<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Savin Corporation
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Savin Corporation
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, $.001 par value per share
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
3,946,650
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
$41,500,000
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$41,500,000
------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
$8,300
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
PRE CON
------------------------------------------------------------------------
(3) Filing Party:
Savin Corporation
------------------------------------------------------------------------
(4) Date Filed:
January 23, 1995
------------------------------------------------------------------------
<PAGE> 2
SAVIN CORPORATION
333 LUDLOW STREET
STAMFORD, CONNECTICUT 06904
March 11, 1995
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Savin Corporation (the "Company") to be held at Marriott's Rancho Las Palmas
Resort located at 41000 Bob Hope Drive, Rancho Mirage, California on March 31,
1995, at 8:30 a.m., local time.
At the meeting you will be asked to consider and vote on an Agreement and
Plan of Merger by and among the Company, Ricoh Corporation and SC Acquisition
Corp., a wholly-owned subsidiary of Ricoh Corporation. The Agreement and Plan of
Merger generally provides for a taxable exchange in which, if the merger is
consummated, you will receive an amount in cash without interest equal to
$10.426 per share, assuming that: (a) common stock purchase options previously
granted to the Company's directors are cancelled prior to the effective time of
the merger in exchange for the payment by the Company to the directors of
$350,000 in the aggregate; and (b) the Company does not agree pursuant to
certain provisions of the Agreement and Plan of Merger to any other reduction of
the aggregate merger consideration or an escrow of a portion thereof prior to
the effective time of the proposed merger. The Agreement and Plan of Merger
includes provisions which permit the parties under certain circumstances to
agree to reduce the aggregate merger consideration by an amount of up to
$1,500,000, or to escrow a portion thereof, if such a reduction or escrow
becomes necessary in order to avoid the failure of a condition to the
effectiveness of the merger. The resolution which the stockholders will be asked
to approve at the Special Meeting will include a grant of authority to the Board
of Directors to agree, if the Board of Directors deems it appropriate, to such a
reduction in the aggregate merger consideration, or an escrow of a portion
thereof, in an amount of up to $250,000 (in addition to the $350,000 reduction
reflecting the payment to be made to the directors in connection with the
cancellation of options) without soliciting further approval of the
stockholders. If the Board of Directors agrees to the maximum price reduction or
escrow authorized without a resolicitation of stockholder approval, the amount
payable in the merger in respect of each share of common stock would be reduced
to $10.36. Accordingly, the exact per share amount that will be payable under
the Agreement and Plan of Merger could be reduced from $10.426 per share to a
price as low as $10.36 per share under certain circumstances, without
resolicitation of stockholder approval, if the Board of Directors deems it
appropriate, as described in the Proxy Statement accompanying this letter.
The Notice of Special Meeting of Stockholders and the Proxy Statement
accompanying this letter more fully describe the matters to be considered at the
Special Meeting. We urge you to read the enclosed materials carefully.
YOUR BOARD OF DIRECTORS HAS APPROVED THE AGREEMENT AND PLAN OF MERGER AND
RECOMMENDS A VOTE "FOR" THE AGREEMENT AND PLAN OF MERGER.
Approval of the Agreement and Plan of Merger requires the affirmative vote
of the holders of a majority of the outstanding shares of the Company's common
stock entitled to vote thereon. Holders who own shares representing
approximately 65% of the Company's outstanding common stock have agreed to vote
those shares, and have granted Ricoh Corporation an irrevocable proxy giving it
the right to vote those shares, in favor of the Agreement and Plan of Merger.
<PAGE> 3
Whether or not you plan to attend the Special Meeting, we urge you to sign,
date and return the enclosed proxy card in the envelope provided so that as many
shares as possible may be represented at the meeting. The vote of each
stockholder is important and your cooperation in returning your executed proxy
card will be appreciated. Should you desire to attend the meeting and vote in
person, you may do so even though you have previously returned your proxy card.
Thank you.
Sincerely,
/s/ D. Thomas Abbott
D. Thomas Abbott
Chairman of the Board
and Chief Executive Officer
2
<PAGE> 4
SAVIN CORPORATION
333 LUDLOW STREET
STAMFORD, CONNECTICUT 06904
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 31, 1995
------------------------
A Special Meeting of the Stockholders of Savin Corporation ("Savin" or the
"Company") will be held on March 31, 1995, at 8:30 a.m., local time, at
Marriott's Rancho Las Palmas Resort, located at 41000 Bob Hope Drive, Rancho
Mirage, California.
The meeting will be held to consider the following business, which is
described in the accompanying Proxy Statement:
1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, dated December 21, 1994 (the "Merger Agreement"), by and
among Savin, Ricoh Corporation ("Ricoh") and SC Acquisition Corp., a
wholly-owned subsidiary of Ricoh ("Merger Sub"), pursuant to which Merger Sub
will be merged with and into Savin, with Savin being the surviving corporation
and becoming a wholly-owned subsidiary of Ricoh, and each outstanding share of
the common stock of Savin (other than shares for which appraisal rights have
been properly exercised and perfected in accordance with the General Corporation
Law of the State of Delaware) will be converted into the right to receive an
amount in cash without interest equal to $10.426 per share, assuming that: (a)
common stock purchase options previously granted to the Company's directors are
cancelled prior to the effective time of the merger in exchange for the payment
by the Company to the directors of $350,000 in the aggregate; and (b) the
Company does not agree pursuant to certain provisions of the Merger Agreement to
any other reduction of the aggregate merger consideration or an escrow of a
portion thereof prior to the effective time of the merger. The Agreement and
Plan of Merger includes provisions which would permit the parties under certain
circumstances to agree to reduce the aggregate merger consideration by an amount
of up to $1,500,000 or to escrow a portion thereof, if such a reduction or
escrow becomes necessary in order to avoid the failure of a condition to the
effectiveness of the merger. The resolution which the stockholders will be asked
to approve at the Special Meeting will include a grant of authority to the Board
of Directors to agree, if the Board of Directors deems it appropriate, to such a
reduction in the aggregate merger consideration, or an escrow of a portion
thereof, in an amount of up to $250,000 (in addition to the $350,000 reduction
reflecting the payment to be made by the Company to the directors in connection
with the cancellation of options) without soliciting further approval of the
stockholders. If the Board of Directors agrees to the maximum price reduction or
escrow authorized without a resolicitation of stockholder approval, the amount
payable in the merger in respect of each share of common stock would be reduced
to $10.36. Accordingly, the exact per share consideration payable in the merger
could be reduced from $10.426 per share to a price as low as $10.36 per share
under certain circumstances without resolicitation of stockholder approval if
the Board of Directors deems it appropriate. The Merger Agreement also provides
that (a) each share of the common stock of Merger Sub will be converted into one
share of the common stock of the surviving corporation; (b) each share of the
common stock held in the treasury of Savin will be cancelled without
consideration therefor; and (c) each of the outstanding options to purchase
shares of the common stock of Savin immediately prior to the effective time of
the merger shall be cancelled and the holder thereof shall be entitled to
receive an amount in cash without interest for each share of common stock
underlying such option equal to the difference between the price per share to be
paid in the merger and the exercise price of such option.
2. Such other matters as may properly come before the meeting or any
postponements or adjournments thereof.
The Board of Directors has fixed the close of business on March 2, 1995, as
the record date for determining those stockholders of the Company who will be
entitled to vote at the Special Meeting. Any holder of the common stock of Savin
who does not wish to accept the per share price to be paid pursuant to the
Merger Agreement has the right to seek appraisal of such holder's shares and to
be paid the "fair value"
<PAGE> 5
thereof in cash provided the proposed merger is consummated and the holder fully
complies with certain statutory procedures described in the accompanying Proxy
Statement.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Russell Gough
RUSSELL GOUGH
Secretary
March 11, 1995
IT IS DESIRABLE THAT AS MANY STOCKHOLDERS AS POSSIBLE BE REPRESENTED AT THE
SPECIAL MEETING AND, THEREFORE, WHETHER OR NOT YOU ARE ABLE TO BE PRESENT IN
PERSON OR OTHERWISE REPRESENTED AT THE SPECIAL MEETING, YOU ARE REQUESTED TO
SIGN AND RETURN THE ENCLOSED PROXY, SO THAT YOUR SHARES WILL BE REPRESENTED.
THE BOARD OF DIRECTORS HAS APPROVED THE AGREEMENT AND PLAN OF MERGER AND
RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF THE AGREEMENT AND PLAN
OF MERGER. HOLDERS OF SHARES REPRESENTING APPROXIMATELY 65% OF THE OUTSTANDING
SHARES OF COMMON STOCK HAVE AGREED TO VOTE THOSE SHARES, AND HAVE GRANTED RICOH
CORPORATION AN IRREVOCABLE PROXY GIVING IT THE RIGHT TO VOTE THOSE SHARES, IN
FAVOR OF THE MERGER.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
2
<PAGE> 6
SAVIN CORPORATION
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
------------------------
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Savin Corporation, a Delaware corporation ("Savin" or
the "Company"), of proxies for use at a special meeting of stockholders to be
held at 8:30 a.m., local time, Friday, March 31, 1995, at Marriott's Rancho Las
Palmas Resort, 41000 Bob Hope Drive, Rancho Mirage, California and at any
postponements or adjournments thereof (the "Special Meeting"), for the purpose
described below. This Proxy Statement is first being mailed to stockholders of
Savin on or about March 11, 1995.
At the Special Meeting, the stockholders of Savin will be asked to consider
and vote upon a proposal to approve and adopt an Agreement and Plan of Merger,
dated December 21, 1994 (the "Merger Agreement"), by and among Savin, Ricoh
Corporation, a Delaware corporation ("Ricoh"), and SC Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Ricoh ("Merger Sub").
The Merger Agreement provides for the merger (the "Merger") of Merger Sub
with and into Savin, with Savin being the surviving corporation and becoming a
wholly-owned subsidiary of Ricoh. At the effective time of the Merger (the
"Effective Time"), each share of the common stock, $.001 par value per share, of
Savin ("Common Stock"), outstanding immediately prior thereto (other than those
shares for which appraisal rights have been properly exercised and perfected in
accordance with the General Corporation Law of the State of Delaware) will be
converted into the right to receive an amount in cash without interest equal to
$10.426 per share, assuming that: (a) common stock purchase options previously
granted to the Company's directors are cancelled prior to the Effective Time of
the merger in exchange for the payment by the Company to the directors of
$350,000 in the aggregate; and (b) the Company does not agree, pursuant to
certain provisions of the Merger Agreement, to any other reduction of the
aggregate merger consideration or escrow of a portion thereof prior to the
Effective Time. The Agreement and Plan of Merger includes provisions which
permit the parties under certain circumstances to agree to reduce the aggregate
merger consideration by an amount of up to $1,500,000, or to escrow a portion
thereof, if such a reduction or escrow becomes necessary in order to avoid the
failure of condition to the Merger. The resolution which the stockholders will
be asked to approve at the Special Meeting includes a grant of authority to the
Board of Directors to agree, if the Board of Directors deems it appropriate, to
a reduction in the aggregate merger consideration or an escrow of a portion
thereof, in an amount of up to $250,000 without solicitation of further approval
from stockholders. If the Board of Directors agrees to the maximum price
reduction or escrow authorized without a resolicitation of stockholder approval,
the amount payable in the Merger in respect of each share of Common Stock would
be reduced to $10.36. Accordingly, the per share consideration that will be
payable under the Merger Agreement could be reduced from $10.426 per share to a
price as low as $10.36 per share under certain circumstances without
resolicitation of stockholder approval if the Board of Directors deems it
appropriate. For a more complete description of the Merger Agreement and the
Merger, see "THE MERGER AGREEMENT."
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY............................................................................... 2
The Special Meeting.............................................................. 2
The Merger....................................................................... 2
Vote Required.................................................................... 4
The Effective Time of the Merger................................................. 5
Purpose and Reason for the Merger................................................ 5
Federal Tax Consequences......................................................... 5
Financing the Merger............................................................. 5
Appraisal Rights................................................................. 5
GENERAL............................................................................... 5
Proposal to be Considered at the Special Meeting................................. 5
Voting Rights and Vote Required.................................................. 6
Agreements of Majority Stockholders.............................................. 7
Proxies.......................................................................... 8
SPECIAL FACTORS....................................................................... 9
History and Background........................................................... 9
Recommendations of the Board of Directors; Fairness of the Merger................ 11
Fairness Opinion of Arthur Andersen LLP.......................................... 12
Purpose and Effects of the Merger................................................ 17
Certain Federal Income Tax Consequences.......................................... 17
Accounting Treatment............................................................. 18
Financing of the Per Share Merger Consideration.................................. 18
Capital Regulatory Matters....................................................... 18
Cancellation of Directors' Options............................................... 18
THE MERGER AGREEMENT.................................................................. 19
General.......................................................................... 19
Effective Time of the Merger..................................................... 19
Merger Consideration............................................................. 19
Possible Reduction or Escrow of Merger Consideration............................. 20
Per Share Merger Consideration................................................... 21
Conversion of Securities......................................................... 21
Representations and Warranties................................................... 21
Covenants........................................................................ 22
Conditions to Closing............................................................ 23
Termination or Amendment of Merger Agreement..................................... 24
Escrow Agreement................................................................. 24
Expenses......................................................................... 25
VOTING REQUIREMENTS................................................................... 25
APPRAISAL RIGHTS...................................................................... 26
BUSINESS INFORMATION REGARDING SAVIN.................................................. 28
General.......................................................................... 28
Products......................................................................... 28
Sources of Supply................................................................ 29
Marketing and Distribution....................................................... 29
</TABLE>
i
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Competition...................................................................... 30
Research and Development......................................................... 31
Patents and Trademarks........................................................... 31
Savin Credit Corporation......................................................... 31
Employees........................................................................ 31
BUSINESS INFORMATION REGARDING RICOH AND MERGER SUB................................... 31
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................ 31
SPECIAL FINANCIAL INFORMATION OF THE COMPANY.......................................... 32
SAVIN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................................... 34
Nine Months Ended October 1, 1994 Compared To Nine Months Ended October 2, 1993....... 34
Reorganization................................................................... 34
Results of Operations............................................................ 34
Revenues......................................................................... 34
Operating Costs and Expenses..................................................... 35
Interest Expense................................................................. 35
Other Income..................................................................... 35
Reorganization Items............................................................. 35
Extraordinary Item............................................................... 35
Year Ended January 1, 1994 Compared to Year Ended December 31, 1992................... 36
Summary.......................................................................... 36
Revenues......................................................................... 37
Costs of Sales, Service and Rentals.............................................. 37
Selling and Administrative Expenses.............................................. 37
Restructuring Charges............................................................ 38
Gain on Sale of Assets........................................................... 38
Interest Expense................................................................. 38
Reorganization Items............................................................. 38
Provision for Income Taxes....................................................... 38
Extraordinary Item............................................................... 39
Year Ended December 31, 1992 Compared to Year Ended December 31, 1991................. 39
Summary.......................................................................... 39
Revenues......................................................................... 39
Selling and Administrative Expenses.............................................. 40
Restructuring Charges............................................................ 40
Interest Expense................................................................. 40
Other Income/Expense............................................................. 40
Reorganization Charges........................................................... 40
Provision for Income Taxes....................................................... 41
LIQUIDITY AND CAPITAL RESOURCES....................................................... 41
Third Party Financing............................................................ 42
Subsidiary Financing............................................................. 42
Equipment and Other Financing.................................................... 43
PROPERTIES............................................................................ 43
LEGAL PROCEEDINGS..................................................................... 44
</TABLE>
ii
<PAGE> 9
<TABLE>
<CAPTION>
PAGE
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<S> <C>
MARKET PRICES FOR THE COMMON STOCK.................................................... 44
SECURITY OWNERSHIP OF THE COMPANY..................................................... 44
Voting Arrangements.............................................................. 44
Security Ownership of Certain Beneficial Owners and Management................... 45
INDEPENDENT AUDITORS.................................................................. 46
MISCELLANEOUS......................................................................... 46
AVAILABLE INFORMATION................................................................. 47
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.......... 48
Annex A -- Merger Agreement
Annex B -- Opinion of Arthur Andersen LLP
Annex C -- Appraisal Rights
</TABLE>
iii
<PAGE> 10
SUMMARY
The following is a summary of certain information contained in this Proxy
Statement. This summary is not intended to be a complete statement of all
material features of the Merger and is qualified in its entirety by reference to
the more detailed information appearing elsewhere in this Proxy Statement and
the Annexes hereto. Terms used but not defined in this summary have the meanings
ascribed to them elsewhere in this Proxy Statement and the Annexes hereto.
Stockholders are urged to read this Proxy Statement and the Annexes hereto in
their entirety.
THE SPECIAL MEETING
A special meeting of the stockholders of Savin will be held at 8:30 a.m. on
Friday, March 31, 1995 at Marriott's Rancho Las Palmas Resort located at 41000
Bob Hope Drive, Rancho Mirage, California. At the Special Meeting, the
stockholders of Savin will be asked to consider and vote upon a proposal to
approve and adopt an Agreement and Plan of Merger, dated December 21, 1994, by
and among Savin, Ricoh and Merger Sub. A copy of the Merger Agreement is
attached to this Proxy Statement as Annex A.
THE MERGER
The Merger Agreement provides that, conditioned upon the approval of the
Merger Agreement by the stockholders of Savin and the satisfaction of certain
other conditions, Merger Sub will be merged with and into Savin and Savin will
be the surviving corporation. Pursuant to the terms of the Merger Agreement, at
the closing of the Merger Ricoh will deposit, or cause the Merger Sub to
deposit, with the Paying Agent (as defined below) cash, cash equivalents or a
combination thereof in an amount equal to the aggregate purchase price of
$41,500,000 (the "Aggregate Merger Consideration"), subject to possible
reduction of the Aggregate Merger Consideration, or an escrow of a portion
thereof, under the circumstances described in the succeeding paragraphs.
The Merger Agreement provides that the Aggregate Merger Consideration will
be reduced in an amount equal to the amount of any payments made by Savin to its
directors in connection with the termination of stock options previously granted
to such directors. The Company intends to pay, immediately prior to the
Effective Time of the Merger, $50,000 to each director other than the Chairman
of the Board, and $100,000 to the Chairman of the Board, in connection with the
termination of options previously granted to the directors (subject to
stockholder approval) to purchase in the aggregate 155,000 shares of Common
Stock at an exercise price of $1.00 per share (the "Directors' Options").
Assuming such payments to the Savin directors are made, the Aggregate Merger
Consideration will be reduced by $350,000 and the per share amount to be
received by stockholders in the Merger will be reduced proportionally. Assuming
such payments are made and assuming no other reduction in the Aggregate Merger
Consideration is agreed to by the Board of Directors of the Company the per
share amount to be received by stockholders in the Merger will be $10.426 per
share.
The Merger Agreement also contains provisions which would enable Savin
under certain circumstances to agree to a reduction of the Aggregate Merger
Consideration (or, in some cases, to an escrow of a portion thereof) in order to
avoid the failure of certain conditions to the effectiveness of the Merger. Such
a reduction or escrow could be considered if, for example, a new litigation
filed subsequent to December 21, 1994 asserting a claim or claims in excess of
$100,000 against the Company or a similar loss contingency or material adverse
change that might result in a reduction of $2,000,000 or less in either the
value of Savin to Ricoh or the Merger Sub or the net worth of Savin from that
shown on its July 2, 1994 balance sheet were to occur prior to the Effective
Time. See "THE MERGER AGREEMENT -- Possible Reduction or Escrow of Merger
Consideration." Any such possible reduction in the Aggregate Merger
Consideration would have the effect of reducing the per share amount to be
received by the stockholders in the Merger, except that if the Company agrees to
place a portion of the Aggregate Merger Consideration in escrow, it is possible
that a portion of the amount so escrowed would subsequently be distributed to
the stockholders upon the termination of such escrow, as described herein. See
"THE MERGER AGREEMENT -- Escrow Agreement." If the Board of Directors agrees to
a price reduction or escrow of up to $250,000 which is the maximum price
reduction or
2
<PAGE> 11
escrow authorized without a resolicitation of stockholder approval, the amount
payable in the merger in respect of each share of Common Stock would be reduced
to $10.36.
The Company's Board of Directors is not at this time aware of any
circumstances which would give rise to a reduction of the Aggregate Merger
Consideration (other than payments made to the directors in connection with the
cancellation of the Directors' Options) or an escrow of a portion thereof, and
does not currently anticipate any such circumstances arising prior to the
Effective Time. The resolution regarding the Merger to be presented to the
stockholders at the Special Meeting includes explicit authorization of the
Company's Board of Directors to agree to a reduction of the Aggregate Merger
Consideration or the escrow of a portion of the Aggregate Merger Consideration
in an amount up to $250,000 (not including the $350,000 reduction which will be
triggered by the Company's payment of that amount to the Company's directors in
connection with the cancellation of the Directors' Options) without soliciting
further approval of the stockholders. Consequently, if any such circumstances
arise prior to the Effective Time, the Board of Directors will have the
authority by virtue of the approval of the Merger Agreement at the Special
Meeting to agree to an additional reduction of the Aggregate Merger
Consideration or an escrow of a portion of the Aggregate Merger Consideration in
an amount of up to $250,000. If any circumstances arise prior to the Effective
Time which would, in the Board of Director's judgment, justify a reduction of
the Aggregate Merger Consideration in an amount which exceeds $250,000, the
Board of Directors will seek stockholder approval of such reduction. See "THE
MERGER AGREEMENT -- Possible Reduction or Escrow of Merger Consideration" and
"THE MERGER AGREEMENT -- Cancellation of Directors' Options." The Aggregate
Merger Consideration, after giving effect to any reduction or escrow applicable
thereto, is referred to herein as the "Adjusted Aggregate Merger Consideration."
As a result of the Merger, each outstanding share of the Common Stock
(other than those for which appraisal rights have been properly exercised and
perfected in accordance with the General Corporation Law of the State of
Delaware) will be converted into the right to receive an amount in cash without
interest equal to: (a) the Adjusted Aggregate Merger Consideration divided by;
(b) the total number of shares of Common Stock that are (i) issued and
outstanding immediately prior to the Effective Time; and (ii) issuable pursuant
to any options to purchase Common Stock that are outstanding immediately prior
to the Effective Time, whether or not then exercisable.
As of March 2, 1995 (the "Record Date"), there were 3,946,650 shares of
Common Stock outstanding. There are no currently outstanding options to purchase
Common Stock other than the Directors' Options (which will be cancelled
immediately prior to the effectiveness of the Merger). The Company does not
intend to grant, and has agreed in the Merger Agreement that it will not grant,
any additional options prior to the effectiveness of the Merger. The Company
does not intend to issue any additional shares of Common Stock prior to the
Effective Time.
Assuming that the Directors' Options are cancelled in connection with the
payment of $350,000 to the Company's directors, and assuming that there is no
other reduction of the Aggregate Merger Consideration (or an escrow of a portion
thereof) in order to avoid the failure of a closing condition, the holders of
Common Stock will be entitled to receive an amount in cash without interest
equal to $10.426 per share. If circumstances arise which cause the Company's
Board of Directors to agree to a price reduction or escrow of $250,000 (which is
the maximum reduction or escrow which can be agreed to by the Board of Directors
without further stockholder approval), the amount payable in the Merger in
respect of each share of Common Stock will be $10.36. If any circumstances arise
prior to the Effective Time which cause the parties to the Merger Agreement to
consider a price reduction or escrow in an amount exceeding $250,000, the Board
of Directors prior to agreeing to any such reduction or escrow will request
Arthur Andersen LLP ("Arthur Andersen") to issue an opinion to the effect that
the Aggregate Merger Consideration after such reduction is fair from a financial
point of view to the holders of Common Stock. The cash amount to be payable
under the terms of the Merger Agreement in respect of each share of Common Stock
is referred to herein as the "Per Share Merger Consideration." See
"GENERAL -- Proposal to be Considered at the Special Meeting," "THE MERGER
AGREEMENT -- General," "THE MERGER AGREEMENT -- Merger Consideration."
3
<PAGE> 12
The Merger Agreement provides that Savin shall enter into an escrow
agreement (the "Escrow Agreement") with a person designated by the Company and
reasonably satisfactory to Ricoh and Merger Sub, if immediately prior to the
closing of the Merger the Company: (a) has not resolved all of the claims
brought in the Company's bankruptcy proceeding which claims are being disputed
by the Company (the "Disputed Claims"); or (b) has elected to cause a portion of
the Aggregate Merger Consideration to be placed in escrow pending the resolution
of one or more Significant Lawsuits (defined below) or Unscheduled Significant
Lawsuits (defined below). The Escrow Agreement provides for the creation of
three accounts: an expense account, a claims account and a litigation settlement
account. All Disputed Claims have been resolved. Accordingly no funds or shares
will be allocated to the claims account prior to the closing of the Merger.
Funds will be disbursed from the expense account to satisfy the expense of
maintaining the escrow accounts and the expense of resolving any Significant
Lawsuits or Unscheduled Significant Lawsuits. Funds shall issue from the
litigation settlement account in settlement of the Significant Lawsuits and
Unscheduled Significant Lawsuits. The Escrow Agreement further provides that
Savin shall appoint a stockholder representative who, together with the
Surviving Corporation, shall approve the settlement of all Significant Lawsuits
and Unscheduled Significant Lawsuits and authorize the disbursement of funds
from the escrow accounts unless disbursement has been authorized by court order.
The Escrow Agreement shall remain in effect until all such claims and lawsuits
shall be settled. Any funds remaining in the escrow accounts after the
satisfaction of all claims and lawsuits and the payment of all expenses shall be
distributed to the Savin stockholders on a pro rata basis. See "THE MERGER
AGREEMENT -- Escrow Agreement."
As soon as practicable after the Effective Time, Ricoh will cause the
Paying Agent to mail to the record holders of Common Stock instructions
regarding the surrender of their certificates, together with a letter of
transmittal for this purpose. The Per Share Merger Consideration will be
distributed to each record holder of Common Stock upon the surrender by such
stockholder of the certificate or certificates which prior to the Merger
represented shares of the Common Stock owned by such stockholder accompanied by
a duly executed letter of transmittal and such other documents as may be
required thereby. The total Per Share Merger Consideration payable to a
stockholder will be rounded down to the nearest whole cent. After the Effective
Time, each outstanding certificate which prior thereto represented shares of
Common Stock (other than shares for which appraisal rights have been properly
exercised and perfected in accordance with Section 262 of the General
Corporation Law of the State of Delaware) will represent only the right to
receive the Per Share Merger Consideration. See "THE MERGER AGREEMENT -- Merger
Consideration" and "APPRAISAL RIGHTS."
VOTE REQUIRED
The affirmative vote of a majority of the shares of the Common Stock
outstanding on the Record Date is required for approval and adoption of the
Merger Agreement. Abstentions and broker non-votes will not be voted for or
against the proposal to approve and adopt the Merger Agreement but will have the
effect of a negative vote because the affirmative vote of holders of a majority
of the outstanding shares of the Common Stock entitled to vote is required to
approve such proposal. See "GENERAL -- Voting Rights and Vote Required" and
"VOTING REQUIREMENTS."
King Holding Corporation, a Minnesota corporation ("King"); Internationale
Nederlanden Lease Structured Finance, B.V., a company organized under the laws
of the Netherlands ("ING Lease"); HCS Technology, N.V., a company organized
under the laws of the Netherlands ("HCS"); and Janos Szekeres ("Szekeres"),
(collectively, the "Majority Stockholders") own 2,591,596 shares of Common Stock
in the aggregate representing on the Record Date approximately 65% of the
outstanding shares of Common Stock. The Majority Stockholders have executed
agreements with Ricoh (the "Stockholder Agreements"), pursuant to which they
have agreed, among other things, to vote all of their shares of Common Stock,
and have granted Ricoh an irrevocable proxy giving it the right to vote those
shares in favor of the approval and adoption of the Merger Agreement. See
"GENERAL -- Voting Rights and Vote Required."
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THE EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of a Certificate of Merger
with the Office of the Secretary of State of the State of Delaware. It is
anticipated that the filing will be made promptly following the Special Meeting,
assuming that the conditions to closing, including approval of the Merger
Agreement by the stockholders of the Company, have been satisfied or, if
permissible, waived. See "THE MERGER AGREEMENT -- Effective Time of the Merger"
and "THE MERGER AGREEMENT -- Conditions to Closing."
PURPOSE AND REASON FOR THE MERGER
The purpose of the Merger is to effect the acquisition by Ricoh of the
entire equity interest in Savin. See "SPECIAL FACTORS -- Purpose and Effects of
the Merger."
FEDERAL TAX CONSEQUENCES
The receipt of the Per Share Merger Consideration pursuant to the Merger
will be a taxable transaction for the holders of the Common Stock, for federal
income tax purposes and may result in taxation to such holders under applicable
state, local and foreign or other tax laws. The gain or loss on the transaction
will be a capital gain or loss if the stock is a capital asset in the hands of
the stockholder. The tax rates will vary between and among individuals and
between individuals and corporations. See "SPECIAL FACTORS -- Certain Federal
Income Tax Consequences."
EACH STOCKHOLDER IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE MERGER,
INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS.
FINANCING THE MERGER
The Merger is not contingent on Ricoh's ability to obtain financing. See
"SPECIAL FACTORS -- Financing of Per Share Merger Consideration."
APPRAISAL RIGHTS
Pursuant to Section 262 of the General Corporation Law of the State of
Delaware ("Section 262"), any holder of the Common Stock who does not wish to
accept the Per Share Merger Consideration has the right to seek appraisal of
such holder's shares and to be paid the "fair value" thereof in cash if the
Merger is consummated and the holder strictly complies with the procedures set
forth in Section 262. Failure to comply strictly with such procedures will
result in a loss of such appraisal rights. A copy of Section 262 is attached to
this Proxy Statement as Annex C. See "GENERAL -- Voting Rights and Vote
Required" and
"APPRAISAL RIGHTS."
GENERAL
PROPOSAL TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the stockholders of Savin will be asked to consider
and vote upon a proposal to approve and adopt an Agreement and Plan of Merger,
dated December 21, 1994 (the "Merger Agreement"), by and among Savin, Ricoh
Corporation, a Delaware corporation ("Ricoh") and SC Acquisition Corp., a
wholly-owned subsidiary of Ricoh ("Merger Sub"). The resolution regarding the
Merger to be presented to the stockholders at the Special Meeting also includes
explicit authorization of the Company's Board of Directors to agree to a
reduction of the Aggregate Merger Consideration or the escrow of a portion of
the Aggregate Merger Consideration in an amount up to $250,000 (not including
the $350,000 reduction which will be triggered by the Company's payment of such
amount to the Company's directors in connection with the cancellation of the
Directors' Options) without soliciting further approval of the stockholders. If
the Board
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of Directors agree to the maximum price reduction or escrow authorized without a
resolicitation of stockholder approval, the amount payable in the Merger in
respect of each share of common stock would be reduced to $10.36.
The Merger Agreement provides for the merger (the "Merger") of Merger Sub
with and into Savin, with Savin being the surviving corporation and becoming a
wholly-owned subsidiary of Ricoh. "Surviving Corporation" shall hereinafter
refer to Savin from and after the effective time of the Merger.
At the Effective Time, each share of the Common Stock outstanding
immediately prior to the Effective Time (other than shares for which appraisal
rights have been properly exercised and perfected in accordance with the General
Corporation Law of the State of Delaware) will be converted into the right to
receive an amount in cash without interest equal to $10.426 per share, assuming
that: (a) the Directors' Options are cancelled prior to the Effective Time in
exchange for the payment by the Company to the directors of $350,000 in the
aggregate; and (b) the Company does not agree, pursuant to certain provisions of
the Merger Agreement, to a reduction of the Aggregate Merger Consideration, or
escrow of a portion thereof, prior to the Effective Time. The resolution which
the stockholders will be asked to approve at the Special Meeting will include a
grant of authority to the Board of Directors to agree, if the Board of Directors
deems it appropriate, to a reduction in the aggregate merger consideration, or
an escrow of a portion thereof, in accordance with the terms of the Merger
Agreement, in an amount of up to $250,000 without soliciting further approval of
the stockholders. If the Board of Directors agrees to the maximum price
reduction or escrow authorized without a resolicitation of stockholder approval,
the amount payable in the merger in respect of each share of Common Stock would
be reduced to $10.36.
Additionally, at the Effective Time: (a) each share of the Common Stock
held in the treasury of Savin immediately prior to the Effective Time, if any,
will be cancelled and retired and cease to exist (and no consideration will be
paid with respect thereto); (b) each option to purchase shares of Common Stock
outstanding immediately prior to the Effective Time shall be cancelled and the
holder thereof shall be entitled to receive an amount in cash without interest
for each share of Common Stock underlying such option equal to the difference
between the Per Share Merger Consideration and the exercise price of such
option; and (c) each share of the common stock of Merger Sub outstanding
immediately prior to the Effective Time will be converted into one share of the
common stock of the Surviving Corporation. A copy of the Merger Agreement is
attached to this Proxy Statement as Annex A.
VOTING RIGHTS AND VOTE REQUIRED
The Board of Directors has fixed the close of business on March 2, 1995 as
the date for determining the stockholders of the Company entitled to notice of
and to vote at the Special Meeting and any postponements or adjournments
thereof. On the Record Date, 3,946,650 shares of the Common Stock were
outstanding which were held of record by approximately 776 persons.
Each share of the Common Stock is entitled to one vote on any matter that
comes before the Special Meeting. The presence in person or by proxy of the
holders of a majority of the shares of the Common Stock outstanding on the
Record Date will constitute a quorum for the Special Meeting. Abstentions and
broker non-votes will be considered present for purposes of establishing a
quorum.
Under the General Corporation Law of the State of Delaware (the "DGCL"),
the Merger Agreement must be approved by the holders of a majority of the
outstanding shares of the Common Stock entitled to vote at the Special Meeting.
Abstentions and broker non-votes will not be voted for or against the approval
and adoption of the Merger Agreement but will have the effect of a negative vote
because the affirmative vote of holders of a majority of the shares of the
Common Stock entitled to vote is required to approve such proposal.
The Majority Stockholders, owners of record of 2,591,596 shares in the
aggregate representing on the Record Date approximately 65% of the outstanding
shares of the Common Stock, have executed and delivered the Stockholder
Agreements to Ricoh, pursuant to which they have agreed, among other things, to
vote their shares of the Common Stock entitled to be voted at the Special
Meeting and have granted Ricoh an irrevocable proxy giving it the right to vote
those shares in favor of approval and adoption of the Merger
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Agreement. The number of shares of the Common Stock held or controlled by the
Majority Stockholders is sufficient to constitute a quorum and to approve and
adopt the Merger Agreement regardless of the vote of any other stockholder of
the Company. See "GENERAL -- Agreements of Majority Stockholders."
Holders who do not vote in favor of, or who abstain from voting on, the
approval and adoption of the Merger Agreement and who comply with the provisions
of Section 262 have the right to seek appraisal of their shares and to be paid
in cash the "fair value" of their shares of the Common Stock. A copy of Section
262 is attached as Annex C to this Proxy Statement. A stockholder contemplating
the exercise of the appraisal rights provided by Section 262 should carefully
review that section, including without limitation the procedural steps required
to perfect those rights. A summary description of those rights is provided under
"APPRAISAL RIGHTS" below. A stockholder who fails to comply strictly with the
requirements under Section 262 will lose his, her or its appraisal rights and
will be entitled to the Per Share Merger Consideration for the shares of the
Common Stock held by such stockholder.
AGREEMENTS OF MAJORITY STOCKHOLDERS
The Majority Stockholders have entered into the Stockholder Agreements to
induce Ricoh to enter into the Merger Agreement. The Stockholder Agreements
contain an agreement by each Majority Stockholder not to sell, transfer, pledge,
encumber or dispose of its shares of Common Stock or enter into any commitment
or agreement to dispose of such shares. Additionally, the Majority Stockholders
have agreed to vote all of their shares of Common Stock in favor of the approval
and adoption of the Merger Agreement and against any action or agreement that
would either result in the Company's breach in any material respect of a
covenant, representation, warranty or other obligation under the Merger
Agreement or impede, interfere with or attempt to discourage the Merger.
Each Majority Stockholder has granted to Ricoh its irrevocable proxy and
power of attorney to vote all of such Majority Stockholder's shares of Common
Stock at any meeting of stockholders of the Company and to execute written
consents in order to take action without a meeting in favor of the approval and
adoption of the Merger Agreement and against any action or agreement that would
either result in a breach in any material respect of any covenant,
representation, warranty or other obligation of the Company under the Merger
Agreement or impede, interfere with or attempt to discourage the Merger.
The Stockholder Agreements grant Ricoh an option to purchase each Majority
Stockholder's shares of Common Stock upon: (a) the failure of the Company to
call a special meeting of stockholders to approve the Merger Agreement for a
date on or before April 20, 1995 or the adjournment of such meeting to a date
after April 20, 1995; (b) the failure of the Board of Directors of the Company
to recommend to the stockholders the adoption and approval of the Merger
Agreement or the withdrawal of such recommendation after it has been made; (c)
the breach by any Majority Stockholder of its agreement not to solicit,
participate in or initiate inquiries, discussions or negotiations with third
parties concerning any acquisition of shares of the capital stock of the
Company, any sale or other disposition of a material portion of the assets of
the Company or any business combination involving the Company; (d) the breach by
any Majority Stockholder of its agreement to vote all of its shares of Common
Stock in favor of the approval and adoption of the Merger Agreement and against
any action or agreement that would either result in the Company's breach in any
material respect of a covenant, representation, warranty or other obligation
under the Merger Agreement or impede, interfere with or attempt to discourage
the Merger; (e) the breach by the Company of its agreement not to solicit,
participate in or initiate inquiries, discussions or negotiations with third
parties concerning any acquisition of shares of the capital stock of the
Company, any sale or other disposition of a material portion of the assets of
the Company or any business combination involving the Company and to cause its
officers, employees, representatives, agents or affiliates controlled by it not
to take any such actions; or (f) any attempt by any Majority Stockholder to
revoke the proxy granted to Ricoh or the failure by a Majority Stockholder
timely to deliver a valid proxy in the event the validity of the proxy granted
by such Majority Stockholder is called into doubt.
The price per share of Common Stock to be paid by Ricoh upon exercise of
the options is equal to $41,500,000 less the amount of any payment made by Savin
to its directors in connection with the termination
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of the Directors' Options, divided by the total of the number of shares of
Common Stock: (a) issued and outstanding immediately prior to the closing of the
purchase of shares by Ricoh pursuant to the option; (b) issuable pursuant to the
Plan of Reorganization relating to Savin's Chapter 11 proceeding (the "Plan of
Reorganization"), in settlement of the full amount of all Disputed Claims
outstanding on such date; (c) issuable pursuant to the Directors' Options and
all other rights obligating the Company to issue shares of Common Stock; and (d)
having a value in an amount equal to the reasonably estimated cost of settling
the Disputed Claims. All Disputed Claims have previously been settled so no
additional shares will be issuable to settle or to cover the cost of settling
Disputed Claims.
Ricoh has agreed not to exercise an option to purchase shares of Common
Stock of any Majority Stockholder unless it simultaneously exercises each of the
options granted to it by the other Majority Stockholders. The closing of the
purchase of shares of Common Stock upon exercise of an option, however, shall
not be contingent upon the closing of the purchase of shares pursuant to the
other Majority Stockholders' options if Ricoh shall have attempted to exercise
the other options and shall have been ready to perform its obligations under the
Stockholder Agreements. Additionally, Ricoh has agreed that upon the purchase of
shares of Common Stock pursuant to the exercise of the options, Ricoh: (a) will
not terminate the Merger Agreement (except as specified below); (b) will perform
its obligations under the Merger Agreement; and (c) if the Merger Agreement is
terminated and the Merger has not been consummated, Ricoh shall within 180 days
after the date of such termination undertake to effect a merger of one of its
subsidiaries with and into the Company or, to the extent permitted by Delaware
law, shall make a tender offer for the shares of Common Stock not then held by
it, on terms and conditions as nearly equivalent as possible to those contained
in the Merger Agreement. Ricoh may terminate the Merger Agreement after exercise
of the options if the Effective Time shall not have occurred by August 29, 1995
or if at any time after exercise of the options the Company shall materially
breach or fail to perform in any material respect its covenants or obligations
under the Merger Agreement; provided that at the time of such breach or failure
of performance a majority of the members of the Board of Directors has not been
designated or appointed by Ricoh.
The Board of Directors has unanimously declared that the restrictions on
transfer of shares of Common Stock contained in the Company's Second Restated
Certificate of Incorporation are terminated to the extent necessary to permit
consummation of the transactions contemplated by the Merger Agreement and the
Stockholder Agreements. The purchase of 65% of the outstanding shares of Common
Stock will cause an "ownership change" under the Internal Revenue Code of 1986,
as amended (the "Code"), and Treasury Regulations proposed thereunder (the
"Treasury Regulations"). If such "ownership change" occurs it will result in the
loss by the Company of certain tax benefits arising under the Code and the
Treasury Regulations.
The Stockholder Agreements terminate upon termination of the Merger
Agreement, provided, however, that if the Merger Agreement is terminated by the
Company because the Effective Time shall not have occurred by April 20, 1995,
the Stockholder Agreements shall terminate on the date 30 days after the date of
termination of the Merger Agreement.
PROXIES
In order for a stockholder to have such holder's shares of Common Stock
voted by proxy, the stockholder should sign and return the enclosed proxy card.
The cost of soliciting these proxies will be borne by the Company. Proxies
will be solicited through the use of the mails. Arrangements will also be made
with brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of the stock held
of record by such persons and the Company may reimburse them for reasonable
out-of-pocket and clerical expenses incurred by them in connection therewith.
Stockholders who execute proxies retain the right to revoke them at any
time by giving written notice of revocation to the Secretary of the Company at
333 Ludlow Street, Stamford, Connecticut 06904, or by attending the Special
Meeting in person and voting thereat or by executing a later dated proxy. Unless
so revoked, the shares represented by the proxies solicited by the Board of
Directors of the Company will be voted in accordance with the directions given
therein by the stockholders. Any proxy not specifying to the
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contrary will be voted FOR the approval and adoption of the Merger Agreement. So
far as the Company's management is aware, such proposal is the only matter to be
acted upon at the Special Meeting. As to any other matter which may properly
come before the meeting or any postponements or adjournments thereof, the
persons designated as proxies in the accompanying proxy card will vote thereon
in accordance with their best judgment.
SPECIAL FACTORS
HISTORY AND BACKGROUND
Unsolicited Indications of Interest. During the summer of 1994, the
Company received from Ricoh, from Peter J. King and from Alco Standard
Corporation, informal expressions of a desire to discuss, among other things, a
possible strategic alliance with the Company that might include an acquisition
of all or a substantial part of the Company or some other type of alliance. Mr.
King is a member of the Board of Directors, the beneficial owner of shares of
Common Stock representing 27% of the outstanding shares of Common Stock and the
President and Chief Executive Officer of P.J. King Companies, Inc., a company in
the office products business (the "King Companies"). Alco Standard Corporation
is a publicly traded company in the office products and services business ("Alco
Standard"). Mr. King expressed an interest in causing the King Companies to
submit a proposal either individually or jointly with Alco Standard. The
Company's management reported these developments to the executive committee of
the Board of Directors (the "Executive Committee") and, at a meeting on July 27,
1994, the Executive Committee reported such developments to the Board of
Directors. The Board of Directors instructed the Executive Committee to further
explore these developments.
On July 26, 1994 the Company and Ricoh entered into a Confidentiality and
Standstill Agreement (the "Ricoh Confidentiality Agreement"), pursuant to which
the Company agreed to deliver to Ricoh certain information and granted Ricoh
access to certain books, records and other information of the Company for
purposes of allowing Ricoh to determine the feasibility of a strategic alliance
with the Company. The Confidentiality Agreement further provided that Ricoh
would keep confidential any information obtained during its review of the
Company and that for a period of three full calendar months following the
termination of discussions regarding a strategic alliance with the Company
neither Ricoh nor any of its affiliates, agents, representatives, officers or
directors would, either directly or indirectly: (a) purchase or offer to
purchase, acquire or own any shares of capital stock or other securities of the
Company; (b) solicit proxies or consents of stockholders of the Company, or
engage in any solicitation with respect to any matter in opposition to the
recommendation of the Board of Directors; (c) acquire or seek to acquire control
of the Company; or (d) intervene in any legal proceeding of the Company or in
any way in the Company's operation.
On August 1, 1994, the Company and Alco Standard entered into a
Confidentiality and Standstill Agreement containing terms and provisions
substantially similar to those contained in the Ricoh Confidentiality Agreement.
At a regular meeting of the Board of Directors on September 26, 1994 at
which all of the directors were present, the Executive Committee reported that
it had engaged in a series of preliminary discussions with Ricoh, the King
Companies and Alco Standard regarding, among other things, possible strategic
alliances or acquisitions and that it was the recommendation of the Executive
Committee that the Company should establish a procedure by which formal
proposals could be presented to the Company by any entity that wished to do so.
Mr. King advised the Board of Directors that he did not believe it was
appropriate for him to participate in the discussion of these issues as a member
of the Board of Directors or as a member of the Executive Committee. Mr. King
requested that he temporarily be removed from the Executive Committee and left
the meeting. The Board of Directors unanimously declared that Mr. Ben de Jonge,
a member of the Board of Directors, should serve on the Executive Committee
until it was appropriate for Mr. King to resume his seat on such committee. Mr.
Vintiadis, a member of the Board of Directors and the Executive Committee,
reported that the Executive Committee intended to invite Ricoh, the King
Companies and Alco Standard to submit written proposals to the Company.
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On September 29, 1994 the Executive Committee caused procedures and
guidelines for the submission of proposals to be sent to Ricoh, the King
Companies and Alco Standard.
On October 7, 1994 Ricoh submitted its proposal to the Company regarding an
acquisition transaction. The King Companies and Alco Standard declined to submit
either an individual or a joint proposal to the Executive Committee.
At a special meeting of the Board of Directors on October 15, 1994 at which
all of the directors except Mr. Anderson were present, the Executive Committee
reported that it had received a proposal from Ricoh. Mr. King advised the Board
of Directors that neither he nor the King Companies intended to submit a
proposal to the Company and Mr. King participated in the meeting. Mr. Abbott
reported that he had engaged in discussions with Ricoh on behalf of the
Executive Committee to clarify certain aspects of Ricoh's proposal. Mr. Abbott
distributed to the Board of Directors a draft letter of intent (the "Letter of
Intent") and term sheet (the "Term Sheet"), containing the terms of Ricoh's
proposal. The members of the Executive Committee discussed the Letter of Intent
and Term Sheet with the Board of Directors and recommended to the Board of
Directors that it approve such documents. The members of the Board of Directors
present at the meeting unanimously approved the Letter of Intent and Term Sheet.
Contacts and Negotiations Regarding the Merger. On October 20, 1994, Savin
and Ricoh executed the Letter of Intent and Term Sheet (together, the "Agreement
in Principle") with respect to the proposed acquisition of Savin by Ricoh. The
Agreement in Principle provided for the negotiation of an agreement by which a
wholly-owned subsidiary of Ricoh would be merged with and into Savin in exchange
for the payment of $42,000,000 in cash, subject to certain possible downward
adjustments, to the stockholders of Savin.
The Agreement in Principle also provided that Ricoh would have 20 business
days to conduct a due diligence review of the Company after which time Ricoh
would notify the Company in writing that it had completed its due diligence
review and that either: (a) Ricoh had not discovered any fact or condition which
had caused Ricoh to conclude that a document filed by the Company with the
Securities and Exchange Commission since December 14, 1993 (the "SEC Filings")
contained a statement of a material fact which was untrue when such statement
was made (a "Material Misrepresentation") or omitted to state a material fact
necessary in order to make the statements contained in such SEC Filings not
misleading (a "Material Omission"); or (b) Ricoh had discovered facts or
circumstances which had caused Ricoh to conclude that the SEC Filings contain
either a Material Misrepresentation or a Material Omission.
The Agreement in Principle further provided that Ricoh pay to the Company a
$1,000,000 termination fee if, at the end of the due diligence period, Ricoh did
not negotiate in good faith to execute and deliver, or execute and deliver in a
timely manner, a merger agreement containing customary and reasonable terms and
provisions appropriate for a transaction of size and nature comparable to the
proposed transaction. The Agreement in Principle also obligated the Company to
obtain options from a majority of Savin stockholders to purchase such
stockholders' shares of Common Stock, which stock options would make it highly
likely that Ricoh would obtain the necessary stockholder approval of its
proposed acquisition of Savin.
On October 22, 1994 a press release regarding the Agreement in Principle
was issued by Savin.
On December 2, 1994 Ricoh delivered to the Company a letter stating that it
had completed its due diligence review of the due diligence materials provided
by the Company and that it had not discovered any facts or conditions which had
caused it to conclude that the SEC Filings contained a Material
Misrepresentation or a Material Omission. In such letter Ricoh noted that
certain requested materials had not yet been provided by the Company. As a
result of Ricoh's due diligence review, the Company and Ricoh had agreed to a
reduction in the Aggregate Merger Consideration to $41,500,000 and certain
additional conditions to the effectiveness of the Merger.
On December 5, 1994 the Board of Directors held a special meeting at which
all of the directors were present. The Board of Directors unanimously approved
the Merger Agreement and recommended its adoption by the stockholders of Savin.
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Negotiations were conducted with respect to the Merger Agreement and the
Stockholder Agreements to arrive at terms and conditions mutually acceptable to
the parties thereto.
On December 21, 1994, Savin, Ricoh and Merger Sub executed the Merger
Agreement and the Majority Stockholders and Ricoh executed the Stockholder
Agreements. On December 22, 1994 a Savin press release regarding the Merger
Agreement was issued.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS; FAIRNESS OF THE MERGER
The Board of Directors of the Company has unanimously approved and adopted
the Merger Agreement as being fair to the stockholders of the Company and
recommends to the Company's stockholders that they vote FOR approval and
adoption of the Merger Agreement and the transactions contemplated thereby. In
reaching its conclusions, the principal factors considered by the Board of
Directors were as follows:
(i) The relationship of the Per Share Merger Consideration to the
historical market prices for the shares of Common Stock. The Per Share
Merger Consideration represents a significant premium over $7.25 per share
(the average of the closing bid and asked prices on October 20, 1994, the
last date that a trade was executed for the Common Stock prior to the
announcement of the Agreement in Principle);
(ii) The knowledge the Executive Committee and the Board of Directors
had regarding the Company's financial condition, business, operating
results and prospects. Although the Executive Committee and the Board of
Directors believe that the Company has adequate capital resources to
continue to conduct its business as it has historically been conducted, the
Executive Committee and the Board of Directors considered the capital
demands that may be confronted by the Company in the future in order for it
to remain competitive in a market with rapidly changing technology. The
Executive Committee and the Board of Directors reviewed and considered the
following information supplied by the Company: historical, current and
projected financial statements and information; annual reports; and annual
proxy statements. The Board of Directors also reviewed the analyses of
Arthur Andersen (described below) prepared in connection with the rendering
of Arthur Andersen's fairness opinion;
(iii) The relative certainty of Ricoh completing the Merger by virtue
of the fact that Ricoh's offer was and is not subject to any financing
contingency and the terms of the Merger Agreement provide for limited
conditions to Ricoh's and Merger Sub's obligations to close the Merger;
(iv) The fact that the Per Share Merger Consideration would be paid in
cash, which the Board of Directors believed would be desired by most
stockholders;
(v) The limited growth prospects for the Company due to changing
market conditions, increased competition, and the lack of capital to fund
future growth opportunities;
(vi) The fact that the Company had formally solicited acquisition
proposals from Alco Standard and the King Companies, as well as from Ricoh
but received a proposal only from Ricoh;
(vii) Holders of the Common Stock will have appraisal rights under
Section 262;
(viii) The fact that no third party has expressed to the Executive
Committee an interest in acquiring Savin or making a significant equity
investment in Savin since the time of the public announcement of the
Agreement in Principle.
At the December 5, 1994 Board of Directors' meeting, Arthur Andersen orally
delivered to the Board its opinion that the Per Share Merger Consideration was,
as of December 5, 1994, fair to Savin's stockholders from a financial point of
view.
In view of the wide variety of factors considered in connection with its
evaluation of the Merger and the Merger Agreement, the Board of Directors did
not find it practicable to assign relative weights to the factors considered in
reaching its decision. The Board of Directors therefore did not qualify or
otherwise attach relative weights to the specific factors considered by it.
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There are no compensation arrangements in connection with the Merger other
than fees payable by Savin to Arthur Andersen, The Pendergast Group, Inc. and
other professionals. Each of the Company's directors other than the Chairman of
the Board will receive a payment of $50,000 and the Chairman of the Board will
receive a payment of $100,000 immediately prior to the Effective Time in
connection with the cancellation of options to purchase Common Stock previously
granted to the directors subject to stockholder approval.
FAIRNESS OPINION OF ARTHUR ANDERSEN LLP
The Company retained Arthur Andersen to render a fairness opinion in
connection with the Board of Directors' consideration of the Merger Agreement.
Arthur Andersen is a well-recognized accounting, tax and other professional
services firm and has experience in company valuations and in the valuation of
businesses and their securities in connection with mergers and acquisitions,
loan transactions and other business transactions. The Board of Directors
selected Arthur Andersen to render a fairness opinion based on Arthur Andersen's
experience in company valuations and in securities valuation generally. Arthur
Andersen was not engaged to perform other services including accounting,
auditing, tax, appraisal, or other consulting services. Arthur Andersen's
services with respect to the Merger do not constitute, nor should they be
construed to constitute in any way, a review or audit of or any other procedures
with respect to any financial information nor should such services be relied
upon by any person to disclose weaknesses in internal controls, financial
statement errors or irregularities, or illegal acts or omissions of any person
affiliated with the Merger. No limitations were imposed by the Board of
Directors or the Company on the scope of the investigation by Arthur Andersen or
the procedures followed by Arthur Andersen in rendering its opinion. Arthur
Andersen was engaged solely to render a fairness opinion with respect to the
Merger Agreement and was not engaged to perform any other investment banking
services. In view of the Company's prior discussions with Alco Standard and the
King Companies, and in view of the fact that the Company was at an advanced
stage in its negotiations with Ricoh at the time Arthur Andersen was engaged,
the Board of Directors did not believe that it would be in the best interest of
the stockholders to engage Arthur Andersen to perform merger and acquisition
investment banking services. Accordingly, Arthur Andersen was not authorized to,
nor did it, solicit any indications of interest from any other party in
acquiring Savin.
