T R O U B L E D C O M P A N Y R E P O R T E R Monday, February 18, 2001, Vol. 6, No. 34 Headlines AMC ENTERTAINMENT: Registers 9 Million Shares of Common Stock AMF BOWLING: S&P Ups Rating to B After Emergence from Bankruptcy BANYAN STRATEGIC: Amends CEO Schafran's Employment Contract BURNHAM PACIFIC: Liquidating Distribution Record Date is Feb. 28 COMDISCO INC: Net Loss Narrows to $12 Mill. in December Quarter COMDISCO INC: Exclusive Period Extended through April 15 COMPOSITE SOLUTIONS: Needs More Funds to Continue Operations CONTINENTAL AIRLINES: Vanguard Windsor Holds 8.96% Equity Stake CRESCENT OPERATING: CEI Inks Pact to Fund Prepackaged Bankruptcy CROWN CORK: Reports Losses for Fourth Quarter and Full-Year 2001 DELTA AIR LINES: Vanguard PRIMECAP Holds 8.11% Equity Interest ELEC COMMUNICATIONS: Nasdaq Denies Request for Continued Listing ENRON CORP: Texas Seeks Appointment of Retirees' Committee ENRON CORP: Former Employees Win Place at Bankruptcy Table ENVIRO-RECOVERY: "Concerned Shareholders" Set Special Meeting ENVIRO-RECOVERY: Involuntary Case Summary EXODUS COMMUNICATION: Settles $7.9M Dispute With StorageNetworks FEDERATED DEPT: Shareholders Balk at Fingerhut's Liquidation FLAG TELECOM: Fitch Places Low-B Rating on Watch Negative FUELNATION: Moore Stephens Replaces Sellers as Accountants GLOBAL CROSSING: UST Appoints Unsecured Creditors' Committee GLOBALSTAR L.P.: Files for Chapter 11 Reorganization in Delaware GLOBALSTAR L.P.: Case Summary & Largest Unsecured Creditors GLOBIX CORP.: Filing For Chapter 11 With Prepack Plan This Week GLOBIX CORP: EBITDA Loss Slides-Down to $11 Million in Q1 2002 HA-LO INDUSTRIES: Seeks Okay to Hire Arthur Andersen as Auditors HARBISON-WALKER: Chapter 11 Case Summary HARBISON-WALKER: TRO Halts Asbestos Claims against Halliburton INTERACTIVE NETWORK: Shareholders to Convene on March 21 in L.A. IT GROUP: Bringing-In Zolfo Cooper As Bankruptcy Consultant INTEGRATED HEALTH: Court Confirms Rotech Plan Of Reorganization INT'L FIBERCOM: Files for Chapter 11 Protection in Arizona INT'L FIBERCOM: Case Summary & 20 Largest Unsecured Creditors KAISER ALUMINUM: Blocking Enforcement of Senior Debt Guarantees KAISER ALUMINUM: S&P Drops Ratings to D After Chapter 11 Filing KC ACQUISITION: Fails to Pay $1.7 Million Security Assoc. Debt KMART CORPORATION: Paying Pre-Petition Foreign Vendor Claims LUBY'S INC.: Dimensional Fund Reports 7% Equity Stake MAGNUM HUNTER: Special Stockholders' Meeting Set For March 13 MARINER POST-ACUTE: Confirmation Hearing Set for March 25, 2002 MCLEODUSA INC: Taps Houlihan Lokey as Financial Advisor MEDICALOGIC: Bankruptcy Filing Prompts Nasdaq Delisting NATIONSRENT INC: Committee Retains Bayard Firm as Co-Counsel OPEN PLAN: Royce and Associates Discloses 9.99% Equity Stake PINNACLE ENTERTAINMENT: S&P Ratchets Ratings Down One Notch POLYPORE: S&P Assigns B+ Rating to New $160 Million Term Loan PSINET INC: Selling Foliofn Securities For $1.5 Million Cash ROADHOUSE GRILL: Asks Court to Dismiss Involuntary Petition SOFTWARE LOGISTICS: Synnex Overbids Zomax by $4MM & Wins Assets SPALDING HOLDINGS: S&P Drops Rating to D After Missing Payment SUN HEALTHCARE: Reorganized Debtors' Board of Directors TOWER AUTOMOTIVE: American Express Discloses 5.3% Equity Stake TREESOURCE INDUSTRIES: Will Go Private After Bankruptcy Exit WHX CORPORATION: Using Wheeling Downs Sale Proceeds To Cut Debts WILLIAMS CONTROLS: David S. Eberly Joins Board of Directors XO COMMS: Posts Lower EBITDA Losses in 2001 Fourth Quarter * PENTA Advisory Services Hires Claybrook to Lead New DE Office * BOND PRICING: For the week of February 18 - 22, 2002 ********* AMC ENTERTAINMENT: Registers 9 Million Shares of Common Stock ------------------------------------------------------------- AMC Entertainment Inc. is selling 9,000,000 shares of its common stock. The Company has granted the underwriters an option to purchase up to 1,350,000 additional shares of common stock to cover over-allotments. AMC's common stock is listed on the American Stock Exchange under the symbol "AEN." The last reported sale price of the common stock on the American Stock Exchange on January 29, 2002, was $11.25 per share. AMC's common stock has one vote per share. Its Class B Stock has ten votes per share. Holders of its common stock generally vote as a class with holders of its Class B Stock and holders of its Series A Convertible Preferred Stock (other than the original purchasers of its Series A Convertible Preferred Stock and their affiliates) on an as converted basis, on all matters other than the election of directors. Holders of AMC's common stock generally have the right to elect two of the eight members of the Board of Directors. AMC is the largest movie exhibitor in the U.S. based on revenueand the second-largest based on screen count. It has one of theindustry's most modern theater circuits due to its rapidexpansion and consistent disposition activity since 1995. At September 27, 2001, the company reported a working capital deficit of over $93 million. AMF BOWLING: S&P Ups Rating to B After Emergence from Bankruptcy ---------------------------------------------------------------- Standard & Poor's raised its corporate credit rating on bowling center operator AMF Bowling Worldwide Inc. to single-'B' from 'D' following the approval of Richmond, Virginia-based AMF Bowling's bankruptcy reorganization and proposed new capital structure. Standard & Poor's also said it was assigning its single-'B' bank loan rating to the company's proposed $350 million senior secured bank facility, and that all previous issue ratings on the company have been withdrawn. The new issue consists of a $75 million revolving credit facility due in 2007 and a $275 million term loan due in 2008. The current outlook is stable. The new funding should be finalized when the company completes its bankruptcy reorganization within the next six weeks. The loan facility is expected to be used to help fund cash distributions required under the company's reorganization plan and to fund the operating company's working capital and letter of credit needs. Standard & Poor's credit analyst Alyse Michaelson said "Standard & Poor's ratings incorporate the expectation that the company's management will moderate its financial policies, and that the company will generate sufficient cash flow to manage its capital structure and gradually improve financial flexibility over the near term." AMF is the world's largest owner and operator of retail bowling centers in a highly fragmented industry. The company is also one of the two major manufacturers of bowling equipment, which is sold to independent operators. Standard & Poor's said that its ratings reflect AMF's strong position in the bowling center and equipment industries, a degree of business diversity, and the company's significantly reduced debt burden and amortization requirements following the recapitalization. These factors are offset by the secular decline in the U.S. bowling center industry and considerable contraction in demand for bowling products that could hamper cash flow growth and improvement in key credit ratios over the near term. DebtTraders reports that AMF Bowling Worldwide's 12.250% bonds due 2006 (AMBW2) are trading between 2.5 and 3.5. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AMBW2for real-time bond pricing. BANYAN STRATEGIC: Amends CEO Schafran's Employment Contract ----------------------------------------------------------- Banyan Strategic Realty Trust (Nasdaq: BSRTS) executed an amendment to the employment contract between the Trust and L.G. Schafran, the Trust's Chairman, Interim President and Chief Executive Officer. The original contract expired on February 13, 2002. The Term of the amendment is from February 13, 2002 until the final liquidation and dissolution of the Trust in accordance with the Plan of Termination and Liquidation, adopted January 5, 2001. Under the terms of the amendment, Schafran will no longer be paid an annual salary, but will instead bill the Trust on an hourly basis for services rendered at the rate of $300.00 per hour. His reasonable business expenses (including health insurance premiums) will also be reimbursed. Mr. Schafran will continue to serve as Chairman of the Board of Trustees in addition to Interim President and CEO. Under the terms of the Trust's declaration, Mr. Schafran, as an officer, is deemed not to be an independent trustee and is not entitled to any compensation for serving as a trustee. The Trust's board remains comprised of three independent trustees and Mr. Schafran. In other news, the Trust announced that at the annual meeting of shareholders held on January 30, 2002, current trustees Walter E. Auch, Sr., Daniel Levinson, Steven Peck and L.G. Schafran were re-elected to an additional term. Following the annual meeting, the Trust's board of trustees approved terminating the Trust's Stock Option Program. Under the Program, each independent trustee is granted options to purchase 2,000 shares of the Trust's shares of beneficial interest ten days following his or her re-election as a trustee. In connection with terminating the Program, each trustee surrendered any unexercised vested options, which were granted under the Program in consideration for a cash payment equal to the surrender value of the options. As a result, Mr. Auch received $5,375.00 in exchange for his vested options; Mr. Levinson received $2,125.00, Mr. Peck received $2,125.00 and Mr. Schafran (who had received options under the Program prior to his appointment as Chief Executive Officer and Interim President) received $1,125.00. Banyan Strategic Realty Trust is an equity Real Estate Investment Trust (REIT) which, on January 5, 2001, adopted a Plan of Termination and Liquidation. On May 17, 2001, the Trust sold approximately 85% of its portfolio in a single transaction and now owns interests in three (3) real estate properties located in Atlanta, Georgia; Huntsville, Alabama; and Louisville, Kentucky. As of this date the Trust has 15,496,806 shares of beneficial interest outstanding. BURNHAM PACIFIC: Liquidating Distribution Record Date is Feb. 28 ---------------------------------------------------------------- Burnham Pacific Properties, Inc. (NYSE: BPP) announced that its Board of Directors has fixed the close of business on February 28, 2002 as the record date for determining stockholders entitled to receive a liquidating distribution out of proceeds from the pending sale of two of the Company's California retail assets to Developers Diversified Realty Corporation (DDR), which is tentatively scheduled to close not later than February 28, 2002. Under the purchase agreement with DDR, the two assets are expected to be sold for an aggregate of approximately $65.4 million, of which at least $15.1 million is to be paid in cash. At DDR's option, any or all of the remaining balance may be paid in cash or, subject to certain conditions, by the issuance of DDR common shares to the Company. The specific amount and form (i.e., cash and/or DDR common shares) of the liquidating distribution, as well as its payment date, will be announced by the Company in a subsequent press release to be issued only when and if the sale of the assets to DDR is consummated. There can be no assurance that the closing of the transaction with DDR will occur on its current terms, when currently anticipated, or at all. As a result, there can be no assurance as to the amount or form of the liquidating distribution, the timing thereof, or that the liquidating distribution will be made at all. Because the liquidating distribution is conditioned on the closing of the transaction with DDR, the NYSE has informed the Company that normal "ex-dividend" procedures will be deferred and due-bills will be used. As a result, a seller of Burnham's common stock during the period beginning on the second business day prior to