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/raid1/www/Hosts/bankrupt/TCR_Public/040728.mbx T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, July 28, 2004, Vol. 8, No. 156 Headlines 360NETWORKS: Holds a $1.2M Claim in Encompass' Chapter 11 Case ADELPHIA COMMS: Committee Will Pursue FPL & Prestige Claims AIR CANADA: 3 Travel Agencies Ask Court to Reverse Claim Ruling ALLMERICA FINANCIAL: 2nd Quarter Net Income Increases to $32 Mil. AMC ENTERTAINMENT: Marquee Launches Debt Offerings to Fund Buyout ARCHANGEL DIAMOND: Asks Colorado Court to Reconsider Claims Ruling BASIS100: Schedules Aug. 12 Conference Call to Review Q2 Results BAY VIEW: Fitch Withdraws BB- Securities Rating After Redemption BBF RESOURCES: TSX Exchange Continues Trade Halt Order BECKMAN COULTER: Reports 11.7% Net Earnings Growth in 2nd Quarter BENEM VENTURES: TSX Halts Stock Trading Pending Policy Compliance BORDEN CHEMICAL: S&P Keeps Negative Watch Pending Acquisition CALL-NET: Will Hold Q2 Conference Call Today at 1:00 P.M. CALLINAN: Pursues Exploration Efforts Amidst Bullish Metal Trading CAMCO: Stockholders' Deficit Nears $18 Million as of June 19 CANDESCENT: Hires McKenna Long as Government Contracts Counsel CATHOLIC CHURCH: Wants to Honor Prepetition Employee Obligations CMQ RESOURCES: Provides Update on Exploration Activities COEUR D'ALENE: Wheaton Tells Shareholders Not to Tender Shares Yet COGENTRIX: S&P Puts B+ Sr. Unsecured Bond Rating on Positive Watch CONGOLEUM: Plan Confirmation Hearing Date Reset to October 5, 2004 CORECARE BEHAVIORAL: Emerges From Bankruptcy Protection COVANTA ENERGY: Files Second Post-Confirmation Report DELTA FUNDING: Fitch Junks 4 Class Ratings over High Delinquencies DII/KBR: Wants Court to Approve C & C Marine Sale Agreement DSL.NET: Recapitalization Eliminates Preferred Dividend Payments EARTHSHELL CORP: Stockholders Approve Proposals at July 26 Meeting ENERGY CORP: Enters into Restated Credit Agreement with Foothill ENRON CORP: Oregon Attorney General Asks FERC to Protect Taxpayers ENTERPRISE PRODUCTS: BB+ Rated Energy Company Releases Q2 Results ENWAVE: Canadian National Science Council Denies Funding Proposal EXIDE TECH: Pachulski Wants to Collect $2,310,278 Final Fees FEDERAL-MOGUL: Wants to Expand AlixPartners' Employment FINOVA GROUP: Sells Resort Portfolio for $133.3 Million FIRST CHESAPEAKE: Michael O'Hanlon Acquires Medical Capital Group FIRST CHESAPEAKE: Relocates Corporate Offices to Conshohocken, Pa. FIRST CHESAPEAKE: Involuntary Chapter 7 Petition Filed in Florida FIRST CHESAPEAKE FINANCIAL: Involuntary Chapter 7 Case Summary FIRST CHESAPEAKE: Faces $350,000 Lawsuit from Ex-Director D. Vinik FIRST CHESAPEAKE: Cash Problems Spur Collateral One to Shut Down FLEMING COMPANIES: Court Confirms Joint Reorganization Plan GENTEK INC: Henry Druker Transfers 1,240 Shares to Questor HERITAGE ORG: Signs-Up Doherty Long as Malpractice Attorney INTEGRATED HEALTH: Rotech Wants More Time to File Final Report INT'L BIOCHEMICAL: Trustee Hires Ragsdale Beals as Attorneys INTERNET SATELLITE: Files for Chapter 11 Protection in Florida INTERNET SATELLITE: Case Summary & 20 Largest Unsecured Creditors KAISER ALUMINUM: Retirees' Panel Taps ABD Insurance as Consultant KMART: Asks Court to Expunge Preference Defendants' $31M Claims KOMTEK INC: Case Summary & 20 Largest Unsecured Creditors LEADING BRANDS: Settles Litigation with Three Licensors MACMILLAN GOLD: Reports Positive Development in Mexico Drilling MAJESCOR: Closes $700K Financing with 4 Quebec-based Institutions MIRANT CORPORATION: Wants to Implement Employee Severance Plan NEW WORLD PASTA: Committee Wants to Hire Fried Frank as Counsel OMEGA HEALTHCARE: Publishes Second Quarter 2004 Financial Results PACIFIC USA: Committee Nixes Subordinated Debt Swap Transactions PANEL TOWN: Case Summary & 20 Largest Unsecured Creditors PARMALAT: Farmland Sells Kinnet Distribution Assets to CoolBrands PEGASUS SATELLITE: Wants to Escrow Member Agreement Payments PG&E CORP: To Webcast 2nd Quarter Earnings Result on August 3 POLINA TAXI INC: Case Summary & 3 Largest Unsecured Creditors PURE TECH: Stockholders' Deficit Narrows to $8.8 Mil. at June 30 RCN CORPORATION: Five Entities Disclose Equity Interests RELIANCE FINANCIAL: Overview of Bank Committee's 2nd Amended Plan RENT-A-CENTER: Second Quarter Revenues Climb to $573 Million SAFETY-KLEEN: JPMorgan to Acquire European Unit for EUR273,500,000 SONIC ENVIRONMENTAL: Resumes Stock Trading on TSX Venture Exchange SPEEDWARE LIMITED: Secures 15 New Contracts Worth Over $4 Million SPIEGEL: SEC Revokes Class A Registration After Settlement Offer STERLING FINANCIAL: Reports Improved Second Quarter Results SYBRON DENTAL: Posts Higher Sales & Income in Fiscal 3rd Quarter SYNOVUS FINANCIAL: Fitch Assigns Ratings to Four Subsidiaries TACTEX CONTROLS: Expects to Raise $2,000,000 from Equity Units TECH LABORATORIES: Obtains $10.5 Million Equity Commitment TENNECO AUTOMOTIVE: Launches $500M 11-5/8% Senior Sub. Debt Offer TENNECO AUTOMOTIVE: S&P Rates $500M Sr. Subordinated Notes at B- TNP RESOURCES: S&P Revises Credit Watch Implications to Developing TOM EXPLORATION: Will Get CDN$180,000 from Private Investor TOWER AUTOMOTIVE: Moving Bowling Green Operations to Milan, Tenn. TRADE PARTNERS: Case Summary & 8 Largest Unsecured Creditors TROPICAL SPORTSWEAR: Incurs $5.8 Million Net Loss in 3rd Quarter TUCSON ELECTRIC: Fitch Rates Secured Credit Facility at BB+ UNIFI INC: S&P's Low-B Ratings Remain on CreditWatch Negative UNITED AIRLINES: Asks Court to Continue CBA Grievance Process USG CORP: Futures Rep Extends Terms CIBC World's Retention VANGUARD HEALTH: S&P Places Ratings on CreditWatch Negative VITAL BASICS: Employing Point Capital as Investment Bankers W.R. GRACE: German Unit Acquires Grom HPLC Packing Tech & Services W.R. GRACE: Wants to Make $20 Million Retirement Fund Contribution WAVEFRONT: Secures Multi-Point Monitoring Solutions Contract WESTERN OIL: President Guy Turcotte to Assume Chairman's Position WOMEN FIRST: Auctioning Pharmaceutical Assets on August 18 WORLDCOM INC: Agrees to Assume Three NCR Corporation Agreements * Mary Anne Citrino Joins Blackstone's Corporate Advisory Group * Upcoming Meetings, Conferences and Seminars ********* 360NETWORKS: Holds a $1.2M Claim in Encompass' Chapter 11 Case -------------------------------------------------------------- On April 19, 2002, Encompass Services Corporation filed proofs of claim, including Claim No. 710 for $3,082, against 360networks inc. and its debtor-affiliates. Except for Claim No. 710, the other Encompass proofs of claim have been expunged. On November 19, 2002, Encompass and its subsidiaries filed for Chapter 11 protection in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. On April 14, 2003, the Official Committee of Unsecured Creditors of 360networks filed Claim No. 3105 in the Encompass case, alleging a $2,845,639 general unsecured claim. Claim No. 3105 represents the amount of certain alleged avoidable transfers 360networks made to Encompass on or within 90 days before the bankruptcy petition date. On May 21, 2003, the Texas Bankruptcy Court confirmed Encompass' Second Amended Joint Plan of Reorganization. The Encompass Plan became effective on June 9, 2003. As of the Encompass Plan Effective Date, the Reorganized Encompass Debtors appointed Todd A. Matherne to serve as the disbursing agent under the Encompass Plan with the consent of the holders of Existing Credit Agreement Claims. On February 26, 2004, the Disbursing Agent objected to Claim No. 3105. The Committee and Disbursing Agent engaged in settlement discussions and negotiations concerning the Avoidance Payments to amicably resolve, settle and compromise the claims related to the Avoidance Payments, and avoid the uncertainty and expense of litigation. In a Court-approved Stipulation, the Committee and the Disbursing Agent agree that: (a) Claim No. 3105 will be allowed in the Encompass Bankruptcy proceeding as a general unsecured Class 6 claim for $1,200,000, in full satisfaction of the claims related to the Avoidance Payments; (b) The Disbursing Agent will pay the Committee all pro rata distributions to which the Committee is entitled under the Encompass Plan, at the same time and in accordance with the same procedures for payment to other Class 6 creditors; (c) The Committee, the Debtors and the Reorganized Debtors forever waive, release and discharge the Encompass Debtors from any and all action, claims, contracts and agreements relating to the Proofs of Claim or the Avoidance Payments; and (d) The Encompass Debtors forever waive, release and discharge the Debtors, the Reorganized Debtors and the Committee from any and all action, claims, contracts and agreements relating to the Proofs of Claim or the Avoidance Payments. Headquartered in Vancouver, British Columbia, 360networks, Inc. -- http://www.360.net/-- is a leading independent provider of fiber optic communications network products and services worldwide. The Company filed for chapter 11 protection on June 28, 2001 (Bankr. S.D.N.Y. Case No. 01-13721), obtained confirmation of a plan on October 1, 2002, and emerged from chapter 11 on November 12, 2002. Alan J. Lipkin, Esq., and Shelley C. Chapman, Esq., at Willkie Farr & Gallagher, represent the Company before the Bankruptcy Court. When the Debtors filed for protection from its creditors, they listed $6,326,000,000 in assets and $3,597,000,000 in liabilities. (360 Bankruptcy News, Issue No. 72; Bankruptcy Creditors' Service, Inc., 215/945-7000) ADELPHIA COMMS: Committee Will Pursue FPL & Prestige Claims ----------------------------------------------------------- The Official Committee of Unsecured Creditors and Adelphia Communications Corporation and its debtor affiliates (ACOM Debtors) ink a stipulation authorizing the Creditors Committee to prosecute, on the ACOM Debtors' behalf, claims against: (1) FPL Group, Inc., and West Boca Security, Inc.; and (2) Prestige Communications of NC, Inc., Jonathan J. Oscher, Lorraine Oscher McClain, Robert F. Buckfelder, Buckfelder Investment Trust, and Anverse, Inc. Committee's Investigation of the Claims In January 2004, the Creditors Committee began an investigation into possible avoidance claims against the FPL Group and the Prestige Defendants. In the course of that investigation, the Creditors Committee reviewed transaction documents and worked closely with the ACOM Debtors to determine the validity of potential claims against the Defendants. As a result of the investigation, the Creditors Committee possesses a significant level of knowledge of facts relevant to the transactions involving the FPL Group and the Prestige Defendants and the potential claims against them. The culmination of the Creditors Committee's investigation is the agreement with the ACOM Debtors and the drafting and contemporaneous filing of the Complaints with the Court. Complaint Against Prestige The Complaint against Prestige aims to recover a fraudulent conveyance arising out of ACOM's purchase of certain cable systems from Prestige, for around $800,000,000 -- which was far more than what the cable assets were worth -- while ACOM was insolvent. ACOM entered into, and overpaid in, the Asset Purchase as part of a transaction in which the members of the Rigas Family -- John Rigas, Tim Rigas and Michael Rigas -- who were ACOM directors and senior officers, simultaneously bought for themselves Prestige's sister company, Prestige Communications, Inc., in Georgia, at a significantly lower price. The Prestige Complaint also seeks to recover damages for aiding and abetting the Rigas Family's breaches of fiduciary duty as the Prestige Defendants knew that the Rigas Family was breaching its fiduciary duty by entering into the purchase agreement, and they substantially assisted the Rigas Family in doing so by agreeing to, and then consummating, the transaction. Complaint Against FPL Group The Complaint against the FPL Group aims to recover a fraudulent conveyance arising out of ACOM's January 28, 1999 repurchase of certain shares of its Class A Common Stock and Series C Cumulative Convertible Preferred Stock from the FPL Group for around $149,000,000. At the time of the Repurchase, ACOM was insolvent or was rendered insolvent by its repurchase of the securities, and ACOM did not receive reasonably equivalent value in exchange for the amount it paid in the transaction. To compensate for their loss incurred as a result of the Repurchase, the ACOM Debtors want to avoid, recover and preserve for the benefit of their estates the cash amount ACOM paid pursuant to the transaction, together with all interest paid in respect of the obligations avoided. Parties Stipulate The salient terms of the Stipulation are: A. Joint Filing of Complaints The ACOM Debtors and the Creditors Committee will jointly file the Complaints on behalf of ACOM's estates, signed by each of their counsel. B. The ACOM Debtors are Nominal Plaintiffs The ACOM Debtors will be nominal plaintiffs only and will not be bound by any of the factual allegations made in the Complaints by the Creditors Committee. On the Court's approval of the Stipulation, the ACOM Debtors' counsel is authorized to withdraw the Actions. C. Leave to File Complaint The Creditors Committee will be granted leave and have standing to file and prosecute the Claims, including those set forth in the Complaint, on behalf of the ACOM Debtors' estates, in its own name and in the name of the ACOM Debtors in accordance with the decision of the U.S. Court of Appeals for the Second Circuit in Commodore Int'l, Ltd., v. Gould (In re Commodore Int'l, Ltd.). In Commodore, the Second Circuit held that a creditors committee may acquire standing to pursue the debtors' claims if: (i) the committee has the debtors' consent; and (ii) the Court finds that suit by the committee is: (a) in the best interest of the bankruptcy estate; and (b) "necessary and beneficial" to the fair and efficient resolution of the bankruptcy proceedings." D. The ACOM Debtors' Prosecution of Claim if Stipulation is Not Approved If the Court does not approve the Stipulation, the ACOM Debtors will prosecute the Claims on behalf of their estates without prejudice to the Creditors Committee's right to intervene. E. Settlement of Claims The ACOM Debtors will retain the right to compromise and to settle the Claims. Parties-in-interest will retain the right to oppose the settlements as if the Stipulation never existed and as if the ACOM Debtors had retained exclusive control over the Claims. The ACOM Debtors' participation as a party in the Complaints is significant because the Creditors Committee is not replacing the Debtors as claimant. Rather, the Committee is assisting the Debtors with the litigation. The Debtors will retain an appropriate level of control over the litigation through their ability to enter into settlements and object to amendments to the Complaints. The Creditors Committee and the ACOM Debtors find the necessity to prosecute the Claims against the FPL Group and the Prestige Defendants. The Stipulation strikes an appropriate balance between the rights of the parties to prosecute, participate in, control and settle the litigation against the FPL Group and the Prestige Defendants. The Stipulation is fair and equitable and falls well within the range of reasonable business judgment. The Complaints allege, at the very least, colorable claims that will yield significant recoveries to the ACOM Debtors' estates. The Creditors Committee is a logical party to bring the Complaints. The Creditors Committee represents the real parties- in-interest in the adversary proceeding as it is the unsecured creditors who will directly benefit from recoveries. The Creditors Committee assures the Court that its counsel has expertise in the area of avoidance actions. For the last five months, the Creditors Committee's counsel has been undertaking an analysis of, and an investigation into, the Claims. The Committee's counsel has, therefore, developed the intellectual capital necessary to pursue the claims set forth in the Complaints. It would be costly and wasteful for the ACOM Debtors' counsel to duplicate the work already performed by the Committee's counsel. Adelphia Communications Corporation and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. (Adelphia Bankruptcy News, Issue No. 64; Bankruptcy Creditors' Service, Inc., 215/945-7000) AIR CANADA: 3 Travel Agencies Ask Court to Reverse Claim Ruling --------------------------------------------------------------- On June 22, 2004, the Honorable Allan M. Austin as Claims Officer disallowed a claim for damages filed by Always Travel, Inc., Highbourne Enterprises, Inc., and Canadian Standard Travel Agent Registry against Air Canada. Hon. Austin affirmed the decision of Ernst & Young, Inc., the Court-appointed Monitor, to disallow the Travel Agencies' CN$1,700,000,000 claim for voting and distribution purposes. Before the Petition Date, the Travel Agencies commenced an action before the Federal Court of Canada against Air Canada and six other co-defendants, including other airline companies and the International Air Transport Association, for breach of the Competition Act. The Travel Agencies brought the Action on behalf of 3,7000 Canadian travel agents accredited by the IATA. The Travel Agencies complain that Hon. Austin: (a) erred in declining to permit the Travel Agencies to cross examine the affiants on behalf of Air Canada, to call evidence in the nature of an examination under Rule 39.03 of the Rules of Civil Procedure, or to call oral evidence; (b) failed to consider relevant documents and facts, and did admit irrelevant and inadmissible documents and facts for the purpose of coming to his decision; (c) made findings of fact based on determinations of credibility without giving the Travel Agencies or their witnesses an opportunity to be heard; (d) made findings of fact that were clearly wrong and made overriding and palpable errors on the evidence; and (e) made errors of fact and law in misapprehending the nature of the Travel Agencies' claim. Thus, the Travel Agencies ask Mr. Justice Farley to set aside Hon. Austin's determination as to their claim. The Travel Agencies ask the Court to fix the value of their claim for voting and distribution purposes. Headquartered in Saint-Laurent, Quebec Canada, Air Canada -- http://www.aircanada.ca/-- represents Canada's only major domestic and international network airline, providing scheduled and charter air transportation for passengers and cargo. The Company filed for CCAA protection on April 1, 2003 (Ontario Superior Court of Justice, Case No. 03-4932) and Section 304 petition with the U.S. Bankruptcy Court for the Southern District of New York (Case No. 03-11971). Matthew A. Feldman, Esq., and Elizabeth Crispino, Esq., at Willkie Farr & Gallagher serve as the Debtors' U.S. Counsel. When the Debtors filed for protection from its creditors, they listed C$7,816,000,000 in assets and C$9,704,000,000 in liabilities. (Air Canada Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 215/945-7000) ALLMERICA FINANCIAL: 2nd Quarter Net Income Increases to $32 Mil. ----------------------------------------------------------------- Allmerica Financial Corporation (NYSE: AFC) reported second quarter net income of $32.4 million compared to net income of $24.4 million in the second quarter of last year. Segment income after taxes was $29.1 million compared to $18.7 million in the second quarter of last year. Segment income after taxes is presented consistent with the manner in which management evaluates operating results. "Our second quarter results reflect continued improvement in our core property and casualty operations," said Frederick H. Eppinger, president and chief executive officer of Allmerica Financial Corporation. "The property and casualty business produced another solid quarter driven by improved underwriting performance and continued rate increases." Mr. Eppinger added, "The Life Companies continue to produce solid cash flow and remain financially strong." Segment Results Allmerica Financial consists of property and casualty operations, which represents our ongoing business, and life operations, which is a run-off business consisting primarily of proprietary life insurance, annuity and guaranteed investment products previously issued by Allmerica's life insurance subsidiaries. The Company conducts its business in four operating segments. Property and casualty operations consist of three operating segments: Personal Lines, Commercial Lines, and Other Property and Casualty. The Personal Lines segment markets automobile, homeowners and ancillary coverages to individuals and families. The Commercial Lines segment offers a suite of products targeted at the small to mid-size business markets, which include commercial multiple peril, commercial automobile, workers' compensation and other commercial coverages. The Other Property and Casualty segment includes a block of run- off voluntary pools business in which we have not actively participated since 1995; AMGRO, Inc., a premium financing business; and Opus Investment Management, Inc., which provides investment management services to institutions, pension funds and other organizations. The Life Companies, our fourth operating segment, includes the results of our run-off business of life and annuity products and guaranteed investment contracts. The following table shows segment income after taxes, and is presented in a manner consistent with the way management evaluates results and is in accordance with Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information". Segment income after taxes excludes the items listed in the table at the end of this document. Property and Casualty Property and Casualty segment income was $49.1 million in the second quarter of 2004, up from $13.3 million in the second quarter of 2003. Personal Lines segment income was $35.8 million in the quarter compared to $0.2 million in the prior year. Loss performance improved significantly in the quarter, resulting in a nine-point improvement in our loss ratio. Results improved due to a favorable change in the development of prior accident years' loss reserves as well as improved accident year results. In the current quarter, we had favorable development of prior accident years' loss reserves in the personal automobile line. In the second quarter of 2003, we had adverse development of prior accident years' loss reserves in the personal automobile line, largely related to our Michigan personal injury protection coverage. Current accident year underwriting performance improved as a result of reduced loss frequency and continued rate increases. Commercial Lines segment income was $12.6 million in the quarter, compared to $35.2 million in the second quarter of 2003. The decrease in segment income is due primarily to an increase in underwriting and loss adjustment expenses. The increase in underwriting expenses is due to higher staffing and technology costs related to the development of this business, as well as an increase in contingent commissions. Loss adjustment expenses in the second quarter of last year benefited from reserve reductions that did not recur in the current year. Furthermore, the loss ratio increased due to an increase in adverse development of prior accident years' loss reserves in the workers' compensation line and certain other less significant commercial lines. Other Property & Casualty segment income was $0.7 million in the quarter, compared to a loss of $22.1 million in the prior year. The significant loss in the prior year was due to a pre-tax charge of $23.0 million resulting from an adverse arbitration decision related to an insurance pool we exited in 1996. Property and Casualty highlights: * Net premiums written were $580.1 million in the second quarter of 2004, compared to $571.0 million in the second quarter of 2003. * Net premiums earned were $566.2 million in the second quarter of 2004, compared to $561.8 million in the second quarter of 2003. * In the second quarter of 2004, pre-tax catastrophe losses were $15.1 million, compared to $21.2 million in the comparable period one year earlier. The Life Companies reported a segment loss of $6.3 million in the second quarter of 2004, compared to segment income of $13.5 million in the second quarter of 2003. Cash flow (segment income excluding certain non-cash items) was $26.9 million versus $23.0 million in the second quarter of last year and was consistent with expectations. The segment loss in the current quarter was primarily due to derivatives losses associated with the GMDB hedging program and increased GMDB expenses due to the application of Statement of Position 03-1. Segment income in the second quarter of 2003 was favorably impacted by rising equity markets, which reduced the amortization of deferred acquisition costs. The GMDB hedging program was not in effect during the comparable quarter in 2003. The Life Companies segment income is expected to be volatile due to the hedge program and the impact of the new SOP 03-1 rules on GMDB reserve and DAC accounting. The inherent volatility is due to several factors, principally equity market levels, but including also interest rates, surrenders and any deviation between the performance of the underlying mutual funds and the indices associated with futures contracts in connection with the hedging program. Life Companies highlights: * Life Companies segment income excluding certain non-cash items was $26.9 million in the second quarter of 2004 compared to $23.0 million in the second quarter of 2003 and $40.3 million in the first quarter of 2004. * Total adjusted statutory capital for the combined life insurance subsidiaries at June 30, 2004 was $592.0 million compared to $589.8 million at March 31, 2004. * The Risk Based Capital (RBC) ratio of Allmerica Financial Life Insurance and Annuity Company, Allmerica's lead life insurance company, increased to 428 percent at June 30, 2004, compared to 420 percent at March 31, 2004. * In the second quarter of 2004, individual annuity redemptions were $555.9 million compared to $634.1 million in the first quarter of 2004. The individual annuity redemption rate was 20 percent in the current quarter compared to 22 percent in the first quarter of 2004. Investment Results Net investment income was $106.2 million for the second quarter of 2004, compared to $117.4 million in the same period of 2003, a decrease of $11.2 million. Net investment income in the Life Companies declined by $14.7 million and was partially offset by a $3.5 million increase in the Property and Casualty business. The increase in investment income for the quarter in our Property and Casualty business was due to an increase in average invested assets, partially offset by a reduction in average pre-tax yields on fixed maturities due to lower prevailing fixed maturity investment rates. Second quarter net investment income decreased for the Life Companies primarily due to lower invested assets resulting from both general account annuity redemptions and a reduction in outstanding guaranteed investment contract balances. Also contributing to the decline was the aforementioned reduction in average pre-tax yields on fixed maturities. Second quarter 2004 pre-tax net realized investment gains were $7.0 million, compared to $13.2 million of pre-tax net realized investment gains in the same period of 2003. In the current quarter, pre-tax net realized investment gains of $7.7 million were primarily from sales of fixed maturity and equity securities. There were no realized losses on other-than-temporary impairments in the second quarter of 2004. In the second quarter of 2003, pre- tax net realized investment gains were principally related to realized gains of $29.0 million from sales of certain fixed maturity and equity securities, and gains on derivative instruments of $2.0 million, partially offset by $19.5 million of realized losses resulting from other-than-temporary impairments on certain fixed maturity securities. Balance Sheet Shareholders' equity was $2.2 billion, or $41.48 per share at June 30, 2004, compared to $2.2 billion, or $41.89 per share at December 31, 2003. Excluding accumulated other comprehensive income, book value was $42.36 per share at the close of the second quarter, compared to $41.59 per share at December 31, 2003. Total assets were $23.7 billion at June 30, 2004, compared to $25.1 billion at year-end 2003. Separate account assets were $10.7 billion at June 30, 2004, versus $11.8 billion at December 31, 2003. The declines in total and separate account assets were principally the result of surrenders of individual variable annuities. Allmerica Financial Corporation is the holding company for a group of insurance companies headquartered in Worcester, Massachusetts. * * * As reported in the Troubled Company Reporter's June 17, 2004 edition, Standard & Poor's Ratings Services raised its ratings on two synthetic transactions related to Allmerica Financial Corp. The raised ratings follow the June 8, 2004 upgrade of Allmerica Financial Corp.'s preferred stock. The ratings on both of the swap-independent synthetic transactions are weak-linked to the underlying collateral, preferred shares issued by AFC Capital Trust I. The raised ratings reflect the current credit quality of the underlying securities. A copy of the Allmerica Financial Corp.-related summary analysis, "Summary: Hanover Insurance Co.," dated June 8, 2004, is available on RatingsDirect, Standard & Poor's web-based credit analysis system. Ratings Raised PreferredPLUS Trust Series ALL-1 $48 million trust certificates series ALL-1 Rating Class To From A B B- B B B- CorTS Trust For AFC Capital Trust I $36 million Allmerica corporate-backed trust securities certificates series 2001-19 Rating Class To From A B B- AMC ENTERTAINMENT: Marquee Launches Debt Offerings to Fund Buyout ----------------------------------------------------------------- Marquee Inc. has commenced an offering of $150 million aggregate principal amount of its Senior Notes due 2012 and $305 million aggregate principal amount of its Senior Floating Rate Notes due 2011. As also reported, Marquee Holdings Inc. has commenced an offering of its Senior Discount Notes due 2014, which will generate aggregate gross proceeds of $170 million, each in a private placement offering. The net proceeds from the sale of each series of senior notes in the offerings are expected to be used to finance, in part, the acquisition of AMC Entertainment Inc. (AMEX:AEN) by Marquee Holdings Inc., a newly created investment vehicle owned by affiliates of J.P. Morgan Partners, the private equity arm of JPMorgan Chase & Co., and affiliates of Apollo Management, L.P., a private investment firm. The closing of the merger is subject to certain terms and conditions customary for transactions of this type, including receipt of shareholder and regulatory approvals and the completion of financing. Upon consummation of the offerings of the senior notes by each of Marquee Inc. and Marquee Holdings Inc., the proceeds will be deposited into separate escrow accounts for the benefit of the holders of each series of notes pursuant to the terms of separate escrow agreements. Each of the escrow agreements will provide that the escrow agent may only release the escrow proceeds upon the earlier of (1) January 31, 2005, and (2) the satisfaction of certain conditions, including, among other things, the completion of the merger between AMC Entertainment Inc. and Marquee Inc., a wholly owned subsidiary of Marquee Holdings Inc., with AMC Entertainment Inc. remaining as the surviving entity and related transactions. Upon release of the escrow funds, Marquee Inc. and Marquee Holdings Inc. intend to apply the net proceeds from the offerings to the consideration to be paid to AMC Entertainment Inc.'s shareholders in the Merger and to pay the related fees and expenses. Each series of senior notes will be sold to qualified institutional buyers in reliance on Rule 144A and outside the United States to non-U.S. persons in reliance on Regulation S. The Notes will not be registered under the Securities Act of 1933, as amended, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. On July 23, 2004, the Company filed with the Securities and Exchange Commission a current report on form 8-K, which included the Agreement and Plan of Merger, dated as of July 22, 2004, by and among Marquee Holdings Inc., Marquee Inc. and AMC Entertainment Inc. and related documents. The proxy statement that the Company plans to file with the Securities and Exchange Commission and mail to its shareholders will contain information about the Company, the proposed Merger and related matters. Shareholders are urged to read the proxy statement carefully when it is available, as it will contain important information that shareholders should consider before making a decision about the Merger. In addition to receiving the proxy statement from the Company by mail, shareholders also will be able to obtain the proxy statement, as well as other filings containing information about the Company, without charge, from the Securities and Exchange Commission's website -- http://www.sec.gov/-- or, without charge, from the Company at http://www.amctheatres.com/ The Company and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the Company's shareholders with respect to the proposed Merger. Information regarding any interests that the Company's executive officers and directors may have in the transaction will be set forth in the proxy statement. AMC is the largest movie exhibitor in the U.S. based on revenue and the second-largest based on screen count. It has one of the industry's most modern theater circuits due to its rapid expansion and consistent disposition activity since 1995. * * * As reported in the Troubled Company Reporter's February 23, 2004 edition, Standard & Poor's Ratings Services assigned its 'CCC+' rating to movie exhibitor AMC Entertainment Inc.'s proposed Rule 144A offering of up to $550 million in senior subordinated notes due 2014. Proceeds will be used to pay off existing subordinated notes and related call premiums, fees, and expenses. At the same time, Standard & Poor's affirmed its 'B' corporate credit rating on the company. The Kansas City, Missouri-based firm will have about $785 million in debt, on a pro forma basis. The outlook is positive. "The ratings reflect AMC's financial risk as its heavy reliance on lease financing result in high lease adjusted leverage, an elevated fixed cost structure, and modest cash flow," said Standard & Poor's credit analyst Steve Wilkinson. Ratings also reflect AMC's modern theater circuit and the mature and competitive nature of the industry. The potential for an upgrade depends on AMC's ability to improve key credit measures and maintain solid discretionary cash flow. The ultimate use of AMC's excess cash balances and liquidity will be important considerations, given its aggressive financial strategies in the past and its interest in acquisitions. The successful conversion of its preferred stock into common equity could also warrant an upgrade. ARCHANGEL DIAMOND: Asks Colorado Court to Reconsider Claims Ruling ------------------------------------------------------------------ Archangel Diamond Corporation (ADC) filed a petition for writ of certiorari with the Colorado Supreme Court. This follows the denial by the Colorado Court of Appeal of ADC's Motion for Reconsideration, which was filed after the Court of Appeal, by judgment dated March 25, 2004, affirmed the ruling of the Denver District Court dismissing Archangel's claims against Arkhangelskgeoldobycha -- AGD -- and LUKoil for lack of personal jurisdiction. The Colorado Supreme Court is expected to rule within approximately 90 days of the date of filing of the writ on whether or not to accept the petition, i.e., by approximately October 16, 2004. If the petition is accepted, the Supreme Court will then consider de novo ADC's appeal against the ruling of the Denver District Court dismissing Archangel's claims against AGD and LUKoil for lack of personal jurisdiction. At March 31, 2004, Archangel reported a $35,416,714 stockholders' deficit compared to a $35,022,901 deficit at December 31, 2003. BASIS100: Schedules Aug. 12 Conference Call to Review Q2 Results ---------------------------------------------------------------- Basis100 (TSX:BAS), a leading data intelligence and analytics provider to the U.S. mortgage and lending securities community, will hold an open conference call to review the Company's fiscal 2004 second quarter financial results on Thursday, August 12, at 11 a.m. (EST) via telephone and broadcast over the Internet. Participating in the first quarter conference call will be: - Michael Johnston, President and CEO - Edward J. Hartman, CFO The 2004 second quarter financial results will be released publicly and available on the Basis100 web site -- http://www.Basis100.com-- before the market opens on Thursday, August 12, 2004. To participate in the conference call: - Dial In Participation - The dial-in number to participate in the teleconference is 1-800-814-4861 - Audio WebCast - To access the conference call via the Internet (listen-only mode), visit the Basis100 web site -- http://www.Basis100.comand go to the Investor section. Click on the "Events & Presentations" tab and then the "Conference Call" link. You will need Windows Media Player to listen to the Web broadcast. Visit the Basis100 Web site in advance of August 12 to download a free copy of Windows Media Player. - Conference Call Replay - A replay of the conference call will be available until 11:59 p.m. (EST) on August 19 by dialing 1-877-289-8525 and entering the reservation number 21070203, followed by the "number" sign. You may also hear the replay by visiting http://www.Basis100.com. Go to the Investor section of the web site and click on the "Conference Calls" link on the left navigation bar. If interested parties require additional information, contact Sandy Koeppl at 412-747-4700 or via email at investor.relations@basis100.com. About Basis100 Inc. Basis100 (TSX:BAS) is a leading data intelligence and analytics provider to the U.S. mortgage and lending securities community. Through its successful strategic partnerships with other industry leaders and advancements in its proprietary technology, Basis100 offers a vast array of collateral assessment solutions from automated valuation models to full appraisals to aid customers in their lending decisions. The company's BasisValues(SM) system is a dynamic web-based delivery platform that incorporates ordering and delivery of Basis100's complete decisioning suite of collateral assessment solutions. BasisValues, with the addition of upgradeable solutions, allows for: customized business rule logic, risk mitigation, consistency of process and selection and bulk processing requests. At December 31, 2003, Basis 100 reported a $74,262,651 stockholder deficit compared to a $76,717,903 deficit at December 31, 2002. BAY VIEW: Fitch Withdraws BB- Securities Rating After Redemption ---------------------------------------------------------------- Fitch Ratings withdrew its 'BB-' preferred stock rating for Bay View Capital Trust I, as the securities were redeemed on June 30, 2004. BBF RESOURCES: TSX Exchange Continues Trade Halt Order ------------------------------------------------------ Further to TSX Venture Exchange Bulletin dated July 14, 2004, effective at 6:09 a.m., PST, July 26, 2004 trading in the BBF Resources, Inc. shares -- which trades using the symbol BBF -- will remain halted pending receipt and review of acceptable documentation regarding the Change of Business and/or Reverse Take-Over pursuant to Listings Policy 5.2. Policy 5.2 applies to any transaction or series of transactions entered into or proposed to be entered into by an Issuer or a NEX Company that will result in a Reverse Take-Over -- RTO. This Policy also applies to any transaction or series of transactions entered into or proposed to be entered into by any Tier 2 Issuer that will result in a Change of Business. The provisions of this Policy relating to COBs do not generally apply to Tier 1 Issuers. Tier 1 Issuers undergoing a Change of Business are referred to Policy 5.3 -- Acquisitions and Dispositions of Non-Cash Assets. Issuers are reminded that this Policy must be read in conjunction with Policy 5.9 -- Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions, which incorporates by reference OSC Rule 61-501 as Appendix 5B. This Policy describes the filing and related procedures to be followed in connection with a COB or RTO. Transactions filed in furtherance of a COB or RTO must be in compliance with the relevant policies in the Manual (e.g. Private Placements, Acquisitions and Dispositions of Non Cash Assets.) The Company was incorporated under the Alberta Business Corporations Act on March 18, 1996. On May 15, 1996 the Company commenced active business operations. The Company is in the development stage. The Company, directly and through joint ventures, is in the process of exploring its mineral properties and has not yet determined whether these properties contain ore reserves that are economically recoverable. The recoverability of amounts shown for mineral properties is dependent upon the discovery of economically recoverable reserves, confirmation of the Company's interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete the development and future profitable production or proceeds from the disposition thereof. At March 31, 2004, the Company's balance sheet shows a $2,479,895 stockholders' deficit, compared to a $2,451,404 deficit at December 31, 2003. BECKMAN COULTER: Reports 11.7% Net Earnings Growth in 2nd Quarter ----------------------------------------------------------------- Beckman Coulter, Inc. (NYSE: BEC) reported second quarter ended June 30, 2004 results. Second Quarter 2004 Discussion Sales in the second quarter increased 8.3% over prior year quarter. The Clinical Diagnostics Division had a strong performance, posting sales growth of 10%, led by immunodiagnostics. The success of the new UniCel DxI(TM) 800 immunoassay system drove sales growth in immunodiagnostics up 19%, with sales of immunoassay products up nearly 30%. The Biomedical Research Division sales were up 4%, as the company continues to launch new products into a recovering research market. Specialty testing had the best performance in Biomedical Research, with revenues growing 8%, driven by continuing gains in cellular analysis. Geographically, on a constant currency basis, European sales increased nearly 5% with weaker results in Germany tempering otherwise strong performance. Sales in Asia were flat, with a decline in Japan offsetting otherwise strong results in the rest of the Far East. Sales in the Americas increased 6%, led by solid performance in the Clinical Diagnostics Division. Gross profit margin was up slightly from prior year at 48% of sales benefited by currency and systems-to-aftermarket sales mix. However, this benefit was partially offset by an unfavorable geographic sales mix and an accelerated build-up of the service and support infrastructure in clinical diagnostics to accommodate the rapidly growing immunoassay and lab automation installed base. Operating income grew 16.3% to $94.4 million. Non-operating expense in the second quarter of 2004 was $13.4 million, an increase of $3.7 million over prior year quarter due primarily to higher currency-related expenses. The tax rate was 28% versus 27% in the prior year. Net earnings grew 11.7%, but higher diluted share count limited diluted earnings per share growth to 7.3%, or $0.88. In the second quarter of 2004, the company contributed $40 million to the U.S. pension plan and repurchased approximately 820,000 shares of common stock at an average cost of $57.87. The following business developments and product announcements were significant in the second quarter: Business Developments: * Signed agreement with Althea Technologies, Inc. for gene expression technology that will be incorporated into the company's GenomeLab(TM) suite of products. * Signed three-year contract with Premier, Inc. to supply approximately $130 million in diagnostic systems, supplies and services. * Moody's Investors Service confirmed its Baa3 ratings of the company's debt and revised its outlook on the ratings from stable to positive. Product Announcements: * Shipped the FC 500 CXP Flow Cytometry system used in clinical diagnostics laboratories, primarily for monitoring immunodeficiency diseases such as HIV. * Launched new iTopia(TM) Epitope Discovery system for use in vaccine research and development. * Shipped the Immage(R) 800 serum protein analyzer for use in clinical diagnostics laboratories. * Released the ProteomeLab(TM) A2(TM) MicroArray system, a medium-density testing array platform for therapeutic development and evaluation of biomarkers for disease diagnosis. First Half Discussion Total sales for the first half of 2004 grew 11.3%. Clinical Diagnostics Division sales growth was over 13%, with strong sales in all three product areas due to a relatively healthy market for laboratory equipment in hospitals and Beckman Coulter's broad product offering of systems to simplify and automate patient testing. In the Biomedical Research Division, sales growth for the first half was nearly 7%. There is uneven government funding for medical research around the globe and a slow ramp up in R&D instrumentation purchases by pharmaceutical and biotechnology firms. Beckman Coulter's new products are targeted at the faster growing segments of the market throughout the world, such as genomic, proteomic and cell-based research. Reported net earnings growth for the first half of 2004 was affected by a prior year first quarter 2003 non-taxable net credit of $27.7 million from the settlement of an escrow account recovery and a pretax restructuring charge of $18.5 million. The net of these two unusual items, after tax, positively affected 2003 first half net earnings by $15.9 million. On a comparable basis, first half 2004 net earnings grew 15.7% to $93.6 million and earnings per diluted share grew 11.8% to $1.42. John P. Wareham, chairman and chief executive officer, said, "As we previously stated, first quarter sales growth was unseasonably high, and the second quarter growth rate would be slightly lower. In total, the first half was up as expected over prior year giving us confidence for the remainder of 2004. On the strength of our results, we more fully funded our investments in the clinical diagnostics service, selling and marketing infrastructure to support our new product rollouts." 