======================================================================== L&H/DICTAPHONE BANKRUPTCY NEWS Issue Number 1* ------------------------------------------------------------------------ Copyright 2000 (ISSN XXXX-XXXX) November 30, 2000 ------------------------------------------------------------------------ Bankruptcy Creditors' Service, Inc., Phone 609-392-0900 FAX 609-392-0040 ------------------------------------------------------------------------ L&H/DICTAPHONE BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 24 Perdicaris Place, Trenton, New Jersey 08618, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. Each issue is prepared by Peter A. Chapman, Editor. Subscription rate is US$45 per issue. Reproduction of L&H/DICTAPHONE BANKRUPTCY NEWS is prohibited without permission. ======================================================================== IN THIS ISSUE ------------- [00000] HOW TO ORDER A SUBSCRIPTION TO L&H/DICTAPHONE BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF LERNOUT & HAUSPIE AND DICTAPHONE [00002] L&H'S CONSOLIDATED BALANCE SHEET AS OF JONE 30, 2000 [00003] DICTAPHONE'S CONSOLIDATED BALANCE SHEET AS OF SEPT. 30, 2000 [00004] L&H TO RESTATE FINANCIALS FOR 1998, 1999, 2000 [00005] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING [00006] L&H/DICTAPHONE DEBTORS' CHAPTER 11 DATABASE [00007] LIST OF L&H/DICTAPHONE'S 20 LARGEST UNSECURED CREDITORS [00008] STONINGTON SUES TO RESCIND DICTAPHONE/L&H MERGER DEAL [00009] ORGANIZATIONAL MEETING WITH U.S. TRUSTEE TO FORM COMMITTEES KEY DATE CALENDAR ----------------- 11/29/00 Voluntary Petition Date 12/14/00 Deadline for filing Schedules of Assets and Liabilities 12/14/00 Deadline for filing Statement of Financial Affairs 12/14/00 Deadline for filing List of Leases and Executory Contracts 12/19/00 Deadline to provide Utility Companies with adequate assurance 01/29/01 Deadline to assume or reject leases and executory contracts 02/27/01 Deadline for removal of actions pursuant to F.R.B.P. 9027 03/29/01 Expiration of Debtors' Exclusive Period to propose a Plan 05/28/01 Expiration of Debtors' Exclusive Solicitation Period 11/29/02 Deadline for Debtors' Commencement of Avoidance Actions Organizational Meeting with UST to form Official Committees Bar Date for filing Proofs of Claim First Meeting of Creditors pursuant to 11 U.S.C. Sec. 341(a) Expiration of DIP Financing Facility ----------------------------------------------------------------------- [00000] HOW TO ORDER A SUBSCRIPTION TO L&H/DICTAPHONE BANKRUPTCY NEWS ----------------------------------------------------------------------- L&H/DICTAPHONE BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is $45 per issue. Newsletters are delivered via e-mail; invoices, transmitted with each newsletter issue, arrive by fax. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- ----------------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF LERNOUT & HAUSPIE AND DICTAPHONE ----------------------------------------------------------------------- LERNOUT & HAUSPIE SPEECH PRODUCTS N.V. Flanders Languages Valley, 50 8900 Ieper Belgium Telephone (32 57) 228-888 Fax (32 57) 208-489 and 52 Third Avenue Burlington, MA 01803 Phone (781) 203-5000 Fax (781) 238-0986 http://www.lhsl.com Lernout & Hauspie Speech Products (NASDAQ: LHSPE, EASDAQ: LHSP), the company's whose slogan is "We have the world talking" succeeded in that objective in the last weeks, culminating days of stunning announcements with a filing on November 29, 2000, for relief under Chapter 11 in Delaware. Lernout & Hauspie is a global leader in advanced speech and language solutions for vertical markets, computers, automobiles, telecommunications, embedded products, consumer goods and the Internet. The company is making the speech user interface the keystone of simple, convenient interaction between humans and technology, and is using advanced translation technology to break down language barriers. The company provides a wide range of offerings, including: customized solutions for corporations; core speech technologies marketed to OEMs; end user and retail applications for continuous speech products in horizontal and vertical markets; and document creation, human and machine translation services, Internet translation offerings, and linguistic