/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/010301.MBX T R O U B L E D C O M P A N Y R E P O R T E R Thursday, March 1, 2001, Vol. 5, No. 42 Headlines ARMSTRONG: Claimants Balk at Scope Of Foley Hoag's Employment ASSOCIATED GOLF: Dismisses Stefanou as Certifying Accountant BRIDGE INFORMATION: Court Okays Use of Current Business Forms CALIFORNIA CASUALTY: S&P Cuts Insurer's Rating to BBBpi from Api CATHOLIC HEALTHCARE: Cuts Jobs And Closes Sacramento Operations EMPLOYERS SECURITY: S&P Assigns Bpi Financial Strength Rating FINOVA: Berkadia to Extend $6B Loan Commitment Under Chapter 11 FORECROSS CORP.: Continuing Losses Trigger Going Concern Doubts FRUIT OF THE LOOM: U.S. Trustee Opposes Nunc Pro Tunc Retention GAINSCO INC.: Believes Credit Agreement is in Technical Default GENROCO: Hires Investment Advisor to Raise $1.5MM in New Capital GREYSTONE DIGITAL: Experiencing Liquidity Squeeze HARNISCHFEGER INDUSTRIES: Settles EPA's $9,667,827 Claim HOME PRODUCTS: Reports Fourth Quarter and Year-End 2000 Results HORIZON PHARMACIES: Restructures $7 Million Bank One Revolver ICG COMM.: Moves To Assume Key Employee & Consulting Agreements INDESCO: Court Gives Final Nod to CIT $25 Million DIP Facility INFU-TECH: Formulates Plan to Raise Capital INTEGRATED HEALTH: Rejects 39 Burdensome Rotech Equipment Leases KITTY HAWK: Emerald Extends $11MM Tender Offer For Secured Notes LERNOUT & HAUSPIE: BBNT Presses For Decision On HARK License LETSBUYIT.COM: Reopens Business in Four European Countries LOEWEN GROUP: Indiana Unit Selling Main & Frame Assets For $335K LTV CORPORATION: Pays Due Diligence Fees to Potential DIP Lenders MEDICAL RESOURCES: Emerges From Chapter 11 MONTGOMERY WARD: Kimco Offers Top Bid for Real Estate NORD RESOURCES: Elects John F. Champagne as New President & CEO NORD RESOURCES: Considering Merger Deal with Nord Pacific NUOASIS RESORTS: Working Capital Deficit Continues OTR EXPRESS: Financing Contingencies & Net Losses Raise Concerns OTR EXPRESS: Secures Relaxed Payment Terms from Equipment Lenders OWENS CORNING: Seeks Approval Of Settlement With Gerald Metals PILLOWTEX CORP.: Alabama Gas Wants to Terminate Utility Services PLAY-BY-PLAY: Restructuring Convertible Debentures for Warrants PROLOGIC MANAGEMENT: Can't Pay Debts Coming Due from Operations QUEBECOR MEDIA: Appoints Eugene Marquis as New Turnaround CEO SERVICE MERCHANDISE: Seeks Further Extension to Decide on Leases SUNSHINE MINING: New Common Stock Trades Under SSMR Symbol TRAVELNSTORE.COM: Hires Stonefield Josephson as New Accountant US INTERACTIVE: Nasdaq Delists Equity Securities WESTERN MUTUAL: S&P Junks Insurer's Financial Strength Rating WHEELING-PITTSBURGH: Court Approves Stipulations with Cananwill ********* ARMSTRONG: Claimants Balk at Scope Of Foley Hoag's Employment ------------------------------------------------------------- The Official Committee of Asbestos Claimants objected to the proposed employment of Foley, Hoag & Eliot LLP as special legislative counsel to Armstrong Holdings, Inc. The Committee stated it does not generally object to this employment, but believes restrictions on the scope of the work should be imposed. Specifically, the Committee stated that the Court should not authorize the employment of Foley Hoag for the purpose of acting as counsel for the Debtors relating to legislation concerning the Debtors' asbestos liabilities. Initially, the Committee submitted that any such legislation is unlikely to succeed and therefore the limited assets of the Debtors' estates should not be wasted in pursuit of futility. This is particularly troubling to the Committee in light of the fact that the Debtors have failed to make what the Committee describes as "the slightest showing" that the pursuit of any such legislation would be in the interests of their estates. In fact, the Committee said, it is likely that any such legislation would be intentionally designed to be contrary to the interests of the Asbestos Claimants Committee and its constituency - described by the Committee as the single largest component of the Debtors' estates. The Committee suggested that, at a minimum, Elihu Inselbuch, Esq., and Peter Van N. Lockwood, Esq., at Caplin & Drysdale, Chartered, told Judge Farnan, the Debtors and Foley Hoag should provide additional information related to the scope of this proposed retention and the Debtors' contemplated legislative endeavors in order to attempt to substantiate the entry of an Order granting the Application. Without comment or prejudice, Stephen Karotkin, Esq., and Debra A. Dandeneau, Esq., from Weil, Gotshal & Manges, LLP, advised Judge Farnan that the Debtors withdraw their Application. (Armstrong Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) ASSOCIATED GOLF: Dismisses Stefanou as Certifying Accountant ------------------------------------------------------------ On February 14, 2001, Associated Golf Management Inc. dismissed its certifying accountant, Stefanou & Company, LLP. Stefanou's report for the year ended December 31, 1998 contained an explanatory paragraph regarding the substantial doubt about the company's ability to continue as a going concern. The decision to dismiss Stefanou was approved by the company's Board of Directors. BRIDGE INFORMATION: Court Okays Use of Current Business Forms ------------------------------------------------------------- At the Debtors' behest, Judge McDonald granted Bridge Information Systems, Inc. authority to continue using their existing supplies of business forms (including, but not limited to, letterhead, purchase orders, invoices, contracts and checks), without the need to follow the United States Trustee's operating guideline that all business forms used by a chapter 11 debtor bear a "debtor-in-possession" legend. Parties doing business with the Debtors undoubtedly will be aware, Judge McDonald observed, as a result of the size and notoriety of the Debtors and these cases, of the Debtors' status as chapter 11 debtors-in-possession. Changing Business Forms immediately would be expensive and burdensome to the Debtors estates and extremely disruptive to the Debtors' business operations. Accordingly, until existing stock is depleted, the Debtors may continue using their prepetition business forms. (Bridge Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) CALIFORNIA CASUALTY: S&P Cuts Insurer's Rating to BBBpi from Api ---------------------------------------------------------------- Standard & Poor's lowered its financial strength rating on California Casualty Compensation Insurance Co. to triple-'Bpi' from single-'Api'. Based in San Mateo, Calif., California Casualty Compensation (NAIC: 10063) is a member of the California Casualty group of companies. As of Oct. 1, 1997, CCG discontinued writing new workers' compensation insurance in California. Following the 1998 modification of the interaffilated pooling agreement with the other members of the group, under which all workers' compensation and miscellaneous commercial lines business is retroceded to California Casualty Compensation, California Casualty Compensation no longer qualifies for the same rating as the other pool members. This business is currently being run off. The run-off operations are managed by California Casualty Management Co. California Casualty Compensation, which began business in 1994, is licensed only in California. Major Rating Factors: * The implicit support from the company's parent, California Casualty Indemnity Exchange, is a factor in the rating. * The company's five-year average ROR of negative 1.5% is weak. When the return is further adjusted for volatility, the company's score is below that of higher-rated insurers. In addition, at the end of the second quarter of 2000, the company reported a gain of $3.3 million compared with a gain of $4.7 million for the same time period in the prior year, a 30% decrease. * The company is adequately capitalized. However, in 1999, California Casualty Compensation was more leveraged than peer companies, with net premiums written plus liabilities to surplus at 5.2 times. Ratings with a 'pi' subscript are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. Ratings with a 'pi' subscript are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings. Ratings with a 'pi' subscript generally are not modified with "plus" or "minus" designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said. CATHOLIC HEALTHCARE: Cuts Jobs And Closes Sacramento Operations --------------------------------------------------------------- Catholic Healthcare West, which is restructuring in a plan aimed at saving $100 million annually, will phase out its Mercy Healthcare Sacramento operations as part of a consolidation strategy. The San Francisco, Ca.-based hospital operator, which is reducing the number of its operating divisions, will lay off 350 employees in conjunction with the plan to fold Mercy into its Northern California division. Catholic Healthcare, which operates forty-three hospitals, has lost $657 million over the past two years, including a $318 million operating loss for its fiscal year ended last June. (New Generation Research, February 27, 2001) EMPLOYERS SECURITY: S&P Assigns Bpi Financial Strength Rating ------------------------------------------------------------- Standard & Poor's assigned its double-'Bpi' financial strength rating on Employers Security Insurance Co. (ESIC). The rating action reflects the company's marginal earnings and some degree of premium volatility. Partially offsetting these factors is the company's historically healthy capital growth and solid reinsurance program. ESIC (NAIC: 32005), formed in 1992, writes primarily workers' compensation policies in Indiana, Illinois, and Kentucky. Indiana, the company's home state, accounts for almost 90% of its business. In addition, the company writes policies in Michigan and Iowa for policyholders with out-of-state operations through a fronting agreement with Continental National Indemnity Co. (single-'Bpi' financial strength rating). ESIC is responsible for every aspect of service associated with these policies. In addition to the workers' compensation business, a very small amount of miscellaneous surety and commercial umbrella policies is written. The company is a wholly owned subsidiary of Employers Security Holding Co. (ESHC). ESHC is principally owned by a group of independent insurance agents located throughout Indiana. These same agents conduct the majority of the company's marketing efforts with all appointed agencies having equity rights to the company. Major Rating Factors: -- For the five-year period ended Dec. 31, 1999, the company has managed to average an annual net income of only $320,000. The five-year average return on revenue for the same period was 8.3%. Calendar year 1999 was the first year since 1993 in which an underwriting loss was reported, but earnings have been relatively slim in other years as well. Company management attributes the losses in 1999 to an increase in loss reserves for the calendar year due to pricing pressure in the primary line of business. In addition, a high level of business for the year was written at year-end but not earned until 2000. As the commissions were booked in 1999, this had a negative effect on the expense ratio for the year. -- There has been some degree of premium volatility in recent years. Most of the excessive growth in 1999 (an increase of 54% from year-end 1998) is associated with an accounting policy change. Premiums are now reported written when billed as opposed to on an annualized basis. This change caused a significant increase in the amount of direct premiums reported in 1999 (about an additional $2 million). However, there have still been some fluctuations in recent years caused by expansion into new states, most notably Illinois and Kentucky. -- Capital, at $5.1 million for year-end 1999, is appropriate for the current rating as indicated by Standard & Poor's model. Growth over the past five years has been healthy, with an average annualized gain of 19% per year. Results through the third quarter of 2000 indicate more modest increases. It should be noted that capital growth is not keeping pace with premium growth and further diminishment in this ratio could weaken the company's capital adequacy ratio. -- The company participates in an excess of loss reinsurance treaty with Swiss Reinsurance America Corp. (Swiss Re) (triple-'A' financial strength rating) for their workers' compensation line of business. This program significantly minimizes ESIC's exposure by limiting its net retention to $200,000. In addition, ESIC utilizes a quota share agreement, also with Swiss Re, for its commercial umbrella policies. Ratings with a 'pi' subscript are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. Ratings with a 'pi' subscript are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings. Ratings with a 'pi' subscript generally are not modified with "plus" or "minus" designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said.--CreditWire FINOVA: Berkadia to Extend $6B Loan Commitment Under Chapter 11 --------------------------------------------------------------- The FINOVA Group Inc. (NYSE: FNV), Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) and Leucadia National Corporation (NYSE: LUK; PCX) entered into an agreement for a $6 billion loan to FINOVA Capital Corporation, the principal operating subsidiary of The FINOVA Group Inc., in connection with a restructuring of all of FINOVA Capital's outstanding bank and publicly traded debt securities. The restructuring will be accomplished pursuant to proceedings under Chapter 11 of the United States Bankruptcy Code. FINOVA expects to file a petition for reorganization under Chapter 11 in the near future. Subject to necessary approval of creditors and the court, FINOVA Capital will use proceeds of this $6 billion senior secured five year term loan to pay down, at par value, its existing bank and publicly traded indebtedness on a pro rata basis. The balance of FINOVA Capital's bank and bond indebtedness will be restructured into approximately $5 billion of new senior notes of FINOVA. The $6 billion loan will be made by Berkadia LLC, an entity formed for this purpose and owned jointly by Berkshire Hathaway and Leucadia. Berkadia has received a $60 million commitment fee and, in addition to certain other fees, will receive an additional $60 million fee upon funding under the agreement. Berkadia's commitment for the loan has been guaranteed by Berkshire Hathaway and Leucadia and expires on August 31, 2001, or earlier, if certain conditions are not satisfied. Berkadia expects to finance its funding commitment and Berkshire Hathaway will provide Berkadia's lenders with a 90% primary guarantee of such financing, with Leucadia providing a 10% primary guarantee and Berkshire providing a secondary guarantee of Leucadia's guarantee. Upon completion of the reorganization as currently contemplated, Berkshire Hathaway and Leucadia together will receive common stock representing 51% of FINOVA's outstanding shares and the public will retain its existing shares. Berkadia will be entitled to designate a majority of FINOVA's board of directors. FINOVA currently has cash on hand of approximately $1 billion, which will be available in the bankruptcy proceedings to address commitments to customers, operating expenses, claims and expenses of the bankruptcy and expenses related to the consummation of the restructuring. In connection with the agreements, FINOVA and Leucadia have entered into a 10-year management agreement under which Leucadia is providing general management services to FINOVA in exchange for an $8 million annual fee. Lawrence S. Hershfield, an executive of Leucadia, has been appointed Chief Restructuring Officer of FINOVA and will work closely with a special committee of FINOVA's board of directors to complete the restructuring. Completion of the transaction is subject to negotiation and approval of definitive loan documentation, Berkadia's approval of the terms and conditions of FINOVA's restructuring plan and bankruptcy court and necessary creditor approval of the plan of reorganization. In connection with the agreements, FINOVA Capital announced a moratorium on repayment of principal on its outstanding bank and bond debt. The purpose of the moratorium is to help assure that all creditors are treated equitably in the debt restructuring process. It is the company's intention to schedule a meeting with creditors in the near future. The FINOVA Group Inc., through its principal operating subsidiary, FINOVA Capital Corporation, is a financial services company focused on providing a broad range of capital solutions primarily to midsize business. FINOVA is headquartered in Scottsdale, Ariz., with business development offices throughout the U.S. and London, U.K., and Toronto, Canada. For more information, visit the company's website at www.finova.com. Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged in a number of diverse business activities. The most important of these businesses is the property and casualty insurance business conducted on both a direct and reinsurance basis through a number of subsidiaries. Leucadia National Corporation is a holding company for its consolidated subsidiaries engaged in property and casualty insurance (through Empire Insurance Company and Allcity Insurance Company), manufacturing (through its Plastics Division), banking and lending (principally through American Investment Bank, N.A.) and mining (through MK Gold Company). FORECROSS CORP.: Continuing Losses Trigger Going Concern Doubts --------------------------------------------------------------- Through December 31, 2000, Forecross Corporation had sustained recurring losses from operations and, at December 31, 2000, had a shareholders' deficit of $1,909,000 and a net working capital deficiency of $1,930,000. In addition, revenues for the quarter ended December 31, 2000 declined approximately $472,000 from $1,417,000 during the same period in 1999, and at December 31, 2000, the company's cash had declined significantly. These conditions raise substantial doubt about the ability of the company to continue as a going concern. During fiscal 2001, the company expects to meet its working capital and other cash requirements with cash derived from operations, short-term receivables and other financing as required, and software license fees from organizations desiring access to the company's various product offerings. The company's continued existence is dependent upon its ability to achieve and maintain profitable operations by controlling expenses and obtaining additional business. Management believes that the return of migration contracts combined with increased automation of its services for migration projects and cost reduction actions previously implemented should improve its profitability in fiscal 2001. However, there can be no assurance that the company's efforts to achieve and maintain profitable operations will be, successful. Total revenue for the three months ended December 31, 2000 was $472,000 as compared to $1,417,000 for the same period of 1999, a decrease of 67%. The overall net loss for the three months ended December 31, 2000 was $599,000 compared with a loss of $35,000 for the three months ended December 31, 1999. FRUIT OF THE LOOM: U.S. Trustee Opposes Nunc Pro Tunc Retention --------------------------------------------------------------- The U.S. Trustee objected to Fruit of the Loom, Ltd.'s Official Committee's application to employ Rosenthal, Monhait, Gross & Goddess as local special litigation counsel. Patricia A. Staiano laid out her case in one sentence. She indignantly told the Judge that the Official Committee relies on "extraordinary circumstances" as its rationale to retain Rosenthal, Monhait yet does not elaborate on what those might be. (Fruit of the Loom Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) GAINSCO INC.: Believes Credit Agreement is in Technical Default --------------------------------------------------------------- GAINSCO, INC. (NYSE: GNA) reported a fourth quarter 2000 net loss of $10.8 million (net loss available to common shareholders of $10.9 million), or $0.52 per common share, basic and diluted. These results include the impact of higher than anticipated current and prior period losses, primarily attributable to the commercial trucking book, which the Company began exiting in late 2000. For the fourth quarter of 1999, net income was $1.8 million, or $0.07 per common share, diluted. "2000 was a difficult year of underwriting and financial performance for our Company," said Glenn W. Anderson, GAINSCO's president and chief executive officer. "Severe claims experience in the Company's commercial trucking book was the primary reason for the Company's poor year 2000 results, and as announced in November 2000 we are in the process of exiting approximately $25 million of annual gross premiums written of this business. As we move into 2001, our goal is to further mitigate the trucking problem and build upon the underlying profitability and potential of our ongoing businesses." Year 2000 Results Total year 2000 net loss was $19.6 million (net loss available to common shareholders $20.3 million), or $0.97 per share, basic and diluted. The 2000 results compare to net income of $7.1 million, or $0.32 per share, diluted for 1999. For the fourth quarter and full year 2000, the effects of common stock equivalents and convertible preferred stock are antidilutive due to the net losses. As a result, basic loss per share and diluted loss per share are reported as the same number. The statutory combined ratio for 2000 was 124.2%. This compares with a 1999 statutory combined ratio of 98.6%. The statutory combined ratio for the fourth quarter of 2000 was 127.3% and compares with a statutory combined ratio of 98.9% for the fourth quarter of 1999. Net premiums written for the year ended December 31, 2000 were $118.8 million versus $131.1 million for 1999. Net premiums written for the fourth quarter 2000 were $4.0 million versus $34.7 million for the 1999 fourth quarter. Net premiums declined in the 2000 fourth quarter as a result of ceding of approximately $28.2 million of premiums, including 100% of the commercial trucking book of business, to reinsurers per the new agreements. Gross premiums written increased 12% for the fourth quarter 2000 versus the fourth quarter 1999 and 26% for total year 2000 versus total year 1999. Year-end 2000 shareholders' equity was $4.50 per share, assuming conversion of preferred stock, compared with $5.08 per share at year-end 1999. 2001 Capital Transactions The Company has entered into two separate agreements for the sale of securities, which would provide for $6.0 million of new capital to the Company. The first agreement is with Goff Moore Strategic Partners, L.P. ("GMSP"), a current significant shareholder in GAINSCO. The second agreement is with Mr. Robert W. Stallings, a private investor with extensive experience in the financial services industry, who would join GAINSCO's Board of Directors and become non-executive Vice Chairman. Mr. Stallings is the recently retired Chairman and founder of ING Pilgrim Capital Corporation, a $20 billion asset management firm, which was acquired by ING Group in September 2000 and with which he had been associated since 1991. Mr. Stallings has exceptional experience in managing and directing the activities of several large public and private financial companies. Mr. Stallings will fill a vacancy on the Board of Directors created by the previous resignation of Mr. Robert McGee. Mr. McGee resigned from his position as a director, effective December 31, 2000, because of his determination that other substantial business obligations required his time and attention. The Company is very appreciative of Mr. McGee's past service as a director. Under terms of the agreements with GMSP, GMSP would purchase a new series of GAINSCO redeemable preferred stock for $3.0 million in cash. The annual dividend rate on the preferred stock would be 10% during the first three years and 20% thereafter. Unpaid dividends would be cumulative and compounded. The preferred stock would be redeemable at the Company's option after five years and at the option of the majority holders after six years. The agreement with GMSP is conditioned upon the following changes in the securities currently held by GMSP. The exercise prices of the Series A Common Stock Purchase Warrant and the Series B Common Stock Purchase Warrant held by GMSP would be amended to equal a defined Conversion Price (see below) and 115% of the defined Conversion Price, respectively. Each of these warrants provides for the purchase of 1.55 million shares of GAINSCO common stock, subject to adjustment. Further, GAINSCO is required to give notice of redemption of the outstanding shares of its Series A convertible preferred stock on January 1, 2006, subject to certain conditions. Any stock unredeemed for any reason after that date would accrue interest, payable quarterly at a rate equal to eight percent per year with any unpaid interest compounded annually. The agreement with GMSP provides an opportunity to convert GAINSCO holding company illiquid investments with a cost of $4.2 million to cash as of November 2002, as follows: GAINSCO could at its option require GMSP to purchase the illiquid investments for $2.1 million, less any future cash received prior to November 2002 from the investments. GMSP could at its option require GAINSCO to sell the illiquid investments to GMSP for $4.2 million, less any future cash received prior to November 2002 from the investments. Under terms of the agreements with Mr. Stallings, Mr. Stallings would purchase for $3.0 million a new series of GAINSCO convertible, redeemable preferred stock plus a warrant to purchase an aggregate of 1,050,000 shares of GAINSCO common stock at the defined Conversion Price. The annual dividend provisions and the redemption provisions of this preferred stock, for any stock not converted to common, would be the same as those for the GMSP redeemable preferred stock. The new series of convertible, redeemable preferred stock would be convertible into GAINSCO common stock at the defined Conversion Price. The term of the warrant would be five years. A defined Conversion Price formula, subject to standard adjustments, would be used to determine the conversion price for the convertible preferred stock issued to Mr. Stallings and to determine the exercise prices for the Stallings warrant and the GMSP warrants. The Conversion Price would be determined as the lesser of tangible book value per share of common stock as of June 30, 2001, or 110% of the average closing price per share for the 30 trading days immediately prior to April 30, 2001. Under no circumstance would the Conversion Price be less than $2.25. Upon consummation of the transactions, GMSP will own, in the aggregate, approximately 33% of the outstanding shares of GAINSCO common stock on a fully diluted basis, and Mr. Stallings will own, in the aggregate, approximately 8% of the outstanding shares of GAINSCO common stock on a fully diluted basis. Keefe, Bruyette & Woods, Inc., as financial advisor to GAINSCO, has rendered an opinion to the Special Committee of the Board of Directors of the Company to the effect that the proposed capital transactions are fair to the Company from a financial point of view. Mr. Stallings has agreed to provide consulting services to GAINSCO's insurance subsidiaries over the next five years. Among other things, Mr. Stallings is to provide strategic planning advice, including the analysis of the Companies' performance in various sectors of their respective businesses, and recommendations for growth strategies and opportunities for new markets and products. For his services, Mr. Stallings is to receive $300,000 per year. GAINSCO believes it is in breach of two covenants in its credit agreement as a result of statutory operating losses during 2000. The Company recently presented a proposal to the bank for resolution of these issues. Consummation of the new capital agreements highlighted above is subject to satisfactory resolution with the bank. GAINSCO, INC. is a nonstandard property and casualty insurance holding company. GAINSCO's nonstandard commercial and specialty lines products include commercial automobile, auto garage, general liability, commercial property, directors and officers liability, lawyers liability and other miscellaneous liability products distributed primarily through wholesale general agents throughout the United States. The Company's nonstandard personal lines products include private passenger automobile, personal umbrella and property insurance primarily distributed through retail agents in the Southeast and upper Midwest. GENROCO: Hires Investment Advisor to Raise $1.5MM in New Capital ---------------------------------------------------------------- Genroco Inc. believes that the combination of current existing cash, available borrowing capacity and the company's ability to obtain additional long-term indebtedness is not adequate to finance the company's operations for the current activities and foreseeable future. As a result, the company has engaged an investment advisor to assist in the process of raising an additional $1,500,000 in equity capital during the fourth quarter of fiscal 2001. To date, no additional capital has been raised. In addition to this planned financing, the company, in order to increase investment in the development of sales channels and proprietary technology, is considering a secondary public offering, potential sale of the company, increased funding from current owners or another private placement to raise additional funds during the first half of fiscal 2002. If the company is not successful in raising additional capital, the company will not be able to continue its current operations and there is substantial doubt as to the company's ability to continue as a going concern. There can be no assurance that the company will be successful in raising such capital at all or on terms commercially acceptable to the company or shareholders. During Genroco's third quarter of Fiscal Year 2001 ended December 31, 2000, net sales were $380,000, up 33% from sales of $285,000 in the third quarter last year, ended December 31, 1999. For the nine months of the current year, ended December 31, 2000, net sales were $1,314,000, down 40% from $2,181,000 for the nine months ended December 31, 1999. The company's net loss for the third quarter ended December 31, 2000 was $1,050,000 compared to a loss of $603,000 for the third quarter ended December 31, 1999. Losses for the nine months ended December 31, 2000 were $2,662,00o compared to a loss of $631,000 for the nine months ended December 31, 1999. GREYSTONE DIGITAL: Experiencing Liquidity Squeeze ------------------------------------------------- Greystone Digital Technology Inc. had a working capital deficiency of $745,016 at December 31, 2000; net loss of $6,702,543 and an accumulated deficit from losses since its inception of $49,052,261 at December 31, 2000. These matters raise substantial doubt about the ability of the company to continue as a going concern. Historically, the company has funded its operations primarily through sales of common stock to and borrowings from its principal stockholder and sales of common stock and convertible notes payable to private investors pursuant to private placement memorandums and exemptions from registration under the Securities Act of 1933. Management plans to obtain the additional funds needed to enable the company to continue as a going concern through the private placements of debt or equity securities. However, management cannot provide any assurance that the company will be successful in consummating these private placements. If the company is unable to raise additional capital, it may be required to liquidate assets or take actions which may not be favorable to the company in order to continue its operations. On February 12, 2001 the company had approximately $20,000 in cash, accounts payable of approximately $950,000 (including approximately $109,000 over 90 days) and short term notes payable of approximately $521,000. The nine company officers have not had their salaries paid for three most recent pay periods, and all non-officer employees were paid late for the most