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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to ___________
Commission file number 1-12312
INTERSCIENCE COMPUTER CORPORATION
(Name of small business issuer in its charter)
California 95-3880130
(State of Incorporation) (I.R.S. Employer Identification No.)
5236 Colodny Drive, Suite 100, Agoura Hills, California 91301
(Address of principal executive offices) (zip code)
Issuer's telephone number: (818) 707-2000
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act: Common Stock
Check whether the issuer (1) filed all reports to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to filing requirements for the past 90 days.
Yes X No
Check mark indicates that the disclosure of delinquent filers pursuant
to Item 405 of Regulation S-B is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year were $11,235,303.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of April 20, 1998 was approximately $1,160,000.
There were 2,541,666 shares outstanding of registrant's common stock as
of April 20, 1998.
The following documents are incorporated by reference into this report:
None.
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FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report
contains forward-looking statements. The forward-looking statements contained
herein are subject to certain risks and uncertainties that could cause actual
results to differ materially from those reflected in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in the section entitled "Management's Discussion and
Analysis and Plan of Operation." Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. Interscience Computer Corporation
undertakes no obligation to publicly revise these forward-looking statements to
reflect events or circumstances that arise after the date hereof. Readers should
carefully review the risks described in other documents the Company files from
time to time with the Securities and Exchange Commission, including the
Quarterly Reports on Form 10-QSB to be filed by the Company and any Current
Reports on Form 8-K by the Company.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
OVERVIEW
The Company was organized in 1983 to be a third-party provider of
maintenance services for computer hardware and related peripheral equipment.
Unless otherwise specified herein, all references to the "Company" shall mean
Interscience Computer Corporation and all of its subsidiaries. On September 15,
1993, the Company effected an initial public offering of units, each of which
consisted of one share of common stock and a warrant to purchase an additional
share of common stock. The warrants expired in September 1996. The Company's
principal executive offices are currently located in Agoura Hills, California.
On March 6, 1997 the Company filed for protection under Chapter
11 of the U.S. Bankruptcy Code. The bankruptcy filing was caused by several
factors. The Company had made four acquisitions, and the cash flow of the
Company was not sufficient to pay the operating expenses and the substantial
debts assumed as part of the acquisitions. In addition, the Company was
incurring substantial legal expense from six lawsuits which were then pending
against the Company.
The Company's business plan had been to expand its maintenance
services through these acquisitions to include maintenance on Xerox machines as
well as those manufactured by Siemens AG ("Siemens"). The Company was not able
to operate the Xerox maintenance business on a profitable basis and it was sold
effective November 1, 1997 with the approval of the Bankruptcy Court. The
Company continues to maintain high speed production printers manufactured by
Siemens but the majority of the
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Company's revenues now are generated from the sale to the Company's maintenance
clients and to others of consumable products used by high speed production
printers.
On April 1, 1998 a hearing was held in the Bankruptcy Court to
consider confirmation of the Company's First Amended Plan of Reorganization (the
"Plan"). After considering the evidence, the Bankruptcy Court ruled that the
Plan should be and was in fact confirmed. As a result, the Company is revested
with all of its assets. The Plan terms control all claims and equity interests
which existed as of March 6, 1997, the date when the Company filed its Chapter
11 reorganization case. The Company can now conduct business as usual without
the pre-requisite of obtaining Bankruptcy Court approval. Initial distributions
to creditors, as required under the Plan, is expected to be completed by the end
of May, 1998. There are several claims which will be the subject of claims
objections. Once those objections are resolved, the Company will seek a final
decree from the Bankruptcy Court closing the case.
The Company's principal consumable product is a liquid fusing
agent (the "Fusing Agent") used by the Model 2200 Siemens Printer. The Company
currently sells the Fusing Agent directly to its maintenance clients and
distributes the Fusing Agent to other operators of the Model 2200 Siemens
Printer. The Company also sells the Fusing Agent to NCR Corporation, OCE
Printing Systems, Inc. ("OCE") and the Bradshaw Group. During the 1997 Fiscal
Year, sales of the Fusing Agent constituted approximately 38% of the Company's
total revenue.
BUSINESS GOALS AND STRATEGY - RECENT DEVELOPMENTS
As indicated, on April 1, 1998, the Bankruptcy Court confirmed
the Plan. Pursuant to the Plan, the outstanding common shares will be increased
from 2,541,666 to approximately 5,200,000 shares. The Company will issue to
creditors approximately 675,000 shares of Common Stock on the basis of one share
for every $5.00 of an approved unsecured claim and all pre-bankruptcy unsecured
debts would be satisfied. The Company's only remaining obligations would be as
follows:
1. A three-year loan from Sanwa Bank of approximately
$1,000,000 to be amortized over 36 equal installments with interest at prime
plus three percent.
2. A loan from Horizon Bank of $85,000 to be paid over
three years in 36 equal installments.
3. An obligation to share the proceeds on the remaining
unsold Xerox inventory with the unsecured creditors.
As part of the Plan, the Company's Series A Cumulative
Convertible Preferred Stock and Series B Cumulative Convertible Preferred Stock
will be converted into 1,750,000 shares of Common Stock with two year warrants
to purchase an additional
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500,000 shares of Common Stock at $1.00 per share. All delinquent dividends will
be forgiven. An additional 250,000 shares of Common Stock will be issued to
management.
As indicated above, the Xerox maintenance business was sold in
November 1997 to Anacomp Corporation for $1,220,000 and a potential earnout to
be paid in the 13th month of Anacomp's operation. As a result, the maintenance
business is expected to provide only 20% of the Company's revenues, with the
remainder expected to be from sales of the Fusing Agent.
The following acquisitions by the Company in 1995 and 1996 (the
"Acquisitions") are stated here for historical reasons only. All of these
businesses were sold or closed during the bankruptcy proceedings.
- In June 1995, the Company acquired all of the outstanding
shares of Laser Support & Engineering, Inc. ("LSE") for $1,678,000 in cash and
promissory notes. LSE was a privately held company engaged in training Xerox
printer field engineers and in providing maintenance services for Xerox high
speed printers.
- In October 1995, the Company acquired the Page Printing
Division ("PPD") of Miltope Business Products, Inc. for approximately $260,000.
PPD is a third-party maintenance provider for Delphax and Olympus page
printers.
- In June 1996, the Company acquired certain Xerox printer
maintenance contracts, equipment and spare parts inventory from BancTec, Inc.
for a purchase price of $2,050,000 in cash and a promissory note. The Company
also hired some of BancTec's field engineers.
- In October 1996, the Company acquired substantially all of the
assets of Laser Printing Services, Inc. ("LPS"), a Xerox laser printer
maintenance provider, for $600,000 in cash and a promissory note.
FUSING AGENT
In 1992, the Company commenced marketing the Fusing Agent for use
with the Model 2200 Siemens Printer. Revenues realized by the Company from the
sale of the Fusing Agent during the fiscal year ended September 30, 1996 and
1997 were approximately $4,668,000 and $4,270,000, respectively. Although, the
Company believes that its sales of the Fusing Agent, both in the U.S. and in
Europe, will continue to constitute a major source of revenues for the Company
in the future, revenues from the Fusing Agent are expected to decline as the
existing base of Siemens printers declines.
Background: In 1984, the Siemens Printer was introduced in the
United States. The Model 2200 Siemens Printer is a computer-driven high-speed,
non-impact
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production printing system. Typical uses for the Siemens Printer include
printing labels, bank statements, checks, bar codes, and "junk mail." The
Siemens Printer is the only commercially available printing system known to the
Company that utilizes a cold fusion (chemical) process to fuse print to the
printed materials. All other currently available high-speed production printers,
including the printers manufactured by IBM and Xerox and other printers
manufactured by Siemens, use heat and pressure to fuse print to the printed
materials. Most printed materials can be printed using standard printers that
rely on heat and pressure to fuse print and do not require cold fusion printing.
The cold fusion process, however, has certain advantages over the heat fusion
process, particularly when printing on plastic stocks (including credit cards),
on heat sensitive materials, such as gummed labels and envelopes, and on
preprinted color forms. The Model 2200 Siemens Printer can perform all standard
printing functions and can also be used for printing purposes where heat and
pressure fusion is inappropriate.
The cold fusion process of the Siemens Printer was previously
dependent on the use of CFC-113 (Freon), a fluorocarbon that has been identified
as an ozone-depleting chemical. Title VI of the Clean Air Amendments of 1990
(the "Clean Air Act") established a comprehensive regime for phasing out
ozone-depleting substances, including CFC-113 and other chlorofluorocarbons
("CFCs") by the year 2000. As a result of these environmental regulations, the
Fusing Agent has effectively replaced the prior CFC-based fusing agent used in
the Siemens printers. Although the Fusing Agent, a halogenated hydrocarbon
(HCFC), does not use CFC-113, it is classified by the EPA as an ozone-depleting
substance. However, because HCFCs deplete the stratospheric ozone to a much
lesser extent than CFCs, the production of HCFCs is currently not required to be
phased out until January 1, 2004. The use of the Fusing Agent will continue
thereafter until the supply thereof has been depleted.
Product; Market. The Fusing Agent has been accepted and
recommended by Siemens as a substitute for the CFC-113 based fusing agent for
the Model 2200 Siemens Printer. Independent tests have confirmed that the Fusing
Agent meets commercial standards of toxicity and safety. Tests performed by the
Company indicate that the Fusing Agent can be substituted for CFC-113 in the
Siemens Printer fusing process without any loss of printing efficiency or
quality. Until the Company introduced the Fusing Agent, all Model 2200 Siemens
Printers used the CFC-113 fusing agent that was sold exclusively by Siemens.
The Company believes that there are approximately 400 Model 2200
Siemens printers currently in use in the U.S., including printers that were sold
by StorageTek under the StorageTek label and printers that were incorporated
into a printing system that was packaged and sold by Datagraphics. However, the
number of Siemens printers in service is declining and is not expected to
increase due to the election by Siemens AG to cease manufacturing the Model 2200
Siemens printer. Accordingly, the potential market for the Fusing Agent is
expected to decline over the long term as the existing Siemens printers are
withdrawn from use.
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The Company formed Interscience PLC ("PLC") in the United
Kingdom, in part, to sell Fusing Agent in the United Kingdom and, possibly, in
the rest of Western Europe. However, the Company has never realized a profit
from its investment in PLC. Effective April 1, 1998, the Company sold PLC to its
Managing Director for $10,000 and entered into a license agreement with PLC
requiring the payment by PLC of a royalty of $10 per case of Fusing Agent sold
commencing April 1, 1999.
Sales and Marketing. The Company initiated sales of the Fusing
Agent in 1992 to its existing maintenance customers under the Company's label.
Since February 1993, the Company has also been selling the Fusing Agent to both
its maintenance clients and to other distributors, including OCE (the successor
to Siemens Nixdorf Printing Systems), NCR Corporation, an owner and operator of
a significant number of the Siemens printers, and to the Bradshaw Group, a third
party maintenance provider. The Company allows these purchasers to resell the
Fusing Agent under their own private labels.
SOURCES OF SUPPLY:
The Company has numerous sources of supply. It has not entered
into a specific contract but believes that there are several domestic or foreign
companies that can provide the Company with HCFC that it expects to need in the
future. The Company makes purchase decisions based on current economic
conditions and does not believe that they will have any difficulty obtaining
HCFC.
The Fusing Agent sold by the Company is dispensed into the Model
2200 Siemens Printer from a specially designed reusable canister capped with a
valve designed by the Company. The canister and valve are manufactured for the
Company by unaffiliated manufacturers. Although the manufacturers of the
canister and valve are currently the Company's only sources for such components,
the Company believes that it could find alternate manufacturers for the valve
and canisters. Since the canisters are re-usable, any temporary delay in the
manufacture of such canisters would not be expected to have an immediate impact
on its ability to supply the Fusing Agent to its clients. Nevertheless, any
extended delay or disruption in the production of these components by the
current manufacturers could delay the Company's Fusing Agent shipments and could
have an adverse effect on the Company's Fusing Agent sales.
The Company currently purchases the various other products that
its sells for use with high-speed printers, including its proprietary toners,
the non-proprietary toners, and the developers, from various third-party
independent manufacturers. The terms under which these other products are
manufactured, packaged and shipped for the Company vary depending on the product
and the Company's needs.
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OTHER SERVICES AND SOURCES OF REVENUE
During the 1997 Fiscal Year, the Company completed development of
a toner compatible with the Delphax line of high speed electron beam imaging
systems ("EBI") and the Miltope Business Products line of page printer. The
Company has recently commenced selling its EBI toner. Although revenues from the
EBI toner have, to date, been relatively small, the Company expects toner
revenue to increase in 1998.
PATENTS
On July 26, 1994, the United States Patent and Trademark Office
(the "Patent Office") issued a U.S. patent (the "Patent") to the Company for the
use of the Fusing Agent as an alternative fusing agent in the cold printing
process. A patent for the use of the Fusing Agent as a fusing agent in the cold
printing process has also been issued to the Company in the United Kingdom and
in Belgium. The Company also has applied for similar patent rights with the
European Patent Office but such application has been denied.
In October 1995, the Patent Office issued a notice to the Company
that an unnamed party had copied a claim of the Patent for purposes of
instituting an Interference Proceedings to determine priority of invention. In
February 1997, the Patent Office declared Interference No. 103692 with a patent
application filed in the name of Gerd Goldman (the "Goldman Application"). The
Company understands that the Goldman Application is owned by OCE Printing
Systems GmbH. The Patent is identified as the Junior Party in the Interference.
In May 1997, pursuant to the Company's request, the Interference was stayed and
the Company was ordered to notify the Administrative Patent Judge within fifteen
days of the Company's discharge from bankruptcy. See Item 3, Legal Proceedings.
Although the Company believes that the Fusing Agent was
independently developed and does not infringe on patents of others, third
parties can claim that the Company's Fusing Agent infringes on the rights of
others. If it were determined that the Fusing Agent does infringe on the
property rights of third parties, including any patent issued pursuant to the
Goldman Application, the Company may be required to modify the formula of the
Fusing Agent or obtain a license from such third party. No assurance can be
given that the Company will be able to do so in a timely manner or on acceptable
terms and conditions; and the failure to do either could have a material adverse
effect on the Company's business. The Company, in the past, has initiated
litigation against a number of companies that have sold the Fusing Agent without
the Company's permission, and the Company will continue to defend its rights in
the Patent.
The Company has also filed several other patent applications with
the Patent Office regarding the cold fusion process and consumable products used
by printers, including an application related to dry toners which may
advantageously be used
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in color imaging, security document imaging, magnetic ink character recognition
printing and other specialized imaging applications with an electrophotographic,
electrographic, or magnetographic imaging systems designed for solvent vapor
fixing. To date, no other patents have been issued to the Company, and no
assurance can be given that any additional patents will be granted.
COMPETITION
Maintenance. The Company competes for equipment maintenance and
service contracts with both manufacturers of computers and peripheral equipment,
and with other third-party servicing companies. The manufacturers of the
computers and peripheral equipment serviced by the Company, which include Xerox,
Siemens, IBM and StorageTek, all have large maintenance divisions to support
their respective product lines. In addition, there are many large,
well-established national third-party service companies, including General
Electric Computer Services Corp., AT&T, Bell Atlantic Business Systems, Inc.
(formerly Sorbus, Inc.), and Grumman Corp. These companies, and most of the
company's other competitors, have substantially greater financial resources,
including larger marketing budgets, and larger technical staffs than the
Company. Most manufacturers of equipment also have the advantage of greater
familiarity with their own equipment and have greater access to the buyers of
such equipment. The Company competes regionally with other third-party
maintenance companies and with small specialty service companies.
Fusing Agent. The Company believes that it is the only
manufacturer of the Fusing Agent for the Model 2200 Siemens Printer.
EMPLOYEES
As of April 15, 1998, the Company had 12 full-time employees,
including two executive officers.
ITEM 2. DESCRIPTION OF PROPERTY.
As of April 15, 1998, the Company leases one warehouse in Los
Angeles pursuant to a three-year lease expiring February 2001 at a rent of
$4,700 per month, and one office facility in Agoura Hills, California pursuant
to a one-year lease expiring December 1998 at a rental of $2,700 per month. The
warehouse in Los Angeles has 10,000 square feet and the office in Agoura Hills
has 2,362 square feet.
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ITEM 3. LEGAL PROCEEDINGS.
The Company is the assignee of the entire right, title and
interest in and to U.S. Patent No. 5,333,042 (the "Patent") directed to a method
for using fusing agent in cold fusion laser printers. On October 16, 1995, the
Patent Office issued a notice to the Company that an unnamed party had copied a
claim of the Patent for purposes of instituting an Interference proceedings
under 35 U.S.C. 135 to determine priority of invention. In February 1997, the
Patent Office declared Interference No. 103692 with a patent application filed
in the name of Gerd Goldman (the "Goldman Application"). The Company understands
that the Goldman Application is owned by OCE Printing Systems GmbH. The Patent
is identified as the Junior Party in the Interference. In May 1997, pursuant to
the Company's request, the Interference was stayed and the Company was ordered
to notify the Administrative Patent Judge within fifteen days of the Company's
discharge from bankruptcy. Once notified of the discharge from bankruptcy, the
Patent Office will continue the formal proceedings to determine who was the
first inventor of the copied claim. Such proceedings could take several years to
resolve and be expensive to defend. The Company intends to vigorously defend its
rights to the Patent in the Interference Proceedings.
Prior to the institution of the bankruptcy proceedings, the
Company was a defendant in a number of lawsuits. Except for two, all of such
lawsuits were settled during such proceedings. The Company is contesting the two
lawsuits in the Bankruptcy Court, and believes that any recovery would be
immaterial.
The Company is a plaintiff in a class action suit against Siemens
Nixdorf Printing Systems and NCR Corporation for antitrust violations. As of
this date, the class of plaintiffs has not been certified. That case is entitled
Mailers Data Services, Inc., et al., v. Siemens Nixdorf Printing Systems, L.P.,
et al. and is pending in the Circuit Court of the Sixth Judicial Circuit in and
for Pinellas County, Florida and assigned case number 96-7077-CI-08.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
No matters were submitted during the fourth quarter of the fiscal
year covered by this report to a vote of the security holders.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock is currently traded in the OTC Electronic
Bulletin Board under the symbol "INTR". The following table sets forth the high
and low sales prices for the Common Stock during the two most recent fiscal
years. The prices do not include retail mark-ups, mark-downs or fees.
<TABLE>
<CAPTION>
Common Stock
Sales Prices
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Year Ended September 30, 1996 HIGH LOW
----------------------------- ---- ---
<S> <C> <C>
October 1, 1995 - December 31, 1995 $5.50 $4.875
January 1, 1996 - March 31, 1996 $5.50 $4.687
April 1, 1996 - June 30, 1996 $5.125 $4.50
July 1, 1996 - September 30, 1996 $5.00 $3.625
Year Ended September 30, 1997
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October 1, 1996 - December 31, 1996 $4.00 $3.00
January 1, 1997 - March 31, 1997 $2.875 $ .25
April 1, 1997 - June 30, 1997 $ .3125 $ .1875
July 1, 1997 - September 30, 1997 $ .875 $ .375
Year Ending September 30, 1998
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October 1, 1997 - December 31, 1997 $ .938 $ .563
January 1, 1998 - March 31, 1998 $ .750 $ .281
</TABLE>
To date, the Company has not declared or paid any cash dividends with
respect to its Common Stock, and the current policy of the Board of Directors is
to retain earnings, if any, to provide for the growth of the Company.