tools. L&H's products and services originate in four basic areas: automatic speech recognition, text-to-speech, digital speech and music compression and text-to-text (translation). L&H in the parent corporation of Dictaphone Corporation, a company which can trace its corporate roots back to Alexander Graham Bell. Dictaphone also filed a related proceeding under Chapter 11. It was joined in that by L&H Holdings USA, Inc., a wholly owned subsidiary of L&H. L&H's speech products lines include L&H Voice Xpress, L&H Now You're Talking, Talking Max, L&H Clinical Reporter, L&H Power Scribe, L&H Kurzweil, L&H MagniReader, and SPK3 for Mandarin and Cantonese. Its language products include L&H Power Translator Pro, L&H Simply Translating, L&H Easy Language, L&H iTranslator, Transphere Arabic, Japanese Translation, and J-Text Pro. The company also has a line of speech development products and language development tools. Dictaphone, acquired by L&H earlier in 2000, includes call centers, including training centers and consulting services, recording technology for financial services, correctional facilities, voice for healthcare documentation networks, intelligent enterprise wide document creation solutions that incorporate: speech recognition, powerful document editing/management, and routing capabilities, digital portable voice recorders, Internet / Intranet technology, and server applications for the insurance and legal industries, the da Vinci system for public safety operations, and other voice-oriented business applications. A substantial portion of the Company's revenues are derived from the sale of products manufactured at the Company's manufacturing facility which is located in Melbourne, Florida. Dictaphone has fully and unconditionally guaranteed the repayment of $200.0 million of 11-3/4% Senior Subordinated Notes Due 2005 issued to finance the acquisition of the Company from Pitney Bowes. The Notes are subordinate to financing of the Credit Agreement, dated August 7, 1995, as amended, and other senior indebtedness as defined in the indenture pursuant to which the Notes were issued. As of March 31, 2000 the Credit Agreement consisted of a $75.0 million Tranche B Term Loan due June 30, 2002 (the "Tranche B Loan"), a $62.75 million Tranche C Term Loan due June 30, 2002 (the "Tranche C Loan" and together with the Tranche B Loan, the "Term Loans") and a six-year revolving credit facility of up to $40.0 million. The Company repaid the Term Loans and the Revolving Credit Facility with an advance from Lernout & Hauspie immediately following the acquisition of the Company by Lernout & Hauspie on May 5, 2000. Dictaphone Non-U.S. is not a guarantor of the Notes. L&H has been active issuance of its stock in a series of investments, mergers and acquisitions. In February, 2000, the Company acquired Clockworks International Limited. The Company issued two notes in the principal amounts of IR(Pounds) 1,007,736 (approximately $1.2 million) and IR(Pounds) 1,492,264 (approximately $1.8 million), respectively. On April 3, 2000, the notes automatically converted into a total of 54,954 shares of the Company's common stock. In April 2000, the Company issued 500,000 shares of common stock at a purchase price of $56.50 per share to an institutional investor. In that same month the Company issued 8,170 shares of common stock to BCB Voice Systems Inc. in connection with its investment in BCB Voice Systems Inc. Also in April 2000 the Company declared a two-for-one split of its common shares which was effective in May 2000. In May 2000, the Company issued 9,384,190 shares of common stock in connection with its acquisition of Dictaphone Corporation, discussed in detail below. In connection with this acquisition, it announced its intent to dispose of Dictaphone's contract manufacturing business in Florida. Dictaphone is currently in discussions regarding the sale of that business and expects to complete the sale by the end of 2000. In that same month, the Company issued 6,987 shares of common stock to two former shareholders of Emti Portugal. These shares were issued as additional consideration for the Company's acquisition of Emti Portugal in August 1997 which became payable upon the satisfaction of certain performance targets being met for the year ended 1999. Also