On December 5, 1994, Arthur Andersen orally advised the Board of Directors
that, based on various considerations and assumptions described below, it was of
the opinion that, as of such date, the estimated $10.36 to $10.43 per share
consideration to be received by the stockholders of Savin in the Merger was fair
to such holders from a financial point of view. Arthur Andersen subsequently
reaffirmed its oral opinion by delivering a written opinion dated December 21,
1994. The full text of Arthur Andersen's written opinion, so dated, which sets
forth the assumptions made, procedures followed, matters considered and limits
of its review is attached hereto as Annex B and is incorporated by reference
herein.
In connection with its opinion, Arthur Andersen read, among other things,
(a) the Company's Annual Reports on Form 10-K filed with the Securities and
Exchange Commission (the "Commission") for the fiscal years ended December 31,
1991, December 31, 1992 and January 1, 1994, (b) the Company's Quarterly Reports
on Form 10-Q for the fiscal quarters ended April 2, 1994, July 2, 1994 and
October 1, 1994, as filed by the Company with the Commission, (c) current and
historical financial information with respect to the results of operations,
including unaudited interim financial information for the ten-month periods
ending October 30, 1993 and October 29, 1994, (d) the Company's Disclosure
Statement regarding the Plan of Reorganization, (e) the financial terms, to the
extent publicly available, of certain comparable acquisition or business
combination transactions (described below) in the office products distribution
industry specifically and in other industries generally, (f) the Agreement in
Principle, and (g) drafts and the execution copy of the Merger Agreement, and
performed such other studies, analyses and inquiries (described below) as Arthur
Andersen deemed appropriate. Arthur Andersen also read and discussed with the
management of the Company certain financial information, internal financial
statements and financial operating data concerning the Company prepared by the
Company. Such financial operating data addressed gross profit margin trends by
product category for the dealer and direct divisions, working capital
requirements, home office charges, the potential acquisition of additional
branches, the purchase of new rental equipment and sales trends among the
Company's top ten dealers. Arthur Andersen met with the Company's strategic
assessment advisor, The
12
<PAGE> 21
Pendergast Group, Inc. (the "Pendergast Group"), and the Company's management
and discussed such advisor's assessment of strategic alternatives to enhance
shareholder value and the sale process including solicitation of possible
acquirors. Arthur Andersen compared the Company's operating plan and related
projected operating results to the Plan of Reorganization to understand the
fundamental changes in the Company's current operating plan. Arthur Andersen met
with the Company's management and the Pendergast Group to discuss such factors
as the consolidation occurring in the industry due to technological changes and
intense competition, the Company's limited capital resources to fund the
replacement of the aging installed base of copiers and the impact these factors
would have on the Company's future. Arthur Andersen, the Pendergast Group and
the Company's management also discussed the strategic alternatives available to
the Company which were identified as: Savin's ability to raise additional
capital in the public markets through a public offering; the Company's ability
to raise capital from traditional lending sources on favorable terms, the
conduct of the sale process; expressions of interest received by the Company;
and Ricoh's offer to acquire the Company. Arthur Andersen also had discussions
with the Company's tax advisor, Deloitte & Touche LLP, to discuss the Company's
available net operating loss carry forward. In rendering its opinion Arthur
Andersen relied, with the permission of the Company, upon the accuracy and
completeness of all information supplied or otherwise made available to it by
the Company, and Arthur Andersen did not assume responsibility for independently
verifying such information, did not assume responsibility for undertaking an
independent appraisal of the assets or liabilities (contingent or otherwise) of
the Company and was not furnished with such appraisals. Arthur Andersen was
advised by the Company, and it assumed, that the financial information was
reasonably prepared and reflected the best currently available estimates and
judgments of management of the Company as to the expected future financial
performance of the Company.
The terms of the engagement of Arthur Andersen by the Savin Executive
Committee are set forth in a letter agreement dated November 22, 1994 between
Arthur Andersen and the Company (the "Engagement Letter"), which letter
contained an indemnification rider (the "Indemnification Rider"). Pursuant to
the terms of the Engagement Letter, the Company agreed to pay Arthur Andersen a
cash fee of approximately $115,000, $25,000 of which was paid upon the signing
of the Engagement Letter, $45,000 of which was paid at the time Arthur Andersen
informed the Board of Directors that it was ready to deliver its oral or written
opinion to the Board of Directors and the remainder of which was paid at the
time Arthur Anderson delivered its written opinion to the Board of Directors.
The Company also agreed to reimburse Arthur Andersen upon request and from time
to time for its reasonable out-of-pocket expenses, including the reasonable fees
and expenses of its legal counsel, if any, incurred in connection with the
services performed under the Engagement Letter. The obligation of the Company to
pay Arthur Andersen's fees and disbursements under the Engagement Letter was
without respect to the conclusion set forth in its opinion and was not
contingent on the consummation of the Merger. Pursuant to the Indemnification
Letter, the Company agreed to indemnify Arthur Andersen against certain
liabilities relating to or arising out of its engagement, including liabilities
under federal securities laws.
The following presentation summarizes certain financial analyses performed
by Arthur Andersen in arriving at its oral opinion of December 5, 1994 and its
confirmatory written opinion dated December 21, 1994. The following summary is
qualified in its entirety by reference to the full text of such opinion. Holders
of Common Stock are urged to and should read such opinion in its entirety.
Historical Stock Trading. Arthur Andersen analyzed the historical trading
prices and volumes of the Common Stock. Arthur Andersen determined that on
October 22, 1994, (the date on which the Company announced the execution of the
Agreement in Principle), the Per Share Merger Consideration approximated $10.36
to $10.43 per share depending upon whether the Board of Directors would agree to
a reduction of the Aggregate Merger Consideration in an amount of up to $250,000
or an escrow of a portion thereof. The Per Share Merger Consideration represents
a premium of approximately 43% to 44% over the $7.25 average of the closing bid
and asked prices per share of Common Stock two days prior to the announcement of
the execution of the Agreement in Principle and an 88% to 90% premium over the
$5.50 average of the closing bid and asked prices per share of Common Stock two
months prior to such date. Arthur Andersen also considered the price, trading
history and restrictions on trading of the Common Stock and the percentage of
such stock which had traded since May 23, 1994.
13
<PAGE> 22
Summary of Selected Publicly-Traded Companies. Arthur Andersen considered
certain financial, operating and stock market information of the Company and of
selected publicly-traded companies engaged in the office products distribution
industry. In its analysis, Arthur Andersen calculated various financial ratios
including return on equity, revenue growth rates and earnings margins and growth
rates for Tech Data Corporation, Merisel Inc., Alco Standard Corporation and
Danka Industries, Inc. Although these companies were comparable to the Company
based on certain characteristics of their businesses, none of these companies
possessed characteristics identical to those of the Company.
Arthur Andersen calculated various financial valuation multiples based on
certain publicly available information. The multiples for the latest 12 months
("LTM") were based on publicly available information as of November 28, 1994.
The multiples were as follows: (i) total market capitalization (debt less cash
plus market value of equity) as a multiple of LTM sales was a high of .98x, a
low of .11x and a harmonic mean of .25x; (ii) total market capitalization as a
multiple of LTM earnings before interest, taxes, depreciation and amortization
("EBITDA") was a high of 8.44x, a low of 4.86x and a harmonic mean of 6.84x;
(iii) total market capitalization as a multiple of earnings before interest and
taxes ("EBIT") was compared to a high of 11.13x, a low of 5.69x and a harmonic
mean of 8.50x; and (iv) total market capitalization as a multiple of stated book
value was a high of 3.51x, a low of 1.81x and a harmonic mean of 2.51x. In
evaluating the offer price, Arthur Andersen concluded that the appropriate
multiple range to consider was the range between the determined low multiple and
the harmonic mean. Harmonic mean is a calculation that minimizes the effects of
the highs and lows in determining the average of a range of numbers so that any
high or low number does not excessively skew the average of the remaining
numbers.
Arthur Andersen also prepared an analysis of total market capitalization
multiple of next fiscal year's revenue, EBITDA and EBIT for each of the selected
comparable companies. These ratios were calculated based on security analysts'
reports available for each comparable company. Total market capitalization as a
multiple for the next fiscal year's revenue was a high of .86x, a low of .07x
and a harmonic mean of .19x. The total market capitalization as a multiple of
next fiscal year's EBITDA was a high of 7.36x, a low of 3.78x and a harmonic
mean of 5.63x. Total market capitalization as a multiple of next year's EBIT was
a high of 9.73x, a low of 4.26x and a harmonic mean of 6.83x. In evaluating the
offer price, Arthur Andersen concluded that the appropriate multiple range to
consider was the range between the determined low multiple and the harmonic
mean.
In arriving at a relevant range for the Company, Arthur Andersen considered
such factors as Savin's historical and projected performance, market conditions
and the lack of liquidity of its stock when compared to that of the
aforementioned companies.
14
<PAGE> 23
Comparable Transaction Analyses. Arthur Andersen compared the prices paid
in selected merger and acquisition transactions for companies in the office
products distribution industry and the price proposed to be paid pursuant to the
Merger Agreement. The transactions analyzed and considered by Arthur Andersen
included:
<TABLE>
<CAPTION>
DATE BUYER TARGET
- - --------- ---------------------------------- ----------------------------------
<S> <C> <C>
8/16/89 Resurgens Communications Group Southern Cellular Telecom, Inc.
6/21/89 Harris Corp. Harris 3M Document Production
8/31/90 Savin Corporation Copytron
12/1/91 Gestetner Holdings PLC Savin Canada
5/8/90 Softech Inc. Information Decisions Inc.
5/16/91 Alco Standard Corporation Office Products Group (The Hillman
Companies)
1/31/94 Merisel FAB, Inc. Computerland (U.S. Franchise &
Distribution)
3/9/92 Danka Industries Inc. B.B.M. Company, Inc.
2/7/92 Danka Industries Inc. Duncan, Inc.
2/22/91 Danka Industries Inc. A-Kopy
6/9/92 Danka Industries Inc. International Calculator Sales
Inc.
4/2/91 Danka Industries Inc. Professional Business Machines
Inc.
6/9/92 Danka Industries Inc. Modern Office Machines, Inc.
4/16/93 Danka Industries Inc. Copy Products Inc.
5/1/93 Danka Industries Inc. Teak Inc.
5/14/93 Danka Industries Inc. Uni-Copy Corp.
6/28/93 Danka Industries Inc. Business Copy Products
7/1/93 Danka Industries Inc. Midwest Toner Distributors Inc.
1/1/93 Danka Industries Inc. Layne's Copy Products Co.
9/21/94 Ameriquest Robec
</TABLE>
Arthur Andersen calculated the aggregate consideration and various
financial multiples from available actual and estimated information for each
transaction. The aggregate consideration for the selected transactions ranged
from $325,000 for the acquisition of a select number of office product
distribution branch operations to a high of $463 million for the acquisition of
entire businesses. The financial multiples based on total market capitalization
were as follows: (i) sales for the LTM period were: -- approximately .25x for
the Company, which compared to a high of .70x, a low of .07x and a harmonic mean
of .31x for the acquired companies in the other transactions; (ii) EBITDA for
the LTM period was -- approximately 4.2x for the Company, which compared to a
high of 9.7x, a low of 3.57x and a harmonic mean of 6.01x for the acquired
companies in the other transactions; (iii) EBIT for the LTM period
was -- approximately 9.4x for the Company, which compared to a high of 22.30x, a
low of 3.38x and a harmonic mean of 6.28x for the acquired companies in the
other transactions; and (iv) book value at the time the transaction was
announced -- approximately 1.6x for the Company, which compared to a high of
11.81x, a low of 1.63x and a harmonic mean of 2.67x for the acquired companies
in the other transactions. In evaluating the offer price on the basis of
comparative financial performance, Arthur Andersen concluded that the
appropriate range of multiples to consider was the range between the determined
low multiple and the harmonic mean.
Discounted Cash Flow Analysis. Arthur Andersen performed a discounted cash
flow analysis using the Company's projections. Arthur Andersen calculated the
net present value of the aggregate free cash flows for the period covering the
two months ending December 31, 1994 and the three years ending December 31, 1997
using discount rates ranging from 15% to 20%. Arthur Andersen calculated the
Company's terminal value in 1997 based on a perpetuity model using the Company's
projected 1997 cash flow. Cash flow consisted of EBIT, less income taxes, plus
depreciation and amortization and less capital expenditures and changes in
working capital. The terminal value was derived assuming growth rates in
perpetuity were 1% to 5%.
15
<PAGE> 24
Using the discounted cash flow methodology described above and management's
projections of future cash flows, the implied per share values ranged from $4.52
to $7.43 before considering any potential utilization of the Company's net
operating loss carryforward ("NOL"). Including the impact of the utilization of
the NOL (see below), the implied per share value aggregated $7.02 to $10.72.
Net Operating Loss Carryforward. Arthur Andersen had discussions with the
Company's tax advisors with respect to the amount, vintage and annual
limitations (due to potential ownership changes) of the existing NOL. This
information was then applied to the Company's projected operating results to
determine the timing and potential utilization of the NOL. The tax savings was
then discounted to the present using a discount rate of 15% to 20%. The implied
per share value relating to the NOL was $2.50 to $3.29.
The preparation of a fairness opinion is a complex project. No single
analytical methodology used by Arthur Andersen was critical to its overall
conclusion as each analytical technique has its inherent strengths and
weaknesses. The nature of available information may further affect the value of
any particular methodology or technique. Arthur Andersen's conclusion was based
upon all of the analyses and factors that it considered taken as a whole and
also on the application of Arthur Andersen's experience and judgment. Its
conclusion involved significant elements of subjective judgment and qualitative
analysis. No value, merit or weight of any single technique or factor was
assigned by Arthur Andersen. Accordingly, Arthur Andersen believes that its
analysis must be considered as a whole and that to focus upon specific portions
of such analyses and factors would create an incomplete and misleading view of
the process underlying the preparation of the opinion. Arthur Andersen's
analyses and opinion were based upon forecasts and projections of future results
which are not necessarily indicative of actual future results. The forecasts and
projections were prepared by the Company for the fiscal years 1995 through 1997.
Major assumptions upon which the projections were based include (i) flat
industry-wide unit placements, (ii) continued consolidation of dealers within
the office machine industry, (iii) a slow expansion of retail volume through
copier installed base acquisitions, (iv) stabilized foreign exchange rates, and
(v) slight increase in interest rates. In performing its analysis, Arthur
Andersen made numerous assumptions as discussed above with respect to market
conditions, industry performance, general business and economic conditions and
other matters that existed as of the date of its opinion, many of which are
beyond the Company's control, and therefore are inherently imprecise. Arthur
Andersen's analyses and opinion is for the benefit and use of the Board of
Directors in its consideration of the Merger and may not be used for any other
purpose except in connection with the solicitation of proxies by the Board of
Directors to be voted at the Special Meeting. Arthur Andersen's analyses and
opinion do not constitute a recommendation to any stockholder of Savin as to how
to vote at the Special Meeting with respect to the Merger. Arthur Andersen was
not requested to opine as to, and its opinion does not address, Savin's
underlying business decision to proceed with or effect the Merger.
Prior to their engagement, Arthur Andersen informed the Board of Directors
that they have previously acted as financial adviser to the creditors committee
in connection with the Company's Chapter 11 bankruptcy filing in 1992. Some of
the current stockholders of the Company, including King, ING Lease, HCS and
Credit Lyonnais Bank Nederland N.V., were members of such creditors committee.
Arthur Andersen also served as the financial advisor for the Company in
connection with the filing of the Plan of Reorganization that was approved by
the United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court"), on December 14, 1993. Furthermore, they have provided
accounting, audit, tax and other financial services to Ricoh and its parent
corporation.
The Arthur Andersen opinion is based upon the Aggregate Merger
Consideration reduced by the $350,000 which is intended to be paid to the
Company's directors in connection with the cancellation of Directors' Options
and the possible reduction or escrow of a portion of the Aggregate Merger
Consideration in an amount up to $250,000 which may be considered by the Board
of Directors. If any circumstances arise prior to the Effective Time which cause
the parties to the Merger Agreement to consider a price reduction or escrow in
an amount exceeding $250,000, the Board of Directors prior to agreeing to any
such reduction or escrow will request Arthur Andersen to issue an opinion to the
effect that the Aggregate Merger Consideration after such reduction or escrow is
fair from a financial point of view to the holders of Common Stock.
16
<PAGE> 25
PURPOSE AND EFFECTS OF THE MERGER
The purpose of the Merger is to effect the acquisition by Ricoh of the
entire equity interest of the Company.
The acquisition of the Company by Ricoh has been structured as a merger of
Merger Sub with and into the Company with the Company as the surviving entity in
order to effectuate the foregoing purpose and to preserve the Company's existing
contractual arrangements with third parties.
The per share price was negotiated between representatives of Savin and
Ricoh. The average of the closing bid and asked prices of the Common Stock
during the 90 day period preceding the execution of the Agreement in Principle
ranged from $5.50 to $7.25.
As a result of the Merger, the entire equity interest of the Company will
be owned by Ricoh. Therefore, following the Merger, the present holders of the
Common Stock will no longer have an equity interest in the Company and will no
longer share in any future earnings or growth of the Company, the risks
associated with achieving any such earnings and growth, or the potential to
realize greater value for their shares of the Common Stock through divestitures,
strategic acquisitions or other corporate opportunities that could have been
pursued by the Company. Instead, each such holder of shares of the Common Stock
will have the right to: (a) receive an amount in cash without interest equal to
$10.426 per share of Common Stock held, assuming that the Company does not agree
to a reduction of the aggregate purchase price or an escrow of a portion thereof
prior to the Effective Time, as provided in the Merger Agreement (see
"GENERAL -- Proposal to be Considered at the Special Meeting"); or (b) to seek
appraisal rights as described below under "APPRAISAL RIGHTS" pursuant to a
transaction which has been determined by the Board of Directors, as discussed
above, to be fair to such stockholders. See "Recommendations of the Board of
Directors; Fairness of the Merger." If the Board of Directors agrees to the
maximum price reduction or escrow authorized without a resolicitation of
stockholder approval, the amount payable in the merger in respect of each share
of Common Stock would be reduced to $10.36.
Subsequent to the Merger, the registration of the Common Stock under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), will be
terminated and Savin will cease filing reports with the Commission.
The Merger Agreement is not structured so that approval of at least a
majority of unaffiliated stockholders is required.
Any holder of the Common Stock who does not wish to accept the Per Share
Merger Consideration has the right to seek appraisal of such holder's shares and
to be paid the "fair value" thereof by following the procedures prescribed in
Section 262 of the DGCL, a copy of which is attached as Annex C to this Proxy
Statement, and is summarized under "APPRAISAL RIGHTS" below. Failure to take any
of the steps required under Section 262 on a timely basis would result in the
loss of appraisal rights.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of the Per Share Merger Consideration for the Common Stock
pursuant to the Merger will be a taxable transaction for the holders of the
Common Stock for federal income tax purposes under the Internal Revenue Code of
1986, as amended (the "Code"), and also may result in taxation to such holders
under applicable state, local, foreign and other tax laws.
In general, under the Code, a stockholder will recognize gain or loss equal
to the difference between the tax basis for the shares of the Common Stock sold
and the amount of cash received in exchange therefor. Such gain or loss will be
a capital gain or loss if the shares of the Common Stock are capital assets in
the hands of the stockholder and will be long-term capital gain or loss if the
holding period for the shares of the Common Stock is more than one year.
Long-term capital gains recognized are currently taxable at a maximum rate of
28% (as compared with a maximum rate of 39.6% on ordinary income). Corporations
generally are subject to tax at a rate of 35% on both capital gains and ordinary
income. The distinction between capital gain and
17
<PAGE> 26
ordinary income may be relevant for certain other purposes, including the
taxpayer's ability to utilize capital loss carryovers to offset any gain
recognized.
The foregoing discussion of the federal income tax consequences may not be
applicable to stockholders who acquired their shares of the Common Stock
pursuant to the exercise of options or other compensation arrangements or who
are not citizens or residents of the United States or who are otherwise subject
to special tax treatment under the Code. The tax effects of the transaction
under state, local, foreign and other tax laws may be different.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED ON EXISTING TAX LAW
AS OF THE DATE OF THIS PROXY STATEMENT, WHICH MAY DIFFER ON THE DATE OF THE
CONSUMMATION OF THE MERGER OR AT THE EFFECTIVE TIME. EACH STOCKHOLDER IS URGED
TO CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO SUCH STOCKHOLDER OF THE TRANSACTION, INCLUDING THE APPLICABILITY
AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Merger will be accounted for as a "purchase" as that term is used under
generally accepted accounting principles for accounting and financial reporting
purposes.
FINANCING OF THE PER SHARE MERGER CONSIDERATION
The Merger will not be contingent upon Ricoh's ability to obtain financing.
CAPITAL REGULATORY MATTERS
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the rules and regulations thereunder, provide that certain
transactions may not be consummated until required information and materials
have been furnished to the Antitrust Division of the U.S. Department of Justice
and the Federal Trade Commission and certain waiting periods have expired or
been terminated. The respective obligations of the Company, on the one hand, and
Ricoh and Merger Sub, on the other hand, to consummate the Merger are
conditioned upon all waiting periods (and any extension thereof) applicable to
consummation of the Merger under the HSR Act having expired or been terminated.
See "THE MERGER AGREEMENT -- Conditions to Closing." Information and materials
were filed on behalf of Savin on February 9, 1995. On February 23, 1995, the
Company was notified that early termination of the requisite waiting period
under the HSR Act was granted effective as of such date.
CANCELLATION OF DIRECTORS' OPTIONS
On January 27, 1994, the Board of Directors granted to each director of
Savin options to purchase 25,000 shares of Common Stock at an exercise price of
$1.00 per share. Of the 25,000 options, 10,000 options are vested and 5,000
additional options will vest on December 14, 1995, December 14, 1996 and
December 14, 1997. On July 28, 1994, the Board of Directors granted to the
Chairman of the Board a fully-vested option to purchase 5,000 shares of Common
Stock at an exercise price of $1.00 per share. The Directors' Options were
granted to the directors subject to stockholder approval. Instead of seeking
stockholder approval of the Directors' Options at the Special Meeting, the Board
of Directors has determined to cancel such options immediately prior to the
Effective Time in exchange for the payment by the Company of $50,000 to each
director except the Chairman of the Board, and $100,000 to the Chairman of the
Board. If the Board of Directors had determined not to cancel the Directors'
Options prior to the Effective Time and had sought and obtained approval of the
Directors' Options at the Special Meeting, the Savin directors would receive in
the Merger the difference between the Per Share Merger Consideration and the
exercise price for each share of Common Stock underlying the Directors' Options
in accordance with the terms of the Merger Agreement. Assuming that the Per
Share Merger Consideration equals $10.426, the payment to each director in the
18
<PAGE> 27
Merger upon cancellation of his Directors' Options would be $235,650, and the
payment to the Chairman of the Board would be $282,780.
THE MERGER AGREEMENT
GENERAL
The Merger Agreement provides for the merger of Merger Sub with and into
Savin, with Savin being the surviving corporation. As a result of the Merger,
Savin will be a wholly-owned subsidiary of Ricoh. Merger Sub's Certificate of
Incorporation and By-laws will be the charter documents of the surviving
corporation.
The following summary of the terms of the Merger and the Merger Agreement
is qualified in its entirety by the terms of the Merger Agreement attached as
Annex A to this Proxy Statement.
EFFECTIVE TIME OF THE MERGER
The Effective Time will occur upon the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware in the manner provided
under the DGCL. The Company anticipates that the closing of the Merger
transaction and the filing of the Certificate of Merger will occur promptly
following the Special Meeting.
MERGER CONSIDERATION
Under the terms of the Merger Agreement, at the Effective Time: (a) each
share of the Common Stock outstanding immediately prior to the Effective Time
(other than shares for which appraisal rights under the DGCL have been properly
exercised and perfected) will be converted into the right to receive the Per
Share Merger Consideration; (b) each share of the Common Stock held in the
treasury of Savin immediately prior to the Effective Time, if any, will be
cancelled and retired and cease to exist (and no consideration will be paid with
respect thereto); (c) each option to purchase Common Stock outstanding
immediately prior to the Effective Time shall be cancelled and the holder
thereof shall be entitled to receive an amount in cash without interest for each
share of Common Stock underlying such option equal to the difference between the
Per Share Merger Consideration and the exercise price of such option; and (d)
each share of the common stock of Merger Sub will be converted into one share of
the common stock of the Surviving Corporation.
At the closing of the Merger, Ricoh will deposit, or cause the Merger Sub
to deposit, with the Paying Agent cash, cash equivalents or a combination
thereof in an amount equal to the Aggregate Merger Consideration, subject to
reduction of the Aggregate Merger Consideration under the circumstances
described in the next paragraph.
The Aggregate Merger Consideration may be reduced in an amount equal to:
(a) the amount of any payments made by Savin to its directors in connection with
the termination of stock options previously granted to such directors; (b) the
amount of any reduction of the Aggregate Merger Consideration that, pursuant to
the Merger Agreement, Savin may agree to in order to prevent a failure of
certain conditions to the effectiveness of the Merger; and (c) the amount of the
Aggregate Merger Consideration that, pursuant to the Merger Agreement, Savin may
agree to be placed in escrow in order to prevent a failure of certain conditions
to the effectiveness of the Merger. Each of the foregoing possible reductions in
the Aggregate Merger Consideration would have the effect of reducing the per
share amount to be received by the stockholders in the Merger, except that if
the Company agrees to place a portion of the Aggregate Merger Consideration in
escrow, it is possible that a portion of the amount so escrowed would be
distributed to the stockholders upon the termination of such escrow, as
described herein. See "THE MERGER AGREEMENT -- Escrow Agreement".
The Company intends to pay, immediately prior to the effective time of the
Merger, $50,000 to each director other than the Chairman of the Board, and
$100,000 to the Chairman of the Board, in connection with the termination of the
Directors' Options. Assuming such payment to the Savin directors is made, the
Aggregate Merger Consideration will be reduced by $350,000.
19
<PAGE> 28
POSSIBLE REDUCTION OR ESCROW OF MERGER CONSIDERATION
When the initial indications of interest regarding an acquisition were
communicated to the Company's Board of Directors, the Board of Directors
expressed considerable concern about the risk of adverse impact on the Company's
business if a proposal regarding an acquisition of the Company were publicly
announced but for any reason ultimately the acquisition was not consummated.
Accordingly, in considering the Ricoh acquisition proposal, the Company's Board
of Directors ascribed substantial weight to the fact that the Ricoh proposal was
subject only to conventional closing conditions (and not, for example, subject
to a financing condition). Because of those concerns, the Board of Directors
required that the Merger Agreement contain provisions which would enable the
Company to agree to a price reduction under certain circumstances rather than
face the risk that the Merger might not be consummated if some adverse event
occurred prior to the Effective Time.
In the event any of the representations and warranties (other than with
respect to the Company's capitalization, authority to enter into the Merger
Agreement, governing charter documents and bankruptcy reorganization and other
than as a result of any Significant Lawsuit) of the Company contained in the
Merger Agreement or any of the Majority Stockholders contained in the
Stockholder Agreements fails to be true and correct or a Material Adverse Change
(defined below) shall have occurred and such failures could not reasonably be
expected to result in a net reduction of $2,000,000 or more in either the value
of the Surviving Corporation to Ricoh or Merger Sub or the net worth of the
Company from that shown on its balance sheet dated July 2, 1994, the obligation
of Ricoh and Merger Sub to consummate the transactions contemplated by the
Merger Agreement shall remain in full force and effect provided that the Company
agrees to a reduction in the Aggregate Merger Consideration in an amount equal
to the amount by which the net reduction in value or net worth (whichever
reduction is greater) exceeds $500,000. Any reduction in the Aggregate Merger
Consideration would represent the amount of a net reduction in either the value
of the Surviving Corporation to Ricoh or Merger Sub or the net worth of the
Company from that shown on its balance sheet dated July 2, 1994 (whichever is
greater), as a result of the breach of any representation and warranty of the
Company or any Majority Stockholder set forth in the Merger Agreement or the
Stockholder Agreements, respectively, or the occurrence of any material adverse
change in the business, assets, properties, condition (financial or otherwise),
or results of operations or prospects of Savin and its subsidiaries taken as a
whole (a "Material Adverse Change"). The amount of any such reduction shall be
determined by Ricoh and may be agreed to by Savin.
The Aggregate Merger Consideration may also be reduced by an amount equal
to the amount of a net reduction in either the value of the Surviving
Corporation to Ricoh or Merger Sub or the net worth of the Company from that
shown on its balance sheet dated July 2, 1994 (whichever is greater), or such
other amounts that may be agreed to in writing by Savin, Ricoh and Merger Sub,
as a result of the existence immediately prior to the Effective Time of: (a) one
or more lawsuits existing at December 21, 1994 claiming damages in excess of
$500,000 net of amounts to be paid or reimbursed pursuant to the Company's
insurance policies and net of amounts reserved by the Company against such
lawsuits (each a "Significant Lawsuit"); or (b) one or more lawsuits arising
after December 21, 1994 claiming damages in excess of $100,000 (each an
"Unscheduled Significant Lawsuit").
In the event the Company does not agree to a reduction of the Aggregate
Merger Consideration on account of the existence of a Significant Lawsuit or an
Unscheduled Significant Lawsuit, the Company may avoid the failure of a
condition to the effectiveness of the Merger by agreeing to escrow a portion of
the Aggregate Merger Consideration equal to the net reduction in either the
value of the Surviving Corporation to Ricoh or Merger Sub or the net worth of
the Company from that shown on its balance sheet dated July 2, 1994 (whichever
is greater), resulting from the existence of a Significant Lawsuit or an
Unscheduled Significant Lawsuit. See "THE MERGER AGREEMENT -- Escrow Agreement."
The Board of Directors is not at this time aware of any circumstances which
would give rise to a reduction or an escrow of the Aggregate Merger
Consideration and does not currently anticipate any such circumstances arising
prior to the Effective Time. The resolution regarding the Merger to be presented
to the stockholders at the Special Meeting includes explicit authorization of
the Company's Board of Directors to
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agree to a reduction of the Aggregate Merger Consideration or the escrow of a
portion of the Aggregate Merger Consideration in an amount up to $250,000. If
any such circumstances arise prior to the Effective Time, the Board of Directors
will have the authority by virtue of the approval of the Merger Agreement at the
Meeting to agree to a reduction of the Aggregate Merger Consideration or an
escrow of a portion of the Aggregate Merger Consideration in an amount of up to
$250,000.
PER SHARE MERGER CONSIDERATION
The Per Share Merger Consideration shall be equal to: (a) the Adjusted
Aggregate Merger Consideration divided by; (b) the total number of shares of
Common Stock that are (i) issued and outstanding immediately prior to the
Effective Time, and (ii) issuable pursuant to any options to purchase Common
Stock that are outstanding immediately prior to the Effective Time, whether or
not then exercisable. As of March 2, 1995, there are 3,946,650 shares of Common
Stock outstanding. There are no currently outstanding options to purchase Common
Stock other than the Directors' Options (which will be cancelled immediately
prior to the effectiveness of the Merger) and the Company does not intend to
grant, and has agreed in the Merger Agreement that it will not grant, any
additional options prior to the effectiveness of the Merger.
CONVERSION OF SECURITIES
Instructions with regard to the surrender of certificates representing
shares of the Common Stock which are entitled to receive the Per Share Merger
Consideration, together with a letter of transmittal to be used for that
purpose, will be mailed by a bank or trust company designated by Ricoh and
reasonably satisfactory to the Company (the "Paying Agent"), to each holder of
record of Common Stock as of the Effective Time as soon as practicable after the
Effective Time. The Paying Agent, as soon as practicable following receipt from
a stockholder of a duly executed letter of transmittal, together with
certificates representing the shares being surrendered and any other items
specified in the letter of transmittal, shall pay such stockholder, by check,
the Per Share Merger Consideration (which aggregate amount shall be rounded down
to the nearest whole cent) to which such holder is entitled.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES FOR SHARES OF THE
COMMON STOCK WITH THE ENCLOSED PROXY CARD.
After the Effective Time, holders of certificates representing shares of
the Common Stock who do not properly exercise and perfect their appraisal rights
under Section 262 shall cease to have any rights as a stockholder of the Company
and such holder's sole right will be to receive the Per Share Merger
Consideration to which such holder is entitled. In no event will any holder be
entitled to receive any interest on the Per Share Merger Consideration to be
distributed in connection with the Merger.
At the Effective Time, the stock transfer books of Savin will be closed
with respect to shares of the Common Stock issued and outstanding immediately
prior to the Effective Time and no transfers of such shares will be made
thereafter on the Surviving Corporation's stock transfer books. Certificates
representing former shares of the Common Stock of Savin which are presented to
the Paying Agent or the Surviving Corporation will be cancelled in exchange for
the Per Share Merger Consideration.
At the closing of the Merger, Ricoh will provide the Paying Agent with
sufficient funds to enable the Paying Agent to pay the Adjusted Aggregate Merger
Consideration. The Paying Agent will hold the funds in trust and deliver the
funds (in the form of checks of the Paying Agent) to the persons entitled
thereto upon surrender of their certificates representing shares of the former
Common Stock. Any cash delivered to the Paying Agent pursuant to the Merger
Agreement and not paid upon the surrender of such certificates within six months
after the Effective Time will be delivered to the Surviving Corporation, subject
to the rights of holders of unsurrendered certificates of the Company as
provided in the Merger Agreement.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties by
each of Savin, Ricoh and Merger Sub relating to, among other things: (a)
corporate organization, existence, good standing;
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(b) corporate power and authority to enter into and perform the Merger
Agreement; (c) due authorization of the execution, delivery and performance of
the Merger Agreement (subject, in the case of Savin, to approval thereof by its
stockholders); (d) the validity and binding effect of the Merger Agreement; (e)
the Merger not conflicting with the terms of the charter documents or resulting
in breaches of any agreements; and (f) consents or approvals of governmental
bodies or any third parties.
Additionally, with respect to Savin only, the Merger Agreement contains
representations and warranties relating to, among other things: (a) corporate
power and authority to own, lease and operate its properties and carry on its
business; (b) its subsidiaries; (c) capital structure; (d) litigation; (e);
compliance with applicable laws; (f) accuracy of documents filed with the
Commission; (g) material contracts; (h) bankruptcy matters; (i) taxes; (j)
employee benefits; (k) environmental matters; and (l) the absence of Material
Adverse Changes and certain other changes.
All of the representations and warranties set forth in the Merger Agreement
will terminate as of the closing of the Merger.
COVENANTS
Savin has agreed that, from the date of the Merger Agreement until
consummation of the transactions contemplated thereby (the "Closing"), Savin
will, and will cause its subsidiaries, to conduct its business and operations in
the ordinary course consistent with past practices and except as contemplated by
the Merger Agreement, will not take certain actions without the prior written
consent of Merger Sub, which actions include without limitation: (a) amendments
to its charter documents; (b) stock splits, combinations or reclassifications;
(c) stock redemptions or reacquisitions; (d) the incurrence of indebtedness
(other than the short-term borrowing of working capital in the ordinary course
of business and consistent with past practice); (e) the issuance, sale or grant
of any shares of its capital stock other than upon the settlement, in accordance
with the Plan of Reorganization, of claims raised in the Company's bankruptcy
proceeding that have not been settled prior to the date of the Merger Agreement;
(f) the sale or pledge of any assets (other than in the ordinary course of
business and consistent with past practice); (g) the modification of employment
arrangements or the grant of salary increases, bonuses or severance pay (other
than in the ordinary course of business and consistent with past practice); (h)
entering into any other agreements, commitments or contracts which are material
to the Company; (i) the material modification of any existing agreement or the
conduct of its business or operations; (j) the making of a material investment
of a capital nature; (k) the waiver of any rights of value (other than in the
ordinary course of business and consistent with past practice); or (l) the
authorization or proposing of any of the foregoing or entering into any
contract, agreement or commitment to do any of the foregoing.
The Company has agreed (the "No Inconsistent Activities Covenant"), that
until the Effective Time it will not solicit, participate in or initiate
inquiries, discussions or negotiations with third parties or provide assistance
or information to third parties concerning any acquisition of shares of the
capital stock of the Company, any sale or other disposition of a material
portion of the assets, rights or operations of the Company or any business
combination involving the Company (collectively, a "Transaction") or otherwise
facilitate any efforts to accomplish any of the foregoing and will not cause or
permit its officers, employees, representatives, agents or affiliates controlled
by it and will instruct its directors not to solicit, participate in or initiate
inquiries, discussions or negotiations with third parties or provide assistance
or information to third parties concerning a Transaction or otherwise facilitate
any efforts to accomplish any of the foregoing. Savin may engage in such
activities, upon the written advice of its outside counsel, only to the extent
required for the Board of Directors to act in a manner that is consistent with
its fiduciary obligations under the DGCL. Immediately upon deciding to take any
such action, Savin shall notify Ricoh and Merger Sub of such action, each of
whom shall have the unilateral right to terminate the Merger Agreement.
Savin has agreed to pay to Ricoh and Merger Sub a $1,000,000 termination
fee (the "Termination Fee") upon the occurrence of any of the following events
(each a "Termination Event"): (a) a termination of the Merger Agreement by Ricoh
or Merger Sub based on a breach by the Company of the No Inconsistent Activities
Covenant; (b) the commencement on or before April 20, 1995 of a tender offer or
exchange offer
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for 20% or more of the outstanding voting securities of the Company and the
failure of the Board of Directors, within 10 business days after receipt of such
offer, to unconditionally reject such offer and recommend that the Company's
stockholders reject such offer; and (c) the entering into an agreement by the
Company on or before June 4, 1995, with any party other than Ricoh and Merger
Sub with respect to a Transaction, provided, however, that the Company may enter
into an agreement after April 20, 1995 respecting (i) the issuance of shares of
Common Stock that do not, in the aggregate constitute more than 5% of the
outstanding shares of Common Stock, or (ii) the sale of assets that do not, in
the aggregate, constitute more than 25% of the total value of the Company's
tangible assets net of reserves against such assets, without such agreement
being a Termination Event. Payment of the Termination Fee upon the occurrence of
a Termination Event shall relieve the Company of any liability to either Ricoh
or Merger Sub for any fees or expenses incurred in connection with the Merger
Agreement or damages or losses of any kind incurred as a result of the
termination of the Merger Agreement.
Savin has agreed to give representatives of Ricoh and Merger Sub access, at
all reasonable times prior to the Effective Time to its premises, books and
records, contracts, agreements and commitments. Ricoh and Merger Sub completed
their due diligence review of the Company prior to the date of the Merger
Agreement. The right of access and information granted to Ricoh and Merger Sub
pursuant to the Merger Agreement is limited to: (a) specific matters that relate
to a representation or warranty of the Company in the Merger Agreement as to the
material accuracy of which Ricoh or Merger Sub shall have a reasonable basis for
concern; (b) specific matters that relate to a covenant or agreement of the
Company in the Merger Agreement as to the material performance of which by the
Company Ricoh or Merger Sub shall have a reasonable basis for concern; (c)
specific matters that Ricoh or Merger Sub have a reasonable concern may
constitute a Material Adverse Change with respect to the Company; and (d)
matters that Ricoh or Merger Sub may reasonably need to know or understand prior
to the Effective Time in connection with Ricoh's management and development of,
and plans with respect to, the Company and its subsidiaries and their assets
from and after the Effective Time.
Savin has agreed to give Ricoh and Merger Sub notice of any: (a) material
default or event that would become a material default under any material
contract or agreement; (b) notice from any third party alleging that the consent
of such third party is or may be required in connection with the Merger; (c)
notice from any regulatory authority in connection with the Merger; (d) Material
Adverse Change or any event that could reasonably be expected to result in such
change; and (e) legal action commenced, or to Savin's knowledge, threatened
against or relating to the Company.
Ricoh has agreed not to amend the indemnification provisions in the
Surviving Corporation's Certificate of Incorporation for a period of three years
from the Effective Time in a manner that would lessen or otherwise adversely
affect the indemnification provided thereunder, except as may be required by
law.
The Merger Agreement contains various covenants by each of Savin, Ricoh and
Merger Sub relating to, among other things: (a) using reasonable commercial
efforts to take all action needed to be taken to consummate the Merger; (b)
public announcements; (c) compliance with the Exchange Act; and (d)
indemnification from any claim for brokers' or finders' fees.
Additionally, with respect to Savin only, the Merger Agreement contains
covenants relating to, among other things: (a) approval and adoption of the
Merger Agreement by Savin stockholders; (b) the execution and delivery of an
escrow agreement, if necessary; and (c) obtaining consents and waivers to the
transactions contemplated by the Merger Agreement.
CONDITIONS TO CLOSING
The obligations of Ricoh and Merger Sub to consummate the transactions
contemplated by the Merger Agreement are subject to the satisfaction of certain
conditions including without limitation: (a) approval and adoption of the Merger
Agreement by the requisite vote of the stockholders of the Company; (b) receipt
of an opinion from counsel to Savin; (c) the expiration or termination of any
waiting period applicable to the Merger under the HSR Act; (d) the final
resolution of all claims brought against the Company by the New York State
Department of Environmental Conservation relating to the Company's former
property in Owego,
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New York (which has already been accomplished); (e) the performance in all
material respects by the Company and by the Majority Stockholders of their
respective covenants under the Merger Agreement and their respective Stockholder
Agreements; (f) the absence of (i) any governmental order, statute, rule,
regulation, executive order, stay, decree, judgment or injunction preventing
consummation of the Merger; or (ii) any Material Adverse Change; and (g) the
truth and correctness, in all material respects, of the representations and
warranties of Savin contained in the Merger Agreement and each of the Majority
Stockholders contained in the Stockholder Agreements. In the event any of the
representations and warranties (other than with respect to the Company's
capitalization, authority to enter into the Merger Agreement, governing charter
documents and bankruptcy reorganization and other than as a result of any
Significant Lawsuit) of the Company contained in the Merger Agreement or any of
the Majority Stockholders contained in the Stockholder Agreements fails to be
true and correct or a Material Adverse Change shall have occurred and such
failures could not reasonably be expected to result in a net reduction of
$2,000,000 or more in either the value of the Surviving Corporation to Ricoh or
Merger Sub or the net worth of the Company from that shown on its balance sheet
dated July 2, 1994, the obligation of Ricoh and Merger Sub to consummate the
transactions contemplated by the Merger Agreement shall remain in full force and
effect provided that the Company agrees to a reduction in the Aggregate Merger
Consideration in an amount equal to the amount by which the net reduction in
value or net worth (whichever reduction is greater) exceeds $500,000.
The obligation of Savin to consummate the transactions contemplated by the
Merger Agreement is subject to certain conditions including, without limitation:
(a) approval and adoption of the Merger Agreement by the requisite vote of the
stockholders of Savin; (b) receipt of an opinion from counsel to Ricoh and
Merger Sub; (c) the absence of any governmental order, statute, rule,
regulation, executive order, stay, decree, judgment or injunction preventing
consummation of the Merger; (d) the truth and correctness, in all material
respects, of the representations and warranties of Ricoh and Merger Sub
contained in the Merger Agreement; (e) the performance and compliance by each of
Ricoh and Merger Sub in all material respects of its obligations under the
Merger Agreement; and (f) the expiration or termination of any waiting period
applicable to the Merger under the HSR Act.
TERMINATION OR AMENDMENT OF MERGER AGREEMENT
At any time prior to the Effective Time, the Merger Agreement may be
terminated at any time notwithstanding approval thereof by the stockholders of
Savin: (a) by mutual action of Savin, Ricoh and Merger Sub; (b) by Ricoh or
Merger Sub if the Company or any of the Majority Stockholders shall have
materially breached or failed to perform in any material respects its covenants
or obligations contained in the Merger Agreement or the Stockholder Agreements,
respectively; (c) by Ricoh, Merger Sub or the Company if there shall have been
issued any final, nonappealable governmental order, decree or ruling or there
shall have been taken any other action restraining, enjoining or otherwise
prohibiting the Merger; or (d) by Ricoh, Merger Sub or the Company if the
Effective Time shall not have occurred by April 20, 1995.
Such entities also may amend the Merger Agreement at any time prior to the
Effective Time provided that an amendment made subsequent to the adoption of the
Merger Agreement by the stockholders of Savin may not: (a) alter or change the
amount or kind of consideration to be delivered to the stockholders of the
Company; (b) alter or change any term of the Certificate of Incorporation of the
Surviving Corporation; or (c) alter or change any of the terms and conditions of
the Merger Agreement if such alteration or change would adversely affect the
stockholders of Savin.
ESCROW AGREEMENT
The Company has agreed to enter into an escrow agreement (the "Escrow
Agreement") with a person designated by the Company and reasonably satisfactory
to Ricoh and Merger Sub (the "Escrow Agent"), if immediately prior to the
closing of the Merger, the Company: (a) has not resolved all of the Disputed
Claims; or (b) has elected to cause a portion of the Aggregate Merger
Consideration to be placed in escrow pending the resolution of one or more
Significant Lawsuits or Unscheduled Significant Lawsuits. The Company has
previously settled all of the Disputed Claims. In the event any Significant
Lawsuits or Unscheduled Significant Lawsuits exist immediately prior to the
Effective Time and the Company has elected to cause an
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agreed-upon portion of the Aggregate Merger Consideration to be placed in escrow
pending the resolution of such lawsuits, the Surviving Corporation shall cause
such amounts to be delivered to the Escrow Agent at the Effective Time.
The shares of Common Stock delivered to the Escrow Agent shall be
converted, at the Effective Time, into the right to receive the Per Share Merger
Consideration. The Escrow Agent shall tender the Common Stock for the Per Share
Merger Consideration and shall deposit the Per Share Merger Consideration into
an expense account (the "Expense Account"). Funds will be disbursed from the
Expense Account to pay the cost and expense of settling any Significant Lawsuits
and any Unscheduled Significant Lawsuits. Any portion of the Aggregate Merger
Consideration delivered to the Escrow Agent for distribution upon settlement of
any Significant Lawsuits or Unscheduled Significant Lawsuits shall be divided
appropriately between a litigation settlement account (the "Litigation
Settlement Account") and the Expense Account.
Savin shall appoint a representative of the Savin stockholders (the
"Stockholders' Representative") to approve, together with the Surviving
Corporation, the settlement of any Significant Lawsuits and Unscheduled
Significant Lawsuits. Additionally, the Stockholders' Representative shall,
together with the Surviving Corporation, authorize the Escrow Agent to make
distributions from time to time from the Litigation Settlement Account upon the
settlement of Significant Lawsuits or Unscheduled Significant Lawsuits and from
the Expense Account to pay the costs thereof and the costs of maintaining the
escrow. If at any time any Significant Lawsuit or Unscheduled Significant
Lawsuit is settled for an amount that is less than the amount that shall be set
forth on a schedule to the Escrow Agreement, the Stockholders' Representative
may instruct the Escrow Agent to transfer the difference between such amounts
from the Litigation Settlement Account to the Expense Account. In the event the
Expense Account becomes depleted, the Surviving Corporation shall be entitled to
receive the balance of the funds from the Litigation Settlement Account.
Upon receipt by the Escrow Agent of a written notice or a final court order
stating that the Significant Lawsuits and Unscheduled Significant Lawsuits have
been settled or otherwise finally resolved and all amounts payable from the
Expense Account and the Litigation Settlement Account have been paid, the Escrow
Agent shall distribute any remaining sums less all costs, expenses and fees
incurred or estimated to be incurred by the Escrow Agent to all stockholders
entitled to such distribution, on a pro-rata basis.
No stockholder who has properly executed and perfected appraisal rights
under Section 262 of the Delaware General Corporation Law (each such shareholder
a "Dissenting Stockholder") shall be entitled to participate in any distribution
to stockholders unless such Dissenting Stockholder has effectively withdrawn or
lost its right to appraisal and payment prior to the making of a distribution.
EXPENSES
Whether or not the Merger is consummated, all costs and expenses incurred
in connection with the Merger will be the responsibility of the party incurring
the same. However, upon the occurrence of a Termination Event, Savin will be
required to pay the Termination Fee in satisfaction of all: (a) fees or expenses
incurred by Ricoh and Merger Sub in connection with the Merger Agreement and the
transactions contemplated thereby; and (b) damages or losses of any kind
incurred by Ricoh or Merger Sub as a result of such termination. See "THE MERGER
AGREEMENT -- Covenants."
VOTING REQUIREMENTS
Under the DGCL, the Merger Agreement must be approved by the holders of a
majority of the outstanding shares of the Common Stock entitled to vote at the
Special Meeting. Abstentions and broker non-votes will not be voted for or
against the proposal to approve and adopt the Merger Agreement but will have the
effect of a negative vote because the affirmative vote of holders of a majority
of the shares of the Common Stock entitled to vote is required to pass such
proposal.
The Majority Stockholders have agreed with Ricoh to vote all of their
shares of the Common Stock in favor of the approval and adoption of the Merger
Agreement, which shares represent approximately 65% of the shares of the Common
Stock entitled to vote at the Special Meeting and have granted Ricoh an
irrevocable
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proxy to so vote such shares. The number of shares of the Common Stock held or
controlled by the Majority Stockholders represents a majority of the shares of
the Common Stock entitled to vote on the Merger Agreement and, if voted in favor
of the Merger Agreement, will be a sufficient number to approve the Merger
Agreement.
The Board of Directors of the Company recommends a vote FOR adoption and
approval of the Merger Agreement.
APPRAISAL RIGHTS
Holders of record of the Common Stock who comply with the applicable
statutory procedures summarized herein will be entitled to appraisal rights
under Section 262. A person having a beneficial interest in the Common Stock
held of record in the name of another person, such as a broker or nominee, must
act promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect appraisal rights.
The following discussion is not a complete statement of the law pertaining
to appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262 which is reprinted in its entirety as Annex C to this Proxy
Statement. All references in Section 262 and in this summary to a "stockholder"
are to the record holder of shares of the Common Stock as to which appraisal
rights are asserted.
The failure of a stockholder to vote against a proposal will not, in and of
itself, constitute a waiver of such stockholder's appraisal rights under Section
262.
Under the DGCL, holders of shares of the Common Stock who follow the
procedures set forth in Section 262 will be entitled to have their shares
appraised by the Delaware Chancery Court and to receive payment in cash of the
"fair value" of such shares at the Effective Time, exclusive of any element of
value arising from the accomplishment or expectation of the Merger, together
with a fair rate of interest, if any, as determined by such court.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, the corporation not less than 20 days prior to the
meeting, must notify each of its stockholders who was a stockholder on the
record date for such meeting with respect to shares for which appraisal rights
are available, that appraisal rights are so available, and must include in such
notice a copy of Section 262. This Proxy Statement constitutes such notice to
the holders of the Common Stock of the Company on the Record Date and a copy of
Section 262 is attached to this Proxy Statement as Annex C. Any stockholder who
wishes to exercise such appraisal rights or who wishes to preserve his, her or
its right to do so should review the following discussion and Annex C carefully
because the failure timely and properly to comply with the procedures specified
will result in the loss of appraisal rights under Section 262.
A holder of shares of the Common Stock wishing to exercise such holder's
appraisal rights (i) must not vote in favor of adoption of the Merger Agreement
and (ii) must deliver to the Company prior to the vote on the Merger Agreement
at the Special Meeting, a written demand for appraisal of such holder's shares
of the Common Stock. The written demand must inform the Company of the identity
of the stockholder and that he, she or it intends thereby to demand appraisal of
his, her or its shares. Voting against (whether in person or by proxy),
abstaining from voting or failing to vote on approval and adoption of the Merger
Agreement will not constitute a demand for appraisal within the meaning of
Section 262. All written demands for appraisal should be sent or delivered to
the Company at 333 Ludlow Street, Stamford, Connecticut 06904, Attention: Chief
Financial Officer.
A holder of shares of the Common Stock who wishes to exercise such holder's
appraisal rights must be the record holder of such shares on the date the
written demand for appraisal is made and must continue to hold such shares of
record until the Effective Time. Accordingly, a holder of the Common Stock who
is the record holder of shares of the Common Stock on the date the written
demand for appraisal is made, but who thereafter transfers such shares prior to
the Effective Time, will lose any right to appraisal in respect of such shares.
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Only a holder of record of shares of the Common Stock is entitled to assert
rights for shares of the Common Stock registered in that holder's name. A demand
for appraisal should be executed by or on behalf of the holder of record, fully
and correctly, as such holder's name appears on such holder's stock
certificates. If shares of the Common Stock are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the demand
should be made in that capacity, and if the shares of the Common Stock are owned
of record by more than one person as in a joint tenancy or tenancy in common,
the demand should be executed by or on behalf of all joint owners. An authorized
agent, including an agent for two or more joint owners, may execute a demand for
appraisal on behalf of a holder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, the agent is agent for such owner or owners. A record holder such as a
broker who holds shares of the Common Stock as nominee for several beneficial
owners may exercise appraisal rights with respect to shares of the Common Stock
held for one or more beneficial owners while not exercising such rights with
respect to the shares of the Common Stock held for other beneficial owners. In
such case, the written demand should set forth the number of shares of the
Common Stock as to which appraisal is sought. If the number of shares is not set
forth, the demand will be treated as a demand as to all shares of the Common
Stock held in the name of the record owner. Stockholders who hold their Common
Stock in brokerage accounts or other nominee forms and who wish to exercise
appraisal rights are urged to consult with their brokers to determine the
appropriate procedures for the making of a demand for appraisal by such a
nominee.
