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) November 17,
1998
SYQUEST TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-19674 94-2793941
(Commission File Number) (IRS Employer Identification No.)
47071 Bayside Parkway, Fremont, California 94538
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 226-
4000
Not Applicable
(Former name or former address, if changed since last report.)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events
Delisting of SyQuest Technology, Inc. Common Stock
On January 21, 1999, Registrant's Common Stock was delisted from
the Nasdaq National Market for failure to maintain the minimum
listing requirements of the Nasdaq National Market.
Registrant's Common Stock had been suspended from trading since
November 2, 1998.
Sale of Substantially All Assets
Registrant previously disclosed that on November 17, 1998, it
filed a petition pursuant to Chapter 11 of the United States
Bankruptcy Code. It also previously disclosed that on January
11, 1999, Registrant entered into an agreement with Iomega
Corporation for the sale of substantially all of Registrant's
assets to Iomega. A hearing has been scheduled for February 24,
1999, at 9:00 am at 1300 Clay Street, Oakland, California to
authorize Registrant to proceed with the sale to Iomega. Any
competing overbids must be received no later than February 19,
1999, as set forth in that certain Order Under 11 U.S.C.
Sections 363(b)and 105 Authorizing And Approving (i) Sale
Procedures And Notice Of Hearing Regarding Sale Of Substantially
All Of Debtor's Assets, And (ii) Breakup Fee, Overbid,
Exclusivity And Alternative Financing Provisions Of Asset
Purchase Agreement, a copy of which is attached hereto as
Exhibit 99.1.
Absence of Distribution to Shareholders/Bar Date for Filing
Claims
Pursuant to the terms of the proposed sale of assets to Iomega,
it is not expected that there will be any assets available for
distribution to Registrant's shareholders. A bar date of May
19, 1999, has been established as the deadline for parties to
file proof of claims or interests.
Financial Information
Since the filing of its bankruptcy petition, Registrant has not
filed its periodic reports required pursuant to the Securities
and Exchange Act of 1934, as amended. However, in order to
provide certain financial information, attached to this Report
on Form 8-K as exhibit 27.1 and 27.2 is a copy of the monthly
operating reports filed to date in connection with Registrant's
bankruptcy case.
Item 7. Financial Statements and Exhibits
c) Exhibits
27.1 Registrant's Monthly Operating Report for the
period November 17, 1998 through November 30, 1998.
27.2 Registrant's Monthly Operating Report for the
period December 1, 1998 through December 31, 1998.
99.1 Order Under 11 U.S.C. Sections 363(b)and 105
Authorizing And Approving (i) Sale Procedures And Notice Of
Hearing Regarding Sale Of Substantially All Of Debtor's Assets,
And (ii) Breakup Fee, Overbid, Exclusivity And Alternative
Financing Provisions Of Asset Purchase Agreement
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.
SYQUEST TECHNOLOGY, INC.
(Registrant)
Date: February 4, 1999 By /s/ Edward L. Marinaro
Edward L. Marinaro
Chairman of the Board
MURPHY SHENEMAN JULIAN & ROGERS
A Professional Corporation
PATRICK A. MURPHY (S.B. No. 038832)
TOBIAS S. KELLER (S.B. No. 151445)
101 California Street, 39th Floor
San Francisco, CA 94111
Telephone Number: 415/398-4700
Facsimile Number: 415/421-7879
Attorneys for the Debtor
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re ) Case No. 98-71198-T
)
SYQUEST TECHNOLOGY, INC., a )
A Delaware corporation, )
) ORDER UNDER 11 sections
Debtor. ) 363(b) AND 105
) AUTHORIZING AND
) APPROVING (i) SALE
) PROCEDURES AND NOTICE OF
) HEARING REGARDING SALE
) OF SUBSTANTIALLY ALL OF
) DEBTOR'S ASSETS, AND
) (ii) BREAKUP FEE,
) OVERBID, EXCLUSIVITY AND
) ALTERNATIVE FINANCING
) PROVISIONS OF ASSET
) PURCHASE AGREEMENT
___________________________________)
Date: January 19, 1999
Time: 9:00 a.m.
Place: Courtroom 201
1300 Clay Street,
Oakland, California
Exhibit 99.1
The Court has considered the Debtor's Emergency Motion
For Order Under 11 U.S.C. Sections 363(b) and 105 Authorizing
and Approving (i) Sale Procedures and Notice of Hearing
Regarding Sale of Substantially All Of Debtor's Assets, and (ii)
Breakup Fee, Overbid, Exclusivity and Alternative Financing
Provisions of Asset Purchase Agreement (the "Motion") dated
January 12, 1999, filed by SyQuest Technology, Inc. as debtor
and debtor in possession (the "Debtor"), all objections thereto,
and the evidence heard by the Court at the hearing on the
Motion. Based upon the foregoing, the Court makes the following
findings of fact and conclusions of law:
A. Timely notice of the Motion was provided to the
United States Trustee, the Debtor's pre-petition secured lender,
Greyrock Capital, a Division of Nations Credit Commercial
Corporation (the "Lender"), counsel to the official creditors'
committee, counsel to Plaza III, Ltd., all parties who have
requested special notice in this Chapter 11 case, and various
other parties as reflected on the certificates of service filed
by the Debtor herein. Said notice together with the hearing
held on the Motion on January 19, 1999 and on January 20, 1999
was sufficient under the circumstances and satisfied all
applicable notice and hearing requirements of the Bankruptcy
Code and the Bankruptcy Rules. There has been adequate
opportunity for all parties in interest to appear and be heard
on the Motion and that no further notice or hearing is required.
B. The Debtor has articulated good and sufficient
reason for (1) establishing the sale procedures attached hereto
as Exhibit A (the "Sale Procedures"), (2) approving the form and
content of the notice of hearing on the Motion attached hereto
as Exhibit B (the "Hearing Notice") and the method of
notification of creditors provided in the Motion, and (3)
approving the breakup fee, overbid, exclusivity and alternative
financing provisions (the "Provisions") contained in the Asset
Purchase Agreement subject to the changes set forth herein (as
modified, the "Modified Provisions"), and that such Modified
Provisions are in the best interests of the Debtor and its
estate. This Court specifically finds that the Debtor has shown
good cause to notify holders of equity interests in the Debtor
by publication and, accordingly, the Court shall and hereby does
relieve the Debtor of its obligation to give notice to such
holders of interests by any other means. See Fed. R. Bankr.