the record date until a subsequent "ex-dividend" date established by the NYSE will be required to assign the right to the liquidating distribution to the purchaser of such shares. Investors are encouraged to consult their brokers for more information regarding these procedures. The announcement of this conditional liquidating distribution and the NYSE's modified procedures will have no effect on the Company's previously announced liquidating distribution of cash in the amount of $0.45 per common share, which is payable on February 22, 2002 to stockholders of record as of the close of business on February 14, 2002. Under the purchase agreement with DDR, DDR has agreed to purchase the Company's owned portion of 1000 Van Ness, which is a mixed-use property in downtown San Francisco containing 123,000 square feet of gross leaseable area. DDR has also agreed to purchase Hilltop Plaza Shopping Center, a 245,000 square foot open-air community shopping center, located along Interstate 80 in Richmond, California. Burnham Pacific Properties, Inc. is a real estate investment trust (REIT) that focuses on retail real estate. More information on Burnham may be obtained by visiting the Company's Web site at http://www.burnhampacific.com COMDISCO INC: Net Loss Narrows to $12 Mill. in December Quarter --------------------------------------------------------------- Comdisco, Inc., (NYSE:CDO) reported operating results for its fiscal first quarter ended December 31, 2001. Operating Results For the fiscal first quarter, Comdisco reported a loss from continuing operations of $216 million as compared with earnings of $86 million, for the year earlier period. These results exclude Comdisco's Availability Solutions business, which has been recorded as a discontinued operation following the sale of the business to SunGard (NYSE:SDS) on November 15, 2001. The decrease in fiscal 2002 compared to the first quarter of fiscal 2001 was primarily the result of losses from Comdisco Ventures and a pretax charge of $250 million ($189 million after-tax or $1.25 per common share) to reduce cost in excess of fair value related to the sale of the company's Electronics and Laboratory and Scientific assets. Net earnings from discontinued operations was $204 million, or $1.36 per common share, for the three months ended December 31, 2001 compared to $0 million in the year earlier period. Approximately $199 million (or $1.32 per share) of the net earnings within discontinued operations for the current year period relates to the gain on the sale of the Availability Solutions business. Overall, the company had a net loss for the first quarter of $12 million, compared to net earnings of $88 million for the prior year period. Total revenue for the three months ended December 31, 2001, was $496 million, compared to $788 million for the prior year quarter. The decrease in total revenue in the current year compared to the year earlier period is due to lower revenues from the sale of equity securities in Comdisco Ventures' portfolio, and lower leasing and remarketing revenues. Leasing Sales Evaluation Process On January 25, 2002, Comdisco announced that the U.S. Bankruptcy Court for the Northern District of Illinois approved the sale of the company's Electronics and Laboratory & Scientific Leasing businesses to GE Capital's Commercial Equipment Financing unit. Under the terms of the agreement, GE Capital Equipment Financing will pay Comdisco approximately $665 million, plus future contingent payments based on portfolio performance. The consideration includes the assumption of approximately $250 million of related secured debt. The sales are expected to close no later than March 31, 2002. Not including proceeds from this sale, Comdisco's cash position as of February 14, 2002 was approximately $1.8 billion. On February 5, 2002, the company announced it had completed the Bankruptcy Court supervised sales evaluation process for its remaining leasing businesses--North American IT Leasing, Telecommunications and Healthcare--without completing a transaction and intends to retain those businesses. The company said it would now focus on its plan of reorganization. Comdisco, Inc. and 50 domestic U.S. subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Illinois on July 16, 2001. The filing allows the company to provide for an orderly sale of some of its businesses, while resolving short-term liquidity issues and enabling the company to reorganize on a sound financial basis to support its continuing businesses. Comdisco's operations located outside of the United States were not included in the Chapter 11 reorganization cases. All of Comdisco's businesses, including those that filed for Chapter 11, are conducting normal operations. The company has targeted emergence from Chapter 11 during the first half of 2002. Comdisco -- http://www.comdisco.com-- provides technology services worldwide to help its customers maximize technology functionality, while freeing them from the complexity of managing their technology. The Rosemont (IL) company offers leasing to key vertical industries, including semiconductor manufacturing and electronic assembly, healthcare, telecommunications, pharmaceutical, and biotechnology. Through its Ventures division, Comdisco provides equipment leasing and other financing and services to venture capital backed companies. COMDISCO INC: Exclusive Period Extended through April 15 -------------------------------------------------------- Comdisco, Inc., (NYSE:CDO) announced that the U.S. Bankruptcy Court for the Northern District of Illinois approved the company's request for an extension of the exclusive periods during which only Comdisco may file a plan of reorganization and solicit acceptances for that plan. These periods, which had been scheduled to expire on March 15, 2002, and May 15, 2002, have now been extended to April 15, 2002 and June 15, 2002, respectively. The company announced on February 5, 2002, that it had completed the U.S. Bankruptcy Court-supervised sales evaluation process for its remaining leasing businesses--North American Information Technology (IT) Leasing, Telecommunications and Healthcare-- without completing a transaction and that it intends to retain those businesses. Comdisco said that it would now focus on filing its plan of reorganization. Comdisco also announced that the Court has approved the sale of substantially all of the Company's North American IT CAP (Information Technology Control and Predictability) Services contracts to Lisle-IL based T-Systems, Inc. The sale is expected to close no later than February 28, 2002. T-Systems plans to offer employment to about 30, or substantially all, of Comdisco's North American IT CAP employees. Comdisco, Inc., and 50 domestic U.S. subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Illinois on July 16, 2001. The filing allows the company to provide for an orderly sale of some of its businesses, while resolving short-term liquidity issues and enabling the company to reorganize on a sound financial basis to support its continuing businesses. Comdisco's operations located outside of the United States were not included in the Chapter 11 reorganization cases. All of Comdisco's businesses, including those that filed for Chapter 11, are conducting normal operations. The company has targeted emergence from Chapter 11 during the first half of 2002. Comdisco -- http://www.comdisco.com-- provides technology services worldwide to help its customers maximize technology functionality, while freeing them from the complexity of managing their technology. The Rosemont (IL) company offers leasing to key vertical industries, including semiconductor manufacturing and electronic assembly, healthcare, telecommunications, pharmaceutical, and biotechnology. Through its Ventures division, Comdisco provides equipment leasing and other financing and services to venture capital backed companies. COMPOSITE SOLUTIONS: Needs More Funds to Continue Operations ------------------------------------------------------------ Composite Solutions Inc., formerly JS Business Works, Inc., was incorporated in the state of Florida on October 20, 1997. The Company has two wholly owned subsidiaries: Composite Solutions Inc., incorporated in the state of Nevada on December 8, 1998, and Trans-Science Corporation, incorporated in the state of California on September 15, 1980. During the period August 16, 2000 to March 31, 2001, the company had another wholly owned subsidiary, Penultimo, Inc. dba Anchor Reinforcements which was incorporated in the state of California on January 13, 1992. Composite Solutions Inc. and subsidiaries were organized to develop, manufacture and market high technology products and processes to be utilized in key areas of existing and new construction. The Company is in the development stage and its efforts through September 30, 2001 have been principally devoted to raising additional capital and negotiating with potential key personnel and leasing facilities. There is no assurance that any benefit will result from such activities. The Company will continue to incur expenses and losses as it pursues its development efforts. The Company's financial position and operating results raise substantial doubt about its ability to continue as a going concern, as reflected by the net loss of $1,367,322 for the year ended September 30, 2001 and losses of $3,045,080 accumulated from October 20, 1997 (Inception) to September 30, 2001. In addition the Company's current liabilities exceeds current assets by $1,035,403 at September 30, 2001. The ability of the Company to continue as a going concern is dependent upon commencing operations, developing sales and obtaining additional capital and financing. CONTINENTAL AIRLINES: Vanguard Windsor Holds 8.96% Equity Stake ---------------------------------------------------------------- Vanguard Windsor Funds-Windsor Fund beneficially owns 8.96% of the outstanding common stock of Continental Airlines. The Funds hold sole power to vote, and shared power to dispose of the 4,964,700 shares beneficially held. Continental breakfast? It's available on Continental Airlines, which serves more than 135 US cities and more than 95 cities. The #5 US carrier (trailing United, American, Delta, and Northwest) has hubs in Cleveland, Houston, and Newark, New Jersey. Continental Micronesia serves the western Pacific from Guam, and regional carrier Continental Express serves 70 US cities. Continental code-shares with airlines such as Air France, Alitalia, and Virgin Atlantic. It has a major alliance with Northwest Airlines, which includes code-sharing as well as shared frequent-flyer programs. In the wake of terrorist attacks in Sept. 2001, the airline is paring down flights and laying off more than 21% of its workforce. CRESCENT OPERATING: CEI Inks Pact to Fund Prepackaged Bankruptcy ---------------------------------------------------------------- Crescent Operating, Inc. (OTCBB: COPI.OB) has executed an agreement with Crescent Real Estate Equities Company (NYSE:CEI), which provides, among other things, the basis for Crescent Operating to file a prepackaged bankruptcy plan that the Company believes will provide for a limited recovery to its stockholders. In summary, the Agreement provides the following: -- CEI will assist and provide funding to Crescent Operating for the implementation of a prepackaged bankruptcy of Crescent Operating, which funding is expected to provide for the settlement or satisfaction of all of the Company's known creditors. -- Crescent Operating will immediately transfer to CEI assets related to its hospitality business and will permit CEI to foreclose on the Company's equity interests in its residential land development and related entities. In connection with the transfer and foreclosure, CEI will cancel and extinguish indebtedness and lease obligations aggregating