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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of
1934
Date of Report (Date of earliest event reported): March 2, 1998
INTERNATIONAL META SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-17945 33-0146747
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation
or organization)
7718 Wood Hollow Drive, Suite 150
Austin, Texas 78731
(Address of principal executive office)
Issuer's telephone number: 512-795-8825
Item 3 Bankruptcy or Receivership.
On March 2, 1998, International Meta Systems, Inc. (the
"Company") filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court for the Western District of Texas, Austin Division (Case
No. 98-10782FM). The petition lists total assets for the Company
of $2,254,766, and total liabilities of $7,157,462.
On February 17, 1998, the Company received a $135,000 loan from
IPIQ Corporation ("IPIQ"), an unaffiliated Delaware corporation
controlled by Dr. Phillip M. Neches, a former director of the
Company, in return for a promissory note secured by a security
agreement granting to IPIQ a lien and security interest in
substantially all assets owned by the Company including the
Company's contract rights and general intangibles. The loan was
used to meet current operating expenses.
On March 6, 1998, the Company received a payment of $140,000
pursuant to a contract with ZSP Corporation. The ZSP contract is
part of IPIQ's collateral to secure payment of the February 17,
1998, promissory note. IPIQ consented to use of the cash
received from ZSP pursuant to an
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operating budget agreed between the Company and IPIQ. The
Company may require additional financing to pay operating
expenses while it operates under Chapter 11 and develops a plan
of reorganization. There can be no assurance that the Company
will be successful in obtaining the additional financing that
will be required to permit its successful reorganization. While
the Company believes it can successfully reorganize and continue
operations, failure to obtain additional financing may jeopardize
the Company's ability to continue in business or to successfully
reorganize under the Bankruptcy Code.
This Report contains forward-looking statements that involve
risks and uncertainties. Actual results, events and performance
could differ materially from those contemplated by these forward-looking
statements. Among the factors that could cause actual
results, events and performance to differ materially are risks
and uncertainties discussed in the preceding paragraph and those
detailed from time to time in the Company's filings with the
Securities and Exchange Commission, including the Company's
annual report on Form 10-KSB for the fiscal year ended December
31, 1996, and the Company's quarterly report on Form 10-QSB for
the quarterly periods ended March 31, June 30, and September 30,
1997, and in the Company's other public reports and statements.
Item 5 Other Events
On February 5, 1998, Dr. Phillip M. Neches resigned from the
Company's board of directors. On February 11, 1998, George W.
Smith resigned as the Company's chief executive officer. Mr.
Smith remains a member of the Company's board of directors. Also
on February 11, 1998, Dr. Lee Hoevel resigned from the Company's
board of directors. Dr. Hoevel continues to serve as the
Company's president and has assumed Mr. Smith's duties as chief
executive officer. Neither Mr. Smith, Dr. Hoevel, nor Dr. Neches
expressed any disagreement with the Company on any matter
relating to the Company's operations, policies or practices.
Item 7 Financial Statements and Exhibits
(c) Exhibits
10.1 Promissory Note dated February 17, 1998, from the Company to
IPIQ, filed herewith.
10.2 Security Agreement dated February 17, 1998, granting
security interest in property to IPIQ, filed herewith.
99.1 Press release issued by the Company on March 3, 1998, filed
herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Date: March 17, 1998 INTERNATIONAL META SYSTEMS, INC.
/s/ Lee Hoevel
---------------------------------
Lee Hoevel, President
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$135,000 Austin, Texas February 17, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned promises to pay to the order
of IPIQ Corporation the sum of One Hundred Thirty Five Thousand
Dollars ($135,000) at Murray Hill, New Jersey on or before March
1, 1998.
The principal balance shall accrue interest at the rate of
ten percent (10%) per annum. Accrued interest shall be payable
in full upon the payment date set forth above.
In the event that the holder shall be required to take
action to collect any amounts due under the terms of this note,
the prevailing party in such action shall be entitled to
reimbursement for reasonable attorneys' fees actually incurred,
as determined by the Court.
Dated: February 17, 1998 at Austin, Texas.
INTERNATIONAL META SYSTEMS, INC.
/s/ Lee Hoevel
By------------------------------
Lee Hoevel, President
THIS PROMISSORY NOTE IS SECURED BY A SECURITY INTEREST IN
PERSONAL PROPERTY OF THE MAKER.
