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/raid1/www/Hosts/bankrupt/TCR_Public/010525.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, May 25, 2001, Vol. 5, No. 103 Headlines ADVANTICA RESTAURANT: Maurice Halperin Now Owns 6.23% Of Stock ALGOMA STEEL: Has Until June 22 To File Plan of Arrangement ALLIS-CHALMERS: Completes Merger Transaction With OilQuip AT HOME: Moody's Downgrades Convertible Notes' Ratings To Caa3 CASUAL MALE: Court Approves $135 Million DIP Financing CONSUMERS PACKAGING: Continues Operations Under CCAA Protection DIAMOND BRANDS: Files Chapter 11 Petition in Wilmington DIAMOND BRANDS: Case Summary & 39 Largest Unsecured Creditors eBT INTERNATIONAL: Board Endorses Plan of Complete Liquidation EQUITEX INC.: Special Stockholders' Meeting Set For June 22 ERGO SCIENCE: Shares Knocked Off the Nasdaq ERLY INDUSTRIES: Changes Name to Torchmail Communications Inc. GENESIS HEALTH: Wants To Reject JSM Construction Contract GOLF TRUST: Lenders Demanding Immediate Payment Of Debt HISPANIC TELEVISION: Shares Face Delisting From Nasdaq ICG COMMUNICATIONS: Committee Taps Houlihan Lokey As Advisor INTEGRATED HEALTH: Gets Extension Of Mich. Hospice Office Lease JORE CORPORATION: Files For Chapter 11 Protection in Montana JPM COMPANY: Posts $8.4 Million Net Loss For First Quarter 2001 LOEWEN GROUP: Rejects Real Property Lease In Florida LTI HEALTHCARE: Pacific Exchange Suspends Trading of Shares METROMEDIA FIBER: S&P Places B+ Senior Debt Rating On Watch MIST INC: Sells Imprinter Business for CDN$7 Million to Pay Debt NCT GROUP: Largest Shareholder Buys Additional 4.3 Mil Shares NEFF CORPORATION: Amends Terms of Credit Facility NUTRI/SYSTEM: Nasdaq Delists Shares, Now Trading On OTCBB PACIFIC GAS: Martinez Demands Power Payments At Market Rates PARK-OHIO: S&P Downgrades Credit Ratings To Low-B's PICCADILLY CAFETERIAS: Moody's Cuts Senior Note Rating to Caa1 PHONETEL TECHNOLOGIES: Looks For More Lenders To Fund Operations RESPONSE ONCOLOGY: Reports First Quarter Results SL INDUSTRIES: Board Opts To Suspend Regular Cash Dividend SMARTCARDESOLUTIONS.COM: Creditor Moves To Enforce Security STAGE STORES: Files Second Amended Plan of Reorganization TELIGENT INC.: Obtains Court Nod For Employee Retention Program V3 SEMICONDUCTOR: Files For Chapter 11 To Facilitate Sale V3 SEMICONDUCTORS: Chapter 11 Case Summary VALLEY MEDIA: Receives Nasdaq's Delisting Notice VENCOR INC.: Seeks To Clarify Record Date For Distributions W.R. GRACE: Asbestos Claimants Ask To Retain Legal Analysis BOOK REVIEW: TAKING CHARGE: Management Guide to Troubled Companies and Turnarounds ********* ADVANTICA RESTAURANT: Maurice Halperin Now Owns 6.23% Of Stock -------------------------------------------------------------- Maurice A. Halperin of Boca Raton, Florida, a private investor, during the last sixty days has purchased a total of 827,000 shares of the common stock of Advantica Restaurant Group, Inc. The source of the funds for the purchase of the common stock was from Mr. Halperin's personal funds. He paid a total of $6,543,245 for 2,205,379 shares. He also owns 313,523 warrants which are currently exercisable at a price of $14.60 per share to purchase 313,523 shares of common stock. He received the warrants as a result of a bankruptcy reorganization of the Company in January 1998. He surrendered subordinated debentures in consideration for the warrants. The purpose for the acquisition of the common stock is investment. As of May 9, 2001, Mr. Halperin beneficially owned approximately 6.23% of the outstanding common stock of the Company, consisting of 2,205,379 shares of common stock and 313,523 warrants to purchase an equal number of shares of common stock. He has the sole power to vote and dispose of the shares of common stock and warrants. In the past sixty days, Mr. Halperin purchased 827,000 shares in open market transactions on the OTC Electronic Bulletin Board operated by the National Association of Securities Dealers, Inc. Eleven of the transactions were executed on his behalf by Prudential Securities, Incorporated and 26 by UBS PaineWebber, Inc., securities broker-dealers. ALGOMA STEEL: Has Until June 22 To File Plan of Arrangement ----------------------------------------------------------- Algoma Steel Inc. (TSE:ALG.) announced that it has been granted an extension of its protection under the Companies' Creditors Arrangement Act (CCAA) and the time for the filing of a Plan of Arrangement to June 22, 2001. The original order obtained by the Company was to expire on May 23, 2001. The Company also announced that it has appointed Hap Stephen as Chief Restructuring Officer. Mr. Stephen will have senior executive responsibility for Algoma's financial restructuring and will report to the Company's Board of Directors in that regard. Mr. Stephen was former Chairman of Repap Enterprises Inc. and has extensive experience in Canadian restructurings including recent involvement in Eatons, Beatrice Foods, Dylex and Olympia and York. Algoma's Chairman, Earl Joudrie, said, "The Company is pleased to have retained someone of Mr. Stephen's skill and experience in restructuring. He is clearly one of the leading Canadian experts in financial restructuring. The management of the Company's steel operations remains under the direction of Sandy Adam, President and CEO and his management team." Algoma Steel Inc., based in Sault Ste. Marie, Ontario, is Canada's third largest integrated steel producer. Revenues are derived primarily from the manufacture and sale of rolled steel products including hot and cold rolled sheet and plate. ALLIS-CHALMERS: Completes Merger Transaction With OilQuip --------------------------------------------------------- Allis-Chalmers Corporation (Nasdaq OTC:ACLM), announced that on May 9, 2001 it completed a transaction pursuant to which its wholly-owned subsidiary merged into OilQuip Rentals, Inc. In connection with the merger, Allis-Chalmers agreed to issue 10,000,000 shares of its common stock to the former OilQuip shareholders, which upon issuance will constitute approximately 86% of its outstanding stock, and appointed Munawar H. Hidayatallah, the Chief Executive Officer and controlling shareholder of OilQuip, as the new President, Chief Executive Officer and Chairman of the Board of Directors of Allis- Chalmers. In accordance with the merger, Allis-Chalmers issued 400,000 shares of its common stock to the former OilQuip shareholders and agreed to issue an additional 9,600,000 shares to such shareholders upon the amendment of its charter to authorize the issuance of such shares. Holders of approximately 70% of Allis- Chalmers common stock have granted proxies to Mr. Hidayatallah in favor of approving such amendment, which is expected to be approved at a meeting of shareholders to be held in June or July 2001. As a result of the merger, Allis-Chalmers was relieved of a liability to the Pension Benefit Guaranty Corporation in the amount of approximately $66.7 million. The merger transaction will be accounted for as a reverse acquisition under the purchase method of accounting. OilQuip, through its subsidiary Mountain Compressed Air, Inc., provides air drilling services for the exploration and production of natural gas in the United States. Prior to the merger, Allis-Chalmers operated one active subsidiary, Houston Dynamic Service, Inc., an equipment repair and remanufacture facility located in Houston, Texas. Allis-Chalmers intends to investigate acquisition opportunities in the natural gas exploration and drilling industry and intends to use Houston Dynamic Service as a centralized fabrication and machining facility for its operations. Mountain Compressed Air, Inc. has outstanding warrants to purchase an aggregate of approximately 20% of its outstanding shares, including a warrant issued to Wells Fargo Energy Capital entitling the holder to acquire 13.5% of its outstanding shares. AT HOME: Moody's Downgrades Convertible Notes' Ratings To Caa3 -------------------------------------------------------------- Moody's Investors Service lowered the following debt ratings of At Home Corporation to Caa3 from B3: * $437 million (face value) of 0.525% convertible subordinated notes due 2018 * $500mm of 4.75% convertible subordinated notes due 2006 Also, the senior implied and senior unsecured issuer ratings are both Caa1. The outlook for all ratings is negative while approximately $937 million of debt securities affected. For Moody's, it has become clear that the financial and/or other strategic sponsorship that had been previously expected from AT&T is far less likely to come, and as a result, the company's balance sheet will likely remain financially strained. Furthermore, according to Moody's, it seems increasingly likely that At Home will not have significant influence in negotiations with cable service providers to keep its exclusive and/or preferred access to subscribers given that cable networks are more broadly opened-up to competing ISPs. On immediate basis, Moody's specifically noted the company's rapidly eroding liquidity position, which has been badly hurt by the fairly significant underperformance and very costly expense associated with running its media business units. But though it remained questionable as to how long before the company will run out of money, Moody's believes that the company's near-term liquidity needs are likely to be met, in one form or another. Based in Redwood City, California, At Home Corporation is a global broadband Internet service provider utilizing cable infrastructure and cable modems as its delivery mechanism. CASUAL MALE: Court Approves $135 Million DIP Financing ------------------------------------------------------ Casual Male Corp. (NASDAQ: CMAL) and certain of its subsidiaries, each of which filed voluntary petitions to reorganize their businesses under Chapter 11 of the United States Bankruptcy Code on May 18, 2001, have received approval of certain orders from the United States Bankruptcy Court for the Southern District of New York. The Company announced that Judge Robert E. Gerber approved on an interim basis a $135 million post-petition credit facility provided by a lending group led by Fleet Retail Finance, Inc. and Back Bay Capital Funding LLC. The credit facility will provide loans to the Company to fund the Company's ongoing operations. The Court also entered an order that enables the Company to take full advantage of the automatic injunction (that commenced immediately upon the Chapter 11 filings) to protect its substantial net operating loss carryforward. The Court approved certain notice procedures that limit the buying and selling of the Company's equity and Convertible Subordinated Notes and the trading of claims that could effect an "ownership change" for tax purposes, thereby adversely affecting the Company's valuable NOL tax asset. In order to make sure that no violations of the automatic stay occur by claims or securities trading, the Court approved certain procedures to govern and restrict trading. These procedures will notify (i) beneficial holders of the Company's Convertible Subordinated Notes or common stock that, if they beneficially own 5% or more of such notes or stock, they are stayed from purchasing any additional notes or stock, and if they own less than 5% of such notes and stock, they are stayed from purchasing an amount which, when added to their total beneficial ownership, would equal more than 4.99% of such notes or stock, and (ii) holders of general unsecured claims (other than the Convertible Subordinated Notes) and holders of the 13% Senior Subordinated Notes due December 31, 2001 of the procedures that must be satisfied before the sale or other transfer of such claims may be deemed effective. Pursuant to the Order, any sale or other transfer in violation of such procedures will be null and void. Casual Male Corp. and its subsidiaries operate businesses engaged in the retail sale of apparel through its Casual Male Big & Tall, Repp Big & Tall and B&T Factory Store businesses, which offer fashion, casual, dress clothing and footwear to the big and tall man and through its Work n' Gear subsidiary which sells a wide selection of workwear, health-care apparel and uniforms for industry and service businesses. The Company's businesses offer their merchandise to customers through diverse selling and marketing channels including retail stores, catalog, direct selling work forces and e-commerce websites. CONSUMERS PACKAGING: Continues Operations Under CCAA Protection --------------------------------------------------------------- Consumers Packaging Inc. (TSE: CGC) announced that it has sought and obtained an Order of the Ontario Superior Court of Justice under the Companies' Creditors Arrangement Act (CCAA). The Order stays legal proceedings against the Company in respect of its Canadian operations until June 22, and authorizes Consumers Packaging to develop a restructuring plan. The CCAA Order does not apply to the Company's non-Canadian holdings, including 60% owned Anchor Glass Container Corporation, based in Tampa Fl., and 100% owned GGC LLC, which operates the Glenshaw Glass plant in Glenshaw Pa. The Order will enable the Company to continue operating in the normal course and to make payments to its employees, suppliers and others for goods and services received after the Order was issued. Consumers Packaging has secured access to sufficient funds from a banking syndicate to continue operations during this period. The protection afforded by the Order allows the Company to stabilize its operations and permits the Independent Committee and management to develop a restructuring plan for its future operations. A plan may include the sale of some or all of the business. The Toronto office of KPMG Inc. has been appointed Monitor under the CCAA and will be assisting the Company in formulating its restructuring plan. The Company is deferring scheduled interest payments on two series of bonds totaling U.S. $245 million and on other debts. The Company's financial statements for the year ended December 31, 2000, which were due to be filed with regulatory authorities by May 22, are expected to be filed by June 30, 2001. The completion of these financial statements has been delayed by the Company's restructuring plans. The Company acknowledges that the Ontario Securities Commission may impose: (i) a management cease trade order (affecting directors, officers and insiders of Consumers Packaging at any time since September 30, 2000) and (ii) an issuer cease trade order if the financial statements are not filed by July 22, 2001. The Company confirms that it intends to comply with alternate information requirements as specified by securities regulators. "This Order will allow us to continue to operate and service our customers during the CCAA period," said Brent Ballantyne, Chief Restructuring Officer and Chief Executive Officer. "We will continue to work with all key stakeholders in developing a plan that will address the Company's current financial needs." Moreover, the Toronto Stock Exchange halted the trading of the Company's shares pending more information. Consumers Packaging employs approximately 2400 people in Canada. It manufactures and sells glass containers for the food and beverage industry. It commenced operations in 1917 and supplies approximately 85% of the glass containers used by the Canadian juice, food, beer, wines and liquor industries. In Canada, the company operates six facilities, three in Ontario (Toronto, Brampton and Milton), and one each in Quebec (Montreal), New Brunswick (Scoudouc) and British Columbia (Lavington). In the United States, it operates a plant in Glenshaw, Pennsylvania through its wholly owned subsidiary, GGC LLC (Glenshaw Glass). Consumers Packaging also owns 60% of Anchor Glass Container Corporation, which is the third largest manufacturer of glass containers in the United States. It employs approximately 4,000 persons and operates nine glass manufacturing plants in the United States. DIAMOND BRANDS: Files Chapter 11 Petition in Wilmington ------------------------------------------------------- Diamond Brands announced that in order to implement the next phase of its restructuring process, it has filed voluntary petitions under Chapter 11 of the Bankruptcy Code. The Company also announced it obtained a commitment for up to $8.2MM in debtor-in-possession financing to fund the Company's operations during its voluntary restructuring under Chapter 11. The financing, which is subject to Court approval, is being provided by the Company's current senior lenders led by Wells Fargo, as administrative agent. "After exploring all available alternatives, we believe that a voluntary Chapter 11 proceeding presents the most effective means to restructure our debt and our operations," said Chief Executive Officer Naresh Nakra. "Chapter 11 allows us to continue to move forward with our planned improvements in operations and merchandising and allows us to achieve our restructuring objectives in an orderly, timely manner. "With the support of our vendors and the hard work of our employees, we will be able to emerge from this process a stronger, more competitive company," Mr. Nakra stated. "Looking ahead, the $8.2 Million financing package we have arranged will provide the liquidity necessary to fund our ongoing operations and enable the Company to purchase