approximately $63.7 million. -- The Agreement provides for the issuance of CEI common shares to Crescent Operating stockholders, following confirmation of Crescent Operating's bankruptcy plan. CEI has agreed to provide approximately $14.0 million to Crescent Operating in the form of cash and common shares of CEI to fund costs, claims and expenses relating to the bankruptcy and related transactions, and to provide for the distribution of CEI common shares to the Crescent Operating stockholders. As part of the bankruptcy, it is expected that the balance of the indebtedness and lease obligations of Crescent Operating to CEI will be canceled. The number of CEI common shares to be issued to the Company stockholders will be based upon the aggregate claims, costs and expenses incurred by CEI and Crescent Operating in connection with the Company's bankruptcy and related transactions. The Company anticipates that the value of the CEI common shares issued (which is part of the $14.0 million consideration previously mentioned) will be approximately $5.0 to $8.0 million, or approximately $0.46 to $0.74 per share of Crescent Operating common stock. The final amount, which will not be determined until the confirmation of Crescent Operating's bankruptcy plan, could vary substantially from this estimate. -- The Agreement calls for the proposed bankruptcy plan to be submitted to the Company's stockholders for approval. CEI will not be obligated to issue its shares to the Company's stockholders unless the holders of two-thirds of the shares that are voted at the meeting approve the bankruptcy plan. The Company is not required, however, to have stockholder approval to file for bankruptcy protection, and will do so whether or not approval is obtained. The Company believes that if it is required to file for bankruptcy protection without the prior stockholder approval of the bankruptcy plan, the stockholders will receive nothing in the bankruptcy, as the Company's debts far exceed its assets, and its creditors, including CEI, will not be paid in full. -- Crescent Operating will further agree to sell its interest in the tenant of the AmeriCold temperature controlled logistics properties to a new entity that will be owned by the CEI shareholders. The proceeds of the sale are to be applied by the Company to the repayment of the Company's $15 million obligation to Bank of America. Prior to execution of the Settlement Agreement, all of the members of the board of directors other than Jeffrey L. Stevens resigned from the board of directors, and John Goff resigned as president and chief executive officer due to the conflict of interest between CEI and Crescent Operating. Jeffrey L. Stevens will assume that position through completion of the bankruptcy proceedings. Important Information Crescent Operating filed a preliminary proxy statement with the Securities and Exchange Commission on February 14, 2002 in connection with the proposals to be voted upon at a Special Meeting of Stockholders of Crescent Operating to be held as soon as practicable. In connection with the proposed transaction, CEI will file an exchange offer prospectus and a registration statement with the Commission. It is anticipated that the definitive joint proxy statement/prospectus will be mailed in April 2002 to each Crescent Operating stockholder of record on the record date, subject to clearance from the Commission. Crescent Operating and CEI and their respective officers and directors may be considered participants in the solicitation of proxies in favor of the proposal to be voted upon at the Special Meeting. Information regarding their positions and security holdings is available in the public filings of Crescent Operating and CEI, which are available at the Commission's web site at http://www.sec.gov Stockholders of Crescent Operating may obtain additional information regarding the interests of the participants and additional information by reading the definitive joint proxy statement/prospectus when it becomes available. Investors and stockholders may obtain a free copy of the exchange offer prospectus, the proxy statement and related documents from the Commission's web site at http://www.sec.gov. Free copies of these documents may also be obtained from CEI by directing a request to Crescent Real Estate Equities Company, Investor Relations, 777 Main Street, Suite 2100, Fort Worth, Texas 76102, (817) 321-1412 or from Crescent Operating by directing a request to Crescent Operating, Inc., Investor Relations, 777 Taylor Street, Suite 1050, Fort Worth, Texas 76102, (817) 339-2200. CROWN CORK: Reports Losses for Fourth Quarter and Full-Year 2001 ---------------------------------------------------------------- Crown Cork & Seal Company, Inc. (NYSE: CCK) announced its results for the fourth quarter and year ended December 31, 2001. Net sales of $7.2 billion for 2001 and $1.7 billion for the fourth quarter were 1.4% below and 1.8% higher, respectively, compared to prior year same period results. Excluding negative foreign currency translation effects of $147 million, net sales would have been slightly higher in 2001 compared to 2000. Operating income continued to be affected by depressed pricing across many product lines. Despite improved volumes across most major product lines, fourth quarter operating income in 2001, before charges, was also affected by the following factors compared to the prior year: (i) the write-off of $8 million of working capital associated with the closure of seven plants in the U.S. and Europe, (ii) negative variances of $25 million on lower overall production activity as the Company reduced inventories by $426 million, or 33% from year-end 2000 levels, and (iii) a liquidation of LIFO inventory layers carried at higher costs which prevailed in prior years, the effect of which was to increase cost of products sold by $10 million. In 2001, cash flow from operations was $426 million before capital expenditures of $168 million and asbestos-related payments of $118 million. The improvement in cash flow from operations of $60 million compared to 2000 is primarily due to the previously announced working capital reduction initiative. Interest expense for the year was $455 million and $104 million in the fourth quarter, increases of $62 million and $2 million, respectively, over the prior year periods. The increases reflect higher average borrowing rates and debt outstanding during the year. Year-end net debt, net of cash of $456 million, was $4,869 million at December 31, 2001 compared to $4,967 million at December 31, 2000, net of $382 million of cash. Outstanding receivable securitizations were $110 million and $162 million at December 31, 2001 and 2000, respectively. John W. Conway, Chairman and Chief Executive Officer, commented, "In 2001, we made significant progress restructuring and streamlining operations; we brought down inventories, lowered our working capital requirements and have taken actions to reduce excess capacity. Late in the year, we also experienced a more rational pricing environment. Looking ahead, the Company is focused on continuing to increase our operating efficiencies and delevering. We expect to benefit from the improving pricing levels in 2002. However, we also anticipate those gains to be partially offset by lower non- cash pension income." Additional Charges As previously announced, the Company, in the fourth quarter, recorded $211 million and $47 million, respectively, related to the pending divestitures of certain interests in Africa and the closure of seven plants in the U.S. and Europe. Consistent with Statement of Financial Accounting Standards Board Opinion 109 ("SFAS 109"), the Company also took a charge of $510 million or $4.06 per share, during the fourth quarter, to record an increase in the valuation allowance for net U.S. deferred tax assets. The Company has net operating loss carryforwards for tax purposes ("NOLs") and other deferred tax benefits that are available to offset future taxable income. Only a portion of the NOLs and deferred tax benefits are attributable to operating activities with the remainder being attributable to U.S. tax deductions related to asbestos-related payments and pension fund contributions. When viewed in the context of the applicable accounting literature the losses generated for U.S. tax purposes the last several years and the lack of projected U.S. taxable income in the next two years, requires the Company to offset the loss carryforward by a valuation allowance. After the charge, at December 31, 2001, the Company's net U.S. deferred tax assets have now been fully offset by a valuation allowance. In accordance with SFAS 109, the Company will continue to assess the valuation allowance and, to the extent it is determined that such allowance is no longer required, the tax benefit of these net deferred tax assets will be recognized to income in the future. In the fourth quarter, the Company recorded a net charge of $51 million ($0.41 per diluted share) to increase its asbestos reserve. In the quarter, the asbestos reserves were adjusted because the year-old report of the Company's independent medical demographic expert was updated to reflect 2001 data, and the Commonwealth of Pennsylvania enacted legislation to limit asbestos liabilities of a Pennsylvania corporation that were inherited in a merger. Based on the independent report, the Company's own review and the views of counsel concerning the possible effects of the legislation, the Company estimates that its asbestos liability for pending and future asbestos claims will range between $340 million to $580 million. The charge of $51 million increases the Company's reserve to the low end of this range. Review by Major Division The Americas Division generated net sales of $853 million in the fourth quarter and $3,666 million in 2001 compared to $850 million and $3,742 million in the same prior year periods. Throughout the Division, beverage can unit volumes increased 4.0% and 2.6% for the fourth quarter and full year, respectively. Demand in North America was strong for the year 2001 with the Company shipping 21.8 billion cans, up 2% from the 21.4 billion cans shipped in 2000. In the seasonally slow fourth quarter, North American beverage can shipments were up 5.4% over the 2000 fourth quarter. Food can shipments in North America were up 12.7% while aerosol can volumes were off 2.7% compared to the prior year fourth quarter. Sales unit volumes continued to be strong throughout the Divisions' plastics operations. Single-serve PET beverage bottle volumes increased 8.3% in the fourth quarter and 6.9% for the year while custom PET bottles and beverage and specialty closures all reported double-digit volume growth in the fourth quarter and for the year. The European Division generated net sales of $733 million in the fourth quarter and $3,200 million for the year compared to $713 million and $3,239 million for the respective 2000 periods. Unfavorable currency translation reduced net sales by $112 million in 2001 compared to 2000. Excluding the impact of currency translation, net sales increased 2.3% for the full year compared to 2000 and were level in the fourth quarter. Demand for all major product groups remained strong throughout the Division. Food can unit volumes, up 4.9% in the fourth quarter and 2.3% for the year, benefited from strong performances in Central and Eastern Europe, Greece and West Africa. Beverage can unit volumes were up 7.1% in the fourth quarter and 3.9% overall for the year with gains reported throughout most operations, most notably Spain. Aerosol can shipments, up 2.2% over last year's fourth quarter and 4.5% for the year, continued to benefit from strong performances throughout all operations. The plastics sector had a very strong 2001 with volume growth reported across most operations, including PET preforms