2004 Outlook According to Mr. Wareham, "Our focus on gaining share in the high- volume immunoassay market is delivering exceptional sales growth within the Clinical Diagnostics Division, while new product rollouts are stimulating growth in the Biomedical Research Division. In the third quarter, we expect sales to be up 8 to 11%, including about a 2% currency effect. Clinical Diagnostics sales growth should be in the 10 to 13% range, while Biomedical Research sales should grow in the 4 to 6% range. Net earnings should increase in the high teens and diluted earnings per share should be in the $0.69 to $0.74 range. "Within clinical diagnostics, sales growth should continue to benefit from placements of new immunoassay systems, along with strong sales in routine chemistry, driven by laboratory automation. "In biomedical research, we remain cautiously optimistic about the recovery of spending in the pharmaceutical and biotechnology research and development markets. Our new products for biomedical research, including the Biomek(R) NX and 3000 robotic systems, GenomeLab(TM) SNPStream(R) genotyping system and the ProteomeLab(TM) A2(TM) MicroArray system, should aid sales growth in the second half." Concluded Mr. Wareham, "Assuming that currency rates stay at their present levels, we expect our total year sales to increase 9 to 10%, including currency. Clinical Diagnostic Division sales should grow 10 to 13% and Biomedical Research Division sales should grow 4 to 6%. Operating profit margin should improve by up to 80 basis points over prior year, primarily due to the weaker dollar. Non- operating expenses should increase by $5 million to $10 million over prior year due to currency-related expenses. Net earnings should grow in the 13 to 15% range with diluted earnings per share growth in the range of 11 to 13%, before prior year unusual items that impact comparisons." Quarterly Dividend Increase The company's Board of Directors declared a quarterly cash dividend of $0.13 per share, an 18% or $0.02 per share increase, payable on September 2, 2004 to stockholders of record on August 13, 2004. This dividend represents the 61st consecutive quarterly dividend payout and the 13th consecutive year of increase in quarterly dividends since the company's relisting on the New York Stock Exchange in 1988. This dividend increase reflects the Board's intention to return the annual dividend payout ratio to the 15 to 20% range. Beckman Coulter, Inc. is a leading manufacturer of biomedical testing instrument systems, tests and supplies that simplify and automate laboratory processes. Spanning the biomedical testing continuum -- from systems biology and clinical research to laboratory diagnostics and point-of-care testing -- Beckman Coulter's 200,000 installed systems provide essential biomedical information to enhance health care around the world. The company, based in Fullerton, Calif., reported 2003 annual sales of $2.2 billion with 64 percent of this amount generated by recurring revenue from supplies, test kits and services. For more information, visit http://www.beckmancoulter.com/ * * * As reported in the Troubled Company Reporter's May 4, 2004 edition, Fitch Ratings downgrades and places on Rating Watch Negative Beckman Coulter, Inc.'s 7.4975% net lease pass-through certificates, $109.7 million series BC 2000-A to 'BB-' from 'BBB'. The rating of this transaction depends upon the ratings of Beckman Coulter's senior debt obligations and Financial Structures Limited's (FSL) insurer financial strength. The downgrade and Rating Watch Negative placement is the result of the FSL's rating being lowered to 'BB-' and placed on Rating Watch Negative. Beckman Coulter's senior debt obligations are currently rated 'BBB' by Fitch. The Rating Outlook for the company is Positive. BENEM VENTURES: TSX Halts Stock Trading Pending Policy Compliance ----------------------------------------------------------------- Further to TSX Venture Exchange Bulletin dated July 14, 2004, effective at 10:04 a.m., PST, July 26, 2004 trading in Benem Ventures Inc. shares of the Company will remain halted pending receipt and review of acceptable documentation regarding the Qualifying Transaction pursuant to Policy 2.4. Policy 2.4 applies to any issuer that proposes to list on the Exchange as a capital pool company -- a CPC. The Exchange's program was designed as a corporate finance vehicle to provide businesses with an opportunity to obtain financing earlier in their development than might be possible with an initial public offering. The CPC program permits an IPO to be conducted and an Exchange listing to be achieved by a newly created company that has no assets, other than cash, and has not commenced commercial operations. The CPC then uses this pool of funds to identify and evaluate assets or businesses which, when acquired, qualify the CPC for listing as a regular Tier 1 or Tier 2 Issuer on the Exchange. The Policy outlines the procedures for listing a CPC on the Exchange and the procedures to be followed and standards to be applied when a CPC undertakes a Qualifying Transaction. The Company was incorporated under the laws of the province of Alberta and is classified as a Capital Pool Company as defined in the TSX Venture Exchange Policy 2.4. The principal business of the Company is to identify and evaluate opportunities for the acquisition or participation within 18 months of listing on the TSX Venture Exchange. The Company may not have sufficient funds to complete the acquisition and may be required to raise additional equity or debt financing. At March 31, 2004, stockholders' deficit widens to $170,548 compared to a deficit of $133,368 at June 30, 2003. BORDEN CHEMICAL: S&P Keeps Negative Watch Pending Acquisition ------------------------------------------------------------- Standard & Poor's Ratings Services' ratings on resins producer Borden Chemical Inc. remain on CreditWatch with negative implications. The ratings were placed on CreditWatch on July 6, 2004, following the announcement that Apollo Management LP will acquire Borden Chemical from Kohlberg Kravis Roberts & Co. for about $1.2 billion. Standard & Poor's will resolve the CreditWatch when the acquisition of Borden Chemical is completed. At that time, the corporate credit rating of Borden Chemical will be lowered to 'B+' from 'BB' and the ratings on the existing unsecured notes will be lowered to 'B-' from 'BB-'. The outlook will be stable. At the same time, Standard & Poor's assigned its 'BB-' senior secured bank loan rating and a recovery rating of '1' to Borden Chemical's proposed $175 million secured revolving credit facility, based on preliminary terms and conditions. The 'BB-' rating is one notch higher than the expected corporate credit rating following the CreditWatch resolution; this and the '1' recovery rating indicate high expectation of full recovery of principal in the event of a default. Standard & Poor's also assigned its 'B-' rating and a recovery rating of '4' to the company's proposed tranches of senior second secured notes totaling $475 million with maturity dates of 2010 and 2014 to be issued under Rule 144a with registration rights. The 'B-' rating is two notches lower than the expected corporate credit rating following the CreditWatch resolution, reflecting a limited security package, the priority position of secured debt and meaningful subsidiary obligations in an advantaged position relative to the notes; this and the '4' recovery rating indicate a marginal (25%-50%) recovery of principal in the event of a default. With the CreditWatch resolution, the ratings that are being assigned Friday, July 23 will be affirmed. Proceeds from the new bank credit facility and the senior second secured notes are to be used to finance the acquisition of Borden Chemical and to repay a portion of the company's existing indebtedness. "The overall creditworthiness of Borden Chemical will reflect a very aggressive financial profile resulting from high debt leverage at the outset of the proposed acquisition by Apollo Management, somewhat offset by the company's fair business profile as a leading global manufacturer of formaldehyde-based resins," said Standard & Poor's credit analyst Peter Kelly. During the next few years, management is expected to emphasize debt reduction until key financial ratios are improved to appropriate levels for the ratings. Borden Chemical's credit quality will reflect its position as a leading producer of formaldehyde-based thermosetting resins for the forest products industry and other industrial applications, with about $1.5 billion of sales. End uses include furniture and construction products, such as structured panels, medium-density fiberboard and particleboard, and coatings for the foundry industry. The company also is the leading global manufacturer of formaldehyde, and consumes much of its production internally. CALL-NET: Will Hold Q2 Conference Call Today at 1:00 P.M. --------------------------------------------------------- Call-Net Enterprises Inc. (TSX: FON, FON.B) will release its second quarter 2004 results before the markets open today, July 28, 2004. Later, the Company will hold a quarterly conference call. Date: Wednesday, July 28, 2004 Time: 1:00 p.m. ET Participants: Bill Linton, president and chief executive officer Roy Graydon, executive vice president & chief financial officer Access Number: 1-800-446-4472 and 416-695-9757 Confirmation: T512862S Webcast: http://www.callnet.caor http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=868340 To participate in the conference call, call the access number 10 minutes prior to the scheduled start time and request Call-Net's second quarter results teleconference. If interested parties require assistance during the conference call, an operator can be reached by pressing '0'. A replay of the conference call will be available as follows: Replay: 1-888-509-0081 and 416-695-5275 until August 4, 2004. Archive: The audio webcast will be archived at http://www.callnet.ca About Call-Net Enterprises Inc. Call-Net Enterprises Inc., (S&P, B/Negative, LT Corporate Rating), primarily through its wholly owned subsidiary Sprint Canada Inc., is a leading Canadian integrated communications solutions provider of local and long distance voice services as well as data and IP services to households and businesses across Canada. Call-Net, headquartered in Toronto, owns and operates an extensive national fibre network, has over 134 co-locations in five major urban areas including 25 municipalities and maintains network facilities in the United States and the United Kingdom. For more information, visit the Company's web sites at http://www.callnet.ca/and http://www.sprint.ca/ CALLINAN: Pursues Exploration Efforts Amidst Bullish Metal Trading ------------------------------------------------------------------ Callinan Mines Limited, which is involved in the exploration and development of polymetallic mineral deposits, reports that recent nickel prices have been very favourable as the metal continues on a strong, bullish trend. In light of this, Callinan intends to advance exploration efforts on their recently acquired Pine and Phillips Lake claims in the Thompson Nickel Belt. Both claims are known to contain ultramafic host rocks common to high-grade nickel and PGM mineralization. The properties cover portions of the Manassan Thompson and Pipe formations. The sulphide faces is folded and intruded by Ultramafics. Nearby hosts of similar character contain the Thompson and Birch Tree ore bodies. Mapping carried out by J. Macek et al. of the Manitoba geological survey and published in preliminary map 2001 I-1 indicates folded structures not previously known. The geophysical surveys carried out previously did not cover these structures in the proper direction. The program to be carried out by Callinan will include re-gridding portions of the property in the correct direction. Based on drill results from the previous operator, and the results of a magnetic survey, Callinan's geologists will design a drill program to test numerous shallow targets. Work will begin on the projects in August to re-establish the previous grid and map a drill program. Drilling by the previous operator intersected nickel values at Pine Lake and Phillips Lake ranging in values from 0.43% nickel to 6.07% nickel. DDH PL-7 on the Phillips Lake property had values of 1.19% Ni over 14.3 m including 1.99% Ni over 3.72 m. None of the 15 holes were assayed for PGM values. After these results were assessed, project geologists at the time recommended that two additional holes, designed to trace previous drill intercepts to depth and test for a massive sulphide keel section, be drilled. The holes were never completed. Deeper drilling in conjunction with down hole electromagnetic surveys is being considered at this time. The properties' close proximity to mining infrastructure in the town of Thompson, Manitoba could make them very economically auspicious should they prove to host significant nickel mineralization. Callinan Mines Ltd. trades in the TSX Venture Exchange under the symbol CAA. It is listed in Standard & Poor's. Its year low/high posts $0.20-$1.00. At July 22, 2004 is traded at $0.64. At March 31, 2004, Callinan Mines posted a stockholders' deficit of $6,942,818 compared to a deficit of $6,240,604 at June 30, 2003. CAMCO: Stockholders' Deficit Nears $18 Million as of June 19 ------------------------------------------------------------ Camco (TSX:COC) announced, primarily as a result of closure costs relating to the Hamilton manufacturing and distribution facility, a net loss of $1.9 million for the second quarter ending June 19, 2004, compared to net income of $1.2 million for the same period last year. Income from operations, before closure costs and investment write downs, rose to $4.2 million in the second quarter of 2004 versus $2.8 million for the same period in 2003. Total sales for the second quarter amounted to $167 million up 5% from 2003. Excluding plant closure costs, higher income from operations for the second quarter of 2004 was attributable to higher domestic and export sales and lower base costs. Closure costs of $6.5 million ($4.4 million net of taxes) were recorded in the second quarter of 2004. As previously announced, closure costs for the Hamilton plant will continue to be updated on a quarterly basis during 2004. For the first half of 2004, the Company recorded a net loss of $5.6 million on sales of $290 million. Sales in 2003 were $283 million resulting in net income of $0.3 million. Income from operations, before closure costs rose to $4.8 million, compared to $1.7 million in 2003. The principal drivers of improved year-over- year operational performance were: strong domestic sales, base cost productivity improvements resulting in lower operating costs, and increased production at the Company's manufacturing facility in Montreal. At June 19, 2004, Camco's balance sheet showed a stockholders' deficit of 17,768,000 compared to a deficit of $12,136,000 at December 31, 2003. James Fleck, President and CEO commented: "Although net income for the balance of the year will continue to be impacted by quarterly charges for Hamilton closure costs as explained in the first quarter MD&A, on an operations basis, the Company continues to outperform 2003. We are now down to the last five months of production in Hamilton and the Plant continues to perform extremely well, primarily as a result of the continued efforts of our employees. In Montreal, the dryer capacity program to expand plant production will be fully operational by September and work has started on the design of a new dryer platform. We are continuing to evaluate offers for the sale of the Hamilton site as well as redundant equipment." Plant Closure Costs In the second quarter of 2004, the Company recorded plant closure costs of $6.5 million ($4.4 million net of taxes) primarily comprising of employee severance. As disclosed in last year's fourth quarter MD&A, closure costs for the Hamilton plant will be updated on a quarterly basis during 2004. In accordance with accounting guidelines, only a portion of the severance and pension expense could be recorded in 2003. Total plant closure costs are currently estimated to be $99.8 million ($66.8 million net of taxes) excluding any gains as a result of the sale of the Hamilton facilities, with $77.6 million ($52.6 million net of taxes) recorded in 2003, $5.9 million ($4.0 million net of taxes) recorded in the first quarter of 2004, $6.5 million ($4.4 million net of taxes) recorded in the second quarter and the remainder of $9.8 million ($6.6 million net of taxes) to be recorded in the balance of 2004. The majority of the remainder of closure costs still to be recorded during 2004 are related to employee severance. The estimate of current year closure costs of $22.2 million, a $3.8 million increase from the 2003 year-end estimate of $18.4 million, is mainly due to the improvements in pension and benefits made in the closure contract agreement dated January 14, 2004. An additional pension settlement cost will be funded over the next five years and will be recorded upon final settlement of the plan obligations. As at December 31, 2003 this settlement cost was actuarially estimated to be $11.5 million. The actual amount of the settlement and the future funding requirements will be dependent upon future interest rates and plan asset returns. Payments related to severance expenses will be made in January 2005, following the closure of the Hamilton facility in December 2004, while pension-funding payments will be incurred until 2008/2009. The portion of the total closure costs, currently estimated to be approximately $99.8 million ($66.8 million net of taxes), that will require a cash outlay is approximately $27.3 million, which relates primarily to severance payments. The majority of these cash payments will be made in January 2005, after the December 2004 closure. Interest and Other Expenses Interest and other expenses of $0.3 million were $0.6 million lower than last year. This was principally due to the combination of reduced average debt and lower interest rates, as well as a timing difference of the income generated from the redemption of preferred shares of the joint venture. Cash Flow and Balance Sheet Cash from Operations: During the quarter, cash generated from operations amounted to $6.6 million versus $10.2 million cash generated for the same period last year. For the first half of 2004, cash generated from operations equalled $15.6 million versus a usage of $9.1 million in 2003. The variance from 2003 is attributable to improved working capital levels, including a $40.9 million increase in accounts payable from the beginning of the year. Capital Investing Activities: The Company's plant and equipment investing activities for the quarter was $0.2 million versus $1.8 million last year. The investing activities are primarily related to quality and productivity improvements in the Company's Montreal facility. Bank Borrowings and Dividends: Bank borrowings decreased by $10.7 million in the second quarter of 2004 to $27.0 million versus an increase of $1.1 million to $42.7 million for the same period last year. The Company did not declare a dividend in the second quarter of 2004. Liquidity and Capital Resources In the second quarter, the Company met all of its requirements for banking and cash. To assist with closure related expenses, the Company has arranged an additional credit facility of $20.0 million with its banker available from January 1, 2004-September 30, 2004 and from January 1, 2005-September 30, 2005. To date, the Company has not had the need to draw upon these funds. Factors Affecting Current and Future Operations Hamilton Manufacturing The Company is continuing refrigeration and range production at the Hamilton facility until November 2004. The financial results for the Hamilton operations up to November 2004 will be treated as "results from normal operations". The Company has not recorded any provisions for expected gains and losses that relate to normal production operations in 2004. On January 14, 2004, the Union representing hourly and salary employees at the manufacturing facility in Hamilton accepted a closure contract agreement. The agreement included improvements to both pension and benefits. The Company estimates the additional cost of the contract to be approximately $3.0-$3.5 million. Some of the additional costs will be recorded as plant closure costs and some will be recorded through pension and benefit expense in 2004. Montreal Manufacturing Concurrent with the extension of the dryer supply contract, the Company announced two new investment programs in the Montreal facility. Under the first program, the Company will be investing $14.9 million over a period of 18 months during 2003 and 2004 to expand plant capacity. The investment in plant and equipment is required to meet increased demand. Under the second program, the Company will be investing $15.2 million in the design and production of a new, leading edge dryer platform. The financing arrangement for both of the investment programs totalling $30.1 million has two components: (1) GE Canada has entered into two equipment operating leases with the Company valued at up to $8.2 million (US) in connection with capacity project and $8.6 million (US) for the new dryer development and production. (2) The remainder of the financing ($7.7 million CDN) will be funded through internal sources and through Investissement Quebec. The Investissement Quebec grant is conditional on Camco maintaining certain employment levels through to 2010. In March 2004, the unions representing hourly and salary employees at the Montreal facility ratified a three-year contract. The new contract included improvements to wages, benefits and pensions. Camco is the largest Canadian manufacturer, marketer and service provider of home appliances, with manufacturing operations in Hamilton, Ontario and Montreal, Quebec. The Company's product line includes such popular names as GE, Hotpoint, Moffat, Monogram and Samsung. Camco also produces and services private brands for major Canadian department stores. For information regarding Camco's products and services, please visit the Company website at http://www.geappliances.ca/ CANDESCENT: Hires McKenna Long as Government Contracts Counsel -------------------------------------------------------------- Candescent Technologies Corporation and Candescent Technologies International, Ltd., express their interest to hire McKenna Long Aldridge LLP as their special government contracts counsel. The Debtors tell the U.S. Bankruptcy Court for the Northern District of California, San Jose Division, that they have certain governmental contracts related to intellectual property requiring McKenna Long's special expertise and experience. McKenna Long has represented the Debtors for about nine years and is familiar with both the Debtors' governmental contracts and the Debtors' relationship with the relevant government entities. Given McKenna Long's expertise and experience in governmental contracts and dealing with government entities, the Debtors believe that the firm's retention is in the best interest of the estates. The Debtors submit that McKenna Long will provide advice, counsel and opinion in all matters relating to their governmental contracts including, without limitation, the Debtors' interests in any subject inventions and patents related to the governmental contracts. The Debtors assure the Court they will monitor and manage the distribution of work among their professionals to avoid any unnecessary duplication of effort. The attorneys currently expected to perform services in this retention and their hourly rates are: Professional Billing Rate ------------ ------------ E. Sanderson Hoe, Esq. $500 per hour Matthew T. Bailey, Esq. $455 per hour Headquartered in Los Gatos, California, Candescent Technologies Corp. -- http://www.candescent.com/-- is a supplier of flat panel displays for notebook computers, communications and consumer products. The Company filed for chapter 11 protection on June 16, 2004 (Bankr. N.D. Calif. Case No. 04-53803). Ramon Naguiat, Esq., at Pachulski, Stang, Ziehl, Young et al represents the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed both estimated debt and assets of over $100 million each. CATHOLIC CHURCH: Wants to Honor Prepetition Employee Obligations ---------------------------------------------------------------- Pursuant to Sections 105(a), 507(a)(3) and (a)(4) of the Bankruptcy Code, the Archdiocese of Portland in Oregon seeks the Court's authority to: (a) pay or otherwise honor various employee-related prepetition payment obligations, including, without limitation, wages, salaries, vacation, holiday, sick leave, and reimbursement of employee out-of-pocket business expenses; (b) continue postpetition and to pay amounts coming due, including any accrued prepetition amounts, under the employee benefit plans and programs in effect immediately before the Petition Date; (c) continue payment of any and all local, state, and federal withholding and payroll-related taxes relating to prepetition periods for its employees; and (d) direct all banks to honor its payroll and expense checks for payment of its prepetition obligations. The Debtor's workforce consists of 112 employees. Ninety are employed on a full-time basis and 22 on a part-time basis. Of these employees, 33 are union employees. Employees are paid at the end of each month, but may elect to receive a mid-month advance on the 15th. As of the Petition Date, the Debtor estimates that the accrued and unpaid payroll for prepetition services of employees is $40,000 for union employees, and $60,000 for non-union employees for an estimated total of $100,000. The Debtor operates on a fiscal year ending June 30. For year 2002 to 2003, revenues for the Debtor's combined operations totaled $9,942,922, while revenues for 2003 to 2004 totaled $15,742,901. The Debtor's ability to preserve its existing ministries and reorganize is dependent on the continued service of its workforce. Employees work in numerous ministries and other operations of the Debtor, including managerial and clerical, religious and pastoral services, including, but not limited to, office of youth ministries, religious education, Archdiocesan Resource Center, cemeteries, archives, Catholic Campaign for Human Development, deaf ministry, child protection and assistance, continuing education for clergy, marriage, family life, and aging, the Office for People with Disabilities and multiple other ministries and disciplines. The experience and knowledge of these employees is critical to the Debtor's ongoing ministries. If the Debtor fails to pay the prepetition obligations and continue employee benefits, its employees will suffer significant hardship, and may be unable to meet their personal living expenses. This would have a negative impact on employee morale and would likely result in unmanageable turnover and loss. The Debtor must demonstrate its ability to continue paying its employees and providing those benefits that have been promised to them as a condition of their employment with the Debtor. For this reason, the Debtor seeks Judge Perris' permission to continue the regular payment of wages, salaries, and employment- related benefits and expenses as they come due in the ordinary course, including those Payroll Expenses that were incurred prepetition but which come due for payment postpetition. Specifically, the Debtor seeks the Court's authority to pay $382,000 for its payroll that will come due on July 31, 2004, which includes $35,600 in mid-month advances that were due on July 15, 2004. A portion of the sums relates to prepetition services provided by its employees. Thomas W. Stilley, Esq., at Sussman Shank, LLP, in Portland, Oregon, reports that the Debtor's books and records indicate that no individual's prepetition wages and benefits exceed the Section 507(a)(3) and (4) statutory limit of $4,650, to any one employee. The Debtor maintains these employee benefit plans and incurs estimated monthly contributions and expenses as: Medical and Prescription Insurance $75,000 Dental/Vision Insurance 2,000 Life Insurance 1,500 Family EAP 300 Long Term Disability 1,200 Short Term Disability 250 Long Term Care 100 Health Care Spending 800 401(k) Plan (Union) 3,000 403(B) Plan (Non-union) 15,000 Administrative Fees to third party administrator 2,400 Garnishment Orders 1,450 Pension (Union and Cemetery Employees) 5,200 Of these sums, $6,900 has accrued as unpaid employee benefits through the Petition Date. In addition, the Debtor reimburses employees in the ordinary course for necessary business and travel expenses. The outstanding amounts of these expenses are unknown at this time. The Debtor seeks the Court's authority to continue to provide the programs which were in existence before the Petition Date, and to pay all amounts due as the amounts come due in the ordinary course, including amounts accrued on account of prepetition employee service. Furthermore, the Debtor seeks Judge Perris' permission to pay: -- monthly payments due to the Oregon insurance program used to provide workers' compensation and other insurance. The annual premium for the Oregon State Continuation Fund is due in September. The next quarterly payment is due on July 15, 2004 for $5,000. The self-insurance program is administered by the Debtor for the benefit of itself and other insured entities in the ordinary course of the Debtor's operations and is comprised of funds paid by the Debtor and other entities insured by the program for their proportionate part of the premiums; -- quarterly all amounts due to the State of Oregon Unemployment Insurance Fund. The next due date for a quarterly payment is at the end of July 2004 in the estimated amount of $20,000 to $25,000; and -- any and all local, state, and federal withholding and payroll-related taxes relating to prepetition periods and postpetition periods relating to the Debtor's employees. The Debtor is current on all taxes due through the Petition Date. Any delay in the payment of the employees' wages and other benefits will be extremely detrimental to the Debtor's relationship with its employees and its ability to maintain a stable workforce, Mr. Stilley says. The Debtor faces the possibility that its ministries could be significantly impaired if its employees do not work or choose to look for alternative employment. At this early stage in the case, the Debtor cannot risk any disruption in its ministries caused by its inability to maintain a stable work force. Paul DuFresne Objects Paul DuFresne, a creditor in the Debtor's Chapter 11 case, argues that the Debtor's assertion that its ability to preserve its existing ministries and successfully reorganize is dependent on the continued service of its workforce is incorrect because: (a) it ignores the very real possibility that staffing may be eliminated during the reorganization; and (b) it discounts the positive impact that personnel changes could have on the operation of the Archdiocese. Mr. DuFresne points out that the Debtor's upper management, which made the decisions that resulted in the Debtor being the only Archdiocese in the history of the United States to file for bankruptcy, might benefit from talents and skills of different clergy, professionals and managers. Mr. DuFresne relates that the Debtor's statement that it must demonstrate its ability to continue paying its employees and providing promised benefits, assumes that pay levels are appropriate, and that the same level of service cannot be obtained from outside contractors at a lower price. However, the Debtor has not provided even the slightest assurance that these assumptions are true. In fact, Mr. DuFresne believes that it is appropriate that the top decision makers in the Archdiocese should take a moderate pay cut, like 25%, for the duration the reorganization process to demonstrate their sincerity in sharing the burden of the bankruptcy with the creditors, and work as an incentive to the speedy resolution of the bankruptcy proceedings. Due to the Debtor's voluntary petition for Chapter 11 bankruptcy protection, Mr. DuFresne says, there is also a credible possibility that the Debtor's management and oversight of expenses and travel is wasteful or inadequate. The burden of proof should be on the Debtor to show that expenses and travel are necessary for the continued financial success or financial recovery of the Debtor. In the alternative, Mr. DuFresne proposes these terms for salary, wage, business and travel expenses: (1) All payroll expenses incurred prepetition should be authorized for payment from the new bank accounts set up by the Debtor after filing for Chapter 11 Petition. Payroll Expenses consist of: * wages, salaries; * federal, state, and local payroll taxes; * unemployment insurance; * medical and dental insurance; and * employee benefit plans. (2) All Payroll Expenses incurred through July 31, 2004 should be paid after they became due from the new bank accounts set up by the Debtor after filing for Chapter 11 bankruptcy. (3) The Court should be immediately order a hiring freeze so that the Debtor cannot hire new staff without explicit Court authorization. (4) No additional Payroll Expenses are to be authorized or paid until the Debtor provides these information on each of the Debtor's Employees to the Court, and to any creditors who desire it: * Job title and job description, * Length of service and date hired, * Whether full-time, part-time, or member of clergy, * Compensation, which should include: -- the amount; -- how the employee is paid, whether hourly, salary, piecework; -- all benefits like pension contributions, health insurance contributions, etc.; and -- non-monetary compensation like housing, meals, and transportation, and * Pay history, which must be provided by the W-2 forms for the last 3 years. Only after this information is reviewed by the Court and by creditors, and a meeting is held between interested parties to devise a short and long term staffing plan, will additional payroll expenses be authorized or paid. (5) No business or travel expenses, either prepetition or postpetition, are to be paid until the Debtor provides full history of expenditures from all accounts for the past year. The Debtor may indicate which of these expenditures are for normal business expenses and travel, but records of all expenditures must be provided so that expenditures which may be hidden or mislabeled can be found. (6} All business travel by Archdiocesan employees, whether already paid for or not, is banned. Reasonable efforts will be made by the Debtor to recover costs for travel already paid for but not yet taken. However, the inability to collect all, some, or any of already paid travel expenses will not be an excuse for further business or travel expenses to be incurred during travel. All travel will be canceled. (7) Once the Debtor has provided the needed records, the Court may approve business and travel expenses only on a case by case basis. Guidelines may be developed by the Court, the Debtor and interested creditors in the context of an overall reorganization plan which may relieve the Court of the burden of approving each individual expense, but until the guidelines are developed, the Court should approve each expense individually. The Archdiocese of Portland in Oregon filed for chapter 11 protection (Bankr. Ore. Case No. 04-37154) on July 6, 2004. Thomas W. Stilley, Esq. and William N. Stiles, Esq. of Sussman Shank LLP represent the debtor in its restructuring efforts. When the debtor filed for chapter 11 protection, it listed estimated assets of $10,000,000 to $50,000,000 and estimated debts of $25,000,000 to $50,000,000. (Catholic Church Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 215/945-7000) CMQ RESOURCES: Provides Update on Exploration Activities -------------------------------------------------------- CMQ Resources Inc. (CMQ:TSX-VEN) commenced drilling its current 6-hole drill program on April 26, 2004, and has to date completed the first 4 holes for a total of 7,812 feet of drilling. A total of 640 feet of rock has been cored, drill samples have been prepared, and all samples have been submitted to ALS Chemex for analysis. CMQ expects to complete the final two holes of the initial program within the next 6 weeks and to announce the results of the program following completion of assays and initial analysis on or about September 30, 2004. CMQ has used mud rotary methods through the gravels and the holes were completed with HQ size core. Geochemistry is continuing with 8 line miles of soil gas surveys completed at Montezuma and 17.5 line miles at Vasquir. A total of 479 soil samples have been taken and submitted for third party analysis. Geophysical activities have included an ultra-high definition magnetic survey carried out at a 150-foot x 150-foot grid over 6 square miles flown in an ultralight aircraft. In addition, interpretations have been completed over approximately 100 square miles over the Vasquir project. AMT surveys totaling 25 line miles have been carried out on the Montezuma and Vasquir property. An airborne 3D Full Tensor gravity gradiometry survey has been commissioned to cover both project areas and is expected to commence in the first half of August 2004. John Hogg, Vice-President Exploration, Montezuma Mines Inc., is the qualified person, as defined by National Instrument 43-101, who will supervise the exploration efforts on the Company's Nevada projects. CMQ is a mineral exploration company actively pursuing two significant exploration stage gold projects in the Crescent Valley, Nevada. At March 31, 2004, the company's stockholders' deficit increased to $658,971 from a $430,034 deficit at December 31, 2003. COEUR D'ALENE: Wheaton Tells Shareholders Not to Tender Shares Yet ------------------------------------------------------------------ On June 23, 2004, Coeur d'Alene Mines Corporation would be making a tender offer to acquire all outstanding shares of Wheaton River Minerals Ltd. (TSX:WRM) (AMEX:WHT). On July 13, 2004, Coeur issued a press release announcing that it had mailed its tender offer documents to Wheaton shareholders. The press release failed to disclose that Coeur's tender offer was not made to Wheaton's Canadian shareholders. On July 14, 2004, at the request of the British Columbia Securities Commission, Coeur issued a press release correcting that announcement by announcing that the tender offer had only been made to Wheaton shareholders in the United States and that Coeur would be making an offer to Wheaton's Canadian shareholders "shortly". Thirty-two days have passed since Coeur announced that it would be making a tender offer to all Wheaton shareholders and thirteen days have passed since the commencement of Coeur's tender offer in the United States only and no offer has yet been made by Coeur to Wheaton's Canadian shareholders. By making the offer only to Wheaton shareholders in the United States, Coeur has created confusion among the Wheaton shareholders and the investing public. Wheaton's Board of Directors, based on the recommendation of its Special Committee, have concluded that they are unable to make a recommendation at this time to shareholders to accept or reject the tender offer made by Coeur to Wheaton's United States shareholders. Wheaton's board also recommends that shareholders do not tender their shares to Coeur's U.S. offer or take any other action until they have received a further recommendation from the wheaton board. In connection with its response to Coeur's offer to Wheaton's United States shareholders, Wheaton has filed a Schedule 14D-9 with the U.S. Securities and Exchange Commission. The principal reasons for not making a recommendation at this time were: -- The Coeur offer has not been made to all Wheaton shareholders and therefore it is not appropriate to make a recommendation to only some of the Wheaton shareholders. -- Coeur has stated that it will be making an offer to Wheaton's Canadian shareholders "shortly". -- If, and when, an offer is made by Coeur to Wheaton shareholders in Canada such offer may provide additional material information relevant to the Special Committee's recommendations. The Special Committee and the Board of Directors will then make a recommendation to all Wheaton shareholders after all information regarding the Coeur offer is available. -- The offer by Couer is subject to conditions that cannot be satisfied unless an offer is made to Wheaton's Canadian shareholders. Wheaton has requested Coeur to confirm that Coeur will not take up and pay for Wheaton shares under its U.S. tender offer unless, and until, it provides Wheaton shareholders resident in Canada with the same opportunity on the exact same terms and conditions. To date, Wheaton has not received this confirmation. Ian Telfer, Chairman and CEO of Wheaton, stated, "Due to the highly unusual manner in which Coeur has chosen to proceed with its bid, the Special Committee and the Board felt that they had no option but to respond in this manner. Under U.S. law, we were required to make this filing. Wheaton feels strongly that we should communicate our view of Coeur's offer to all of our shareholders at the same time and only after all of the information is available. While Coeur has been saying that they intend to make a take-over bid for Wheaton's shares for over a month now, they have not yet made a bid to Wheaton's Canadian shareholders." Once Coeur's offer is made to all shareholders of Wheaton in Canada, Wheaton's Board of Directors and Special Committee will carefully review Coeur's offer and provide its response within the time period prescribed by law. About Coeur d'Alene Coeur d'Alene Mines Corporation is the world's largest primary silver producer, as well as a significant, low-cost producer of gold. The Company has mining interests in Nevada, Idaho, Alaska, Argentina, Chile and Bolivia. * * * As reported in the Troubled Company Reporter's June 3, 2004 edition, Standard & Poor's Ratings Services placed its B- corporate credit and senior unsecured debt ratings on Coeur D'Alene Mines Corp. on CreditWatch with positive implications following the company's announcement that it intends to acquire precious metals mining company Wheaton River Minerals Ltd. in a stock and cash transaction valued at approximately $1.8 billion. "The CreditWatch action reflects what is likely to be a meaningful improvement in Coeur's business and financial profile upon the successful acquisition of lower-cost producer Wheaton," said Standard & Poor's credit analyst Paul Vastola. Standard & Poor's expects that its ratings on Coeur would likely be raised several notches. Standard & Poor's will continue to monitor the transaction for any potential revisions to the deal. The deal remains subject to several conditions and is expected to close by Sept. 30, 2004. COGENTRIX: S&P Puts B+ Sr. Unsecured Bond Rating on Positive Watch ------------------------------------------------------------------ Standard & Poor's Ratings Services placed its 'B+' rating on Cogentrix Energy Inc.'s (BB-/Stable/--) $354 million senior unsecured bonds due 2008 on CreditWatch with positive implications, following Goldman Sachs' announcement that it will guarantee this debt issue pending consent from bondholders. Upon receiving the consent, which is expected by the end of July, Standard & Poor's will upgrade this debt issue from the current 'B+' rating to Goldman Sachs' senior unsecured rating of 'A+'. All of Cogentrix's other ratings, which include an issuer rating of 'BB-' and a senior secured bank loan rating of 'BB+', will remain the same. The rationale reflects the fact that Cogentrix will remain the primary obligor to the debt issue to be guaranteed by Goldman Sachs. Moreover, Goldman Sachs has not made any indication that