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated February 17, 1998, is entered
into between International Meta Systems, Inc., a Delaware
corporation, and IPIQ Corporation, a Delaware corporation.
The parties agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall
have the following definitions:
1.1 The term "Accounts" means and includes all
presently existing and hereafter arising accounts, contract
rights, instruments, notes, drafts, documents, chattel paper and
all other forms of obligations owing to Debtor, whether or not
earned by performance, and any and all insurance, guaranties and
other security therefor.
1.2 The term "this Agreement" means and refers to this
Security Agreement, any concurrent or subsequent rider to this
Security Agreement, and any extensions, supplements, notes,
amendments, or modifications to or in connection with this
Security Agreement and/or to any such rider.
1.3 The term "the Code" means and refers to the
California Uniform Commercial code and any and all terms used in
this Agreement which are defined in the Code, unless specifically
defined herein, shall be construed and defined in accordance with
the meaning and definition ascribed to such terms under the Code.
1.4 The term "Collateral" means and includes all of
the assets of Debtor, including, without limitation, the
following:
(a) the Accounts;
(b) the Equipment;
(c) the General Intangibles;
(d) the Inventory;
(e) the Negotiable Collateral;
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(f) any money, deposit accounts or other
assets of Debtor;
(g) All patents, trademarks, copyrights,
mask works, trade secrets and other
intellectual property, whether or not
reduced to practice, applied for,
registered, or granted.
(h) the proceeds of any of the foregoing,
including, but not limited to, the
proceeds of insurance covering the
foregoing, or any portion thereof, and
any and all money, deposit accounts or
other tangible and intangible property
resulting from the sale or other
disposition of the foregoing or any
portion thereof or interest therein, and
the proceeds thereof; and;
(h) Debtors Books relating to any of the
foregoing.
1.5 The term "Debtor" means and refers to
International meta systems, Inc., a Delaware corporation, with
places of business located at 100 N. Sepulveda Bl., Suite 601, El
Segundo, CA 90245 and 7718 Wood Hollow Dr., Suite 150, Austin, TX
78731.
1.6 The term "Debtor's Books" means and includes all
of Debtor's books and records including, but not limited to:
Ledgers; records indicating, summarizing or evidencing Debtor's
assets or liabilities; and all computer programs, disc or tape
files, printouts, runs and other computer prepared information
relating to or summarizing Debtor's assets or liabilities and the
equipment containing such information.
1.7 The term "Equipment" means and includes all of
Debtor's present and hereafter acquired machinery, machine tools,
motors, equipment, furniture, furnishings, fixtures, motor
vehicles, tools, parts, dies, jigs, goods, and any interest in
any of the foregoing, and all attachments, accessories,
accessions, replacements, substitutions, additions and
improvements thereto, wherever located.
1.8 The term "Event of Default" means any of the
following:
(a) an "Event of Default" under any, some, or all
of the Notes or Obligations;
(b) If there is an impairment of the priority of
Secured Party's security interests in the
Collateral; or
(c) any breach of a representation and warranty
of the Debtor herein or of a covenant of the
Debtor herein which remains uncured 10 days
after written notice by Secured Party to
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Debtor.
1.9 The term "General Intangibles" means and includes
all of the Debtor's present and future general intangibles and
all other presently owned or hereafter acquired intangible
personal property of Debtor (including, without limitation, any
and all franchise agreements, rights under franchise agreements,
choses or things in action, goodwill, patents, copyrights, mask
works, trade names, trademarks, purchase orders, customer lists,
monies due or recoverable from pension funds, infringement
claims, computer programs, computer discs, computer tapes,
literature, reports, catalogs, deposit accounts, tax refunds and
tax refund claims) other than goods and Accounts.
1.10 The term "Inventory" means and includes all
present and future inventory in which Debtor has any interest,
including, but not limited to, goods held for sale or to be
furnished under a contract of service and all of Debtor's present
and future raw materials, work in process, finished goods, and
packing and shipping materials, wherever located, and any
documents of title representing any of the above.
1.11 The term "Negotiable Collateral" means and
includes all of Debtor's present and future letters of credit,
advises of credit, notes, drafts, instruments, documents, leases,
and chattel paper.
1.12 The term "Note" means, collectively, that certain
Secured Promissory Note, of even date herewith, in the principal
amount of $135,000 executed by the Debtor for the benefit of
Secured Party.
