fiscal 2002." Commenting further, Mr. Gallup stated, "Our fourth quarter represents a significant turnaround from the results of the third quarter. We are pleased with our customers' acceptance of the market price adjustment and we are just now beginning to see its impact on financial results. We have been told that the FDA is actively reviewing our clinical data regarding the ABS safety alert and we look forward to its final clearance. We remain confident that our first quarter will be profitable." Founded in 1982, Immucor manufactures and sells a complete line of reagents and systems used by hospitals, reference laboratories and donor centers throughout the world to detect and identify certain properties of the cell and serum components of blood prior to transfusion. Immucor markets a complete family of automated instrumentation for all market segments. For more information on Immucor, please visit our website at http://www.immucor.com INTEGRATED HEALTH: Westhaven Seeks Payment on Washoe Lease Claim ---------------------------------------------------------------- Westhaven Reno, LLC seeks to compel payment of an Administrative Priority Claim, against Integrated Health Services, Inc., for actual damages in the approximate amount of $3,310,000 and interest, plus punitive damages and attorney's and court fees in relation to rejected lease (the Washoe Lease) for a 129 bed nursing facility in Sparks, Nevada, known as the Washoe Convalescent Center. Movant is an assignee of the lease entered into by Westhaven Healthcare Partnership (Westhaven) and Horizon Healthcare in July 1991. IHS 151 assumed Horizon's obligations under the Lease, as amended, and IHS guaranteed the obligations of IHS 151 under the Lease pursuant to agreements dated December 31, 1997. By amendment, the term of the Washoe Lease was extended until June 30, 2004. On July 18, 2000, Debtors filed their Motion for an Order Authorizing the Rejection of Eight Unexpired Leases of Non- Residential Real Property Relating to Certain Skilled Nursing Facilities, which included the Washoe Lease. Westhaven filed a limited objection voicing that any rejection should be conditioned on protective measures to insure an orderly transition of operations. While the motion to reject the Washoe Lease was pending, Westhaven began the due diligence process to find a suitable management company or operator to replace the Debtors upon turnover of the Washoe Facility. In doing so, Westhaven discovered a pattern of acts and omissions on the part of Debtors, which irreparably harmed, if not destroyed the value of the Washoe Facility, especially as an ongoing business enterprise, the Movant tells the Court. In particular, the Movant tells the Court that Westhaven discovered: (1) significant and extensive deferred maintenance, pre- petition and post-petition, which would require at least $300,000 for remedy and repair, and which further resulted in lower occupancy and private pay rates. (2) a history of noncompliance with rules and regulations of governmental agencies, which resulted in the imposition of civil monetary penalties in the approximately amount of $300,000 constituting an assessment or encumbrance against the Washoe Facility because operations cannot be transferred or assumed until these penalties are paid. (3) through a central administrative office, Debtors had apparently begun diverting new residents from the Washoe Facility to other facilities in the vicinity under their own operation. (4) in the process of winding down the operations of the Washoe Facility, Debtors converted supplies, equipment and inventory which was legally owned by Westhaven under the terms of the Washoe Lease. (5) in contravention of covenants in the Washoe Lease and the orders of the Court, Debtors closed the Washoe Facility, transferred all of the residents or patients to their other facilities in the vicinity, and removed equipment, supplies and key personnel. By way of an amended limited objection filed on February 15, 2001, Westhaven advised the Court of the foregoing acts and omissions, which would effectively preclude anyone from assuming operations of the Washoe Facility. The Washoe Lease was subsequently rejected pursuant to the terms of a stipulation between the parties, approved and entered by the Court on May 3, 2001. From the filing date until entry of the stipulation, Debtors had not tendered a postpetition rent payment, the Movant tells the Court. The Movant notes that, under the terms of the stipulation, Debtors paid the administrative rent due but draws the Court's attention to the term in the Stipulation: "Nothing herein shall be construed so as to waive, prejudice or impair any claims or defenses of any of the parties hereto under the [Washoe Lease], except claims by Westhaven ... for administrative rent, the amounts of which are liquidated herein." Accordingly, the movant accuses Debtors of Postpetition Breach of Lease Agreement as follows: (1) conversion of supplies and equipment in contravention of the terms of the Washoe Lease; (2) closure of the Washoe Facility and transferring the residents to other IHS owned, operated or controlled facilities in the area; (3) abandonment of the Washoe Facility by the Lessee in default of the Washoe Lease. (4) committing waste to the Washoe Facility, both intentionally and by their failure to use reasonable care in preserving the property. (5) Negligence in exercising ordinary care so as not to injure the leased property entrusted to their care and possession. (6) Conversion in wrongfully exercising dominion and control over the property in denial of and inconsistent with the rights of Movant, including but not limited to equipment, supplies, inventory and contractual relationships with residents of the Washoe Facility, and in committing a "taking" of the Washoe Facility by the intentional or negligent damage. (7) with respect to Accounting, Movant is entitled to an accounting of all revenue received from patients or residents diverted or transferred to other facilities owned or operated by Debtors. Movant asserts that IHS is liable to it for the numerous breaches of the Washoe Lease pursuant to the terms of its guaranty, and additionally or alternatively, directly liable for its own participation in the decision making, intentional and negligent acts, errors and omissions which proximately caused substantial damage to Movant. IHS is directly liable, Movant asserts, on an alter-ego basis, because IHS exercises actual control over IHS 151 and operates it and hundreds of other subsidiaries as mere instrumentalities, tools or conduits through which IHS conducts its business. Movant further seeks Punitive Damages and Sanctions on the bases that Debtors were not only negligent but grossly negligent, that Debtors commit willful, intentional and malicious acts of waste and conversion which resulted in extensive damage to Movant's interest in the property, and most importantly, Debtors' acts and omissions were committed with apparent disregard for the Court's orders directing them to perform all obligations under the Washoe Lease under section 365(d)(5) of the Bankruptcy Code. Movant asserts that it is entitled to payment of its damages on an administrative priority basis because the diminution and destruction of the value of the Washoe Facility and the value of the converted equipment and supplies are damages resulting from postpetition acts and omissions in flagrant violation of the orders of the Court expressly directing the Debtors to perform all obligations under the Leases and section 365(d)(3) of the Bankruptcy Code, and because Debtors and their estates have been significantly and unjustly enriched by the diversion of the income and revenues from residents transferred to other facilities and the value of equipment, supplies and other assets converted to the Debtors' use and benefit. In summary, Movant seeks an order from the Court: (a) directing Debtors to account for and pay to Movant all revenue derived directly or indirectly from residents or patients diverted or transferred from the Washoe Facility; (b) allowing Movant's administrative claim and directing Debtors to pay to Movant: (i) actual damages in the approximate amount of$3,3 10,000 and interest thereon at the applicable rate; (ii) a reasonable attorney's fee for preparation and trial and conditional awards in the event of appeal; (iii) punitive damages in an amount deemed appropriate by the Court and/or sanctions for violation of the orders of this Court; (iv) costs of court incurred in this matter; and/or (v) granting such other and further relief to which Movant may show itself justly entitled at law or in equity. (Integrated Health Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900) ITI EDUCATION: Sells Assets to Education Management for $3.2M ------------------------------------------------------------- Education Management Corporation (NASDAQ: EDMC) announced it has entered into an agreement to purchase certain assets of ITI Education Corporation (ITI), based in Halifax, Nova Scotia, Canada from Ernst & Young Inc., in its capacity as ITI's court- appointed receiver. ITI was placed into receivership last month. The purchase price will be approximately C$5 million (US$3.2 million). ITI Education Corporation, through its operating subsidiary ITI Information Technology Institute Inc., offers a post-graduate business education program. ITI's market-driven curriculum incorporates all aspects of business application development, as well as professional development, communication, and interpersonal skills. EDMC will purchase a portion of ITI that encompasses education institutions in Halifax, Toronto, and Vancouver. "ITI has a highly effective education program and thousands of successful graduates. We believe we can build on this foundation," said Robert B. Knutson, Chairman and CEO of EDMC. "Students experience a unique education environment, working in teams and learning to use technology to solve business problems. We conducted an exhaustive evaluation of ITI and are satisfied that the education program is exceptional. We look forward to bringing ITI to financial stability and to having its graduates serve the needs of employers in North America," Mr. Knutson said. The ITI transaction is expected to close by early November of 2001, subject to court and regulatory approvals. Upon the closing, the three schools will become EDMC's first in Canada. "EDMC has built its reputation and success by being a constructive partner in the communities where our institutions reside. We will continue that record in Canada," Mr. Knutson said. Education Management Corporation http://www.edumgt.com is among the largest providers of proprietary post-secondary education in the United States, based on student enrollment and revenue. EDMC's education institutions offer master's, bachelor's and associate's degree programs and non-degree programs in the areas of design, media arts, culinary arts, and fashion. The Company has provided career-oriented education programs for over 35 years, and its Art Institutes http://www.artinstitutes.edu have graduated more than 125,000 students. JAM JOE: Wants Deadline to File Schedules Extended to Sept. 26 -------------------------------------------------------------- Jam Joe L.L.C. asks the U.S. Bankruptcy Court for the District of Delaware for an extension in filing the schedules of assets & liabilities and statement of financial affairs to the next scheduled hearing date on September 26, 2001. KOMAG: Expects Stock Trading in OTCBB After Appeal Withdrawal ------------------------------------------------------------- Komag, Incorporated (Nasdaq: KMAG), the largest independent producer of media for disk drives, announced that it withdrew its appeal to the Nasdaq Listing Qualifications Panel and is voluntarily delisting its common stock from the Nasdaq National Market. The company expects its common stock to be traded on the OTC Bulletin Board under the symbol KMAG. Founded in 1983, Komag is the world's largest independent supplier of thin-film disks, the primary high-capacity storage medium for digital data. Komag leverages the combination of its U.S. R&D centers with its world-class Malaysian manufacturing operations to produce disks that meet the high-volume, stringent quality, low cost and demanding technology needs of its customers. By enabling rapidly improving storage density at ever-lower cost per gigabyte, Komag creates extraordinary value for consumers of computers, enterprise storage systems and electronic appliances such as peer-to-peer servers, digital video recorders and game boxes. For more information about Komag, visit Komag's Internet home page at http://www.komag.com L.L. KNICKERBOCKER: Court Approves Substantial Sale of Assets ------------------------------------------------------------- The L.L. Knickerbocker Co., Inc. previously reported the scheduling with the United States Bankruptcy Court of a hearing on the sale of substantially all of the Company's assets and to consider overbids on September 4, 2001. At the hearing, the Court approved the sale of substantially all of the Company's assets to Brian Blosil. There were no overbids received at the hearing. The Company expects to consummate the sale on or before September 30, 2001. The L.L. Knickerbocker Co., Inc. will remain in existence after the above sale, but it is anticipated that it will cease to have operations and have little or no assets. The L.L. Knickerbocker Co., Inc. is a multi-brand collectible products, gift, toy and jewelry company that designs, develops, produces and markets products over diverse distribution channels. The Company's products are sold through independent gift and collectible retailers, department stores, electronic retailers, Internet, and international distributors. The Company is a major supplier of collectible products and fashion jewelry to the leading electronic retailer. LAIDLAW INC: Gets Okay to Set-Up Interim Compensation Procedures ---------------------------------------------------------------- Laidlaw Inc. sought and obtained an Administrative Order Establishing Procedures for Interim Compensation and Reimbursement of Expenses of Professionals. Judge Kaplan rules that professionals, who are specifically retained in these cases, may seek interim payment of compensation and reimbursement of expenses in accordance these procedures: (a) On a monthly or less frequent basis, each Professional seeking interim compensation may submit a statement of its fees and expenses for an identified calendar month to these parties: (i) the Debtors, c/o Laidlaw Inc., 3221 North Service Road, Burlington, Ontario, Canada L7R 3Y8 (Attn: Ivan R. Cairns, Esq.); (ii) counsel to the Debtors, Jones, Day, Reavis & Pogue, North Point, 901 Lakeside Avenue, Cleveland, Ohio 44114 (Attn: Richard M. Cieri, Esq.); Jones, Day, Reavis & Pogue, 77 West Wacker, Chicago, Illinois 60601 (Attn: Paul E. Harner, Esq.); and Hodgson Russ LLP, One M&T Plaza, Suite 2000, Buffalo, New York 14203 (Attn: Garry M. Graber, Esq.); (iii) the Office of the United States Trustee, 42 Delaware Avenue, Suite 1000, Buffalo, New York 14202 (Attn: Christopher K. Reed, Esq.); (iv) counsel to the Creditors' Committee; (v) counsel to any other official committee appointed in these cases, pursuant to section 1102 of the Bankruptcy Code; (vi) counsel to the Bank Group, Clifford Chance Rogers & Wells LLP, 200 Park Avenue, New York, New York 10166 (Attn: Margot B. Schonholtz); and (vii) counsel to the Noteholders' Committee, DeBevoise & Plimpton, 875 Third Avenue, 23rd Floor, New York, New York 10022 (Attn: Peter L. Borowitz). Each of the Notice Parties shall have 15 days from the date of service of a Fee Statement to review the Fee Statement. At the expiration of the Review Period, the Debtors will promptly pay each Professional an amount equal to the lesser of: (i) 80% of the fees and 100% of the expenses requested in the Professional's Fee Statement, and (ii) the aggregate amount of fees and expenses not subject to an objection. (b) If one of the Notice Parties objects to the compensation or reimbursement of expenses sought in a particular Fee Statement, any such party may: (i) prepare a written statement of its objection, along with an affidavit setting forth the precise nature of the objection and the amount of objectionable fees and expenses at issue; and (ii) serve the Objection on the Professional that submitted the Fee Statement and the Notice Parties so that the Objection is received by these parties by the end of the Review Period. Thereafter, the objecting party and the affected Professional may attempt to resolve the Objection on a consensual basis. If the parties are unable to reach a resolution of the Objection within 15 days after service of the Objection, the affected Professional may either: (i) file the Objection with the Court, together with a request for payment of the difference, if any, between the Maximum Interim Payment and the Actual Interim Payment made to the affected Professional; or, (ii) forego payment of the Incremental Amount until the next interim or final fee application