and pay for goods and services." Diamond Brands said that while it completes its restructuring, the Company's operations will continue to function as usual. The Company's employees will continue to be paid without interruption, and it will continue to pay for all new raw materials and product shipments from vendors in the ordinary course of business. The Company said that it expects its customer policies to remain unchanged, and is committed to continue providing its customers with the best quality and highest customer service as usual. Diamond Brands is a leading designer, manufacturer and marketer of a broad range of consumer products including disposable plastic cutlery and straws, matches, toothpicks, clothespins and wooden crafts. The Company filed its voluntary Chapter 11 petitions yesterday in the U.S. Bankruptcy Court for the District of Delaware in Wilmington. DIAMOND BRANDS: Case Summary & 39 Largest Unsecured Creditors ------------------------------------------------------------- Lead Debtor: Diamond Brands Incorporated 1800 Cloquet Ave. Cloquet, MN 55720 Debtor affiliates filing separate chapter 11 petitions: Diamond Brands Operating Corp. Forster, Inc. Diamond Brands Kansas, Inc. Type of Business: Manufacturer and marketer of consumer products, consisting primarily of wooden matches, toothpicks, clothespins, wooden crafts, and plastic cutlery. The company's products are marketed primarily under the nationally recognized Diamond and Forster brand names, which have been in existence since 1881 and 1887 respectively. Chapter 11 Petition Date: May 22, 2001 Court: District of Delaware Bankruptcy Case Nos.: 01-01825 through 01-01828 Debtors' Counsel: David S. Kurtz, Esq. Skadden, Arps, Slate, Meagher & Flom 333 W. Wacker Drive Chicago, IL 60606 (312) 407-0700 and Gregg M. Galardi, Esq. Patricia A. Widdoss, Esq. Skadden, Arps, Slate, Meagher & Flom LLP One Rodney Square Wilmington, DE 19801 (302) 651-3000 Total Assets: $76,681,000 Total Debts: $238,684,000 Consolidated List of Debtors' 39 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ State Street Bank Bond Debt $105,062,500 and Trust Company Corporate Trust Department William Kotkosky 225 Asylum Street 23rd Floor Hartford, CT 06103 (As Indenture Trustee for 10 1/8% Senior Subordinated Notes due 2008) Tel: (860) 244-1844 Fax: (860) 244-1881 State Street Bank Bond Debt $30,395,073 and Trust Company Corporate Trust Department William Kotkosky 225 Asylum Street 23rd Floor Hartford, CT 06103 (As Indenture Trustee for 12 7/8% Senior Discount Debentures due 2009) Tel: (860) 244-1844 Fax: (860) 244-1881 Seaver Kent - TPG Convertible $9,679,967 Partners, L.P. Note Debt Alexander Seaver 430 Cowper Street Suite 200 Palo Alto, CA 94301 Tel: (650) 321-4000 Fax: (650) 321-4049 Seaver Kent I, Convertible $967,655 Parallel, L.P. Note Debt Alexander Seaver 430 Cowper Street Suite 200 Palo Alto, CA 94301 Tel: (650) 321-4000 Fax: (650) 321-4049 Packing Corporation Trade Debt $468,892 of America 525 Mt. Tom Road N. Hampton, MA 01060 978-256-4856 (telephone) 978-256-9194 (facsimile) Ohio Valley Plastics Inc. Trade Debt $285,520 P.O. Box 6964 Evansville, IN 47719 812-425-8544 (telephone) 812-425-1520 (facsimile) Stone Management Trade Debt $185,000 Corporation Century Box Trade Debt $110,353 Gooby Ind., Corp. Paperboard Industry Corp. Trade Debt $91,142 Toronto Mill Division Goldmax Industries, Inc. Trade Debt $83,122 Solon MFG. Co., Inc. Trade Debt $71,216 Credit Suisse First Boston Trade Debt $65,099 Information Resources, Inc. Trade Debt $59,441 D&G Packaging, Inc. Trade Debt $54,051 Manhattan Poly Bag Corp. Trade Debt $49,644 Conflandey Inc. Trade Debt $40,476 K&K Thermoforming, Inc. Trade Debt $38,818 Rock-Tenn Company Trade Debt $33,621 Federal Aviation Trade Debt $33,000 Administration Inland Container Corp. Trade Debt $28,655 Ralphs Grocery Company Trade Debt $27,751 RTS Packaging, LLL Trade Debt $26,799 Hudson Color Concentrates Trade Debt $23,358 Scott & Daniells, Inc. Trade Debt $22,949 John Lewis Industries Trade Debt $22,440 American Polymers Trade Debt $19,814 Chattanooga Paperboard Co. Trade Debt $19,597 NAP Industries Inc. Trade Debt $17,249 RAM Consulting Trade Debt $17,083 Donahue-Corry Associates Trade Debt $16,519 Bi-lo, Inc. Trade Debt $14,555 Fleming Company Trade Debt $14,544 Aamstrand Ropes & Trade Debt $12,684 Twines, Inc. Newark Pacific Trade Debt $12,570 Paperboard Corp. Stanley Bostitch, Inc. Trade Debt $12,302 Super Store Industries Trade Debt $11,396 Franklin Printing Trade Debt $11,383 Crow Rope Industries Trade Debt $11,240 Harris-Teeter Supermarket Trade Debt $10,134 eBT INTERNATIONAL: Board Endorses Plan of Complete Liquidation -------------------------------------------------------------- eBT International, Inc. (Nasdaq: EBTI) disclosed that its Board of Directors has unanimously voted to dissolve and liquidate the Company, subject to the approval of the holders of a majority of its shares. Based upon current information, the Company anticipates that assets available for distribution to shareholders will be between $3.10 and $3.22 per share. The Board will call a special meeting of shareholders, expected to be held in August 2001, to approve the Plan of Complete Liquidation and Dissolution. A Proxy statement describing the Plan will be mailed to shareholders approximately 30 days prior to the meeting. In reaching its decision that the plan of liquidation and dissolution is in the best interests of the Company and its shareholders, the Board of Directors considered a number of factors. The Proxy statement will describe these factors in detail, including the Company's recent performance, the state of the content management industry, prevailing economic conditions and previous unsuccessful efforts to sell or merge the Company last year and more recently. The Board also considered restructuring the business in light of the Company's unsatisfactory revenue performance in the fiscal quarter ended April 30, 2001. These plans, including plans involving significant reductions in the Company's current operations, either entailed considerable risk, or did not demonstrate that positive operating cash flow or operating income could be achieved in a period of time acceptable to the Board, and required a significant amount of cash to fund the Company's operations prior to the achievement of potentially acceptable financial results. Consequently, the Board determined that it would not be advisable to continue the operations of the Company, which are currently reducing the Company's liquidity on a monthly basis. Additionally, for some time, the Company's stock has traded well below the anticipated cash liquidation value of the shares. Based on this information, the Board's business judgment of the risks associated with restructuring the business, and the advice of its advisors, the Board of Directors has concluded that distributing the Company's net liquid assets to stockholders would return the greatest value to shareholders as compared to other available alternatives. The Board of Directors also has received a fairness opinion from Morgan Stanley, a copy of which will be included in the Proxy statement. In connection with the intent to liquidate, the Company has begun the orderly wind down of its operations, including laying off the majority of its employees, seeking purchasers for the sale of its intellectual property and other tangible and intangible assets and providing for its outstanding and potential liabilities. In addition, the Company will continue to provide support and maintenance to existing maintenance agreement holders for the duration of their current contracts. Upon approval of the Plan, the Board currently anticipates that an initial distribution of liquidation proceeds, in the amount of not less than $2.75 per common share, will be made to shareholders within 75 days after the shareholders meeting. The remaining net assets will be held in a contingency reserve, and the Board anticipates that shareholders could receive periodically additional liquidation proceeds of approximately $.25 to $.50 per share. The estimated time frame for payment of these proceeds will be described in the proxy statement. The range of the total liquidating distribution may be able to be reported with greater precision at the time the proxy statement is mailed to shareholders. Under Delaware law, the Company will remain in existence as a non-operating entity for three years from the date the Company files a Certificate of Dissolution in Delaware and will maintain a certain level of liquid assets to cover any remaining liabilities and pay operating costs during the dissolution period. During the dissolution period, the Company will attempt to convert its remaining assets to cash and settle its liabilities as expeditiously as possible. The Company is currently unable to estimate with certainty the amount of proceeds that it will realize upon the sale of its intellectual property and related assets, or the amount of retained cash that will be needed to satisfy the Company's liabilities. If the Company's shareholders approve the plan of liquidation, the Company will file a Certificate of Dissolution promptly after the shareholders vote, and shareholders will then be entitled to share in the liquidation proceeds based upon their proportionate ownership at that time. The Company expects that its shares will be delisted from the Nasdaq Stock Market in connection with the dissolution, but the shares may be eligible for trading on the NASD's electronic bulletin board pending the liquidation. In light of the cessation of the Company's operations, the Board also announced that James Ringrose has resigned as President and Chief Executive Officer effective May 30, 2001. The Company reported net revenues of $1,097,000 for the fiscal quarter ended April 30, 2001. This compares to net revenues of $3,934,000 for the Company's ongoing operations for the fiscal quarter ended April 30, 2000. Total net revenues for the fiscal quarter ended April 30, 2000 was $10,290,000, including revenues of the Company's former IED division, as well as its former MediaBank product line, which were divested in the second quarter of fiscal 2001. The Company's net loss for the fiscal quarters ended April 30, 2001 and April 30, 2000, excluding net restructuring and special charges, was $4,756,000, or $0.32 per share, and $4,937,000, or $0.30 per share, including results attributable to the divested businesses. The reported net loss for the fiscal quarter ended April 30, 2001 was $5,573,000, or $0.37 per share, as compared to a net loss of $6,772,000, or $0.41 per share, in the prior year fiscal quarter, including results attributable to the divested businesses. The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the transactions contemplated by the Plan of Complete Liquidation and Dissolution. Information concerning the beneficial ownership of each of the Company's directors and executive officers may be found in the Company's proxy statement filed with the SEC under Schedule 14A on May 4, 2001. The proxy statement is available for free both on the SEC's website (http://www.sec.gov)or by contacting Christopher M. Burns at (401) 752-4400. In connection with the proposed liquidation and dissolution, the Company will file a proxy statement on Schedule 14A with the SEC, which will describe the liquidation and dissolution. EQUITEX INC.: Special Stockholders' Meeting Set For June 22 ----------------------------------------------------------- A Special Meeting of Stockholders of Equitex, Inc., a Delaware corporation, will be held at 1400 Glenarm Place, Suite 300, Denver, Colorado, 80202, on June 22, 2001 at 10 a.m. Mountain Daylight Time, to consider and take action on: (1) A proposal to amend paragraph 4 of the Certificate of Incorporation to increase the number of authorized shares of Equitex's common stock, $.02 par value, from 7,500,000 shares to 50,000,000 shares. Passage of this proposal requires the affirmative vote of a majority of the outstanding stock of each class entitled to vote thereon as a class. (2) A proposal to provide for the following actions: -- the distribution by Equitex of all of its assets and liabilities to Equitex 2000, Inc., a wholly-owned and Delaware-chartered subsidiary of Equitex; and -- the distribution by Equitex of all of the outstanding shares of common stock of Equitex 2000 to the stockholders of Equitex on the basis of one share of common stock of Equitex 2000 for each share of common stock of Equitex. Passage of this proposal requires the affirmative vote of a majority of the outstanding stock of each class entitled to vote thereon as a class. (3) A proposal to acquire all of the outstanding capital stock of Nova Financial Systems, Inc. and Key Financial Systems, Inc., companies under common control with nearly an identical ownership structure, in exchange for the greater of 7,140,000 shares or 50% of the outstanding common stock of Equitex on a post acquisition basis, cash consideration of $5 million and a warrant. This proposal is subject to the approval of proposal number one. Passage of this proposal requires the affirmative vote of a majority of the total votes cast on the proposal in person or by proxy. (4) Such other business as may properly come before the meeting, or any adjournment or adjournments thereof. The discussion of the proposals by the board of directors set forth above is intended only as a summary, and is qualified in its entirety by the information relating to the proposals set forth in the Company's proxy statement mailed to its stockholders. Only holders of record of Equitex's common stock at the close of business on May 14, 2001 will be entitled to notice of and to vote at this special meeting, or any postponements or adjournments thereof. ERGO SCIENCE: Shares Knocked Off the Nasdaq ------------------------------------------- Ergo Science Corporation (Nasdaq:ERGO) said it was advised by Nasdaq on May 23, 2001, that its common stock would be delisted from The Nasdaq Stock Market effective with the open of business on May 24, 2001. The Company intends to seek to have one or more market makers quote its common stock on Nasdaq's OTC Bulletin Board. Ergo Science Background Ergo Science Corporation is a company in transition. Since 1990, the Company has been engaged in developing ERGOSET(R) tablets for the treatment of type 2 diabetes and other metabolic disorders. Over the last several years, however, the Company has been unable to persuade the U.S. Food and Drug Administration to approve ERGOSET(R) for marketing. Although ERGOSET(R) is considered "approvable" by the FDA, the FDA has required, prior to granting approval, an additional clinical trial to rule out a possible increased risk of a serious adverse event with the use of ERGOSET(R). After discussions with the FDA and its own consultants regarding the scope and complexity of the additional clinical trial, the Board of Directors of the Company believes that the next phase of the development of ERGOSET(R) will be better undertaken by a company that has more experience with human drug development and more resources for regulatory approval and marketing than Ergo. Accordingly, the Company has begun the process of attempting to sell or license its interests in ERGOSET(R) (including its intellectual property rights) and its other human drug related assets. The Ergo Board of Directors is also considering additional strategic alternatives for the Company to enhance shareholder value. Although no final decisions have been made, the Board is considering (i) taking steps to help preserve the Company's net operating loss carry forwards and (ii) acquiring one or more established businesses. During this transition period, the Company intends to continue to conserve its cash and other assets. ERLY INDUSTRIES: Changes Name to Torchmail Communications Inc. -------------------------------------------------------------- Torchmail Communications Inc. (OTCBB:TOCH) (Formerly: Erly Industries, Inc.