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/raid1/www/Hosts/bankrupt/TCR_Public/990727.MBX T R O U B L E D C O M P A N Y R E P O R T E R Monday, July 27, 1999, Vol. 3, No. 142 Headlines AMERICAN BANKNOTE: Announces Trading In Shares To Be Suspended BRAKE HEADQUARTERS: Court Grants Use Of Cash Collateral BROOKE GROUP: Ala. Court Nixes Fletcher Class Action Settlement BROTHERS GOURMET: Seeks Extension of Exclusivity COSMETIC CENTER: Delisted From NASDAQ/Appoints New CFO COSMETIC CENTER: GOB Sales To Wind Down Operations CRIIMI MAE: Creditors Committee Opposes Bridge Order DANKA BUSINESS SYSTEMS: Notifies SEC, Reports Will Be Filed Late EAGLE PICHER: Acquisitions/Sale Affect Comparison Of Statistics GEOTEK COMMUNICATIONS: Stockholders To Receive Nothing HECHINGER: To Employ KPMG as Tax Consultants and Auditors IEC ELECTRONICS: Third Quarter Results JUMBOSPORTS: Seeks Authority To Sell Property In Tucson, Arizona LIVENT (US): Order To Show Cause Re: Term Sheet MARVEL ENTERPRISES: Appoints Peter Cuneo President And CEO MERRY-GO-ROUND: 4th Cir. Declines to Cap Landlords' Claims MERRY-GO-ROUND: Judge Makes Snyder Weiner Jump through Hoops METAL MANAGEMENT: CEO Resigns/Search On For Replacement NATIONAL HEALTH: Seeks Order Authorizing DIP Financing NU-KOTE HOLDING: Objection Overruled, KPMG Appointed Auditor PHYSICIANS RESOURCE: Restructuring Agreement Breach Is Alleged PRESLEY COMPANIES: Merger With Wholly-Owned Subsidiary Proposed PRIMARY HEALTH: Seeks Interim Hearing For DIP Credit Agreement QUALITECH STEEL: Asks To File Plan Without Disclosure Statement RENAISSANCE COSMETICS: Seeks Approval of Employee Retention Plan SMARTALK TELESERVICES: AT&T Asks To Lower Amount Of Holdback Note STAFF BUILDERS: Quarterly Revenues Off/Losses Up STARTER CORP: MLBP Objects to Asset Purchase Agreement TAL WIRELESS: Liquidating Assets/Shareholders Position Unclear TELETRAC INC: Seeks Authorization to Employ Financial Advisor TRACE INT'L: Filing Does Not Change Control in Foamex Debt VIDIKRON TECHNOLOGIES: Announces PNC Bank Action WELLCARE MANAGEMENT: Transactions To Change Future Operations WIRELESS ONE: Seeks Extension To Assume or Reject Leases Z.FREDERICK: Hearings Set for Auction and Sale Meetings, Conferences and Seminars ********** AMERICAN BANKNOTE: Announces Trading In Shares To Be Suspended --------------------------------------------------------------- American Banknote Corporation announced that it has been notified by the New York Stock Exchange that trading in the company's stock will be suspended prior to the opening on Tuesday, August 3, 1999 or earlier if American Banknote commences trading in another securities marketplace; information is received that American Banknote does not meet the listing requirements of the other securities marketplace; or American Banknote makes a material adverse news announcement. Following suspension, application will be made by the NYSE to the Securities and Exchange Commission to delist the issue. The NYSE has taken these actions in light of the company's failure to meet certain listing standards. As previously announced, the company's advisor, The Blackstone Group, is continuing discussions with an informal committee of Subordinated Note holders, who hold more than 85% of the notes, on the terms of a consensual restructuring converting all or a substantial portion of that debt to equity. There is no assurance that American Banknote will be able to reach any agreement with the holders of the notes. American Banknote Corporation is a leading global full-service provider of secure transaction solutions in carefully selected markets along three major product groups: Transaction Cards & Systems, Printing Services & Document Management, and Security Printing Solutions. A combined strategy of operating along product lines and constant expansion of transaction activities worldwide reflects the rapidly changing field of electronic commerce. BRAKE HEADQUARTERS: Court Grants Use Of Cash Collateral ------------------------------------------------------- The voluntary petition for Chapter 11 bankruptcy proceedings by Sanyo Automotive Parts, Ltd. and ABS Brakes, Inc. was filed on May 28, 1999, in the U.S. Bankruptcy Court for the Eastern District of New York. The two companies are wholly-owned subsidiaries of Brake Headquarters U.S.A., Inc. The two petitions are being jointly administered under court order dated June 3, 1999. An emergency motion to use the cash collateral of the National Bank of Canada, New York Branch, was made returnable on June 3, 1999 and after a hearing, the use of the cash collateral in accordance with a budget submitted by Sanyo and ABS was ordered. A permanent hearing on the use of cash collateral is scheduled. The two subsidiaries will have the opportunity, under the guidance of the courts, to settle outstanding claims and reorganize their business. This decision was due, in part, to continued losses incurred, especially by Sanyo, and to protect the integrity of Brake Headquarter's operations and those of its subsidiary WAWD, which are not expected to be negatively affected as a result of these filings. BROOKE GROUP: Ala. Court Nixes Fletcher Class Action Settlement --------------------------------------------------------------- Brooke Group Ltd. (NYSE: BGL) announced that the Alabama State Court in Mobile has denied final approval of a limited fund settlement agreement between Brooke and its Liggett Group tobacco subsidiary and class action plaintiffs and individual smokers nationwide in Fletcher, et al. v. Brooke Group Ltd., et al. In the ruling, the Alabama State Court attributed the decision to the recent Supreme Court decision in Ortiz v. Fibreboard Corp. Brooke is a holding company which owns Liggett Group Inc. and controlling interests in Liggett-Ducat Ltd. and New Valley Corporation. According to the Los Angeles Times, Brooke Group is the U.S.' No. 5 cigarette maker. Liggett's plan would have given consumers 9% of the company's annual pretax income, or at least $ 1 million a year for the next 25 years. A fund would have distributed the money, and smokers wouldn't be allowed to opt out of the settlement and file their own lawsuits--removing the threat to Liggett of any further liability. A Brooke Group spokesman said the company is reviewing its options. During a hearing before Kendall on June 10, a Liggett consultant testified that without the settlement, mounting claims estimated at more than $46 million so far would force Liggett into bankruptcy. Brooke Group's shares closed unchanged at $22.31 on the NYSE. BROTHERS GOURMET: Seeks Extension of Exclusivity ------------------------------------------------ The debtors, Brothers Gourmet Coffees, Inc. et al. seek an extension of the exclusive period during which the debtors may solicit acceptances of their plan of reorganization. The debtors seek an extension through and including September 16, 1999. The debtors state that they have diligently pursued the advancement of their chapter 11 cases, entering into an Asset Purchase Agreement and Supply Agreement, authorizing the sale of the Assets of the debtor to P&G for consideration consisting of cash in the amount of $21.5 million and assumed liabilities under customer contracts of up to $1.3 million. The debtors represent that the extension is reasonable in view of the progress made by the debtors, streamlining their business, negotiating , drafting and filing a plan of reorganization and a proposed disclosure statement, preparing for and conducting the auction and contracting to sell a substantial portion of their business for the benefit of creditors. P&G did not purchase the Houston Facility under the terms of the Asset Purchase Agreement. The debtors believe that the bifurcated sale structure ultimately will maximize the value obtained for the debtor's assets as a whole, and maximize the return to creditors, however, the debtors' timetable for confirmation of the plan will be delayed in order to provide the debtors with additional time to either market and sell the remaining assets or formulate and propose a plan providing for an internal reorganization of the remaining assets. COSMETIC CENTER: Delisted From NASDAQ/Appoints New CFO --------------------------------------------------------------- Early in May The Cosmetic Center, Inc. announced that its common stock will no longer be listed on The Nasdaq SmallCap Market. The stock had been trading on the SmallCap Market via a temporary exception from the minimum bid price requirement. The Cosmetic Center, Inc. is a specialty retailer of brand-name cosmetic, fragrance, skin care, hair and personal care products, sold at value prices. The company's retail and outlet stores operate principally under the names The Cosmetic Center and Prestige Fragrance & Cosmetics. The company also reported that Mr. Kemp Woollen, Vice President and Chief Accounting Officer of the company, resigned his position with the Cosmetic Center Inc. as of May 21, 1999 and that Charles Kill has been named the company's new Chief Financial Officer, effective June 14, 1999. Mr. Kill is a certified public accountant, with 25 years experience, including over 20 years in retailing. COSMETIC CENTER: GOB Sales To Wind Down Operations -------------------------------------------------- On July 9, 1999, The Cosmetic Center, Inc. revealed that, based on the increasingly competitive marketplace for its products and its current financial position, the company has decided to proceed with an orderly wind-down of its operations, subject to Bankruptcy Court approval. The company plans to liquidate its inventory through Going-out- of-Business sales, which are expected to begin by the end of July, after selection of a Court-approved liquidator. These sales are anticipated to continue up to sixteen weeks, or until the middle of November, depending upon the location. Cosmetic Center expects to retain many of its store-based associates and a portion of its corporate associates as the business is phased down, and anticipates that its Columbia, Maryland headquarters will be closed by the end of the year. The company noted that it will continue its efforts to locate a strategic buyer for the business as the wind-down proceeds. Cosmetic Center filed for Court protection under Chapter 11 of the Bankruptcy Code on April 16, 1999. The company, which employs approximately 1,200 people, currently operates 31 Cosmetic Center stores primarily in Maryland and Virginia and 93 Prestige Fragrances & Cosmetics outlet stores in 27 states. The month ended May 29, 1999, financial figures show a net loss of $3,110 million on sales revenues of $18,384 million. The five months ending on the same date showed a net loss of $16,787 million on revenues of $67,232 million. CRIIMI MAE: Creditors Committee Opposes Bridge Order ---------------------------------------------------- CRIIMI MAE, Inc., debtor, and its two affiliated debtors filed a motion for a third extension of exclusivity, seeking a 60 day extension of the period that currently ends on August 2, 1999. The debtor also filed a motion for a bridge order extending exclusivity until the court is able to conclude a hearing on the third exclusivity motion. The Official Committee of Unsecured Creditors in the CRIIMI Mae, Inc. objects to the motion for the bridge order stating that if the third motion for exclusivity is granted, it would give the debtor a full year of exclusivity to file a plan of reorganization. "For a debtor that is essentially a securities portfolio without an ongoing business - more akin to a hedge fund than an operating company - this is extraordinary." The Committee suggests that the debtor is substantially behind its projected schedule to negotiate an equity investment as a foundation for its recapitalization plan of reorganization. The Committee blames the delay on the debtors and their professionals. The Committee states that the debtor received three draft equity purchase agreements from credible prospective investors, and yet it still does not have a deal. The delay that has been suffered was not inevitable, but was instead the result in large part of the debtor's inability to manage the process properly. The Committee states further that the recapitalization effort remains a high-risk proposition. The Committee states that the risks of volatility of the CMBS market, which affect the value of the debtor's assets, remain as great as ever. Also, developments in the bond market have also begun to threaten the values of the debtor's assets. Since the beginning of the calendar year, there has been a steady increase in interest rates which has eroded the value of the debtor's assets. The Committee objects to a bridge order saying that the debtor delayed in filing the third motion for exclusivity late, with no good reason for such filing, and in doing so ignored the court's warning from May. DANKA BUSINESS SYSTEMS: Notifies SEC, Reports Will Be Filed Late ---------------------------------------------------------------- Danka Business Systems plc reports that due to the operational and administrative pressures on the company's staff which have resulted from the restructuring of the company's business; the preparation of reports required by the company's bank lenders in order to obtain and maintain waivers of financial covenant requirements under its bank credit agreement; the updating of a business plan and other matters required to satisfy the requirements for advances under the credit agreement while the waivers have been in effect; the efforts to conclude the company's disposition of its outsourcing business and other assets; ongoing activities necessary to maintain the company's relationships with and access to other sources of funding; and ongoing activities necessary to maintain the company's relationships with and access to suppliers and vendors, Danka has been unable to assemble the required information and has been unable to prepare its annual financial reports within the prescribed time period required by the Securities & Exchange Commission. The company indicates that it anticipates annual statements for the year ended March 31, 1999 will reflect lower levels of revenue, and will reflect an operating loss, net loss and net loss per American Depositary Share for the year and quarter ended March 31, 1999 compared to revenue, operating earnings, net earnings and net earnings per ADS for the year and quarter ended March 31, 1998. EAGLE PICHER: Acquisitions/Sale Affect Comparison Of Statistics --------------------------------------------------------------- Eagle Picher, in filing financial information for the year ended May 31, 1999, points out that as a result of an acquisition effective February 24, 1998, the company's results of operations and financial position for periods after February 24, 1998 are not comparable to those of prior periods. The company's unaudited consolidated statement of income (loss) as of February 28, 1998 includes results of operations from (1) December 1, 1997 through February 24, 1998 of the predecessor company and (2) February 25 through February 28, 1998 of the company. In addition to the effects of the acquisition, other factors affecting the comparability of operations are the sale of the Trim Division in the fourth quarter in 1998 and the acquisition of Carpenter in the second quarter of 1999. The company's net sales were $249.8 million for the second quarter ended May 31, 1999, an increase of $29.9 million or 13.6% from the comparable period of 1998. Included in the results of the second quarter of 1999 are net sales of Carpenter, which was acquired in the second quarter of 1999, and included in the second quarter of 1998 are net sales of the Trim Division, which was sold in the fourth quarter of 1998. If the net sales of the Trim Division and Carpenter are excluded, the company's quarterly net sales increased 0.2%. On a year-to-date basis, net sales increased 4.4% in 1999 from the comparable period in 1998. However if the net sales of the Trim Division and Carpenter are excluded, net sales decreased 0.9%. Net gain for the second quarter ended May 31, 1999, was $2.4 million while net loss for the comparable period in 1998 was $9.3 million. GEOTEK COMMUNICATIONS: Stockholders To Receive Nothing ------------------------------------------------------ As previously reported by Geotek Communications, Inc., on February 12, 1999 the company agreed to sell all of its 191 900 MHz licenses to Nextel Communications, Inc. for a purchase price of $150 million, subject to Bankruptcy Court and regulatory approvals. On June 15, 1999, Nextel sent a letter to the company indicating that Nextel had determined not to continue its efforts to obtain regulatory approvals allowing Nextel to acquire certain of Geotek's FCC Licenses located in cities subject to a Consent Decree between Nextel and the United States of America. The Phase II Licenses were to be sold to Nextel for $130,839,000 (in cash or Nextel common stock) of the $150 million total purchase price. As of July 1, 1999, the agreement had not been terminated. If the agreement is terminated as to the Phase II Licenses, then, pursuant to the company's Second Amended Consolidated Plan of Liquidation dated May 21, 1999, the unsecured creditors of Geotek will not receive or retain any property under the plan. Under the Plan, the company's preferred and common stock will be canceled upon the effective date of the plan. The holders of the company's preferred stock and common stock will not receive or retain any property under the plan. HECHINGER: To Employ KPMG as Tax Consultants and Auditors --------------------------------------------------------- The debtors, Hechinger Investment Company of Delaware, Inc., et al. seek authority to employ KPMG LLP as tax consultants and auditors for the debtors and seek payment of prepetition indebtedness. The debtors require accountants, among other things, to audit the debtors' financial statements, assist the debtors in complying with the regulatory requirements of the SEC and to provide tax compliance and related advisory services. The hourly rates payable to KPMG are currently Partner $415 to $470 Director/Senior Manager $275 to $400 Manager $250 to $275 Senior Accountant $195 to $245 Staff Accountant $150 to $190 The debtors also seek court authority to pay KPMG a prepetition indebtedness of $398,250, of which a majority can be attributed directly to the preparation of tax returns. As a result of the bankruptcy filing, the debtors' bank returned the original checks for the payment. IEC ELECTRONICS: Third Quarter Results -------------------------------------- (NASDAQ: IECE) today reported results for the third quarter and first nine months of fiscal 1999. Net sales for the three-month period ended June 25, 1999, were $ 37.5 million, a 13 percent decrease from the $ 43 million reported for the same quarter last year. For the quarter, the Company reported a net loss of $ 1.7 million, or $ .23 per share. This compares to a net loss of $ 1.3 million, or $ .18 per share, for the same quarter one year ago. For the first nine months of fiscal 1999, IEC reported sales of $ 108.6 million, a decrease from the $ 208 million in sales reported for the first nine months of fiscal 1998. The net loss for the first nine months of fiscal 1999 was $ 5.8 million, or $ .76 per share. This compares to net earnings of $ 99,000, or $ .01 per share for the first nine months of fiscal 1998. Russell E. Stingel, Chairman and Chief Executive Officer, commented, "Sales showed a modest increase after several quarters of softness that had been caused by the loss of our PC-related business. We believe this demonstrates our business development efforts in telecom, networking, and industrial electronics are beginning to yield results. Our expansion into Europe and Mexico is expected to enable IEC to achieve additional success with our business portfolio. "We continue to improve efficiency to increase margins while investing in engineering and box-build services that are increasingly important to our customers," Mr. Stingel said. The Company also announced that, in accordance with the existing transition plan, Mr. Stingel is retiring at the end of the current fiscal year after 22 years of service with the Company. David W. Fradin, currently President and Chief Operating Officer, has been named President and Chief Executive Officer effective October 1, 1999. Mr. Fradin will become a member of the Board of Directors, and Mr. Stingel will continue to serve as Chairman. IEC is a full service, ISO 9002 certified, contract manufacturer employing state-of-the-art production utilizing both surface mount and pin-through-hole technology. IEC offers its customers a wide range of manufacturing and management services, on either a turnkey or consignment basis, including design prototyping, material procurement and control, concurrent engineering services, manufacturing and test engineering support, statistical quality assurance and complete resource management. Information regarding IEC can be found on its World Wide Web page located at http://www.iec-electronics.com. JUMBOSPORTS: Seeks Authority To Sell Property In Tucson, Arizona ---------------------------------------------------------------- The debtors, Jumbosports Inc., seek authority to sell real property located in Tucson, Arizona to Home Depot USA, Inc. The property is located at 7255 East Broadway Boulevard. The total purchase price for the real property is $2.7 million consisting of a deposit in the amount of $50,000 which will be placed with the escrow agent, Landamerica Financial Group, Inc. The Real Estate Broker CB Richard Ellis, Inc. is entitled to a commission of $135,000 in connection with the sale of the Real Property. LIVENT (US): Order To Show Cause Re: Term Sheet ----------------------------------------------- The Honorable Arthur J. Gonzalez orders that all parties in interest show cause at a hearing on July 29, 1999 at 11:00 AM why the court should not enter an order approving the term sheet summarizing the terms of the agreement by an d among Livent Inc. and its debtor subsidiaries Westsun Show Systems (US) Inc. and its affiliates and SFX Entertainment Inc. The Term Sheet provides for the assumption and assignment of certain unexpired leases and the rejection of certain unexpired leases in connection with the debtors' pending sale of substantially all of the debtors' assets to SFX. The Term Sheet also resolves cure amounts and other claims asserted by Westsun against the debtors, including fixing rejection damage claims. The Term Sheet sets forth the terms of a continuing relationship between Westsun and SFX after closing of the Asset Sale. MARVEL ENTERPRISES: Appoints Peter Cuneo President And CEO ---------------------------------------------------------- Marvel Enterprises, Inc. has announced the appointment of Peter Cuneo as President and Chief Executive Officer of the company. Mr. Cuneo replaces Eric Ellenbogen, who resigned from the company to head a media investment concern. In making the announcement, Morton Handel, the company's Chairman of the Board, said, "Peter's twenty-five years of management and administrative experience in a broad range of consumer businesses with strong brand identities makes him uniquely suited to build on the company's existing creative talent and to ensure continued growth. I look forward to his leadership." Mr. Cuneo said, "This is an exciting opportunity to further develop Marvel's creative capital. I expect to continue the recent growth of Marvel's publishing and licensing businesses. At the same time, I look forward to expanding the opportunities available to Marvel from the entertainment projects currently in progress, such as the X-Men and Spider-Man live-action feature films, and the significant expansion of Marvel's internet presence." Mr. Cuneo has been Chief Executive Officer of Remington Products Company, L.L.C., a manufacturer and marketer of personal care appliances; President of the Security Hardware Group of Black and Decker Corporation; and, as President of Clairol's Personal Care Division, a senior executive at Bristol-Myers Squibb Company. He was also a director of FactoryMall.com, an internet marketer of durable consumer products that was sold to Theglobe.com, Inc. in February, 1999. He holds an MBA from the Harvard Graduate School of Business, and received his undergraduate degree from Alfred University, where he is currently a member of the Board of Trustees. Commenting on Mr. Ellenbogen's departure, Mr. Handel said, "Eric joined Marvel at a critical time, just as the company emerged from Chapter 11 bankruptcy. He assembled an outstanding management team, successfully completed a $250 million long-term financing and arranged a three-year $60 million working capital facility. He also helped launch the Spider-Man filmed entertainment franchise with Sony Pictures Entertainment, resolving years of litigation over the company's best-known property. We thank him for his considerable contributions to Marvel." Marvel Enterprises, Inc. is one of the world's leading entertainment companies with operations in the licensing, comic book publishing and toy businesses. The company was formed on October 1, 1998 upon the emergence of Marvel Entertainment Group, Inc. from bankruptcy and its merger with Toy Biz, Inc. Through its ownership of over 3,500 proprietary characters, the company has published comic books for over 60 years in over 70 countries. Marvel licenses the right to use its characters in a wide range of consumer products such as video games, interactive software and apparel, as well as for television series and feature films. MERRY-GO-ROUND: 4th Cir. Declines to Cap Landlords' Claims ---------------------------------------------------------- The United States Court of Appeals for the Fourth Circuit held on appeal that the Bankruptcy Code's rent cap does not apply to a landlord's administrative claim for future rent arising under a Chapter 11 postpetition commercial lease that was breached by the Chapter 7 trustee following case conversion. Capping future rent administrative claims, the panel opined, could provide a disincentive for landlords to lease property to debtors-in- possession. Moreover, the concern that the landlord would receive a windfall at the expense of other creditors