and bottles and the entire health and beauty care packaging business. The Asia-Pacific Division generated net sales and operating income of $321 million and $27 million, respectively, in 2001, compared to $308 million and $22 million, respectively, in 2000. Operating income improved to 8.4% of net sales for the year as sales unit volumes were up in each major product category. Beverage can sales unit volume growth was reported throughout the Division with strong performances in Southeast Asia. Increased unit volume shipments of food cans and plastic beverage closures were also noted throughout the Division. Conference Call Replay The Company held a conference call on February 14, 2002 to discuss earnings. A replay of the conference call is available for a one-week period ending at midnight on Thursday, February 21. The telephone numbers for the replay are (402) 998-0482 or toll free (800) 759-4661 and the access code is 4846. Crown Cork & Seal is a leading supplier of packaging products to consumer marketing companies around the world. World headquarters are located in Philadelphia, Pennsylvania. DebtTraders reports that Crown Cork & Seal's 8.375% bonds due 2005 (CCK7) are trading between 61 and 63. See http://www.debttraders.com/price.cfm?dt_sec_ticker=CCK7for real-time bond pricing. DELTA AIR LINES: Vanguard PRIMECAP Holds 8.11% Equity Interest -------------------------------------------------------------- Vanguard PRIMECAP Fund owns 8.11% of Delta Air Lines, Inc. by virtue of the beneficial ownership of 9,990,800 shares of Delta's common stock. The fund holds sole power to vote or direct the voting of the shares. The Fund is a business trust organized under the laws of the Commonwealth of Delaware. Delta Air Lines, the #3 US carrier (behind UAL's United and AMR's American), is expanding its US regional operations while building a global alliance. With hubs in Atlanta, Dallas/Fort Worth, Cincinnati, New York City (Kennedy), and Salt Lake City, Delta flies to 205 US cities and about 45 foreign destinations. It also serves more than 220 US cities and nearly 120 destinations abroad through code-sharing agreements. In the US, Delta owns regional carriers Delta Express, Atlantic Southeast, and COMAIR. Internationally, it has formed the SkyTeam alliance with Air France, AeroMexico, and Korean Air Lines to compete with rival alliances Star and Oneworld. Delta also owns 40% of computer reservation service WORLDSPAN. As reported in the September 25, 2001, edition of the Troubled Company Reported, Standard & Poor's lowered its corporate credit, senior secured debt and senior unsecured debt ratings on Delta Air Lines Inc., to the low-B level, and were placed on CreditWatch with negative implications. The downgrades, S&P said, reflected the severe impact of sharply reduced air traffic since the September 11 terrorist attacks in New York City and Washington, D.C., with expectations for only a slow recovery in the coming months. This worsens significantly an already grim airline industry outlook, with depressed business travel and higher labor costs. The extent of the downgrades was determined principally by: * The risk of a downward rating action prior to the current crisis, and thus how much credit "cushion" was available within those ratings; * The cash and bank lines available to Delta Air Lines Inc., as well as the amount of owned, unsecured aircraft that could be used in secured debt or sale-leasebacks to raise further funds; and * The ability of Delta Air Lines to reduce cash operating expenses and commitments for capital spending. DebtTraders reports that Delta Air Lines' 9.750% bonds due 2021 (DELAIR4) are trading between 87.5 and 90. See http://www.debttraders.com/price.cfm?dt_sec_ticker=DELAIR4for real-time bond pricing. ELEC COMMUNICATIONS: Nasdaq Denies Request for Continued Listing ---------------------------------------------------------------- eLEC Communications Corp. (Nasdaq:ELEC) received notice from Nasdaq Stock Market, Inc. indicating that pursuant to the January 31, 2002 oral hearing before a Nasdaq Listing Qualifications Panel, a determination has been made to deny eLEC's request for continued inclusion on The Nasdaq SmallCap Market. The company fails to comply with the net tangible assets/shareholders' equity/market capitalization/net income requirement, as set forth in Marketplace Rule 4310(c)(2). The company will meet the eligibility criteria to have its common stock quoted on the OTC Bulletin Board (OTCBB). The OTCBB is a regulated quotation service that displays real-time quotes, last-sale prices and volume information in over-the-counter securities. Information regarding the OTCBB can be found on the Internet at http://www.otcbb.com eLEC Communications Corp. is a competitive local exchange carrier that is taking advantage of the convergence of the current and future competitive technological and regulatory developments in the Internet and telecommunications markets. eLEC provides an integrated suite of communications services to small and medium-sized business customers, including local phone service, long distance, dial-up access, dedicated access, xDSL, and Web site design and hosting. For further information, visit the eLEC Web site at http://www.elec.net ENRON CORP: Texas Seeks Appointment of Retirees' Committee ---------------------------------------------------------- The Office of the Attorney General of the State of Texas, on behalf of Texas state agency creditors, asks Judge Gonzalez to appoint an Official Committee of Former and Retired Employees. Jeffrey S. Boyd, Deputy Attorney General for Litigation, recounts that Enron Corporation fired about 4,400 of its 7,500 employees in Houston, Texas shortly after the Petition Date. "Many of these employees lost not only their jobs but also their life savings in 401(k) retirement plans due to the erosion in value of Enron stock resulting from the accelerated financial collapse of its corporate empire," Mr. Boyd relates. As of January 25, 2002, Mr. Boyd informs Judge Gonzalez that the Texas Workforce Commission -- a state agency charged with the responsibility for administering Texas' unemployment law -- processed 3,153 claims from former Enron employees for state unemployment benefits. The Commission expects more claims to be filed. Early this year, Mr. Boyd says, the Attorney General of Texas wrote United States Trustee Carolyn Schwartz for the Southern District of New York to express the State's concern about the apparent absence of representation in Enron's bankruptcy case for the Debtors' recently discharged employees -- almost all of whom reside in the Houston area. The U.S. Trustee is still considering the request. But in the event that the U.S. Trustee decides not to appoint a committee, Mr. Boyd says, the Court will still be able to address the issue. But if the U.S. Trustee grants the request, Mr. Boyd says, the Office of the Texas Attorney General will promptly withdraw this motion. According to Mr. Boyd, the Official Creditors' Committee cannot properly represent the thousands of former employees as well as the thousands of retirees because their interests vastly differ. Though there is one representative unconnected to a well funded financial institution, Mr. Michael P. Moran -- a former general counsel of certain of the Debtor entities -- Mr. Boyd points out that Mr. Moran can be easily outnumbered. The 15-member Creditors' Committee is dominated by institutional lenders, Mr. Boyd observes. With Enron's recent history of terminating employees, Mr. Boyd says, it is not unlikely that the Debtor's representatives may next seek to decrease expenses by terminating or modifying the Debtor's pre-petition retiree benefits plan. Thus, the Attorney General of Texas asserts that an additional Committee of Former and Retired Employees must immediately be put in place. (Enron Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON CORP: Former Employees Win Place at Bankruptcy Table ---------------------------------------------------------- U.S. Trustee Carolyn Schwartz has informed attorneys for the Severed Enron Employees Coalition (SEEC) that she has decided to appoint an "official committee to focus on the issues relating to (Enron) employees." Her decision comes just 16 days after SEEC formally requested the appointment of such a committee. "What can I say? We're thrilled," says bankruptcy attorney Scott Baena, who filed the first motion calling for the appointment of an official Employees' Committee. At the time, Mr. Baena said, "These Chapter 11 cases have the potential to tear the fabric of the nation's employee retirement system. Undoubtedly, and by no choice of their own, the severed employees are at the forefront of a battle likely to rage in the courts and in Congress for a long time. The Severed Employees are entitled to full and complete representation in every forum where their fate is being decided." Currently, there is a single former employee on a 15-member Official Committee of Unsecured Creditors. The remainder of the committee is comprised of five banks, three indenture trustees, two investment management companies, three trade creditors and one insurance company. That former employee worked for Enron as an in-house attorney. In a letter to Mr. Baena, Trustee Schwartz articulated her concern for the interests of former Enron (OTC: ENRNQ) employees saying, "Because of issues peculiar to these cases, including the facts that there are more than 20,000 participants in the Debtors' employee benefits plans and many suits brought relating to the Debtors' 401(k) plan, I have determined that separate representation is appropriate." Ms. Schwartz has invited SEEC attorneys to make recommendations concerning the specific composition of the new Employees Committee. A similar invitation has been made to Texas Attorney General John Cornyn. Attorneys on behalf of SEEC intend to immediately respond to her request. The SEEC legal team is made up of the following attorneys and law firms: - George Whittenburg, Whittenburg Whittenburg & Schachter, P.C. - Randy McClanahan and Scott Clearman, McClanahan & Clearman, L.L.P. - Martin Dies, III and Richard Hile, Dies & Hile, L.L.P. - Broadus Spivey, Spivey & Ainsworth, P.C. - Scott Baena, Bilzin Sumberg Dunn Baena Price & Axelrod LLP For further information about this latest Enron development, please contact attorney Scott Baena at 305-607-3753 or attorney Martin Dies at 409-882-1732. Or, contact Mike Androvett at 800- 559-4534 or by paging Mike at 800-943-1502. ENVIRO-RECOVERY: "Concerned Shareholders" Set Special Meeting ------------------------------------------------------------- A group designating themselves as "Concerned Shareholders" of Enviro-Recovery Inc. is inviting Company shareholders to be present, or represented by proxy, at a Special Meeting of Shareholders at the Cheqamegon Hotel, 101 Lake Shore Drive West, Ashland, Wisconsin, on ________ __, 2002, (date not yet specified) at 10:00 a.m. Central time, to remove Jeffrey Schwartz, Bruce Nesmith and David "Caz" Neitzke as directors of the Company and to elect David "Caz" Neitzke, John K. Tull and Jack Lowry as directors. This Special Meeting of Shareholders is being called by the shareholders consisting of at least 30 percent of all the shares entitled to vote at the special meeting in accordance with the Company's By-Laws. Shareholders of record at the close of business , 2002 (date not yet supplied) are entitled to vote at the Special Meeting of Shareholders and all adjournments thereof. Since a majority of the outstanding shares of the Company's stock must be represented at the meeting in order to constitute a quorum, the "Concerned Shareholders" are urging all shareholders either to attend the meeting or to be represented by proxy. The meeting is being called by the Concerned Shareholders in that there has not been an annual