recent pay period prior to the filing of the company's latest financial reports. Revenues for the three months ended December 31, 2000 were $470,985 as compared to $381,286 for the three months ended December 31, 1999, reflecting an increase in revenue of $89,699 (or approximately 24%). The net loss of $3,760,796 increased by $2,387,545 from the $1,373,251 net loss reported in the previous reporting period. In summary, during the current period, revenues were up by $89,699 or 24%, while total expenses, including other expense, increased by $2,477,244. GreyStone has incurred losses in each fiscal year since 1993, and as of December 31, 2000, GreyStone had an accumulated deficit of $49,052,261. HARNISCHFEGER INDUSTRIES: Settles EPA's $9,667,827 Claim -------------------------------------------------------- Previously, the United States, on behalf of the Environmental Protection Agency, filed a proof of claim against Debtor Ecolaire Incorporated of Harnischfeger Industries, Inc. Pursuant to the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. sections 9601 et seq., the proof of claim asserted a claim for at least $9,667,827 for unreimbursed environmental response costs incurred by the United States at the Welsh Road Site (a/k/a Walsh Road and Barkman Landfill), located in Honey Brook Township, Chester County, Pennsylvania, and for response costs to be incurred in the future by the United States at the site. The parties agreed, without admitting liability, that the EPA Claim will be allowed as a general unsecured claim in the amount of $13,277 and paid as a general unsecured claim upon distribution to holders of general unsecured claims without discrimination in accordance with the terms of the Debtors' Joint Plan, and the United States will be deemed to have withdrawn the EPA Claim for any amount in excess of $13,277. The United States covenants not to bring a civil action or take administrative action against the Debtor pursuant to section 106 and 107 of CERCLA relating to the Site. Nevertheless, the United States reserves all rights against the Debtor with respect to all other matters, and specifically with respect to liability for damages for injury to, destruction of, or loss of natural resources, liability for response costs that have been or may be incurred by federal agencies which are trustees for natural resources, claims based on a failure by the Debtor to meet a requirement of the Settlement Agreement, and claims for any site other than the Welsh Road Site. In connection with the Settlement Agreement, the Debtor is entitled to protection from contribution actions or claims as is provided by CERCLA Section 113(f)(2), 42 U.S.C. section 9613(f)(2). The Debtor covenants not to sue and agreed not to assert any claims or causes of action against the United States with respect to the Site, including but not limited to: any direct or indirect claim for reimbursement from the Hazardous Substance Superfund, any claims for contribution against the United States, its departments, agencies or instrumentalities, and any claims arising out of response activities at the Site. However, the Settlement Agreement expressly provides that nothing in the agreement will be construed to constitute preauthorization of a claim within the meaning of Section 111 of CERCLA, 42 U.S.C. section 9611 or 40 C.F.R. section 300.700(d). (Harnischfeger Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 609/392-0900) HOME PRODUCTS: Reports Fourth Quarter and Year-End 2000 Results --------------------------------------------------------------- Home Products International, Inc. (Nasdaq SmallCap: HPII), a leader in the housewares industry, announced financial results for the fourth quarter and year ended December 30, 2000. The Company reported a net loss in the fourth quarter of $69.2 million ($9.41 per share) as compared to net income of $2.7 million ($.36 per share) in the same period last year. The current quarter reflects restructuring, special and other charges totaling $65.8 million ($8.95 per share). The charges included a $44.4 million ($6.04 per share) charge for goodwill write-offs, $8.9 million ($1.22 per share) for fixed asset write-offs and $12.5 million ($1.69 per share) for the previously announced plans to exit a manufacturing facility, reduce headcount and realign other manufacturing facilities. The quarter was further impacted by an income tax charge of $1.8 million ($.24 per share) to reverse income tax benefits recorded in the year's prior quarters. Excluding the effects of the various one-time charges and income tax adjustment, the pre-tax loss in the quarter was $1.6 million as compared to a pre-tax profit in 1999 of $4.7 million. The decrease in profits between years was due to the increased cost of plastic resin and decreased selling prices. The restructuring and special charges of $12.5 million relates to the planned closing of the Company's Leominster, MA manufacturing facility, a reduction in headcount and other cost cutting initiatives. During the first quarter of 2001, the company expects to record additional restructuring charges of $2 to $3 million as it completes the relocation of equipment and inventory from Leominster and other facilities. As a result of the Leominster closing and other cost reduction initiatives, the Company expects cash savings of $5 to $6 million annually. The cash outflow in 2001 to close the Leominster facility, reduce headcount and achieve other cost cutting objectives is estimated at $6 to $7 million. As a result of the $44.4 million goodwill write-off, the Company's pre-tax earnings will increase by $1.6 million ($.22 per share). The fixed asset write-offs will reduce annual depreciation expense by $1.8 million ($.25 per share). The Company reported revenues of $74.5 million for the fourth quarter of 2000 as compared to $73.9 million in the prior year, an increase of 1%. The Company experienced strong cash flow as debt was reduced by $5.8 million during the fourth quarter. The Company also announced that it continued to be in compliance with all of its loan covenants. Availability under the Company's senior loan agreement exceeded $30 million at December 30, 2000. For the year ended December 30, 2000, the Company reported a net loss of $71.5 million ($9.77 per share) as compared to net income of $2.0 million ($.26 per share) in 1999. The 2000 results were impacted by the same restructuring, special and other charges recorded in the fourth quarter. The 1999 results include restructuring, special and other nonrecurring charges totaling $9.0 million ($1.19 per diluted share) related to the Company's third quarter 1999 restructuring. Excluding the effects of the various one-time charges in both years, the Company recorded a pre-tax loss in 2000 of $5.7 million as compared to a pre-tax profit of $19.1 million in 1999. The significant decline in profitability was largely the result of increased plastic resin costs, decreased selling prices and costs related to the Company's new El Paso facility. The Company announced revenues for the year of $297 million as compared to $294 million in the prior year, an increase of 1%. In addition, the Company experienced strong cash flow as debt was reduced by $5.3 million during the year. Home Products International, Inc. is an international consumer products company specializing in the manufacture and marketing of quality diversified housewares products. The Company sells its products to all the largest national retailers. Some of the statements made in this press release are forward- looking and concern the company's future growth, product development, markets and competitive position. While management will make its best efforts to be accurate in making these f HORIZON PHARMACIES: Restructures $7 Million Bank One Revolver ------------------------------------------------------------- Horizon Pharmacies, Inc. (Amex: HZP; Frankfurt: HPZ) said that it had restructured a $7 million revolving credit facility from Bank One, N.A. In connection with restructuring such debt, all principal and interest due to Bank One pursuant to the revolving credit facility was paid in full by McKesson HBOC, Inc. (NYSE: MCK), the guarantor of the Bank One revolving credit facility. Bank One assigned to McKesson all rights and interest to (i) the loan agreement between Horizon and Bank One, (ii) the $7 million Promissory Note originally issued by Horizon to Bank One, and (iii) all related loan documents. McKesson and Horizon thereafter amended the Promissory Note to convert the repayment terms from a fixed maturity date to a demand obligation. Horizon is currently in default under the Credit Agreement and McKesson has the right to demand payment of all outstanding borrowings under such agreement. Horizon and McKesson are currently engaged in negotiations with respect to restructuring the Credit Agreement debt. Horizon also announced that the Supply Agreement between McKesson and Horizon has been terminated. Horizon is currently in default with respect to the payment of certain amounts due under the Supply Agreement and based on these monetary defaults McKesson has terminated the Supply Agreement. Horizon has obtained alternative sources of supply with respect to the products previously supplied by McKesson without disruption in supply to stores. Horizon and McKesson are currently engaged in negotiations with respect to restructuring the repayment of all amounts due pursuant to the Supply Agreement. Rick McCord, CEO and President, stated, "We are pleased to announce the completion of the first step in restructuring Horizon's debt. Also, with the termination of the McKesson Supply Agreement, Horizon will consider all wholesale suppliers to obtain a lower cost of goods. As the initial phase of Horizon's restructuring plan continues, several alternative financings are being considered. As previously stated, our goal is to lower our cost of goods sold in combination with complete debt refinancing to continue with our strategic plan of consolidation of the retail pharmacy industry. Our primary focus has been on the improvement of EBITDA and cash flow with new growth resuming after the restructuring plan is completed. Many improvements have been made in store operations and this will continue to be our focus until all store goals have been achieved. We expect to have the refinancing agreement in place over the next several months." McCord continued, "Our pharmacy same store sales for January showed a double digit increase with prescription business continuing to rise. HorizonScripts.com, our mail order and Internet pharmacy which is licensed in 50 states, continues to expand its annual revenue run rate of $7 million. HorizonScripts.com, www.horizonscripts.com, is the fulfillment center for online pharmacy services offered to 700 Piggly Wiggly Co. participating stores through its Web site and 100 other participating grocery stores through Grocery Shopping Network." Horizon is a "brick and click" pharmacy company with over one million customers and owns and operates one Internet pharmacy at www.horizonscripts.com, two mail order pharmacies, 46 retail pharmacies in 16 states, 16 home medical equipment locations, five closed-door institutional pharmacies, seven intravenous (IV) operations, and one home healthcare agency. Horizon's focus is to become an innovative leader in the healthcare industry by providing value-added services to the customers. Horizon's business strategy is to focus primarily on total customer service and convenience. Horizon's revenue growth comes from existing brick and mortar stores, acquisitions of new stores, Internet strategy, kiosk development and joint ventures. Horizon's primary growth will occur with acquisitions of new stores with conversions to the new concept store model, thereby, improving operating efficiencies. ICG COMM.: Moves To Assume Key Employee & Consulting Agreements --------------------------------------------------------------- Prior to the Petition Date there were ten employees of ICG Communications, Inc. (other than the Chief Executive Officer, that had employment contracts with the Debtors. Of those ten, four have left the Debtors' employ. These four persons were the Debtors' President and Chief Operating Officer, the Debtors' Chief Financial Officer, the head of human resources, and the head of regulatory affairs. After these departures, the Debtors restructured the responsibilities and reporting structure of the members of senior management below the level of CEO, resulting in six employees that do not have employment contracts being promoted to positions that report directly to the CEO. The Debtors believe that the six remaining employees with employment contracts, the six employees that now report directly to the CEO, and the CEO together constitute key members of senior management of the Debtors. By this Motion, the Debtors sought Judge Walsh's authorization to: (1) Assume the six existing employment contracts; (2) Enter into new contracts with the six employees that newly report directly to the CEO; (3) Assume the Debtors' contract with Randall Curran, the Debtors' CEO; and (4) Enter into consulting agreements with the four former executives who have left the Debtors' employ. Each of the proposed new employment agreements is substantially identical, except for levels of base salary. Each of the existing employment agreements will be amended to be in the same form. The only material economic obligation contained in the proposed contracts is the provision of a severance benefit equal to one year's base salary if an employee is terminated other than for cause, death or disability. Success Bonus for Mike Kallet The Debtors asked one material difference, however. The Debtors proposed to include in the proposed contract for one employee - Mr. Mike Kallet - a success bonus of $500,000 payable upon confirmation of a reorganization plan in these cases, or the consummation of a sale of substantially all of the Debtors' assets, provided that Mr. Kallet remains employed by the Debtors on such date, or if he is terminated prior to confirmation or consummation of a sale other than for cause, death or disability. Mr. Kallet is the Debtors' executive vice president in charge of operations and as such is principally responsible for maintaining the Debtors' highly complex telecommunications network. Mr. Kallet is a highly skilled individual whose services could be sought by any telecommunications company, including the Debtors' competitors. The Debtors' telecommunications network is described by the Debtors as their "lifeblood", and accordingly, Mr. Kallet's continued services are particularly critical to the Debtors' ability to achieve a successful outcome in these cases. The Debtors stated to Judge Walsh that the proposed bonus is well within the range of success bonuses paid to key executives in other large Chapter 11 cases. Employees with Existing Employment Contracts The six employees who have employment contracts at present, and their respective titles, are: Michael D. Kallet Executive Vice President Operations Richard E. Fish Executive Vice President and Chief Financial Officer Darlinda Coe Senior Vice President Network Support David Hurtado Senior Vice President Telephony Operations Gary F. Lindgren Senior Vice President Engineering John Colgan Senior Vice President Financial Planning/ Corporate Controller New Employees Without Existing Employment Contracts The employees with whom the Debtors do not at present have employment agreements, but with whom employment contracts are being proposed, are: Bernard Zuroff Executive Vice President General Counsel/Secretary Kim Gordon Senior Vice President Marketing Gayle Landis Senior Vice President People Resources Robert Athey Senior Vice President Sales Jack Campbell Senior Vice President Information Systems and Services Brian Cato Senior Vice President Customer Care General Terms of Proposed Employment Contracts The Debtors noted that they have sought and obtained approval of an employee retention agreement that was adopted and partially implemented before the Petition Date, and the continuation of the Debtors' severance policy. The Debtors premised these motions on the Debtors' business