The Surviving Corporation will within 10 days after the effective date of
the Merger notify each stockholder of Savin who has complied with the statutory
requirements summarized above that the Merger has become effective. Within 120
days after the effective date of the Merger, but not thereafter, the Surviving
Corporation or any stockholder who has complied with the statutory requirements
summarized above may file a petition in the Delaware Chancery Court demanding a
determination of the value of the stock for all such stockholders. The Company
has no obligation to and has no present intention to file a petition with
respect to the appraisal of the fair value of the shares of the Common Stock.
Accordingly, it is the obligation of the stockholders to initiate all necessary
action to perfect their appraisal rights within the time prescribed in Section
262.
Within 120 days after the effective date of the Merger, any stockholder who
has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the Surviving Corporation a
written statement setting forth the aggregate number of shares of the Common
Stock not voted in favor of adoption and approval of the Merger Agreement and
with respect to which demands for appraisal have been received and the aggregate
number of holders of such shares. Such statements must be mailed within 10 days
after a written request therefor has been received by the Company.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine the stockholders entitled
to appraisal rights and will appraise the "fair value" of their shares of the
Common Stock, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. Stockholders
considering seeking appraisal should be aware that the fair value of their
shares of the Common Stock as determined under Section 262 could be more than,
the same as or less than the Per Share Merger Consideration they would receive
pursuant to the Merger Agreement if they did not seek appraisal of their shares
of the Common Stock and that investment banking opinions as to fairness from a
financial point of view are not necessarily opinions as to fair value under
Section 262. The Delaware Supreme Court has stated that proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court should be considered in the
appraisal proceedings.
The Delaware Chancery Court will determine the amount of interest, if any,
to be paid upon the amounts to be received by person whose shares of the Common
Stock have been appraised. The costs of the action may be determined by the
Delaware Chancery Court and taxed upon the parties as the Delaware Chancery
Court deems equitable in the circumstances. Upon application of a stockholder,
the Delaware Chancery Court may also order that all or a portion of the expenses
incurred by any stockholder in connection with an appraisal, including, without
limitation, reasonable attorney's fees and the fees and expenses of experts
utilized in the appraisal proceedings, be charged pro rata against the value of
all of the shares entitled to an appraisal.
27
<PAGE> 36
Any holder of shares of the Common Stock who has duly demanded an appraisal
in compliance with Section 262 will not, after the Effective Time, be entitled
to vote the shares subject to such demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares (except dividends or
other distributions payable to holders of record of shares of the Common Stock
as of a record date prior to the effective date of the Merger).
If any stockholder who properly demands appraisal of such stockholder's
shares of the Common Stock under Section 262 fails to perfect, or effectively
withdraws or loses, such stockholder's right to appraisal, the shares of the
Common Stock of such stockholder will be converted into the right to receive the
Per Share Merger Consideration. A stockholder will fail to perfect, or
effectively withdraw or lose, such stockholder's right to appraisal if, among
other things, no petition for appraisal is filed within 120 days after the
Effective Time, or if the stockholder delivers to the Company a written
withdrawal of such stockholder's demand for appraisal and acceptance of the Per
Share Merger Consideration. Any such attempt to withdraw an appraisal demand
more than 60 days after the Effective Time of the Merger will require the
written approval of the Company.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 FOR PERFECTING
APPRAISAL RIGHTS WILL RESULT IN THE LOSS OF SUCH RIGHTS (IN WHICH EVENT A
STOCKHOLDER WILL BE ENTITLED TO RECEIVE THE PER SHARE MERGER CONSIDERATION WITH
RESPECT TO HIS, HER OR ITS SHARES OF THE COMMON STOCK IN ACCORDANCE WITH THE
MERGER AGREEMENT).
BUSINESS INFORMATION REGARDING SAVIN
GENERAL
Savin, a Delaware corporation organized in 1978 to succeed a predecessor
company founded in 1959, is a distributor of monochromatic plain paper copiers,
facsimile machines and related supplies and accessories throughout the United
States and its territories (collectively, the "United States"). The Company
sells and services its products through a network of approximately 312
independent dealers, most of which are non-exclusive, operating in approximately
451 locations, eleven Company-owned regional branches, and one joint venture
dealership. The Company is the only distributor of copier products in the United
States that distributes copiers using both liquid and powder-imaging
technologies.
The Company's principal executive offices are located at 333 Ludlow Street,
Stamford, Connecticut 06904 and its telephone number is (203) 967-5000.
PRODUCTS
The Company distributes monochromatic plain paper copiers and related
supplies and accessories. Savin also distributes commercial facsimile machines
and related supplies and accessories.
Monochromatic Copiers. The Company initiated liquid-copying technology in
the United States and is the only distributor of both liquid and powder toner
copiers in the United States.
The Company offers a full line of monochromatic plain paper copiers
manufactured by Ricoh capable of producing ten to eighty copies-per-minute
utilizing dry and liquid toners. Approximately 75% of the current models are dry
toner models. Savin's copiers offer a wide variety of features and options,
including sorting, variable reduction and enlargement, automatic two-sided
copying, high-capacity paper trays, semi-automatic and automatic document
feeders, editing, coin-operated copying, and variable, single-color copying
capability. Savin sells paper, parts and other supplies for its products, and
provides product servicing.
In 1989, the Company became a non-exclusive distributor of a full-color
copier developed by and purchased from Colorocs, and manufactured, until 1991,
by Sharp Corp. under the name "Prism(R) I." In 1991, Savin discontinued
purchasing any additional full-color copiers and has liquidated its inventory of
new full-color copiers and its rental base of color copiers. Savin will continue
to service its existing installed color copier base.
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<PAGE> 37
Since 1992, the Company has expanded its copier line by introducing
seventeen new models of monochromatic copiers, including four new models of
monochromatic copiers introduced in 1994.
Facsimile Machines. Since 1991, the Company has introduced seven new
models of facsimile machines including three new models in 1993 and one new
model in 1994, manufactured by Ricoh, in Japan.
Paper Shredders. The Company began marketing paper shredders in 1994 and
currently offers four models of paper shredders.
SOURCES OF SUPPLY
All of Savin's monochromatic copiers are manufactured and assembled by
Ricoh in Japan, China, Hong Kong and the United States. In 1987, Savin extended,
through December 31, 1995, its original equipment manufacturing relationship
pursuant to an agreement with Ricoh (the "Ricoh Agreement"). The Ricoh Agreement
requires Ricoh to supply Savin with liquid and powder toner copiers. If Savin
were to fail to make, or make provisions for, scheduled payments to Ricoh for
purchases of copiers and accessories in accordance with the Ricoh Agreement,
Ricoh's obligations to provide such copiers and accessories would terminate, at
Ricoh's option.
Ricoh also supplies Savin with a line of facsimile machines for
distribution in the United States on a nonexclusive basis.
The Company is not aware of any current or impending limitations on Ricoh's
ability to deliver products. Delivery could be affected by unforeseen events,
including manufacturing disruptions, shipping or dock strikes, or the imposition
of import or export quotas or controls. Deliveries from Ricoh have been
interrupted from time to time during 1991 and 1992 due to Savin's cash
constraints. Since Savin relies on Ricoh as its only supplier of monochromatic
copiers and as its only supplier of facsimile machines, maintaining its
relationship with Ricoh is critical to Savin's operations. In 1993, revenues
from sales, rentals and service of Ricoh-manufactured equipment and parts
accounted for 97% of Savin's revenues.
Savin sells, under its own name, copier paper purchased primarily from
Georgia-Pacific, which also sells copier paper in competition with Savin. Savin
purchases dry and liquid toners, parts and drums from Ricoh, a competitor of
Savin in the dry toner, parts and drum markets, and from certain other vendors.
MARKETING AND DISTRIBUTION
The Company markets and distributes its products in the United States
through eleven Company-owned regional branches, one joint venture dealership (in
which Savin has a minority interest) and approximately 312 independent dealers,
most of which are non-exclusive, operating in approximately 451 locations.
Savin has exclusive distribution rights through December 31, 1995 for
Ricoh-manufactured liquid toner copiers in the United States. However, if Savin
were to fail (and if such failure is not waived by Ricoh) to make scheduled
payments to Ricoh for copiers and accessories, Savin's liquid toner distribution
rights, at Ricoh's option, would become semi-exclusive. Savin believes that
through use of the $18 million working capital facility provided by Foothill
Capital Corporation (the "Foothill Facility") and two standby letters of credit
in favor of Ricoh (the "Security Pacific L/C's") it will be able to provide for
scheduled payments to Ricoh in accordance with the Ricoh Agreement. However, if
Ricoh were to take such action, Savin believes that a significant investment
would be required by Ricoh to develop a distribution system for marketing liquid
toner copiers. Savin also has non-exclusive marketing rights for
Ricoh-manufactured powder toner copiers and facsimile machines distributed by
Savin. In 1992, Savin discontinued marketing the Colorocs full-color copier.
The Company provides a full range of dealer support services, including
cooperative advertising, competitive pricing strategies, incentive programs,
sales and service training and refresher courses. The Company also offers
financing programs to dealers and end users to assist them in acquiring Savin's
products. See "BUSINESS INFORMATION REGARDING SAVIN -- Savin Credit
Corporation."
29
<PAGE> 38
For additional information on sales and rental revenues, see generally,
"SAVIN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS."
As of January 1, 1994, Savin had an aggregate dollar amount of backlog
orders for certain products of approximately $2.7 million, compared to $.8
million as of December 31, 1992. Savin attempts to fill such backlog orders
within thirty days. Savin believes that the dollar amount of firm backlog orders
is not material to its operations.
Savin has been a supplier of copiers, parts, supplies and services to the
United States government for over five years, and also supplies state
governments and municipalities throughout the country. The United States
government and its federal agencies accounted for between 9% and 17% of Savin's
revenues in each of its last six years. In October 1993, Savin was awarded a
three-year non-exclusive General Services Administration ("GSA") contract to
supply the United States government with copiers and related supplies, parts and
services. In September 1990, Savin was awarded sixteen "cost-per-copy" one-year
contracts (with respect to most of which the United States government has had
options to renew for three successive years), providing for the rental, to the
United States government and federal agencies, of approximately 4,400 rental
machines. Most of such contracts terminated on or before September 30, 1994.
Savin's copiers are in use in all 50 states.
The contracts relating to sales and service to the federal government and
state governments and their respective agencies frequently include provisions
for pricing adjustments in certain situations, and such federal and state
government contracts are subject to termination at the election of the federal
or state governments or their respective agencies. Pricing for certain
governmental agencies may be subject to audit by such agencies. No customer of
Savin, other than governmental bodies or their agencies, accounted for 5% of
Savin's revenues during any of the last five years.
Savin warrants its new copiers to retail customers for ninety days from the
date of installation and provides service at no additional charge during such
warranty period. In addition, Savin offers, after the expiration of such ninety
day warranty period, equipment service to its retail customers pursuant to
service contracts and on a per-call basis. Savin also sells paper, parts, toner
and other supplies for its products. Savin's dealers are responsible for the
service (including service under warranty) of machines sold by them, for which
they receive no additional compensation from Savin.
COMPETITION
Monochromatic Copiers. The monochromatic copier industry is a mature
industry. The market for Savin's monochromatic copiers is highly competitive and
the factors affecting competition are subject to change. The market is dominated
by Canon, Sharp and Xerox. Approximately seventeen other competitors, including
Ricoh, Kodak, Minolta, Toshiba and Panasonic, also offer monochromatic copiers.
Ricoh manufactures the monochromatic copiers that Savin sells. Several of
Savin's competitors manufacture their own copiers and, accordingly, enjoy gross
margins associated with the manufacturing process, unlike Savin. Nearly all of
these competitors have substantially greater financial resources than Savin. A
number of companies having greater financial resources than Savin sell parts and
supplies in competition with Savin for use in Savin's copiers.
Competition in the office copier market has continued to increase in recent
years as a result of the improved reliability of powder toner copiers, the
introduction of lower-priced copiers, the entry of additional competitors and
periodic price adjustments made in response to competitive conditions.
Competition in the copier market is based upon such factors as the price of the
machine, availability of service, copy quality, speed, reliability and features
or options such as sorters, reduction, enlargement, color capability and
document feed systems. See "BUSINESS -- Sources of Supply; Marketing and
Distribution," and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Liquidity and Capital Resources -- Third Party
Financing."
Facsimile Products. The market for Savin's facsimile products is highly
competitive, with approximately forty-two competitors, including Ricoh, Canon
and Sharp, many of which have substantially greater
30
<PAGE> 39
financial resources than Savin. Savin believes that competition in the facsimile
product market is based upon such factors as the price of the product,
availability of service, quality, speed, reliability and certain features or
options. The market for facsimile products generally is increasingly subject to
competitive forces from related and other industries and technologies, including
but not limited to, electronic mail and wide spread installation of personal
computers with facsimile capabilities.
RESEARCH AND DEVELOPMENT
The Company's business, to a significant extent, is dependent upon its
ability to anticipate market trends and to obtain the benefits of technological
advances. Recent advances in existing technology have improved overall copier
reliability and have increased the utility of copiers. Also, facsimile equipment
has become faster and more reliable than in the past.
Historically, the Company has engaged the services of others to conduct
research and development work for it. Since 1989, the Company has made no
expenditures on research and development. Savin currently relies exclusively
upon Ricoh for these activities and works with Ricoh to improve its products in
order to maintain its current state of competitiveness in its markets.
PATENTS AND TRADEMARKS
The Company has no rights under any patents that are material to the
conduct of its business.
The Company sells substantially all of its products under the Savin
trademark (together, in certain cases, with other trademarks owned by Savin).
SAVIN CREDIT CORPORATION
Savin Credit Corporation ("SCC"), a wholly-owned finance subsidiary of
Savin, provides financing to dealers and end-users at competitive rates. SCC
provides a variety of financial programs to enable Savin's dealers to acquire
more readily Savin's copier equipment, including inventory and equipment rental
financing, rental pool financing, and special products financing. Current
programs range from short-term inventory financing to longer-term direct
financing leases.
EMPLOYEES
At October 1, 1994, Savin employed 811 employees.
BUSINESS INFORMATION REGARDING RICOH AND MERGER SUB
The principal business of Ricoh is the manufacture, distribution and sale
of office automation equipment, including copiers and facsimile machines and
related supplies within the geographic bounds of North America and Latin
America.
Merger Sub is a recently-formed Delaware corporation organized by Ricoh for
the purpose of enabling Ricoh to acquire Savin. Merger Sub has not conducted any
activities other than those related to its formation, the preparation of this
Proxy Statement, the Schedule 13D filed with the Commission and the negotiation
of the Merger Agreement and its obligations thereunder.
The principal executive office of each of Ricoh and Merger Sub is located
at Five Dedrick Place, West Caldwell, New Jersey 07006, and the telephone number
of each is (201) 882-2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Peter J. King, a director of Savin, is an affiliate of King Holding
Corporation, the holder of 27% of the outstanding Common Stock. King Holding
Corporation has agreed to vote its shares of Common Stock at the Special Meeting
for approval of the Merger Agreement.
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<PAGE> 40
Each of the directors of Savin, with the exception of Mr. Abbott, shall
receive $50,000 in cash immediately prior to the Effective Time in exchange for
the cancellation of options to purchase 25,000 shares of Common Stock. Mr.
Abbott shall receive $100,000 in cash immediately prior to the Effective Time in
exchange for the cancellation of options to purchase 30,000 shares of Common
Stock.
SPECIAL FINANCIAL INFORMATION OF THE COMPANY
The following table sets forth selected historical consolidated financial
information of the Company for each of its last five fiscal years and for the
nine months ended October 1, 1994 and October 2, 1993. The following financial
information should be read in conjunction with the historical consolidated
financial statements and notes thereto of Savin included elsewhere in this Proxy
Statement. The interim unaudited information for Savin and its subsidiaries for
the nine months ended October 1, 1994 and October 2, 1993 reflect, in the
opinion of Savin management, all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the information provided for
such interim periods. The results of operations of such interim periods are not
necessarily indicative of results which may be expected for any other interim
period or for the year as a whole.
The following consolidated condensed financial information has been
prepared in accordance with generally accepted accounting principals, where
appropriate, in conformity with fresh start reporting under Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code", issued in November 1990 by the American Institute of Certified
Public Accountants ("SOP 90-7"). For financial reporting purposes the following
consolidated condensed financial information is presented as if the Plan of
Reorganization became effective at November 28, 1993 which was in conformity
with the Company's fiscal month-end, and financial statements for periods
subsequent to November 27, 1993 have been designated "Successor Company".
Financial statements for the periods prior to November 28, 1993 have been
designated "Predecessor Company".
32
<PAGE> 41
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR COMPANY
COMPANY COMPANY COMPANY ----------------------------------------------------------------
-------- --------- --------- FORTY-
NINE NINE FIVE SEVEN
MONTHS MONTHS WEEKS WEEKS
ENDED ENDED ENDED ENDED YEAR ENDED DECEMBER 31,
OCT. 1, OCT. 2, JAN. 1, NOV. 27, ---------------------------------------------------
1994 1993 1994 1993 1992 1991 1990 1989
-------- --------- --------- -------- --------- --------- --------- ---------
(IN THOUSANDS OF DOLLARS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF
OPERATIONS(1)
Sales and rentals..... $143,050 $ 153,660 $17,935 $179,698 $ 228,113 $ 312,279 $ 377,679 $ 357,545
Income (loss) from
operations.......... $ 2,884 $ 5,556 $(1,256) $ 10,452 $ (8,542) $ (97,401) $ 253 $ (45,918)
Extraordinary items... $ 961 $ 1,449 $ -- $ 68,747 $ -- $ -- $ 456 $ --
Net income (loss)..... $ 3,845 $ 7,005 $(1,256) $ 79,199 $ (8,542) $ (97,401) $ 709 $ (45,918)
PER COMMON SHARE
Income (loss)(2)...... $ 1.01 N/A $ (.34) N/A N/A N/A N/A N/A
Price range(3)........ 5.125 to N/A N/A N/A N/A N/A N/A N/A
7.50
FINANCIAL POSITION
Current assets........ $ 51,387 $ 58,651 $60,177 $ 60,734 $ 61,433 $ 77,155 $ 145,449 $ 127,743
Current liabilities... $ 44,713 $ 47,928 $56,751 $ 56,230 $ 56,412 $ 162,233 $ 167,987 $ 130,971
Rental equipment,
net................. $ 3,394 $ 2,914 $ 3,189 $ 3,695 $ 8,663 $ 17,322 $ 44,298 $ 27,944
Total assets.......... $ 75,387 $ 64,466 $85,520 $ 86,738 $ 74,228 $ 99,961 $ 219,186 $ 176,369
Long-term
indebtedness........ $ 298 $ -- $ 2,765 $ 3,246 $ 1,339 $ 13,833 $ 26,943 $ 23,094
Liabilities subject to
compromise.......... $ -- $ 101,216 $ -- $ -- $ 108,129 $ -- $ -- $ --
Preferred stock
subject to
repurchase.......... $ -- $ 126,518 $ -- $ -- $ 123,449 $ 142,380 $ 136,960 $ 128,442
Stockholders' equity
(deficiency)........ $ 29,376 $(211,196) $25,004 $ 26,260 $(215,132) $(225,521) $(123,372) $(116,160)
OTHER DATA
Number of Company
retail branch
locations........... 21 21 21 21 18 23 25 23
Number of dealer
locations........... 451 422 422 422 466 484 569 570
Percentage of revenue
from sales, rentals
and service through
branches............ 41% 42% 40% 46% 52% 58% 42% 42%
Percentage of revenue
from sales to
dealers............. 59% 58% 60% 54% 48% 42% 58% 58%
Number of employees... 811 889 874 870 935 1,169 2,033 1,873
</TABLE>
- - ---------------
(1) Results of operations for 1991 and prior years includes Savin Canada, which
was sold in December 1991.
(2) Net income (loss) per share for the Predecessor Company is not meaningful
due to debt discharge, the cancellation of Predecessor Company common and
preferred stock, the issuance of Common Stock and fresh start reporting.
(3) There was no public trading of the Common Stock prior to 1994.
33
<PAGE> 42
SAVIN MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED OCTOBER 1, 1994 COMPARED TO
NINE MONTHS ENDED OCTOBER 2, 1993
REORGANIZATION
On August 25, 1992, (the "Filing Date"), Savin and two wholly-owned
subsidiaries, Classic Intersystems, Inc. and Diversified Equipment Leasing
Corporation (collectively, the "Company"), each filed voluntary petitions (the
"Chapter 11 Filings") for relief under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court
for the Southern District of New York (the "Bankruptcy Court"). Savin's only
other active subsidiary, Savin Credit Corporation ("SCC") was not included in
the Chapter 11 Filings. On November 24, 1993, the Bankruptcy Court entered an
order confirming the Plan of Reorganization. The effective date of the Plan was
December 14, 1993 (the "Effective Date").
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles applicable to a going
concern, and where applicable, in conformity with fresh start reporting under
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
under the Bankruptcy Code," issued in November 1990, by the American Institute
of Certified Public Accountants ("SOP 90-7"). To facilitate a meaningful
comparison of the Company's 1993 and 1994 first nine months of operating
performance, the following discussions of results of operations are presented on
a traditional comparative basis for both fiscal periods. The financial
statements for the two periods are not, however, comparable in all material
respect due to the implementation of fresh start reporting.
RESULTS OF OPERATIONS
The Company reported net income of $3.8 million for the first nine months
of 1994, compared to net income of $7.0 million for the first nine months of
1993. Included in income for the first nine months of 1994 is a nonrecurring
extraordinary gain, net of income taxes, of $1 million from the extinguishment
of debt. 1993 includes Chapter 11-related reorganization related expenses of
$3.1 million for the nine month period.
REVENUES
Revenues for the nine months ended October 1, 1994 were $143.0 million,
compared to $153.7 million for the comparable period in 1993. The decline in
revenues occurred primarily in rental and service in the Company's direct sales
operations, and to a lesser extent in equipment sales. Revenues from the sale of
copier and facsimile equipment decreased by $.6 million, or 1%, for the nine
month period, compared to the respective 1993 period. For the nine month period,
lower sales of equipment to direct customers were offset by higher equipment
sales to dealers. The Company has recently shifted its direct customer marketing
focus to increasing sales of new equipment. Revenue from supply sales decreased
$.5 million, or 2%, for the first nine months of 1994 compared to 1993. During
the nine month period in 1994, supply sales to dealers have been higher compared
to 1993 levels. Offsetting these increases, however, have been lower supply
sales to direct customers. The supply sales decline to direct customers is
largely attributable to the Company's shrinking installed base of copiers, and
will continue until the Company is able to stem the decline in the installed
base. Supply sales have also been negatively impacted by the growth of low cost
alternative toner distributors.
Service revenue decreased $4.6 million, or 11%, for the nine month period
in 1994, compared to the same period in 1993. The decline occurred primarily in
the sale of maintenance agreements to direct customers, and in parts sales to
dealers. The reduction in maintenance agreement sales is also symptomatic of the
declining installed base.
Rental revenue decreased $5.0 million, or 28%, for the nine month period in
1994 compared to 1993. The Company has not been actively placing new rental
copiers, except to meet certain contractual requirements,
34
<PAGE> 43
since 1991. This decline in new rental placements has resulted in a steadily
dwindling base of active rental copiers, and should continue in the near term.
OPERATING COSTS AND EXPENSES
Gross profits for the first nine months of 1994 were $43.3 million,
compared to $47.1 million, for the same period in 1993. Gross margin percentages
declined slightly in 1994 for the comparable nine month period.
Gross profits from the sales of copier and facsimile equipment increased by
$.8 million, or 5%, for the nine month period in 1994 compared to 1993. The
increase was due mainly to higher gross margins from equipment sales to dealers,
the result of favorable product mixes and price increases more than offsetting
an increase in yen-denominated product costs compared to 1993. Gross margins on
equipment sales will come under downward pressure, however, during the remainder
of 1994 absent any significant strengthening of the U.S. dollar relative to the
Japanese yen. Gross profits from the sale of supplies decreased for the first
nine months of 1994 by $1.1 million, or 7%, compared to the respective period in
1993. The decline in gross profits from supply sales for the nine month period
in 1994 resulted from both lower sales volume to direct customers and a less
profitable product mix compared to 1993.
Service gross profits for the first nine months of 1994 declined $3.0
million, or 22%, compared to 1993. The decrease is primarily due to lower
maintenance agreement revenues in 1994 from direct customers, which has not been
fully offset by service overhead cost reductions.
Rental gross profits decreased by $.5 million for the first nine months of
1994, compared to the same period in 1993. The decline in rental revenue was
largely offset by lower depreciation and commission expense in 1994, as the
Company's base of active rentals continues to decline.
Selling and administrative expense increased $.2 million for the first nine
months of 1994, compared to 1993. Depreciation and amortization expense
increased by $.6 million for the nine month period, mainly due to Chapter
11-related fair value adjustments. Bad debt expense increased $.6 million for
the nine month period, due to higher accrual rates in 1994. Professional fee
expense increased by $.3 million for the first nine months of 1994. Offsetting
these increases for the first nine months of 1994 are lower salary expense ($.5
million) and lower business tax expense ($.2 million).
INTEREST EXPENSE
Interest expense for the first nine months of 1994 decreased $.7 million,
compared to the same period in 1993. The decrease was mainly due to lower
Foothill Capital Corporation ("Foothill") fees and the repayment of a financing
agreement by the Company in December 1993.
OTHER INCOME
Other income for the first nine months of 1993 includes a gain of $.5
million on the sale of an idle warehouse facility.
REORGANIZATION ITEMS
The Company recorded reorganization charges of $3.1 million for the first
nine months of 1993. These charges include professional fees incurred offset in
part by interest income earned on the Company's cash balances.
EXTRAORDINARY ITEM
During the first nine months of 1994, SCC recorded an extraordinary item
from a gain on the forgiveness of debt of $1.0 million, net of taxes.
35
<PAGE> 44
YEAR ENDED JANUARY 1, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1992
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles applicable to a going
concern, and where applicable, in conformity with fresh start reporting under
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
under the Bankruptcy Code," issued in November 1990, by the American Institute
of Certified Public Accountants ("SOP 90-7"). The accompanying consolidated
financial statements for the period ended January 1, 1994 are presented as if
the Plan became effective at November 28, 1993, in conformity with the Company's
fiscal month-end. To facilitate a meaningful comparison of the Corporation's
fiscal 1993 and 1992 operating performance, the following discussions of results
of operation are presented on a traditional full year basis for
both fiscal periods. Consequently, fiscal 1993 information presented in the
table below does not comply with accounting requirements under SOP 90-7, which
call for separate reporting for the successor company and the predecessor
company.
CONSOLIDATED RESULTS OF OPERATIONS (IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
---------------------
1/1/94 12/31/92
-------- --------
<S> <C> <C>
REVENUES:
Sales................................................ $123,156 $139,159
Service.............................................. 51,649 55,238
Rentals.............................................. 21,512 32,119
Finance Income....................................... 1,316 1,597
-------- --------
197,633 228,113
-------- --------
OPERATING COSTS AND EXPENSES:
Cost of sales........................................ 90,077 97,353
Cost of service...................................... 35,120 33,987
Cost of rentals...................................... 12,422 21,981
Selling and administrative expenses.................. 50,923 62,298
Provision for restructuring costs.................... (50) 5,706
Gain on sale of assets............................... (451) 0
Interest expense..................................... 2,640 9,310
Other expense (income), net.......................... (63) 1,982
Reorganization items expense (income), net........... (2,255) 4,014
-------- --------
188,363 236,631
======== ========
Income before income taxes and extraordinary item...... 9,270 (8,518)
Income tax provision................................... 74 24
Extraordinary item-gain on the forgiveness of debt..... 68,747 0
-------- --------
Net Income (loss)...................................... $ 77,943 $ (8,542)
======== ========
</TABLE>
SUMMARY
The Company recorded net income of $77.9 million on revenues of $197.6
million for the fiscal year ended January 1, 1994, ("1993"), as compared to a
net loss of $8.5 million on revenues of $228.1 million for the fiscal year ended
December 31, 1992 ("1992"). Results for 1993 include non-recurring items related
to Savin's emergence from Chapter 11 totaling $71.0 million in income. Results
for 1992 include restructuring and reorganization charges aggregating $9.7
million. Absent these items, 1993 income would be $7.0 million, compared to
income of $1.2 million in 1992.
36
<PAGE> 45
REVENUES
Revenues decreased to $197.6 million in 1993 from $228.1 million in 1992, a
decrease of $30.5 million, or 13%.
Equipment and Supply Sales. Revenues from sales of copier and facsimile
equipment decreased to $86.7 million in 1993 from $98.5 million in 1992, a
decrease of 12%. Sales to dealers decreased $2.9 million, or 4% in 1993 compared
to 1992, while direct sales to retail customers declined $8.0 million, or 27%,
in 1993 compared to 1992. Revenues in 1992 included $3.6 million from the
liquidation of Savin's new and used color copier inventory. Equipment sales to
dealers were adversely impacted by Savin's operating under Chapter 11 protection
for most of 1993, which caused some dealers to stock less new machine inventory.
Retail sales were lower due to the cessation in 1992 of certain major account
contracts and also due to the retail division's focus in 1993 on selling its
inventory of used copiers while Savin was in Chapter 11, which generate lower
revenues per unit than new equipment.
Revenue from supply sales decreased by $3.9 million, or 9%, in 1993
compared to 1992. Sales of higher-margined toners accounted for $2.1 million of
the decrease, and sales of paper accounted for the balance. The entire decrease
occurred primarily in retail sales due to Savin's declining installed base of
copiers.
Service Revenue. Revenues in 1993 from service of copiers and spare parts
sales decreased $3.6 million, or 7%, in 1993 compared to 1992. The decrease
occurred mainly in maintenance contract sales to direct customers, again due to
the declining installed base of copiers. Partially offsetting this decrease was
an increase of $1.8 million, or 11%, in the sales of spare parts to dealers.
Rental Revenue. Revenues from copier rentals decreased $10.6 million, or
33%, in 1993 compared to 1992. The significant decrease is the cumulative effect
of Savin's decision, beginning in 1992, to limit its placement of new rental
copiers, especially under major account and government contracts. Savin's
experience had been that such contracts carry low margins and require
significant up front capital investment.
COSTS OF SALES, SERVICE AND RENTALS
Gross profits and gross margins were $60.0 million and 30.4%, respectively,
for 1993, compared to $74.5 million and 32.8%, respectively, for 1992. The
decline in gross profits was principally volume related, although higher costs
in some areas did adversely affect gross margins in 1993 compared to 1992.
Costs of Sales. Copier and facsimile equipment gross profits decreased
$4.7 million in 1993 compared to 1992, due mainly to lower sales volume. Gross
margins on equipment sales declined 2% in 1993, due to higher products costs
incurred by Savin resulting from the strengthening of the Japanese Yen relative
to the U.S. Dollar in 1993. Savin was able to partially offset or avoid such
cost increases through price increases and a shift to used copier sales to
retail customers. Savin also realized $3.6 million in gross profits during 1992
from the liquidation of its color copier inventory. Supply sales gross profits
decreased $3.5 million, or 16%, in 1993 compared to 1992, due primarily to lower
volume.
Cost of Service. Service and spare parts gross profits decreased $4.7
million, or 22%, in 1993 compared to 1992. The gross profit decrease was
primarily the result of lower service revenues from retail customers, partially
offset by higher sales of spare parts to dealers. Gross margins on service
declined from 39% in 1992 to 32% in 1993 due to increases in service labor and
overhead costs of servicing retail customers, and to an increase in the cost of
spare parts due to the strengthening of the Japanese Yen.
Cost of Rentals. Gross profits from copier rentals decreased $1.0 million,
or 10%, in 1993 compared to 1992, however, gross margins from rentals increased
to 42% in 1993, compared to 32% in 1992. The decrease in gross profits was due
entirely to lower rental revenue in 1993. Rental gross margins improved in 1993
mainly due to lower depreciation expense as more of Savin's pool of rental
copiers became fully depreciated.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses ("SGA") decreased by $11.4 million, or
18%, in 1993 compared to 1992. The decrease in SGA in 1993 kept SGA at 26% of
revenue for 1993, compared to SGA of 27% of
37
<PAGE> 46
revenue for 1992. Bad debt expense decreased $3.2 million in 1993 compared to
1992, due to tightened accounts receivable collection efforts and to lower
accounts receivable balances in 1993. Facility-related expenses decreased $2.4
million in 1993 compared to 1992, due to reduced warehousing capacity and to
Savin's rejection, as a debtor-in-possession under the Bankruptcy Code in late
1992, of certain above-market real estate leases and the renegotiation of such
leases at more favorable rates. Employee-related expenses decreased $1.9 million
in 1993 compared to 1992. Savin had approximately 60 fewer employees at January
1, 1994 than at December 31, 1992. Other significant expense reductions in 1993
compared to 1992 were in non-Chapter 11 related professional fees ($1.6 million
reduction), freight ($1.4 million reduction), data processing ($.5 million
reduction) and advertising ($.5 million reduction).
RESTRUCTURING CHARGES
In 1993, Savin recorded additions to provisions established for a
restructuring plan implemented in 1992 but not yet completed (the "1992
Restructuring"), and reversed a portion of a restructuring provision established
in 1991 due to certain lower than previously expected costs. The net impact of
the two actions was a benefit to operations of $50,000 in 1993. The remaining
activities under the 1992 Restructuring are estimated to cost approximately $1.6
million, and cover upgrading Savin's computer systems and relocating several
retail branches and corporate offices to lower cost facilities. Most of these
estimated costs represent future cash expenditures rather than non-cash
write-offs. The upgrading of the computer system should generate expense
reductions of $1.5 million annually from lower computer leasing costs, salaries
and rent expense. The relocation of office and warehouse facilities should also
lead to substantial annual cost savings by late 1994.
In 1992, Savin recorded a restructuring provision of $5.7 million to
implement the 1992 Restructuring, which included, in addition to activities
delineated above, the engagement of management consultants and other
professionals to effect the 1992 Restructuring, certain staffing reductions and
the renegotiation of certain financing arrangements to which Savin was a party.
With the exception of the items listed in the paragraph above, the 1992
Restructuring activities were completed during 1993.
GAIN ON SALE OF ASSETS
Savin recorded a gain of $.5 million during 1993 on the sale of an idle
warehouse facility.
INTEREST EXPENSE
Interest expense decreased $6.7 million in 1993 compared to 1992. Of this
decrease, $5.0 million was attributable to interest on pre-petition unsecured or
undersecured debt, for which Savin ceased accruing interest as of the Petition
Date. Contractual interest not accrued was $9.6 million during 1993 and $12.1
million for 1992. Interest expense on the Foothill Facility decreased by $.4
million in 1993 compared to 1992, due to lower average borrowings outstanding
during 1993 and to lower average interest rates during 1993.
REORGANIZATION ITEMS
Savin recorded several reorganization items during the period ended
November 27, 1993 related to the emergence from bankruptcy. Professional fees
totaling $4.2 million were recorded during this period, compared to $1.6 million
during 1992. A provision for the settlement of claims of $5.0 million was
recorded during the 1993 period, compared to $2.4 million during 1992.
Additionally, Savin recorded a non-recurring gain of $11.3 million in 1993 from
the adjustments to fair value assets and liabilities in accordance with SOP
90-7.
PROVISION FOR INCOME TAXES
Savin recorded provisions for income taxes of $74,000 for 1993 and $24,000
for 1992, for state income taxes in both years.
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<PAGE> 47
EXTRAORDINARY ITEM
During the period ended November 27, 1993, Savin recorded two extraordinary
items for gains on the forgiveness of debt. The first was a gain of $1.4 million
from the extinguishment of debt related to the repayment of a bank loan
outstanding to Classic, on which Savin was a guarantor. The second gain on the
forgiveness of debt was from the implementation of the Plan of Reorganization,
for which Savin recorded a gain of $67.3 million. In accordance with provisions
of the Internal Revenue Service Code, because Savin was operating under Chapter
11 protection, such gains are exempt from Federal income taxes.
YEAR ENDED DECEMBER 31, 1992 COMPARED TO YEAR ENDED DECEMBER 31, 1991
SUMMARY
Savin recorded a net loss of $8.5 million on revenues of $228.1 million for
1992, as compared to a net loss of $97.4 million on revenues of $312.3 million
for the year ended December 31, 1991 ("1991").
The results for each of 1992 and 1991 include nonrecurring charges. The
results for 1992 include restructuring and reorganization charges aggregating
$9.7 million. Results of operations in 1991 include nonrecurring charges
aggregating $46.7 million.
REVENUES
Revenues decreased to $228.1 million in 1992 from $312.3 million in 1991, a
decrease of $84.2 million. Excluding revenues in 1991 attributable to Savin
Canada, Inc. ("Savin Canada"), revenues decreased $24.4 million, or 10%, in 1992
compared to 1991, primarily due to lower sales to dealers and to major account
customers.
Equipment and Supply Sales. Revenues from sales of all copier and
facsimile equipment decreased to $95.4 million in 1992 from $109.9 million in
1991, excluding Savin Canada. Sales to dealers decreased $7.4 million, or 10%,
and sales to retail customers decreased $4.7 million, or 14% in 1992 as compared
to 1991. Revenues in 1992 included $3.6 million from the liquidation of Savin's
new and used color copier inventory. Equipment sales to dealers were adversely
impacted by Savin's Chapter 11 Filing, which caused some dealers to stock less
new machine inventory. Retail customer sales were lower in 1992 due to the
expiration of certain major account contracts at the end of 1991, and Savin's
decision not to bid for less-profitable major account contracts during 1992.
Revenues from supply sales decreased by $11.2 million, or 20%, in 1992
compared to 1991 without Savin Canada. Sales of higher-margined chemicals
declined by $6.3 million, primarily due to Savin's declining installed base and
to dealers switching to competitors' product lines. Paper sales decreased by
$4.9 million as dealers continued the trend of purchasing directly from the
manufacturers.
Rentals. Revenues from copier rentals decreased $.8 million in 1992
compared to 1991, excluding Savin Canada. Increases in Savin's rental base in
conjunction with its contracts to supply copiers to the U.S. Navy and GSA were
largely offset by cancellations of older monochromatic and color rental
contracts. Savin severely limited the placements of new copiers under non-GSA
rental contracts during 1992.
Service. Revenues in 1992 from service and spare parts sales decreased 1%
from 1991 levels, excluding Savin Canada. Increases in maintenance agreements
sales to retail customers were offset by decreases in revenue from sales of
spare parts to dealers during 1992.
Cost of Sales, Service and Rentals. Gross profits and gross margins were
$74.8 million and 33%, respectively in 1992, as compared to $60.1 million and
24%, respectively, in 1991, excluding Savin Canada.
Copier and facsimile equipment gross profits increased by $2.0 million in
1992 compared to 1991 (excluding Savin Canada) despite lower revenues in 1992.
Gross margins on equipment increased to 23% in 1992 from 18% in 1991. The
improvement in gross profits and margins was due mainly to increased sales of
higher-margined used copier equipment to retail customers in 1992 and to the
cessation in late 1991 of sales
39
<PAGE> 48
under less profitable major account contracts. Gross margins on equipment sales
to dealers for 1992 were relatively unchanged from 1991 levels. Savin also
realized $3.6 million in gross profits during 1992 from the liquidation of its
color copier inventory.
Rental gross profits increased by $9.2 million, or 124%, in 1992 compared
to 1991, excluding Savin Canada. The increase was due primarily to lower
depreciation expenses, since much of Savin's rental base was fully or nearly
fully depreciated.
Service gross profits increased by $.6 million, or 2.5%, in 1992 compared
to 1991, excluding Savin Canada. Profit margins on service were slightly higher
in 1992 than in 1991 due to lower service overhead expenses in 1992.
Supply gross profits decreased by $2.2 million, or 9%, in 1992 compared to
1991, excluding Savin Canada. Profit margins on both paper and chemicals
increased in 1992 due to price increases and favorable product mixes.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses decreased by $23 million, or 27%, in
1992 compared to 1991, excluding Savin Canada. Employee-related costs decreased
by $9.4 million, reflecting a 19% reduction in staffing levels. Advertising
expenses were $4.2 million lower in 1992 due to a sharp reduction in national
advertising programs. Facilities expenses decreased by $3.0 million in 1992
compared to 1991 as Savin reduced its total warehousing capacity. Facilities
expenses also decreased in 1992 due to Savin's rejection, as a
debtor-in-possession under the Bankruptcy Code, of certain above-market real
estate leases and the renegotiation of such leases at more favorable rates.
Other significant expense reductions in 1992 compared to 1991 were bad debts
($1.9 million reduction), professional fees ($1.6 million reduction), freight
($1 million reduction), amortization ($1 million reduction) and SCC expenses ($1
million reduction).
RESTRUCTURING CHARGES
In 1992, Savin recorded an additional restructuring provision of $5.7
million relating to the various financial and operational restructurings begun
in 1992 and continuing in 1993. The provision primarily provides for
consultants' fees, facility and computer downsizing and other related costs.
INTEREST EXPENSE
Interest expense decreased $6.7 million in 1992 compared to 1991, excluding
Savin Canada. Due to the Chapter 11 Filings, Savin has ceased accruing interest
as of the Petition Date on certain pre-petition indebtedness. Contractual
interest not accrued during 1992 was $2.7 million. Interest expense on the
Foothill Facility decreased by $2.7 million in 1992 compared to 1991 due to
lower average borrowings outstanding during 1992 and to lower average interest
rates prevailing during 1992.
OTHER INCOME/EXPENSE
Other expense was $3.1 million lower in 1992 compared to 1991, excluding
Savin Canada. Included in other expense for 1992 is a $1.7 million charge for
the write-off of a receivable from HCS, which was in liquidation, and $.4
million in leasing related asset write-downs.
REORGANIZATION CHARGES
Savin recorded charges for the estimated costs of its reorganization
totaling $4.0 million at December 31, 1992. Included in these provisions are
$1.6 million for professional fees incurred in 1992 and $2.4 million for
rejected lease claims.
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<PAGE> 49
PROVISION FOR INCOME TAXES
Savin recorded an income tax provision of $24,000 for 1992, compared to an
income tax provision of $1.5 million for 1991. The 1992 provision is for certain
state income taxes. The 1991 provision included $.7 million for state income
taxes, $.4 million for Canadian income taxes incurred by Savin Canada and $.3
million in charges in lieu of taxes.
LIQUIDITY AND CAPITAL RESOURCES
On the Effective Date, Classic and Diversified were merged into Savin, and
Savin emerged from reorganization proceedings under Chapter 11 of the Bankruptcy
Code upon the effectiveness of the Plan of Reorganization confirmed by the
Bankruptcy Court on November 24, 1993. Savin, Classic and Diversified had each
commenced, on the Petition Date, a reorganization case by making the Chapter 11
Filings under the Bankruptcy Code. Savin's only other active wholly-owned
subsidiary, SCC, was not included in the Chapter 11 Filings.
Under the Plan of Reorganization, as of the Effective Date all shares of
common stock and preferred stock issued prior to the Effective Date, and all
options, warrants and other interests or rights relating thereto, respectively,
were cancelled. In addition, approximately $93.7 million of pre-petition debt
and other obligations of Savin were extinguished through the issuance of New
Common Stock to the holders of such debt and obligations. Savin recorded an
extraordinary gain of $67.3 million at November 27, 1993 in connection with such
extinguishment. The Plan of Reorganization also provided for cash payments of
approximately $8.9 million for certain secured obligations and settlements
awarded by Savin. Approximately $5.8 million of such payments are payable in
installments through 1996. Due to the provisions of the Plan of Reorganization
outlined above, Savin's long-term liquidity position has been substantially
improved. As part of the adoption of fresh start accounting at the Effective
Date, Savin recognized $12.5 million of Deferred Tax assets, which, when
realized, will also provide future benefits to Savin's liquidity. The Company
believes that based on projections which incorporate cost reductions resulting
from the Chapter 11 reorganization but which do not consider the impact of the
Merger, it is more likely than not that the deferred tax assets will be
realized. If the Merger is completed, the availability of most of the Deferred
Tax assets could be eliminated.
The Company reported a $7.1 million decrease in cash for the first nine
months of 1994, compared to an increase in cash of $5.4 million for the same
period in 1993. Sources of cash were $10.0 million from operations adjusted for
noncash activities, $3.1 million in net proceeds under the SCC Credit Facility
(defined below) and the Foothill Facility and $5.5 million from decreased
inventories. Primary uses of cash were $6.4 million in settlement of the AFF
Facility (defined below), $5.6 million for increased trade receivables, $5.4
million for accounts payable and accrued expense payments, $2.2 million in
payments of long-term debt and $4.5 million for the acquisition of rental
machines and other equipment.
Throughout 1993, Savin's short-term liquidity position had been favorably
affected since cash requirements relating to the payment of principal and
interest associated with long-term and short-term indebtedness, accounts payable
and other liabilities which arose prior to the Chapter 11 Filings, were, in most
cases, deferred until the Plan of Reorganization became effective. Offsetting
these favorable impacts, however, was the payment of administrative and
professional expenses incurred due to the Chapter 11 process, and the payment of
certain settlements at the Effective Date. Savin recorded a negative cash flow
of $.5 million for 1993, compared to a positive cash flow of $6.4 million in
1992. Net cash provided by operations before reorganization items was $14.7
million in 1993, compared to $19.6 in 1992. The working capital surplus of Savin
was $.4 million at January 1, 1994, compared to $5.0 million at December 31,
1992.
Primary sources of cash during 1993 were $14.1 million from operations
after adjusting for non-cash items, $5.2 million from the decrease of accounts
receivable, $1.6 million from accounts payable and other working capital items
and $.8 million gross proceeds from the sale of an idle warehouse facility. Uses
of cash during 1993 were primarily $7.8 million in payment of rental financing
and other secured debt, $5.5 million in payment of reorganization related
settlements and professional fees, $5.0 million in increased inventories,
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<PAGE> 50
$2.6 million for the acquisition of property, plant and equipment, principally
computer hardware and software, and $1.2 million in the decrease in deferred
revenues for maintenance contracts.
THIRD PARTY FINANCING
Prior to the Petition Date, Savin had a secured revolving line of credit
with Foothill which allowed Savin to borrow funds and to obtain letter of credit
support based on Savin's level of qualifying accounts receivable and inventory.
Subsequent to the Petition Date and with Bankruptcy Court authorization, Savin
entered into a debtor-in-possession credit facility with Foothill (the "Foothill
DIP Facility") which included essentially the same terms and conditions as the
credit facility in place between Savin and Foothill prior to the Chapter 11
Filings.
Upon emergence from Chapter 11 protection on the Effective Date, Savin
entered into the Foothill Facility with Foothill which replaced the Foothill DIP
Facility. The Foothill Facility supports the Security Pacific L/C's in favor of
Ricoh, Savin's primary supplier, to be used for product purchases by Savin from
Ricoh. Without the Security Pacific L/Cs, Ricoh may not be willing to produce
and deliver products to Savin. The Security Pacific L/Cs expire on April 10,
1995. The Company intends to extend such letter of credit coverage prior to
their expiration and has the ability to do so under the Foothill Facility.
At October 1, 1994, the maximum amount of borrowings under the Foothill
Facility based upon available collateral was $16.9 million, of which $9.2
million was used to support the letters of credit. There were cash advances of
$1.3 million and $22,000 of accrued fees outstanding at October 1, 1994. The
interest rate on the Foothill Facility is equal to the prime rate plus 2% (9.75%
at October 1, 1994).
On March 28, 1994, the Foothill Facility was amended to effectuate certain
changes to the restrictive covenants. The amendments to the Foothill Facility
are effective as of the Effective Date. The Foothill Facility, as amended,
contains restrictive covenants, the most restrictive of which requires the
Company and Savin to maintain a Current Ratio, as defined in the agreement, of
.65 to 1.
Pursuant to the terms of the Foothill Facility, borrowings under the
Foothill Facility constitute senior indebtedness of Savin and are secured by a
first priority lien on substantially all of Savin's assets. Foothill has access
to Savin's cash receipts which enables Foothill, under certain circumstances, to
accelerate the repayment of borrowings under the Foothill Facility. Foothill may
accelerate the repayment of borrowings upon the occurrence of certain events of
default, including any material adverse change (determined in Foothill's sole
discretion) in Savin's ability to repay such borrowings or in its relationship
with Ricoh (including the termination of, material amendment to, or default
under, the Ricoh Agreement).
SUBSIDIARY FINANCING
During February 1994, SCC entered into financing arrangements with Foothill
(the "SCC Credit Facility"). Under the SCC Credit Facility, Foothill provides a
secured line of credit to SCC up to a maximum of $7.0 million. Based on SCC's
qualifying accounts receivable collateral at October 1, 1994 the maximum amount
of available borrowings at that date was $5.0 million. The interest rate on the
SCC Credit Facility is equal to the prime rate plus 2% (9.75% at October 1,
1994). At October 1, 1994, $1.8 million was outstanding under the SCC Credit
Facility.
The SCC Credit Facility contains restrictive covenants, the most
restrictive of which requires SCC to maintain Debt to Tangible Net Worth Ratio,
as defined in the agreement, of 4.5 to 1 at October 1, 1994.
SCC entered into the SCC Credit Facility in order to repay the secured
revolving line of credit (the "AFF Facility") which had been obtained in 1989
from Atlantic Financial Federal ("AFF"). The AFF Facility has been administered
by the RTC, or its assignees, since December 1989, when AFF went into
receivership. At January 1, 1994, $7.0 million of principal and $.9 million of
accrued and unpaid interest was outstanding under the AFF Facility. In February
1994, the RTC agreed to accept, and SCC paid, approximately $6.4 million in full
satisfaction of all amounts owed to the RTC by SCC under the AFF Facility.
Accordingly, SCC recorded an extraordinary gain, net of taxes, of $1.0 million
in February 1994 on the extinguishment of the AFF Facility.
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<PAGE> 51
EQUIPMENT AND OTHER FINANCING
During the fourth quarter of 1990, Savin financed, through a third party, a
portion of its monochromatic copier equipment rented to customers under
cost-per-copy contracts. Proceeds from the financing were $12.5 million. After
the Petition Date, Savin continued to meet its obligations under the terms of
the financing arrangement and accordingly, the outstanding indebtedness from the
financing was not at any time reclassified to "Liabilities subject to
compromise". On the Effective Date, the financing agreement between Savin and
the third party was amended and the balance due under the financing agreement of
$.6 million was repaid. The amended financing agreement also established a
repurchase obligation whereby Savin agreed to repurchase the rental equipment
subject to the cost-per-copy contracts on October 1, 1994 for $.5 million.
Pursuant to an agreement reached with ING Lease on the Effective Date (the
"ING Lease Settlement Agreement"), ING Lease received a promissory note from
Savin in the principal amount of $4,660,226 (the "ING Lease Promissory Note").
The note bears interest at a rate of 6% per annum and is payable in monthly
installments through October 1995. Interest on any overdue principal or overdue
interest is payable at the greater of (i) 8% per annum or (ii) 3% over the rate
per annum publicly announced from time to time by Citibank, N.A., New York, as
its base rate, but in no event higher than the maximum rate permitted by
applicable law. The ING Lease Promissory Note is secured by a second lien upon
substantially all of Savin's assets. At October 1, 1994, Savin was in compliance
with the covenants contained in the ING Lease Settlement Agreement.
In settlement of certain state and local tax obligations aggregating $1.1
million, Savin entered into various notes on the Effective Date, payable in
monthly or quarterly installments. The terms of these notes range from one to
three years and they bear interest at rates ranging from 6% to 8%.
The viability of the Company, and its ability to continue operations, is
directly dependent upon generating cash from operations and continuing the
Foothill Facility. In 1993, the Company met its working capital requirements
primarily through the use of the Security Pacific L/Cs and cash generated by
operations. In addition, in an effort to improve its working capital position,
the Company routinely negotiates adjustments in the scheduled arrivals of, and
payment for, products to match demand levels. Savin's working capital
requirements for 1994 must be satisfied solely through cash generated by
operations and the use of the Foothill Facility. Savin has no plans for material
capital expenditures in 1994 but plans for $1.6 million in restructuring related
expenditures in 1994. The Company believes it will have adequate capital
resources generated from operations and from the Foothill Facility and SCC
Credit Facility to meet its foreseeable capital requirements and to fund future
operations.
PROPERTIES
In October 1992, the Bankruptcy Court granted Savin's motion to reject all
of its real property leases. Subsequently, Savin negotiated month-to-month
leases for certain warehouse and office space with respect to most of such
leases. Savin has entered into eighteen leases with terms of one to five years
(of which nine have termination options in favor of Savin exercisable in the
thirty-sixth month of such leases) and is reviewing the requirements for its
other facilities.
At March 1, 1995, the Company was leasing approximately 168,000 square feet
of warehouse space and approximately 174,000 square feet of office, training,
administrative and sales space. The Company believes that certain of its
facilities are excessive for its needs and is taking corrective actions with
respect to such facilities. The Company believes that its other properties are
suitable and adequate for its needs and are in good condition. Information with
respect to the principal facilities used by the Company is set forth below:
<TABLE>
<CAPTION>
ADDRESS PRIMARY USE SQUARE FEET
----------------------- ---------------------------------------- -----------
<S> <C> <C>
Stamford, CT........... Executive and administrative facilities 26,000
Ontario, CA............ Principal product and service parts 75,000
distribution and warehouse facility
</TABLE>
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<PAGE> 52
LEGAL PROCEEDINGS
The Company is a party to several legal proceedings arising in the ordinary
course of business that are not material to the financial condition and
operations of the Company.