in May 2000, the Company issued 12,347 shares of common stock to two former shareholders of Emti Brazil. These shares were issued as additional consideration for the Company's acquisition of Emti Brazil in August 1997 which became payable upon the satisfaction of certain performance targets being met for the year ended 1999. In June 2000, the Company issued 10,011,236 shares of common stock in connection with its acquisition of Dragon Systems, Inc. Dragon Systems, headquartered in Newton, Massachusetts, is a leading developer and supplier of speech and language technology. In addition to the issuance of stock, the Company converted all outstanding Dragon Systems stock options into options to acquire approximately 1.65 million shares of its common stock at a weighted average exercise price of $20.15 per share. In that same month, the Company issued 480,000 shares of common stock at a purchase price of $44.80 per share to an institutional investor. During the six months ended June 30, 2000, the Company issued an aggregate of 1,049,319 shares of common stock in connection with the conversion of approximately $28.9 million of Company-obligated mandatorily redeemable securities of a subsidiary trust holding solely parent convertible subordinated debentures. As of June 30, 2000, the Company was committed to pay the previous shareholders of certain acquired companies a maximum amount of approximately $31.75 million if certain financial or other performance targets are reached by these companies. In connection with the acquisition of Dictaphone, Fortis Bank N.V., KBC Bank N.V., Artesia Banking Corporation N.V., Deutsche Bank N.V. and Dresdner Bank Luxembourg S.A. collectively provided a total of $430 million in financing. The acquisition financing consisted of a $200 million short-term debt facility due March 31, 2001 which bears interest at LIBOR plus 100 basis points and a $230 million five year declining balance facility which bears interest at LIBOR plus 175 basis points. In addition, Deutsche Bank provided an ongoing $20 million revolving credit facility to Dictaphone which bears interest at LIBOR plus 125 basis points. These credit facilities are unsecured and contain financial and other covenants, including a covenant of the Company not to borrow any additional amounts under its existing credit facilities. The credit facilities also provide that the Company must use the cash proceeds of any sale of equity to prepay amounts outstanding under the short term facility, provided that an aggregate of $50 million in cash proceeds of any sales of equity made during the term of the short term facility may be used by the Company for other purposes. Initial funding of $200 million under the short-term facility and $30 million under the five year facility was used by the Company to repay Dictaphone's existing bank debt and the outstanding preferred stock, to satisfy other obligations in connection with the acquisition and to cover closing costs. As of June 30, 2000, the Company had borrowed $200 million under its short-term facility, $30 million under its five year facility and $16.5 million under its Dictaphone facility. As of June 30, 2000, Dictaphone had $200 million of senior subordinated notes outstanding. These notes bear interest at 11 3/4% per annum, are due in August 2005, and are redeemable by Dictaphone, at its option, at a declining rate beginning at 105.875% of par commencing in August 2000. The notes also contain financial and other covenants that are applicable to Dictaphone. The notes remain separate obligations of Dictaphone and have not been assumed or guaranteed by Lernout & Hauspie. On July 3, 2000, the Company acquired additional assets of Rodeer Systems, Inc., consisting of Rodeer's business operations in the states of Arizona, Georgia, Minnesota, Oklahoma, Texas and some operations in California for an aggregate purchase price of approximately $25 million in cash pursuant to the agreement with Rodeer Systems, Inc. dated May 2000. In this same month the Company borrowed an additional $55.0 million under its five year bank facility to redeem approximately $41.5 million of Dictaphone's senior subordinated notes that were put to Dictaphone by the noteholders at 101% of par following the acquisition of Dictaphone and for