(OTCBB: "ERLY")) announced that the change of the company's name from "Erly Industries Inc." to "Torchmail Communications Inc." which was authorized by shareholders and the board of directors of the company in January 2001, as part of the company's change of domicile to the State of Delaware, would finally take effect on May 24, 2001. The NASD has designated a new trading symbol for the company which will be "TOCH." As a part of the action to change the company's domicile State from California to Delaware, the company also affected a one for one hundred reverse split of its shares. The company has a new transfer agent, Standard Registrar and Transfer Co., 12528 South 1840 East, Draper, UT 84020, Telephone 801/571-8844. Persons desiring to exchange their Erly Industries share certificates for certificates of Torchmail may do so by sending their certificates to Standard Registrar and Transfer Co. at the above address, and paying all appropriate transfer charges. Fractional shares resulting from the reverse split will be rounded up to the next whole share. Torchmail (Erly Industries Inc.) is a fully reporting company under the Securities Exchange Act of 1934. For more information on the company, see its public disclosures at www.sec.gov. Torchmail (Erly Industries Inc.) emerged from bankruptcy on Aug. 21, 1999 and is currently a shell company which is seeking to acquire operations through an acquisition, merger or to begin a start-up business. The majority interest in Torchmail is owned by Wasatch Capital Corp., a subsidiary of AXIA Group Inc. AXIA is a publicly traded company (OTCBB: AXIA) which specializes in marketing publicly traded shell corporations and in assisting small companies in going public. In addition to its interest in Torchmail, AXIA also currently has an interest in Kelly's Coffee Group Inc. (OTCBB: KLYS) which it is assisting in its attempts to complete a merger or acquisition. For additional information on the operations of AXIA, visit www.axiagroupinc.com. GENESIS HEALTH: Wants To Reject JSM Construction Contract --------------------------------------------------------- Genesis Health Ventures, Inc. & The Multicare Companies, Inc. have filed a motion seeking the Court's authority to reject a JSM Construction Contract for a project in New Jersey -- the Madison Avenue Project. The Debtors previously sought to assume the contract. Upon the Committee's interposition, the proposed assumption was stayed. In the meantime, the parties entered into a stipulation that sets forth a deadline for either assumption or rejection of the contract. Subsequent to the stipulation, JSM, a debtor-in-possession in a chapter 11 case in Pennsylvania, filed a motion to compel the Debtors to assume the contract. In consultation with the Committee, the Debtors seek rejection of the contract on the bases that this is sound business judgment in light of time lapse (the winter months have passed) and changed circumstances and also in light of the deadline imposed. It would not benefit the estates, the Debtors believe, to make premature assumption before the deadline. The parties also entered into a stipulation regarding the handling of confidential information in discovery actions for this matter. The Madison Avenue Project / JSM Construction Contract The contract was entered into by a Multicare subsidiary in 1998 and subsequently assigned to a Genesis subsidiary. On November 22, 1995, Madison Avenue Assisted Living, Inc., a subsidiary of Multicare, entered into a ground lease with 151 Madison Avenue Corporation related to Property located at 151 Madison Avenue, Morristown, New Jersey 07960. In addition, on or about June 16, 1998, Madison Avenue entered into a construction contract (the JSM Construction Contract) with JSM Company for the purpose of renovating an existing mansion and constructing a 90- unit assisted living facility on the Property, to be known as Heritage at Madison Avenue. In early 1998, GHV determined that the Madison Avenue Project, including the Facility, should be developed and operated by GHV rather than Multicare. Accordingly, on February 20, 1998, GHV assigned the Ground Lease and the JSM Construction Contract to Geriatric & Medical Services, Inc., a subsidiary of GHV and one of the Debtors in the GHV chapter 11 cases. Prior to the Commencement Date of the GHV chapter 11 cases, the Debtors discontinued paying JSM for work done and JSM ceased work. On February 22, 2000, JSM sought to obtain a mechanic's lien (the JSM Lien) in the amount of $958,291.00 by filing a construction lien claim with the Clerk of Morris County. On March 20, 2000, JSM commenced its own chapter 11 case in the United States Bankruptcy Court for the Eastern District of Pennsylvania. Debtors' Previous Motion for Assumption Subsequent to the Commencement Date, the Debtors filed a motion to assume the JSM Construction Contract pursuant to section 365 of the Bankruptcy Code, on negative notice. The Prepetition Secured Lenders interposed. (Prior to the petition date, Genesis and certain Debtors were and still are indebted to the Lenders principal amount in the aggregate of approximately $1,104,000,000 plus interest, costs and expenses.) Mellon Bank, N.A., as Agent for the Pre-Petition Secured Lenders, advised the Debtors that it would oppose the Debtors' motion because it had concerns that the Debtors' financial projections for the Project, as completed, were overly optimistic such that the additional investment necessary to complete the Project would not be recovered. The Debtors estimated that the cost for JSM to complete the Madison Avenue Project would be $1,400,000. The Debtors' records show accrued unpaid amount of $ 1,259,760.00 due to JSM as of the Commencement Date under the JSM Construction Contract, which includes the mechanic lien and an unsecured claim of $301,469.00 for prepetition work for which JSM did not seek a mechanic's lien. JSM had agreed to reduce the unsecured portion of its claim by $120,000 to $181,469 with the result that the Cure Amount under the JSM Construction Contract would come down to $1,139,760 only if the JSM Construction Contract was assumed. The Debtors further estimated that the cost to have a construction company other than JSM complete the Project would be approximately $1,900,000.00. Moreover, because GHV failed to record the assignment of the Ground Lease and the JSM Construction Contract, and JSM properly and timely filed the Lien Claim, pursuant to N.J.S.A., Section 2A:44A, JSM should have a valid mechanic's lien against the property of the Debtors and is a secured creditor of the Debtors in the amount of $958,291.00. Had GHV recorded the assignment of the Ground Lease and the JSM Construction Contract, JSM would have had notice of the assignment and, presumably, would have filed the Lien Claim against the Debtors. N.J.S.A. provides, in relevant part: "2A:44A-3. Entitlement to lien for work, services, material or equipment provided pursuant to contract. Any contractor, subcontractor or supplier who provides work, services, material or equipment pursuant to a contract, shall be entitled to a lien for the value of the work or services performed, or materials or equipment furnished in accordance with the contract and based upon the contract price, subject to the provisions of sections 9 and 10 of this act. The lien shall attach to the interest of the owner in the real property. If a tenant contracts for improvement of the real property and the contract for improvement has not been authorized in writing by the owner of a fee simple interest in the improved real property, the lien shall attach only to the leasehold interest of the tenant. 2A:44A-l0. Attachment of lien claim; priority of bona fide purchasers and other liens; maximum liability. Subject to the limitations of section 6 of this act, the lien claim shall attach to the interest of the owner from and after the time of filing of the lien claim. Except as provided by section 20 of this act, no lien claim shall attach to the estate or interest acquired by a bona fide purchaser first recorded or lodged for record; nor shall a lien claim enjoy priority over any mortgage, judgment or other lien first recorded, lodged for record, filed or docketed." In the motion for assumption of the contract, the Debtors noted the essence of time for preparing the Facility for the winter months and for completing the Madison Avenue Project, e.g., the Facility's roof leaked and significant paving must be done before the ground froze. Already familiar with the Project, JSM was prepared to return to work, and could complete the Project sooner than a replacement construction company. Accordingly, the Debtors asked the Court to authorize assumption of the Contract on the basis that this was a valid exercise of their business judgment. With respect to its position on the Debtors' motion for assumption of the contract, the Agent indicated that they required additional time for analyzing the matter and that, absent an extension of the Objection Deadline, the Prepetition Lenders would object to the Debtors' Motion to Assume. The Agent advised the Debtors that a sale of the unfinished facility together with a rejection of the JSM Contract might be more advantageous to the Debtors. Accordingly, the Debtors agreed to extend the Objection Deadline for the benefit of the Prepetition Lenders for an indefinite period, pending resolution of the Prepetition Lenders' concerns with respect to the assumption of the JSM Construction Contract. JSM's Motion to Compel Assumption While the matter was pending in the GHV cases, JSM filed a motion in their own cases in the Pennsylvania Bankruptcy Court to, among other things, assume the JSM Construction Contract and the motion was granted by the Pennsylvania Bankruptcy Court. Then, JSM filed a motion in the GHV cases Motion For Order Compelling Immediate Assumption Of Construction Project. JSM told Judge Walsh that the Debtors' failure to meet its payment obligations to JSM in connection with the Contract was a major precipitating factor in the need for JSM to file its chapter 11. According to JSM, the Debtors requested JSM to resume work on the Project and provide a discount for pre-petition work already performed. JSM agreed and the parties came to an understanding on certain adjustments to the Contract. JSM also told Judge Walsh that in response to the Debtors' request to complete the Project, JSM, at great time and expense, renegotiated all of the subcontracts to account for the remobilization costs, and obtained new subcontractors to substitute for those who refused to resume work. Thereafter, the Debtors sought assumption of the Contract in their proceedings. JSM complained that the delay after the prepetition secured lenders' interposition in the Debtors' motion for assumption had already begun to cause problems with the subcontractors, who already suffered when the Project was halted previously and who were questioning whether the Debtors were going forward with the Project. JSM pointed out that as a debtor-in-possession itself and a fiduciary to its own creditors, JSM could not subject their creditors to the uncertainty of commencing work withoout the approval of the assumption of the Contract by the Bankruptcy Court in Delaware in the GHV cases. Fidelity and Deposit's Response Fidelity and Deposit Company of Maryland, filed a response in support of JSM's Motion For Order Compelling Immediate Assumption Of Construction Project. F&D had issued certain payment and performance bonds in connection with the Madison Avenue Assisted Living Facility Project and the related construction contract. From time to time, subcontractors sought payment from F&D for work performed on the Project and F&D had made several, substantial payments to claimants which had provided goods and services in connection with the Project, F&D told Judge Walsh. F&D noted that so long as Genesis kept the matter in limbo, the subcontractors and F&D would suffer. Therefore, F&D supported JSM's motion. Mellon Bank's Objection to JSM's Motion Mellon Bank, N.A., as Agent for the GHV Debtors' Pre-Petition Secured Lenders, took a different position. Mellon Bank drew Judge Walsh attention to the unusual posture of the JSM Motion. Mellon Bank noted that this was not a motion by Debtors seeking to assumean executory contract, nor was it a motion brought by a third party seeking to compel a debtor to assume or reject an executory contract. It was, Mellon Bank pointed out, a motion by a non- debtor in the GHV cases, seeking to compel the GHV Debtors to assume a contract which the Debtors were not prepared to assume at that juncture. Mellon Bank asserted that the mere fact that the JSM Contract had been assumed in JSM's chapter 11 cases because it might benefit JSM, as a debtor in that case, could hardly be a sufficient basis to compel assumption in the GHV Debtors' cases. Mellon Bank also mentioned in their objection that they had advised the Debtors it would oppose the Debtors' motion for assumption because it had concerns that the Debtors' financial projections for the project would be overly optimistic such that the additional investment necessary to complete the Project would not be recovered. The Debtors' Response to JSM's Motion to Compel In their response to JSM's Motion to Compel, the Debtors requested that the Court (i) deny the Motion to Compel or, in the alternative, (ii) grant the Debtors 60 days to determine whether to assume or reject the JSM Construction Contract. Stipulation and Order to Resolve JSM's Motion to Compel The Motion to Compel was resolved by the Stipulation between the Debtors, the Prepetition Lenders, and JSM. The Stipulation provided that "[t]he Debtors shall have until 4:00 p.m.. e.s.t. on March 19, 2001 within which time to withdraw the Debtors' Motion to Assume and file a motion to reject the JSM Construction Contract" or else the Debtors' Motion to Assume shall be deemed granted "without the necessity of any further notice or hearing." The Stipulation further provided that all the parties "reserve any and all rights and remedies that they have or may have in connection with the JSM Construction Contract, including without limitation, the withdrawal of the Debtors' Motion to Assume and/or rejection of the JSM Construction Contract and the validity of JSM's mechanic's lien." Debtors' Motion for Rejection of Contract The Debtors have determined that the rejection of the JSM Construction Contract is a valid exercise of their business judgment and is in the best interest of GHV Debtors, their estates and creditors in light of the time lapse and changes in circumstances since they filed the motion for assumption, as well as the deadline for assumption/rejection imposed under the Stipulation. The Debtors related that, subsequent to their filing of the Motion to Assume, GHV and the Prepetition Lenders (which will own a substantial portion of the equity in the Debtors upon their emergence from chapter 11) examined and reassessed their long-term strategic goals with respect to the Facility. Toward that end, the Debtors worked with several parties that had renewed their interest in purchasing the Facility to develop offers to purchase the Facility in either an unfinished state or upon completion. The Debtors tell the Court that they have received and are in the process of analyzing several offers to purchase the Facility to determine which offer is the highest and best for the Debtors, their estates, and creditors. The Debtors reckoned that they may accept an offer pursuant to which the purchaser will acquire the Facility in its unfinished state and complete construction without the assistance of the Debtors, then assumption at this time will require the Debtors to pay a cure amount of approximately $1,139,760.00 for a contract that is not beneficial to the Debtors' estates. The Debtors represented that they will not be in a position to assume the JSM Construction Contract until they (a) fully analyze the offers they have received, determine which one is the highest and best, and enter into a binding contract with such offeror, which may include the ability of the purchaser to receive the benefit of the JSM Construction Contract; or (b) determine that they will complete and operate the Facility as a GHV facility. Because pursuant to the Stipulation, the Debtors cannot extend the deadline by which they are required to move to reject the JSM Construction Contract and withdraw the Debtors' Motion to Assume, the Debtors submit that rejection at this time is a proper exercise of their business judgment. The Debtors further noted that, if the JSM Construction Contract is rejected and it happens that they are required to complete the Madison Avenue Project prior to a sale of the Facility, they will have little difficulty retaining another construction company at a cost competitive to the amount the Debtors would have to pay JSM to complete the project. In contrast, if the Debtors prematurely assume the JSM Construction Contract, they must first cure the default under the JSM Construction Contract in the amount of $ 1,139,760.00, and then pay JSM such additional amount to complete construction. The Debtors reminded Judge Walsh that at the time the Motion to Assume was filed, they submitted that time was of the essence to complete the Madison Avenue Project expeditiously because the winter months could negatively impact construction and that JSM was in the best position to economically and efficiently complete such project within that time frame. However, because the Madison Avenue Project could not be timely re-commenced and the winter months have almost passed, any small delay attendant to retaining another construction company to complete the Madison Avenue Project will be insignificant, the Debtors represented. The Debtors reiterated that they reserve the right to continue to investigate the validity of the JSM Lien, as expressly set forth in the Stipulation. Stipulated Protective Order In connection with the handling of documents pursuant to discovery in the motion by the Debtors for rejection of the JSM Construction Contract, the Debtors and JSM Company, through their respective counsel, pursuant to Rule 7026 of the Federal Rules of Bankruptcy Procedure and Rule 26(c) of the Federal Rules of Civil Procedure, stipulated to the entry of a protective order as follows: (1) Each page of each document produced pursuant to discovery in connection with the Motion shall bear a unique identifying number. (2) CONFIDENTIAL INFORMATION refers to information that a producing party claims to be its trade secret or other confidential research, development, or commercial information within the meaning of Fed. R. Civ. P. 