MARKET PRICES FOR THE COMMON STOCK
The Common Stock is not quoted on any exchange. The following table sets
forth, for the quarterly periods indicated, the high and low closing prices of
the Common Stock as reported on the OTC Bulletin Board.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED HIGH LOW
----------------------------------------------------------- ------ ------
<S> <C> <C>
April 2, 1994.............................................. $ 7.00 $6.00
July 2, 1994............................................... 7.50 5.125
October 1, 1994............................................ 6.75 5.50
December 31, 1994.......................................... 10.00 5.75
</TABLE>
Since December 14, 1993, the Company has not declared or paid any cash
dividends on its capital stock. The Company's revolving credit facility contains
certain restrictions on the Company's ability to declare dividends, primarily
based on cash-flow from operations and debt-service requirements. Assuming the
Merger is not consummated, the Company does not anticipate declaring or paying
any cash dividends in the foreseeable future.
On October 20, 1994, the last day that a trade was executed before Ricoh
and Savin publicly announced the execution of the Agreement in Principle, the
high and low sales price for the Common Stock of the Company on the OTC Bulletin
Board was $7.25.
SECURITY OWNERSHIP OF THE COMPANY
VOTING ARRANGEMENTS
Each of ING Lease, the holder of 600,000 shares of Common Stock (or
approximately 15.6% of the outstanding Common Stock entitled to vote at the
Special Meeting), Credit Lyonnais Bank Nederland N.V. ("CLBN"), the holder of
394,937 shares of Common Stock (or approximately 9.7% of the outstanding Common
Stock entitled to vote at the Special Meeting), King, the holder of 1,065,596
shares of Common Stock (or approximately 27% of the outstanding Common Stock
entitled to vote at the Special Meeting), HCS, the holder of 600,000 shares of
Common Stock (or approximately 15.6% of the outstanding Common Stock entitled to
vote at the Special Meeting) and the Company are parties to an Agreement Among
Certain Stockholders (the "Stockholders Agreement") dated as of December 14,
1993 pursuant to which the contracting stockholders agree to vote their shares
of Common Stock in favor of the slate of directors nominated in accordance with
Article III of the Amended and Restated By-laws of the Company (the "By-laws"),
in the election of directors of the Company held at each meeting of stockholders
during calendar years 1994, 1995 and 1996 at which directors are to be elected.
Article III of the By-Laws provides that the slate of nominees recommended to
the stockholders by the Board of Directors for election to the Board shall
include (i) the Chief Executive Officer of the Company; (ii) one independent
nominee nominated by the nominating committee of the Board of Directors; (iii)
one nominee designated by King; (iv) one nominee designated by CLBN; (v) one
nominee designated by HCS; (vi) one nominee designated by ING Lease; and (vii)
Mr. Wertheimer as representative of the holders of Subordinated Notes and
Subordinated Debentures, as such terms are defined in the Plan of
Reorganization.
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<PAGE> 53
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 2, 1995, the number of and
percentage of shares of the Common Stock owned beneficially by (i) each member
of the Company's Board of Directors, the Company's Chief Executive Officer and
the two most highly compensated executive officers, and all directors and
executive officers of the Company as a group; and (ii) the persons known to the
Company to be the beneficial owners of 5% or more of shares of the Common Stock
outstanding:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENTAGE
OR IDENTITY GROUP BENEFICIAL OWNERSHIP OF CLASS
--------------------------------------------------- -------------------- -------------
<S> <C> <C>
Ricoh Corporation.................................. 2,591,596(1) 65.5%
Five Dedrick Place
West Caldwell, New Jersey 07006
King Holding Corporation........................... 1,065,596(2) 27.0%
2500 Minnesota
World Trade Bldg.
30 East 7th Street
St. Paul, Minnesota 55101
HCS Technology, N.V................................ 600,000(2) 15.2%
Bookel De Neree
Atrium, 2e verdieping
Strawinskylaan 3037
1077 Amsterdam
The Netherlands
ING Lease Structured Finance, B.V.................. 600,000(2) 15.2%
Karspeldreef 14
1101 CK Amsterdam Southeast
The Netherlands
Credit Lyonnais Bank............................... 394,937(2) 10.0%
Nederland, N.V.
63 Coolaingel
3018 AB Rotterdam
The Netherlands
Janos Szekeres..................................... 326,000 8.2%
70 Ocean Drive East
Stamford, CT 06902
D. Thomas Abbott................................... 30,000(3)(4) *
Robert E. Anderson, III............................ 25,000(3) *
Ben N. de Jonge.................................... 25,000(3) *
Peter J. King...................................... 1,090,596(3)(5) 27.6%
Polyvios C. Vintiadis.............................. 25,000(3) *
Stephen Wertheimer................................. 25,000(3) *
John Breiten....................................... 0 *
Thomas L. Salierno, Jr. ........................... 0 *
All current officers and directors................. 1,220,596 *
as a group (8 persons)
</TABLE>
- - ---------------
* Less than 1%
(1) Ricoh has been granted options by the Majority Stockholders pursuant to the
Stockholder Agreements to purchase 2,591,596 shares of Common Stock, in the
aggregate, held by such stockholders. See "GENERAL -- Agreements of
Majority Stockholders."
(2) Is party to the Agreement Among Certain Stockholders, dated as of December
14, 1993, pursuant to which it has agreed to vote its shares of New Common
Stock in favor of the slate of directors nominated in accordance with
Article III of the Amended and Restated By-laws, in each election of
directors of
45
<PAGE> 54
Savin held in any meeting of Savin stockholders during calendar years 1994,
1995 and 1996. An agreement among stockholders to vote shares of stock
could be the basis for establishing a group under Section 13(d) of the
Securities Exchange Act of 1934, as amended. Accordingly, parties to the
Agreement Among Certain Stockholders may be deemed to constitute a group
for purposes of beneficial ownership of shares. The parties to the
Agreement Among Certain Stockholders disclaim group status.
(3) On January 27, 1994, the Board of Directors granted to each director of
Savin options to purchase 25,000 shares of Common Stock when issued at an
exercise price of $1.00 per share. Of the 25,000 options, 10,000 options
vested, and 5,000 additional options will vest on each of the successive
three anniversary dates subsequent to the Effective Date. The Company
intends to pay, immediately prior to the effective time of the Merger,
$50,000 to each director other than the Chairman of the Board, and $100,000
to the Chairman of the Board, in connection with the termination of such
options. Assuming such payments to the Savin directors are made, the
Aggregate Merger Consideration will be reduced by $350,000.
(4) On July 28, 1994, the Board of Directors granted to Mr. Abbott a
fully-vested option to purchase 5,000 shares of Common Stock at an exercise
price of $1.00 per share.
(5) Includes 1,065,596 shares owned by King Holding Corporation, of which Mr.
King and family trusts are sole shareholders.
INDEPENDENT AUDITORS
The consolidated financial statements of the Company and its subsidiaries
and the notes thereto, together with the related financial statement schedules
for the year ended January 1, 1994, included in this Proxy Statement have been
audited by Deloitte & Touche LLP, the Company's independent auditors as stated
in their report incorporated by reference.
Representatives of Deloitte & Touche LLP are expected to be present at the
meeting with the opportunity to make a statement if they so desire and are
expected to be available to respond to appropriate questions.
MISCELLANEOUS
If the Merger is not consummated for any reason, the Company intends to
hold the 1995 Annual Meeting of Stockholders on or about July 18, 1995. Any
stockholder of the Company wishing to include proposals in the proxy materials
for such meeting must meet the requirements of the rules of the Commission
relating to stockholders' proposals. Such proposals must be received by the
Secretary of the Company in writing at the principal executive offices of the
Company prior to June 19, 1995 but no earlier than May 19, 1995.
46
<PAGE> 55
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports and other information may be
inspected and copied or obtained by mail upon payment of the Commission's
prescribed rates at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the
Commission's regional offices located at 7 World Trade Center, New York, New
York 10048, and Kluczynski Federal Building, Suite 1400, 500 West Madison
Avenue, Chicago, Illinois 60661.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Russell Gough
RUSSELL GOUGH
Secretary
Stamford, Connecticut
March 11, 1995
47
<PAGE> 56
SAVIN CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGES
----------
<S> <C>
Report of Independent Auditors................................................... 49
Consolidated Financial Statements and Notes as of October 1, 1994, January 1,
1994 and December 31, 1992 and for the nine months ended October 1, 1994, the
five weeks ended January 1, 1994, the forty-seven weeks ended November 27,
1993, and the years ended December 31, 1992 and 1991:
Consolidated Balance Sheets................................................. 50 and 51
Consolidated Statements of Operations....................................... 52
Consolidated Statements of Shareholders' Equity (Deficiency)................ 53
Consolidated Statements of Cash Flows....................................... 54 and 55
Notes to Consolidated Financial Statements.................................. 56 to 73
Consolidated Supplemental Financial Statement Schedule for the nine months ended
October 1, 1994, the five weeks ended January 1, 1994, the forty-seven weeks
ended November 27, 1993 and the years ended December 31, 1992 and 1991:
VIII Consolidated Valuation and Qualifying Accounts and Reserves............ 74
IX Consolidated Short-term Borrowings...................................... 75
</TABLE>
------------------------
SCHEDULES OMITTED
Schedules, other than those listed above, are omitted since they are not
required, are not applicable or the information required is included in the
consolidated financial statements and notes thereto.
48
<PAGE> 57
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Savin Corporation
We have audited the accompanying consolidated balance sheet of Savin
Corporation and subsidiaries(the "Company") as of January 1, 1994, (Successor
Company balance sheet) and December 31, 1992 (Predecessor Company balance
sheet), and the related consolidated statement of operations, stockholders'
equity (deficiency) and cash flows for the five week period ended January 1,
1994 (Successor Company operations), the 47 week period ended November 27, 1993,
and the years ended December 31, 1992 and 1991 (Predecessor Company operations).
Our audits also included the financial statement schedules listed in the Index
to Consolidated Financial Statements and Financial Statement Schedules. These
financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the consolidated financial statements, on
November 24, 1993, the Bankruptcy Court entered an order confirming the plan of
reorganization which became effective after the close of business on December
14, 1993 (November 27, 1993 for financial reporting purposes). Accordingly, the
accompanying consolidated financial statements and financial statement schedules
have been prepared in conformity with AICPA Statement of Position 90-7,
"Financial Reporting for Entities in Reorganization Under the Bankruptcy Code",
for the Successor Company as a new entity with assets, liabilities, and a
capital structure having carrying values not comparable with prior periods as
described in Note 2.
In our opinion, the Successor Company consolidated financial statements
present fairly, in all material respects, the financial position of Savin
Corporation and subsidiaries at January 1, 1994, and the results of their
operations and their cash flows for the five week period ended January 1, 1994
in conformity with generally accepted accounting principles. Further, in our
opinion, the Predecessor Company consolidated financial statements referred to
above present fairly, in all material respects, the financial position of the
Predecessor Company at December 31, 1992 and the results of their operations and
their cash flows for the 47 week period ended November 27, 1993 and the years
ended December 31, 1992 and 1991 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement schedules,
when considered in relation to the Successor and Predecessor Company basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
As described in Note 15, to the consolidated financial statements, the
Company changed its method of accounting for income taxes effective January 1,
1993 to conform with Statement of Financial Accounting Standards No. 109.
/s/ Deloitte & Touche
Stamford, Connecticut
March 3, 1994
(March 28, 1994 as to Note 8)
49
<PAGE> 58
SAVIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
(A) PREDECESSOR
SUCCESSOR COMPANY COMPANY
----------------------- | ------------
|
OCTOBER 1, JANUARY 1, | DECEMBER 31,
1994 1994 | 1992
---------- ---------- | ------------
(UNAUDITED) |
<S> <C> <C> | <C>
ASSETS |
Current assets: |
Cash........................................................... $ 3,516 $ 10,650 | $ 11,130
Accounts receivable trade, net of allowances of $4,928 at |
October 1, 1994 and $5,692 at January 1, 1994 |
(1992 -- $6,990)............................................. 24,227 19,665 | 24,417
Other receivables, net of allowances of $2,524 at October 1, |
1994 and $2,930 at January 1, 1994 (1992 -- $5,066).......... 783 882 | 2,826
Inventories (Note 6)........................................... 15,985 22,383 | 16,779
Other current assets........................................... 4,364 3,542 | 6,281
Deferred tax asset (Note 15)................................... 2,512 3,055 | --
-------- -------- | --------
Total current assets....................................... 51,387 60,177 | 61,433
-------- -------- | --------
Property, plant and equipment (Note 7): |
Rental machines (Note 2)....................................... 5,333 3,693 | 39,176
Less accumulated depreciation.................................. (1,939) (504) | (30,513)
-------- -------- | --------
3,394 3,189 | 8,663
-------- -------- | --------
Other.......................................................... 4,750 3,368 | 23,564
Less accumulated depreciation................................ (1,108) (271) | (22,219)
-------- -------- | --------
3,642 3,097 | 1,345
-------- -------- | --------
Property, plant and equipment, net......................... 7,036 6,286 | 10,008
-------- -------- | --------
Deferred tax asset (Note 15)..................................... 7,844 9,432 | --
-------- -------- | --------
Reorganization value in excess of amounts allocable to |
identifiable assets (Note 2)................................... 9,044 9,395 | --
-------- -------- | --------
Long-term receivables............................................ 76 230 | 2,276
-------- -------- | --------
Other assets..................................................... -- -- | 511
-------- -------- | --------
Total assets............................................ $ 75,387 $ 85,520 | $ 74,228
======== ======== ========
</TABLE>
- - ---------------
(A) Due to the reorganization and implementation of fresh start reporting, the
financial statements for the Successor Company (periods after November 27,
1993) are not comparable to those of the Predecessor Company. See "Notes to
Consolidated Financial Statements -- Notes 1 and 2" for more information on
the reorganization and implementation of fresh start reporting.
See Notes to Consolidated Financial Statements.
50
<PAGE> 59
SAVIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(A) PREDECESSOR
SUCCESSOR COMPANY COMPANY
-------------------------- | ------------
OCTOBER 1, JANUARY 1, | DECEMBER 31,
1994 1994 | 1992
----------- ---------- | ------------
(UNAUDITED) |
|
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY) |
<S> <C> <C> | <C>
LIABILITIES |
Current liabilities: |
Short-term borrowings (Note 8)........................... $ 3,149 $ 7,039 | $ 7,030
Long-term indebtedness, current portion (Note 9)......... 3,255 3,023 | 3,483
Accounts payable, trade.................................. 13,100 16,641 | 11,469
Accrued expenses (Note 10)............................... 19,044 23,320 | 27,595
Deferred gross profits and revenues...................... 5,555 5,700 | 6,835
Chapter 11 liabilities subject to settlement (Note 13)... 610 1,028 | --
------- ------- | ---------
Total current liabilities.............................. 44,713 56,751 | 56,412
Long-term indebtedness (Note 9)............................ 298 2,765 | 1,339
Deferred gross profits and revenues........................ -- -- | 31
Chapter 11 liabilities subject to settlement (Note 12)..... 1,000 1,000 | --
Liabilities subject to compromise.......................... -- -- | 108,129
------- ------- | ---------
Total liabilities...................................... 46,011 60,516 | 165,911
------- ------- | ---------
Commitments and contingencies (Notes 11 and 12). |
Preferred Stock -- subject to repurchase, Cumulative |
Convertible Series B, C, D; par value $.001 per share; |
authorized, 21,260,000 shares; issued, 11,552,280 shares |
at repurchase and liquidation value (Note 2): |
Held by affiliate...................................... -- -- | 94,024
------- ------- | ---------
Held by others......................................... -- -- | 21,499
------- ------- | ---------
Dividends in arrears: |
Due to affiliate....................................... -- -- | 5,641
------- ------- | ---------
Due to others.......................................... -- -- | 2,285
------- ------- | ---------
SHAREHOLDERS' EQUITY (DEFICIENCY) |
Preferred stock, Cumulative Convertible Series A par value |
$.001 per share; authorized, 740,000 shares; issued, |
288,459 shares; liquidation value, net of treasury stock, |
$5,769 (Note 2).......................................... -- -- | --
Common stock, par value $.001 per share; authorized, |
700,000,000 shares; issued, 2,959,781 shares (Note 2).... -- -- | 3
New common stock, par value $.001 per share; authorized |
10,000,000 shares; issued 3,841,471, shares.............. 4 4 | --
Additional paid-in capital: |
Preferred................................................ -- -- | 5,152
Common................................................... 26,783 26,256 | 202,544
Accumulated deficit........................................ 2,589 (1,256) | (413,364)
Less treasury stock (Note 2): |
Preferred, Series A, at cost, 24,750 shares.............. -- -- | (458)
Common, at cost, 6,269 shares............................ -- -- | (9,009)
------- ------- | ---------
Total shareholders' equity (deficiency)........... 29,376 25,004 | (215,132)
------- ------- | ---------
Total liabilities and shareholders' equity |
(deficiency).................................... $75,387 $85,520 | $ 74,228
======= ======= | =========
</TABLE>
- - ---------------
(A) Due to the reorganization and implementation of fresh start reporting, the
financial statements for the Successor Company (periods after November 27,
1993) are not comparable to those of the Predecessor Company. See "Notes to
Consolidated Financial Statements -- Notes 1 and 2" for more information on
the reorganization and implementation of fresh start reporting.
See Notes to Consolidated Financial Statements.
51
<PAGE> 60
SAVIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SUCCESSOR COMPANY | PREDECESSOR COMPANY
------------------------ | -----------------------------
NINE MONTHS FIVE WEEKS | FORTY-SEVEN YEARS ENDED
ENDED ENDED | WEEKS ENDED DECEMBER 31,
OCTOBER 1, JANUARY 1, | NOVEMBER 27, -------------------
1994 1994 | 1993 1992 1991
----------- ---------- | ----------- -------- --------
(UNAUDITED) |
<S> <C> <C> | <C> <C> <C>
Revenues: |
Sales.................................. $ 93,479 $ 12,077 | $ 111,079 $139,159 $183,440
Service................................ 35,976 4,277 | 47,372 55,238 69,750
Rentals................................ 12,552 1,487 | 20,025 32,119 56,286
Finance income......................... 1,043 94 | 1,222 1,597 2,803
---------- --------- | --------- -------- --------
143,050 17,935 | 179,698 228,113 312,279
---------- --------- | --------- -------- --------
Operating costs and expenses: |
Cost of sales.......................... 68,575 9,238 | 80,839 97,353 151,924
Cost of service........................ 25,411 3,096 | 32,024 33,987 46,674
Cost of rentals........................ 5,754 904 | 11,518 21,981 38,415
Selling and administrative expenses.... 37,279 5,758 | 45,165 62,298 102,788
Reorganization items, net (Notes 1 |
and 2).............................. -- -- | (2,255) 4,014 --
Provision for restructuring costs |
(Note 4)............................ -- -- | (50) 5,706 33,079
Loss (gain) on sale of assets.......... -- -- | (451) -- 11,291
Interest expense (contractual interest |
of $9,561 for the forty-seven weeks |
ended November 27, 1993 and $12,130 |
for 1992)........................... 1,169 175 | 2,465 9,310 18,576
Other expense (income), net............ 55 18 | (81) 1,982 5,441
---------- --------- | --------- -------- --------
138,243 19,189 | 169,174 236,631 408,188
---------- --------- | --------- -------- --------
Income (loss) before income taxes and |
extraordinary item..................... 4,807 (1,254) | 10,524 (8,518) (95,909)
Income tax provision (Note 15)........... 1,923 (2) | (72) (24) (1,492)
---------- --------- | --------- -------- --------
Income (loss) before extraordinary |
item................................... 2,884 (1,256) | 10,452 (8,542) (97,401)
Extraordinary item: |
Gain on the forgiveness of debt (Notes |
2 and 9)............ ............... 961 -- | 68,747 -- --
---------- -------- | --------- -------- --------
Net income (loss)........................ $ 3,845 $ (1,256) | $ 79,199 $ (8,542) $(97,401)
========= ======== | ======== ======== ========
Income (loss) per new common share....... $ 1.01 $ (.34)
========= ========
Number of new common shares to be used in
computing net loss per share........... 3,797,664 3,749,115
========= ==========
</TABLE>
Net income (loss) per share for the Predecessor Company is not meaningful
due to debt discharge, the cancellation of common and preferred stock, the
issuance of New Common Stock and fresh start reporting.
See Notes to Consolidated Financial Statements.
52
<PAGE> 61
SAVIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONAL
PAR VALUE PAID-IN CAPITAL CUMULATIVE ACCUMULATED TREASURY STOCK TOTAL
------------------ --------------------- TRANSLATION EARNINGS ------------------- EQUITY
PREFERRED COMMON PREFERRED COMMON ADJUSTMENT (DEFICIT) PREFERRED COMMON (DEFICIENCY)
--------- ------ --------- --------- ----------- ----------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY:
Year Ended December
31, 1991:
Balance at
December 31,
1990............ $ -- $ 147 $ 5,152 $ 163,794 $(164) $(282,834) $(458) $(9,009) $(123,372)
Payment of
Preferred Stock
dividends in
kind............ -- -- -- -- -- (16,364) -- -- (16,364)
Preferred Stock
dividends in
arrears......... -- -- -- -- -- (3,643) -- -- (3,643)
Issuance of Common
Stock:
Increasing Rate
Note
interest...... -- 6 -- 502 -- -- -- -- 508
Conversion of
Preferred
Stock......... -- 45 -- 14,542 -- -- -- -- 14,587
Series A
Preferred
Stock
dividends..... -- 3 -- 294 -- (297) -- -- --
Reverse Stock
Split......... -- (199) -- 199 -- -- -- -- --
Net loss........ -- -- -- -- -- (97,401) -- -- (97,401)
Translation
adjustment.... -- -- -- -- 164 -- -- -- 164
----- ----- ------- --------- ----- --------- ----- ------- ---------
Balance at
December 31,
1991............ $ -- $ 2 $ 5,152 $ 179,331 $ -- $(400,539) $(458) $(9,009) $(225,521)
Year Ended December
31, 1992:
Balance at
December 31,
1991............ $ -- $ 2 $ 5,152 $ 179,331 $ -- $(400,539) $(458) $(9,009) $(225,521)
Preferred Stock
dividends in
arrears......... -- -- -- -- -- (4,283) -- -- (4,283)
Issuance of Common
Stock:
Conversion of
Preferred
Stock......... -- 1 -- 23,213 -- -- -- -- 23,214
Net loss........ -- -- -- -- -- (8,542) -- -- (8,542)
----- ----- ------- --------- ----- --------- ----- ------- ---------
Balance at
December 31,
1992............ $ -- $ 3 $ 5,152 $ 202,544 $ -- $(413,364) $(458) $(9,009) $(215,132)
Forty-Seven Weeks
Ended November 27,
1993:
Balance at
December 31,
1992............ $ -- $ 3 $ 5,152 $ 202,544 $ -- $(413,364) $(458) $(9,009) $(215,132)
Preferred Stock
dividends in
arrears......... -- -- -- -- -- (3,828) -- -- (3,828)
Issuance of Common
Stock:
Conversion of
Preferred
Stock......... -- -- -- 759 -- -- -- -- 759
Net income...... -- -- -- -- -- 79,199 -- -- 79,199
Elimination of
Predecessor
Company
stockholders'
interest (Note
2)............ -- (3) (5,152) (203,303) -- 337,993 458 9,009 139,002
Issuance of new
common shares
(Notes 2 and
13)........... -- 4 -- 26,256 -- -- -- -- 26,260
----- ----- ------- --------- ----- --------- ----- ------ ---------
Balance at
November 27,
1993............ $ -- $ 4 $ -- $ 26,256 $ -- $ -- $ -- $ -- $ 26,260
- - -------------------------------------------------------------------------------------------------------------------------------
SUCCESSOR COMPANY:
Five Weeks Ended
January 1, 1994:
Balance at
November 27,
1993............ $ -- $ 4 $ -- $ 26,256 $ -- $ -- $ -- $ -- $ 26,260
Net loss.......... -- -- -- -- -- (1,256) -- -- (1,256)
----- ------ ------- --------- ----- --------- ----- ------ -----------
Balance at January
1, 1994......... $ -- $ 4 $ -- $ 26,256 $ -- $ (1,256) $ -- $ -- $ 25,004
===== ===== ======= ========= ===== ========= ===== ====== ==========
Nine months ended
October 1, 1994:
Balance at January
1, 1994......... $ -- $ 4 $ -- $ 26,256 $ -- $ (1,256) $ -- $ -- $ 25,004
Issuance of Common
Stock:
Claims
Settlement.... -- -- -- 527 -- -- -- -- 527
Net income...... -- -- -- -- -- 3,845 -- -- 3,845
----- ----- ------- --------- ----- --------- ----- ------ ----------
Balance at October
1, 1994......... $ -- $ 4 $ -- $ 26,783 $ -- $ 2,589 $ -- $ -- $ 29,376
===== ===== ======= ========= ===== ========= ===== ====== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
53
<PAGE> 62
SAVIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SUCCESSOR COMPANY | PREDECESSOR COMPANY
------------------------- | ---------------------------------
|
|
NINE MONTHS FIVE WEEKS | FORTY-SEVEN YEARS ENDED
ENDED ENDED | WEEKS ENDED DECEMBER 31,
OCTOBER 1, JANUARY 1, | NOVEMBER 27, ------------------
1994 1994 | 1993 1992 1991
----------- ----------- | ------------ ------- --------
(UNAUDITED) |
<S> <C> <C> | <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: |
Net income (loss)............................ $ 3,845 $(1,256) | $ 79,199 $(8,542) $(97,401)
Adjustments to reconcile net income (loss) to |
net cash provided (used) by operating |
activities before reorganization items: |
Depreciation and amortization.............. 3,994 563 | 7,640 13,073 31,220
Increase in interest accrued but not |
paid..................................... -- 53 | 504 4,349 2,082
Provision for allowances on accounts |
receivable, trade and other.............. -- 186 | 86 5,506 2,915
Provision for inventory and rental |
equipment obsolescence................... -- 141 | 1,066 481 4,309
Provision for restructuring................ -- -- | (50) 5,706 33,079
(Gain) loss on sale of assets.............. -- -- | (451) -- 11,291
Extraordinary gain on forgiveness of |
debt..................................... (961) -- | (68,747) -- --
Non-cash reorganization items.............. -- -- | (6,251) 2,424
Utilization of deferred tax asset.......... 2,131 -- | -- -- --
Other non-cash items....................... 1,001 107 | 1,330 (291) (216)
Change in assets and liabilities, net of |
the effect of acquisitions and |
dispositions: |
Decrease (increase) in trade |
receivables........................... (7,174) 1,244 | 1,396 10,422 6,037
Decrease (increase) in SCC financing |
receivables........................... 1,637 (1,011) | 3,532 (397) 7,980
Decrease (increase) in inventories....... 5,524 (2,209) | (2,785) 5,378 8,334
Increase (decrease) in accounts payable |
and accrued expenses.................. (3,297) 5,151 | (1,455) (7,461) (1,267)
Decrease in accrued restructuring |
costs................................. (2,053) (1,208) | (2,156) (9,129) (1,149)
Increase (decrease) in deferred revenues, |
net of amortization................... (546) 20 | (1,161) (320) (2,541)
Decrease (increase) in other working |
capital............................... (1,326) 605 | 627 (1,644) 3,378
------- ------- | -------- ------- --------
Total adjustments..................... (1,070) 3,642 | (66,875) 28,097 105,452
------- ------- | -------- ------- --------
Net cash provided by operating |
activities before reorganization |
items............................... 2,775 2,386 | 12,324 19,555 8,051
------- ------- | -------- ------- --------
Reorganization items: |
Professional fees..................... -- -- | (2,622) (782) --
Payments to settle liabilities subject |
to compromise....................... -- (2,901) | -- -- --
------- ------- | -------- ------- --------
Net cash provided by operating |
activities.......................... 2,775 (515) | 9,702 18,773 8,051
------- ------- | -------- ------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
54
<PAGE> 63
SAVIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SUCCESSOR COMPANY | PREDECESSOR COMPANY
------------------------ | ---------------------------------
NINE MONTHS FIVE WEEKS | FORTY-SEVEN YEARS ENDED
ENDED ENDED | WEEKS ENDED DECEMBER 31,
OCTOBER 1, JANUARY 1, | NOVEMBER 27, -------------------
1994 1994 | 1993 1992 1991
----------- ---------- | ------------ -------- --------
(UNAUDITED) |
<S> <C> <C> | <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES: |
Proceeds from sale of assets......... $ -- $ -- | $ 800 $ -- $ 18,134
Net acquisition of rental machines... (2,909) (97) | (233) (321) (21,893)
Acquisition of other property, plant |
and equipment..................... (1,609) (195) | (2,111) (108) (606)
Proceeds from disposal of other |
property, plant and equipment..... -- -- | 16 107 55
Other investing activities........... -- -- | -- -- (389)
------- -------- | -------- -------- --------
Net cash used in investing |
activities...................... (4,518) (292) | (1,528) (322) (4,699)
------- -------- | -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES: |
Net borrowings (payments) under |
Foothill line-of-credit........... 3,118 -- | -- (22,180) (1,990)
Proceeds from short-term debt........ -- -- | -- 18,001 38,102
Payments of short-term debt.......... (6,350) -- | -- (2,970) (31,825)
Proceeds from long-term debt......... -- -- | -- -- 18,150
Payments of long-term debt........... (2,159) (886) | (6,961) (4,870) (21,179)
------- -------- | -------- -------- --------
Net cash provided (used) by |
financing activities............ (5,391) (886) | (6,961) (12,019) 1,258
------- -------- | -------- -------- --------
Effect of exchange rate changes on |
cash.............................. -- -- | -- -- 19
------- -------- | -------- -------- --------
Net change in cash................... (7,134) (1,693) | 1,213 6,432 4,629
Cash, beginning of period............ 10,650 12,343 | 11,130 4,698 69
------- -------- | -------- -------- --------
Cash, end of period.................. $ 3,516 $ 10,650 | $ 12,343 $ 11,130 $ 4,698
======= ======== | ======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW |
INFORMATION: |
Cash paid during the period for: |
Interest.......................... $ 105 $ 51 | $ 758 $ 3,412 $ 13,298
Income taxes...................... -- -- | 5 5 508
SUPPLEMENTAL SCHEDULE OF NON-CASH |
INVESTING AND FINANCING ACTIVITIES: |
Increasing Rate Note interest paid in |
common stock...................... $ -- $ -- | $ -- $ -- $ 508
Preferred dividends paid in |
preferred stock................. -- -- | -- -- 3,360
Preferred dividends paid in common |
stock........................... -- -- | -- -- 297
Accounts payable converted to note |
payable......................... -- -- | -- -- 10,970
Advertising credits used in |
exchange for advertising........ -- -- | -- -- 373
Debt and other obligations |
extinguished through the |
issuance of new common stock.... 317 -- | 93,736 -- --
Non-cash issuance of common |
stock........................... 527 -- | -- -- --
</TABLE>
See Notes to Consolidated Financial Statements.
55
<PAGE> 64
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
1. PETITION FOR REORGANIZATION UNDER CHAPTER 11 AND BASIS OF PRESENTATION
On August 25, 1992, (the "Filing Date"), Savin Corporation ("Savin") and
two wholly-owned subsidiaries, Classic Intersystems, Inc. ("Classic") and
Diversified Equipment Leasing Corporation ("Diversified") (collectively, the
"Company"), each filed voluntary petitions (the "Chapter 11 Filings") for relief
under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in
the United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court"). Savin's only other active subsidiary, Savin Credit
Corporation ("SCC") was not included in the Chapter 11 Filings. On November 24,
1993, the Bankruptcy Court entered an order confirming the Amended Joint
Consolidated Plan of Reorganization of the Company, (the "Plan"). The effective
date of the Plan is December 14, 1993 (the "Effective Date").
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles and in conformity with
fresh start reporting under Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code," issued in November 1990
by the American Institute of Certified Public Accountants ("SOP 90-7"). The
Company is required to adopt fresh start reporting since the reorganization
value (approximate fair value at the date of reorganization) was less than the
total of all postpetition liabilities and allowed prepetition claims, and
holders of existing common and preferred stock before the Effective Date
received less than 50% of the new common stock of the emerging entity. For
financial reporting purposes the accompanying consolidated financial statements
for the period ended January 1, 1994 are presented as if the Plan became
effective at November 28, 1993 which was in conformity with the Company's fiscal
month-end, and are designated "Successor Company". Financial statements for
periods prior to November 28, 1993 have been designated "Predecessor Company".
Under fresh start reporting, the final consolidated balance sheet of the
Predecessor Company as of November 27, 1993 became the opening consolidated
balance sheet of the Successor Company. Since fresh start reporting has been
reflected in the accompanying consolidated financial statements for the period
after November 27, 1993, such statements are not comparable in all material
respects to any prior financial statements of the Predecessor Company.
Accordingly, a vertical black line is shown to separate post-emergence
operations from those prior to November 28, 1993.
2. PLAN OF REORGANIZATION AND FRESH START REPORTING
Under the Plan, as of the Effective Date, all shares of existing common
stock and preferred stock, and all common stock options of the Predecessor
Company were canceled. In addition, approximately $93.7 million of prepetition
debt and other obligations were extinguished in exchange for the issuance of new
common stock, par value $.001 per share (the "New Common Stock") to the holders
of such debt and obligations and, accordingly, the Company recorded an
extraordinary gain of $67.3 million which was not subject to current income
taxes. As a result of such issuance, approximately 80 percent of the voting
stock of the Successor Company is held by a group made up of the Company's
former major creditors, which include the Company's former bondholders; Credit
Lyonnais Bank Nederland N.V. ("CLBN"); HCS Technology N.V., the Company's former
majority shareholder ("HCS"); ING Lease Structured Finance B.V., an affiliate of
ING Bank N.V. ("ING"); and the P.J. King Companies, Inc. ("King"). The Plan also
provided for cash payments of approximately $8.9 million for certain secured and
other obligations of the Company. Approximately $5.8 million of such payments
are payable in installments through 1996.
Under the provisions of SOP 90-7, the Company adopted fresh start reporting
as of November 27, 1993. Accordingly, the statement of operations for the
forty-seven weeks ended November 27, 1993 reflects the effects of the
forgiveness of debt and other obligations resulting from confirmation of the
Plan, the effects of
56
<PAGE> 65
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
the adjustments to the fair value of assets and liabilities of the Successor
Company, and the effects of reorganization related settlement awards and
professional fees.
To determine its reorganization value, the Company considered various
valuation approaches, including discounted future cash flows, implied
capitalization based on market statistics of comparative public companies,
comparable merger and acquisition activities and other applicable ratios and
industry indices. The Company relied primarily on the discounted future cash
flow method, and to a lessor extent on the other methods, in arriving at its
estimated reorganization value. The cash flow projections were based on
estimates about circumstances and events that have not yet taken place. Such
estimates and assumptions are inherently subject to significant economic and
competitive uncertainties and contingencies beyond the control of the Company.
Specifically, certain assumptions were made with respect to the value of the
Japanese Yen relative to the U.S. Dollar, the Company's relationship with Ricoh
Corporation, its sole supplier of copiers, the emergence from Chapter 11 and the
Company's ability to utilize net operating loss carryforwards. Any variances
among these key assumptions could impact the value of the Company.
Under fresh start reporting, the reorganization value of the Company has
been allocated to the Successor Company's assets on the basis of the purchase
method of accounting. The portion of reorganization value not attributable to
specific tangible or identifiable intangible assets of the Successor Company has
been reflected as "Reorganization value in excess of amounts allocable to
identifiable assets" in the accompanying consolidated balance sheet as of
January 1, 1994.
The Company recorded the following amounts as reorganization items, net for
the:
<TABLE>
<CAPTION>
FORTY-SEVEN
WEEKS ENDED YEAR ENDED
NOVEMBER 27, DECEMBER 31,
1993 1992
------------ ------------
<S> <C> <C>
Professional fees................................. $ (4,184) $ (1,594)
Provision for settlement of claims................ (5,031) (2,424)
Interest income................................... 188 4
Fresh start adjustments........................... 11,282 --
------------ ------------
Reorganization items, net......................... $ 2,255 $ (4,014)
=========== ==========
</TABLE>
Liabilities recorded by the Company that were classified as "Liabilities
Subject to Compromise" at December 31, 1992 consisted of the following:
<TABLE>
<S> <C>
Unsecured debt.................................................... $ 44,135
Undersecured debt................................................. 2,232
Trade payables and accrued expenses............................... 19,687
Accrued interest.................................................. 3,765
Due to affiliate.................................................. 38,310
--------
Total................................................... $108,129
========
</TABLE>
57
<PAGE> 66
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
The effect of the adoption of the Plan and fresh start reporting on the
consolidated balance sheet of the Predecessor Company as of November 27, 1993
was as follows:
<TABLE>
<CAPTION>
CONFIRMATION ADJUSTMENTS
PRECONFIRMATION ----------------------------------- REORGANIZED
AS OF SETTLEMENTS AS OF
NOVEMBER 27, AND DEBT STOCK FRESH NOVEMBER 27,
1993 DISCHARGE CANCELATION START 1993
--------------- ----------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash............................................ $ 12,343 $ -- $ -- $ -- $ 12,343
Accounts receivable............................. 20,092 -- -- -- 20,092
Other receivables............................... 1,241 (50) -- -- 1,191
Inventory....................................... 20,372 -- -- -- 20,372
Other current assets............................ 3,681 -- -- -- 3,681
Deferred tax asset.............................. -- -- -- 3,055(2) 3,055
--------- --------- --------- ------- --------
Total Current Assets...................... 57,729 (50) -- 3,055 60,734
--------- --------- --------- ------- --------
Rentals, net...................................... 2,626 -- -- 1,069(1) 3,695
Other PPE, net.................................... 2,192 -- -- 777(1) 2,969
Other long term assets............................ 473 -- -- -- 473
Deferred tax asset................................ -- -- -- 9,432(2) 9,432
Excess reorganization value....................... -- -- -- 9,435(3) 9,435
--------- --------- --------- ------- --------
Total Assets.............................. $ 63,020 $ (50) $ -- $23,768 $ 86,738
========= ========= ========= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Short term debt................................. $ 7,033 $ -- $ -- $ -- $ 7,033
Current long term debt.......................... 624 2,805 -- -- 3,429
Chapter 11 claims payable....................... -- 3,652 -- -- 3,652
Accounts payable and accrued expenses........... 34,314 (574) -- -- 33,740
Restructuring reserve........................... 1,600 -- -- -- 1,600
Deferred revenue................................ 5,750 -- -- -- 5,750
Chapter 11 liabilities subject to settlement.... -- 1,028 -- -- 1,028
--------- --------- --------- ------- --------
Total Current Liabilities................. 49,321 6,911 -- -- 56,232
--------- --------- --------- ------- --------
Long term debt.................................... 75 3,171 -- -- 3,246
Chapter 11 liabilities subject to settlement...... -- 1,000 -- -- 1,000
Liabilities subject to compromise................. 99,509 (99,509) -- -- --
--------- --------- --------- ------- --------
Total liabilities......................... 148,905 (88,427) -- -- 60,478
--------- --------- --------- ------- --------
Preferred Stock subject to repurchase............. 126,518 -- (126,518) -- --
Common Stock -- Predecessor....................... 203,309 -- (203,309) -- --
Preferred Stock -- Predecessor.................... 5,152 -- (5,152) -- --
Treasury Stock -- Predecessor..................... (9,468) -- 9,468 -- --
New Common Stock.................................. -- 26,260 -- -- 26,260
Accumulated earnings (deficit).................... (411,396) 62,117 325,511 23,768 --
--------- --------- --------- ------- --------
Total liabilities and shareholders' equity
(deficiency)............................ $ 63,020 $ (50) $ -- $23,768 $ 86,738
========= ========= ========= ======= ========
</TABLE>
- - ---------------
(1) Write-up of fixed assets to fair value.
(2) To recognize deferred tax assets.
(3) Represents unallocated portion of reorganization value.
58
<PAGE> 67
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
3. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION:
The consolidated financial statements include the accounts of Savin
Corporation and its wholly-owned subsidiaries. Significant intercompany accounts
and transactions have been eliminated.
FISCAL YEAR AND FINANCIAL STATEMENT RECLASSIFICATIONS AND RESTATEMENT:
The Company's fiscal year is the 52 week period ending on the Saturday
closest to December 31.
Certain reclassifications have been made to prior year financial statements
to conform to the current presentation.
REVENUE RECOGNITION:
In accordance with industry practice, the Company recognizes sales revenue
upon shipment of product or upon receipt of a signed delivery and acceptance
certificate for lease financed sales.
Rental machines are rented to customers principally under one, two or
three-year contracts. These rental contracts are accounted for as operating
leases and, accordingly, rental income is recognized over the lease term as
earned.
The Company invoices customers in advance for certain service contracts.
These revenues are deferred and reflected in income ratably over the term of the
contract.
Finance income is recorded as earned on inventory and rental pool
financing.
INVENTORIES:
Inventories at October 1, 1994 and January 1, 1994 are stated at fair
value, generally determined to be replacement cost, to the extent that such
inventory existed at November 27, 1993, or at the lower of cost or market, cost
being determined by the average cost method, to the extent such inventory was
purchased subsequent to November 27, 1993.
Inventories at December 31, 1992 are stated at the lower of cost or market,
cost being determined by the average cost method.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is stated at fair value. Rental machines are
depreciated using the straight-line method over fifteen to thirty-six months.
Depreciation and amortization for other property, plant and equipment is
provided using the straight-line method. The estimated useful lives generally
used are: buildings, 15 years; machinery and equipment, 10 years; furniture, 7
to 10 years; leasehold improvements, the life of the lease or, if shorter, the
useful life; computer equipment, 5 years; computer software, 5 years. When
assets are retired or otherwise disposed of, the cost and accumulated
depreciation is written off; any profit or loss on such disposals is reflected
in operations.
Expenditures for maintenance and repairs are charged to operations as
incurred; renewals and betterments are capitalized.
59
<PAGE> 68
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE ASSETS:
As a result of adopting fresh start reporting, the Company recorded as of
November 27, 1993 reorganization value in excess of amounts allocable to
specific tangible or identifiable intangible assets of $9,435. This intangible
asset is being amortized on a straight-line basis over a 20 year period.
WARRANTIES:
The Company warrants its new copiers to retail customers for 90 days from
the date of installation and provides service at no additional charge during the
warranty period. Warranty expense is accrued at the time of sale and is included
in cost of sales and rentals. Warranty expense does not represent a material
cost to the Company.
INCOME TAXES:
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes" effective January 1, 1993. SFAS 109
requires a change from the deferred method to the asset and liability method of
accounting for income taxes. Under the asset and liability method, deferred
income taxes are recognized for the tax consequences of temporary differences by
applying enacted statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and the tax basis of existing
assets and liabilities. Under SFAS 109, the effect on deferred taxes of a change
in tax rates is recognized in income in the period of enactment. Under the
deferred method, deferred taxes were recognized using the tax rate applicable to
the year of calculation and were not adjusted for subsequent changes in tax law.
Additionally, SFAS 109 allows the recognition, in certain circumstances, of the
tax benefit of net operating loss carryforwards. Such recognition was generally
not allowable under the deferred method. The adoption of SFAS No. 109 has not
had a material effect on the Company's financial position and results of
operations.
RETIREMENT PLAN:
The Company provides an Employee Savings and Retirement Plan for employees
who elect to participate. The plan provides for the Company to match a portion
of certain participant contributions. The results of operations for the nine
months ended October 1, 1994, five weeks ended January 1, 1994, the forty-seven
weeks ended November 27, 1993 and the years ended December 31, 1992 and 1991
include cash contributions of $476, $32, $503, $426 and $784, respectively, made
by the Company to satisfy its matching obligations under the plan. The Company
does not provide postretirement benefits, and is unaffected by FASB Statement
No. 106 "Employers' Accounting for Postretirement Benefits Other than Pensions".
The Company adopted FASB Statement No. 112 "Employers' Accounting for
Postemployment Benefits" effective January 1, 1993 and such adoption was not
material to the Company's financial position and results of operations.
4. RESTRUCTURINGS
In 1993, the Company recorded additions to provisions established for a
restructuring plan implemented in 1992 but not yet completed (the "1992
Restructuring"), and reversed a portion of a restructuring provision established
in 1991 due to certain lower than previously expected costs. The net impact of
the two actions was a benefit to operations of $50 in 1993. The remaining
activities under the 1992 Restructuring are estimated to cost approximately $1.6
million, and cover updating the Company's computer systems and relocating
several retail branches and corporate offices to lower cost facilities. The
remaining costs will be funded primarily in cash.
In 1992, the Company recorded a restructuring provision of $5.7 million to
implement the 1992
60
<PAGE> 69
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
Restructuring, which included, in addition to activities delineated above, the
engagement of management consultants and other professionals to effect the 1992
Restructuring, certain staffing reductions and the renegotiation of certain
financing arrangements to which the Company was a party. With the exception of
the items listed in the paragraph above, the 1992 Restructuring activities were
completed during 1993.
In late 1991, the Company adopted a plan for an operational and financial
restructuring designed primarily to improve the Company's working capital
position and to reduce operational spending levels. A charge of $33.1 million
was recorded, consisting primarily of the write down of inventory and
receivables related to the Company's full color Prism(TM)I copier totaling $12.6
million and the write-off of other deferred and intangible assets totaling $7.5
million. Additionally, provisions were recorded totaling $13.0 million for
restructuring costs including professional fees, severance, vacant facilities
and other related costs.
5. GAIN/LOSS ON DISPOSAL OF ASSETS
In June 1993, the Company sold its idle warehouse facility in Conklin, New
York for $800. Approximately $249 was paid to satisfy mortgages on the facility
and a pre-tax gain of $451 was recognized on the sale.
On December 17, 1991, the Company sold to a third party all of the issued
and outstanding capital stock of the Company's wholly-owned Canadian subsidiary,
Savin Canada, Inc. ("Savin Canada"). The aggregate purchase price was
approximately $18.1 million. Proceeds from the sale were used to repay $10
million of short term loans from HCS and short term bank loans with the balance
being used for general working capital purposes. A pre-tax loss of $11.3 million
was recorded on the transaction.
6. INVENTORIES
Inventories consisted of the following at:
<TABLE>
<CAPTION>
OCTOBER 1, JANUARY 1, DECEMBER 31,
1994 1994 1992
---------- ---------- ------------
<S> <C> <C> <C>
Office machines and accessories................... $ 8,324 $ 11,816 $ 7,617
Parts, paper and supplies......................... 7,661 10,567 9,162
---------- ---------- ------------
$ 15,985 $ 22,383 $ 16,779
======= ======= ==========
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at:
<TABLE>
<CAPTION>
OCT. 1, 1994 JAN. 1, 1994 DEC. 31, 1992
---------------- --------------- ------------------
ADJ. ACCUM ADJ. ACCUM ACCUM
COST DEPREC COST DEPREC COST DEPREC
------ ------- ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Rental Machines...................................... $5,333 $(1,939) $3,693 $(504 ) $39,176 $(30,513)
====== ======== ====== ====== ======== =========
Land and buildings................................... $ -- $ -- $ -- $ -- $ 1,440 $ (1,303)
Machinery and equipment.............................. 49 (21) 42 -- 747 (632)
Furniture, computers and leasehold improvements...... 4,701 (1,087) 3,326 (271 ) 21,377 (20,284)
------ ------- ------ ------ ------- --------
Total Other.......................................... $4,750 $(1,108) $3,368 $(271 ) $23,564 $(22,219)
====== ======== ====== ====== ======== =========
</TABLE>
The net book value of rental machines was increased by $1.1 million at
November 27, 1993 to estimated fair value in accordance with fresh start
reporting requirements. The additional cost is being depreciated over 15 months.
Also in accordance with fresh start reporting requirements, the net book value
of the Company's furniture and fixtures was increased by $.8 million at November
27, 1993 to estimated fair value, and is being depreciated over a period of
seven years. In addition, the Company adjusted cost and accumulated
61
<PAGE> 70
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
depreciation balances for rental machines and other property, plant and
equipment to fair value at November 27, 1993.
Depreciation expense for the nine months ended October 1, 1994, five weeks
ended January 1, 1994, forty-seven weeks ended November 27, 1993 and the years
ended December 31, 1992 and 1991 was $3,643, $522, $7,640, $13,063 and $29,518,
respectively.
8. CREDIT ARRANGEMENTS AND SHORT-TERM BORROWINGS
Credit arrangements and short-term borrowings consisted of the following
at:
<TABLE>
<CAPTION>
OCTOBER 1, JANUARY 1, DECEMBER 31,
1994 1994 1992
---------- ---------- ------------
<S> <C> <C> <C>
Foothill Capital Corporation.......................... $3,149 $ 31 $ 22
Credit Lyonnais....................................... -- -- 10,000
AFF Facility.......................................... -- 7,008 7,008
---------- ---------- ------------
3,149 7,039 17,030
Less amounts reclassified as liabilities subject to
compromise....................................... -- -- (10,000)
---------- ---------- ------------
$3,149 $7,039 $ 7,030
======= ======= ==========
</TABLE>
Upon emergence from Chapter 11 protection on December 14, 1993, Savin
entered into an $18 million working capital facility (the "Foothill Facility")
with Foothill Capital Corporation ("Foothill"). The Foothill Facility allows
Savin to borrow funds and obtain letter of credit support based on Savin's level
of qualifying accounts receivable and inventory (the "Available Collateral").
The Foothill Facility supports two standby letters of credit (the "Security
Pacific L/C's) totaling $9.0 million, which were issued during early 1992 by
Security Pacific National Bank (now part of Bank of America), in favor of Ricoh
Corporation, Savin's primary supplier ("Ricoh"), to be used for product
purchases by Savin from Ricoh. Without the Security Pacific L/Cs or an alternate
financing arrangement, Ricoh may not be willing to produce and deliver products
to Savin. The Security Pacific L/Cs expire on April 10, 1995. The Company has
the intent and ability through the Foothill Facility to extend such letter of
credit coverage prior to their expiration.
At October 1, 1994, the maximum amount of borrowings under the Foothill
Facility based upon the Available Collateral was $16.9 million, of which $9.2
million was used to support the letters of credit. There were cash advances of
$1.3 million and $22 of accrued fees outstanding at October 1, 1994. The
interest rate on the Foothill Facility is equal to the prime rate plus 2% (9.75%
at October 1, 1994).
The Foothill Facility was amended on March 28, 1994 as of the Effective
Date, with respect to certain restrictive covenants. The Foothill Facility, as
amended, contains restrictive covenants affecting Tangible Net Worth, Debt to
Equity Ratios and the Current Ratio, the most restrictive of which requires
Savin to maintain a Current Ratio, as defined in the amendment, of at least .65
to 1 at October 1, 1994. For dividend restrictions, see Note 13.
With the Company's emergence from Chapter 11 protection, the debtor-in-
possession financing facility previously in effect with Foothill was replaced by
the Foothill Facility.
During February 1994, SCC, a wholly-owned subsidiary not a party to the
Chapter 11 Filings, entered into financing arrangements with Foothill (the "SCC
Credit Facility"). Under the SCC Credit Facility, Foothill provides a secured
line of credit to SCC up to a maximum of $7.0 million. Based on SCC's qualifying
accounts receivable collateral at October 1, 1994 the maximum amount of
available borrowings at that date was $5.0 million. The interest rate on the SCC
Credit Facility is equal to the prime rate plus 2% (9.75% at October 1, 1994).
At October 1, 1994, $1.8 million was outstanding under the SCC Credit Facility.
62
<PAGE> 71
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
SCC entered into the SCC Credit Facility in order to repay a previous
secured line of credit which had been obtained in 1989 from Atlantic Financial
Federal (the "AFF Facility"). The AFF Facility has been administered by the
Resolution Trust Corporation (the "RTC"), or its assignees, since December 1989,
when Atlantic Financial Federal went into receivership. At January 1, 1994, $7.0
million of principal and $.9 million of accrued and unpaid interest was
outstanding under the AFF Facility. In February 1994, the RTC agreed to accept,
and SCC paid, $6.4 million in full satisfaction of all amounts owed to the RTC
by SCC under the AFF Facility. Accordingly, SCC recorded an extraordinary gain,
net of taxes, of $1.0 million in February 1994 on the extinguishment of the AFF
Facility.
The SCC Credit Facility contains restrictive covenants similar to those in
the Foothill Facility, the most restrictive of which requires SCC to maintain a
Debt to Tangible Net Worth Ratio, as defined in the agreement, of 4.5 to 1.
9. LONG-TERM INDEBTEDNESS
Long-term indebtedness consisted of the following at:
<TABLE>
<CAPTION>
OCTOBER 1, JANUARY 1, DECEMBER 31,
1994 1994 1992
---------- ---------- ------------
<S> <C> <C> <C>
Note payable in monthly installments through 1995..... $2,808 $4,660 $ --
Tax notes payable in installments through 1996........ 745 1,128 --
Increasing Rate Senior Subordinated Notes, effective
interest 14.54%, due March 1, 1992.................. -- -- 1,891
Zero Coupon Convertible Senior Subordinated Notes,
effective interest .59%, due May 1, 1996............ -- -- 1,359
Zero Coupon Convertible Senior Subordinated Notes,
effective interest 3.28%, due February 1, 1996...... -- -- 170
11 3/8% Subordinated Debentures, due October 1,
1998................................................ -- -- 4,672
14% Subordinated Debentures, due August 1, 2000....... -- -- 3,921
Rental equipment financing payable in monthly
installments through:
May 1994 including interest at 13.5%................ -- -- 4,574
December 1991 including interest at 11.25%.......... -- -- 684
November 1993 including interest at 11.5%........... -- -- 13,472
Note payable in monthly installments through 1994..... -- -- 2,232
Other................................................. -- -- 506
------ ------ --------
3,553 5,788 33,481
Less amounts reclassified as liabilities subject to
compromise.......................................... -- -- 28,659
Less current portion.................................. 3,255 3,023 3,483
------ ------ --------
Long-term indebtedness........................... $ 298 $2,765 $ 1,339
====== ====== ========
</TABLE>
The Company was in default on substantially all of its long-term debt at
December 31, 1992 and such debt was classified as "Liabilities subject to
compromise" in accordance with SOP 90-7.