hearing, at which time the Court will consider and dispose of the Objection if requested by the parties. (c) At four-month intervals, each of the Professionals may file with the Court and serve on the Notice Parties an application for interim Court approval and allowance of the compensation and reimbursement of expenses incurred by the Professional during the prior four calendar months. Interim Fee Applications must be filed within 45 days after the end of the Interim Fee Period for which the application seeks allowance of fees and reimbursement of expenses. The first Interim Fee Application must be filed on or before December 17, 2001 for the Interim Fee Period from the Petition Date through October 31, 2001. Any Professional that fails to file an Interim Fee Application when due shall be ineligible to receive further interim payments of fees or expenses under the Compensation Procedures until such time as an Interim Fee Application is submitted. There will be no other penalties for failing to submit an Interim Fee Application in a timely manner. (d) Each Interim Fee Application shall be scheduled for a hearing with the Court at the next omnibus hearing in these cases that is at least 15 days after the filing and service of such Interim Fee Application or at such other time as the Court deems appropriate. If no objections to an Interim Fee Application are filed and no prior Objections to a Fee Statement for the applicable Interim Fee Period remain pending, the Court may grant the Interim Fee Application without conducting a hearing. (e) The pendency of an Objection to payment of compensation or reimbursement of expenses shall not disqualify a Professional from the future payment of compensation or reimbursement of expenses under the Compensation Procedures. (f) Neither: (i) the payment of or the failure to pay, in whole or in part, interim compensation and reimbursement of expenses under the Compensation Procedures, nor (ii) the filing of or failure to file an Objection will bind any party in interest or the Court with respect to the allowance of applications for compensation and reimbursement of expenses of Professionals (including any Interim Fee Applications). (Laidlaw Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392- 0900) LERNOUT & HAUSPIE: Plan's Classification & Treatment of Claims -------------------------------------------------------------- Lernout & Haupsie Group, a world leader in the development of technologies relating to computerized speech recognition and production, filed its plan of reorganization dated August 28, 2001 with the U.S. Bankruptcy Court for the District of Delaware. The Plan reflects a consensual resolution and settlement among the L&H Group, the Creditors' Committees and the Estates' primary creditor constituencies of the allocation of the assets of the members of the L&H Group among the holders of Allowed Claims. The Plan has three major components: (a) the reorganization of Dictaphone, (b) the disposition and distribution of the assets of L&H NV and L&H Holdings, and the (c) the formation of a litigation vehicle to maximize the recoveries on the L&H Group's litigation claims. The reorganization of Dictaphone is premised upon effecting a substantial deleveraging and strengthening of the balance sheet of Dictaphone through the conversion of a substantial portion of Dictaphone's prepetition indebtedness into Dictaphone New Common Stock on the Effective Date. It also incorporates the terms of settlements regarding the allocation of the assets among Dictaphone's creditor constituencies. The Reorganization Plan contemplates and is contingent upon, a post-Effective Date credit facility with availability of up to $30 million for Dictaphone. As precondition to emergence from the Chapter 11 Case, Dictaphone is purchasing certain technology assets and businesses from L&H NV and L&H Holdings that are integral to its post-Effective Date business plans. In contrast, under the plan, L&H NV and L&H Holdings are disposing of their assets for cash to maximize their respective Estates to be distributed to their respective creditor and equity constituencies. In addition, the Plan provides for the creation of a Litigation LLC to pursue claims that the L&H Group may have against third parties arising out of the events that preceded the Chapter 11 Cases. Litigation Membership Interests are to be distributed to each of the members of the L&H Group in accordance with the provisions of the Plan. Treatment Of Classified Claims Against Lernout & Hauspie Speech Products N.V. (a) Unimpaired Classes Of Claims Against L&H NV (i) L&H NV Class 1: Priority Non-Tax Claims Against L&H NV. L&H NV Class 1 consists of all Claims against L&H NV entitled to priority under the Bankruptcy Code other than Priority Tax Claims and Administrative Expense Claims. These Claims include, among other things, certain Unsecured Claims for wages, salaries, or commissions, including vacation, severance, and sick leave pay earned within 90 days of the Petition Date and subject to a maximum of $4,300 per individual, and certain unsecured claims for contribution to any employee benefit plan, subject to a maximum of $4,300 per covered employee. On the Effective Date or, if such Priority Non-Tax Claim becomes an Allowed Priority Non-Tax Claim after the Effective Date, on the next Quarterly Distribution Date after such Priority Non-Tax Claim becomes an Allowed Priority Non-Tax Claim, a holder of an Allowed L&H NV Class 1 Priority Non-Tax Claim against L&H NV will receive, in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed L&H NV Class 1 Priority Non-Tax Claim (a) Cash equal to the amount of such Allowed L&H NV Class 1 Priority Non-Tax Claim, or (b) such other treatment as to which Post Effective Date L&H NV and such holder will have agreed upon in writing. (ii) L&H NV Class 2: Secured Claims Against L&H NV L&H NV Class 2 consists of all Secured Claims against L&H NV, other than DIP Facility Claims. Each holder of an Allowed Secured Claim against L&H NV will be deemed to be classified in a separate Class and will be treated as follows: To the extent that any such Claim is determined to be an Allowed, valid and perfected Secured Claim, the holder of such L&H NV Secured Claim will receive the first net proceeds (i.e., proceeds net of all costs and expenses related to such sale) from the sale of any of its Collateral to the extent of the principal amount of its Claim. To the extent permitted under applicable law, including the Bankruptcy Code, as determined by the Bankruptcy Court at the Confirmation Hearing, the holder of such Allowed L&H NV Secured Claim will receive the contractual non-default rate of interest on such Allowed L&H NV Secured Claim semiannually in arrears based upon the amount of unpaid principal for such period and permitted costs thereon. Until each L&H NV Secured Claim is paid in full, the holder of such Allowed Secured Claim will retain the Liens securing such Allowed Secured Claim. Notwithstanding anything to the contrary contained in the Plan, Post Effective Date L&H NV will make full payment to such secured creditors to the extent of their Allowed Secured Claim on or before March 31, 2003. (iii) L&H NV Class 3: L&H NV Convenience Claims Against L&H NV L&H NV Class 3 consists of each of: (a) Allowed Unsecured Claim against L&H NV in an amount equal to the Cash equivalent (as of the applicable Record Date) of Euro 25,000 or less, (b) Allowed Unsecured Claim against L&H NV of a holder that has irrevocably elected on its Ballot to reduce such Claim against L&H NV to the amount of the Cash equivalent (as of the applicable Record Date) of Euro 25,000 or less, and/or (c) Disputed Unsecured Claim against L&H NV that becomes an Allowed Unsecured Claim of the Cash equivalent (as of the applicable Record Date) of Euro 25,000 or less with the consent of and in the amount agreed to by such Debtor or its successor-in-interest, as the case may be, or pursuant to a Final Order. Under the Plan, each holder of an Allowed L&H NV Convenience Claim against L&H NV will be paid an amount in Cash equal to 75% of such Allowed L&H NV Convenience Claim, in full and complete satisfaction, settlement, release, and discharge of and in exchange for such holder's Claim on the later of (y) 30 days after the Effective Date; or (z) the first Business Day after the date that is 30 days after the date such Claim becomes an Allowed Claim; provided, however, that the total amount of cash to be distributed or reserved on account of holders of Claims in this class will not exceed the Cash equivalent (as of the Effective Date) of Euro 1,500,000, which amount will be allocated pro-rata among the holders of such Claims if the total amount of Allowed Claims in this Class exceeds the Cash equivalent (as of the Effective Date) of Euro 1,500,000. L&H NV Class 3 specifically excludes any Claim classified under and receiving treatment as a Claim under L&H NV Class 4 (L&H NV Unsecured Claims), L&H NV Class 5 (PIERS/Old Convertible Subordinated Notes Claims), and L&H NV Class 6 (L&H NV Securities Laws Claims). No interest will be paid on any L&H NV Class 3 L&H NV Convenience Claim. (iv) L&H NV Class 4: Unsecured Claims Against L&H NV L&H NV Class 4 consists of all Unsecured Claims against L&H NV other than: (a) L&H NV Class 3 Convenience Class Claims, (b) L&H NV Class 5 PIERS/Old Convertible Subordinated Notes Claims, and (c) L&H NV Class 6 Securities Laws Claims. Class 4 Unsecured Claims include, inter alia, Claims under the Belgian Revolving Credit Facility, all prepetition trade Claims, and other prepetition general unsecured creditors. Subject to some limitations, on the Effective Date or, if such Unsecured Claim becomes an Allowed Unsecured Claim after the Effective Date, on the next Quarterly Distribution Date after such Unsecured Claim becomes an Allowed Unsecured Claim, and thereafter for each Distribution of L&H NV Available Cash, in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed L&H NV Class 4 Unsecured Claim, (1) with respect to Distributions that are not the proceeds (either directly or derivatively) of Intercompany Distributions under Dictaphone Class 8 Intercompany Loan Agreement Claims, each holder of an Allowed Unsecured Claim will receive a Ratable Proportion of (x) 93% of the L&H NV Available Cash and (y) 93% of the Class NV Litigation Membership Interests, and (2) with respect to Distributions that are the proceeds (either directly or derivatively) of Intercompany Distributions under Dictaphone Class 8 Intercompany Loan Agreement Claims, each holder of an Allowed Unsecured Claim, excluding holders of Claims under the Belgian Revolving Credit Facility, will receive a Ratable Proportion of (x) 93% of the L&H NV Available Cash and (y) 93% of the Class NV Litigation Membership Interests. No interest will be paid on any L&H NV Class 4 Unsecured Claim. As a condition to receiving the Distributions, all holders of Claims under the Belgian Revolving Credit Facility (which are classified under, and constitute a portion of, the L&H NV Class 4 Unsecured Claims) will be deemed to have waived any right to receive, and will not receive, either directly or derivatively, any Intercompany Distributions, whether in the form of Distributions or proceeds thereof from any of the Debtors or their respective Estates. No estimates or statements of the amount of Allowed L&H NV Class 4 Unsecured Claims against L&H NV are provided. Holders of Allowed L&H NV Class 4 Unsecured Claims will not receive any distributions after they have received 100% repayment in Cash of the principal amount of their Allowed L&H NV Class 4 Unsecured Claims. Any distributions by Dictaphone or Reorganized Dictaphone, as the case may be, to the Lenders on account of the Dictaphone Guaranty will be included in determining whether the Lenders have received 100% repayment of their claims relating to the Belgian Revolving Credit Facility. The Lenders, however, may assert the full amount of their Allowed L&H NV Class 4 Unsecured Claims until such time as they have received 100% repayment of the principal amount of their Allowed claims under the Belgian Revolving Credit Facility (after taking into account distributions under the L&H NV Plan and the Dictaphone Plan). After all holders of Allowed L&H NV Class 4 Unsecured Claims have received 100% repayment of the principal amount of their Allowed Unsecured Claims, all further Distributions of L&H NV Available Cash and Class NV Litigation Membership Interests will be distributed as follows: (a) holders of Allowed L&H NV Class 5 PIERS/Old Convertible Subordinated Notes Claims will receive a Ratable Proportion of both (i) 93% of the L&H NV Available Cash and (ii) the proceeds of 93% of the Class NV Litigation Membership Interests, (b) holders of Allowed L&H NV Class 6 Securities Laws Claims will receive a Ratable Proportion of 3.5% of the L&H NV Available Cash and 3.5% of the Class NV Litigation Membership Interests, and (c) Post-Effective Date L&H NV will retain 3.5% of the L&H NV Available Cash and 3.5% of the Class NV Litigation Membership Interests. (v) L&H NV Class 5: PIERS/Old Convertible Subordinated Notes Claims Against L&H NV L&H NV Class 5 consists of all PIERS Transaction Claims and Old Convertible Subordinated Notes Claims against L&H NV. Subject to some limitations in the Plan, on the Effective Date or, if such PIERS/Old Convertible Subordinated Notes Claim becomes an Allowed PIERS/Old Convertible Subordinated Notes Claim after the Effective Date, on the next Quarterly Distribution Date after such PIERS/Old Convertible Subordinated Notes Claim becomes an Allowed PIERS/Old Convertible Subordinated Notes Claim, and thereafter for each Distribution of L&H NV Available Cash, each holder of an PIERS/Old Convertible Subordinated Notes Claim will receive, in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed PIERS/Old Convertible Subordinated Notes Claim, a Ratable Proportion of both (i) 6% of the L&H NV Available Cash and (ii) 6% of the Class NV Litigation Membership Interests. No interest will be paid on any L&H NV Class 5 PIERS/Old Convertible Subordinated Notes Claim. (vi) L&H NV Class 6: Securities Laws Claims Against L&H NV L&H NV Class 6 consists of all Claims against L&H NV (1) arising from rescission of a purchase or sale of a security of a Debtor or an Affiliate of a Debtor; (2) for damages arising from the purchase or sale of such a security; (3) for reimbursement, indemnification, or contribution allowed under the Bankruptcy Code on account of a Claim for damages or rescission arising out of a purchase or sale of a Debtor or an Affiliate of a Debtor; or (4) for similar violations of the of the securities laws, misrepresentations, or any similar claim, including, to the extent related to the foregoing or subject to subordination under the Bankruptcy Code, the Securities Class Actions/Suits against L&H NV. Subject to Section 5.2.4(b) of the Plan, on the Effective Date or, if such Securities Laws Claim against L&H NV becomes an Allowed Securities Laws Claim after the Effective Date, on the next Quarterly Distribution Date after such Securities Laws Claim becomes an Allowed Securities Laws Claim, and thereafter for each Distribution of L&H NV Available Cash, each holder of an Allowed L&H NV Securities Laws Claim will receive, in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed L&H NV Class 6 L&H NV Securities Laws Claim, a Ratable Proportion of both (i) 0.5% of the L&H NV Available Cash and (ii) 0.5% of the Class NV Litigation Membership Interests. No interest will be paid on any L&H NV Class 6 Securities Laws Claim. Impaired Class Of Equity Interests Against L&H NV (Entitled To Vote) L&H NV Class 7: Common Stock In L&H NV L&H NV Class 7 consists of all interests of the holders of L&H NV Common Stock on account of such interests. The L&H NV Common Stock will remain outstanding on and after the Effective Date except as specifically provided otherwise in the Plan. On the Effective Date, each holder of an Allowed L&H NV Common Stock Equity Interest will retain, in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed L&H NV Common Stock Equity Interest, its Allowed L&H NV Common Stock Equity Interest. Such holders of Allowed L&H NV Common Stock Equity Interest will not be entitled to receive any other Distributions under the Plan on account of the L&H NV Common Stock. L&H NV will retain both (i) 0.5% of the L&H NV Available Cash and (ii) 0.5% of the Class NV Litigation Membership Interests, which, subject to restrictions under applicable law, may be distributed to the holders of Allowed L&H NV Common Stock Equity Interest upon the dissolution of L&H NV. No interest will be paid on any L&H NV Class 7 Common Stock. Impaired Classes Of Equity Interests Against L&H NV (Not Entitled To Vote) L&H NV Class 8: Other Equity Interests In L&H NV L&H NV Class 8 consists of all Equity Interests in L&H NV not otherwise classified in L&H NV Class 6 or 7, including the interests of holders of L&H NV Old Stock Options and any Claims of the types described in the Bankruptcy Code. A holder of any Equity Interest in L&H NV not otherwise