26(c)(7). Information to be treated under this Protective Order as CONFIDENTIAL INFORMATION shall include: (a) Information set forth in responses to discovery requests made under Fed. R. Bankr. P. 7031, 7033 and 7036 and Fed. R. Civ. P. 31, 33 or 36, or in documents produced for inspection in connection with the Motion under Fed B. Bankr. P. 7033 and 7034 and Fed. R. Civ. P. 33(d) or 34, provided that, prior to delivery to the receiving party, the responses or copies of documents are marked by the producing party with the following legend: CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER IN RE: GENESIS HEALTH VENTURES, INC. CASE NO: 00~2692(JHW) (b) Information revealed by inspection of things or premises in connection with the Motion under Fed R. Bankr. P. 7034 and Fed. R. Civ. P. 34, under terms to be agreed upon by the parties through good-faith negotiations in connection with any such inspection. (c) Information revealed during a deposition upon oral examination in connection with the Motion under Fed R. Bankr. P. 7030 and Fed. R. Civ. P. 30 for 10 days following receipt of the transcript by counsel for the producing party, but not thereafter unless, before the 10-day period has expired, counsel for the producing party notifies counsel for the receiving party in writing that CONFIDENTIAL INFORMATION is set forth in the transcript and specifies in writing the portions of the transcript that disclose CONFIDENTIAL INFORMATION, or during the deposition, counsel for the producing party or any other party requests that a separate transcript be prepared covering portions of the transcript to be CONFIDENTIAL INFORMATION. (3) CONFIDENTIAL INFORMATION disclosed pursuant to discovery in connection with the Motion shall be used solely in connection with the Motion. (4) Access to CONFIDENTIAL INFORMATION disclosed pursuant to discovery in connection with the Motion shall be limited to the following persons: (a) Counsel of record for a receiving party and stenographic, clerical, and legal assistant employees, and agents of those counsel whose functions require access to CONFIDENTIAL INFORMATION; (b) The directors, officers, employees and general or limited partners of the parties, or any subsidiary or affiliate thereof who are assisting the parties in this Litigation, or who appear as witnesses (c) Outside experts or consultants who are not regular employees of a receiving party and who are retained by the receiving party or its counsel, such as independent technical experts, accountants, statisticians, economists, or other consultants, whose advice and consultation are being or will be used by such party or its counsel in connection with this action, including their stenographic and clerical personnel, provided that disclosure to such experts or consultants and their stenographic and clerical personnel shall be made only on the following conditions: -- Counsel desiring to disclose CONFIDENTIAL INFORMATION to such experts or consultants shall first obtain a signed Agreement To Be Bound By Protective Order in the form as in Exhibit A to the Stipulated Protective Order from each such expert or consultant and each of his/her stenographic and clerical personnel who would require access to CONFIDENTIAL INFORMATION, and counsel shall retain in his/her file the original of each such signed Agreement To Be Bound By Protective Order. (d) Non-technical trial consultants and graphics or design services retained by outside trial counsel for the purpose of preparing demonstrative or other exhibits; (e) Court reporters employed in connection with this action; (f) The Court and its authorized staff. (5) CONFIDENTIAL iNFORMATION disclosed pursuant to discovery in connection with the Motion shall not be made public by the receiving party, shall be used only by persons permitted access to it under Paragraphs 3 and 4 and shall be disclosed only to persons specified in Paragraphs 3 and 4. (6) If CONFIDENTIAL INFORMATION disclosed pursuant to discovery in connection with the Motion is to be filed with the Court in connection with any proceedings herein, it shall be filed in a sealed envelope marked with the caption of the case and the following legend: CONTAINS INFORMATION TO BE OPENED ONLY BY OR AS DIRECTED BY THE COURT IN RE: GENESIS HEALTH VENTURES, INC. CASE NO. OO-2692(JHW) (7) This Stipulated Protective Order shall not prevent a party from attempting to examine, at deposition or at trial, persons who are not authorized to receive CONFIDENTIAL INFORMATION disclosed pursuant to discovery in connection with the Motion, as identified herein, so long as such examination concerns CONFIDENTIAL INFORMATION to which the witness previously had authorized access or of which the witness has prior knowledge, as demonstrated by foundation testimony during the deposition or trial. This Stipulated Protective Order shall not prevent counsel from examining a witness to determine whether he or she has prior knowledge of CONFIDENTIAL INFORMATION, as long as such examination is done in a manner that does not disclose the details of the CONFIDENTIAL INFORMATION. (8) CONFIDENTIAL INFORMATION disclosed pursuant to discovery in connection with the Motion may be used in testimony at the Motion hearing, and at depositions and may be offered in evidence at the Motion hearing, all subject to any further Order regarding confidentiality as this Court may enter, and may be used to prepare for and conduct discovery and to prepare for the Motion hearing, all subject to paragraphs 3 and 4, but may not be used for any other purpose except as expressly provided herein or by further Order of the Court. (9) The acceptance of CONFIDENTIAL INFORMATION disclosed pursuant to discovery in connection with the Motion by the parties shall not constitute an admission or concession or permit an inference that the CONFIDENTIAL INFORMATION is in fact confidential. This Stipulated Protective Order shall not foreclose any party from moving for an Order that documents or other items designated CONFIDENTIAL INFORMATION are not, in fact, confidential. Prior to bringing such a motion, the receiving party shall first request in writing that the producing party change its designation. If the producing party refuses to agree Within ten (10) days, the receiving party may file a motion for an Order changing or removing the designation. On such a motion, the producing party shall have the burden of proving that the CONFIDENTIAL INFORMATION embodies its trade secrets or other confidential research, development or commercial information within the meaning of Fed. R. Civ. P. 26(c)(7). (10) The disclosure by a producing party of CONFIDENTIAL INFORMATION disclosed pursuant to discovery in connection with the Motion by way of delivering responses to discovery requests, delivering copies of documents, disclosing deposition testimony or otherwise, without the designation required by paragraph 2, shall constitute a waiver of any claim of confidentiality, except where such disclosure resulted from inadvertence or mistake on the part of the producing party and such inadvertent or mistaken disclosure is thereafter brought to the attention of the receiving party within 5 days after discovery of such disclosure. Upon such notice of inadvertent or mistaken disclosure, the producing party shall also provide properly marked documents. Upon such notice, and upon receipt of properly marked documents, the receiving party shall return said unmarked documents and things to the extent practicable, shall not retain copies of said unmarked documents, and shall treat information contained in said documents and any summaries or notes thereof as CONFIDENTIAL INFORMATION. (11) Should any CONFIDENTIAL INFORMATION be disclosed, through inadvertence or otherwise, by the receiving party to any person or party not authorized under this Stipulated Protective Order, then the receiving party shall: (a) use its best efforts to obtain the return of any such CONFIDENTIAL INFORMATION and to bind such unauthorized person or party to the terms of this Stipulated Protective Order; (b) within three (3) days of the discovery of such disclosure, inform such persons or party of all provisions of this Stipulated Protective Order; (c) within five (5) days of the discovery of such disclosure, identify such person or party to the producing party; and (d) request such person or party to sign the Agreement To Be Bound By Protective Order in the form attached as Exhibit A to the protective order. The executed agreement shall be served, if obtained, upon counsel of record for the producing party within five (5) days of its receipt by the receiving party. (12) Nothing in this Stipulated Protective Order shall require disclosure of information that counsel contends is protected from disclosure by the attorney-client privilege or the work-product immunity. (13) If the discovery process calls for the production of information and the party requested believes that doing so would breach an express or implied agreement with a nonparty to maintain such information in confidence, the party requested to produce the information shall, at least five (5) days before the date for production, give written notice to the nonparty that its information is subject to discovery in this litigation, and shall provide the nonparty with a copy of this Stipulated Protective Order. At the same time such written notice is given to the nonparty, the party requested to produce the information will advise the potential receiving party that: (1) such notice has been given; (2) the type of information subject to the notice; and (3) the name and address of the nonparty. The information subject to the notice shall not be produced unless the nonparty agrees to such production or the requesting party is successful in moving to compel production. (14) If information subject to a claim of attorney-client privilege or work-product immunity is inadvertently or mistakenly produced, such production shall in no way prejudice or otherwise constitute a waiver of, or estoppel as to, any claim of privilege or work-product immunity for such information. If a party has inadvertently or mistakenly produced information subject to claim of immunity or privilege, the information for which a claim of inadvertent or mistaken production is made shall be returned upon request to the producing party within three (3) days of such request. Moreover, any copies of the information and any notes or summaries referring or relating to any such inadvertent or mistakenly produced information shall be destroyed. The party returning such information may move the Court for an Order compelling production of such information. (15) The restrictions and obligations set forth in this Stipulated Protective Order relating to CONFIDENTIAL INFORMATION disclosed pursuant to discovery in connection with the Motion shall not apply to any information that: (a) the parties agree, or the Court rules, is already public knowledge; (b) the parties agree, or the Court rules, has become public knowledge other than as a result of disclosure by the receiving party; or (c) has come or hereafter comes into the receiving party's legitimate possession independently of the producing party. Such restrictions and obligations shall not be deemed to prohibit discussions with any person regarding any CONFIDENTIAL INFORMATION if said person already has legitimate possession thereof. (16) In the event that a party desires to provide access to or disseminate CONFIDENTIAL INFORMATION disclosed pursuant to discovery in connection with the Motion to any person not entitled to access under paragraphs 3 and 4, it may move the Court for an order that such person be given access thereto. In the event the motion is granted, or by agreement of the parties, such person may have access to CONFIDENTIAL INFORMATION after first signing an Agreement To Be Bound By Protective Order in the form of Exhibit A attached to the motion, a copy of which shall be forwarded promptly thereafter to opposing counsel. (17) This Stipulated Protective Order shall not prevent any party from applying to the Court for relief therefrom, or from applying to the Court for further or additional protective orders. (18) This Stipulated Protective Order shall survive the termination of this action. (19) After final termination of this action, trial counsel for the receiving party may retain one archival copy of deposition transcripts, deposition exhibits, Court transcripts, Court exhibits, documents and other submissions to the Court or to opposing counsel, and CONFIDENTIAL INFORMATION disclosed pursuant to discovery in connection with the Motion to the extent it includes or reflects attorney's work product. Within 30 days after final termination of this action including any appeals, counsel for the receiving party either shall return all additional CONFIDENTIAL INFORMATION in its possession, custody or control to counsel for the producing party or shall certify destruction thereof to such counsel. (20) If a nonparty provides discovery to any party in connection with this Motion, the provisions of this Stipulated Protective Order shall apply to such discovery as if such discovery were being provided by a party. Under such circumstances, the nonparty shall have the same rights and obligations under this Stipulated Protective Order as held by the parties to this action. Should any nonparty wish to produce information that the party considers CONFIDENTIAL INFORMATION under any circumstances other than those provided in this Stipulated Protective Order, the nonparty shall be required to obtain agreement to such terms for production from each party to the action or to seek relief from the Court. (21) The undersigned parties agree to be bound by the terms of this Stipulation pending entry by the Court of an order hereon, and agree to cause any third parties who agree to be bound by this Stipulation to abide by the terms of the Stipulation pending entry of an Order by the Court. (Genesis/Multicare Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) GOLF TRUST: Lenders Demanding Immediate Payment Of Debt -------------------------------------------------------- Golf Trust of America, Inc. (AMEX:GTA) announced that the lenders to its operating partnership gave notice Tuesday afternoon that they are accelerating the outstanding debt under two of its credit agreements. As previously reported, the lenders assert that the operating partnership is currently in default under both agreements due to its failure to comply with several covenants. As a result, the lenders now assert that the outstanding balance is immediately due and payable by the operating partnership, in addition to all other amounts owed under the agreements. The lenders also demand full payment for the outstanding debt and other amounts due from the operating partnership's guarantors, which include Golf Trust of America, Inc. and certain other of its affiliates. In addition, Bank of America, N.A., the administrative agent under the agreements, obtained a court order yesterday which enjoins certain of the rights of the operating partnership until a preliminary injunction hearing, which is set for May 31, 2001. The Company reports that negotiations with Bank of America, N.A. and the other lenders are ongoing. Furthermore, all interest has been paid in full on a current basis and a portion of the proceeds from asset sales has been used as a partial pay-down on the outstanding principal balance. Golf Trust of America, Inc. is a real estate investment trust involved in the ownership of high-quality golf courses in the United States. The Company currently owns an interest in 37.5 (eighteen-hole equivalent) golf courses. HISPANIC TELEVISION: Shares Face Delisting From Nasdaq ------------------------------------------------------ Hispanic Television Network (Nasdaq: HTVN) received a Nasdaq Staff Determination Letter regarding its status with the Nasdaq. The Staff Determination letter dated May 17, 2001 indicates that the Company does not comply with the net tangible asset and minimum bid price requirements for continued listing set forth in the Marketplace Rules and that its securities are, therefore, subject to delisting from the Nasdaq National / Small Cap Market. Because the company believes that recent, previously announced agreements will greatly enhance its operating performance and lead to further stability in its distribution plan, the company has requested an oral hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination. There can be no assurance the Panel will grant the Company's request for continued listing. "We have done many positive things to right our course and reduce our losses in a difficult market," said HTVN Chairman Jim Ryffel. "We are proving the viability of our business model by increasing revenue and rapidly expanding our distribution in both station and cable agreements." He added, "The irony is that HTVN is a much better company today than it was a year ago, when there were no questions regarding our listing on Nasdaq." HTVN further stated, "We are appealing the determination and requesting a hearing before the Nasdaq Listing Qualifications Panel. No date for a hearing has been set. Nasdaq will not delist the company's stock while the appeal is pending." About HTVN HTVN, the nation's third largest Spanish language television