Proc. 2002(d).
C. The sale of the Debtor's assets is in the best
interests of the Debtor's estate and constitutes a proper
exercise of the Debtor's reasonable business judgment.
D. The Modified Provisions have been negotiated in
good faith and at arms' length between the Debtor and Iomega
Corporation (the "Purchaser").
E. The Purchaser is not an "insider" or "affiliate"
(as such terms are defined in the Bankruptcy Code) of the
Debtor.
F. The amounts provided in (1) the Breakup Fee
Provision (as defined in the Asset Purchase Agreement) as
modified herein (the "Modified Break Up Fee Provision") for
payment to the Purchaser in the event that the Acquired Assets
(as defined in the Asset Purchase Agreement) are sold to a
purchaser other than the Purchaser and (2) the Overbid Provision
as modified herein (the "Modified Overbid Provision") for the
cash amount of any bid competing with the Purchaser's bid under
the Asset Purchase Agreement and the minimum increase in the
aggregate value of any competing bid or subsequent bid
thereafter, are each reasonable and appropriate relative to the
size and nature of the proposed asset sale, are necessary to
ensure that the Purchaser will not withdraw its bid, and will
enhance the benefits to the Debtor's estate from the sale.
G. The Exclusivity Provision as modified herein (the
"Modified Exclusivity Provision") is sufficiently limited in
scope, does not prohibit the Debtor from receiving, considering
and responding to bona fide expressions of interest not
solicited by the Debtor, and allows the Debtor to provide any
such potential offerer with appropriate information which may be
necessary to such potential offeror in formulating their offers.
H. As a condition to the Asset Purchase Agreement, the
Purchaser requires that the Modified Provisions be approved by
this Court.
ACCORDINGLY, IT IS HEREBY ORDERED, ADJUDGED and DECREED,
THAT:
1. The Motion is hereby granted as set forth
herein.
2. A final evidentiary hearing on the Debtor's
Motion for Order (A) Authorizing Sale of Inventory, Equipment,
Intellectual Property, and Certain Other Assets (B) Authorizing
Debtor to Assume and Assign Certain Executory Contracts and (C)
Authorizing Settlement and Release of Certain Claims ("Sale
Motion") and to confirm the results of the Sale will be held on
February 24, 1999 at 9:00 a.m. (the "Final Hearing") before this
Court, and may be continued without further notice, other than
as announced in open court at the date and time of such hearing.
3. Any objections to the Sale Motion must be in
writing, filed with the Bankruptcy Court and served upon (i) the
Debtor's counsel, Patrick A. Murphy, Esquire, at Murphy Sheneman
Julian & Rogers, 101 California Street, Suite 3900, San
Francisco, California 94111, telecopy 415/421-7879 ("Debtor's
Counsel"), (ii) the Purchaser's counsel, Mark N. Polebaum,
Esquire, at Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109, telecopy 617/526-5000 ("Purchaser's
Counsel"), (iii) the Counsel to the Official Creditor's
Committee, Patrick M. Costello, Esquire, at Murray & Murray,
3030 Hansen Way, Suite 200, Palo Alto, CA 94304, telecopy
650/852-9244 (the "Committee Counsel"), and (iv) the Counsel to
the Lender, Leo D. Plotkin, Esquire, Levy, Small & Lallas, 815
Moraga Drive, Los Angeles, California 90049, telecopy
310/471-7990 ("Lender's Counsel") in such manner that it is
actually received no later than 4:00 p.m. on February 19, 1999.
Objections must be sufficiently detailed as to state with
particularity each and every ground for such objection.
4. Any person wishing to submit a higher and
better offer for the Acquired Assets must comply with all of the
requirements of the Sale Procedures (an "Alternative Bid"). If
an Alternative Bid is received, the Court will establish final
bidding procedures at the Final Hearing in accordance with the
Sale Procedures.
5. Alternative Bids, if any, must be filed with
the Court and delivered to the Debtor's Counsel, with a copy to
the Purchaser's Counsel, Committee Counsel and Lender's Counsel,
such that it is actually filed and received by 4:00 p.m. on
February 19, 1999 and must comply with the terms and provisions
of the Sale Procedures and this Order.
6. Any contract or lease counter-party wishing
to object to the assumption and assignment by the Debtor to the
successful bidder at the Sale of any contract or lease to which
they are a counter-party with the Debtor, must do so in a
writing filed with this Court and actually received by Debtor's
Counsel, Purchaser's Counsel and Committee Counsel by 4:00 p.m.
on February 19, 1999. Such writing must set forth each and
every specific default in such executory contract or lease, and
include, with respect to any monetary default, a specific
monetary amount necessary to cure such monetary default.
7. Absent a valid objection to the assumption
and assignment of an executory contract or lease (a) nothing
will be paid to cure any default in any executory contract or
lease or to compensate for any pecuniary loss resulting from
such default, (b) the applicable contract or lease counter-party
is hereby forever barred from asserting any default, loss or
liability against the assignee based on any event or
circumstances, whether known or unknown, arising prior to the
date of the assignment, and (c) the Purchaser's promise to
perform under such contract will constitute adequate assurance
of future performance under such contract or lease, under 11
U.S.C. Section 365(f). Upon assignment of any executory
contracts or leases, the Debtor and its estate will be relieved
of any liability for any breach of such contract or lease
occurring after such assignment.
8. Any potential bidder desiring access to the
books and records of the Debtor shall, prior to obtaining such
access, execute and deliver to the Debtor a confidentiality
agreement in form and substance reasonably acceptable to the
Debtor.
9. The Sale Procedures which are attached
hereto as Exhibit A are approved.
10. The form and content of the Hearing Notice
which is attached hereto as Exhibit B is approved.