classified in L&H NV Classes 6 or 7 will receive no distributions under the Plan on account of such equity interest. Treatment Of Classified Claims Against L&H Holdings (a) Unimpaired Classes Of Claims Against L&H Holdings (i) L&H Holdings Class 1: Priority Non-Tax Claims Against L&H Holdings L&H Holdings Class 1 consists of all Claims against L&H Holdings entitled to priority under the Bankruptcy Code other than Priority Tax Claims and Administrative Expense Claims. On the Effective Date or, if such Priority Non-Tax Claim becomes an Allowed Priority Non-Tax Claim after the Effective Date, on the next Quarterly Distribution Date after such Priority Non-Tax Claim becomes an Allowed Priority Non-Tax Claim, a holder of an Allowed L&H Holdings Class 1 Priority Non-Tax Claim against L&H Holdings will receive, in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed L&H Holdings Class 1 Priority Non-Tax Claim: (a) Cash equal to the amount of such Allowed L&H Holdings Class 1 Priority Non-Tax Claim, or (b) such other treatment as to which Post Effective Date L&H Holdings and such holder will have agreed upon in writing. (ii) L&H Holdings Class 2: Secured Claims Against L&H Holdings L&H Holdings Class 2 consists of all Secured Claims against L&H Holdings, other than DIP Facility Claims. Each holder of an Allowed Secured Claim against L&H Holdings will be deemed to be classified in a separate Class and will be treated as follows: Each holder of an Allowed Secured Claim against L&H Holdings will, at the sole option of L&H Holdings or Post-Effective Date L&H Holdings, as the case may be, receive on the Effective Date on account of its Allowed Secured Claim (a) treatment as provided under the Bankruptcy Code, with any Cash payments required under the Bankruptcy Code being made on the Effective Date; or (b) such holder's Collateral. If the holder of an L&H Holdings Allowed Secured Claim receives treatment as provided in (a) above, such holder will retain the Liens securing the Allowed Secured Claim until paid in full. Any deficiency amount relating to an Allowed Secured Claim will be treated as a L&H Holdings Class 4 Unsecured Claim. Notwithstanding the foregoing, L&H Holdings or Post Effective Date L&H Holdings, as the case may be, and any holder of an Allowed Secured Claim may agree to any alternate treatment of such Secured Claim, which treatment may include preservation of such holder's Lien; provided, however, that such treatment will not provide a return to such holder having a present value in excess of the amount of such holder's Allowed Secured Claim. Any such agreement must be presented to the Bankruptcy Court, the L&H Creditors' Committee and the Dictaphone Creditors' Committee for approval at or prior to the Effective Date, and will not materially and adversely impact the treatment of any other creditor under the L&H Holdings Plan. (iii) L&H Holdings Class 3: Unsecured Claims Against L&H Holdings L&H Holdings Class 3 consists of all Unsecured Claims against L&H Holdings. Under the Plan, on the Effective Date or, if such Unsecured Claim becomes an Allowed Unsecured Claim after the Effective Date, on the next Quarterly Distribution Date after such Unsecured Claim becomes an Allowed Unsecured Claim, each holder of an Allowed L&H Holdings Class 3 Unsecured Claim will receive, in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed L&H Holdings Class 3 Unsecured Claim, a distribution equal to 100% of the principal amount of such Allowed L&H Holdings Class 3 Unsecured Claim, provided, however, that the total amount of Cash to be distributed or reserved on account of the holders of Claims in this class will not exceed $5,000,000, which amount will be allocated pro-rata among the holders of such Claims if the total amount of Allowed Claims in this Class exceeds $5,000,000. No interest will be paid on any L&H Holdings Class 3 Unsecured Claim. Impaired Class Of Equity Interests Against L&H Holdings (Entitled To Vote) L&H Holdings Class 4 Common Stock In L&H Holdings L&H Holdings Class 4 consists of all interests of the holders of L&H Holdings Common Stock on account of such interests. On the Effective Date, the L&H Holdings Common Stock will remain outstanding on and after the Effective Date. On the Effective Date and thereafter for each Distribution of L&H Holdings Available Cash, L&H NV, as the holder of all of L&H Holdings Common Stock, will receive 100% of each of (a) the L&H Holdings Available Cash and (b) the L&H Holdings Litigation Membership Interests. No interest will be paid on any L&H Holdings Class 4 Common Stock. Impaired Class of Equity Interests Against L&H Holdings (Not Entitled To Vote) L&H Holdings Class 5 Other Equity Interests In L&H Holdings L&H Holdings Class 5 consists of all Equity Interests in L&H Holdings not otherwise classified in L&H Holdings Class 4, including the interests of holders of L&H Holdings Old Stock Options and any Claims of the types described in section 510(b) of the Bankruptcy Code and any Securities Laws Claims against L&H Holdings. A holder of any Equity Interest in L&H Holdings not otherwise classified in L&H Holdings Class 4 will receive no distributions under the Plan on account of such equity interest. Treatment Of Classified Claims Against Dictaphone (a) Unimpaired Classes Of Claims against Dictaphone (i) Dictaphone Class 1: Priority Non-Tax Claims Against Dictaphone Dictaphone Class 1 consists of all Claims against Dictaphone entitled to priority under the Bankruptcy Code other than Priority Tax Claims and Administrative Expense Claims. On the Effective Date or, if such Priority Non-Tax Claim becomes an Allowed Priority Non-Tax Claim after the Effective Date, on the next Quarterly Distribution Date after such Priority Non-Tax Claim becomes an Allowed Priority Non-Tax Claim, a holder of an Allowed Dictaphone Class 1 Priority Non-Tax Claim against Dictaphone will receive, in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed Dictaphone Class 1 Priority Non-Tax Claim (a) Cash equal to the amount of such Allowed Dictaphone Class 1 Priority Non-Tax Claim, or (b) such other treatment as to which Post-Effective Date Dictaphone and such holder will have agreed upon in writing. (ii) L&H NV Class 2: Secured Claims Against L&H NV Dictaphone Class 2 consists of all Secured Claims against Dictaphone, other than DIP Facility Claims. Each holder of an Allowed Secured Claim against Dictaphone will be deemed to be classified in a separate Class and will be treated as follows: Each holder of an Allowed Secured Claim against Dictaphone will, at the sole option of Dictaphone or Reorganized Dictaphone, as the case may be, receive on the Effective Date on account of its Allowed Secured Claim (a) treatment as provided under the Bankruptcy Code, with any Cash payments required under the Bankruptcy Code being made on the Effective Date; or (b) such holder's Collateral. If the holder of an Allowed Secured Claim receives treatment as provided in (a) above, such holder will retain the Liens securing the Allowed Secured Claim until paid in full. Any deficiency amount relating to an Allowed Secured Claim will be treated as a Dictaphone Class 4 Unsecured Claim. Notwithstanding the foregoing, Dictaphone or Reorganized Dictaphone, as the case may be, and any holder of an Allowed Secured Claim may agree to any alternate treatment of such Secured Claim, which treatment may include preservation of such holder's Lien; provided, however, that such treatment will not provide a return to such holder having a present value in excess of the amount of such holder's Allowed Secured Claim. Any such agreement must be presented to the Bankruptcy Court, the L&H Creditors' Committee and the Dictaphone Creditors' Committee for approval at or prior to the Effective Date, and will not materially and adversely impact the treatment of any other creditor under the Dictaphone Plan. (b) Impaired Classes Of Claims Against Dictaphone (Entitled to Vote) (i) Dictaphone Class 3 Dictaphone Convenience Claims Against Dictaphone Dictaphone Class 3 consists of each (a) Allowed Unsecured Claim against Dictaphone in an amount equal to $2,500 or less, (b) Allowed Unsecured Claim against Dictaphone of a holder that has irrevocably elected on its Ballot to reduce such Claim against Dictaphone to the amount of $2,500 or less, and/or (c) Disputed Unsecured Claim against Dictaphone that becomes an Allowed Unsecured Claim of $2,500 or less with the consent of and in the amount agreed to by such Debtor or its successor-in-interest, as the case may be, or pursuant to a Final Order. Under the Plan, each holder of an Allowed Dictaphone Convenience Claim against Dictaphone will be paid an amount in Cash equal to 50% of such Allowed Dictaphone Convenience Claim, in full and complete satisfaction, settlement, release, and discharge of and in exchange for such holder's Claim on the later of (y) 30 days after the Effective Date; or (z) the first Business Day after the date that is 30 days after the date such Claim becomes an Allowed Claim; provided, however, that the total amount of Cash to be distributed or reserved on account of the holders of Allowed Claims in this class will not exceed $1,000,000, which amount will be allocated pro-rata among the holders of such Claims if the total amount of Allowed Claims in this Class exceeds $1,000,000. Dictaphone Class 3 specifically excludes any Claim classified under and receiving treatment as a Claim under Dictaphone Class 4 (Dictaphone Unsecured Claims), Dictaphone Class 5 (Lenders' Guaranty Claims), Dictaphone Class 6 (Deutsche Bank Line of Credit Claims), Dictaphone Class 7 (Dictaphone Noteholders Claims) and Dictaphone Class 8 (Intercompany Loan Agreement Claims). No interest will be paid on any Dictaphone Class 3 Dictaphone Convenience Claim. (ii) Dictaphone Class 4: Unsecured Claims Against Dictaphone Dictaphone Class 4 consists of all Unsecured Claims against Dictaphone, excluding Dictaphone Class 3 Claims (Dictaphone Convenience Claims against Dictaphone), Dictaphone Class 5 Claims (Lenders' Guaranty Claims against Dictaphone); Dictaphone Class 6 Claims (Deutsche Bank Line of Credit Claims against Dictaphone); Dictaphone Class 7 Claims (Dictaphone Noteholders Claims against Dictaphone); and Dictaphone Class 8 Claims (Intercompany Loan Agreement Claims against Dictaphone). Subject to some limitations, on the Effective Date, or, if such Unsecured Claim becomes an Allowed Unsecured Claim after the Effective Date, on the next Quarterly Distribution Date after such Unsecured Claim becomes an Allowed Unsecured Claim, each holder of an Allowed Dictaphone Class 4 Unsecured Claim will receive, in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed Dictaphone Class 4 Unsecured Claim, a Ratable Proportion of (a) 9% of the Distributable Shares of the Dictaphone New Common Stock and (b) 9% of the Class D Litigation Membership Interests. No interest will be paid on any Dictaphone Class 4 Unsecured Claim. The Distributions to holders of Allowed Claims against Dictaphone in the Classes receiving Dictaphone New Common Stock and Class D Litigation Membership Interests (i.e., Allowed Dictaphone Class 4 (Unsecured Claims), Dictaphone Class 5 (Allowed Lenders' Guaranty Claims), Dictaphone Class 7 (Dictaphone Noteholders Claims) and Dictaphone Class 8 (Intercompany Loan Agreement Claims)) will vary based upon the aggregate amount of Allowed Dictaphone Class 4 Unsecured Claims. The baseline Distribution allocation set forth in the Plan (prior to the reallocation set forth in the Plan) assumes that the aggregate amount of Allowed Dictaphone Class 4 Unsecured Claims is $37,500,000. Dictaphone Class 4 (Unsecured Claims) will receive proportionally more or less of the Dictaphone New Common Stock and Class D Litigation Membership Interests to the extent that the actual amount of Allowed Dictaphone Class 4 Unsecured Claims deviates from the $37,500,000 baseline assumption. For example, if the aggregate amount of Allowed Unsecured Claims in such Class is 50% greater than the $37,000,000 estimate, Dictaphone Class 4 will receive a 50% increase in the amount of Dictaphone New Common Stock and Class D Litigation Membership Interests (i.e., this Class would receive 13.5% of the total Distribution of Dictaphone New Common Stock and Class D Litigation Membership Interests instead of 9%). If the aggregate amount of Dictaphone Class 4 Unsecured Creditors falls anywhere within the range of $25 million to $50 million, the adjustment of the Distributions to the Dictaphone Class 4 will cause a corresponding adjustment of Distributions solely to Dictaphone Class 8 (Intercompany Loan Agreement Claims). To the extent that the aggregate amount Dictaphone Class 4 Unsecured Creditors falls anywhere outside the range of $25 million to $50 million, the adjustment of the Distributions to Dictaphone Class 4 will cause a pro rata adjustment of Distributions to each of Dictaphone Class 5, 7 and 8. The specific mechanics for these reallocations are set as follows: The Distributions of the Distributable Shares of the Dictaphone New Common Stock and of the Class D Litigation Membership Interests to holders of Allowed Dictaphone Class 4 Unsecured Claims will each be adjusted by the Dictaphone Class 4 Adjustment Percentage (e.g., a 10% increase in the estimated amount of Allowed Dictaphone Class 4 Unsecured Claims will effect a Distribution of (a) 9.9% of the Distributable Shares of the Dictaphone New Common Stock and (b) 9.9% of the Class D Litigation Membership Interests); (ii) the adjustment of the Distributions on account of the Allowed Dictaphone Class 4 Unsecured Claims effected in (i) above will cause a corresponding adjustment to the Distribution allocation of the Distributable Shares of the Dictaphone New Common Stock and of the Class D Litigation Membership Interests among the Dictaphone Class 5 Allowed Lenders' Guaranty Claims, Dictaphone Class 7 Dictaphone Noteholders Claims and Dictaphone Class 8 Intercompany Loan Agreement Claims as follows: (A) if the Dictaphone Class 4 Adjustment Percentage is within the range of 33.3% (the extent to which the Dictaphone Class 4 Adjustment Percentage is within such range, the "Standard Deviation"), then the Intercompany Distribution will be increased or decreased to effect the reallocation of Distributable Shares of the Dictaphone New Common Stock and of the Class D Litigation Membership Interests to holders of Allowed Dictaphone Class 4 Unsecured Claims; and (B) if the Dictaphone Class 4 Adjustment Percentage is greater than 33.3% (the extent to which the Dictaphone Class 4 Adjustment Percentage is outside such range is referred to as the "Excess Deviation"), then the Distribution allocation of the Distributable Shares of the Dictaphone New Common Stock and of the Class D Litigation Membership Interests among the Dictaphone Class 5 Allowed Lenders' Guaranty Claims, Dictaphone Class 7 Dictaphone Noteholders Claims and Dictaphone Class 8 Intercompany Loan Agreement Claims will be adjusted as follows: (i) to the extent of the adjustment for the Distributions accorded to the Class 4 Unsecured Claims arising from the Standard Deviation, then the Intercompany Distribution will be increased or decreased to effect such reallocation of Distributable Shares of the Dictaphone New Common Stock and of the Class D Litigation Membership Interests; and (ii) to the extent of the adjustment for the Distributions accorded to the Class 4 Unsecured Claims arising from the Excess Deviation, pro rata among each of the Dictaphone Class 5 Allowed Lenders' Guaranty Claims, Dictaphone Class 7 Dictaphone Noteholders Claims and Dictaphone Class 8 Intercompany Loan Agreement Claims based upon their respective allocations of Distributable Shares of the Dictaphone New Common Stock and of the Class D Litigation Membership Interests. Until a final Distribution is made on account of Allowed Dictaphone Class 4 Unsecured Claims, Reorganized Dictaphone will maintain sufficient reserves of Dictaphone New Common Stock and Class D Litigation Membership Interests to give effect to the foregoing adjustment provisions, which reserves will be held in escrow for the sole benefit of the ultimate beneficiaries of Distributions of such reserves. (iii) Dictaphone Class 5: Lenders' Guaranty Claims against Dictaphone Dictaphone Class 5 consists of all Claims under the Dictaphone Guaranty, including without limitation, all claims relating thereto. Subject to some limitations, on the Effective Date, or, if such Lenders' Guaranty Claim becomes an Allowed Lenders' Guaranty Claim after the Effective Date, on the next Quarterly Distribution Date after such Lenders' Guaranty Claim becomes an Allowed Lenders' Guaranty Claim, each holder of an Allowed Dictaphone Class 5 Lenders' Guaranty Claim will receive, in full satisfaction, settlement, release, and discharge of and in exchange for such Dictaphone Class 5 Lenders' Guaranty Claim, a Ratable Proportion of (a) Reorganized Dictaphone/Lenders 12% Notes, (b) 65% of the Distributable Shares of the Dictaphone New Common Stock and (c) 65% of the Class D Litigation Membership Interests. The Reorganized