meeting of shareholders since March 24, 1999. For additional information why the Concerned Shareholders feel the need for a Special Meeting, see Related Party Transactions, "Ashland Action" in the proxy statement which is accompanying the notice of the Special Meeting being mailed to shareholders. On January 25, 2002, several creditors of Enviro-Recovery, Inc. and Superior Water Logged Lumber Company, Inc. filed involuntary petitions against each company under Chapter 11 of the United States Bankruptcy Code. The actions were filed at the United States Bankruptcy Court in the Western District of Wisconsin, located in Eau Claire, Wisconsin, Case Numbers 02-10456-11 (Enviro) and 92-10457-11 (Superior). The Company is engaged primarily in the production of lumber and wood products from old growth forest timber recovered from the bottom of the lakes and rivers of North America. Lumber sales are made to customers located mainly in the upper Midwestern region of the United States. ENVIRO-RECOVERY: Involuntary Case Summary ----------------------------------------- Alleged Debtor: Enviro-Recovery, Inc. 2200 E Lake Street Ashland, WI 54806 Involuntary Petition Date: January 25, 2002 Case Number: 1-02-10456-tsu Chapter: 11 Court: Western District of Wisconsin (Eau Claire) Judge: Thomas S. Utschig Petitioner's Counsel: Timothy J. Peyton, Esq. Suite 202 634 West Main Street Madison, WI 53703 Tel: (608) 257-5424 Petitioning Creditors and Amount of Claim: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Martin Hardwood, Co. Inc. Advances $13,343 1 Columbia Dr. Niagara Falls, NY 14305 Security Insurance and _____ _____ Financial Services, Inc. 12725 S. Moreland Road New Berlin, WI 53151 Schenck Business _____ _____ Solutions, S.C. 200 East Washington Street Appleton, WI 54913 EXODUS COMMUNICATION: Settles $7.9M Dispute With StorageNetworks ---------------------------------------------------------------- Exodus Communications, Inc. sought and obtained approval of a stipulation with StorageNetworks Inc. to settle their legal disputes arising under their Master Services Agreement, Joint Marketing Services Agreement and Assignment Agreements. Mark S. Chehi, Esq., at Skadden Arps Meagher & Flom LLP in Wilmington, Delaware, relates that the services agreements were entered by the parties at different times between 1999 to 2000. StorageNetworks, on September 24, 2001, offset $2,063,292 it owed to the Debtors against amounts owed by the Debtors for pre- petition services and, the next day, filed suit against the Debtors in the Chancery Court of Delaware seeking a declaratory judgment, injunctive relief and monetary damages of at least $7,900,000. With this stipulation and order, the Debtors and StorageNetworks agree that: A. The Master Services Agreement, Joint Marketing Services Agreement and Assignment Agreements are assumed by the Debtor. B. The Master Services Agreement and Joint Marketing Services Agreement are modified as provided in the Settlement Agreement. C. The Debtors shall timely pay StorageNetworks amounts due it under the Joint Marketing Services Agreement for services provided on and after the Petition Date. All amounts owed by the Debtors to StorageNetworks under the terms of the Joint Marketing Services Agreement on or after September 27, 2001 shall be made and allowed as administrative expenses. D. The September 24, 2001 setoff was proper and is not subject to further challenge. E. On the effective date of the Debtor's reorganization plans, StorageNetworks shall be paid all amounts owed under the Joint Marketing Services Agreement before the Petition Date. The cure amount shall be equal to all sums invoiced $7,427,423 less the sum of the amounts specified under the Settlement Agreement and shall be treated as an administrative expense. F. Both the Debtors and StorageNetworks shall devote the necessary, knowledgeable personnel and resources to determine what portion of the disputed $1,054,000 between the parties is owed by StorageNetworks to the Debtor for floor space for the period prior to the Petition Date. G. StorageNetworks shall provide to the Debtors by November 10, 2002 a detailed analysis of the invoices received to date from the Debtors, StorageNetworks' payments against such invoice and a description of reasons for any short payments. Thereafter, Both parties shall meet and review and attempt to determine in good faith how much of the said amount is owed to the Debtors. H. If the Debtor's plan of reorganization is not confirmed and effective within 12 months of the Petition Date, then the Debtor shall pay StorageNetworks the cure amount in six, equal monthly installments beginning November 15, 2002. But if the reorganization plan is confirmed, the Debtor shall pay any remaining cure amount on the date that such reorganization plan becomes effective. In any case, if the Debtors assign, sell or transfer the Marketing Services Agreement to a third party, the Debtors shall pay to StorageNetworks any remaining cure amount upon the closing of such assignment, sale or transfer. I. The automatic stay is modified to the extent necessary to permit StorageNetworks to setoff immediately against the cure amount any additional, undisputed amounts the parties have agreed that StorageNetworks owes to the Debtor for floor space prior to the Petition Date under the Marketing Services Agreement and setoff any amounts owed by StorageNetworks against any amounts invoiced by StorageNetworks to the Debtor for services rendered under the Joint Marketing Services Agreement pre- petition. J. Exodus shall not prevent or interfere with StorageNetworks' access to its equipment and facilities or for it to discontinue its services to StorageNetworks at its facilities, unless StorageNetworks has failed to pay an undisputed amount owed to Exodus or materially breached the Marketing Services Agreement and the Debtor has given StorageNetworks thirty days' written notice of such failure and opportunity to pay or cure such breach. I. Each party shall waive and release the other party of any claims arising under the Master Services Agreement, Joint Marketing Services Agreement and Assignment Agreements. J. This stipulation and agreement shall not be deemed to modify the parties' rights and does not prejudice the right of the Debtors to seek to assign the contracts to one or more third parties, or the rights of StorageNetworks to object such assignment. K. The automatic stay is modified to permit StorageNetworks to have the Chancery Court Action dismissed sans prejudice. L. The automatic stay is modified to the extent necessary to permit StorageNetworks to terminate the Master Services Agreement, Joint Marketing Services Agreement and Assignment Agreements if the Debtors materially breaches any of the agreements and such default remains uncured 30 days after notification. Mr. Chehi assures the Court that the Settlement Agreement was negotiated in good faith at arm's length and that it is fair and equitable and in the best interest of the Debtors and their estates. Exodus also recognizes that StorageNetworks' data storage and management services that are provided to the Debtors are actual and necessary costs to preserving the Debtors' estate. The benefits of the Settlement Agreement, Mr. Chehi submits, outweigh the costs, expense and risk to the estate of potential litigation. (Exodus Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900) FEDERATED DEPT: Shareholders Balk at Fingerhut's Liquidation ------------------------------------------------------------ Shareholders of Federated Department Stores, Inc., filed a lawsuit in Minnesota state court against top executives and board members for allegedly taking steps to liquidate its Fingerhut subsidiary without a good faith effort to sell it as an operational company. The suit charges the defendants with breaching their fiduciary duties to stockholders since Fingerhut, a sizeable corporate asset, is worth much more to buyers intact. "By making plans to liquidate Fingerhut without even considering offers for the company, Federated executives acted irresponsibly and betrayed the best interests of their shareholders. Now that such offers have been made, shareholders will insist that all options are pursued that could keep the company alive," said William Lerach, a lead attorney for the plaintiffs and partner at Milberg Weiss Bershad Hynes & Lerach LLP. Federated Department Stores purchased Fingerhut in 1999 for $1.7 billion. The suit charges Federated executives and board members with "gross mismanagement" that resulted in the deterioration of the company's value. According to the complaint, liquidating Fingerhut would enable executives to hide losses and spread them out over four quarters. On January 16, 2002, Federated Department Stores announced it would liquidate Fingerhut without any prior announcement that Fingerhut was for sale. Since then, Federated has sent layoff notices to nearly 70 percent of Fingerhut's 6,000 employees. Fingerhut has significantly reduced its inventory and has stopped opening new customer credit accounts. The lawsuit claims that liquidating Fingerhut would decrease its value by hundreds of millions of dollars because the majority of its worth is based on money owed to Fingerhut by current customers, many of whom rely on Fingerhut's policy of providing credit to low income and elderly individuals without credit cards. The complaint states that these customers will have little incentive to pay their credit debt once the company is discontinued, and since most credit amounts are relatively small there will be no cost-effective way to collect these receivables. The shareholder derivative suit against Federated is part of a broader trend of shareholders -- as the owners of corporations - - holding directors and executives accountable for actions that undercut a company's best interest. The lawsuit requests injunctive relief to halt the liquidation process and force the defendants to solicit buyers and fairly consider offers for the company. Unless the court intervenes, the current plans for liquidation will diminish Fingerhut's value, according to the complaint. "I believed in the company enough to use my own money to buy Federated stock. As an employee at Fingerhut and a shareholder, I can't sit by and watch the executives liquidate a once profitable company instead of asking for a fair purchase price that would keep our doors open," said the plaintiff Nick Wesenberg, an employee for 17 years in Fingerhut's receivables department and a Federated shareholder. The complaint alleges that Federated executives failed to: * Take adequate and thorough steps to determine if a better price was available for potential bidders to buy Fingerhut as an operational company; * Conduct an auction of Fingerhut to determine the highest possible price it might obtain; or * Negotiate with prospective bidders in a manner designed to maximize interest in Fingerhut. Defendants named in the suit include James Zimmerman (CEO of Federated and Chairman of the Board), Terry Lundgren (President and Chief Merchandising Officer of Federated and a director of the company), Ronald Tysoe (Vice Chairman, Finance and Real Estate of Federated and a director of the company), as well as other Federated directors. Fingerhut executives Michael Sherman (President and CEO), Steven Lightman (Vice President, Operations), and Nils Ytterbo (Senior Vice President and CFO), all of whom live in Minnesota, are also named in the suit. Defendants Sherman, Lightman, and Ytterbo have all been promised substantial severance payment to help Federated officers and directors liquidate Fingerhut rather than sell it as an ongoing business. FLAG TELECOM: Fitch Places Low-B Rating on Watch Negative --------------------------------------------------------- Fitch Ratings has placed Flag Telecom Holdings Limited (FTHL) 'B+' rating and