broadcasting company continues to develop its strategy of owning, operating, and affiliating television stations in key U.S. Hispanic markets. HTVN continues to make great strides in growing its broadcasting business by the recent signing of major cable contracts that include Time Warner Cable, AT&T Broadband, and National Cable TV Co-OP. ICG COMMUNICATIONS: Committee Taps Houlihan Lokey As Advisor ------------------------------------------------------------ The Official Committee of Unsecured Creditors in ICG Communications, Inc.'s chapter 11 cases, acting through Derek C. Abbott and William H. Sudell, Jr., of the Wilmington firm of Morris, Nichols, Arsht & Tunnell, and Chaim J. Fortgang and Dov Kleiner of the New York firm of Wachtell, Lipton, Rosen & Katz, asked Judge Walsh for approval of their employment of Houlihan Lokey Howard & Zukin Capital, LP, as financial advisor to the Committee, effective nunc pro tunc to December 1, 2000, and for his approval of the proposed terms of employment. The services to be rendered by Houlihan to the Committee are: (a) Evaluating the assets and liabilities of the Debtors and their subsidiaries and preparing reports on some for the Committee; (b) Analyzing and reviewing the financial and operating statements of the Debtors and their subsidiaries; (c) Analyzing the business plans and forecasts of the Debtors and their subsidiaries; (d) Evaluating all aspects of any debtor-in-possession financing, cash collateral usage, and adequate protection, and any exit financing in connection with any plan of reorganization and any budgets related to those; (e) Devising appropriate strategies to maximize the value to be received by the unsecured creditors in the Debtors' cases; (f) Helping with the claim resolution process and distributions relating thereto; (g) Providing such specific valuation or other financial analyses as the Committee may require in connection with these cases: (h) Assesses the financial issues and options concerning either (i) the sale of any assets of the Debtors, or (ii) the Debtors' plan(s) of reorganization; (i) Preparation, analysis and explanation of the Plan to various constituencies; (j) Oversee and assist the Committee in connection with all aspects of the Debtors' efforts to enter into a transaction or transactions to sell, assign, transfer or otherwise dispose of some or all of the Debtors' assets; and (k) Providing testimony in court on behalf of the Committee, if necessary. As compensation for its services, Houlihan Lokey will charge the Debtors' estates under its engagement letter. Houlihan Lokey will be entitled to receive, subject to Court approval, a fee of $250,000 per month for the first four months, commencing as of December 1, 2000, and $175,000 per month thereafter, with an aggregate minimum fee of $1,000,000, plus deferred fees, plus reasonable and necessary out-of-pocket expenses. Upon substantial consummation of any Chapter 11 plan of reorganization, Houlihan Lokey will be entitled to apply for a deferred fee payment. The Committee has the right to take a position on any such application in its sole discretion. The amount of the deferred fee payment, if any, will be subject to the approval of the Bankruptcy Court. The Debtors will pay the monthly fee by the first day of each month, in advance for the month, plus reimbursement for the reasonable and documented out- of-pocket expenses for each month. In addition, the Debtors are to indemnify Houlihan Lokey and its affiliates, and their respective past, present and future directors, officers, shareholders, employees, agents and controlling persons, to the fullest extent lawful, from and against any and all losses, claims, damages or liabilities (or actions in respect thereof), joint or several, arising out of or related to the engagement, any actions taken or omitted to be taken by an indemnified party (including acts or omissions constituting ordinary negligence) in connection with the engagement, the liquidation of the Debtors' assets and/or any restructuring transaction. The term restructuring transaction includes (i) substantial consummation of a Chapter 11 plan of reorganization, or (ii) closing of a tender offer for substantially all of the Claims. In addition, the agree to reimburse the indemnified parties for any legal or other expenses reasonably incurred by them in respect thereof at the time such expenses are incurred; provided, however, the Debtors will not be liable under the indemnity for any loss, claim, damage or liability which is finally judicially determined to have resulted primarily from the willful misconduct or gross negligence of any indemnified party. Houlihan Lokey assures Judge Walsh is customary and reasonable for financial advisory engagements. By affidavit, Alan D. Fragen, a Director of Houlihan, assured Judge Walsh that Houlihan Lokey does not have or represent any interest materially adverse to the interests of the Debtors or their estate, creditors or equity interest holders, and is a disinterested person as that term is defined in the Bankruptcy Code. However, Mr. Fragen warned that as the Debtors have numerous relationships and creditors, every reasonable effort has been made to discover and eliminate the possibility of any conflict, but he and Houlihan Lokey is unable to state with certainty whether one of its clients or an affiliated entity holds a claim or otherwise is a party in interest in these Chapter 11 cases. However, Mr. Fragen assured Judge Walsh that if Houlihan Lokey discovers any information that is contrary to or pertinent to the statements made in the Application and Affidavit, Houlihan Lokey will promptly disclose this information. In the interests of full disclosure, Mr. Fragen stated that Houlihan Lokey numbers among its current clients Regal, a subsidiary of Hicks, Muse, Tate & Furst, Inc., Aetna, Inc., and e-spire Communications, a shareholder of W. R. Huff Asset Management Co., LLC, all of which are or may be parties in interest to these estates, but in no event does Houlihan Lokey represent these parties in connection with these estates. Mr. Fragen explained that the reason for the request for nunc pro tunc engagement is that Houlihan Lokey began review of various documents as requested by the Committee to familiarize itself with these cases and to negotiate the terms of the engagement with the Committee. As a result of this review, Houlihan Lokey was able to immediately begin assisting the Committee and its counsel in analyzing the benefits and costs of the Debtors' proposed actions. The United States Trustee Objects Patricia A. Staiano, the United States Trustee for Region 3, appearing through Frank J. Perch, III, Trial Attorney, said that the compensation sought by Houlihan Lokey is excessive. The requested monthly fee of $250,000 for the first four months exceeds the prevailing rate for such services in Chapter 11 cases, including fees billed by internationally known major investment houses in equally large or larger cases pending in Delaware. It exceeds the rate being charged by other professionals in these cases. Furthermore, Houlihan Lokey does not appear to provide for a credit of even part of the monthly billing against any subsequent success or transaction fees. The Trustee expressed her concern that any order entered on the Application might be construed as pre-approving the amount of any success or transaction fee. The Trustee objects to any provision of the engagement letter that might purport to cap or limit Houlihan Lokey's liability to the fees received. The Trustee also objects to approval of the application nunc pro tunc, saying that approval retroactively is not warranted under the standards stated by the Court of Appeals for the Third Circuit in such decisions as F/S Airlease II, Inc. v. Simon in 1988, and In re Arkansas Co. in There were no emergent matters in the case of sufficiently long and continuous intensity to account for a delay of four months in moving for Houlihan Lokey's retention. As to the allegation regarding the need for time to negotiate with the Committee over the terms of the engagement, the Trustee notes that the terms of the engagement, other than the dollar amount of the initial monthly fee, are largely typical and customary and in fact are terms which Houlihan Lokey has argued vigorously in other cases are standard and basically nonnegotiable. (ICG Communications Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392- 0900) INTEGRATED HEALTH: Gets Extension Of Mich. Hospice Office Lease --------------------------------------------------------------- Integrated Health Services, Inc. sought and obtained the Court's approval of the first amendment to the lease agreement between Debtor Hospice of Integrated Services, Inc. and SOP-Crescent Centre L.L.C., pursuant to Sections 105 and 363 of the Bankruptcy Code, so as to provide for an extension of the lease term to November 30, 2003, retroactive to December 1, 2000. In addition, the Amendment provides for periodic increases in Base Rent and Electric Charge Monthly Installments. Hospice d/b/a Samaritan Care Hospice of Michigan leases an office suite located in the building at Crescent Centre, 24445 Northwestern Highway, Southfield, Michigan 48075 pursuant to a lease entered in or about December of 1996 with Consolidated Capital Equity Partners Two L.P., a California Limited Partnership. The Leased Space is used to house administrative and support staff relating to the Debtors' hospice business. At some time after the Lease Date, SOP-Crescent Centre L.L.C., a Michigan Limited Liability Company, purchased the Building from Consolidated and took an assignment of all of Consolidated rights under the Lease. The initial term of the lease was for 4 years commencing on December 1996 and ending on November 30, 2000. The total base rent for the lease term was $179,140 to be paid in monthly installments. The total leased space is 3,380 square feet. Although the Lease expired on November 30, 2000, Hospice has maintained possession of the Leased Space, with the consent of SOP, and has continued to make monthly rental payments. The Debtors believe that the Lease and its terms are at market rates and that execution of the Amendment will provide a benefit to the Debtors, their estates and creditors. Hospice requires office space in order to effectively manage its business and monitor its support staff. To that end, the Debtors believe that the Leased Space serves Hospices' purposes well insofar as: (a) the Lease is at competitive rates; and (b) execution of the Amendment will avoid the necessity of having to locate new space as well as avoiding the disruption of Hospice's business caused by a move to such new location. In their business judgment, the Debtors submit that the Amendment is fair, equitable and in the best interests of their estates and creditors. The Debtors made it clear that entry into the Amendment should not be construed as any indication that the Debtors are seeking to assume the lease at this time. (Integrated Health Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) JORE CORPORATION: Files For Chapter 11 Protection in Montana ------------------------------------------------------------ Jore Corporation (Nasdaq:JORE) filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code in the District of Montana. Jore has received a commitment for debtor-in-possession financing from its principal lenders. The term of the financing agreement, subject to certain conditions, is through December 31, 2001. As a debtor-in-possession under the Code, Jore is authorized to operate its business in the normal course, but may not enter into transactions outside the normal course of business without court approval. Jore's liquidity shortfall in 2001 was caused by several issues. First, slowing retail economic conditions have resulted in lower than anticipated revenues since mid-2000. This revenue slow-down occurred at a time when Jore was completing its $70 million vertical integration program to expand internal manufacturing capabilities and production capacity. Also, the cost and effort of the nationwide rollout of Stanley(R) branded products at the Home Depot was significantly greater than expected. Each of these issues has strained Jore's cash and borrowing capacity in the first half of 2001, which is also the low period of Jore's seasonal production and sales. During the reorganization period, Jore will continue to explore available strategic alternatives including the sale of all or part of its operations. Proceeds from a sale will be used first to repay secured creditors, and second to repay unsecured creditors as of the date of the filing. The percentage recovery for secured and unsecured creditors depends on a number of factors, including the ultimate selling price and resolution of disputed claims. It is unlikely there will be any remaining value to the Company's common shareholders. As part of the restructuring, the Company has requested to pay certain unsecured debts that relate to its ongoing business, including payments to employees and critical suppliers. Jore also announced its results for the quarter ended March 31, 2001. For the first quarter of 2001, net revenues were $6.2 million, compared to $7.1 million for the first quarter of 2000. The year-over-year decline in revenue reflects the Company's strategic transition away from OEM sales to focus on direct to retail sales, and the slowdown in retail spending during recent periods. The net loss for the first quarter of 2001 was $7.5 million or ($0.54) per diluted share on 13.9 million shares outstanding, compared to a net loss of $1.3 million or ($0.09) per diluted share on 13.8 million shares outstanding in the same period of 2000. Results for the first quarter of 2001 were adversely affected by the lower than anticipated sales levels and higher than expected cost of goods. The Company invested approximately $70 million in manufacturing equipment in 1999 and 2000 in order to meet anticipated sales growth. Low utilization levels resulted in $2.4 million of excess capacity costs which are now being treated as period costs, $1.2 million for obsolete inventory and $1.0 million for start-up manufacturing costs from 2000 that were included in beginning 2001 inventory. Total operating expenses for the first quarter 2001 were $2.8 million, up from $2.3 million in the same period of 2000 and down from $6.1 million in the fourth quarter of 2000. The year- over-year increase primarily reflects a $0.5 million write-off of prepaid commission expense and increased professional fees. The sequential decrease in total operating expenses reflects the anticipated seasonal decline in business activity, as well as Jore's efforts to reduce operating expenses in line with the challenging economic environment and the Company's overall financial position. In addition, the Company has recently restructured its management team, including the appointment of Gerald McConnell as President and CEO of Jore Corporation and President of the Company's Power Tools Accessories Group. Matt Jore, formerly President, Chairman and CEO, will become President of the Company's Technology Group and focus on customer relationships and product/process development. Jim Loebbecke, member of the board of directors since July 2000, will become the Company's chairman of the board. McConnell and Jore will also serve on the board of directors. The Company has also consolidated the Chief Financial Officer and Controller functions, with Mick Quinlivan, formerly Controller, assuming those responsibilities. Monte Giese, former CFO, will help transition the Company through the funding, reorganization and strategic alternatives process. "While we regret the need to file for protection under Chapter 11, we are pleased to have secured the necessary financing to move this business forward," said Gerald McConnell, President and CEO of Jore Corporation. "The funding will allow us to maintain the high service levels and product fill rates that our customers have come to expect." About Jore Corporation Jore Corporation is a leader in the design and manufacture of innovative power tool accessories and hand tools for the do-it- yourself and professional craftsman markets. The Company relies on advanced technologies and advanced equipment engineering in its manufacturing processes to drive cost reductions and higher quality in its products. Its products save users time by offering enhanced functionality, increased productivity and ease of use. Jore sells its products under the licensed Stanley(R) brand, as well as under various private labels of the industry's largest retailers and power tool manufacturers, including Sears, The Home Depot, Lowe's, Menard's, Canadian Tire, Tru*Serv, Black & Decker, Makita and more. JPM COMPANY: Posts $8.4 Million Net Loss For First Quarter 2001 --------------------------------------------------------------- The JPM Company (NASD:JPMXC) reported net sales for its second fiscal quarter ended March 31, 2001, of $32.9 million, a decline of 19.1% from the $40.6 million in the same period last year. The decrease in revenue was attributed to the continuing weakness in the global telecommunications industry. The net loss for the quarter ended March 31, 2001, of $8.4 million, or $1.14 per share, compared to a net loss of $486,000, or $0.07 per share in the same