Dictaphone/Lenders 12% Notes are promissory notes payable by Reorganized Dictaphone to be issued by Reorganized Dictaphone on the Effective Date. As a condition to receiving the Distributions set forth in the Plan, all holders of Allowed Dictaphone Class 5 Lenders' Guaranty Claims will be deemed to have waived any right to receive, and will not receive, either directly or derivatively, any Intercompany Distributions, whether in the form of Distributions or proceeds thereof from any of the Debtors or their respective Estates. The Reorganized Dictaphone/Lenders 12% Notes will be in the aggregate original principal amount of $20,500,000 and bear interest at the rate of 12% per annum, payable semi-annually as follows: the first four semiannual interest payments may be, at Reorganized Dictaphone's sole option, paid in kind or in Cash; commencing on the fifth semiannual interest payment and thereafter, all payments of interest must be paid in Cash. The maturity date will be the fifth anniversary of the Effective Date. The Reorganized Dictaphone/Lenders 12% Notes may be prepaid in whole or in part at any time without penalty or premium. All payments of principal, interest and other amounts under the Reorganized Dictaphone/Lenders 12% Notes will be subordinated to the Exit Facility and will be pari passu with the Reorganized Dictaphone/DB 12% Note. Except with respect to the interest provided under the Reorganized Dictaphone/Lenders 12% Notes, no interest will be paid on any Dictaphone Class 5 Lenders' Guaranty Claim. (iv) Dictaphone Class 6: Deutsche Bank Line Of Credit Claims Against Dictaphone Dictaphone Class 6 consists of all Deutsche Bank Line of Credit Claims. On the Effective Date, each holder of an Allowed Dictaphone Class 6 Deutsche Bank Line of Credit Claim will receive, in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed Dictaphone Class 6 Deutsche Bank Line of Credit Claim, a Ratable Proportion of the principal amount of $6,000,000 of the Reorganized Dictaphone/DB 12% Note. The Reorganized Dictaphone/DB 12% Note is a promissory note payable by Reorganized Dictaphone to be issued by Reorganized Dictaphone on the Effective Date. The Reorganized Dictaphone/DB 12% Note will be in the aggregate original principal amount of $6,000,000 and bear interest at the rate of 12% per annum, payable semi-annually as follows: the first four semiannual interests may be, at Reorganized Dictaphone's sole option, paid in kind or in Cash; commencing on the fifth semiannual interest payment and thereafter, all payments of interest must be paid in Cash. The maturity date will be the fifth anniversary of the Effective Date. The Reorganized Dictaphone/DB 12% Note may be prepaid in whole or in part at any time without penalty or premium. All payments of principal, interest and other amounts under the Reorganized Dictaphone/DB 12% Note will be subordinated to the Exit Facility and will be pari passu with the Reorganized Dictaphone/Lenders 12% Note. Except with respect to the interest provided under the Reorganized Dictaphone/DB 12% Note, no interest will be paid on any Dictaphone Class 6 Deutsche Bank Line of Credit Claim. (v) Dictaphone Class 7: Dictaphone Noteholders Claims Dictaphone Class 7 consists of all Dictaphone Noteholders Claims. Subject to some limitations, on the Effective Date, or, if such Dictaphone Noteholders Claim becomes an Allowed Dictaphone Noteholders Claim after the Effective Date, on the next Quarterly Distribution Date after such Dictaphone Noteholders Claim becomes an Allowed Dictaphone Noteholders Claim, each holder of an Allowed Dictaphone Class 7 Dictaphone Noteholders Claim will receive, in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed Dictaphone Class 7 Dictaphone Noteholders Claim, a Ratable Proportion of (a) 18% of the Distributable Shares of the Dictaphone New Common Stock, (b) 18% of the Class D Litigation Membership Interests, and (c) the Dictaphone New Warrants. No interest will be paid on any Dictaphone Class 7 Dictaphone Noteholders Claim. (vi) Dictaphone Class 8: Intercompany Loan Agreement Claims Against Dictaphone Dictaphone Class 8 consists of all Intercompany Loan Agreement Claims against Dictaphone. Subject to some limitations, on the Effective Date, or, if such Intercompany Loan Agreement Claim becomes an Allowed Intercompany Loan Agreement Claim after the Effective Date, on the next Quarterly Distribution Date after such Intercompany Loan Agreement Claim becomes an Allowed Intercompany Loan Agreement Claim, each holder of an Allowed Dictaphone Class 8 Intercompany Loan Agreement Claim will receive, in full satisfaction, settlement, release, and discharge of and in exchange for such Allowed Dictaphone Class 8 Intercompany Loan Agreement Claim, a Ratable Proportion of the Intercompany Distribution, which is comprised of (a) 8% of the Distributable Shares of the Dictaphone New Common Stock, and (b) 8% of the Class D Litigation Membership Interests. These Intercompany Distributions may not be distributed, either directly or derivatively, to holders of Dictaphone Class 5 Lenders' Guaranty Claims or holders of Claims under the Belgian Revolving Credit Facility, and which Distributions are subject to adjustment under the Plan. Further, no interest will be paid on any Dictaphone Class 8 Intercompany Loan Agreement Claim. Impaired Classes of Claims Against Dictaphone (Not Entitled to Vote) Dictaphone Class 9 Securities Laws Claims Against Dictaphone Dictaphone Class 9 consists of all Claims against Dictaphone: (1) arising from rescission of a purchase or sale of a security of a Debtor or an Affiliate of a Debtor; (2) for damages arising from the purchase or sale of such a security; (3) for reimbursement, indemnification, or contribution allowed under the Bankruptcy Code on account of a Claim for damages or rescission arising out of a purchase or sale of a Debtor or an Affiliate of a Debtor; or (4) for similar violations of the of the securities laws, misrepresentations, or any similar claim, including, to the extent related to the foregoing or subject to subordination under the Bankruptcy Code, the Securities Class Actions/Suits against Dictaphone. A holder of any Securities Laws Claims against Dictaphone will receive no distributions under the Plan on account of such Securities Laws Claims. Impaired Classes of Equity Interests In Dictaphone (Not Entitled to Vote) Dictaphone Class 10 Equity Interests In Dictaphone Dictaphone Class 10 consists of all Equity Interests in Dictaphone. On the Effective Date, the certificates evidencing any and all Equity Interests will be cancelled, and the holders of any Equity Interests in Dictaphone will receive no Distributions under the Plan on account of such Equity Interests. (L&H/Dictaphone Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) MCMS INC: Files for Chapter 11 Protection in Delaware ----------------------------------------------------- MCMS, Inc., a global leading electronics manufacturing services provider announced that it has reached an agreement to sell substantially all of its operating assets to Manufacturers' Services Limited. MSL is also a global leading supplier in the electronics manufacturing services industry with headquarters in Concord, Massachusetts. Rick Rowe, Chief Executive Officer of MCMS, said, "MCMS is very pleased to have a company like MSL acquiring its business operations." He added "given MSL's size and strong global presence, I believe this proposed transaction offers great opportunities for MCMS's customers, employees, and suppliers." MSL President and Chief Operating Officer, Bob Donahue stated, "The acquisition of MCMS meets several of our long range strategic objectives, principally gaining a presence in Mexico and also strengthening our West Coast and Asian operations. Also MCMS adds depth in the area of optics and radio frequency technology while increasing the diversity of our customer portfolio." Simultaneously, MCMS announced that it, and its two U.S. subsidiaries, have voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware in Wilmington to implement the sale. During the bankruptcy process, MCMS will have the opportunity to consider other offers for the operating assets. The Chapter 11 cases do not involve MCMS's foreign subsidiaries with the exception of its Belgium subsidiary, which filed for Judicial Composition on September 5, 2001 under the applicable laws of Belgium. The terms and conditions of the definitive agreement entered into between MCMS and MSL relating to the asset sale, including a purchase price of approximately $43.5 million, subject to certain adjustments and the assumption of certain liabilities, will be described in the Form 8-K to be filed by MCMS with the Securities and Exchange Commission. MCMS also announced that it has secured a commitment for Debtor- in-Possession (DIP) financing from a consortium of banks led by PNC Bank, subject to bankruptcy court approval. MCMS emphasized that during the voluntary restructuring and sale process, day- to-day operations will continue uninterrupted. MCMS believes that the financing package and the other court orders that MCMS is requesting will, among other things, provide ample funding to pay all amounts due to its employees, maintain all employee benefit plans, and maintain normalized business with its suppliers post-petition allowing uninterrupted manufacturing services to its customers. The closing of the sale is expected to occur in November 2001, subject to regulatory and Bankruptcy Court approval. MCMS, Inc. is a global leading provider of advanced electronics manufacturing services to original equipment manufacturers who primarily serve the data communications, telecommunications, and computer/memory module industries. MCMS targets customers that are technology leaders in rapidly growing markets, such as Internet infrastructure, wireless communications and optical networking, that have complex manufacturing service requirements and that seek to form long-term relationships with their electronics manufacturing service providers. The Company offers a broad range of electronics manufacturing services, including pre-production engineering and product design support, prototyping, supply chain management, manufacturing and testing of printed circuit board assemblies, full system assembly, end-order fulfillment and after-sales product support. The Company delivers this broad range of services through operations in Nampa, Idaho; Durham, North Carolina; Penang, Malaysia; Colfontaine, Belgium; Monterrey, Mexico; and San Jose, California. MCMS information is available by visiting the company's Web site at http://www.mcms.com MCMS INC: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------- Lead Debtor: MCMS, Inc. 83 Great Oaks Blvd. San Jose, California 95119 Debtor affiliates filing separate chapter 11 petitions: MCMS Customer Services, Inc. MCMS Holdings, LLC Type of Business: Provider of advanced electronics manufacturing services to original equipment manufacturers, primarily serving the data communications. telecommunications and computer memory module industries. Chapter 11 Petition Date: September 18, 2001 Court: District of Delaware Bankruptcy Case Nos.: 01-10477 through 01-10479 Debtors' Counsel: Eric D. Schwartz, Esq. Donna L. Harris, Esq. Morris. Nichols, Arsht & Tunnell 1201 North Market Street Wilmington, DE 19801 (302)658-9200 Total Assets: $173,406,000 Total Debts: $343,511,000 Debtors' 20 Largest Consolidated Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ United States Trust Bond $145,000,000 Company of New York, as Trustee Jim Logan 114 West 47th Street New York NY 10036 Fax: 212-852-1626 United States Trust Bond $30,000,000 Company of New York, as Trustee Jim Logan 114 West 47th Street New York NY 10036 Fax: 212-852-1626 ATT Fixed Wireless Trade $3,038,993 Dennis Davenport PO Box 97059 Redmond, WA 98073 Tel: 425-702-2995 Fax: 425-702-2571 Extreme Networks Trade $2,862,877 Allan Miller 3585 Monroe St Santa Clara CA 95051 Tel: 408-579-3440 Fax: 408-279-3029 Avnct Electronics Marketing Trade $2,444,651 Sherry Westergren 2855 East Cottonwood Parkway Suite 220 Salt Lake City, UT 84121 Tel: 800-332-9326 Fax: 800-760-3237 Memec United Trade $2,375,326 Steve Grant Dept LA 22026 Pasadena CA 91185 Tel: 298-882-2444 Fax: 858-450-8859 Cisco Systems Trade $1,901,932 Veronica Foronda 170 W. Tasman Dr. San Jose, CA95134 Tel: 408-526-7000 Fax: 413-778-2305 Arrow Electronics Inc. Trade $556,592 Hector Hernandez 7459 South Lima Englewood, CO 80112 Tel: 303-645-8700 Fax: 919-572-9090 Galileo Technology Inc. Trade $444,028 Mike Tate 142CharcotAve San Jose CA 95131 Tel: 408-992-5413 Fax: 408-367-1401 JDS Uniphase Corp. Trade $443,373 Mike McGuire 200 Precision Drive Horsham, PA 19044 Tel: 215-328-6615 Fax: 215-675-901 Toppan Electronics Trade $437,963 Arnold Sema 7770 Miramar Road San Diego. CA 92126 Tel: 619-695-2222 Fax: 619-695-2165 Canyon County Tax Collector Trade $436,117 Gene Kuehn P.0.Box 1010 Caldwell ID 83606 Tel: 208-454-7354 Fax: 208-454-7388 Xpcdx Trade $388,$74 Brian Wright 432 Stealhead Way Boise, ID 83704 Tel: 208-375-3110 Fax: 208-376-9624 Tyco Trade $347,343 Martha Brown Middletown, PA 17057 2800 Fulling Mill Road Tel: 717-986-7309 Fax: 717-986-5073 Broadcam Corporation Trade $293,256 Scott Scott 16215 Alton Parkway Irvine, CA 92619 Tel: 949-585-5952 Fax: 714-450-8710 Multek, Inc. Trade $281,031 Gary Engstrom 16 Hammond Irvine, CA 92618 Tel: 949-609-7250 Fax: 949-951-5431 Matthews Metals Trade $218,684 Stewart Connector Systems Trade $217,688 L G Electronics Trade $217,273 North American Logistics Trade $212,859 MCMS INC: Strikes Deal to Sell Key Assets to MSL for $43.5MM ------------------------------------------------------------ Manufacturers' Services Ltd. (MSL) (NYSE: MSV) has entered into an agreement to acquire from MCMS, Inc. operations in Mexico, Asia and the U.S. for $43.5 million. The transaction is subject to approval by the Bankruptcy Court supervising the Chapter 11 case for MCMS, which was filed Tuesday. The operations that MSL is acquiring are an ideal fit with its strategic plan to expand operations in low cost regions, as the acquisition will add operations in Monterrey, Mexico, Penang, Malaysia and Xiamen, China. "This combination is a great fit for MSL and our combined customers. The additional facilities and capabilities will further round out our global offering and enhance our ability to serve customers throughout the entire product lifecycle," stated Bob Donahue, President and COO of MSL. "Both MSL and MCMS use BaaN as the primary ERP platform and this compatibility will ensure a smooth and rapid transition as the companies' assets are combined. The MCMS business principals of providing the highest levels of customer care will blend perfectly with the MSL culture." "We are confident that MSL offers our customers the best opportunity for world-class manufacturing support. Combined, we will continue to support the MCMS business philosophy of globally providing consistent quality systems, manufacturing processes, procedures and information systems in order to bring strategic advantages to our customers," said Rick Rowe, MCMS CEO. "Both companies' cultures are focused on the delivery of first-class customer care and will help enable a smooth transition through this process." Manufacturers' Services Ltd. (MSL) (NYSE:MSV) is a leading global provider of advanced electronics manufacturing services (EMS) to original equipment manufacturers (OEMs). The company operates a global network of manufacturing facilities in the world's major electronics markets - North America, Europe and Asia. MSL has developed relationships with leading OEMs in rapidly growing industries such as wired and wireless communications, networking and storage equipment, computer systems and peripherals, consumer electronics, industrial equipment and commercial avionics. MSL provides integrated supply chain solutions that address all stages of the product life cycle, including engineering and design, new product introduction, materials procurement and management, testing, printed circuit board assembly, product assembly, systems integration and assembly, order fulfillment, distribution and after-market support. MSL differentiates itself by providing exceptional customer service, by broadly and deeply integrating our services into our OEM customer's operations, and by leveraging information technology to connect a global network of supply, purchasing and fulfillment sites. MSL is headquartered in Concord, Mass. For more information, please visit the company's Web site at http://www.msl.com MARINER POST-ACUTE: Court Approves MHG's Disclosure Statement ------------------------------------------------------------- Judge Walrath issued an order approving the Disclosure Statement with respect to the MHG Senior Bank Lenders' First Amended Joint Plan of Reorganization as containing adequate information to enable holders of claims against and interest in Mariner Post- Acute Network, Inc. with to make an informed judgment about the MHG Senior Bank Lenders' First Amended Plan. Accordingly, Plan Proponents are authorized by the Court to use