Consequently, no cash dividends are expected to be paid on the Common Stock in
the foreseeable future.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in this
Annual Report.
OVERVIEW
The Company was organized in 1983 to be a third-party provider of
maintenance services for computer hardware and related peripheral equipment. On
September 15, 1993, the Company effected an initial public offering of units,
each of which consisted of one share of common stock and a warrant to purchase
an additional share of common stock. The warrants expired in September 1996. The
Company's principal executive offices are currently located in Agoura Hills,
California.
On March 6, 1997 the Company filed for protection under Chapter 11 of
the U.S. Bankruptcy Code. The bankruptcy filing was caused by several factors.
The Company had made four acquisitions, and the cash flow of the Company was not
sufficient to pay the operating expenses and the substantial debts assumed as
part of the acquisitions. In addition, the Company was incurring substantial
legal expense from lawsuits which were then pending against the Company.
The Company's business plan had been to expand its maintenance
services through these acquisitions to include maintenance on Xerox machines as
well as those manufactured by Siemens. The Company was not able to operate the
Xerox maintenance business on a profitable basis and it was sold effective
November 1, 1997 with the approval of the Bankruptcy Court. The Company
continues to maintain high speed production printers manufactured by Siemens but
the majority of the Company's revenues now are generated from the sale to the
Company's maintenance clients and to others of consumable products used by high
speed production printers.
On April 1, 1998, the Bankruptcy Court ruled that the Company's Plan
of Reorganization should be and was in fact confirmed. Initial distributions to
creditors, as required under the Plan, are expected to be completed by the end
of May, 1998.
The Company's principal consumable product is a the Fusing Agent used
by the Model 2200 Siemens Printer. In July 1994, the U.S. Patent and Trademark
Office issued a patent to the Company for the use of the Fusing Agent in the
cold or vapor fusion laser printing process. The Company currently sells the
Fusing Agent directly to its maintenance clients and distributes the Fusing
Agent to other operators of the Model 2200 Siemens Printer. The Company also
sells the Fusing Agent to NCR Corporation, OCE, and the Bradshaw Group. During
the 1997 Fiscal Year, sales of the Fusing Agent constituted approximately 38% of
the Company's total revenue. The Company expects that U.S. sales of the Fusing
Agent will decrease in the future as the
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Model 2200 Siemens Printer is gradually replaced by newer models of printers
that do not use the Fusing Agent.
RESULTS OF OPERATIONS
FISCAL YEARS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
Sales for the fiscal year ended September 30, 1997 were approximately
the same as those for the fiscal year ended September 30, 1996. The 1997 sales
consisted of 38% from the sale of the fusing agent and 62% from maintenance and
other related activities. The 1996 results were 41% from the fusing agent and
59% from maintenance revenues. The Company believes that the decrease in sales
of Fusing Agent from $4,668,000 in 1996 to $4,270,000 in 1997 was due to the
Company's cash flow problems and inability to ship all orders. Additionally
Fusing Agent sales by Interscience PLC, the Company's United Kingdom subsidiary,
declined by 10% during fiscal year 1997. The maintenance revenues for 1997 of
$6,965,000 will be substantially reduced in the future as a result of the sale
in November 1997 of the Xerox maintenance business.
Cost of sales increased from 61.5% of sales to 81.8% of sales. This
increase was caused by two factors: (a) reduced sales of Fusing Agent which have
a higher gross profit and lower cost of sales and (b) increased expenses in
connection with the Xerox maintenance business, primarily parts cost. As a
result of the increase in cost of sales, gross profit decreased from 38.5% to
18.2%.
Selling and administrative expenses decreased by $1,270,000 from
41.4% to 30.2% as a percentage of sales. This came about as a result of the
Company's reorganization program, consolidating and reducing administrative
expense. Depreciation and amortization increased from 2.4% of sales to 2.9% of
sales. This was the result of a full year's depreciation on some of the assets
acquired in 1996. The Company had no research and development expenses in fiscal
year 1997.
The Company also wrote down parts inventory by $8,335,105 and
goodwill by $1,191,862. The inventory writedown was made in connection with the
lack of working capital to continue the Xerox maintenance business resulting in
the sale of the Xerox maintenance business. The goodwill writedown was
associated with the Acquisitions made by the Company and the Company's decision
to sell the businesses so acquired.
As a result of these writedowns and losses in fiscal 1997, the
Company incurred a loss from operations of $11,213,837 in contrast with a loss
of $670,837 in fiscal 1996.
The Company could receive future tax benefits based on this loss
when the inventory that was written off is sold or abandoned. The Company has
elected not
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to record a tax benefit at this time and will not until the Company has proven
that it is in a position to take advantage of those tax losses. The Company has
provided a 100% valuation allowance since it is more likely that the deferred
tax asset will not be realized.
LIQUIDITY AND CAPITAL RESOURCES
By March 1997, it became evident that the Company was unable to meet
its cash needs due to the following:
1. The burden of the Acquisition debt explained previously in
this report.
2. The legal expenses in connection with six lawsuits then
pending against the Company in this report.
3. The loss from operations of the Xerox maintenance business.
4. The Company had negative cash flow from operating activities
of $3,031,147 in 1996 and negative cash flow from financing
activities of $75,000 in 1997.
As a result, the Company filed on March 6, 1997 a petition for
protection under Chapter 11 of the U.S. Bankruptcy Code. During the period since
the bankruptcy filing, the Company has accomplished the following:
1. Sale of the losing Xerox maintenance business to Anacomp
Corporation on November 1, 1997.
2. Settlement of all of the major lawsuits.
3. Settlement with the sellers of LSE for a reduced amount of
$760,000 thus eliminating a larger judgment against the
Company.
4. A compromise agreement with all of its other creditors.
5. Reduced its loan from Sanwa Bank to $1,000,000 and agreed with
the bank on a new three-year payout.
6. Reduced the monthly equipment and property lease expense from
$80,000 per month to less than $10,000 per month.
7. Reduced the number of employees from approximately 80 to 12.
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On April 1, 1998, the Bankruptcy Court confirmed the Company's Plan
of Reorganization. Pursuant to the Plan, the outstanding common shares will be
increased from 2,541,666 to approximately 5,200,000 shares. The Company will
issue to creditors approximately 675,000 shares of Common Stock on the basis of
one share for every $5.00 of an approved unsecured claim and all pre-bankruptcy
unsecured debts would be satisfied. The Company's only remaining obligations
would be as follows:
1. A three-year loan from Sanwa Bank of approximately
$1,000,000 to be amortized over 36 equal installments with interest at prime
plus three percent.
2. A loan from Horizon Bank of $85,000 to be paid over three
years of 36 equal installments.
3. An obligation to share the proceeds on the remaining unsold
Xerox inventory with the unsecured creditors.
As part of the Plan, the Company's Series A Cumulative Convertible
Preferred Stock and Series B Cumulative Convertible Preferred Stock will be
converted into 1,750,000 shares of Common Stock and two year warrants to
purchase an additional 500,000 shares of Common Stock at $1.00 per share. All
delinquent dividends will be forgiven. An additional 250,000 shares of Common
Stock will be issued to management.
BACKLOG
The Company's total backlog as of September 30, 1997 for Fusing Agent
sales was approximately $550,000. The backlog on maintenance contracts are not
meaningful because these contracts carry 30 day cancellation clauses.
FUTURE OPERATIONS
It is expected that the Company in the next fiscal year will derive
at least 80% of its revenue from sales of Fusing Agent. The Company believes
that it will have sufficient cash flow to fund its operations through at least
the next fiscal year.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 128, "Earnings per
share ("SFAS No. 128") issued by the FASB is effective for fiscal years and
interim periods after December 15, 1997. Early adoption is not permitted. SFAS
128 provides for the calculation of Basic and Diluted earnings per share. Basic
earnings per share includes no dilution and is computed by dividing income
available to
13
<PAGE> 15
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of the entity, similar to fully
diluted earnings per share. The Company does not expect adoption of SFAS No. 128
to have a material effect on its financial position or results of operations.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130") issued by the FASB is effective for
financial statements with fiscal years beginning after December 15, 1997.
Earlier application is permitted. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. The Company does not expect adoption of
SFAS No. 130 to have a material effect on its financial position or results of
operations.
Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" ("SFAS No. 131") issued
by the FASB is effective for financial statements with fiscal years beginning
after December 15, 1997. Earlier application is permitted. SFAS No. 131 requires
that the public companies report certain information about operating segments,
products, services and geographical areas in which they operate and their major
customers. The Company does not expect adoption of SFAS No. 131 to have an
effect on its financial position or results of operations.
Statement of financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Post-Retirement Benefits" ("SFAS No. 132")
issued by the FASB is effective for fiscal years beginning after December 15,
1997. Early adoption is permitted. SFAS No. 132 revises the employers'
disclosures about pension and other post-retirement plans. It standardizes the
disclosure requirements for pensions and other post-retirement benefits. As the
Company does not have a pension or post-retirement plan, SFAS No. 132 does not
apply.
ITEM 7. FINANCIAL STATEMENTS
The following is a list of financial statements filed herewith:
Consolidated Balance Sheet as of September 30, 1997
Consolidated Statements of Operations for the years ended September
30, 1997 and 1996
Consolidated Statements of Shareholder's Equity (Deficit) for the
years ended September 30, 1997 and 1996
14
<PAGE> 16
Consolidated Statements of Cash Flows for the years ended
September 30, 1997 and 1996
Notes to Consolidated Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Effective September 30, 1997, the Company dismissed Hollander,
Gilbert & Co. as the Company's independent certified public accountants, and
engaged BDO Seidman, LLP as the Company's new independent certified public
accountants. Prior to the engagement of BDO Seidman, LLP, neither the Company
nor anyone on its behalf consulted with that firm regarding the application of
accounting principles to a specified completed or contemplated transaction, or
the type of audit opinion that might be rendered on the Company's consolidated
financial statements.
None of the reports on the Company's consolidated financial
statements for either the two fiscal years ended September 30, 1995 or September
30, 1996 contained an adverse opinion or a disclaimer of opinion, or were
modified as to uncertainty, audit scope or accounting principles.
The decision to change accountants was approved by the Company's
Board of Directors.
During the above mentioned audit engagements, there were no
disagreements with Hollander, Gilbert & Co. on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of
Hollander, Gilbert & Co. would have caused Hollander, Gilbert & Co. to make
reference to the subject matter of the disagreements in connection with the
firm's reports on the Company's consolidated financial statements.
15
<PAGE> 17
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
As of April 20, 1998, the directors and executive officers of the
Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Joseph R. Mancuso, Ph.D. 55 Director
George O. Harmon 73 Director
Norman Baker 56 Director
Robert Pearson 62 Director
Walter Kornbluh 66 President, Chief Executive Officer
and Chairman of the Board
Stephen Crosson 38 Vice President of Operations, Secretary
and Treasurer
</TABLE>
Joseph Mancuso, Ph.D. Dr. Mancuso became a director of the Company in
September 1993 following the closing of the Company's initial public offering.
Since 1978, Dr. Mancuso has been the publisher of the Entrepreneurial Manager's
Newsletter and the principal of both the Center for Entrepreneurial Management,
Inc., and the Chief Executive Officers Club. He is director of Globus Growth
Group, a venture capital firm.
George Harmon. Mr. Harmon became a director of the Company in
September 1993 following the closing of the Company's initial public offering.
From March 1988 to the present, Mr. Harmon has been the Chairman of the Board
and the Chief Executive Officer of Harmon Associates, and since March 1987 he
has been the Chairman of the Board of Omnidata Corporation. Mr. Harmon is a
director of Cirvis Inc.
Norman Baker. Mr. Baker, a U.K. national, joined the Company in
January 1994, as Managing Director of Interscience Computer Corporation-PLC.
Mr. Baker has for the past fifteen years been a director and associate of N.B.
Direct Mail Ltd., a U.K. domiciled direct marketing, research and mailing
operation. Mr. Baker was appointed to the Company's board in March 1995.
16
<PAGE> 18
Robert Pearson. Mr. Pearson has been associated with Renaissance
Capital since April of 1994. Presently, Mr. Pearson serves as a Senior Vice
President, Director of Corporate Finance of Renaissance Capital. He has served
as Executive Vice President of the Thomas Group from May 1990 to March 1994. For
25 years, Mr. Pearson held various senior management positions at Texas
Instruments, including Vice President of finance from October 1983 to June 1985.
Mr. Pearson holds directorships in the following companies: Poore Brothers, Inc.
and Tava Technologies.
Walter Kornbluh. Mr. Kornbluh joined the Company in May 1997. Mr.
Kornbluh is a licensed Certified Public Accountant in the States of California
and New York. For the past 10 years he has been the President and majority
owner of Workout Specialist Inc., a firm that specializes in assisting
companies with financial problems. He spent 17 years as President of Marathon
Office Supply, Inc., a public company whose stock was listed on the American
Stock Exchange.
Stephen W. Crosson. In March, 1992 Mr. Crosson became the
Company's Director of Operations, and in April 1995, Mr. Crosson became Vice
President of Operations. Mr. Crosson became Treasurer in April 1998.
DIRECTOR COMPENSATION
Directors do not receive any annual compensation. However, outside
directors receive $1,000 each for each meeting attended and reimbursement for
out-of-pocket expenses for attending meetings.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and certain of its officers, and persons who own more than
10 percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"). Officers, directors and greater than 10 percent
shareholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file. The Company believes that all
forms required to be filed under Section 16(a) were timely filed.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid by the Company
for its fiscal years ended September 30, 1997, September 30, 1996, and September
30, 1995 to its Chief Executive Officer and all other executive officers
(collectively, the "Named Executive Officers") whose total salary and bonus from
the Company exceeded $100,000 in the fiscal year ended September 30, 1997:
17
<PAGE> 19
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-----------------------------
FISCAL YEAR ALL
NAME AND ENDED OTHER
PRINCIPAL POSITION SEPTEMBER 30, SALARY BONUS COMPENSATION(2)
- ------------------ ------------- --------- ------- ----------------
<S> <C> <C> <C> <C>
Frank J. LaChappelle 1997 $141,250 -- $1,412
Chairman of the Board 1996 $143,750 -- $1,438
and Chief Executive Officer 1995 $150,000 -- $1,700
</TABLE>
- --------------------
(1) The compensation described in this table does not include insurance,
retirement benefits and other benefits received by the foregoing executive
officers which are available generally to all employees of the Company and
certain perquisites and other personal benefits received by the foregoing
executive officers of the Company, the value of which did not exceed the
lesser of $50,000 or 10% of the executive officer's cash compensation in the
table.
(2) Represents matching payments made under the 401(k) plan.
There were no options granted in the fiscal year ending September 30, 1997
and no options were exercised. As part of the Plan, all outstanding options were
cancelled in fiscal year 1997.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
All existing employment agreements were cancelled pursuant to the
Plan. Pursuant to the Plan, Renaissance Capital Corporation ("RCC") will
exchange its preferred stock (Series A and Series B Cumulative Convertible
Preferred Stock) into 1,750,000 shares of Common Stock. RCC will also be granted
warrants to purchase 500,000 shares of Common Stock at $1.00 per share for a
period of two years. During the 1997 fiscal year, Robert Pearson a
representative of RCC, became a director.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of April 20, 1998 by (i)
each person who is known by the Company to own beneficially more than 5% of
18
<PAGE> 20
the Company's outstanding Common Stock; (ii) each of the Company's directors;
(iii) the named Executive Officer; and (iv) executive officers and directors of
the Company as a group:
<TABLE>
<CAPTION>
COMMON STOCK(1)
---------------------------------
NUMBER OF PERCENTAGE OF
NAME AND ADDRESS(2) SHARES OUTSTANDING(3)
------------------- -------------- --------------
<S> <C> <C>
Frank J. LaChappelle........(4) 835,000 16.05
George O. Harmon............. 20,000 ---
Joseph R. Mancuso............. 6,500 ---
Robert Pearson..................(5) --- ---
Norman Baker................... 15,000 ---
Walter Kornbluh................ 200,000(6) 3.8
Renaissance Capital Growth &
Income Fund III, Inc........... 2,250,000(7) 39.47
8080 N. Central Expressway
Suite 210
Dallas, Texas 75206
All executive officers and
directors as a group
(6 persons)..................... 291,500 5.6
</TABLE>
- --------------------
(1) As used herein, the term beneficial ownership is defined by Rule 13d-3 under
the Securities Exchange Act of 1934 as consisting of sole or shared voting
power and/or sole or shared investment power subject to community property
laws where applicable.
(2) The address of each person is c/o the Company at 5236 Colodny Drive, #100,
Agoura Hills, CA 91301.
(3) Based on 5,200,000 shares of Common stock outstanding which, as of April 20,
1998, represents the Company's estimate of shares to be outstanding on the
effective date of the Plan.
19
<PAGE> 21
(4) All shares are held in the LaChappelle Family Trust with respect to which
Mr. LaChappelle exercises voting and investment power.
(5) Does not include any shares owned by RCC. Mr. Pearson is an executive
officer of RCC.
(6) Consists of shares to be issued pursuant to the Plan.
(7) According to Schedule 13D, dated September 13, 1994, filed with the
Commission, RCC is the investment advisor of Renaissance Capital Growth &
Income Fund III, Inc. (the "Fund"). As a part of the Plan, the Fund will
exchange all of its shares of Preferred Stock for 1,750,000 shares of the
Common Stock of the Company and two year warrants to purchase 500,000 shares
of Common Stock at $1.00 per share.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Mr. Frank LaChappelle resigned as an officer and director effective
on April 1, 1998. The Company has forgiven a $30,000 note to the Company. Mr.
LaChappelle has entered into a consulting agreement with PLC, the Company's
former English subsidiary, for a period of one year at a rate of $10,000 per
month.
Pursuant to a Share Sale Agreement dated April 1, 1998 between the
Company and Norman Baker, the Company sold to Mr. Baker all of the capital stock
of PLC for $10,000. Pursuant to a License Agreement dated April 1, 1998, PLC
agreed to pay a royalty to the Company of $10 per case of Fusing Agent sold
commencing April 1, 1999.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit
No. Description of Exhibit
1.1 First Amended Disclosure Statement to Accompany
Debtors First Amended Plan of Reorganization and
Debtors First Amended Plan of Reorganization
1.2 Sale to Anacomp Corporation the Company's Xerox
Business
20
<PAGE> 22
1.3 Settlement Agreement and Release of Claims between the
Company and LSE Partners
1.4 Share Sale Deed dated April 1, 1998 between the
Company, Norman Baker and Frank LaChappelle
1.5 License Agreement dated April 1, 1998 between the
Company and PLC.
1.6 Siemens printer contract sale agreement with A.B.O.G. Inc.
doing business as Landmark Computer Group dated May 4, 1998.
1.7 Siemens printer maintenance contract sale agreement with
CSI Computer Specialists Inc. dated May 4, 1998.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the
fiscal year covered by this report.