period last year. The higher net loss was primarily due to reduced sales and certain other charges of approximately $3.2 million, which were mostly non- cash. Included in the $3.2 million of charges were $2.1 million for inventory reserve estimates and other inventory adjustments, $0.5 million for the change in market value of derivatives and $0.6 million for other valuation reserves and adjustments. For the six months ended March 31, 2001, the Company reported sales of $77.5 million, a decline of $8.6 million or 10% compared to the same period last year. The net loss for the first six months of fiscal 2001 was $14.1 million, or $1.91 per share, compared to net income of $544,000, or $0.07 per diluted share for the corresponding period last year. Due to uncertainty over the Company maintaining compliance with future listing requirements, the Company's Board of Directors has discontinued the process of effectuating a reverse stock split intended to return the minimum bid price for the Company's common shares above $1.00. In the event the Company cannot meet the requirements for continued listing on the NASDAQ Small Cap Market, its common shares would be listed in the OTC-Bulletin Board. The JPM Company is a leading independent manufacturer of cable assemblies and wire harnesses for original equipment manufacturers and contract manufacturers in the telecommunications, networking, computer and business automation sectors of the global electronics industry. Headquartered in Lewisburg, Pennsylvania; JPM also has facilities in Beaver Springs, Pennsylvania; San Jose, California; Guadalajara, Mexico; Toronto and Calgary, Canada; Sao Paulo, Brazil; Leuchtenberg, Germany and Bela, Czech Republic. For more information about JPM or its products, visit the Company's Web site at http://www.jpmco.com. LOEWEN GROUP: Rejects Real Property Lease In Florida ---------------------------------------------------- The Loewen Group, Inc. sought and obtained the Court's authority to reject an unexpired nonresidential real property lease between Debtor Kapala-Glodek Funeral Services, Ltd., as tenant, and C. Eugene Cox and Ronald V. Flobeck (the landlord) with respect to real property located at 1630 Pine Island Road, Cape Coral, Florida 33391 because under the term of the lease, if Kapala-Glodek fails to exercise its Purchase Option by June 4, 2001, the landlord has the option to sell the property to Kapala-Glodek for $2 million by giving 60 days advance written notice to Kapala-Glodek. Although the funeral home and cemetery businesses operated on the Property have been reasonably successful, in light of the term of the lease related to the purchase option, the Debtors have determined, in the exercise of their business judgment, that the rejection of the lease is in the best interests of their estates and creditors. (Loewen Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) LTI HEALTHCARE: Pacific Exchange Suspends Trading of Shares ----------------------------------------------------------- LTC Healthcare Inc. (LTI) (OTC:LTHT) announced that the Pacific Exchange Inc. suspended trading in the company's stock as of May 17, 2001. On May 21, 2001, the company was notified by PCX Equities Inc. ("PCXE") that the company did not comply with Tier II listing maintenance requirements for net tangible assets as defined in PCXE rule 5.5(h). This rule requires a listed company to maintain total net tangible assets of at least $500,000, or net worth of at least $2 million. As a result of this noncompliance, PCX suspended trading in the company's stock. The company reported on its Form 10-Q for the quarter ended March 31, 2001, a negative net worth of $8,096,000. The notification from PCXE requires the company to provide a plan of remediation to again have the company in listing compliance within 30 days and implement the plan of remediation within 30 days of submission. Thereafter, the company would have a maximum of 60 days to effectively resolve the noncompliance. Absent this correction, PCX will proceed to delist the company on July 17, 2001. On May 23, 2001, the company sent PCXE a letter stating that it would not be able to present a plan whereby the company was again within the required listing requirements, and as a result the company expects that PCXE will immediately begin delisting procedures. Currently, the company is trading on the OTC Bulletin Board under the trading symbol "LTHT." The principal business of the company is providing long-term health-care services through the operation of nursing facilities. At March 31, 2001, the company operated 30 nursing facilities with 3,377 licensed beds and one rehabilitation hospital with 84 beds, located in seven states. METROMEDIA FIBER: S&P Places B+ Senior Debt Rating On Watch ----------------------------------------------------------- Standard & Poor's placed its single-'B'-plus senior unsecured debt rating on Metromedia Fiber Network Inc. (MFN) on CreditWatch with negative implications. The preliminary single- 'B'-plus rating on the company's senior unsecured shelf registration was also placed on CreditWatch negative. At the same time, Standard & Poor's affirmed its single-'B'-plus corporate credit rating on MFN as well as its preliminary triple-'C' rating on the company's preferred stock shelf registration. These ratings are not on CreditWatch. The outlook is stable. The CreditWatch listing of the unsecured debt does not reflect an anticipated diminution in the company's credit worthiness. Rather, it reflects the potential that the company's priority obligations relative to total assets will exceed thresholds established by Standard & Poor's for delineating a higher degree of recovery risk for unsecured debt holders. The risk that this concentration will exceed Standard & Poor's criteria is heightened by the expectation that in 2001 MFN will draw on a $350 million secured bank facility currently under negotiation. The company has not closed on this facility, and the commitment will expire on June 30, 2001, if MFN has not entered into definitive documentation for the senior credit facility by then. The company is expected to use this funding source to cover its cash operating and capital requirements over the next few years. Standard & Poor's will determine a realistic, reasonable asset value for the company's extensive local fiber asset holdings, coupled with other network equipment and assets, to determine if the 15% threshold of priority obligations relative to total asset value will be breached over the next few years with the addition of the secured bank facility. Based on the assessment of asset value, coupled with expected incurrence of construction and other trade payables during the company's fiber buildout plans through 2002, the senior unsecured debt may be notched down one level below the corporate credit rating. The corporate credit rating on MFN reflects the business risks faced by this emerging local facilities telecommunications company as it expands from its core New York City metropolitan area into a national and international company. Risk is tempered, somewhat, by the current strong demand for quality local fiber-optic networks, the company's excellent service reputation, and the prefunding of its aggressive business plan with expected obtainment of a $350 million bank facility. Significant debt funding of MFN's network expansion has contributed to the company's weak credit profile, and the company is not expected to be EBITDA positive until 2003. Cash balances at March 31, 2001, were about $553 million, while debt stood at $2.6 billion. Capital spending is estimated at about $1 billion in 2001. Outlook: Stable MFN is in the early stages of its network development and its business model is evolving. The company derives a degree of financial flexibility from its large strategic investor Verizon Communications Inc., from the prefunding of its capital program, and from its ability to swap spare fiber-optic capacity to extend its core network. These factors should allow MFN to execute its aggressive business plan within the current rating category, Standard & Poor's said. MIST INC: Sells Imprinter Business for CDN$7 Million to Pay Debt ---------------------------------------------------------------- MIST Inc. (TSE:MIS - news), a global leader in wireless transaction technology, announced the completion of the sale of the NBS Bartizan Imprinter Division, based in Kitchener, Ontario for net proceeds of CDN$7 million. Proceeds of the sale will be used to repay debt. ``We are pleased that the restructuring of MIST is drawing to a close. Our vision remains sharply focused the development of wireless transaction solutions and payment gateway opportunities,'' stated Charles E. Lee, President and CEO of MIST Inc. About MIST Inc. MIST Inc. (TSE:MIS - news), a leading global provider of wireless transaction-enabling technologies, designs, manufactures and distributes wireless and wired Point-of-Sale solutions. The MIST Freedom family of wireless transaction terminals was developed to complement MIST's existing range of products. The MIST FreedomGate(TM) provides gateway services with value-added options such as messaging, time and attendance, e-commerce and advertising. With facilities in Canada, the United States and Japan, MIST's clients include North American and international banks, financial institutions, credit and debit card processors, as well as retail, hotel, restaurant, healthcare and loyalty customers. For more information, visit www.mistwireless.com. Investors may contact investor- relations@mistwireless.com. NCT GROUP: Largest Shareholder Buys Additional 4.3 Mil Shares ------------------------------------------------------------- NCT Group, Inc. (OTCBB: NCTI) reported that its largest beneficial shareholder, Ms. Carole Salkind, has purchased 4.3 million shares of NCTI common stock. She accomplished this by converting the principal, interest and penalty on the Company's February 13, 2001 $500,000 note to her into stock. This purchase resolves NCTI's default in the principal amount on the note of $500,000 as previously reported. Additionally, Ms. Salkind and the Company rolled the principal, interest and penalty on the Company's January 26, 1999, $1.0 million note into a new $1.4 million four month convertible note, convertible into shares of the Company's common stock at a price of $0.13 per share or convertible into shares of the Company's subsidiaries, Artera Group International, Ltd. or Distributed Media Corporation International, Ltd., at Ms. Salkind's election. This resolves NCTI's default in the principal amount on the note of $1.0 million as previously reported. The new convertible note earns interest at the prime rate as published in The Wall Street Journal. The Company also issued Ms. Salkind a five-year warrant to purchase 500,000 shares of the Company's common stock at a price of $0.13 per share, which approximated the market price of the common stock on May 14, 2001, the day of issuance. About NCT Group, Inc. NCT Group, Inc. is a publicly-traded, high-tech company with operating subsidiaries in media and communications. NCTI's strong technology base of using sound and signal waves to electronically reduce noise, improve signal-to-noise ratio and enhance sound quality, drives leading edge technological innovations in media, through its Distributed Media Corporation International (DMCI) subsidiary, and communications, through its MidCore Software and Pro Tech subsidiaries, with a specific concentration on IP telephony applications. The Company's emerging technology incubation strategy nurtures development of NCTI technologies and complementary technologies from outside developers. For more information refer to www.nct-active.com. NEFF CORPORATION: Amends Terms of Credit Facility ------------------------------------------------- Neff Corp. (NYSE:NFF) has reached agreement with its lenders to amend certain terms of its revolving credit facility. The amendment permanently waives the events of default under certain financial covenants and includes an increase in pricing. The amendment also reduces the maximum commitment under the credit facility from $219.5 million to $160.0 million as of June 30, 2001, and provides for additional reductions to the commitment each quarter until the commitment is reduced to $120.0 million as of December 31, 2002. At March 31, 2001, Neff had $141.3 million outstanding under the revolving credit facility. Mark Irion, Chief Financial Officer commented, "We are pleased to reach an agreement with our lenders that reflects the goals of our business plan and provides adequate capital for Neff to pursue all of our business objectives. Neff remains focused on improving leverage by reducing our capital expenditures and applying free cash flow to pay down outstanding debt." Neff Corp. is one of the largest equipment rental companies in the United States, with 80 locations in 17 states at March 31, 2001. NUTRI/SYSTEM: Nasdaq Delists Shares, Now Trading On OTCBB --------------------------------------------------------- Nutri/System, Inc. (NASDAQ:THIN - news) had been notified by Nasdaq that its common stock would be delisted from the Nasdaq National Market at the opening of business today, May 25, 2001 because the Company no longer meets the minimum bid price and minimum tangible net worth criteria applicable to continued listing on the Nasdaq National Market. Beginning on May 25, 2001 shares of Nutri/System, Inc. common stock will trade on the Nasdaq OTC Bulletin Board electronic quotation system under the symbol THIN.OB. PACIFIC GAS: Martinez Demands Power Payments At Market Rates ------------------------------------------------------------ One of the qualified facilities, Martinez Cogen LP, asked the Court to enter an order requiring Pacific Gas and Electric Company to pay in advance fair market value for all electricity supplied to the Debtor by MCLP pending assumption or rejection of the Power Purchase Agreement between MCLP and the Debtor, dated May 1985 under which the Debtor had allegedly withheld approximately $10.8 million in payments as of the Petition Date. MCLP complained that, pursuant to a unilateral directive issued by the Debtor to the qualified facilities providing energy to PG&E, the utility has in effect dictated that MCLP (i) provide the Debtor with the long-term pricing contemplated by the PPA, without reaffirming its long-term commitment to MCLP, and (ii) provide the Debtor with postpetition credit without the protections afforded by Section 364 of the Bankruptcy Code for those who provide credit support to a debtor. MCLP is not willing to continue to perform on those terms dictated by the Debtor. The contract price under the PPA is substantially below market price, MCLP tells the Court. MCLP reckons that if it were to supply at least 15 megawatts of electricity per hour to the Debtor at current market prices (assuming a rate of about $3001 MWh), the Debtor would be incurring additional indebtedness to MCLP at the rate of approximately $108,000 per day. Absent assumption of the PPA, the Bankruptcy Code does not entitle the Debtor to pay anything but the fair market value of energy delivered by MCLP postpetition; nor does the Bankruptcy Code entitle the Debtor to compel MCLP to extend credit for postpetition energy purchases, MCLP asserts. Accordingly, MCLP believes it is entitled to an order (a) directing the Debtor to pay as an administrative expense under sections 503(b) and 507(a) of the Bankruptcy Code the difference between the contract price and fair market value for all energy delivered by MCLP from the Petition Date until the date of the order, and (b) directing the Debtor to pay fair market value in advance for all prospective energy deliveries by MCLP until the PPA is assumed or rejected. MCLP owns and operates a 99.9 megawatt electric generation plant (the Facility) in Martinez, California, burning natural gas to produce electrical and thermal energy. The 99.9 megawatts of electricity purchased from MCLP is sufficient to meet the power needs of about 99,900 homes in California. 