11. The Debtor shall (i) serve a copy of the
Hearing Notice on each of the Debtor's listed secured and
unsecured creditors, Committee Counsel, Lender's Counsel, the
United States Trustee, all counter-parties with the Debtor to
executory contracts or leases, and all parties or their counsel
who have filed an appearance in the Chapter 11 case or have
requested service of notice in this case, by first class mail,
postage prepaid, and (ii) cause the Hearing Notice to be
published in The Wall Street Journal, National Edition, and/or
such other publications as may be ordered by this Court at least
twenty (20) days prior to the day of the Sale and the hearing on
the Sale Motion. All counter-parties with the Debtor to
executory contracts or leases shall also be served by the Debtor
with a copy of the Motion and all relevant declarations. Notice
as set forth in this paragraph 11 shall constitute due and
sufficient notice under the circumstances and no further notice
shall be required.
12. The Debtor hereby is authorized and directed
to cause the Hearing Notice to be published in accordance with
the requirements of the immediately preceding paragraph.
13. The Breakup Fee Provision contained in
Section 4.9 of the Asset Purchase Agreement is hereby amended in
its entirety to read as follows and is hereby approved:
4.9 Breakup Fee Provisions. In the event that the
Seller sells or otherwise transfers all or any substantial
portion of the Acquired Assets as part of a sale approved
pursuant to the Section 363 sale process contemplated by this
Agreement or otherwise (unless the Buyer shall have breached its
obligations hereunder which results in the termination of this
Agreement by Seller)*to any party other than the Buyer, then the
Seller shall pay to the Buyer, within two business days after
the closing of such sale or transfer, (i) $300,000 or, (ii)
$100,000 if such other party purchasing such Acquired Assets has
complied with the Overbid Provisions, such party's offer is not
subject to satisfaction of similar conditions to those set forth
in Section 5.1(i) hereof, and the conditions set forth in
Section 5.1(i) hereof have not been satisfied or waived by the
Buyer (the "Breakup Fee"). The Breakup Fee provided for by this
Section 4.9 is intended to cover the expenses and opportunity
costs incurred by the Buyer in pursuing and negotiating this
Agreement and the transactions contemplated hereby, and is
considered by the Parties to be reasonable for such purposes.
The claims of the Buyer to the Breakup Fee shall constitute a
first priority administrative expense under 11 U.S.C. Section
507(a)(1).
*or the Buyer terminates the Agreement or fails to close for any
reason other than (i) the Seller's material breach of the
obligations hereunder or (ii) the condition set forth in Section
5.1(i).
1. The Overbid Provision contained in Section
4.8 of the Asset Purchase Agreement is hereby amended in its
entirety to read as follows and is hereby approved:
4.8 Competitive Bid Procedures. Subject to
Bankruptcy Court approval, the Seller agrees that in order for
any Alternative Proposal to be approved by the Bankruptcy Court,
such proposal must (i) be upon and subject to terms and
conditions which are no less favorable to the Seller as are
contained in this Agreement, except as to purchase price or the
inclusion of the Releases set forth in Section 1.3(b) hereof,
(ii) include (x) a purchase price having a value at least
$250,000 plus the amount of any Breakup Fee (collectively, the
"Initial Overbid Amount") greater than the value of the Purchase
Price provided in this Agreement, (y) a cash component of the
purchase price of at least the Cash Purchase Price plus any
Breakup Fee less any Inventory Sale Credit (which cash component
would be $9,800,000 assuming there is no Inventory Sale Credit
and a $300,000 Breakup Fee) and (z) any subsequent increase
thereof shall be at least $100,000 in excess of the prior offer
(in any event, the Buyer shall have the right to match any
competitive offers and any and all increases thereof) and (iii)
provide for a debtor in possession financing facility for the
benefit of the Seller in an amount equal to or greater than the
outstanding balance of principal, interest, fees, expenses and
other amounts owed by the Seller to the Buyer under the DIP Loan
Agreement (the proceeds of such new facility shall first be used
to pay in full the amounts due with respect to the DIP Loan
Agreement) which shall be available to the Seller as of the date
the Alternative Bid is accepted (collectively, the "Overbid
Provisions").
1. The Exclusivity Provision contained in
Section 4.7 of the Asset Purchase Agreement is hereby amended in
its entirety to read as follows and is hereby approved:
4.7 Exclusivity. The Seller shall not, and Seller shall
use its best efforts to cause its Subsidiaries and each of its
directors, officers, employees, representatives and agents not
to, directly or indirectly, encourage, solicit or initiate any
proposal or offer from any person or entity (other than the
Buyer or an affiliate, associate, representative or agent of the
Buyer) concerning any merger, consolidation, sale of material
assets, tender offer, recapitalization, accumulation of shares
of stock of any Seller, proxy solicitation or other business
combination involving the Seller or any Subsidiary or any
division of the Seller or any Subsidiary or any of their
respective businesses (an "Alternative Proposal"), or agree to,
or endorse an Alternative Proposal unless such Alternative
Proposal has been approved by the Bankruptcy Court pursuant to
the Section 363 sale process contemplated by this Agreement or
(b) provide any non-public information concerning the business,
properties or assets of the Seller to any person or entity
(other than the Buyer) unless such person or entity has entered
into a confidentiality agreement in form and substance
reasonably satisfactory to the Seller and Buyer (the
"Confidentiality Agreement"); provided, however, that Seller
shall not be prohibited from providing information, including
non-public information, to qualified persons who may seek to
make a proposal as part of the Section 363 sale process
contemplated by this Agreement provided such qualified person
has entered into a Confidentiality Agreement with respect to
non-public information (the "Exclusivity Provision"). The
Seller shall immediately notify the Buyer of, and shall disclose
to the Buyer a reasonably detailed description of any inquiries
received by either Seller or any of its agents or
representatives (including, without limitation, the date of such
inquiry, the identity of the inquirer and the status of such
inquiry) with respect to the acquisition of any of the Acquired
Assets and the Seller shall provide the Buyer with copies of any
written proposals and a description of any verbal proposals
which are received by Seller or any of its agents or
representatives. This Section 4.7 shall not prevent the Debtor
from communicating or providing any information to the Official
Unsecured Creditors Committee of the Seller (the "Committee"),
provided that the Committee may not provide or disclose any
proprietary information to any third party unless such third
party is subjection to a Confidentiality Agreement.