Flag Limited's 'BB+' rating on Rating Watch Negative following announcements made Wednesday by the company in its preliminary fourth quarter and full year financial results statement. Specifically, management has indicated that they are reviewing their business in light of deteriorating market conditions. Concerns have been raised about their liquidity position beginning 2003 given the current operating environment, and particularly that of the capital markets generally for operators in their sector. In making specific reference to the Flag Europe-Asia cable network, operated by Flag Limited, the company has said it is reviewing this network, including the likelihood that it will generate sufficient cash to repay the US$430 million of senior notes currently outstanding at maturity in 2008. Management has indicated that depending on the outcome of this review, it may be necessary to recognize an impairment as at December 31st, 2001. In its review, Fitch will be evaluating the proposed steps management is undertaking, including any restructuring and refinancing alternatives being considered and the potential impact on secured and unsecured creditors alike. Further comments will be made to the market as details of Wednesday's announcement and Fitch's assessment of management's options under consideration become clearer. FUELNATION: Moore Stephens Replaces Sellers as Accountants ---------------------------------------------------------- On February 7, 2002, Sellers & Associates, P.C., FuelNation, Inc.'s independent accountant for the Company's most recent fiscal year, resigned. The Company's financial statements for the last fiscal year prepared by Sellers & Associates, P.C. contained a going concern opinion. Also on February 7, 2002, FuelNation engaged the accounting firm of Moore Stephens P.C. independent public accountants, to audit its fiscal year ended December 31, 2001 and 2000, as well as future financial statements, to replace the firm of Sellers & Associates, P.C. This change in independent accountants was approved by the Board of Directors of FuelNation. GLOBAL CROSSING: UST Appoints Unsecured Creditors' Committee ------------------------------------------------------------ Pursuant to Section 1102(a) and 1102(b) of the Bankruptcy Code, the U.S. Trustee appoints these creditors to the Official Committee of Unsecured Creditors in Global Crossing Ltd.'s chapter 11 cases, effective February 7, 2002: A. Alcatel and affiliates 15540 North Lombard Street, Portland, OR 97203-6428 Attention: Mr. Richard Nilsson, President Phone: (503) 240-4010 B. Aegon USA Investment Management, LLC 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499 Attention: Mr. Brian Elliott Phone: (319) 398-8988 Telecopier: (319) 369-2009 C. The Bank of New York as Indenture Trustee 5 Penn Plaza, 13th Floor, New York, New York 10001 Attention: Mr. Gary Bush, Vice President Phone: (212) 896-7260 Telecopier: (212) 328-7302 D. DuPont Capital Management One Righter Parkway, Suite 3200, Wilmington, DE 19803 Attention: Mr. Ming Shao, Senior Portfolio Manager Phone: (302) 477-6070 Telecopier: (302) 677-6370 E. Hartford Investment Management Company 55 Farrington Avenue, 10th Floor, Hartford, CT 06105 Attention: Mr. Mark Niland Phone: (860) 297-6175 Telecopier: (860) 297-8885 F. Lucent Technologies Inc. 600 Mountain Avenue, Murray Hill, New Jersey 07974-0636 Attention: Mr. Rob Slater, Managing Director Phone: (908) 582-6687 Telecopier: (908) 582-6069 G. Morgan Stanley Investment Management One Tower Bridge, West Conshohocken, PA 19428-2881 Attention: Ms. Deanna L. Loughnane, Executive Director Phone: (610) 940-5000 Telecopier: (610) 260-7088 H. Nationwide Insurance One Nationwide Plaza, Columbus, OH 43216 Attention: Mr. Jeffrey Golbus, Manager, Public Bonds Phone: (614) 249-7513 Telecopier: (614) 249-4698 I. The Northwestern Mutual Life Insurance Company 720 East Wisconsin Ave., Milwaukee, Wisconsin 53202-4797 Attention: Mr. Steve Martinie, Assistant Secretary Phone: (414) 271-1444 Telecopier: (414) 625-1841 J. PPM America 225 West Wacker, Suite 1200, Chicago, IL 60606 Attention: Mr. Joel Klein, Senior Managing Director Phone: (312) 634-2559 Telecopier: (312) 634-0728 K. Teachers Insurance and Annuity Association of America 730 Third Avenue, New York, New York 10017-3206 Attention: Mr. Roi G. Chandy, Director Phone: (212) 916-6139 Telecopier: (212) 916-6140 L. U.S. Trust Company 499 Washington Blvd, Jersey City, New Jersey 07310 Attention: Mr. Corwin Chen, Senior Vice President Phone: (201) 533-6875 Telecopier: (212) 597-0160 M. Verizon Communications, Inc. c/o William Cummings 1095 Avenue of the Americas, New York, New York 10036 Phone: (212) 395-0802 Telecopier: (212) 302-9177 (Global Crossing Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBALSTAR L.P.: Files for Chapter 11 Reorganization in Delaware ---------------------------------------------------------------- Globalstar L.P. has reached agreement with several of its major creditors to restructure the company's debt and, in order to facilitate the timely completion of the restructuring, has filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court in Delaware. Normal company operations and customer support will continue uninterrupted while Globalstar operates under Chapter 11 protection, and the company intends to continue providing its telecommunications services in the normal course. This announcement follows a November 14, 2001, regulatory filing in which Globalstar disclosed the likelihood of a Chapter 11 filing, pointing out that demand for the company's service has continued to grow but that the cost of servicing the company's debt had outpaced Globalstar's revenues. "This filing is an important first step in establishing a new Globalstar with renewed credibility, enabling it to address new business opportunities and to further broaden our customer base," said Olof Lundberg, chairman and CEO of Globalstar. "Potential customers have told us that we need to demonstrate financial viability and a commitment to the future. Now with this step, we're ready to begin. Our major creditors are on board, and we hope to complete the restructuring process rapidly, returning to expanding the use of both our current voice and data satellite services and, with new partners, develop new products. "I want to assure our 66,000 customers that Globalstar remains very much open for business. With the cooperation of our gateway operators and local service providers, customers can expect normal operations and our usual high quality of service as we progress through the reorganization process," Mr. Lundberg added. The proposed restructuring plan, which will be submitted for Court approval, calls for the establishment of a new Globalstar company which will take ownership of all of Globalstar L.P.'s existing assets, including its satellite constellation and related operations. In addition, the new company will acquire all equity stakes in three of its service providers - Globalstar USA, Globalstar Caribbean, and Globalstar Canada - that were originally held by Vodafone Group Plc and Loral Space & Communications. Acquisition of equity in Globalstar USA and Globalstar Caribbean are subject to FCC and other regulatory approvals. Under this plan, the new company will initially be owned by Globalstar L.P.'s existing bondholders and other unsecured creditors, with the option later to issue additional shares for sale to gateway operators outside of the U.S. and Canada who may wish to invest in the new company. The reorganization plan also calls for the cancellation of all existing partnership interests in Globalstar L.P., including partnership interests held by the publicly traded Globalstar Telecommunications Limited (GTL). As the company has cautioned earlier in public announcements and SEC filings, this action will likely leave shares in GTL with very little or no value. The restructuring plan also contemplates a rights offering to common shareholders in GTL and to GLP creditors which could give them the option to purchase shares in the new company. There can be no assurance at this time whether such a rights offering can be achieved, and it would in any case be subject to review and approval by Globalstar's creditors and the bankruptcy court. As part of the agreement with its major creditors, Globalstar said it will begin implementing a new business model, which will broaden its business opportunities and accelerate the acquisition of new customers. Initial steps of the new business plan include: -- Aggressively priced service, using existing system capacity and phone inventories to build cash flow. Service packages will be aimed in particular at volume usage and multiple phone units, covering both voice and data services. -- Consolidation of selected gateways into the new Globalstar company, allowing Globalstar to assume responsibility for marketing and operations in several of its largest markets. Globalstar L.P. had already initiated this process by agreeing in December 2001 to acquire most of Vodafone Group Plc's North American Globalstar-related assets, which will now be transferred to the new company. This will create greater operating efficiencies, lowering the overall cost of delivering service to customers, and avoiding duplication of functions at each service provider while at the same time allowing Globalstar to capture the full retail revenue stream in these markets. -- Marketing efforts that will be focused on high-potential countries and customer segments, primarily enterprise customers, and with particular attention to aviation, maritime and government services. Recent events have highlighted the utility and value of mobile satellite telephony, not only in crisis situations but also in day-to-day applications relating to security, defense, and civil emergency preparedness. -- Use of new 2GHz radio spectrum recently granted to Globalstar by the U.S. Federal Communications Commission (FCC). The company will explore opportunities to utilize this valuable asset in both existing and new applications and in terms of evolution to a second generation system. -- Pursuit of new business opportunities that will evolve out of more flexible spectrum utilization rules following a favorable outcome of the FCC's current Notice of Proposed Rulemaking (NPRM) proceedings relating to air traffic control. As part of Globalstar's work to develop its restructuring plan over the past several months, it has substantially reduced its operating expenses. As a result, the company today has approximately $46 million of cash on hand, significantly more than its original projections from a year earlier. The final restructuring will likely require some new investment to provide enough funds to carry the company through to a cash flow breakeven point, although the company's new lower cost structure calls for substantially less additional funding than would have been necessary under the company's earlier business model. The company is currently in discussions with possible investors to meet this investment requirement, although there can be no assurance as to the timing, likelihood or amount of any such investment. In the meantime, Globalstar continues to make progress in strengthening and expanding its business and customer base to create a firm foundation for the new, restructured company. Recent achievements include: -- Expansion of service coverage throughout Central Asia, including Afghanistan. Globalstar service is already being used extensively in this region to support medical and humanitarian programs. -- Finalization of plans to ship and construct a second gateway in China. Upon completion, the new Lanzhou gateway, together with the existing Beijing gateway, will provide service coverage across over 80% of the country. -- Sale of over 1,000 phones to the U.S. government for use in domestic security, including