21
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INTERSCIENCE COMPUTER CORPORATION
By /s/ WALTER KORNBLUH
----------------------------------------
Walter Kornbluh, Chairman of the Board,
President and Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ WALTER KORNBLUH Chairman of the Board, April 30, 1998
- ------------------------------ President and Chief
Walter Kornbluh Executive Officer
/s/ STEPHEN CROSSON Vice President of April 30, 1998
- ------------------------------ Operations, Secretary and
Stephen Crosson Treasurer, and Principal
Financial and Accounting
Officer
/s/ JOSEPH R. MANCUSO Director April 30, 1998
- ------------------------------
Joseph R. Mancuso
/s/ GEORGE O. HARMON Director April 30, 1998
- ------------------------------
George O. Harmon
/s/ NORMAN BAKER Director April 30, 1998
- ------------------------------
Norman Baker
/s/ ROBERT PEARSON Director April 30, 1998
- ------------------------------
Robert Pearson
</TABLE>
22
<PAGE> 24
INTERSCIENCE COMPUTER
CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1997
<PAGE> 25
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
CONTENTS
================================================================================
<TABLE>
<S> <C>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT 3
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheet
September 30, 1997 4
Consolidated statement of operations
Years ended September 30, 1997 and 1996 5
Consolidated statement of shareholders' (deficit) equity
Years ended September 30, 1997 and 1996 6
Consolidated statement of cash flows
Years ended September 30, 1997 and 1996 7-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9-19
</TABLE>
2
<PAGE> 26
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders
Interscience Computer Corporation
(Debtor-in-Possession)
We have audited the accompanying consolidated balance sheet of Interscience
Computer Corporation and Subsidiaries as of September 30, 1997, and the related
consolidated statement of operations, shareholders' equity (deficit) and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit 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
misstatements. 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Interscience
Computer Corporation and Subsidiaries as of September 30, 1997, and their
results of operations, and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ BDO SEIDMAN, LLP
-----------------------------------
BDO Seidman, LLP
Los Angeles, California
March 13, 1998
Except for the last paragraph of
Note 11, as to which the date is
April 1, 1998
3
<PAGE> 27
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Interscience Computer Corporation
(Debtor-in-Possession)
We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of Interscience Computer Corporation and
subsidiaries for the year ended September 30, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of Interscience Computer Corporation and subsidiaries for the year
ended September 30, 1996, in conformity with generally accepted accounting
principles.
/s/ HOLLANDER, GILBERT & CO.
--------------------------------------
Hollander, Gilbert & Co.
Los Angeles, California
December 20, 1996 (except with respect
to the Company's bankruptcy filing
discussed in Note 1 as to which the
date is March 6, 1997)
<PAGE> 28
================================================================================
<TABLE>
<CAPTION>
September 30, 1997
- -----------------------------------------------------------------------------------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 586,811
Accounts receivable, net of allowance for doubtful
accounts of $290,129 1,090,628
Inventories (Note 3) 868,475
Due from officers, net of allowance of $104,134 (Note 5) 30,000
Prepaid expenses and other receivables, net of allowance of
$174,326 197,764
- -----------------------------------------------------------------------------------------
Total current assets 2,773,678
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $809,015 (Note 4) 300,817
OTHER ASSETS
Patents, net of accumulated amortization of
$165,492 (Note 2) 310,376
Deposits and other 37,281
- -----------------------------------------------------------------------------------------
Total other assets 347,657
- -----------------------------------------------------------------------------------------
Total assets $ 3,422,152
=========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 29
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEET
================================================================================
<TABLE>
<CAPTION>
September 30, 1997
- ------------------------------------------------------------------------------------------
<S> <C>
LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES NOT SUBJECT TO COMPROMISE
Current Liabilities
Trade accounts payable $ 175,155
Accrued liabilities 999,359
Deferred revenues 141,967
- ------------------------------------------------------------------------------------------
Total current liabilities 1,316,481
Liabilities subject to compromise (Note 11) 5,375,889(a)
- ------------------------------------------------------------------------------------------
Total liabilities 6,692,370
COMMITMENTS AND CONTINGENCIES (Note 2 and 6)
SHAREHOLDERS' DEFICIT (Note 7)
Preferred stock, no par value; authorized 1,000,000 shares; issued and
outstanding 40,000 shares 3,590,000
Common stock, no par value; authorized 10,000,000 shares; issued and
outstanding 2,541,666 shares 4,241,748
Accumulated deficit (11,101,966)
- ------------------------------------------------------------------------------------------
Total shareholders' deficit (3,270,218)
- ------------------------------------------------------------------------------------------
Total liabilities and shareholders' deficit $ 3,422,152
==========================================================================================
(a) Liabilities subject to compromise consist of the following:
Trade accounts payable $ 2,246,485
Long=term debt converted to current 3,129,404
==========================================================================================
Total liabilities subject to compromise $ 5,375,889
==========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 30
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
Years ended September 30, 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
SALES $ 11,235,303 $ 11,253,383
COST OF SALES 9,196,857 6,927,149
- ---------------------------------------------------------------------------------------------------
GROSS PROFIT 2,038,446 4,326,234
- ---------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Sales and administrative 3,388,689 4,658,929
Development - 67,799
Depreciation and amortization 336,627 270,343
Write-down of inventory (Note 3) 8,335,105 -
Write-down of goodwill (Note 10) 1,191,862 -
- ---------------------------------------------------------------------------------------------------
Total operating expenses 13,252,283 4,997,071
- ---------------------------------------------------------------------------------------------------
Loss from operations (11,213,837) (670,837)
- ---------------------------------------------------------------------------------------------------
Reorganization items:
Professional fees 137,644 -
OTHER INCOME (expense)
Loss contingency (Note 6) - (200,000)
Gain (loss) on asset sale - (39,460)
Interest income 879 5,100
Interest expense (158,922) (227,695)
- ---------------------------------------------------------------------------------------------------
Total other income (expense) (158,043) (462,055)
- ---------------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAX (11,509,524) (1,132,892)
INCOME TAX EXPENSE (BENEFIT) (Note 8) 12,610 (81,000)
- ---------------------------------------------------------------------------------------------------
NET LOSS (11,522,134) (1,051,892)
DIVIDENDS ON PREFERRED STOCK $ 75,000 $ 285,247
====================================================================================================
LOSS APPLICABLE TO COMMON STOCK $ (11,597,134) $ (1,337,139)
====================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 2,541,666 2,541,666
====================================================================================================
LOSS PER COMMON SHARE $ (4.56) $ (.53)
====================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 31
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
===================================================================================================================================
Preferred Stock Common Stock Retained
--------------------------- --------------------------
Shares Amount Shares Amount Earnings Total
(Accumulated
Deficit)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, at October 1, 1995 36,000 $ 3,200,000 2,541,666 $ 4,241,748 1,832,307 $ 9,274,055
Private placement 4,000 390,000 - - - 390,000
Cash dividends paid on preferred stock - - - - (285,247) (285,247)
Net loss - - - - (1,051,892) (1,051,892)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, at September 30, 1996 40,000 3,590,000 2,541,666 4,241,748 495,168 8,326,916
Cash dividends paid on preferred stock - - - - (75,000) (75,000)
Net loss - - - - (11,522,134) (11,522,134)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, at September 30, 1997 40,000 $ 3,590,000 2,541,666 $ 4,241,748 (11,101,966) $ (3,270,218)
===================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 32
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Years ended September 30, 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (11,522,134) $ (1,051,892)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Loss from write-down of inventory 8,335,105 -
Loss from write-down of goodwill 1,191,862 -
Depreciation and amortization 336,627 270,343
Provision for doubtful accounts - 405,980
Loss from rescission of asset sale - 61,929
Loss contingency - 200,000
Changes in operating assets and liabilities:
Accounts receivable 929,770 (257,239)
Inventories (208,555) (2,549,345)
Prepaid expenses and other receivables (137,239) 28,000
Deposits and other 58,991 (3,919)
Accounts payable and accrued expenses 1,312,308 143,136
Deferred revenue (26,425) 24,374
Income taxes payable and deferred - (302,514)
- ---------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 270,310 (3,031,147)
- ---------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiary - (27,638)
Rescission of asset sale - 51,809
Advance to officer - (30,000)
Investment in equipment contracts receivable 55,146 487,290
Sale of assets - 585,000
Patent acquisition cost - (72,849)
Purchase of property and equipment - (65,594)
- ---------------------------------------------------------------------------------------------
Net cash provided by investing activities 55,146 928,018
- ---------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 33
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Years ended September 30, 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans - 3,645,000
Principal reductions of short-term and long-term
obligations - (3,356,286)
Proceeds of preferred stock placement - 390,000
Cash dividend paid on preferred stock (75,000) (285,247)
- ---------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (75,000) 393,467
- ---------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 250,456 (1,709,662)
CASH AND CASH EQUIVALENTS, beginning of period 336,355 2,046,017
- ---------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 586,811 $ 336,355
=============================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 158,922 $ 69,493
=============================================================================================
Income taxes paid $ 12,610 $ 212,988
=============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE> 34
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
Interscience Computer Corporation (the "Company") was incorporated under the
laws of the State of California on October 14, 1983, to be a third party
provider of maintenance services for computer hardware and related peripheral
equipment. The Company currently provides technical support, training, spare
parts resale and maintenance for the Siemens, Xerox and Delphax families of high
speed production printers. In 1992, the Company introduced a
non-chloroflurocarbon fusing agent, developed by the Company and patented on
July 26, 1994, for use with certain high speed laser printers. Soon thereafter,
the Company initiated a toner development program. As a result of the Company's
development of the Fusing Agent and toner, gross revenues from these items
constituted approximately 38% and 31% of Company sales, for the years 1997 and
1996.
PETITION FOR RELIEF UNDER CHAPTER 11
On March 6, 1997, the Company (the "Debtor") filed petitions for relief under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
in Los Angeles, California. Under Chapter 11, certain claims against the Debtor
in existence prior to the filing of the petitions for relief under the federal
bankruptcy laws are stayed while the Debtor continues business operations as
Debtor-in-possession. These claims are reflected in the September 30, 1997
consolidated balance sheet as "liabilities subject to compromise." Additional
claims (liabilities subject to compromise) may arise subsequent to the filing
date resulting from rejection of executory contracts, including leases, and from
the determination by the court (or agreed to by parties in interest) of allowed
claims for contingencies and other disputed amounts. Claims secured against the
Debtor's assets (Secured Claims) also are stayed, although the holders of such
claims have the right to move the court for relief from the stay. Secured Claims
are partially secured primarily by liens on the Debtor's property, equipment and
accounts receivable.
9
<PAGE> 35
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Reorganization Plan (the "Plan") was approved by the Bankruptcy Court on
April 1, 1998.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Interscience
Computer Corporation and its subsidiaries, all of which are wholly-owned. All
significant intercompany transactions have been eliminated. The accompanying
consolidated financial statements include the results of operations and cash
flows of acquired subsidiaries from their respective dates of acquisition.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents. Such cash
equivalents, at times, may exceed federally insured limits. The Company
maintains its accounts with financial institutions with high credit ratings.
10
<PAGE> 36
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories consist of consumables held for sale in the normal course of
business and replacement parts. Consumables are recorded at the lower of cost or
market. Cost is determined on the first-in, first-out method. The Company
periodically reviews its inventory and establishes a provision for excess
quantities and obsolescence.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 "Disclosures About Fair
Value of Financial Instruments," requires disclosure of the fair value of
certain financial instruments. Accounts receivable and accounts payable and
liabilities subject to compromise as reflected in the financial statements
approximate fair value because of the short-term maturity of these instruments.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed on the
straight-line method based upon the estimated useful life of the asset,
primarily 5 years.
INTANGIBLES
The costs of patents acquired are amortized on the straight-line method over
seven years.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically assesses the recoverability of the carrying amounts of
long-lived assets, including intangible assets. A loss is recognized when
expected undiscounted future cash flows are less than the carrying amount of the
asset. The impairment loss is the difference by which the carrying amount of the
asset exceeds its fair value. See Notes 3 and 9.
DEFERRED REVENUE
Service revenue is recognized ratably over the contract period. Deferred service
revenue represents billing in advance of the service period.
11
<PAGE> 37
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION
The financial statements of the Foreign Subsidiary were translated from
British Pounds, the functional currency, into U.S. dollars.
Results of operations for the Company's foreign subsidiary are translated using
the average exchange rates during the period. Resulting translation adjustments
are not material.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 128, "Earnings per share ("SFAS
No. 128") issued by the FASB is effective for fiscal years and interim periods
after December 15, 1997. Early adoption is not permitted. SFAS 128 provides for
the calculation of basic and Diluted earnings per share. Basic earnings per
share includes no dilution and is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of the entity, similar to fully
diluted earnings per share. The Company does not expect adoption of SFAS No. 128
to have a material effect on its financial position or results of operations.
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130") issued by the FASB is effective for financial
statements with fiscal years beginning after December 15, 1997. Earlier
application is permitted. SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. The Company does not expect adoption of
SFAS No. 130 to have a material effect on its financial position or results of
operations.
12
<PAGE> 38
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS No. 131") issued by the FASB is
effective for financial statements with fiscal years beginning after December
15, 1997. Earlier application is permitted. SFAS No. 131 requires that the
public companies report certain information about operating segments, products,
services and geographical areas in which they operate and their major customers.
The Company does not expect adoption of SFAS No. 131 to have an effect on its
financial position or results of operations.
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
about Pensions and Other PostRetirement Benefits" ("SFAS No. 132") issued by the
FASB is effective for fiscal years beginning after December 15, 1997. Early
adoption is permitted, SFAS No. 132 revises the employers' disclosures about
pension and other post-retirement plans. It standardizes the disclosure
requirements for pensions and other post-retirement benefits. As the Company
does not have a pension or post-retirement plan SFAS No. 132 does not apply.
13
<PAGE> 39
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
2. DISCLOSURE OF CERTAIN RISKS AND UNCERTAINTIES
PATENT
The Company is the assignee of the entire right, title and interest in and to
U.S. Patent No. 5,333,042 (the "Patent") directed to a method for using fusing
agent in cold fusion laser printers. The Fusing Agent represents approximately
38% and 31% of the Company's sales for the years ended 1997 and 1996. A
loss of this Patent would have a material adverse effect on the business of the
Company. On October 16, 1995, the Patent Office issued a notice to the Company
that an unnamed party had copied a claim of the Patent for purposes of
instituting an Interference Proceedings under 35 U.S.C. 135 to determine
priority of invention. The Patent Office notified the Company that an
interference was declared, and the Company is unable to estimate when the Patent
Office will issue its determination on the Claim. Such proceedings
could take several years to resolve and be expensive to defend. The Company
believes that it was the first inventor of the inventions claimed in the patent.
SOURCES OF SUPPLY
The Company believes that there are several domestic or foreign companies that
can provide the Company with the hydro chloro-flouro carbon ("HCFC") that it
expects to need in the future for the manufacture of its fusing agent. The
Company has initiated discussions with several suppliers regarding future
purchases of HCFC and will decide on who its future supplier will be based on
price and other considerations.
14
<PAGE> 40
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
2. DISCLOSURE OF CERTAIN RISKS AND UNCERTAINTIES (CONTINUED)
CUSTOMER CONCENTRATION
One customer accounted for approximately 15% of total sales in 1996. Two
customers accounted for approximately 19% of total sales in 1997.
3. INVENTORIES
Inventories consist of the following at September 30, 1997:
<TABLE>
<CAPTION>
1997
- ----------------------------------------------------------------
<S> <C>
Equipment and parts for sale $ 560,050
Replacement parts 308,425
- ----------------------------------------------------------------
Total inventory $ 868,475
================================================================
</TABLE>
In September 1997, the Company recorded special charges of $8,335,105 to
write-off inventory associated with operations which would require additional
working capital to continue. The Company has been unable to obtain additional
working capital since it is in bankruptcy reorganization. This inventory was
primarily related to the Xerox and Delphax maintenance business. The Company
intends to sell these operations during the year ending September 30, 1998.
15
<PAGE> 41
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at September 30, 1997:
<TABLE>
<CAPTION>
1997
- ----------------------------------------------------------------
<S> <C>
Furniture and fixtures $ 64,778
Test and training equipment 1,005,332
Transportation equipment 39,722
- ----------------------------------------------------------------
1,109,832
Less accumulated depreciation 809,015
- ----------------------------------------------------------------
$ 300,817
================================================================
</TABLE>
5. RELATED PARTY TRANSACTION
As of September 30, 1997, the Company had outstanding receivables of $30,000
from its Chief Executive Officer, $85,000 plus accrued interest of $8,634 from
its Vice President of Sales and Services, and $10,500 from its former President.
During the year ended September 30, 1997, the Company classified $104,134 of
these receivables as doubtful accounts.
6. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases its facilities pursuant to various leases.
Minimum annual lease payments required under non-cancelable leases as of
September 30, 1997 are as follows:
<TABLE>
<CAPTION>
Year Ending
September 30, Amount
- -----------------------------------------------------------------
<S> <C>
1998 $ 83,124
1999 58,824
2000 50,724
2001 23,500
- ----------------------------------------------------------------
$ 216,172
================================================================
</TABLE>
Total rent expense for the years ended September 30, 1997 and 1996 amounted to
$331,035 and $162,005, respectively.
16
<PAGE> 42
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
TAX-QUALIFIED SAVINGS PLAN
The Company has adopted a tax-qualified savings plan (the "401(k) Plan") which
is intended to qualify under Section 401(k) of the Internal Revenue Code. The
Company pays the administrative expenses of the 401(k) Plan and currently
matches 25% of an employee's contribution, up to 1% of an employee's salary, by
making additional contributions to the plan. Generally, an employee becomes
eligible for participation in the 401(k) Plan after six months of employment
with the Company. Each employee may elect to contribute to the 401(k) Plan,
through payroll deductions, up to the statutory limitation. Salary reduction
contributions are immediately 100% vested. Company contributions vest 20% after
two years of service and 20% each service year thereafter. The Company's
matching contributions were $8,105 and $7,815 in 1997 and 1996, respectively.
LEGAL PROCEEDINGS
On August 13, 1996, Thomas Zirnite ("Zirnite") filed an action against the
Company for breach of contract and wrongful termination in the Los Angeles
County Superior Court, seeking unspecified damages. The Company cross-complained
for $1,000,000 of damages and $10,000,000 of punitive damages based on slander.
Zirnite alleged that the termination was in retaliation for his refusal to
perform accounting procedures that would violate the law and generally accepted
accounting procedures. Zirnite made such allegations to the third parties, for
which the Company filed the cross-complaint. The Zirnite claims were settled
after September 30, 1997 for $50,000 as part of the unsecured creditors.
17
<PAGE> 43
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
On September 23, 1996, Laura Brennan filed a complaint against the Company and
James Mitchelli, Vice President of the Company, for employment discrimination
and wrongful termination. Ms. Brennan alleged that she was terminated upon
becoming pregnant. The complaint asked for an unspecified amount of actual and
punitive damages. The Brennan claims were settled after September 30, 1997 for
$60,000 as part of the unsecured creditors.
The Company is a plaintiff in a class action suit against Siemens Nixdorf
Printing Systems and NCR Corporation for antitrust violations. As of this date,
the class of plaintiffs has not been certified. That case is entitled Mailers
Data Services, Inc., et al., v. Siemens Nixdorf Printing Systems, L.P., et al.
and is pending in the Circuit Court of the Sixth Judicial Circuit in and for
Pinellas County, Florida and assigned case number 96-7077-CI- 08.