2. The Alternative Financing Provision
contained in Section 4.8(iii) of the Asset Purchase Agreement is
hereby approved.
3. The Debtor is authorized and required to
make the payment of the Breakup Fee to the Purchaser when the
same is due in accordance with the terms of the Asset Purchase
Agreement. If and to the extent the Breakup Fee becomes due and
payable, it shall constitute an actual, necessary cost and
expense of preserving the Debtor's estate pursuant to 11 U.S.C.
Section 503(b)(1) and be entitled to treatment as a first
priority, administrative expense in the Debtor's Chapter 11 case
under 11 U.S.C. Section 507(a)(1) and shall have priority in
right and payment from the proceeds of the Sale over all liens
against the Debtor's assets and claims (administrative or
otherwise) against the Debtor's estate.
4. Any and all bids for all or substantially
all of the Debtor's assets must comply with terms and provisions
of the Sale Procedures. The bid by the Purchaser under the
Asset Purchase Agreement is hereby deemed to comply with the
Sale Procedures.
5. The Debtor shall comply with the terms and
provisions of the Modified Exclusivity Provision.
20. The Debtor and the Committee shall not disclose
and shall treat as confidential that certain Amended Letter of
Intent dated December 11, 1998 among the Debtor, the Purchaser
and SyQuest Technology Holding which is referred in Section
1.3(c) of the Asset Purchase Agreement; provided that the Debtor
or the Committee may disclose such Amended Letter of Intent only
if: (i) the Purchaser, in its sole discretion, consents in
writing or (ii) this Court enters an order, after notice and a
hearing (which hearing may be requested on an expedited basis
provided 48-hours prior notice thereof is given to the
Purchaser), authorizing the disclosure of such Amended Letter of
Intent.
21. Entry of this Order shall be sufficient and
conclusive evidence of the validity and enforceability of the
Modified Provisions.
Dated: January 15, 1999 /s/ Leslie Tchaikovsky
The Honorable Leslie Tchaikovsky
United States Bankruptcy Judge
APPROVED AS TO FORM:
HALE AND DORR LLP
By ____________________________
Mitchel Appelbaum
Attorneys for Purchaser
MURRAY & MURRAY
By ____________________________
Patrick M. Costello
Attorneys for Creditors
Committee
LEVY, SMALL & LALLAS
By ____________________________
Leo D. Plotkin
Attorneys for Greyrock
Capital
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re: [CASE NAME] Case No. 98-71198-T
SYQUEST TECHNOLOGY, INC. CHAPTER 11
MONTHLY OPERATING REPORT
(GENERAL BUSINESS CASE)
SUMMARY OF FINANCIAL STATUS
MONTH ENDED 11/30/98 FILING DATE: 11/17/98
1. Debtor in possession (or trustee) hereby submits this
Monthly Operating Report on the Accrual Basis of accounting (or
if checked here ___ the Office of the U.S. Trustee or the Court
has approved the Cash Basis of Accounting for the Debtor).
Dollars reported in ($ 000)
2. Asset Structure
a. Current Assets (Market Value)
End of Current End of Prior As of
Month Month Petition Filing
30,163
b. Total Assets (Market Value)
End of Current End of Prior As of
Month Month Petition Filing
38,071 36,899
c. Current Liabilities
End of Current End of Prior As of
Month Month Petition Filing
31,927
EXHIBIT 27.1
d. Total Liabilities
End of Current End of Prior As of
Month Month Petition Filing
85,984 85,026
3. Statement of Cash Receipts & Disbursements for Month
a. Total Receipts
Current Prior Cumulative
Month Month Case to Date
0
b. Total Disbursements
Current Prior Cumulative
Month Month (Case to Date)
79
c. Excess (Deficiency) of Receipts Over Disbursements (a - b)
Current Prior Cumulative
Month Month (Case to Date)
79
d. Cash Balance Beginning of Month
Current Prior Cumulative
Month Month (Case to Date)
95
e. Cash Balance End of Month (c + d)
Current Prior Cumulative
Month Month (Case to Date)
16
4. Profit/(Loss) from the Statement of Operations
Current Prior Cumulative
Month Month (Case to Date)
(162)
5. Account Receivables (Pre and Post Petition)
Current Prior Cumulative
Month Month (Case to Date)
11,229
6. Post-Petition Liabilities
Current Prior Cumulative
Month Month (Case to Date)
50
7. Past Due Post-Petition Account Payables(over 30 days)
Current Prior Cumulative
Month Month (Case to Date)
0
At the end of this reporting month: Yes No
8. Have any payments been made on pre-petition X
debt, other than payments in the normal course
to secured creditors or lessors? (if yes, attach
listing including date of payment, amount
of payment and name of payee)*
9. Have any payments been made to professionals?
(if yes, attach listing including date of payment,
amount of payment and name of payee) X
10. If the answer is yes to 8 or 9, were all
such payments approved by the court?
11. Have any payments been made to officers,
insiders, shareholders, relatives? (if yes,
attach listing including date of payment,
amount and reason for payment, and name of payee) X
12. Is the estate insured for replacement cost of
assets and for general liability? X
13. Are a plan and disclosure statement on file? X
14. Was there any post-petition borrowing during X
this reporting period?
15. Check if paid: Post-petition taxes X;
U.S. Trustee Quarter Fees ;
Check if filing is current for post-
Petition tax reporting and tax returns:
(Attach explanation, if post-petition taxes or U.S. Trustee
Quarterly Fees are not paid current or if post-petition tax
reporting and tax return filings are not current.)
* Employee Payroll Expenses
I declare under penalty of perjury that I have reviewed the
above summary and attached financial statements, and after
making reasonable inquiry believe that these documents are
correct.
Date: 12/21/98 /s/ Henry Lo
Responsible Individual
SYQUEST TECHNOLOGY, INC.