was alleviated by the landlord's state-law duty to mitigate its claim. In re Merry-Go-Round Enterprises, Inc., 1999 WL 371588 (C.A.4 (Md.)). MERRY-GO-ROUND: Judge Makes Snyder Weiner Jump through Hoops ------------------------------------------------------------ Synder, Weier, Weltchek, Vogelstein & Brown, after extracting the widely-reported $185 million settlement from Ernst & Young, LLP, filed its Fee Application with the Bankruptcy Court in Baltimore seeking payment of its 40% contingency fee from Merry-Go-Round Enterprises, Inc.'s chapter 7 estate. Bear, Stearns & Co., Inc., launched an attack, asking Judge Derby to review the fee for its reasonableness in light of the hours spent by the Firm in prosecuting the case. Persuaded that more inquiry is necessary before approving payment of the Contingency Fee, Judge Derby has scheduled a hearing for August 4, 199, to consider, among others the parties may raise, six questions: (1) Does the fee quested by Snyder, Weiner in this case violate Maryland Rule of Professional Conduct 1.5(a)? (2) If the fee requested by Snyder, Weiner violates Maryland Rule of Professional Conduct 1.5(a), what impact, if any, should such a finding have on the bankruptcy court's decision on Snyder, Weiner's application for approval of its contingency fee? (3) If considering Snyder, Weiner's fee application, should the bankruptcy court consider what was the fair market price for the subject legal representation of the Trustee? (4) If so, how should the fair market price be determined? Further, did the Trustee consider the fair market price when she employed Snyder, Weiner? (5) In considering Snyder, Weiner's fee application, should the bankruptcy court make an assessment of the risk in the representation, and, if so, how and as of what date or dates? (6) To what extent was the Trustee informed as to the risks of success in the subject legal representation at the time she entered into the retention agreement with Snyder, Weiner? To adduce evidence relative to these six questions, and to get a clearer picture about the Trustee's estimates of allowable chapter 7, post-chapter 11 and pre-chapter 11 claims against the Merry-Go-Round Estates, Bear, Stearns & Co., Inc., is proceeding to depose Snyder Weiner and Deborah Devan, the Chapter 7 Trustee. Bear, Stearns is represented in this matter by David M. Friedman, Esq., at Kasowitz Benson in New York. METAL MANAGEMENT: CEO Resigns/Search On For Replacement ------------------------------------------------------- On July 16, 1999, Metal Management, Inc. announced that T. Benjamin Jennings has resigned, effective immediately, as the company's Chairman and Chief Executive Officer, and as a director, in order to pursue other personal and business interests. Mr. Jennings and the company have agreed that Mr. Jennings will continue his relationship with Metal Management in a consulting capacity to assist in future transactions. Metal Management will immediately commence a nationwide search for a new Chief Executive Officer. Albert A. Cozzi, Metal Management's President and Chief Operating Officer, will assume the additional title of Chairman of the Board. Pending the outcome of the nationwide search, the duties of the chief executive officer will be carried out by a four-member committee consisting of Mr. Cozzi, William T. Proler, the President of the company's Gulf Coast operations, and Executive Vice Presidents George A. Isaac, III and David A. Carpenter. The composition of the company's Board of Directors will otherwise remain unchanged. Metal Management is one of the largest and fastest-growing full service metals recyclers in the United States, with approximately 50 recycling facilities in 15 states and estimated annualized gross revenues of approximately $800-million. The company also owns a 28.5 percent interest in Southern Recycling, the largest scrap metal recycler in the Gulf Coast region. NATIONAL HEALTH: Seeks Order Authorizing DIP Financing ------------------------------------------------------ National Health & Safety Corporation seeks court approval of each of the following components of the first phase of the debtor's reorganization strategy. a. The debtor requests that the court establish a bidding and sale procedure for the debtor to sell the PowerX Division and set a hearing on the final sale; b. The debtor requests that the court immediately approve, on an interim basis, the DIP Facility between the Debtor and Medsmart to fund the debtor's ongoing cash flow losses until the sale of the PowerX Division. c. The debtor requests the court to compare the offer of Medsmart to the offers of any other parties received prior to the hearing date on the sale of the assets and to approve the sale of the PowerX Division assets tot he highest bidder; d. The debtor requests the assumption and assignment of the executory contracts related to the POWERX Division designated as the "Assumed Contracts" in the Asset Purchase Agreement; and e. Upon final hearing the debtor requests that the court approve the DIP financing facility on a final basis to fund any further operational cash flow drains pending confirmation of the debtor's plan of reorganization. NU-KOTE HOLDING: Objection Overruled, KPMG Appointed Auditor ------------------------------------------------------------ As previously reported on November 6, 1998 Nu-kote Holding, Inc. filed a voluntary petition for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Tennessee in Nashville, Tennessee. Six subsidiaries of the Company, Nu-kote International, Inc., Future Graphics, Inc., Nu-kote Imperial, Inc., Nu-kote Latin America, Inc., Nu-kote Imaging International, Inc. and International Communication Materials, Inc., also filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code on November 6, 1998. On January 22, 1999 Nu-kote filed a motion with the Bankruptcy Court to employ PricewaterhouseCoopers LLP as the principal accountants to audit its consolidated financial statements. PricewaterhouseCoopers had been engaged in that capacity prior to the filing by Nu-kote for protection under Chapter 11. The U.S. Trustee's office objected to the engagement of PricewaterhouseCoopers LLP, and on March 16, 1999 a hearing was held in the Bankruptcy Court to determine whether Nu-kote would be permitted to engage the firm. At that hearing, the Bankruptcy Court denied the motion to employ PricewaterhouseCoopers LLP. The Bankruptcy Court ruled that the firm was disqualified from acting in such capacity due to a conflict of interest which resulted from the merger of Coopers & Lybrand and Price Waterhouse on July 1, 1998. Prior to the merger, Coopers & Lybrand was the principal accountant to audit Nu-kote's consolidated financial statements. On June 15,1999 KPMG Peat Marwick L.L.P was engaged to act as the company's auditors. An objection to their engagement was filed with the Bankruptcy Court on July 6, 1999. On July 13, 1999 the Bankruptcy Court heard the objection to the engagement of KPMG and overruled it. As a result KPMG will audit Nu-kote and its subsidiaries based in the United States and elsewhere to act as the company's principal auditor. PricewaterhouseCoopers L.L.P. will continue to act as auditor for the company's foreign subsidiaries that are not in bankruptcy. Standard & Poor's CreditWire--July 23, 1999--Standard & Poor's today assigned its single-'B'-minus rating to The Penn Traffic Co.'s $ 100 million 11% senior unsecured notes due 2009 and its double-'B'-minus rating to the company's $ 320 million secured credit facility. Standard & Poor's also assigned its single-'B'-plus corporate credit rating to Penn Traffic. The outlook is stable. On March 1, 1999, Penn Traffic filed a petition for relief under chapter 11 of the Bankruptcy Code. The company emerged from bankruptcy reorganization on June 29, 1999. The restructuring reduced the company's debt outstanding to about $ 350 million as all of Penn Traffic's $ 1.13 billion formerly outstanding senior and subordinated notes were canceled. The speculative-grade ratings reflect the challenges faced by a new management team to improve the company's operations and gain market share in a highly competitive industry after four years of declining profitability and same-store sales. The declining performance was caused by poor merchandising, strategic planning, and customer service as well as excessive cost cutting. The company failed to understand local market demand and competition which ultimately led to reduced customer traffic and sales. These factors are somewhat mitigated by the company's new capital structure which provides adequate financial flexibility through reduced debt service costs, a lack of near-term maturities, and adequate capacity under the revolving credit facility. Several new individuals