the Disclosure Statement in connection with the solicitation of votes to accept or reject the Senior Bank Lenders' First Amended Joint Plan of Reorganization under chapter 11 of the Bankruptcy Code. Summary of MHG Lenders' 1st Amended Plan of Reorganization PNC Bank, National Association, and First Union National Bank as Agents under the Bank Credit Agreements (the Plan Proponents) have agreed upon and formulated the First Amended Joint Plan of Reorganization whereby the lenders under the Bank Credit Agreements, including the Plan Proponents, (the Senior Bank Lenders) would oversee the emergence of the Debtors from chapter 11. The Banks, as Plan Proponents are represented by lawyers at O'Melveny & Myers LLP and Blank Rome Comisky & McCauley LLP. The Plan, provides that: (1) the Senior Bank Claims will be deemed allowed in the aggregate amount of approximately $440 million, such that each holder of a Senior Bank Claim will receive its Ratable Proportion of (A) Excess Cash, (B) New Senior Notes issued by Reorganized MHG or by one of its subsidiaries in an amount equal to the difference between $100 million and the aggregate amount of Cash distributed on or prior to the Effective Date on account of the Senior Bank Claims (including any Excess Cash distributed on the Effective Date), (C) the APS Proceeds (which shall constitute a mandatory prepayment on the Senior Bank Claim holders' New Senior Notes), (D) $48 million in New Subordinated Notes issued by Reorganized MHG or by one of its subsidiaries, (E) 80,000 shares of New Common Stock, representing 100% of the shares of New Common Stock of Reorganized MHG to be initially issued by Reorganized MHG (subject to dilution by the issuance of New Common Stock to New Management), (F) any distributions otherwise payable to holders of the Subordinated Note Claims to the extent such holders' subordination rights are not waived; (2) each holder of a General Unsecured Claim will receive in full satisfaction of such Claim, its Ratable Proportion of the General Unsecured Fund, which will consist of the lesser of (a) $7,500,000 or (b) the amount necessary to fund a 5% distribution to holders of Allowed General Unsecured Claims and Allowed Non-MPAN Subordinated Note Claims; (3) each holder of a non-MPAN Subordinated Note Claim will receive its Ratable Proportion of the General Unsecured Fund, and the Senior Bank Lenders will be deemed to have waived their subordination rights as to such bolder, if, but only if, (a) the class of non-MPAN Subordinated Note Claim holders has voted to accept the Plan and (b) such holder has not voted to reject the Plan; (4) each holder of a Mortgage Claim will receive a New Senior Note in the fair market value of such Claim determined as described in Section VIII.B.3.a and as set forth in the Plan or such other treatment as may be required by the Court in order to confirm the Plan pursuant to Section 1129(b) of the Bankruptcy Code; provided that if the Bankruptcy Court determines that the Allowed amount of such Claim is greater than the amount set forth in the Plan, or the Plan Proponents determine, in their sole discretion, not to provide the treatment dictated by the Court, the Plan Proponents may return the Collateral securing such Claim; (5) each holder of a United States Claim will be treated according to the terms of a settlement agreement as contemplated in Section 9.1(c) of the Plan, provided that, if no settlement agreement is reached, under Section 7.7 of the Plan these Claims may be conclusively estimated and limited by the Bankruptcy Court, and will be satisfied by a distribution of 5% of each Allowed Claim if by Final Order of the Court such Claims are determined to be unsecured Claims, or such treatment as is afforded by the Plan to a Secured Claim, Administrative Expense Claim or cure amount to the extent such Claims fall within such Class; and (6) no holder of an MPAN Claim, a Securities Litigation Claim or a Punitive Damage Claim against any of the Debtors, or any Equity Interest will receive or retain any property on account of such Claims or Interests. All distributions will be made as of the Effective Date or as soon thereafter as is practicable. The MHG Debtors' operations are currently managed by MPAN pursuant to the terms of a certain "Management Protocol" established at the time the Debtors entered into the DIP Facility. In exchange for providing management services to the Debtors, MPAN receives compensation on a monthly basis equal to 5% of the gross revenues of the Debtors. Pursuant to the DIP Facility, MPAN's management of the Debtors may be terminated by the Plan Proponents at any time prior to the Effective Date of the Plan and a replacement manager for the Debtors may be selected by the Plan Proponents. MPAN also may be replaced as the manager of the Debtors' operations after the Effective Date of the Plan. The Plan Proponents contemplate that MPAN will be terminated as the manager of the operations of the Debtors, whether before or after the Effective Date, and that Reorganized MHG will hire Capella Senior Living, LLC as new management to operate Reorganized MHG and the Subsidiary Debtors, as reorganized. It is anticipated that Reorganized MHG will provide the New Management up to 20% of the New Common Stock of Reorganized MHG through outright grants, options and stock option plans. In addition, if Reorganized MHG acquires any assets from the New Management (or any entity controlled by the New Management) that are used to operate Reorganized MHG, it is expected that such assets will be purchased in exchange for New Subordinated Notes. The Plan Proponents anticipate that, on or after the Effective Date, the Board of Directors will install new management for Reorganized MHG and the Subsidiary Debtors (as reorganized). To that end, the Plan Proponents have identified Capella Senior Living, LLC as the new manager for the facilities. It is further anticipated that, upon Capella's being installed as the new manager (a) Paul Diaz will become a member of the Board of Directors, and (b) the officers of Capella will become the officers of Reorganized MHG. Capella was formed in March 2000 to provide long term care services through the operation and management of nursing, rehabilitation and assisted living facilities located primarily in the eastern half of the United States. In November 2000, it was engaged by the Plan Proponents as a healthcare industry business advisor in connection with the Debtors' chapter 11 cases. Pursuant to that engagement, Capella, among other things, developed (a) a plan for the continued operation of the Debtors' facilities as part of a stand alone plan of reorganization (the "Business Plan"), and (b) a transition plan to provide for the transition of management services from MPAN to Capella (the "Transition Plan"). In addition, pursuant to the terms of the engagement, the Senior Lenders agreed to pay to Capella a monthly fee, a bonus upon confirmation of a plan of reorganization for MHG and the Subsidiary Debtors, and a termination fee upon the sale of the Debtors to MPAN or another third party. The Plan Proponents tell the Court that Capella has thoroughly evaluated the current state of the Debtors' facilities and has prepared a detailed and comprehensive plan for improving services to residents and ensuring efficient and effective business operations. In addition, Capella has prepared for the movement of business operations from MPAN to Capella, expending significant resources to prepare for the transition, organize the management team and create business processing support systems and infrastructure. Capella has performed detailed due diligence on MHG's information systems and operations, reviewed facility and company financials, and examined the long term care industry as a whole. Capella reviewed, among other things, facility inspection reports, liability claims, and its corporate compliance program. Capella's senior management performed comprehensive due diligence analysis on all aspects of the Debtors' operations as preparation for developing the Business Plan. Capella met with MPAN senior management with responsibility for Debtor facilities at MPAN's corporate offices in Atlanta in late February 2001 and began a series of weekly detailed conference calls with MPAN representatives. The Business Plan prepared by Capella (as revised from time to time) forms the basis for the Plan including, without limitation, the determination of which facilities to retain as part of the Debtors' operations going forward. As part of the Business Plan, Capella has also consulted with three different representatives of national insurance carriers and has confirmed that adequate insurance coverage will be available without interruption by the Effective Date. Capella is developing risk management and loss prevention programs for both residents and employees and is experienced in dealing with third party claims administration programs, the Plan Proponents note. The Transition Plan specifically addresses all the steps needed to successfully transition management services from MPAN to Capella. The Transition Plan identifies risks of execution for each major area of operations, addresses such risks and includes contingency plans for addressing any unexpected developments. The Transition Plan includes specific steps to address the area of business processing, which includes such vital functions as time and attendance, payroll, clinical/billing systems, resident assessment data collection and collection of financial data. Capella does not believe Reorganized MHG faces any significant risk if a CIA is imposed, but has nonetheless closely monitored the negotiations between MPAN, MHG and government agency representatives. As part of the Plan, Reorganized MHG will acquire 100% of the limited liability company interests in Capella from the owners thereof in a tax-free exchange for $2 million of New Subordinated Notes. Thereafter, Capella will be a wholly owned limited liability subsidiary of Reorganized MHG. The Plan Proponents also advise that the principals and senior management of Capella include highly-qualified facility operators and managers, with over two decades of experience as long term care entrepreneurs (having successfully built and managed several companies), healthcare professionals, and advisors to long term care facilities and financial institutions, and include the following: * Paul J. Diaz, JD, Co-Founder, Chairman/CEO Mr. Diaz previously served as Executive Vice President and Chief Operating Officer with MHG where he was responsible for managing and directing the health services company's diversified business units in 39 states. Mr. Diaz joined MHG as President of its Inpatient Division following MHG's acquisition in October 1996 of Allegis Health Services, Inc., which Mr. Diaz helped to found in 1989 and where he served as Chief Executive Officer and Vice-Chairman of the Board until the 1996 acquisition. Mr. Diaz has a B.A. Finance and Accounting (American University) and a J.D. (Georgetown University Law Center). * David N. Hansen, Co-Founder, President/CFO Mr. Hansen served as Executive Vice President, Chief Financial Officer and Treasurer of MHG where he was responsible for financial reporting, management of information systems, annual business planning, investor relations and reimbursement. In addition, Mr. Hansen was elected to the MHG Board of Directors in 1997. Prior to his position at MHG, Mr. Hansen was an engagement partner in the Boston office of Coopers & Lybrand, LLP, responsible for providing audit, tax and consulting services to health care and other service businesses. Mr. Hansen has a B.A. Business Administration from the University of Massachusetts and an M.B.A. from Cornell University. * Francis X. Hinckley, Senior Vice President and Chief Information Officer * Patricia M. McGillan, Esq., General Counsel, Senior Vice President, Quality Assurance and Compliance * Thomas Pedroni, Jr., Esq. Senior Vice President, Risk Management Services * Patrick J. Cimerola, M.S. Senior Vice President, Human Resources * Francine R. Kwiatkowski, BSN, MBA Senior Vice President, Resident Services * James F. Offutt Senior Vice President, Finance * Daren A. Cortese, MBA Senior Vice President, Business Development At present, Capella staff number 31 full and part-time staff who are engaged in each major area of operations. By the Effective Date, Capella's corporate, transition and operations teams will include 90 full time positions, including 24 Information Systems consultants. MPAN asserts that it and MHG may have claims against, among others, Messrs Diaz and Hansen of Capella, arising in connection with their prior employment by MHG and the acquisition by MPAN of MHG in 1998. Messrs Diaz and Hansen deny any liability to MPAN or MHG and assert that they may have claims against, among others, MPAN as a result of actions taken by or on behalf of MPAN during the MHG chapter 11 cases. The Plan does not address the merits of the claims nor their resolution and there can be no assurance that these claims would not, if litigated, impair or impede confirmation of the Plan. (Mariner Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900) MAXICARE HEALTH: CaliforniaChoice Acts to Protect Members --------------------------------------------------------- In an effort to assure continuity of care for its enrollees, CaliforniaChoice announced that Maxicare members will be afforded the opportunity to switch carriers effective Jan. 1, 2002. In addition, no new Maxicare membership will be accepted by CaliforniaChoice beyond the Nov. 1 coverage effective date. This significant action was driven by the current uncertainty on the future viability of Maxicare which filed for bankruptcy June 25, and which remains under the close supervision of the California Department of Managed Health Care (DMHC). "We were informed by the DMHC that despite their best efforts, no buyer emerged for many of Maxicare's commercial membership products. Since 90 percent of Maxicare's small employer group membership is enrolled through CaliforniaChoice, we decided to take this step now rather than expose our members to continued uncertainty," said John Word, III, co-founder and managing partner of CaliforniaChoice. "The DMHC has done an excellent job in assuring Maxicare members access to medical coverage during this recent period, but we felt that now was the time to start implementing an exit strategy," Word continued. At present, it is business as usual for all currently enrolled Maxicare members. Doctors, hospitals and pharmacies are, by law, required to continue honoring their contracts. CaliforniaChoice is an employee choice health program offered to employers of two to 50 employees. It is composed of eight different HMO networks -- including Maxicare -- as well as PPO options. Employers set a contribution budget and then empower each employee to make their own health plan and benefit level selections based on family needs and budget. Since hospitals and physicians affiliate with multiple health plans, switching from Maxicare to another plan offered through CaliforniaChoice will allow enrollees to most likely retain their providers of preference with no break in continuity. In addition, benefit and co-pay levels between all CaliforniaChoice HMO plans are identical, further ensuring continuity in coverage. Taking this action now preempts any fears enrollees may have of being stranded without coverage or access to their choice of providers. "Continuity of care is critical and people should be able to access the doctor and hospital they want," said Word. "Our No. 1 priority is to assure that CaliforniaChoice Maxicare members receive uninterrupted access to medical care. The best way to do this is to provide them the opportunity to pick a new health plan without any disruption for themselves or their employer group." Over the past two years, the growing instability of medical groups and health plans have caused considerable disruption to the people of California. Often, individuals are forced to choose a new doctor with whom they have no prior relationship or are assigned a doctor by the health plan. Word said this is "not only unsettling and frustrating, but adds cost to the system. New doctors want to do their own tests on patients, often duplicating perfectly fine work that has recently been done." Sadly, it is the individual employee who often bears the brunt of financial insolvency, contract disputes or other turbulence which disrupt what were once solid companies and relationships, said Word. The protection CaliforniaChoice provides is to ensure that doctors and hospitals are available on more than one of our health plans so employees have a choice and a safety net to guard against this environment. As the nation's fastest-growing health purchasing alliance, CaliforniaChoice currently has 150,000 members and more than 10,000 employer groups in California. MESA AIR: Slashes Senior Executive Pay and Reduces Operations ------------------------------------------------------------- Mesa Air Group, Inc. (Nasdaq: MESA), announced that effective