DEBTOR IN POSSESSION
STATEMENT OF OPERATIONS (IN 000's)
FOR THE PERIOD 11/18/98 THROUGH 11/30/98
ACTUAL
($)
REVENUES:
NET SALES 0
COST OF SALES 0
0
OPERATING EXPENSES:
PAYROLL 76 (3)
RENT 24 (1)
INTEREST 33 (2)
UTILITIES 26 (5)
OUTSIDE SERVICES-SECURITY 3 (4)
NET LOSS BEFORE TAXES 162
INCOME TAXES 0
NET LOSS 162
(1) Rent accrual for the period 11/18-11/30/98.
(2) Interest accrual for the period 11/18-11/30/98.
(3) Payroll expense.
(4) Outside services (security).
(5) Accrual for PG&E and Pacific Bell (post-petition deposits)
SYQUEST TECHNOLOGY, INC.
DEBTOR IN POSSESSION
BALANCE SHEET (IN 000's)
AS OF 11/30/98
11/17/98 11/30/98
ASSETS DR CR
CURRENT ASSETS:
CASH 95 76 (3) 16
3 (4)
A/R 11,229 11,229
INVENTORIES 17,243 17,243
PREPAID & DEPOSITS 1,596 1,596
TOTAL CURRENT ASSETS 30,163 30,084
NET PROPERTY, PLANT & EQUIPMENT 5,081 5,081
TOTAL FIXED ASSETS 5,081
5,081
OTHER LONG TERM ASSETS 2,827 2,827
TOTAL ASSETS 38,071 37,992
LIABILITIES:
BANK BORROWINGS-GREYROCK/SVB 9,056 33 (2) 9,089
ACCOUNTS PAYABLE 13,085 24 (1) 13,135
26 (5)
ACCRUED LIABILITIES 9,786 9,786
OTHER LIABILITIES 26,452 26,452
TOTAL LIABILITIES 58,379 58,462
INTERCOMPANY PAYABLE 27,605
27,605
STOCKHOLDER'S EQUITY/(DEFICIT) (47,913) 162
(48,075)
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY/(DEFICIT) 38,071 162 162 37,992
MONTHLY TAX STATEMENT
DEBTOR: SYQUEST TECHNOLOGY, INC.
Case Number: 98-71198-T
Month Reported: November 1998
GROSS PAYROLL 76,080.07
Federal Tax 15,805.71
State Tax Withheld 4,736.59
Employer Tax 1,540.36
Remittance to IRS 17,346.07
Date Remitted 12/8/98
Remittance to EDD 4,736.59
Date Remitted 12/21/98
GROSS SALES -
Remittance to SBE -
Date Remitted -
OTHER TAXES -
Remittance -
Date Remitted -
I declare under penalty of perjury under the laws of the United
States of America that the foregoing is true and correct.
Date: 12/21/98 Signature: /s/ Henry Lo
Print Name: Henry C. Lo
Executive Vice President
and Chief Financial Officer
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re: [CASE NAME] Case No. 98-71198-T
SYQUEST TECHNOLOGY, INC. CHAPTER 11
MONTHLY OPERATING REPORT
(GENERAL BUSINESS CASE)
SUMMARY OF FINANCIAL STATUS
MONTH ENDED: 12/31/98 FILING DATE: 11/17/98
1. Debtor in possession (or trustee) hereby submits this
Monthly Operating Report on the Accrual Basis of accounting (or
if checked here ___ the Office of the U.S. Trustee or the Court
has approved the Cash Basis of Accounting for the Debtor).
Dollars reported in ($ ____)
2. Asset Structure
a. Current Assets (Market Value)
End of Current End of Prior As of
Month Month Petition Filing
29.906 30.084
b. Total Assets (Market Value)
End of Current End of Prior As of
Month Month Petition Filing
37,814 37,992 36,899
c. Current Liabilities
End of Current End of Prior As of
Month Month Petition Filing
32,076 32,010
EXHIBIT 27.2
d. Total Liabilities
End of Current End of Prior As of
Month Month Petition Filing
86,133 86,067 85,026
3. Statement of Cash Receipts & Disbursements for Month
a. Total Receipts
Current Prior Cumulative
Month Month (Case to Date)
553 0 553
b. Total Disbursements
Current Prior Cumulative
Month Month (Case to Date)
308 79 387
c. Excess (Deficiency) of Receipts Over Disbursements (a - b)
Current Prior Cumulative
Month Month (Case to Date)
245 <79> 166
d. Cash Balance Beginning of Month
Current Prior
Month Month
16 95
e. Cash Balance End of Month (c + d)
Current Prior
Month Month
261 16
4. Profit (Loss) from the Statement of Operations
Current Prior Cumulative
Month Month (Case to Date)
<244> <162> <406>
5. Account Receivables (Pre and Post Petition)
Current Prior Cumulative
Month Month (Case to Date)
11,130 11,229
6. Post-Petition Liabilities
Current Prior
Month Month
40 50
7. Past-Due Post Petition Account Payables(over 30 days)
Current Prior
Month Month
0 0
At the end of this reporting month: Yes No
8. Have any payments been made to pre-petition X
creditors, other than payments in the normal
course to secured creditors or lessors? (if yes,
attach listing including date of payment, amount
of payment and name of payee)*
9. Have any payments been made to professionals?
(if yes, attach listing including date of payment,
amount of payment and name of payee) X
10. If you answered yes to line 7, 8, or 9,
were all such payments approved by the court?
11. Have any payments been made to officers,
insiders, shareholders, relatives? (if yes,
attach listing including date of payment,
amount and reason for payment, and name of payee) X
12. Is the estate insured for replacement cost of
assets and for general liability? X
13. Are a plan and disclosure statement on file? X
14. Was there any post-petition borrowing during X
this reporting period?
15. Check if paid: Post-petition taxes X
U.S. Trustee Quarter Fees X
Check if filing is current for post-
Petition tax reporting and tax returns
(Attach explanation, if post-petition taxes or U.S. Trustee
Quarterly Fees are not paid current or if post-petition tax
reporting and tax return filings are not current.)
* Employee Payroll Expenses
I declare under penalty of perjury that I have reviewed the
above summary and attached financial statements, and after
making reasonable inquiry believe that these documents are
correct.
Date: /s/ Henry Lo
Responsible Individual
SYQUEST TECHNOLOGY, INC.