1.13 The term "Obligations" means and includes any and
all debts, obligations and payments owing by Debtor to Secured
Party pursuant to the Note, or any advances made under the terms
of the Letter Agreement dated February 12, 1998, or this
Agreement of any kind and description, whether direct or
indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, and including, without limitation,
all Secured Party Expenses, whether or not evidenced by a
promissory note or other writing.
1.14 The term "Secured Party" means and refers to IPIQ
Corporation, a Delaware corporation, c/o Philip M. Neches, 12
Murray Hill Manor, Murray Hill, NJ 07974, or any successor
registered holder of the Notes or Obligations.
1.15 The term "Secured Party Expenses" means and
includes: costs and expenses incurred by Secured Party in
gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale and/or advertising
to sell the Collateral, whether or not a sale is consummated; and
reasonable costs and expenses of suit, including reasonable
attorneys' fees, incurred by Secured Party in enforcing or
defending this Agreement or the Note, or any portion thereof.
2. CREATION OF SECURITY INTEREST
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2.1 Debtor hereby grants to secured Party a continuing
priority security interest in all presently existing and
hereafter acquired or arising collateral in order to secure
prompt payment of any and all Obligations. Secured Party's
security interest in the Collateral shall attach to all
Collateral as a first priority security interest without further
act on the part of Secured Party or Debtor, except in the case of
certain patents and copyrights, for which a security interest is
held by Amerscan Partners III, Limited Partnership, or its
assignees or affiliates ("The Prior Secured Parties"). Debtor
shall furnish to Secured Party a written subordination agreement
from the Prior Secured Parties, agreeing to subordinate their
security interests to the security interest held under this
Agreement.
2.2 Debtor shall execute and deliver to Secured Party,
concurrently with Debtor's execution of this Agreement, and at
any time or times hereafter at the request of Secured Party, all
financing statements, continuation financing statements,
assignments, mortgages, endorsements of certificates of title,
applications for title, notices, and all other documents that
Secured Party may reasonably request, in form reasonably
satisfactory to Secured Party, necessary to perfect and maintain
perfected Secured Party's security interests in the Collateral.
Secured Party (through any of its agents) shall
have the right, upon the occurrence of an Event of Default and at
any time or times thereafter, during Debtor's usual business
hours, or during the usual business hours of any third party
having control over the records of Debtor, to inspect and verify
Debtor's Books in order to verify the amount or condition of, or
any other matter relating to, the Collateral and Debtor's
financial condition.
2.3 Secured Party shall have no duty with respect to
the collateral other than the duty to use reasonable care in its
possession. Without limiting the generality of the foregoing,
Secured Party shall be under no obligation to take any steps
necessary to preserve rights in the collateral against any other
parties, to sell the collateral if it threatens to decline in
value, or to exercise any rights represented thereby; provided,
however, that Secured Party may, at its option, do so, and any
and all expenses incurred in connection therewith shall be for
the sole account of Debtor and shall constitute Secured Party
Expenses.
3. WARRANTIES, REPRESENTATIONS, AND COVENANTS
3.1 Debtor represents, warrants, covenants and agrees
that:
(a) Debtor owns the Collateral free and clear of
any restrictions, liens, claims, security
interest granted herein constitutes a legal,
valid, binding and (upon filing of the UCC-1
financing statement executed concurrently
herewith and the delivery of the
subordination agreement referred to above)
perfected first priority lien on the
Collateral;
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(b) Debtor shall keep the Inventory and the
Equipment only at its current facilities
identified to Debtor, or such other locations
as to which Debtor has given Secured Party at
least 15 days prior written notice;
(c) Other than in the ordinary and usual course
of business, the Inventory shall not at any
time or times hereafter be stored with a
bailee, warehouseman or similar party without
Secured Party's prior written consent;
(d) After the occurrence of an Event of Default,
Secured Party shall have the right, during
Debtor's usual business hours, to inspect and
examine the Inventory and the equipment and
to check and test the same as to quantity and
condition; and
(e) Debtor shall promptly notify Secured Party of
any change of Debtor's address from the
addresses indicated in Section 1.5 of this
Agreement.
3.2 Debtor will not, without Secured Party's prior
written consent, do, authorize or permit any of the following:
(a) Other than in the ordinary and usual course
of Debtor's business as presently conducted,
sell, lease, or otherwise dispose of, move,
relocate or transfer, whether by sale or
otherwise, any of the Collateral, without
giving Secured Party at least 15 days prior
written notice;
(b) Change Debtor's name or add any fictitious
business name without giving Secured Party at
least 15 days prior written notice; or
(c) Suspend or go out of business.