have been hired to fill key management positions, including Joseph Fisher, president and chief executive officer. Fisher and his team will be challenged to stabilize the company's operations and attract both old and new customers to the company's supermarkets. Although same-store sales declined through June 1999, the rate has slowed, indicating that management's efforts may have begun to take effect and a stabilization of the business may be near. The reorganization provides the company with much greater financial flexibility and cash flow protection than under the old capital structure. Lease-adjusted total debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) is now about 4 times (x) compared with 12x before the company filed for bankruptcy protection. Standard & Poor's expects lease- adjusted EBITDA to cover interest expense by about 2.4x in 1999. On a pro forma basis for the reorganization, EBITDA coverage of interest expense would have been about 2.1x in 1998. Financial flexibility is provided by the revolving credit facility, which is expected to have more than $ 100 million of availability at the company's peak borrowing level, and the lack of near-term maturities. The $320 million credit facility, consisting of a $ 205 million six-year revolving credit facility due 2005, $ 40 million Term Loan A due 2005, and $75 million Term Loan B due 2006, is secured by substantially all assets of the company and its subsidiaries, other than those assets subject to specific liens. Borrowings under the revolving credit facility are limited to a borrowing base determined as the sum of 85% of accounts receivable and 65% of inventory. The bank facility is rated one notch higher than the corporate credit rating. Standard & Poor's assessment of the value of the company's discrete assets considered the market values using outside appraisals, where necessary, the assets' potential to retain value over time, and an orderly liquidation scenario. The security interest in the collateral, coupled with the borrowing base limitation for amounts outstanding under the revolving credit facility, offers reasonable prospects for full recovery of principal if a payment default were to occur. The senior unsecured notes are rated two notches below the corporate credit rating because of the significant amount of secured debt in the capital structure. PHYSICIANS RESOURCE: Restructuring Agreement Breach Is Alleged -------------------------------------------------------------- Physicians Resource Group, Inc., on July 20, 1999, announced that Resurgence Asset Management, L.L.C., the party with which the company has entered into a restructuring agreement related to the company's 6% Convertible Subordinated Debentures due 2001, has notified the company that Resurgence Asset Management believes there has been a material breach by Physicians Resource Group of the terms of the Restructuring Agreement and that such alleged breach provides Resurgence the right to terminate the Restructuring Agreement. The company has stated that it does not believe that it has breached the Restructuring Agreement and continues to pursue its restructuring. However, the company does not believe that it will complete its restructuring by September 30, 1999, the date by which the Restructuring Agreement indicates the company's restructuring must be completed. Physicians Resource Group indicates that it intends to continue to pursue its restructuring. Since January 1, 1999, the company has been successful in completing sales of assets used in connection with the operation of fifteen medical practices and certain interests in six ambulatory surgery centers. In connection with those sales, all litigation and other disputes with the affiliated medical practices and surgery centers were resolved, approximately $6.4 million in principal amount of notes payable by the company to the affiliated medical practices were retired and the management services agreements between the company and the affiliated medical practices were terminated. In connection with these asset sales, the company generated cash sufficient to allow it to retire approximately $9.5 million in bank indebtedness, as well as its $3.75 million loan from Resurgence provided for in the Restructuring Agreement. There is no assurance that Resurgence will not attempt to terminate the Restructuring Agreement based on the company's alleged breach of the Restructuring Agreement or any failure by the company to complete the restructuring by September 30, 1999. Physicians Resource Group is a provider of physician practice management services to eye care practices and operates ambulatory surgery centers. PRESLEY COMPANIES: Merger With Wholly-Owned Subsidiary Proposed -------------------------------------------------------------- On July 20, 1999, The Presley Companies issued an announcement that, after approval by a special committee of its Board of Directors, Presley and William Lyon Homes, Inc. have agreed to an extension of its revised letter of intent to October 15, 1999. The extension also extends to October 15, 1999, the period in which the parties have agreed (with certain exceptions) to negotiate exclusively. Presley also announced that its Board of Directors has approved, subject to shareholder approval, a merger of Presley into a wholly-owned subsidiary. The subsidiary will be the surviving company in the merger. Presley indicates that the principal purpose of the proposed merger is to help preserve Presley's substantial net operating loss carryforwards and other tax benefits for use in offsetting future taxable income or income tax by decreasing the risk of an "ownership change" for federal income tax purposes. This will be accomplished by imposing certain restrictions on the transfer of the surviving company's stock. These restrictions will be similar to those imposed by several other public companies for the purpose of preserving their tax benefits against an "ownership change." As previously reported, Presley's future use of tax carryforwards would be severely limited if there were an "ownership change," as defined by the applicable tax laws and regulations, over any three-year period. While Presley believes an "ownership change" has not occurred since 1994, there is a risk that future shifts in ownership, primarily involving present or future holders of 5% or more of Presley's shares, could result in an "ownership change" as calculated for federal income tax purposes. Generally, Presley has no control over purchases or sales by investors who acquire 5% or more of its shares. However, the merger is being proposed to reduce the risk of an "ownership change" occurring by restricting certain transfers of the new company's stock. In general, if the proposed merger is consummated, the transfer restrictions will prohibit, without prior approval of the board of directors of the new company, the direct or indirect disposition or acquisition of any stock of the company by or to any holder who owns or would so own upon the acquisition (either directly or through the tax attribution rules) 5% or more of the new company's stock. These restrictions are intended to bind all holders of shares of Presley's common stock outstanding at the effective time of the proposed merger. If the proposed merger is consummated, the transfer restrictions on the shares of the new company will remain in effect for at least three years unless the new company's board determines that they are no longer needed to preserve the company's tax benefits. Transfers of shares of Presley common stock occurring prior to the effective time of the proposed merger will not be restricted and all holders of Presley common stock as of such effective time will receive shares of the new company in exchange for their Presley shares on a proposed one-for-five basis. However, subsequent dispositions of those company shares will be subject to the transfer restrictions. Accordingly, if the proposed merger is consummated, persons who are or become "5% stockholders" of Presley for purposes of the applicable federal income tax regulations will be prohibited from disposing of their shares or acquiring additional shares in the new company while the transfer restrictions are in effect unless the express consent of the board of directors of the new company is obtained. The proposed merger will be submitted for approval at a special meeting of stockholders of Presley which has not yet been called. The proposed merger will require the approval of a majority of the shares of Presley's Series A and Series B common stock, voting as a single class. No appraisal rights will be available in connection with the transaction. The merger is also subject to a number of other conditions, including receipt of necessary consents and