judgment that, to retain needed employees during these Chapter 11 cases, and to properly motivate and reward employees for working with the Debtors during their restructuring efforts, both a retention program, called "pay-to- stay", and a severance policy needed to be established and approved by this Court. This severance policy expressly excludes any employee with an employment contract, and as a result neither Mr. Curran nor the six senior executives with existing contracts have any severance protection approved on a postpetition basis. If entry into the proposed contracts is authorized, the employment status of the key executives will remain "at-will", and thus the employment of each of these executives may be terminated by the Debtors at any time for any reason. The proposed contracts provide for: (a) Payment of base salary until termination; (b) Participation in normal corporate benefits and plans until termination; and (c) A severance benefit equal to one year's base salary, payable as a lump sum equal to one year's base salary, if the employee is terminated other than for cause, death or disability, or if the employee resigns as a result of "constructive dismissal". The present contracts, which provide for a severance package equaling one year's base salary plus any bonus, will be amended to reduce the package to one year's base salary. The proposed contracts also contain provisions requiring, after an employee's termination, continued maintenance of confidential information, and prohibit, after an employee's termination, solicitation of other employees of the Debtors. The Curran Agreement In early September 2000, the Debtors' Board of Directors hired Mr. Randall Curran to become the Debtors' new CEO and to lead their restructuring efforts. At that time, the Debtors entered into the Curran Agreement, which they now seek authority to assume. The principal terms of the Curran Agreement, the term of which is month to month, are: Duties: Mr. Curran shall serve as the Debtors' Chief Executive Officer and shall report to the Board of Directors and the Special Executive Committee of the Board. Compensation: Mr. Curran shall receive a monthly base salary of $75,000. This salary may be increased in accordance with normal business practices of the Debtors. Benefits: Mr. Curran shall receive employee benefits as are generally provided to senior executives of the Debtors: temporary housing; certain travel costs; an automobile for use; and reimbursement of expenses. Severance: Mr. Curran shall receive a lump sum termination benefit in an amount equal to twelve month's base salary, at the rate then in effect, as severance upon termination other than for death, disability, cause or good reason. The Debtors advised Judge Walsh that, during Mr. Curran's tenure, the Debtors' operations have been substantially stabilized, operating costs have been significantly reduced, and the process of developing a long- term plan has begun. Therefore, the Debtors asserted that continuing Mr. Curran's contract is beneficial to and in the best interests of these estates and their creditors. The Consulting Agreements Each of the four former employees were parties to employment agreements with the Debtors, and each was a participant in the Debtors' retention plan initiated prior to the Petition Date. This plan provides, among other things, that participants who are severed are entitled to receive remaining payments under the program in a lump sum upon termination. The Court's approval of the retention plan expressly excluded these former executives. Each of the former employees has agreed, at the Debtors' request, to continue consulting with the Debtors on an "as needed" basis over the next approximately six months, as well as to continue to respond to ongoing requests for information and assistance. In fact, the Debtors told Judge Walsh they will need access to these individuals as they move forward with their restructuring efforts. In addition, each of these former executives has claims assertable against these estates arising out of their former employment contracts. While the Debtors believe that any such claims would be prepetition unsecured claims, the former executives have contended that some portion of their claims would have administrative priority status. To ensure that the Debtors continue to have access to these individuals, to ensure that these former executives do not attempt to solicit the Debtors' current employees, and resolve any claims these former employees may have against these estates, the Debtors believe it is best that these estates enter into consulting agreements with each of these former executives. In addition to providing for continued consulting services, non- solicitation of employees, and mutual releases, the proposed consulting agreements provide for each former executive to receive payments for a 26-week period on a bi-weekly basis. The amount of the proposed payments for each former officer total: Bill Beans $528,895 Former President and CEO Harry Herbst $342,548 Former CFO Carla Wolin $257,500 Former head of human resources Cindy Schonhaut $217,500 Former head of regulatory affairs These proposed payments are approximately the amount of the remaining retention payments these former executives were slated to receive under the retention plan, less approximately half of the salary payments made to them for the period of December 4, 2000, to February 4, 2001. No other payments are proposed under the consulting agreements, and if approved, all claims based on the existing employment agreements will be released. The Debtors told Judge Walsh that aggregate claims under the existing employment agreements could exceed $2.2 million. (ICG Communications Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) INDESCO: Court Gives Final Nod to CIT $25 Million DIP Facility -------------------------------------------------------------- The U.S. Bankruptcy Court in Manhattan granted final approval for Indesco International Inc.'s (X.III) $25 million debtor-in- possession financing from The CIT Group/Business Credit Inc. The order directs the New York-based manufacturer of plastic trigger sprayers and other liquid dispensing systems to promptly repay all outstanding pre-petition obligations with the initial proceeds of the DIP financing. As adequate protection for any post-petition decrease in the value of CIT's interests, U.S. Bankruptcy Judge Robert E. Gerber granted the lender a joint and several claim against the company's estate. The DIP financing, which matures Jan. 5, 2002, provides a $1 million carve-out fee for professionals, the order said. (ABI World, February 27, 2001) INFU-TECH: Formulates Plan to Raise Capital ------------------------------------------- Infu-Tech, Inc. provides specialty pharmaceuticals, infusion therapy (i.e., administration of nutrients, antibiotics and other medications either intravenously or through feeding tubes), and other medical products to patients in their homes, nursing homes and subacute care facilities. In March 2000, the company formed a subsidiary, Smartmeds.com, Inc. The company is 42% owned by Kuala Healthcare, Inc. formerly Continental Health Affiliates, Inc. The remaining 58% of the company's equity is publicly traded. The company incurred a ($0.9 million) net loss for the six months ended December 31, 2000 after having incurred a ($3.8 million) loss in the year ended June 30, 2000, and is experiencing a slowdown in payments from several managed care organizations which have affected its ability to pay its suppliers on a timely basis. The company has extended its payment terms with some of its suppliers while also executing a plan to pursue collection of its accounts receivable, consolidate its operations, and reduce operating costs. A number of factors could contribute to the company suspending its operations including: * Company is put in default by its lender, * Company is not successful in obtaining additional capital, * Company does not receive cash payments from Kuala, * Company continues to incur significant losses. As of December 31, 2000 the company's current liabilities exceeded its current assets by $1.7 million. Infu-Tech has a $1.5 million line of credit with Heller Healthcare secured by certain accounts receivable. As of December 31, 2000, the outstanding loan was $1.1 million, the maximum available based on billing and collection activity. The company's stockholders' equity was $0.9 million versus the $4.0 million requirement from Heller. In addition, the company had accounts payable greater than 120 days old. The company has obtained a waiver from Heller to alleviate these events of default. The waiver requires that stockholders' equity be no less than $900,000 through June 30, 2001. On November 3, 2000 the company renewed the agreement with Heller which expires on December 31, 2001. The company is exploring additional borrowing alternatives. As indicated in the company's independent auditors' report on the June 30, 2000 financial statements, these factors raise substantial doubt about the company's ability to continue as a going concern. The continuation of the company as a going concern is dependent upon its ability to obtain additional financing and generate revenues with gross margins sufficient to produce operating profit. Management has taken action and is formulating plans to strengthen the company's working capital position and generate sufficient cash to meet its operating needs through June 30, 2001 and beyond. The company is attempting to increase revenue by providing wireless healthcare services. Also, negotiations are in process with its primary vendor Genzyme to convert the $5.1 million owed them to a long term payment schedule and increase the margins resulting from future Genzyme sales. Further, the company is negotiating for additional financing with several lenders. No assurance can be made that management will be successful in achieving its plan. INTEGRATED HEALTH: Rejects 39 Burdensome Rotech Equipment Leases ---------------------------------------------------------------- Rotech and its subsidiaries, which conduct Integrated Health Services, Inc.'s home respiratory services operations, are parties to several hundred leases or executory contracts relating to the use of, inter alia, durable medical equipment, office furniture and automobiles. The Debtors sought and obtained the Court's authority to reject 39 of such Agreements because they: (a) are of no value to the Debtors, or constitute a burden upon the Debtors' estates; and (b) are unnecessary for the Debtors' continued operations. At the Debtors' behest, the Court directed that a Rejection Claims Deadline of 30 days, after which the holder of a rejection claim will be forever barred from asserting such claim against any of the Debtors or their estates and sharing in any distribution out of the Debtors' estates or assets under any plan of reorganization confirmed in these chapter 11 cases, and claim holders will be bound by the terms of any such plan and/or Order of the Court authorizing distributions from the Debtors' estates. (Integrated Health Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900) KITTY HAWK: Emerald Extends $11MM Tender Offer For Secured Notes ---------------------------------------------------------------- According to published reports, Kitty Hawk, Inc. announced that Emerald Bay Investors, LLC had commenced an unsolicited tender offer for up to $11 million of the Company's 9.95% senior secured notes due 2004 at a price of 22 cents on the dollar, cash. Kitty Hawk has been operating under Chapter 11 protection since May 1, 2000. (New Generation Research, February 27, 2001) LERNOUT & HAUSPIE: BBNT Presses For Decision On HARK License ------------------------------------------------------------ Curtis J. Crowther, Esq., and Leonard P. Goldberger, Esq., of the Wilmington Delaware firm of White & Williams LLP, attorneys for BBNT Solutions LLC, asked Judge Wizmur to compel Lernout & Hauspie Speech Products N.V. and Dictaphone Corp. to either assume or reject a Source Code Software License Agreement with BBNT. BBNT is the owner of certain intellectual property known as the HARK Recognizer Software, and certain speech associated recognition technology which is the subject of a Source Code Software Agreement between the Debtor and BBNT dated December 2, 1998. The significant terms of the HARK License Agreement are: (a) BBNT shall perform certain software development services related to the HARK Recognizer software for three years after the effective date of the license; (b) BBNT shall provide four full-time equivalent personnel to the Debtor for development services work each year during the three-year development services period; (c) The license contains a limited exclusivity obligation which restricts BBNT's ability to sell, market, or distribute the HARK Source Code and speech recognizer technology. This obligation is concurrent with the three-year development service term, and will expire on December 1, 2001. Prior to the filing of the voluntary petition, the Debtor indicated its continued interest in the HARK Recognizer software and other related technology. However the Debtor failed to make post-petition payments under the Agreement of $500,000 due on December 1, 2000. The Debtor's default has the effect of locking BBNT into performing development services under the HARK Agreement and restricting BBNT from marketing or otherwise distributing the Hark software while the Debtor does not perform its only obligation - payment under the Agreement. By this Motion, BBNT requested that a deadline be set for the Debtor to decide whether to assume or reject the HARK Licensing Agreement. BBNT suggested that the deadline be set at 10 days after the granting of this motion. It is necessary that BBNT know the Debtors' intentions regarding the Hark license, software and technology for these reasons: (a) BBNT should not be required to continue providing technically sophisticated personnel to the Debtor, as provided in the licensing agreement, considering that the Debtor is not paying for such services; (b) BBNT's HARK speech recognizer technology cannot be marketed to others due to the exclusivity provision of the Agreement. It is patently unfair to force BBNT to deploy scarce technical resources without compensation while the Debtor delays making a decision. The current delay is a great burden to BBNT while diminishing the economic value of the Hark technology without any reassurance of future recovery or recoupment; (c) Since the Debtor indicated that it is interested in the HARK technology on the same day that the voluntary petition was filed, the decision to either assume or reject the contract should not be difficult to make promptly; and, (d) The Debtor's failure to make a decision increases claims against its estate, since BBNT will possess an administrative claim for the post-petition amounts due BBNT also asked Judge Wizmur to order that, in the event that the Debtor wishes to assume the HARK License, it must cure the outstanding default and/or provide adequate assurance that the default will be cured. This requirement shall also extend to the Debtor's future performance under the contract as well. On the other hand, if the Debtor chooses not to assume the contract, BBNT asked that the Debtor be compelled to return all documents, software tools, and other materials provided by BBNT to the Debtor relating to the HARK License. (L&H/Dictaphone Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392- 0900) LETSBUYIT.COM: Reopens Business in Four European Countries ---------------------------------------------------------- LetsBuyIt.com, the retail web site that recently won a last- minute reprieve from bankruptcy, said that it had re-opened for business in Germany, Britain, France and Sweden, according to Reuters. LetsBuyIt said that its product range reflected the preferences of its 1.2 million members and would "leverage its existing contacts with its most important suppliers." The company last week said that a comprehensive revamp would help it back into the black by the end of 2002 as it slashes costs and pulls out of unprofitable operations. This follows