Included in the consolidated statements of operations for the fiscal year ended
September 30, 1996 is a one-time pre-tax provision of $200,000 in connection
with legal proceedings.
7. SHAREHOLDERS' DEFICIT
All options which had been previously issued and the Company's Incentive Stock
Option Plan were terminated during the year ended September 30, 1997.
8. INCOME TAXES
At September 30, 1997, the Company has available net operating loss
carryforwards of approximately $9,729,000 for income tax purposes, which expire
in varying amounts through 2012.
The net operating loss carryforward generated a deferred tax asset of
approximately $3,710,000. The deferred tax asset was not recognized since it is
more likely that they will not be realized. Accordingly, a 100% valuation
allowance was provided.
18
<PAGE> 44
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
9. ACQUISITIONS
The Company acquired assets of three companies during the year ended September
30, 1996. The excess of purchase price over the fair value of tangible assets
was accounted for as goodwill.
In October 1995, the Company acquired the Page Printer Division ("PPD") of
Miltope Business Products, Inc. for approximately $260,000. PPD is a
third-party maintenance provider for Delphox and Olympus page printers.
In June 1996, the Company acquired certain Xerox printer maintenance contracts,
equipment and spare parts inventory form BancTec, Inc. for a purchase price of
$2,050,000 in cash and a promissory note. The Company also hired some of
BancTec's field engineers.
In October 1996, the Company acquired substantially all of the assets of Laser
Printing Services, Inc. ("LPS"), a Xerox laser printer maintenance provider,
for $600,000 in cash and a promissory note.
10. GOODWILL
In September 1997, the Company recorded a write-down of $1,191,862 to write-off
the unamortized portion of goodwill associated with the JC Alltime and Laser
Support and Engineering lines of business. The Company has been unable to obtain
additional working capital to continue these operations since it is in
bankruptcy reorganization and intends to discontinue these operations during the
year ending September 30, 1998.
19
<PAGE> 45
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
11. SUBSEQUENT EVENTS
SALE OF XEROX MAINTENANCE BUSINESS
The Company sold its Xerox maintenance business to Anacomp Corporation, an
Indiana corporation as of November 1, 1997. The purchase price was $1,220,000 at
closing and an earnout payment based on revenues generated by the Xerox
maintenance business to be made in the 13th month following closing. The sale to
Anacomp was heard on December 1, 1997 by the bankruptcy court and was approved.
SALE OF FOREIGN OPERATIONS
Effective April 1, 1998, the Company sold all of the capital stock of PLC to
its Managing Director for $10,000 and entered into a license agreement with PLC
requiring the payment by PLC of a royalty of $10.00 per case of fusing agent
sold commencing April 1, 1999.
FILING OF DISCLOSURE STATEMENT AND PLAN OF REORGANIZATION
The Company filed an amended Disclosure Statement and Plan of Reorganization on
January 5, 1998. On January 9, 1998 a hearing was held on the adequacy of the
Disclosure Statement and the statement was approved to be mailed to creditors.
Under the Plan, creditors will be treated as follows:
1. Administrative expenses will be paid in cash shortly after confirmation.
2. Tax liabilities will be paid over a six-year period in equal quarterly
payments.
3. Sanwa Bank has already received $1,000,000 and the balance of the loan will
be paid over three years at prime interest plus 3%.
4. Horizon Bank will be paid in 36 equal installments of principal and interest.
5. All vendors under $500 will be paid in full at closing.
20
<PAGE> 46
INTERSCIENCE COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
11. SUBSEQUENT EVENTS (CONTINUED)
6. All unsecured creditors will receive 25% of their approved debt shortly after
closing plus one (1) share of stock for every five dollars ($5.00) of approved
debt. There is a possibility of an additional payment based on future sales of
Xerox parts.
7. The preferred shareholders have agreed to accept 1,750,000 shares of common
stock with two year warrants to purchase an additional 500,000 shares of common
stock at $1.00 per share. All delinquent dividends will be forgiven.
8. Original shareholders will retain their shares. They will be diluted by
issuance of common stock to the preferred shareholders and unsecured creditors.
9. An additional 250,000 shares of common stock will be issued to management.
The above Plan was approved by the unsecured creditors' committee Sanwa Bank and
Horizon Bank. To date there have been no objections to the Plan. The effect of
this reorganization will be shown in the Company's September 30, 1998 financial
statement and will include a forgiveness of indebtedness by the unsecured
creditors as well as expenses for all the costs of bankruptcy from October 1,
1997.
The Plan was approved by the Bankruptcy Court on April 1, 1998.
21
<PAGE> 1
EXHIBIT 1.1
BIEGENZAHN WEINBERG
STEPHEN F. BIEGENZAHN (SBN 60584)
JOEL B. WEINBERG (SBN 101466)
21031 Ventura Boulevard, Suite 905
Woodland Hills, California 91364-2203
(818) 594-8822
Attorneys for Debtor in Possession
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
In re ) BK. NO. SV 97-13095 AG
)
) In a Case Under Chapter 11 of
INTERSCIENCE COMPUTER ) the Bankruptcy Code
CORPORATION, A CALIFORNIA )
CORPORATION, ) DEBTOR'S FIRST AMENDED
) PLAN OF REORGANIZATION
Debtor. ) (JANUARY 5, 1998)
)
DEBTOR'S TAX I.D. ) Confirmation Hearing:
NO. 95-3880130 )
) DATE: April 1, 1998
) TIME: 9:00 a.m.
) CTRM: 302
) U.S. Bankruptcy Court
) San Fernando Valley
) Division
) 21041 Burbank
) Boulevard
) Woodland Hills,
- -------------------------------- ) California 91367
Pursuant to 11 U.S.C. Sections 1121(c), 1121(d), and 1129,
INTERSCIENCE COMPUTER CORPORATION, a California corporation ("Debtor"), hereby
proposes this Debtor's First Amended Plan of Reorganization (January 5, 1998):
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. DEFINITIONS.......................................................... 2
A. Defined Terms.................................................................. 2
B. Terms Defined in the Code.......................................................8
C. Rules of Interpretation, Computation of Time and
Governing Law...................................................................8
1. Rules of Interpretation............................................... 8
2. Computation of Time................................................... 9
3. Governing Law......................................................... 9
ARTICLE II. TREATMENT OF ADMINISTRATIVE AND TAX CLAIMS........................... 10
A. Administrative Claims......................................................... 10
1. Payment of Administrative Claims..................................... 10
(a) Administrative Claims In General..............................10
(b) Statutory Fees............................................... 10
(c) Ordinary Course Liabilities.................................. 10
(d) Professional Fees And Expenses............................... 11
(e) Bar Dates for Administrative Claims.......................... 11
B. Tax Claims.................................................................... 12
ARTICLE III. CLASSIFICATION OF CLAIMS AND INTERESTS............................... 12
A. Claims and Interests.......................................................... 12
B. Limitation on Inclusion in a Class............................................ 12
C. Classes of Claims and Interests............................................... 13
1. Class 1 (Allowed Secured Claim of Sanwa Bank)........................ 13
2. Class 2 (Allowed Secured Claim of Horizon Bank)...................... 13
3. Class 3 (All Allowed Secured Claims Except Sanwa
and Horizon Bank) .................................................. 13
4. Class 4 (Administrative Convenience Claims) ........................ 13
5. Class 5 (General Allowed Unsecured Claims) ......................... 13
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C>
6. Class 6 (Interest Holders -- Old Preferred) ......................... 14
7. Class 7 (Interest Holders -- Old Common) ............................ 14
ARTICLE IV. SPECIFICATION AND TREATMENT OF UNIMPAIRED
CLAIMS............................................................... 14
A. Priority Claims............................................................... 14
B. Allowed Tax Claims............................................................ 14
C. Allowed Class 4 Claims (All Allowed Secured Claims
Except Sanwa Bank and Horizon Bank)........................................... 14
ARTICLE V. SPECIFICATION AND TREATMENT OF IMPAIRED
CLASSES.............................................................. 15
A. Class 1 (Allowed Secured Claim of Sanwa Bank)................................. 15
B. Class 2 (Allowed Secured Claim of Horizon Bank)............................... 18
C. Class 4 (Administrative Convenience Claims)................................... 19
D. Class 5 (General Allowed Unsecured Claims) ................................... 19
E. Class 6 (Allowed Interest -- Old Preferred) .................................. 20
F. Class 7 (Interest Holders -- Old Common) ..................................... 20
G. No Fractional Shares.......................................................... 21
ARTICLE VI. VOTING OF CLAIMS AND INTERESTS....................................... 21
A. Objections to Claims and Interests............................................ 21
B. Voting of Claims or Interests................................................. 21
ARTICLE VII. MEANS FOR IMPLEMENTATION OF THE PLAN................................. 22
A. Continued Corporate Existence................................................. 22
B. Corporate Issues And Authorizations........................................... 22
1. Corporate Governance................................................. 22
a. Certificate of Incorporation and Bylaws...................... 22
b. Directors and Officers....................................... 23
c. Corporate Actions and Authorizations......................... 23
d. Cancellation of Claims and Rights to
Acquire Interests............................................ 25
C. Issuance of Securities of Reorganized Debtor.................................. 25
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C>
D. Assignability of Consideration Received....................................... 25
E. Prohibited Actions by Governmental Taxing
Authorities................................................................... 26
ARTICLE VIII. PROVISIONS COVERING DISTRIBUTIONS AND
OBJECTIONS TO CLAIMS AND INTERESTS................................... 26
A. Disbursing Agent.............................................................. 26
B. Funding for Payments to Allowed Administrative
Claims........................................................................ 26
1. Funding for Allowed Administrative and Other
Claimants............................................................ 26
2. Distribution of Securities .......................................... 27
C. Disputed Claims and Interests................................................. 27
1. Objections to Claims and Interests................................... 27
2. Filing Deadline...................................................... 27
3. Payment or Distribution upon Resolution of
Disputed Claims or Interests......................................... 27
D. Funding for Priority, Administrative and Secured
Claims........................................................................ 28
ARTICLE IX. CONDITIONS PRECEDENT TO CONFIRMATION AND
CONSUMMATION OF THE PLAN............................................. 28
A. Revesting of Assets in Debtors................................................ 28
B. Litigation Rights............................................................. 28
ARTICLE X. EXECUTORY CONTRACTS AND UNEXPIRED LEASES...................................... 29
A. Rejection of Executory Contracts and Unexpired
Leases........................................................................ 29
B. Classification of Claims Arising from the Rejection
of Executory Contracts and Unexpired Leases....................................29
ARTICLE XI. MODIFICATION OF THE PLAN..............................................30
ARTICLE XII. DISCHARGE.............................................................30
ARTICLE XIII. RETENTION OF JURISDICTION.............................................30
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE XIV. SECURITIES TO BE ISSUED PURSUANT TO THE PLAN..........................31
A. Status of Securities to be Issued Pursuant to the
Plan...............................................................................31
ARTICLE XV. CONFIRMATION REQUEST..................................................32
</TABLE>
- iv -
<PAGE> 6
ARTICLE I.
DEFINITIONS
A. Defined Terms. As used herein, the following terms
shall have the following meanings:
1. "Administrative Claim" means a Claim entitled to priority
pursuant to Section 507(a)(1) or Section 507(b) of the Code. Such Claims
include, without limitation, a Claim for payment of an administrative expense of
the kind specified in Section 503(b) of the Code, including, without limitation,
the actual and necessary costs and expenses of preserving and operating the
Debtor's Estate, compensation and reimbursement of expenses for legal and other
services awarded under Sections 330(a) and/or 331 of the Code, and all fees and
charges assessed against the Debtors' Estates pursuant to Chapter 123 of Title
23, United States Code.
2. "Acquired Operations" means collectively LSE, defined infra,
the Page Printing Division acquired from Miltope Business Products, Inc.,
certain operations relating to Xerox printer maintenance acquired from BancTec,
Inc. and the assets acquired from Laser Printing Services, Inc.
3. "Administrative Claimant" means the holder of an Allowed
Administrative Claim.
4. "Allowed Claim" means a Claim against the Debtor to the extent
that:
a. Proof of such Claim was:
(1) Timely filed;
(2) Deemed filed pursuant to Section 1111(a)
of the Code; or
- 2 -
<PAGE> 7
(3) Late filed with leave, and pursuant to Final
Order, of the Court; and
b. (1) No objection to such Claim is filed with the
Court;
(2) The Court, pursuant to Final Order, allows
such Claim; or
(3) The Plan allows such Claim.
5. "Allowed Secured Claim" means a Secured Claim which is or has
become an Allowed Claim.
6. "Allowed Tax Claim" means a Tax Claim which is or has become
an Allowed Claim, and does not include claims held by Tax Claimants assessed on
the basis of taxable income of the Debtors earned or arising after the Petition
Date.
7. "Allowed Unsecured Claim" means any Allowed Claim which is not
an Administrative Claim, a Secured Claim, a Tax Claim, a Priority Claim, or an
Insider Claim.
8. "Anacomp" means Anacomp an Indiana corporation which purchased
certain assets of Debtor pursuant to Court order entered on December 1, 1997.
9. "Anacomp Proceeds" means the Debtor's proceeds from the sale
of certain of the Debtor's assets to Anacomp pursuant to Court order in the sum
of approximately $1,032,000.00
10. "Bankruptcy Rules" means, collectively, the Federal Rules of
Bankruptcy Procedure and the Local Bankruptcy Rules for the Central District of
California as now in effect or hereafter amended.
11. "Bar Date" means July 9, 1997.
12. "Business Day" means any day except Saturday,
- 3 -
<PAGE> 8
Sunday or any other day on which state or federal law authorizes commercial
banks in Los Angeles, California, to close.
13. "Case" means the Case of Interscience Computer Corporation
assigned clerk's docket number SV 97-130095-AG which Case was commenced by the
filing of a voluntary Chapter 11 petition by the Debtor in the Court, defined
infra.
14. "Chapter 11" means Chapter 11 of the Code.
15. "Claim" means any right to payment from the Debtor that arose
prior to Confirmation, whether or not such right or demand is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured, or, any right or
equitable remedies for breach of performance, if such breach gives rise to a
right to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured or unsecured.
16. "Claimant" means the holder of any Allowed Claim.
17. "Class" means a class of Claims or Interests described in
this Plan.
18. "Code" means Title 11 of the United States Code, Section 101,
et seq., as amended.
19. "Committee" means the Official Committee of Creditors Holding
Unsecured Claims Against the Debtor which has been appointed in this Case by the
Office of the United States Trustee, and any successor committee.
20. "Confirmation" means the entry of the Order of Confirmation
confirming the Plan pursuant to Section 1129 of the Code.
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21. "Court" means the United States Bankruptcy Court for the
Central District of California, or such other Court, which either had or has
jurisdiction over the Case.
22. "Debtor" means Interscience Computer Corporation, a
California corporation, the debtor in possession in the Case.
23. "Disbursing Agent" means Debtor or such other party as the
Court may designate.
24. "Distribution Account" means the segregated commercial
account maintained by the Disbursing Agent, as trustee for the benefit of the
Debtor's Creditors for distributions to be made pursuant to the Plan, defined
infra, at financial institution which appears on the list of depository
institutions approved by the Office Of The United States Trustee for the Central
District of California.
25. "Disclosure Statement" means the Disclosure Statement
approved by the Court as containing adequate information in conformity with
Section 1125 of the Bankruptcy Code.
26. "Disputed Claim" means a Claim either: (a) scheduled by the
Debtor as disputed, contingent or unliquidated in the Schedules on file with the
Court, as may be amended or modified; or (b) as to which an objection has been
filed and which objection either (i) has not been withdrawn or (ii) has not been
determined by a Final Order.
27. "Distribution Date" means the first Business Day
following the Effective Date.
28. "Effective Date" means that date which is eleven (11) days
after the entry of the Order of Confirmation.
29. "Estate" means the estate in the Case created
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pursuant to Section 541(a) of the Code.
30. "Final Order" means an order, judgment, or other decree of
the Court or any court of competent jurisdiction as to which: (a) the operation
or effect has not been reversed, stayed, modified or amended; (b) any appeal
that has been or may be taken has been resolved; or (c) the time for appeal,
review or rehearing has expired.
31. "Horizon Bank" means Horizon Bank of Virginia, a state member
bank.
32. "Interest" means: (a) the common or preferred stock of each
of the Debtor; and (b) any right, warrant or option, however arising, to acquire
the common stock or any other equity interest, or any rights therein, of the
Debtor.
33. "ICC-PLC" means Interscience PLC, a corporation organized and
existing under the laws of the United Kingdom, which is a wholly owned subsidary
of the Debtor.
34. "ICC-Gmbh" means Interscience Gmbh, a corporation organized
and existing under the laws of the Republic of Germany, which is a wholly owned
subsidiary of ICC-PLC.
35. "LSE" means Laser Support & Engineering, Inc., a California
corporation, which is a wholly owned subsidiary of the Debtor.
36. "LSE Plaintiffs" means collectively Dennis Casey, John
Hively, John Greb and Barry Lynn who were the former shareholders of LSE and are
the plaintiffs in an action pending in the Superior Court of California in the
County of Orange assigned clerk's docket number 767230 and entitled Greb v.
Interscience Computer Corporation, which has been consolidated with a cross
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action filed by the Debtor against the LSE Plaintiffs.
37. "New Common" means the shares of Reorganized Debtor's common
stock to be issued pursuant to the Plan.
38. "Old Common" means the shares of Debtor's common stock which
were issued and outstanding at the Petition Date.
39. "Old Preferred" means the shares of the Debtor's preferred
stock which were issued outstanding at the Petition Date.
40. "Order of Confirmation" means the Order of the Court
confirming the Plan pursuant to Section 1129 of the Code.
41. "Petition Date" means March 6, 1997.
42. "Plan" means this "Debtor's First Amended Plan of
Reorganization (January 5, 1998)," as may be amended or modified, including any
and all exhibits hereto.
43. "Priority Claim" means a Claim entitled to priority under
Section 507(a) of the Code, other than an Administrative Claim or a Tax Claim.
44. "Property Taxes" means all taxes, if any, with respect to the
real property constituting encumbrances (within the meaning of California Civil
Code Section 1114), which taxes are an Allowed Claim.
45. "Pro Rata" means the ratio that the amount of a particular
Allowed Claim or Interest bears to the total amount of Allowed Claims or
Interests of the same Class.
46. "Reorganized Debtor" means the Debtor after Confirmation.
47. "Sanwa Bank" means Sanwa Bank California a banking
institution qualified to do business under the laws of the
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State of California.
48. "Schedules" means the Schedules of Assets and Liabilities
filed by the Debtor with the Court, including any amendments thereto, as of the
date of the Plan.
49. "Secured Claim" means a claim which is secured by a properly
perfected lien on, or security interest in, any property of the Debtor's
Estates, only to the extent provided in Sections 506(a) and 506(b) of the Code.
50. "Securities Act" means the Securities Act of 1933, as
amended.
51. "Tax Claim" means a claim entitled to priority pursuant to
Section 507(a)(7) of the Code.
52. "Tax Claimant" means the holder of an Allowed Tax Claim.
53. "Warrant" means a stock purchase warrant of Reorganized
Debtor to be issued pursuant to the Plan, one (1) of which shall entitle the
holder thereof to acquire one (1) share of New Common for $1.00, and which shall
be exercisable for a period of two (2) years from the Effective Date.