interest due on the redeemed notes and the remaining outstanding notes. In August 2000, the United States District Court for the District of Massachusetts dismissed with prejudice all claims under the class action lawsuits, consolidated in that court in April 1999. The suit had alleged that the Company and certain of its officers knowingly and improperly accounted for write-offs of in-process research and development expenses in connection with certain acquisitions. In August 2000, several law firms announced that they have named the Company in class action lawsuits that allege that the Company misrepresented its financial condition by inflating its reported revenues. The announcements contend that the Company's actions violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated under that Act. The announcements state that the lawsuits are being filed on behalf of all purchasers of the Company's common stock during varying periods, ranging from as early as December 28, 1999, through August 7, 2000. The Company anticipates that these plaintiffs will be seeking unspecified compensatory damages, attorneys' and experts' fees and other relief. The Company stated it believed that the claims against it in these class action lawsuits were groundless, and it intended to vigorously defend itself. ------------------------------------------------------------------- [00002] L&H'S CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 ------------------------------------------------------------------- LERNOUT & HAUSPIE SPEECH PRODUCTS N.V. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS At June 30, 2000 (Unaudited, Amounts in Thousands of US Dollars) ASSETS Current assets: Cash and cash equivalents............................. $ 199,393 Marketable securities................................. 288 Accounts receivable, net ............................. 237,067 Value added tax and other receivables................. 6,525 Inventory............................................. 27,125 Prepaid expenses and other current assets............. 60,699 ---------- Total current assets....................... 531,097 ---------- Deferred financing costs............................ 6,491 Deferred tax assets.................................. 7,702 Property and equipment, net of accumulated depreciation of $72,078......................... 75,129 Investments.......................... 35,310 Intangibles, net of amortization..... 1,703,678 Software development costs, net of amortization....... 13,369 ---------- Total assets...................... $2,372,776 ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable......................................... $ 251,907 Current portion of long-term debt..................... 3,404 Accounts payable...................................... 57,831 Accrued expenses...................................... 99,328 Deferred revenue...................................... 75,932 ---------- Total current liabilities.................. 488,402 Long-term debt, less current portion.................. 234,297 ---------- Total liabilities.......................... 722,699 ---------- Minority interest..................................... 1,150 Company-obligated mandatorily redeemable security of subsidiary trust holding solely parent convertible subordinated debentures........ 117,757 Shareholders' equity: Common shares, no par value ..................... 120,472 Convertible Common shares ....................... 494 Additional paid-in capital....................... 1,553,340 Accumulated deficit.............................. (125,115) Accumulated other comprehensive loss............. (18,021) ---------- Total shareholders' equity.................. 