approvals; receipt of a satisfactory opinion as to the federal income tax effects of the merger; and consummation of the other transactions contemplated by the previously announced letter of intent with William Lyon Homes, Inc. If the proposed merger is consummated, each share of Series A or Series B common stock of Presley will be converted into the right to receive 0.2 common shares of the new company and outstanding stock options will be correspondingly adjusted. The new company will have the same financial position as that of Presley immediately before the merger (the merger is expected to take effect after consummation of the transactions contemplated in the letter of intent with William Lyon Homes). Except for the transfer restrictions, the new shares will have terms substantially similar to the old shares. Presley is not soliciting proxies at this time and the offering of new shares will be made under the federal securities laws only pursuant to a registration statement declared effective by the Securities and Exchange Commission. PRIMARY HEALTH: Seeks Interim Hearing For DIP Credit Agreement -------------------------------------------------------------- The debtors, Primary Health Systems, Inc. and its debtor affiliates seek an interim hearing to consider the Emergency Motion for entry of interim and final orders authorizing the debtors to enter into a first amendment to the DIP Credit Agreement for July 28, 1999 at 9:30 AM. Pursuant to the Credit Agreement the debtors have received a commitment from the Lenders to lend up to $23 million to the debtors. The amendment that the debtors seek provides that the amount outstanding at any one time shall not exceed the aggregate principal amount of $26.5 million. In anticipation of the August 31, 1999 termination date of the Credit Agreement, the debtors and the Lenders intend to enter into an amendment to the Credit Agreement that, among other things, will extend the Termination Date. QUALITECH STEEL: Asks To File Plan Without Disclosure Statement --------------------------------------------------------------- The debtors, Qualitech Steel Corporation and Qualitech Steel Holdings Corp., the Official Unsecured Creditors Committee and the Plan Proponents, Chase Venture Capital Associates, LP, John Hancock Mutual Life Insurance Company, Newcourt Commercial Finance Corporation and Textron, Inc. seek leave to file a plan of reorganization without a Disclosure Statement and to set a Disclosure Statement Hearing. The Senior Lenders assert that they were the successful bidder at the auction and now seek entry of an order approving their credit bid. Each of the plan proponents as well as the debtor opposes the sale on procedural and substantive grounds. By order dated June 24, 1999, the court terminated the exclusivity period of the debtors and the plan proponents seek leave of court to file a plan of reorganization. The plan proponents request leave to file their plan without a Disclosure Statement, and that the court set July 30, 1999 as the date on or before which their Disclosure Statement must be filed. The plan proponents request that a hearing on the Disclosure Statement be set for August 20, 1999 with all objections to the disclosure statement to be filed on or before August 17, 1999. The plan proponents request that the plan and disclosure statement be mailed on or before August 24 to all creditors, and that the hearing on plan confirmation be set for September 22, 1999 with all objections to confirmation to be filed on or before September 13, 1999. The debtors request that the court set July 30, 1999 as the date on or before which their disclosure statement must be filed. As provided in the plan, Qualitech shall provide for an authorized capital stock of one million shares of New Common Stock, including 400,000 shares of New Class A Common stock, 200,000 shares of New Class B Common Stock and 200,000 shares of New Class C common stock and 100,000 shares of New Preferred stock. As of the Effective Date, Reorganized Qualitech will obtain $60 million in new debt financing secured by a first priority lien in substantially all assets of Reorganized Qualitech in the form of $40 million in term debt and $20 million in revolving debt. Reorganized Qualitech will obtain $125 million in new debt financing in the form of New Bonds, which will have a second priority lien in substantially all the assets of Reorganized Qualitech and the payment of which will be guaranteed by the US Government. RENAISSANCE COSMETICS: Seeks Approval of Employee Retention Plan ---------------------------------------------------------------- The debtors, Renaissance Cosmetics, Inc., et al. seek entry of an order approving an Employee Retention Plan designed to retain certain key executives and employees during the wind down of the cases. On July 1, 1999 the court approved the sale of substantially all of the debtors' assets to DPC Acquisition Corp. A closing is anticipated on or about July 31, 1999. Proposed retention bonus payments total $100,000. SMARTALK TELESERVICES: AT&T Asks To Lower Amount Of Holdback Note ----------------------------------------------------------------- On January 19, 1999, SmarTalk TeleServices, Inc. and certain of its non-foreign subsidiaries filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. On March 31, 1999, pursuant to the terms of an Asset Purchase Agreement, dated January 19, 1999 between SmarTalk TeleServices, Inc., and its debtor and non-debtor subsidiaries and AT&T Corp. AT&T purchased substantially all the assets of Smartalk for aggregate consideration of approximately $145 million consisting of approximately $96 million in cash and payment of approximately $9 million in indebtedness and transaction costs and a $40 million promissory note issued by AT&T in favor of Smartalk. The purchase price is subject to downward adjustments pursuant to a post-closing purchase price adjustment formula and in the event of claims by AT&T. Although the company and AT&T have not yet finalized the closing statements and purchase price adjustment statement, AT&T has suggested that the principal amount of the holdback note be reduced by $4,578,072 to $35,421,928. In connection with the sale of substantially all of the company's assets to AT&T, Smartalk recognized a loss on the impairment and anticipated liquidation values of certain assets that were excluded from the AT&T sale transaction. In addition, numerous claims have been submitted from the company's creditors which Smartalk indicates specify amounts that may differ from the company's records or that may overstate the actual value of the company's obligations with respect to such claims. The company will perform a claims analysis process that will involve investigating and reconciling the filed proofs of claims to the company's records. Filing of the company's May 1999 financial statements with the Securities & Exchange Commission reveals Smartalk incurred a net loss of $1,909,003, with zero income reported. STAFF BUILDERS: Quarterly Revenues Off/Losses Up ------------------------------------------------ For the three months ended May 31, 1999, total revenues for Staff Builders Inc. decreased by $3.6 million (or 3.2%) to $107.7 million from $111.3 million for the same three month period in 1998. Net loss in the 1999 quarter cited was $2.1 million, while net loss sustained in the same period of 1998 was $1.0 million. Staff Builders has cited a number of conditions which it feels raises substantial doubt about the ability of the company to continue as a going concern. As a result, management of the company is said to be pursuing various strategies, including negotiating with alternative lending sources, additional deferred payment terms for Medicare and Medicaid audit liabilities as well as for any repayments of Medicare periodic interim payments and deferred payment terms for other creditors. The management is implementing an intensified collection effort and has obtained a deferred payment schedule for the repayment of excess PIP payments made to the company by the Federal government as well as for audit liabilities assessed to date. Staff Builders received written notification dated June 18, 1999, from United Government Services, the company's Health Care Financing Administration contracted intermediary, containing a revised repayment schedule, which requires 24 equal monthly installments commencing June 25, 1999, of approximately $1.3 million, including principal and interest. The company has paid the first of these installments. As of May 31, 1999, the total amount of excess PIP amounts received were approximately $19.0 million. STARTER CORP: MLBP Objects to Asset Purchase Agreement ------------------------------------------------------ Major League Baseball