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To: trust200 who wrote (3154)	8/2/1998 5:15:00 PM
From: Strategy	Respond to of 10081

Very unusual indeed. Consider this: the mechanics of the hedge are self perpetuating - the more the stock drops the more shares they can short and still be net long. here's a snippit from the filing. ======================================== POTENTIAL DILUTIVE EFFECTS. The number of shares of Common Stock which may be issued upon conversion of the Series B Shares is dependent upon the trading price of the Common Stock at the time of conversion. If the lowest sales price of the Common Stock in the five trading days prior to conversion is less than $3.53, the number of shares of Common Stock issuable upon conversion of the Series B Shares will increase. The number of shares of Common Stock which may be issued upon conversion of the Series C Shares is also dependent upon the trading price of the Common Stock at the time of conversion. If the sales price of the Common Stock decreases, the number of shares of Common Stock issuable upon conversion of the Series C Shares will increase. ========================================== I couldn't figure out how much they actually paid for the series C's but I think it's somewhere between $11 and $12.50 per share. So lets look at the mechanics of the transaction using these numbers. Instutional guys buy $30MM 5% note and short 2.5MM shares at $12 to set their hedge. They now have a $30 million dollar note that actually only cost them nothing. Lets say the price drops to 8 bucks and if they could convert now, because of the anti-dilution stuff cited abve, they would get approx. 3.75 million shares. So they are now net long 1.25 million shares - time for another short. If the stock goes to 2 bucks, they get 15 million shares and have a net long position of 11.25 million shares, and a 5% cash (or stock) return on capital. So, the question then becomes, how much stock do you think they want? Again, I may have misunderstood the agreement, but I would never ever ASSUME that a group of Mutual Funds, an Insurance co, and several securities firms outsmarted themselves. I would require proof.