1,531,170 ---------- Total liabilities and shareholders' equity.. $2,372,776 ========== The following summarizes accounts receivable, from companies partially owned by the Company, FLV Fund, S.AI.L Trust and/or L&H Investment Company and from certain other related parties. Accounts receivable at June 30, 2000 included a total of $13,134 from Microsoft Corporation, LanguageWare.net Ltd., CellPort Labs Inc., Xiox Corporation, EHQ Inc., Iris N.V., Phonetic Topographics N.V., Intel Corporation, Nordisk Sprakteknologi AS, Speech Systems Inc., Hogadata Benelux N.V., BCB Voice Systems Inc., ESL.com Ltd., Telekol Corporation, Cegeka Healthcare Systems N.V., Computer Voice Dictation Solutions Inc., iSAIL Solutions N.V., Voicecom.net and Sail Labs N.V. On November 9, 2000, the Company announced that due to certain errors and irregularities identified in its ongoing audit committee inquiry, it expects to restate its financial statements for the periods 1998, 1999 and for the first half of 2000. The Company further announced that it does not expect its mid-year audit and necessary restatements to be completed by November 14, 2000. Accordingly, the Company's Form 10-Q for the third quarter ended September 30, 2000 will not be filed in a timely manner, nor does the Company believe that it will be filed on or before the fifth calendar day following the prescribed due date. These reasons could not be eliminated without unreasonable effort or expense. -------------------------------------------------------------------- [00003] DICTAPHONE'S CONSOLIDATED BALANCE SHEET AS OF SEPT. 30, 2000 -------------------------------------------------------------------- DICTAPHONE CORPORATION (Successor Company) CONDENSED CONSOLIDATED BALANCE SHEETS At June 30, 2000 (Unaudited, Amounts in Thousands of US Dollars) ASSETS Current assets: Cash and cash equivalents $ 1,572 Accounts receivable, less allowances of $5,939 77,991 Receivable due from affiliate 1,341 Inventories 14,235 Assets to be disposed of 35,349 Other current assets 4,391 -------- Total current assets 134,879 Property, plant and equipment, net 32,706 Intangibles, net 817,924 Other assets 5,599 -------- Total assets $991,108 ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: accounts payable $ 5,307 Payable due to affiliates 19,018 Interest payable 3,082 Accrued liabilities 16,784 Advance billings 67,195 Current portion of long-term debt 10,123 -------- Total current liabilities 121,509 Long-term debt 315,416 Due to Parent Company 16,000 Accrued pension liability 5,950 Deferred tax liability 2,600 Other liabilities 11,231 -------- Total liabilities 472,706 -------- Stockholder's equity: Common stock ($.01 par value; 100 shares outstanding) 1 Additional paid-in capital 593,444 Accumulated deficit (75,045) Accumulated other comprehensive income 2 -------- Total stockholder's equity 518,402 -------- Total liabilities and stockholder's equity $991,108 ======== The amount due to Lernout & Hauspie is for a term of two years as from May 5, 2000 at a fixed interest rate of 8% per annum, with interest payable at the end of each six month period during the term. The interest payment otherwise due on November 5, 2000 WAS deferred for a period of six months. The Senior Subordinated Notes bear interest at a rate of 113/4% per annum, payable semi-annually on each February 1 and August 1. The Notes mature on August 1, 2005. In September 2000, an affiliate of Lernout and Hauspie purchased Notes in the amount of $16 million in the open market. The aggregate principal amount available under the revolving line of credit is $20 million. Loans under the revolving line of credit bear interest at a per annum interest rate equal to Deutsche Bank's floating base rate (6.93% at September 30, 2000). Other debt matures in 2001 and bears interest at a per annum rate of 7.25%. ------------------------------------------------------------------- [00004] L&H TO RESTATE FINANCIALS FOR 1998, 1999, 2000 ------------------------------------------------------------------- IEPER, BELGIUM & BURLINGTON, MASS. -- November 9, 2000 -- Lernout & Hauspie Speech Products N.V., a world leader in speech and language technology, products and services, today provided an update on the status of the mid-year audit of the Company that it had commissioned last August and of the ongoing audit committee inquiry. As a result of certain errors and irregularities identified in the audit committee inquiry, the Company expects to restate its financial statements for the periods 1998, 1999 and for the first half of 2000. Although the audit committee is working diligently to determine the impact of these discrepancies on L&H's financial statements for these periods, L&H does not expect the audit and necessary restatements to be completed by November 14, 2000. Accordingly, the Company does not believe that its Form 10-Q for the third quarter ended September 30, 