immediately, the company has instituted a reduction in senior management pay. Chairman and Chief Executive Officer Jonathan Ornstein and President and Chief Operating Officer Mike Lotz will have their base salaries reduced by 50 percent, to $100,000 and $87,500, respectively. Other members of the Mesa senior management team will take a 20 percent reduction. Mesa also announced that it will reduce turboprop operations at its Air Midwest and CCAIR subsidiaries, effectively immediately. "Unlike our regional jets that are flown under contract to our major airline partners, the bulk of our turboprop operations are flown under a standard revenue-sharing agreement," said Lotz. "The reduction will be approximately 20 percent of Mesa's non- contract flying, or approximately 7 percent of its total flying. We regret the further impact this will have on rural communities." "Considering the extraordinary events, we believe it is better to be proactive than reactive. Mesa is in a strong financial position now, but we need to implement these steps quickly so we can remain that way," Ornstein stated. "The act of war on September 11 has already had a chilling effect on commercial aviation. One carrier has declared bankruptcy and other carriers are announcing significant layoffs and schedule reductions. We urge the federal government to quickly approve an airline financial relief package before the situation worsens." Mesa Air Group currently operates 126 aircraft with 1,100 daily system departures to 120 cities, 36 states, Canada and Mexico. It operates in the west and mid-west as America West Express, the mid-west as US Airways Express and Midwest Express and the east as US Airways Express, and in New Mexico under the independent Mesa Airlines. In addition, the company has 61 regional jets on firm order and holds options on another 184 jet aircraft. The Company, which was founded in New Mexico in 1982, has approximately 4,000 employees. Mesa Air Group, Inc. has signed recently a letter of intent with Raytheon Aircraft Company and Raytheon Aircraft Credit Corporation to settle outstanding issues related to its Beech1900D aircraft fleet financed with Raytheon. In the letter of intent, which is subject to definitive documentation, Raytheon has agreed to assist Mesa in reducing Mesa's 1900D operating expenses. Mesa and Raytheon have also come to an agreement under which Mesa is no longer in default under the outstanding loan agreements. NATIONAL AIRLINES: Waives Customer Advance Purchase Requirements ---------------------------------------------------------------- In an effort to aid travelers in the aftermath of the last week's tragedy, National Airlines is removing all advance purchase requirements on most published fares for tickets purchased by September 28, 2001. "As our nation fights to deal with the catastrophic events of September 11th, the hearts and prayers of all National Airlines employees continue to be with the families and friends of those affected," said Michael J. Conway, president and CEO of the airline. "It will take time to heal the physical, psychological and emotional wounds from these heinous acts, but like so many of our political and business leaders have stated, this country will not falter to terrorism. Americans are strong and already we have seen a concerted effort to get our nation back to some semblance of normalcy. "National Airlines is waiving the advance purchase requirements on tickets to help people be with loved ones," the CEO added. "In doing so, our lowest priced tickets can be acquired right up to the flight time, based on availability." Conway concluded, "To the many heroes that have emerged, and to those who will emerge, we thank you. And to our colleagues, particularly at American Airlines and United Airlines, please know that all of National Airlines is with you." National Airlines serves Chicago Midway, Chicago O'Hare, Dallas/Ft. Worth, Los Angeles, Miami, Newark, New York JFK, Philadelphia, San Francisco and Washington, DC with nonstop flights to and from its Las Vegas hub. National Airlines is making adjustments and reductions to its flight schedule as a result of the tragic events of September 11th. It is set to slash its existing service by as much as 20 percent. Two weeks before that, National Airlines announced that it would file a restructuring plan in middle of next month. OWENS CORNING: Making Secret Pension Plan Contributions ------------------------------------------------------- Owens Corning filed a motion with the U.S. Bankruptcy Court for the District of Delaware asking for authority to make contributions to the Debtors' pension plan. J. Kate Stickles, Esq., at Saul Ewing LLP in Wilmington, Delaware, disclose that the Debtors have sponsored pension plans to provide retirement income to eligible employees embodied in the Owens Corning Merged Retirement Plan with approximately 30,000 participants. PricewaterhouseCoopers (PwC), the pension plan's actuary, has projected that the Debtors will be required to make mandatory minimum funding contributions under applicable law and regulations in the amount of [REDACTED] plus incremental premiums to the PBGC of [REDACTED]. Ms. Stickles contends that the relief requested is appropriate and in the best interest of the Debtors, their estates and creditors and should be authorized. In accordance with mandated minimum funding requirements, the Debtors must make a payment of [REDACTED]. Ms. Stickles claims that payment by September 15, 2001 is more desirable because: (1) it satisfies the same legal minimum funding requirements with substantially less aggregate contributions over the projected period; (2) [REDACTED] in contributions to the pension plan is projected to be required in any event; (3) it eliminates PBGC excess insurance premiums of approximately [REDACTED]. Ms. Stickles asserts that the Debtors has more than sufficient cash to make the required contributions that will not require further borrowings and can be made without exhausting cash reserves. (Owens Corning Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) OWENS CORNING: Net Income Tops $29 Million in Second Quarter ------------------------------------------------------------ Net sales of Owens Corning for the quarter ended June 30, 2001 were $1.239 billion, down 4% from the second quarter 2000 level of $1.295 billion. The decrease is due to price and volume declines in North American Building Materials businesses, as well as the sale of the Falcon Foam and European Building Materials businesses. Adjusted for the disposition of these businesses, sales in 2001 declined 2% compared to the second quarter of 2000. In the Building Materials Systems business, sales during the second quarter of 2001 reflect volume and price decreases in the U.S. insulation market and price decreases in U.S. roofing markets offset partially by volume increases in roofing, compared to the second quarter of 2000. In the Composite Systems business, sales reflect price increases in composites markets during the second quarter of 2001 offset by volume decreases primarily in the U.S. On a consolidated basis, the currency translation impact of sales denominated in foreign currencies was unfavorable during the second quarter of 2001 compared to the second quarter of 2000. For the quarter ended June 30, 2001, Owens Corning reported net income of $29 million, compared to a net loss of $425 million for the quarter ended June 30, 2000. On a pre-tax basis, Owens Corning reported income from operations of $57 million in the second quarter of 2001. When adjusted for $17 million in costs of restructuring and other charges and $17 million in Chapter 11 related expenditures, Owens Corning generated $91 million in income from operations compared to $152 million for the second quarter of 2000 (adjusted for asbestos-related charges). Net income for the second quarter 2001 reflects the price and volume decreases described above compounded by continued increase in energy costs recognized as well as the impact of the Company's review of cost structures. Cost of borrowed funds during the second quarter of 2001 was $4 million, $47 million lower than the second quarter 2000 level, due to the cessation of interest (totaling $46 million during the quarter, and $96 million year to date on most debt as a result of the Chapter 11 Filing. Net sales for the six months ended June 30, 2001 were $2.306 billion, down from the $2.552 billion reported for the first six months of 2000. Price and volume decreases across North American Building Materials markets and the disposition of Building Materials Europe resulted in the sales decline. The net income for the six months ended June 30, 2001 was $19 million, compared to a net loss of $377 million for the same period in 2000. PACIFIC GAS: Assumes Amended PPA with QF United Cogen ----------------------------------------------------- Pursuant to an Order of the Court governing the amendment and assumption of Power Purchase Agreements with QFs, Pacific Gas and Electric Company gives Notice, dated August 15, 2001 of its intention to amend and assume, the Power Purchase Agreement of the Qualifying Facility United Cogen, Inc., pursuant to 11 U.S.C. Section 365 and Rules 6006 and 9019 of the Federal Rules of Bankruptcy Procedure: United operates a co-generation facility with a capacity of 30,000 kW. Prior to the commencement of its bankruptcy case, PG&E failed to pay in full the amounts due under the PPA between PG&E and Hypower, Inc., resulting in pre-petition claims for payment to United in the amount of $13,014,189.15 (the Pre- Petition Payables). The Assumption Agreements provides for August 20, 2001 as the effective date for the PPA Amendments and PG&E's assumption of the PPA, provided that United has the right to terminate its respective Assumption Agreement and PPA Amendment for a 15-day period following the entry of the Bankruptcy Court Order approving the Assumption Agreements in the event that the QF cannot obtain satisfactory fuel supply and financial arrangements and internal approvals as set forth in the Assumption Agreements. Upon the effective date of assumption of the PPAs, the Pre- Petition Payables will be elevated to administrative priority status and will accrue interest, and will be paid by PG&E to United in accordance with the Assumption Agreement providing that United's right to dispute the amount of the Pre-Petition Payable is reserved in accordance with the Assumption Agreement. United waives certain potential administrative and pre-petition claims, including any claim to receive any difference between a "market rate" and the contract price for energy and capacity delivered to PG&E from and after April 6, 2001 through August 20, 2001, the effective date for PG&E's assumption of the PPA. (Pacific Gas Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900) PAYSTAR COMMS: Plan to Make $3.5MM Debt Reduction Underway ---------------------------------------------------------- PayStar Corporation (OTCBB:PYST), the nation's leader in providing content-based Internet Kiosks, Cashless ATM devices, Prepaid Telecom Services and Wireless Banking, announces the recasting of Q3 estimated revenues to lower than expected. This recast is a result of the recent economic downturns and a reduction in Cashless Teller Machine (CTM) purchase orders from its U.S. Cash Exchange Business Unit. Recently a major national distributor has notified U.S. Cash Exchange that its orders for third quarter will be significantly lower than originally forecast due to one of its major dealers going out of business. A Summit Technologies (national distributor) spokesperson said it is currently in negotiations with two new replacement dealers and orders for Q4 should return to normal. PayStar is pleased to announce that plans are under way to lower Q3 short-term debt by approximately $3.5 million, which will significantly improve the balance sheet. PayStar's recent reorganization has resulted in a 15% reduction in force. This will result in what management believes will continue to improve the bottom line and accomplish year-end goals. PayStar Corporation, a premier global distributor of telephony and financial services, provides its customers with an array of enabling devices. PayStar is comprised of three fully integrated divisions: Commercial Telephony Switch Services, Consumer Internet and Telephony Products including prepaid cards, and Consumer Services providing service and maintenance of Cashless ATMs (CTMs), payphones and Internet enabled kiosks. PayStar is the location services provider (LSP) to retail merchants and is considered a "carrier's carrier" for wholesale telecom services worldwide. Success is driven by internal sales and mergers and acquisitions. PayStar's global strategy centers on expanding its network of thousands of merchant locations that utilize its enabling devices. * * * The Company will need additional working capital to be successful in its activity and to service its current debt and for the potential claims from the contingent liabilities outlined in note 13 and therefore continuation of the Company as a going concern is dependent upon obtaining the additional working capital necessary to accomplish its objective. Management has developed a strategy, which it believes will accomplish this objective and is presently engaged in seeking and has obtained various sources of additional working capital including additional loans from officers, equity funding through a private placement, long term financing, and increased revenues from sales which will enable the Company to operate for the coming year. Liquidity & Capital Resources As of June 30, 2001, the Company had $345,277 in cash. Its operating activities generated a negative cash flow of $471,256 for the three months ended June 30, 2001. Cash used from investing activities of $221,379 for the three months ended June 30, 2001, was primarily expended for the purchase of several subsidiaries. Its financing activities generated cash of $406,000 as of June 30, 2001. The principal reason for the cash generated was from the sale of stock in our private placement issuance. The Company's future capital requirements will depend on numerous factors, including: - Revenue generation from our newly formed subsidiaries; - Increased sales of ATM machines; - Entry into the Prepaid Services arena; and - Greater efficiency of operations. The Company expects to fund its operations through profits from the above factors as well as from future private and public financing. As of June 30, 2001, PayStar Communications Corporation and its subsidiaries had total assets of $4.8 million and total current liabilities of $6.5 million. The Company's total stockholders' deficiency totaled $(1.685) million. RELIANCE GROUP: Bank & Creditors Panel Jointly Employ PwC --------------------------------------------------------- Pursuant to 11 U.S.C. Sections 328(a), 1103(a) and Rule 2014(a), the Official Unsecured Bank Committee and the Official Unsecured Creditors' Committee of Reliance Group Holdings, Inc. seek permission to jointly retain PricewaterhouseCoopers as its financial advisor. Counsel from White & Case and Orrick, Herrington tell the Court that the Committees met on July 26, 2001, and agreed to retain PwC as its joint financial advisors. Around August 9, 2000, the Bank Group retained PwC to provide financial advice in connection with the investigation of the financial condition of the Debtors and consideration of options available to the Bank Group with respect thereto. PwC has provided such services to the Bank Group throughout the discussions culminating in the Term Sheet completed shortly before the filing. As part of its retention by the Bank Group, PwC became familiar with the financial and operating structure of RGH, their financial affairs and various issues, which are important in the context of these cases. At the suggestion of the United States Trustee, the Committees propose to share PwC's services in order to minimize expense. In the event that the Committees become adverse to each other with respect to a particular issue, the Committees have agreed that the Creditors' Committee shall be permitted to retain a financial advisor other than PwC with respect to such issue and PwC shall continue to provide services to the Bank Committee. Subject to further order of this Bankruptcy Court, PwC is expected to render the following services, among others, to the Committees: (a) Study of Reserves - reviewing any recent studies of RIC's reserves performed by the Company or by any third party advisor to the Company. To the extent appropriate, perform independent analyses of loss and loss adjustment expense reserves; (b) Run-Off Model - analyzing any proposed run-off models received from the Debtors as well as, if appropriate, preparing independent run off analyses; (c) Historical Operating Activity - preparing analyses of the Company's historical operating activities and results; (d) Cash Flow - analyzing the Company's historical, actual and projected cash flows; (e) RIC Operating Activities - subject to the availability of information, monitoring the