Under the terms of the settlement reached with ING, on the Effective Date,
ING received a promissory note from the Company in the amount of $4,660. The
note bears interest at a rate of 6% per annum and is payable in monthly
installments beginning January 1994 through October 1995. Interest on any
overdue principal or overdue interest is payable at the greater of (i) 8% per
annum or (ii) 3% over the rate per annum publicly announced from time to time by
Citibank N.A., New York, as its base rate, but in no event higher
63
<PAGE> 72
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
than the maximum rate permitted by applicable law. At October 1, 1994, the
Company was in compliance with the covenants contained in the ING settlement
agreement.
In settlement of certain state and local tax obligations, on the Effective
Date, the Company entered into various notes, payable in monthly or quarterly
installments. The terms of these notes range from one to three years and they
bear interest at rates ranging from 6% to 8%.
During the fourth quarter of 1990, the Company financed, through a third
party, a portion of its monochromatic copier equipment rented to customers under
cost-per-copy contracts. Proceeds from the financing were $12.5 million. After
the Filing Date, the Company continued to meet its obligations under the terms
of the financing arrangement and, accordingly, the outstanding indebtedness from
the financing was not reclassified to "Liabilities subject to compromise". On
December 14, 1993, the financing agreement between the Company and the third
party was amended and the balance due under the financing agreement of $.6
million was repaid. The amended financing agreement also established a
repurchase obligation whereby the Company agreed to repurchase the rental
equipment subject to the cost-per-copy contracts on October 1, 1994 for $.5
million.
Savin had been a guarantor on a loan made in 1988 by First Interstate Bank
of Oregon, N.A. ("First Interstate") ("the First Interstate Loan") to Classic.
The Company and First Interstate entered into an agreement in March 1993, which
was subsequently revised in July 1993, pursuant to which the Company paid $850
to First Interstate on July 30, 1993 in return for a release from First
Interstate of all liability of Savin and Classic for the payment of the First
Interstate Loan. As of July 30, 1993, the outstanding principal and accrued
interest balance under the First Interstate Loan was approximately $2.3 million.
The Company recorded an extraordinary gain of $1.4 million on the extinguishment
of the First Interstate Loan.
Maturities of long-term indebtedness at January 1, 1994 were as follows:
<TABLE>
<CAPTION>
YEAR OF
MATURITY AMOUNT
-------- ------
<S> <C>
1994........................................................ $3,023
1995........................................................ 2,630
1996........................................................ 135
------
$5,788
======
</TABLE>
10. ACCRUED EXPENSES
Accrued expenses consisted of the following at:
<TABLE>
<CAPTION>
OCTOBER 1, JANUARY 1, DECEMBER 31,
1994 1994 1992
---------- ---------- ------------
<S> <C> <C> <C>
Payroll, commissions and compensated absences......... $ 1,936 $ 3,670 $ 3,000
Accrued restructuring costs........................... 718 1,579 7,804
Accrued interest payable.............................. 314 1,151 688
Accrued environmental costs........................... 459 468 200
Accrued advertising................................... 2,513 2,378 2,125
Accrued professional fees............................. 1,094 1,116 1,499
Accrued insurance..................................... 1,111 1,303 637
Other accrued expenses................................ 10,899 11,655 11,642
-------- -------- --------
$ 19,044 $ 23,320 $ 27,595
======== ======== ========
</TABLE>
64
<PAGE> 73
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
Advertising expense included in selling and administrative expenses for the
nine months ended October 1, 1994, five weeks ended January 1, 1994, forty-seven
weeks ended November 27, 1993 and years ended December 31, 1992 and 1991 was
$3.5 million, $.3 million, $4.0 million, $4.8 million and $9.0 million,
respectively.
11. LEGAL PROCEEDINGS
Operations of the Company's Business Subsequent to the Filing
Date. Pursuant to the Bankruptcy Code, creditors and other parties-in-interest
may not (subject to certain exceptions), during the course of Chapter 11
proceedings, without the prior approval of the bankruptcy court having
jurisdiction over the debtor's estate: (i) commence or continue a judicial,
administrative or other proceeding against the debtor which was or could have
been commenced prior to the petition date, or to recover a claim that arose
prior to the petition date, (ii) enforce any prepetition judgments against the
debtor, (iii) take any action to obtain possession of the debtor's property or
to exercise control over property of the debtor or its estate, or (iv) set off
any debt owing to the debtor that arose prior to the petition date against a
claim of such creditor or party-in-interest against the debtor that arose prior
to the petition date. Pursuant to the Bankruptcy Code, substantially all
prepetition litigation against Savin, Classic and Diversified was automatically
stayed as a result of the Chapter 11 Filings.
General Prepetition Litigation. The following discussion provides a brief
description and other information regarding prepetition litigation in which
Savin or its affiliates were parties, a description of actions taken or other
developments subsequent to the Filing Date in connection with such litigation,
and a description of the various settlements relating to such litigation.
Class Action Lawsuits. In 1985, the Company, several of its former
officers and directors and certain other entities were named as defendants in
several separate class action lawsuits. The plaintiff class consisted of persons
or entities who purchased shares of old common stock or Series A Preferred Stock
from July 31, 1981 through November 12, 1985. The plaintiffs and the defendants
reached an agreement in principle with respect to a settlement of the lawsuits,
which agreement in principle was approved by order of the Bankruptcy Court and
the Connecticut District Court. In the settlement Savin issued 6,000 shares of
New Common Stock in escrow for distribution to the plaintiffs by the attorneys
for the plaintiff class.
Settlement of King Litigation. In 1986 and 1988, Savin, Classic and SCC
entered into certain agreements with King providing, generally, for the sale of
copiers and facsimile machines and related rental contracts and leases to King.
In 1990, Savin was served with a complaint, as subsequently amended, alleging
that Savin and SCC breached certain of those agreements, and sought equitable
relief, and monetary, punitive and treble damages. Subsequently, Savin and SCC
filed counterclaims for breach of the agreement in issue and for interference
with its contractual relations. In 1991, HCS and Foothill became involved in the
King litigation. After extensive negotiations between Savin and King during
which the King litigation was stayed by agreement, the Bankruptcy Court entered
a consent order in February 1993 entirely staying the King litigation as to all
parties due to the then-pending settlement discussions.
Pursuant to the Plan and pursuant to an agreement between King and Savin,
King agreed to settle their claims against Savin and its affiliates, and against
third parties, in exchange for the payment by Savin to King of $1.5 million in
cash and the issuance of 27% of the outstanding New Common Stock.
Settlement of HCS Litigation. In February 1993, the Company commenced an
adversary proceeding in the Bankruptcy Court against HCS, Infotec (an affiliate
of HCS) and three Dutch banks (including Credit Lyonnais -- New York Branch) and
certain of their affiliates alleging that HCS and the banks unlawfully exercised
control over the Company and its assets, and engaged in a series of actions
alleged by the Company to be breaches of contractual and fiduciary duties, and
fraudulent and preferential transfers of the Company's assets. In exchange for
agreeing with the Company to a settlement of the defendants' claims against the
65
<PAGE> 74
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
Company, the Company agreed to dismiss the litigation. Pursuant to the Plan, the
Company distributed 600,000 and 394,937 shares of New Common Stock to HCS and
CLBN, respectively, and paid $1 million to CLBN on the Effective Date.
Settlement of Savin Lease N.V. Litigation. In 1990 and 1991, the Company
entered into four transactions with Savin Lease N.V. (and certain of its
affiliates) ("Lease N.V.") for the sale of monochromatic copiers, color copiers,
and facsimile equipment (the "Equipment") and related rental contracts (the
"Rental Contracts"). In 1991, disputes arose between the Company and Lease N.V.
after the Company asserted that it had paid at least $8 million more than was
due to Lease N.V. under the documentation relating to such transactions (the
"Lease N.V. Loan Documentation"). In January 1992, the Company terminated
payments to Lease N.V., and in May 1992, the Lease N.V. litigation was commenced
when the Company was served with a complaint by Lease N.V. relating to certain
claims it asserted against the Company under the Lease N.V. Loan Documentation.
In compliance with a temporary restraining order obtained by Lease N.V., the
Company paid certain monies it received (less certain offsets) aggregating
$8,090 under the Lease N.V. Loan Documentation into an escrow account, and
refrained from selling any of the copiers pending a determination of the claims
made in the Lease N.V. litigation.
In connection with the settlement reached between the Company and ING
pursuant to the Plan, the Company issued to ING an aggregate of 600,000 shares
of New Common Stock (or approximately 15.1% of the outstanding New Common Stock,
when issued) in satisfaction of ING allowed claims against the Company for $15
million. In addition, ING transferred all of its right, title and interest in
the Equipment and Rental Contracts to the Company pursuant to a Settlement, Sale
and Security Agreement dated as of December 14, 1993 (the "ING Settlement
Agreement") in return for which the Company executed and delivered to ING a
promissory note (the "ING Promissory Note") in the principal amount of $4,660,
payable subsequent to the Effective Date in 22 equal monthly installments at an
annual interest rate of 6%. The ING Promissory Note is secured by a second lien
upon substantially all of Savin's assets. All of the ING litigation has been
discontinued with prejudice.
On or about October 28, 1994, the Company was served with a Summons and
Complaint by W. Phillip Sullins and Savin Coastal Valley, Inc. ("SCV") in an
action in the Superior Court in the State of California in which plaintiffs
sought compensatory damages in an amount in excess of $3 million, other
unspecified damages and other relief for alleged breaches of a Dealership
Agreement and related claims. Savin owns 49% of SCV and, according to Savin's
records, SCV and Mr. Sullins were indebted to Savin in the amount of
approximately $750 pursuant to the Dealership Agreement and certain promissory
notes and guarantees. The parties conducted extensive settlement discussions and
have executed and delivered settlement documents. Under the settlement, among
other things, all claims of defendants will be dismissed without payment of any
amount by Savin.
The Company is also party to several "ordinary course of business lawsuits"
which in management's opinion will not have a material adverse effect on the
Company's financial position and results of operations.
12. COMMITMENTS AND CONTINGENCIES
The Company has a minimum purchase commitment with Ricoh whereby the
Company must purchase certain quantities over specified time periods of liquid
toner copiers as new models are introduced. Failure to meet such commitments
could result in the Company being liable for tooling amortization charges from
Ricoh. The Company has adequately provided for any expected resultant liability.
Rental expense for the nine months ended October 1, 1994, five weeks ended
January 1, 1994, forty-seven weeks ended November 27, 1993 and the years ended
December 31, 1992 and 1991, amounted to approximately $2,976, $392, $3,682,
$5,660, and $8,941, respectively. Minimum rental commitments under
66
<PAGE> 75
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
noncancellable operating leases pertaining primarily to warehouses, offices and
equipment aggregated $6,177 at October 1 and are due as follows: 1994 $436; 1995
$2,168; 1996 $2,311; 1997 $2,240; 1998 $1,951 and thereafter $412.
The Company, through SCC, is contingently liable to repurchase leases sold
with recourse to third-party leasing companies. At October 1, 1994, January 1,
1994 and December 31, 1992, the aggregate value of the Company's contingent
obligations under such recourse leases amounted to approximately $.1 million,
$.3 million and $1.2 million, respectively.
The Company has contracts to provide copiers and service to the federal and
state governments and their respective agencies which frequently include
provisions for pricing adjustments in certain situations, and such federal and
state government contracts are subject to termination at the election of the
federal or state governments of their respective agencies. The United States
government and its federal agencies accounted for between 9% and 17% of Savin's
revenues from continuing operations in each of its last six years. Pursuant to
several of such contracts under which the Company supplies copiers to the
General Services Administration (the "GSA"), the Company has received notice
from the GSA of alleged pricing discrepancies resulting from a GSA-performed
audit of certain transactions. The Company has responded to the GSA, and
disagrees with the audit findings. The Company has adequately reserved, however,
for any resultant liability.
In 1993, the Company entered into agreements with three executive officers
for base compensation of $.6 million in the aggregate for employment through
December 14, 1994 pursuant to which, in the event of a termination "without
cause" of such officer's employment by Savin, the officer would be entitled to
receive severance payments in an amount equal to two year's base compensation if
such termination occurs within one year of the Effective Date, and in an amount
equal to one year's base compensation if such termination occurs more than one
year after the Effective Date.
The Company was notified in September 1991 by the New York State Department
of Environment Conservation (the "NYSDEC") that it was a potentially responsible
party for certain site investigation and environmental clean-up costs in
connection with a manufacturing-related facility located in Owego, New York
which was owned at one time by a former subsidiary of the Company. The Company
recorded $1.0 million as Chapter 11 liabilities subject to settlement for
expenditures that could have been incurred in connection with site investigation
and any remediation actions that could have been required as a result of the
site investigations, and the Company's responsibility (if any) for any cleanup
costs, was never fully determined. The NYSDEC filed a proof of claim with the
Company in an undetermined amount with respect to such clean-up liability. On
January 5, 1995, the Bankruptcy Court approved a settlement with NYSDEC pursuant
to which a claim for $925,000 was allowed in full and final satisfaction of
NYSDEC's claims. The Company issued 37,000 shares of Common Stock in settlement
of such claims.
The Company received a letter dated January 3, 1992 from the Pennsylvania
Department of Environmental Resources ("PADER") regarding the clean-up of
certain prepetition groundwater contamination at a site owned until 1985 by a
former subsidiary in Hallstead, Pennsylvania (the "Hallstead Site"). Subsequent
to 1985, but prior to the Filing Date, some groundwater contamination was
identified by PADER at the Hallstead Site which was spreading to adjoining
residential property owned by a local resident. The Company bought the parcel
and the Company's independent environmental consultants communicated with PADER
regarding a possible clean-up plan for both the Hallstead Site and the
residential property. For a period of time prior to the Filing Date, the
groundwater contamination levels in the area were monitored by the Company's
environmental consultants and reported to PADER. Since PADER has not filed a
claim in the Chapter 11 cases of any kind, including regarding investigation or
remediation of the prepetition groundwater contamination at the Hallstead Site,
the Company believes that PADER is barred from asserting such a claim. However,
since the Company owns the property, no assurance can be given that postpetition
costs incurred by PADER
67
<PAGE> 76
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
regarding remediation of groundwater contamination at that site would not be
administrative expenses or obligations of the Company.
Pursuant to a consent order signed in April 1988 with the NYSDEC, the
Company is obligated to monitor a third site ("Conklin") for which remedial
actions have already been completed. The Company has recorded a liability of $.5
million for costs related to the Hallstead and Conklin sites.
The estimate of the costs to remediate and monitor (for a period of 20 to
30 years) the above mentioned three sites range from $1.5 million to $2.3
million based on a cost study prepared by the Company's environmental
consultants. Estimated remediation costs have not been discounted, as the
Company cannot yet determine the timing of such payments. Estimated monitoring
costs amounting to $.8 million to $1.2 million, have been discounted at a rate
of 6.25% per annum. The annual cost of such monitoring is estimated at $71 to
$90. Management believes that the ultimate costs to remediate and monitor such
sites will not have a material adverse effect on the Company's financial
position and results of operations.
13. SHAREHOLDERS' EQUITY
The Company's Second Restated Certificate of Incorporation (the "New
Charter") authorizes the issuance of up to ten million shares of New Common
Stock, par value $.001 per share. Each holder of record of New Common Stock will
be entitled to one vote per share owned. There are no conversion, preemptive or
other subscription rights and no redemption provisions applicable to the New
Common Stock.
The Company is in the process of distributing certificates representing the
shares of New Common Stock issuable pursuant to the Plan. Pursuant to the terms
of the Plan, shares of New Common Stock are not deemed issued and outstanding
(for example, for purposes of voting) until certificates have been distributed.
Once certificates have been distributed to holders of allowed claims as of the
Effective Date, such holders will be deemed to have been holders of their shares
of New Common Stock effective as of the Effective Date.
The issuance of shares of New Common Stock pursuant to the Plan is exempt
from the registration requirements of the Securities Act of 1933, as amended,
and of equivalent state securities or "blue sky" laws by reason of an exemption
provided by Section 1145(a)(1) of the Bankruptcy Code. In addition to the 3.7
million shares of New Common Stock to be issued pursuant to the Plan as of the
Effective Date, the Company estimates that no more than .2 million additional
shares of New Common Stock will be issued to satisfy approximately $5.6 million
in prepetition disputed claims which will be resolved in the Bankruptcy Court.
The New Charter imposes restrictions on the transfer of New Common Stock by
any person or entity that owns five percent or more of the New Common Stock
immediately following the Effective Date ("Five Percent Holder"). These
restrictions are imposed in order to preserve the ability of the Company to
utilize net operating loss carryovers to which the Company is entitled to
pursuant to the Internal Revenue Code. The restriction period begins on the
Effective Date and ends no earlier than two years and no later than three years
and three months after the Effective Date, subject to modification by the Board
of Directors. King may not transfer any of its allotment of New Common Stock
during such period. During the restriction period, each Five Percent Holder,
other than King, may transfer up to but not in excess of forty-three percent of
such holder's initial allotment of New Common Stock without the consent of the
Company. Any other proposed transfers by a Five Percent Holder during the
restriction period must be approved by the Company. Additional restrictions
imposed on certain Five Percent Holders are discussed in the New Charter.
DIVIDENDS:
Holders of New Common Stock will be entitled to receive such dividends, if
any, as may be declared from time to time by the Board of Directors in its
discretion from sources legally available therefor. By reason
68
<PAGE> 77
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
of a covenant included in the settlement agreement with ING and a similar
covenant included in the Foothill Facility, it is not anticipated that the
Company will declare a cash dividend with respect to the New Common Stock for
the foreseeable future.
14. STOCK OPTION PLAN
During January 1994, the Company's Board of Directors approved a resolution
whereby each director would receive as compensation options to acquire 25,000
shares of New Common Stock at an exercise price of $1.00 per share (the
"Director Stock Option Plan"). The options vest at the rate of 20% at the
beginning of each year of service as a director of the Company over a period of
five years. In the event of a change of control of the Company, all options
shall immediately vest. As the options vest, Savin will be required to charge
against earnings an aggregate amount equal to the difference between the then
current fair market value of the New Common Stock and the exercise price of such
options. If a director resigns from the Company's board, or is not re-elected,
any options not yet vested will be extinguished. The Director Stock Option Plan
is subject to ratification by a majority of the Company's stockholders, and to
the filing of any required Securities and Exchange Commission registration
statements, if necessary. Upon ratification, the Company expects to record
deferred compensation (to be amortized over the vesting period) and a
corresponding increase to additional paid-in capital of approximately $750
related to the grant.
All options outstanding under the 1986 Stock Option Plan at the Effective
Date have been cancelled.
15. INCOME TAXES
TAX PROVISION
The provision for income taxes was comprised of the following:
<TABLE>
<CAPTION>
NINE MONTHS FIVE WEEKS FORTY-SEVEN YEAR ENDED
ENDED ENDED WEEKS ENDED DECEMBER 31,
OCTOBER 1, JANUARY 1, NOVEMBER 27, ---------------
1994 1994 1993 1992 1991
----------- ---------- ------------ ---- ------
<S> <C> <C> <C> <C> <C>
Federal.............................. $ 1,634 $ -- $ -- $ -- $ --
State................................ 289 2 72 24 776
Foreign.............................. -- -- -- -- 403
Charge in lieu of tax................ -- -- -- -- 313
----------- ----- ----- ---- ------
Total...................... $ 1,923 $ 2 $ 72 $ 24 $1,492
========= ======== ========== ==== ======
</TABLE>
69
<PAGE> 78
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
The following table reconciles income taxes computed at the federal
statutory rate to the income tax provision:
<TABLE>
<CAPTION>
FIVE WEEKS FORTY-SEVEN YEAR ENDED
ENDED WEEKS ENDED DECEMBER 31,
JANUARY 1, NOVEMBER 27, ------------------------
1994 1993 1992 1991
---------- ------------ ------- -------------
<S> <C> <C> <C> <C>
Tax (benefit) computed at applicable statutory
rate......................................... $ (439) $ 3,683 $(2,888) $ (32,609)
Increases resulting from:
Tax effect of unrecognized net operating
losses.................................... 423 (1,103) 2,815 26,561
State income taxes........................... 2 72 8 473
Foreign income taxed at rates that differ
from the U.S.............................. -- -- -- 403
Meals and entertainment...................... 1 16 89 87
Nondeductible amortization................... 15 -- -- 2,114
Sale of Savin Canada......................... -- -- -- 3,436
Nondeductible expenses....................... -- -- -- 1,027
Nontaxable gains on settlement of claims and
fresh start reporting adjustments......... -- (2,601) -- --
Other........................................ -- 5 -- --
------ -------- ------- ---------
Tax at actual rate............................. $ 2 $ 72 $ 24 $ 1,492
====== ======== ======= =========
</TABLE>
NET OPERATING LOSSES AND CREDIT CARRYFORWARDS
The Company has net operating loss carryforwards ("NOLs") of approximately
$252 million as of January 1, 1994 which expire in the years 1997 through 2007.
For purposes of computing the regular tax liability of the Company, all of the
taxable income recognized in a taxable year generally may be offset by
unrestricted NOLs. The Company also generated capital loss and credit
carryforwards of approximately $16 million which will expire between 1995 and
2001. Future utilization of such benefits is subject to certain restrictions.
Section 382 of the Internal Revenue Code (the "Code") places an annual
limitation on the amount of income which can be offset by NOLs and built-in
losses and other tax benefit carryforwards for both regular tax and alternative
minimum tax purposes, if the entity possessing NOLs experiences an "ownership
change." If an ownership change occurred, the amount of preownership change NOLs
and other carryforward benefits generally cannot exceed an amount equal to the
product of (i) the fair market value of stock (subject to various adjustments)
multiplied by (ii) the applicable federal long-term tax-exempt rate on the date
of the ownership change (the "Annual Limitation").
The Company has experienced two separate ownership changes, the first of
which occurred on January 22, 1988. The second ownership change occurred on July
27, 1989. The first Annual Limitation to the pre-January 23, 1988 NOLs of
approximately $143 million is $1.2 million. Under existing limitations,
approximately $132 million of the pre-January 23, 1988 NOLs will expire
unutilized. The second Annual Limitation to the Company's post-January 22, 1988
through July 27, 1989 NOLs of approximately $25 million is essentially $5.3
million.
It has been determined that an additional ownership change has occurred
sometime in 1991 and that the availability of utilizable tax benefit
carryforwards, as discussed above could be reduced. However, sufficient
information is not currently available to determine the actual date of such
ownership change.
70
<PAGE> 79
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
As previously discussed, the Company completed its bankruptcy
reorganization on December 14, 1993, which resulted in an additional ownership
change. However, the Code includes certain exceptions (the "Bankruptcy
Exception") which provide that the Annual Limitation will not apply to further
limit the utilization of the Company's NOLs if certain stock ownership criteria
are met. The Company believes it has met such criteria as of the Effective Date.
Pursuant to the Bankruptcy Exception rules, an ownership change occurring
within two years after the Effective Date of the reorganization will result in
the retroactive disallowance of the Bankruptcy Exception and the imposition of
an Annual Limitation of zero. Thus, a subsequent ownership change within two
years after the Effective Date would eliminate Savin's NOLs and other tax
benefits. In order to minimize the chances of a subsequent ownership change, the
New Charter and an agreement between certain Five Percent Holders provide for
restrictions on the transfer of New Common Stock. The New Charter provides that
transfers made in violation of such restrictions shall be null and void.
DEFERRED TAX ASSET
As a result of applying SFAS 109, $146 million of previously unrecorded
deferred tax benefits (without regard to limitations and expirations) were
recognized at January 1, 1993 as part of the cumulative effect of adopting this
statement. These net deferred tax benefits were offset at that date, in their
entirety, by a valuation allowance, due to the uncertainty of their realization
resulting from the impact of the Chapter 11 Filings on operations. (See Note 3).
Deferred income tax benefits reflect the net effects of (a) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and (b)
operating loss, capital loss and tax credit carryforwards.
At November 27, 1993, as part of fresh start reporting, the Company
decreased the valuation allowance by $12.5 million, based on taxable income
projections over the next three years and an analysis of current and prior tax
years without the impact of bankruptcy related charges and other nonrecurring
items.
The estimated tax effects of significant items comprising the Company's net
deferred tax asset as of January 1, 1994 are as follows:
<TABLE>
<S> <C>
Deferred tax liabilities......................................... $ --
Deferred tax assets:
Fixed assets................................................... 2,161
Reserves not currently deductible.............................. 11,194
Operating loss carryforwards................................... 100,960
Capital loss carryforwards..................................... 6,628
Tax credit carryforwards....................................... 2,098
Other.......................................................... 732
---------
Net deferred tax asset........................................... 123,773
Valuation allowance.............................................. (111,286)
---------
Adjusted net deferred tax asset.................................. $ 12,487
=========
</TABLE>
16. RELATED PARTY TRANSACTIONS
JOINT VENTURES
At January 1, 1994, the Company held an equity interest of 49% in a joint
venture. The joint venture is a former Savin branch owned by the Company which
was converted to a dealership.
71
<PAGE> 80
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
All business transactions with the joint venture, primarily the sale of
copier equipment, facsimile machines, parts and related supplies for resale, are
conducted at terms comparable to the Company's dealers.
REGENT PACIFIC
On February 21, 1992, the Company and Regent Pacific Management Corporation
("Regent Pacific") entered into an agreement (the "Regent Pacific Agreement")
providing, generally, for certain management services to be rendered to the
Company by Regent Pacific in connection with the Company's attempt to undergo a
financial restructuring. During the forty-seven weeks ended November 27, 1993
and the year ended December 31, 1992, the Company paid $2,622 and $3,506,
respectively, in fees to Regent Pacific (excluding $500 deposited into an escrow
fund to secure the Company's potential indemnification obligations to Regent
Pacific), and reimbursed Regent Pacific (or paid to others on Regent Pacific's
behalf) an aggregate of approximately $231 and $468 for expenses pursuant to the
Regent Pacific Agreement, as amended.
KING COMPANIES
The Company is currently considering various proposals from a subsidiary of
King, an entity wholly-owned by Mr. Peter J. King, a Director of the Company, to
offer certain end user financing options to the Company's customers. No payments
were made to King pursuant to such proposals during 1993, and such proposals are
currently being evaluated by the Company.
During 1993, the Company repurchased from King its right, title and
interest in approximately 600 rental copiers and underlying rental contracts for
$375. Such rental copiers and contracts were included in transactions entered
into in 1988 between the Company and King.
An agreement for the lease of new equipment was executed by International
Leasing Corporation, a subsidiary of King, and a branch manager, on behalf of
the Company, in February 1994. On the Effective Date, Savin rescinded the
authority of its employees and agents to enter into contracts without the
express grant of authority from the Board of Directors. The employee executing
the contract had no authority to bind the Company to the terms of the contract.
Consequently, the Company does not consider itself bound to the contract unless
its terms are approved by the Board of Directors. The Board of Directors has not
yet determined whether such agreement should be approved. See Note 11 for a
discussion on the settlement of the King litigation.
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data is as follows:
<TABLE>
<CAPTION>
1994 QUARTERS
-----------------------------
1ST 2ND 3RD
------- ------- -------
<S> <C> <C> <C>
Revenues........................................................ $50,112 $46,577 $46,360
======= ======= =======
Gross profit.................................................... $14,576 $14,409 $14,326
======= ======= =======
Net income (loss before extraordinary item (c).................. $ 1,506 $ 881 $ 946
Extraordinary item:
Gain on the foregiveness of debt.............................. 961 -- --
------- ------- -------
Net income...................................................... $ 2,017 $ 881 $ 946
======= ======= =======
</TABLE>
72
<PAGE> 81
SAVIN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT WHERE NOTED, AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1993 QUARTERS
---------------------------------------------------
1ST 2ND 3RD 4TH (B)
------- ------- ------- ------------------
EIGHT FIVE
WEEKS WEEKS
------- -------
<S> <C> <C> <C> <C> <C>
Revenues..................................... $52,049 $51,429 $50,182 $26,038 $17,935
======= ======= ======= ======= =======
Gross profit (a)............................. $17,070 $15,864 $14,181 $ 8,202 $ 4,697
======= ======= ======= ======= =======
Net income (loss) before extraordinary item
(c)........................................ $ 2,519 $ 2,962 $ 75 $ 4,896 $(1,256)
Extraordinary item:
Gain on the forgiveness of debt............ -- -- 1,449 67,298 --
------- ------- ------- ------- -------
Net income (loss)............................ $ 2,519 $ 2,962 $ 1,524 $72,194 $(1,256)
======= ======= ======= ======= =======
Loss per Common Share (d).................... $ (.34)
=======
</TABLE>
<TABLE>
<CAPTION>
1992 QUARTERS
----------------------------------------
1ST 2ND 3RD 4TH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues............................................... $62,940 $60,087 $54,859 $50,227
======= ======= ======= =======
Gross profit (a)....................................... $19,378 $19,666 $17,483 $18,265
======= ======= ======= =======
Net income (loss) (d) (e).............................. $ (308) $ (940) $ 1,173 $(8,467)
======= ======= ======= =======
</TABLE>
- - ---------------
(a) Gross profit equals total revenues, less cost of sales, service and rentals.
(b) As a result of adopting fresh start reporting, the Company's fourth quarter
in 1993 includes two periods -- October 3, 1993 through November 27, 1993
and November 28, 1993 through January 1, 1994.
(c) The eight weeks ended November 27, 1993 includes a gain of $2.3 million from
reorganization items.
(d) Net income (loss) per share for the Predecessor Company is not meaningful
due to debt discharge, the cancellation of common and preferred stock, the
issuance of new common stock and fresh start reporting.
(e) The fourth quarter of 1992 includes $4.0 million in reorganization items and
$5.7 million in restructuring charges.
73
<PAGE> 82
SCHEDULE VIII
SAVIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN C COLUMN D
COLUMN B ---------- ----------------------------- COLUMN E
---------- ADDITIONS DEDUCTIONS ----------
COLUMN A BALANCE AT CHARGED TO ----------------------------- BALANCE AT
- - ----------- BEGINNING COSTS AND AMOUNTS END OF
DESCRIPTION OF PERIOD EXPENSES WRITTEN OFF(1) TRANSFERS(2) PERIOD
- - ----------- ---------- ---------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts deducted
from trade accounts receivable in the
consolidated balance sheet:
Successor Company:
Nine months ended October 1,
1994.......................... $5,692 $ 840 $ (1,201) $ (403) $4,928
====== ====== ======== ====== ======
Five Weeks ended January 1,
1994.......................... $5,928 $ 186 $ (421) $ (1) $5,692
====== ====== ======== ====== ======
Predecessor Company:
Forty-seven weeks ended November
27, 1993...................... $6,990 $ 86 $ (789) $ (359) $5,928
====== ====== ======== ====== ======
Year ended:
December 31, 1992............. $8,285 $3,075 $ (4,033) $ (337) $6,990
====== ====== ======== ====== ======
December 31, 1991............. $7,581 $4,566 $ (3,862) $ (--) $8,285
====== ====== ======== ====== ======
Allowance for doubtful accounts deducted
from other current receivables in the
consolidated balance sheet:
Successor Company:
Nine months ended October 1,
1994.......................... $2,930 $ 177 $ (694) $ 111 $2,524
====== ====== ======== ====== ======
Five weeks ended January 1,
1994.......................... $2,992 $ -- $ (64) $ 2 $2,930
====== ====== ======== ====== ======
Predecessor Company:
Forty-seven weeks ended November
27, 1993...................... $5,066 $ -- $ (2,117) $ 43 $2,992
====== ====== ======== ====== ======
Year ended:
December 31, 1992............. $2,071 $2,431 $ (93) $ 657 $5,066
====== ====== ======== ====== ======
December 31, 1992............. $1,080 $1,118 $ (127) $ -- $2,071
====== ====== ======== ====== ======
</TABLE>
- - ---------------
(1) Uncollectible accounts written off, net of recoveries.
(2) Amounts transferred to or from other accounts.
74
<PAGE> 83
SCHEDULE IX
SAVIN CORPORATION AND SUBSIDIARIES
CONSOLIDATED SHORT-TERM BORROWINGS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN F
COLUMN D COLUMN E -------------
COLUMN C ----------- ----------- WEIGHTED
COLUMN A -------- MAXIMUM AVERAGE AVERAGE
- - --------------------- COLUMN B WEIGHTED AMOUNT AMOUNT INTEREST
------------- AVERAGE OUTSTANDING OUTSTANDING RATE
CATEGORY OF AGGREGATE BALANCE AT INTEREST DURING DURING DURING
SHORT-TERM BORROWINGS END OF PERIOD RATE(1) THE PERIOD THE PERIOD THE PERIOD(3)
- - --------------------- ------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Successor Company:
Nine months ended:
October 1, 1994:
Other financial
institutions......... $ 3,149 9.75% $ 4,037 $ 3,216 8.82%
======= ===== ======= =====
Five Weeks ended:
January 1, 1994:
Banks................... $ 7,008 7.50% $ 7,008 $ 7,008 7.50%
===== =====
Other financial
institutions............ 31 8.00% 31 31 8.00%
===== =====
------- -------
Total................ $ 7,039 $ 7,039
======= =======
Predecessor Company:
Forty-seven weeks ended:
November 27, 1993:
Banks................... $ 7,008 7.50% $17,008(4) $17,008(4) 7.50%
===== =====
Other financial
institutions......... 25 10.00% 57 39 10.00%
===== =====
------- -------
Total................ $ 7,033 $17,047
======= =======
Year ended:
December 31, 1992:
Banks(4).................. $17,008 7.50% $17,008 $17,008 7.70%
===== =====
Other financial
institutions............ 22 10.00% 23,247 4,432 9.76%
===== =====
------- -------
Total................ $17,030 $21,440
======= =======
December 31, 1991:
Banks........................ $17,008 8.00% $39,191 $34,319 10.37%
===== =====
Other financial
institutions............ 25,171 9.26% 36,714 32,238 11.18%
===== =====
------- -------
Total................ $42,179 $66,557
======= =======
</TABLE>
- - ---------------
(1) At end of period.
(2) Based upon the amount of borrowings outstanding at each month end during the
period.
(3) The average amount outstanding for each borrowing during the period
multiplied by the weighted average interest rate for each borrowing, divided
by the average total borrowing outstanding during the period.
(4) Includes $10,000 of liabilities subject to compromise.
75
<PAGE> 84
ANNEX A
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RICOH CORPORATION,
SC ACQUISITION CORP.
AND
SAVIN CORPORATION
------------------------
DECEMBER 21, 1994
------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE> 85
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 THE MERGER............................................................... 1
1.1 The Merger............................................................... 1
1.2 Effective Time........................................................... 1
1.3 Effect of the Merger..................................................... 1
1.4 Certificate of Incorporation............................................. 1
1.5 By-Laws.................................................................. 1
1.6 Directors................................................................ 1
1.7 Officers................................................................. 1
1.8 Meeting of the Company's Stockholders; Proxy Statement................... 2
1.9 Additional Actions....................................................... 2
ARTICLE 2 CONVERSION OF SECURITIES................................................. 2
2.1 Common Stock............................................................. 2
2.2 Dissenting Shares........................................................ 2
2.3 Acquiror Common Stock.................................................... 3
2.4 Exchange of Common Stock................................................. 3
2.5 Stock Options............................................................ 4
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE ACQUIROR............ 4
3.1 Organization............................................................. 4
3.2 Authorization; Binding Agreement......................................... 4
3.3 No Violations............................................................ 4
3.4 Proxy Statement; Other Information....................................... 5
3.5 Governmental Approvals................................................... 5
3.6 Finders and Investment Bankers........................................... 5
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................ 5
4.1 Organization............................................................. 5
4.2 Capitalization........................................................... 5
4.3 Subsidiaries............................................................. 6
4.4 Authority Relative to this Agreement..................................... 6
4.5 Consents and Approvals; No Violations.................................... 7
4.6 Litigation............................................................... 7
4.7 Bankruptcy Matters....................................................... 7
4.8 SEC Filings; Financial Statements........................................ 7
4.9 Absence of Certain Changes or Events..................................... 8
4.10 Governmental Authorization and Compliance with Laws...................... 9
4.11 Proxy Statement; Other Information....................................... 9
4.12 Finders and Investment Bankers........................................... 9
4.13 Employment and Similar Agreements and Arrangements....................... 9
4.14 Taxes.................................................................... 9
4.15 Employee Benefit Plans................................................... 11
4.16 Liabilities.............................................................. 13
4.17 Environmental Matters.................................................... 13
4.18 Contracts................................................................ 13
4.19 Intangible Property...................................................... 14
4.20 Real Estate.............................................................. 14
4.21 Insurance................................................................ 14
</TABLE>
i
<PAGE> 86
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
4.22 Labor Controversies...................................................... 15
ARTICLE 5 COVENANTS................................................................ 15
5.1 Conduct of Business of the Company....................................... 15
5.2 Notification of Certain Matters.......................................... 16
5.3 Access and Information................................................... 16
5.4 Company Approval......................................................... 17
5.5 Reasonable Commercial Efforts............................................ 18
5.6 Public Announcements..................................................... 18
5.7 Exchange Act Compliance.................................................. 18
5.8 No Inconsistent Activities............................................... 18
5.9 Termination Fee.......................................................... 19
5.10 Indemnification of Directors and Officers................................ 19
5.11 Indemnification of Brokerage............................................. 19
5.12 Escrow Agreement......................................................... 19
5.13 Consents and Waivers..................................................... 20
ARTICLE 6 CONDITIONS............................................................... 20
6.1 Conditions to Each Party's Obligations................................... 20
6.2 Conditions to Obligation of the Parent and the Acquiror.................. 20
6.3 Conditions to Obligation of the Company.................................. 22
ARTICLE 7 CLOSING.................................................................. 22
7.1 Time and Place; Filing of Certificates of Merger......................... 22
7.2 Filing of Certificates of Merger......................................... 22
ARTICLE 8 TERMINATION AND ABANDONMENT.............................................. 22
8.1 Termination.............................................................. 22
8.2 Procedure and Effect of Termination...................................... 23
ARTICLE 9 MISCELLANEOUS............................................................ 23
9.1 Certain Definitions...................................................... 23
9.2 Amendment and Modification............................................... 25
9.3 Waiver of Compliance; Consents........................................... 25
9.4 Survival................................................................. 25
9.5 Notices.................................................................. 25
9.6 Assignment............................................................... 26
9.7 Expenses................................................................. 26
9.8 Governing Law............................................................ 26
9.9 Counterparts............................................................. 26
9.10 Interpretation........................................................... 26
9.11 Entire Agreement......................................................... 26
9.12 No Third Party Beneficiaries............................................. 26
</TABLE>
ii
<PAGE> 87
<TABLE>
<S> <C>
SCHEDULES
A -- Majority Stockholders
4.2 -- Options
4.5 -- Consents
4.6 -- Litigation
4.9 -- Material Changes
4.10 -- Permits
4.13 -- Employment Agreements
4.14 -- Tax Matters
4.15.2 -- Benefit Plans
4.15.14 -- Unfunded Benefit Obligations and Reserves
4.16 -- Liabilities
4.17 -- Environmental Matters
4.18 -- Material Contracts
4.19 -- Intangible Property
4.20 -- Real Estate
4.21 -- Insurance
5.1 -- Changes
EXHIBIT
A -- Form of Escrow Agreement
</TABLE>
iii
<PAGE> 88
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 21, 1994 (the
"Agreement"), by and among RICOH CORPORATION, a Delaware corporation (the
"Parent"), SC ACQUISITION CORP., a Delaware corporation and a wholly owned
subsidiary of the Parent (the "Acquiror"), and SAVIN CORPORATION, a Delaware
corporation (the "Company"). The Acquiror and the Company are sometimes
collectively referred to herein as the "Constituent Corporations."
RECITALS:
The respective Boards of Directors of the Parent, the Acquiror and the
Company each have approved this Agreement pursuant to which, among other things,
the Acquiror will be merged with and into the Company (the "Merger") on the
terms and conditions contained herein and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL").
In order to induce the Parent and the Acquiror to agree to enter into this
Agreement and to effect the Merger, each of the stockholders of the Company
listed on Schedule A hereto (the "Majority Stockholders") have entered into a
Stockholder Agreement, dated the date hereof (the "Stockholder Agreement"), with
the Parent.
NOW THEREFORE, in consideration of the premises and the representations,
warranties and covenants contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.2) and in accordance
with the DGCL, the Acquiror shall be merged with and into the Company, which
shall be the surviving corporation in the Merger (hereinafter sometimes referred
to as the "Surviving Corporation"). At the Effective Time, the separate
existence of the Acquiror shall cease.
1.2 Effective Time. The Merger shall become effective as of the date and
time (the "Effective Time") of filing with the Secretary of State of the State
of Delaware of a certificate of merger (the "Certificate of Merger") in such
form as required by, and executed in accordance with, the DGCL.
1.3 Effect of the Merger. As of the Effective Time, the effects of the
Merger shall be as set forth in Section 259 of the DGCL.
1.4 Certificate of Incorporation. The Certificate of Incorporation of the
Acquiror, as in effect immediately prior to the Effective Time, shall become,
from and after the Effective Time, the Certificate of Incorporation of the
Surviving Corporation until thereafter amended in accordance with applicable
law. As of the Effective Time, the name of the Surviving Corporation shall be
Savin Corporation.
1.5 By-Laws. The By-Laws of the Acquiror, as in effect immediately prior
to the Effective Time, shall become, from and after the Effective time, the
By-Laws of the Surviving Corporation until thereafter amended as provided
therein and in accordance with applicable law.
1.6 Directors. The directors of the Acquiror at the Effective Time shall
become, from and after the Effective Time, the directors of the Surviving
Corporation and shall hold office from the Effective Time until their respective
successors are duly elected or appointed and qualify in the manner provided in
the Certificate of Incorporation and By-Laws of the Surviving Corporation, or as
otherwise provided by applicable law.
1.7 Officers. The officers of the Acquiror at the Effective Time shall
become, from and after the Effective Time, the initial officers of the Surviving
Corporation and shall hold office from the Effective Time until their respective
successors are duly elected or appointed and qualify in the manner provided in
the Certificate of Incorporation and By-Laws of the Surviving Corporation, or as
otherwise provided by applicable law.
<PAGE> 89
1.8 Meeting of the Company's Stockholders; Proxy Statement. The Company
shall take all action necessary in accordance with applicable law to convene a
meeting of its stockholders as promptly as practicable to consider and vote upon
the Merger. The Company shall, through its Board of Directors (the "Board"),
recommend that the Company's stockholders vote in favor of the Merger and the
approval and adoption of this Agreement, unless the Board shall determine in
good faith, following an appropriate review and based on the advice of the
Board's outside counsel, that such action would cause the Board to breach its
fiduciary duties under Delaware law. As soon as practicable, the Company shall
file with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and shall use
its best efforts to have cleared by the SEC, a proxy statement (the "Proxy
Statement") with respect to the meeting of the Company's stockholders referred
to in this Section 1.8.
1.9 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall determine or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Constituent Corporations acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
ARTICLE 2
CONVERSION OF SECURITIES
2.1 Common Stock.
2.1.1 Each share of Common Stock, par value $.001 per share, of the
Company (the "Common Stock") issued and outstanding immediately prior to
the Effective Time (except for shares of Common Stock then owned of record
by the Parent or the Acquiror and except for Dissenting Shares (as defined
in Section 2.2)) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive an
amount in cash equal to (a) $41,500,000 less (i) the amount of any
reduction in the aggregate purchase price for the shares of Common Stock
pursuant to Section 6.2, (ii) the amount of any portion of the aggregate
purchase price for the shares of Common Stock that shall be paid to the
Escrow Agent pursuant to Section 6.2 and (iii) the aggregate amount of all
payments, if any, made by the Company to the holders of Options (as defined
in Section 2.5) in connection with any redemption, cancellation or
termination thereof, divided by (b) the total number of shares of Common
Stock that are (i) issued and outstanding immediately prior to the
Effective Time (including, without limitation, all shares of Common Stock
issued in settlement of Unresolved Claims ((as defined in Section 4.2)) and
all shares of Common Stock issued to the Escrow Agent ((as defined in
Section 5.12)) pursuant to Section 5.12) and (ii) issuable pursuant to
Options outstanding immediately prior to the Effective Time, whether or not
then exercisable (such quotient being hereinafter referred to as the "Price
Per Share") payable to the holder thereof, without interest thereon, upon
surrender of the certificate representing such share of Common Stock.
2.1.2 Each share of Common Stock held in the Company's treasury
immediately prior to the Effective Time, if any, shall, by virtue of the
Merger, be cancelled and retired and cease to exist, without any conversion
thereof.
2.2 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, each share of Common Stock that is issued and outstanding immediately
prior to the Effective Time and that is held by a stockholder who has properly
exercised and perfected appraisal rights under Section 262 of the DGCL (the
"Dissenting Shares"), shall not be converted into or exchangeable for the right
to receive the Price Per Share,
2
<PAGE> 90
but shall be entitled to receive such consideration as shall be determined
pursuant to Section 262 of the DGCL; provided, however, that, if such holder
shall have failed to perfect or shall have effectively withdrawn or lost its
right to appraisal and payment under the DGCL, each share of Common Stock of
such holder shall thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right to receive the
Price Per Share, without any interest thereon, in accordance with Section 2.4,
and such shares shall no longer be Dissenting Shares.
2.3 Acquiror Common Stock. Each share of common stock of the Acquiror
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into one share of common stock of the Surviving Corporation.
2.4 Exchange of Common Stock.
2.4.1 On the Closing Date (as defined in Section 7.1), the Parent
shall cause the Acquiror to deposit in trust with a bank or trust company
designated by the Acquiror and reasonably satisfactory to the Company (the
"Exchange Agent") cash, cash equivalents or a combination thereof in an
aggregate amount equal to the product of: (i) the number of shares of
Common Stock issued and outstanding at the Effective Time (other than
shares of Common Stock then owned of record by the Parent or the Acquiror
or held in the Company's treasury and other than any Dissenting Shares);
and (ii) the Price Per Share (such product being hereinafter referred to as
the "Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions, make the payments provided for in Section 2.1.1 out of the
Exchange Fund. The Exchange Agent may invest all or portions of the
Exchange Fund in any one or more of the following: (a) securities issued or
directly and fully guaranteed or insured by the United States of America or
any agency or instrumentality thereof having maturities of not more than
one year from the date of acquisition thereof; (b) time deposits and
certificates of deposit of any commercial bank incorporated in the United
States of America of recognized standing having capital and surplus in
excess of $50,000,000; (c) securities, bonds, notes, debentures,
investments or other forms of debt of any Person rated at least AA or the
equivalent thereof by Standard & Poor's Corporation and at least Aa or the
equivalent thereof by Moody's Investors Service, Inc.; or (d) investments
in money market or mutual funds registered under the Investment Company Act
of 1940, as amended, whose sole investments are comprised of securities of
the types described in clauses (a) through (c) above. All net earnings with
respect to any investment of the Exchange Fund shall be paid to the
Surviving Corporation as and when requested by the Surviving Corporation.
If any cash or cash equivalents deposited with the Exchange Agent for
purposes of paying the Price Per Share for the Common Stock pursuant to
this Article 2 remains unclaimed following the expiration of six months
after the Effective Time, such cash (together with accrued interest) shall
be delivered to the Surviving Corporation by the Exchange Agent and,
thereafter, holders of certificates that immediately prior to the Effective
Time represented shares of Common Stock shall be entitled to look only to
the Surviving Corporation (subject to abandoned property, escheat or
similar laws) as general creditors thereof with respect to the surrender
and exchange of such certificates.
2.4.2 Promptly after the Effective Time, the Exchange Agent shall mail
to each record holder (other than the Parent and the Acquiror), as of the
Effective Time, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented shares of Common Stock
(the "Certificates") a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) and instructions for use in effecting the surrender of the
Certificates for payment therefor. Upon surrender by such holder to the
Exchange Agent of a Certificate, together with such letter of transmittal
duly executed, the holder of such Certificate shall be entitled to receive
in exchange therefor, cash in an amount equal to the product of the number
of shares of Common Stock represented by such Certificate and the Price Per
Share, and such Certificate shall forthwith be cancelled. No interest will
be paid or accrued on the cash payable upon the surrender of the
Certificates. If the payment is to be made to a person other than the
person in whose name a Certificate surrendered is registered, it shall be a
condition of payment that: (i) the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer; and (ii) the
person requesting such payment shall pay any transfer or other taxes
required by
3
<PAGE> 91
reason of the payment to a person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 2.4, each
Certificate (other than Certificates representing shares of Common Stock
then owned of record by the Parent or the Acquiror and other than
Certificates representing Dissenting Shares) shall represent for all
purposes whatsoever only the right to receive the Price Per Share in cash
multiplied by the number of shares evidenced by such Certificate, without
any interest thereon.
2.4.3 After the Effective Time there shall be no transfers on the
stock transfer books of the Surviving Corporation of the shares of Common
Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for transfer or for any other reason, they shall be cancelled
and exchanged for cash as provided in this Article 2.
2.5 Stock Options. Each holder of an option, warrant, call, subscription,
stock appreciation right or other right or other agreement obligating the
Company to issue, transfer or sell, or securities or rights convertible or
exchangeable for, any shares of Common Stock (each, an "Option"), which Option
is outstanding immediately prior to the Effective Time, whether or not then
exercisable, shall be entitled to receive, and shall receive, in settlement and
cancellation thereof, an amount in cash equal to the product of: (i) the
difference between the Price Per Share and the exercise price of each such
Option; and (ii) the number of shares of Common Stock covered by such Option.
All payments in respect of Options shall be made as soon as practicable after
the Effective Time. Prior to the Effective Time, the Company shall use its best
efforts to cause each holder of an outstanding Option to consent to the
cancellation of all such Options in consideration solely for the payment
provided herein with respect to Options that are outstanding prior to the
Effective Time, and shall take such other action as may be necessary to carry
out the terms of this Section 2.5.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE ACQUIROR
The Parent and the Acquiror represent and warrant to the Company as
follows:
3.1 Organization. Each of the Parent and the Acquiror is a corporation
validly existing and in good standing under the laws of the State of Delaware.
The Acquiror is a newly formed, wholly owned subsidiary of the Parent and,
except for activities incident to the acquisition of the Company, the Acquiror
has not engaged in any business activities of any type or kind whatsoever.
3.2 Authorization; Binding Agreement. Each of the Parent and the Acquiror
has the full legal power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the board of directors of the Parent
and the Acquiror, respectively, and no other proceedings on the part of the
Parent or the Acquiror are necessary to authorize the execution and delivery of
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by each of the Parent
and the Acquiror and constitutes a legal, valid and binding agreement of the
Parent and the Acquiror, enforceable against each of them in accordance with its
terms.
3.3 No Violations. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby nor compliance by
the Parent or the Acquiror with any of the provisions hereof will: (i) conflict
with or result in any breach of any provision of its Certificate of
Incorporation or By-Laws; (ii) require any consent, approval or notice under or
conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which the Parent or the Acquiror is a party or by
which either of them or any material portion of their properties or assets may
be bound; or
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(iii) violate any order, writ, injunction, determination, award, decree, law,
statute, rule or regulation applicable to the Parent or the Acquiror or any
material portion of their properties or assets; provided that no representation
and warranty is made in the foregoing clauses (ii) and (iii) with respect to
matters that could not reasonably be expected to result in Material Adverse
Effect (as defined below) with respect to the Parent. For purposes of this
Agreement, "Material Adverse Effect" with respect to any person means a material
adverse effect on the business, assets, properties, condition (financial or
otherwise), results of operations or prospects of such person and its
subsidiaries taken as a whole.
3.4 Proxy Statement; Other Information. None of the information relating
to each of the Parent and the Acquiror supplied or to be supplied by it in
writing for inclusion in the Proxy Statement will, at the time the Proxy
Statement is mailed, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading and, at the time of the meeting of
stockholders to which the Proxy Statement relates, as then amended or
supplemented, the Parent and the Acquiror shall have provided to the Company
such information, if any, as shall be necessary to correct any statement
relating to the Parent or the Acquiror supplied by it in writing for inclusion
in the Proxy Statement that has become false or misleading in any earlier
communication with respect to the solicitation of any proxy for such meeting.
3.5 Governmental Approvals. No consent, approval or authorization of or
declaration or filing with any foreign, federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
(each, a "Governmental Entity") on the part of each of the Parent and the
Acquiror that has not been obtained or made is required in connection with the
execution or delivery by each of the Parent and the Acquiror of this Agreement
or the consummation by each of the Parent and the Acquiror of the transactions
contemplated hereby, other than: (i) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware; (ii) filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); and (iii) consents, approvals, authorizations, declarations or filings
that, if not obtained or made, would not have a Material Adverse Effect with
respect to the Parent or prevent the Parent or the Acquiror from consummating
the transactions contemplated hereby.
3.6 Finders and Investment Bankers. Neither the Parent or the Acquiror nor
any of their respect officers or directors has employed any investment banker,
business consultant, broker or finder, except for Nomura Wasserstein Perella
Co., Ltd. ("NWP") and its affiliate, Wasserstein Perella & Co., Inc. ("WP"), or
incurred any liability for any investment banking, business consultant,
brokerage or finders' fees or commissions in connection with the transactions
contemplated hereby, except for fees payable to NWP, all of which fees have
been, or will be, paid by the Parent or its affiliate.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Parent and the Acquiror as
follows:
4.1 Organization. Each of the Company and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each of the Company and its subsidiaries is
duly qualified or licensed and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not individually or in the aggregate have a Material Adverse
Effect with respect to the Company. The Company has heretofore delivered to the
Parent and the Acquiror accurate and complete copies of the Certificates of
Incorporation and By-Laws, or equivalent governing instruments, as currently in
effect, of the Company and each of its subsidiaries.