3.3 Debtor will collect, in standard machine-readable
formats, copies of all works subject to copyright and mask work
protection, and of all technical trade secrets used in its
business, in a place where the same are easily accessible to
Secured Party in the event of a Default hereunder. At Secured
Party's election, Debtor shall deposit at debtor's expense such
copies with such escrow holder as Secured Party shall choose, to
be released to Secured Party in the event of such default and
shall execute such written agreements and undertakings as shall
be customary in favor of escrow holders in escrows involving
similar property and terms of release.
4. SECURED PARTY'S RIGHTS AND REMEDIES
4.1 In any Event of Default under this Agreement
occurs and such Event of
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Default is not cured within ten (10) business days after delivery
of notice to Debtor by Secured Party, Secured Party may, at its
election, without notice of its election and without demand, do
any one or more of the following, all of which are authorized by
Debtor:
(a) Without notice to or demand upon Debtor, make
such payments and do such acts as are
necessary to protect its security interest in
the Collateral. Debtor agrees to assemble
the collateral if Secured Party so requires,
and to make the collateral available to
Secured Party as Secured Party may designate.
To the extent permitted under the Code,
Debtor authorizes Secured Party to enter the
premises where the Collateral is located,
take and maintain possession of the
Collateral, or any part of it, and to pay,
purchase, contest or compromise any
encumbrance, charge or lien which in the
opinion of Secured Party appears to be prior
or superior to its security interest and to
pay all expenses incurred in connection
therewith.
(b) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise
for sale and sell (in the manner provided for
herein) the collateral; and
(c) To the extent permitted under the code, sell
the Collateral at either public or private
sale, or both, by way of one or more
contracts of transactions, for cash or on
terms, in such manner and at such places
(including Debtor's premises) as is
commercially reasonable. It is not necessary
that the Collateral be present at any such
sale.
4.2 Debtor agrees that it shall be commercially
reasonable for Secured Party to sell or dispose of the collateral
on an "as is, and with all faults" basis. Debtor and Secured
Party agree that the following conduct by Secured Party with
respect to any disposition of the Collateral shall conclusively
be deemed commercially reasonable (but other conduct by Secured
Party including, but not limited to, Secured Party's use in it
sole discretion of other or different times, places and manners
of noticing and conducting any disposition of the Collateral
shall not be deemed unreasonable): Any public or private
disposition as to which on no later than the tenth calendar day
prior thereto written notice thereof is mailed, or fifth calendar
day prior thereto written notice thereof is personally delivered,
to Debtor and, with respect to any public disposition, on no
later than the fifth calendar day prior to thereto notice thereof
describing in general, non-specific terms the Collateral to be
disposed of is published in the Los Angeles times; and which is
held in Los Angeles County at any place designated by Secured
Party, with or without the Collateral being present; and which
commences at any time between 8:00 A.M. and 5:00 P.M.
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4.3 Secured Party's rights and remedies under this
Agreement and all other agreements shall be cumulative. Secured
Party shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No
exercise by Secured Party of one right or remedy shall be deemed
an election, and no waiver by Secured Party of any default on
Debtor's part shall be deemed a continuing waiver. No delay by
Secured Party shall constitute a waiver, election or acquiescence
by it.
5. WAIVERS
5.1 Debtor waives the right to direct the application
of any and all payments at any time or time hereafter received by
Secured Party on account of any Obligations, and Debtor agrees
that secured Party shall have the continuing exclusive right to
apply and reapply such payments in any manner as Secured Party
may deem advisable, notwithstanding any entry by Secured Party
upon its books.
5.2 Except as otherwise provided herein, Debtor waives
demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement,
extension or renewal of nay or all commercial paper, accounts,
documents, instruments, chattel paper, and guarantees at any time
held by Secured Party on which Debtor may in any way be liable.
5.3 So long as Secured Party complies with its
obligations, if any, under Section 9207 of the code and the first
sentence of Section 2.3 hereof, Secured Party shall not in any
way or manner be liable or responsible for: (a) the safekeeping
of the collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any
diminution of the value thereof; or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency or other person
whomsoever. All risk of loss, damage or destruction of the
collateral shall be borne by Debtor.