a four-million euros last-minute rescue package funded by maverick German investor Kim Schmitz just when the e- tailer was contesting bankruptcy in an Amsterdam court, and a further 53 million euros supplied by anonymous lenders. The rejuvenated web site operator has cut staffing to around 150 from almost 400, and the marketing budget-52 million euros last year as LetsBuyIt built its brand-will be severely reined in. (ABI World, February 27, 2001) LOEWEN GROUP: Indiana Unit Selling Main & Frame Assets For $335K ---------------------------------------------------------------- Pursuant to section 363 and 365 of the Bankruptcy Code, and the Court's Disposition Order authorizing The Loewen Group, Inc.'s Global Bid Procedures Programs, Loewen Indiana sought and obtained the Court's authority to sell the funeral home business and related assets at Main & Frame Funeral Home (2720) and at Main & Frame Blue River Chapel (3169), both in New Castle, Indiana 47362, to JD Stripe, Inc. (collectively, the Initial Bidder) free of all liens, claims and encumberances, at a purchase price of $ 335,000 pursuant to the Asset Purchase Agreement dated December 26, 2000, or to the Purchaser that the Debtors determine has submitted the highest and best offer, free of all liens, claims and encumberances. Any Qualified competing bid must exceed $351,750 i.e. 5% above the Purchase Price offered by the Initial Bidder. Any entity that desires to submit a competing bid for the Sale Locations may do so in accordance with the Bidding Procedures approved by the Disposition Order. The Selling Debtor does not anticipate assuming and assigning any executory contracts or unexpired leases in connection with the Transaction. In accordance with the Net Asset Sale Proceeds Procedures, the Debtors will use the proceeds generated to repay any outstanding balances under the Replacement DIP Facility and deposit the net proceeds into an account maintained by LGII at First Union National Bank for investment, pending ultimate distribution on court order. Neweol would sell and the Initial Bidder would purchase certain accounts receivable related to the Sale Locations, pursuant to a purchase agreement between Neweol and the Initial Bidder. The amount of the Neweol Allocation will be determined immediately prior to closing. The Neweol Allocation will not be utilized or deposited in the manner contemplated by the New Asset Sale Proceeds Procedures. (Loewen Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 609/392-0900) LTV CORPORATION: Pays Due Diligence Fees to Potential DIP Lenders ----------------------------------------------------------------- The LTV Corporation sought and obtained permission from Judge Bodoh to pay due diligence fees to two potential institutional lenders for postpetition financing. The Debtors told Judge Bodoh they continue to pursue negotiations regarding a potential DIP facility with their present prepetition lenders, and that access to new financing is critical to their successful reorganization. The Debtors asked, and Judge Bodoh ordered, that the names of the potential lenders be kept under seal and not disclosed to the public. The Debtors are approaching the placement of postpetition DIP financing as a competitive bidding process with lenders expressing an interest in extending postpetition financing. The Debtors are paying $150,000 to fund a due diligence fee as a prerequisite for the institutional lender to proceed with negotiations of a potential DIP facility with the Debtors. The Debtors told Judge Bodoh that the institutional lenders in question have required that the request for payment of this fee be placed under seal to keep confidential the names and terms of these prospective financiers. The Debtors assure Judge Bodoh that the lender's request is common in commercial lending transactions under similar circumstances, and that no further negotiations may be had unless a due diligence fee is promptly paid. David G. Heiman, Richard M. Cieri, and Michelle M. Morgan of the Cleveland, Ohio, branch of Jones, Day, Reavis & Pogue, told Judge Bodoh that the name of prospective lenders, and the terms of these prospective loans, constitute "confidential commercial information", and that publicly disclosing the identity of the institutional lender or the potential terms of a DIP facility at this time could substantially impair their ability to negotiate effectively with other lenders. This, in turn, might thwart the Debtors' attempts to obtain the best possible terms for a DIP facility for these Chapter 11 cases. Nevertheless, when the Debtors enter into a definitive agreement the names and terms will be publicly disclosed. Judge Bodoh therefore ordered that until further Order only "special notice parties", such as the Committee and the United States Trustee, will have access to information concerning these due diligence requests, and this information will be denied to the general public. (LTV Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-00900) MEDICAL RESOURCES: Emerges From Chapter 11 ------------------------------------------ Medical Resources, Inc. (formerly OTC Bulletin Board: MRIIQ) said it had concluded its financial restructuring and completed its Chapter 11 proceedings. The Company's emergence from bankruptcy follows the February 8, 2001 confirmation of its Plan of Reorganization by the United States Bankruptcy Court for the Southern District of New York. Under the Plan of Reorganization, the holders of $75 million of the Company's Senior Notes have received approximately 84% of the reorganized Company's Common Stock with the remaining equity being distributed to other creditors and plaintiffs in lawsuits previously pending against the Company. Under the Plan of Reorganization, the pre-Chapter 11 shareholders of the Company will receive no distribution and such holders' shares of Common Stock will be cancelled. Christopher J. Joyce, Co-Chief Executive Officer of the Company said, "we are extremely pleased to announce the completion of the debt-for-equity conversion we announced in April 2000. This financial restructuring, and its elimination of over $95 million of debt obligations, has provided the Company with a greatly improved balance sheet that will allow us to maximize the value of our 70 imaging centers and to take full advantage of attractive opportunities in our core business going forward." In connection with the completion of its Chapter 11 proceedings, the Company also announced it had filed a notice with the Securities and Exchange Commission on Form 15 certifying that the Company had less than 300 record holders of its Common Stock and therefore was no longer subject to the reporting requirements of the Securities Exchange Act of 1934. Medical Resources specializes in the ownership, operation and management of fixed-site outpatient medical diagnostic imaging centers. The Company operates 70 imaging centers in the United States and provides network management services to managed care organizations in regions where its centers are concentrated. MONTGOMERY WARD: Kimco Offers Top Bid for Real Estate ----------------------------------------------------- Several major department store chains are lined up to buy Montgomery Ward & Co.'s 250 stores and other buildings from a partnership bidding to purchase the assets at auction this week, a Ward's spokesman said, according to the Associated Press. Wards and its unsecured creditors committee have approved a deal with the partnership led by New York-based Kimco Realty Corp., which has emerged as the strongest bidder, said Chuck Knittle of the Chicago-based retailer. The deal is expected to generate more than $450 million in proceeds for Wards and Kimco. Wards, which announced its impending shutdown on December 28, has closed 58 stores and plans to shutter a total of 100 stores by Sunday. All 250 stores, located in 30 states, are expected to close by sometime this spring. The assets are to be sold in an auction for federal bankruptcy court in Delaware, with approval expected by week's end. (ABI World, February 27, 2001) NORD RESOURCES: Elects John F. Champagne as New President & CEO --------------------------------------------------------------- W. Pierce Carson resigned as President and Chief Executive Officer of Nord Resources Corporation and from his position as a Director of the company effective January 10, 2001. Mr. Carson will provide consulting services to the company from time to time. The Board of Directors elected John F. Champagne, the company's Executive Chairman of the Board of Directors, to serve as the company's new President and Chief Executive Officer. Mr. Champagne will continue as Chairman of the Board. Ricardo M. Campoy resigned from his position as a Director of the company effective January 5, 2001. NORD RESOURCES: Considering Merger Deal with Nord Pacific --------------------------------------------------------- Nord Resources Corporation owns 28.51% of Nord Pacific Limited, a company engaged in the production of copper and the exploration for gold, copper and other minerals in Australia, Papua New Guinea and North America. The directors of the company have authorized the officers of the company to investigate the feasibility of a merger of Nord Resources and Pacific. Consummation of a merger would be subject to a number of conditions, including agreement on a satisfactory exchange ratio. If terms are agreed, a majority vote of the shareholders of both the company and Pacific would be necessary for approval of a merger, and regulatory approvals in the United States and Canada would be required. There can be no assurance that a merger of the company and Pacific would be consummated. NUOASIS RESORTS: Working Capital Deficit Continues -------------------------------------------------- NuOasis Resorts, Inc. was incorporated in Colorado on February 6, 1989 and became public in 1990. In January 1998, the company was re-incorporated in the state of Nevada. Through subsidiaries, the company invests in companies that lease, manage and operate hotels, legalized gaming casinos, and related operations. Prior to fiscal 2000, the Company manufactured and distributed specialty food products. NuOasis has recurring losses from operations, and at December 31, 2000, the company had a working capital deficit of $9.0 million. Further, the company's largest asset is an investment in ORI, which requires approximately $6 million of immediate working capital to service certain past-due trade creditors of the Le Palace Hotel & Resort and it will require additional capital to meet obligations as they become due during the next 12 months. These factors raise substantial doubt about the company's ability to continue as a going concern. The company's consolidated financial statements for the three and six months ended December 31, 1999, include the accounts of ORI, NUOI, Casino Management of America, Inc., NuOasis Laughlin, Inc., NuOasis Las Vegas,Inc., NuOasis Properties, Inc., ACI Asset Management Inc. and FFI. CMA, NuLa, NuLV, NuOP, and ACI were spun-off in the third quarter of fiscal year 2000. At June 30, 2000, the company had an ownership interest in Oasis Resorts International, Inc. ("ORI") that exceeded 50%, and as a result, the company consolidated the accounts of ORI with its financial statements. During the quarter ended September 30, 2000, the company disposed of certain of its shares of ORI common stock, and ORI issued additional shares of its common stock to a party other than the company. These transactions decreased the company's ownership interest in ORI to approximately 47% at September 30, 2000. Based on this level of ownership interest, and on management's expectation that the company's ownership interest will continue decreasing in future periods, the accounts of ORI are no longer consolidated in the company's financial statements. At December 31, 2000, the company owned approximately 17% of ORI which it accounts for on the equity method. As a result of ORI no longer being consolidated with the company, there were no revenues in the first six months of fiscal 2000. Revenues for the first half of fiscal 2000 were $3.2 million which were entirely due to the operations of the Le Palace Hotel Tunisia. To date, the hotel has not been able to realize its potential due the failure of the developer to complete certain amenities at the hotel, the Cap Gammarth Casino and the surrounding properties associated with the complex. Total cost of revenues were $3.6 million in the fiscal 2000 first six months. Only minimal expenditures are being made to operate the hotel. Selling, general and administrative costs were $147,000 in fiscal 2001, consisting primarily of legal, accounting and advisory fees and only related to the Company and NuOI. Selling, general and administrative costs were $1.6 million in fiscal 2000 and also included ORI and the operations of the LePalace Hotel. During the first six months of fiscal 2000, the company realized a loss in the equity in earnings of unconsolidated subsidiaries of $1.1 million. This loss was due entirely to the company's approximate 50% interest in ORI in the first Quarter of fiscal 2001 and 17% interest in ORI in the second Quarter of fiscal 2001. During fiscal 2001, ORI impaired certain assets due to declines in market value. During the first half of fiscal 2000, NuOI sold 267,000 shares of ORI common stock for $245,000 and recorded a loss on sale of securities of $35,000. As a result of the company's assigning FFI to Eurasia Corp., it recognized a gain on sale of discontinued operations of $602,000. This gain primarily resulted from the company no longer being liable for amounts due to FFI. As a result of ORI no longer being consolidated with the company, there were no revenues in the first quarter of fiscal 2001. Revenues for the second quarter of fiscal 2000 were $1.5 million which were entirely due to the operations of the Le Palace Hotel Tunisia. Total cost of revenues were $1.5 million in the fiscal 2000 second quarter. Only minimal expenditures are being made to operate the hotel. Selling, general and administrative costs were $45,000 in fiscal 2001, consisting primarily of legal, accounting and advisory fees and only related to the company and NuOI. Selling, general and administrative costs were $838,000 in fiscal 2000 and also included ORI and the operations of the LePalace Hotel. During the second quarter of fiscal 2001, the company realized a loss in the equity in earnings of unconsolidated subsidiaries of $126,000. This loss due entirely to the company's approximate 17% interest in ORI in the second Quarter of fiscal 2001. During the second quarter of fiscal 2001, ORI recorded an additional impairment of $150,000 on certain assets due to declines in market value. During the second quarter of fiscal 2000, NuOI sold 174,000 shares of ORI common stock for $94,000 and recorded a loss on sale of securities of $89,000. The Company had a cash balance of approximately $325,000 at December 31, 2000. OTR EXPRESS: Financing Contingencies & Net Losses Raise Concerns ---------------------------------------------------------------- OTR Express, Inc. (Amex: OTR), a nationwide transportation and logistics company, reported a net loss of $6,927,000, or $3.88 per share (basic and diluted), for the year ended December 31, 2000, compared to a net loss of $892,000, or $0.49 per share, in 1999. Fourth-quarter net loss was $3,511,000, or $1.97 per share (basic and diluted), compared to a net loss of $927,000, or $0.52 per share, in the fourth quarter of 1999. The losses for the quarter and full year included substantial charges to reflect the write- down of revenue equipment to be divested as part of the Company's previously announced fleet reduction plan, which is aimed at reducing debt and restoring profitability. OTR revenues declined 3 percent in 2000, to $78,342,000 from $80,480,000 in 1999. Revenues for the fourth quarter declined 14 percent, to $17,887,000 from $20,726,000 a year earlier. The declines resulted primarily from a smaller number of trucks in service as part of the planned fleet reduction. Operating loss for the year was $4,875,000, including charges of $3,281,000 related to asset write-downs in