B. Terms Defined in the Code. A term used in the Plan, not otherwise
defined here but used in the Code, shall have the definition assigned to such
term in the Code.
C. Rules of Interpretation, Computation of Time and Governing Law.
1. Rules of Interpretation.
For purposes of the Plan: (a) whenever from the context
it is appropriate, each term, whether stated in the singular or
the plural, shall include both the singular and the plural; (b)
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any reference in the Plan to a contract, instrument, release or other agreement
or document being in a particular form or on particular terms and conditions
means that such agreement or document shall be substantially in such form or
substantially on such terms and conditions; (c) any reference in the Plan to an
existing document or exhibit filed or to be filed means such document or
exhibit, as it may have been or may be amended, modified or supplemented; (d)
unless otherwise specified, all references in the Plan to Sections, Articles and
Exhibits are references to Sections, Articles and Exhibits of or to the Plan;
(e) the words "herein" and "hereto" refer to the Plan in its entirety rather
than to a particular portion of the Plan; (f) any reference in this Plan to the
word "including" shall mean "including without limitation"; and (g) captions and
headings to Articles and Sections are inserted for convenience of reference only
and are not intended to be a part of, or to affect, the interpretation of the
Plan.
2. Computation of Time.
In computing any period of time prescribed or allowed by the
Plan, the provisions of Bankruptcy Rule 9006(a) shall apply.
3. Governing Law.
Except to the extent that the Bankruptcy Code or Bankruptcy Rules
are applicable, and subject to the provisions of any contract, instrument,
release or other agreement or document entered into in connection with the Plan,
the rights and obligations arising under the Plan shall be governed by, and
construed and enforced in accordance with, the laws of the State of California,
without giving effect to the principles of conflict
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of the laws of the State of California.
ARTICLE II.
TREATMENT OF ADMINISTRATIVE AND TAX CLAIMS
A. Administrative Claims.
1. Payment of Administrative Claims.
(a) Administrative Claims in General.
Except as specified below, and subject to the bar
date provisions set forth below, each holder of an Allowed Administrative Claim
shall receive cash equal to the amount of such Allowed Administrative Claim
(unless the holder of such Allowed Administrative Claim agrees to other
treatment) on the latest of: (i) the Effective Date; (ii) 30 days after the date
on which an order allowing such Administrative Claim becomes a Final Order; or
(iii) such other time or times that are agreed to by the holder of the Allowed
Administrative Claim and the Debtor.
(b) Statutory Fees.
On or before the Effective Date, Administrative
Claims for fees payable pursuant to Section 1930 of Title 28 of the United
States Code, as determined by the Court at the hearing on Confirmation, shall be
paid in cash equal to the amount of such Allowed Administrative Claim.
(c) Ordinary Course Liabilities.
Administrative Claims based on liabilities
incurred by the Debtor in the ordinary course of business shall be assumed and
paid by the Debtor pursuant to the terms and conditions of the particular
transaction giving rise to such Administrative Claim, without any further action
by the holders of such Administrative Claim.
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(d) Professional Fees and Expenses. The
administrative claims of professionals employed in the case will be paid in cash
in the full amount of such Allowed Administrative Claim on the later of the
following to occur: (i) entry of a Final Order approving such fees and costs; or
(ii) the Effective Date.
(e) Bar Dates for Administrative Claims.
Except as set forth below, requests for payment of
Administrative Claims must be filed and served on the Debtors no later than 60
days after the Effective Date. Holders of Administrative Claims that are
required to file and serve a request for payment of such Claims and that do not
file and serve a request by the applicable bar date shall be forever barred from
asserting such Claims against the Debtors or its property. Professionals
employed pursuant to Section 327, et seq., of the Code or other entities
requesting compensation or reimbursement of expenses pursuant to Sections 327,
328, 330, 331, 503(b) and 1103 of the Code for services rendered before the
Effective Date shall file and serve on the Debtors an application for final
allowance of compensation and reimbursement of expenses no later than 120 days
after the Effective Date. The foregoing provisions shall not apply to
professional fees and expenses incurred by Debtor subsequent to the Effective
Date pursuant to the Plan.
(f) United States Trustee Quarterly Fees. The
Reorganized Debtor shall be responsible for timely payment of fees incurred
pursuant to Section 1930(a)(6) of Title 28 of the United States Code. After
Confirmation, the Reorganized Debtor shall file with the Court and serve on the
Office of the United States Trustee a quarterly financial report regarding all
income and
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disbursements, including all Plan payments, for each quarter (or portion
thereof) the case remains open.
B. Tax Claims. Unless the holder of an Allowed Tax Claim agrees to a
different treatment of such Claim, each holder of an Allowed Tax Claim shall be
paid the full amount of such Allowed Tax Claim in cash on the Effective Date,
or, at the election of the Debtor, in equal quarterly installments over a period
commencing at the end of the first calendar quarter after the Effective Date,
and continuing at the end of each calendar quarter thereafter until the date
that is six (6) years after the date of assessment, with interest at a fixed
rate per annum equal to nine percent (9%) in the manner set forth in Section
1129(a)(9)(C) of the Code.
ARTICLE III.
CLASSIFICATION OF CLAIMS AND INTERESTS
A. Claims and Interests. Various Claims and Interests are defined and
designated in Classes below. Claims of a kind specified in Sections 507(a)(1),
507(a)(8) or 507(b) of the Code (i.e., Administrative Claims and Tax Claims)
have not been classified and are excluded from the following Classes in
accordance with Section 1123(a)(1) of the Code. The Plan is intended to provide
for the treatment of all Claims against the Debtor and to deal with all property
of the Debtor and its Estate of whatever character. Only holders of Allowed
Claims and Interests are eligible for distribution under the Plan.
B. Limitation on Inclusion in a Class. The Plan classifies a Claim in a
particular Class only to the extent that the Claim falls within the description
of that Class, and shall be deemed
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classified under a different Class to the extent that any remainder of the Claim
qualifies within the description of such different Class.
C. Classes of Claims and Interests. Claims and Interests are classified
as follows:
1. Class 1 (Allowed Secured Claim of Sanwa Bank). Class 1
consists of the Allowed Secured Claim of Sanwa Bank against the Debtor.
2. Class 2 (Allowed Secured Claim of Horizon Bank). Class 2
consists of the Allowed Secured Claim of Horizon Bank against the Debtor.
3. Class 3 (All Allowed Secured Claims, Except Sanwa Bank And
Horizon Bank). Class 3 consists of all Allowed Secured Claims, if any, against
the Debtor, excluding the Allowed Secured Claims of Sanwa Bank and Horizon Bank.
Each holder of an Allowed Secured Claim in Class 3 shall be deemed to be a
separate sub- class of Class 3, and the holder of such Allowed Secured Claim in
each such sub-class shall have a separate vote which shall not be counted with
any other sub-class for purposes of establishing satisfaction of Section
1129(a)(8) of the Code.
4. Class 4 (Administrative Convenience Claims). The Allowed
Unsecured Claims of Creditors holding claims of $500.00 or less against Debtor,
and Creditors who assert claims in excess of $500.00 and agree to accept the sum
of $500.00 in full satisfaction of the Holder's Claim.
5. Class 5 (General Allowed Unsecured Claims). Class 5 consists
of all Allowed Unsecured Claims against the Debtors other than: (a) unclassified
Claims referred to in Article II of
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the Plan; and (b) Claims included within any other Class designated in the Plan.
6. Class 6 (Interest Holders -- Old Preferred). Class 6 consists
of the Old Preferred Interests in Debtor.
7. Class 7 (Interest Holders -- Old Common). Class 7 consists of
the Old Common Interests in Debtor.
ARTICLE IV.
SPECIFICATION AND TREATMENT OF UNIMPAIRED CLAIMS
A. Priority Claims. Priority Claims are not impaired. Unless the holder
of such Claim agrees to a different treatment, each holder of an Allowed
Priority Claim shall be paid cash equal to the amount of such Allowed Priority
Claim on the later of: (a) the Effective Date, or as soon thereafter as
practicable; or (b) the date on which, by Final Order, such creditor holds an
Allowed Priority Claim.
B. Allowed Tax Claims. The holders of Allowed Tax Claims shall be paid
in conformity with Paragraph B of Article II of the Plan.
C. Allowed Class 3 Claims (All Allowed Secured Claims Except Sanwa Bank
And Horizon Bank). Class 3 is not impaired. Except to the extent that the holder
of a Class 3 Claim agrees to a different treatment, each holder of an Allowed
Class 3 Claim shall receive, at the sole election of the Debtors made no later
than the Effective Date, one of the following treatments: (a) the Allowed
Secured Claim shall be cured and reinstated pursuant to Section 1124(2) of the
Code, and the Reorganized Debtor shall fund all amounts, and take all actions
otherwise necessary, to reinstate such Allowed Secured Claim (and the Allowed
Secured
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<PAGE> 19
Claim, as reinstated, shall thereafter be the exclusive responsibility of the
Reorganized Debtors); or (ii) the legal, equitable and contractual rights to
which the holder of such Allowed Secured Claim is entitled shall remain
unaltered.
ARTICLE V.
SPECIFICATION AND TREATMENT OF IMPAIRED CLASSES
A. Class 1 (Allowed Secured Claim of Sanwa Bank). The Class 1 Allowed
Secured Claim is impaired. The Holder of Allowed Class 1 Claim shall receive the
following, in full satisfaction of its Allowed Secured Claim in the principal
amount of approximately $2,250,000:
(I) From the Anacomp Proceeds, $1,000,000 in cash on or before
the Effective Date which $1,000,000 shall be applied to reduce the principal
owing on account of the Class 1 Secured Claim;
(II) The remaining balance (which includes all principal,
interest and Sanwa Bank's attorneys' fees -- less cash collateral payments made
during the Case and the paydown referred to above) in the amount of
approximately $1,250,000 (the "New Sanwa Balance") shall accrue interest at the
rate of Sanwa Bank's reference rate, plus three percent (3%) per annum.
Principal and interest shall be paid in monthly installments amortized and paid
in full within three (3) years of the Effective Date. For purposes of
clarification, monthly payments shall be calculated by dividing the New Sanwa
Balance by thirty six (36) and adding interest monthly to determine the monthly
payments due.
(III) Sanwa Bank shall (a) retain its security interests in all
pre-petition collateral, in which it was validly
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perfected as of the Petition Date, including without limitation, all of the
Debtor's accounts receivable, all inventory within the State of California in
which Sanwa Bank had a validly perfected security interest as of the Petition
Date; and all other pre- petition collateral in which Sanwa Bank held a valid
perfected security interest as of the Petition Date; and (b) be granted a
security interest in the "earn out" payment to be paid by Anacomp in connection
with the sale of the Debtor's Xerox maintenance business in the 13th month
following closing and all patents and a replacement security interest in all
accounts receivable; and (c) have a security interest in all proceeds of the
foregoing wherever located now and hereafter acquired.
(IV) Reorganized Debtor shall maintain an accounts receivable
coverage ratio as to $750,000.00 of the New Sanwa Balance of no less than one to
one (1:1), as determined on a monthly basis. For purposes of determining the
accounts receivable coverage ratio, all booked accounts receivable of Debtor
and/or Reorganized Debtor shall be eligible except accounts receivable which are
more than one hundred twenty (120) days old. On a monthly basis commencing on
the Effective Date, Reorganized Debtor shall be required to reduce (in addition
to regular monthly payments of principal and interest referred to above) the
principal balance of the New Sanwa Balance on a dollar for dollar basis to the
extent the one to one (1:1) collateral coverage ratio falls out of formula as to
$750,000.00 of the New Sanwa Balance. Reorganized Debtor shall provide Sanwa
Bank with a weekly sales and collection journal (including a borrowing base
certificate) in a form and substance acceptable to Sanwa Bank which includes,
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among other things, a statement by an officer of Reorganized Debtor attesting to
Reorganized Debtor's booked accounts receivable, sales, inventory, the remaining
amount of the New Sanwa Balance.
(V) Commencing on the Effective Date until the New Sanwa Balance
has been reduced to $750,000, or less (which $750,000 or less, shall be secured
by the one to one accounts receivable ratio referred to above); Debtor shall pay
the proceeds, net of all costs, from the sale of inventory, equipment and other
collateral in which Sanwa Bank had a valid perfected security interest as of the
Petition Date to reduce the New Sanwa Balance;(1)
(VI) The "earn out" payment to be made by Anacomp in the
thirteenth (13th) month following the close of the sale to Anacomp shall be paid
to Sanwa Bank to reduce dollar for dollar the New Sanwa Balance;
(VII) Reorganized Debtor shall provide Sanwa Bank with monthly
financial statements, including but not limited to, a balance sheet and income
statement, calculated on an accrual basis, within thirty (30) days of month end
commencing on the last day of the first month following the Effective Date;
(VIII) Sanwa Bank, in its sole discretion, shall be permitted to
conduct collateral audits and/or audits of the Reorganized Debtor's books and
records on a quarterly basis at Reorganized Debtor's expense up to the first
$2,000.00 per audit;
- --------
(1) This does not include any assets, including without limitation machinery
and inventory and proceeds thereof which were located outside of the
State of California as of the Petition Date. Such assets are free and
clear of any claim of Sanwa Bank.
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<PAGE> 22
(IX) Debtor and Sanwa Bank hereby release each other, effective
on the Effective Date, from all claims and causes of action which either party
and their respective, officers, shareholders, creditors, agents, professionals
and directors may have against the other party relating to Sanwa Bank's loans
and other financial accommodations to Debtor and the administration thereof;
provided, however, that all obligations under this Plan and all other
obligations which Sanwa Bank may have to the Debtor as to the Debtor's deposit
accounts and the like are excluded from this release;
(X) Debtor shall maintain deposit accounts at Sanwa Bank so long
as the New Sanwa Balance or any portion thereof remains due and owing; and
(XI) Debtor, Committee and Sanwa Bank shall execute such
documents as are necessary to accomplish and implement the foregoing terms and
conditions.
B. Class 2 (Allowed Secured Claim of Horizon Bank). The Class 2 Allowed
Secured Claim of Horizon Bank is impaired. The Holder of Allowed Class 2 Claim
shall have an Allowed Secured Claim in the principal amount of approximately
$75,000.00 (the "New Horizon Balance").
The Class 2 Claimant shall receive the following in full
satisfaction of its Class 2 claims:
(I) A promissory note in the principal amount of the New Horizon
Balance amortized over thirty six (36) months with monthly payments of $3,000
commencing on the first day of the first month following the Effective Date with
the balance due and payable on the first day of the 25th month following the
Effective
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<PAGE> 23
Date. Interest shall be at the existing rate under the notes and loan
documentation evidencing the Class 2 Claim. The Reorganized Debtor may pre-pay
the New Horizon Balance, in whole or in part, without penalty.
(II) The Class 2 Claimant shall retain its security interest in
all pre-petition collateral and all proceeds of the same. Nothing in this Plan
is intended as nor shall it be construed as a waiver or exoneration of any
guarantee of Class 2 Claims and any guarantee shall survive and remain
enforceable post-Confirmation.
C. Class 4 (Administrative Convenience Class). The Allowed Class 4 Claims
are impaired. In full satisfaction of their respective Allowed Unsecured Claims,
Holders of Class 4 Claims shall receive cash, on the Effective Date, in an
amount equal to the lesser of: (i) the Allowed Amount of the Holder's Allowed
Unsecured Claim; or (ii) $500.00.
D. Class 5 (General Allowed Unsecured Claims). The Allowed Class 5 Claims
are impaired. In full satisfaction of their respective Allowed Unsecured Claims,
each Holders of and Allowed Class 5 Claim shall receive:
1. Immediately following the Effective Date, a cash payment in an
amount equal to Twenty Five Percent (25%) of the holder's Allowed Class 5 Claim;
2. From the post-Confirmation sale of the Debtor's inventory of
spare parts which as of the Petition Date were physically located outside of the
State of California the Holders of Allowed Class 5 Claims shall receive
Two-Thirds (2/3) of the proceeds from the sale of that inventory (net of the
costs of sale
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and preservation of that inventory) up to the first Million Dollars received.
The Reorganized Debtor will receive the remaining One-Third (1/3). After the
first One Million Dollars in proceeds of sale of the foregoing inventory is
received then Holders of Allowed Class 5 Claims shall receive One-Third (1/3) of
the proceeds from the sale of that inventory (net of the costs of sale and
preservation of that inventory) and the Reorganized Debtor shall receive the
remaining Two-Thirds(2/3) up to the second $1,000,000.00 received from the sale
of that inventory. On any amounts received for the sale of the foregoing
inventory over $2,000,000.00 the holders of Class 5 Claims and the Reorganized
Debtor shall divide the amounts received on a fifty-fifty basis (net of the
costs of sale and preservation of that inventory) until that inventory has been
exhausted; and
3. Immediately following the Effective Date, one share of New
Common for each Five Dollars ($5.00) in Allowed Claim amount.
E. Class 6 (Allowed Interests -- Old Preferred). Class 6 Allowed
Interests are impaired. Holders of Class 6 Interests shall surrender their Old
Preferred certificates and shall receive the following in full satisfaction of
all Claims, Debts, management fees, preferred dividends and Interests:
1. 1,750,000 shares of New Common; and
2. 500,000 Warrants.
F. Class 7 (Interest Holders -- Old Common). Class 7 is impaired. The
holder of Class 7 Interests in Debtor shall retain their Interests in Debtor
subject to dilution as provided in this Plan.
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<PAGE> 25
G. No Fractional Shares. No fractional shares shall be
issued. All fractional shares will be rounded down to the nearest
whole share.
ARTICLE VI.
VOTING OF CLAIMS AND INTERESTS
A. Objections to Claims and Interests. All objections to Claims and
Interests must be filed as follows:(i) for Claims and Interests filed before the
date of Confirmation, on or before 180 days after the Effective Date; and (ii)
for Claims or Interests filed subsequent to the date of Confirmation, on or
before 180 days after the filing of such Claim or Interest; provided, however,
that the Court may extend the deadlines set forth above.
B. Voting of Claims or Interests. The amount of a Claim that will be used
to determine votes for or against the Plan will be either: (i) the Claim amount
listed in the Schedules; or (ii) the liquidated amount specified in a proof of
Claim timely filed with the Court that is not subject to an objection. If the
holder of a Claim submits a ballot, but such holder has not timely filed a proof
of Claim and such holder's Claim is listed on the Schedules as contingent,
unliquidated or disputed, or such holder's Claim is the subject of an objection,
the ballot will not be counted in accordance with Rule 3018 of the Federal Rules
of Bankruptcy Procedure, unless the Court temporarily allows the Claim for the
purpose of voting to accept or reject the Plan in accordance with Rule 3018 of
the Federal Rules of Bankruptcy Procedure.
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ARTICLE VII.
MEANS FOR IMPLEMENTATION OF THE PLAN
A. Continued Corporate Existence.
Subject to the transactions and events described below, the
Reorganized Debtor shall continue to exist after the Effective Date as a
corporate entity, with all of the powers of a corporation under applicable law
and without prejudice to alter or terminate such existence (by merger or
otherwise) under applicable law. Except as otherwise provided in the Plan, on
the Effective Date, all property of the Debtor's Estate shall vest in the
Reorganized Debtor, free and clear of all claims, security interests, liens,
charges, other encumbrances and Interests. On and after the Effective Date, the
Reorganized Debtor may operate its business and may use, acquire and dispose of
property and compromise or settle any Claim without supervision or approval of
the Court, other than those restrictions expressly imposed by the Plan, Order of
Confirmation, and Bankruptcy Rules with respect to reporting requirements for
periods following Confirmation prior to the entry of a final decree. On and
after the Effective Date, the Reorganized Debtor shall be vested with the right
to dispute any Claim or Interest, to resolve or compromise any Disputed Claim or
Disputed Interest and to enforce any provision of the Plan.