Properties, Inc. ("MLBP") objects to the motion of Starter Corporation, et al., debtors, for entry of an order approving an Asset Purchase Agreement which purports to sell substantially all of the debtors' assets and contemplates authorizing the assumption and assignment of Executory Contracts. MLBP states that the current prospective purchaser of the debtor's assets does not intend to purchase and/or assume and assign any of the License Agreements or Foreign Agreements and the Asset Purchase Agreement so reflects this intention. Nevertheless, the debtors require objections to the motion in the event a prospective purchaser surfaces and indicates a desire to purchase any of the agreements. As of July 11, 1999 MLBP represents that none of the bids received by the debtors seeks to acquire the agreements. MLBP believes that the motion for approval of the Asset Purchase Agreement should be denied, because to the extent that it seeks to sell and/or assume and assign the License agreements or the Foreign Agreements, the Agreements are not assignable under non-bankruptcy law and MLBP has not consented to such assignment, the debtors have not tendered a cure of the defaults under the Agreements and the debtors have not provided adequate assurances of future performance. TAL WIRELESS: Liquidating Assets/Shareholders Position Unclear ----------------------------------------------------------------- Last year, on October 6, 1997, Tal Wireless Networks Inc. filed a voluntary petition for protection under Chapter 11 of the Federal Bankruptcy Laws in the United States Bankruptcy Court, Northern District of California, San Jose Division pursuant to which the company's existing directors would continue in possession but subject to the supervision and orders of the Bankruptcy Court. The company now plans to liquidate assets and review the claims of its various creditors. It is unclear at this time whether there will be any funds available for distribution to shareholders. Once this information has been determined, the company may file a Plan of Reorganization with the Bankruptcy Court. The cumulative case-to-date net loss of the company is $2,677.5 million while reporting only $7.0 million in revenue. TELETRAC INC: Seeks Authorization to Employ Financial Advisor ------------------------------------------------------------- The debtor, Teletrac, Inc. is seeking authorization to employ and retain PricewaterhouseCoopers, LLP as financial advisor for the debtor, Teletrac, Inc. The debtor submits that it is essential for it to employ PricewaterhouseCoopers as its financial advisor because among other things the debtor requires certain valuations and financial advice with respect to its plan, disclosure statement, and the plan confirmation process. Subject to court approval, compensation will be payable to PricewaterhouseCoopers on an hourly basis. The partners, directors, manager and associates presently designated to represent the debtor have current standard hourly rates ranging from $450 per hour to $150 per hour. TRACE INT'L: Filing Does Not Change Control in Foamex Debt -------------------------------------------------------------- Foamex International Inc. (Nasdaq: FMXI) has been informed that Trace International Holdings, Inc., a New York-based holding company, and one of its subsidiaries, which together hold approximately 46 percent of the Company's common stock, filed a petition for relief under Chapter 11 of the bankruptcy code in Federal court in New York City on July 21, 1999. Foamex stated that Trace's bankruptcy filing does not constitute a change of control under the provisions of the Company's various bank agreements, public debt and promissory notes. The Company noted that if the bankruptcy court allowed Trace's creditors to foreclose on, and take ownership of the Foamex common stock held by Trace, or otherwise authorized a sale or transfer of these shares, certain acceleration and put rights under the terms of the bank agreements, public debt and promissory notes could be triggered. The Company said that it will seek to resolve the issues that may arise if the change of control provisions are triggered in the future, including waivers of such provisions and/or refinancing certain debt, if necessary. There is no assurance that the Company will be able to obtain such waivers or financing. As of March 31, 1999 the Company had approximately $ 789.1 million of debt outstanding. Mr. Johnson said, "Our lenders recognize the strong on-going potential of Foamex and continue to be supportive of the new leadership. In addition, they recognize the benefits of operating independently of Trace. I believe that Foamex has the potential to be far more profitable than it has been in recent history. We look forward to the continued support of our customers, suppliers and employees as we address the Company's development." Mr. Johnson added that Trace's filing should not have a negative impact on Foamex's day- to-day operations. Actions Implemented to Position Foamex for Sustained Profitability Mr. Johnson reiterated that the Linwood-PA based leadership team has taken positive actions that are designed to position Foamex for sustained profitability. These include: - Strengthened financial controls. - Initiatives to build a new organization, including the appointment of John Televantos, an ARCO Chemical Company veteran, as President of the Foam Business Group. Mr. Televantos is responsible for the Company's Foam and Automotive Products business units as well as the Company's overall manufacturing operations, business development, research, logistics and sourcing initiatives. - The June 1999 amendments of the Company's bank agreements. - Contemporaneous actions to improve future cash flows, including eliminating the $ 3.0 million annual payment under a management agreement with a subsidiary of Trace as well as terminating the sublease by Trace of New York office space. Foamex, headquartered in Linwood, Pennsylvania, manufactures and markets flexible polyurethane and advanced polymer products in North America. The Company expects to announce results for the second quarter 1999 on or about August 5, 1999. For more information, visit its web site at http://www.foamex.com. VIDIKRON TECHNOLOGIES: Announces PNC Bank Action ------------------------------------------------ Vidikron Technologies Group, Inc. (the "Company") (Nasdaq: VIDI) announced that PNC Bank has exercised its right of setoff against all of Vidikron of America, Inc.'s ("Vidikron" the Company's U.S. operating subsidiary) funds in accounts maintained at the Bank and has commenced sending letters to all of Vidikron's customers notifying them to remit payments directly to the Bank. Vidikron's agreement with PNC Bank requires that Vidikron maintain all its accounts and deposits with the Bank. As a result of these actions, the Company, and its Vidikron subsidiary, may find it necessary to seek protection from creditors under Chapter 11 of the Bankruptcy Code. The Company has initiated a number of actions to avoid a bankruptcy filing. It is negotiating for an infusion of new capital and the conversion of certain indebtedness into equity, as well as a change in terms of certain outstanding securities. In that respect, the Company has signed non-binding term sheets with certain of its creditors and security holders. There can be no assurance that Vidikron will avoid a bankruptcy proceeding, nor can the outcome of any such proceeding on the Company's security holders be predicted. Vidikron Technologies Group, Inc. is in the business of developing and marketing technological innovations in the high- end home theater industry under its premier Vidikron brand. The company distributes its products in over 46 countries worldwide. WELLCARE MANAGEMENT: Transactions To Change Future Operations ------------------------------------------------------------- The WellCare Management Group, Inc. is a managed health care company whose direct and indirect wholly-owned subsidiaries, WellCare of New York, Inc. and WellCare of Connecticut, Inc., are health maintenance organizations. WellCare of Connecticut, which is a wholly-owned subsidiary of WellCare of New York, is modeled on WellCare of New York and operates in the State of Connecticut. As of December 31, 1998, WellCare of New York membership consisted of commercial members as well as those covered by governmental programs (Medicare, Medicaid and Child Health Plus). WellCare of Connecticut services only commercial members. Until June 1999, WellCare provided management services to each of its subsidiaries. In June 1999, the company entered into a number of transactions which will significantly change the future operations of the company. On June 11, 1999, WellCare closed on two separate transactions. Kiran