4.2 Capitalization. The authorized capital stock of the Company consists
of 10,000,000 shares of Common Stock. As of the date hereof, 3,841,626 shares of
Common Stock are outstanding and no shares are
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held in the Company's treasury. No other capital stock of the Company is
authorized or issued. All issued and outstanding shares of Common Stock have
been duly authorized and are validly issued, fully paid, nonassessable and free
of preemptive rights. As of the date hereof, each of the Majority Stockholders
is the record and, to the knowledge of the Company, beneficial owner of the
number of shares of Common Stock set forth in the Stockholder Agreement executed
and delivered by such Majority Stockholder. Except for the Options granted to
the directors of the Company (which entitle the holders thereof to acquire, in
the aggregate, 155,000 shares of Common Stock at an exercise price of $1.00 per
share), at the date hereof there are not, and at the Effective Time there will
not be, any existing Options. Schedule 4.2 sets forth a correct and complete
list of (a) the holders of Options, the number of Options held by each such
holder, the number of Options that are presently vested with respect to each
such holder and a schedule of the future vesting of all presently unvested
Options with respect to each such holder and (b) the holders of all prepetition
disputed claims that are unresolved as of the date hereof (the "Unresolved
Claims"), the total amount of each such Unresolved Claim, and the total number
of shares of Common Stock that would be issuable in full settlement of each such
Unresolved Claim if such Unresolved Claim were resolved for the full amount
claimed.
4.3 Subsidiaries. Exhibit 22.01 to the Company's Annual Report on Form
10-K for the fiscal year ended January 1, 1994 (the "1993 Form 10-K") sets forth
the name, jurisdiction of incorporation or organization and percentages of
outstanding capital stock owned, directly or indirectly, by the Company, with
respect to each subsidiary of the Company. Except for the Company's 49%
ownership interest in Savin Coastal Valley, Inc. and certain other equity
interests that do not, in the aggregate, exceed $100,000 in value, neither the
Company nor any of its subsidiaries owns any direct or indirect equity interest
in any corporation (other than direct or indirect subsidiaries of the Company),
partnership, joint venture or other entity, domestic or foreign. All of the
outstanding shares of capital stock of each of the Company's subsidiaries have
been duly authorized and validly issued and are fully paid and nonassessable.
There are no irrevocable proxies or similar obligations with respect to such
capital stock and no equity securities or other interests of any of the
subsidiaries are or may become required to be issued by reason of any options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of any capital stock of any subsidiary, and there are no contracts,
commitments, understandings or arrangements by which any subsidiary is bound to
issue additional shares of its capital stock, or options, warrants or rights to
purchase or acquire any additional shares of its capital stock or securities
convertible into or exchangeable for such shares. All shares of capital stock of
each of the Company's subsidiaries are owned by the Company free and clear of
any claim, lien, encumbrance, security interest or agreement with respect
thereto, other than the security interests granted to (a) Foothill Capital
Corporation ("FCC") pursuant to the Amended and Restated Loan and Security
Agreement dated December 14, 1993 between the Company and FCC and the Loan and
Security Agreement dated February 7, 1994 between Savin Credit Corporation and
FCC and (b) Internationale Nederlanden Lease Structured Finance B.V. ("ING")
pursuant to the Settlement, Sale and Security Agreement, dated December 7, 1988
(the "ING Agreement"), between the Company and ING (collectively, the
"Creditors' Liens").
4.4 Authority Relative to this Agreement. The Company has full legal power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board and no other proceedings on the part of the
Company or any subsidiary of the Company are necessary to authorize the
execution and delivery of this Agreement or to consummate the transactions
contemplated hereby (other than the adoption of this Agreement by the
stockholders of the Company in accordance with the DGCL and the Certificate of
Incorporation and By-Laws of the Company). This Agreement has been duly and
validly executed and delivered by the Company and, subject to the approval and
adoption of this Agreement by the stockholders of the Company, constitutes a
legal, valid and binding agreement of the Company, enforceable against it in
accordance with its terms. The Board has unanimously declared the Restriction
Period (as defined in the Company's Certificate of Incorporation) terminated in
accordance with Section 8 of the Company's Certificate of Incorporation, but
only to the extent necessary to permit the consummation of the transactions
contemplated hereby and by the Stockholder Agreements in accordance with their
terms.
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4.5 Consents and Approvals; No Violations. Except for applicable
requirements of the Exchange Act, the HSR Act and the filing and recordation of
appropriate merger documents as required by the DGCL, no filing with, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the consummation by the Company of the transactions contemplated
by this Agreement. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby nor compliance by the
Company with any of the provisions hereof will: (i) conflict with or result in
any breach of any provision of the Certificates of Incorporation or By-Laws or
other governing instruments of the Company or any of its subsidiaries; (ii)
except as set forth on Schedule 4.5, require any consent, approval or notice
under or conflict with or result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of them or any material portion of their
properties or assets may be bound; or (iii) violate any order, writ, injunction,
determination, award, decree, law, statute, rule or regulation applicable to the
Company or any of its subsidiaries or any material portion of their properties
or assets; provided that no representation and warranty is made in the foregoing
clauses (ii) and (iii) with respect to matters that could not reasonably be
expected to result in Material Adverse Effect with respect to the Company.
4.6 Litigation. Except as disclosed in the SEC Filings (as defined in
Section 4.8) or as otherwise set forth on Schedule 4.6 hereto, as of the date
hereof there are no claims, actions, proceedings or, to the knowledge of the
Company, investigations pending or threatened against the Company or any of its
subsidiaries, or any properties or rights of the Company or any of its
subsidiaries, before any court or Governmental Entity that could reasonably be
expected to result in a Material Adverse Effect with respect to the Company. As
of the date hereof, neither the Company nor any of its subsidiaries nor any
property of any of them is subject to any order, judgment, injunction or decree.
A final order and judgment approving the settlement of the litigation captioned
as In re Savin Corporation Securities Litigation, Civil Action No. B-85-617
(AHN), in the United States District Court for the District of Connecticut and
dismissing such action with prejudice has been entered by such Court.
4.7 Bankruptcy Matters. The Company has delivered to the Parent and the
Acquiror complete and correct copies of the Company's plan of reorganization
(the "Plan of Reorganization") and disclosure statement in the Chapter 11 Case
(as defined below), as amended, supplemented or modified to date and as
confirmed by the confirmation order of the bankruptcy court, dated as of
November 23, 1993, as entered on the docket of such court on November 24, 1993,
with respect thereto (the "Confirmation Order"), and of the Confirmation Order.
For purposes of this Agreement, "Chapter 11 Case" means Case No. 92 B 44809
(BRL) commenced by the Company and certain other debtors in the United States
Bankruptcy Court for the Southern District of New York for relief under chapter
11 of title 11 of the U.S. Code (the "Bankruptcy Code"). The Plan of
Reorganization became effective on December 14, 1993, and is in full force and
effect as confirmed by the Confirmation Order. No motion: (i) to modify the Plan
of Reorganization (whether under section 1127 of the Bankruptcy Code or
otherwise); (ii) to revoke confirmation (whether under section 1144 of the
Bankruptcy Code or otherwise); or (iii) to convert or dismiss the Chapter 11
Case (whether under section 1112 of the Bankruptcy Code or otherwise) is
pending. The Confirmation Order has become a "Final Order" as defined in the
Plan of Reorganization and is no longer subject to any appeal, rehearing,
reargument, certiorari or other review.
4.8 SEC Filings; Financial Statements. The Company has made all filings
required to be made with the SEC since September 30, 1991 and has delivered to
the Parent and the Acquiror correct and complete copies of its: (i) Annual
Reports on Form 10-K for the years ended December 31, 1992 and January 1, 1994,
as filed with the SEC; (ii) proxy statements relating to all of the Company's
meetings of stockholders (whether annual or special) since September 30, 1993;
and (iii) all other reports, statements and registration statements (including
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed by the
Company with the SEC since March 31, 1993 (collectively, the "SEC Filings"). As
of their respective dates, the SEC Filings (including all exhibits and schedules
thereto and documents incorporated by reference therein), did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or
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necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
and its subsidiaries included or incorporated by reference in the SEC Filings
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects the
consolidated assets, liabilities and financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and changes in cash for the periods then ended (subject, in
the case of any unaudited interim financial statements, to normal year-end
adjustments, which have not been or are not expected to be material).
4.9 Absence of Certain Changes or Events. Except as disclosed in the SEC
Filings or as set forth on Schedule 4.9, since July 2, 1994 there has not been:
(i) any material adverse change in the business, assets, properties,
condition (financial or otherwise), results of operations or prospects of
the Company and its subsidiaries taken as a whole (the foregoing, a
"Material Adverse Change");
(ii) any damage, destruction or loss, whether covered by insurance or
not, having a Material Adverse Effect;
(iii) any change by the Company in accounting principles or methods
except insofar as may be required by a change in generally accepted
accounting principles;
(iv) any declaration, payment or setting aside for payment of any
dividend or any redemption, purchase or other acquisition of any shares of
capital stock or securities of the Company;
(v) any return of any capital or other distribution of assets to
stockholders of the Company as such;
(vi) any direct or indirect purchase or other acquisition of stock,
other securities or other assets (other than purchases of such other assets
in the ordinary course of business and at arm's-length purchase prices) of
any person and any direct or indirect loan, advance (other than advances to
employees for travel expenses in the ordinary course of business) or
capital contribution to any person other than any joint venture or
partnership in which the Company or any of its subsidiaries, but no
affiliate, has an equity interest;
(vii) any incurrence of any obligation or liability, including any
borrowing or capital expenditure or commitment by the Company or any of its
subsidiaries (other than obligations, liabilities, borrowings and capital
expenditures or commitments through the date hereof in the ordinary course
of business and consistent with past practice);
(viii) any waiver by the Company or any of its subsidiaries of any
right of material value of its respective businesses;
(ix) any payment or commitment to pay by or on behalf of the Company
or any of its subsidiaries any severance or termination pay to any officer,
director, employee, consultant, agent or other representative of the
Company or any of its subsidiaries, other than in the ordinary course of
business;
(x) a grant of any general increase in the compensation of its
officers or employees (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any such officer or employee,
except for annual increases in the ordinary course of business in
accordance with past practices and the Company's policies in existence as
of the date of this Agreement; or
(xi) any agreement to take, whether in writing or otherwise, any
action which, if taken prior to the date hereof, would have made any
representation or warranty in this Article 4 untrue or incorrect in any
material respect.
Since January 1, 1994, the Company and its subsidiaries have conducted
their respective businesses only in the ordinary course.
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4.10 Governmental Authorization and Compliance with Laws. Except as set
forth on Schedule 4.10, the business of the Company and its subsidiaries has
been operated in compliance with all laws, ordinances, regulations and orders of
all Governmental Entities, except for violations which do not and could not
reasonably be expected to result in a Material Adverse Effect with respect to
the Company. Except as set forth on Schedule 4.10, the Company and its
subsidiaries: (i) have all permits, certificates, licenses, approvals and other
authorizations (collectively, "Permits") required in connection with the
operation of their business; (ii) are not in violation of any Permit applicable
to any of them or to the operation of their business; and (iii) no proceeding is
pending or, to the knowledge of the Company, threatened to revoke any Permit,
except those the absence or possible violation of which does not and could not
reasonably be expected to result in a Material Adverse Effect with respect to
the Company.
4.11 Proxy Statement; Other Information. None of the information relating
to the Company and its subsidiaries included in the Proxy Statement will, at the
time the Proxy Statement is mailed, be false or misleading with respect to any
material fact, or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading or, at the
time of the meeting of stockholders to which the Proxy Statement relates, as
then amended or supplemented, necessary to correct any statement which has
become false or misleading in any earlier communication with respect to the
solicitation of any proxy for such meeting. The Proxy Statement will comply in
all material respects as to form with the requirements of the Exchange Act and
the rules and regulations thereunder.
4.12 Finders and Investment Bankers. Neither the Company nor any of its
officers or directors has employed any investment banker, business consultant,
broker or finder except for The Pendergast Group, Inc. ("Pendergast"), or
incurred any liability for any investment banking, business consultant,
brokerage or finders' fees or commissions in connection with the transactions
contemplated hereby, except for fees payable to Pendergast pursuant to the
agreement, dated as of August 8, 1994, between Pendergast and the Company, all
of which fees have been, or will be, paid by the Company.
4.13 Employment and Similar Agreements and Arrangements. Except as set
forth on Schedule 4.13, there are no employment, consulting, severance or
indemnification arrangements, agreements or understandings between the Company
or any of its subsidiaries, on the one hand, and any Majority Stockholders or
directors or officers of the Company or any of its subsidiaries or of any
Majority Stockholder or any of its subsidiaries, on the other hand, and no
"change in control," "golden parachute" or like payments shall become payable by
the Company or any of its subsidiaries to any director or officer of the Company
or any of its subsidiaries as a result of the transactions contemplated hereby.
4.14 Taxes.
4.14.1 The Company and its subsidiaries have timely filed all federal,
state, local and foreign tax returns, tax reports, and declarations of
estimated tax, including, without limitation, consolidated federal income
tax returns of the Company and its subsidiaries (collectively, "Tax
Returns") required to be filed through the date hereof or extensions
therefor, and shall prepare and timely file, in a manner consistent with
prior years and applicable law and regulations, all Tax Returns required to
be filed on or before the day of the Effective Time, and all such Tax
Returns are or will be correct and complete in all material respects. The
Company and its subsidiaries have timely paid all Taxes (as defined in
Section 4.14.11) that are due, or claimed or asserted by any taxing
authority to be due, from or with respect to any of them through the date
hereof and shall timely pay any Taxes required to be paid by any of them on
or before the Effective Time, except for those that are being contested in
good faith by appropriate proceedings and with respect to which appropriate
reserves have been reflected in the financial statements included in the
1993 Form 10-K or the notes thereto (the "Financial Statements"). With
respect to any period for which Tax Returns have not yet been filed, or for
which Taxes are not yet due or owing, the Company has no liability for
Taxes other than Taxes incurred in the ordinary course of business or for
which accruals were reflected in the Financial Statements. The Company and
its subsidiaries have made all required current estimated Tax payments
sufficient to avoid any underpayment penalties in excess of $10,000 in the
aggregate.
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4.14.2 There are no liens or other encumbrances with respect to Taxes
(other than Taxes not yet due and payable) upon any of the assets of the
Company or any of its subsidiaries except as noted on Schedule 4.14.2.
4.14.3 The United States federal income Tax Returns of the Company and
its subsidiaries have not been audited or examined by the United States
Internal Revenue Service (the "IRS") since the tax year ended April 30,
1983. The statute of limitations has expired with respect to the Company's
Federal Income Tax returns for the tax years ended December 31, 1990 and
prior, with the exception of tax years in which net operating losses were
generated, to the extent of any utilization of such net operating losses.
The Company and its subsidiaries have had various audits by state and local
taxing jurisdictions. Such audits have been concluded with the exceptions
noted on Schedule 4.14.3. There are no outstanding agreements, waivers or
arrangements extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of, Taxes due
from or with respect to the Company for any taxable period, except as noted
on Schedule 4.14.3. The Company has previously delivered or made available
to the Parent and the Acquiror correct and complete copies of each of: (i)
any audit reports issued within the last three years relating to the United
States federal, state, local or foreign Taxes due from or with respect to
the Company or any of its subsidiaries; and (ii) the United States federal
Tax Return, and state, local, and foreign Tax Returns for each of the last
three taxable years, filed by the Company or any of its subsidiaries. No
closing agreement pursuant to Section 7121 of the Internal Revenue Code of
1986, as amended (the "Code") (or any predecessor provision) or any similar
provision of any state, local, or foreign law has been entered into by or
with respect to the Company or any of its subsidiaries. The Company has
installment agreements with various taxing authorities as set forth in
Schedule 4.14.3.
4.14.4 No audit or other proceeding, except as noted on Schedule
4.14.4, by any court, governmental authority, or similar person is pending
or, to the knowledge of the Company, threatened with respect to any Taxes
due from or with respect to the Company or any of its subsidiaries or any
Tax Return filed by or with respect to the Company or any of its
subsidiaries, except as noted on Schedule 4.14.4. No assessment of Tax is
proposed against the Company or any of its subsidiaries or any of their
respective assets except as noted in Section 4.14.4.
4.14.5 No election under any of Section 108, 168, 338, 472, 1017,
1033, or 4977 of the Code (or any predecessor provisions) has been made or
filed by or with respect to the Company or any of its subsidiaries. No
consent to the application of Section 341(f)(2) of the Code (or any
predecessor provision) has been made or filed by or with respect to any of
the properties of the Company or any of its subsidiaries. None of the
properties of the Company or any of its subsidiaries is an asset or
property that is or will be required to be treated as being owned by any
person (other than the Company or such subsidiary) pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately before the enactment of the Tax Reform
Act of 1986.
4.14.6 Neither the Company nor any of its subsidiaries has agreed to
or is required to make any adjustment pursuant to Section 481(a) of the
Code (or any predecessor provision) by reason of any change in any
accounting method, and there is no application by the Company or any of its
subsidiaries pending with any taxing authority requesting permission for
any changes in any accounting method of the Company or any of its
subsidiaries. The IRS has not proposed any such adjustment or change in
accounting method.
4.14.7 To the best of the Company's knowledge, neither the Company nor
any of its subsidiaries has been or is in violation (or with notice or
lapse of time or both, would be in violation) of any applicable law
relating to the payment or withholding of Taxes relating to employment. The
Company and its subsidiaries, through the services of an outside agent,
have duly and timely withheld from employee salaries, wages, and other
compensation and paid over to the appropriate taxing authorities all
material amounts required to be so withheld and paid over for all periods
under all applicable laws.
4.14.8 Neither the Company nor any of its subsidiaries is a party to,
is bound by or has any obligation under, any Tax sharing agreement or
similar contract.
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4.14.9 There is no contract, plan or arrangement covering any person
that, individually or collectively, could give rise to the payment of any
amount that would not be deductible by the Company or any of its
subsidiaries by reason of Section 280G of the Code.
4.14.10 Neither the Company nor any of its subsidiaries is a "United
States real property holding corporation," within the meaning of Section
897(c)(2) of the Code.
4.14.11 For purposes of this Agreement, "Tax" or "Taxes" shall mean:
(i) Any charge imposed by any foreign, federal, state, county or
local government or subdivision thereof with respect to any income,
profits, estimated, sales or use, excise, franchise, ad valorem,
severance, capital levy, production, transfer, withholding, business and
occupation, real or personal property, gross receipt, unemployment,
FICA, FUTA, and other payroll taxes; and
(ii) Interest, additions and penalties (civil or criminal) imposed
in connection with any Tax and any interest in respect of any such
additions or penalties.
4.15 Employee Benefit Plans.
4.15.1 For purposes of this Agreement:
(i) "Benefit Plan" means any employee benefit plan, arrangement,
policy or commitment, including, without limitation, any employment,
consulting or deferred compensation agreement, executive compensation,
bonus, incentive, pension, profit-sharing, savings, retirement, stock
option, stock purchase or severance pay plan, any life, health,
disability or accidental death and dismemberment insurance plan, any
holiday or vacation practice or any other employee benefit plan within
the meaning of section 3(3) of ERISA, as to which the Company has any
direct or indirect, actual or contingent liability;
(ii) "Company Benefit Plan" means any Benefit Plan that provides
benefits with respect to current or former Employees;
(iii) "Welfare Plan" means any Benefit Plan that is a welfare plan
within the meaning of and subject to ERISA section 3(1);
(iv) "Retiree Welfare Plan" means any Welfare Plan that provides
benefits to current or former employees beyond their retirement or other
termination of service (other than coverage mandated by COBRA, the cost
of which is fully paid by the current or former employee or his
dependents);
(v) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended;
(vi) "COBRA" means the provisions of Code section 4980B and Part 6
of Title I of ERISA;
(vii) "Employee" means any individual employed by the Company or
any of its subsidiaries; and
(viii) "PBGC" means the Pension Benefit Guaranty Corporation.
4.15.2 Schedule 4.15.2 lists all Company Benefit Plans. With respect
to each such plan, the Company has delivered to the Parent and the Acquiror
correct and complete copies of: (i) all plan texts and agreements and
related trust agreements or annuity contracts; (ii) all summary plan
descriptions and material Employee communications; (iii) the most recent
annual report (including all schedules thereto); (iv) the most recent
annual audited financial statement and opinion applicable to a plan
intended to qualify under code section 401(a) or 403(a); (v) if the plan is
intended to qualify under Code section 401(a) or 403(a), the most recent
determination letter, if any, received from the IRS; and (vi) all material
communications with any governmental entity or agency (including, without
limitation, the PBGC and the IRS).
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4.15.3 The Company has no direct or indirect, actual or contingent
liability with respect to any Benefit Plan other than to make payments
pursuant to Company Benefit Plans in accordance with the terms of such
plans.
4.15.4 Each of the Company and its subsidiaries has made all material
payments due from it to date with respect to each Benefit Plan.
4.15.5 All material amounts properly accrued as liabilities to, or
expenses of, any Benefit Plan that have not been paid have been properly
reflected on the Financial Statements.
4.15.6 There are no Benefit Plans that are subject to any of Code
section 412, ERISA section 302 or Title IV of ERISA.
4.15.7 Each Benefit Plan conforms in all material respects to, and its
administration is in all material respects in compliance with, all
applicable laws and regulations.
4.15.8 There are no actions, liens, suits or claims pending or
threatened (other than routine claims for benefits) with respect to any
Benefit Plan.
4.15.9 Each Benefit Plan which is intended to qualify under Code
section 401(a) or 403(a) so qualifies.
4.15.10 Each Benefit Plan which is a "group health plan" (as defined
in ERISA section 607(1)) has been operated in all material respects in
compliance with the provisions of COBRA and any applicable, similar state
law.
4.15.11 There is no contract or arrangement in existence with respect
to any Employee that would result in the payment of any amount that by
operation of Code section 280G would not be deductible to the Company or
any of its subsidiaries.
4.15.12 No assets of the Company are allocated to or held in a "rabbi
trust" or similar funding vehicle.
4.15.13 There are no Retiree Welfare Plans.
4.15.14 Except as disclosed on Schedule 4.15.14, there are no: (i)
unfunded benefit obligations with respect to any Employee that are not
fairly reflected by reserves shown on the Financial Statements; or (ii)
reserves, assets, surpluses or prepaid premiums with respect to any Welfare
Plan.
4.15.15 The consummation of the transactions contemplated by this
Agreement will not: (i) entitle any current or former Employee to severance
pay, unemployment compensation or any similar payment; (ii) accelerate the
time of payment or vesting, or increase the amount of any compensation due
to, any current or former Employee; or (iii) constitute or involve a
prohibited transaction (as defined in ERISA section 406 or Code section
4975), constitute or involve a breach of fiduciary responsibility within
the meaning of ERISA section 502(l) or otherwise violate Part 4 of Title I
of ERISA.
4.15.16 No Benefit Plan is a "multiple employer plan" or a
"multiemployer plan" within the meaning of the Code or ERISA.
4.15.17 No Benefit Plan that is or was subject to Title IV of ERISA
has been terminated; no filing of a notice of intent to terminate such a
Benefit Plan has been made; and the PBGC has not initiated any proceeding
to terminate any such Benefit Plan. No event has occurred, and no condition
or circumstance exists, that presents a material risk that any Benefit Plan
has or is likely to experience a "partial termination" (within the meaning
of Code section 411(d)(3)).
4.15.18 As of the Effective Time, the Company, its subsidiaries and
any entity under common control with the Company within the meaning of Code
section 414(b), (c), (m) or (o) has not incurred any liability or
obligation under the Worker Adjustment and Retraining Notification Act, as
it may be amended from time to time, and within the six-month period
immediately following the Effective Time,
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will not incur any such liability or obligation if, during such six-month
period, only terminations of employment in the normal course of operations
occur.
4.16 Liabilities. Except as disclosed in the SEC Filings or as set forth
on Schedule 4.16 or any other Schedule to this Agreement, the Company and its
subsidiaries do not have any material direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility, fixed
or unfixed, choate or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, contingent or otherwise ("Liabilities"), whether
or not of a kind required by generally accepted accounting principles to be set
forth in a financial statement, other than: (i) liabilities fully and adequately
reflected or reserved against on the Financial Statements; and (ii) liabilities
incurred in the ordinary course of business.
4.17 Environmental Matters. Except as set forth on Schedule 4.17, the
Company and its subsidiaries are and have been in compliance with all applicable
federal, state, local and foreign laws, principles of common law, regulations
and codes, as well as orders, decrees, judgments or injunctions issued,
promulgated, approved or entered thereunder relating to pollution, protection of
the environment or public health and safety (collectively, "Environmental
Laws"), there is no civil, criminal or administrative judgment, action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding, notice
or demand letter pending or, to its knowledge, threatened against the Company or
any of its subsidiaries pursuant to Environmental Laws that, individually or in
the aggregate, could reasonably be expected to result in a Material Adverse
Effect with respect to the Company and there are no past or present events,
conditions, circumstances, activities, practices, incidents, agreements, actions
or plans which may prevent compliance with, or which have given rise to or will
give rise to liabilities under, Environmental Laws that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Change
with respect to the Company.
4.18 Contracts. Schedule 4.18 sets forth a list of all of the following
contracts and other agreements to which the Company or any of its subsidiaries
is a party or by or to which either the Company or any of its subsidiaries or
its or their assets or properties are bound or subject:
(i) customer contracts and agreements for the sale of products which
by their terms exceed one year and which are in dollar amounts in excess of
$300,000 annually;
(ii) supply contracts and agreements which by their terms exceed one
year and which are in dollar amounts in excess of $500,000 annually;
(iii) contracts, severance agreements and other agreements with any
current or former holder of at least 5% of the Common Stock or any officer,
director, employee, consultant, agent or other representative providing for
payments or benefits of any kind in excess of $100,000 in the aggregate;
(iv) contracts and other agreements with any labor union or
association representing any employee of the Company or any of its
subsidiaries;
(v) contracts, agreements or other arrangements between the Company or
any of its subsidiaries, on the one hand, and any of the Majority
Stockholders or any affiliate thereof (other than the Company or its
subsidiaries), on the other hand;
(vi) joint venture agreements;
(vii) contracts or other agreements under which the Company or any of
its subsidiaries agrees to indemnify any party pursuant to which the
Company could have indemnity obligations in excess of $10,000 (other than
standard purchase, lease or sale contracts entered into in the ordinary
course of business) or to share tax liability of any party;
(viii) contracts and other agreements relating to the borrowing of
money; and
(ix) any other material contract or other agreement whether or not
made in the ordinary course of business.
There have been delivered or made available to the Parent and the Acquiror
correct and complete copies of all such contracts and other agreements set forth
on Schedule 4.18. All of such contracts and other agreements are in full force
and effect and neither the Company nor any subsidiary of the Company is in
default under any of them, nor, to the knowledge of the Company, is any other
party to any such contract or
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other agreement in default thereunder, nor does any condition exist that with
notice or lapse of time or both would constitute a default thereunder, which has
or could reasonably be expected to have a Material Adverse Effect with respect
to the Company. Except as set forth on Schedule 4.18, no approval or consent of
any person is needed in order that any contracts and other agreements to which
the Company or any of its subsidiaries is a party or by or to which either the
Company or any of its subsidiaries or its or their assets or properties are
bound or subject continue in full force and effect following the consummation of
the transactions contemplated by this Agreement, except for those approvals or
consents, the failure to obtain which does not and could not reasonably be
expected to have a Material Adverse Effect with respect to the Company. None of
the Company or any of its subsidiaries, or to the Company's knowledge, any
affiliate, is a party to or bound by any contract or agreement which,
individually or in the aggregate, has or could reasonably be expected to have a
Material Adverse Effect with respect to the Company. Except as set forth on
Schedule 4.18, no single supplier or customer supplied or purchased, during the
last 12 months more than 5% of the products supplied to the Company and its
subsidiaries taken as a whole or purchased more than 5% of the products sold by
the Company and its subsidiaries taken as a whole. As of the date hereof, there
are no disputes between the Company and any of its suppliers or customers that
have or could reasonably be expected to have a Material Adverse Effect with
respect to the Company.
4.19 Intangible Property. Schedule 4.19 sets forth a list of all patents
on record in the United States Patent and Trademark Office (the "PTO") issued to
the Company or Savin Business Machines Corporation and a list of all trademarks
on record in the PTO registered by the Company. To the best of the Company's
knowledge, the Company or its subsidiaries owns, or is licensed to, or otherwise
has, the right to use all of the patents, trademarks, service marks, trade
names, copyrights and franchises (collectively, "Intangible Property") required
for the conduct of the business of the Company or any of its subsidiaries,
except for those rights, the failure of which to have does not and could not
reasonably be expected to have a Material Adverse Effect with respect to the
Company. Except as set forth on Schedule 4.19, the rights of the Company or such
subsidiary in such Intangible Property are free and clear of any liens or other
encumbrances and neither the Company nor any of its subsidiaries has received
written notice of any adversely-held Intangible Property of any other person, or
notice of any charge or claim of any person relating to such Intangible Property
or any process or confidential information of the Company or its subsidiaries
and the Company does not know of any basis for any such charge or claim, except
for such liens, charges and claims that do not and could not reasonably be
expected to have a Material Adverse Effect with respect to the Company.
4.20 Real Estate. Schedule 4.20 sets forth a list and summary description
of: (i) all real property owned by the Company or any of its subsidiaries and
all buildings and other structures located on such real property; (ii) all
leases, subleases or other agreements under which the Company or any of its
subsidiaries is lessor or lessee of any real property; (iii) all options held by
the Company or any of its subsidiaries or contractual obligations on its part to
purchase or acquire any interest in real property; and (iv) all options granted
by the Company or any of its subsidiaries or contractual obligations on its part
to sell or dispose of any interest in real property. To the best of the
Company's knowledge, the Company or a subsidiary is the owner of record, lessee
under the leases or holder of the options, as the case may be, of each of the
items set forth on such Schedule (except as set forth in response to clause (iv)
above). To the best of the Company's knowledge, such leases, subleases and other
agreements are in full force and effect and neither the Company nor any of its
subsidiaries has received any notice of default thereunder. Except for the
Creditors' Liens, the leasehold interests of the Company and its subsidiaries
are subject to no lien or other encumbrance that has or could reasonably be
expected to have a Material Adverse Effect with respect to the Company and enjoy
a right of quiet possession as against any such lien or other encumbrance on the
property.
4.21 Insurance. A correct and complete list of all insurance policies or
binders held by or on behalf of the Company or its subsidiaries or pursuant to
which the business, properties or assets of the Company or its subsidiaries are
insured is set forth on Schedule 4.21 and the Company has heretofore delivered
correct and complete copies of such policies and binders to the Parent or the
Acquiror. Such policies or binders (as applicable) are in full force and effect
and all premiums due thereon have been paid.
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4.22 Labor Controversies. There are no labor controversies pending or, to
the knowledge of the Company, threatened against the Company or any of its
subsidiaries that have or could reasonably be expected to have a Material
Adverse Effect with respect to the Company.
ARTICLE 5
COVENANTS
5.1 Conduct of Business of the Company. Except as contemplated by this
Agreement, during the period from the date of this Agreement to the Effective
Time, the Company shall, and shall cause each of its subsidiaries to, conduct
its operations according to its ordinary course of business and consistent with
past practice, and the Company shall, and shall cause each of its subsidiaries
to, use its best efforts to preserve intact its business organization, to keep
available the services of its officers and employees and to maintain
satisfactory relationships with licensors, licensees, suppliers, contractors,
distributors, customers and others having business relationships with it.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, prior to the Effective Time, neither the
Company nor any or its subsidiaries will, without the prior written consent of
the Acquiror:
(i) amend or propose to amend its Certificate of Incorporation or
By-Laws (or comparable governing instruments);
(ii) authorize for issuance, issue, sell, pledge, deliver or agree or
commit to issue, sell, pledge or deliver (whether through the issuance or
granting of any options, warrants, commitments, subscriptions, rights to
purchase, awards or otherwise) any stock of any class or any securities
convertible into or exchangeable for share of stock of any class of the
Company or any of its subsidiaries, other than shares of Common Stock
issuable upon the exercise of the Options, upon the terms provided therein,
and other than shares of Common Stock issuable to holders of Unresolved
Claims in settlement thereof, upon the terms provided in the Plan of
Reorganization, which holders shall have received notice from the Company
of the existence of this Agreement and the transactions contemplated hereby
(which notice, at the Company's option, may consist, among other things, of
delivery of copies of all press releases issued by the Company prior to the
date thereof with respect to the Merger);
(iii) split, combine or reclassify any shares of its capital stock or
declare, pay or set aside any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or redeem, purchase or otherwise acquire or offer to acquire
any shares of its own capital stock or any of its subsidiaries;
(iv) (a) except in the ordinary course of business consistent with
past practice, create, incur, assume, maintain or permit to exist any
short-term debt (including obligations in respect of capital leases) in
excess of the amount currently outstanding; (b) create, incur, assume,
maintain or permit to exist any long-term debt (including obligations in
respect of capital leases), except for long-term debt currently
outstanding; (c) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, indirectly, contingently or otherwise) for
the obligations of any other person except wholly owned subsidiaries of the
Company in the ordinary course of business consistent with past practice;
(d) make any loans, advances or capital contributions to, or investments
in, any other person in excess of $30,000 in the aggregate (other than
customary travel advances to employees or subsidiaries made in the ordinary
course of business consistent with past practice, prepayments to suppliers
of goods and services made in the ordinary course of business and currently
committed capital expenditures); or (e) incur any material liability or
obligation (absolute, accrued, contingent or otherwise) other than in the
ordinary course of business and consistent with past practice, or change
any assumption underlying, or methods of calculating, any bad debt,
contingency or other reserve;
(v) (a) except as set forth on Schedule 5.1, increase in any manner
the compensation of any of its directors or officers or increase in any
manner the compensation of any of its employees, except for annual
increases in the ordinary course of business consistent with past practices
and Company policies in existence on the date hereof; (b) pay or agree to
pay any pension, retirement allowance or other employee
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benefit not required by any existing plan, agreement or arrangement to any
such director, officer or employee, whether past or present; (c) commit
itself to any additional pension, profit-sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation
right, group insurance, severance pay, retirement or other employee benefit
plan, agreement or arrangement, or to any employment or consulting
agreement with or for the benefit of any person, or to amend or extend any
of such plans or any of such agreements in existence on the date hereof;
provided that the Company may commit itself to, or amend, any of such plans
applicable to the employees of the Company generally if all such
commitments and amendments occurring at any one time do not and will not,
in the aggregate, increase the liabilities of the Company; or (d) except as
set forth on Schedule 5.1, make any payment or award under any executive
compensation plan of the Company;
(vi) except in the ordinary course of business consistent with past
practice, sell, transfer, mortgage, or otherwise dispose of, or encumber,
or agree to sell, transfer, mortgage or otherwise dispose of or encumber,
any assets or properties, real, personal or mixed;
(vii) enter into any other agreements, commitments or contracts which,
individually or in the aggregate, are material to the Company and its
subsidiaries taken as a whole (except agreements, commitments or contracts
for the purchase, sale or lease of goods or services, consistent with past
practice) or otherwise make any material change in: (a) any existing
material agreement, commitment or arrangement; or (b) the conduct of the
business or operations of the Company and its subsidiaries taken as a
whole;
(viii) other than in the ordinary course of business and consistent
with past practice, make any material investment of a capital nature either
by purchase of stock or securities, contributions to capital, property
transfers or otherwise, or by the purchase of any property or assets of any
other individual, firm or corporation;
(ix) other than in the ordinary course of business and consistent with
past practice, waive any rights of value or make any payment, direct or
indirect, of any liability of the Company or any of its subsidiaries before
the same comes due in accordance with its terms; or
(x) agree, commit or arrange to do any of the foregoing.
5.2 Notification of Certain Matters. The Company shall give prompt notice
to the Parent and the Acquiror of: (i) any notice of, or other communication
relating to, a default or event that, with notice or lapse of time or both,
would become a default, received by the Company or any of its subsidiaries
subsequent to the date of this Agreement and prior to the Effective Time, under
any agreement or contract listed or required to be listed on Schedule 4.18,
which default has or could reasonably be expected to have a Material Adverse
Effect with respect to the Company; (ii) any notice or other communication from
any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement;
(iii) any notice or other communication from any regulatory authority in
connection with the transactions contemplated by this Agreement; (iv) any
Material Adverse Change or the occurrence of an event that could reasonably be
expected to result in any Material Adverse Change; and (v) any claims, actions,
proceedings or investigations commenced or, to the Company's knowledge,
threatened, involving or affecting the Company or any of its subsidiaries or any
of their property or assets, or, to the Company's knowledge, any employee,
consultant, director or officer, in his or her capacity as such, of the Company
or any of its subsidiaries which, if pending on the date hereof, would have been
required to have been disclosed in writing pursuant to Section 4.6 or which
relates to the consummation of the Merger.
5.3 Access and Information.
5.3.1 Between the date of this Agreement and the Effective Time, the
Company shall give the Parent and the Acquiror and their respective
authorized representatives (including their respective accountants,
financial advisors and legal counsel) at all reasonable times access to all
plants, offices, warehouses and other facilities and to all contracts,
agreements, commitments, books and records (including tax returns) of the
Company and its subsidiaries, will permit the Parent and the Acquiror to
make such inspections as they may reasonably require and will cause its
officers and those of its
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subsidiaries promptly to furnish the Parent or the Acquiror with: (i) such
financial and operating data and other information with respect to the
business and properties of the Company and its subsidiaries as the Parent
or the Acquiror may from time to time reasonably request; and (ii) a copy
of each report, schedule and other document filed or received by the
Company or any of its subsidiaries pursuant to the requirements of federal
or state securities laws. Notwithstanding the foregoing, the parties agree
that prior to the date hereof the Parent and the Acquiror have completed
their due diligence review of the Company and that the right of access and
information granted to the Parent and the Acquiror pursuant to this Section
5.3.1 shall be limited to: (i) specific matters that relate to a
representation or warranty of the Company hereunder as to the material
accuracy of which the Parent or the Acquiror shall have a reasonable basis
for concern; (ii) specific matters that relate to a covenant or agreement
of the Company hereunder as to the material performance of which by the
Company the Parent or the Acquiror shall have a reasonable basis for
concern; (iii) specific matters that the Parent and the Acquiror have a
reasonable concern may constitute a Material Adverse Change with respect to
the Company; and (iv) matters that the Parent and the Acquiror may
reasonably need to know or understand prior to the Effective Time in
connection with the Parent's management and development of, and plans with
respect to, the Company and its subsidiaries and their assets from and
after the Effective Time.
5.3.2 Except as the Company may otherwise consent in writing, prior to
the Effective Time, the Parent, the Acquiror and their respective
affiliates shall hold and shall cause its respective employees,
representatives, consultants and advisors to hold in strict confidence,
unless compelled to disclose by judicial or administrative process, or, in
the opinion of its counsel, by other requirements of law, all documents and
information concerning the Company and its subsidiaries and affiliates
furnished to the Acquiror or its affiliates in connection with the
transactions contemplated by this Agreement (except to the extent that such
information can be shown to have been: (i) known by the Parent, the
Acquiror or their affiliates prior to its disclosure to any of them by the
Company; (ii) in the public domain through no fault of the Parent, the
Acquiror or their affiliates; (iii) later lawfully acquired by the Parent,
the Acquiror or their affiliates from other sources unless the Parent, the
Acquiror or their affiliates knew such information was obtained in
violation of an agreement of confidentiality; or (iv) was prepared
independently by the Parent, the Acquiror or their affiliates without
violating this Agreement) and shall not release or disclose such
information to any other person, except its auditors, attorneys, financial
advisors and other consultants and advisors and lending institutions
(including banks) in connection with this Agreement (it being understood
that such persons shall be informed by the Parent or the Acquiror of the
confidential nature of such information and shall be directed by the Parent
or the Acquiror to treat such information confidentially). If the
transactions contemplated by this Agreement are not consummated, such
confidence shall be maintained for three years from the later of: (a) the
date of this Agreement; or (b) the date this Agreement is terminated (if
ever) in accordance with Article 8, except to the extent such information
comes into the public domain under requirements of law or through no fault
of the Parent or the Acquiror or their affiliates and, if requested by the
Company, the Parent and the Acquiror shall destroy or return to the Company
all copies of written information furnished by the Company to the Parent or
the Acquiror or their affiliates, agents, representatives or advisors;
provided, however, that the Parent may retain one copy of such materials,
under seal, in its Legal Department for use in the defense of any
litigation or claims under the terms hereof. If the Parent or the Acquiror
shall be required to make disclosure of any such information by operation
of law, the Parent or the Acquiror shall give the Company prior notice of
the making of such disclosure and shall use all reasonable efforts to
afford the Company an opportunity to contest the making of such
disclosures.
5.4 Company Approval. The Company shall, to the extent required by
applicable law or as otherwise reasonably requested by the Acquiror, take all
steps necessary to duly call, give notice of, convene and hold a meeting of its
stockholders (including filing with the SEC and mailing to its stockholders the
Proxy Statement) as soon as practicable for the purpose of adopting and
approving this Agreement and the transactions contemplated hereby and for such
other purposes as may be necessary or desirable. The Board shall recommend to
its stockholders the adoption and approval of this Agreement and the
transactions contemplated hereby and use its reasonable best efforts to obtain
any necessary approval by its stockholders hereby, unless the Board shall
determine in good faith, following an appropriate review and based on the
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advice of the Board's outside counsel, that such action would cause the Board to
breach its fiduciary duties under Delaware law.
5.5 Reasonable Commercial Efforts. Upon the terms and subject to the
conditions hereof, each of the parties hereto agrees to use all reasonable
commercial efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement, including using all reasonable commercial efforts to: (i) obtain all
necessary consents, amendments to or waivers under the terms of any of the
Company's borrowing or other contractual arrangements required by the
transactions contemplated by this Agreement; (ii) to effect promptly all
necessary or appropriate registrations and filings, including, without
limitation, filings and submissions pursuant to the HSR Act and the DGCL; (iii)
subject to Article 9, to defend and to cooperate with each other in defending
any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby; and (iv) to fulfill or cause the fulfillment of the conditions to
Closing (as defined in Section 7.1). In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each corporation which is a
party to this Agreement shall take all such necessary action. In the event the
Parent exercises the options granted to it pursuant to the Stockholder
Agreements, the Company agrees to cooperate in releasing the shares of Common
Stock subject to such options then held in escrow by the Company pursuant to
Section 4 of the Company's Certificate of Incorporation. The previous sentence
shall survive the termination of this Agreement.
5.6 Public Announcements. So long as this Agreement is in effect, the
Parent and the Acquiror, on the one hand, and the Company, on the other hand,
shall not, and shall cause their affiliates not to, issue or cause the
publication of any press release or any other announcement with respect to the
Merger or this Agreement without the consent of the other party, except where
such release or announcement is required by applicable law or pursuant to any
listing agreement with, or the rules or regulations of, any securities exchange,
in which case the party will use its best efforts to provide a copy of the
proposed press release or announcement to the other parties prior to its being
made available to the public.
5.7 Exchange Act Compliance. In consummating the Merger, the Parent, the
Acquiror and the Company shall comply in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
5.8 No Inconsistent Activities. The Company agrees that for the period of
time from the date hereof to and including the Effective Time, the Company will
not, and will not cause or permit any of its affiliates controlled by it or any
of its officers (including the Chairman of the Board), employees,
representatives or agents, and will direct and instruct its directors not to,
initiate or solicit, directly or indirectly, any inquiries or the making of any
proposal with respect to, or, except to the extent required in order for the
Board to act in a manner that is consistent with its fiduciary obligations under
Delaware law, as advised in writing by its outside counsel, engage in
discussions or negotiations with or provide any information to any person in
connection with: (i) the possible disposition of shares of Common Stock or of a
material portion of the assets, rights or operations of the Company; or (ii) any
business combination involving the Company (together, a "Transaction") or
otherwise facilitate any effort or attempt to do or seek any of the foregoing.
The Company immediately shall cease and terminate discussions or negotiations
with all parties other than the Parent and the Acquiror with respect to any
Transaction that have been conducted heretofore. If the Company shall decide in
accordance with its fiduciary obligations under Delaware law (upon the written
advice of outside counsel, as set forth above) to provide information to any
person other than the Parent or the Acquiror or their respective affiliates or
to enter into discussions or negotiations respecting a Transaction with any
person other than the Parent or the Acquiror or their respective affiliates, the
Company shall notify the Parent and the Acquiror immediately. Upon receipt of
such notification, the Parent and the Acquiror shall have the unilateral right
to terminate this Agreement and the sole remedy of the Parent and the Acquiror
shall be to receive the fee provided for in Section 5.9, subject to the terms
and conditions of Section 5.9. Any third party receiving any information in
respect of a Transaction shall be subject to confidentiality restrictions
substantially the same as those binding on the Parent and the Acquiror.
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5.9 Termination Fee. Upon the occurrence of a Termination Event (as
defined below) the Company shall promptly (and in any event within ten days
after such occurrence) pay to the Parent a fee equal to $1,000,000. A
"Termination Event" shall occur if:
(i) the Parent or the Acquiror terminates this Agreement pursuant to
Section 8.1(ii) based on a material breach by the Company of Section 5.8;
(ii) a tender offer or exchange offer for 20% or more of the
outstanding voting securities of the Company is commenced on or before the
date that is 120 days after the date hereof and the Board does not within
10 business days after receipt of such offer unconditionally reject such
offer and recommend that the Company's stockholders reject such offer; and
(iii) the Company enters into an agreement on or before the date that
is 165 days after the date hereof with any party other than the Parent or
the Acquiror respecting a Transaction (other than such an agreement entered
into after the date that is 120 days after the date hereof respecting the
issuance of shares of Common Stock that do not, in the aggregate,
constitute more than 5% of the outstanding shares of Common Stock or the
sale of assets of the Company that do not, in the aggregate, constitute
more than 25% of the total value of the Company's tangible assets as
reflected on the most recent financial statements of the Company, net of
all reserves against such assets).
Except to the extent specifically provided in this Section, the Parent and
the Acquiror shall not be entitled, as a result of a Termination Event, to any
reimbursement of expenses incurred in connection with the transactions
contemplated hereby, it being understood that such fee is intended in part to
serve as such reimbursement in the event of a Termination Event. Upon payment by
the Company of the Termination Fee to the Parent, the Company shall have no
further liability with respect to the Termination Event to either the Parent or
the Acquiror for any (i) fees or expenses incurred by the Parent or the Acquiror
in connection with this Agreement and the transactions contemplated hereby or
(ii) damages or losses of any kind incurred by the Parent or the Acquiror as a
result of such termination. This Section shall survive the termination of this
Agreement.
5.10 Indemnification of Directors and Officers. The Surviving Corporation
shall indemnify and hold harmless each present or former director and officer of
the Company and its subsidiaries (the "Indemnified Persons"), as provided in the
Certificate of Incorporation and By-laws of the Company and Section 145 of the
DGCL, in each case as currently in effect. For a period of three years after the
Effective Time, the Surviving Corporation's certificate of incorporation, as in
effect at the Effective Time with respect to indemnification of officers and
directors, shall not be modified if such modification would lessen or otherwise
adversely affect the indemnification provided thereunder, except as required by
law. This Section 5.10 shall survive the Merger and is intended to benefit each
of the Indemnified Persons, each of whom shall be entitled to enforce this
Section 5.10 against the Surviving Corporation.
5.11 Indemnification of Brokerage. The Parent and the Acquiror, on the one
hand, and the Company, on the other hand, each agree to indemnify and save the
other harmless from any claim or demand for commission or other compensation by
any broker, finder, agent or similar intermediary claiming to have been employed
by or on behalf on the Parent or the Acquiror or any of their affiliates, on the
one hand, or by the Company or any of its affiliates, on the other hand, and to
bear the cost of legal expenses incurred in defending any such claim.
5.12 Escrow Agreement. If, immediately prior to the Closing, any of the
Unresolved Claims shall not have been resolved and satisfied through the
issuance of shares of Common Stock and/or if the Company shall elect to cause a
portion of the purchase price to be paid to the Escrow Agent (as defined below)
pursuant to Section 6.2, the Company shall execute and deliver an Escrow
Agreement (the "Escrow Agreement") in the form attached hereto as Exhibit A with
a person (the "Escrow Agent") designated by the Company and reasonably
satisfactory to the Parent and the Acquiror, and the Company shall issue to the
Escrow Agent, to hold and disburse as provided therein (a) the number of shares
of Common Stock equal to the sum of (i) the aggregate number of shares of Common
Stock issuable in full settlement of all then outstanding Unresolved Claims,
(ii) the aggregate number of shares of Common Stock that would be issuable to
the King Companies
19
<PAGE> 107
(as defined in the Plan of Reorganization), or their assignees, pursuant to the
Plan of Reorganization as a result of the settlement in full of all the
outstanding Unresolved Claims, and (iii) the number of shares of Common Stock
that, if issued and outstanding immediately prior to the Effective Time, would
be converted by virtue of the Merger into the right to receive cash in an amount
equal to the estimated fees, costs and expenses of settlement of all then
outstanding Unresolved Claims, which amount shall be agreed to in writing by the
Company and the Parent, and (b) the portion, if any, of the purchase price that
the Company shall elect to pay to the Escrow Agent pursuant to Section 6.2.
5.13 Consents and Waivers. The Company shall use its reasonable best
efforts to obtain all consents and waivers necessary under the Foothill Capital
Corporation ("Foothill") credit facilities of the Company and Savin Credit
Corporation and the ING Agreement with respect to the transactions contemplated
hereby. The Company's undertaking in this Section 5.13 to use reasonable best
efforts to obtain waivers and consents shall not obligate the Company in
connection with obtaining any such waiver or consent to pay money to Foothill or
ING or to agree to become bound by terms more burdensome to the Company or any
of its affiliates than the existing terms of the Foothill credit facilities or
the ING Agreement, as the case may be.
ARTICLE 6
CONDITIONS
6.1 Conditions to Each Party's Obligations. The respective obligations of
each party to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following conditions:
(i) This Agreement shall have been adopted by the affirmative vote of
the stockholders of the Company by the requisite vote in accordance with
applicable law;
(ii) No order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction shall have been enacted, entered,
promulgated or enforced by any court or Governmental Entity that prohibits
or prevents the consummation of the Merger; provided that the Parent, the
Acquiror and the Company shall use their best efforts to have such order,
statute, rule, regulation, executive order, stay, decree, judgment or
injunction vacated; and
(iii) Any waiting period applicable to the Merger under the HSR Act
shall have expired or been terminated.
6.2 Conditions to Obligation of the Parent and the Acquiror.
6.2.1 The obligation of the Parent and the Acquiror to effect the
Merger shall be subject to the fulfillment, at the Effective Time, of the
following additional conditions, any one or more of which may be waived by
the Parent and the Acquiror:
(i) The Company and each of the Majority Stockholders shall have
performed in all material respects its and their covenants and
obligations under this Agreement and their respective Stockholder
Agreements required to be performed on or prior to the Effective Time
pursuant to the terms hereof and thereof.
(ii) The representations and warranties of the Company contained in
this Agreement and of each of the Majority Stockholders contained in
their respective Stockholder Agreements shall be true and correct in all
material respects on and as of the Effective Time as if made on and as
of such date (it being agreed that where any such representation and
warranty includes a Material Adverse Effect exception or other
materiality exception, such exception shall be deemed not to exist for
purposes of this Section 6.2.1(ii)).
(iii) There shall not have occurred after the date hereof any
Material Adverse Change. Notwithstanding any other provision of this
Agreement or any disclosure made by the Company to the Parent or the
Acquiror, for purposes of this Section 6.2.1(iii), each of the lawsuits
described on Schedule 4.6 claiming damages in excess of $500,000, net of
amounts to be paid or reimbursed pursuant to the Company's insurance
policies and net of amounts reserved by the Company against
20
<PAGE> 108
such lawsuits, in each case as of the date hereof (the "Significant
Lawsuits") shall be deemed to be an event that occurred after the date
hereof. If any Significant Lawsuit has not been resolved as of the
Closing on terms reasonably satisfactory to the Parent and the Acquiror,
based on the explanation of such Significant Lawsuit previously provided
by the Company, the Parent and the Acquiror shall have the right at the
Closing to claim that such Significant Lawsuit (individually or together
with any other Significant Lawsuits) constitutes a Material Adverse
Change hereunder.
(iv) All actions, proceedings, instruments and documents required
to carry out the transactions contemplated hereby or incidental hereto,
including all steps taken for compliance with the requirements of the
securities, antitrust and regulatory laws, and all other related legal
matters shall have been reasonably satisfactory to and approved by Paul,
Weiss, Rifkind, Wharton & Garrison, counsel for the Parent and the
Acquiror, and such counsel shall have been furnished with such certified
copies of such corporate actions and proceedings and such other
instruments and documents as it shall have reasonably requested,
including an opinion of counsel to the Company.
(v) The New York State Department of Environmental Conservation's
claims against the Company relating to the Company's former property in
Owego, New York shall have been finally resolved in the manner
contemplated by the Stipulation and Order with Respect to Claims of the
New York State Department of Environmental Conservation dated November
29, 1994 between NYSDEC and the Company, a true and correct copy of
which has been provided to the Parent.
6.2.2 Notwithstanding Section 6.2.1, if the Parent or the Acquiror
asserts that there has been one or more failures of any condition set forth
in Section 6.2.1(ii) and/or (iii) (other than with respect to Sections 4.2,
4.4, 4.5(i) and 4.7 and other than as a result of any Significant Lawsuit)
and such failures could not reasonably be expected to result in a net
reduction of $2,000,000 or more in either the value of the Surviving
Corporation to the Parent or the Acquiror or the net worth of the Company
from that shown on the July 2, 1994 balance sheet of the Company, such
failures shall not be deemed to constitute a failure of a condition if the
Company agrees to reduce the aggregate purchase price for all of the shares
of Common Stock hereunder in an amount equal to the amount by which the net
reduction in such value or net worth (whichever reduction is greater)
exceeds $500,000.