2000 will be filed in a timely manner. In addition and unrelated to the restatement, L&H believes the revenue for the third quarter will be at least $40 million below its previously published range of $165 to $185 million. In a joint statement, Mr. Roel Pieper Chairman of L&H and Mr. John Duerden, CEO of L&H, said: "We are very confident in our business and the proven demand for our products, technologies and services. We have significant resources committed to this task and we are making progress. We share the desire of our investors, customers and employees to put this matter to rest quickly. We also are determined to ensure that the Company's financial information is completely accurate. We are committed to providing the correct information to the marketplace as soon as possible, so that our entire organization can focus fully on its daily operations and on the job of building shareholder value." Previously, the Company announced that in connection with its ongoing audit committee inquiry, it expects to restate its financial statements for the periods 1998, 1999 and for the first half of 2000. Following this announcement, the Company's independent auditor, KPMG Bedrijfsrevisoren, has notified the Company that it has determined that its auditor's report relating to each of the Company's financial statements for 1998 and 1999 should no longer be relied upon. ------------------------------------------------------------------ [00005] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING ------------------------------------------------------------------ IEPER, BELGIUM & BURLINGTON, MASS. -- November 29, 2000 -- Lernout & Hauspie Speech Products NV, a world leader in speech and language technology, products and services, today announced that it has voluntarily filed a Chapter 11 petition for reorganization protection under the U.S. bankruptcy code and that it would file a request for a concordaat reorganization under Belgian law. The chapter 11 filing, made today in Wilmington, Delaware, will enable L&H to continue addressing its past problems, while developing a new strategic plan to leverage the Company's unparalleled base of technology assets and market access, as well as restore profitability. In addition to the filing, L&H is in active negotiations to obtain debtor-in- possession financing. John Duerden, President and Chief Executive Officer of L&H, said: "We have tried, without success, to reach an acceptable accommodation with our bank lenders. After an intensive analysis of L&H's world-wide business operations and a careful assessment of its financial position, we concluded that a voluntary reorganization filing is both prudent and necessary to preserve and rebuild our valuable customer base and technology assets." Daniel Hart, General Counsel of L&H explained that, "an important factor in the decision to seek reorganization protection was the recent discovery of a very significant cash shortfall on the balance sheet of the Korean subsidiary, the circumstances of which we will vigorously investigate with the assistance of external resources." Mr. Duerden expressed confidence that this was the right decision for the company at this time: "This court-supervised process will enable us to focus on realizing the enormous commercial potential of L&H's considerable technology resources, while continuing to investigate and remediate problems emanating from the past." Roel Pieper, Chairman of the Board, said, "Despite L&H's financial situation, we remain a market and technology leader, which gives us a strong foundation on which to build a new and profitable company. With this reorganization we now have the opportunity to chart a new course for L&H." In the US, the filing was made by Lernout & Hauspie Speech Products NV, Dictaphone Corporation, and L&H Holdings USA, Inc., the successor corporation to Dragon Systems Inc., for reorganization under Chapter 11 of the U.S. Bankruptcy Code. In Belgium, a concordaat reorganization filing will be made by Lernout & Hauspie Speech Products NV. ------------------------------------------------------------------- [00006] L&H/DICTAPHONE DEBTORS' CHAPTER 11 DATABASE ------------------------------------------------------------------- Debtors: Lernout & Hauspie Speech Products, N.V. Dictaphone Corporation