B. Corporate Issues and Authorizations.
1. Corporate Governance.
a. Certificate of Incorporation and Bylaws.
On the Effective Date, the certificate of
incorporation and bylaws of the Debtor shall be deemed amended and
restated to give effect to the Plan. The certificate of
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incorporation and bylaws of the Debtor shall, among other things, prohibit the
issuance of non-voting equity securities to the extent required by Section
1123(a) of the Code. On and after the Effective Date, Reorganized Debtor may
amend and restate its certificate of incorporation or bylaws as permitted by
applicable general corporate law including, without limitation, the general
corporations law for the State of California.
b. Directors and Officers.
The initial members of the boards of directors of
the Reorganized Debtor shall be the individuals identified in the Disclosure
Statement. The initial officers of the Reorganized Debtor, and their respective
positions, shall be as described in the Disclosure Statement.
c. Corporate Actions and Authorizations.
The Confirmation, the initial election of directors and
officers for the Reorganized Debtor, the distribution of cash, and the other
matters provided for in the Plan involving corporate action by the Debtor shall
be deemed to have occurred and be effective as provided in the Plan and shall be
authorized and approved in all respects without any requirement of further
action by or approval of the shareholders or directors of the Debtor. In
addition to the foregoing, upon Confirmation of the Plan, the board of directors
of Reorganized Debtor shall be authorized, without shareholder approval, to
amend the Articles of Incorporation and/or the Bylaws of Reorganized Debtor as
specified below, and to take such corporate actions and/or enter into such other
transactions as specified below, with the terms and conditions to be determined
by the Board of Directors:
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(i) Increase the number of authorized shares of common stock of
Reorganized Debtor up to 100,000,000 shares.
(ii) Establish an employee stock option and/or stock bonus plan.
(iii) Issue shares, warrants and/or other securities to carry out
a merger, acquisition, spin off, change in control, sale of assets, joint
venture or any other transaction contemplated in the Plan or Disclosure
Statement without solicitation of, notice to or consent of shareholders.
(iv) Amend Reorganized Debtor's Articles of Incorporation and/or
Bylaws to provide the maximum indemnification or other protection to Reorganized
Debtor's officers and directors that is allowed under applicable state law.
(v) Without shareholder approval, take any and all actions
necessary or appropriate to effectuate any amendments to its certificate or
articles of incorporation and/or bylaws called for under the Plan and the board
of directors and officers of Reorganized Debtor shall be authorized to execute,
verify, acknowledge, file and publish any and all instruments or documents that
may be required to accomplish the same.
(vi) Enter into a severance agreement with Frank LaChapelle which
shall include among its terms the following: (a) loans to Frank LaChappelle in
the amount of $30,000.00 shall be released and waived; (b) Reorganized Debtor
shall pay Cobra payments for Mr. LaChapelle for a period of one year commencing
with the Effective Date and terminating on the first anniversary of the
Effective Date in an amount not to exceed $6,000 in aggregate; (c) ICC-PLC shall
employ Mr. LaChapelle as a consultant
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<PAGE> 29
for a period of one year from the Effective Date, commencing on the Effective
Date and terminating on the first one year anniversary of the Effective Date.
d. Cancellation of Claims and Rights to Acquire Interests.
Upon Confirmation of the Plan, except for the
shares of Old Common issued and outstanding as of the Petition Date, all
outstanding instruments and securities representing Claims or any rights to
acquire Interests in the Debtors shall be deemed canceled and of no further
force and effect, without any further action on the part of the Court or any
person. The holders of such cancelled instruments, securities, and other
documents shall have no rights arising from or relating to such instruments,
securities or other documents or the cancellation thereof, except the rights
provided pursuant to the Plan.
C. Issuance of Securities of Reorganized Debtor.
On the Effective Date or as soon as practicable thereafter,
Reorganized Debtor is hereby authorized to and shall issue the securities to be
distributed as provided for in the Plan.
D. Assignability of Consideration Received.
Any person or entity, including any private or publicly held
corporation, entitled to receive consideration or securities of the Reorganized
Debtors may designate one or more nominees or designees to receive the
consideration or securities to be issued pursuant to the Plan, and that person
or entity, including any private or publicly held corporation, may distribute
the securities to any person or entity it so nominates or designates,
- 25 -
<PAGE> 30
including to any public or private shareholder or Interest holder,
so nominated or designated.
E. Prohibited Actions by Governmental Taxing Authorities.
Any governmental taxing authority shall be prohibited
from charging any transfer, sales, or any other type of fee or tax pursuant to a
corporate action related to consummation of the Plan.
ARTICLE VIII.
PROVISIONS COVERING DISTRIBUTIONS
AND OBJECTIONS TO CLAIMS AND INTERESTS
A. Disbursing Agent.
The Disbursing Agent and shall make all distributions from the
Distribution Account contemplated by the Plan with respect to all Allowed
Classes of Claims and Interests.
B. Funding for Payments to Allowed Administrative and Other Claims.
1. Funding for Allowed Administrative and Other Claimants. In
order to fund required payments to the holders of Allowed Administrative Claims
and the Holders of any other Claims provided for in the Plan, the Debtor shall
deposit, have deposited or procured irrevocable commitments to pay a sum
sufficient to satisfy all such Allowed Administrative Claims, all other Claims
(provided for in the Plan) and all other Plan obligations. On or before ten days
prior to any distribution contemplated under this Plan the Debtor shall cause to
be deposited into the Distribution Account funds sufficient to make each such
distribution. As soon as practicable following the Effective Date, the
Disbursing Agent will disburse to the holders of Allowed Claims, whether
- 26 -
<PAGE> 31
administrative, priority, classified or unclassified, all sums required to be
paid to the holders of such Claims under the Plan.
2. Distribution Of Securities.
Reorganized Debtor, either directly or through its stock
transfer agent, shall distribute the securities authorized under
the Plan.
C. Disputed Claims and Interests.
1. Objections to Claims and Interests. Unless the Court orders
otherwise, as of the date of Confirmation, the Reorganized Debtor shall have the
right and standing to: (a) object to or contest the allowance of any alleged
Claim, whether or not such Claim is listed in the Schedules as disputed,
contingent or unliquidated; and (b) compromise and settle its objections to
Disputed Claims or Interests. The Reorganized Debtors may litigate to final
judgment, settle or withdraw objections to Disputed Claims or Interests. The
Reorganized Debtor shall pay any expenses and fees that they incur in connection
with such actions.
2. Filing Deadline. All objections to Claims and Interests must
be filed as follows: (i) for Claims and Interests filed before the date of
Confirmation, on or before 180 days after the Effective Date; and (ii) for
Claims or Interests filed subsequent to the date of Confirmation, on or before
180 days after the filing of such Claim or Interest; provided, however, that the
Court may extend the deadlines set forth above.
3. Payment or Distribution upon Resolution of Disputed Claims or
Interests. With respect to any Claim or Interest as to which the Debtor has
filed an objection,
- 27 -
<PAGE> 32
Debtor shall make no payments or distributions with respect to the holder of a
disputed Claim or Interest until the Court resolves any and all objections to
Disputed Claims or Interests pursuant to a Final Order or unless the Debtor and
the Claimant or Interest holder reach a settlement.
D. Funding for Priority, Administrative Secured and Unsecured
Claims.
On the later of: (i) the Effective Date; or (ii) the
date upon which a Claim becomes an Allowed Claim, Debtor shall fund the
aggregate amount needed under the Plan to pay the following: (1) Allowed
Administrative Claims; (2) Allowed Tax Claims; (3) the amounts, if any, required
to cure or pay in full any Allowed Secured Claims; (4) the amounts required to
be paid to Holders of Allowed Unsecured Claims in accordance with the Plan.
ARTICLE IX.
CONDITIONS PRECEDENT TO CONFIRMATION
AND CONSUMMATION OF THE PLAN
A. Revesting of Assets in Debtors.
Pursuant to Sections 553 and 1141 of the Bankruptcy
Code, all assets of the Estate shall vest in the Reorganized Debtor free of
liens and Claims except as provided in the Plan.
B. Litigation Rights.
Pursuant to Section 1123(b)(3) of the Code, and except as
otherwise provided in the Plan, each and every claim, demand or cause of action
which the Debtor had, or had the power to assert, immediately prior to
Confirmation, including but not limited to avoidance actions pursuant to Section
544 through 553, inclusive, of the Code, shall vest in the Reorganized Debtor
free and clear
- 28 -
<PAGE> 33
of all liens, claims and interests of Claimants other than as provided in the
Plan. The Reorganized Debtor may commence adversary proceedings or take other
action against persons or entities in order to assert those claims, demands or
causes of action, including without limitation those claims referred to in the
Disclosure Statement. The Reorganized Debtors may prosecute or, when
appropriate, settle and compromise such causes of action or claims for relief,
and all net recoveries shall become the property of the Reorganized Debtor.
ARTICLE X.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
A. Rejection of Executory Contracts and Unexpired Leases.
Pursuant to Section 365 of the Code, and except as
provided by operation of law or by order of this Court, the Debtor hereby
rejects all executory contracts and unexpired leases which existed on the
Petition Date except those, if any, previously assumed by Debtor pursuant to
Final Order; provided that as to any unexpired lease or executory contract as to
which there is a motion for assumption under section 365(a) of the Code which is
pending as of the Confirmation Date, this provision shall be suspended and shall
be subject to Court Order.
B. Classification of Claims Arising from the Rejection of Executory
Contracts and Unexpired Leases.
Any Claim arising from the rejection of an executory contract or
unexpired lease shall be deemed a Class 5 Unsecured Claim. The holder of a Claim
arising from the rejection of an executory contract or unexpired lease must file
with the Court and serve on the Disbursing Agent, not later than 20 days after
the
- 29 -
<PAGE> 34
Order of Confirmation, a Proof of Claim for any damages resulting from the
rejection of such executory contract or unexpired lease, or such holder is
forever barred from asserting any Claim or participating as a Claimant under the
Plan by reason of the rejection.
ARTICLE XI.
MODIFICATION OF THE PLAN
Pursuant to the provisions of Section 1127 of the Code, the
Debtor and the Reorganized Debtor reserve the right to modify or alter the
provisions of the Plan at any time prior or subsequent to the Order of
Confirmation.
ARTICLE XII.
DISCHARGE
The Order of Confirmation constitutes the discharge of any and
all liabilities of the Debtor, except as provided in the Plan and under the
Code.
ARTICLE XIII.
RETENTION OF JURISDICTION
Notwithstanding the Order of Confirmation, the Court shall retain
jurisdiction for all purposes provided by the Code, including, without
limitation:
A. The determination of the allowability and amount of Claims under the
Plan, including, without limitation, Claims arising under Section 1124(2) of the
Code;
B. The determination or request for payment of Claims entitled to
priority under Section 507(a)(1) of the Code, including compensation of the
parties entitled thereto;
C. The resolution of any disputes regarding the
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<PAGE> 35
interpretation of the Plan;
D. Implementation of the Plan and entry of orders in furtherance of
consummation of the Plan, including, without limitation, appropriate orders to
protect the assets of the Estate, the Disbursing Agent, and/or the Reorganized
Debtor from creditor actions which the Plan and Order of Confirmation disallow
or affect;
E. The adjudication of any cause of action or claim for relief, including
avoidance power actions which the Debtor or the Reorganized Debtor have brought
or might bring;
F. The modification of the Plan pursuant to Section 1127 of the Code; and
G. The entry of a final decree terminating the Cases.
ARTICLE XIV.
SECURITIES TO BE ISSUED
PURSUANT TO THE PLAN
A. Status of Securities to be Issued Pursuant to the Plan.
Except with respect to an entity that is an underwriter
as defined in subsection (b) of Section 1145 of the Code, Section 5 of the
Securities Act of 1933 and any State or local law requiring registration for
offer or sale of a security or registration or licensing of an issuer of,
underwriter of, or broker or dealer in a security, shall not apply to the offer,
issuance and sale of New Common.
/ / /
/ / /
/ / /
- 31 -
<PAGE> 36
ARTICLE XV.
CONFIRMATION REQUEST
If necessary, the Debtor, as proponent of the Plan, request
Confirmation pursuant to Section 1129(b) of the Code.
Dated: January 5, 1998 INTERSCIENCE COMPUTER CORPORATION,
a California corporation
By: /S/
-----------------------------------
WALTER KORNBLUH, President
Presented by:
BIEGENZAHN WEINBERG
By: /S/
----------------------------------
JOEL B. WEINBERG
Attorneys for Debtor in Possession
- 32 -
<PAGE> 1
EXHIBIT 1.2
ASSET PURCHASE AGREEMENT
dated as of November 13, 1997,
by and between
ANACOMP, INC., as Purchaser
and
INTERSCIENCE COMPUTER CORP.,
together with its wholly-owned subsidiary
LASER SUPPORT AND ENGINEERING,
as Seller
With Respect to the Xerox Laser Printer Maintenance
Business Assets of Seller
Exhibit 1.2
<PAGE> 2
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it
is attached but is inserted for convenience only.
<TABLE>
<CAPTION>
Page
No.
---
ARTICLE I. SALE OF ASSETS AND CLOSING
<S> <C> <C>
1.01 Assets ..................................................................... 1
1.02 Liabilities.................................................................. 5
1.03 Purchase Price; Allocation; Earnout Payments................................. 6
1.04 Closing ..................................................................... 7
1.05 Further Assurances........................................................... 7
1.06 Third-Party Consents......................................................... 8
1.07 Insurance Proceeds............................................................ 9
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF SELLER
2.01 Organization of Seller........................................................ 9
2.02 Authority..................................................................... 9
2.03 No Conflicts................................................................. 10
2.04 Governmental Approvals and Filings........................................... 10
2.05 Books and Records............................................................ 11
2.06 Absence of Changes........................................................... 11
2.07 Legal Proceedings............................................................ 11
2.08 Employees.................................................................... 12
2.09 Intellectual Property Rights................................................. 12
2.010 Manuals; Diagnostic/Software Fees............................................ 12
2.011 Contracts.................................................................... 13
2.012 Licenses..................................................................... 14
2.013 Environmental Matters........................................................ 15
2.014 Taxes. ..................................................................... 16
2.015 Substantial Customers and Suppliers.......................................... 16
2.016 Inventory.................................................................... 16
2.017 No Guarantees................................................................ 17
2.018 Entire Business.............................................................. 17
2.019 Disclosure................................................................... 17
2.020 Prepaid Expenses............................................................. 17
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01 Organization................................................................. 18
3.02 Authority.................................................................... 18
3.03 No Conflicts................................................................. 18
3.04 Governmental Approvals and Filings........................................... 18
3.05 Legal Proceedings............................................................ 19
3.06 Financial Ability to Perform................................................. 19
3.07 Resale Number................................................................ 19
3.08 Noncompetition............................................................... 19
</TABLE>
1
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV. COVENANTS OF SELLER
4.01 Regulatory and Other Approvals............................................... 19
4.02 Due Diligence Investigation by Purchaser..................................... 20
4.03 Solicitation of Competing Offers;
Payment of Purchaser's Expenses
in Event of Successful Overbid....................................... 20
4.04 Conduct of Business.......................................................... 20
4.05 Certain Restrictions......................................................... 21
4.06 Delivery of Books and Records, etc.;
Removal of Property.................................................. 22
4.07 Noncompetition............................................................... 22
4.08 Notice and Cure.............................................................. 23
4.09 Fulfillment of Conditions.................................................... 24
4.010 Taxes ......................................................................24
ARTICLE V. CONDITIONS TO OBLIGATIONS OF PURCHASER
5.01 Representations and Warranties............................................... 24
5.02 Performance.................................................................. 25
5.03 Orders and Laws.............................................................. 25
5.04 Regulatory Consents and Approvals............................................ 25
5.05 Third Party Consents......................................................... 25
5.06 Deliveries................................................................... 26
5.07 Proceedings.................................................................. 26
5.08 Approval of Board of Directors of Purchaser.................................. 26
5.09 Bankruptcy Court Order....................................................... 26
ARTICLE VI. SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
6.01 Survival of Representations, Warranties,
Covenants and Agreements............................................. 27
ARTICLE VII. INDEMNIFICATION
7.01 Indemnification.............................................................. 28
ARTICLE VIII. TERMINATION
8.01 Termination.................................................................. 28
8.02 Effect of Termination........................................................ 29
ARTICLE IX. DEFINITIONS
9.01 Definitions.................................................................. 29
ARTICLE X. MISCELLANEOUS
10.01 Notices..................................................................... 35
10.02 Bulk Sales Act.............................................................. 36
</TABLE>
2
<PAGE> 4
<TABLE>
<S> <C> <C>
10.03 Entire Agreement............................................................ 36
10.04 Expenses.................................................................... 37
10.05 Public Announcements........................................................ 37
10.06 Confidentiality............................................................. 37
10.07 Waiver ..................................................................... 38
10.08 Amendment................................................................... 38
10.09 No Third Party Beneficiary.................................................. 38
10.010 No Assignment; Binding Effect............................................... 39
10.011 Headings.................................................................... 39
10.012 Consent to Jurisdiction and Service of Process.............................. 39
10.013 Invalid Provisions.......................................................... 40
10.014 Governing Law............................................................... 40
10.015 Counterparts................................................................ 40
</TABLE>
3
<PAGE> 5
This Asset Purchase Agreement (the "Agreement")
dated as of November 13, 1997, is made and entered into by and between Anacomp,
Inc., an Indiana corporation ("Purchaser"), on the one hand, and Interscience
Computer Corp., a California corporation ("Interscience") and its wholly-owned
subsidiary Laser Support and Engineering, a California corporation ("LSE") (LSE
and Interscience, each individually and jointly and severally, "Seller"), on the
other hand. Capitalized terms not otherwise defined herein have the meanings set
forth in Section 9.01.
WHEREAS, Seller is engaged in the business of servicing and
maintaining laser printers (and the sale of consumable products in connection
therewith) through maintenance contracts with its customers (the "Business")
including the service and maintenance of Xerox laser printers (the "Xerox Laser
Printer Maintenance Business"); and
WHEREAS, Interscience filed its chapter 11 petition for relief
under the Bankruptcy Code on March 6, 1997 (the "Petition Date"), and its
chapter 11 case, Case No. 97 13095-AG currently is pending in the United States
Bankruptcy Court for the Central District of California, San Fernando Division,
the Honorable Arthur M. Greenwald presiding (the "Bankruptcy Court"); and
WHEREAS, Seller desires to sell, transfer and assign to
Purchaser, and Purchaser desires to purchase and acquire from Seller, certain of
the assets of Seller relating to the operation of the Business and specifically
those assets that comprise the Seller's Xerox Laser Printer Maintenance
Business, and in connection therewith, Purchaser has agreed to assume certain of
the liabilities of Seller relating to Seller's Xerox Laser Printer Maintenance
Business, all on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I.