it has any intention to become the primary obligor to this or other debts issued by Cogentrix. CONGOLEUM: Plan Confirmation Hearing Date Reset to October 5, 2004 ------------------------------------------------------------------ The U.S. Bankruptcy Court for the District of New Jersey approved Congoleum Corporation's (AMEX:CGM) request to reschedule its confirmation hearing from September 9, 2004 to October 5, 2004. Roger S. Marcus, Chairman of the Board, commented, "As we prepare for the confirmation hearing, there is some concern about certain aspects of the reorganization plan. As a consequence, there have been opportunities identified to improve upon the plan. We asked the court for a little additional time in order to respond to these concerns prior to the hearing and we appreciate the court's granting of our request. We believe this slight delay in what has been a very long process is more than worthwhile, as it should serve to both increase the likelihood of confirmation and reduce the risk of delays to our plan taking effect." Headquartered in Mercerville, New Jersey, Congoleum Corporation -- http://www.congoluem.com-- manufactures and sells resilient sheet and tile floor covering products with a wide variety of product features, designs and colors. The Company filed for chapter 11 protection on December 31, 2003 (Bankr. N.J. Case No. 03-51524). Domenic Pacitti, Esq., at Saul Ewing, LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $187,126,000 in total assets and $205,940,000 in total debts. CORECARE BEHAVIORAL: Emerges From Bankruptcy Protection ------------------------------------------------------- CoreCare Behavioral Health, Inc. d/b/a Kirkbride Center, a major subsidiary of CoreCare Systems, Inc., and its affiliate CoreCare Realty Corporation emerged from bankruptcy protection on Saturday. Both Companies had previously filed for voluntary chapter 11 in the U.S. Bankruptcy Court for the Eastern District of Pennsylvania on May 6, 2002 due to an expiring Forbearance Agreement with its mortgage holder and its inability to refinance its outstanding debt. Its Plan of Reorganization became effective June 24, 2004, and on July 8, 2004 the real estate ownership and associated mortgage were transferred to a new wholly owned subsidiary of the corporation, Kirkbride Realty Corporation. Also transferred to Kirkbride Realty Corporation were leases with third-party tenants totaling $1,700,000 of annual rents. CoreCare Behavioral Health Management, Inc. will retain its behavioral healthcare licenses and operations and will become a tenant of Kirkbride Realty Corporation. Kirkbride Realty Corporation and other affiliate companies will also serve as guarantors on certain debts of CoreCare Behavioral Health Management, Inc. At the Effective Time of the Plan, the Company had $2,250,000 on hand from financing and State Tobacco Funds awards. These funds will cover its initial plan requirements thereby reducing liabilities to the IRS, other taxing authorities and administrative costs associated with the Bankruptcy. During its Bankruptcy period the Company was able to extinguish liabilities to GE Credit, Medicare and other payers. The remaining liabilities have been restructured allowing the Company three years to refinance its first mortgage, and five to ten years to resolve its remaining tax debt and unsecured creditors. The amounts of the repayment obligations are described in the Current Report on Form 8-K the Company is filing contemporaneously with this announcement. The Company's equity structure did not change as a result of the Reorganization Plan as no new shares were issued, and it retained 100% ownership of its subsidiaries including Kirkbride Realty Corporation. Since Bankruptcy filing the Company has made steady progress to improve its financial stability: * Third-party tenant revenue increased * A new subsidiary, CoreCare Food Service, Inc., was created to manage food service contracts with several of the third- party tenants, thereby adding new revenue. * Quantum Clinical Services Group was re-engineered, increasing its revenue base * The Hospital reopened 24 acute inpatient psychiatry beds to better serve new payer contracts; this general psychiatry program will allow the Hospital to increase its Medicare payer mix. The Hospital expects to benefit from the recent changes in Medicare reimbursement. Additionally on July 15, 2004 the Company's Board of Directors changed the Company's fiscal year end from December 31 to June 30. The Company's transition period will be January 1, 2004 to June 30, 2004. A 10-K for this period will be filed once audited financial statements are available. The new fiscal year will be July 1, 2004 through June 30, 2005. This decision was made to recognize the asset restructuring occurring at this time as well as to synchronize the Company's fiscal year with Medical Assistance Cost Report requirements. The Company's Reorganization Plan and Disclosure Plan have been included with its 8-K filing with the Securities and Exchange Commission. The Company's Bankruptcy Counsel is Janssen Keenan & Ciardi P.C. The Company intends to work towards filing its required SEC reports, and to that end has re-engaged its former SEC counsel and transfer agent. The Company's corporate office is located at The Blackwell Human Services Campus, 111 North 49th Street, Philadelphia, Pennsylvania 19139. CoreCare Systems, Inc. (Pink Sheets: CRCS) the parent company of CoreCare Behavioral Health Management, Inc., CoreCare Realty Corporation and Kirkbride Realty Corporation was NOT included in the Chapter 11 filing. Westmeade Healthcare, Inc., Quantum Clinical Services Group and CoreCare Food Services, Inc., wholly owned subsidiaries of the parent Company were NOT involved in the Chapter 11 proceedings. CoreCare Systems provides a comprehensive range of behavioral health services through its two subsidiaries CoreCare Behavioral Health Management, Inc. and Westmeade Healthcare, Inc.; clinical drug testing for central nervous systems drugs through its subsidiary Quantum Clinical Services Group, food services for its tenants through CoreCare Food Services, Inc. and tenant leasing and real estate development through Kirkbride Realty Corporation. CoreCare Behavioral Health Management, Inc. is licensed as a 74- bed psychiatric hospital and a 148-bed Drug & Alcohol Rehabilitation program as well as several intensive outpatient programs. COVANTA ENERGY: Files Second Post-Confirmation Report ----------------------------------------------------- The Reorganized Covanta Energy Corporation Debtors filed their second post-confirmation status report with the Court on July 14, 2004. The Reorganized Debtors disclose taking these steps to consummate the Second Reorganization Plan: -- The Reorganized Debtors have assumed or rejected their executory contracts and unexpired leases, and continued the process of paying the cure amounts with respect to those executory contracts and unexpired leases that they have assumed. The Reorganized Debtors continue to resolve disputes concerning the Cure Amounts; -- The Reorganized Debtors continue to engage in the claims reconciliation process with respect to disputed claims against the Reorganized Debtors and the Remaining Debtors. Since the First Status Report, the Reorganized Debtors have filed eighteen omnibus objections to claims; -- Distributions have been made or are in the process of being made in accordance with the Second Reorganization Plan on account of all currently allowed Claims in Class 1, Class 3A, Class 3C, Class 4, Class 7 and Class 8. The Reorganized Debtors continue to make substantial progress toward making distributions to holders of Allowed Claims in Classes 4 and 8, and the first quarterly distribution for both has been completed. The Reorganized Debtors will not make distributions to individual holders of Claims in Class 6 until all the Claims are actually allowed or Disallowed; and -- Covanta Tampa Bay, Inc., and Covanta Tampa Construction, Inc., filed their Joint Plan of Reorganization on April 2, 2004 and the related Disclosure Statement on April 13, 2004. The Disclosure Statement was approved on May 19, 2004, and the Plan and Disclosure Statement were sent to the Covanta Tampa Debtors' creditors for solicitation on or before May 24, 2004. [The Covanta Tampa Plan was confirmed on July 16, 2004.] Headquartered in Fairfield, New Jersey, Covanta Energy Corporation -- http://www.covantaenergy.com/-- is a publicly traded holding company whose subsidiaries develop, own or operate power generation facilities and water and wastewater facilities in the United States and abroad. The Company filed for Chapter 11 protection on April 1, 2002 (Bankr. S.D.N.Y. Case No. 02-40826). Deborah M. Buell, Esq., and James L. Bromley, Esq., at Cleary, Gottlieb, Steen & Hamilton represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed $3,280,378,000 in assets and $3,031,462,000 in liabilities. (Covanta Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 215/945-7000) DELTA FUNDING: Fitch Junks 4 Class Ratings over High Delinquencies ------------------------------------------------------------------ Fitch Ratings has taken rating action on these Delta Funding Corporation issues: Series 1997-2 -- Classes A-5, A-6, A-7 affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 rated 'A+,' is placed on Rating Watch Negative; -- Class B-3 downgraded to 'CCC' from 'B'. Series 1997-3 Group F -- Class M-1F affirmed at 'AAA'; -- Class M-2F affirmed at 'A+'. Series 1997-3 Group A -- Class B-1A downgraded to 'CCC' from 'B-'. Series 1997-4 Group F -- Class M-1F affirmed at 'AA'; -- Class M-2F affirmed at 'A'; -- Class B-1F affirmed at 'BBB'. Series 1997-4 Group A -- Class B-1A affirmed at 'BBB'. Series 1998-1 Group F -- Classes A-5F, A-6F affirmed at 'AAA'; -- Class M-1F affirmed at 'AA+'; -- Class M-2F affirmed at 'A+'; -- Class B-1F affirmed at 'BBB'. Series 1998-1 Group A -- Class B-1A rated 'B-,' is placed on Rating Watch Negative. Series 1998-2 Group F -- Classes A-5F, A-6F affirmed at 'AAA'; -- Class M-1F affirmed at 'AA'; -- Class M-2F affirmed at 'A'; -- Class B-1F affirmed at 'BBB'. Series 1998-2 Group A -- Class M-2A affirmed at 'A'. Series 1999-2 -- Classes A-6F, A-7F, A-1A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class B downgraded to 'B' from 'BBB-'. Series 1999-3 -- Classes A-1F, A-2F, A-1A affirmed at 'AAA'. -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class B downgraded to 'B' from 'BBB-'. Series 2000-1 -- Classes A-5F, A-6F, A-1A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA;' -- Class M-2 affirmed at 'A'; -- Class B downgraded to 'BB-' from 'BBB-'. Series 2000-2 -- Classes A-5F, A-6F, A-1A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class B downgraded to 'C' from 'B-'. Series 2000-3 -- Classes A-5F, A-6F and A-1A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class B downgraded to 'BB-' from 'BBB'. Series 2000-4 -- Class A affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 downgraded to 'BB' from 'A'; -- Class B downgraded to 'C' from 'CC'. Series 2001-1 -- Classes A-1, A-2 affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class B affirmed at 'BBB'. Series 2001-2 -- Classes A-1F, A-1A, affirmed at 'AAA'; -- Class M-1 affirmed at 'AA'; -- Class M-2 affirmed at 'A'; -- Class B affirmed at 'BBB' The negative rating actions are a result of high delinquencies and credit enhancement deterioration. The affirmations reflect credit enhancement consistent with future loss expectations. In addition, the affirmations on the senior certificates in series 2000-1, 2000-2, 2000-3, 2000-4, 2001-1, and 2001-2 reflect a certificate insurance policy provided by Financial Security Assurance Inc., whose insurer financial strength is rated 'AAA' by Fitch Ratings. The affirmation on the senior class of series 1999-3 reflects the bond insurance policy provided by MBIA Insurance Corporation, whose insurer financial strength is rated 'AAA' by Fitch Ratings. Fitch will continue to closely monitor these deals. DII/KBR: Wants Court to Approve C & C Marine Sale Agreement ----------------------------------------------------------- Kellogg Brown & Root, Inc., asks the Court to approve the terms of a Purchase and Sale Agreement with C & C Marine Holdings, L.L.C., and to authorize the consummation of the transactions contemplated in the Agreement. Michael G. Zanic, Esq., at Kirkpatrick & Lockhart, LLP, in Pittsburgh, Pennsylvania, relates that KBR has agreed to sell, and C & C has agreed to purchase, an approximately 7-acre lot of unimproved real property located in Belle Chasse, Louisiana. According to Mr. Zanic, the Property has not been used by KBR for any business purpose for the past five years, and is not anticipated to have any strategic value to KBR's business operations in the foreseeable future. Prior to the execution of the Sale Agreement, the Property had been leased to Packard Pipe Terminals, Inc. That lease was terminated prior to the Petition Date, and KBR has no interest in continuing to serve as a landlord with respect to the Property. Prior to its bankruptcy petition date and following an appraisal of the Property, which estimated its value to be $425,000, KBR retained a local real estate agent affiliated with RE/MAX Commercial Brokers, Inc., to market the Property. RE/MAX proceeded to market the property by, among other things, posting a "For Sale" billboard on the Property, sending out marketing brochures to other local real estate brokers, placing advertisements in a local business newspaper, and listing the Property on both local and national real estate Web sites. As a result of these marketing efforts, KBR received and ultimately accepted an offer to purchase the property from C & C for $450,000. Under the terms of the Sale Agreement, KBR has agreed to warrant its good title to the Property, and to provide limited indemnification rights to C & C for a period of one year for any losses arising directly out of environmental conditions existing on the Property at or prior to the time of closing. Apart from these limited buyer protections, C & C has agreed that the sale will be on an "as is, where is" basis, and has waived the benefit of any representations of warranties regarding the merchantability, suitability or fitness of the property for any of C & C's intended uses. Following execution of the Sale Agreement in late November 2003, C & C completed its due diligence review of the Property. All other necessary consents and approvals have been obtained and both parties are prepared to close the sale immediately. Mr. Zanic points out that it makes good business sense for KBR to liquidate the Property and put the resulting proceeds to work financing its core business activities. Moreover, the price set forth in the Sale Agreement: -- is higher than the appraised value of the Property, -- was obtained after customary marketing efforts, and -- represents a fair and reasonable price for the Property. In addition, the Sale Agreement was negotiated at arm's length by two sophisticated business entities acting with the assistance of counsel, and there is no evidence to suggest that C & C is proceeding in anything other than the utmost good faith. Thus, KBR insists that C & C should be accorded the protections available to a good faith purchaser under Section 363(m) of the Bankruptcy Code. Because there is no just reason to delay a closing with respect to the Property and because the parties to the Sale Agreement are eager to consummate it at the earliest possible opportunity, KBR also asks the Court for a waiver of the ten-day stay imposed by Rule 6004(g) of the Federal Rules of Bankruptcy Procedures. Headquartered in Houston, Texas, Kellogg, Brown & Root is engaged in the engineering and construction business, providing a wide range of services to energy and industrial customers and government entities in over 100 countries. DII has no business operations. The Company filed for chapter 11 protection on December 16, 2003 (Bankr. W.D. Pa. Case No. 02-12152). Jeffrey N. Rich, Esq., Michael G. Zanic, Esq., and Eric T. Moser, Esq., at Kirkpatrick & Lockhart LLP, represent the Debtors in their restructuring efforts. (DII & KBR Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 215/945-7000) DSL.NET: Recapitalization Eliminates Preferred Dividend Payments ---------------------------------------------------------------- DSL.net, Inc. (NASDAQ: DSLNC), a leading nationwide provider of broadband communications services to businesses, has completed a recapitalization with VantagePoint Venture Partners with respect to VantagePoint's preferred stock interest in the Company. In the recapitalization, VantagePoint agreed to convert all of DSL.net's outstanding Series X preferred stock into nearly 89.5 million shares of DSL.net common stock, which includes shares of common stock issued in lieu of accrued Series X preferred stock dividends. This conversion eliminates the Company's July 2006 mandatory cash redemption obligation, the annual 12% dividend requirement and all special voting and Board of Directors appointment rights associated with the Series X preferred stock. The recapitalization also involves the issuance by the Company to VantagePoint of $15.68 million of DSL.net Series Z preferred stock. These shares do not contain any conversion, mandatory redemption, special dividend or special voting rights. The shares of Series Z preferred stock were issued to allow VantagePoint to retain a liquidation preference in the event of the sale of DSL.net or substantially all of its assets. In certain circumstances, the liquidation preference will be reduced or eliminated to the extent VantagePoint sells or distributes a certain number of shares of DSL.net common stock. The Series Z preferred stock will expire on the earlier of July 18, 2008, or when the Company's common stock has traded at $1.50 per share for a designated period of time. "This is a significant financial milestone for DSL.net because it improves our capital structure through the elimination of substantial cash-redemption and future dividend requirements, while also eliminating special voting and certain Board appointment rights. In addition, this transaction improves our balance sheet by removing mandatorily redeemable obligations and increasing shareholders' equity, or net worth, by an equal amount," said Kirby G. "Buddy" Pickle, chief executive officer of DSL.net. "With the cooperation of VantagePoint and the support of our Board of Directors, we have attained one of our major strategic goals of improving the Company's capital structure." About DSL.net DSL.net, Inc. is a leading nationwide provider of broadband communications services to businesses. The Company combines its own facilities, nationwide network infrastructure and Internet Service Provider (ISP) capabilities to provide high-speed Internet access, private network solutions and value-added services directly to small- and medium-sized businesses or larger enterprises looking to connect multiple locations. DSL.net product offerings include T-1, DS-3 and business-class DSL services, virtual private networks (VPNs), frame relay, Web hosting, DNS management, enhanced e-mail, online data backup and recovery services, firewalls and nationwide dial-up services, as well as integrated voice and data offerings in select markets. For more information, visit http://www.dsl.net/ * * * As reported in the Troubled Company Reporter's April 22, 2004 edition, DSL.net, Inc. (NASDAQ: DSLN), a leading nationwide provider of broadband communications services to businesses, disclosed that in compliance with Nasdaq Marketplace Rule 4350 (b)(1)(B), that the independent audit report filed with the Company's Annual Report on Form 10-K for the year ended Dec. 31, 2003, included a qualification for a going concern. The disclosure in this press release is required under the above Nasdaq rule and does not represent any change to the Company's recently filed Annual Report on Form 10-K. EARTHSHELL CORP: Stockholders Approve Proposals at July 26 Meeting ------------------------------------------------------------------ EarthShell(R) Corporation's (OTCBB:ERTH) stockholders approved both of the proposals presented at the Company's reconvened annual meeting. The meeting, originally convened on June 28, 2004, was adjourned to July 26, 2004 because a quorum was not present at that time. At Monday's reconvened meeting, stockholders elected the seven directors currently serving on the Company's board of directors to continue serving until the 2005 annual meeting of stockholders. They also approved an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of common stock from 25,000,000 to 40,000,000 and to increase the total number of shares of all classes of stock the Company is authorized to issue. These shares will be available for issuance from time to time in the future for transactions that the Board of Directors considers to be in the best interests of the Company. About the Company EarthShell Corporation is a development stage company engaged in the licensing and commercialization of proprietary composite material technology for the manufacturing of foodservice disposable packaging, including cups, plates, bowls, hinged-lid containers, and sandwich wraps. In addition to certain environmental characteristics, EarthShell Packaging is designed to be cost performance competitive compared to other foodservice packing materials. At March 31, 2004, Earthshell Corporation's balance sheet shows a stockholders' deficit of $14,306,794 compared to a deficit of $12,268,775 at December 31, 2003. ENERGY CORP: Enters into Restated Credit Agreement with Foothill ---------------------------------------------------------------- As previously reported, on July 10, 2002, Energy Corporation of America entered into a $50 million revolving Credit Agreement with Foothill Capital Corporation, now Wells Fargo Foothill, Inc. ECA and Foothill have entered into an Amended and Restated Credit Agreement dated June 10, 2004. Foothill will also serve as Arranger and Administrative Agent for any future lenders that become a party to the Agreement. The Restated Credit Agreement provides for a $50 million revolving loan and a $50 million term loan. Depending on its level of borrowing under the Restated Credit Agreement, the applicable interest rates for base rate loans are based on Wells Fargo's prime rate plus 0.250% to 0.75%. ECA has the ability under the Restated Credit Agreement to designate certain loans as Libor Rate Loans at interest rates based upon the rate at which dollar deposits are offered to major banks in the London interbank market plus 2.25% to 2.75%. The Restated Credit Agreement expires on July 10, 2008. ECA is currently working with Foothill and others to fulfill the conditions to funding as set forth in the Restated Credit Agreement including execution and recordation of the necessary security documents. The obligations under the Restated Credit Agreement are secured by a portion of the assets of Eastern American Energy Corporation and Allegheny & Western Energy Corporation, each of which is a subsidiary of ECA. The Restated Credit Agreement, among other things, restricts the ability of ECA and its subsidiaries to incur new debt, grant additional security interests in its collateral, engage in certain merger or reorganization activities, or dispose of certain assets. Upon the occurrence of an event of default, the lenders may terminate the Restated Credit Agreement and declare all obligations thereunder immediately due and payable. * * * As reported in the Troubled Company Reporter's May 10, 2004 edition, Standard & Poor's Ratings Services withdrew its ratings on independent oil and gas exploration and production company Energy Corp. of America. In addition, the ratings on the company's senior subordinated notes due 2007 were also withdrawn. Standard & Poor's most recent corporate credit and subordinate ratings were 'CC' and 'C', respectively, reflecting the ratings downgrade on Jan. 28, 2004. The ratings before withdrawal reflected the company's announcement that it was in default under the indenture for its senior subordinated notes as an indirect adverse legal judgment. ENRON CORP: Oregon Attorney General Asks FERC to Protect Taxpayers ------------------------------------------------------------------ Attorney General Hardy Myers sent a letter to the Federal Energy Regulatory Commission (FERC) Chairman, Patrick Henry Wood III, urging the Commission to take prompt action to protect the rights of ratepayers who have been severely impacted by the fraudulent activities of Enron Corporation. Washington Attorney General Christine Gregoire sent a similar letter. Both letters also reiterate the states' requests that FERC provide state investigators with any and all documents related to efforts by the now-bankrupt company to manipulate the west coast energy market. The letter requests FERC take immediate enforcement action on behalf of Oregon ratepayers and other west coast energy customers to hold Enron accountable. "There can be no doubt that Enron, through fraud and deceit, sent the west coast energy market into an unnecessary and destructive tailspin," said Myers. "The fact that FERC has not already taken adequate steps to hold this company accountable is inexcusable." The letter follows two recent developments related to Enron's conduct in the energy marketplace. Recent disclosures of tapes and transcripts of phone conversations further demonstrate that Enron was not only complicit in unlawful market manipulation, it was a leader in the development of the fraudulent and deceptive practices. Additionally, the federal indictment of former Enron CEO Kenneth Lay supports the states' steadfast assertions of market manipulation. The letter highlights the need for urgency, as any relief or penalties ordered by FERC are likely to be subject to the terms of the bankruptcy proceeding. Already, many of the claims are being litigated and the priority standing of creditors is being established. FERC acknowledgment of Enron's unlawful behavior will reinforce Oregon's $440 million claim and provide an alternative opportunity for ratepayer relief through a federal claim. To date, FERC has imposed no meaningful disciplinary action against Enron and made no effort to offset the extraordinary losses suffered by Oregon ratepayers which resulted from Enron's market manipulation. The final letter is available at http://www.doj.state.or.us (Enron Bankruptcy News, Issue No. 118; Bankruptcy Creditors' Service, Inc., 215/945-7000) ENTERPRISE PRODUCTS: BB+ Rated Energy Company Releases Q2 Results ----------------------------------------------------------------- Enterprise Products Partners L.P. (NYSE:EPD) released its financial results for the second quarter and six months ended June 30, 2004. Enterprise reported net income of $33.1 million for the second quarter of 2004 compared to net income of $33.1 million for the second quarter of 2003. Distributable cash flow for the second quarter of 2004 was $174.2 million compared to $66.9 million for the second quarter of 2003. Distributable cash flow for the second quarter of 2004 includes $104.5 million from the monetization of an interest rate hedging program associated with the long-term debt that the partnership expects to issue in connection with its proposed merger with GulfTerra Energy Partners, L.P. The gain from the hedging program will be amortized to net income for book and tax purposes over the life of the future planned issuances. "Overall, we continued to see a solid recovery in our businesses during the second quarter as a result of the improvement in both the domestic and global economies," said O.S. "Dub" Andras, President and Chief Executive Officer of Enterprise. "The ethylene industry, which is greatly influenced by general economic conditions, is the largest single consumer of the NGLs ethane and propane. The improvement in the economy was reflected in the production rates for the ethylene industry and its demand for NGLs. Ethane demand by the ethylene industry averaged 747,000 barrels per day (BPD) in the second quarter of this year compared to 614,000 BPD in the second quarter of last year. Demand for ethane in June of this year was 765,000 BPD, a 205,000 BPD, or 37 percent, increase over 560,000 BPD in June of last year. Likewise, demand for propane in the second quarter of 2004 was 383,000 BPD compared to 299,000 BPD in the second quarter of last year. This improvement translated into an overall increase in the NGL volumes transported by our pipelines." "Our earnings during the quarter, however, were negatively impacted by a loss in our NGL marketing business and the effect of high fuel costs at some of our facilities. The loss in our NGL marketing business was due to the ineffectiveness of a strategy that we have traditionally used to manage our NGL production and inventory on a seasonal basis. As a result of the unexpected magnitude in the volatility of crude oil, natural gas and NGL prices during the second quarter, this resulted in a decrease in gross operating margin of approximately $15 million, or $0.06 per unit. With the expectation that this level of volatility will likely continue, we have modified our practices to minimize the risk of such losses in the future." "Fuel costs at our facilities have remained high primarily due to the price of natural gas and natural gas-fired electricity. We have recently taken additional steps to reduce our consumption of natural gas and natural gas-fired electricity. Effective July 1, 2004, we entered into a five-year contract to purchase 50 megawatts of electricity at a fixed price from a coal-fired power facility in Texas that is owned by an affiliate of an electric utility. We are also in the process of converting several pump stations that are powered by NGLs to electric motors. We believe these initiatives will save approximately $9 million annually based on current natural gas and NGL prices," stated Mr. Andras. "Our planned merger with GulfTerra and the natural hedge that we believe will exist between the two partnerships with respect to natural gas should mitigate Enterprise's fuel cost exposure to natural gas prices going forward. The gathering fee that GulfTerra collects on approximately 80 percent of the gas it gathers in the San Juan basin is based on a percentage of natural gas prices. As a result, GulfTerra effectively has a long natural gas position of approximately 70 million cubic feet per day (MMcfd) up to a certain level of natural gas prices and a long position of 40 MMcfd thereafter which economically offsets our net 35 MMcfd requirement for fuel," said Mr. Andras. "The unitholder meetings for the respective partnerships are scheduled for July 29, 2004. We currently believe that the merger will be completed in the third quarter of this year. Under the terms of the merger agreement, we have agreed to increase our cash distribution rate to limited partners by at least 6 percent to a quarterly rate of $0.395 per unit, or a $1.58 per unit on an annualized basis, upon completion of the merger. This increase would take effect on the next regular quarterly distribution payment date in November if the merger is completed in the third quarter as currently expected." Revenue for the second quarter of 2004 increased to $1.7 billion from $1.2 billion in the second quarter of last year. Operating income for the second quarter of 2004 was $65.1 million compared to $66.3 million in the second quarter of 2003. Gross operating margin was $106.1 million for the second quarter of 2004 compared to $106.5 million for the same quarter in 2003. Pipelines -- Gross operating margin for the Pipelines segment was $67.2 million for the second quarter of 2004 versus $72.0 million in the second quarter of 2003. Combined pipeline volumes for the second quarter of 2004 were 1,612,000 BPD compared to 1,566,000 equivalent BPD in the second quarter of 2003. Natural gas liquids (NGLs) and petrochemical volumes transported in the second quarter of 2004 increased to 1,331,000 BPD compared to 1,295,000 BPD in the second quarter of 2003. Natural gas pipeline volumes in the second quarter of 2004 were 1,068 billion British thermal units per day (BBtud) compared to 1,033 BBtud transported during the second quarter of 2003. Gross operating margin from the Mid-America and Seminole pipelines for the second quarter of 2004 was $31.1 million compared to $39.9 million for the second quarter of 2003. Net NGL volumes transported by the two pipelines increased by 43,000 BPD compared to the same period last year. The $8.8 million decrease in gross operating margin from the second quarter of last year was primarily due to a one-time $3.8 million reduction in operating expense in 2003 that did not recur in 2004; a $3.6 million increase in repair, maintenance and fuel expenses, including $1.8 million that was attributable to the partnership's ongoing pipeline integrity inspection program. The increase in expenses from the prior year more than offset the increase in gross operating margin associated with the higher transportation volumes. Beginning July 1, 2004, the tariffs on the Mid-America and Seminole pipeline will increase by approximately $7.2 million on an annual basis as the result of the annual adjustment for the increase in the Producer Price Index (PPI). "The operating costs on the Mid-America and Seminole pipelines have increased significantly over the last two years due to an increase in fuel and pipeline integrity costs. The increase in natural gas prices has materially increased the cost of fuel. In 2002, fuel costs for these two pipelines were approximately $34 million compared to an annualized rate of $50 million based on the first six months of this year. Unlike regulated natural gas pipelines, the fuel costs associated with these pipelines are not automatically passed through to our pipeline customers. In addition, we expect to spend approximately $11 million on pipeline integrity costs during 2004 compared to a nominal amount in 2002. We are currently evaluating a cost of service filing for the recovery of these increased costs," stated Mr. Andras. For the second quarter of 2004, gross operating margin from the partnership's NGL import services decreased by $4.0 million from the same quarter in 2003 due to a 118,000 BPD decrease in volume at the import facility and its supporting pipeline facility. Greater worldwide demand for NGLs during the quarter resulted in competition for NGLs and the diversion of volumes to international markets that normally would have been delivered to the U.S. Gulf Coast. "We have since seen a recovery in the demand for our import services. Our import terminal is currently scheduled to run at full capacity for most of the third quarter," continued Mr. Andras. Gross operating margin from the Lou-Tex NGL pipeline decreased by $2.8 million due to a 12,000 BPD decrease in volume. This decrease in margin and volume was due to the partnership's election to maximize its total gross operating margin by diverting mixed NGLs and refinery-grade propylene to other partnership facilities. The decrease in gross operating margin from the Lou-Tex NGL pipeline associated with this election was more than offset by an increase in the gross operating margin from the Fractionation and Processing segments. Gross operating margin for the second quarter of 2004 included $10.7 million in equity income associated with our 50% ownership in the general partner of GulfTerra that was acquired in December 2003. Total pipeline integrity inspection expense for the second quarter of 2004 was approximately $3.1 million compared to $0.1 million in the second quarter of 2003. In addition, approximately $1.2 million of major pipeline integrity repair costs were capitalized during the second quarter of 2004 compared to $0.7 million in the second quarter of last year. Major pipeline integrity repair costs are capitalized and included in our sustaining capital expenditures. Fractionation -- Gross operating margin for the Fractionation segment was $35.9 million for the second quarters of both 2004 and 2003. An increase in gross operating margin from the propylene fractionation business offset decreases from the NGL fractionation and butane isomerization businesses. Gross operating margin from the propylene fractionation business increased by $4.2 million during the second quarter of 2004 versus the second quarter of 2003 due to improved unit margins and a 2,000 BPD increase in volume. Gross operating margin for the NGL fractionation business decreased by $3.4 million during the second quarter of 2004 compared to the same quarter in 2003. Gross operating margin decreased by approximately $6.8 million due to a gain recorded in the second quarter of 2003 from an inventory measurement adjustment for mixed NGLs pending fractionation that did not recur in the second quarter of 2004. This decrease was partially offset by a 36,000 BPD increase in NGL fractionation volumes and an increase in the value of percent-of-liquids revenues at the expanded Norco fractionator. Processing -- Gross operating margin for the Processing segment was $4.4 million for the second quarter of 2004 compared to $2.7 million for the second quarter of 2003. Gross operating margin from the partnership's natural gas processing business was $10.3 million during the second quarter of 2004 compared to $0.8 million for the same quarter last year. Fee-based natural gas processing volumes increased to 1,248 million cubic feet per day in the second quarter of 2004 from 160 MMcfd in the second quarter of 2003 reflecting the effects of the conversion of the partnership's major processing agreements to fee-based agreements. Equity NGL production was 45,000 BPD for the second quarter of 2004 compared to 39,000 BPD for the second quarter of 2003. "Compared to the second quarter of last year, gross operating margin generated by our natural gas processing business increased by $9.5 million due to the conversion of all of our major processing contracts to either fee-based or percent-of-liquids type agreements. These agreements should provide our partnership with a more stable stream of cash flow and a consistent return on investment from this business." Gross operating margin from NGL marketing activities was a loss of $6.0 million during the second quarter of 2004 versus a profit of $1.9 million in the second quarter of 2003. NGL marketing for the second quarter of 2004 included a $15.2 million loss associated with the ineffectiveness of a strategy that was used to manage the partnership's NGL production and inventory on a seasonal basis. Pipeline volumes expressed in terms of equivalent barrels per day are on an energy equivalent basis where 3.8 million British thermal units of natural gas are equivalent to one barrel of NGLs. About the Company Enterprise Products Partners L.P. is the second largest publicly- traded midstream energy partnership with an enterprise value of over $7 billion. Enterprise is a leading North American provider of midstream energy services to producers and consumers of natural gas and natural gas liquids. The Company's services include natural gas transportation, processing and storage and NGL fractionation (or separation), transportation, storage and import/export terminaling. * * * As reported in the Troubled Company Reporter's May 20, 2004 edition, Standard & Poor's Rating Services lowered its corporate credit ratings on Enterprise Products Partners L.P. and Enterprise Products Operating L.P. to 'BB+' from 'BBB-' and removed the ratings from CreditWatch with negative implications. The outlook is stable. The ratings were originally placed on CreditWatch on Dec. 15, 2003 as a result of the announcement of the merger between Enterprise Products and GulfTerra Energy Partners L.P. (BB+/Watch Neg/--). The rating action is based upon an assessment that the credit rating on Enterprise Products will be 'BB+' whether or not the proposed merger with GulfTerra takes place. "On a stand-alone basis, Enterprise Products' creditworthiness has deteriorated over the past year," said Standard & Poor's credit analyst Peter Otersen. ENWAVE: Canadian National Science Council Denies Funding Proposal ----------------------------------------------------------------- EnWave Corporation (TSX.V: ENW) has received a response from the National Science and Engineering Research Council of Canada regarding the request for funding the microbicidal sponge project as announced in a press release on May 12, 2004. While Council's reviewers strongly endorsed the technical quality and feasibility of the proposal, the grant selection committee denied the application based upon certain aspects of the Company business plan. The Company intends to resubmit its application in order to address the issues raised by the Council. The Company will also seek funding from alternative governmental funding agencies and will continue to develop the technology in collaboration with scientists at the University of British Columbia and at the Lindsley F. Kimball Research Institute of the New York Blood Center, using the Company's own resources. About the Company EnWave is in the business of developing and marketing patented vacuum microwave technology. The corporation's patented VM technology provides unique products for global market opportunities in many industries including: food processing, pharmaceutical, chemical, biotechnology and nutraceuticals. As of March 31, 2004, the Company posts a CDN$5,813,765 stockholder's deficit compared to a CDN$5,765,315 deficit at September 30, 2003. EXIDE TECH: Pachulski Wants to Collect $2,310,278 Final Fees ------------------------------------------------------------ Exide Technologies and its debtor affiliates employed Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., as bankruptcy co- counsel in their Chapter 11 cases. Pachulski filed 25 prior fee applications: Period Approved Approved Date Filed Covered Fees Expenses ---------- ------- -------- -------- 07/03/02 04/2002 $65,347 $34,669 07/29/02 05/2002 164,879 28,922 08/12/02 06/2002 82,072 12,901 10/01/02 07/2002 92,001 18,063 10/25/02 08/2002 67,972 30,206 11/12/02 09/2002 46,711 26,221 12/06/02 10/2002 38,406 13,192 12/31/02 11/2002 43,348 17,597 01/22/03 12/2002 25,662 31,915 03/03/03 01/2003 29,416 14,067 04/22/03 02/2003 24,092 17,487 05/28/03 03/2003 30,270 17,947 06/13/03 04/2003 25,370 12,382 07/09/03 05/2003 30,357 18,362 07/30/03 06/2003 31,377 15,764 09/18/03 07/2003 40,774 25,345 10/01/03 08/2003 48,014 20,577 10/30/03 09/2003 48,783 21,192 12/22/03 10/2003 250,446 78,035 01/26/04 11/2003 56,882 56,534 02/18/04 12/2003 63,326 23,376 03/16/04 01/2004 40,412 23,369 04/05/04 02/2004 43,556 22,937 05/10/04 03/2004 Pending Pending 06/01/04 04/2004 Pending Pending For March 2004, the firm seeks $83,963.50 as compensation and $62,056.47 as reimbursement. For April 2004, fees total $74,093 while expenses reached $78,674.11. Hence, Pachulski asks the Court to approve the final allowance of compensation for professional services rendered amounting to $1,588,586 and the reimbursement of actual and necessary expenses incurred equal to $721,692. The compensation and reimbursement, totaling $2,310,278, covers the period starting from April 15, 2002 through April 16, 2004. Compensation by Project Category Project Category Total Hours Fee ---------------- ----------- --- Asset Analysis/Recovery 0.7 $236 Asset Disposition 16.1 2,547 Appeals 89.1 12,440 Bankruptcy Litigation 1,479.2 413,985 Case Administration 1,078.2 84,000 Claims Administration/Objections 168.9 15,226 Compensation Professionals 304.6 60,138 Compensation Professionals/Others 491.3 45,418 Document Production 0.7 98 Employee Benefit/Pension 35.7 10,545 Executory Contracts 880.0 249,784 Financial Filings 129.4 35,618 Financing 68.9 19,712 Litigation: Non-bankruptcy 5.5 832 Meeting of Creditors 40.7 18,218 Operations 160.5 37,481 Plan and Disclosure 707.2 195,788 Reclamation Litigation 13.2 2,312 Retention of Professionals 212.5 59,738 Retention of Professionals/Others 124.7 26,541 Stay Litigation 77.7 16,258 Tax Issues 3.2 716 Travel 13.5 1,234 Summary of Expenses Category Expense -------- ------- Air Fare $1,250 Auto Travel 4,913 Working Meals 5,169 Conference Call 8,271 Court Parking 15 Delivery/Courier 69,074 Express Mail 35,987 Filing Fee 7,495 Facsimile 66,670 Guest Parking 408 Hotel 1,076 In House Attorney Service 80 In House Messenger 30 Meeting Room 1,917 Court Research 7,353 Outside Reproduction 44,957 Reproduction 59,959 Postage 361,584 Overtime 6,021 Telephonic Expense 163 Transcript 30,922 Travel Expense 2,061 Legal Research 6,316 Headquartered in Princeton, New Jersey, Exide Technologies is the world-wide leading manufacturer and distributor of lead acid batteries and other related electrical energy storage products. The Company filed for chapter 11 protection on April 14, 2002 (Bankr. Del. Case No. 02-11125). Matthew N. Kleiman, Esq., and Kirk A. Kennedy, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. On April 14, 2002, the Debtors listed $2,073,238,000 in assets and $2,524,448,000 in debts. (Exide Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 215/945-7000) FEDERAL-MOGUL: Wants to Expand AlixPartners' Employment ------------------------------------------------------- According to David M. Sherbin, Federal-Mogul Corporation Senior Vice President, General Counsel and Secretary, the implementation of fresh start accounting is an important aspect of the Debtors' plans to emerge from their Chapter 11 cases. Under standard accounting practices, debtors emerging from reorganization under the Bankruptcy Code are required to adopt fresh start accounting if two conditions are met: (a) The reorganization value of the assets of the debtor is less than the total of all postpetition liabilities and allowed claims; and (b) The holders of prepetition voting equity interests in the debtor receive less than 50% of the voting shares of the reorganized debtor and that the loss of control is not temporary. Mr. Sherbin notes that under the Debtors' Third Amended Joint Plan, these conditions may be met and, accordingly, the Debtors will be required to implement a fresh start accounting process. Through the fresh start accounting process, Mr. Sherbin explains, the Debtors' reorganization value will be allocated to their assets and liabilities based on the fair market value of the assets and liabilities. The resulting allocations will then be used in the Debtors' financial reporting after emergence. Given the magnitude of the Debtors' businesses and the attendant complexity of the Debtors' accounting structure, the Debtors need to begin the fresh start accounting process so as to facilitate their smooth and expedient transition out of bankruptcy. Search for the Right Professional Unfortunately, the Debtors determined that there is not an individual on their in-house accounting staff that possesses the required experience, knowledge and skills to oversee the fresh start accounting project. Hence, the Debtors made the decision to retain an outside professional. The Debtors evaluated the fresh start accounting capabilities available to them from each of the so-called Big Four public accounting firms, at a fifth regional accounting firm, and at AlixPartners, LLC. The Debtors also evaluated the independence of each of the firms. Of the six potential firms, only AlixPartners has the combination of independence and specialized accounting knowledge. AlixPartners currently provides financial advisory services to the Debtors. AlixPartners' Services Hence, the Debtors seek the Court's authority to expand the scope of AlixPartners' employment to include fresh start accounting services, nunc pro tunc to June 23, 2004. AlixPartners, however, will continue to provide advisory services. AlixPartners will: (1) plan the fresh start accounting process; (2) obtain valuations necessary to implement the fresh start accounting; (3) prepare for the implementation of the fresh start accounting; and (4) implement and follow-up on the implementation of the fresh start accounting. Although the tasks will generally occur one after the other, certain aspects of the tasks will happen simultaneously given the Debtors' anticipated timetable for emergence. A. The Planning Phase AlixPartners will assist the Debtors' in-house accounting personnel in developing and enhancing plans for the fresh start accounting project, reaching decisions on certain key issues to be addressed in connection with the fresh start accounting, and preparing an initial model of how the fresh start accounting will work. B. The Valuation Phase The valuation phase will include assisting the Debtors in evaluating and selecting the professionals to perform fair market valuations of their assets and liabilities in accordance with fresh start accounting principles, and then working with these professionals and the Debtors to obtain the valuations on which the fresh start accounting will be based. C. The Preparation Phase AlixPartners will assist the Debtors in preparing for the implementation of the fresh start accounting, including: (a) developing instructions, in conjunction with the Debtors, for recording entries in the Debtors' general ledger at certain selected levels of the Debtors' operations; (b) determining how to handle the payment of administrative and priority claims as well as the payment of any costs that may be necessary to cure outstanding defaults under any of the Debtors' prepetition executory contracts; (c) addressing payments to unsecured creditors under the Plan; and (d) ensuring that specific procedures are known to the Debtors' in-house personnel and outside professionals, and in place for handling any changes in the corporate structure and the various reporting cut-off issues that may result from the Debtors' emergence. D. The Implementation and Follow-Up Phase The Implementation Phase will include the actual recording of the fresh start accounting entries, as well as the important step of ensuring and verifying that the entries are property recorded. Disclosures to the Securities and Exchange Commission relating to the Debtors' fresh start accounting will also need to be accurately prepared. Fee Cap Increased The Debtors also propose to increase the $125,000 monthly cap applicable to AlixPartners' fees to $250,000. The Debtors believe that the modified cap will accommodate both AlixPartners' existing services as well as the fresh start accounting services. Headquartered in Southfield, Michigan, Federal-Mogul Corporation -- <http://www.federal-mogul.com/>http://www.federal-mogul.com/-- is one of the world's largest automotive parts companies with worldwide revenue of some $6 billion. The Company filed for chapter 11 protection on Oct. 1, 2001 (Bankr. Del. Case No. 01- 10582). Lawrence J. Nyhan, Esq., James F. Conlan, Esq., and Kevin T. Lantry, Esq., at Sidley Austin Brown & Wood and Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed $10.15 billion in assets and $8.86 billion in liabilities. (Federal-Mogul Bankruptcy News, Issue No. 60; Bankruptcy Creditors' Service, Inc., 215/945-7000) FINOVA GROUP: Sells Resort Portfolio for $133.3 Million ------------------------------------------------------- In a regulatory filing with the Securities and Exchange Commission on July 8, 2004, The FINOVA Group, Inc., disclosed the sale and prepayment of virtually all of its resort portfolio. FINOVA, through its principal operating subsidiary, FINOVA Capital Corporation, completed the sale of a portion of its timeshare resort portfolio for $133.3 million of net cash proceeds on June 30, 2004. Net proceeds were $22 million in excess of FINOVA'S carrying amount. The carrying amount had previously been reduced by various adjustments, the majority of which were due to the estimation of fair value in connection with FINOVA'S implementation of fresh-start reporting upon emergence from bankruptcy. Accounting rules did not permit subsequent adjustments for increases in estimated valuation until they were realized. Richard Lieberman, Senior Vice President, General Counsel and Secretary of FINOVA, relates that during the second quarter of 2004, FINOVA collected, in the ordinary course of business, $275 million of prepayments from the resort portfolio. The second quarter events virtually eliminated FINOVA's resort portfolio except for a few retained accounts. These events substantially reduced FINOVA's financial assets. The collections, coupled with the proceeds from the asset sale, will be used primarily to reduce FINOVA's outstanding indebtedness, and fund $17 million into a segregated cash account for potential distributions to stockholders. However, those distributions are currently prohibited by the indenture governing the Notes. Despite the favorable disposition of the resort portfolio, FINOVA has a significant negative net worth, Mr. Lieberman says. Based on FINOVA's financial condition, it remains highly unlikely there will be funds available to fully repay the outstanding principal on the Notes. As a result, there will be no return to the FINOVA's stockholders. FINOVA maintains that investing in its debt and equity securities involves a high level of risk to the investor. (Finova Bankruptcy News, Issue No. 49; Bankruptcy Creditors' Service, Inc., 215/945-7000) FIRST CHESAPEAKE: Michael O'Hanlon Acquires Medical Capital Group ----------------------------------------------------------------- On May 27, 2004, the Board of Directors of First Chesapeake Financial Corporation (FCFK.PK) authorized the transfer of 100% of the common stock of Medical Capital Group, Inc., a Florida corporation, to Michael O'Hanlon, the principal organizer of the wholly owned subsidiary. MGC was formed in March 2004 by First Chesapeake to provide medical billing, transcription, data entry, and audit services to clients in the healthcare industry. Final approval for a business plan to begin operations was never given by First Chesapeake's Board of Directors. As a result of the Board of Directors' review of First Chesapeake's present situation, First Chesapeake has decided to transfer its interest in MCG to Mr. O'Hanlon. First Chesapeake does not believe that this transfer qualifies as a disposal of a "significant amount of assets, otherwise than in the ordinary course of business", requiring disclosure, due to the fact that MCG had yet to begin operations or realize an incoming cash-flow resulting from services provided to clients. First Chesapeake Financial Corporation was incorporated in the Commonwealth of Virginia on May 18, 1992. The Company is a provider of financial services in the mortgage banking segment. The Company's business strategy is to create a national retail and wholesale mortgage banking business. * * * As reported in the Troubled Company Reporter's April 30, 2004 edition, First Chesapeake Financial Corporation (OTC BB: FCFKE) disclosed that it defaulted on its Series F Senior Secured Convertible Debenture issued to GL Equities, LLC on January 9, 2004. First Chesapeake defaulted on the Series F Debenture by: (1) not making payments of interest for the Month of March on the Series F Debenture, (2) defaulting on mortgage payments for a pledged property, (3) not delivering stock powers to GL from All American Companies, Inc., (4) not hiring a CFO reasonably acceptable to GL, and (5) not delivering stock certificates for shares of All American Companies, Inc. as required under an accompanying agreement to the Series F Debenture. The Series F Debenture is secured by all of First Chesapeake's tangible and intangible assets, as well as a Trust Mortgage Deed encumbering certain real property in West Virginia owned by First Chesapeake's subsidiary, Professional Property Developers, LC. The Series F Debenture is also secured by 5,400,000 shares of First Chesapeake common stock that All American Companies, Inc. presently owns and an additional 4,600,000 shares of First Chesapeake Common stock that it is entitled to have issued once First Chesapeake's shareholders authorize an increase in the number of authorized shares of common stock. The Series F Debenture is guaranteed by All American Companies, Inc., Collateral One Mortgage Corporation, a wholly owned subsidiary of First Chesapeake, Professional Property Developers, LC, a wholly owned subsidiary of First Chesapeake, Kautilya Sharma, a/k/a Tony Sharma, the Chairman and CEO of First Chesapeake, together with his wife Sheenoo Sharma. FIRST CHESAPEAKE: Relocates Corporate Offices to Conshohocken, Pa. ------------------------------------------------------------------ On June 11, 2004, First Chesapeake Financial closed its corporate offices in Boca Raton, Florida, which was subleased on a month-to- month basis from another tenant. First Chesapeake has relocated its corporate offices to 200 Four Falls, Suite 115, West Conshohocken, Pennsylvania, outside of Philadelphia. Before moving to Boca Raton on August 13, 2003, the Company's previous headquarters was located in Philadelphia, Pennsylvania. First Chesapeake is in the process of transferring its records to its new Pennsylvania headquarters, where it will continue a full audit of its finances. First Chesapeake Financial Corporation was incorporated in the Commonwealth of Virginia on May 18, 1992. The Company is a provider of financial services in the mortgage banking segment. The Company's business strategy is to create a national retail and wholesale mortgage banking business. * * * As reported in the Troubled Company Reporter's April 30, 2004 edition, First Chesapeake Financial Corporation (OTC BB: FCFKE) disclosed that it defaulted on its Series F Senior Secured Convertible Debenture issued to GL Equities, LLC on January 9, 2004. First Chesapeake defaulted on the Series F Debenture by: (1) not making payments of interest for the Month of March on the Series F Debenture, (2) defaulting on mortgage payments for a pledged property, (3) not delivering stock powers to GL from All American Companies, Inc., (4) not hiring a CFO reasonably acceptable to GL, and (5) not delivering stock certificates for shares of All American Companies, Inc. as required under an accompanying agreement to the Series F Debenture. The Series F Debenture is secured by all of First Chesapeake's tangible and intangible assets, as well as a Trust Mortgage Deed encumbering certain real property in West Virginia owned by First Chesapeake's subsidiary, Professional Property Developers, LC. The Series F Debenture is also secured by 5,400,000 shares of First Chesapeake common stock that All American Companies, Inc. presently owns and an additional 4,600,000 shares of First Chesapeake Common stock that it is entitled to have issued once First Chesapeake's shareholders authorize an increase in the number of authorized shares of common stock. The Series F Debenture is guaranteed by All American Companies, Inc., Collateral One Mortgage Corporation, a wholly owned subsidiary of First Chesapeake, Professional Property Developers, LC, a wholly owned subsidiary of First Chesapeake, Kautilya Sharma, a/k/a Tony Sharma, the Chairman and CEO of First Chesapeake, together with his wife Sheenoo Sharma. FIRST CHESAPEAKE: Involuntary Chapter 7 Petition Filed in Florida ----------------------------------------------------------------- On June 14, 2004, First Chesapeake learned that an involuntary bankruptcy petition under Chapter 7 of the Bankruptcy Code was filed in the United States Bankruptcy Court for the Southern District of Florida against the Company. Although the Company has not been served with the petition, the petitioners, Serafina Martell, Daniel Bittinger, and Cynthia Estes, claim that First Chesapeake is indebted to them in the aggregate amount of $575,000, or the individual amounts of $25,000, $500,000, and $50,000, respectively. On April 26, 2004, Mr. Bittinger demanded payment from First Chesapeake under a convertible promissory note for $250,000.00, allegedly executed by the Company on November 3, 2003 and which was due and payable on March 5, 2004. First Chesapeake disputes the validity of this debt because its management does not believe that the Company received consideration for its obligations under the note. On April 26, 2004, Mr. Bittinger also demanded payment under a second convertible promissory note, which was allegedly entered into between Mr. Bittinger and the Company's former management on November 3, 2003 for $250,000.00. On April 26, 2004, after consultation with the Company's management, Mr. Bittinger conceded that the second convertible promissory note for $250,000 was not a valid debt and marked the document as void and returned it to the Company. The Company is unaware of any debts due Mr. Bittinger as detailed in his petition. In the bankruptcy petition, Ms. Estes and Ms. Martell indicate that their debts arise from loans made to First Chesapeake. The Company is also reviewing the validity of these alleged debts. The Company is in the process of obtaining additional information regarding the bankruptcy petition and is reviewing its rights, as well as the potential effect of this action on the Company's business as a whole. Once the petition is served, the Company plans on vigorously defending against this action. On June 14, 2004, First Chesapeake learned that Cynthia Estes, the Manager of Professional Property Developers, LLC, a West Virginia Limited Liability Company, filed a petition for bankruptcy under Chapter 11 of the Bankruptcy Code on behalf of PPD. Ms. Estes and the two other members of PPD transferred their entire interest to First Chesapeake. Following the purchase, First Chesapeake retained Ms. Estes as the Manager of PPD. Ms. Estes' petition asserts that she is currently the sole member of PPD. First Chesapeake is taking the position that PPD is a wholly-owned subsidiary of First Chesapeake, and will assert the position that First Chesapeake is the sole member of PPD in the Bankruptcy Court. First Chesapeake is in the process of obtaining additional information regarding the bankruptcy petition and is reviewing its rights in regards to Ms. Estes' actions, as well as the potential effect of this action on the Company's business as a whole. First Chesapeake does not anticipate being able to file is Form 10-K for the year ended December 31, 2003 by June 27, 2004 as disclosed in an 8-K filed on May 28, 2004. Due to the recently disclosed events, the Company is not in a position at this time to estimate when its Annual Report will be filed. First Chesapeake anticipates filing its Form 10-Q for the period ended March 31, 2004 at the same time that it files its 10-K for the year ended December 31, 2003. FIRST CHESAPEAKE FINANCIAL: Involuntary Chapter 7 Case Summary -------------------------------------------------------------- Alleged Debtor: First Chesapeake Financial Corporation 999 Yamato Road #100 Boca Raton, Florida 33431 Involuntary Petition Date: June 14, 2004 Case Number: 04-32840 Chapter: 7 Court: Southern District of Florida (Palm Beach) Judge: Steven H. Friedman Petitioners' Counsel: Brian K. McMahon, Esq. 7301A W. Palmetto Park Road #305C Boca Raton, FL 33433 Tel: 561-367-1232 Petitioners: Serafina Martell Daniel Bittinger Cynthia Estes Aggregate Amount of Claims: $575,000 FIRST CHESAPEAKE: Faces $350,000 Lawsuit from Ex-Director D. Vinik ------------------------------------------------------------------ On May 28, 2004, First Chesapeake Financial was served with a civil complaint for damages in excess of $350,000 filed by Donald Vinik, a former Director of First Chesapeake, in the Circuit Court of the 15th Judicial Circuit of Florida in Palm Beach County. The complaint also names Kautilya Sharma, First Chesapeake's former Chairman, CEO, and President, Sheenoo Sharma, Trade Tech Holding, Inc., a Pennsylvania corporation, Geek Securities, Inc., a Delaware corporation primarily owned by Mr. Sharma, and Collateral One Mortgage Corporation, a Virginia corporation and wholly-owned subsidiary of First Chesapeake, as defendants. Mr. Vinik alleges that he wired $350,000 into an account of First Chesapeake in September, 2003 to purchase 50% of a company known as Blue Ridge Land Development, which owned approximately 34 acres of land in Putnam County, West Virginia. Mr. Vinik asserts that the $350,000 was intended to purchase from First Chesapeake shares of First Chesapeake common stock to be issued to Cynthia Estes in exchange for 50% of Blue Ridge, with title being held in the name of Mr. Sharma and Mr. Vinik, personally. First Chesapeake never purchased Blue Ridge, and is investigating whether the $350,000 was wired into one of its accounts, as Mr. Vinik alleges, or alternatively, into an account of one of the co-defendants. Additionally, First Chesapeake asserts that as a Director, with access to non-public information, Mr. Vinik was aware that First Chesapeake did not have authorized and unissued common stock available to consummate this transaction in addition to the fact that this transaction was never authorized by its Board of Directors. First Chesapeake has retained outside legal counsel to vigorously defend against the claims of Mr. Vinik. FIRST CHESAPEAKE: Cash Problems Spur Collateral One to Shut Down ---------------------------------------------------------------- On June 9, 2004, in response to cash flow problems, Collateral One Mortgage Corporation, a wholly-owned subsidiary of First Chesapeake Financial, closed all of its offices and laid off all but three employees which were specifically retained for the purpose of winding up operations. Collateral One's mortgage origination business suffered an abrupt downturn following the arrest of Kautilya Sharma, a/k/a Tony Sharma, First Chesapeake's former Chairman, CEO, and President, for activities unrelated to First Chesapeake. First Chesapeake is considering if filing a petition for relief under Chapter 7 of the Bankruptcy Code by Collateral One would be in First Chesapeake's best interests. FLEMING COMPANIES: Court Confirms Joint Reorganization Plan ----------------------------------------------------------- Fleming Companies, Inc. announced that the US Bankruptcy Court in Delaware confirmed the Company's Third Amended Plan of Reorganization filed jointly by Fleming and its Unsecured Creditors' Committee. Following a confirmation hearing in Wilmington, Delaware, Judge Mary Walrath ruled that Fleming had met all of the necessary statutory requirements to confirm the Plan. It is anticipated that the Plan will become effective in mid-August. The Plan provides for the reorganization of the Debtors centered around the Fleming convenience store distribution operations through the formation of a new entity which will be known as Core- Mark Holding Company, Inc. Unsecured creditors will receive the majority of the common stock of Core-Mark. Financing commitments from General Electric Capital Corporation for a $240 million revolving credit facility and a $10 million term loan have been provided. Sankaty Advisors, LLC has provided a commitment for an additional $70 million term loan facility. Additionally, Fleming's remaining assets and liabilities not related to the convenience operations will be transferred to either a Post-Confirmation Trust, which will have the responsibility for liquidating such assets and liabilities, pursuing causes of action and reconciling and paying claims, or a Reclamation Creditors' Trust, which will have similar responsibilities and rights with respect to reclamation creditors. Core-Mark distributes products to convenience stores and other retailers from 22 distribution centers. Core-Mark's distribution centers service customers in 38 states and five Canadian provinces. Mike Walsh, President and Chief Executive Officer of Core-Mark said, "We are pleased to emerge from bankruptcy as an independent company with a loyal customer base and a strong balance sheet. We look forward to working with our new board of directors and owners to drive our business forward." Archie Dykes, Chief Executive Officer of Fleming, said, "We appreciate the strong support for our Plan of Reorganization by creditors and lenders. They have been cooperative and constructive partners throughout Fleming's reorganization process. We are also grateful to our vendors, customers and associates for their continued support during this challenging time, and we greatly appreciate the time and attention Judge Walrath and the bankruptcy court, clerks and staff have given to this case." Sandra Schirmang, Co-Chair of the OCUC, added, "We have worked hard to assist Core-Mark so that it may emerge from bankruptcy as a strong company, with a healthy balance sheet and customer- focused philosophy. Going forward, Core-Mark intends to have a corporate governance structure that will allow the Company to focus on the creation of long-term value. We welcome the opportunity to work with senior management and associates to build a brighter future for Core-Mark." About Core-Mark Core-Mark is a leading distributor of consumer packaged goods and store supplies to the convenience retail industry. Core-Mark provides distribution and logistics services as well as value- added programs to over 19,500 customer locations across 38 states and five Canadian provinces. Core-Mark services a variety of store formats including traditional convenience retailers, mass merchandisers, drug, liquor and specialty stores, and other stores that carry consumer packaged goods. Headquartered in Lewisville, Texas, Fleming Companies, Inc. -- http://www.fleming.com/-- is the largest multi-tier distributor of consumer package goods in the United States. The Company filed for chapter 11 protection on April 1, 2003 (Bankr. Del. Case No. 03-10945). Richard L. Wynne, Esq., Bennett L. Spiegel, Esq., Shirley Cho, Esq., and Marjon Ghasemi, Esq., at Kirkland & Ellis, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, they listed $4,220,500,000 in assets and $3,547,900,000 in liabilities. GENTEK INC: Henry Druker Transfers 1,240 Shares to Questor ---------------------------------------------------------- Henry L. Druker, Director of GenTek, Inc., acquired 1,240 shares of GenTek common stock, par value $0 per share, which he transferred to Questor Management Company, LLC, without consideration. In a regulatory filing with the Securities and Exchange Commission on June 29, 2004, Mr. Druker disclosed that: -- Questor Partners Fund II, LP, holds 688,106 shares of GenTek common stock; -- Questor Side-By-Side Partners II, LP, holds 32,978 shares of GenTek stock; and -- Questor Side-By-Side Partners II 3(c)(1), LP, holds 12,452 shares of GenTek stock. Mr. Druker may be deemed to have indirect beneficial interests in a portion of the GenTek common stock as a result of his ownership interests in Questor Partners Fund II, Questor Side-By-Side Partners II, and Questor Side-By-Side Partners II (3)(1). Mr. Druker disclaims beneficial ownership of the securities except to the extent of his pecuniary interest, if any. (GenTek Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., 215/945- 7000) HERITAGE ORG: Signs-Up Doherty Long as Malpractice Attorney ----------------------------------------------------------- The Heritage Organization, L.L.C., asks the U.S. Bankruptcy Court for the Northern District of Texas Dallas Division, for permission to engage Doherty Long Wagner L.L.P. as its special counsel. The Debtor relates that it holds very valuable claims, one of which is a legal malpractice claim, against its former in house counsel, W. Ralph Canada, and needs a special litigation counsel to pursue that cause of action. The Debtor wants to employ Doherty Long as special counsel for the specific purpose of pursuing professional malpractice and negligence, breach of fiduciary duty and contract claims against Mr. Canada. Mr. Canada has a claim against the Debtor's estate in excess of $6 million, which the Debtor intends to dispute. The primary attorneys on this matter are Brett Wagner, Esq., and Mark Long, Esq. They agreed to charge an hourly rate of $250 for their work. Mr. Wagner may call upon additional attorneys in his firm to assist in this case. Doherty Long professional billing rates range from $50 to $100 per hour. Additionally, Doherty Long will be paid a contingency fee, which is a percentage of the total reduction in Mr. Canada's claim: -- 20% of the first $2 million reduction in Mr. Canada's claim, -- 15% of the next $2 million reduction in Mr. Canada's claim, and -- 10% of the remaining amount of Mr. Canada's claim if it is fully disallowed. -- 40% if an affirmative recovery over and above the disallowance or offset of Mr. Canada's claim is obtained. Headquartered in Dallas, Texas, The Heritage Organization, L.L.C., filed a chapter 11 protection on May 17, 2004 (Bankr. N.D. Tex. Case No. 04-35574). When the Company filed for protection from its creditors, it listed both estimated debts and assets of over $10 million. INTEGRATED HEALTH: Rotech Wants More Time to File Final Report -------------------------------------------------------------- RoTech Medical Corporation and its subsidiaries ask the U.S. Bankruptcy Court to further: (a) delay the automatic entry of a final decree closing their Chapter 11 cases until November 8, 2004; and (b) extend the date for filing a final report and accounting to the earlier of October 8, 2004 or 15 days before the hearing to consider any motion closing the Rotech Debtors' Chapter 11 cases. Alfred Villoch, III, Esq., at Young Conaway Stargatt & Taylor, in Wilmington, Delaware, tells the Court that since Rotech's Plan became effective, the Rotech Debtors have been working diligently to review and reconcile the claims filed in their bankruptcy cases and to prosecute or resolve pending claim objections. To date, the Rotech Debtors have made substantial progress in their claims administration process. According to Mr. Villoch, the Rotech Debtors just recently made an initial distribution to allowed claimholders under the Rotech Plan. However, there are still disputed claims that have not been resolved or litigated. The Rotech Debtors are also preparing to present evidence in connection with certain adjourned claim objections to the Court. Mr. Villoch states that once the remaining issues are resolved, the Rotech Debtors expect making a second and final distribution in their Chapter 11 cases. The Rotech Debtors point out that delay in the entry of a final decree will ensure a full opportunity for them to continue to prosecute or resolve the pending claim objections and other matters. As to Rotech's request to extend the deadline for filing the final report and accounting, Mr. Villoch explains that the Court's jurisdiction may still be necessary while the claims administration process is ongoing. The Court will convene a hearing on August 4, 2004 to consider the Rotech Debtors' request. By application of Del.Bankr.LR 9006-2, the deadline for Rotech to file a final report is automatically extended through the conclusion of that hearing. Headquartered in Owings Mills, Maryland, Integrated Health Services, Inc. -- http://www.ihs-inc.com/-- IHS operates local and regional networks that provide post-acute care from 1,500 locations in 47 states. The Company filed for chapter 11 protection on February 2, 2000 (Bankr. Del. Case No. 00-00389). Michael J. Crames, Esq., Arthur Steinberg, Esq., and Mark D. Rosenberg, Esq., at Kaye, Scholer, Fierman, Hays & Handler, LLP, represent the Debtors in their restructuring efforts. On September 30, 1999, the Debtors listed $3,595,614,000 in consolidated assets and $4,123,876,000 in consolidated debts. (Integrated Health Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., 215/945-7000) INT'L BIOCHEMICAL: Trustee Hires Ragsdale Beals as Attorneys ------------------------------------------------------------ Herbert C. Broadfoot II, the appointed Chapter 11 Trustee for International Biochemical Industries, Inc.'s case, sought and obtained approval from the U.S. Bankruptcy Court for the Northern District of Georgia, Atlanta Division, to employ Ragsdale, Beals, Hooper & Seigler, LLP to represent him as general counsel. Mr. Broadfoot tells the Court that he has selected Ragsdale Beals because it has considerable experience in matters of this nature. The Firm will represent the Trustee in connection with carrying out his duties required under the Bankruptcy Code. The Ragsdale Beals attorneys currently bill at: Professionals Designation Billing Rate ------------- ----------- ------------ Herbert C. Broadfoot II Attorney $275 per hour John W. Ragsdale, Jr. Attorney $275 per hour James R. Schulz Attorney $250 per hour William R. Patterson Attorney $240 per hour Herbert H. Gray III Attorney $235 per hour S. Lynn Robinson Paralegal $85 per hour Kelly B. Lyons Paralegal $75 per hour Headquartered in Atlanta, Georgia, International BioChemical Industries, Inc. -- http://www.bioshield.com/-- is a maker of concentrated antiviral and antimicrobial products. The Company filed for chapter 11 protection on April 5, 2004 (Bankr. N.D. Ga. Case No. 04-92814). Jesse Blanco, Jr., Esq., represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $114,500 in assets and $18,465,934 in debts. INTERNET SATELLITE: Files for Chapter 11 Protection in Florida -------------------------------------------------------------- Internet Satellite Platform, Inc. (ISAT), the leading provider of wholesale satellite-based Internet services, has filed for Chapter 11 Bankruptcy Protection and is seeking interim and long-term funding. ISAT, which has over 200+ active Internet Service Provider and Rural Telco partners and over 4,000 subscribers, filed for Chapter 11 Bankruptcy protection on June 9, 2004, after management was unable to close on a second $500k tranche of a $2m Series C round it had closed in April 2004. Not being able to close on the second tranche of the Series C round left ISAT's management unable to continue its operations at a level that the business and its partners demanded. ISAT's management has been in discussions with several entities from within the industry since June 9, 2004 to secure needed interim and permanent funding and believes that it will be able to close an interim funding round in the near future. To date however, management has been unable to secure funding. "If ISAT is able to assemble the right combination of funding partners, from within or outside the industry, we are confident that our satellite Internet service can continue to be the best performing and lowest priced Internet via satellite offering in the Americas," said Mario J. Pino, President of ISAT. Until the filing, ISAT built its wholesale satellite Internet business steadily, and completed 2003 with revenues of approximately $2 million. ISAT earns revenue on a wholesale basis from end-users that subscribe to the Internet via satellite service through it's 200+ active partners who retail the service to their dial-up subscribers residing predominately in rural areas of the United States. To deliver the Internet via satellite service, ISAT leases capacity on two (2) of SES AMERICOM satellites, AMC6 and AMC4. ISAT's primary service is delivered within the United States via the AMC6 satellite, in the KU band, with service also being offered to the C band dish market via the AMC4 satellite. The Internet via satellite signal is uplinked to these satellites from two (2) teleport facilities located in Georgia (Crawford Communications) and Maryland (SES AMERICOM). ISAT's management believes that its flagship high-speed Internet solution, SatXpress, optimizes the structural economics of satellite technologies while capitalizing on the satellite strengths: One-way broadcasting. The wholesale broadband solution combines standards-based satellite technology with terrestrial- based dialup service allowing ISPs and rural telco operators to brand this solution to reach consumers and businesses in areas where broadband access is not available. About Internet Satellite Platform, Inc. Internet Satellite Platform, Inc. is a privately held Florida corporation established to leverage the best in Internet and satellite technologies. The company's highly reliable and scalable satellite-based platform enables ISAT to extend broadband Internet services through its ISP and Data CLEC partners to subscribers living primarily in rural areas of the U.S., Canada and Latin America, where other forms of terrestrial (e.g. cable modem or DSL) broadband services are not available. ISAT is 19.9% owned by SES AMERICOM, the largest supplier of satellite services in the United States. ISAT utilizes SES AMERICOM's hybrid AMC-6 satellite optimized to serve the enterprise, Internet/ISP, VSAT, and media markets. As a member of the SES GLOBAL family, SES AMERICOM is able to provide end-to-end telecommunications solutions to any region in the world. For further information on ISAT or its solutions, visit http://www.isatplatform.com/ INTERNET SATELLITE: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------------- Debtor: Internet Satellite Platform Inc. 201 Park Place, Suite 106 Altamonte Springs, Florida 32701 Bankruptcy Case No.: 04-06672 Type of Business: The Debtor is the leading provider of wholesale satellite-based Internet services. See http://www.isatplatform.com/ Chapter 11 Petition Date: June 9, 2004 Court: Middle District of Florida (Orlando) Judge: Karen S. Jennemann Debtor's Counsels: Gavin D. Lee, Esq. 201 Park Place, Suite 204 Altamonte Springs, FL 32701 Tel: 407-339-5151 Robert B. Branson, Esq. Law Office of Robert Branson 1524 East Livingston Street Orlando, FL 32803 Tel: 407-894-6834 Fax: 407-896-7370 Total Assets: $577,946 Total Debts: $577,946 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Crawford Communications, Inc. $114,425 B2C2 $66,610 Baker & Mckinzie $63,890 Microsoft Capital Credit Corporation $62,445 Main Data, s. r. b. $50,375 Saturn Distributing $36,927 SEC Capital Services $33,329 Mentat, Inc. $30,000 United Healthcare $27,167 Cisco Capital Credit Corporation $24,300 Del Financial Services $16,299 Joseph E. Fritts $14,503 Red Rocket Incorporated $13,446 Hewlett Packard Financial Services $13,026 Crawford Communications, Inc. $12,781 Lorenzo Thompson CPA $10,000 Nextel Communications $5,103 Kischman Corporation $4,585 KarlNet, Inc. $4,008 Market Models $3,826 KAISER ALUMINUM: Retirees' Panel Taps ABD Insurance as Consultant ----------------------------------------------------------------- Pursuant to Sections 1114(b)(2), 1103(a) and 328(a) of the Bankruptcy Code, the Official Committee of Retired Salaried Employees in Kaiser Aluminum Corporation's chapter 11 proceedings ask the Court for permission to retain ABD Insurance & Financial Services, Inc. The Committee wants to retain ABD as its retiree benefits consultant. The Committee asks that the retention be approved nunc pro tunc to March 4, 2004. Retirees Committee Chairman John E. Daniel explains that the Committee wants ABD to identify and evaluate the Retirees' options for replacement medical and prescription drug insurance coverage. ABD will gather data concerning various options, will explore the feasibility of, and compare the advantages and disadvantages of the options, and will make recommendations to the Retirees Committee with respect to the options and their anticipated costs. Terri Ezaki will serve as ABD's project leader for the Engagement. Ms. Ezaki has been an employee benefits broker and consultant for 10 years and has placed medical coverage for both active and retiree employees during her tenure. Ms. Ezaki is licensed as a Life Agent in the state of California. ABD entered into a Scope of Services Agreement dated March 5, 2004, with the Kaiser Aluminum Salaried Retirees Association, an association of retired salaried employees of the Debtors. Under the Engagement Agreement, KASRA agreed to pay a $30,000 fee to ABD in full compensation for all services to be rendered by ABD to the Retirees Committee, and all costs to be incurred by ABD, in connection with the Engagement. KASRA paid ABD's fee in three $10,000 payments on March 30, 2004, April 15, 2004, and May 1, 2004. KASRA agreed to advance ABD's $30,000 fee from its own funds for the benefit of the Retirees Committee due to the termination date for the Retirees' medical insurance coverage. Because the services to be rendered by ABD will benefit all of the Retirees rather than just those Retirees who are members of KASRA, Mr. Daniel asserts that ABD's fee is a Retirees Committee expense in connection with performing its duties under Section 1114. Accordingly, the Retirees Committee will seek reimbursement of ABD's fee and will repay KASRA for the amounts advanced by it to ABD. Ms. Ezaki assures the Court that the firm does not represent or hold any interest adverse to the Debtors, their estates, or any party-in-interest, with respect to the matters on which it is to be employed. Headquartered in Houston, Texas, Kaiser Aluminum Corporation operates in all principal aspects of the aluminum industry, including mining bauxite; refining bauxite into alumina; production of primary aluminum from alumina; and manufacturing fabricated and semi-fabricated aluminum products. The Company filed for chapter 11 protection on February 12, 2002 (Bankr. Del. Case No. 02-10429). Corinne Ball, Esq., at Jones, Day, Reavis & Pogue, represent the Debtors in their restructuring efforts. On September 30, 2001, the Company listed $3,364,300,000 in assets and $3,129,400,000 in debts. (Kaiser Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., 215/945-7000) KMART: Asks Court to Expunge Preference Defendants' $31M Claims --------------------------------------------------------------- In reviewing their books and records, Kmart Corporation and its debtor affiliates found that they made payments to three claimants that were avoidable under Section 547 of the Bankruptcy Code. Through preference actions, the Debtors sought to avoid certain payments made to the Preference Defendants within 90 days of the Petition Date. In light of the payments made to the Preference Defendants, Andrew Goldman, Esq., at Wilmer, Cutler, Pickering, LLP, in New York, asserts that the Preference Defendants are no longer entitled to a claim pursuant to Section 502(d). It would be unfair for the Preference Defendants to be permitted to assert and receive a distribution on a claim as other creditors who have not received similar payments may do. Accordingly, the Debtors ask the Court to expunge the Preference Defendants' claims: Claimant Claim No. Claim Amount -------- --------- ------------ Deloitte Consulting, LP 48934 $14,730,843 Haas Racing, Inc. 53473 4,000,000 41340 11,825,651 Sun Trust Bank 36401 945,000 36526 1,125,000 (Kmart Bankruptcy News, Issue No. 77; Bankruptcy Creditors' Service, Inc., 215/945-7000) KOMTEK INC: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------- Debtor: KomTek, Inc. 40 Rockdale Street Worcester, Massachusetts 01606 Bankruptcy Case No.: 04-44249 Type of Business: The Debtor is a manufacturing company that offers casting and forging capabilities under a single management structure. See http://www.komtek-kei.com/ Chapter 11 Petition Date: July 26, 2004 Court: District of Massachusetts (Worcester) Judge: Henry J. Boroff Debtor's Counsel: Steven A. Kressler, Esq. Kressler & Kressler, P.C. 11 Pleasant Street, Suite 200 Worcester, MA 01609 Tel: 508-791-8411 Fax: 508-752-6168 Estimated Assets: $0 to $50,000 Estimated Debts: $1 Million to $10 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ The CIT Group $2,600,000 1211 Avenue of The Americas New York, NY 10036 US Small Business Administration $993,000 Thomas P. O'Neil Bldg., Causeway St. Boston, MA 02205 Cannon-Muskegon Corp. $174,334 AllVac/Allegheny Teledyne Co. $142,065 SMS Eumuco, Inc. $131,225 Peterboro Tool Co., Inc. $113,465 Carpenter Technology Corp. $103,506 Cartech, Inc. $101,811 Steel Workers Pension Trust $89,881 Commerce Bank $86,327 Northeastern University $86,093 Fleet Bank $85,300 Massachusetts Electric $82,294 E.V.L. Tool & Mold Co., Inc. $79,888 Stowe & Degon $75,000 Aerodyne Ulbrich Alloys, Inc. $63,470 Mass Materials Research, Inc. $61,517 IHS Inc. $47,352 Rolled Alloys Inc. $43,831 Cameron & Mittleman LLP $41,930 LEADING BRANDS: Settles Litigation with Three Licensors ------------------------------------------------------- All litigation and disputes among Futuristic Brands USA, Inc., New Sun Beverages Company (USA) Inc., Zemper International, SA, and Thomas C. Lines, -- the Licensors -- and Leading Brands, Inc. (NASDAQ:LBIX) and its subsidiaries and its Chairman & CEO Ralph D. McRae have been settled. No payment was made to Leading Brands, Inc. or its subsidiaries or management by or on behalf of any of the Licensors and no payment was made by the Leading Brands or Mr. McRae to any of the Licensors. The Licensors withdraw and retract any of their statements in respect of Leading Brands, Inc. or Ralph D. McRae. In October 2003, the action was commenced seeking damages for improper and fraudulent conduct by those persons and their associates and to prevent the improper termination of three license agreements. Issues surrounding the three license agreements then became the subject of a lawsuit and arbitration proceeding pending in Massachusetts against the Company initiated by certain of the licensors. Leading Brands, Inc. and its subsidiaries are engaged in the bottling, distribution, sales, merchandising and brand management of beverages and food products across North America. The Company primarily operates in the following integrated activities: beverage packaging, food and beverage sales and distribution, as well as brand licensing and development. At February 29, 2004, Leading Brands' stockholders' deficit widened to $17,524,051 from a $15,676,561 deficit at February 28, 2003. MACMILLAN GOLD: Reports Positive Development in Mexico Drilling --------------------------------------------------------------- MacMillan Gold Corporation reports the additional positive results from the Phase IV drilling program completed at the Cerro de Oro Gold and Silver Property in Zacatecas, Mexico. Thus far in 2004, the Company has completed twenty-seven reverse circulation drill holes totaling 4,389 metres. Results for nine holes were released May 13, 2004 with an additional twelve holes released July 08, 2004. The remaining six holes as shown in the attached table include what are the most exciting results since we began drilling on this property in July of 2003. The highlight is Hole 54, which intersected from surface 41.1 m. of 1.44 g Au/t, 119.9 g Ag/t, 1.73% lead and 1.55% zinc. All drill holes were vertical 5-inch