communications support at the 2002 Winter Olympics in Salt Lake City. Globalstar's Chapter 11 filing and business model announcement result from an extended business review begun in January 2001, when the company announced that it was suspending payments of interest and principal on all of its funded debt, including its credit facilities, vendor financing agreements and Senior Notes, as well as dividend payments on its preferred stock, and that it had engaged The Blackstone Group to assist it in exploring strategic alternatives. The Company's informational filings with the Court are available to the public at the office of the Clerk of the Bankruptcy Court, 824 Market Street, Wilmington, DE 19801 (tel: 1-888-667- 5530). The filings will also be available electronically, for a fee, through the Court's Internet Web site at http://www.deb.uscourts.gov(Case Nos. 02-010499, 02-010501, 02- 010503, 02-010504). DebtTraders reports that Globalstar Capital Corporation's (with Globalstar as underlying issuer) 11.500% bonds due 2005 (GSTAR4) are trading between 9 and 10. For real-time bond pricing, see http://www.debttraders.com/price.cfm?dt_sec_ticker=GSTAR4 GLOBALSTAR, L.P.: Case Summary & Largest Unsecured Creditors ------------------------------------------------------------ Lead Debtor: Globalstar, L.P. 3200 Zanker Road San Jose, CA 95134 Bankruptcy Case No.: 02-10504-PJW Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Globalstar Capital Corporation 02-10499-PJW Globalstar Services Company, Inc. 02-10501-PJW Globalstar, L.L.C. 02-10503-PJW Type of Business: Globalstar. L.P. operates a worldwide low- earth orbit satellite-based digital telecommunications system and provides a satellite communications and communication- related service. Chapter 11 Petition Date: February 15, 2002 Court: District of Delaware Judge: Peter J. Walsh Debtors' Counsel: Paul Leake, Esq. John J. Rapisardi, Esq. Jones, Day, Deavis & Pogue 599 Lexington Avenue New York, NY 10022-6030 Tel: 212 326-3839 Fax: 212 755 7306 -and- Brendan Linehan Shannon, Esq. Young Conoway Stargatt & Taylor LLP The Brandywine Building 1000 West Street, 17 Floor PO Box 391 Wilmington, DE 19899-0391 Tel: 302 571 6600 Fax: 302 571 1253 Total Assets: $573,431,000 Total Debts: $3,325,553,000 Debtor's Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Bank of New York 11.375% Senior $1,450,000,000 as Indenture Trustee Notes/Bonds 5 Penn Plaza, 13th Floor New York, NY 10001 10.75% Senior Fax: 212 328 7302 Notes/Bonds Max Volmar Corporate Trust 11.25% Senior Administrator Notes/Bonds Tel: 212 328 7302 Daniel H. Golden, Esq. 11.50% Senior Akin, Gump, Strauss, Notes/Bonds Hauer & Field 590 Madison Avenue 20th Floor New York, NY 10022 Tel: 212 872 1000 Fax: 212 672 1002 Loral Space & Term Loan A, $500,000,000 Communications, Ltd Term Loan B & 600 Third Avenue Revolver 36th Floor New York, NY 10016 Note Payable $51,309,686 Fax: 212 338 5350 Mr. Avi Katz Accrued Liability $736,762 General Counsel & Accrued Payable Tel: 212 338 5340 Marc Abrams, Esq. Accounts Payable (GSCI) $29,580 Wilkie Farr & Gallagher The Equitable Center Accounts Payable (GLLC) $4,857 787 Seventh Avenue New York, NY 10019-6099 Tel: 212 726 8000 Fax: 212 728 8111 Space Systems/Loral, Inc. Accounts Payable, $207,058,430 600 Third Avenue Vendor Financing & 36th Floor Acrued Liability New York, NY 10016 Fax: 212 338 5340 -and- 3825 Fablan Way M/S Z02 Palo Alto, CA 94303 Fax: 650 852 6414 Contact Persons: Mr. Avi Katz General Counsel Tel: 212 338 5340 Julie Bannerman, Esq. Notes Payable $11,650,000 Tel: 650 852 5474 Marc Abrams. Esq. Tel: 212 728 8000 Fax: 212 728 8111 Qualcomm Incorporated Vendor Financing, $514,297,552 5775 Morehouse Drive Accrued Liabilities & Bldg R-143E Accounts Payable San Diego, CA 92121 Fax: 858 651 6045 -or- 6455 Lusk Blvd. Note Payable $21,925,000 San Diego, CA 92121 Fax: 858 658 1550 Accounts Payable (GSCI) $86,346 Suzanne Reynolds Tel: 858 578 1121 Partnership, LP Globalstar do Brasil Accounts Payable $138,177 Prala do Flamengo 200 19 Ander (parte) 22210-060 Accounts Payable (GSCI) $108,356 Rio de Janiero-RJ Brazil Fax: 55 21 2555 8894 Accrued Liability $900,192 Mr. Michael Vahrenkamp Tel: 55 21 2555 8811 Loral Qualcomm Accrued Management Fees $105,481 Loal Cyberstar Account Payable $85,950 Lockhead Martin Notes Payable & $150,006,397 Corporation Accounts Payable 3200 Zanker Road Building 220 San Jose, CA 95134 -or- Lockhead Martin Space Operations Enterprise Solutions PO Box 48587 Fax: 281 218 2677 Douglas Ericsson Tel: 408 473 4547 Ericsson Mobile Contract Claim $54,235,420 Communications (UK) Limited Sony Ericsson Mobile Communications Sony Ericsson House 202 Hammersmith Road London W6 7DN United Kingdom Mr. Cyrus Allen Tel: 44 208 762 5869 Vodafone Satellite Accounts Payable & $2,114,785 Services Ltd. (UK) Accrued Liability Jeff Bloszles The Courtyard Accounts Payable & $199,210 2-4 London Road Accrued Liability Newburry, Berkshire (GSCI) RG14 1JL United Kingdom Tel: 925 210 3808 DASA Globalstar Limited Notes Payable $10,125,000 Partner, Inc. Dr. Jurgen Koffler c/o Daimler Chrysler Aerospace AG RBD (Spce Ops) PO Box 801169 8163 Munich, Germany Fax: 49 89 607 22630 Tel: 49 89 607 34240 Eslacom s.p.a. Accrued Payable & $2,849,778 Michael Yates Accrued Liability Via de Settebagnal, 390 Rome 00138 Italy Tel: 39 06 872 75 637 Fax: 39 06 87275 301 TESAM Accrued Liability & $2,107,645 Stan Haverlik Accounts Payable 8-16 Rue Paul Couturier Malakoff Codex 92245 Accrued Liability $180,333 France Site Mgmt. (GSCI) Fax: 33 1 55 22 33 19 Tel: 33 1 55 22 33 03 Saudi Globalstar Accrued Liabiltiy & $1,246,117 Operations Accounts Payable Dr. Ahmed Sindi New Akarya Bldg. Silten Street, Mdez Tower #3 Floor 8 Office 8304 Riyadh 11476 Kingdom of Saudi Arabia Fax: 966 1 47 60250 Tel: 956 1 477 5560 Segal Company Accrued Pension $1,095,539 Doron Scharf Liabilities 1 Park Avenue New York, NY 10016 Fax: 212 251 5490 Globalstar Northern Accounts Payable $11,924 Europe Accounts Payable (GSCI) $226,603 Santa Clara County Accrued Property $265,959 Tax Collection Tax Liability Madelyn Murphy 70 W. Hedding St. East Wing San Jose, CA 95110 Fax: 408 286 5275 Tel: 408 808 7949 DACOM Accrued Liability $145,883 Office Depot Accounts Payable $14,003 Agllent Financial Accounts Payable $12,094 Services Xerox Corporation Accounts Payable $6,683 Corporate Express Accounts Payable $6,244 Pinkerton Accounts Payable $5,249 Federal Express Corp. Accounts Payable $2,856 Sodexto Marriott Accounts Payable $2,788 Services All Pro Building Svcs Accounts Payable $2,721 DHL Worldwide Express Accounts Payable $2,399 ICS Electronics Ltd. Accounts Payable $850 Leadership Directories Accounts Payable $850 GLOBIX CORP.: Filing For Chapter 11 With Prepack Plan This Week --------------------------------------------------------------- Globix Corporation (Nasdaq: GBIX) has received, pursuant to its consent solicitation for the acceptance of its plan of reorganization, the required acceptances from holders of its senior notes and preferred stock for acceptance of the plan under Chapter 11 of the U.S. Bankruptcy Code. The plan was accepted by holders of senior notes representing approximately 97.5% of the $500 million principal amount of senior notes that actually voted and 97% in number of holders that actually voted. In addition, 100% of the preferred shareholders voted to accept the plan. The Company intends to commence Chapter 11 proceedings and file the plan under the Bankruptcy Code during the week of February 19, 2002, and expects to exit from bankruptcy by the end of March 2002, or as soon as practicable thereafter. The financial restructuring under the plan will reduce significantly the principal amount of the Company's outstanding indebtedness by approximately $480 million by converting a substantial portion of the Company's indebtedness into new common stock. The Company's bondholders will exchange the currently outstanding $600 million principal amount of senior notes for $120 million in new senior secured notes and approximately 85% of the reorganized Company's new common stock. Current holders of the Company's preferred stock will receive approximately 14% of the new common stock. Current holders of the Company's common stock, and certain claims in respect thereof, will receive approximately 1% of the new common stock. All currently existing securities of the Company will be cancelled upon consummation of the plan. Moreover, the new debt to be issued under the plan will permit Globix to satisfy interest payments in kind for at least two years and, at the discretion of the Company's board of directors, up to four years, thereby eliminating a liquidity concern arising from current debt service obligations. The Company believes that the restructuring will substantially reduce uncertainty with respect to its future and better position it to attract and maintain new customers. The Company intends to continue operating in Chapter 11 in the ordinary course of business. It intends to seek the necessary relief from the Bankruptcy Court to pay its employees, trade, and certain other creditors in full and on time, regardless of whether such claims arise prior to or after the Chapter 11 filing. Peter Herzig, Chief Executive Officer, said, "We are pleased to have received such overwhelming support from both our bondholders and preferred shareholders to proceed with the plan. As we take these steps to secure the Company's financial position, I am confident that we are doing all that is necessary to ensure a bright future for Globix. The successful execution of this plan will allow us to focus on developing Globix to its fullest potential as an industry-leading provider of hosting and advanced Internet services for enterprise businesses." GLOBIX CORP: EBITDA Loss Slides-Down to $11 Million in Q1 2002 -------------------------------------------------------------- Globix Corporation (Nasdaq: GBIX) reports financial results for its fiscal first quarter 2002 ended December 31, 2001. Revenue for the first quarter of fiscal 2002 was $23.4 million compared to $26.2 million in the prior year quarter. EBITDA loss (loss before net interest, income taxes, depreciation and amortization and restructuring charges) was $11.0 million for the first quarter of 2002 compared to $15.2 million in the same quarter last year. During the first quarter of fiscal 2001, the Company recorded a restructuring charge of $38.1 million related to the modification of Internet data center expansion plans, and $2.3 million from the cumulative effect of a change in accounting principle. For the fiscal first quarter of 2002, net loss attributable to common stockholders was $43.5 million, or $1.11 per share based on 38.9 million common shares. Net loss for the prior year quarter was $75.0 million, or $2.01 per share based on 37.3 million common shares, inclusive of the restructuring charge and the cumulative effect of the change in accounting principle. As part of the Company's continued effort to reduce expenses and work towards reaching the important goal of turning cash flow positive, the Company also reported that in recent weeks it has terminated approximately 30% of its workforce. The majority of those employees terminated performed functions related to providing internal services, peripheral client services and other functions not directly related to the Company's core business. Globix is a leading provider of advanced Internet hosting, network and applications solutions for business. Globix delivers services via its secure state-of-the-art Internet Data Centers, its high-performance global backbone and content delivery network, and its world-class technical professionals. Globix provides businesses with cutting-edge Internet resources and the ability to deploy, manage and scale mission-critical Internet operations for optimum performance and cost efficiency. HA-LO