SALE OF ASSETS AND CLOSING
I.01 Assets. (a) Assets Transferred. On the terms and subject to
the conditions set forth in this Agreement, Seller will sell, transfer, convey,
assign and deliver to Purchaser, and Purchaser will purchase and pay for, at the
Closing, all of Seller's right, title and interest in, to and under the
following Assets of Seller used or held for use in connection with Seller's
Xerox Laser Printer Maintenance Business, as the same shall exist on the Closing
Date (collectively, the "Assets"):
1
<PAGE> 6
(i) Business Contracts With Customers. All maintenance contracts,
purchase orders, licenses and other contracts, and the personal property
leases listed on attached Schedule A hereto, to which Seller and the
customers of Seller's Xerox Laser Printer Maintenance Business are
parties and which are utilized in or part and parcel of the conduct of
Seller's Xerox Laser Printer Maintenance Business, including without
limitation contracts relating to service representatives, suppliers,
sales representatives, distributors, and marketing arrangements utilized
in the conduct of Seller's Xerox Laser Printer Maintenance Business (the
"Business Contracts"); and with respect only to those Business Contracts
listed on attached Schedule B (which Business Contracts are utilized by,
or are for the benefit of, Seller's businesses in addition to the Xerox
Laser Printer Maintenance Business), the rights and obligations under
such Business Contracts shall be to the extent practicable allocated
between the Xerox Laser Printer Maintenance Business and such other
businesses of Seller in a fair and equitable manner that is reasonably
satisfactory to the parties.
(ii) Accounts Receivable. All trade accounts receivable and the
proceeds thereof arising from the conduct of Seller's Xerox Laser
Printer Maintenance Business on and after November 1, 1997, all payments
to and collections by Seller on such trade accounts receivable from
November 1, 1997, to the Closing Date, all payments to and collections
by Seller on such trade accounts receivable after the Closing Date, and
all notes, bonds and other evidences of Indebtedness of and rights to
receive payments arising out of sales and services occurring in the
conduct of the Xerox Laser Printer Maintenance Business of Seller on and
after November 1, 1997, and the security agreements related thereto,
including any rights of Seller with respect to any third party
collection procedures or any other Actions or Proceedings which have
been commenced in connection therewith on and after November 1, 1997
(the "Accounts Receivable");
(iii) Deposits and Advances. All deposits or advances by or on
behalf of Seller in connection with Seller's Xerox Laser Printer
Maintenance Business;
(iv) Inventory. (a) The Xerox laser printer field inventory in
the possession of Seller's engineers or field or service
representatives, located at customer sites, or in transit from or to the
Seller's sites and the customer's sites, in each case including but not
limited to demonstration equipment, office and other supplies, parts,
packaging materials and other accessories related thereto; (b) those
seven replacement Xerox laser printers (located at customer sites) and
those twenty laser cores and twenty
2
<PAGE> 7
roller cores (in the possession of vendors) listed on attached Schedule
C; (c) any of the foregoing in (a) and (b) purchased subject to any
conditional sales or title retention agreement in favor of any other
Person; and (d) all rights of Seller against suppliers of such
inventories in (a), (b), (c) or otherwise (the "Inventory");
(v) Diagnostic Equipment. The tool kits, diagnostic software and
equipment in the possession or care of the service engineers and field
representatives employed by Seller in Seller's Xerox Laser Printer
Maintenance Business, including any of the foregoing purchased subject
to any conditional sales or title retention agreement in favor of any
other Person) (the "Diagnostic Equipment");
(vi) Intangible Personal Property. All Intellectual Property used
or held for use in the conduct of the Seller's Xerox Laser Printer
Maintenance Business (including Seller's goodwill therein) and all
rights, privileges, claims, causes of action and options relating or
pertaining to the Assets described in this Section 1.01, including
without limitation all rights of Interscience to conduct its Xerox Laser
Printer Maintenance Business acquired as successor to the rights of
Laser Support and Engineering, but not including any patents or licenses
in which Seller has an interest and which Seller requires for use in the
conduct of its Seimens and other non-Xerox laser printer maintenance and
consumables sales business (the "Non-Xerox Business") (the "Intangible
Personal Property");
(vii) Books and Records. Copies of all Books and Records used or
held for use relating to the Assets and requested by Purchaser,
including copies of all maintenance and other technical manuals used in
Seller's Xerox Laser Printer Maintenance Business, other than the
Excluded Books and Records (as provided in Section 1.01(b)) (the
"Business Books and Records"); and to the extent any of the Business
Books and Records are items susceptible to duplication and are either
(x) used in connection with any of Seller's businesses other than the
Xerox Laser Printer Maintenance Business or (y) are required by law to
be retained by Seller, Seller may deliver photostatic copies or other
reproductions from which, in the case of Business Books and Records
referred to herein, information solely concerning Seller's businesses
other than the Xerox Laser Printer Maintenance Business has been
deleted;
(viii) Cash. Cash (including checks received prior to the close
of business on the Closing Date, whether or not deposited or cleared
prior to the close of business on the Closing Date), commercial paper,
certificates of deposit and other bank deposits, treasury bills and
other cash
3
<PAGE> 8
equivalents (all of the foregoing, collectively "Cash and Cash
Equivalents") that represents (x) the gross revenues and proceeds of
sales and services provided by Seller in the conduct of Seller's Xerox
Laser Printer Maintenance Business on and after November 1, 1997, minus
(y) those ordinary course of business expenses listed on the attached
Schedule D and incurred by Seller in connection with sales and services
provided by Seller in the conduct of Seller's Xerox Laser Printer
Maintenance Business between November 1, 1997, and the Closing Date,
which amount shall be paid by Seller to Purchaser no later than thirty
days after the Closing Date; and
(ix) Other Assets and Properties. All other Assets and Properties
of Seller used or held for use in connection with the Seller's Xerox
Laser Printer Maintenance Business, except the Excluded Assets (as
defined in Section 1.01(b)) (the "Other Assets").
(b) Excluded Assets. Notwithstanding anything in this Agreement to the
contrary, the following Assets and Properties of Seller, including even as they
may relate to the Seller's Xerox Laser Printer Maintenance Business (the
"Excluded Assets") shall be excluded from and shall not constitute Assets:
(i) Cash. Cash and Cash Equivalents that represent the revenues and
proceeds of sales and services provided by Seller in the conduct of
Seller's Xerox Laser Printer Maintenance Business prior to November 1,
1997, and in the conduct of Seller's Non-Xerox Business at any time;
(ii) Excluded Accounts Receivable. All trade accounts receivable and
the proceeds thereof that represent the revenues and proceeds of sales
and services provided by Seller in the conduct of Seller's Xerox Laser
Printer Maintenance Business prior to November 1, 1997, and in the
conduct of Seller's Non-Xerox Business at any time;
(iii) Insurance. Life insurance policies of officers and other
employees of Seller and all other insurance policies relating to the
operation of the Business;
(iv) Employee Benefit Plans. All assets owned or held by any
Benefit Plans;
(v) Tax Refunds. All refunds or credits, if any, of Taxes due to
or from Seller;
(vi) Excluded Books and Records. The minute books, stock transfer
books and corporate seal of Seller and any other Books and Records
relating to the Excluded Assets, the
4
<PAGE> 9
Retained Liabilities or the Non-Xerox Business (the "Excluded
Books and Records");
(vii) Excluded Inventory. All inventory of Seller's Non-Xerox
Business plus the inventory used in Seller's Xerox Laser Printer
Maintenance Business that is not in the possession of Seller's engineers
or field or service representatives, not located at customer sites, and
not in transit from or to the Seller's sites and the customer's sites
(the "Excluded Inventory"); and
(viii) Seller's rights under this Agreement and the related
Operative Agreements.
I.02 Liabilities. (a) Assumed Liabilities. In connection with the
sale, transfer, conveyance, assignment and delivery of the Assets pursuant to
this Agreement, on the terms and subject to the conditions set forth in this
Agreement, at the Closing, Purchaser will assume and agree to pay, perform and
discharge when due the following obligations of Seller arising in connection
with the operation of Seller's Xerox Laser Printer Maintenance Business, as the
same shall exist on the Closing Date (the "Assumed Liabilities"), and no others:
(i) Obligations under Contracts and Licenses. With respect to the
Seller's Xerox Laser Printer Maintenance Business, all obligations of
Seller under the Business Contracts to be performed on or after the
Closing Date, and excluding any such obligations arising or to be
performed
prior to the Closing Date;
(ii) Returned Parts. All obligations of Seller for replacement of,
or refund for, damaged, defective or returned parts related to the
Seller's Xerox Laser Printer Maintenance Business, but only to the
extent such parts are subject to full return privileges from the
supplier thereof;
(b) Retained Liabilities. Except for the Assumed Liabilities,
Purchaser shall not assume by virtue of this Agreement or the transactions
contemplated hereby, and shall have no liability for, any Liabilities of Seller
(including, without limitation, those related to the Business) of any kind,
character or description whatsoever (the "Retained Liabilities"). Seller shall
discharge in a timely manner or shall make adequate provision for all of the
Retained Liabilities, provided that Seller shall have the ability to contest, in
good faith, any such claim of liability asserted in respect thereof by any
Person other than Purchaser and its Affiliates.
I.03 Purchase Price; Allocation; Earnout Payments.
(a) Purchase Price. The purchase price for the Assets is
$1,220,000 (the "Purchase Price") and shall be paid by Purchaser
5
<PAGE> 10
in immediately available United States funds at the Closing in the manner
provided in Section 1.04. In addition, Purchaser will make certain payments to
Seller after the Closing Date pursuant to the earnout provisions in Section
1.03(c) below. $300,000 of the Purchase Price, plus all of the earnout payments,
is allocable to, and deemed to be in consideration of the covenant of Seller
contained in Section 4.07; $20,000 of the Purchase Price is allocable to, and
deemed to be in consideration of the Diagnostic Equipment; $450,000 of the
Purchase Price is allocable to, and deemed to be in consideration of the
Inventory. The entirety of the Purchase Price, including the earnout payments,
shall be allocated and distributed amongst Seller as eighty three percent (83%)
to Interscience and seventeen percent (17%) to LSE.
(b) Further Allocation of Purchase Price. If requested in writing
by any party hereto, Purchaser and Seller shall negotiate in good faith prior to
the Closing Date and determine any additional allocation of the consideration
paid by Purchaser for the Assets. Each party hereto agrees (i) that any such
allocation shall be consistent with the requirements of Section 1060 of the
Internal Revenue Code and the regulations thereunder, (ii) to complete jointly
and to file separately Form 8594 with its Federal income Tax Return consistent
with such allocation for the tax year in which the Closing Date occurs and (iii)
that no party will take a position on any income, transfer or gains Tax Return,
before any Governmental or Regulatory Authority charged with the collection of
any such Tax or in any judicial proceeding, that is in any manner inconsistent
with the terms of any such allocation without the consent of the other party.
(c) Adjustment of Purchase Price Pursuant to Earnout. (i) On the
first Business Day after the thirtieth day of the full thirteenth month
following the Closing Date, Purchaser shall pay to Seller in immediately
available United States funds forty five (45%) percent of the revenues over
$1,700,000 and up to $2,800,000 billed by Purchaser during the twelve full
calendar months immediately following the Closing Date to the Interscience
Customers of the Xerox Laser Printer Maintenance Business. For the purpose of
this Section 1.03, "Interscience Customers" shall mean: (x) the customers as of
November 1, 1997, acquired as part of the Assets (the "Current Customers"); and
(y) those customers that are not Current Customers and are referred by Seller to
Purchaser by written referrals after the Closing Date, including former
customers of Seller's Xerox Laser Printer Maintenance Business not doing
business with Seller as of November 1, 1997, but not including any of
Purchaser's current customers (the "New Customers"). The maximum amount payable
to Seller under this earnout provision is $495,000 (45% of [$2,800,000 minus
$1,700,000]). (ii) In addition to any earnout payments due under the immediately
preceding Section 1.03(c)(i), in the event that the revenues billed by Purchaser
during the first full twelve
6
<PAGE> 11
calendar months after the Closing Date from the Xerox Laser Printer Maintenance
Business exceed $2,800,000, then as to only such revenues that are (x) in excess
of the $2,800,000 and (y) are billed by Purchaser during such twelve month
period to New Customers (meaning by way of written referrals from Seller), on
the first Business Day after the thirtieth day of the full thirteenth month
following the Closing Date, Purchaser shall pay to Seller in immediately
available United States funds fifteen percent (15%) of any such revenues billed
over $2,800,000 (i.e., 15% of the revenues in excess of $2,8000,000 that are
billed by Purchaser to New Customers during such twelve month period).
I.04 Closing. The Closing will take place at the offices of
Milbank, Tweed, Hadley & McCloy in Los Angeles, California, or at such other
place as Purchaser and Seller mutually agree, at 10:00 A.M. local time, on the
Closing Date. At the Closing, Purchaser will pay the Purchase Price by wire
transfer of immediately available funds to such account as Seller may reasonably
direct by written notice delivered to Purchaser by Seller at least two (2)
Business Days before the Closing Date. Simultaneously, (a) Seller will assign
and transfer to Purchaser all of its right, title and interest in and to the
Assets, free and clear of any and all liens, claims and encumbrances, by
delivery of (i) a General Assignment and Bill of Sale substantially in the form
of Exhibit A hereto (the "General Assignment"), duly executed by Seller, (ii) an
assignment of the Intellectual Property in form and substance reasonably
satisfactory to Purchaser, and (iii) such other good and sufficient instruments
of conveyance, assignment and transfer, in form and substance reasonably
acceptable to Purchaser's counsel, as shall be effective to vest in Purchaser
good title to the Assets (the General Assignment and the other instruments
referred to in clauses (ii) and (iii) being collectively referred to herein as
the "Assignment Instruments"). At the Closing, there shall also be delivered to
Seller and Purchaser the contracts, documents and instruments required to be
delivered to consummate this Agreement.
I.05 Further Assurances; Post-Closing Cooperation. (a) At any
time or from time to time after the Closing, at Purchaser's request and without
further consideration, Seller shall execute and deliver to Purchaser such other
instruments of sale, transfer, conveyance, assignment and confirmation, provide
such materials and information and take such other actions as Purchaser may
reasonably deem necessary or desirable in order more effectively to transfer,
convey and assign to Purchaser, and to confirm Purchaser's title to, all of the
Assets, and, to the full extent permitted by Law, to put Purchaser in actual
possession and operating control of Seller's Xerox Laser Printer Maintenance
Business and the Assets and to assist Purchaser in exercising all rights with
respect thereto, and otherwise to cause Seller to
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fulfill its obligations under this Agreement and the Operative
Agreements.
(b) Effective on the Closing Date, Seller hereby constitutes and
appoints Purchaser the true and lawful attorney of Seller, with full power of
substitution, in the name of Seller or Purchaser, but on behalf of and for the
benefit of Purchaser: (i) to demand and receive from time to time any and all
the Assets and to make endorsements and give receipts and releases for and in
respect of the same and any part thereof; (ii) to institute, prosecute,
compromise and settle any and all Actions or Proceedings that Purchaser may deem
proper in order to collect, assert or enforce any claim, right or title of any
kind in or to the Assets; (iii) to defend or compromise any or all Actions or
Proceedings in respect of any of the Assets; and (iv) to do all such acts and
things in relation to the matters set forth in the preceding clauses (i) through
(iii) as Purchaser shall deem desirable. Seller hereby acknowledges that the
appointment hereby made and the powers hereby granted are coupled with an
interest and are not and shall not be revocable by it in any manner or for any
reason. Seller shall deliver to Purchaser at Closing an acknowledged power of
attorney to the foregoing effect executed by Seller. Purchaser shall indemnify
and hold harmless Seller from any and all Losses caused by or arising out of any
breach of Law by Purchaser in its exercise of such power of attorney.
(c) Following the Closing, Seller will afford Purchaser, its
counsel and its accountants, during normal business hours, reasonable access to
the books, records and other data relating to Seller's Xerox Laser Printer
Maintenance Business in its possession with respect to periods prior to the
Closing and the right to make copies and extracts therefrom, to the extent that
such access may be reasonably required by Purchaser in connection with (i) the
preparation of Tax Returns, (ii) the determination or enforcement of rights and
obligations under this Agreement, (iii) compliance with the requirements of any
Governmental or Regulatory Authority, (iv) the determination or enforcement of
the rights and obligations of any party to this Agreement or any of the
Operative Agreements or (v) in connection with any actual or threatened Action
or Proceeding.
I.06 Third-Party Consents. To the extent that any Business
Contract is not assignable without the consent of another party, this Agreement
shall not constitute an assignment or an attempted assignment thereof if such
assignment or attempted assignment would constitute a breach thereof or a
default thereunder. Seller and Purchaser shall use their best efforts to obtain
the consent of such other party to the assignment of any such Business Contract
to Purchaser in all cases in which such consent is or may be required for such
assignment. If any such consent shall not be obtained, Seller shall cooperate
with Purchaser in any reasonable arrangement designed to provide for
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Purchaser the benefits intended to be assigned to Purchaser under the relevant
Business Contract including enforcement at the cost and for the account of
Purchaser of any and all rights of Seller against the other party thereto
arising out of the breach or cancellation thereof by such other party or
otherwise. If and to the extent that such arrangement cannot be made, Purchaser
shall have no obligation pursuant to Section 1.02 or otherwise with respect to
any such Business Contract. The provisions of this Section 1.06 shall not affect
the right of Purchaser not to consummate the transactions contemplated by this
Agreement if the condition to its obligations hereunder contained in Section
5.06 has not been fulfilled.
I.07 Insurance Proceeds. If any of the Assets are destroyed or
damaged or taken in condemnation, the insurance proceeds or condemnation award
with respect thereto shall be an Asset.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
II.01 Organization of Seller. Interscience is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
California, and has full corporate power and authority to conduct the Business
as and to the extent now conducted and to own, use and lease the Assets. LSE is
a corporation duly organized, validly existing and in good standing under the
Laws of the State of California, and has full corporate power and authority to
conduct the Business as and to the extent now conducted and to own, use and
lease the Assets. Interscience is the owner of one hundred percent of the common
stock of LSE.
II.02 Authority. Subject to the approval of the Bankruptcy Court
of this Agreement, Seller has full corporate power and authority to execute and
deliver this Agreement and the Operative Agreements to which it is a party, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby, including without limitation to
sell and transfer (pursuant to this Agreement) the Assets. The execution and
delivery by Seller of this Agreement and the Operative Agreements to which it is
a party, and the performance by Seller of its obligations hereunder and
thereunder, have been duly and validly authorized by the Board of Directors of
Seller, no other corporate action on the part of Seller or its stockholders
being necessary. This Agreement has been duly and validly executed and delivered
by Seller and constitutes, and upon Bankruptcy court approval of this Agreement
and the execution and
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delivery by Seller of the Operative Agreements to which it is a party, such
Operative Agreements will constitute, legal, valid and binding obligations of
Seller enforceable against Seller in accordance with their terms.