L&H Holdings USA, Inc. Bankruptcy Case Nos.: 00-4397 through 00-4399 Petition Date: November 29, 2000 Court: United States Bankruptcy Court District of Delaware Marine Midland Plaza Building 824 Market Street Wilmington, Delaware 19801 Judge: Not Yet Assigned Circuit: Third Debtors' Lead Counsel: Luc A. Despins, Esq. Milbank, Tweed, Hadley & McCloy, LLP 1 Chase Manhattan Plaza New York, New York 10005 Telephone (212) 530-5000 Debtors' Local Counsel: Robert J. Dehney, Esq. Morris, Nichols, Arsht & Tunnell 1201 North Market Street P. O. Box 1347 Wilmington, Delaware 19899-1347 Telephone (302) 658-9200 U.S. Trustee: Daniel Astin, Esq. Office of the United States Trustee Curtis Center, 9th Floor West 901 Walnut Street Philadelphia, PA 19106 (215) 597-4411 Lernout & Hauspie's Reported Financial Condition as of June 30, 2000: Total Assets: $ 2,372,776,000 Total Liabilities: Short Term Debt $ 255,311,000 Long Term Debt $ 234,297,000 Dictaphone's Reported Financial Condition as of June 30, 2000: Total Assets: $ 1,018,820,000 Total Liabilities: $ 389,698,000 ----------------------------------------------------------------------- [00007] LIST OF L&H/DICTAPHONE'S 20 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------------- Creditor Nature of Claim Amount -------- --------------- ------- KBC Bank Bank loan $145,804.347 Havenlaan 2, 1080 Brussels, Belgium c/o Dirk De Bleser Accounting & Rerporting/BBR Havalaan 12, B-1080 Brussels, Belgium Tel: 32-3-429-42-76 Fax: 32-3-429-49-20 Shawmut Bank Connecticut Senior subordinated $142,416,000 National Association notes Trustee relating to the 11-3/4 Senior Subordinated Notes due August 1, 2005 777 Main Street Hartford, Connecticut 06115 Fortis Bank N.V. Bank loan $123,913,044 3 Montagne du Parc 100 Brussels, Belgium c/o Hans De Langhe Corporate Credit Department Fortis Bank N.V. 3 Montagne du Parc 100 Brussels, Belgium Tel: 32-02-228-06-05 Fax: 32-02-228-06-39 Artesia Banking Bank loan $ 41,304,348 Corporation N.V. Koning Albert II Iaan 30, Box 2, 1000 Brussels, Belgium c/o Piet Cordonnier Tel: 32-02-204-52-61 Fax: 32-02-204-32-41 Deutsche Bank N.V. Bank loan $ 19,565,217 Lange Gasthuisstraat 9, 2000 Antwerp, Belgium c/o Peter Van Raemdonck Tel: 32-02-551-64-88 Fax: 32-02-551-63-09 Dresdner Bank Bank loan $ 19,413,044 Lusembourg S.A. Rue du Marche-aux-Herbes 26 L-1728 Luxembourg c/o Christian Kogge Tel: 00352-4760-255 Fax: 00352-4760-824 Deutsche Bank AG Bank loan/Letter $ 14,272,505 31 West 52nd Street of Credit Facility New York, New York 10019 c/o Frank Raetzer Tel: (212) 469-8000 Fax: (212) 469-8115 SG Cowen Capital Professional fees $ 8,000,000 Securities Corp. 1221 Avenue of the Americas New York, New York 10020 c/o Ben Howe Tel: (212) 276-4297 Fax: (617) 946-3766 Wyle Electronics Trade debt $ 4,433,491 15360 Barranca Parkway Irvine, California 92618 c/o Joe Jovene Tel: (949) 453-4387 Fax: (949) 753-9890 Brown, Rudnick, Freed Legal fees $ 1,500,000 & Gesmer One Financial Center Boston, Massachusetts 02111 Tel: (617) 856-8200 Fax: (617) 856-8201 Finova Capital Trade debt $ 1,385,000 2650 S. Decker Lake Lane 2nd Floor P. O. Box 30028 Salt Lake City, Utah 84130-0028 Tel: (800) 748-4457 Fax: (801) 924-2190 Victor Company of Japan Trade debt $ 719,064 Co., Ltd. 12, 3-chome, Moriya-cho Kanagawa-ku, Yokohama Japan Tel: Kanagawa-pref., 221-8528 Fax: 011-81-45-4502568 Amherst Computer Trade debt $ 530,860 Products 10 Columbia Drive Amherst, New Hampshire Tel: (603) 889-6820 Fax: (603) 577-9400 Predictive Technologies Trade debt $ 474,021 560 Rustic Trail Beavercreek, Ohio 45434 Tel: (937) 272-2352 Fax: (937) 320-9017 Olympus Optical Co., Ltd. Trade debt $ 469,664 San-Ei Building 22-2, Nishi Shinjuku 2-chome Shinjuku, Tokyo Japan c/o H. Kakizaki Logistics Development Department Olympus Optical Co., Ltd. Tel: 011-81-3-3345-0895 Fax: 022-81-3-3340-2201 Radisys Corporation Trade debt $ 412,156 5445 N.E.2d Dawson Creek Drive Hillsboro, Oregon 97124 Tel: (800) 950-0044 Fax: (503) 615-1115 OSS Corporation Trade debt $ 364,838 One Enterprise Drive Suite 109 Shelton, Connecticut 06484 Tel: (203) 925-1083 Fax: (203) 925-1303 Centennial Technologies Trade debt $ 266,257 7 Lopez Road Wilmington, Massachusetts 01887 Tel: (978) 988-8848 Fax: (978) 988-7651 Patton Boggs LLP Legal fees $ 225,000 2550 M Street