6.2.3 Notwithstanding Section 6.2.1, if the Parent or the Acquiror
asserts that there has been a failure of the condition set forth in Section
6.2.1(iii) arising as a result of one or more Significant Lawsuits, and
asserts that a net reduction in value or net worth (whichever reduction is
greater) referred to in such paragraph has occurred, such failure shall not
be deemed to constitute a failure of a condition if (i) the Company elects
to cause a portion of the aggregate purchase price for all of the shares of
Common Stock equal to such asserted net reduction in value or net worth
(whichever reduction is greater) to be paid to the Escrow Agent to be held
in escrow and disbursed as provided in the Escrow Agreement with respect to
such Significant Lawsuits or (ii) the Company agrees to reduce the
aggregate purchase price for all of the shares of Common Stock hereunder in
amount equal to such net reduction in value or net worth (whichever is
greater) or such other amount as may be agreed in writing by the Parent,
the Acquiror and the Company.
6.2.4 Notwithstanding Section 6.2.1, if the Parent or the Acquiror
asserts that there has been a failure of the condition set forth in Section
6.2.1(iii) arising as a result of one or more lawsuits filed against the
Company subsequent to the date hereof claiming damages in excess of
$100,000 (the "Unscheduled Significant Lawsuits"), and asserts that a net
reduction in value or net worth (whichever reduction is greater) referred
to in such paragraph has occurred, such failure shall not be deemed to
constitute a failure of a condition if (i) the Parent, the Acquiror and the
Company agree to cause a portion of the aggregate purchase price for all of
the shares of Common Stock equal to such asserted net reduction in value or
net worth (whichever reduction is greater) to be paid to the Escrow Agent
to be held in escrow and disbursed as provided in the Escrow Agreement with
respect to such Unscheduled Significant Lawsuits or (ii) the Parent, the
Acquiror and the Company agree to reduce the aggregate purchase price for
all of the shares of Common Stock hereunder in amount equal to such net
reduction in
21
<PAGE> 109
value or net worth (whichever is greater) or such other amount as may be
agreed in writing by the Parent, the Acquiror and the Company.
6.3 Conditions to Obligation of the Company. The obligation of the Company
to effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following additional conditions, any one or more of which
may be waived by the Company:
(i) The Parent and the Acquiror shall have performed in all material
respects their covenants and obligations under this Agreement required to
be performed on or prior to the Effective Time pursuant to the terms
hereof;
(ii) The representations and warranties of the Parent and the Acquiror
contained in this Agreement shall be true and correct in all material
respects on and as of the Effective Time as if made on and as of such date
(it being agreed that where any such representation and warranty includes a
Material Adverse Effect exception or other materiality exception, such
exception shall be deemed not to exist for purposes of this Section
6.3(ii)); and
(iii) All actions, proceedings, instruments and documents required to
carry out the transactions contemplated hereby or incidental hereto,
including all steps taken for compliance with the requirements of the
securities, antitrust and regulatory laws, and all other related legal
matters shall have been reasonably satisfactory to and approved by Anderson
Kill Olick & Oshinsky, P.C., counsel for the Company, and such counsel
shall have been furnished with such certified copies of such corporate
actions and proceedings and such other instruments and documents as it
shall have reasonably requested, including an opinion of counsel to the
Parent and the Acquiror.
ARTICLE 7
CLOSING
7.1 Time and Place; Filing of Certificates of Merger. Subject to the
provisions of Article 6, the closing of the Merger (the "Closing") shall take
place in New York City at the offices of Paul, Weiss, Rifkind, Wharton &
Garrison, as soon as practicable but in no event later than 10:00 a.m., local
time, on the first business day after the date on which each of the conditions
set forth in Article 6 have been satisfied or waived by the party or parties
entitled to the benefit of such conditions; or at such other place, at such
other time, or on such other date as the Parent, the Acquiror and the Company
may mutually agree. The date on which the Closing actually occurs is herein
referred to as the "Closing Date."
7.2 Filing of Certificates of Merger. At the Closing, the Parent, the
Acquiror and the Company shall cause the Certificate of Merger to be executed
and filed with the Secretary of State of the State of Delaware as provided in
the DGCL, and shall take any and all other lawful actions and do any and all
other lawful things to cause the Merger to become effective.
ARTICLE 8
TERMINATION AND ABANDONMENT
8.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
whether before or after approval by the stockholders of the Company:
(i) by mutual action of the Parent, the Acquiror and the Company;
(ii) by the Parent or the Acquiror if the Company or any of the
Majority Stockholders shall have materially breached or failed to perform
in any material respect its covenants or obligations contained herein or in
their respective Stockholder Agreements;
(iii) by the Parent, the Acquiror or the Company if a court of
competent jurisdiction or other Governmental Entity shall have issued an
order, decree or ruling or taken any other action restraining,
22
<PAGE> 110
enjoining or otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and nonappealable; and
(iv) by the Parent, the Acquiror or the Company if the Effective Time
shall not have occurred by the date that is 120 days after the date hereof.
8.2 Procedure and Effect of Termination. In the event of termination and
abandonment of the Merger by the Parent or the Acquiror, on the one hand, or by
the Company, on the other hand, pursuant to Section 8.1, written notice thereof
shall forthwith be given to the other and this Agreement shall terminate and the
Merger shall be abandoned without further action by any of the parties hereto.
If this Agreement is terminated as provided herein no party hereto shall have
any liability or further obligation to any other party under the terms of this
Agreement except for the willful breach by any party hereto and except as stated
in Sections 5.3.2, 5.5, 5.8 and 5.9.
ARTICLE 9
MISCELLANEOUS
9.1 Certain Definitions.
9.1.1 For purposes of this Agreement, the following terms shall have
the meanings ascribed to them in this Section 9.1.1:
(i) "person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization
and a government or any department or agency thereof;
(ii) "affiliate," with respect to any person, shall mean and
include any person controlling, controlled by or under common control
with such person, and shall also include any person 20% or more of whose
outstanding voting power is owned by the specified person either
directly or indirectly through subsidiaries; and
(iii) "subsidiary" of any specified person shall mean any
corporation 50 percent or more of the outstanding voting power of which,
or any partnership, joint venture or other entity 50 percent or more of
the total equity interest of which, is directly or indirectly owned by
such specified person. For purposes of this Agreement, all references to
"subsidiaries" of a person shall be deemed to mean "subsidiary" if such
person has only one subsidiary.
9.1.2 For purposes of this Agreement, the following terms shall have
the meanings ascribed to them in the Sections set forth opposite them
below:
<TABLE>
<CAPTION>
TERM SECTION
------------------------------------------------------------------ -----------
<S> <C>
1993 Form 10-K.................................................... 4.3
Acquiror.......................................................... Recitals
affiliate......................................................... 9.1
Agreement......................................................... Recitals
Bankruptcy Code................................................... 4.7
Benefit Plan...................................................... 4.15.1
Board............................................................. 1.8
Certificate of Merger............................................. 1.2
Certificates...................................................... 2.4.2
Chapter 11 Case................................................... 4.7
Closing........................................................... 7.1
Closing Date...................................................... 7.1
COBRA............................................................. 4.15.1
Code.............................................................. 4.14.5
Common Stock...................................................... 2.1
</TABLE>
23
<PAGE> 111
<TABLE>
<CAPTION>
TERM SECTION
------------------------------------------------------------------ -----------
<S> <C>
Company........................................................... Recitals
Company Benefit Plan.............................................. 4.15.1
Confirmation Order................................................ 4.7
Constituent Corporations.......................................... Recitals
Creditors' Liens.................................................. 4.3
DGCL.............................................................. Recitals
Dissenting Shares................................................. 2.2
Effective Time.................................................... 1.2
Employee.......................................................... 4.15.1
Environmental Laws................................................ 4.17
ERISA............................................................. 4.15.1
Escrow Agent...................................................... 5.12
Escrow Agreement.................................................. 5.12
Exchange Act...................................................... 1.8
Exchange Fund..................................................... 2.4.1
Exchange Agent.................................................... 2.4.1
FCC............................................................... 4.3
Financial Statements.............................................. 4.14.1
Foothill.......................................................... 5.13
Governmental Entity............................................... 3.5
HSR Act........................................................... 3.5
Indemnified Persons............................................... 5.11
ING............................................................... 4.3
ING Agreement..................................................... 4.3
Intangible Property............................................... 4.19
IRS............................................................... 4.14.5
Liabilities....................................................... 4.16
Majority Stockholders............................................. Recitals
Material Adverse Change........................................... 4.9
Material Adverse Effect........................................... 3.3
Merger............................................................ Recitals
NOL's............................................................. 4.14.3
NWP............................................................... 3.6
Option............................................................ 2.5
Option Plan....................................................... 2.5
Parent............................................................ Recitals
PBGC.............................................................. 4.15.1
Pendergast........................................................ 4.12
Permits........................................................... 4.10
person............................................................ 9.1
Plan of Reorganization............................................ 4.7
Price Per Share................................................... 2.1.1
Proxy Statement................................................... 1.8
Retiree Welfare Plan.............................................. 4.15.1
SEC Filings....................................................... 4.8
SEC............................................................... 1.8
Significant Lawsuits.............................................. 6.2.1(iii)
Stockholder Agreement............................................. Recitals
</TABLE>
24
<PAGE> 112
<TABLE>
<CAPTION>
TERM SECTION
------------------------------------------------------------------ -----------
<S> <C>
subsidiary........................................................ 9.1
Surviving Corporation............................................. 1.1
Tax............................................................... 4.14.11
Tax Returns....................................................... 4.14.1
Termination Event................................................. 5.9
Transaction....................................................... 5.8
Unresolved Claims................................................. 4.2
Unscheduled Significant Lawsuits.................................. 6.2.4
Welfare Plan...................................................... 4.15.1
</TABLE>
9.2 Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified or supplemented only by a written agreement signed by
the parties hereto at any time prior to the Effective Time with respect to any
of the terms contained herein; provided, however, that, after this Agreement is
adopted by the Company's stockholders pursuant to Section 5.4, no such amendment
or modification shall: (i) alter or change the amount or kind of the
consideration to be delivered to the stockholders of the Company; (ii) alter or
change any term of the Certificate of Incorporation of the Surviving
Corporation; or (iii) alter or change any of the terms or conditions of this
Agreement if such alteration or change would adversely affect the stockholders
of the Company.
9.3 Waiver of Compliance; Consents. Any failure of the Parent or the
Acquiror, on the one hand, or the Company, on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by the Parent,
the Acquiror or the Company, respectively, only by a written instrument signed
by the party granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
9.3.
9.4 Survival. The respective representations and warranties of the Parent,
the Acquiror and the Company contained herein shall not survive the Closing
hereunder.
9.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
telecopier (with a confirmed receipt thereof) or registered or certified mail
(postage prepaid, return receipt requested), and on the next business day when
sent by overnight courier service, to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to the Parent, the Acquiror or the Surviving Corporation, to:
Ricoh Corporation
Five Dedrick Place
West Caldwell, New Jersey 07006
Attention: David R.S. Kennedy, Esq.
Telecopier: (201) 808-7691 or
(201) 882-2134
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Toby S. Myerson, Esq.
Telecopier: (212) 757-3990
25
<PAGE> 113
(b) if to the Company, to:
Savin Corporation
333 Ludlow Street
Stamford, Connecticut 06904
Attention: D. Thomas Abbott
Telecopier: (203) 967-5005
with a copy to:
Anderson Kill Olick & Oshinsky
1251 Avenue of the Americas
New York, New York 10020
Attention: Michael W. Stamm, Esq.
Telecopier: (212) 278-1733
9.6 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties; provided,
however, that the rights of the Acquiror may be transferred in whole or in part
to any wholly owned subsidiary of the Parent.
9.7 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs or expenses.
9.8 Governing Law. This Agreement shall be governed by the laws of the
State of New York applicable to agreements made and to be performed entirely
within such State, without regard to the choice of law principles thereof.
9.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.10 Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
9.11 Entire Agreement. This Agreement, including the documents or
instruments referred to herein, embodies the entire agreement and understanding
of the parties hereto in respect of the subject matter contained herein. There
are no restrictions, promises, representations, warranties, covenants, or
undertakings, other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements, including without limitation, the
letter agreement, dated July 26, 1994, between the Company and the Parent, and
the understandings between the parties with respect to the subject matter
hereof.
9.12 No Third Party Beneficiaries. Except as expressly provided in Section
5.10, this Agreement is not intended to, and does not, create any rights or
benefits of any party other than the parties hereto.
26
<PAGE> 114
IN WITNESS WHEREOF, the Parent, the Acquiror and the Company have caused
this Agreement to be signed by their respective duly authorized officers on the
date first above written.
RICOH CORPORATION
By /s/ ERIC L. STEENBURGH
------------------------------------
Name: Eric L. Steenburgh
Title: President and Chief
Operating Officer
SC ACQUISITION CORP.
By /s/ ROBERT D. POLUCKI
------------------------------------
Name: Robert D. Polucki
Title: Vice President and
Secretary
SAVIN CORPORATION
By /s/ D. Thomas Abbott
------------------------------------
Name: D. Thomas Abbott
Title: Chairman
27
<PAGE> 115
SCHEDULE A
<TABLE>
<S> <C>
Janos Szekeres 326,000
HCS Technology, N.V. 600,000
Internationale Nederlanden Lease 600,000
Structured Finance B.V.
King Holding Corporation 1,013,583
</TABLE>
<PAGE> 116
SCHEDULE 4.2
(a) OPTIONS GRANTED UNDER OPTION PLAN TO DIRECTORS;
<TABLE>
<CAPTION>
OPTIONS UNVESTED
HOLDER VESTED OPTIONS
------ ------- --------
<S> <C> <C>
D. THOMAS ABBOTT 15,000 15,000
ROBERT E. ANDERSON, III 10,000 15,000
BEN de JONGE 10,000 15,000
PETER J. KING 10,000 15,000
POLYVIOS C. VINTIADIS 10,000 15,000
STEPHEN WERTHEIMER 10,000 15,000
---------- ----------
TOTAL 65,000 90,000
</TABLE>
5,000 of the unvested options vest for each holder
on the following dates:
12/14/95
12/14/96
12/14/97
The unvested options will terminate immediately
prior to the Effective Time of the merger.
<PAGE> 117
SCHEDULE 4.2 (CONTINUED)
(b) HOLDERS OF UNRESOLVED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT CLAIM AMOUNT Of COMMON
NUMBER FILED CLAIM SHARES @
100%
<S> <C> <C> <C>
1 RKJ Office 00053 $484,000 19,360
2 IBM Credit 01543 $476,847 19,073
3 Joseph Levy 00798 $718,900 28,756
4 Newport Typewriter 00990 $56,054 2,242
5 F & T Limited Partnership 01076 $30,458 1,218
6 Drake Systems 01025 $24,282 971
7 Baron, Jody L. (d/b/a Homespinners) 00412 $20,000 800
8 National Union Fire Insurance 01532 $10,000 400
9 Ameritech 01535 $3,171 126
10 Newport Typewriter 00988 $2,800 112
11 New York State DEC (A) $925,000 37,000
Professional fee expense to resolve claims 10,000
King Holding Corporation (adjustment) 44,405
----------
TOTAL 164,463
==========
</TABLE>
(A) Amount agreed upon by Savin and claimant
<PAGE> 118
SCHEDULE 4.5
CONSENT, APPROVALS, NOTICES
REQUIRED UNDER EXISTING AGREEMENTS
<TABLE>
<CAPTION>
DOCUMENT RESTRICTION
-------- -----------
<S> <C>
AMENDED AND RESTATED LOAN AND SECURITY SECTION 8.3 NEGATIVE COVENANTS, RESTRICTIONS
AGREEMENT BETWEEN SAVIN CORPORATION ON FUNDAMENTAL CHANGES - NEED FOOTHILL'S PRIOR
AND FOOTHILL CAPITAL CORPORATION WRITTEN CONSENT
LOAN AND SECURITY AGREEMENT BETWEEN SECTION 7.3 NEGATIVE COVENANTS, RESTRICTIONS
SAVIN CREDIT CORPORATION AND FOOTHILL ON FUNDAMENTAL CHANGES - NEED FOOTHILL'S PRIOR
CAPITAL CORPORATION WRITTEN CONSENT
SETTLEMENT, SALE AND SECURITY AGREEMENT SECTION 10(i) COVENANTS, RESTRICTIONS ON FUNDA-
BY AND BETWEEN SAVIN CORPORATION AND MENTAL CHANGES - SAVIN CANNOT ENTER INTO ANY
INTERNATIONALE NEDERLANDEN LEASE MERGER UNTIL THE SECURED OBLIGATION HAS BEEN
STRUCTURED FINANCE B.V. (ING) PAID IN FULL
LETTER AGREEMENT BETWEEN SAVIN CREDIT SECTION 6(d)(iii) COVENANTS - SCC WILL NOT BE A PARTY
CORP. AND SANWA LEASING CORP. TO ANY MERGER UNTIL TERMINATION OF THIS AGREE-
MENT OR FOR AS LONG AS SANWA HOLDS ANY CONTRACT
PURCHASED UNDER THIS AGREEMENT
PROPERTY LEASES:
1.- 17100 PIONEER BLVD
ARTESIA, CA.
LESSOR: 91 FREEWAY PARTNERS
2.- 62 WALNUT ST LEASES REQUIRE PRIOR NOTIFICATION OR CONSENT
WELLESLEY, MA. FROM LANDLORDS.
LESSOR: NEWTON WELLESLEY
EXECUTIVE OFFICE PARK
3.- 1655 N. FT. MEYER
ARLINGTON, VA.
LESSOR: PARK PLACE ASSOCIATES
ASSISTANCE AGREEMENT - REQUIRES CONSENT TO CHANGE IN BUSINESS STRUCTURE
STATE OF CONNECTICUT (TO BE EXECUTED)
</TABLE>
<PAGE> 119
SCHEDULE 4.6
CLAIMS, ACTIONS, PROCEEDINGS OR INVESTIGATIONS, THREATENED
OR PENDING AGAINST THE COMPANY OR ANY OF ITS SUBSIDIARIES
CLAIM DESCRIPTION
- - ----------------------------------- -------------------------------------
S. & G. BULLARD v. SAVIN EMPLOYEE LAWSUIT:
- FAMILY LEAVE ACT
- AMERICANS WITH DISABILITIES ACT
LEASEAMERICA v. GALLIN DEALER RELATED:
- DEFECTIVE PRODUCT
BARAJAS v. SAVIN EMPLOYEE RELATED:
- EMPLOYEE AUTO ACCIDENT
CAMBRIDGE COURT CONDO v. PRODUCT RELATED:
SAVIN - FIRE AT DEALER's CUSTOMER
BANKRUPTCY RELATED CLAIMS - SEE SCHEDULE 4.2(b)
SAVIN COASTAL VALLEY v. SAVIN DEALER RELATED:
- BREACH OF CONTRACT
INDEPENDENT SCHOOL DISTRICT #26, PRODUCT RELATED:
LEFLORE CO., OK v. SAVIN et al - FIRE AT DEALER's CUSTOMER
OTHER PROCEEDINGS:
- - ------------------
GSA POST COMPLETION AUDIT PENALITIES ON THE GSA MULTIPLE AWARD
CONTRACT GS-OOF-77061 (10/1/85 TO 9/30/87)
OPEN WORKER's COMP CASES
<PAGE> 120
SCHEDULE 4.9
MATERIAL CHANGES SINCE JULY 2, 1994
1. Material adverse changes in business, assets, properties,
conditions, results of operations or prospects of Company or its
subsidiaries
none
2. Damage, destruction or loss having a Material Adverse Effect
none
3. Changes in accounting principals
none
4. Declaration, payment of dividends or demptions, purchases or
other acquisitions of Company stock
none
5. Return of Capital or Assets to Stockholders
none
6. Purchases of stock or assets, loans advances or capital
contributions to any Person
none
7. Incurrence of obligations or liability not in the ordinary
course of business
Certain obligations in connection with the relocation grant to
be obtained from State of Connecticut
8. Waiver of any right of material value
none
9. Payments or commitments to pay severance or termination pay to
officers, directors, employees, etc. other than in the ordinary
course
none
10. Increases in compensation to officers and employees
none
11. Agreements to take actions contrary to representations and
warranties
none
<PAGE> 121
SCHEDULE 4.10
PERMITS
1. Permits, licenses, certificates required in connection
with business - status
none
<PAGE> 122
SCHEDULE 4.13
EMPLOYMENT AGREEMENTS
1. Employment, consulting or other understandings with
stockholders, officers, directors
Employment agreements dated 6/30/94 between the Company
and John Breiten and Thomas Salierno, Jr., respectively
2. Change - in - Control or Golden Parachute Obligations
Directors' stock options, per section 4.2, become
100% vested when a change - in - control occurs
<PAGE> 123
SCHEDULE 4.14
TAX MATTERS
SCHEDULE 4.14.2
TAX LIENS
PROPERTY TAX JURISDICTIONS HAVE THE POWER TO LEVY TAX LIENS ON PROPERTY WHEN
RENDITIONS ARE FILED. THIS IS THEIR NORMAL COURSE OF BUSINESS AND SAVIN
CORPORATION IS NOT NOTIFIED OF THESE LIENS AND ARE AUTOMATICALLY RELEASED WHEN
PAID
SAVIN CORPORATION HAS INSTALLMENT AGREEMENTS WITH VARIOUS TAXING AUTHORITIES FOR
PRE-BANKRUPTCY TAXES. THE TAXING AUTHORITIES MAY HAVE FILED A LIEN.
SCHEDULE 4.14.3
AUDITS IN PROCESS OR SCHEDULED
<TABLE>
<CAPTION>
COMPANY TAXING JURISDICTION TYPE OF TAX PERIOD STATUS
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SAVIN CORPORATION STATE OF TEXAS SALES & USE 5/1/90 - 6/30/93 ON APPEAL
SAVIN CORPORATION STATE OF SOUTH CAROLINA SALES & USE 9/1/92 - 9/30/94 ONGOING
SAVIN CREDIT CORPORATION STATE OF CALIFORNIA SALES & USE 1/1/91 - 3/31/94 SCHEDULED FOR 1/95
</TABLE>
WAIVERS OR EXTENSION AGREEMENTS
<TABLE>
<Caption
COMPANY TAXING JURISDICTION TYPE OF TAX PERIOD
- - ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
SAVIN CORPORATION STATE OF TEXAS SALES & USE 5/1/90 - 8/25/92
SAVIN CREDIT CORPORATION STATE OF CALIFORNIA SALES & USE 1/1/91 - 12/31/91
</TABLE>
OPEN INSTALLMENTS AGREEMENTS
<TABLE>
<CAPTION>
TAXING JURISDICTION BALANCE DUE
- - --------------------------------------------------------------------
<S> <C>
CITY OF NEW YORK $154,806.98
ILLINOIS DEPT OF REVENUE $112,947.83
CALIFORNIA STATE BOARD $ 27,152.92
STATE OF TEXAS $182,372.18
STATE OF TENNESSEE $ 4,998.50
COMMONWEALTH OF MASS. $112,649.99
CT DEPT OF REVENUE $ 89,169.73
DALLAS DIST $ 11,694.26
</TABLE>
SCHEDULE 4.14.4
AUDITS OR OTHER PROCEEDINGS: AUDITS THREATENED; AND PROPOSED ASSESSMENTS
- - ------------------------------------------------------------------------
NONE EXCEPT AS NOTED IN 4.14.3
<PAGE> 124
SCHEDULE 4.15.2
BENEFIT PLANS
The following is a list of all Company Benefit Plans:
1. Officers' employment agreements dated 6/30/93 between the Company
and John Breiten and Thomas Salierno, Jr., respectively
2. Savin Corp Employee Savings & Retirement Plan(401K)
3. Directors' stock options
4. 1994 Management bonus plan
5. 1994 "Everybody Counts" bonus incentive plan
6. Various sales compensation & incentive programs for
sales reps
sales supervisors
sales managers
Dealer sales managers (DSM'S)
aftermarket sales reps
maintenance agreement reps
telemarketing reps
7. Performance appraisal and salary reviews
8. Promotional increases
9. Benefits:
medical plan
dental plan
vision
life insurance and accidental death
supplemental life
dependent life
short term disability
long term disability
travel accident insurance
10. Other:
military/jury duty personal leave of absence
family and medical leave
disability leave
sick time
vacation days
holidays
floating holidays
bereavement
relocation plans
severance pay
manager car allowance
FE car program/allowance
<PAGE> 125
SCHEDULE 4.15.14
UNFUNDED BENEFIT OBLIGATIONS AND RESERVES
1. Unfunded benefit obligations not fairly reflected by reserves shown on
financial statements
none
2. Reserves, assets, surpluses or prepaid premiums with respect to any
Welfare Plan
<TABLE>
<S> <C>
Accrued vacation compensation liability $1,301,318
Workers compensation retroactive premium deposits $1,021,067
Accrued workers compensation retroactive claims liability $398,945
</TABLE>
<PAGE> 126
SCHEDULE 4.16
LIABILITIES
1. Indebtedness, liabilities, claims, etc. not incurred in the
ordinary course of business and not disclosed in SEC filings or
this agreement
none
<PAGE> 127
SCHEDULE 4.17
ENVIRONMENTAL MATTERS
1. Compliance with environmental laws:
Owego, NY - Site Contamination, Ground Water Contamination
As described in the Company's most recent Form 10-K. Since the
date thereof the Company and the NYSDEC have engaged in substantial
discussions and negotiations concerning the NYSDEC claims. These
discussions have resulted in an agreement to be presented to
the Bankruptcy Court for approval to revise and allow the
claims as a single Class 3B Allowed Claim in full and final satisfaction
of any claims NYSDEC may have at Owego.
Hallstead, Pa. - Site Contamination, Ground Water Contamination
As described in the Company's most recent Form 10-K.
Conklin, NY - Site Contamination, Ground Water Contamination
As described in the Company's most recent Form 10-K.
<PAGE> 128
SCHEDULE 4.18
MATERIAL CONTRACTS
1. Customer contracts and agreements for sale of products
in excess of $300,000 annually
State of Florida
Portland Public Schools
State of Oregon
State of Oregon - Human Resources Building
GSA:
Multiple award schedule GS 26F 1009 B
Telecommunications multiple award GS-OOK-94-AGS 0481
Class II and Class III copiers GS-26F-00011
US Post Office National Ordering Agreement 104 230 -89 - H-0041
US House of Representatives
CIGNA
City of Philadelphia
Los Angeles Unified School District
Dealer Agreements with significant dealers-
each agreement being substantially in the form of
Dealer Agreement previously provided to the Parent:
Garden State Business Machines
Adams Remco Inc.
Standard Copy Products
Business Systems of Arizona
G.E. Richards
Duplicator Sales & Services
Hawaii Business Equipment
Paul B. Williams
Scriptex Enterprises, Ltd.
ITS Office Systems
Max Davis Associates
Street & Co.
2. Supply contracts in excess of $500,000
Ricoh Corp
Nashua Corp
International Communications Materials, Inc.
USCO Corp
3. Contracts, agreements for payments in excess of $100,000
to current and former stockholders, directors, officers,
employees, etc.
Employment agreements dated 6/20/93 between
the Company and John Breiten and Thomas Salierno, Jr., respectively
Severance agreement between the Company and Joseph O'Donnell
4. Contracts with labor unions
none
<PAGE> 129
SCHEDULE 4.18
MATERIAL CONTRACTS
5. Contracts with Majority Stockholders or their Affiliates
Settlement, Sale and Security Agreement by and between
Savin Corp and ING Lease
The agreement among certain stockholders
6. Joint venture agreements
Savin Coastal Valley
7. Indemnification agreements or tax sharing agreements
Indemnification to Savin Canada Holdings Inc.
Hewitt Associates
8. Loan agreements
Amended and restated loan and security agreement between
Savin Corp and Foothill Capital
Loan and security agreement between
Savin Credit Corp and Foothill Capital
Settlement, sale and security agreement by and between
Savin Corp and ING Lease
9. Other material contracts whether or not in the ordinary course of
business
Pendergest
Arthur Anderson
Assistance Agreement - State of Connecticut (to be executed)
10. Approvals or consents to transactions by third parties
Foothill Capital Corp
ING Lease
Sanwa
Property Leases:
17100 Pioneer Blvd.
Artesia, Ca.
Lessor: 91 Freeway Partners
62 Walnut ST.
Wellesley, Ma.
Lessor: Newton Wellesley Executive
Office Park
1655 N. Ft. Meyer
Arlington, Va.
Lessor: Park Place Associates
State of Connecticut pursuant to assistance agreement
to be executed with the State of Connecticut
<PAGE> 130
SCHEDULE 4.18
MATERIAL CONTRACTS
11. Suppliers or customers - supplying or purchasing more than 5% of products
during last 12 months
-------------------------------------------------------------------------
Suppliers:
Ricoh Corp
Nashua Corp
International Communications Materials, Inc.
Photofax
US Fuji
Georgia Pacific
Can-am Metals
Customers:
US Government
Top dealers:
Garden State Business Machines
Adams Remco Inc.
Standard Copy Products
Business Systems of Arizona
G.E. Richards
Duplicator Sales & Services
Hawaii Business Equipment
Paul B. Williams
Scriptex Enterprises, Ltd.
ITS Office Systems
Max Davis Associates
Street & Co.
<PAGE> 131
SCHEDULE 4.19
Below is a list of patents on record in the U.S. Patent office as issued
to Savin Corporation or Savin Business Machines:
1. 5,047,307, Sep. 10, 1991, Toner for use in compositions for developing
latent electrostatic images, method of making the same, and liquid composition
using the improved toner; Benzion Landa, et al., 430/137 [IMAGE AVAILABLE]
2. 5,025,290, Jun. 18, 1991, Pulsed voltage development electrode cleaner;
Benzion Landa, et al., 355/265; 118/647; 355/246 [IMAGE AVAILABLE]
3. 5,017,784, May 21, 1991, Thermal detector; Arden Sher, et al., 250/338.1;
204/180.6; 252/501.1; 428/328, 402.24; 524/439 [IMAGE AVAILABLE]
4. 4,980,259, Dec. 25, 1990, Liquid developer formulation; Benzion Landa, et
al., 430/117, 115, 137 [IMAGE AVAILABLE]
5. 4,917,371, Apr. 17, 1990, Automatic document feeder and registration system
therefor; Francis M. Bastow, et al., 271/245, 275 [IMAGE AVAILABLE]
6. 4,890,135, Dec. 26, 1989, Photoconductive drum cleaning apparatus; Kenneth
W. Gardiner, et al., 355/299; 15/256.53 [IMAGE AVAILABLE]
7. 4,871,163, Oct. 3, 1989, Paper control gate; Benzion Landa, et al.,
271/225, 184, 298, 301, 303, 902 [IMAGE AVAILABLE]
8. 4,860,924, Aug. 29, 1989, Liquid developer charge director control; Robert
M. Simms, et al., 222/56; 118/689; 222/DIG.1; 355/256 [IMAGE AVAILABLE]
9. 4,842,974, Jun. 27, 1989, Toner for use in compositions for developing
latent electrostatic images, method of making the same, and liquid composition
using the improved toner; Benzion Landa, et al., 430/137; 428/111, 114, 364, 407
[IMAGE AVAILABLE]
<PAGE> 132
10. 4,809,969, Mar. 7, 1989, Automatic document feeder and registration system
therefor; Francis M. Bastow, et al., 271/258 [IMAGE AVAILABLE]
11. 4,794,651, Dec. 27, 1988, Toner for use in compositions for developing
latent electrostatic images, method of making the same, and liquid composition
using the improved toner; Benzion Landa, et al., 430/110, 109, 111, 114, 115
[IMAGE AVAILABLE]
12. 4,791,494, Dec. 13, 1988, Multiple variable light source printer; Louis F.
Schaefer, 358/300; 355/1, 67 [IMAGE AVAILABLE]
13. 4,785,327, Nov. 15, 1988, Pneumatic charge director dispensing apparatus;
Benzion Landa, et al., 355/256; 430/115 [IMAGE AVAILABLE]
14. 4,768,060, Aug. 30, 1988, Push-pull liquid development method and
apparatus; Benzion Landa, et al., 355/257, 261 [IMAGE AVAILABLE]
15. 4,760,423, Jul. 26, 1988, Apparatus and method for reducing hydrocarbon
emissions from a liquid-based electrophotographic copying machine; Bruce E.
Holtje, et al., 355/215; 96/130; 355/30 [IMAGE AVAILABLE]
16. 4,756,986, Jul. 12, 1988, Mixed pigment system for modulation of toner
gamma; George A. Gibson, 430/114, 115 [IMAGE AVAILABLE]
17. D 295,868, May 24, 1988, Copying machine with document handler and sorter;
Donald W. Carr, et al., D18/39 [IMAGE AVAILABLE]
18. 4,725,053, Feb. 16, 1988, Automatic document feeder and registration system
therefor; Francis M. Bastow, et al., 271/229, 246, 270 [IMAGE AVAILABLE]
19. 4,719,026, Jan. 12, 1988, Electrophoretic method of producing
high-density magnetic recording media and a composition and a suspension for
practicing the same; Arden Sher, et al., 252/62.54; 204/180.6; 252/62.53;
427/128, 130; 428/407, 694B, 900 [IMAGE AVAILABLE]
20. D 291,892, Sep. 15, 1987, Copying machine; Donald W. Carr, et al., D18/39
[IMAGE AVAILABLE]
21. 4,678,317, Jul. 7, 1987, Charge and bias control system for
electrophotographic copier; Israel Grossinger, 355/216; 118/648; 355/246 [IMAGE
AVAILABLE]
22. 4,678,177, Jul. 7, 1987, Registering method; Benzion Landa 271/238, 245,
250, 253 [IMAGE AVAILABLE]
23. 4,629,310, Dec. 16, 1986, Optical scanning system for
variable-magnification copier; Benzion Landa, et al., 355/243, 57, 235 [IMAGE
AVAILABLE]
24. 4,629, 308, Dec. 16, 1986, Lens and shutter positioning mechanism for
variable-magnification copier; Benzion Landa, et al., 355/243, 55, 71 [IMAGE
AVAILABLE]
25. 4,627,705, Dec. 9, 1986, Multiple color liquid developer
electrophotographic copying machine and liquid distribution system therefor;
<PAGE> 133
Benzion Landa, et al., 355/326R; 118/645, 659; 355/256, 307 [IMAGE AVAILABLE]
26. 4,624,543, Nov. 25, 1986, Method and apparatus for electrophotographically
processing information; James R. Young, et al., 358/300; 355/240 [IMAGE
AVAILABLE]
27. 4,621,799, Nov. 11, 1986, Automatic document feeder and registration system
therefor; Francis M. Bastow, et al., 271/10, 110, 227, 242, 265 [IMAGE
AVAILABLE]
28. 4,620,699, Nov. 4, 1986, Copy sheet registration assembly for
electrophotographic copier; Benzion Landa, et al., 271/245, 307 [IMAGE
AVAILABLE]
29. 4,598,992, Jul. 8, 1986, Electrophotographic copier having readily
removable drum and improved drive system therefor; Benzion Landa, et al.,
355/211 [IMAGE AVAILABLE]
30. 4,589,761, May 20, 1986, Reciprocating optics copier with means for
counteracting acceleration reaction forces; Benzion Landa, 355/235, 236 [IMAGE
AVAILABLE]
31. 4,586,810, May 6, 1986, Engineering drawing electrophotocopier; Benzion
Landa, 355/215, 106, 117 [IMAGE AVAILABLE]
32. 4,585,535, Apr. 29, 1986, Electrophoretic method of producing high-density
magnetic recording media; Arden Sher, et al., 204/180.6, 181.4; 252/62.53, 62.54
[IMAGE AVAILABLE]
33. 4,585,329, Apr. 29, 1986, Platen cover assembly for copier; Benzion Landa,
355/231, 75, 133 [IMAGE AVAILABLE]
34. 4,582,774, Apr. 15, 1986, Liquid developing latent electrostatic images
and gap transfer; Benzion Landa, 430/126, 115 [IMAGE AVAILABLE]
35. 4,579,253, Apr. 1, 1986, Toner control system; Richard S. Shenier; 222/56,
DIG.1; 250/225, 565, 575 [IMAGE AVAILABLE]
36. 4,569,514, Feb. 11, 1986, Copy sheet decelerator for electrophotographic
copier; Bruce E. Holtje, 271/314; 198/624; 271/182, 270; 414/794.8 [IMAGE
AVAILABLE]
37. 4,556,211, Dec. 3, 1985, Sheet stacking apparatus and registration
mechanism therefor; Roger D. Carr, 271/221, 236; 414/789.1 [IMAGE AVAILABLE]
38. 4,538,899, Sep. 3, 1985, Catalytic fixer-dryer for liquid developed
electrophotocopiers; Benzion Landa, et al., 355/291, 282, 292; 422/4, 173, 199
[IMAGE AVAILABLE]
39. RE 31,964, Aug. 6, 1985, Automatic development electrode bias control
system; Louis F. Schaefer, et al., 355/262; 118/708; 324/72; 355/256, 264, 265
[IMAGE AVAILABLE]
40. 4,531,824, Jul. 30, 1985, Heater for electrophotographic copiers; Benzion
Landa, 355/285, 30 [IMAGE AVAILABLE]
<PAGE> 134
41. 4,529,832, Jul. 16, 1985, Lead-cadmium-sulphide solar cell; Arden Sher, et
al., 136/260, 265; 257/458; 427/74; 437/5, 101, 965 [IMAGE AVAILABLE]
42. 4,522,484, Jun. 11, 1985, Electrophotographic apparatus for increasing the
apparent sensitivity of photoconductors; Benzion Landa, 355/256; 118/647;
355/261, 266 [IMAGE AVAILABLE]
43. 4,511,238, Apr. 16, 1985, Traversing, intermittently contacting sheet
pickoff for electrophotographic copier; Tatsu Hori, 355/271, 315 [IMAGE
AVAILABLE]
44. 4,506,877, Mar. 26, 1985, Automatic biasing mechanism for paper cassette
support plate; Oded Sagiv, 271/127 [IMAGE AVAILABLE]
45. 4,501,486, Feb. 26, 1985, Wiper blade for electrophotocopier; Benzion
Landa, 355/299; 15/1.51, 256.51 [IMAGE AVAILABLE]
46. 4,492,300, Jan. 8, 1985, Resilient-feed ball injector for microballistic
printer; Benzion Landa, 198/443, 526; 221/212, 237 [IMAGE AVAILABLE]
47. D 276,591, Dec. 4, 1984, Bottle; Jacques Guiguizian D9/520, 570 [IMAGE
AVAILABLE]
48. 4,480,825, Nov. 6, 1984, Sheet set separator for electrophotographic
copier; Benzion Landa, 271/81, 182, 184, 207, 225, 272, 314; 414/791.2, 794.8
[IMAGE AVAILABLE]
49. D 275,650, Sep. 25, 1984, Bottle; Jacques Guiguizian, D9/521, 523, 524
[IMAGE AVAILABLE]
50. 4,473,865, Sep. 25, 1984, Stationary light source electrophotographic
copier; Benzion Landa, 362/6; 355/66, 67, 228; 362/3, 98, 217, 279, 291, 298,
342, 345 [IMAGE AVAILABLE]
51. 4,469,461, Sep. 4, 1984, Low profile keyboard actuator; Benzion Landa,
400/473, 62, 474, 478 [IMAGE AVAILABLE]
52. 4,460,667, Jul. 17, 1984, Method for developing latent electrostatic images
for gap transfer to a carrier sheet; Benzion Landa, 430/30; 118/262, 647;
355/256, 274; 430/117, 119 [IMAGE AVAILABLE]
53. 4,460,286, Jul. 17, 1984, Centrifugal ball elevator for microballistic
printer; Benzion Landa, 400/124.29; 198/642, 658; 494/65 [IMAGE AVAILABLE]
54. 4,454,215, Jun. 12, 1984, Improved composition for developing latent
electrostatic images for gap transfer to a carrier sheet; Benzion Landa,
430/115, 119 [IMAGE AVAILABLE]
55. 4,439,035, Mar. 27, 1984, Copier cleaning system incorporating resilient
noncellular sealing roller; Benzion Landa, 355/307; 15/256.52; 101/425 [IMAGE
AVAILABLE]
56. 4,435,068, Mar. 6, 1984, Apparatus for electrophotography; Benzion Landa,
355/309, 235, 271, 315 [IMAGE AVAILABLE]
57. 4,426,667, Jan. 17, 1984, Pulse width modulation system; Dale P. Masher,
<PAGE> 135
et al., 360/44, 43 [IMAGE AVAILABLE]
58. 4,420,244, Dec. 13, 1983, Apparatus for developing latent electrostatic
images for gap transfer to a carrier sheet; Benzion Landa 355/274, 256 [IMAGE
AVAILABLE]
59. 4,420,243, Dec. 13, 1983, Hold-down arrangement for copy sheet pick-off
system; James M. Baker, et al., 355/315, 271 [IMAGE AVAILABLE]
60. 4,420,149, Dec. 13, 1983, Automatic original document feeder for
electrophotographic copier; Max Schultes, et al., 271/10; 221/188, 209; 271/4,
9, 122, 162; 355/313, 318; 400/625 [IMAGE AVAILABLE]
61. 4,418,903, Dec. 6, 1983, Large capacity combination magazine and sheet
feeder for copying machines; Benzion Landa, 271/10, 22, 126, 162 [IMAGE
AVAILABLE]
62. 4,413,048, Nov. 1, 1983, Developing composition for a latent electrostatic
image for transfer of the developed image across a gap to a carrier sheet;
Benzion Landa, 430/115, 119, 137, 138 [IMAGE AVAILABLE]
63. 4,411,976, Oct. 25, 1983, Method of increasing the density of
liquid-developed gap-transferred electrophotographic images and developing
composition for use therein; Benzion Landa, et al., 430/114, 115, 119, 126
[IMAGE AVAILABLE]
64. 4,400,739, Aug. 23, 1983, Microballistic facsimile scanner and recorder;
Benzion Landa, 358/496; 355/202 [IMAGE AVAILABLE]
65. 4,400,079, Aug. 23, 1983, Injection roller developer for
electrophotographic copier and biasing system therefor; Benzion Landa, 355/256;
118/661; 355/259, 269, 307 [IMAGE AVAILABLE]
66. 4,396,187, Aug. 2, 1983, Sheet detector for electrophotographic copier;
Benzion Landa, 271/258, 265, 270 [IMAGE AVAILABLE]
67. 4,392,742, Jul. 12, 1983, Liquid developer copier cleaning system
incorporating resilient closed-cell cleaning roller; Benzion Landa, 355/296;
15/256.52; 101/425 [IMAGE AVAILABLE]
68. 4,378,422, Mar. 29, 1983, Method and apparatus for transferring developed
electrostatic images to a carrier sheet; Benzion Landa, et al., 430/126, 112,
117 [IMAGE AVAILABLE]
69. 4,378,169, Mar. 29, 1983, Resilient breech for microballistic printers;
Benzion Landa, 400/124.29; 124/44.7, 56 [IMAGE AVAILABLE]
70. 4,368,881, Jan. 18, 1983, Friction paper feeder; Benzion Landa, 271/122;
192/56C; 271/125 [IMAGE AVAILABLE]
71. 4,367,035, Jan. 4, 1983, Liquid developer electrostatic copier for
shipboard use; Tatsu Hori, 355/256; 354/324, 331; 355/27, 307 [IMAGE AVAILABLE]
72. 4,364,661, Dec. 21, 1982, Process and apparatus for transferring developed
electrostatic images to a carrier sheet, improved carrier sheet for
<PAGE> 136
use in the process and method of making the same; Benzion Landa, 355/274;
118/621; 355/309; 428/156; 430/48, 126 [IMAGE AVAILABLE]
73. 4,364,657, Dec. 21, 1982, Multiple-blade pickoff for electrophotographic
copier; Benzion Landa, 355/315; 271/309, 312, 900; 355/312 [IMAGE AVAILABLE]
74. 4,364,460, Dec. 21, 1982, Electromagnetic helical spring clutch; Benzion
Landa, 192/35, 81C, 84T [IMAGE AVAILABLE]
75. 4,362,297, Dec. 7, 1982, Large capacity combination magazine and sheet
feeder for copying machines; Benzion Landa, 271/152, 160 [IMAGE AVAILABLE]
76. 4,355,883, Oct. 26, 1982, Photocopier scanning apparatus; Benzion Landa,
355/235, 57, 60, 66 [IMAGE AVAILABLE]
77. 4,351,617, Sep. 28, 1982, Microballistic printer; Benzion Landa 400/124.29,
17 [IMAGE AVAILABLE]
78. 4,350,447, Sep. 21, 1982, Synchronizing system for rapid-fire gun in a
microballistic printer or the like; Benzion Landa, 400/124.29 [IMAGE AVAILABLE]
79. 4,350,333, Sep. 21, 1982, Large-capacity sheet-stacking apparatus; Benzion
Landa, 271/217 [IMAGE AVAILABLE]
80. 4,343,881, Aug. 10, 1982, Multilayer photoconductive assembly with
intermediate heterojunction; Arden Sher, et al., 430/57, 60 [IMAGE AVAILABLE]
81. 4,341,851, Jul. 27, 1982, Electrophotographic photoconductor comprising CdS
and ZnS; John B. Mooney, et al., 430/56, 58, 59, 60, 88, 89, 90, 94, 95
[IMAGE AVAILABLE]
82. 4,340,312, Jul. 20, 1982, Barrelless gun for microballistic printer;
Benzion Landa, 400/124.29 [IMAGE AVAILABLE]
83. 4,334,762, Jun. 15, 1982, Single fixed position lens variable copy size
optical system for copying machine; Benzion Landa, 355/233, 30, 57, 235, 243;
359/726, 823 [IMAGE AVAILABLE]
84. 4,329,070, May 11, 1982, Method of avoiding collisions of projectiles in a
microballistic printer; Benzion Landa, 400/124.29 [IMAGE AVAILABLE]
85. D 264,219, May 4, 1982, Copying machine; William L. Plumb, et al., D18/36
[IMAGE AVAILABLE]
86. 4,326,792, Apr. 27, 1982, Combined registration image transfer and pickoff
assembly for electrophotographic copier; Benzion Landa, 355/271; 271/277;
355/277, 315 [IMAGE AVAILABLE]
87. 4,326,644, Apr. 27, 1982, Sawtooth feeder with jam preventer; Benzion
Landa, 221/263; 111/77 [IMAGE AVAILABLE]
88. 4,325,627, Apr. 20, 1982, Method and apparatus for liquid-developing latent
electrostatic images; Ronald Swidler, et al., 355/256; 118/651, 661; 355/261,
266; 430/118, 119 [IMAGE AVAILABLE]
<PAGE> 137
89. 4,320,953, Mar. 23, 1982, Pick-off device for electrostatic copier; Max
Schultes, et al., 355/315; 271/308, 900 [IMAGE AVAILABLE]
90. 4,302,093, Nov. 24, 1981, Combined transfer and registration system for
electrophotographic copier; Benzion Landa, 355/274, 277, 317 [IMAGE AVAILABLE]
91. 4,286,886, Sep. 1, 1981, Method and apparatus for controlling the feed of
projectiles in a microballistic printer; Benzion Landa, 400/124.29; 124/3, 51.1
[IMAGE AVAILABLE]
92. 4,286,039, Aug. 25, 1981, Method and apparatus for removing excess
developing liquid from photoconductive surfaces; Benzion Landa, et al., 430/119;
118/661 [IMAGE AVAILABLE]
93. 4,278,884, Jul. 14, 1981, Method and apparatus for xeroradiography; Benzion
Landa, 378/28; 118/647 [IMAGE AVAILABLE]
94. 4,269,504, May 26, 1981, Pickoff device for copying machine; Benzion Landa,
355/315; 271/308, 900 [IMAGE AVAILABLE]
95. 4,268,178, May 19, 1981, Anti-bounce projectile collecting surface for
microballistic printer; Benzion Landa, 400/124.29, 686 [IMAGE AVAILABLE]
96. 4,259,003, Mar. 31, 1981, Imaging surface discharge and cleaning apparatus
for electrophotographic copier; Norman F. Mangal, et al., 355/210; 118/652;
355/219; 361/212, 200 [IMAGE AVAILABLE]
97. 4,256,820, Mar. 17, 1981, Method of electrophotography using low intensity
exposive; Benzion Landa, 430/54; 355/214, 245, 256; 430/31, 103, 126
[IMAGE AVAILABLE]
98. 4,253,656, Mar. 3, 1981, Apparatus for collating or otherwise sorting the
output of sheet-delivering devices; Benzion Landa, 271/293, 294
[IMAGE AVAILABLE]
99. RE 30,477, Jan. 13, 1981, Electrophotographic liquid developing system;
Kenneth W. Gardiner, et al., 118/689, 647; 355/246, 256, 264, 266
[IMAGE AVAILABLE]
100. 4,244,648, Jan. 13, 1981, Misfeed detector for copy machine; Max Schultes,
et al., 355/206; 271/258, 308, 311, 902 [IMAGE AVAILABLE]
101. 4,236,808, Dec. 2, 1980, Copier scan and collator back bar control;
Robert J. Tusso, et al., 355/233; 271/224; 355/311, 323 [IMAGE AVAILABLE]
102. 4,233,381, Nov. 11, 1980, Method and apparatus for increasing the apparent
resolution of developed electrophotographically reproduced images; Benzion
Landa, 430/33; 355/210, 245; 430/35, 45, 126 [IMAGE AVAILABLE]
103. 4,231,562, Nov. 4, 1980, Recirculating document feeder; Tatsu Hori,
271/3.1, 186, 213, 225, 902 [IMAGE AVAILABLE]
104. 4,222,675, Sep. 16, 1980, Low profile keyboard operator; Richard W. Brown,
et al., 400/474; 200/175; 335/112; 400/70 [IMAGE AVAILABLE]
<PAGE> 138
105. 4,181,094, Jan. 1, 1980, Excess developer removal apparatus; Kenneth W.
Gardiner, 118/652, 63, 660; 355/256, 296 [IMAGE AVAILABLE]
106. 4,168,830, Sep. 25, 1979, Air jet paper pick-off for liquid developer
electrostatic copier; Tatsu Hori, et al., 271/176; 118/245; 271/186, 195, 900,
902; 432/60 [IMAGE AVAILABLE]
107. 4,157,059, Jun. 5, 1979, Copy set separating tray for document copier; Max
Schultes, et al., 211/50; 248/542; 271/213; 414/791.2 [IMAGE AVAILABLE]
108. 4,129,295, Dec. 12, 1978, Semiautomatic document feeder; Tatsu Hori, et
al., 271/186, 209, 902 [IMAGE AVAILABLE]
109. 4,124,295, Nov. 7, 1978, Background brightness control for document
copier; Kenneth W. Gardiner, 355/68, 214 [IMAGE AVAILABLE]
110. 4,023,791, May 17, 1977, Semi-automatic document feeder; Tatsu Hori, et
al., 271/3, 4, 246, 273 [IMAGE AVAILABLE]
111. 3,999,687, Dec. 28, 1976, Toner concentration detector; James A. Baer, et
al., 222/52; 118/689; 222/DIG.1 [IMAGE AVAILABLE]
112. 3,981,267, Sep. 21, 1976, Electrophotographic liquid developing system;
Kenneth W. Gardiner, et al., 118/689, 647; 355/256, 266 [IMAGE AVAILABLE]
113. 3,970,036, Jul. 20, 1976, Toner Concentration detector for dry powder
magnetic brush toning system; James A. Baer, et al., 118/688, 689; 222/56;
324/236 [IMAGE AVAILABLE]
114. 3,949,703, Apr. 13, 1976, Self-cleaning developer applicator; Ian Edward
Smith, et al., 118/648, 649; 355/256, 259 [IMAGE AVAILABLE]
115. 3,939,085, Feb. 17, 1976, Process for forming a liquid developer
organisol; Ian Edward Smith, et al., 430/137 [IMAGE AVAILABLE]
116. 3,892,481, Jul. 1, 1975, Automatic development electrode bias control
system; Louis F. Schaefer, et al., 355/264; 118/664, 665; 324/72; 355/208, 256
[IMAGE AVAILABLE]
117. 3,851,964, Dec. 3, 1974, CONTACT TRANSFER ELECTROSTATIC COPYING APPARATUS;
Ian Edward Smith, et al., 355/280, 279; 430/117 [IMAGE AVAILABLE]
118. 3,851,962, Dec. 3, 1974, ELECTROSTATIC HOLD DOWN APPARATUS; Curtis P. Van
Vloten, 355/309; 226/94; 250/324; 271/901 [IMAGE AVAILABLE]
119. 3,850,829, Nov. 26, 1974, DEVELOPING LIQUID FOR ELECTROSTATIC IMAGES;
Ian Edward Smith, et al., 430/113, 115, 116, 904 [IMAGE AVAILABLE]
120. 3,839,032, Oct. 1, 1974, METHOD OF CONTACT TRANSFER OF DEVELOPED
ELECTROSTATIC IMAGES; Ian Edward Smith, et al., 430/117; 118/638; 355/256;
430/112, 126 [IMAGE AVAILABLE]
121. 3,836,245, Sep. 17, 1974, COPY MACHINE HAVING PHOTOCONDUCTIVE BELT;
Peter J. Hastwell, et al., 355/233, 212, 296 [IMAGE AVAILABLE]
122. 3,825,191, Jul. 23, 1974, CENTRIFUGAL MILL FOR CONTACT TRANSFER
<PAGE> 139
ELECTROSTATIC COPIER; Ian E. Smith, et al., 241/46.11, 79.1 [IMAGE AVAILABLE]
123. 3,819,942, Jun. 25, 1974, REGULATED POWER SUPPLY FOR CORONA CHARGING UNIT;
Peter J. Hastwell, et al., 250/324; 361/235 [IMAGE AVAILABLE]
124. 3,789,794, Feb. 5, 1974, APPARATUS FOR DEVELOPING ELECTROSTATIC IMAGES;
Ian Edward Smith, et al., 118/694, 602; 137/93 [IMAGE AVAILABLE]
125. 3,782,818, Jan. 1, 1974, SYSTEM FOR REDUCING BACKGROUND DEVELOPER
DEPOSITION IN AN ELECTROSTATIC COPIER; Ian E. Smith, 355/266; 430/103, 119
[IMAGE AVAILABLE]
126. 3,766,632, Dec. 4, 1973, CLEANING MECHANISM FOR PHOTOCONDUCTIVE SURFACES;
Ian E. Smith, et al., 355/297, 228, 256, 299, 300, 307 [IMAGE AVAILABLE]
127. 3,770,972, Nov. 6, 1973, CORONA CHARGER CONFIGURATION; Peter J. Hastwell,
250/324, 326 [IMAGE AVAILABLE]
128. 3,767,300, Oct. 23, 1973, POLLUTION CONTROL SYSTEM FOR DUPLICATOR MACHINE;
Paul I. Brown, et al., 355/297; 34/77; 355/30, 256, 298, 299 [IMAGE AVAILABLE]
129. 3,760,276, Sep. 18, 1973, DIGITAL TRANSMISSION SYSTEM; Richard S. Shenier,
375/17, 43 [IMAGE AVAILABLE]
130. 3,758,779, Sep. 11, 1973, ELECTROSTATIC CHARGING APPARATUS; Edward P.