DEBTOR IN POSSESSION
STATEMENT OF OPERATIONS (IN 000's)
FOR THE PERIOD 12/01/98 THROUGH 12/31/98
ACTUAL
($)
REVENUES:
NET SALES 385
COST OF SALES 255
130
OPERATING EXPENSES:
PAYROLL 186(2)
RENT 56(3)
INTEREST 79(1)
UTILITIES 40(5)
OUTSIDE SERVICES-SECURITY 13(4)
TOTAL OPERATING EXPENSES 374
NET LOSS BEFORE INCOME TAXES (244)
INCOME TAXES 0
NET LOSS (244)
(1) Interest accrual for the period 12/1-12/31/98
(2) Payroll expense.
(3) Rent expense for the period 12/1/-12/31/98
(4) Outside services (security).
(5) Accrual for PG&E and Pacific Bell
SYQUEST TECHNOLOGY, INC.
DEBTOR IN POSSESSION
BALANCE SHEET (IN 000's)
AS OF 12/31/98
11/30/98 12/31/98
ASSETS
Current Assets:
Cash 16 281
A/R 11,229 11,130
Inventories 17,243 16,988
Prepaid & Deposits 1,596 1,527
TOTAL CURRENT ASSETS 30,084 29,906
NET PROPERTY, PLANT 5,081 5,081
& EQUIPMENT
TOTAL FIXED ASSETS 5,081 5,081
OTHER LONG TERM ASSETS 2,827 2,827
TOTAL ASSETS 37,992 37,814
LIABILITIES:
Bank Borrowings- 9,089 9,168
Greyrock/SVB
Accounts Payable 13,135 13,122
Accrued Liabilities 9,786 9,786
Other Liabilities 26,452 26,452
TOTAL LIABILITIES 58,462 58,528
INTERCOMPANY PAYABLE 27,605 27,605
Stockholder's Equity 37,992 37,814
(Deficit)
Monthly Tax Statement
Debtor: SyQuest Technology, Inc.
Case No.: 98-71198-T
Month reported: December 1998
GROSS PAYROLL
12/4/98 12/18/98 12/31/98
Federal Tax 63,444.39 63,111.70 59,478.60
State Tax Withheld 14,253.87 14,053.57 14,848.89
Employer Tax 3,620.48 3,602.64 3,200.34
Remittance to IRS 15,880.78 15,615.95 15,615.95
Date Remitted 12/4/98 12/18/98 12/31/98
Remittance to EDD 3,620.48 3,602.64 3,200.34
Date remitted 12/4/98 12/18/98 12/31/98
GROSS SALES
Remittance to SBE
Date Remitted
OTHER TAXES
Remittance
Date Remitted
I declare under penalty of perjury under the laws of the
United States of America that the foregoing is true and correct.
DATE: 1/19/99 Signature: /s/ Henry Lo
Print Name: Henry Lo
To comply with the court's Order For Payment Of State And
Federal Taxes and the U.S. Trustee Guidelines, attach the signed
original of this statement to the Monthly Operating Report filed
with court; attach a copy to the copy of the Monthly Operating
Report served on the United States Trustee; and transmit a copy
of this statement to the IRS and the EDD. This statement is due
on or before the 20th day of the month following the month being
reported.
MURPHY SHENEMAN JULIAN & ROGERS
A Professional Corporation
PATRICK A. MURPHY (S.B. No. 038832)
TOBIAS S. KELLER (S.B. No. 151445)
101 California Street, 39th Floor
San Francisco, CA 94111
Telephone Number: 415/398-4700
Facsimile Number: 415/421-7879
Attorneys for the Debtor
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re ) Case No. 98-71198-T
)
SYQUEST TECHNOLOGY, INC., a )
A Delaware corporation, )
) NOTICE OF FINAL
Debtor. ) HEARING ON MOTION
) FOR ORDER (A)
) AUTHORIZING SALE
) OF INVENTORY, EQUIPMENT,
) INTELLECTUAL PROPERTY,
) AND CERTAIN OTHER ASSETS
) (B) AUTHORIZING DEBTOR
) TO ASSUME AND ASSIGN
) CERTAIN EXECUTORY
) CONTRACTS AND (C)
) AUTHORIZING SETTLEMENT
) AND RELEASE OF CERTAIN
) CLAIMS
___________________________________)
EXHIBIT B
PLEASE TAKE NOTICE THAT on February 24, 1999 beginning
at 9:00 a.m., the Bankruptcy Court will hold a final evidentiary
hearing (the "Final Hearing") on Debtor's Motion for Order (A)
Authorizing Sale of Inventory, Equipment, Intellectual Property,
and Certain Other Assets (B) Authorizing Debtor to Assume and
Assign Certain Executory Contracts and (C) Authorizing
Settlement and Release of Certain Claims ("Sale Motion") which
was filed with the Bankruptcy Court on January 12, 1999.
The Sale Motion requests authority for the Debtor to
sell certain of its assets and to assume and assign certain of
its executory contracts and leases (collectively, the "Assets")
to Iomega Corporation (the "Purchaser"), or to the highest and
best bidder at the final hearing which complies with the Sale
Procedures. The Purchaser has agreed to purchase certain of the
Debtor's assets other than accounts receivable and real estate
and certain other excluded assets (the "Acquired Assets") for
the aggregate sum of (i) $9,500,000 in cash (subject to certain
closing adjustments), plus (ii) the release by the Purchaser
(and its subsidiaries) of all claims against the Debtor and its
subsidiaries for certain patent and trademark infringement and
other claims asserted in pending lawsuits. The intended sale of
the Acquired Assets will be free and clear of all liens,
mortgages, security interests, encumbrances, liabilities, claims
or any other interests, of any nature, whether arising before or
after the commencement of the Chapter 11 case, including,
without limitation, any claims or liabilities arising out of or
in connection with any employee benefit plan or warranty or
product liability claim (collectively the "Claims"), except for
certain liabilities described in the Asset Purchase Agreement
which are to be specifically assumed by the Purchaser (the
"Assumed Liabilities"). The Claims shall attach to the proceeds
of this sale of the Acquired Assets in the same order of
priority which they now enjoy. You may receive a complete copy
of the Sale Motion by contacting the Debtor's counsel.