connection with the Company's downsizing, compared to operating income of $2,248,000 in 1999. For the fourth quarter, the Company reported an operating loss of $2,530,000, including a charge of $2,566,000 for asset write-downs, compared to an operating loss of $452,000 in 1999. A slow economy, increased fuel costs, fewer seated trucks and depressed used truck values contributed to the operating losses. "As previously announced, we are downsizing the Company to lower our fixed costs and improve performance in the midst of a very tough time for the trucking industry," said William P. Ward, president and CEO. "After these actions, we expect to have approximately 215 company-owned tractors and 50 owner operators, with lower fixed costs and a reduced debt burden. We have been working closely with our lenders to restore OTR to a more financially sound condition, and our drivers and home-office staff have gone above and beyond the call of duty in helping OTR take these steps to remain a viable company." In connection with the downsizing, the Company is returning or selling approximately 190 tractors and approximately 400 trailers and anticipates debt to be reduced by at least $10 million. In addition to disposing of trucks and trailers, the Company is consolidating some office functions, moving logistics operations from Salt Lake City, Utah, to the home office in Olathe, Kansas, and reducing reliance on less-profitable broker freight. "OTR Express customers have been responding positively to the changes we are making, since they understand the current trucking environment and know that we provide outstanding truckload service," Mr. Ward added. "Our top priority, even as we streamline operations, is to provide reliable service to OTR customers." Due to the financing contingencies and the net losses, the Company announced that its outside auditors will be issuing a "going concern" opinion on the Company's 2000 financial statements. The Company's revenue rate per mile (including fuel surcharge) was $1.115 in 2000, compared to $1.077 in 1999. For the fourth quarter, the rate per mile was $1.147 in 2000, compared to $1.115 a year earlier. OTR Express, Inc., headquartered in Olathe, Kansas, is a transportation and logistics company serving customers with high- quality equipment and one of the most experienced driver fleets in the industry. The common stock is traded on the American Stock Exchange under the symbol OTR. For further information, please contact Steve Ruben, chief financial officer, OTR Express, at (913) 829-1616, or by visiting the company's website at www.otrx.com. OTR EXPRESS: Secures Relaxed Payment Terms from Equipment Lenders ----------------------------------------------------------------- OTR Express, Inc. reached agreement in principle with its four largest equipment lenders to provide the Company with modified payment terms to provide cash flow relief through April 2001. In exchange for debt relief, these tentative agreements call for the Company to return trucks to the equipment lenders and to provide additional collateral. Additionally, the Company is currently in default on certain financial covenants in its working capital line of credit agreement and will be operating under default over the near term. There can be no assurance that the Company will be able to comply with the terms of these financing agreements. OWENS CORNING: Seeks Approval Of Settlement With Gerald Metals -------------------------------------------------------------- Owens Corning and certain of its subsidiary Debtors asked Judge Walrath to review and approve their settlement and compromise with Gerald Metals, Inc., including modification of the stay to the extent necessary to carry out the terms of the settlement. The initial dispute arose over the parties' respective rights in certain quantities of precious metal currently in he possession of the Debtors, but as to which Gerald claims an interest. The Settlement Under the terms of the settlement, the Debtors will pay Gerald the sum of $10,524,479.78, plus per diem charges of $2,665.08, beginning after January 31, 2001, in immediately available funds. To facilitate this settlement, the Debtors concurrently asked the Court to modify the stay to the extent necessary for Gerald to collect the settlement monies. In consideration for the Debtors' payment of the settlement amount, Gerald will release to the Debtors any ad all right or interest which it holds in the metals, and shall further release any and all claims which it might assert against the Debtors' estates on account of the metals. The settlement amount will be in full satisfaction of any and all claims, defenses, offsets, counterclaims and causes of action between the Debtors and Gerald arising out of or related to certain leases, and represents a discount of at least $300,000 from the secured or priority claim which the Debtors believe Gerald would otherwise be able to assert against the Debtors' estates. Accordingly, the Debtors believe that approval of the settlement will result in substantial savings to the Debtors' estates and unsecured creditors. The Master and Confirmation Leases In 1999 the Debtors and Gerald entered into a Master Rhodium Lease Agreement, and a Master Platinum Lease Agreement. These leases provide the terms and conditions for certain purported leases which the parties subsequently signed from time to time, and under which the Debtors purportedly acquired a leasehold interest in the metals. Each individual lease was evidenced by a lease confirmation, of which 30 had been executed and were outstanding prior to the Petition Date. The lease confirmations each set forth such terms as the amount of the metals purportedly leases, the term of the purported lease, and the lease fee, which was set as a monthly lease fee equal to interest only on the stated original value of the leased metals calculated at LIBOR plus a spread ranging from 225 to 275 basis points per annum. The master leases further provide that, upon expiration of the lease term set forth in any lease confirmation, and on the terms stated in the master leases, the Debtors would be permitted to purchase Gerald's interest in the leased metals for a price equal to the stated value of the metals as of the commencement of the lease. The Metals The metals subject to the leases are quantities of platinum and rhodium which the Debtors use in connection with certain of their manufacturing activities, most notably the production of fiberglass. The bulk of the metals have been fabricated into glass extrusion bushings at the Debtors' various industrial plants, the removal of which would cause substantial expense, inconvenience, and disruption of the Debtors' businesses. However, the Debtors believe that a smaller quantity of the metals is currently held at the Debtors' facilities in its original form, where such metals are stored for eventual use in spare or replacement parts. As of the Petition Date, the aggregate purchase option price of all metals which the Debtors held subject to the master leases totaled approximately $135 million. Under the lease terms stated in their respective lease confirmations, each of the leases to which the metals are subject purportedly expired on or before December 7, 2000. In addition to the $135 million of metals held by the Debtors, the Debtors held approximately $9 million of platinum and rhodium which Gerald leased to it under an earlier set of master leases that differed from the 1999 master leases in several material respects. Because the parties did not dispute that these $9 million of metals were subject to valid, true leases, the Debtors have purchased all such metals from Gerald in the ordinary course of business upon the expiration of the applicable lease terms. The Letters of Credit Prior to the Petition Date, the Debtors obtained letters of credit payable to Gerald in the event that the Debtors failed to perform certain of their obligations under the leases. In October 2000 Gerald presented each of the letters of credit to its respective issuing bank, and between October 24 and October 26 Gerald received payment from the issuing banks of approximately $125,358,731.16, the maximum amount available to be drawn on the letters of credit. Following its drawdown of the letters of credit, Gerald has calculated its remaining claim as of January 31, 2001, to be $10,824,479.78, which amount reflects total unpaid return obligations, accrued and unpaid lease fees, and costs and expenses which are recoverable under the terms of the master leases, less the letter of credit proceeds. The amount and calculation of this remaining claim is not in dispute. The Financing Statements As additional security for the Debtors' repayment obligations, under the master leases the Debtors were required to deliver a security interest in the metals to Gerald. Gerald subsequently filed U.C.C.Rep.Serv.(CBC)-1 financing statements with respect to he metals in the States of Ohio, North Carolina, South Carolina, Texas, and Tennessee. After independent review of the financing statements, the Debtors have concluded that the security interests create d thereby appear to have been properly perfected, and that the perfection of Gerald's security interests is not vulnerable to attack as a voidable transfer under the Bankruptcy Code. The Debtors have further determined that, to the extent they are valid, the financing statements appear to create a perfected security interest in approximately 21,100 ounces of platinum and 2,200 ounces of rhodium currently in the Debtors' possession. The Debtors estimate that, as of the Petition Date, the collateral had an aggregate fair market value of approximately $17.9 million. In addition to the collateral, Gerald holds certain additional collateral as security for the Debtors' lease obligations, consisting of a $500,000 cash margin reserve and approximately 50 ounces of rhodium with an estimated current market value of $100,000. In sum, Gerald likely holds a valid, perfected security interest in the collateral and the additional security, which have an aggregate value of approximately $18.5 million. Because the parties agreed that the remaining claim of Gerald is approximately $10.8 million or less, Gerald is believed to be fully secured on its claims under the leases. The Dispute The settlement is a global settlement of all claims arising out of or related to the leases. In its negotiations with the Debtors, Gerald has taken the position that it has retained ownership of the metals, and that the Debtors, following the expiration of the purported leases, no longer have any right or interest in the metals. As such, absent this settlement, Gerald may demand or take action to regain possession of the metals. The Debtors have disputed this contention and believe that the leases may be recharacterized as secured debt. In the event that the Debtors prevail on the lease-debt dispute, it is anticipated that other areas of dispute may arise between the parties. Notwithstanding their reluctance to make payment on what they believe to be a secured claim prior to the consummation of their Chapter 11 plan, the Debtors have determined, in their business judgment, that approval of the settlement at this time is in the best interests of the Debtors and their estates. Even if the Debtors prevail on the lease/debt dispute, Gerald will likely have an allowable, full secured claim for an amount at least equal to the remaining claim. The settlement amount is less than the remaining claim. Since, under any circumstances, the remaining claim will likely have to be paid in full, the settlement thus creates a substantial savings for the Debtors' estates. Additionally, approval now of the settlement will relieve the Debtors from potentially costly and time-consuming litigation. The Debtors told Judge Walrath that the exact terms of the settlement agreement are confidential, and asked that she enter an immediate order protecting the estates' interests in confidential information contained in the settlement. The Debtors are now engaged, or may soon become engaged, in negotiations with certain additional lessors of precious metals or other personal property who may assert that they are similarly situated to Gerald. These negotiations pertain to, among other topics, the claims which the additional lessors have asserted or may assert in the Debtors' Chapter 11 cases, as well as the terms and conditions on which the Debtors and the additional lessors will do business in he future. The Debtors have not yet determined the terms, if any, on which they would be willing to enter into compromises or business agreements with the additional lessors. For this reason, the Debtors believe that their negotiating position with respect to the additional lessors may be prejudiced or compromised if members of the general public, including the additional lessors, are able to examine the exact terms of the Debtors' settlement with Gerald. The Debtors have summarized the general terms of the settlement in considerable in the settlement motion. Upon the Court's entry of this Order, the Debtors will file, under seal, the full settlement agreement. In addition, the Debtors will provide a copy of the full settlement upon request to the Committees, the United States Trustee, and the Debtors' pre- and postpetition lenders upon the Court's granting of this Motion and the party's execution of an appropriate confidentiality agreement. (Owens Corning Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) PILLOWTEX CORP.: Alabama Gas Wants to Terminate Utility Services ---------------------------------------------------------------- Eric Lopez Schnabel, Esq., at Klett, Rooney, Lieber & Schorling in Delaware, asked Judge Robinson to modify the automatic stay to allow Alabama Gas Corporation to terminate its agreements with Debtor Fieldcrest Cannon, Inc., with the motion serving as written notice to Pillowtex Corporation of termination under the terms of the Agreements. Alabama Gas Corporation, or Alagasco, is a natural gas utility regulated by the Alabama Public Service Commission. It provides gas utility services to Debtor's manufacturing facilities in Alabama. In that capacity, it entered into agreements with the Debtor to provide special services over and above its basic utility services. The agreements include: (a) January 5, 1994 Agency Agreement; (b) September 29, 1994 Basic Agreement for Gas Service; (c) December 21, 1994 Special Services Agreement; (d) Agency Agreement for pipeline transportation services; and (e) October 4, 1994 Transportation Service Agreement. These agreements govern the terms and conditions of: (1) Alagasco's delivery of gas purchased by the Debtor from Alagasco; (2) Alagasco's delivery to the Debtor of gas purchased by the Debtor from other sources; and (3) Alagasco's purchase and delivery of gas on behalf of the Debtor. These agreements are terminable at the will of either of the parties. Mr. Schnabel argued that the agreements increase Alagasco's credit exposure as it may have to advance its own funds in purchasing gas for the Debtor. This exposes Alagasco to a greater credit risk than if it only provided basic utility services. He informs the Judge that the Debtor is in default of its obligations to Alagasco and that the outstanding pre-petition amount due and owing Alagasco is approximately $155,468.07, including $137,844.57 past due as of the filing date. Alagasco reasoned that the equities in this case establish "cause" for terminating these agreements and modifying the bankruptcy stay. The Debtor is more than two months in default of the agreements and such a significant default is itself cause for modifying the stay. Alagasco will be exposed to undue and onerous obligations under the agreements, considering its increased credit risk and the unusually volatile conditions of the current gas market. Alagasco also requested that Judge Robinson order modification of the stay so that Alagasco may effect termination of the agreements as necessary to allow Alagasco to provide gas utility service under standard terms, to the extent Alagasco is required to continue such service, and to require that the Debtor post a bond securing future