Thicthener, 250/325; 361/229 [IMAGE AVAILABLE]
131. 3,757,081, Sep. 4, 1973, APPARATUS FOR HEATING COPY PAPER FOR
ELECTROSTATIC COPIERS; Ian Edward Smith, et al., 219/216, 388 [IMAGE AVAILABLE]
132. 3,749,050, Jul. 31, 1973, CLEANING SYSTEM FOR WETTING TANK ROLLERS;
Peter J. Hastwell, 118/681; 15/256.53; 118/104, 203 [IMAGE AVAILABLE]
133. 3,741,643, Jun. 26, 1973, PNEUMATIC ASSEMBLY FOR REMOVING EXCESS DEVELOPER
LIQUID FROM PHOTOCONDUCTIVE SURFACES; Ian Edward Smith, et al., 355/256;
239/597; 355/27; 430/117, 125 [IMAGE AVAILABLE]
134. 3,709,594, Jan. 9, 1973, METHOD AND APPARATUS FOR ELECTROSTATIC COLOR
PRINTING; Peter J. Hastwell, 355/327; 101/163; 355/256 [IMAGE AVAILABLE]
135. 3,694,067, Sep. 26, 1972, PRODUCTION AND REPRODUCTION SYSTEMS WITH ENDLESS
FILM OR TAPE CARTRIDGE; Carl J. Clement, 353/78, 26R [IMAGE AVAILABLE]
136. 3,639,051, Feb. 1, 1972, ELECTROSTATIC COPIER; E. Paul Charlap, et al.,
355/251 [IMAGE AVAILABLE]
<PAGE> 140
<TABLE>
<CAPTION>
NAME SAVIN IF ASSIGNOR SEARCH ENTER Y
NAME PAT # NAME PAT #
<S> <C> <C> <C>
SAVIN CORPORATION, VALHALL 4506877 SAVIN CORPORATION 4794651
SAVIN CORPORATION D291892 SAVIN CORPORATION 4842974
SAVIN CORPORATION D295868 SAVIN CORPORATION 4860924
SAVIN CORPORATION 4411976 SAVIN CORPORATION 4980259
SAVIN CORPORATION 4529832 SAVIN CORPORATION 5017784
SAVIN CORPORATION 4538899 SAVIN CORPORATION 5025290
SAVIN CORPORATION 4585329 SAVIN CORPORATION 5047307
SAVIN CORPORATION 4585535 SAVIN CORPORATION 5146276
SAVIN CORPORATION 4719026 SAVIN CORPORATION 5192638
SAVIN CORPORATION 4756986 SAVIN CORPORATION 5264313
SAVIN CORPORATION 4760423 SAVIN CORPORATION 5286593
SAVIN CORPORATION 4768060 SAVIN CORPORATION 5300390
SAVIN CORPORATION 4785327 SAVIN CORPORATION A CORP 4511238
</TABLE>
DO A PATENT NUMBER QUERY ON EACH PATENT TO DETERMINE CURRENT OWNERSHIP.
PRESS XMIT TO LOOK AT MORE RECORDS
<TABLE>
<CAPTION>
NAME SAVIN IF ASSIGNOR SEARCH ENTER Y
NAME PAT # NAME PAT #
<S> <C> <C> <C>
SAVIN CORPORATION, VALHA 4329070 SAVIN CORPORATION, VALHAL 4454215
SAVIN CORPORATION, VALHALL 4501486 SAVIN CORPORATION, VALHAL 4378422
SAVIN CORPORATION, 9 WEST 4629310 SAVIN CORPORATION, VALHAL 4492300
SAVIN CORPORATION, 9 WEST 4629308 SAVIN CORPORATION, VALHAL 4378169
SAVIN CORPORATION, VALHAL 4341851 SAVIN CORPORATION, VALHAL 4400739
SAVIN CORPORATION, VALHAL D275650 SAVIN CORPORATION, VALHAL 4435068
SAVIN CORPORATION, VALHA 4426667 SAVIN CORPORATION, VALHAL 4343881
SAVIN CORPORATION, ALHALL D276591 SAVIN CORPORATION, VALHAL 4624543
SAVIN CORPORATION, STAMFO 4785327 SAVIN CORPORATION, VALHAL 4413048
SAVIN CORPORATION, VALHAL 4400079 SAVIN CORPORATION, VALHAL 4420149
SAVIN CORPORATION, VALHAL 4340312 SAVIN CORPORATION, VALHAL 4411976
SAVIN CORPORATION, VALHAL 4364657 SAVIN CORPORATION, VALHAL 4460286
SAVIN CORPORATION, VALHAL 4586810 SAVIN CORPORATION, VALHAL 4420243
</TABLE>
DO A PATENT NUMBER QUERY ON EACH PATENT TO DETERMINE CURRENT OWNERSHIP.
PRESS XMIT TO LOOK AT MORE RECORDS
<PAGE> 141
<TABLE>
<CAPTION>
NAME SAVIN IF ASSIGNOR SEARCH ENTER Y
NAME PAT # NAME PAT #
<S> <C> <C> <C>
SAVIN CORPORATION, VALHAL 4621799 SAVIN CORPORATION, 9 WEST 4768060
SAVIN CORPORATION, VALHAL 4538899 SAVIN CORPORATION, 9 WEST 4980259
SAVIN CORPORATION, 9 W. B 4756986 SAVIN CORPORATION, 9 WEST 5025290
SAVIN CORPORATION, 9 W. B 4760423 SAVIN CORPORATION, VALHAL 4556211
SAVIN CORPORATION, 9 WEST 4529832 SAVIN, S. A. D269499
SAVIN CORPORATION, 9 WEST 4627705 SAVIN, VALHALLA, NY 10595 4531824
SAVIN CORPORATION, 9 WEST 4598992 SAVINGS SPOT LTD. THE, 21 D304207
SAVIN CORPORATION, 9 WEST 4569514
SAVIN CORPORATION, 9 WEST 4620699
SAVIN CORPORATION, 9 WEST 4585535
SAVIN CORPORATION, 9 WEST D291892
SAVIN CORPORATION, 9 WEST 4678317
NO MORE RECORDS ON SELECTION
</TABLE>
<PAGE> 142
Below is a list of trademarks registered to Savin Corporation:
SAVIN CORPORATION
<TABLE>
<CAPTION>
================================================================================
TRADEMARK COUNTRY STATUS
================================================================================
<S> <C> <C>
5020 US Registered
5030 US Registered
5040 US Registered
7010 US Renewed
7015 US Renewed
7020 US Registered
7025 US Registered
7035 AD US Renewed
7040 US Registered
7050 US Renewed
7055 US Renewed
7065 US Registered
7120 US Registered
7150 US Renewed
7220 US Renewed
7230 US Renewed
755 COPIER US Renewed
760 COPIER US Renewed
7640 US Renewed
765 US Cancelled
770 COPIER US Renewed
772 US Renewed
775 US Renewed
780 COPIER US Renewed
790 COPIER (1,143,198) US Renewed
870 US Renewed
880 US Renewed
895 US Renewed
9350 US Renewed
</TABLE>
-1-
<PAGE> 143
<TABLE>
<S> <C> <C>
COLOR MAGICIAN US Cancelled
COLOR MAGICIAN 500 US Cancelled
ELECTRO INK (R-23298) US (NYS) Renewed
ELECTRO INK (1,316,402) US
ELECTRO MIX US Renewed
IMAGE INJECTION SYSTEM US Abandoned
INK INJECTION US
LANDA PROCESS US Renewed
PRISM US Renewed
SAVIN (1,500,782) US Registered
SAVIN (836,540) US Renewed
SAVIN (R-9063) US (NYS) Renewed
SAVIN (R-9068) US (NYS) Renewed
SAVIN (1,014,386) US Renewed
SAVIN (1,148,326) US
SAVIN LOGO (1,174,900) US Renewed
SAVIN LOGO (939,352) US Renewed
SAVIN LOGO (913,252) US
SAVIN FAX US Registered
SYSTEM 600 US Registered
SYSTEM 800 US Cancelled
SYSTEM 850 US Cancelled
V-35 US Registered
WORD MASTER US Registered
840 US Registered
</TABLE>
-2-
<PAGE> 144
<TABLE>
<S> <C> <C>
SAVIN LOGO (Cl. 18) ARGENTINA Registered
SPECTRUM (Cl. 9) AUSTRALIA Abandoned
SAVIN LOGO (Cl. 1,9) AUSTRIA Registered
SAVIN (Cl. 9) AUSTRIA Registered
SAVIN LOGO (Cl. 1,9) BENELUX Registered
SAVIN LOGO (Cl. 54) BOLIVIA Registered
SPECTRUM BRAZIL
755 Copier (RN 260,241) CANADA Registered
790 Copier (RN 262,488) CANADA Registered
880 (RN 264,766) CANADA Registered
840 (RN 268,499) CANADA Registered
ELECTRO MIX (Cl. 7) CANADA Registered
LANDA PROCESS CANADA Registered
LASERFAX CANADA Registered
SAVIN CANADA Registered
SAVIN LOGO (260,240) CANADA Registered
SAVIN LOGO (273,659) CANADA Registered
SPECTRUM CANADA Registered
SYSTEM 600 CANADA Registered
WORD MASTER CANADA Registered
SAVIN (Cl. 7,9,16) CHILE Registered
SAVIN DEVICE (Cl. 1,9,16) DENMARK Registered
SAVIN (Cl. 9) (1,475,255) FRANCE Registered
SAVIN (Cl. 1,9) (1,155,290) FRANCE Registered
SAVIN GERMANY WEST Registered
SAVIN (Cl. 1,9) (916,564/9) GERMANY WEST Registered
SAVIN DEVICE (Cl. 1,9) GREECE Cancelled
SPECTRUM (83451/90) HONG KONG
SAVIN (Cl. 9,16) (292,584) ITALY Registered
SAVIN (Cl. 1,9,16) (283,225) ITALY
SAVIN LOGO (Cl. 1,9) ITALY Registered
SAVIN LOGO (Cl. 11) JAPAN Registered
SAVIN (Cl. 10) (2,080,495) JAPAN Registered
</TABLE>
-3-
<PAGE> 145
<TABLE>
<S> <C> <C>
SAVIN (Cl. 25) (50,793/81) JAPAN Abandoned
SPECTRUM (Cl. 11) JAPAN Abandoned
SPECTRUM (Cl. 39) KOREA
SPECTRUM (Cl. 9) MALAYSIA
SPECTRUM (Cl. 9) MEXICO
SAVIN LOGO (Cl. 1,9) NEW ZEALAND Registered
SAVIN (Cl. 1) NEW ZEALAND Registered
SAVIN LOGO (Cl. 9) NORWAY Abandoned
SAVIN (Cl. 9) PANAMA Abandoned
SAVIN LOGO (Cl. 6) PANAMA Registered
SAVIN (Cl. 9) PARAGUAY Registered
SAVIN (Cl. 16) PARAGUAY Registered
SAVIN (Cl. 42) PARAGUAY Registered
SAVIN LOGO (Cl. 1) PORTUGAL Registered
SAVIN LOGO (Cl. 9) PORTUGAL Registered
SPECTRUM (Cl. 9) SINGAPORE
SPECTRUM (Cl. 9) SOUTH AFRICA
SAVIN (Cl. 9) (1,518,379) SPAIN
SAVIN SPAIN
SAVIN SPAIN
SAVIN LOGO (Cl. 1a) SPAIN Registered
SAVIN LOGO (Cl. 1,9) SWEDEN Registered
SAVIN (Cl. 1,9,16) SWITZERLAND Registered
SAVIN (Cl. 16) (264,497) SWITZERLAND Registered
SAVIN (251,273) SWITZERLAND Registered
SPECTRUM (Cl. 72) TAIWAN
SPECTRUM THAILAND
SAVIN LOGO/"SAVIN" UK/GB Registered
SAVIN (Cl. 25) URUGUAY Registered
SAVIN LOGO (Cl. 24) VENEZUELA
SAVIN LOGO (Cl. 1,9) VENEZUELA
SAVIN LOGO (Cl. 21) VENEZUELA
</TABLE>
-4-
<PAGE> 146
SCHEDULE 4.20 - REAL ESTATE
11/30/94
(1) DESCRIPTIONS OF ALL REAL PROPERTY OWNED BY THE COMPANY OR ANY OF ITS
SUBSIDIARIES
(1) PA HALLSTEAD BOX 289-GREAT BEND TOWNSHIP 8,500 SQ FT OF LAND
ONLY - NO BUILDINGS
(2) DESCRIPTION OF ALL LEASES, SUBLEASES OR OTHER AGREEMENTS UNDER WHICH THE
COMPANY OR ANY OF ITS SUBSIDIARIES IS LESSOR OR LESSEE OF ANY REAL PROPERTY
<TABLE>
<CAPTION>
ST CITY LOCATION USAGE
==============================================================================================
<S> <C> <C> <C> <C>
1 CA ARTESIA 17100 PIONEER BLVD LA BRANCH OFFICE
2 CHINO (LA) 6251 SCHEAFER LA SALES OFFICE
3 GLENDALE (LA) 4720 SAN FERNANDO RD LA SALES OFFICE
4 SAN DIEGO 4360 VIEWRIDGE AVE NAVY TRAINING
5 S.F. 389 OYSTER POINT BLVD SF BRANCH OFF/WHSE
6 SANTA CLARA (SF) 4699 OLD IRONSIDE SF SALES OFFICE
7 CT STAMFORD 333 LUDLOW ST - HARBOR PARK CORPORATE HQ
8 FL TAMPA 207 KELSEY LANE TAMPA BRANCH OFF/WHSE
9 GA NORCROSS 1670 OAKBROOK DEALER OFF & TRAINING CENTER
10 IL ADDISON 1225 GREEN BRIAR DRIVE CHICAGO BRANCH OFF/WHSE
11 CHICAGO 222 N LASALLE (LOOP) DEALER OFF & BRANCH SALES
12 MA WELLESLEY 62 WALNUT STREET BOSTON BRANCH OFFICE
13 WALTHAM 411 WAVERLY OAKS RD BOSTON BRANCH WHSE
14 W. SPRINGFIELD 171 PARK AVE BOSTON SALES OFFICE
15 WORCESTER 12 HARVARD STREET BOSTON SALES OFFICE
16 MD ROCKVILLE 30 WEST GUDE DR STE 350 WASHINGTON BRANCH OFFICE
17 GAITHERSBURG 15918 TOURNAMENT DRIVE WASHINGTON BRANCH WHSE
- - ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOTAL OFFICE WHSE
LESSOR SQ FT SQ FT SQ FT
================================================================================
<S> <C> <C> <C> <C>
1 91 FREEWAY PARTNERS 12,463 12,463 0
2 FIRST CALIFORNIA INCOME 1,300 1,300 0
3 ROBERT W. STEVENSON 1,216 1,216 0
4 LIDO INVESTMENT CO. 2,600 2,600 0
5 SHELTON PROPERTIES, INC. 17,300 10,300 7,000
6 DON PEARLMAN JOINT VENTURE 3,840 3,840 0
7 JOHN BROWN E & C, INC. (SUBLESSOR) 26,111 26,111 0
8 KRAUSS/SCHWARTZ PROPERTIES 12,930 5,124 7,806
9 OAKBROOK 4512, LTD 16,543 15,335 1,208
10 MEDINAH LAND LIMITED 22,779 14,779 8,000
11 AMERICAN NATIONAL BANK & TRUST CO 4,981 4,981 0
12 NEWTON WELLESLEY EXECUTIVE OFFICE PARK 10,163 10,163 0
13 DUFFY BROTHERS CONSTRUCTION 6,000 0 6,000
14 PLAZA MALL ASSOCIATES 600 600 0
15 PHOTOGRAPHERS' COLOR 812 812 0
16 REALTY ASSOCIATES FUND III 11,838 11,838 0
17 BOWERS PARTNERSHIP 12,200 0 12,200
- - --------------------------------------------------------------------------------
</TABLE>
<PAGE> 147
SCHEDULE 4.20 - REAL ESTATE - CONTINUED
<TABLE>
<CAPTION>
ST CITY LOCATION USAGE
==============================================================================================
<S> <C> <C> <C> <C>
18 MI FLINT 2425 S. LINDEN ROAD DETROIT SALES OFFICE
19 SOUTHFIELD 21555 MELROSE AVE STE 7 DETROIT BRANCH OFF/WHSE
20 DETROIT 615 GRISWOLD STREET DETROIT SALES OFFICE
21 NY NEW YORK 545 FIFTH AVENUE NEW YORK BRANCH OFFICE
22 OR LAKE OSWEGO 4000 KRUSE WAY PORTLAND BRANCH OFFICE
23 PORTLAND 16470 S.W. 72ND AVE PORTLAND BRANCH WHSE
24 SALEM 3000 MARKET STREET PORTLAND SALES OFFICE
25 EUGENE 207 E. 5TH STREET PORTLAND SALES OFFICE
26 PA NORRISTOWN 2626 VAN BUREN AVE PHILADELPHIA BRANCH OFF/WHSE
27 TX CARROLLTON 1305 W. BELTLINE ROAD DALLAS BRANCH OFF/WHSE
28 DALLAS 4201 SPRING VALLEY DEALER OFFICE
29 VA ARLINGTON 1655 N. FT MEYER 1ST FLOOR WASHINGTON SALES OFFICE
==============================================================================================
==============================================================================================
</TABLE>
<TABLE>
<CAPTION>
TOTAL OFFICE WHSE
LANDLORD SQ FT SQ FT SQ FT
===============================================================================
<S> <C> <C> <C> <C>
18 OAK CREEK OFFICE PARK 150 150 0
19 SOUTHFIELD TECHNECENTER PROPERTIES 13,500 10,372 3,128
20 FORD BUILDING 175 175 0
21 NINETEEN NEW YORK PROPERTIES 2,200 2,200 0
22 SPIEKER PROPERTIES, L.P. 8,955 8,955 0
23 PACIFIC REALTY ASSOCIATES 7,000 0 7,000
24 DONALD SATTER 900 900 0
25 JENOVA LAND COMPANY 680 680 0
26 VAN BUREN PARTNERSHIP 15,719 11,471 4,248
27 MERIT INVESTMENT PARTNERS 16,002 12,502 3,500
28 GOVERNMENT EMPLOYEES INSURANCE CO. 2,210 2,210 0
29 PARK PLACE ASSOCIATES 3,395 3,395 0
===============================================================================
TOTAL 234,562 174,472 60,090
===============================================================================
</TABLE>
(3) DESCRIPTION OF OPTIONS TO ACQUIRE OR TO SELL ANY INTEREST IN REAL PROPERTY
None
<PAGE> 148
<TABLE>
<CAPTION>
SCHEDULE 4.21
INSURANCE
INSURANCE POLICY
COVERAGE COMPANY NUMBER EXPIRES
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PROPERTY AETNA C & S 10M015673SCA 1/31/95
DIFFERENCE IN CONDITIONS GREAT AMERICAN IMP705810001 1/31/95
BLANKET CRIME NATIONAL UNION 4422713 12/31/94
OCEAN CARGO AMERICAN HOME AIMA86403 5/4/95
AUTOMOBILE RELIANCE NATIONAL NTT0117102(PKG) 07/30/95
NKA0117103(TX AUTO) 07/30/95
NKA0117104(MA AUTO) 07/30/95
GENERAL LIABILITY RELIANCE NATIONAL NTT0117102 07/30/95
UMBRELLA HOME INSURANCE CO HUL171971 07/30/95
N Y STATE DISABILITY BENEFITS LAW HOME INDEMNITY CO DBP39732 CONTINUOUS
DIRECTORS & OFFICERS AGRICULTURAL EXESS & SURPLUS NSP2107509 12/14/94
AETNA C & S 095LB100846605B 12/14/94
GULF INSURANCE GA5609605 12/14/94
D & O RUN OFF POLICY RELIANCE NATIONAL NDA 0104635 12/14/96
WORKERS COMPENSATION RELIANCE NATIONAL NWA0117105(AOS) 07/30/95
RELIANCE NATIONAL NWA0117106(CA) 07/30/95
RELIANCE NATIONAL NWA0117107(TX) 07/30/95
</TABLE>
<PAGE> 149
SCHEDULE 5.1
CHANGES FROM THE DATE HEREOF UNTIL THE EFFECTIVE DATE
1. Contemplated increases in compensation of directors, officers or employees
none
2. Payments of pension or other employee benefits not required by any existing
plan
none
3. Commitments to payment of additional benefits to any person or amendments
to plans or agreements in existence with respect to such benefits
none
4. Payments or awards under executive compensation plans
Directors' Stock Options
1994 Management bonus plan
<PAGE> 150
EXHIBIT A
ESCROW AGREEMENT
Escrow Agreement date as of ___________________, 1995 between Savin
Corporation, a Delaware corporation ("Savin") and __________________ (the
"Escrow Agent").
WHEREAS, Savin, Ricoh Corporation, a Delaware corporation ("Ricoh")
and SC Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of Ricoh (the "Acquiror") have entered into an Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which the Acquiror will merge with and into
Savin (the "Merger") with Savin being the surviving corporation (the "Surviving
Corporation") and each share of the common stock, par value $.001 per share of
Savin (the "Common Stock") issued and outstanding immediately prior to the
Merger shall, by virtue of the Merger be converted into the right to receive an
amount in cash equal to the price per share of Common Stock calculated in
accordance with the Merger Agreement (the "Price Per Share");(1) and
WHEREAS, as a result of the recent reorganization of Savin, there
remains outstanding as of the date hereof a number of pre-petition disputed
claims that are unresolved (the "Unresolved Claims") and pursuant to the Amended
Joint Consolidated Plan of Reorganization, as modified, by Savin and certain of
its subsidiaries (the "Plan"), Savin was required to deposit with the Disbursing
Agent (as such term is defined in the Plan) shares of Common Stock in an amount
sufficient to satisfy the full amount of the Unresolved Claims (the "Unresolved
Claims Stock"); and
WHEREAS, pursuant to the terms of the Plan, the King Companies (as
such term is defined in the Plan) received shares of Common Stock equal to 27%
of the issued and outstanding Common Stock and, at any time any additional
shares of Common Stock are issued by Savin to holders of Unresolved Claims in
settlement of such claims, the King Companies are entitled to receive additional
shares of Common Stock to maintain their 27% interest in the Common Stock (the
"King Companies Additional Stock").
WHEREAS, a Significant Lawsuit (as defined in the Merger Agreement)
has not been resolved on terms reasonably satisfactory to Ricoh and the
Acquiror, and Savin has elected, pursuant to Section 6.2.3 of the Merger
Agreement, to cause a portion of the aggregate purchase price for all of the
shares of Common Stock pursuant to the Merger Agreement equal to the asserted
net reduction in value or net worth (whichever reduction
_________________
(1) This and other recitals are subject to deletion and appropriate
modification if either there are no Unresolved Claims at closing or if the
Significant Lawsuits or the Unscheduled Significant Lawsuits have been resolved.
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is greater) to be paid in cash to the Escrow Agent to be held in escrow and to
be disbursed as provided herein (the "Significant Lawsuit Escrow Amount");
WHEREAS, one or more of the Unscheduled Significant Lawsuits (as
defined in the Merger Agreement) have not been resolved on terms reasonably
satisfactory to Ricoh and the Acquiror, and Savin, Ricoh and the Acquiror have
elected, pursuant to Section 6.2.4 of the Merger Agreement, to cause a portion
of the aggregate purchase price for all of the shares of Common Stock pursuant
to the Merger Agreement equal to the asserted net reduction in value or net
worth (whichever reduction is greater) to be paid in cash to the Escrow Agent to
be held in escrow and to be disbursed as provided herein (the "Unscheduled
Significant Lawsuit Escrow Amount" and, together with the Significant Lawsuit
Escrow Amount, the "Litigation Escrow Amount");
WHEREAS, Ricoh, the Acquiror and Savin wish to establish the escrow
arrangements contained herein to provide for the payment of (i) Unresolved
Claims when and as they are settled, (ii) any amounts required to be paid by the
Surviving Corporation in connection with the settlement or other final
resolution of any Significant Lawsuit and any Unscheduled Significant Lawsuit
(collectively, the "Lawsuits") when and as such settlement or other final
resolution occurs and (iii) fees, costs and expenses incurred by Savin, the
Surviving Corporation or the Escrow Agent in connection therewith and herewith,
and for the payment under certain circumstances of the balance of the amounts
held in escrow to the shareholders of Savin immediately prior to the
effectiveness of the Merger (the "Former Savin Shareholders") and, under certain
circumstances, to the Surviving Corporation.
NOW, THEREFORE, Savin wishes to appoint __________________ as escrow
agent and ___________________ is willing to accept such appointment on the terms
and conditions set forth herein.
ARTICLE I
Defined Terms
1. For purposes of this Agreement, the terms not otherwise defined
herein shall have the respective meanings ascribed to them in the Merger
Agreement.
ARTICLE II
Appointment of Escrow Agent
2. ____________________ is hereby appointed as escrow agent and
____________________ hereby accepts such appointment. In its capacity
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as escrow agent under this Agreement, ____________________ is hereinafter
referred to as the "Escrow Agent".
ARTICLE III
Transfer of Property to Escrow Agent
3.1 On the date hereof, Savin in its capacity as the Disbursing Agent
shall deliver to the Escrow Agent certificates representing: (i) the Unresolved
Claims Stock; (ii) the King Companies Additional Stock; and (iii) shares of
Common Stock sufficient, assuming their conversion to cash at the Price Per
Share, to cover the estimated costs and expenses to be incurred by Savin and/or
the Surviving Corporation in connection with the settlement or other final
resolution of the Unresolved Claims and the administration by Savin, the
Surviving Corporation and the Escrow Agent of this Escrow Agreement (including
the fees and expenses contemplated by Section 5.3) (the "Settlement Expenses
Stock" and collectively, with the Unresolved Claims Stock and the King Companies
Additional Stock, the "Escrowed Stock").
3.2 Upon consummation of the Merger and receipt by the Escrow Agent
of a form letter of transmittal from the Exchange Agent with instructions for
use in effecting the surrender of the certificates representing shares of
Escrowed Stock for payment, the Escrow Agent shall pursuant to such instructions
promptly surrender such certificates for cancellation to the Exchange Agent,
together with such letter of transmittal duly executed and shall receive in
exchange therefore, cash in an amount equal to the product of the number of
shares of the Escrowed Stock represented by such certificates and the Price Per
Share (the "Stock Proceeds Escrow Fund"). Upon consummation of the Merger,
Savin shall cause the Litigation Escrow Amount to be delivered to the Escrow
Agent (the "Litigation Escrow Fund" and collectively with the Stock Proceeds
Escrow Fund, the "Escrow Fund"). The Stock Proceeds Escrow Fund shall be held
in two separate accounts, called the Claims Account and the Expenses Account.
Cash received with respect to the Unresolved Claims Stock and the King Companies
Additional Stock shall be held in the Claims Account and cash received with
respect to the Settlement Expenses Stock shall be held in the Expenses Account.
The Litigation Escrow Fund shall be divided such that an amount equal to the
estimated costs and expenses to be incurred by the Surviving Corporation in
connection with the settlement or other final resolution of the Lawsuits, as
agreed in writing by the Surviving Corporation and the Shareholders'
Representative, shall be held in the Expenses Account, and the balance of the
Litigation Escrow Fund shall be held in a third account called the "Litigation
Settlement Account".
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ARTICLE IV
Distributions from Escrow Fund
4.1 Attached hereto are schedules of all Unresolved Claims, including the
name and last known address of the holder of each claim the claim, number, and
the amount of the claim, as well as a shareholders' list setting forth the name
and address of each holder of Savin Common Stock immediately prior to the
Closing Date and the number of shares of Common Stock held by each such
shareholder. Also attached hereto is a schedule of all Lawsuits, including, with
respect to each Lawsuit, the name and last known address of each plaintiff, the
court and case number, the nature of the claims made and the amount claimed as
damages or, if different, the amount delivered to the Escrow Agent hereunder
with respect to such Lawsuit.
4.2 At any time that there shall be funds contained in the Expenses Account
(other than funds reserved pursuant to Section 5.2 hereof), the Unresolved
Claims and the Lawsuits may not be settled or otherwise finally resolved without
the prior written consent of the Surviving Corporation and the Shareholders'
Representative; provided, however, that the Surviving Corporation may not
withhold its consent to the settlement or other final resolution of any
Unresolved Claim or Lawsuit if the amount of such settlement or other final
resolution is not in excess of the amount of such Unresolved Claim or Lawsuit
set forth on the Schedules referred to in Section 4.1 hereof and the Surviving
Corporation will receive a complete release with respect to such Unresolved
Claim or Lawsuit.
4.3 As Unresolved Claims are settled or otherwise finally resolved, the
Escrow Agent shall from time to time at the joint written direction of the
Surviving Corporation and _____________, as a representative of the Savin
shareholders (the "Shareholders' Representative"), or such other person as a
successor to the Shareholders' Representative as designated by _________, or as
directed by a final, nonappealable order of a court of competent jurisdiction or
a final and binding written decision of an arbitrator designated by the
Surviving Corporation and the Shareholders' Representative (a "Final Order")
make distributions from the Claims Account to holders of Unresolved Claims. The
Escrow Agent shall be entitled to rely solely upon such joint written
instructions or a Final Order with respect to the settlement or other final
resolution of each such claim and the amount each such holder of an Unresolved
Claim is entitled to receive from the Escrow Fund. Such written instructions or
a Final Order shall include the name and address of the holder of the Unresolved
Claim that has been settled, the claim number, the amount of the claim and the
amount to be distributed from the Escrow Fund in respect of the settlement of
such claim. Simultaneously with the distribution to each holder of an Unresolved
Claim, the Escrow Agent shall distribute from
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the Claims Account to the King Companies an amount representing the King
Companies Additional Stock with respect to the settlement of such Unresolved
Claim. Such distributions shall be made within ten days of receipt by the Escrow
Agent of joint written instructions from the Surviving Corporation and the
Shareholders' Representative or a Final Order.
4.4 Upon receipt by the Escrow Agent of joint written notice executed by the
Surviving Corporation and the Shareholders' Representative or a Final Order, in
each case stating that a Lawsuit has been settled or otherwise finally resolved
and the amount of such settlement or other final resolution, the Escrow Agent
shall distribute from the Litigation Settlement Account such settlement or other
final resolution amount as directed in such joint written notice or a Final
Order. Such distribution shall be made within ten days of receipt by the Escrow
Agent of such joint written notice or a Final Order. Any amount remaining in the
Litigation Settlement Account after settlement or other final resolution of all
Lawsuits shall be transferred to the Expenses Account.
4.5 The Escrow Agent shall from time to time at the joint written direction
of the Surviving Corporation and the Shareholders' Representative or as
directed by a Final Order make distributions from the Expenses Account to cover
the costs and expenses incurred by Savin and/or the Surviving Corporation in
connection with the settlement or other final resolution of the Unresolved
Claims and the Lawsuits and the administration by Savin, the Surviving
Corporation and the Escrow Agent of this Escrow Agreement (including the fees
and expenses contemplated by Section 5.3 hereof). Such distributions shall be
made within ten days of receipt by the Escrow Agent of such joint written
instructions or a Final Order.
4.6 If at any time any Unresolved Claim or Lawsuit is settled or otherwise
finally resolved and the amount of such settlement or other final resolution is
less than the amount of such Unresolved Claim or Lawsuit set forth on the
schedules referred to in Section 4.1 hereof, then the difference between such
amounts or any portion thereof may be transferred at the written instruction of
the Shareholders' Representative from the Claims Account or the Litigation
Settlement Account, as the case may be, to the Expenses Account, the Claims
Account or the Litigation Settlement Account.
4.7 If at any time there shall be no funds contained in the Expenses Account
(other than funds reserved pursuant to Section 5.2 hereof), the Surviving
Corporation shall be entitled to receive the balance at such time of the Claims
Account and the Litigation Settlement Account. In such event, the Escrow Agent
shall promptly deliver notice of such fact to the Surviving Corporation and the
Shareholders' Representative and, within ten days after receipt by the Escrow
Agent of joint written instructions from the Surviving Corporation and the
Shareholders'
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Representative or a Final Order, in each case instructing the Escrow Agent to
distribute the balance of the Claims Account and the Litigation Settlement
Account to the Surviving Corporation, the Escrow Agent shall so deliver such
balance.
4.8 The Escrow Agent shall maintain complete records of all distributions
made pursuant to this Agreement. The Escrow Agent shall provide with each
distribution, a statement setting forth the claim number, claim amount and what
the distribution is in respect of.
4.9 Upon receipt by the Escrow Agent of joint written notice executed by the
Surviving Corporation and the Shareholders' Representative or a Final Order
stating that the Lawsuits and all Unresolved Claims have been settled or
otherwise finally resolved and all amounts payable from the Expenses Account
have been paid, the Escrow Agent shall distribute any sums remaining in the
Escrow Fund, less all costs, expenses and fees incurred or estimated to be
incurred by the Escrow Agent to all Former Savin Shareholders entitled to such
distribution, on a pro-rata basis.
4.10 Upon receipt by the Escrow Agent of joint written notice executed by
the Surviving Corporation and the Shareholders' Representative or a Final Order
setting forth (i) the amount estimated of all Unresolved Claims that have not
been settled or otherwise finally resolved (the "Unsettled Claims Amount"); (ii)
the costs and expenses estimated to be incurred by the Surviving Corporation in
settling or otherwise finally resolving such claims the (the "Settlement
Expenses"); and (iii) the amount representing the King Companies Additional
Stock with respect to the settlement or other final resolution of such
Unresolved Claims (the "King Amount") and directing the Escrow Agent to
distribute the balance of the Escrow Fund, the Escrow Agent shall distribute the
Unsettled Claims Amount, the Settlement Expenses and if any of the Lawsuits have
not been settled or otherwise finally resolved, all amounts held in the
Litigation Settlement Account and the costs and expenses estimated to be
incurred by the Surviving Corporation in settling or otherwise finally resolving
such Lawsuits to the Surviving Corporation and the King Amount to the King
Companies. The balance of the Escrow Fund, less all costs, expenses and fees
incurred or estimated to be incurred by the Escrow Agent, shall be distributed
by the Escrow Agent to all Former Savin Shareholders entitled to such
distribution, on a pro-rata basis.
4.11 Notwithstanding any other provision of this Agreement to the contrary,
no Former Savin Shareholder who has properly executed and perfected appraisal
rights under Section 262 of the Delaware General Corporation Law (each such
shareholder a "Dissenting Shareholder") shall be entitled to participate in any
distribution to Former Savin Shareholders hereunder unless such Dissenting
Shareholder has effectively withdrawn or lost its right to appraisal and payment
under such
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section prior to the making of such distribution (in which case it shall cease
to be, for purposes of this Section 4.11, a Dissenting Shareholder).
Furthermore, notwithstanding any other provision of this Agreement to the
contrary, the Surviving Corporation shall be entitled to participate in any
distribution to Former Savin Shareholders as if this Agreement did not contain
the preceding sentence and as if the Surviving Corporation held all of the
rights of all of the Dissenting Shareholders to participate in such
distribution.
ARTICLE V
Investment of the Escrow Fund; Fees and Expenses
5.1 The Escrow Agent shall act as custodian of the Escrow Fund and shall
from time to time invest and reinvest the Escrow Fund in (i) direct obligations
of, or repurchase agreements collateralized by direct obligations of, the United
States government (or agencies or instrumentalities thereof) or any state of the
United States (or agencies or instrumentalities of any thereof) with a term of
one year or less, or (ii) certificates of deposit, time deposits or other
interest-bearing deposits of commercial banks having total capital and surplus
of at least $250,000,000 as the Surviving Corporation and the Shareholders'
Representative from time to time direct. The Escrow Agent shall have authority
for determining such obligations but shall have no liability whatsoever for any
investment losses resulting from the investment or reinvestment of the Escrow
Fund.
5.2 Federal, state or local taxes, if any, hereafter imposed upon, asserted
or assessed against any income generated from the Escrow Fund shall be paid from
such income generated and shall be reserved for prior to any distribution of
such amounts pursuant to this Agreement.
5.3 For its services, the Escrow Agent shall be entitled to a fee of
$_________ plus its reasonable out-of-pocket expenses. All fees, costs and
expenses of the Escrow Agent and the escrow created hereunder shall be paid
from the Escrow Fund as a charge against income received by the Escrow Agent
from the investment of the Escrow Fund if such income shall be sufficient;
otherwise, such fees, costs and expenses shall be paid from the Escrow Fund
(first from the Expenses Account, second, if there are insufficient funds in
the Expenses Account, from the Claims Account and third, if there are
insufficient funds in the Claims Account, from the Litigation Settlement
Account) as a charge against such Accounts to the extent there are funds
remaining in such Accounts upon settlement or other final resolution of all
Unresolved Claims and the Lawsuits but prior to any distribution to Former
Savin Shareholders. In the event there are insufficient funds to pay such fees,
costs and expenses, any fees, costs or expenses not paid from the Escrow Fund
shall be paid by the Surviving Corporation.
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ARTICLE VI
Escrow Agent
6.1 The duties and obligations of the Escrow Agent shall be
determined solely by the express provisions of this Agreement and the
Escrow Agent shall not be liable except for the performance of such
duties and obligations as are specifically set out in this Agreement.
6.2 The Escrow Agent shall not be responsible in any manner
whatsoever for any failure or inability of Savin, the Surviving Corporation or
the Shareholders' Representative to honor any of the provisions of this
Agreement.
6.3 The Escrow Agent shall be fully protected in acting on and
relying upon any written advice, certificate, notice, direction, instruction,
request, or other paper or document which the Escrow Agent in good faith
believes to be genuine and to have been signed or presented by the proper party
or parties, and may assume that any person purporting to give such advice,
certificate, notice, direction instruction or request or other paper or
document has been duly authorized to do so.
6.4 The Escrow Agent shall not be liable for any error of judgement,
or for any act done or step taken or omitted by it in good faith or for any
mistake in fact or law, or for anything which it may do or refrain from doing in
connection herewith, except its own gross negligence or willful misconduct.
6.5 The Escrow Agent may seek the advice of legal counsel in the
event of any dispute or question as to the construction of any of the provisions
of this Agreement or its duties hereunder, and it shall incur no liability and
shall be fully protected in respect of any action taken, omitted or suffered by
it in good faith in accordance with the opinion of such counsel.
6.6 The Surviving Corporation will reimburse and indemnify the Escrow
Agent for, and hold it harmless against any loss, liability or expense,
including but not limited to counsel fees, other than any loss, liability or
expense resulting from the willful misconduct or gross negligence on the part of
the Escrow Agent, arising out of or in connection with its acceptance of, or the
performance of its duties and obligations under, this Agreement as well as the
costs and expenses of defending against any claim or liability arising out of or
relating to this Agreement.
6.7 The Escrow Agent hereby accepts its appointment and agrees to act
as Escrow Agent under the terms and conditions of this Agreement.
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6.8 The Escrow Agent shall supply to the Surviving Corporation and to
the Shareholders' Representative quarterly reports of all disbursements made
during that quarter. After all distributions are made, the Escrow Agent shall
account to the Surviving Corporation and to the Shareholders' Representative for
all such distributions and provide certifications or other evidence of the
making of such distributions as the Surviving Corporation and the Shareholders'
Representative may require.
ARTICLE VII
Resignation or Removal of Escrow Agent
7.1 The Escrow Agent may resign as such following the giving of sixty
days' prior written notice to the Surviving Corporation and to the Shareholders'
Representative. Similarly, the Escrow Agent may be removed and replaced
following the giving of sixty days' prior joint written notice to the Escrow
Agent by the Surviving Corporation and the Shareholders' Representative. In
either event, the duties of the Escrow Agent shall terminate sixty days after
the date of such notice; and the Escrow Agent shall then account for and deliver
the balance of the Escrow Fund then in its possession to a successor Escrow
Agent as shall be appointed by the Surviving Corporation and the Shareholders'
Representative as evidenced by a written notice filed with the Escrow Agent. If
Surviving Corporation and Shareholders' Representative are unable to agree upon
a successor or shall have failed to appoint a successor prior to the expiration
of sixty days following the date of the notice of resignation or removal, the
then acting Escrow Agent may petition any court of competent jurisdiction for
the appointment of a successor Escrow Agent or other appropriate relief; and any
such resulting appointment shall be binding upon all of the parties hereto. Upon
acknowledgement by any successor Escrow Agent of the accounting for and the
receipt of the then remaining balance of the Escrow Fund, the then acting Escrow
Agent shall be fully released and relieved of all duties, responsibilities, and
obligations under this Agreement, except as provided to the contrary herein.
ARTICLE VIII
Notices
8. Any notice described in or required by the terms of this
Agreement shall be deemed to have been properly given either (a) at the time of
actual delivery thereof, (b) if given by overnight delivery service, the next
business day, or (c) if given by certified or registered mail, five (5)
business days after certification or registration thereof, to the parties
listed below at their respective addresses or at such other addresses as they
may designate by a written notice given in accordance with this Paragraph 8.
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(a) If the Escrow Agent, addressed to:
----------------------------------
----------------------------------
----------------------------------
Telephone No. --------------------
Fax No. --------------------------
(b) if to the Surviving Corporation, addressed to:
Savin Corporation
333 Ludlow Street
Stamford, Connecticut 06904
Telephone No. --------------------
Fax No. --------------------------
Attention: -----------------------
(b) if to the Shareholders' Representative, addressed to:
----------------------------------
----------------------------------
----------------------------------
Telephone No. --------------------
Fax No. --------------------------
ARTICLE IX
Termination
9.1 This Agreement shall terminate upon the completion of all
distributions of the Escrow Fund and all responsibility of the Escrow Agent
hereunder.
9.2 Upon any termination, the Escrow Agent shall deliver to the
successor Escrow Agent, if any, or in lieu thereof to the Surviving Corporation,
as soon as practicable, a record of all distributions made pursuant to this
Agreement and if such termination is before all distributions have been made,
any cash or other property remaining in the Escrow Fund accompanied by a report
reflecting the current status of pending Unresolved Claims.
ARTICLE X
Miscellaneous
10.1 Entire Agreement; Binding Effect; Benefit. The terms and
provisions of this Agreement constitute the entire agreement between the parties
hereto. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and assigns. Nothing in this Agreement, express or implied is
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intended to confer upon any other person any rights or remedies under or by
reason of this Agreement.
10.2 Modification. This Agreement may be amended or modified at any
time or from time to time by a writing executed by the parties hereto and the
Shareholders' Representative.
10.3 Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of New York.
10.4 General. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first above written.
SAVIN CORPORATION
BY: ------------------------------------
[ESCROW AGENT]
BY: ------------------------------------
AGREED AND CONSENTED TO:
- - ---------------------------------------
SHAREHOLDERS' REPRESENTATIVE
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Annex B
[ARTHUR ANDERSEN LOGO]
[ARTHUR ANDERSEN LETTERHEAD]
December 21, 1994
Board of Directors
Savin Corporation
Stamford Harbor Park
333 Ludlow Street
Stamford, Connecticut 06904-2270
Members of the Board:
You have asked us to advise you with respect to the fairness from a financial
point of view to the stockholders of Savin Corporation (the "Company") of the
per share offer price which is estimated to be between $10.36 to $10.43 per
share, pursuant to the terms of the Agreement and Plan of Merger, as of December
21, 1994, (the "Transaction"), among the Company and Ricoh Corporation (the
"Acquiror").
The Agreement and Plan of Merger provides for the merger of SC Acquisition
Corp., a subsidiary of the Acquiror, with and into the Company for an aggregate
price of $41.5 million reduced by $350,000 which is intended to be paid to the
Company's directors in connection with the cancellation of Directors' Option and
the potential $250,000 reduction in the aggregate merger consideration but
without giving effect to any other possible reduction or escrow which may be
considered by the Board of Directors.
In connection with our analysis, the Company furnished us with certain documents
and other information concerning the Company, as we requested. We have performed
such studies, analyses and inquiries as considered appropriate. Among other
items we have considered, we have:
1) read current and historical financial information with respect to the
results of operations, including unaudited interim financial
information for the ten-month periods ending October 30, 1993 and
October 29, 1994;
2) read the following publicly available business and financial
information relating to the Company for recent years and interim
periods to date; Form 10-K for the years ended December 31, 1991,
December 31, 1992 and January 1, 1994 and Form 10-Q for the quarters
ending April 2, 1994, July 2, 1994, and October 1, 1994;
3) read the Company's Disclosure Statement regarding its amended joint
consolidated plan of reorganization filed with the U.S. Bankruptcy
Court, Southern District of New York, on September 15, 1993;
<PAGE> 162
[ARTHUR ANDERSEN LOGO]
Board of Directors
Savin Corporation
December 21, 1994
Page 2
4) met with the Company's financial advisor, the Pendergast Group Inc.,
and discussed: (i) the aforementioned advisor's strategic assessment of
available alternatives to enhance shareholder value presented to the
Company's Board of Directors on July 28, 1994, and (ii) the advisory
process with respect to the sale, including the contacting by such
advisor of other potential acquirers;
5) read the letter of intent dated October 20, 1994, and the Agreement and
Plan of Merger dated December 21, 1994;
6) read certain internal financial and operating information, including
financial forecasts and projections, prepared by the management of the
Company;
7) considered certain financial and stock market data of the Company, and
we have compared that data with similar data for certain other
companies, the securities of which are publicly traded, which we
believe may be similar or comparable to the Company;
8) held meetings and discussions with management and senior personnel to
discuss the business, operations, assets, historical financial results
and future prospects of the Company;
9) discussed with the Company's tax advisers its available net operating
loss carryforward;
10) performed a discounted cash flow analysis;
11) considered the financial terms of certain recent acquisition or
business combination transactions in the office products distribution
industry specifically and in other industries generally; and,
12) conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
In our analysis and in formulating our opinion, we have assumed and relied upon
the accuracy and completeness of all the financial and other information
provided to us or publicly available, and we have not assumed any responsibility
for the independent verification of such information. We have further relied
upon the assurances of management of the Company that they are unaware of any
facts that would make the information provided to us incomplete or misleading in
any respect. We
<PAGE> 163
[ARTHUR ANDERSEN LOGO]
Board of Directors
Savin Corporation
December 21, 1994
Page 3
have assumed, with your consent, that the financial forecasts and projections
provided to us by the Company were prepared in good faith and on bases
reflecting the best currently available judgments and estimates of the Company's
management. We have not conducted a physical inspection of the properties or
facilities of the Company and have not made or obtained an independent valuation
or appraisal of the assets or liabilities of the Company. We express no view
whatever as to the federal, state or local tax consequences of the Transaction.
Our services to the Company in connection with the Transaction have been
comprised solely of financial advisory services in connection with this fairness
opinion and not accounting, audit, tax or appraisal services. Without limiting
the foregoing, our services with respect to the Transaction do not constitute,
nor should they be construed to constitute in any way, a review or audit of or
any other procedures with respect to any financial information nor should such
services be relied upon by any person to disclose weaknesses in internal
controls, financial statement errors or irregularities, or illegal acts or
omissions of any person affiliated with the Transaction. Our opinion is
necessarily based on economic and market conditions and other circumstances as
they exist and can be evaluated by us on the date hereof. We shall have no
obligation to update the Opinion unless requested by you in writing to do so and
expressly disclaim any responsibility to do so in the absence of any such
request.
Additionally, we have not been authorized to and have not solicited alternative
offers for the Company or its assets, or investigated any other alternative
transactions which may be available to the Company. Our opinion does not address
nor shall it be construed to address the underlying business decision to effect
the Transaction.
In connection with this Opinion, we have received a fee for our services. We
have previously acted as financial advisor to the Creditor's Committee (now the
existing stockholders) in connection with the Company's Chapter 11 bankruptcy
filing in 1992. We also served as the financial advisor for the Company in
connection with their filing a Plan of Reorganization that was approved by the
Bankruptcy Court on December 14, 1993. Furthermore, we have provided accounting,
audit, tax and other financial services to Ricoh of Japan and Ricoh America.
It is understood that this letter is for the benefit and use of the Board of
Directors of the Company in its consideration of the Transaction and may not be
used for any other purpose or reproduced, or referred to without our prior
written consent, except in connection with the solicitation or proxies by the
Board of Directors with respect to the Transaction. This letter does not
constitute a recommendation to any stockholder with respect to whether to vote
in favor of the Transaction or take any other action in connection with the
Transaction or otherwise, and should not be relied upon by any stockholder as
such.
<PAGE> 164
[ARTHUR ANDERSEN LOGO]
Board of Directors
Savin Corporation
December 21, 1994
Page 4
Based upon and subject to the above, including the various assumptions and
limitations set forth herein, it is our opinion that as of the date hereof the
consideration to be received by the stockholders of the Company in the
Transaction is fair from a financial point of view.
ARTHUR ANDERSEN LLP
<PAGE> 165
ANNEX C
262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise compiled with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sections 251, 252, 254, 257, 258, 263 or 264 of this title;
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock which, at the record
date fixed to determine the stockholders entitled to receive notice of and to
vote at the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities
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exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or (ii)
held of record by more than 2,000 stockholders; and further provided that no
appraisal rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its approval
the vote of the stockholders of the surviving corporation as provided in
subsection (f) of section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to sections 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation;
b. Shares of stock of any other corporation which at the effective date
of the merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or held
of record by more than 2,000 stockholders;
c. Cash in lieu of fractional shares of the corporations described in the
foregoing subparagraphs a. and b. of this paragraph; or
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d. Any combination of the shares of stock and cash in lieu of fractional
shares described in the foregoing subparagraphs a. b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under section 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for such
meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are available
for any or all of the shares
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of the constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares shall
deliver to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of his shares. Such demand will
be sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
his shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to section 228 or
253 of this title, the surviving or resulting corporation, either before the
effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal rights of the
effective date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent corporation, and shall
include in such notice a copy of this section. The notice shall be sent by
certified or registered mail, return receipt requested, addressed to the
stockholder at
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his address as it appears on the records of the corporation. Any stockholder
entitled to appraisal right may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of this shares.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
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stockholder within 10 days after his written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under subsection
(d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
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(g) At the hearing on such petition, the court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair
rate of interest, the Court may consider all relevant factors, including the
rate of interest which the surviving or resulting corporation would have had to
pay to borrow money during the pendency of the proceeding. Upon application by
the surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholder entitled to an
appraisal. Any stockholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to
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subsection (f) of this section and who has submitted his certificate of stock to
the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal
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rights as provided in subsection (d) of this section shall be entitled to vote
such stock for any purpose or to receive payment of dividends or other
distributions on the stock (except dividends or other distributions payable to
stockholders of record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition for an
appraisal shall be filed within the time provided in subsection (e) of this
section, or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of his demand for an appraisal and an
acceptance of the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the corporation, then
the right of such stockholder to an appraisal shall cease. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed
as to any stockholder without the approval of the Court, and such approval may
be conditioned upon such terms as the Court deemed just.
(1) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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PROXY
SAVIN CORPORATION
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints D. Thomas Abbott and Russell Gough, or
either of them, with power of substitution, attorneys and proxies to represent
the undersigned in the Special Meeting of Stockholders of SAVIN CORPORATION to
be held on Friday, March 31, 1995, at Marriott's Rancho Las Palmas Resort, 41000
Bob Hope Drive, Rancho Mirage, California at 8:30 a.m. local time, or at any
adjournment thereof, to vote all shares of the Savin Corporation Common Stock,
par value $.001 per share, which the undersigned is entitled to vote as
designated below and upon such other business that may properly come before the
meeting.
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATION MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR THE PROPOSAL AND, IN THE DISCRETION OF THE PROXY
HOLDERS, ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
1. Approval and adoption of the Agreement and Plan of Merger, dated December
21, 1994, among Savin Corporation, Ricoh Corporation and SC Acquisition
Corp., including the authorization of the Board of Directors to agree to a
reduction in the aggregate merger consideration or an escrow of a portion
thereof, in an amount of up to $250,000, if necessary, without
resolicitation of stockholder approval, as set forth in the Proxy Statement
and the Annexes thereto.
/ / FOR / / AGAINST / / ABSTAIN
(Continued and to be signed and dated on the reverse side)
<PAGE> 175
(Continued from other side)
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED IN
ACCORDANCE WITH THE STOCKHOLDER'S SPECIFICATIONS HEREON. IN THE ABSENCE OF SUCH
SPECIFICATION, THE PROXY WILL BE VOTED "FOR" APPROVAL AND ADOPTION OF THE
AGREEMENT AND PLAN OF MERGER.
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
MARK HERE IF YOU PLAN
TO ATTEND THE MEETING / /
Dated: March _____ , 1995
----------------------------------
----------------------------------
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Please sign exactly as name
appears hereon and date. If the
shares are held jointly, each
holder should sign. When signing
as an attorney, executor,
administrator, trustee, guardian
or as an officer signing for a
corporation, please give full
title under signature.