DEADLINE FOR OBJECTIONS TO SALE MOTION. Any
objections to the Sale Motion must be in writing, filed with the
Bankruptcy Court and served upon (i) the Debtor's counsel,
Patrick A. Murphy, Esquire, Murphy Sheneman Julian & Rogers, 101
California Street, Suite 3900, San Francisco, California 94111,
telecopy 415/421-7879, (ii) the Purchaser's counsel, Mark N.
Polebaum, Esquire, Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109, telecopy 617/526-5000, (iii) the Counsel to
the Official Creditors' Committee, Patrick M. Costello, Esquire,
Murray & Murray, 3030 Hansen Way, Suite 200, Palo Alto,
California 94304-1009, telecopy 650/852-9244 (the "Committee
Counsel"), and (iv) Leo D. Plotkin, Esquire, Levy, Small &
Lallas, 815 Moraga Drive, Los Angeles, California 90049,
telecopy 310/471-7990 ("Lender's Counsel") in such manner that
it is actually received on or before February 19, 1999 before
4:00 p.m. Objections must be sufficiently detailed as to state
with particularity each and every ground for such objection.
The hearing on the Sale Motion may be continued without further
notice, other than as announced in open court at the date and
time of the hearing on the Sale Motion.
ALTERNATIVE BIDS. Alternative Bids, if any, must be
filed with the Bankruptcy Court and delivered to the Debtor's
counsel (at the above address), with a copy to the Purchaser's
counsel, the Committee Counsel and the Lender's Counsel (each at
the above address), such that it is actually received by them on
or before February 19, 1999 at 4:00 p.m. and must comply with
the terms and provisions of the Sale Procedures which are
attached hereto as Exhibit A. Counsel to the proponent of an
Alternative Bid must be present at the Final Hearing.
FINAL HEARING ON SALE MOTION. A final evidentiary
hearing on the Sale Motion will take place on February 24, 1999
beginning at 9:00 a.m. before the Honorable Leslie J.
Tchaikovsky, United States Bankruptcy Judge, in Courtroom 201,
United States Bankruptcy Court for the Northern District of
California, 1300 Clay Street, Oakland, California. The Final
Hearing on the Sale Motion may be continued or otherwise
suspended without further notice, except for notice given in
open court at the time of such hearing.
ASSUMPTION AND ASSIGNMENT OF EXECUTORY CONTRACTS. If
the Bankruptcy Court grants Debtor's Sale Motion, the Debtor
will have the authority to assume and assign the executory
contracts and leases which are listed on Schedule 1.2(a) of
assigned contracts to the Asset Purchase Agreement (a copy of
which Schedule 1.2(a) is attached hereto as Exhibit B). Unless
a contract or a lease non-debtor party objects in writing filed
with the Bankruptcy Court and actually received by Debtor's
counsel and the Purchaser's counsel on or before February 19,
1999 at 4:00 p.m. setting forth each and every specific default
in any executory contract or lease and include, with respect to
any monetary default, a specific monetary amount necessary to
cure such monetary default, nothing will be paid to cure any
default in any executory contract or lease or to compensate for
any pecuniary loss resulting from such default and the
applicable contract or lease non-debtor party shall thereafter
be forever barred from asserting any default, loss or liability
against the assignee of such contract or lease based on any
event or circumstance arising prior to the date of the
assignment. Absent objection, the Purchaser's promise to
perform under such contract will constitute adequate assurance
of future performance under such contract or lease. Pursuant to
11 U.S.C. Section 365(k), upon assignment of any executory
contracts or leases, the Debtor and its estate will be relieved
of any liability for any breach of such contract or lease
occurring after such assignment.
DATED: January ___, 1999 MURPHY SHENEMAN JULIAN &
ROGERS
A Professional Corporation
By /s/ Tobias S. Keller
Tobias S. Keller
Attorneys for the Debtor
EXHIBITS INTENTIONALLY OMITTED
SALE PROCEDURES
The following sale procedures ("Sale Procedures") shall
govern the sale (the "Sale") of certain of the Debtor's assets
(the "Acquired Assets"), including, without limitation,
assignment of certain of its executory contracts and leases (the
"Contracts"), pursuant to the Motion for Order (A) Authorizing
Sale of Inventory, Equipment, Intellectual Property, and Certain
Other Assets Free and Clear of Liens and Interests, (B)
Authorizing Debtor to Assume and Assign Certain Executory
Contracts and (C) Authorizing Settlement and Release of Certain
Claims (the "Sale Motion"). The Sale Procedures have been
approved and authorized by order dated January 20, 1999 (the
"Procedures Order") of the United States Bankruptcy Court for
the Northern District of California ("Bankruptcy Court")n in the
Chapter 11 case of SyQuest Technology, Inc., Debtor and Debtor-
in-Possession, Case No. 98-71198-T (the "Chapter 11 Case"),
which was commenced on November 17, 1998 (the "Petition Date").
1. A final evidentiary hearing (the "Final Hearing") on all of
the relief requested in the Sale Motion will be held before the
Honorable Leslie J. Tchaikovsky, United States Bankruptcy Judge,
in Courtroom 201 of the United States Bankruptcy Court for the
Northern District of California, 1300 Clay Street, Oakland,
California, beginning at 9:00 a.m. on February 24, 1999.
2. The Debtor has signed an Asset Agreement with Iomega
Corporation (the "Purchaser") (the "Asset Purchase Agreement").
The Purchaser also intends to purchase certain assets of SyQuest
Technology Malaysia Sdn Bhd ("SyQuest Malaysia"), a Malaysian
subsidiary of the Debtor, pursuant to a separate arrangement
with the Receiver and Manager of SyQuest Malaysia appointed by
SyQuest Malaysia's secured creditor pursuant Malaysian law (the
"Malaysian Arrangement"). Any bidder desiring to submit an
alternative bid ("Alternative Bid") shall (i) file with the
Bankruptcy Court such bid in the form of executed asset purchase
agreements, having terms and conditions no less favorable as the
Asset Purchase Agreement, and deliver a copy thereof to each of
the Debtor's Counsel, the Purchaser's Counsel, the Committee
Counsel, and Lender's Counsel, and (ii) deposit $500,000 in cash
with the Debtor's Counsel on terms and conditions similar to
those set forth in the Escrow Agreement (as defined in the Asset
Purchase Agreement) such that such bid and deposit are actually
received by the appropriate parties no later than a4:00 p.m. on
February 19, 1999.