diameter reverse circulation and were completed by Layne de Mexico, S.A. de C.V. under the supervision of Mr. David Bending, P.Geo., Vice President of Exploration for MacMillan, and a Qualified Person. Samples collected from each 1.524 m. interval were assayed by BSI Inspectorate Laboratories of Sparks, Nevada with sample preparation completed at their Mexican facilities. Reported intercepts are approximate true widths. Hole 23 was drilled in the South Contact Target and intersected mineralization including 3.6 m. of 0.31 g Au/t and 9.2 g Ag/t. MacMillan plans to follow up on the South Contact Target with diamond drilling at greater depth. Holes 50 and 51 were drilled in the San Leonides Target in the central portion of the Cerro de Oro valley, which extends over 3 km east to west and over 2 km north to south. Drill locations were selected from targets identified in the Induced Polarization surveys conducted in January 2004 by Zonge Engineering and Research Organization. Visual results of the Induced Polarization are disclosed at http://www.macmillangold.com. Hole 50 intersected 9.1 m. of 0.40 g Au/t and 10.9 g Ag/t including 1.5 m. of 1.40 g Au/t and 33.7 g Ag/t. Hole 51 intersected 41.1 m. of 28.9 g Ag/t including 4.6 m. of 103.3 g Ag/t and separately 4.6 m. of 52.6 g Ag/t with 0.26% zinc. These holes continue to indicate the potential for a large size disseminated gold and silver deposit within the San Leonides Target. Holes 52 and 53 were drilled to further explore the Maderito Target discovered in Hole 29 reported May 13, 2004. Hole 29 intersected 30.5 m. of 0.81 g Au/t and 13.6 g Ag/t including 13.7 m. of 1.41 g Au/t, 14.0 g Ag/t and 0.17% zinc. Hole 52 intersected 9.1 m. of 0.39 g Au/t including 3.0 m. of 0.58 g Au/t. Hole 53 was weakly mineralized with no intersects to report. Hole 54 was also drilled to test Maderito and intersected 41.1 m. starting at surface of 1.44 g Au/t, 119.9 g Ag/t, 1.73% lead and 1.55% zinc. This intersect included 10.7 m. starting at surface of 2.0 g Au/t, 275.7 g Ag/t, 3.8% lead and 1.5% zinc. Mr. George A. Brown, President, CEO and Director reports that the strong values and proximity to surface of the Hole 54 intersects combined with the excellent logistics at the Cerro de Oro provide MacMillan with strong indications that Cerro has excellent exploration growth potential. Logistics include road access, abundant water, an existing power line onto the property, and a nearby functional mining community at Conception del Oro. A follow up drilling program is now being planned with the aim of determining whether a significant resource exists at Maderito. Additional drilling will also be included at the numerous other target areas at Cerro including the San Leonides. The aim at San Leonides will be to attempt to expand upon existing results from the Induced Polarization targeted drilling to develop a resource of large volume lower grade disseminated gold and silver. Management feels there are many geological similarities at Cerro to the poly-metallic deposit reported by Western Silver at their Penesquito nearby in Zacatecas. The next phase of drilling at Cerro will include diamond drilling so that we can obtain more precise structural and grade information particularly in the contact zone targets such as the Maderito and the previously productive Santa Rosa Zones. Diamond drill core will also provide samples of mineralized intervals, which can be utilized for preliminary metallurgical testing. Diamond drilling will also enable the Company to test some targets at greater depth and test areas where ground water made reverse circulation drilling less reliable. Targets for diamond drilling will be selected after we complete our geological interpretation of all 56 drill holes to date. According to the Company, MacMillan is adequately funded to complete all of the exploration programs budgeted for this year on its eight Mexican gold and/or silver projects. Management feels that proceeding diligently with good methodical exploration programs is the means to provide increased asset value over time to our shareholders. MacMillan Gold Corp. is a Canadian resource company listed on the TSX Venture Exchanges: Symbol "MMG" As of March 31, 2004, the Company reported a $13,865,383 stockholders deficit compared to a $13,689,919 deficit at September 30, 2003. MAJESCOR: Closes $700K Financing with 4 Quebec-based Institutions ----------------------------------------------------------------- Majescor Resources agreed to sell via non-brokered private placements 3.6 million units at a price of $0.25 per unit for a total of $900,000. Each unit consists of one common share and one common share purchase warrant. Each common share purchase warrant will be exercisable for a period of 12 months at $0.30 and at a price of $0.35 for a further 12 months. All securities issued will be subject to a four (4) month hold period. The company closed $700,000 out of the $900,000 with four Quebec- based institutions: -- SIDEX $200,000; -- James Bay Development Corporation $200,000; -- FTQ Nord du Qu,bec $200,000; -- SODEMEX I, II, $100,000. The remaining $200,000 will close shortly. Andre Audet, Chairman and Chief Executive Officer of Majescor Resources commented, "We are very pleased to have the support of the Quebec venture and regional development funds. These funds will help advance our key Portage project in the Otish Mountains". Majescor is a well-funded exploration company with a large portfolio of diamond properties in Quebec, as well as projects in Nunavut with Diamonds North Resources, Ltd., in the Northwest Territories with Tyhee NWT Corporation and Diamondex Resources, and in the USA with Dunsmuir Ventures, Ltd., and Firestone Diamonds, PLC. As of February 29, 2004, Majescor's stockholders' deficit widened to $6,856,435 from a $3,910,870 deficit at February 28, 2003. MIRANT CORPORATION: Wants to Implement Employee Severance Plan -------------------------------------------------------------- Robin E. Phelan, Esq., at Haynes and Boone, LLP, in Dallas, Texas, informs Judge Lynn that aside from the Key Employee Retention Program, Mirant Corporation and its debtor affiliates intend to provide a severance plan for Management Council members and to provide for the continuation of the Mirant Services Severance Pay Plan currently in effect for non-Management Council Key Employees until one year after the Debtors' emergence from Chapter 11. The Debtors believe that the implementation of a KERP Severance Plan serves a different, but equally important, function than the performance-based or stay-based payments that the Key Employees would receive under the KERP. Mr. Phelan explains that the KERP Severance Plan is intended to provide financial downside protection to the Key Employees and their families against a potential sudden loss of employment. In the absence of a downside protection, Mr. Phelan is concerned that employees might feel compelled to leave the Debtors' employ in search of the financial security that alternative employment with an employer in a more stable environment would otherwise provide. Pursuant to Section 363(b) of the Bankruptcy Code, the Debtors seek the Court's authority to: (a) implement the KERP Severance Plan; (b) continue the General Severance Plan currently in effect for non-Key Employees; (c) modify the Change in Control Documents; and (d) modify the severance waiver to exclude claims arising under Retention Agreements. KERP Severance Plan Mr. Phelan tells the Court that under the KERP Severance Plan, until one year after the Debtors' emergence from Chapter 11, Management Council Key Employees are entitled, upon termination without cause, to a severance payment totaling 24 months' base salary plus target Short-Term Incentive and 24 months of medical benefits. Under the KERP Severance Plan, non-Management Council Key Employees are entitled, upon termination without cause, to participate in the General Severance Plan the Court previously approved until one year after the Debtors' emergence from Chapter 11. The Debtors believe that the availability of the KERP Severance Plan during the year after emergence from Chapter 11 provides an additional level of security as the Debtors approach their emergence from Chapter 11. Any amounts paid under the KERP Severance Plan are in addition to amounts paid to a severed employee under the terms of Phase I and Phase II of the KERP. Modification of Change in Control Benefits Prior to the Petition Date, Mr. Phelan relates that the Debtors implemented the Mirant Services LLC Change in Control Severance Plan and the Mirant Services LLC Executive Change in Control Severance Plan. The Change in Control Severance Plans were designed to provide severance benefits to the Debtors' employees whose employment is terminated subsequent to a change in control of Mirant. In addition, prior to the Petition Date, the Debtors implemented the Amended and Restated Mirant Corporation Change in Control Benefit Plan Determination Policy. The CIC Determination Policy governs the determination of a "change in control" of Mirant and the benefits to be provided to employees under certain benefit plans in the event of a Change in Control. Besides establishing the definition of Change in Control, the CIC Determination Policy provided for the vesting and payment of accrued obligations and benefits under the Incentive Plan, Non-Qualified Benefit Plans, Supplemental Compensation Plan, Retention Agreements and Change in Control Agreements. Furthermore, a number of senior employees, some of whom are Key Employees, are parties to prepetition change in control agreements with the Debtors that provide for benefits that are in excess of entitlements under the Change in Control Severance Plans. The Debtors estimate that there are contingent claims against the Debtors arising under the Change in Control Documents totaling in excess of $110,000,000 in the aggregate. About $22,000,000 of the aggregate claim represents Key Employees' contingent claims against the Debtors arising under the Change in Control Documents. As part of the global resolution of various outstanding employee compensation and benefit issues identified by the Examiner and as a condition precedent to implementation of the KERP and the KERP Severance Plan with respect to any particular employee and modification of the current General Severance Plan, the Debtors will modify or otherwise terminate the Change in Control Documents to eliminate any liability that may be triggered by the Debtors' Chapter 11 cases or transactions in connection with the Debtors' emergence from Chapter 11. Continuation of General Severance Plan In addition to living with the day-to-day uncertainty regarding their own job security during the Debtors' Chapter 11 cases, Mr. Phelan says that the Debtors' employees also possess very real and personal concerns about their job security upon and after the Debtors' emergence from Chapter 11. The Debtors have discussed these concerns with the Examiner and have determined that providing a greater degree of certainty with respect to employee obligations is in the best interests of the Debtors as well as their employees. The Debtors believe that it is appropriate that, in connection with the modification of the Change in Control Documents, they continue the General Severance Plan currently in effect for employees until one year after the Debtors' emergence. The Debtors believe that the availability of the current General Severance Plan through the year after emergence from Chapter 11 provides an additional level of certainty as the Debtors approach emergence and that the Debtors' employees value the certainty substantially more than they value any contingent obligations owing under the Change in Control Documents. Thus, while payments to a severed employee under the previously approved General Severance Plan or the KERP Severance Plan will reduce any distribution that the employee is otherwise entitled to receive on account of an allowed claim under any employment or severance agreement, the receipt of enhanced severance will be in lieu of entitlement to treatment as an administrative claim, any claim a severed employee may have on account of any Retention Agreements, employment agreements, severance agreements or employee benefit plans. Modification of Severance Waivers Pursuant to the Court's order, dated November 19, 2003, employees are not required to waive claims arising under "employment and/or severance agreements" as a condition precedent to receiving enhanced severance under the Debtors' General Severance Plan so that they do not have to weigh the probability of a successful recovery on contractual claims against the certainty of receiving a relatively reduced severance payment while facing unemployment. While the Debtors did not previously expressly include Retention Agreements within the definition of "employment agreement" as used in the November 19th Order, thereby requiring severed employees to waive claims arising under their Retention Agreements to receive enhanced severance, the Debtors believe that it is appropriate that the term "employment agreement" be expanded to include Retention Agreements, so that severed employees under the General Severance Plan as well as the KERP Severance Plan are not similarly compelled to weigh the probability of a distribution on account of a contractual claim under the Retention Agreements against the certainty of receiving the enhanced severance. Moreover, the Debtors have determined that waiving claims against active employees for the recovery of amounts arising from the Initial Funding is fair and reasonable and benefits the Debtors' estates. Although no litigation currently exists between the parties, the threat of litigation exists in light of the contentions by certain parties that the Initial Funding was inappropriate and represents an avoidable transfer. Nevertheless, the Debtors believe that the uncertainties and costs associated with litigating the claims will outweigh the benefits, if any, that would be derived from a successful avoidable transfer action. Retention Agreements Prior to the Petition Date, the Debtors were parties to various retention agreements with certain of their employees, including certain of the Key Employees. On the Petition Date, the Debtors sought and obtained Court authority to make payments under the Retention Agreements on an interim basis for 50 days. With the expiration of the initial 50-day period, the Debtors ceased paying the employees under their Retention Agreements. Accordingly, it is likely that employees who are parties to the Retention Agreements have claims against the Debtors for unpaid amounts arising under the Retention Agreements. As part of their ongoing contract assessment analysis, the Debtors anticipate that they will reject the Retention Agreements. The Debtors believe that the KERP will replace the function of the Retention Agreements and assist the Debtors in retaining employees entitled to participate in the KERP in a manner that is more consistent with the Debtors' current goals and circumstances than the terms of the Retention Agreements. Nevertheless, to avoid a potential windfall as a result of the implementation of the KERP to any Key Employee who also is party to a Retention Agreement, any distributions based on allowed claims under the Retention Agreements arising from payments accruing after January 14, 2004 under the terms of the Retention Agreements will be reduced by the amount of any of the Remaining Payments and any payments under Phase II of the KERP paid to that Key Employee. Mr. Phelan contends that employees should not be compelled to relinquish prepetition claims under Retention Agreements simply because they need money currently to support their families while they are unemployed. The Debtors believe that it is appropriate that the term "employment agreement" as used in the November 19th Order be expanded to include Retention Agreements, so that severed employees are not compelled to weigh the probability of a distribution on account of a contractual claim against the certainty of receiving the enhanced severance. As provided in the November 19th Order, any distributions an employee ultimately receives on account of an allowed claim arising under a Retention Agreement will be reduced by the amount of the severance payment. Headquartered in Atlanta, Georgia, Mirant Corporation -- http://www.mirant.com/-- together with its direct and indirect subsidiaries, generate, sell and deliver electricity in North America, the Philippines and the Caribbean. The Company filed for chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03- 46590). Thomas E. Lauria, Esq., at White & Case LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $20,574,000,000 in assets and $11,401,000,000 in debts. (Mirant Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 215/945-7000) NEW WORLD PASTA: Committee Wants to Hire Fried Frank as Counsel --------------------------------------------------------------- The Official Unsecured Creditors Committee appointed in New World Pasta Company and its debtor-affiliates' cases, ask the U.S. Bankruptcy Court for the Middle District of Pennsylvania for permission to hire Fried, Frank, Harris, Shriver & Jacobson LLP as its counsel. The Committee submits that it is necessary to employ Fried Frank to ensure that the interests of all of the Debtors' creditors are adequately represented in an efficient and effective manner. Fried Frank will provide its expertise with respect to bankruptcy and restructuring related issues and will act as general bankruptcy counsel for the Committee. Specifically, Fried Frank will: a) provide legal advice with respect to the Committee's rights and interests, including without limitation, in the review and negotiation of any plan of reorganization and related documents; b) respond on behalf of the Committee to any and all applications, motions, answers, orders, reports and other pleadings in connection with the administration of the estates in these cases; c) file pleadings, applications and adversary proceedings to the extent necessary on behalf of the Committee; and d) perform any other legal services requested by the Committee in connection with these Cases and the confirmation and implementation of a plan of reorganization in the Debtors' Cases. Fried Frank has indicated a willingness to act on behalf of the Committee in all of these respects. Bonnie Steigart, Esq., reports that Fried Frank professionals currently bill: Designation Billing Rate ----------- ------------ Partners $595 to $925 per hour Of Counsel $515 to $850 per hour Special Counsel $515 to $590 per hour Associates $275 to $465 per hour Legal Assistants $130 to $205 per hour Headquartered in Harrisburg, Pennsylvania, New World Pasta Company -- http://www.nwpasta.com/-- is the leading dry pasta manufacturer in the United States. The Company filed for chapter 11 protection on May 10, 2004 (Bankr. M.D. Pa. Case No. 04-02817). Eric L. Brossman, Esq., at Saul Ewing LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it estimated debts and assets of over $100 million. OMEGA HEALTHCARE: Publishes Second Quarter 2004 Financial Results ----------------------------------------------------------------- Omega Healthcare Investors, Inc. (NYSE:OHI) reported its results of operations for the quarter ended June 30, 2004. The Company also reported Funds From Operations available to common stockholders for the three months ended June 30, 2004 of $5.1 million. The $5.1 million of FFO available to common stockholders for the quarter includes the impact of $2.3 million of non-cash preferred stock redemption charges and a $3.0 million charge relating to professional liability claims associated with the Company's former owned and operated facilities. The Company has disposed of or re-leased all such facilities and no longer operates any facilities. FFO is presented in accordance with the guidelines for the calculation and reporting of FFO issued by the National Association of Real Estate Investment Trusts. GAAP Net Income After adjusting for the loss from discontinued operations of $137 thousand for the three months ended June 30, 2004, the Company reported a net loss available to common stockholders of ($376) thousand and operating revenues of $22.3 million. This compares to net income available to common stockholders of $1.8 million and operating revenues of $21.5 million for the same period in 2003. Second Quarter 2004 Highlights And Other Recent Developments -- Increased the Company's $125 million revolving credit facility to $175 million. -- Fully redeemed the Company's $57.5 million, 9.25% Series A preferred stock. -- Completed two separate acquisitions totaling $35 million of new investments. Financing Activities And Borrowing Arrangements Credit Facility Increased to $175 Million On April 30, 2004, the Company exercised its right to increase the revolving commitments under its existing $125 million credit facility by an additional $50 million, to $175 million. All other terms of the credit facility, which closed on March 22, 2004, remain the same. The increase of the credit facility's revolving commitments provides the Company with a current undrawn and unused balance of approximately $135 million. Bank of America, N.A. serves as Administrative Agent for the credit facility. 9.25% Series A Preferred Redemption On April 30, 2004, the Company fully redeemed its 9.25% Series A Cumulative Preferred Stock (NYSE:OHI PrA). The Company redeemed the 2.3 million shares of Series A at a price of $25.57813, comprising the $25 liquidation value and accrued dividend. Under FASB-EITF Issue D-42, "The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock," the repurchase of the Series A preferred stock resulted in a non-cash charge to net income available to common shareholders of approximately $2.3 million reflecting the write-off of the original issuance costs of the Series A preferred stock. This non- cash charge did not have any effect on the Company's net worth. Second Quarter 2004 Results Revenues for the three months ended June 30, 2004 were $22.3 million. Expenses for the three months ended June 30, 2004 totaled $7.2 million, comprised of $5.4 million of depreciation and amortization expense and $1.8 million of general, administrative and legal expenses. Cash interest expense for the quarter was $5.8 million. In addition, the Company recorded a $3.0 million charge associated with professional liability claims. As a result of mediation discussions in late May and June, the Company settled a number of professional liability claims that were associated with the Company's former owned and operated portfolio. "We are pleased to have settled the six most problematic patient liability lawsuits that arose during 2000 and 2001," stated C. Taylor Pickett, President and Chief Executive Officer of Omega Healthcare Investors, Inc. "With only five lawsuits remaining, all of which have insurance coverage beyond certain deductibles, we believe we have eliminated the balance sheet risks that were created in 2000 and 2001 when Omega was the licensed operator of certain facilities. Furthermore, the expense recorded during the quarter is carved out of the covenants for both our credit facility and our bonds; therefore, Omega is not limited in any way, including our ability to pay dividends." During the three-month period ended June 30, 2004, the Company sold one closed facility realizing proceeds of approximately $50 thousand, net of closing costs and other expenses, resulting in a loss of approximately $137 thousand. FFO Results For the three months ended June 30, 2004, reportable FFO available to common stockholders was $5.1 million compared to $8.5 million for the same period in 2003 due to the factors mentioned above. The $5.1 million of FFO for the quarter includes the impact of $2.3 million of non-cash preferred stock redemption charges and a $3.0 million charge relating to professional liability legal settlements associated with the Company's former owned and operated facilities. FFO is presented in accordance with the guidelines for the calculation and reporting of FFO issued by the National Association of Real Estate Investment Trusts. However, when excluding the $5.3 million of redemption and professional liability claim charges described above in 2004 and certain non- recurring revenue and expense items in 2003, adjusted FFO was $10.5 million or $0.22 per common share compared to $11.2 million or $0.21 per common share for the same period in 2003. For further information, see the attached "Funds From Operations" schedule and notes. Portfolio Developments Investment Activity During the second quarter of 2004, the Company closed on new investments totaling approximately $35 million. The investment activity involved two separate transactions - one was the $26 million purchase of three facilities in New England and the other was a $9.4 million acquisition of two facilities in Texas. Yields for the two investments were 10.25% and 11%, respectively. Both acquisitions were done on behalf of existing tenants and the accompanying leases were combined with existing Master Leases. Net investment activity for the quarter was $30 million reflecting the payoff of a $4.6 million mortgage loan on 5 facilities in Missouri. Other Assets Closed Facilities On April 30, 2004, the Company sold one closed facility located in Illinois for net proceeds of approximately $50,000, resulting in a loss of approximately $137,000. At the time of this press release, the Company has three remaining closed facilities with a total net book value of approximately $1.8 million. Sun Healthcare Group, Inc. Common Stock Under the Company's restructuring agreement with Sun, previously announced on January 26, 2004, the Company received the right to convert deferred base rent owed to the Company, totaling approximately $7.8 million, into 800,000 shares of Sun's common stock, subject to certain non-dilution provisions and the right of Sun to pay cash in an amount equal to the value of that stock in lieu of issuing stock to the Company. On March 30, 2004, the Company notified Sun of its intention to exercise its right to convert the deferred base rent into fully paid and non-assessable shares of Sun's common stock. On April 16, 2004, the Company received a stock certificate for 760,000 shares of Sun's common stock and cash in the amount of approximately $0.5 million in exchange for the remaining 40,000 shares of Sun's common stock. The Company is accounting for these shares as "available-for-sale marketable securities" with changes in market value recorded in equity. Dividends On July 20, 2004, the Company's Board of Directors announced a common stock dividend of $0.18 per share. The common stock dividend will be paid August 16, 2004 to common stockholders of record on July 30, 2004. At the date of this release, the Company had approximately 46.6 million common shares outstanding. Also on July 20, 2004, the Company's Board of Directors declared its regular quarterly dividends for all classes of preferred stock, payable August 16, 2004 to preferred stockholders of record on July 30, 2004. Series B and Series D preferred stockholders of record on July 30, 2004 will be paid dividends in the amount of approximately $0.53906 and $0.52344, per preferred share, respectively, on August 16, 2004. The liquidation preference for each of the Company's Series B and D preferred stock is $25.00. Regular quarterly preferred dividends represent dividends for the period May 1, 2004 through July 31, 2004 for the Series B and Series D preferred stock. 2004 And 2005 Adjusted FFO Guidance Affirmed The Company affirmed its 2004 adjusted FFO available to common stockholders to be between $0.88 and $0.90 per common share and its 2005 adjusted FFO available to common stockholders to be between $0.96 and $0.98 per common share. The Company's adjusted FFO guidance (and related GAAP earnings projections) for 2004 and 2005 excludes the future impacts of gains and losses on the sales of assets and the impact of acquisitions, expenses related to nursing home operations, additional divestitures, certain one-time revenue and expense items and capital transactions. Reconciliation of the FFO guidance to the Company's projected GAAP earnings is provided on a schedule attached to this Press Release. The Company may, from time to time, update its publicly announced FFO guidance, but it is not obligated to do so. The Company's FFO guidance is based on a number of assumptions, which are subject to change and many of which are outside the control of the Company. If actual results vary from these assumptions, the Company's expectations may change. There can be no assurance that the Company will achieve these results. About the Company Omega is a Real Estate Investment Trust investing in and providing financing to the long-term care industry. At June 30, 2004, the Company owned or held mortgages on 205 skilled nursing and assisted living facilities with approximately 21,900 beds located in 29 states and operated by 39 third-party healthcare operating companies. As previously reported, Standard & Poor's Ratings Services assigned its 'BB-' rating to Omega Healthcare Investors Inc.'s issued $200 million 7% senior notes due April 2014. Concurrently, the senior unsecured debt rating is raised to 'BB-' from 'B' and removed from CreditWatch positive, where it was placed March 5, 2004. Additionally, the rating on the preferred stock is raised to 'B' from 'B-' and removed from CreditWatch positive, where it was also placed March 5, 2004. The rating actions affect $526 million of rated securities. The outlook is stable. PACIFIC USA: Committee Nixes Subordinated Debt Swap Transactions ---------------------------------------------------------------- On June 18, 2004, AutoCorp Equities, Inc. (OTCBB: ACOR) disclosed the rescission of certain previously-reported transactions in accordance with their terms. As reported in AutoCorp's 10-KSB for 2003 on May 18, 2004, AutoCorp entered into agreements to: (A) repurchase 94 million shares of its common stock from Pacific Holdings Group (PHG) in exchange for a $940,000 subordinated note; (B) purchase 7 million shares of nStor Technologies, Inc. (AMEX: NSO) from PHG in exchange for a $2.8 million subordinated note; and (C) convert an open account payable by its Pacific Auto Group, Inc. subsidiary into a subordinated note due to PHG. As part of these transactions, the holders of all of AutoCorp's Series A and B Convertible Preferred Shares agreed to amend the conversion rights so that they would be initially exercisable in May 2006. As also described in AutoCorp's 2003 10-KSB, AutoCorp's indirect wholly-owned subsidiary, American Finance Company, Inc. agreed in April 2004 to sell the shares of its AFCO Receivables Funding Corporation subsidiary to Legacy Receivables Corporation, an entity controlled by certain executive officers of AutoCorp in exchange for a subordinated note. AutoCorp's indirect majority shareholder is Pacific USA Holdings Corp. (PUSA), which is a Chapter 11 debtor-in-possession in bankruptcy case no. 02-80906-SAF filed in the United States District Court, Northern District of Texas, on December 2, 2002. Neither AutoCorp nor any of its subsidiaries is in bankruptcy proceedings. As stated in the AutoCorp 2003 10-KSB, all the above-described transactions were subject to rescission under certain circumstances. On June 9, 2004, the Official Committee of Unsecured Creditors of PUSA exercised its right to demand the rescission of these transactions. Accordingly, PHG has rescinded all of these transactions and American Finance Company, Inc. has rescinded the transaction with Legacy. AutoCorp also disclosed that it has been advised that, pursuant to an action by the Board of Directors of PUSA, Michael McCraw is no longer AutoCorp's Chief Financial Officer and, further, that Jack Takacs is not a Director or Chairman of AutoCorp's Board of Directors. Because a replacement Chief Financial Officer has not been named, this vacancy may contribute to a delay in AutoCorp's filing its March 31, 2004 10-QSB. As stated in the 2003 AutoCorp 10-KSB, AutoCorp continues to evaluate and pursue alternatives for recapitalization and improvement of its liquidity and profitability. At present, AutoCorp is partly dependent for operating funds on investments from its direct and indirect corporate parents. However, there can be no assurance that such alternatives will result in sufficient new capital for AutoCorp's requirements and no assurance that AutoCorp will continue to receive financial support from its direct and indirect corporate parents. PANEL TOWN: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------- Debtor: Panel Town of Dayton, Inc. dba Flooring Outlet of Ohio 6107 Brandt Pike Huber Heights, Ohio 45452 Bankruptcy Case No.: 04-36359 Chapter 11 Petition Date: July 23, 2004 Court: Southern District of Ohio (Dayton) Judge: William A. Clark Debtor's Counsel: Alfred Wm. Schneble, III, Esq. Schneble, Cass & Assoc. Co. L.P.A. 11 W. Monument Ave., Suite 402 Dayton, OH 45402 Tel: 937-222-1232 Fax: 937-222-5622 Total Assets: $338,500 Total Debts: $1,188,873 Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Del Norte Refinance, LLC Vehicles, inventory $314,712 c/o SN Servicing Corporation & assets, etc. P.O. Box 54325 Secured value: New Orleans, LA 70154-4325 $50,000 Internal Revenue Service Federal Tax for Form $264,731 c/o Special Procedures 940 (02 & 03) Cincinnati, OH 45999 Federal Tax for Form 941 (02, 03 & 04) Bishop Distributing Goods $90,675 Ed Dillin Unpaid rent $66,000 Palmer Donavin Manufacturing Goods $53,892 Palmer Donavin Manufacturing $52,323 SBC Advertising $40,799 NBC 22 / Fox 45 Advertising Channel $30,000 22 and 45 Bruce Wholesale Flooring Goods $25,856 Dealers Supply Goods $25,000 Ohio Valley Flooring Goods $25,000 Miami Valley Broadcasting Advertising $23,232 Key Bank Visa Credit Card $21,000 Schnippel Construction, Inc. Goods $19,000 Misco Shawnee, Inc. Goods $17,242 Clem Lumber & Distributing Goods $14,924 Robert Flaugher Goods $12,875 Atty. for Medallion Hardwood Ohio Dept. of Taxation Sales Tax for 2003 & $10,000 2004 Time Warner Advertisement $9,852 Verizon Wireless Cell Phones $9,800 PARMALAT: Farmland Sells Kinnet Distribution Assets to CoolBrands ----------------------------------------------------------------- CoolBrands International Inc. (TSX: COB.A) acquired from Parmalat the Kinnet Dairy DSD ice cream distribution business located primarily in the State of Georgia, with additional distribution coverage in areas of Alabama and South Carolina. Pursuant to the transaction, CoolBrands' wholly owned subsidiary, Eskimo Pie Frozen Distribution, Inc., acquired the entire Kinnet Dairy ice cream distribution business, including customer lists, route lists, delivery vehicles, trademarks and inventory, from Parmalat's subsidiary Farmland Dairies LLC for an undisclosed cash purchase price. The business and assets acquired by CoolBrands do not include any business or assets related to Parmalat's Kinnet Dairy milk business, which Parmalat continues to operate. On July 7, 2003, CoolBrands acquired from Nestle substantially all of its distribution assets in the U.S., making CoolBrands one of only two "direct-store-door" (DSD) ice cream distribution systems with broad penetration of major markets across the U.S. in the grocery and convenience channels, including in the States of Washington, Oregon, California, Utah, Florida, Georgia, Maryland, Pennsylvania, New Jersey, Delaware and the District of Columbia. "This acquisition expands our distribution footprint, adds operational synergies and enhances our strategic value as a favored vendor to retailers in the grocery and convenience channels across the Southeast region," stated CoolBrands' President and Co-Chief Executive Officer, David J. Stein. "Acquiring smaller regional systems such as Kinnet Dairy is part of our strategy of expanding and strengthening our DSD system." About CoolBrands International CoolBrands International is a leader in the consumer products and franchising segments of the frozen dessert industry, marketing a diverse range of frozen dessert products under nationally and internationally recognized brand names. CoolBrands is the pre- eminent company in the fast-growing "better-for-you" ice cream category with offerings such as fat free, non-dairy Whole Fruit (TM) Sorbet, Weight Watchers(R) Smart Ones(R) low-fat and fat-free frozen desserts and new Atkins(R) Endulge(TM) controlled carbohydrate super premium ice cream. CoolBrands also competes in the super premium ice cream category with the Dreamery(R) Ice Cream and Godiva(R) Ice Cream brands. In addition, CoolBrands markets a wide variety of "all family" premium ice creams, frozen novelties and frozen desserts under the Eskimo Pie(R), Chipwich(R), Tropicana(R), Welch's(R), Yoplait(R), Betty Crocker(R) and Trix(R) brand names. CoolBrands' subsidiary, Eskimo Pie Frozen Distribution, operates the second largest "direct store delivery" (DSD) ice cream distribution system in the U.S., serving these CoolBrands products and a growing family of Partner Brands to supermarkets, convenience stores and other retail customers. CoolBrands' subsidiary, Americana Foods, is a leading U.S. manufacturer and supplier of soft serve mixes, packaged ice cream, frozen yogurt and sorbet products and frozen novelties to well known national retailers, food companies and restaurant chains. Americana Foods also manufactures and sells products for the foodservice channel, which are extensively used to standardize quality and reduce labor costs in on-site food preparation. CoolBrands' Foodservice Division manufactures and sells premium soft serve ice cream and frozen yogurt to the foodservice industry. CoolBrands also manufactures and sells a full line of quality flavors, chocolate coatings, fudge sauces, powders for chocolate milk, egg nog bases and other ingredients and flexible packaging products for use in private label dairy products in addition to the Company's brands. CoolBrands also franchises and licenses frozen dessert outlets operated under a Family of Brands including Tropicana(R) Smoothies, Juices & More, Swensen's(R) Ice Cream, I Can't Believe It's Yogurt(R), Yogen Fruz(R), Bresler's(R) Premium Ice Cream, Golden Swirl(R) and Ice Cream Churn(R), with company-owned, franchised and non-traditional partnership locations around the world. About Parmalat Headquartered in Wallington, New Jersey, Parmalat USA Corporation -- http://www.parmalatusa.com/-- generates more than 7 billion euros in annual revenue. The Parmalat Group's 40-some brand product line includes milk, yogurt, cheese, butter, cakes and cookies, breads, pizza, snack foods and vegetable sauces, soups and juices and employs over 36,000 workers in 139 plants located in 31 countries on six continents. The Company filed for chapter 11 protection on February 24, 2004 (Bankr. S.D.N.Y. Case No. 04- 11139). Gary Holtzer, Esq., and Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP represent the Debtors in their restructuring efforts. On June 30, 2003, the Debtors listed EUR2,001,818,912 in assets and EUR1,061,786,417 in debts. (Parmalat Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 215/945-7000) PEGASUS SATELLITE: Wants to Escrow Member Agreement Payments ------------------------------------------------------------ Pegasus Satellite Communications, Inc. and its debtor affiliates distribute DirecTV programming services in their distribution territories pursuant to the NRTC/Member Agreements for Marketing and Distribution of DBS Services, as amended, between the National Rural Telecommunications Cooperative and certain of the Debtors. In exchange for the rights and benefits granted to the Debtors under the Member Agreements, the Debtors make substantial payments to the NRTC. A portion of the payments covers programming and other costs billed by DirecTV, Inc., to NRTC for services ultimately delivered to the Debtors' subscribers. The remainder of the payments reflects charges by the NRTC and DirecTV that are unrelated to the costs of providing services to the Debtors' subscribers. Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, in Portland, Maine, relates that certain of the payments are "Margin" payments charged by the NRTC, not DirecTV, under the Member Agreements. As a cooperative, NRTC is permitted to charge Margin to recover internal costs for the provision of DBS services. In the past, NRTC collected Margin in excess of its costs. The collection of excess Margin has manifested itself in the cooperative realizing revenues in excess of its expenses, producing Net Savings. The Net Savings are allocated to NRTC's patrons, including the Debtors, in the form of patronage distributions and undistributed patronage capital carried on the books of the NRTC. The Debtors estimate that their patronage capital, together with currently distributable amounts, totals $95,000,000. The Debtors make monthly payments to NRTC in arrears. The Debtors' current payment to NRTC was due July 12, 2004, and covers the time period between May 15, 2004 and June 13, 2004. The total amount invoiced for that payment is $31,400,000, of which $11,500,000 is attributable to the postpetition period. In addition, as of the Petition Date, a payment was due to NRTC on June 9, 2004, which covered the prepetition time period between April 15, 2004 and May 14, 2004. The invoiced amount for that time period was $31,500,000 and the Debtors have not paid that prepetition amount due to NRTC. NRTC has announced the termination of the Member Agreements between the Debtors and NRTC effective August 31, 2004. NRTC and DirecTV have also announced the termination of the DBS Agreement effective June 1, 2004. As a result of the purported termination, NRTC has not, and is allegedly not able, to fully perform its obligations to the Debtors under the Member Agreements to provide them with exclusive rights to distribute DirecTV services in their territories. NRTC has also directed the Debtors to remit invoice payments to DirecTV rather than to NRTC and has purportedly assigned an interest in the Debtors' Subscriber information to DirecTV. The Debtors seek the Court's authority to pay into the Registry of the Court, the amounts invoiced for postpetition services that NRTC may assert it is owed under the Member Agreements, which will be held in escrow. This is pending the Court's determination: -- of the reasonable value of the services provided by NRTC to the Debtors during the postpetition period; and -- of whether NRTC is a net creditor or debtor of these estates after consideration of the Debtors' recoupment or set-off arguments. In the alternative, the Debtors seek the Court's authority to establish an escrow account outside of the Court's Registry, but under which a Court order is required for disbursements. Mr. Keach clarifies that the Debtors are not requesting authority to assume the Member Agreements or to pay any prepetition claims of the NRTC. The Debtors reserve all rights to object to any of NRTC's claims. Mr. Keach asserts that the Debtors intend to honor all postpetition obligations properly imposed on them pursuant to the Member Agreements. However, NRTC has not performed its obligations to the Debtors under the Member Agreements since the Petition Date. The Debtors believe that the payments required by the Member Agreements during the postpetition period, which may be $30 to $35 million per month, grossly overstate the reasonable value of services received by their estates. The Member Agreements expressly provide the Debtors the exclusive rights to distribute DirecTV services in their exclusive territories and require NRTC to maintain the confidentiality of the Debtors' subscriber information. The monthly fees required by the Member Agreements are in consideration of NRTC's obligations. Since the Petition Date, the Debtors have not received the benefit of their bargain under the Member Agreements. To the contrary, DirecTV is openly soliciting and activating subscribers in the Debtors' exclusive territories, using the Debtors' Subscriber information. Furthermore, the Debtors believe that they may have significant recoupment or set-off rights against the NRTC for accrued but unpaid excess Margin and patronage in addition to any other future recoveries from the adversary proceeding commenced against NRTC. Headquartered in Bala Cynwyd, Pennsylvania, Pegasus Satellite Communications, Inc. -- http://www.pgtv.com/-- is a leading independent provider of direct broadcast satellite (DBS) television. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. D. Me. Lead Case No. 04-20889) on June 2, 2004. Leonard M. Gulino, Esq., and Robert J. Keach, Esq., at Bernstein, Shur, Sawyer & Nelson, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,762,883,000 in assets and $1,878,195,000 in liabilities. (Pegasus Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 215/945-7000) PG&E CORP: To Webcast 2nd Quarter Earnings Result on August 3 ------------------------------------------------------------- PG&E Corporation (NYSE: PCG) will discuss Second Quarter 2004 Earnings live over the Internet on Tuesday, August 3, 2004 at 9:00 a.m. EDT. To access the live webcast, log on to PG&E Corp.'s website at: http://www.pgecorp.com/financial/news/conference_calls.html or call Investor Relations at 415-267-7080. If you are unable to participate during the live webcast, the call will be archived at http://www.pgecorp.com/Alternatively, a toll- free replay of the conference call may be accessed shortly after the live call through 9:00 p.m. EDT, August 10 by dialing 877-470- 0867. International callers may dial 402-220-0642. PG&E Corporation is an energy-based holding company, headquartered in San Francisco, California. Its operations include electric generation, natural gas and electric transmission, and utility distribution. It is the parent company of Pacific Gas and Electric Company. As previously announced, in February 2004, the Board voted to terminate the Corporation's then-existing shareholder rights plan upon Pacific Gas and Electric Company's exit from Chapter 11. Pacific Gas and Electric Company emerged from Chapter 11 on April 12, 2004, and the rights that previously had been issued under the plan expired on that date. POLINA TAXI INC: Case Summary & 3 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Polina Taxi, Inc. 9331 A Banes Street Philadelphia, Pennsylvania 19115 Bankruptcy Case No.: 04-30145 Chapter 11 Petition Date: July 26, 2004 Court: Eastern District of Pennsylvania (Philadelphia) Debtor's Counsel: Albert A. Ciardi III, Esq. Janssen Keenan & Ciardi, P.C. One Commerce Square 2005 Market Street, Suite 2050 Philadelphia, PA 19103 Tel: 215-599-7281 Fax: 215-665-8887 Estimated Assets: $0 to $50,000 Estimated Debts: $1 Million to $10 Million Debtor's 3 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Banco Popular North America $830,000 120 Broadway, 16th Floor New York, NY 10271 Tomorrow's Financing, Inc. $167,507 E.S.A. Financial Inc. $80,000 PURE TECH: Stockholders' Deficit Narrows to $8.8 Mil. at June 30 ---------------------------------------------------------------- Pure Technologies Ltd., TSX-V: PUR, reports total revenues of $3,067,000 for the second quarter of 2004 and year to date revenue of $5,045,000 for the six months ended June 30, 2004. This compares with revenues of $1,335,000 and $2,808,000 for the respective periods in 2003. Pure experienced significant sales growth during the quarter providing earnings of $0.04 per share (basic and diluted). Year- to-date revenue has already surpassed total revenue for 2003. Pure has also been able to maintain strong margins for the quarter and we expect this trend to continue. During the quarter Pure began work on a major contract for the Great Man-Made River Authority in Libya. This contract is ongoing and will generate further revenues for the remainder of the year. In addition technical support revenues will continue into 2005. Pure has been working closely with this client for over four years providing state-of-the-art infrastructure monitoring technologies to assist in the management of this water resources project. Work also began on two new building projects, one in Canada and one in the United States, and on multiple water and wastewater monitoring projects. The water and wastewater industry segment is growing quickly and should provide increasing revenues for the quarters to follow. Pure continue to devote significant resources to research and development, both for current technologies and new complementary technologies. Pure will continue to expand and protect its intellectual property. Significant patents are pending and as previously announced the Company satisfactorily settled its patent infringement suit against Physical Acoustics Corporation of New Jersey. Expansion of our marketing efforts has and will continue to be a key focus of the Company. Proceeds from the private placement completed in the first quarter and the second private placement closed subsequent to the second quarter will help facilitate this. At June 30, 2004, Pure Technologies stockholders' deficit narrowed to $8,821,000. At December 31, 2003, the company's equity deficit was pegged at $9,884,000. About the Company Pure Technologies is an international technology company, which has developed patented and proprietary technologies for management and surveillance of critical infrastructure. Applications for these technologies include bridges, pipelines, nuclear power plants, high-rise buildings, parking structures and other structures throughout the world. Pure designs and supplies the systems and provides continuing remote monitoring and technical support from its headquarters in Calgary, Canada, its subsidiary in the United States, and a strategic partnership overseas. RCN CORPORATION: Five Entities Disclose Equity Interests -------------------------------------------------------- In separate regulatory filings with the Securities and Exchange Commission, two RCN Corporation officers report their direct and beneficial ownership of non-derivative securities of RCN Corporation: No. of Name Position Shares ---- --------- ------ Michael J. Angi Senior VP 5,000 Deborah M. Royster Senior VP 10,000 Gen. Counsel & Corp. Secretary Mr. Angi owns restricted Common Stock granted under the RCN Corporation 1997 Equity Incentive Plan on September 30, 2002. The Stock will vest 100% on September 30, 2005. Ms. Royster owns restricted Common Stock granted under the 1997 Equity Incentive Plan on May 12, 2003. The Stock will vest 100% on May 12, 2005. Mr. Angi also owns stock options for 20,000 RCN shares, which expire on September 30, 2007. The stock options were granted under the 1997 Equity Incentive Plan on September 30, 2002. As of September 30, 2003, 6,667 options are vested. Ms. Royster owns stock options for 15,000 RCN shares, which expire on May 12, 2008. Ms. Royster's stock options were granted under the 1997 Equity Incentive Plan on May 12, 2003. As of May 12, 2004, 5,000 options are vested. The remaining options for both Mr. Angi and Ms. Royster will vest in equal installments over the second and third anniversary of the grant date. Three entities notify the U.S. Bankruptcy Court for the Southern District of New York that they beneficially own shares of RCN common stock. Specifically: (a) as of July 12, 2004, Vulcan Ventures, Inc., became the beneficial owner of 1,222,250 shares of Series B Preferred Stock, which Vulcan Ventures acquired on February 28, 2000; (b) as of March 31, 2004, HM4 RCN Partners became the beneficial owner of Series A 7% Senior Convertible Preferred Stock: No. of Shares Date Acquired ------------- ------------- 250,000 04/07/1999 4,083 06/30/1999 4,446 09/30/1999 4,524 12/31/1999 4,603 03/31/2000 4,684 06/30/2000 4,766 09/30/2000 4,849 12/31/2000 4,934 03/31/2001 5,021 06/30/2001 5,108 09/30/2001 5,198 12/31/2001 5,289 03/31/2002 5,381 06/30/2002 5,476 09/30/2002 5,571 12/31/2002 5,669 03/31/2003 5,768 06/30/2003 5,869 09/30/2003 5,972 12/31/2003 6,076 03/31/2004 (c) as of July 12, 2004, Wells Fargo & Company became the beneficial owner of: No. of Shares Date Acquired Class or Series of Stock ------------- ------------- ------------------------ 247,009 12/29/2003 Series B Convertible Preferred Stock 11,424,810 12/29/2003 Series B Common Stock 4,323 03/31/2004 Series B Senior Convertible Preferred Stock Headquartered in Princeton, New Jersey, RCN Corporation -- http://www.rcn.com/-- is a provider of bundled Telecommunications services. The Company, along with its affiliates, filed for chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 04-13638) on May 27, 2004. Frederick D. Morris, Esq., and Jay M. Goffman, Esq., at Skadden Arps Slate Meagher & Flom LLP, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $1,486,782,000 in assets and $1,820,323,000 in liabilities. (RCN Corp. Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 215/945-7000) RELIANCE FINANCIAL: Overview of Bank Committee's 2nd Amended Plan ----------------------------------------------------------------- On July 6, 2004, the Official Unsecured Bank Committee delivered its Second Amended Plan of Reorganization and First Amended Disclosure Statement for Reliance Financial Services Corporation to the U.S. Bankruptcy Court in Manhattan. The First Amended Disclosure Statement was approved on July 7. The Second Amended Plan and Disclosure Statement explains that the Section 847 Refund recoveries and other tax assets will not be available if Reorganized RFSC liquidates. If the Chapter 11 Case is converted to a Chapter 7, it is unlikely that there will be a recovery by Reorganized RFSC from the Section 847 Refunds and other tax assets. To the extent that Claim Holders opt-out of assigning their Litigation Claims to Reliance Group Holdings, Inc., they will not be entitled to receive RFSC Litigation Proceeds. Members of Classes 2 and 4a without Litigation Claims will share in any distribution of the RFSC Litigation Proceeds, unless they have elected to opt-out. The Second Amended Plan notes that $461,479,986 in Class 4a Claims has been asserted. However, the Bank Committee and the Official Committee of Unsecured Creditors intend to object to all 4a Claims. As a result, the amount of General Unsecured Claims allowed by the Court will likely be significantly less. The Second Amended Plan clarifies the Release Provisions. The Plan will not release a party from liability arising from willful misconduct, gross negligence, intentional fraud or breach of fiduciary duty that resulted in personal profit at the expense of the estate. The Plan will not release any party for knowing misuse of confidential information. The Plan will not limit the liability of the Debtors', RGH's or the Committees' professionals to their clients. The releases do not cover former and current directors, officers and executives of Reorganized RFSC and RGH from actions prior to June 12, 2001. This includes events connected to the Reliance D&O Action or other actions by M. Diane Koken, the Insurance Commissioner of the Commonwealth of Pennsylvania, as Liquidator of Reliance Insurance Company. The Second Amended Plan prohibits any transfer of New RFSC Common Stock amounting to over 50% that would cause an "ownership change" for tax purposes. There will be no transfer of shares of New RFSC Common Stock that would result in Reorganized RFSC becoming a member of an affiliated group of corporations. During the first 35 days after the first anniversary of the Effective Date, shares of New RFSC Common Stock may only be transferred pursuant to a tender offer by High River, LP, or its affiliates. The tender offer will be extended to all holders of New RFSC Common Stock to tender their shares, up to a maximum of 49.9% of the outstanding shares. If more than 49.9% of the New RFSC Common Stock are tendered, the shares will be purchased on a pro rata basis, based on the number of shares tendered by each holder. If High River and its affiliates would own less than 80% of New RFSC Common Stock, the tender offer will be withdrawn, all tendered shares returned to their holders and no transfer will be permitted. The Holder of an Allowed Liquidator Claim is entitled to full settlement in exchange for its Claim, the payments under the Tax Sharing Agreement and the PA Settlement Agreement, which includes 50% of the Section 847 Refunds and the Liquidator D&O Litigation Proceeds. To the extent payments are provided for under both Agreements, the arrangement will not result in duplicate payments. After the Effective Date and as soon as the disposition of the books and records of RFSC and Reorganized RFSC is legally feasible, the CEO will seek to dispose of the books and records, with notice to the Liquidator and other interested parties. If the Liquidator requires the books and records or determines that they should not be disposed of, the Liquidator will be allowed the opportunity to take possession of the books and records. Headquartered in New York, New York, Reliance Group Holdings, Inc. -- http://www.rgh.com/-- is a holding company that owns 100% of Reliance Financial Services Corporation. Reliance Financial, in turn, owns 100% of Reliance Reliance Insurance Company. The Company filed for chapter 11 protection on June 12, 2001 (Bankr. S.D.N.Y. Case No. 01-13403). When the Company filed for protection from their creditors, they listed $12,598,054,000 in assets and $12,877,472,000 in debts. (Reliance Bankruptcy News, Issue No. 57; Bankruptcy Creditors' Service, Inc., 215/945-7000) RENT-A-CENTER: Second Quarter Revenues Climb to $573 Million ------------------------------------------------------------ Rent-A-Center, Inc. (Nasdaq/NNM:RCII), the leading rent-to-own operator in the U.S., reported quarterly revenues and net earnings for the period ended June 30, 2004. The Company, the nation's largest rent-to-own operator, had total revenues for the quarter ended June 30, 2004, of $573 million, a $19.7 million increase from $553.3 million for the same period in the prior year. This increase of 3.6% in revenues was primarily driven by incremental revenues generated in new and acquired stores, offset by a decrease in same store sales of 2.3%. Net earnings for the quarter ended June 30, 2004, were $51.2 million representing an increase of 6.9% over $0.58 per diluted share, or net earnings of $52.3 million, when excluding the charges discussed below, reported for the same period in the prior year. The increase in earnings per diluted share is primarily the result of lower interest expense as well as a reduction in the number of the Company's outstanding shares, offset by a slight decrease in net earnings attributable to an increase in operating expenses related to new store openings as well as the recently closed and integrated acquisitions of Rainbow Rentals and Rent-Rite. Net earnings for the six months ended June 30, 2004, were $103.4 million representing an increase of 8.7% over $1.15 per diluted share, or net earnings of $103.3 million, when excluding the charges discussed below, for the same period in the prior year. Total revenues for the six months ended June 30, 2004, increased to $1,158.4 million from $1,119.7 million in 2003, representing an increase of 3.5%. Same store revenues for the six- month period ending June 30, 2004, decreased 2.2%. Through the six-month period ended June 30, 2004, the Company generated cash flow from operations of approximately $199.7 million, an increase of over 30% for the same period of the prior year, while ending the quarter with $86.2 million of cash on hand. The Company also announced that its Board of Directors has increased the authorization for stock repurchases under the Company's common stock repurchase program to $200 million. Through the six month period ended June 30, 2004, the Company repurchased 2,621,400 shares for $77.3 million in cash under the program and has utilized a total of $104.2 million of the total amount authorized by its Board of Directors since the inception of the plan. "We are pleased to be reporting diluted earnings per share of $0.62, the high side of our guidance for the quarter," commented Mark E. Speese, the Company's Chairman and Chief Executive Officer. "While we have seen an increase in total revenues, as expected, our net earnings are slightly below last year, reflecting the temporary impact of our two recent acquisitions, our new store initiatives, as well as the impact on our same store sales from, among other things, higher fuel and energy costs that burden our customer." Speese continued, "We continue to believe the recent acquisitions will add approximately $27 million to our operating profits in 2005 as our proven business model takes root in the acquired stores." Speese added, "Therefore, we intend to continue pursuing our long term strategic initiative of increasing our store base between 5% and 10% annually for the next several years, realizing the negative impact on our same store sales resulting from cannibalization as we strategically open stores near market areas served by existing stores in order to meet customer service objectives, gain incremental sales and increase market penetration." During the second quarter of 2004, the Company opened 25 new locations and acquired 161 additional stores while consolidating 12 locations into existing stores. The Company also purchased accounts from 63 additional locations during the second quarter of 2004. Since June 30, 2004, the Company has opened four additional new stores while consolidating one location into an existing store. During the second quarter of 2003, the Company recorded $27.7 million in pre-tax charges associated with its recapitalization. These charges reduced diluted earnings per share in the second quarter of 2003 by $0.19 to the reported diluted earnings per share of $0.39. Additionally, these charges reduced diluted earnings per share for the six month period ended June 30, 2003, by $0.19 to the reported diluted earnings per share of $0.95. Third Quarter 2004 Guidance Revenues -- The Company expects total revenues to be in the range of $585 million to $590 million. -- Store rental and fee revenues are expected to be between $529 million and $534 million. -- Total store revenues are expected to be in the range of $572 million to $577 million. -- Same store sales are expected to be in the (1.5%) to (2.5%) range. -- The Company expects to open 20-25 new store locations. Expenses -- The Company expects depreciation of rental merchandise to be between 21.5% and 21.9% of store rental and fee revenue and cost of goods merchandise sales to be between 73% and 78% of store merchandise sales. -- Store salaries and other expenses are expected to be in the range of 56.0% and 57.5% of total store revenue. -- General and administrative expenses are expected to be between 3.2% and 3.4% of total revenue. -- Net interest expense is expected to be approximately $9.0 million and amortization is expected to be approximately $3.0 million. -- The effective tax rate is expected to be between approximately 37.5% and 38.0% of pre-tax income. -- Diluted earnings per share are estimated to be in the range of $0.58 to $0.60. -- Diluted shares outstanding are estimated to be between 81.0 million and 82.0 million shares. Fiscal 2004 Guidance Revenues -- The Company expects total revenues to be in the range of $2.36 billion and $2.38 billion. -- Store rental and fee revenues are expected to be between $2.10 billion and $2.12 billion. -- Total store revenues are expected to be in the range of $2.30 billion and $2.32 billion. -- Same store sales are expected to be in the (1.0%) to (2.0%) range. -- The Company expects to open approximately 100 new store locations. Expenses -- The Company expects depreciation of rental merchandise to be between 21.5% and 21.9% of store rental and fee revenue and cost of goods merchandise sales to be between 72% and 76% of store merchandise sales. -- Store salaries and other expenses are expected to be in the range of 54.0% and 55.5% of total store revenue. -- General and administrative expenses are expected to be between 3.1% and 3.3% of total revenue. -- Net interest expense is expected to be between $35.0 million and $40.0 million and amortization of intangibles is expected to be approximately $11.0 million. -- The effective tax rate is expected to be between approximately 37.5% and 38.0% of pre-tax income. Rent-A-Center, Inc., headquartered in Plano, Texas, currently operates 2,849 company-owned stores nationwide and in Canada and Puerto Rico. The stores generally offer high-quality, durable goods such as home electronics, appliances, computers, and furniture and accessories to consumers under flexible rental purchase agreements that generally allow the customer to obtain ownership of the merchandise at the conclusion of an agreed-upon rental period. ColorTyme, Inc., a wholly owned subsidiary of the Company, is a national franchisor of 319 rent-to-own stores, 307 of which operate under the trade name of "ColorTyme," and the remaining 12 of which operate under the "Rent-A-Center" name. * * * As reported in the Troubled Company Reporter's July 16, 2004 edition, Standard & Poor's Ratings Services assigned its 'BB+' rating to Rent-A-Center Inc.'s proposed $600 million bank loan. A recovery rating of '2' was also assigned to the bank loan, indicating the expectation of a substantial (80%-100%) recovery of principal in the event of a default. The ratings are based on preliminary information and are subject to review upon final documentation. The proceeds will be used to refinance the company's existing bank loan. "The ratings on Rent-A-Center reflect the company's leading market position in the rent-to-own retail industry, moderate leverage, and adequate liquidity," said Standard & Poor's credit analyst Robert Lichtenstein. "These strengths are partially offset by the highly competitive and fragmented nature of the industry, and challenges in continuing growth in the face of slowing same-store sales." SAFETY-KLEEN: JPMorgan to Acquire European Unit for EUR273,500,000 ------------------------------------------------------------------ JPMorgan Partners, the private equity arm of J.P. Morgan Chase & Co. (NYSE: JPM) signed a definitive agreement under which JPMP will acquire Safety-Kleen Europe Ltd. from Electra Partners. The acquisition is valued at EUR273.5 million, with JPMP acquiring the majority of the Company. The senior team will roll-over a substantial proportion of their shareholding and will continue to lead the business. Based in Isleworth, England, Safety-Kleen is Europe's leading service provider for solvent and aqueous-based parts washers, spray gun cleaners and brake cleaners, servicing both automotive and general industrial customers. Through rapid organic growth and geographical expansion, Safety-Kleen has consistently grown revenue and profitability over the last 12 years. Today, the Company services and continues to grow an installed base of 115,000 Company-owned machines at the premises of 100,000 customers across 12 European Countries. "We are very proud of what we have accomplished at Safety-Kleen Europe over the last five years. Our strong organic growth has been driven by 1,200 dedicated Safety-Kleen people delivering services every day to customers throughout our network. We look forward, with great confidence, to Safety-Kleen's future growth and success in partnership with JPMorgan Partners, a private equity firm which shares our vision for the business and which can help us develop through access to its global network, capital base and financial expertise," said Hyman Bielsky, Safety-Kleen CEO. "Safety-Kleen is a first class company with a first class management. JPMorgan Partners is delighted to have the opportunity to partner with this team and to support them in taking the company to its next stage of development. The business is ideally positioned for strong future growth and profitability, through further penetration of the industrial market and continued geographic expansion," said Tom Walker, Partner at JPMP. ING Barings served as financial adviser to JPMP with respect to this acquisition. Completion of the transaction, which is subject to normal merger clearances, is expected to occur in August 2004. Sale Agreement Conditional Electra Investment Trust says that the completion of the Transaction is conditional upon Irish and German competition clearance. It is presently expected that a competition clearance decision will be made no later than mid-August 2004. If the Transaction is completed, proceeds attributable to Electra are expected to amount to circa GBP100 million which would give rise to an uplift in Electra's net asset value per share of at least 45p over the 31 March 2004 valuation of Safety-Kleen. Electra invested GBP22.3 million in Safety-Kleen Europe in 1998 in the management buy-out of Safety-Kleen. (Safety-Kleen Bankruptcy News, Issue No. 80; Bankruptcy Creditors' Service, Inc., 215/945- 7000) SONIC ENVIRONMENTAL: Resumes Stock Trading on TSX Venture Exchange ------------------------------------------------------------------ Effective at 9:30 a.m., PST, July 26, 2004, Sonic Environmental Solutions, Inc. shares resumed trading in the TSX Venture Exchange. Trading in the shares of the Company was halted at the request of the Company, pending an announcement. This regulatory halt is imposed by Market Regulation Services, the Market Regulator of the Exchange pursuant to the provisions of Section 10.9(1) of the Universal Market Integrity Rules. The Company holds patents for low frequency sonic energy generator technology and proprietary processes to remediate Polychlorinated Biphenyls contaminated soils. As of March 31, 2004, the Company has not yet developed its technology to commercial production. The ability of the Company to realize the costs it has incurred to date on this technology is dependent on the Company being able to commercialize the technology and to operate its business without infringing on the proprietary rights of third parties or having third parties circumvent the Company's rights. As of March 31, 2004, the company reported a CDN$2,138,228 stockholders' deficit compared to a CDN$1,717,111 deficit at December 31, 2003. SPEEDWARE LIMITED: Secures 15 New Contracts Worth Over $4 Million ----------------------------------------------------------------- Speedware Ltd., a Hewlett-Packard Platinum Partner, signed 15 new HP e3000 migration contracts worth over $4 million in the past three months. These software and services revenues, which will be recognized over the next several quarters, primarily related to the sale of licenses of Speedware's migration toolset, known as AMXW. Numerous companies rely on mission-critical enterprise applications and databases that run on the HP e3000, a widely-used Hewlett-Packard server that is being discontinued. To take advantage of this opportunity, Speedware now offers comprehensive migration solutions designed to protect these companies' assets and ensure business continuity as they move toward new computing platforms, including UNIX and Windows. Headlining Speedware's suite of solutions is AMXW, a software toolset designed to migrate third-generation language applications, such as those written in COBOL or C. Speedware acquired the AMXW solution one year ago as part of its ongoing growth strategy. The strategy is gaining traction in the market and therefore creating a significant new source of revenue. "We have invested significantly in our product offerings in recent years, both through internal initiatives and external acquisitions, and we are very proud of our ongoing success," said Andy Kulakowski, Chief Operating Officer of Speedware Ltd. "These new contracts confirm Speedware's leadership position in the HP e3000 migration market space." Speedware offers solutions to migrate a variety of third- and fourth-generation language applications, databases, system utilities and third-party technologies toward open systems. In addition, Speedware distributes and supports several third-party complementary technologies, including Eloquence and Edwin, two products developed by Speedware's European business partners. About Speedware Ltd. Speedware Ltd., a subsidiary of Speedware Corporation Inc. (TSX: SPW), is a leading provider of complete HP e3000 migration solutions, enterprise business intelligence software and application development technology. With a distribution network spanning 35 countries, Speedware offers market leaders end-to-end solutions to enhance their competitive advantage. Celebrating over 25 years in business, Speedware also provides professional consulting services and industry-certified technical support. For more information, visit Speedware on the Web at http://www.speedware.com/migration Speedware Corporation is a leading provider of enterprise IT solutions, through its two operating companies Enterprise Computer Systems Inc. and Speedware Ltd. The Company's Enterprise Application Solutions segment consists of the operations of ECS, based in Greenville, South Carolina. Its offerings include enterprise resource planning, document management, data analytics, reporting, e-commerce and dispatch software solutions, as well as support and professional services which are focused on the building materials market. ECS is a leader in the building materials market with over 2,200 installed sites worldwide. Speedware Ltd., the Company's Development and Analytics Tools segment, offers industry-specific business intelligence solutions, application development technology and HP e3000 migration solutions. Speedware Ltd. has been in business for over 25 years and its products are distributed internationally, both directly and indirectly through business partners. Speedware Corporation stockholders' deficit narrowed to CDN$12,540,000 at March 31, 2004. At September 30, 2003, the company posted a CDN$14,904,000 deficit. SPIEGEL: SEC Revokes Class A Registration After Settlement Offer --------------------------------------------------------------- The Spiegel Group reports that on July 23, 2004, the Securities and Exchange Commission entered an order, pursuant to Section 12(j) of the Securities Exchange Act of 1934, as amended, that immediately revokes the registration of the Class A common shares of Spiegel, Inc. The Commission entered this order pursuant to an Offer of Settlement submitted by Spiegel, Inc. in connection with the pending investigation of the Company by the Commission. As a result of the entry of the order, no member of a national securities exchange, broker, or dealer shall make use of the mails or any means of instrumentality of interstate commerce to effect any transaction in, or to induce the purchase or sale of the Shares. As a result of the Commission's order, the Company is no longer required to and does not anticipate making filings of annual, quarterly or other reports pursuant to Section 13(a) of the Exchange Act. Information about the Company will be available through the "Reorganization Information" section of its Web site at http://www.thespiegelgroup.com/ A copy of the order is available on the Commission's Web site at http://www.sec.gov/ Headquartered in Downers Grove, Illinois, Spiegel, Inc. -- http://www.spiegel.com/-- is a leading international general merchandise and specialty retailer that offers apparel, home furnishings and other merchandise through catalogs, e-commerce sites and approximately 560 retail stores. The Company filed for Chapter 11 protection on March 17, 2003 (Bankr. S.D.N.Y. Case No. 03-11540). James L. Garrity, Jr., Esq., and Marc B. Hankin, Esq., at Shearman & Sterling represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $1,737,474,862 in assets and 1,706,761,176 in debts. STERLING FINANCIAL: Reports Improved Second Quarter Results ----------------------------------------------------------- Sterling Financial Corporation (Nasdaq: STSA) reported core earnings of $13.53 million for the quarter ended June 30, 2004. This compares with core earnings of $8.5 million for the quarter ended June 30, 2003. Core earnings exclude merger and acquisition costs, net gains on sales of securities, and a charge for costs related to early repayment of debt, net of tax. Earnings excluding these items were $13.48 million for the first quarter of 2004. This compares with earnings of $9.5 million for the prior year's comparable quarter. Core earnings for the six months ended June 30, 2004, were $26.5 million which compares with core earnings of $16.4 million for last year's comparable six-month period. Earnings excluding the core earnings adjustments for the six months ended June 30, 2004 were $25.5 million compared to $17.3 million, or $1.08 per diluted share for the prior year's comparable period. Earnings for both the three- and six-month periods ended June 30, 2004, reflect continued increases in net interest income and other income that were primarily due to the completion of the merger of Klamath First Bancorp, Inc., into Sterling earlier in the year. Harold B. Gilkey, chairman and CEO, said, "We are extremely pleased with the results of the second quarter which keep Sterling on its profitability trend line for 2004. Our core earnings for the quarter increased 59% from last year's second quarter and highlight the success of our business plan." Mr. Gilkey commented further, "Improved performance of Sterling's key business lines - retail banking, corporate banking and business banking -- contributed to the quarter's results. We have successfully integrated the new branches acquired from the Klamath merger to now focus on production. The new branches have achieved notable performance as reflected by the growth in deposits and the significant increase in consumer loans." Second Quarter Highlights * Core earnings were $13.5 million for the quarter ended June 30, 2004, compared to $8.5 million for the same period in 2003, a 16% increase on a per share basis. * Earnings per diluted share were $0.58 for the quarter ended June 30, 2004, compared to $0.57 per diluted share for the same period in 2003. * Return on average tangible equity was 18.9% compared to 19.3% for the comparable quarter last year. * Return on average equity was 12.4% for the quarter ended June 30, 2004, compared to 15.5% for the same period in 2003. * Net interest income increased 62% over the second quarter of 2003. * Total deposits increased 12% on an annualized basis over the first quarter of 2004. * Record total loan originations increased 19% over the second quarter of 2003. * Nonperforming assets to total assets decreased to 27 basis points from 77 basis points at June 30, 2003. * Sterling paid a 10% stock dividend effective May 28, 2004. Gilkey continued, "Our commitment to Hometown Helpful(R) service is the foundation of our healthy revenue growth. A good balance of net interest income and fee income, coupled with improved credit quality has also contributed to a strong bottom line." Operating Results Net Interest Income Most revenue and expense categories show significant increases over the comparable prior year as a result of our recent merger with Klamath. Sterling reported net interest income of $48.7 million for the three months ended June 30, 2004, compared to $30.0 million for the same period in the prior year. The increase over the comparable period in 2003 was primarily due to a volume increase of $2.13 billion in average earning assets. The increase in average earning assets was primarily due to the recent merger. However, Sterling generated 22% of the growth in average earning assets without taking the merger into consideration. Net interest income for the six months ended June 30, 2004, was $94.4 million, which compares with net interest income of $58.6 million for the first six months of last year. The increase for the first six months was also due to a volume increase in interest earning assets. Sterling's net interest margin of 3.40% for the second quarter of 2004 showed an increase of 9 basis points over last year's comparable period. Sterling's net interest margin also increased 7 basis points over the first quarter of 2004. Net interest margin for the six months ended June 30, 2004, was 3.36%, which represented a modest increase from 3.33% for the comparable 2003 period. Other Income Total other income was $11.8 million for the three-month period ended June 30, 2004, compared to $9.7 million for the same period one year ago. This is primarily due to an increase in fees and service charge income. Total other income was $24.7 million for the six months ended June 30, 2004, compared to $16.8 million for the same period one year ago. This increase is primarily due to an increase in the volume of Sterling's transaction accounts following the recent merger. Fees and service charge income increased by 71% to $8.4 million for the quarter from $4.9 million in the same period one year ago. Fees and service charge income was $16.7 million and $9.2 million for the six months ended June 30, 2004 and 2003, respectively, an increase of 82%. These increases were primarily due to an increase in transaction account fees, fees from cash management services and an increase in the number of accounts. The total number of transaction accounts as of June 30, 2004, was approximately 146,000, a 74% increase over the comparable period last year. This increase was mainly due to the recent merger and the addition of new branches in the first quarter. The total number of business checking accounts nearly doubled from the same period last year to nearly 100,000 accounts. Income from mortgage banking operations for the quarter was $1.8 million, compared with $2.5 million for the prior year's comparable quarter. For the six months ended June 30, 2004, income from mortgage banking operations was $3.0 million, compared with $4.7 million for the same period in 2003. The decreases were primarily due to an industry wide slowdown in residential refinancing activity. While the mix of Sterling's income from mortgage banking operations has historically been weighted toward residential lending, Sterling's MBO this quarter included a greater contribution from the commercial real estate lending segment. During the quarter ended June 30, 2004, the commercial real estate segment provided 34% of total MBO income, as compared with 13% for the March 2004 quarter and 26% for the December 2003 quarter. Operating Expenses Total operating expenses were $37.1 million for the three months ended June 30, 2004, compared with $22.6 million for the three months ended June 30, 2003, an increase of 64%. Operating expenses were $74.8 million and $44.0 million, respectively, for the six months ended June 30, 2004 and 2003, an increase of 70%. The year- over-year increases were primarily due to increases in personnel, occupancy, and data processing expenses, as well as merger and acquisition costs associated with the recent merger. Full-time equivalent employees have increased year-over-year by 494 to 1,552 at June 30, 2004. Commenting on operating expenses and efficiency, Mr. Gilkey stated, "As we anticipated, our operating efficiency ratio increased to 61.3%, compared to 56.9% in the second quarter of 2003. However, Sterling expects the ratio to decrease because the merger and acquisition costs associated with the integration of the recent merger are expected to decrease during the second half of 2004. Income is also anticipated to increase, as our lending personnel generate increased production." Performance Ratios Return on average tangible equity was 18.9% for the three months ended June 30, 2004, compared with 19.3% for the same period in 2003. Average tangible equity represents total shareholders' equity reduced by goodwill and other intangible assets. Return on average equity was 12.4% for the three months ended June 30, 2004, compared to 15.5% for the same period in 2003. The decrease in both ratios primarily reflected higher average equity, most of which was acquired in the recent merger. Return on average assets was 0.86% for the three months ended June 30, 2004, compared to 0.98% for the same period in 2003. The decrease was primarily due to the addition of approximately $1.5 billion in lower-yielding assets from the recent merger and higher cost of operations. Lending At June 30, 2004, Sterling's net loans receivable increased to $3.72 billion, up from $3.58 billion at March 31, 2004. Sterling's loan growth has been directly related to the significant increase in branch locations, market expansion and the addition of lending personnel. Sterling's primary strength in lending is in building customer relationships, which can lead to increased market share in loans and deposits. Sterling set a new record with total loan originations for the quarter ended June 30, 2004, with total originations of $786.4 million compared to $658.8 million in the second quarter of 2003, an increase of 19%. Sterling's construction, corporate, business banking and consumer loan originations were $635.6 million, or approximately 81%, of total loans. Additionally, as a result of a successful home equity line promotion, consumer direct lending originations were $127.8 million, more than double the level of such originations for the second quarter of 2003, with over 40% of the increase contributed by the new branches. Credit Quality Mr. Gilkey said, "We continued to successfully manage credit quality during the past quarter. At June 30, 2004, total nonperforming assets decreased to $16.9 million, or 0.27% of total assets. This compares favorably with the second quarter 2003 level of $31.4 million, or 0.77% of total assets. The decrease in this ratio was primarily due to the sale of certain loans and the improvement in the credit quality of certain large loans in the commercial real estate and construction portfolio." Classified assets were $80.7 million at June 30, 2004, a decrease compared to $93.3 million at March 31, 2004, and basically flat compared to $80.5 million at June 30, 2003. The loan delinquency ratio decreased to 0.43% of total loans, compared to 0.83% of total loans at March 31, 2004, and 1.13% of total loans at June 30, 2003. Classified assets decreased from the March 2004 quarter primarily due to the sale of certain real estate owned properties, as well as improvements in the status of certain business banking, commercial real estate and construction loans. While the improvement in the delinquency ratio reflects increased loan volume, it primarily reflects a lower volume of delinquent consumer and commercial real estate loans. Sterling's loan charge-off ratio improved slightly and remained at a very modest level. The annualized level of charge-offs to average loans was 0.15% for the second quarter, a decrease from 0.17% at March 31, 2004, and 0.16% at June 30, 2003. Sterling's provision for loan losses was $3.0 million for the three months ended June 30, 2004, compared with $2.6 million for the same period in 2003. At June 30, 2004, the loan loss allowance totaled $45.3 million and was 1.20% of total loans. This compares with an allowance of $32.0 million, or 1.19% of total loans at June 30, 2003. Balance Sheet and Capital Management At June 30, 2004, Sterling's total assets were $6.26 billion, up from the prior year's comparable period of $4.10 billion. Shareholders' equity decreased $22.1 million from March 31, 2004, reflecting an increase in the unrealized loss on securities of $36.1 million, net of taxes. Although investments are recorded at market value, the related borrowings are recorded at cost. At June 30, 2004, the market value of borrowings increased by $21.0 million, net of income taxes, substantially mitigating the unrealized loss. Excluding the unrealized loss component, shareholders' equity was $439.6 million, a 3% increase from the March 31, 2004, adjusted balance of $425.5 million and due primarily to retained earnings. Sterling's risk-based capital ratios continued to exceed the "well- capitalized" requirements. As of June 30, 2004, Sterling's book value per share had increased 19% to $18.05 from $15.15 at the same period one year ago. Excluding the unrealized loss on securities, Sterling's book value per share increased 28% to $19.44 at June 30, 2004, as compared to $15.21 at June 30, 2003. Interest Rate Risk and Portfolio Position It is widely anticipated that interest rates will increase in the near future. Sterling anticipated this increase and has a multilevel strategy in place that is designed to protect our interest margin in such interest rate environments. Some of the components of our strategy are: originating and retaining variable-rate consumer, business banking, construction and commercial real estate loans, which generally have higher yields than residential permanent loans; utilizing the cash flows from the asset-backed securities portfolio to fund increased production of business banking, variable-rate commercial real estate, consumer and construction loans; and selling certain long-term, fixed-rate loans and investments. Additionally, over 50% of our loan portfolio will reprice or mature over the next 12 months. Goodwill Litigation In May 1990, Sterling sued the U.S. Government with respect to the loss of the goodwill treatment and other matters relating to Sterling's past acquisitions of troubled thrift institutions. In the Goodwill Litigation, Sterling seeks damages for, among other things, breach of contract and for deprivation of property without just compensation. In September 2002, the U.S. Court of Federal Claims granted Sterling Savings Bank's motion for summary judgment as to liability on its contract claim, holding that the United States Government owed contractual obligations to Sterling with respect to its acquisition of three failing regional thrifts during the 1980s and had breached its contracts with Sterling. Sterling is waiting for a trial date to be set to determine what amount, if any, the government must pay in damages for its breach. The timing and ultimate outcome of the Goodwill Litigation cannot be predicted with certainty. Because of the effort required to bring the case to conclusion, Sterling will likely continue to incur legal expenses at levels similar to 2003 over the next one to two years. Outlook "I am extremely pleased to report strong results for the second quarter of 2004," said Mr. Gilkey. "Our earnings reflect significant improvements in a number of key areas that drive our performance, including core loan growth, higher revenues from our noninterest income