N.W. Washington, DC 20037-1350 c/o Lanny J. Davis, Esq. Tel: (202) 457-6000 Fax: (202) 457-6315 Sanyo Electric (HK) Ltd. Trade debt $ 212,207 Chuan Kei Fty. Building 14/F 15-23 Kin Kong Street Kwai Chung N.T. Hong Kong Tel: 011-817-24845046 Fax: 011-817-24851849 ----------------------------------------------------------------------- [00008] STONINGTON SUES TO RESCIND DICTAPHONE/L&H MERGER DEAL ----------------------------------------------------------------------- Describing its request for rescission of a merger agreement and ancillary agreements as "extraordinary relief", David C. McBride, Esq., Josy W. Ingersoll, Esq., and John J. Paschetto, Esq., of the firm of Young, Conaway, Stargatt & Taylor, LLP, of Wilmington, Delaware, joined by Alan S. Goudiss, Esq., H. Miriam Farber, Esq., and Thomas Childs, Esq., of Shearman & Sterling in New York, filed suit on behalf of Stonington Partners, Inc., Stonington Capital Appreciation 1994 Fund, L.P., and Stonington Holdings, L.L.C. in the Court of Chancery in Castle County, Delaware, on November 27, 2000, naming as defendants Lernout & Hauspie Speech Products, N.V., and each of Jo Lernout, the co-founder and until November, 2000, the co-chairman of the Board of Directors and a Managing Director of L&H, Pol Hauspie, the co-founder and until November, 2000, the co-chairman of the Board of Directors and a Managing Director of L&H, Gaston Bastiaens, the president and chief executive officer of L&H prior to August, 2000, and Nico Willaert, the vice- chairman of L&H and until November, 2000, a Managing Director of L&H, individually. Claiming that Lernout & Hauspie Speech Products had touted itself as the market leader in the field of speech recognition software and related products to its competitors, bankers, and a variety of investors and potential partners that it was capitalizing on leading-edge technology that would transform computing and personal communications, and in the process, generate huge revenues and earnings. Stonington says, simply, "This was a lie." Stonington claim that without external growth through mergers and acquisitions, L&H could not sustain its revenues, profits or projections. Barely six months after completing its merger with Dictaphone Corporation and Dragon Systems, Inc., L&H announced that it would have to restate its financial statements for 1998, 1999, and the first half of 2000 due to accounting irregularities. The Plaintiffs claim they were fraudulently inducted into entering into an agreement of merger and other related agreements in agreeing to sell its 96% stock ownership of Dictaphone to the defendants in exchange for stock in L&H. Fearing that the Dictaphone stock interests would be pledged to L&H's bank lenders, Stonington sought to rescind these agreements and be restored to its status quo ante, meaning the plaintiffs would once again be the owners of the majority of Dictaphone's stock. The Plaintiffs also seek damages based on false representations and warranties made in the merger documents. ------------------------------------------------------------------- [00009] ORGANIZATIONAL MEETING WITH U.S. TRUSTEE TO FORM COMMITTEES ------------------------------------------------------------------- Ordinarily, the United States Trustee for Region III schedules an organizational meeting for the purpose of forming one or more official committees of the Debtors' creditors within the first 10 to 15 days following the filing of a large-scale chapter 11 case in Delaware. The U.S. Trustee's office advises this morning that no time, date and place for that meeting has been set. Daniel Astin, Esq., is the attorney for the U.S. Trustee in charge of L&H/Dictaphone's chapter 11 cases. Contact the Office of the U.S. Trustee at 215-597-4411 for additional details. *** End of Issue No. 1 *** ------------------------------------------------------------------------- Peter A. Chapman peter@bankrupt.com http://bankrupt.com ------------------------------------------------------------------------- Recommended Reading: "Kirby Benedict: Frontier Federal Judge" -- history and a biography by Aurora Hunt. Order your copy of this title today at http://www.amazon.com/exec/obidos/ASIN/1893122808/internetbankrupt -------------------------------------------------------------------------