10 megawatts of this is sold to the Debtor on a "firm" basis, and a portion of its remaining 89.9 megawatts of electricity is sold to the Debtor on an "as delivered" basis. Such deliveries and purchases have been made pursuant to a 25 year Power Purchase Agreement between the Debtor and MCLP, dated May 1985 (the "PPA"). MCLP also sells electricity to Ultramar Diamond Shamrock Golden Eagle Refinery. About 27% of MCLP's revenue comes from electricity sales to the Debtor. Prior to the commencement of this chapter 11 case, the Debtor had contracted to purchase approximately 4,500 megawatts of electricity from "qualified facilities" or "QFs" throughout the State of California. This represents about one-third of the Debtor's total electrical capacity and powers about 4.5 million California homes. During the four months prior to the commencement of the PG&E chapter 11 case, the Debtor elected not to pay MCLP for electricity and electric capacity as required by the PPA. Instead, the Debtor first curtailed, and then stopped making altogether, payments due under the PPA while accepting MCLP's performance. In December 2000 and January 2001, the Debtor paid only 15% of the amount due and made no payments for February 2001 or March 2001. The Debtor employed a similar strategy with respect to all of its QFs, building up payables to all of its QFs of nearly $1.0 billion, MCLP told the Court. Shortly after commencing its chapter 11 case, the Debtor issued a unilateral directive to MCLP (and all 25 other "qualified facilities" providing energy to the Debtor) indicating that (a) MCLP was to continue providing energy to the Debtor; (b) MCLP would be paid the contract rate for such energy (as modified by the California Public Utility Commission's March 27, 2001 Decision No. 01-103-067) or less, if the Debtor's circumstances required, (c) payment would be made 15 days in arrears, and (d) the Debtor would revisit its requirements from MCLP on a monthly basis. MCLP told the Judge that absent the Debtor's assumption of the PPA, it is clear that the reasonable value of the electricity provided by MCLP to the Debtor is not the price contemplated by the PPA, which reflects a long-term commitment to purchase electricity. If the Debtor elects to receive electricity from MCLP pending the decision to assume or reject the PPA, it must recognize its obligations to pay the fair market value for such electricity, MCLP asserted. (Pacific Gas Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) PARK-OHIO: S&P Downgrades Credit Ratings To Low-B's --------------------------------------------------- Standard & Poor's lowered its corporate credit rating on Park- Ohio Industries Inc. to single-'B'-plus from double-'B'-minus and its subordinated debt rating on the company to single-'B'- minus from single-'B'. In addition, Standard & Poor's assigned its single-'B'-plus rating to Park-Ohio's $180 million secured credit facility. The company's debt totaled about $358 million as of March 31, 2001. The outlook is stable. The rating downgrades reflect Park-Ohio's weaker-than-expected operating results and increased debt use. The company reported a 15% decline in sales and a 38% decline in operating income for the first quarter of 2001 (pro forma for the sale of a business unit) compared with 2000. This followed a 4% decline in sales and a 30% decline in EBITDA during the fourth quarter of 2000. The weak results were caused by the sharp slowdown in heavy-duty truck and automotive production in recent quarters, as well as weakness in the overall U.S. economy. Truck production is expected to remain at low levels during fiscal 2001, while the auto market could show modest improvement during the second half of the year. Debt levels increased by $11 million in the first quarter, primarily due to a $6.3 million increase in working capital. Cash flow protection is thin, with EBITDA interest coverage of 1.7 times (x) in the first quarter and debt to EBITDA (last 12 months) of more than 5x. Little to no improvement in the company's credit profile is expected in the next year. Park-Ohio's ratings reflect the company's leading niche positions in fragmented and cyclical markets, combined with an aggressively leveraged financial profile. The company operates diversified logistics and manufacturing businesses serving a variety of industrial markets. The faster- growing logistics segment accounts for 60% of total sales, supplying fasteners and related products, via supply chain management and wholesale distribution services, to companies in the transportation, electrical, and lawn and garden equipment industries. Manufacturing operations, which account for 40% of sales, include various aluminum components such as transmission pump housings, pinion carriers, and other products supplied primarily to automotive manufacturers. Other manufactured products include crankshafts and camshafts, custom-engineered heating systems, and molded rubber products sold to the aerospace, railroad, automotive, and truck industries. Business risk comes from cyclical end markets, including the automotive and truck manufacturing segments, which represent about 30% of total sales. The faster-growing, and more stable, logistics business, a fairly broad product line, and a large customer base mitigate demand variability. The continuing outsourcing trend among U.S. manufacturers provides good growth opportunities for logistics services. Park-Ohio's financial risk reflects an aggressively leveraged capital structure and relatively modest cash flow protection measures, with funds from operations to total debt of about 10%. In response to weaker demand, the company has completed several cost-cutting actions, reducing expenses by $8 million on an annual basis, which should lead to improved operating results. Liquidity is somewhat constrained, with only $30 million available under a $180 million revolving credit facility, and covenants are tight. Ratings assume the company will remain in compliance with covenants or receive waivers, if necessary. Over time, total debt to EBITDA is expected to average about 4x-4.5x, and EBITDA interest coverage is expected to average about 2x- 2.5x, appropriate levels for the ratings. Outlook: Stable Heavy debt use and thin cash flow protection limit upside ratings potential. Downside risk is limited by the firm's solid niche positions and fair end market diversity, Standard & Poor's said. PICCADILLY CAFETERIAS: Moody's Cuts Senior Note Rating to Caa1 -------------------------------------------------------------- Moody's Investor Service junked the following ratings of Piccadilly Cafeterias, Inc.: * $55.2 million of senior secured notes to Caa1 from B2 * senior implied rating to Caa1 from B2 * senior unsecured issuer rating to Caa2 from B3. The rating outlook is negative while approximately $55 million of debt securities are affected. Moody's said that the downgrade was due to the rating agency's expectation that operational and debt protection measures will remain weak for at least the rest of 2001. Moody's does not anticipate a substantial improvement in unit volume or restaurant cash flow (which has reportedly decreased over the last two quarters) sometime soon since Piccadilly is still identifying the causes of its operational setback. Furthermore, the rating agency said that the downgrade was due to its observation of the intense industry competition at the company's price point, the moderate household incomes of many cafeteria customers, and the company's geographic concentration. The ratings also reflect the thinning real-estate ownership of the company with the recent sale and leaseback of 12 stores. The negative outlook considers the agency's view that results from a new strategy remain at least a year away and that operating margins and leverage may not materially improve in the meantime. Based in Baton Rouge, Louisiana, Piccadilly Cafeterias, Inc. operates 230 cafeteria-style restaurants spread across the South. PHONETEL TECHNOLOGIES: Looks For More Lenders To Fund Operations ---------------------------------------------------------------- Phonetel Technologies Inc.'s working capital deficiency, excluding the current portion of long-term debt, increased from $2,698 at December 31, 2000 to $3,257 at March 31, 2001, which represents a decrease in working capital of $559. Although the Company's cash provided by (used in) operating activities increased from ($732) for the three months ended March 31, 2000 to $238 for the three months ended March 31, 2001, this increase was primarily due to the capitalization of certain interest payments. In addition, the Company has incurred continuing operating losses. The Company was not in compliance with certain financial covenants under its Exit Financing Agreement at December 31, 2000 and March 31, 2001 and presently has no additional credit available thereunder. In addition, the Company has not made the monthly scheduled interest payments from February 1 through May 1, 2001 nor the principal payment relating to the deferred line fee that was originally due on November 17, 2000. As a result of certain amendments to the Company's Exit Financing Agreement, the lenders have waived the default relating to the Company's inability to comply with certain financial covenants at December 31, 2000 through March 31, 2001 and have deferred or extended the due dates of the payments described above. In the event the Company is unable to remain in compliance with the Exit Financing Agreement and the lenders do not waive such defaults, the outstanding balance could become immediately due and payable. The Company's working capital, liquidity and capital resources may be limited by its ability to generate sufficient cash flow from its operations or its investing or financing activities. Cash flow from operations depends on revenues from coin and non- coin sources, including dial-around compensation, and management's ability to control expenses. There can be no assurance that coin revenues will not decrease, that revenues from dial-around compensation will continue at the rates anticipated, or that operating expenses can be maintained at present or reduced to lower levels. To the extent that cash flow from operating activities is insufficient to meet the Company's cash requirements, there can be no assurance that the Company's lender will grant additional advances under the Exit Financing Agreement or that the Company can obtain additional financing to meet its debt service and other cash requirements. The Company has had discussions with its lenders and has requested an additional advance under its Exit Financing Agreement. Although the Company's lenders have been supportive, the Company has not been able to obtain additional advances from its lenders. The Company continues to negotiate with its lenders and to evaluate alternate financing arrangements. The Company has also taken additional steps to further reduce operating expenses and to seek alternate sources of revenue. Management believes, but cannot assure, that cash flow from operations, including any new sources of revenue, and the additional liquidity that its current or alternate lenders may provide, will allow the Company to sustain its operations and meet its obligations through the remainder of 2001. RESPONSE ONCOLOGY: Reports First Quarter Results ------------------------------------------------ Response Oncology, Inc., (OTC Bulletin Board: ROIX), reported its financial results for the first quarter ended March 31, 2001. Net revenues were $31.6 million, 11 percent lower than the $35.6 million reported in the comparable period in 2000. While pharmaceutical sales to physicians increased 4 percent, physician practice management (PPM) service fees declined 10 percent and IMPACT(R) net patient service revenue decreased 52 percent. The decrease in IMPACT services revenue continues to reflect the pullback in breast cancer admissions, which resulted from the high dose chemotherapy/breast cancer study presented at the American Society of Clinical Oncology (ASCO) in May 1999. Since the release of this data, the high dose chemotherapy business has slowed significantly, as evidenced by a 44 percent decrease in high dose procedures at the Company in the first quarter of 2001 compared with the same period in 2000. In addition, Response Oncology experienced a decline in insurance approvals on high dose referrals. As a result of the decline in volumes, the Company closed 19 IMPACT Centers in 2000 and is in the process of closing 11 additional Centers. The decline in PPM service fees is due to the termination of a service agreement and sale of related assets effective February 1, 2001. However, on a same-practice basis, PPM net revenue increased 5 percent due to increases in patient volumes and pharmaceutical utilization. Pharmaceutical sales to physicians rose as a result of the addition of a new pharmacy management contract in the first quarter of 2001 and increased drug utilization by the physicians serviced under these contracts, but were tempered by the termination of two pharmaceutical sales agreements effective July 1, 2000. Operating and general expenses (excluding pharmaceuticals and supplies) for the first quarter of 2001 were down 12 percent, or $1.2 million, compared with the first quarter of 2000. This decrease is due to the closure of IMPACT Centers, the termination of certain PPM service agreements, and reductions in corporate staffing, tempered by increases for professional services, principally legal and consulting fees, related to the Company's restructuring efforts and bankruptcy filings. Pharmaceuticals and supplies expense decreased 5 percent, or $1.3 million. This decrease was due to the termination of the aforementioned pharmacy management agreements as well as a decrease in patient volumes in the IMPACT Centers. Earnings before interest, taxes, depreciation and amortization (EBITDA) declined 87 percent from $1.5 million for the quarter ended March 31, 2000 to $0.2 million for the quarter ended March 31, 2001. The Company's net loss was ($1.2) million, or ($0.09) per diluted share (before the effect of a cumulative change in accounting principle of $0.1 million, or ($0.01), per diluted share), compared with a net loss of ($0.3) million, or ($0.02) per diluted share, for the first quarter of 2000. As previously announced, the Company and its wholly owned subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States District Court for the Western District of Tennessee on March 29, 2001. The Company is currently developing a reorganization plan to restructure its obligations and operations. The Company's financial statement auditors have included an explanatory paragraph to their opinion dated March 30, 2001, on the December 31, 2000 financial statements, stating that the bankruptcy filing and related matters raise substantial doubt about the Company's ability to continue as a going concern. There can be no assurance that any reorganization plan that is effected will be successful. Response Oncology, Inc. is a comprehensive cancer management company. The Company provides advanced cancer treatment services through outpatient facilities known as IMPACT(R) Centers under the direction of practicing oncologists; owns the assets of and manages the nonmedical aspects of oncology practices; compounds and dispenses pharmaceuticals to certain medical oncology practices for a fee; and conducts clinical research on behalf of pharmaceutical manufacturers. Approximately 260 medical oncologists are associated with the Company through these programs. SL INDUSTRIES: Board Opts To Suspend Regular Cash Dividend ---------------------------------------------------------- SL Industries Inc. (NYSE:SL)(PHLX:SL) announced that its board of directors has voted to suspend the company's regular semi- annual cash dividend, which would have been payable in June 2001. As previously announced, the company is presently not in compliance with certain financial covenants in its credit facility. As a result, the company is precluded from, among other things, paying cash dividends to its shareholders. Notwithstanding this, the board's determination to suspend the cash dividend was based primarily on the current economic outlook and the company's need to conserve its working capital for operating purposes at the present time. Owen Farren, president and chief executive officer of SL Industries, said: "As we announced previously, weak economic conditions in the telecommunications and semiconductor markets have had an adverse effect on the company's operating results and liquidity, and in all likelihood will continue to have a significant adverse effect for the rest of the calendar year due to lower revenues combined with existing fixed costs. "We already have announced a number of measures to lower costs. The board of directors believes that the suspension of the semi- annual dividend is an appropriate measure that will assist the company in its continuing efforts to manage working capital." SL Industries last paid a semi-annual cash dividend of 5 cents per share of its common stock on Nov. 22, 2000. About SL Industries SL Industries Inc. designs, manufactures and markets Power and Data Quality (PDQ) equipment and systems for industrial, medical, aerospace and consumer applications. For more information about SL Industries Inc. and its products, visit the company's Web site at www.SLpdq.com. SMARTCARDESOLUTIONS.COM: Creditor Moves To Enforce Security ----------------------------------------------------------- Pursuant to a General Security Agreement dated August 13, 1997, Smartcardesolutions.com Inc., a wholly owned subsidiary of Smartcardesolutions.com Ltd., has been served a Notice of Intention To Enforce Security by a company related to Jamscor, a large shareholder of the Company. The total amount of the principal indebtedness as of May 15, 2001, owing by the Company, as secured by the security is CDN $ 6,808,999.35. The Notice has indicated that the secured creditor has the right to enforce the security after 10 days from the date that the notice was sent. STAGE STORES: Files Second Amended Plan of Reorganization --------------------------------------------------------- Stage Stores Inc. (OTCBB:SGEEQ) and its wholly-owned subsidiaries, Specialty Retailers Inc. and Specialty Retailers Inc. NV, announced that their Second Amended Plan of Reorganization and Disclosure Statement in Support of Second Amended Plan of Reorganization was filed on May 21, 2001 with the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division. The companies expect that the Bankruptcy Court will rule on the approval of the Disclosure Statement next week. If approval is received from the Bankruptcy Court, the companies will commence with the solicitation of votes from creditors for approval of the Second Amended Plan, and hope to conduct a hearing on confirmation of the Second Amended Plan on July 10, 2001. Under the terms of the proposed Second Amended Plan, the type and amount of distributions that each creditor receives will depend upon the class in which the claim is placed. The proposed Second Amended Plan generally provides for issuance of a new class of common stock in a reorganized company and cash payments, totaling approximately $18 million, in full settlement of pre-petition claims. The proposed Second Amended Plan, as filed, does not provide for any distribution to the holders of the Company's Common Stock or to the holders of the Company's Class B Common Stock. Further, the proposed Second Amended Plan calls for the cancellation of the currently outstanding Common Stock and Class B Common Stock upon confirmation of the Second Amended Plan. Stage Stores Inc. brings nationally recognized brand name apparel, accessories, cosmetics and footwear for the entire family to small towns and communities throughout the south central United States. The Company currently operates stores under the Stage, Bealls and Palais Royal names. TELIGENT INC.: Obtains Court Nod For Employee Retention Program --------------------------------------------------------------- Teligent Inc. announced that it received court approval to implement an employee retention and severance program that it deems critical to its reorganization process, according to Dow Jones. The U.S. Bankruptcy Court in Manhattan approved the motion, which allows Teligent to reward employees for staying on during reorganization, at a hearing on Monday. The program, made up of two parts, will cost about $9 million for one year. The first part is the stay bonus plan to entice employees to stay with the company through the year. The other part is the severance program, which promises employees compensation if the Vienna, Va.