6. MISCELLANEOUS
7.1 Debtor may not assign or delegate any of its
rights or obligations hereunder without the prior written consent
of Secured Party. Subject to the foregoing, this Agreement shall
be binding upon and inure to the benefit of the parties hereto
and their respective heirs, administrators, executors, successors
and assigns.
7.2 Unless applicable law requires a different method
of giving notice, any and all notices, demands or other
communications required or desired to be given hereunder by any
party shall be in writing. Assuming that the contents of a
notice meet the requirements of the specific Section of this
Agreement which mandates the giving of that notice, a notice
shall be validly given or made to another party if served either
personally or if deposited in the United States mail certified or
registered, postage prepaid, or if transmitted by telegraph,
telecopy, or other electronic written transmission device or if
sent by overnight courier service, and if
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addressed to the applicable party to the first addresses set
forth in Sections 1.5 and 1.14, respectively. If such notice,
demand or other communication is served personally, service shall
be conclusively deemed made at the time of such personal service.
If such notice, demand or other communication is given by mail,
service shall conclusively deemed made seventy-two (72) hours
after the deposit thereof in the United States mail. If such
notice, demand or other communication is given by overnight
courier, or electronic transmission service shall be conclusively
be deemed made at the time of confirmation of delivery. Copies
of any notice given hereunder shall be delivered to the following
persons:
Copies of Notices to Debtor:
LOEB & LOEB, LLP
1000 Wilshire Boulevard
Los Angeles, California 90017
Attention: David L. Ficksman
Copies of Notices to Secured Party:
Kimball & Weiner LLP
555 South Flower Street
Suite 4540
Los Angeles, California 90071
Telecopier No. (213) 538-3810
Attn: Ira D. Moskatel
Either party may change its address by giving written notice in
the aforesaid manner to the other party.
7.3 This Agreement shall be governed by and construed
in accordance with the laws of the state of California, without
regard to conflicts of law principles.
7.4 This Agreement constitutes the entire agreement
among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties.
7.5 No waiver of compliance with any provision of this
Agreement shall be binding unless executed in writing by the
party making the waiver. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar), not shall
such waiver constitute a continuing waiver unless otherwise
expressly provided.
7.6 Any amendment to this Agreement shall be in
writing and signed by the
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parties hereto.
7.7 In the event that any one or more of the
provisions contained in this Agreement or in any other instrument
referred to herein, shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, then to the maximum
extent permitted by law, such invalidity, illegality or
unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
7.8 The titles, captions or headings of the Sections
herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or
interpretation of this Agreement.
7.9 This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
7.10 After the date hereof, each party will cooperate
in good faith with the other and will take all appropriate action
and execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any
of the transactions contemplated hereunder.
IN WITNESS WHEREOF, the parties have executed this
Agreement on the date first hereinabove written.
INTERNATIONAL META SYSTEMS, INC.
/s/ Lee Hoevel
By----------------------------
Lee Hoevel, President
IPIQ CORPORATION
/s/ Philip M. Neches
By----------------------------
Philip M. Neches, President
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Contact: Bill E. Young FOR IMMEDIATE RELEASE March 3, 1998
Phone: 512.795.8825 ext. 453
INTERNATIONAL META SYSTEMS FILES VOLUNTARY CHAPTER 11 BANKRUPTCY
PETITION
AUSTIN, TEXAS: March 3, 1998--International Meta Systems, Inc.
(OTCBB: IMES) announced today that it has filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code.
Martin Albert, Chairman of International Meta Systems, said "The
Board of Directors is taking this step reluctantly, but has
concluded that the filing is in the best interest of the
shareholders. This action gives the Company the opportunity to
obtain interim financing to allow uninterrupted operations while
it develops a Plan of Reorganization."
Under Reorganization, the Company will continue sales of cell
libraries, macros and design services. Cash flow problems
necessitate the postponement of proposed x86 product plans at
IMS. However the Meta 6000 will continue as a technology
development program.
International Meta Systems provides designs, methodologies, tools
and intellectual property for the silicon design industry. The
Company focuses on customers intending to use a 0.25 micron or
more advanced fabrication process, and whose end-products are
intended to use in microprocessor-based devices. Customer's end
products generally coordinate system-level hardware functions,
manipulating data in a PC or microprocessor-based device as
specified by related application or operating system software.
Examples include controllers, digital signal processors,
microprocessors, custom processor cores, and related components.
ADDITIONAL INFORMATION IS AVAILABLE AT http://www.imes.com.