INDUSTRIES: Seeks Okay to Hire Arthur Andersen as Auditors ---------------------------------------------------------------- Ha-Lo Industries, Inc. and its debtor-affiliates seek permission from the U.S. Bankruptcy Court for the District of Delaware to employ Arthur Andersen LLP as accountants nunc pro tunc to the Petition Date. The Debtors want to employ and retain Andersen to audit the financial statement as of December 31, 2001 for the year then ending, which they expect will be complete by March 31, 2002. The professional services that Andersen will render to the Debtors, include: a) auditing the Debtors' financial statement for the year ending December 31, 2001; b) providing an auditor's report in connection with the financial statements; c) examining evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and evaluating the overall financial statements presentation; d) making specific inquiries of management and others about the representations embodied in the financial statements and the effectiveness of internal control; e) bringing to the attention of Debtors any information under professional standards of which Andersen becomes aware during its audit; and f) bringing to the attention of the Debtors misstatements and any fraudulent or illegal acts of which Andersen becomes aware during its audit. Andersen will charge the Debtors their customary hourly rates in effect on the date services are rendered, plus all reasonable and necessary expenses. Andersen anticipates that the Ongoing Services will be approximately $250,000. In addition to the Ongoing Services, the Debtors and Andersen agreed a $100,000 payment for the Rendered Services. The Debtors tell the Court that they did not intend to delay asking for approval of Andersen's employment. Rather, they say, the delay was unavoidable. In addition, the Debtors believe that employing another auditor will just add expenses greater than they're paying Andersen. The say that they're enjoying significant discounts with Andersen for these type of services. HA-LO Industries, Inc. and subsidiaries Lee Wayne Corporation and Starbelly.com, Inc., provide full service, innovative brand marketing in the custom and promotional products industry. The Company filed for Chapter 11 Petition on July 30, 2001. Adam G. Landis, Eric Lopez Schnabel, Mary Caloway at Klett Rooney Lieber & Schorling represent the Debtors in their restructuring efforts. HARBISON-WALKER: Chapter 11 Case Summary ---------------------------------------- Lead Debtor: Harbison-Walker Refractories Company USX Tower, 51st Floor 600 Grant Street Pittsburgh, PA 15219 Bankruptcy Case No.: 02-21627 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Global Industrial Technologies, Inc. 02-21626 Indresco International, Ltd. 02-21628 Harbison-Walker Refractories Europe, Ltd 02-21629 Harbison-Walker International 02-21630 Refractories, Inc. Global Industrial Technologies 02-21631 Services, Company GPX Corp. 02-21632 GIX Foreign Sales Corp. 02-21633 Global Processing Systems, Inc. 02-21634 TMPSC, Inc. 02-21635 GPX Forge, Inc. 02-21636 GPX Forge-Acquisition, Inc. 02-21637 GPX Forge-U, Inc. 02-21638 A.P. Green Industries, Inc. 02-21639 A.P. Green Services, Inc. 02-21640 APG Development Corp. 02-21641 Detrick Refractory Fibers, Inc. 02-21642 Chapter 11 Petition Date: February 14, 2002 Court: Western District of Pennsylvania (Pittsburgh) Judge: Judith K. Fitzgerald Debtors' Counsel: Paul M. Singer, Esq. Reed Smith 435 Sixth Avenue Pittsburgh, PA 15219 Tel: 412-288-3114 HARBISON-WALKER: TRO Halts Asbestos Claims against Halliburton -------------------------------------------------------------- Halliburton Company (NYSE: HAL) announced that a U.S. Bankruptcy Court has issued a temporary restraining order staying more than 200,000 pending asbestos claims against its subsidiary Dresser Industries, Inc. The ruling came in connection with the filing of a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code by Harbison-Walker Refractories Company. Harbison-Walker, which faces a large number of asbestos-related claims, said it would seek to reorganize its finances in Chapter 11 aided by a trust responsible for resolving all pending and future asbestos-related claims asserted against it. The stay is temporary until the bankruptcy court holds a hearing, which is expected during the next two weeks. The stayed claims represent a majority of the pending asbestos claims against all Halliburton Company subsidiaries. Approximately 132,000 of the stayed claims are refractory claims that Harbison-Walker agreed to be responsible for when it was spun-off from Dresser Industries in 1992. The balance of the stayed claims are pre-1992 refractory claims and other asbestos claims against Dresser Industries that are covered in whole or in part by the same insurance coverage. Chief Judge Judith Fitzgerald of the U.S. Bankruptcy Court, Western District of Pennsylvania, issued the order at the request of Harbison-Walker in the interest of protecting a significant asset of the bankrupt company, namely, the insurance held by Dresser Industries to cover the asbestos-related liabilities associated with Harbison-Walker. In its filing, Harbison-Walker informed the bankruptcy court that it, its parent RHI Refractories Holding Company, and Dresser Industries have agreed to work cooperatively in an attempt to utilize the special provisions of Sections 524(g) and 105 of the Bankruptcy Code to propose and have confirmed a plan of reorganization that will provide for distributions to the legitimate asbestos claimants. If such a plan of reorganization were approved, all pending and future Harbison- Walker-related lawsuits against the debtor and Dresser Industries would be channeled to a Section 524(g)/105 trust for resolution and payment. The U.S. Bankruptcy Code allows the creation of such a trust provided seventy-five percent of asbestos plaintiffs approve its creation. The bankruptcy court also will be asked to approve $35 million in debtor- in-protection (DIP) financing by Dresser Industries to Harbison-Walker so that Harbison-Walker can continue operations during the pendency of the Chapter 11 proceeding and emerge from bankruptcy as a viable company. Dresser Industries also agreed to pay $40 million to RHI Refractories Holding Company to facilitate the Chapter 11 filing. Dresser Industries will pay RHI an additional $35 million if an acceptable plan of reorganization is filed with the bankruptcy court and another $85 million if an acceptable plan and trust are ultimately approved and confirmed by the court. In 1992 Dresser Industries spun-off its Harbison-Walker operations and certain other operations to its shareholders in the form of the stock of INDRESCO, Inc. As part of that spin- off, INDRESCO, which subsequently changed its name to Harbison- Walker, contractually assumed responsibility for all of the asbestos-related claims associated with the Harbison-Walker business filed after the spin-off. Harbison-Walker also agreed to indemnify Dresser Industries against all costs associated with post spin-off claim. Dresser Industries granted Harbison-Walker access to its insurance policies to pay defense and settlement costs. Even though Dresser Industries and Harbison-Walker have accessed that insurance for almost a decade since the spin-off, as of last week's bankruptcy filing by Harbison-Walker, the available products liability limits of that insurance is approximately $2.1 billion. Since December 31, 1999, Harbison-Walker (which is a wholly owned subsidiary of Global Industrial Technologies, Inc.) has been part of the United States operations of Austrian- based RHI AG. Global, its subsidiary A.P. Green Industries Inc. and North American Refractories Company (NARCO), another subsidiary of RHI Refractories Holding Company, also have filed for protection under Chapter 11 in the same court -- NARCO on January 4, 2002, and Global and A.P. Green on February 14, 2002. Halliburton, founded in 1919, is one of the world's largest providers of products and services to the petroleum and energy industries. The company serves its customers with a broad range of products and services through its Energy Services Group and Engineering and Construction Group business segments. The company's World Wide Web site can be accessed at http://www.halliburton.com INTERACTIVE NETWORK: Shareholders to Convene on March 21 in L.A. ---------------------------------------------------------------- The special meeting of shareholders of Interactive Network, Inc. will be held at 10:30 a.m., Pacific time, on Thursday, March 21, 2002, at Sofitel Hotel, 8555 Beverly Blvd., Los Angeles, California 90048. At the special meeting, shareholders will be asked to approve the merger of Interactive Network, Inc. into Two Way TV (US) Inc. (formerly known as TWIN Entertainment, Inc.), the joint venture formed by Interactive Network and Two Way TV Limited. As a result of the merger, shareholders of Interactive Network will become shareholders of Two Way TV (US). After the merger, the former shareholders of Interactive Network will own approximately 48% of the outstanding shares of Two Way TV (US) and 55% on a fully-diluted basis, and Two Way TV Limited will own approximately 52% of the outstanding shares of Two Way TV (US) and 45% on a fully-diluted basis. In the merger, shareholders of Interactive Network will receive one share of Two Way TV (US) for each share of Interactive Network that they own. Therefore, Two Way TV (US) will be issuing 43,019,277 shares in the merger to Interactive Network's shareholders. Interactive Network's common stock currently is quoted on The Over-the-Counter Bulletin Board under the symbol "INNN.OB." On February 6, 2002, the closing sale price of its common stock was $0.31 per share. Two Way TV (US)'s common stock is privately held by its two shareholders and therefore Interactive Network shareholders will be unable to determine the market value of Two Way TV (US)'s shares they will receive in the merger. IT GROUP: Bringing-In Zolfo Cooper As Bankruptcy Consultant ----------------------------------------------------------- The IT Group, Inc. seeks entry of an order under section 327 of the Bankruptcy Code authorizing them to employ and retain Zolfo Cooper LLC as bankruptcy consultant and special financial advisor to the Debtors during these chapter 11 cases. James M. Redwine, the Debtors' Vice President and Senior Corporate Counsel, tells the Court that the Debtors require the services of experienced Bankruptcy Consultants and Special Financial Advisors to assist them in restructuring their business and developing, negotiating and confirming a plan of reorganization. Because of Zolfo Cooper's expertise and experience at a national level in providing reorganization, accounting and a broad range of consulting services to debtors and other parties in interest in financially complex troubled situations, the Debtors have requested that Zolfo Cooper provide such services to them. Mr. Redwine explains that the Debtors selected Zolfo Cooper because of the Firm's experience at a national level in matters of this character and its exemplary qualifications to perform the services required in this case. Zolfo Cooper is well qualified to serve as Bankruptcy Consultants and Special Financial Advisors to the Debtors as the firm specializes in assisting and advising debtors, creditors, investors and court- appointed officials in bankruptcy proceedings and out-of-court workouts. Its services have included assistance in developing/analyzing and evaluating, negotiating and confirming plans of reorganization and testifying regarding debt restructuring, feasibility and other relevant issues. Specifically, Zolfor Cooper will: A. Advise and assist management in organizing the Debtors' resources and activities so as to effectively and efficiently plan, coordinate and manage the chapter 11 &nb