-based company has to lay them off. Teligent also received interim approval to use $36.7 million in cash collateral to meet payroll and maintain its business operations. A final hearing is set for June 13 and objections are due on June 6. (ABI World, May 23, 2001) V3 SEMICONDUCTOR: Files For Chapter 11 To Facilitate Sale --------------------------------------------------------- V3 Semiconductor Inc. has filed for protection under Chapter 11 of the U.S. Bankruptcy Laws in the United States Bankruptcy Court for the Northern District of California. The filing is a requirement under V3's previously announced agreement to sell its assets and business to QuickLogic Corporation in exchange for QuickLogic stock. Pending approval of the bankruptcy court and other required notice periods, V3 intends to close the sale to QuickLogic within 60-90 days. About V3 Semiconductor V3 Semiconductor Inc. (NASDAQ: VVVI), the Embedded Intelligence Company, designs, develops and markets semiconductor silicon solutions. V3's mission is to create high-performance interconnect and controller solutions that enable our customers to build the next-generation networking and Internet infrastructure. V3 targets leading manufacturers of communications network infrastructure equipment, network edge connectivity devices, Internet appliances, set top boxes, residential gateways, mass-storage sub-systems and industrial embedded computers. V3 enables its customers to develop systems faster than ever before, by providing rapid time-to-market solutions comprised of high-performance silicon, supporting software, evaluation platforms, reference designs and applications support. V3's products include highly integrated system controllers, bridge controllers and memory controllers that deliver high throughput through efficient bus management between processor, memory and I/O sub-systems. V3's sales channel includes a direct sales force, manufacturers' representatives and electronics distributors worldwide V3 SEMICONDUCTORS: Chapter 11 Case Summary ------------------------------------------ Debtor: V3 Semiconductors, Inc. dba V3 Incorporated 250 Consumer Rd. #901 Santa Clara, CA 95051 Chapter 11 Petition Date: May 22, 2001 Court: Northern District of California Bankruptcy Case No.: 01-52615 Debtor's Counsel: John Walshe Murray, Esq. Law Offices of Murray and Murray 19330 Stevens Creek Blvd. #100 Cupertino, CA 95014-2526 650-852-9000 VALLEY MEDIA: Receives Nasdaq's Delisting Notice ------------------------------------------------ Valley Media, Inc. (Nasdaq:VMIX) stated it received a Nasdaq Staff Determination on May 17, 2001 that the Company fails to comply with the minimum market value of public float requirement for continued listing set forth in Marketplace Rule 4450(a)(2), and that its securities are, therefore, subject to delisting from The Nasdaq National Market. Further, on March 26, 2001, the Company received notification from Nasdaq that it fails to meet the minimum bid price requirement for continued listing also set forth in Marketplace Rule 4450(a)(5) and that the Company has until June 25, 2001 to comply with this requirement. Valley Media has requested a hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination concerning the minimum market value of public float requirement. According to Nasdaq procedures, the hearing date will be set, to the extent practicable, within 45 days of the request, and the Company's stock will continue to trade on The Nasdaq National Market pending the Panel's decision. There can be no assurance that the Panel will grant the Company's request for continued listing or that the Company will be able to timely comply with the various maintenance requirements for continued listing. The inability to maintain listing of the Company's stock on the Nasdaq National Market would likely adversely affect the ability or willingness of investors to purchase the Company's stock. In addition, the market liquidity of the Company's securities would likely be severely affected. About Valley Media, Inc. Valley Media, Inc. is a distributor of music, video and DVD product, offering Full-line Distribution, Independent Distribution and New Media fulfillment services for e-commerce, in addition to publications and proprietary database products. Valley Media operates facilities in seven states with primary distribution facilities in Louisville, KY, and Woodland, CA, where its corporate headquarters are located. Additional information about Valley Media is available at http//www.valley- media.com. VENCOR INC.: Seeks To Clarify Record Date For Distributions ----------------------------------------------------------- The reorganized debtors, Vencor, Inc. (now known as Kindred Healthcare, Inc.), seek the Court's determination as to the record holders of claims for purposes of distribution pursuant to the Plan, in order to avoid the costs associated with possible litigation and the potential liability exposure to multiple claimants for distributions made in good faith. The Debtors told the Court that approximately 8,600 proofs of claim and interest have been filed in the Vencor chapter 11 case. Various entities apparently have purchased thousands of claims from holders of claims against the Debtors' estates. Certain of the Claims Purchasers have raised questions regarding the validity of transfers, entered into around the record date. The Debtors have also received several informal inquiries from transferees of claims regarding the Debtors' willingness to recognize the Late Transfers as valid transfers. There are also claimants who have filed withdrawals of Notices after the Record Date (the Late Withdrawals). The Debtors would prefer to resolve these inquiries prior to the time such distributions are due to be made, to the extent possible. Therefore, the Debtors believe that an Order of the Court confirming and further clarifying the Record Date for claims transfers is the most efficient and cost effective way to resolve the current inquiries and to avoid further inquiries or potential litigation. The Debtors take the position that distributions under the Plan should only be made to holders of claims against the Debtors as of the Record Date, which is March 19, 2001 under the Plan and Confirmation Order. The Debtors further asserted that, under Bankruptcy Rule 3001, the Late Transfers were not effective prior to the Record Date, and that, under the Bankruptcy Rules, the Debtors are not required to acknowledge any transfers for which a notice of transfer was filed with the Court and the 20 day objection period had run without an objection or for which an objection had been resolved by order of the Court on or prior to March 19, 2001. Inasmuch as the withdrawal of any Notice effectively transfers ownership of a claim, the Debtors indicate their position that the late withdrawals should not be recognized and that distributions be made only to holders of claims against the Debtors as of the Record Date. The Debtors cited Bankruptcy Rule 3001(e)(2) as follows: "If a claim other than one based on a publicly traded note, bond, or debenture has been transferred other than for security after the proof of claim has been filed, evidence of the transfer shall be filed by the transferee. The clerk shall immediately notify the alleged transferor by mail of the filing of the evidence of transfer and that objection thereto, if any, must be filed within 20 days of the mailing of the notice or within any additional time allowed by the court. If the alleged transferor files a timely objection and the court finds, after notice and a hearing, that the claim has been transferred other than for security, it shall enter an order substituting the transferee for the transferor. If a timely objection is not filed by the alleged transferor, the transferee shall be substituted for the transferor. Thus, Bankruptcy Rule 3001(e)(2) provides that the transferee is substituted for the transferor only in the absence of a timely objection to the transfer. Several of the Notices have been filed within twenty days of the Record Date (the Late Transfers). Certain of the Claims Purchasers have argued that because the transferor of the claims have waived their right to object to the transfer, the 20-day rule should not apply. The Debtors asserted that, pursuant to Bankruptcy Rule 3001, the Late Transfers were not effective until after the Record Date and thus, the Debtors are required to recognize only the original claim holder of such claims. The Debtors believe they should not be obligated to make distributions on any such ineffective transfer and risk the possibility of having to make multiple payments for the same claim. The Debtors also made it a point that they are not required to file an objection to invalidate such transfers, given that Bankruptcy Rule 3001 does not set forth a mechanism for Debtors to object to the Late Transfers. Moreover, the Debtors made it clear that nothing contained in the motion should be construed as an admission of the validity of any claim filed against the Debtors' estates and the Debtors reserve all rights with respect to any such claim. Based on section 105 of the Bankruptcy Code, and Rules 3001 and 3021 of the Bankruptcy Rules, and the provision in the Plan and Confirmation Order, the Debtors seek an order from the Court confirming the record date holders for purposes of claims distributions pursuant to the Fourth Amended Joint Plan Of Reorganization Of Vencor, Inc. (Vencor Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) W.R. GRACE: Asbestos Claimants Ask To Retain Legal Analysis ----------------------------------------------------------- John Russell and Marla Riskin, acting for the Asbestos Personal Injury Claimants Committee in W. R. Grace & Co.'s chapter 11 cases, asked Judge Farnan to authorize their retention of Legal Analysis Systems, Inc., as the asbestos-related bodily injury consultant to the Committee. Mark A. Peterson, of LAS, averred that LAS is a "disinterested person within the meaning of the Bankruptcy Code and holds no interest adverse to the Debtors or their estates in the matters for which LAS is to be employed, and further states that LAS has no connection to the Debtor, its creditors, or its related parties. However, LAS will conduct an ongoing review of its files to ensure that no conflicts or other disqualifying circumstances exist or arise. If any new facts or relationships are discovered, LAS will supplement its disclosure to the Court. LAS provides expert services regarding the indemnification and treatment of asbestos bodily injury claimants. The services LAS will perform for the Committee include: (a) Estimation of the number and value of present and future asbestos personal injury claims; (b) Development of claims procedures to be used in the development of financial models of payments and assets of a claims resolution trust; (c) Analyzing and responding to issues relating to the setting of a bar date regarding the filing of personal injury claims; and (d) Analyzing and responding to issues relating to providing notice to personal injury claimants and assisting in the development of the notice procedures. LAS will be compensated on an hourly basis to be paid by the Debtor. The applicable current hourly rates are: Mark A. Peterson $425 Daniel Relles, statistician $290 Patricia Ebener, data collection $200 The Committee suggested to Judge Farnan that the compensation arrangement and schedule of fees provided by LAS is consistent with and typical of the arrangements entered into by LAS and other asbestos bodily injury consultants regarding the provision of similar services for clients such as the Debtor. (W.R. Grace Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) BOOK REVIEW: TAKING CHARGE: Management Guide to Troubled Companies and Turnarounds -------------------------------------------------------- Author: John O. Whitney Publisher: Beard Books Softcover: 283 Pages List Price: $ 34.95 Review by: Susan Pannell Order your copy today at http://amazon.com/exec/obidos/ASIN/1893122034/internetbankrupt Remember when Lee Iacocca was practically a national hero? He won celebrity status by taking charge at a company so universally known as troubled that humor columnists joked their kids grew up thinking the corporate name was "Ayling Chrysler." Whatever else Iococca may have been, he was a leader, and leadership is crucial to a successful turnaround, maintains the author. Mediagenic names merit only passing references in Whitney's book, however. The author's own considerable experience as a turnaround pro has given him more than sufficient perspective and acumen to guide managers through successful turnarounds without resorting to name-dropping. While Whitney states that he "share[s] no personal war stories" in this book it was nonetheless, written from inside the "shoes, skin, and skull of a turnaround leader." That sense of immediacy, the urgency and intensity make Taking Charge compelling reading even for the executive who feels he or she has already mastered the literature of turnarounds. Whitney divides the work into two parts, Part I is succinctly entitled "Survival," and sets out the rules for taking charge within the crucial 120 days. "The leader rarely succeeds who is not clearly in charge by the end of his fourth month," Whitney notes. Cash budgeting, the mainstay of a successful turnaround, is given attention in almost every chapter. Woe to the inexperienced manager who views account receivable management as "an arcane activity 'handled over accounting'" Whitney sets out 50 questions concerning AR that the leader must deal with-not academic exercises, but requirements for survival. Other internal sources for cash, including judiciously managed accounts payable and inventory, asset restructuring, and expense cuts, are discussed. External sources of cash, among them banks, asset leaders, and venture capital funds; factoring receivables; and the use of trust receipts and field warehousing, are handled in detail. Although cash, cash, and more cash is the drumbeat of Part I, Whitney does not slight other subjects requiring attention. Two chapters, for example, help the turnaround manager assess how the company got into the mess in the first place, and develop strategies for getting out of it. The critical subject of cash continues to resonate throughout Part II, "Profit and Growth," although here the turnaround leader consolidates his gain and looks ahead as the turnaround matures. New financial, new organizational, and new marketing arrangements are laid out in detail. Whitney also provides a checklist for the leader to use in brainstorming strategic options for the future. Whitney's underlying theme-that a successful business requires personal leadership as well as bricks and mortar, money and machinery-is summed up in a concluding chapter that analyzes the qualities that make a leader. His advice is as relevant in this 1999 reprint edition as it was in 1987 when first published. ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658- 9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L. Metzler, Bernadette de Roda, Aileen Quijano and Peter A. Chapman, Editors. Copyright 2001. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. *** End of Transmission ***