C. Patel, M.D., the principal of Well Care HMO, Inc., a Florida corporation, an entity unrelated to WellCare, purchased a 55% ownership interest in the company for $5 million. In a second transaction, Group Health Incorporated purchased WellCare of New York's commercial business (approximately 25,000 members) for approximately $5 million, effective June 1, 1999. The consummation of these transactions, along with other concurrent settlements, is expected by the company to: reduce its working capital deficit by approximately $18.0 million; improve the ability to bring WellCare of New York within the 50% to 100% revised contingent reserve requirement, as permitted by NYSID; retire substantially all of the company's long-term debt; significantly reduce WellCare of New York's obligations to its providers; reduce the number of employees from 236 at December 31, 1998 to 105; and change the configuration and focus of the company. Thereafter, WellCare's operations in New York will consist solely of its governmental programs (Medicare, Medicaid, and Child Health Plus), with WellCare of New York's revised statutory cash reserve decreased to $2.9 million, and its revised statutory contingent reserve decreased to $3.7 million. WellCare of Connecticut will continue its commercial business in Connecticut, subject to a public hearing and regulatory approval of the acquisition of control of WellCare of Connecticut. Management says it believes that the consummation of these transactions will improve WellCare's ability to continue as a going concern. In the June 1999 transaction, Dr. Patel purchased shares of a newly authorized series of senior convertible preferred stock for $5 million, which provides Dr. Patel with 55% of WellCare's voting power. The preferred stock is subject to mandatory conversion into common stock upon the amendment to WellCare's certificate of incorporation to increase the number of authorized shares of common stock from 20 million to 75 million. The shares will be convertible into 55% of the then outstanding common stock (after giving effect to such conversion) and will be subject to anti-dilution rights under which Dr. Patel will generally preserve his 55% interest in WellCare until there are 75 million shares of common stock issued and outstanding. The investment by Dr. Patel in WellCare was approved by New York State regulators on June 11, 1999. Pending a public hearing in Connecticut and regulatory approval of the acquisition of control of WellCare of Connecticut, Dr.Patel is precluded from exercising influence in directing the management and policies of WellCare of Connecticut. There can be no assurance that approval of the change in control will be granted nor that the order of supervision will be lifted. In the other transaction, WellCare of New York sold its commercial business, including approximately 25,000 members, to Group Health Inc. for $5 million, effective June 1 1999. WellCare received $4 million at closing, and $1 million was placed in escrow pending a determination of the total number of WellCare of New York commercial members at June 1, 1999. If the commercial membership is at least 25,000 members, all of the proceeds will be released from escrow. WellCare and WellCare of New York have agreed not to engage in commercial HMO business in New York for a period of one year following the closing. WIRELESS ONE: Seeks Extension To Assume or Reject Leases -------------------------------------------------------- The debtor, Wireless One, Inc. seeks entry of an order further extending the time within which the debtor may assume or reject unexpired leases of nonresidential real property. The debtor represents that the 65 unexpired leases are important assets of the debtor, and central to any plan of reorganization. The debtor states that although a plan of reorganization was filed, the changes which have occurred in the debtor's industry are so remarkable that the debtor "cannot blindly proceed with the proposed plan formulated under conditions that were drastically different. The request for extension and the time for analysis of the unexpired leases is itself part of the debtor's good faith progress toward rehabilitation and formulation of a revised plan. Also, the debtor represents that it has recently completed negotiation of, and obtained approval of a commitment letter with its existing DIP lender MCI which will provide to the debtor, if approved, operation of the debtor's business during this case and will serve as an exit facility upon the debtor's emergence from bankruptcy. The debtor believes that it has demonstrated good faith progress towards rehabilitation and the development of a consensual plan of reorganization. Z.FREDERICK: Hearings Set for Auction and Sale ---------------------------------------------- Kenar Enterprises, Ltd., one of the debtors filed a motion seeking a court order fixing dates, times and place of hearing. On July 27, 1999 at 9:30 AM a hearing will be held to consider entry of an order approving the terms of an Auction to sell the debtor's trademarks to BHPC Marketing, Inc. On September 2, 1999 at 10:00 AM a further hearing will be held for an order authorizing the sale of the Purchased Assets to BHPC pursuant to the agreement or to a third party whose competing offer is the highest and best offer consistent with the terms of the bidding procedures provided for under the procedures order, and authorizing the debtor to reject the Executory Contracts. Meetings, Conferences and Seminars ---------------------------------- August 4-7, 1999 AMERICAN BANRKUTPCY INSTITUTE Southeast Bankruptcy Workshop The Ritz-Carlton, Amelia Island, Florida Contact: 1-703-739-0800 August 26-28, 1999 AMERICAN LAW INSTITUTE - AMERICAN BAR ASSOCIATION COMMITTEE ON CONTINUING PROFESSIONAL EDUCATION Real Estate Defaults, Workouts and Reorganizations San Francisco, California Contact: 1-800-CLE-NEWS August 29-September 1, 1999 NATIONAL ASSOCIATION OF BANKRUPTCY TRUSTEES 1999 Convention Grove Park Inn, Asheville, North Carolina Contact: 1-803-252-5646 or info@nabt.com September 13-15, 1999 STATES' ASSOCIATION OF BANKRUPTCY ATTORNEYS 8th Annual States' Taxation & Bankruptcy Conference Hotel Santa Fe, Santa Fe, New Mexico Contact: 1-505-827-0728 September 16-18, 1999 AMERICAN BANRKUTPCY INSTITUTE Southwest Bankruptcy Conference The Hotel Loretto, Santa Fe, New Mexico Contact: 1-703-739-0800 September 17, 1999 GEORGETOWN UNIVERSITY LAW CENTER & THE AMERICAN BANKRUPTCY INSTITUTE Bankruptcy '99: Views from the Bench Georgetown University Law Center, Washington, D.C. Contact: 1-202-662-9890 September 24-25, 1999 VIRGINIA CONTINUING LEGAL EDUCATION 14th Annual Mid-Atlantic Institute on Bankruptcy and Reorganization Practice Boar's Head Inn, Charlottesville, Virginia Contact: 1-800-979-8253 September 27-28, 1999 RENAISSANCE AMERICAN CONFERENCES & BEARD GROUP, INC. Conference on Corporate Reorganizations Regal Knickerbocker Hotel, Chicago, Illinois Contact: 1-903-592-5169 or ram@ballistic.com October 6-9, 1999 NATIONAL CONFERENCE OF BANKRUPTCY JUDGES 73rd Annual Meeting San Francisco Marriott, San Francisco, California Contact: 1-803-957-6225 October 22-26, 1999 TURNAROUND MANAGEMENT ASSOCIATION 1999 Annual Conference The Fairmont--Atop Nob Hill, San Francisco, CA Contact: 1-312-822-9700 or ljfialkoff@turnaround.org November 17-20, 1999 AMERICAN BAR ASSOCIATION'S LATIN AMERICAN LAW SUBCOMMITTEE & THE ASSOCIATION OF COMMERCIAL BANKS OF THE DOMINICAN REPUBLIC Educational Exchange Case De Campo Resort, LaRomana, Dominican Republic Contact: 1-703-739-0800 November 29-30, 1999 RENAISSANCE AMERICAN CONFERENCES & BEARD GROUP, INC. Distressed Investing '99 The Plaza Hotel, New York, New York Contact: 1-903-592-5169 or ram@ballistic.com December 2-4, 1999 AMERICAN BANRKUTPCY INSTITUTE Winter Leadership Conference La Quinta Resort & Club, La Quinta, California Contact: 1-703-739-0800 May 4-5, 2000 RENAISSANCE AMERICAN CONFERENCES & BEARD GROUP, INC. Bankruptcy Sales & Acquisitions The Renaissance Stanford Court Hotel San Francisco, California Contact: 1-903-592-5169 or ram@ballistic.com The Meetings, Conferences and Seminars column appears in the TCR each Tuesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. ********** The Meetings, Conferences and Seminars column appears in the TCR each Tuesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. Bond pricing, appearing in each Friday edition of the TCR, is provided by DLS Capital Partners, Dallas, Texas. 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., Princeton, NJ, and Beard Group, Inc., Washington, DC. Debra Brennan, Yvonne L. Metzler and Lexy Mueller, Editors. Copyright 1999. 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 six 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 * * *