generating businesses, continued improvement in asset quality and expense control. We are also gaining sales and earnings momentum in our new markets and achieving operating efficiencies from recent acquisitions. I believe we are well- positioned to further improve profitability during the remainder of 2004." Mr. Gilkey continued, "We are proud to report that the "Perfect Fit" banking products and Hometown Helpful approach have contributed to a strong loan pipeline, a solid loan portfolio and strong liquidity and capital. Our extensive Pacific Northwest network of branches, corporate banking centers, business banking offices and subsidiaries are all working together to contribute to our bottom line. The core components of the organization remain strong, and we remain particularly pleased with our strategic positioning as a leader in community banking in the Pacific Northwest." About Sterling Sterling Financial Corporation of Spokane, Washington, is a unitary savings and loan holding company, which owns Sterling Savings Bank. Sterling Savings is a Washington State-chartered, federally insured stock savings association, which opened in April 1983. Sterling Savings, based in Spokane, Washington, has branches throughout Washington, Oregon, Idaho and Montana. Through Sterling's wholly owned subsidiaries, Action Mortgage Company and INTERVEST-Mortgage Investment Company, it operates loan production offices in Washington, Oregon, Idaho, Arizona and Montana. Sterling's subsidiary Harbor Financial Services provides non-bank investments, including mutual funds, variable annuities and tax- deferred annuities and other investment products, through regional representatives throughout Sterling's branch network. * * * As reported in the Troubled Company Reporter's July 22, 2004 edition, Fitch Ratings has upgraded the long-term rating of Sterling Financial Corporation (STSA) to 'BB+' from 'BB'. All other ratings have been affirmed by Fitch. Additionally, Fitch has assigned ratings to Sterling Savings Bank, including an investment grade long-term deposit rating of 'BBB-'. A complete list of ratings is provided at the end of this release. The rating upgrade reflects the progress that STSA has made improving both its franchise as well as its balance sheet structure. Through acquisitions, as well as organic growth, STSA has created a Pacific Northwest franchise with approximately $6.1 billion in assets and 134 branches in four states. Additionally, the company has been transforming itself from a thrift to a more community banking oriented entity. An improving level of earnings, aided by a relatively stable NIM over an interest rate cycle, sound asset quality and increased levels of capitalization are the drivers of our higher ratings assessment. The successful continuation of these trends and the additional accumulation of capital remain opportunities for further ratings improvements. SYBRON DENTAL: Posts Higher Sales & Income in Fiscal 3rd Quarter ---------------------------------------------------------------- Sybron Dental Specialties, Inc. (NYSE: SYD), a leading manufacturer of a broad range of value-added products for the dental and orthodontic professions including the specialty markets of endodontics and infection prevention, reported its financial results for its third fiscal quarter ended June 30, 2004. Third Quarter Results Net sales for the third quarter of fiscal 2004 totaled $145.5 million, an increase of 8.4% over $134.2 million in the prior year period. Sybron's total internal net sales growth rate, which excludes currency fluctuations and the impact of acquisitions made in the past twelve months, was 3.7% for the third quarter. The Company's consumable products, which represented approximately 96% of total net sales in the third quarter of fiscal 2004, had an internal net sales growth rate of 6.7%. As expected, equipment sales declined by approximately 38% from the prior year period, which benefited from the introduction of the Company's LED curing light in fiscal 2003. Net income for the third quarter of fiscal 2004 was $16.5 million, or $0.41 per diluted share, an increase of 10.4% over net income of $15.0 million, or $0.38 per diluted share, in the same period of the previous year. In the third quarter of fiscal 2004, Sybron generated $21.5 million in free cash flow, defined as cash flows from operating activities of $24.7 million minus capital expenditures of $3.2 million. This compares with free cash flow of $10.5 million in the same period of the previous year (cash flows from operating activities of $13 million minus capital expenditures of $2.5 million). "We recorded another quarter of solid results through a combination of organic growth and a meaningful contribution from our August 2003 acquisition of SpofaDental," said Floyd W. Pickrell, Jr., Chief Executive Officer of Sybron Dental Specialties. "We have a number of new products, such as the Premise(TM) nanocomposite, that are being well received. We also continue to successfully increase the user base for our established products, such as the Damon self-ligating brackets, which is also having a positive impact on sales of peripheral products like archwires." Ormco and Kerr Highlights During the third quarter, the Company's Ormco subsidiary generated internal net sales growth of 9.7%, with strong growth in both domestic and international sales. Sales in the quarter were positively impacted by strong demand for the Damon 2 self-ligating bracket and the Inspire Ice(TM) clear-ceramic bracket. In addition, Ormco also had a very successful preview promotion for the new Damon 3 self-ligating bracket, in which hundreds of top users of the Damon system placed orders for an advance shipment of the new, more esthetic version of the Damon bracket. The Company is planning a broad launch of the Damon 3 bracket in September. During the third quarter, the Kerr subsidiary's internal net sales growth rate was negative 0.7%. Internal net sales of Kerr's consumable products, which exclude equipment sales including the popular LED curing light launched in fiscal 2003, increased 3.7% over the prior year period. Strong sales of the Premise nanocomposite, the new HiRes magnification loupe, and infection prevention products helped to offset the significant decline in sales of curing lights from the previous year. In addition, SpofaDental continues to perform well following its acquisition last year by Kerr and is seeing significant sales of a new impression material developed for the Central and Eastern European markets. The consolidation of SpofaDental's operations from five facilities into one facility in the city of Jicin in the Czech Republic is progressing on schedule. Third Quarter Financial Highlights Gross margins in the third quarter of 2004 improved to 56.3%, compared with 55.4% in the same period of the previous year. Selling, general and administrative expenses (SG&A) were $52.0 million, or 35.7% of net sales, in the third quarter of 2004, compared with $44.8 million, or 33.4% of net sales, in the same period of the prior year. The increase in SG&A as a percentage of sales from the previous year is primarily attributable to an increase in legal expenses related to patent infringement lawsuits, as well as more activity related to the evaluation of prospective mergers and acquisitions. One of the M&A considerations resulted in the purchase of the Bioplant(R) product line, announced on July 22, 2004, while other discussions remain ongoing pursuant to the Company's strategy of maintaining consistent dialogue with potential acquisition candidates. Research and development expenditures were $2.5 million in the third quarter of 2004, an increase of 15.9% from the $2.1 million of expenditures in the same period of the prior year. Operating income for the third quarter of 2004 was $29.6 million, compared to $29.3 million in the third quarter of 2003. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter were $33.0 million. Operating income was 20.3% and EBITDA was 22.7% of net sales for the quarter. Third quarter 2004 EBITDA is calculated by adding net income of $16.5 million, income taxes of $8.1 million, net interest expense of $5.0 million, and depreciation and amortization of approximately $3.4 million. Sybron's effective tax rate in the third quarter of fiscal 2004 was 33%, compared to 36% in the same period of the prior year. The reduced tax rate is primarily attributable to the benefits resulting from the Company's consolidation of several of its European facilities into Switzerland, which has a lower tax rate. Net trade receivables were $103.5 million and days sales outstanding (DSOs) were 59.3 days at June 30, 2004, which compares with 58.7 days at June 30, 2003. Net inventory was $88.8 million at the end of the third quarter and inventory days were 123 days, which compares to 132 days at June 30, 2003. Please refer to the supplemental schedules provided on the Financial Report's section of Sybron's Investor Relations web site -- http://www.sybrondental.com/investors/index.html-- that detail the calculation of the Company's DSOs and inventory days. Capital expenditures were $3.2 million in the third quarter of fiscal 2004, compared with $2.5 million in the same period of the previous year. The Company has determined that continuing to lease its current corporate headquarters in Orange, California provides greater economic benefits than purchasing the facility, and is currently negotiating a 15-year lease extension. The average debt outstanding for the quarter was approximately $240.6 million with an average interest rate of 7.7%. The Company paid down $15.8 million of debt in the third quarter, leaving total debt outstanding of approximately $233.0 million at June 30, 2004. Sybron's capital structure was 46.1% debt and 53.9% equity at June 30, 2004. This compares with 61.8% debt and 38.2% equity at June 30, 2003. Amended Credit Facility As a result of the recent upgrade in Sybron's credit rating by S&P and Moody's, the Company has received a 50 basis point reduction in the margin on its term loan. In addition, the covenants of Sybron's credit facility have been amended to allow the Company to utilize up to $100 million for stock repurchases or dividend payments, at the Company's discretion. Previously, the Company was limited to $25 million for these purposes. At this point in time, Sybron does not have plans to initiate a stock repurchase program or begin issuing a dividend. Outlook For the fourth quarter of fiscal 2004, Sybron expects revenue to range from $137 million to $142 million, and diluted earnings per share to range from $0.37 to $0.42. Commenting on the outlook for Sybron, Mr. Pickrell said, "We expect to see a continuation of recent trends in the near-term, with growth in the orthodontic and endodontic areas outpacing growth in the general dental area. At Kerr, we are focused on raising additional awareness for the superior features of Premise and utilizing its popularity to cross-market some of our other products used in the restorative process, such as finishing discs and polishers. We will also further strengthen our product offerings for restorative procedures with the introduction of a new self-adhesive cement during the fourth quarter that we believe has excellent potential. "There are a number of catalysts in place that we believe will continue to drive strong results at Ormco, including the broad launch of the Damon 3 bracket in September, which we believe will enhance our efforts to convert orthodontists from traditional brackets. Going forward, we intend to continue building the Damon brand and introduce products such as Damon wires and other high value peripheral products that can increase our share of the overall treatment expenditures," said Mr. Pickrell. Orange, California- based Sybron Dental Specialties, Inc., is a leading manufacturer of products for the professional dental, orthodontics and infection control markets in the United States and abroad. * * * As reported in the Troubled Company Reporter's May 21, 2004 edition, Moody's Investors Service upgraded the ratings of Sybron Dental Specialties, Inc. (SDS), to reflect the merger of Sybron Dental Management, Inc. into SDS. Ratings affected are: -- $150 million Senior Secured Revolver due, 2007, to Ba2 from Ba3 -- $90 million Senior Secured Term Loan due, 2009, to Ba2 from Ba3 -- $150 million Senior Subordinated Notes, due 2012, to B1 from B2 -- Senior Implied Rating, to Ba2 from Ba3 -- Senior Unsecured Issuer Rating, to Ba3 from B1 The outlook for the ratings is stable. Moody's based its action on SDS' successful track record of both organic growth and growth through acquisition combined with the expected material improvement in credit measures over the past several years. Reportedly, SDS' debt has fallen from $341 million as of fiscal year end September 30, 2002 to about $278 million as of fiscal year end 2003. For the six months ended March 31, 2004, SDS's debt has fallen further to $249 million. Moody's expects debt to reduce another $30 to $40 million in fiscal 2004 to just above $200 million; a 40% reduction in debt since the end of the 2002. Lower debt levels combined with stable operating performance has caused SDS debt metrics to improve, says Moody's. SYNOVUS FINANCIAL: Fitch Assigns Ratings to Four Subsidiaries ------------------------------------------------------------- Fitch assigned a long-term debt rating of 'A' and a short-term debt rating of 'F1' to five wholly owned bank subsidiaries of Synovus Financial Corporation. At the same time, Fitch withdrew its ratings for Synovus subsidiaries Charter Bank & Trust Co. and Mountain National Bank, as these two banks were merged into Bank of North Georgia. A complete list of the affected ratings follows. Bank of Nashville -- Long-term deposits 'A+'; -- Long-term issuer 'A'; -- Short-term issuer 'F1'; -- Individual 'B'; -- Support '5'. First Nation Bank -- Long-term deposits 'A+'; -- Long-term issuer 'A'; -- Short-term issuer 'F1'; -- Individual 'B'; -- Support '5'. United Bank and Trust Company -- Long-term deposits 'A+'; -- Long-term issuer 'A'; -- Short-term issuer 'F1'; -- Individual 'B'; -- Support '5'. Trust One Bank -- Long-term deposits 'A+'; -- Long-term issuer 'A'; -- Short-term issuer 'F1'; -- Individual 'B'; -- Support '5'. Ratings Withdrawn Charter Bank & Trust Co. -- Long-term deposits 'A+'; -- Long-term issuer 'A'; -- Short-term issuer 'F1'; -- Individual 'B'; -- Support '5'. Mountain National Bank -- Long-term deposits 'A+'; -- Long-term issuer 'A'; -- Short-term issuer 'F1'; -- Individual 'B'; -- Support '5'. TACTEX CONTROLS: Expects to Raise $2,000,000 from Equity Units -------------------------------------------------------------- Tactex Controls Inc. reached an agreement with First Associates Investments Inc., whereby First Associates has been appointed as an Agent for and on behalf of Tactex to raise, on a commercially reasonable best-efforts basis, up to $2,000,000 from the sale of Units of Tactex at a price of $0.27 per Unit. The Offering will be conducted pursuant to a short form offering document under the policies of the TSX Venture Exchange. Each Unit will consist of one Common Share and one-half (1/2) of one non-transferable Common Share Purchase Warrant, each whole Warrant entitling the holder thereof to purchase one additional Common Share at a price of $0.40 for a period of eighteen months from the date of issue. First Associates will receive a cash commission equal to 10% of the gross proceeds received by the Corporation from the sale of the Units, in addition to a due diligence administration fee of $20,000. The Agent will receive a non-transferable option to acquire that number of Common Shares that is equal to 12% of the gross number of Units sold, at a price of $0.27 per Common Share for a period of 18 months from the date of closing. The Corporation intends to use the proceeds of the Offering: (1) to exercise an option to acquire the rights to the Kinotex technology in the automotive market and to conduct research and development activities for products in that market; (2) increase the Corporation's current manufacturing capacity; (3) increase the Corporation's marketing activities in the health care and automotive markets; and (4) for working capital. About Tactex Tactex -- whose December 31, 2003 balance sheet shows a $932,244 stockholders' deficit compared to a $1,635,506 deficit at December 21, 2002 -- develops and manufactures Kinotex(R) - an innovative pressure sensing technology based on fiber optics, that was originally developed for the Canadian Space Agency. Kinotex(R) enables a new class of Input Devices and Pressure Sensors, which allow expressive human touch control, patient monitoring and diagnostic products. TECH LABORATORIES: Obtains $10.5 Million Equity Commitment ---------------------------------------------------------- Tech Laboratories, Inc. (OTC Bulletin Board: TCHL) has obtained $10.5 million in committed equity capital in the form of a Standby Equity Distribution Agreement (SEDA) with Cornell Capital Partners, L.P. Under the terms of the SEDA, Cornell has committed to provide up to $10.5 million of funding to the Company over a 24-month period to be drawn down at the Company's discretion by the sale of its common stock to Cornell. Company President, Bernard M. Ciongoli, said the funds would be primarily used for working capital. "This recent round of financing and our developing relationship with Cornell Capital is a milestone for our Company," said Mr. Ciongoli. "They've recently helped restructure our debt and this new funding instrument will provide us additional working capital." "We're are eager to assist Tech Laboratories in meeting its ongoing financing needs and we look forward to a long-term relationship with the company," said Walter Bukowski, Vice President of Cornell Capital. Tech Laboratories, Inc. manufactures, markets and sells patented technology for positive access security to prevent unauthorized hacker attacks. Its proprietary DynaTraX(TM) Enterprise Management System (DEMS) enables users to reconfigure networks electronically and also has security features that can trap and trace intrusions (hackers) in a system automatically. This software/hardware system provides the ultimate in positive access security against the increasing threat posed by cyber-terrorists. The Company also recently introduced DynaTraX(TM) Virtual Technician which provides autonomic self-healing and self-managing of network technologies. To view video on Tech Laboratories' comprehensive DynaTraX(TM) technology, go to the Tech Laboratories, Inc. website at http://www.techlabsinc.com/click on "Global Network Management Communications" and download video. About Cornell Capital Based in Jersey City, NJ, Cornell Capital Partners, L.P. began operations in January 2001 to address the financing needs of publicly traded companies. Since then, Cornell Capital has successfully financed numerous public companies. About Tech Laboratories, Inc. Tech Laboratories, Inc. manufactures, markets and sells a product creating a new paradigm of automating and securing high-tech networks at the physical layer. The Company's primary product, DynaTraX(TM), a patented (US6414953B1) high-speed digital matrix cross-connect switch with a revolutionary new technology, can significantly reduce network downtime and achieve substantial cost-savings in data and telecommunications networking environments. DynaTraX(TM) has the ability to create a critical and meaningful solution to stop hackers from intruding into networks, thereby thwarting cyber-terrorists. DynaTraX(TM) electronically disconnects a hacker, detected by Intrusion Detection Software, and reconnects him to a simulated network within 60-90 nanoseconds that allows you to hold and trace him. * * * As reported in the Troubled Company Reporter's January 2, 2004 edition, as a result of operating losses and negative cash flows experienced during 2001 and 2002, and continuing in 2003, Tech Laboratories Inc. has a tenuous liquidity position. If sales do not improve or alternate financing is not obtained, substantial doubt exists about Tech Labs' ability to continue as a going concern. TENNECO AUTOMOTIVE: Launches $500M 11-5/8% Senior Sub. Debt Offer ----------------------------------------------------------------- Tenneco Automotive (NYSE: TEN) has commenced a private placement offering of $500,000,000 of Senior Subordinated Notes. In connection with the offering, the company has commenced a tender offer and consent solicitation for its outstanding $500 million aggregate principal amount of 11-5/8% senior subordinated notes due 2009. The company plans to use the net proceeds of the sale of the notes and cash on hand to complete the offer to purchase. These transactions are designed to reduce the company's annual interest expense by up to $17 million annually. The new notes will be senior subordinated obligations of Tenneco Automotive and will mature in 2014 with interest payable semi- annually. The notes will be guaranteed by each of Tenneco Automotive's material domestic wholly-owned subsidiaries. The tender offer will expire at midnight, Eastern Daylight Time, on August 20, 2004, unless extended or earlier terminated. Holders tendering their notes will be required to consent to certain proposed amendments to the indenture governing the notes, which will eliminate all of the restrictive covenants, amend the satisfaction and discharge provision and eliminate certain events of default provision in the indenture. The consent solicitation will expire at midnight, Eastern Daylight Time, on August 6, 2004, unless extended or earlier terminated. Note holders who validly tender their outstanding notes before the consent solicitation expires will receive $1,075.57 per $1,000 principal amount of notes, which includes a consent payment of $15.00 per $1,000 principal amount of notes. Payment for these notes is expected to be made on or as soon as practicable after the first business day following expiration of the consent solicitation. Note holders who validly tender their notes after the consent solicitation expires and before the offer expires will receive $1,060.57 per $1,000 principal amount of notes. Payment for these notes is expected to be made on or as soon as practicable after the first business day following expiration of the tender offer. In either case, note holders who validly tender their notes will be paid accrued and unpaid interest up to, but not including, the date of payment for the notes. Additional Information The transactions are subject to meeting certain conditions, including market conditions, the company's receipt of tenders of outstanding notes representing at least 60 percent of the principal amount of the notes outstanding, execution of a supplemental indenture incorporating the proposed amendments, and consent of the company's senior bank lenders to permit the transactions on the terms proposed. The terms of the tender offer are described in Tenneco Automotive's Offer to Purchase and Consent Solicitation Statement of July 26, 2004, which may be obtained from Global Bondholder Services at (866) 937-2200 (U.S. toll free) or (212) 430-3774. Tenneco Automotive has engaged J.P. Morgan Securities Inc., Banc of America Securities LLC, Citigroup Global Markets, Inc. and Deutsche Bank Securities Inc. to act as dealer managers in connection with the tender offer and solicitation agents in connection with the consent solicitation. For additional information regarding the offer or consent solicitation, contact J.P. Morgan Securities Inc., High Yield Capital Markets at (212) 970-9153. This announcement is not an offer to purchase, a solicitation of an offer to purchase or a solicitation of consent with respect to any securities. The tender offer and consent solicitation is being made solely by the Offer to Purchase and Consent Solicitation Statement of July 26, 2004. Tenneco Automotive is offering the new senior subordinated notes in reliance upon an exemption from registration under the Securities Act of 1933 for an offer and sale of securities that does not involve a public offering. The notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration. This news release does not constitute an offer to sell or the solicitation of an offer to buy any such security and shall not constitute an offer, solicitation or sale in any jurisdiction in which it would be unlawful. Tenneco Automotive (S&P, B+ Corporate Credit Rating) is a $3.8 billion manufacturing company with headquarters in Lake Forest, Illinois and approximately 19,200 employees worldwide. Tenneco Automotive is one of the world's largest designers, manufacturers and marketers of emission control and ride control products and systems for the automotive original equipment market and the aftermarket. Tenneco Automotive markets its products principally under the Monroe(R), Walker(R), Gillet(R) and Clevite(R)Elastomer brand names. Among its products are Sensa-Trac(R) and Monroe Reflex(R) shocks and struts, Rancho(R) shock absorbers, Walker(R) Quiet-Flow(R) mufflers, Dynomax(R) performance exhaust products, and Clevite(R)Elastomer noise, vibration and harshness control components. TENNECO AUTOMOTIVE: S&P Rates $500M Sr. Subordinated Notes at B- ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B-' rating to Lake Forest, Ill.-based Tenneco Automotive Inc.'s $500 million senior subordinated notes due 2014, to be issued under Rule 144A. At the same time, Standard & Poor's affirmed its 'B+' corporate credit rating and other ratings on Tenneco, a global manufacturer of automotive components. The company has about $1.7 billion of total debt, including operating leases and accounts receivable sales. The outlook is positive. Proceeds from the new debt issue will be used to fund Tenneco's tender offer for its 11.625% $500 million subordinated notes due 2009. The transaction is expected to reduce annual interest cost by $17 million, modestly improving the company's cash flow and debt service coverage statistics. Liquidity will decline modestly, however, because of payment of a tender premium and related fees and expenses. "The ratings on Tenneco reflect its aggressively leveraged capital structure, weak but improving credit protection measures, and slightly below-average business profile due to exposure to the highly competitive and cyclical automotive markets," said Standard & Poor's credit analyst Daniel DiSenso. This exposure partially negates the benefits of strong market positions. Tenneco is a leading global supplier of emissions-control and ride-control products to the automotive original equipment (OE) market and aftermarket. Tenneco has good customer, platform and geographic diversity, and a balance between OE sales (75%) and aftermarket sales (25%). Most of Tenneco's sales are generated in North America (50%) and Europe (38%). Impending stricter emission control standards, demand for improved vehicle stability, and expected rapid growth of the Chinese automotive market create favorable growth prospects for the company. TNP RESOURCES: S&P Revises Credit Watch Implications to Developing ------------------------------------------------------------------ Standard & Poor's Ratings Services said that its 'BB+' corporate credit ratings on utility holding company TNP Enterprises Inc. and unit Texas-New Mexico Power Co. (TNMP) will remain on CreditWatch, but that it will revise the CreditWatch implications to developing from negative. The rating action follows TNP's announcement that the utility holding company and its units, TNMP and retail electric provider, First Choice Power (FCP), will be sold to PNM Resources Inc. (BBB/Stable/A-2) for $1.024 billion. The CreditWatch developing listing indicates that ratings may be raised, lowered or affirmed. The action affects about $800 million of rated debt and $175 million of preferred stock at the Fort Worth, Texas-based company. "The revision of the CreditWatch listing to developing from negative reflects the potential for a ratings upgrade based on the stronger credit profile of PNM Resources," said Standard & Poor's credit analyst Rajeev Sharma. "However, the developing implications also reflect the pending nature of the transaction, as regulatory approvals are required to successfully complete the acquisition," he continued. Without the successful completion of the sale, scheduled for the end of 2005, TNP's ratings would be lowered due to the recent adverse regulatory ruling associated with TNMP's 2004 true-up proceeding with the Public Utility Commission of Texas (PUCT). The PUCT order authorizes TNMP to recover $87 million in stranded costs, as opposed to TNMP's request of $266 million in stranded- cost recovery. Standard & Poor's is concerned that the order would weaken credit metrics at the utility and holding company, and delay the company's debt-reduction plans. These concerns would be alleviated if the acquisition of TNP and its units are consummated in a timely fashion. Standard & Poor's will resolve the CreditWatch listing following a meeting with TNP's and PNM's management and a full review of the proposed transaction and financing plan. TOM EXPLORATION: Will Get CDN$180,000 from Private Investor ----------------------------------------------------------- Tom Exploration Inc. signs an agreement for private placement of CDN$180,000 with a private investor for exploration and working capital purposes. The private investor will purchase 600,000 common shares of Tom Exploration Inc., for a purchase price of $0.30 per share. The securities issued pursuant to this private placement are subject to a holding period of four months. Tom Exploration Inc. Enters into Consulting Agreement Tom has signed consulting agreement with Mr. Pierre Morin to provide services in the areas of finance, investment markets and investor relations. Mr. Morin will serve as a consultant to Tom Exploration, Inc., and with assist in developing and implementing a communications strategy to enhance the profile of Tom Exploration, Inc., within the investment community. Mr. Morin will be paid a monthly retainer and has been granted an incentive option for the purchase of 520,000 common shares at a price of $0.40 per share for a period of three years. The grant of the options and the consulting agreement are subject to regulatory approval. Tom Exploration Inc., a junior exploration company with gold, base metal and pge exposure and with properties located in the major Canadian mining camps of Timmins (Ontario), Rouyn Noranda (Quebec), and Belleterre (Quebec), is a public listed company trading on the TSX Venture Exchange (TUM). At January 31, 2004, the company's stockholders' deficit widened to $9,292,040 from a $8,608,922 deficit at April 30, 2003. TOWER AUTOMOTIVE: Moving Bowling Green Operations to Milan, Tenn. ----------------------------------------------------------------- Tower Automotive, Inc. (NYSE:TWR) will transfer production of its suspension link arm business, an automotive suspension component, from the company's facility in Bowling Green, Ky., to its plant in Milan, Tenn. "The transfer of this product is part of a restructuring of our North American operations to gain production efficiencies and strengthen our competitiveness," said Tom Pitser, Tower Automotive's leader of North American operations. A total of 84 positions at Bowling Green will be affected by this transfer. However, 17 jobs will remain at the Bowling Green facility as part of the painting and coatings operations that will continue. The transfer of suspension link arm production to Milan, Tenn., will be completed by mid-October 2004. The Milan facility currently employs 331 people and produces a variety of automotive products, including: control arms, cross members, engine cradle assemblies, heavy truck stampings, side rails and welded assemblies. Milan's hourly workforce is represented by the United Steel Workers of America. Tower Automotive Inc. is a global designer and producer of vehicle structural components and assemblies used by every major vehicle manufacturer, including BMW, DaimlerChrysler, Fiat, Ford, General Motors, Honda, Hyundai/Kia, Nissan, Toyota and Volkswagen Group. Products include body structures and assemblies, lower vehicle frames and structures, chassis modules and systems, and suspension components. The company is based in Novi, Michigan. Additional company information is available at http://www.towerautomotive.com/ * * * As reported in the Troubled Company Reporter's May 20, 2004, Standard & Poor's Ratings Services assigned its 'B-' rating to Novi, Michigan-based Tower Automotive Inc.'s $110 million 5.75% convertible senior debentures maturing in May 2024, to be issued in accordance with SEC Rule 144A with registration rights. Proceeds from the offering, together with a portion of a new senior secured bank credit facility, will repay outstanding indebtedness under Tower's existing bank credit facility and redeem Tower's $200 million 5% convertible subordinated notes due Aug. 1, 2004. "The transactions will improve Tower's financial flexibility by extending debt maturities and increasing available liquidity," said Standard & Poor's credit analyst Daniel DiSenso. "Ratings could be lowered, though, should there be a delay in the timing of benefits to be derived from actions to turn the business around, resulting in the deterioration of credit statistics." TRADE PARTNERS: Case Summary & 8 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Trade Partners Greenville, LLC c/o Bruce S. Kramer Borod & Kramer, P.C. 80 Monroe, Suite G-1 Memphis, Tennessee 38103 Bankruptcy Case No.: 04-09055 Type of Business: The Debtor owns vacant commercial real estate in Greenville, Michigan. Chapter 11 Petition Date: July 23, 2004 Court: Western District of Michigan (Grand Rapids) Judge: Jo Ann C. Stevenson Debtor's Counsel: Michael J. Quilling, Esq. Quilling Selander Cummiskey & Lownds PC 2001 Bryan Street, Suite 1800 Dallas, TX 75201 Tel: 214-871-2100 Total Assets: $1,810,000 Total Debts: $2,894,187 Debtor's 8 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Trade Partners, Inc. Debts / Services $2,678,637 c/o Bruce S. Kramer, Receiver Borod & Kramer, P.C. 80 Monroe, Ste. G-1 Memphis, TN 38103 Irwin Seating Company Promissory Note $1,871,072 P.O. Box 2429 325 Fruit Ridge Road, N.W. Grand Rapids, MI 44501 McShane & Bowie PLC Debts / Services $9,088 City of Greenville Debts / Services $8,555 Brad's Services, Inc. Debts / Services $1,995 Turf Builders Inc. Debts / Services $1,438 Site Planning Development Debts / Services $258 Inc. InterGlobal Waste Management Debts / Services $0 Inc. TROPICAL SPORTSWEAR: Incurs $5.8 Million Net Loss in 3rd Quarter ---------------------------------------------------------------- Tropical Sportswear Int'l Corporation (Nasdaq:TSIC) released its third quarter fiscal 2004 results. Net sales for the third quarter of fiscal 2004 were $74.8 million as compared with $96.7 million in the same period last year. The Company incurred a net loss for the third quarter of fiscal 2004 of $5.8 million compared with a net loss for the third quarter of fiscal 2003 of $30.6 million. Gross margin for the third quarter of fiscal 2004 was $15.8 million, or 21.2% of net sales, as compared with gross margin of $9.0 million, or 9.3% of net sales for the same period last year. Operating loss for the third quarter of fiscal 2004 was $586,000 as compared with an operating loss of $14.0 million in the same period last year. Selling, general and administrative expenses in the third quarter of fiscal 2004 are $4.2 million less than the same period last year. Net sales for the nine months of fiscal 2004 were $246.0 million as compared with $308.5 million for the same period last year. The Company incurred a net loss for the nine months of fiscal 2004 of $12.2 million compared with a net loss of $34.9 million for the same period last year. Gross margin for the nine months of fiscal 2004 was $49.7 million, or 20.2% net sales, as compared with gross margin of $52.8 million, or 17.1% of net sales for the same period last year. Operating income for the nine months of fiscal 2004 was $801,000 as compared with an operating loss of $16.5 million in the same period last year. Selling, general and administrative expenses for the nine months of fiscal 2004 are $11.5 million less than the same period last year. Other income of $2.8 million for the nine months of fiscal 2004, is composed of a $3.5 million gain on the sale of the Company's unoccupied administration building, offset in part by $722,000 of costs related to the phase out of the Tampa, Florida cutting operations, consisting primarily of asset writedowns and losses on the sale of machinery and equipment. Other charges of $6.1 million recorded in the nine months of fiscal 2003 included costs resulting from the separation of the Company's former chief executive officer, costs related to disposing of one of the Company's corporate aircraft, charges related to the closure of the Duck Head(R) retail outlet store business, reserves for certain contract disputes/litigation and investment banking advisory fees. These items were offset, in part by a gain on the sale of the Duck Head(R) trademarks and a reduction of estimated costs related to the consolidation and reorganization of the Company's Savane(R) division. The Company also previously announced in June, the signing of a new Loan and Security Agreement with The CIT Group. At the end of June, availability under this agreement was $24.8 million. The Company also wrote off approximately $1.7 million of debt issue costs associated with its previous revolving credit line and real estate loan during the third quarter of fiscal 2004. Robin Cohan, Chief Financial Officer, commented: "TSI has made significant progress both financially and operationally. We have increased liquidity, reduced debt, and lowered expenses. Our new bank facility was a strong vote of confidence by our lenders." Richard Domino, President, commented: "Having improved our financial position, TSI is working aggressively to identify more ways to deliver greater value to our customers. A central part of this process was the creation of three new strategic business units. The value we will provide will be derived from designing new products, enabling our customers to differentiate themselves and minimize inventory risk, and leveraging our expertise to help retailers increase demand for products, accelerate inventory turnover and achieve higher margins. This, in turn, should enable TSI to remain competitive in an industry that continues to experience rapid change." TSI is a designer, producer and marketer of high-quality branded and retailer private branded apparel products that are sold to major retailers in all levels and channels of distribution. Primary product lines feature casual and dress-casual pants, shorts, denim jeans, and woven and knit shirts. Major owned brands include Savane(R), Farah(R), Flyers(TM), The Original Khaki Co.