payment. (Pillowtex Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) PLAY-BY-PLAY: Restructuring Convertible Debentures for Warrants --------------------------------------------------------------- Play-By-Play Toys & Novelties, Inc. (Nasdaq: PBYP) reached a definitive agreement in the form of a term sheet with the holders of its Convertible Debentures to restructure and extend the final maturity of the Debentures until December 31, 2002. As part of the restructuring, the holders of the Debentures shall relinquish their right to accelerate demand for payment of the entire amount of debt outstanding under the Debentures, and shall relinquish all conversion rights now associated with the Debentures, including without limitation, rights to control board seats. Other terms of the restructuring include the waiver of existing events of default outstanding under the Debentures and promissory notes. In exchange, the holders of the Debentures shall receive warrants to purchase up to 1.5 million shares of the Company's common stock, and the Company must continue to meet periodic principal and interest payment requirements and must comply with certain financial covenants. The agreement is subject to the payment by the Company of past due principal and interest due under the Debentures, which the Company can make. The holders of the Debentures have agreed to a standstill until March 16, 2001 in order to allow the parties time to prepare and complete final documentation. The holders of the Debentures may not take legal action against the Company to collect on the debt during the two-year extension period unless the Company fails to make periodic payments or violates certain covenants. Arturo G. Torres, Chairman and Chief Executive Officer commented, "I am pleased that we have reached a long-term agreement with the sub-debt holders. I believe the agreement that we have been able to negotiate is reasonable and responsive to the interests of our shareholders. The sub-debt refinancing issue has been a major distraction for the Company and together with the recently restructured terms of several material licensing agreements with Warner Bros., we have successfully resolved two of the most significant issues facing the Company. We are now in a better position to focus our entire efforts on our business. We are thankful for the support of our employees, vendors and customers that have remained faithful to the Company." As reported earlier, the Company recently successfully completed a rescheduling of royalty payments to a significant licensor as well as the reorganization of its operations and human resources in efforts to reduce operating expenses. The Company has finalized its tentative agreement with Warner Bros. Consumer Products that provides for the rescheduling of royalty obligations due under certain significant entertainment character licensing agreements through December 31, 2002, thus preserving its rights under these agreements. Also, the Company recently completed a corporate reorganization which included among other things the downsizing of its employee ranks, the closing of duplicative warehouse activities world-wide, and the implementation of a new sales incentive program all aimed at cutting operating and administrative costs while increasing productivity. Torres further commented, "With these reorganization, financing and licensing issues addressed we can now concentrate all of our efforts on improving our core business. Though some of these cost cutting measures were painful we are very optimistic about the Company's future." Play-By-Play Toys & Novelties, Inc. designs, develops, markets and distributes a broad line of quality stuffed toys, novelties and consumer electronics based on its licenses for popular children's entertainment characters, professional sports team logos and corporate trademarks. The Company also designs, develops and distributes electronic toys and non- licensed stuffed toys, and markets and distributes a broad line of non- licensed novelty items. Play-By-Play has license agreements with major corporations engaged in the children's entertainment character business, including Warner Bros., Paws, Incorporated, Nintendo, and many others, for properties such as Looney Tunes(TM), Batman(TM), Superman(TM), Garfield(TM) and Pokemon(TM). PROLOGIC MANAGEMENT: Can't Pay Debts Coming Due from Operations --------------------------------------------------------------- Prologic Management Systems Inc. provides systems integration services, software development, proprietary software products and related services. The company's securities were delisted from both the NASDAQ Stock Market and the Boston Stock Exchange in August 1998. Delisting resulted from the ompany's failure to maintain the minimum net tangible asset requirement of the NASDAQ Stock Market. Trading of the company's securities may continue to be conducted on the OTC Electronic Bulletin Board or in the non-NASDAQ over-the-counter market. As a result, a holder of the company's securities may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, the company's securities. Net sales for the third quarter of fiscal 2001 were $6,253,906 compared to $8,847,056 for the same period of the prior fiscal year, a decrease of $2,593,150, or approximately 29.3%. The company indicates that the sales decrease was due primarily to an economic downturn that caused clients to delay a significant number of orders during the quarter. Including charges related to the discontinuance of the Great River Systems subsidiary, the company had net loss of $989,604 for the third quarter of fiscal 2000, as compared to a net loss of $484,240 for the same period of the prior fiscal year. Net sales for the fist nine months of fiscal 2000 were $30,297,141 compared to $27,121,131 for the same period of the prior fiscal year, an increase of $3,176,010, or approximately 11.7%. The sales growth was said to be due primarily to continued demand for high-availability integrated systems at the company's BASIS subsidiary, impacted by an economic downturn in the December quarter that caused clients to delay a significant number of orders during that quarter. Including charges related to the discontinuance of the Great River Systems subsidiary, the company had net loss of $696,945 for the first nine months of fiscal 2000, as compared to a net loss of $943,371 for the same period of the prior fiscal year. Historically the company has been unable to generate sufficient internal cash flows to support operations, and has been dependent upon capital reserves and outside capital sources to supplement cash flow. New equity investments, lines of credit and other borrowings, and credit granted by its suppliers have enabled the company to sustain operations over the past several years. The delisting of the company's securities from the NASDAQ Small Cap Market and the subsequent lack of liquidity in the company's securities has materially adversely affected the company's ability to attract equity capital. Additionally, the lack of capital resources has precluded the company from effectively executing its strategic business plan. The ability to raise capital and maintain credit sources is critical to the continued viability of the company. At December 31, 2000, Prologic had current debt obligations, or debt that will become due within twelve months, of approximately $1,892,534, excluding $894,509 of borrowings under its line of credit, the term of which expires on March 31, 2001. It is unlikely that the company will be able to service this debt from funds generated by operations alone. As a result, the company will require additional equity or debt financing to maintain current operations, service current debt, and assure its ability to achieve its plans for current and future expansion and the company will need to either renew the line of credit, replace it with another line of credit with similar borrowing limits, or repay outstanding borrowings by March 31, 2001. No assurance can be given of the company's ability to obtain any or all financing on favorable terms, if at all. In June 2000, Prologic engaged the investment banking firm of Carmichael and Company to assist and advise it in connection with the review of the company's strategic alternatives. In addition to raising capital, possible alternatives include the sale of certain assets, including BASIS, Inc., the company's remaining operating subsidiary. QUEBECOR MEDIA: Appoints Eugene Marquis as New Turnaround CEO ------------------------------------------------------------- The telecommunications industry is currently experiencing difficult market conditions and Vid�otron T�l�com is not immune. Faced with this company's deteriorating financial position, Quebecor Media is forced to take appropriate measures. Consequently, Quebecor Media has decided to refocus the company's activities on sectors that have assured its past success, mainly the provision of high volume telecommunications services to other carriers and large business customers. Vid�otron T�l�com will therefore withdraw from certain activities it had entered in recent years and which have not proven to be economically viable. It remains Quebecor Media's intention to sell this asset when an acceptable offer is received. Eug�ne Marquis, the architect and leader of Vid�otron T�l�com from its creation until 1998, has accepted Quebecor Media's offer to return as head of the company. As Chief Executive Officer, Mr. Marquis's main task will be to implement a turnaround plan and restore Vid�otron T�l�com to an acceptable level of profitability. "Quebecor Media requires its various components to deliver returns that meet market expectations. Telecommunications companies are currently under tremendous pressure due to a definite slowing of the economy, as well as fierce competition. The companies that focus on what they do best will survive these pressures," said Pierre Karl P�ladeau, President and Chief Executive Officer of Quebecor Media. "We have full confidence in the ability of Mr. Marquis to put Vid�otron T�l�com back on track towards profitability that is worthy of companies in the Quebecor group," added Mr. Peladeau. The turnaround plan will result in the elimination of 420 positions between now and August 31, 2001, the end of the company's fiscal year. The eliminations will be effected gradually beginning today. "Vid�otron T�l�com must return to its traditional activities to restore growth and profitability. I am personally convinced that the turnaround plan we are implementing now will produce results quickly for the benefit of the company, its customers and its employees," said Mr. Marquis. Today's actions will maximize the value of Vid�otron T�l�com and Quebecor Media will continue to be open to discussions with those interested in the potential of this company. Quebecor Media Inc. is a subsidiary of Quebecor Inc. (TSE: QBR.A, QBR.B) with operations in Canada, the United States, Chile, France, Spain, Italy and the United Kingdom. It is active in the newspaper sector (Sun Media Corporation), Internet integration technology (Nurun and Mindready), Internet portals (Canoe and Netgraphe), music (Archambault Group), books and magazines, retail video sales (SuperClub Vid�otron), business telecommunications (Vid�otron T�l�com) and remote surveillance (Protectron). Contingent upon CRTC approval and pending a decision in May or June 2001, its Internet access and cable (Vid�otron lt�e) and broadcasting subsidiaries (TVA Group Inc.) are under the control of trustees. SERVICE MERCHANDISE: Seeks Further Extension to Decide on Leases ---------------------------------------------------------------- As previously reported, of Service Merchandise Company, Inc.'s 147 continuing leasehold interests, the Section 365 deadline for assuming or rejecting unexpired leases of non-residential real property has been extended to plan confirmation as to 113 of those interests. Of the remaining 34 unexpired leases for the Go- Forward Stores, upon the objections of various landlords and after a contested hearing, the Court ordered that the deadline for assuming or rejecting the leases be extended to March 31, 2001. In this motion, the Debtors requested for a further extension of the time within which they may assume or reject these 34 unexpired leases until plan confirmation. The Debtors told the Court that, as to nine of these stores, the Debtors have concurrently filed separate motions seeking to assume the underlying leases, and the relief requested is thus only precautionary in the event any such request for lease assumption is denied. Such filing of assumption, the Debtors asserted, indicates their willingness to assume leases under appropriate circumstances. With respect to the other 25 leases, however, the Debtors represent that they are not in a position to make decisions regarding assumption/rejection in light of the variables in the decision making process. These variables, the Debtors said, are related to the market for retail space and the Debtors' financial performance at a particular location. The Debtors told Judge Paine that for the past year, thousands of fee-owned and leasehold properties have been put on the market by retailers that have filed for chapter 11 or that are otherwise restructuring or liquidating their operations. Many of these properties are in the same geographic area and in some cases in the same shopping center as the Debtors' locations and could have a significant impact on the value and marketability of the Debtors' properties. According to the Debtors, all retailers, including Service Merchandise, are dealing with this new, difficult retail environment where billions of dollars of assets have been unexpectedly forced on the market. Thus, the Debtors have modified their previously planned real estate renovation expenditures for 2001 to be more closely aligned with interest in their subleasing program in this market condition. The relative financial performance of the Debtors' individual store, which is also a factor in determining the assumption/rejection of the lease, has changed significantly in light of the recent changes made to the Debtors' operations. Therefore, the Debtors believe it would not be prudent to determine now whether to assume or reject all of the leases with respect to the Objecting Go-Forward Stores where the future relative financial performance of a store remains subject to change as the Debtors' business plan evolves and is further implemented. The Debtors advised the Court that they have remained current on their administrative obligations, including leasehold obligations, throughout the course of their chapter 11 cases. The Debtors also assert that they are often anchor tenants and their continued possession of their premises benefits the landlords. The Debtors concluded that in light of their progress in their chapter 11 cases, the continuing implementation of their strategic real estate initiatives and the lack of prejudice to any affected landlords, it is appropriate to extend the Section 365 Deadline to plan confirmation as to the 34 locations not already subject to that timeframe. Objection By Ramco-Gershenson Properties, L.P. Landlord Ramco-Gershenson Properties, L.P. objected to the Debtors' motion with respect to: Store # Location Mall ------- -------- ---- 531 Sterling Heights, Michigan Clinton Valley Shopping Center 126 Roseville, Michigan Roseville Plaza 533 Novi, Michigan West Oaks I 260 Lakeland, Florida Shoppers of Lakeland Ramco pointed out that the Debtors have requested for the extension not to evaluate the value of its leases, but to evaluate the market which is ever changing, which the Debtors frankly stated in the Motion. This, the landlord said, is a way to shift the burden of adverse market moves to the Landlord and does not constitute "cause" for the requested extension. In refuting the reason cited by the Debtors that they need more time to make sound decision for the assumption/rejection because the leases are valuable assets, Ramco drew the Court's attention to the more than $4,000,000 that the Debtors have spent on determining the value of their leasehold interests over the past two years, based on the amount of $4,129,148 that the Debtors have paid to certain professionals from April 25, 2000 through December 31, 2000. Ramco reminded the Court that the Debtor's previous request for an extension through plan confirmation with respect to the 34 Go- Forward Stores under question was rejected by the Court. Ramco noted that in doing so, the Court acknowledged in its Memorandum dated February 2, 2000 "that an open-ended extension is inconsistent with the spirit and intent of the Code." Ramco criticized the Debtors' filing of the motion as persistence "on seeking further unlawful extensions because it knows that most landlords cannot afford to continue to incur additional substantial expense to preserve the rights provided to them under the Code." Such actions, the landlord said, are done in bad faith and should not be condoned. Ramco-Gershenson drew the Court's attention to the 1984 "Shopping Center" Amendments. Prior to its enactment, the time for the assumption or rejection of all leases of a Chapter 11 debtor was governed by the then Section 365(d)(2), which permitted assumption or rejection "at any time before the confirmation of a plan." The landlord observes that the revision of the Code was a response by Congress to the hardship that the scheme caused to the landlords. The landlord observed that in enacting the 1984 amendments, Congress specifically eliminated the category of non- residential real estate leases from Section 365(d)(2) and placed them in the newly-enacted Sections 365(d)(3) and (d)(4), eliminating a debtor's ability to seek a one time extension through confirmation. About SMCO in particular, Ramco asserted that the lengthy and open-ended extension requested in the Debtors' motion is highly prejudicial to Landlord and its other tenants as it creates uncertainty vis-a-vis the Lease through both the Fall Back-to- School and Christmas seasons. If Debtor were to reject one or more of Landlord's Leases in June of this year, the landlord observed, the store closing could be devastating on the affected center as Landlord would not have sufficient time to find a replacement tenant before the Fall Back-to-School and Christmas season and would be left with a substantial amount of dark square footage in the Shopping Center during these most critical times of the year for retail sales. The landlord concluded that "Cause" simply does not exist for any further extension of the Section 365(d)(4) deadline and the Debtors' motion should be denied. Ramco indicated that it is, however, willing to accommodate Debtor by agreeing to a final extension through May 30, 2001, upon the condition that Debtor be required to operate the premises and pay rent through the extended deadline. Objection By Pompano Plaza, Ltd. Pompano Plaza, Ltd. landlord of the Pompano Plaza Shopping Center, a 145,000 square foot shopping center in Pompano Beach, Florida, told Judge Paine that: (a) uncertainty surrounding the lease prevents financing of renovations; (b) the remaining tenants in the shopping center are threatening to vacate; (c) the center is in violation of the Building Code; and (d) the Debtors' efforts to sublease its excess space are hopeless. While the Debtors asserted that their occupancy benefits landlords, the Pompano landlord believes that it is impossible to obtain financing to renovate the property when its anchor tenant is in bankruptcy, has refused to assume or reject the Lease, and is able to terminate the Lease at any time on 30 days' notice. Pompano told the Court that as landlord it has maintained a renovation plan for the Shopping Center and has remained ready to commence construction. Their architect estimates that such renovation will require financing in excess of $1 million. However, the Shopping Center is subject to a substantial first mortgage and no lender is willing to fund renovations given the uncertainty surrounding SMCO's occupancy. As a result, the Shopping Center is deteriorating and in need of renovation. Two other tenants occupying the Shopping Center, Office Depot, Inc. and Linen Supermarket, Inc. have both threatened to vacate unless necessary repairs are made. Because of deferred maintenance issues, the Shopping Center remains under continuous scrutiny by the city of Pompano Beach, Florida. The city has cited the Shopping Center repeatedly over the past two years for building violations. For example, the building code requires substantial renovation to the center's parking lot. However, if the Lease is rejected, the tenant improvements required to lease the space vacated by SMCO would destroy any parking lot renovations. Therefore, it is pointless to renovate the parking lot in light of the uncertainty of the lease, the landlord told Judge Paine. The Debtors lease 86,000 square feet, of which 31,500 square feet is subleased to Marshalls, Inc. of Pompano, Florida. SMCO has downsized its space to 25,000 square feet and has vacated 30,000 square feet, which remains empty in spite of its inclusion in the Debtors' Strategic Subleasing Program. The landlord notes that the Debtors have not allocated any funds to downsize and to partition and demise the vacant space but there are only temporary partitions separating SMCO's downsized store from the vacant 30,000 square feet of unused space. Like the Debtors, the landlord believes that recent bankruptcies and retail downsizings have increased the competing space on the local market and enhanced the sublease packages being offered. The landlord believes that the Debtors are holding an unrealistic view of the value of the vacant space and will not be able to realize any material value from the space, in a retail market that is fiercely competitive and overbuilt. The Pompano landlord concluded that no "cause" exists for an Additional Extension. In light of the negative impact of the Debtors' continued possession of the lease on the lessor, the landlord asked that the Court compel the Debtors to assume or reject the Lease on or before March 31, 2001. (Service Merchandise Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) SUNSHINE MINING: New Common Stock Trades Under SSMR Symbol ---------------------------------------------------------- Sunshine Mining and Refining Company (OTCBB:SSCFQ) announced that its "new common stock" will begin trading today, March 1, 2001. The symbol for the "new common stock" will be SSMR. The CUSIP number will be 867833-60-0. As previously reported, due to the bankruptcy reorganization, the "old common stock" of Sunshine was cancelled (as are all issues of previously issued warrants). Accounts holding 100 or more shares of "old common stock" will receive the number of shares of "new common stock" equal to 3.52% of the number of "old common" shares owned. Fractional interests will be rounded to the next higher number for each account. (In other words, a holder of 1,000 shares of "old common stock" will receive 36 shares of "new common stock.") No action by holders of "old common stock" is required. Accounts holding fewer than 100 "old common" shares will not receive any "new shares." Sunshine Mining news releases and information can be accessed on the Internet at: www.sunshinemining.com. TRAVELNSTORE.COM: Hires Stonefield Josephson as New Accountant -------------------------------------------------------------- Effective February 15, 2001 TravelnStore.com retained Stonefield Josephson, Inc. to act as the company's independent certified public accountant. In this regard Stonefield replaced Farber & Hass LLP which audited the company's financial statements for the fiscal year ended December 31, 1999 and for the period August 18, 1998 (date of inception) to December 31, 1998. F&H stated in their report to the company's financial statements for the year ended December 31, 1999 and for the period ended December 31, 1998 that, because the company has incurred substantial losses from operations since inception and has a substantial deficit in its working capital and shareholder equity, there is substantial doubt as to the company's ability to continue as a going concern. The change in the company's auditors was approved by the board of directors of the company. The company does not currently have an audit committee. US INTERACTIVE: Nasdaq Delists Equity Securities ------------------------------------------------ U.S. Interactive, Inc. (Nasdaq:USIT) received a Nasdaq Staff Determination indicating that the Company has failed to comply with certain requirements for continued listing of its securities on The Nasdaq Stock Market, including failure to maintain compliance with certain Marketplace Rules such as the market value of the publicly traded shares and the minimum bid price requirement, public interest concerns raised by the Company's Chapter 11 filing, and concerns regarding the residual equity interest of existing stockholders. Nasdaq has informed the Company that the Company's securities will be delisted from the Nasadaq National Market at the opening of business on February 28, 2001. The Company has informed Nasdaq that it believes the filing of the Chapter 11 bankruptcy petition operates as a stay applicable to Nasdaq and any action to delist the Company's securities. The Company has also filed an appeal of the Nasdaq decision. Pending a decision of the appeal, the trading halt in the Company's securities will remain in effect. About U.S. Interactive, Inc. US Interactive(R) (Nasdaq:USIT) is an Internet professional services company that provides customer management solutions to the communications and financial services industries. WESTERN MUTUAL: S&P Junks Insurer's Financial Strength Rating ------------------------------------------------------------- Standard & Poor's lowered its financial strength rating on Western Mutual Insurance Co. (UT) to triple-'Cpi' from double- 'Bpi'. This rating action reflects continued deterioration in the company's claims experience, leading to net losses in 1999 through to the third quarter of 2000. As a result, capital strength has been depleted to a level considered extremely weak. The company, owned by its policyholders, provides accident and health coverage in Utah, Montana, Idaho, and Nevada. Business is principally derived from two sources: Western Petroleum Marketers Association, a trade association servicing the Rocky Mountain region; and Montana Retail Association, a coalition of Montana- based trade associations. The company commenced operations in 1987. Major Rating Factors: -- The company has experienced exceptionally high losses in 1999 and into the third quarter of 2000, in comparison to its surplus level. Losses have amounted to $1.35 million in this period, on a capital base (as of Sept. 30, 2000) of $1.3 million. -- Capitalization has fallen to the very weak level, as indicated by Standard & Poor's capital adequacy ratio, and financial strength is considered limited. -- The company's scope of operation is limited, relying for the majority of its business on Western Petroleum Marketers Association and Montana Retail Association. Ratings with a 'pi' subscript are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. Ratings with a 'pi' subscript are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings. Ratings with a 'pi' subscript generally are not modified with "plus" or "minus" designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said. -- CreditWire. WHEELING-PITTSBURGH: Court Approves Stipulations with Cananwill --------------------------------------------------------------- Wheeling-Pittsburgh Steel Corp. asked for and obtained Judge Bodoh's approval of the Debtors' stipulations with Cananwill, Inc., and WHX Corporation. The Debtors are direct and indirect subsidiaries of WHX, which also owns or controls a number of other operational businesses, including Unimast, Inc., and Handy & Harman. Before the Petition Date, WHX purchased insurance on behalf of itself and its subsidiaries, including the Debtors. In most cases, Wheeling-Pittsburgh Steel Corporation, as the largest of WHX's direct and indirect subsidiaries, was responsible for paying the full premium due in respect of the policies, allocated this premium among itself, WHX, and other of WHX's subsidiaries according to standard insurance practices, and charged the other named insureds under the policies their pro rata share of these premiums through intercompany accounts. On the Petition Date, the Debtors, WHX, and certain of WHX's other subsidiaries were named insureds under the policies of insurance which insure the Debtors against, among other things, damage or loss to property and equipment, and provide the Debtors with additional general liability, automobile, and workers' compensation insurance. Before the Petition Date, WHX entered into two Commercial Insurance Premium Finance and Security Agreements with Cananwill for the purpose of financing the premiums payable in connection with the policies. Cananwill loaned the total sum of $4,549,350.25. Each loan is repayable in equal monthly installments. As of the Petition Date, Cananwill had received five payments aggregating $394,776.80 on one policy, and one payment of $596,444.53 on the other. To secure this loan, WHX granted Cananwill a security interest in all sums payable to the insureds under the policies, including, among other things, any gross unearned premiums and any payment on account of loss which results in a reduction of unearned premium in accordance with the policies' terms. Cananwill can cancel the policies and collect any unearned premiums or other amounts payable under the policies upon an occurrence of an event of default. An event of default occurs, inter alia when an installment payment is not paid to Cananwill in accordance with the terms of the finance agreements, or any other terms of the finance agreements are not met. The Debtors are the primary beneficiaries of the policies. Under the Debtors' current allocation of premiums, WPSC is responsible for 96.5% of the premium for the property policy, and 57% of the premium for the umbrella policy. The Debtors' allocation of the premium for the property policy was calculated on the basis of the insurable value of assets owned by the named insureds by location. The Debtors' allocation of the premium for the umbrella policy was calculated on the basis of sales because third-party liability typically arise out of product claims. As of the Petition Date, Cananwill was owed $3,657,622.54, exclusive of late charges and costs of collection, which sum includes principal and finance charges accrued and to be accrued. The key provisions of the Stipulations are: (a) Upon payment in full of the indebtedness owed to Cananwill, Cananwill waives any claim to late charges and interest on penalties with respect to any payments made in accordance with the Stipulations; (b) Debtors agree to pay to Cananwill the sum of $45,004.56 in one installment on the second business day following the entry of the Stipulations with respect to the first premium agreement, related to its pro rata share of the premium with respect to the umbrella policy; (c) Debtors agree to pay to Cananwill the sum of $3,454,413.82 in an installment of $1,151,137.94 on the second business day following the entry of the Court's order approving the Stipulations, and in equal monthly installments of $575,568.97 on the first day of each month until paid in full, with respect to the second policy, related to its pro rata share of the premium with respect to the property policy; (d) WHX agrees to pay to Cananwill the sum of $33,950.81 in one installment on the second business day following the entry of the Stipulations with respect to the first premium agreement, related to its pro rata share of the premium with respect to the umbrella policy; (e) WHX agrees to pay to Cananwill the sum of $125,253.36 in an installment of $41,751.12 on the second business day following the entry of the Court's order approving the Stipulations, and in equal monthly installments of $20,875.56 on the first day of each month until paid in full, with respect to the second policy, related to its pro rata share of the premium with respect to the property policy. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. 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