run-off performance of RIC related to reserves, claims settlement activities, reinsurance recoveries, overhead costs, investment returns, asset sales, etc; (f) Asset Sales - evaluating the Debtors' proposed asset dispositions including an analysis of the reasonableness of value received; (g) Assets and Liabilities - evaluating the Debtors' assets for realizable value and liabilities for validity; (h) Tax - Advising the Committees in matters related to the Debtors' tax position, including evaluating methods to maximize the value of the Debtors' net operating loss carry forward; (i) Plan of Reorganization - Assisting the Committees in negotiating a consensual Plan of Reorganization with the various parties in interest or, as necessary, assisting the Committees in developing alternative courses of action; (j) Other - performing such other tasks and services as requested by the Committees and/or their counsel; Robert J. Darefsky, CPA and partner at PricewaterhouseCoopers, leads the engagement. To the best of the Committees' knowledge, PwC has no connection with the Debtors, their creditors, any other parties in interest, or their respective attorneys and accountants, District Judges or Bankruptcy Judges in this District, or with the United States Trustee or any person employed in the office of the United States Trustee, except that PwC has provided or currently provides recurring audit and/or tax services to: (1) bank group members JP Morgan Chase, Bank of Montreal, Credit Lyonnais, Angelo Gordon & Co., Fleet Bank, Sanwa Bank, and certain subsidiaries of Deutsche Bank Alex Brown; (2) bondholders Conseco Capital Management, Pacific Investment Management Company (PIMCO), HSBC, TCW, Wells, The Dreyfus Corp., and certain affiliates of Mitchell Hutchins Asset Management; and (3) other parties in interest Bank of America, Union Bank of California, Brokers Risk Placement Services, certain affiliates of Credit Suisse First Boston, Reed Elsevier, Resources Connection, The Depository Trust Company, Dow Jones & Co. and certain affiliates of Wells Fargo Bank. To the best of Affiant's knowledge and belief, the audit and/or tax services rendered to the aforementioned parties are all in matters unrelated to the proceedings at hand. PwC has provided or currently provides non-recurring financial, human resource, and/or management consulting advisory services to: (1) bank group members JP Morgan Chase, Bank of Montreal, Credit Lyonnais, Angelo Gordon & Co., Fleet Bank, Sanwa Bank, ABN Amro Bank, Amroc Investments, LLC, Firstrust Bank, and certain subsidiaries of Deutsche Bank AlexBrown; (2) bondholders Conseco Capital Management, PIMCO, HSBC, TCW, Wells, The Dreyfus Corp., Merrill Lynch, Indosuez Capital, ORIX, OTA Limited Partnership, UBS Asset Management, Wexford Management and certain affiliates of Mitchell Hutchins Asset Management; and, (3) other parties in interest Bank of America, Union Bank of California, Aspen Publishers, Inc., Bank of New York, Bear Stearns &Co., Inc., Xerox Corporation, Wasserstein Perella Securities, Inc., United Parcel Services, Congressional Quarterly, certain affiliates of Credit Suisse First Boston, Reed Elsevier, The Depository Trust Company, Dow Jones & Co. and Wells Fargo Bank. Further, upon information and belief, PwC has in the past provided certain human resource advisory services to entities in which Carl Icahn has been affiliated. With over an estimated 200,000 claims files, RIC was one of the largest property & casualty insurance companies in the United States. As a result, in the ordinary course of its business RIC was involved in a substantial number of disputed claims. PwC has in the past (a) represented various parties in dispute with RIC; and(b) represented RIC, either individually or as part of a larger pool of insurers, in resolving disputed claim matters. PwC is currently involved in one disputed claim matter involving RIC. PwC is serving as a consultant to an entity involved in an approximate $4.0 million disputed claim with RIC. To the extent necessary, PwC will file supplemental affidavits in respect of ongoing services provided or related to RIC. All of the past and current matters were/are in the ordinary course of business and did not relate to the proceedings at hand. Further, with respect to the aforementioned ongoing engagement, PwC will establish ethical walls between members of the engagement team and the team assembled to provide services hereunder to the Committees to ensure that there is no sharing of information of any type. In addition to the items noted in the previous paragraph, in 1999, PwC provided real estate advisory services to a client involved in a potential shopping mall development project with Reliance Development Group. Further, in mid 2000, PwC was briefly retained by RIC to help the claims department perform an independent assessment of their Total Outcome Management claim management system. Both of these limited scope engagements were completed in a short time frame and prior to the retention of PwC by the Unofficial Bank Committee in August 2000. PwC has also in the past represented and currently represents numerous state insurance departments, including providing actuarial and other attestation and advisory services to the State of Pennsylvania Department of Insurance, the California Department of Insurance and to the New York State Department of Insurance. PwC is not currently representing any regulatory insurance agencies in matters related to these proceedings. Given the magnitude and diversity of its client base and its scope of offices nationwide, PwC is, at any point in time, involved as a party or witness in numerous court and administrative proceedings and other general matters requiring the retention of outside legal counsel. As a result, PwC may have retained, may currently retain, or may in the future retain, certain law firms involved in these proceedings. In addition, PwC may be presently, may have been in the past or may in the future be retained by such law firms to provide attestation or advisory services. Any such retention by PwC of these firms or any such retention of PwC by these firms is, was or will be wholly unrelated to these proceedings and does not and will not impair PwC's independence, disinterestedness, or ability to objectively perform professional services in these proceedings. To the best of the Committees' knowledge, information and belief consistent with Section 1103(b) of the Bankruptcy Code, PwC does not hold or represent any interest adverse to the Debtors as debtors-in-possession or to their estates. The Committees submit that PwC is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code and does not hold any adverse interest to the Debtors, and that PwC is qualified to serve as financial advisors for the Committees pursuant to Section 328 and 1103 of the Bankruptcy Code and Rules 2014 and 5002 of the Bankruptcy Rules. The Committees propose that PwC be compensated for the services described herein at its ordinary billing rates and in accordance with its customary billing practices regarding other charges and expenses, all pursuant to the provisions of Sections 330(a) and 331 of the Bankruptcy Code, such Bankruptcy Rules as may from time to time be applicable, such procedures as may be fixed by order of this Court. PwC's hourly rates are set at a level designed to fairly compensate the firm for the work of its professionals and to cover fixed and routine overhead expenses. Hourly rates vary with the experience and seniority of the individuals assigned. The hourly rates charged by PwC are consistent with the rates charged in non-bankruptcy matters of this type and are subject to periodic adjustments to reflect economic and other conditions. The current hourly rates of the partners, directors, managers, senior associates, associates, administrative and paraprofessionals of PwC are as follows: * Partners $500-$625 * Directors/Managers $360-$525 * Senior Associates/Associates $185-$285 * Administrative/Paraprofessionals $95-$140 PwC has been paid for all estimated accrued time and expenses on behalf of the Bank Group through the Petition Date. PwC currently holds a retainer in the approximate amount of $235,000. The remainder of the Retainer will be applied against fees and expenses to be submitted for this Court's approval pursuant to the requirements of the Bankruptcy Code, Federal Rules of Bankruptcy Procedure and local rules of this Court, and future fees pursuant to Sections 330 and 331 of the Bankruptcy Code and the Fee Guidelines. The Committees submit that the employment and retention of PwC is necessary and would be in the best interest of the Debtors and their estates. The Committees believe that their respective interests are aligned with the work and services that it is anticipated PwC shall perform in these cases. To the extent that a conflict between the Committees should arise that would make it impracticable or inappropriate for PwC to continue as financial advisors for both Committees in respect of a particular issue, the Committees have agreed that PwC may continue as financial advisor for the Bank Committee, and the Bank Committee will support any reasonable application by the Creditors' Committee for the employment and retention of a separate financial advisor in respect of such issue. (Reliance Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) STERLING CHEMICALS: Gets Final Approval of $195MM DIP Financing --------------------------------------------------------------- On July 16, 2001, Sterling Chemicals Holdings, Inc. (OTC Bulletin Board: STXX) and certain of its U.S. subsidiaries (the "Company") filed voluntary petitions commencing cases under Chapter 11 of the United States Bankruptcy Code. The Bankruptcy Cases are pending in the U.S. Bankruptcy Court for the Southern District of Texas and are being jointly administered under case number 01-37805-H4-11. On July 18, 2001, the Bankruptcy Court entered an interim order authorizing the Company to obtain debtor-in-possession (DIP) financing from a group of lenders led by The CIT Group/Business Credit, Inc., subject to entry of a final order by the Bankruptcy Court. On Tuesday, the Company announced that the final order was entered by the Bankruptcy Court on September 14, 2001. Under the DIP financing, the Company may borrow up to $195 million, subject to satisfying applicable borrowing base requirements and certain funding conditions. Frank P. Diassi, Sterling's Chairman of the Board commented, "Obtaining final court approval of our DIP financing is a significant step in the Company's efforts to successfully reorganize under Chapter 11. The DIP financing is designed to provide us the liquidity necessary to fund operations during the restructuring process, from which we expect to emerge with an improved and more viable capital structure." A portion of the DIP financing was used to repay the Company's pre-petition revolving credit facilities. The remainder will be available to fund the Company's post-petition operating expenses, including paying for goods and services. The entities included in the Bankruptcy Cases own and operate the Company's manufacturing facilities in Texas City, Texas, Pace, Florida and Valdosta Georgia. The Company's foreign subsidiaries, including those in Canada, Australia and Barbados, are not included in the Bankruptcy Cases. Based in Houston, Texas, Sterling Chemicals Holdings, Inc. is a holding company that, through its operating subsidiaries, manufactures petrochemicals, acrylic fibers and pulp chemicals and provides large-scale chlorine dioxide generators to the pulp and paper industry. The Company has a petrochemical plant in Texas City, Texas; an acrylic fibers plant in Santa Rosa, Florida; and pulp chemical plants in five Canadian locations and one U.S. site. SUN HEALTHCARE: Moves to Reject Two New Mexico Office Leases ------------------------------------------------------------ Sun Healthcare Group, Inc. seek approval, pursuant to sections 363(b), 363(f) and 365(a) of the Bankruptcy Code and Rule 9019 of Bankruptcy Rules, to: (1) reject two unexpired leases of nonresidential real property; (2) sell certain assets; and (3) enter into a Lease Termination Agreement settling claims between Courtyard at Journal Center (the Landlord) and the Debtors, nunc pro tunc to July 31, 2001. The premises subject to the Leases consist of two floors of office space located at 7500 Jefferson N.E., Albuquerque, New Mexico. Subsequent to entering into the Leases, the Debtors encountered significant liquidity problems, which eventually led to the commencement of the Chapter 11 cases. Due to the restructuring and consolidation of certain of their operations, the Debtors no longer require such leased space. The Debtors have vacated the Property, with the exception of certain modular units and office equipment. Because the Leases serve no useful purpose for the Debtors, the Debtors' estates will be benefited by immediately eliminating any unnecessary rent accruals and other obligations associated with the Leases. Rejecting of the Leases will enable the Debtors' estates to save $552.023.00 in future rent obligations. The Debtors also review and analyze the economic value and marketability of the Leases, and have determined that the Leases do not and will not contribute value to the Debtors' estates. Accordingly, the Debtors have determined that it is in the best interest of their estates to reject the Leases. The new tenant has expressed interest in purchasing the Assets from the Debtors and the Debtors and the Landlord have reached a Lease Termination Agreement that will facilitate and minimize the costs of abandonment of the Property, including claims for rejection damages and the costs for removal of Assets. Pursuant to the terms of the Agreement, the Debtors would soil the Assets to the Landlord in exchange for a cash payment of $25,391 and the release of any and all claims the Landlord has against the Debtors relating to the Rejection. In addition, the Debtors will save Removal Costs that would exceed approximately $7,500. Further, the Debtors estimate that lease rejection damages would amount to approximately $189,718. Under the terms of the Agreement, the Landlord's claims for rejection damages would be waived. Because the Debtors believe that the Landlord's offer provides the greatest value to their estates, the Debtors have determined in the exercise of their business judgment that it is in their best interests to enter into the Agreement. The Agreement provides for the termination of the Leases effective July 31, 2001. Upon surrender of possession of the Property, the Debtors will surrender the Assets and deliver a bill of sale conveying title to the Landlord free and clear of all liens and encumbrances. The Debtors will have no obligation to remove any telephone, electrical and computer wiring installed in the Property. The Debtors will not disturb such wiring, and will provide any drawings or maps of the wiring in their possession to the Landlord. Further, the parties will release each other from any and all claims, damages, costs or expenses of any kind and nature, which directly or indirectly have resulted from or may in the future arise under the Lease. (Sun Healthcare Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 609/392-0900) US AIRWAYS: Plans to Reduce Capacity by 23%, Workforce by 11,000 ---------------------------------------------------------------- US Airways said that it will reduce capacity by 23 percent, as measured by available seat miles, from the level of service provided prior to the events of September 11. "The tragic events of September 11 have had a dramatic effect on the nation's aviation industry, including US Airways. As a result of reduced passenger demand as well as the ongoing requirements of new security procedures, US Airways has no choice but to reduce the number of its daily flights. Regrettably, this reduction in service will lead to a smaller US Airways family as personnel reductions follow," said US Airways President and CEO Rakesh Gangwal. "The entire U.S. aviation system is in jeopardy, and without decisive actions the future of the system, along with its impact on the nation's economy, is imperiled. In addition to measures we are taking independently, we will continue to work closely with the Administration and Congress on actions to ensure the future of the framework of the nation's air transportation system," said US Airways Chairman Stephen M. Wolf. Reductions in the US Airways workforce are expected to number approximately 11,000. US Airways Express carriers Allegheny Airlines, Piedmont Airlines, Potomac Air and PSA Airlines - all wholly owned by US Airways - will announce their own service and personnel reductions shortly. Prior to the events of September 11, the US Airways system operated about 4,500 flights, serving about 200,000 passengers, daily. US Airways currently employs 46,500 people throughout its system, serving 204 communities in the United States, Canada, Europe, the Caribbean region and Mexico. U.S. MINERAL: US Trustee Appoints Unsecured Creditors Committee --------------------------------------------------------------- The United States Trustee appoints the unsecured creditors committee in connection with the bankruptcy cases of U.S. Mineral Products Company: A. Ronald J. Dobkin Therm-O-Rock West, Inc. 6732 W. Willis Road, #5014, Chandler, Arizona 85226 Phone: (520) 796-1000 Fax: (502) 796-0223 B. Homer F. Anderson American Vermiculate Corporation 1000 Cobb Place Blvd., Bldg. 100 Suite 190, Kennesaw, Georgia Phone: (770) 590-7970 Fax: (770) 590-0239 C. Kenneth W. Walmsley Edw. C. Levy Co., Inc., & Levy Indiana Slag Co. P.O. Box 540, Portage, Indiana 46368 Phone: (219) 787-8666 Fax: (219) 787-8986 D. John Dudley Copham Sloss Industries Corporation 3500 35th Avenue North, Birmingham, Alabama 35207 Phone: (205) 808-7845 Fax: (205) 808-7715 E. David L. Hall G-P Gypsum Corporation 133 Peachtree St., Atlanta, Georgia 30303 Phone: (404) 652-5843 Fax: (404) 654-1014 WHEELING-PITTSBURGH: Court Approves Stipulation for IRBs -------------------------------------------------------- Judge Bodoh put his stamp of approval on two Stipulations entered into by Wheeling-Pittsburgh Steel Corp. with the Industrial Development Authority of Greensville County, Virginia, the Virginia and Nevada Trustees, and FBW Leasecorp inc., that will resolve disputes with the Indenture Trustees for industrial revenue bonds. Under the stipulations, the Trustees, the Authority, and FBW will not seek relief from the automatic stay in respect of their rights under the bond documents and lease or seek to compel WPSC to pay rent or adequate protection through November 1, 2001. The stipulations also provide that no party in interest will initiate any action seeking an adjudication as to whether 9i) the lease and other bond documents constitute a true lease or a secured financing, (ii) the Trustees, the Authority or FBW is entitled to protections offered a lessor under the Bankruptcy Code or to relief from the automatic stay or to receive adequate protection payments, or (iii) the nature, amount, priority and status of the claims of the Trustees, the Authority, or FBW. The stipulations do not limit WPSC, the Trustees, the Authority, FBW, or the Virginia or Nevada bondholders' ability to file pleadings or take other legal action with respect of their rights under the bond documents as part of a plan of reorganization and disclosure statement or motion for authority to sell the facility or to assume the lease or to assign WPSC's rights under the lease. The stipulations further provide that the Trustees are granted limited relief from the automatic stay to withdraw funds in any of the trust accounts as necessary to pay (i) principal or/and interest payments which thereafter become due on the bonds on the dates when due, (ii) any fees and expenses of the Trustees incurred under the Indenture (including attorney's fees), and (iii) any other costs, fees and expenses which may become due and owing under the Indenture. WPSC will, in the interim, continue, as long as the lease remains in effect, to comply with the provisions of the lease with respect to maintenance and insurance of the facilities. Finally, the stipulation confers exclusive jurisdiction on the Bankruptcy Court to determine these disputes. (Wheeling- Pittsburgh Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) WINSTAR COMMS: Engages Impala Partners as Restructuring Advisor --------------------------------------------------------------- Winstar Communications, Inc. wants to employ Impala Partners, LLC as a restructuring advisor for the purpose of providing restructuring advice and other related services in connection with these chapter 11 cases. Edward J. Kosmowki, Esq., at Young, Conaway Stargatt & Taylor, LLC, in Wilmington, Delaware, states that the Debtors have determined that the size and complexity of their attendant financial difficulties requires them to employ an experienced restructuring advisor to render advisory and other related services to assist them in restructuring their business and formulating and implementing a successful reorganization strategy. Mr. Kosmowski states that the Debtors have selected Impala partners as their restructuring advisor because of Impala Partner's extensive experience, knowledge and reputation in turning around troubled telecommunication firms. The Debtors believe that Impala Partners possess the requisite expertise and is well qualified to provide the advisory services that will be required in these cases. As compensation, Impala Partners will charge the Debtors a monthly retainer of $250,000 per month for the first two months, payable in advance. The Debtors and Impala Partners anticipate that for the first two months, the services of Paul Street, Peter Keenoy, Michael Borom and J. Robert Vipond will be needed to review the Debtors' financial condition and operations on a full-time basis and implement changes necessary for the Debtors' restructuring. Thereafter, the Debtors will pay Impala Partners $100,000 per month for the service of Paul Street who will act as Chief Restructuring Officer for the Debtors, and $50,000 per month each for Peter Keenoy, Michael Borom and J. Robert Vipond. In addition, Impala Partners shall be reimbursed for all reasonable actual and out-of-pocket expenses incurred in connection with its engagement. The agreement also stipulates that Impala Partners will not be entitled to retain any fees paid for any Advisor that does not spend substantially all of his working time during such month advising and assisting the Debtors. In addition, the Agreement also stipulates that Impala Partners and the Debtors would negotiate an additional success fee, which shall be payable upon earlier of a plan of reorganization of emergence by the Debtors from Chapter 11, whether through recapitalization, merger or sale of the Debtors. The following are the terms and conditions of the Success Fee: a) Upon the sale of all or substantially all of the Debtors assets, in one or more transactions, in which the aggregate consideration paid by the purchaser is less than $350 million, Impala shall earn a transaction fee of 0.25% of such consideration. b) Upon the sale of all or substantially all of the Debtors assets, in one or more transactions, in which the aggregate consideration paid by the purchaser is equal to or greater than $350 million, Impala shall earn a transaction fee of 2.0% of such consideration. c) In the event the Debtors achieve cumulative core EBITDA of $11 million for any consecutive three-month period and the Debtors core EBITDA for each month within such period is not less than $1.1 million, Impala Partners shall be entitled to a one-time fee of $1 million. d) In the event the Debtors achieve positive cash flow from operations for the month ending November 30, 2001, Impala Partners shall be entitled to a one-time fee of $1 million. e) In the event the Debtors have not satisfied the conditions to earn the fee described in foregoing subparagraph (d), Impala Partners shall be entitled to a one-time fee of $500,000 if the Debtors achieve a positive cash flow from operations for the month ending December 31, 2001. f) Upon confirmation of a plan of reorganization, Impala shall have earned a transaction fee calculated by subtracting the outstanding amount under the DIP Credit Agreement from the Debtors' total enterprise value and multiplying the result by 1.25%. g) Notwithstanding anything herein to the contrary, total Success fee payable to Impala Partners shall not exceed 1.5% of the aggregate consideration paid in connection with any sale of assets of the Debtors. In addition, to the extent Impala Partners might otherwise be entitled to a transaction fee under subparagraphs (a) or (b) and (f), Impala Partners shall be entitled to only the larger of such fees. h) All fees payable under this Letter Agreement other than monthly fees shall be payable on the consummation of any sale transaction or the effective date of a plan confirmed. Paul A. Street, a principal of Impala Partners, LLC, states that Impala is a "disinterested person" in that the said firm, its principals and employees: a) are not creditors, equity holders or insiders of the Debtors; b) are not and were not investment bankers for any outstanding security of the Debtors; c) have not been within three years before the date of the filing of the Debtors' Chapter 11 petitions an investment bankers for a security of the Debtors or attorney for such an investment banker in connection with the offer, sale or issuance of a security of the Debtors; d) are not within two years before the date of the filing of the Debtors' chapter 11 petition, a director, officer or employee of the Debtors or any investment banker; e) does not have an interest materially adverse to the interest of the Debtors' estates or any class of creditors or equity security holders, by reason of any direct or indirect relationship to the Debtors or an investment banker or for any other reason; Mr. Street states Impala has determined that they do not have any relationship with the Debtors' twenty largest creditors, certain other creditors and entities holding 5% or more of the common or preferred stock of the Debtors. However, Mr. Street adds that Impala is still reviewing potential conflicts with the Debtors' tens of thousands of landlords, vendors, creditors, and other parties-in-interest and will file a supplemental affidavit if it will find any conflict of interest. (Winstar Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) ZANY BRAINY: Hilco Capital LP Completes $115 Million Funding ------------------------------------------------------------ Theodore L. Koenig, President and Chief Executive Officer of Hilco Capital LP, announced the completion and funding of a $15 million junior credit participation for ZB Company, Inc., a majority owned subsidiary of The Right Start, Inc. (Nasdaq:RTST), in a new $115 million credit facility led and agented by Wells Fargo Retail Finance, LLC. The Hilco Capital credit participation was obtained in order to provide additional financial flexibility under the company's credit facility. The Right Start, Inc. recently acquired substantially all of the assets of Zany Brainy, Inc. after Zany Brainy filed for Chapter 11 bankruptcy protection in Delaware on May 16, 2001. Zany Brainy, based in King of Prussia, PA, is a leading specialty retailer of high quality toys, games, books and multimedia products for children in the U.S. The company combines a distinctive merchandise offering with superior customer service and in-store events to create an interactive, kid-friendly and exciting shopping experience for children aged 4 - 12. Zany Brainy currently operates 187 stores in 34 states. Net sales for its most recently completed fiscal year, February 3, 2001, amounted to $400.4 million. The Right Start, based out of Calabasas, CA, is a leading retailer of specialized educational toys for infants and children up to the age of 4. Net sales for the company's most recently completed fiscal year February 3, 2001, amounted to $44.2 million. The Right Start, Inc. now operates 256 retail stores nationwide. Mr. Koenig said, "We are very pleased that we could assist Right Start in its acquisition of Zany Brainy. We look forward to working with the company's management as well as our financial partner, Well Fargo Retail Finance, in order to provide Right Start with the financial flexibility it needs to operate Zany Brainy." Hilco Capital LP is an investment fund specializing in providing junior secured debt, tranche B debt and senior bridge financing throughout North America. Hilco Capital focuses on a broad cross-section of manufacturers, distributors, service providers and retailers. Hilco Capital prides itself on its flexible investment approach, its ability to execute difficult or complex transactions and its ability to close and fund transactions quickly. To learn more about Hilco Capital, visit http://www.hilcocapital.com * Meetings, Conferences and Seminars ------------------------------------ October 3-6, 2001 American Bankruptcy Institute Litigation Skills Symposium Emory University School of Law, Atlanta, Georgia Contact: 1-703-739-0800 or http://www.abiworld.org October 12-16, 2001 TURNAROUND MANAGEMENT ASSOCIATION 2001 Annual Conference The Breakers, Palm Beach, FL Contact: 312-822-9700 or info@turnaround.org October 16-17, 2001 International Women's Insolvency and Restructuring Confederation (IWIRC) Annual Fall Conference Orlando World Center Marriott, Orlando, Florida Contact: 703-449-1316 or http://www.inetresults.com/iwirc October 28 - November 2, 2001 IBA Business Law International Conference Including Insolvency and Creditors Rights Sessions Cancun, Mexico Contact: (0) 20 7629 1206 http://www.ibanet.org/cancun November 15-17, 2001 ALI-ABA Commercial Real Estate Defaults, Workouts, and Reorganizations Regent Hotel, Las Vegas Contact: 1-800-CLE-NEWS or http://www.ali-aba.org November 26-27, 2001 RENAISSANCE AMERICAN MANAGEMENT, INC. & BEARD GROUP Seventh Annual Conference on Distressed Investing The Plaza Hotel, New York City Contact 1-903-592-5169 or ram@ballistic.com November 29-December 1, 2001 American Bankruptcy Institute Winter Leadership Conference La Costa Resort & Spa, Carlsbad, California Contact: 1-703-739-0800 or http://www.abiworld.org January 31 - February 2, 2002 American Bankruptcy Institute Rocky Mountain Bankruptcy Conference Westin Tabor Center, Denver, Colorado Contact: 1-703-739-0800 or http://www.abiworld.org January 11-16, 2002 Law Education Institute, Inc National CLE Conference(R) - Bankruptcy Law Steamboat Grand Resort, Steamboat Springs, Colorado Contact: 1-800-926-5895 or http://www.lawedinstitute.com February 28-March 1, 2002 ALI-ABA Corporate Mergers and Acquisitions Renaissance Stanford Court, San Francisco, CA Contact: 1-800-CLE-NEWS or http://www.ali-aba.org March 3-6, 2002 (tentative) NORTON INSTITUTES ON BANKRUPTCY LAW Norton Bankruptcy Litigation Institute I Park City Marriott Hotel, Park City, Utah Contact: 770-535-7722 or Nortoninst@aol.com March 8, 2002 American Bankruptcy Institute Bankruptcy Battleground West Century Plaza Hotel, Los Angeles, California Contact: 1-703-739-0800 or http://www.abiworld.org March 20-23, 2002 TURNAROUND MANAGEMENT ASSOCIATION Spring Meeting Sheraton El Conquistador Resort & Country Club Tucson, Arizona Contact: 312-822-9700 or info@turnaround.org April 10-13, 2002 (tentative) NORTON INSTITUTES ON BANKRUPTCY LAW Norton Bankruptcy Litigation Institute II Flamingo Hilton, Las Vegas, Nevada Contact: 770-535-7722 or Nortoninst@aol.com April 18-21, 2002 American Bankruptcy Institute Annual Spring Meeting J.W. Marriott, Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org April 25-27, 2002 ALI-ABA Fundamentals of Bankruptcy Law Rittenhouse Hotel, Philadelphia Contact: 1-800-CLE-NEWS or http://www.ali-aba.org May 13, 2002 (Tentative) American Bankruptcy Institute New York City Bankruptcy Conference Association of the Bar of the City of New York New York, New York Contact: 1-703-739-0800 or http://www.abiworld.org June 6-9, 2002 American Bankruptcy Institute Central States Bankruptcy Workshop Grand Traverse Resort, Traverse City, Michigan Contact: 1-703-739-0800 or http://www.abiworld.org June 27-30, 2002 NORTON INSTITUTES ON BANKRUPTCY LAW Western Mountains, Advanced Bankruptcy Law Jackson Lake Lodge, Jackson Hole, Wyoming Contact: 770-535-7722 or Nortoninst@aol.com July 11-14, 2002 American Bankruptcy Institute Northeast Bankruptcy Conference Ocean Edge Resort, Cape Cod, MA Contact: 1-703-739-0800 or http://www.abiworld.org August 7-10, 2002 American Bankruptcy Institute Southeast Bankruptcy Conference Kiawah Island Resort, Kiawaha Island, SC Contact: 1-703-739-0800 or http://www.abiworld.org October 9-11, 2002 INSOL International Annual Regional Conference Beijing, China Contact: tina@insol.ision.co.uk or http://www.insol.org October 24-28, 2002 TURNAROUND MANAGEMENT ASSOCIATION Annual Conference The Broadmoor, Colorado Springs, Colorado Contact: 312-822-9700 or info@turnaround.org December 5-8, 2002 American Bankruptcy Institute Winter Leadership Conference The Westin, La Paloma, Tucson, Arizona Contact: 1-703-739-0800 or http://www.abiworld.org April 10-13, 2003 American Bankruptcy Institute Annual Spring Meeting Grand Hyatt, Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org December 3-7, 2003 American Bankruptcy Institute Winter Leadership Conference La Quinta, La Quinta, California Contact: 1-703-739-0800 or http://www.abiworld.org April 15-18, 2004 American Bankruptcy Institute Annual Spring Meeting J.W. Marriott, Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org December 2-4, 2004 American Bankruptcy Institute Winter Leadership Conference Marriott's Camelback Inn, Scottsdale, AZ Contact: 1-703-739-0800 or http://www.abiworld.org The Meetings, Conferences and Seminars column appears in the Troubled Company Reporter each Wednesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L. Metzler, Bernadette de Roda, Ronald Villavelez and Peter A. Chapman, Editors. Copyright 2001. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. *** End of Transmission ***