(R), Bay to Bay(R), Two Pepper(R), Royal Palm(R), Banana Joe(R), and Authentic Chino Casuals(R). Licensed brands include Bill Blass(R) and Van Heusen(R). Retailer national private brands that we produce include Puritan(R), George(TM), Member's Mark(R), Sonoma(R), Croft & Barrow(R), St. John's Bay(R), Roundtree & Yorke(R), Geoffrey Beene(R), Izod(R), and White Stag(R). TSI distinguishes itself by providing major retailers with comprehensive brand management programs and uses advanced technology to provide retailers with customer, product and market analyses, apparel design, and merchandising consulting and inventory forecasting with a focus on return on investment. * * * In its Form 10-Q for the quarterly period ended April 3, 2004, Tropical Sportswear International Corporation reports: "On June 6, 2003, we renewed our revolving credit line. The Facility provides for borrowings of up to $95 million, subject to certain borrowing base limitations. Borrowings under the Facility bear variable rates of interest based on LIBOR plus an applicable margin (5.6% at April 3, 2004), and are secured by substantially all of our domestic assets. The Facility matures in June 2006. The Facility contained significant financial and operating covenants if availability under the Facility falls below $20 million. These covenants include a consolidated fixed charge ratio of at least .90x and a ratio of consolidated funded debt to consolidated EBITDA of not more than 5.25x. The Facility also includes prohibitions on our ability to incur certain additional indebtedness or to pay dividends, and restrictions on our ability to make capital expenditures. "The Facility contains both a subjective acceleration clause and a requirement to maintain a lock-box arrangement, whereby remittances from customers reduce borrowings outstanding under the Facility. In accordance with Emerging Issues Task Force 95- 22, "Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements That Include Both a Subjective Acceleration Clause and a Lock-Box Arrangement", outstanding borrowings under the Facility of $23.3 million have been classified as short-term as of April 3, 2004. "On December 15, 2003, we paid the semi-annual interest payment of $5.5 million to the holders of our senior subordinated notes. On December 16, 2003, availability under our Facility fell below $20 million, triggering financial covenants which we violated. This caused us to be in technical default under the Facility. On January 12, 2004, we amended the Facility with Fleet Capital, which among other things reduced aggregate borrowings to $70 million. The default under the Facility was waived on January 12, 2004 by the terms of the Amended Facility. Although our Amended Facility provides for borrowings of up to $70 million, the amount that can be borrowed at any given time is based upon a formula that takes into account, among other things, our eligible accounts receivable and inventory, which can result in borrowing availability of less than the full amount. Additionally, the Amended Facility contains a $10 million availability reserve base and higher rates of interest than the Facility. The $10.0 million availability reserve base was met as of April 3, 2004 and through the date of this filing. The Amended Facility also contains monthly financial covenants of minimum EBITDA levels, which began February 2004, and a consolidated fixed charge coverage ratio and consolidated EBIT to consolidated interest expense ratio which begin March 2005. The fiscal 2004 minimum EBITDA levels are cumulative month amounts beginning in the second quarter of fiscal 2004. The minimum EBITDA threshold for fiscal 2004 ranges from $1.8 million for the two months ending February 29, 2004 to $11.8 million for the nine months ending October 2, 2004. We were in compliance with the EBITDA covenants as of April 3, 2004, and had $13.2 million available for borrowing under the Amended Facility. While we believe our operating plans, if met, will be sufficient to assure compliance with the terms of the Amended Facility, there can be no assurances that we will be in compliance through fiscal 2004. "Our estimate of capital needs is subject to a number of risks and uncertainties that could result in additional capital needs that have not been anticipated. An important source of capital is our ability to generate positive cash flow from operations. This is dependent upon our ability to increase revenues, to generate adequate gross profit from those sales, to reduce excess inventories and to control costs and expenses. Another important source of capital is our ability to borrow under the Amended Facility. We have historically violated certain covenants in our borrowing agreements, and to this point, we have been able to obtain waivers from our lenders allowing us continued access to this source of capital. However, there can be no assurances that we will be able to obtain waivers from our lenders should a violation occur in the future. If our actual revenues are less than we expect or operating or capital costs are more than we expect, our financial condition and liquidity may be materially adversely affected. We may need to raise additional capital either through the issuance of debt or equity securities or additional credit facilities, and there can be no assurances that we would be able to access the credit or capital markets for additional capital." TUCSON ELECTRIC: Fitch Rates Secured Credit Facility at BB+ ----------------------------------------------------------- Fitch Ratings has assigned a 'BB+' rating to Tucson Electric Power Company's second mortgage bonds and to a new $401 million credit facility secured by second mortgage bonds. Fitch has also affirmed Tucson Electric's 'BB+' first mortgage and secured pollution control revenue bond ratings and its 'BB-' unsecured pollution control revenue and industrial development bond ratings. Tucson Electric's ratings are: -- First mortgage bonds/ secured PCRBs 'BB+'; -- Second mortgage bonds 'BB+'; -- Secured credit facility 'BB+'; -- Unsecured PCRBs/industrial development bonds 'BB-'. The Rating Outlook is Stable. The current ratings reflect Tucson Electric's weak interest coverage ratios and highly leveraged balance sheet. Favorably, Tucson Electric generates free cash flow that should allow for meaningful debt reduction. The high business risk that results from the absence of a power cost adjustment clause or deferral mechanism and the rate cap under its 1999 industry restructuring settlement agreement is largely mitigated by the company's long coal-fired generation portfolio. The second mortgage bonds are rated the same as the first mortgage bonds and the first collateral trust bonds due to the substantial value of the collateral available to creditors secured by first and second mortgage bonds. The new $401 million credit facility closed on March 25, 2004 and is composed of a $60 million revolving credit facility and a $341 million letter of credit facility. The letter of credit facility supports Tucson Electric's $329 million variable rate, tax-exempt bonds. The credit agreement is secured by $401 million in aggregate principal amount of second mortgage bonds and matures on June 30, 2009. Under the terms of the new credit facility, Tucson Electric is prohibited from issuing additional first mortgage debt. A provision in the earlier agreement that limited the proportion of Tucson Electric net income that can be paid to UniSource Energy was eliminated. However, the Arizona Corporation Commission still limits dividends to 75% of Tucson Electric net income. Importantly, Fitch expects Tucson Electric first mortgage debt to be reduced, at the close of the merger, to levels sufficient to trigger fall-away provisions in the utility's first collateral trust indenture. Under the provisions of the first mortgage trust indenture, the outstanding first mortgage lien now securing the bonds will be replaced by a perfected second mortgage lien. As a result, all of Tucson Electric's outstanding secured debt will then be secured solely by the second mortgage lien and the first mortgage deed of trust will be terminated. In November 2003, Tucson Electric's direct parent, UniSource Energy, entered into a merger agreement with Saguaro Utility Group L.P., whereby Saguaro will purchase all of the UniSource Energy common stock for $25.25 per share. Saguaro (which includes limited partners Kohlberg Kravis Roberts & Co., L.P., J.P. Morgan Partners, LLC and Wachovia Capital Partners) has agreed to acquire UniSource Energy in a transaction valued at roughly $3 billion, including assumed debt. The leveraged transaction, as planned, will be financed by a $550 million equity investment and $660 million of new debt to be issued by a new holding company that will be the parent of UniSource Energy. Two-hundred-sixty three million of the new equity will be invested in Tucson Electric and used to reduce utility debt. Although there is currently no parent-level debt at UniSource Energy, if the merger is consummated as planned, Tucson Electric will be the indirect subsidiary of a highly leveraged parent company. This concern is mitigated by the pre-funded debt redemption feature of the merger proposal and regulatory provisions limiting dividends to 100% of the utility's net income, based on the utility's proposed post-acquisition capital structure and current Arizona Corporation Commission limitations. The $263 million equity investment in Tucson Electric will accelerate debt reductions previously anticipated to occur over a five-year horizon, thereby easing regulatory restrictions limiting the amount of dividends paid by Tucson Electric to its immediate parent, UniSource Energy. The $263 million cash transfer and debt redemption are targeted to improve Tucson Electric's regulatory equity to 40% of total capitalization (the calculation by the Arizona Corporation Commission excludes capitalized lease obligations) enabling the utility to dividend 100% of net income to its parent. The incremental dividend payment is partially offset by lower interest expense associated with the debt reduction. Under the terms of the merger agreement, the investor group will pay roughly $875 million for UniSource Energy equity and assume about $2.1 billion of debt. The merger has been approved by shareholders and requires regulatory approvals from the Arizona Corporation Commission, FERC, and the SEC. Management will remain in place and UniSource Energy's corporate headquarters will remain in Tucson, Arizona. The merger, if approved, is expected in the fourth quarter 2004. UNIFI INC: S&P's Low-B Ratings Remain on CreditWatch Negative ------------------------------------------------------------- Standard & Poor's Ratings Services said that the ratings on Unifi Inc., including its 'B+' corporate credit rating, remain on CreditWatch with negative implications following the firm's announcement of its intent to acquire the INVISTA filament manufacturing assets located in Kinston, N.C. for $21 million. As part of the purchase agreement, the manufacturing alliance between Unifi and INVISTA (formerly with DuPont) will be terminated. Sales from the Kinston facility were approximately $300 million, of which two-thirds were to Unifi. With the acquisition of these assets, Unifi will have a more integrated manufacturing base in the United States. Unifi's total debt outstanding at March 28, 2004, was about $267.6 million. "Resolution of the CreditWatch will depend, among other things, on the Company's strategy regarding its operations in China," said Standard & Poor's credit analyst Susan Ding. "In addition, we will complete a review of the company's business strategies and financial policies." Unifi is a manufacturer and processor of textured polyester and nylon yarns. Unifi's yarns are found in home furnishings, apparel and industrial fabrics, automotive upholstery, and hosiery. UNITED AIRLINES: Asks Court to Continue CBA Grievance Process ------------------------------------------------------------- James H.M. Sprayregen, Esq., at Kirkland & Ellis, relates that UAL Corporation and its debtor affiliates and each of their unions are parties to collective bargaining agreements that establish grievance processes. Disputes arising under the CBAs may be submitted for arbitration to the System Board of Adjustment, a statutorily mandated arbitration board. The SBA is versed in CBAs and labor laws and provides an efficient, cost-effective mechanism for resolving labor disputes. In this regard, the Debtors seek the Court's permission to modify the automatic stay to allow the grievance process of their CBAs to continue. Mr. Sprayregen relates that at the June 18, 2004 hearing, the Court questioned the Debtors' ability to arbitrate prepetition grievances without first obtaining relief from the automatic stay. Mr. Sprayregen explains that the automatic stay does not prevent the arbitration of prepetition grievances, although it may prevent payment of monetary awards resulting from arbitration. However, the Debtors are not seeking permission to pay monetary awards connected with arbitration. Responses (1) AFA and ALPA The Association of Flight Attendants-Communications Workers of America, AFL-CIO, and the Air Line Pilots Association, International, want to be heard. Robert S. Clayman, Esq., at Guerrieri, Edmond & Clayman, in Washington, D.C., asserts that the automatic stay does not apply to the grievance process. The Debtors' CBAs were not rejected pursuant to Section 1113 of the Bankruptcy Code, so an order from the Court is not required. (2) Creditors Committee The Official Committee of Unsecured Creditors concurs with the Debtors' position. Patrick C. Maxcy, Esq., at Sonnenschein, Nath & Rosenthal, says that the Court need not enter an order modifying the stay to allow the employee arbitration process to continue. However, the Committee will not object if the Court deems it necessary to enter an order. (3) IAM On behalf of the International Association of Machinists and Aerospace Workers, AFL-CIO, Ira M. Levee, Esq., at Lowenstein Sandler, in Roseland, New Jersey, states that the Debtors' adequately demonstrate that the automatic stay does not apply to the processing of prepetition grievances within the CBAs. Indeed, the order entered by the Court approving the negotiated modifications to the CBAs recognized that Section 1113 precludes application of the automatic stay. Accordingly, no order is necessary. Headquartered in Chicago, Illinois, UAL Corporation -- http://www.united.com/-- through United Air Lines, Inc., is the holding company for United Airlines -- the world's second largest air carrier. the Company filed for chapter 11 protection on December 9, 2002 (Bankr. N.D. Ill. Case No. 02-48191). James H.M. Sprayregen, Esq., Marc Kieselstein, Esq., David R. Seligman, Esq., and Steven R. Kotarba, Esq., at KIRKLAND & ELLIS represent the Debtors in their restructuring efforts. When the Company filed for protection from their creditors, they listed $24,190,000,000 in assets and $22,787,000,000 in debts. (United Airlines Bankruptcy News, Issue No. 54; Bankruptcy Creditors' Service, Inc., 215/945-7000) USG CORP: Futures Rep Extends Terms CIBC World's Retention ---------------------------------------------------------- Dean M. Trafelet, Esq., the legal representative for the future claimants in USG Corporation's chapter 11 proceedings, sought and obtained the Court's authority to modify and extend the terms of CIBC World Markets Corp.'s engagement through October 30, 2004. CIBC serves as Mr. Trafelet's investment banker and financial advisor. Mr. Trafelet will continue to retain CIBC pursuant to the terms of a supplemental letter agreement: (a) Term The Supplemental Letter Agreement has an initial term commencing from April 30, 2004 for a period of six months, provided that the Futures Representative has the right to continue CIBC's retention after the conclusion of the current period pursuant to a subsequent retention application and engagement letter to be negotiated. During the additional period, either the Futures Representative or CIBC may terminate the Supplemental Letter Agreement with 30 days advance written notice. (b) Fees As compensation for its services to the Futures Representative, CIBC proposes to charge the Debtors' estates a $135,000 monthly fee, nunc pro tunc to April 1, 2004, to be paid throughout the Current Period. (c) Expenses The Debtors will be obligated to reimburse CIBC for its a reasonable out-of-pocket expenses incurred. (d) Key Persons CIBC will make available to the Futures Representative the services of Joseph J. Radecki, Jr. If Mr. Radecki ceases to be employed by CIBC, the Futures Representative is entitled to terminate the Agreement. Mr. Radecki, as representative of CIBC, assures the Court that the firm does not have or represent any interest materially adverse to the interests of the Debtors or their estates, creditors or equity interest holders. CIBC is also a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. Headquartered in Chicago, Illinois, USG Corporation -- http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential and repair and remodel construction, as well as products used in certain industrial processes. The Company filed for chapter 11 protection on June 25, 2001 (Bankr. Del. Case No. 01-02094). David G. Heiman, Esq., and Paul E. Harner, Esq., at Jones, Day, Reavis & Pogue represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $3,252,000,000 in assets and $2,739,000,000 in debts. (USG Bankruptcy News, Issue No. 69; Bankruptcy Creditors' Service, Inc., 215/945-7000) VANGUARD HEALTH: S&P Places Ratings on CreditWatch Negative ----------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on health care service provider Vanguard Health Systems Inc., including the company's 'B+' corporate credit rating, on CreditWatch with negative implications. "The CreditWatch listing follows the company's announcement [Mon]day that Blackstone Group has entered into a definitive agreement to acquire a majority interest in Vanguard in a transaction valued at about $1.75 billion," said Standard & Poor's credit analyst David Peknay. Vanguard's current majority owner is Morgan Stanley Capital Partners. This transaction, if completed, is expected to add to the company's financial leverage. As of March 31, 2004, Vanguard's total debt outstanding was $526 million. Standard & Poor's will monitor progress on the transaction in conjunction with a rating review. VITAL BASICS: Employing Point Capital as Investment Bankers ----------------------------------------------------------- Vital Basics, Inc., and Vital Basics Media, Inc., ask the U.S. Bankruptcy Court for the District of Maine for permission to employ Point Capital Partners, LLC, as their investment banker. The Debtors tell the Court that it intended to file a full payment plan. The Debtors are also committed to exploring all alternatives to generate the best plan for creditors and for other parties-in-interest. The Debtors intend to explore new investment possibilities, financing transactions or a sale of all or part of their equity or assets. The Debtors will look to Point Capital to: a) prepare financial analysis and model of the Debtors' business; prepare confidential memorandum regarding the Debtor; b) develop a list of qualified parties to enter into a Transaction; c) organize a "data room" and solicit interest of qualified parties to a potential transaction; d) meet with potentially interested parties, and solicit proposals for a transaction; e) review and analyze proposals and advise the Debtors with respect thereto; and f) assist the Debtor in negotiations with interested parties, and consummating a transaction. Point Capital will receive a $30,000 retainer, which will be paid at the rate of $10,000 per month for each three months following its appointment. Point Capital will also be paid a success fee for every successful transaction it facilitates: Total Consideration Success Fee ------------------- ----------- $20,000,000 or less 2.0% $20,000,001 to $30,000,000 2.0% multiplied by $20,000,000 plus 3.0% multiplied by the net difference between the total consideration and $20,000,000 $30,000,001 or more 2.0% multiplied by $20,000,000 plus 3.0% multiplied by $10,000,000 plus 5.0% multiplied by the net difference between the total consideration and $30,000,000 Headquartered in Portland, Maine, Vital Basics, Inc. -- http://www.vitalbasics.com/-- is engaged in the business of Sales, through direct consumer marketing and at retail, of nutraceutical and related products throughout the United States and Canada. The Company filed for chapter 11 protection along with its debtor-affiliate, Vital Basics Media, Inc., on May 10, 2004 (Bankr. D. Maine Case No. 04-20734). George J. Marcus, Esq., at Marcus, Clegg & Mistretta, P.A., represents the Debtor in its restructuring efforts. When the Debtors filed for protection from their creditors, Vital Basics, Inc., listed $6,291,356 in total assets and $16,314,589 in total debts; Vital Basics Media, Inc., listed total assts of $378,308 and total debts of $179,242. W.R. GRACE: German Unit Acquires Grom HPLC Packing Tech & Services ------------------------------------------------------------------ W. R. Grace & Co. (NYSE: GRA), announced that its German subsidiary, Grace Holding GmbH, has acquired GROM ANALYTIK + HPLC GmbH, located in Rottenburg-Halfingen. Grom specializes in HPLC (High Performance Liquid Chromatography) column packing technology and services designed for high performance small molecule applications. The business will be integrated into Grace's Davison Specialty Materials unit. Terms of the deal were not disclosed. Founded in 1983, Grom is a privately-held specialty chromatography business based in Germany. The company manufactures columns and provides packing and applications services for analytical and preparative chromatography. Grace, a global leader in silica material technology, has been building its separations business through a strategy of internal growth and acquisitions. The company currently manufactures VYDAC(R) columns and media for analytical, preparative, and process applications and DAVISIL(R) chromatographic media. The company recently introduced the DENALITM line of columns and media for small-molecule separations. Recent acquisitions include MODcol Corporation, experts in preparative column packing technology, and the Jones Chromatography HPLC line. "This acquisition expands our column manufacturing capabilities, especially for the important small-molecule segment of HPLC," said Greg Poling, President, Grace Davison Specialty Materials. "Grom's established expertise in small-molecule separations, service capabilities and advanced small bore and capillary column packing technology, combined with our silica material science, positions us for continued growth in materials for pharmaceutical applications. In addition, the acquisition provides a strong base for our separations business in Europe and enhances our technical service capabilities in that region," Poling explained. "We're pleased to have the Grom organization join our business." (W.R. Grace Bankruptcy News, Issue No. 66; Bankruptcy Creditors' Service, Inc., 215/945-7000) W.R. GRACE: Wants to Make $20 Million Retirement Fund Contribution ------------------------------------------------------------------ W.R. Grace & Co. and its debtor affiliates ask Judge Fitzgerald to authorize -- but not require -- them to make a $19,725,000 contribution in 2004 into a trust that funds the defined benefit retirement plans covering their employees, in accordance with a proposed "funding strategy." The Debtors remind Judge Fitzgerald that, about a year ago, she authorized, but did not require, the Debtors to make contributions to the Grace Retirement Plans of approximately $40 million in each for 2003 and 2004. After discussions with the three Official Committees, the order was submitted authorizing a contribution of $40 million only for 2003. The Debtors' management agreed that they, with the actuary of the Grace Retirement Plans and others, would revisit updated data during the first half of 2004 and would then consult with the three Committees and submit another, separate motion with regard to the proposed 2004 contributions. The Debtors provided the Committees' representatives with the results of the evaluation of the updated data and held discussions. The Retirement Plans The Grace Retirement Plans currently consist of 14 funded, defined benefit pension plans, each of which is qualified under Section 401(k) of the Internal Revenue Code. The most significant Grace Retirement Plan is the "W. R. Grace & Co. Retirement Plan for Salaried Employees," which makes up approximately 83% of the assets, and 85% of the liabilities, of the Grace Retirement Plans in the aggregate, depending on the measure of liability. Many of the Grace Retirement Plans are maintained pursuant to collective bargaining agreements. Unions representing the Debtors' employees consistently for many years have placed a high priority on the continuation and protection of accruals under the Grace Retirement Plans and the periodic enhancement of benefits under those Plans. Virtually all of the Debtors' employees consider continued benefit accruals under the Grace Retirement Plans and the continued financial viability of those Plans as important aspects of their employment relationship with the Debtors and a key component of their financial plan for retirement. Employees Covered by Grace Retirement Plans The Debtors have a long history of providing employees with defined benefit pension plans. For instance, the Grace Salaried Plan has been in existence since at least 1959. Virtually all of the Debtors' active employees are currently covered by one of the Grace Retirement Plans and have been accruing benefits under a Grace Retirement Plan for their entire period of employment with the Debtors and expect to continue to accrue those benefits throughout their employment with the Debtors. The Grace Salaried Plan alone covers over 2,160 active salaried employees -- of a total U.S. workforce of approximately 3,400 employees -- or 64% of the Debtors' domestic workforce. Employers that are considered competitors or peers of the Debtors' businesses with respect to recruitment and retention of employees, generally maintain defined benefit pension plans for their employees. According to Hewitt Associates LLC, a nationally recognized benefits consulting firm, 23 of the 26 companies the Debtors identified for purposes of employee benefit comparisons maintained one or more defined benefit plans during 2002. As a result, the Debtors believe that continued coverage under, and the financial viability of, the Grace Retirement Plans are vital components to maintain competitive retirement benefits, which is key to attracting and retaining high-quality employees for the Debtors' businesses. During recent months, the Debtors' employees have expressed continued concerns regarding the financial viability of the Grace Retirement Plans, in part due to the continued underfunding of the plans. Therefore, the Debtors' management believes that failure to restore the funded status of the Grace Retirement Plans will have a substantial negative impact on the morale of the Debtors' workforce, and thereby the productivity of the Debtors' business. Funded Status of the Grace Retirement Plans As of January 1, 2004 and January 1, 2003, the funded status of the Grace Retirement Plans using Financial Accounting Standard 35, and including the Accumulated Benefit Obligations and the Projected Benefit Obligation, is: A. January 1, 2003 (amounts to nearest million) Measure of Economic Liability Obligation ABO ---------- ---------- --- [None stated] $675 $781 Asset Value 557 557 ----- ------ Funded Status -$118 -$224 ===== ===== B. January 1, 2004 (amounts to nearest million) Measure of Economic Liability Obligation ABO PBO ---------- ---------- --- --- [None stated] $741 $879 $912 Asset Value 658 658 658 ----- ----- ----- Funded Status -$83 -$221 -$254 ===== ===== ===== The change from January 2003 to January 2004 overall was positive: Economic Obligation +$35 ABO +$3 PBO -$12 The Debtors admit that the Grace Retirement Plans are still underfunded by any generally accepted measure. While the asset value increased by approximately $101 million during 2003, the liabilities also increased significantly. Using the Economic Obligation as a measure of liabilities, the amount of underfunding decreased. However, the underfunding remained essentially unchanged using the ABO as a measure of liabilities, and slightly increased using the PBO as the measure. In addition, a cash flow analysis of the Grace Retirement Plans indicates that for 2004 and subsequent calendar years, annual benefit payments from the Grace Retirement Plans will total approximately $70 million per year. The total market value of assets as of January 1, 2004, is $658 mullion, representing a high proportion of total funds paid out on an annual basis when compared to comparable funded retirement plans of other employers. This highlights the necessity for the Debtors to continue to make substantial contributions to the Grace Retirement Plans to assure their continued financial viability. 2004 Funding Strategy To make up for the significant underfunding consistent with the Debtors' business objectives, the Debtors developed a strategy for funding the Grace Retirement Plans that is aimed to: (a) satisfy all legally required minimum contributions under Section 412 of the Internal Revenue Code; (b) avoid the requirement to provide an Underfunding Notice to Grace Retirement Plan participants; and (c) provide an opportunity to minimize the aggregate funding required over 2, 3 and 4 calendar year periods to the extent possible through making contributions slightly earlier than legally required. Calculating contributions for 2004 using the Debtors' proposed funding strategy would also have the important benefit of permitting the Debtors' management to report to concerned employees that substantial contributions will be made in 2004, consistent with the objective of significantly improving the funded status of the Grace Retirement Plans in a reasonable period. The Debtors' estimated contributions consistent with a continuation of the 2004 funding strategy for the years 2004 through 2006 are: 2004 2005 2006 2007 ----------- ----------- ------------ ------------ $19,725,000 $43,879,000 $143,452,000 $194,078,000 The Debtors' management believes that the only other viable alternative to the 2004 funding strategy that could result in a smaller contribution in 2004 than the projected $20 million is for Grace to make contributions to each Grace Retirement Plan, only at the time and in the amount required by Section 412. This "just-in-time" funding for the period 2004 through 2007 would be: 2004 2005 2006 2007 -------- ----------- ------------ ------------ $109,000 $79,410,000 $144,411,000 $203,546,000 Approximately $109,000 is required under Section 412 to be contributed during 2004. However, more than $79 million would then be required in 2005. In addition, under the "just-in-time" funding, the Debtors' management could not report to employees that significant contributions were made during 2004. Underfunding notices would be required to be distributed to employees. Overall, for each multiple calendar year period, the "just-in- time" funding results in greater cumulative cash contributions than a continuation of the 2004 Funding Strategy the Debtors propose. The Debtors will continue to evaluate the Plans and reserve the right to refine or change the funding strategy for 2005 and thereafter. The Debtors nevertheless believe at this time that the 2004 Funding Strategy they have selected offers a sound, basic outline from which future funding strategies may be derived. Debtors' Sound Business Judgment The Debtors currently expect that the 2004 Funding Strategy will satisfy the minimum funding requirement for 2004 and avoid the need to provide the Underfunding Notice for the 2005 plan year. The 2004 Funding Strategy will permit the Debtors to begin the process of fully funding the Grace Retirement Plans by 2007, until at least the re-evaluation of the overall funding strategy in early 2005. The Debtors determine that the 2004 Funding Strategy is an effective approach to funding the Grace Retirement Plans because the legal funding requirements will be satisfied in a manner that will also address the employee morale and competitiveness issues. In particular, the 2004 Funding Strategy represents a systematic method to eliminate the underfunding of the Grace Retirement Plans within a reasonable period of time and demonstrates the Debtors' commitment to fund those Plans by making significant contributions in the current year. The Debtors also assert that the 2004 Funding Strategy is effective from a cash flow management perspective because it provides for making legally required contributions to the Grace Retirement Plans and avoiding the Underfunding Notice through level contributions over 2004, and provides for flexibility as a result of a scheduled re-evaluation of all aspects of the overall funding strategy in early 2005. The Debtors have determined that merely satisfying the minimum funding requirements through "just-in-time" funding each year would not address the concerns of employees because no significant contributions would be made to the Grace Retirement Plans for at least one year. Moreover, satisfying the minimum funding requirements would cause the Debtors to incur the obligation to provide the Underfunding Notice to Grace Retirement Plan participants. The Debtors' management believes that implementing a strategy that would merely satisfy the minimum funding requirements each year is not consistent with the Debtors' overall cash management approach because of the potential for substantial variability in required contributions from year to year. In evaluating options with respect to funding the Grace Retirement Plans, the Debtors have determined that: (a) the morale of the Debtors' employees is adversely affected by the current financial status of the Grace Retirement Plans; not addressing these employee concerns will lead to further erosion of morale and productivity and thereby result in a negative impact on the Debtors' ability to successfully reorganize; (b) merely satisfying the minimum funding requirements through "just-in-time" funding on an ongoing basis will not alleviate the employees' concerns; and (c) providing the Underfunding Notice to Grace Retirement participants would increase employees' concerns regarding the financial status of the Grace Retirement Plans, as well as the financial situation of the Debtors. (W.R. Grace Bankruptcy News, Issue No. 67; Bankruptcy Creditors' Service, Inc., 215/945-7000) WAVEFRONT: Secures Multi-Point Monitoring Solutions Contract ------------------------------------------------------------ Wavefront Energy and Environmental Services Inc. (TSX Venture Exchange: WEE), a provider of innovative technologies for fluid flow optimization and monitoring processes, has recently been awarded a monitoring project. The project's value will approximate $520,000 and involves a multi-point pressure and temperature system to monitor pressure evolution of the reservoir during steam injection and oil production. This project illustrates the trust their clients have in the quality of our products and workmanship and the support we have provided them in the past. About Wavefront Energy and Environmental Services Inc. Wavefront -- whose February 29, 2004 balance sheet shows a $4,902,455 stockholders' deficit compared to a $4,683,605 deficit at August 21, 2003 -- develops, markets, and licenses proprietary technologies in the energy and environmental sectors. The company's Pressure Pulse Technology for fluid flow optimization has been demonstrated to increase oil recovery. Within the environmental sector, Pressure Pulse Technology accelerates contaminant recovery and improves in-ground treatment of groundwater contaminants thereby reducing liabilities and restoring the site to its natural state more rapidly. Wavefront trades on the TSX Venture Exchange under the symbol WEE and the Company's website is http://www.onthewavefront.com/ WESTERN OIL: President Guy Turcotte to Assume Chairman's Position ----------------------------------------------------------------- Western Oil Sands Inc. reports that Guy Turcotte anticipates stepping down as President and Chief Executive Officer at the end of this year or early next year and moving to the position of Chairman of the Board of the Corporation at that time. As Chairman, Mr. Turcotte would succeed Geoff Cumming, who will remain a director of the Corporation. Mr. Turcotte stated "I have been CEO of three different public companies for a period totaling approximately 25 years and feel it is time to reduce my level of involvement in this capacity. Now that the ramp-up to full production of the Athabasca Oil Sands Project nears completion, I feel very comfortable making this change. The past 5 years have been very exciting and challenging, and I expect that the next few years will be equally so as the Corporation pursues its expansion plans. Our initial Project has provided a solid platform for growth within our core business and from which to pursue other opportunities, levering off the strengths of our team. Western has developed a strong management team that is executing the Corporation's objectives, and I intend to remain involved by providing strategic direction to the Corporation in my new role as non-executive Chairman of the Board." In Mr. Turcotte's new role, he will be considered a related director. Therefore, the Board intends to establish a Vice Chairman/Lead Director position to be held by an independent director who will provide independent advice and input in the management of governance issues for the Board. The Board has established a search committee to identify and evaluate potential candidates and to select a suitable person for the position of Chief Executive Officer, which is anticipated to occur by the end of this year or early next year. Upon selection of a suitable candidate, Mr. Turcotte will transition into the role of Chairman of the Board. As Chairman, Mr. Turcotte will continue to office at Western and will maintain certain specific responsibilities which will include a continuing role in managing our relationships with our joint venture partners Shell Canada Limited and Chevron Canada Limited; and advising on strategic, operational and financial matters, including pursuing Western's resolution of outstanding insurance claims. Mr. Cumming, the Corporation's current Chairman, said, "the Board and shareholders of Western express their thanks for Guy's outstanding contribution to the founding of Western and his dedication to the Corporation throughout the past 5 years. We are very pleased that Guy will remain directly involved with Western as its new Chairman; this new role will enable him to continue to provide valuable guidance to Western." Western Oil Sands Inc. -- whose March 31, 2004 balance sheet shows a $13,423,000 stockholders' deficit compared to a $7,720,000 deficit at December 31, 2003 -- is a Canadian oil sands corporation which holds a 20 percent undivided interest in the Athabasca Oil Sands Project together with Shell Canada Limited (60 percent) and Chevron Canada Limited (20 percent). For additional information, visit http://www.westernoilsands.com. The Common Shares of Western are listed on the Toronto Stock Exchange under the symbol "WTO". WOMEN FIRST: Auctioning Pharmaceutical Assets on August 18 ---------------------------------------------------------- Women First Healthcare, Inc., wants the U.S. Bankruptcy Court for the District of Delaware to approve uniform bidding procedures to flush out higher and better bids for its pharmaceutical business. The Debtor's pharmaceutical business includes the Midrin, Equagesic, Synalgos, and Wygesic product lines. Women First has an offer in hand from FSC Laboratories, Inc., for its pharmaceutical business. Subject to higher and better bids and an auction process, Women First signed an Asset Purchase Agreement proposing to sell, assign and transfer the Assets to FSC, free and clear of all liens, claims and encumbrances for $1,750,000, less a $175,000 earnest money deposit. Although the Debtor believes that its agreement with FSC is fair and reasonable, the Bidding Procedures will establish a process for solicitation of overbids to obtain the highest and best price possible for the Assets. FSC will be established as the "stalking horse bidder." Overbids must have an initial offer of at least $350,000 more than the purchase price. Bidding at any auction will be in $100,000 increments. If a superior bid emerges from the auction process, the Debtor will pay FSC a $175,000 break-up fee plus expense reimbursement of up to $75,000 on the date of the consummation of the Alternative Transaction. All Qualified Bidders have until 4:00 p.m. on August 9, 2004, to submit their offers. Written copies of an competing bids must be delivered to: (a) Women First HealthCare, Inc. Attn: Richard Vincent 5355 Mira Sorrento Place, Suite 700 San Diego, California Fax: 858 509-1887; with copies sent to: Latham & Watkins LLP Attn: Robert A. Klyman, Esq. 633 West Fifth Street, Suite 4000 Los Angeles, California 90071 Fax: 302 571-1253; and Young, Conaway, Stargatt & Taylor, LLP Attn: Michael R. Nestor, Esq. The Brandywine Buidling, 1000 West Street PO Box 391, Wilmington, Delaware 19899 Fax: 302 571-1253; (b) counsel to FSC Robinson, Bradshaw & Hinson, PA Attn: David J. Clark, Esq. 101 N. Tryon St., Suite 1900 Charlotte, North Carolina 28246 Fax: 704 373-3990; (c) counsel to the Lenders Paul, Weiss, Rifkind, Wharton & Garrison LLP Attn: Alan W. Kornberg, Esq. 1285 Avenue of the Americas New York, New York 10019 Fax: 212 492-0209; (d) Office of the United States Trustee Attn: David Klauder, Esq., and William Harrington, Esq. 844 King Street, Room 2313 Wilmington, Delaware 19801 Fax: 302 573-6497; and (e) counsel to the Committee Reed Smith LLP Attn: Kirt F. Gwynne, Esq. 1201 Market Street, Suite 1500 Wilmington Delaware 19801 Fax: 302 778-7575. If a Qualified Bid is received on or before the Bid Deadline, an auction will take place on August 18, 2004, at 10:00 a.m. at the offices of Young, Conaway, Stargatt & Taylor, LLP. Headquartered in San Diego, California, Women First HealthCare, Inc. -- http://www.womenfirst.com/-- is a specialty pharmaceutical company dedicated to improve the health and well- being of midlife women. The Company filed for chapter 11 protection on April 29, 2004 (Bankr. Del. Case No. 04-11278). Michael R. Nestor, Esq., and Sean Matthew Beach, Esq., at Young Conaway Stargatt & Taylor represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $49,089,000 in total assets and $73,590,000 in total debts. WORLDCOM INC: Agrees to Assume Three NCR Corporation Agreements --------------------------------------------------------------- Worldcom Inc. and NCR Corporation entered into three agreements from 1999 to 2001: (1) Partnership Service Agreement - Network Services, as revised and amended on May 18, 1999, under which certain of the Debtors purchased from NCR installation, support, and maintenance services; (2) Teaming Agreement, as revised and amended on January 27, 2000, under which certain Service Orders and Statements of Work for Wells Fargo Bank and The Nasdaq Stock Market, Inc., fall; and (3) Global Services Agreement dated July 26, 2001. NCR filed Claim No. 21691, asserting that the Debtors owe $2,100,097 for certain prepetition goods and services it provided. The Debtors tell the Court that NCR owes them $2,376,125 for certain prepetition goods and services they provided. In a Court-approved stipulation, the parties agree that: -- The Debtors will assume the Agreements. The cure payment for the assumption will be $2,100,097. The Cure Payment will be recognized and satisfied in full by deducting the Debtors' Debt from the NCR Debt. The Debtors will not be obligated to make any other payment as a result of the assumption. The Cure Payment will satisfy, discharge, and remedy the Debtors' Debt and all conditions, defaults, and amounts owed by the Debtors under or related to the Agreements that are necessary or required to enable or authorize the assumption. -- NCR will pay the Debtors $276,028: -- The NCR Claims will be deemed expunged and extinguished. The parties will pay, in accordance with the terms of the Agreements and the applicable invoices, all postpetition amounts that are due and owing. Headquartered in Clinton, Mississippi, WorldCom, Inc., now known as MCI-- http://www.worldcom.com-- is a pre-eminent global communications provider, operating in more than 65 countries and maintaining one of the most expansive IP networks in the world. The Company filed for chapter 11 protection on July 21, 2002 (Bankr. S.D.N.Y. Case No. 02-13532). On March 31, 2002, the Debtors listed $103,803,000,000 in assets and $45,897,000,000 in debts. On April 20, 2004, the company (WCOEQ, MCWEQ) formally emerged from U.S. Chapter 11 protection as MCI, Inc. This emergence signifies that MCI's plan of reorganization, confirmed on October 31, 2003, by the U. S. Bankruptcy Court for the Southern District of New York is now effective and the company has begun to distribute securities and cash to its creditors. (Worldcom Bankruptcy News, Issue No. 58; Bankruptcy Creditors' Service, Inc., 215/945-7000) * Mary Anne Citrino Joins Blackstone's Corporate Advisory Group --------------------------------------------------------------- Mary Anne Citrino has joined The Blackstone Group's Corporate Advisory Group as a Senior Managing Director, bringing with her over 20 years experience as a leading investment banker. Prior to joining Blackstone, Ms. Citrino spent more than 20 years advising clients at Morgan Stanley where she was appointed Global Head of its Consumer Products Investment Banking Group in 2001. Some of the more notable transactions in which she was involved include advising Unilever on its acquisitions of Ben & Jerry's, Slim-Fast and Helene Curtis as well as selling its Diversey Lever business to SC Johnson. She also advised Pfizer on its sale of Schick to Energizer, Hershey Trust on its attempted sale of Hershey to Wrigley, and structured and advised on Heinz's spin of assets to Del Monte. Prior to running the consumer products group, Mary Anne was co-head of health care services investment banking at Morgan Stanley. Hamilton E. James, Vice Chairman of Blackstone said, "We are delighted that Mary Anne has decided to join our fast growing corporate advisory team. Her unique experience in the consumer products and healthcare sectors will be extremely valuable and complementary to our existing sector teams." Ms. Citrino added, "Blackstone's extraordinary reputation, its entrepreneurial approach to seeking strategic solutions and its lack of conflicts, combined with the insights and opportunities created by its principal activities, provides an outstanding opportunity. I am enormously excited about advising clients from the Blackstone platform, which is unique on Wall Street for its independence and single-minded focus on its clients." Mary Anne Citrino received a B.A. in Economics from Princeton University, Phi Beta Kappa, and received her MBA from Harvard Business School as a George F. Baker scholar. About The Blackstone Group The Blackstone Group -- http://www.blackstone.com/-- a private investment and advisory firm with offices in New York, Atlanta, Boston, London and Hamburg, was founded in 1985. Blackstone's Corporate Advisory practice offers full transaction execution capability, absolute confidentiality, senior level attention, a focus on long-term strategic planning, and an absence of conflicts of interest. The Blackstone Group's other core businesses include Restructuring and Reorganization Advisory, Private Equity Investing, Private Real Estate Investing, Corporate Debt Investing, and Marketable Alternative Asset Management. * Upcoming Meetings, Conferences and Seminars --------------------------------------------- July 15-18, 2004 AMERICAN BANKRUPTCY INSTITUTE The Mount Washington Hotel Bretton Woods, NH Contact: 1-703-739-0800 or http://www.abiworld.org July 28-31, 2004 AMERICAN BANKRUPTCY INSTITUTE Southeast Bankruptcy Workshop The Ritz-Carlton Reynolds Plantation, Lake Oconee, GA Contact: 1-703-739-0800 or http://www.abiworld.org September 18-21, 2004 AMERICAN BANKRUPTCY INSTITUTE Southwest Bankruptcy Conference The Bellagio, Las Vegas, NV Contact: 1-703-739-0800 or http://www.abiworld.org October 9-10, 2004 INTERNATIONAL WOMEN'S INSOLVENCY & RESTRUCTURING CONFEDERATION IWIRC Annual Fall Conference Nashville, TN Contact: 1-703-449-1316 or www.iwirc.com October 10-13, 2004 NATIONAL CONFERENCE OF BANKRUPTCY JUDGES Seventy Seventh Annual Meeting Nashville, TN Contact: http://www.ncbj.org/ October 15-18, 2004 TURNAROUND MANAGEMENT ASSOCIATION 2004 Annual Convention Marriott Marquis, New York City Contact: 312-578-6900 or www.turnaround.org November 29-30, 2004 BEARD GROUP & RENAISSANCE AMERICAN MANAGEMENT The Eleventh Annual Conference on Distressed Investing Maximizing Profits in the Distressed Debt Market The Plaza Hotel - New York City Contact: 1-800-726-2524; 903-592-5168; dhenderson@renaissanceamerican.com December 2-4, 2004 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Marriott's Camelback Inn, Scottsdale, AZ Contact: 1-703-739-0800 or http://www.abiworld.org March 9-12, 2005 TURNAROUND MANAGEMENT ASSOCIATION 2005 Spring Conference JW Marriott Desert Ridge, Phoenix, AZ Contact: 312-578-6900 or www.turnaround.org April 28- May 1, 2005 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting J.W. Marriot, Washington, DC Contact: 1-703-739-0800 or http://www.abiworld.org June 2-4, 2005 ALI-ABA Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities and Bankruptcy Omni Hotel, San Francisco Contact: 1-800-CLE-NEWS; http://www.ali-aba.org July 14 -17, 2005 AMERICAN BANKRUPTCY INSTITUTE Ocean Edge Resort, Brewster, MA Contact: 1-703-739-0800 or http://www.abiworld.org July 27- 30, 2005 AMERICAN BANKRUPTCY INSTITUTE Southeast Bankruptcy Workshop Kiawah Island Resort and Spa, Kiawah Island, SC Contact: 1-703-739-0800 or http://www.abiworld.org October 19-23, 2005 TURNAROUND MANAGEMENT ASSOCIATION 2005 Annual Convention Chicago Hilton & Towers, Chicago Contact: 312-578-6900 or www.turnaround.org November 2-5, 2005 NATIONAL CONFERENCE OF BANKRUPTCY JUDGES Seventy Eighth Annual Meeting San Antonio, TX Contact: http://www.ncbj.org/ December 1-3, 2005 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Hyatt Grand Champions Resort, Indian Wells, CA Contact: 1-703-739-0800 or http://www.abiworld.org The Meetings, Conferences and Seminars column appears in the Troubled Company Reporter each Wednesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. 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. Monthly Operating Reports are summarized in every Saturday edition of the TCR. 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., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. Yvonne L. Metzler, Emi Rose S.R. Parcon, Bernadette C. de Roda, Rizande B. Delos Santos, Jazel P. Laureno, Aileen M. Quijano and Peter A. Chapman, Editors. Copyright 2004. 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 $675 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 240/629-3300. *** End of Transmission ***