EXHIBIT A
3. No Alternative Bid will be considered unless such bit
contains the following: (i) terms no less favorable to the
Debtor than those contained in the Asset Purchase Agreement,
(ii) a purchase price, payable at the closing of the
transaction contemplated by the asset Purchase Agreement, having
an aggregate value of at least $250,000 in excess of the bid
submitted by the Purchaser, plus the amount of any Breakup Fee,
and include a cash component of at least the Cash Purchase Price
plus the amount of any Breakup Fee, less any Inventory Sale
Credit (as defined in the Asset Purchase Agreement), and (iii) a
provision for the establishment of a new debtor in possession
financing facility (the "Replacement Facility") for the benefit
of the Debtor in an amount at least equal to the aggregate
amount owed by the Debtor under or in connection with the
existing Debtor in Possession Financing Agreement, which
Replacement Facility must be in place and available for use by
the Debtor on the next business day following acceptance of the
Alternative Bid by the Debtor. Any subsequent increases of any
bid, at any time during the sale process, shall be at least
$100,000 in excess of the prior offer (in any event, the
Purchaser shall have the right to match any competitive offers
and any and all increases thereof).
4. Together with the Alternative Bid, each bidder or its
representative shall provide the Debtor, the Committee, the
Purchaser, and the Lender with sufficient indicia that such
bidder or representative is legally empowered, by power of
attorney or otherwise, and financially capable to (a) bid on
behalf of the prospective bidder, and (b) to complete and sign,
on behalf of the bidder, a binding and enforceable (x) asset
purchase agreement and (y) Replacement Facility agreement, and
to perform its obligations with respect thereto. The Purchaser
is deemed to have complied with the procedural requirements in
this paragraph.
5. he Debtor will provide access to its books and records to
interested persons for the purpose of conducting due diligence,
provided that such persons (i) execute a written confidentiality
agreement in form and substance reasonably acceptable to Debtor
and Purchaser and (ii) provide evidence acceptable to the Debtor
that such person has the present ability to fund (x) a bid to
purchase the Debtor's Acquired Assets and take assignment of the
Debtor's Assigned Contracts and (y) the establishment of the
Replacement Facility on the next business day following
acceptance of the Alternative Bid by the Debtor. The Purchaser
is deemed to have complied with these requirements. All bidders
are deemed to acknowledge that they have had an opportunity to
inspect the Debtor's assets and all pertinent documents and
related writings prior to making bids, and all bidders are
deemed to have relied solely on the review and upon their own
investigation and inspection in making their offer(s).
6. All bidders are deemed to have submitted to the exclusive
jurisdiction of the Bankruptcy Court with respect to all matters
related to the Sale and the terms and conditions of the transfer
of the Debtor's Acquired Assets and the Assigned Contracts.
7. All bids shall be "firm offers" and shall not contain any
contingencies to the validity, effectiveness, and/or binding
nature of the offer, including, without limitation,
contingencies for financing, due diligence or inspection except
for the conditions to closing provided for in the Asset Purchase
Agreement.
8. All bidders shall appear in person at the Final Hearing, or
through a duly authorized representative.
9. Solely in the event the Purchaser is not the highest and
best bidder at the Sale, and the Debtor sells a substantial
portion of its assets to another party, whether pursuant to
these Sale Procedures or otherwise, the Purchaser shall be
entitled to recede a breakup fee in the amount of up to $300,000
(the "Breakup Fee") which shall constitute an actual, necessary
cost and expense of preserving the Debtor's estate pursuant to
11 U.S.C. Section 503(b)(1) and be entitled to treatment as a
first priority, administrative expense in each of the Debtor's
Chapter 11 Case under 11 U.S.C. Section 507(a)(1) and shall have
priority in right and payment from the proceeds of the Sale over
all liens against the Debtor's assets and claims (administrative
or otherwise) against the Debtor's estate. Such Breakup Fe e
shall be immediately payable from the purchase price received by
the Debtor. The right to receive such payment shall be senior to
all other rights to proceeds of the Sale to an Alternative
Bidder. No other party will be granted any expense
reimbursement, breakup fees, topping fees, or any such type of
fee, in connection with the Sale.
10. If an Alternative Bid is filed, the Bankruptcy Court shall
establish at the Final Hearing procedures for further bidding;
provided, however, such procedures shall require at a minimum,
that any increases in bids shall be at least $100,000 in excess
of the prior offer and in any event, the Purchaser shall have
the right to match any competitive offer s and any and all
increases thereof.
11. Subject to Bankruptcy Court approval, the entity that makes
the highest and best offer for the Acquired Assets and Assigned
Contracts shall purchase such assets of the Debtor free and
clear of all liens, claims, liabilities, encumbrances and other
interests, pursuant to 11 Section 363(f) with secured claims
attaching to the proceeds of the Sale in the same priority,
dignity and effect as on the Petition Date.
12. The entity that makes the highest and best bid shall
immediately after the Final Hearing complete and sign all
agreement(s), contract(s), instrument(s) or other document(s)
evidencing and containing the terms and conditions upon which
such bid(s) were made.
13. If for any reason the entity that makes the highest and
best bid(s) fails to consummate the purchase of the Acquired
Assets and Assigned Contracts by the Closing, the offeror of the
second highest and best bid will automatically be deemed to have
submitted the highest and best bid and to the extent such
offeror and the Debtor consents, the Debtor and such offeror are
authorized to effect the sale of the Acquired Assets and the
assignment of the Assigned Contracts to such offeror(s) as soon
as is commercially reasonable without further order of the
Bankruptcy Court. In such event, the Debtor specifically
reserves the right to seek all available damages from the
defaulting offeror.
14. Additional terms and conditions, as approved by the
Bankruptcy Court, may be imposed and announced at the Final
Hearing.
SOG\4795\011\1028317.01