II.03 No Conflicts. The execution and delivery and performance by
Seller of this Agreement and the Operative Agreements will not: (A) conflict
with or result in a violation or breach of any of the terms, conditions or
provisions of any (i) certificate or articles of incorporation, by-laws or other
comparable corporate charter documents of Seller, (ii) any Business Contract, or
(ii) any court order, consent decree or similar agreement approved by a court of
which Seller has knowledge and to which Seller or any of its affiliates is a
party and that is material to any of the Assets being transferred by Seller to
Purchaser; or (B) with respect to any Business Contract (i) constitute (with or
without notice or lapse of time or both) a default, (ii) require Seller to
obtain any consent, approval or action of, make any filing with or give any
notice to any Person (other than the filings with and approval of the Bankruptcy
Court and any consents of creditors that the Bankruptcy Court may require) or
(iii) result in the creation or imposition of any Lien upon any of the Assets,
provided, except, however, that this Section 2.03 shall not apply to the
contractual right of any party to a Business Contract to terminate such Business
Contract without cause upon the giving of notice, with or without a waiting
period.
II.04 Governmental Approvals and Filings. Other than the express
approval of the Bankruptcy Court of this Agreement, Seller is not aware of any
consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority on the part of Seller that is required in connection with
the execution, delivery and performance of this Agreement or any of the
Operative Agreements to which it is a party or the consummation of the
transactions contemplated hereby or thereby.
II.05 Books and Records. None of the Business Books and Records
is recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of Seller.
II.06 Absence of Changes. Except for the execution and delivery
of this Agreement and the transactions to take place pursuant hereto on or prior
to the Closing Date, since October 31, 1997, there has not occurred, to the date
hereof, (i) any entering into, amendment, modification, termination (partial or
complete) or granting of a waiver under or giving any consent with respect to
any Business Contract which is an Asset, or
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(ii) any other transaction of Seller involving or affecting the Xerox Laser
Printer Maintenance Business or the Assets outside the ordinary course of
business consistent with past practice.
II.07 Legal Proceedings. (a) Except as disclosed in writing by
the Seller to Purchaser and attached hereto as Schedule E: (i) other than the
pending chapter 11 bankruptcy case of Seller, there are no Actions or
Proceedings pending or, to the Knowledge of Seller, threatened against, relating
to or affecting Seller with respect to the Xerox Laser Printer Maintenance
Business or any of the Assets which (A) could reasonably be expected to result
in the issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or otherwise result in a material
diminution of the benefits contemplated by this Agreement or any of the
Operative Agreements to Purchaser, or (B) if determined adversely to Seller,
could reasonably be expected to result in (x) any injunction or other equitable
relief that would interfere in any material respect with the Business or (y)
Losses by Seller, individually or in the aggregate with Losses in respect of
other such Actions or Proceedings, exceeding $25,000; and (b) there are no facts
or circumstances known to Seller that could reasonably be expected to give rise
to any Action or Proceeding that would be required to be disclosed pursuant to
clause (i) of this Section 2.07(a).
(b) Either: (i) the plaintiffs in the action filed against Seller
on or about August 6, 1996, in the Superior Court of the State of California for
the County of Orange with regard to Seller's acquisition of all of the common
stock of Laser Support and Engineering (the "LSE Action") do not object to this
Agreement and the terms hereof and will inform the Bankruptcy Court in writing
that they do not object to Purchaser acquiring the Assets free and clear of any
claims they have or may assert in the future in connection with the facts giving
rise to the LSE Action; or (ii) the Bankruptcy Court has entered an order under
Federal Rule of Bankruptcy Procedure 9019 which provides for a settlement and
mutual general release of the claims asserted in the LSE Action and the
settlement documents and attendant Bankruptcy Court order contain an express
release of claims against any assignee of the Assets.
(c) Prior to the execution of this Agreement by Seller, to the
best of Seller's knowledge, Seller has delivered to Purchaser all responses of
counsel (that are in Seller's possession and control) to auditors' requests for
information delivered in connection with Seller's most recently prepared audited
financial statements (together with any updates provided by counsel) regarding
Actions or Proceedings pending or threatened against, relating to or affecting
the Seller's Xerox Laser Printer Maintenance Business, and Seller will use its
best efforts to
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obtain copies of any such responses of counsel that are not currently in its
possession or control and will deliver same to Purchaser.
II.08 Employees. (a) Purchaser is not acquiring a division of the
Seller nor any obligations to or with respect to (i) any of Seller's employees
with respect to continuing employment of and compensation of any sort to any
such employees, or (ii) any Benefit Plans, including but not limited to life,
medical, pension or health plans. The order of the Bankruptcy Court approving
this Agreement shall provide expressly that Purchaser is not acquiring a
division or substantially all of the business assets of Seller and that
Purchaser's acquisition is free and clear of any claims against Seller or the
Assets and that all claims against the Seller or the Assets shall attach, if at
all, to the proceeds of the Purchase Price.
(b) Seller consents without qualification to Purchaser's
employment of any Employee of Seller currently or previously employed in
Seller's Xerox Laser Printer Maintenance Business and, as to current employees,
named in the attached
Schedule F.
II.09 Intellectual Property Rights. To the best of Seller's
knowledge, there are no restrictions on the direct or indirect transfer of any
Business Contract, or any interest therein, held by Seller in respect of any
Intellectual Property. Seller has not received notice that Seller is infringing
any Intellectual Property of any other Person in connection with the conduct of
the Xerox Laser Printer Maintenance Business, no claim is pending or, to the
Knowledge of Seller, has been made to such effect that has not been resolved
and, to the Knowledge of Seller, Seller is not infringing any Intellectual
Property of any other Person in connection with the conduct of Seller's Xerox
Laser Printer Maintenance Business.
II.010 Manuals; Diagnostic/Software Fees. Prior to Closing,
Seller will identify for Purchaser (i) the manuals used in connection with
Seller's Xerox Laser Printer Maintenance Business that Seller copied from
original manuals and will provide copies of same to Purchaser, and (ii) which
Diagnostic Equipment requires payment of diagnostic software fees to Xerox and
whether or not and to what extent such fees have been paid.
II.011 Contracts. (a) Seller has provided Purchaser with a true
and complete list of each of the following Contracts or other arrangements (true
and complete copies thereof, or, if none, reasonably complete and accurate
written descriptions of which, together with all amendments and supplements
thereto and all waivers of any terms thereof, have been delivered to Purchaser
prior to the execution of this Agreement) to which Seller is a
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party in connection with the Xerox Laser Printer Maintenance Business or by
which any of the Assets is bound:
(i) (A) all Contracts (excluding Benefit Plans) providing for a
commitment of employment or consultation services in connection with the
Xerox Laser Printer Maintenance Business for a specified or unspecified
term to, or otherwise relating to employment or the termination of
employment of, any Employee, the name, position and rate of compensation
of each Employee who is a party to such a Contract and the expiration
date of each such Contract; and (B) any written or unwritten
representations, commitments, promises, communications or courses of
conduct (excluding Benefit Plans) involving an obligation of Seller to
make payments in any year, other than with respect to salary or
incentive compensation payments in the ordinary course of business, to
any Employee exceeding $10,000 or any group of Employees exceeding
$25,000 in the aggregate in connection with the Xerox Laser Printer
Maintenance Business;
(ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of Seller to engage in any
business activity or compete with any Person in connection with the
Xerox Laser Printer Maintenance Business or prohibiting or limiting the
ability of any Person to compete with Seller in connection with the
Xerox Laser Printer Maintenance Business;
(iii) all partnership, joint venture, shareholders' or other similar
Contracts with any Person in connection with the Xerox Laser Printer
Maintenance Business;
(iv) all Contracts with distributors, dealers, manufacturer's
representatives, sales agencies or franchises with whom Seller deals in
connection with the Xerox Laser Printer Maintenance Business;
(v) all other Contracts in connection with the Xerox Laser Printer
Maintenance Business that (A) involve the payment or potential payment,
pursuant to the terms of any such Contract, by or to Seller of more than
$10,000 annually and (B) cannot be terminated within 30 days after
giving notice of termination without resulting in any material cost or
penalty to Seller.
(b) Each Business Contract required to be disclosed is in full
force and effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms, of each party thereto; and neither
Seller nor, to the Knowledge of Seller, any other party to such Business
Contract is, or has received notice that it is, in violation or breach of or
default under any such Business Contract (or with notice or lapse of time
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or both, would be in violation or breach of or default under any such Business
Contract) in any material respect.
(c) Except with respect to the contractual right of any party to
a Business Contract to terminate such Business Contract without cause upon the
giving of notice, with or without a waiting period, the execution, delivery and
performance by Seller of this Agreement and the Operative Agreements to which it
is a party, and the consummation of the transactions contemplated hereby and
thereby, will not (A) result in or give to any Person any right of termination,
cancellation, acceleration or modification in or with respect to, (B) result in
or give to any Person any additional rights or entitlement to increased,
additional, accelerated or guaranteed payments under, or (C) result in the
creation or imposition of any Lien upon Seller or any of its Assets and
Properties under any Business Contract in connection with the Xerox Laser
Printer Maintenance Business.
II.012 Licenses. Seller has provided Purchaser with a true and
complete list of all material Licenses used or held for use in the Xerox Laser
Printer Maintenance Business (and all pending applications for any such
Licenses), setting forth the grantor, the grantee, the function and the
expiration and renewal date of each. Prior to the execution of this Agreement,
Seller has delivered to Purchaser true and complete copies of all such Licenses.
With respect to the Xerox Laser Printer Maintenance Business:
(i) Seller owns or validly holds all Licenses that are
material thereto;
(ii) each such License is valid, binding and in full force and
effect;
(iii) Seller is not, nor has it received any notice that it is, in
default (or with the giving of notice or lapse of time or both, would be
in default) under any License; and
(iv) except with respect to the contractual right of any party to a
Business Contract to terminate such Business Contract without cause upon
the giving of notice, with or without a waiting period, the execution,
delivery and performance by Seller of this Agreement and the Operative
Agreements to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, will not (A) result in or
give to any Person any right of termination, cancellation, acceleration
or modification in or with respect to, (B) result in or give to any
Person any additional rights or entitlement to increased, additional,
accelerated or guaranteed payments under, or (C) result in the creation
or imposition of any Lien upon Seller or any of its Assets and
Properties under, any License.
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II.013 Environmental Matters. Seller has obtained all Licenses
which are required under applicable Environmental Laws in connection with the
conduct of the Xerox Laser Printer Maintenance Business or the Assets. Each of
such Licenses is in full force and effect. Seller has conducted the Business in
compliance in all material respects with the terms and conditions of all such
Licenses and with any applicable Environmental Law. In addition:
(a) No Order has been issued, no Environmental Claim has been
filed, no penalty has been assessed and no investigation or review is pending
or, to the Knowledge of Seller, threatened by any Governmental or Regulatory
Authority with respect to any alleged failure by Seller to have any License
required under applicable Environmental Laws in connection with the conduct of
the Xerox Laser Printer Business or with respect to any generation, treatment,
storage, recycling, transportation, discharge, disposal or Release of any
Hazardous Material in connection with the Xerox Laser Printer business, and to
the Knowledge of Seller there are no facts or circumstances in existence which
could reasonably be expected to form the basis for any such Order, Environmental
Claim, penalty or investigation.
(b) Seller has not transported or arranged for the transportation
of any Hazardous Material in connection with the operation of the Xerox Laser
Printer Maintenance Business to any location that is (i) listed on the NPL under
CERCLA, (ii) listed for possible inclusion on the NPL by the Environmental
Protection Agency in CERCLIS or on any similar state or local list or (iii) the
subject of enforcement actions by federal, state or local Governmental or
Regulatory Authorities that may lead to Environmental Claims against Seller or
the Business.
II.014 Taxes. Seller has timely filed (or will timely file) all
Tax Returns required to be filed by applicable law prior to the Closing related
to the Business or the Assets. Other than as disclosed on attached Schedule G,
Seller has timely paid (or will timely pay) all Taxes that are due, or claimed
or asserted by any taxing authority to be due, for the periods covered by the
Tax Returns that relate to the Business or the Assets. Tax liens on the Assets
do not exceed the Purchase Price and Seller will use the first proceeds of the
Purchase Price to pay any Tax liens upon the Assets. Seller has complied (and
until the Closing will comply) with all applicable laws, rules and regulations
relating to the payment of withholding Taxes (including withholding and
reporting requirements under Code sections 1441 through 1464, 3401 through 3406,
6041 and 6049 and similar provisions under any other laws) and have, within the
time and in the manner prescribed by law, withheld from employee wages and paid
over to the proper governmental authorities all required amounts.
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II.015 Substantial Customers and Suppliers. Seller has provided
Purchaser with a list of the customers and suppliers of Seller's Xerox Laser
Printer Maintenance Business and the revenues generated by such customer in the
12 months prior to the date of this Agreement. As of the date hereof, Seller is
not aware of (i) any legal or other impediment to Purchaser's ability to acquire
additional inventory from Xerox on substantially the same terms and conditions
as Seller, or (ii) any objection of Xerox to Purchaser's acquisition of the
Assets or to the continued operation of the Xerox Laser Printer Maintenance
Business by Purchaser.
II.016 Inventory. (a) All the Inventory consists of a quality and
quantity usable and salable in the ordinary course of business consistent with
past practice. Seller has good title to the Inventory, and all items included in
the Inventory are the property of Seller, are not held by Seller on consignment
from others and conform in all material respects to all standards applicable to
such inventory or its use or sale imposed by Governmental or Regulatory
Authorities. Seller has restocked with substantially equivalent quantities any
replacement Inventory used at customer sites after October 31, 1997, through the
Closing Date.
(b) As of the Closing Date, eighty-five percent (85%) of the
aggregate Xerox list price of the Inventory is not less than six hundred
thousand dollars ($600,000). In the event that Purchaser reasonably determines
that eighty-five percent (85%) of the aggregate Xerox list price of the usable
Inventory is less than five hundred thousand dollars ($500,000), Seller will
supply Purchaser, at no cost to Purchaser and in timely fashion, with usable
Inventory of the type reasonably requested by Purchaser such that eighty-five
percent (85%) of the aggregate Xerox list price of the usable Inventory will
equal at least five hundred thousand dollars ($500,000). For the purpose of this
Section 2.016(b), "usable Inventory" means Inventory that is not faulty,
damaged, broken or defective for use in the Xerox Laser Printer Maintenance
Business.
II.017 No Guarantees. None of the Liabilities of the Business or
of Seller incurred in connection with the conduct of Seller's Xerox Laser
Printer Maintenance Business is guaranteed by or subject to a similar contingent
obligation of any other Person, nor has Seller guaranteed or become subject to a
similar contingent obligation in respect of the Liabilities of any customer,
supplier or other Person to whom Seller sells goods or provides services or with
whom Seller otherwise has significant business relationships in the conduct of
Seller's Xerox Laser Printer Maintenance Business.
II.018 Entire Business. Except for the Excluded Assets
(including but not limited to the Excluded Inventory and
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the Non-Xerox Business), the sale of the Assets by Seller to Purchaser pursuant
to this Agreement will effectively convey to Purchaser the entirety of Seller's
Xerox Laser Printer Maintenance Business and all of the tangible and intangible
property used by Seller (whether owned, leased or held under license by Seller,
by any of Seller's Affiliates or by others) in connection with the conduct of
Seller's Xerox Laser Printer Maintenance Business heretofore conducted by
Seller.
II.019 Disclosure. All material facts relating to the condition
of Seller's Xerox Laser Printer Maintenance Business have been disclosed to
Purchaser in or in connection with this Agreement. No representation or warranty
contained in this Agreement, and no statement contained in any certificate, list
or other writing furnished to Purchaser pursuant to any provision of this
Agreement, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein, in
the light of the circumstances under which they were made, not misleading.
II.020 Prepaid Expenses. As of the Closing Date, there were no
prepaid expenses relating to the Xerox Laser Printer Maintenance Business of
Seller, as the term "prepaid expenses" is used in the ordinary course of
Seller's business.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
III.01 Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Indiana.
Purchaser has full corporate power and authority to enter into this Agreement
and the Operative Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby.
III.02 Authority. The execution and delivery by Purchaser of this
Agreement and the Operative Agreements to which it is a party, and the
performance by Purchaser of its obligations hereunder and thereunder, have been
duly and validly authorized by the Board of Directors of Purchaser, no other
corporate action on the part of Purchaser or its stockholders being necessary.
This Agreement has been duly and validly executed and delivered by Purchaser and
constitutes, and upon the execution and delivery by Purchaser of the Operative
Agreements to which it is a party, such Operative Agreements will constitute,
legal, valid and binding obligations of Purchaser enforceable against Purchaser
in accordance with their terms.
III.03 No Conflicts. The execution and delivery by Purchaser of
this Agreement does not, and the execution and delivery by Purchaser of the
Operative Agreements to which it is a party, the performance by Purchaser of its
obligations under this Agreement and such Operative Agreements and the
consummation of the transactions contemplated hereby and thereby will not
conflict with or result in a violation or breach of any of the terms, conditions
or provisions of the certificate or articles of incorporation or by-laws or
other comparable corporate charter document of Purchaser or constitute (with or
without notice or lapse of time or both) a default under, require Purchaser to
obtain any consent, approval or action of, make any filing with or give any
notice to any Person as a result or under the terms of, any Contract or License
to which Purchaser is a party.
III.04 Governmental Approvals and Filings. No consent, approval
or action of, filing with or notice to any Governmental or Regulatory Authority
on the part of Purchaser is required in connection with the execution, delivery
and performance of this Agreement or the Operative Agreements to which it is a
party or the consummation of the transactions contemplated hereby or thereby.
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III.05 Legal Proceedings. There are no Actions or Proceedings
pending or, to the knowledge of Purchaser, threatened against, relating to or
affecting Purchaser or any of its Assets and Properties which could reasonably
be expected to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or any of the Operative Agreements.
III.06 Financial Ability to Perform. Purchaser has the financial
wherewithal to make full payment of the Purchase Price on the Closing Date as
required in Section 1.04 and to make all of the earnout payments required under
Section 1.03(c).
III.07 Resale Number. Purchaser is authorized under Law to sell
the Inventory in the ordinary course of its business and has provided Seller
with its applicable resale number.
III.08 Noncompetition. Purchaser is not presently engaged in the
Seimens laser printer maintenance business and will not use the Assets acquired
pursuant to this Agreement to engage in the Seimens laser printer maintenance
business in competition with Seller.
ARTICLE IV.
COVENANTS OF SELLER
Seller covenants and agrees with Purchaser that, at all times
from and after the date hereof until the Closing and, with respect to any
covenant or agreement by its terms to be performed in whole or in part after the
Closing, for the period specified therein or, if no period is specified therein,
indefinitely, Seller will comply with all covenants and provisions of this
Article IV, except to the extent Purchaser may otherwise consent in writing.
IV.01 Regulatory and Other Approvals. Seller will, as promptly as
practicable, (a) take all commercially reasonable steps necessary or desirable
to obtain all consents, approvals or actions of, make all filings with and give
all notices to Governmental or Regulatory Authorities or any other Person
required of Seller to consummate the transactions contemplated hereby and by the
Operative Agreements, and (b) provide such other information and communications
to such Governmental or Regulatory Authorities or other Persons as Purchaser or
such Governmental or Regulatory Authorities or other Persons may reasonably
request in connection therewith. Seller will provide prompt notification to
Purchaser when any such consent, approval, action, filing or notice referred to
in clause (a) above is obtained, taken, made or given, as applicable, and will
advise
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Purchaser of any communications (and, unless precluded by Law, provide copies of
any such communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by this
Agreement or any of the Operative Agreements.
IV.02 Due Diligence Investigation by Purchaser. To the extent not
already provided by Seller, until the Closing Date, Seller will (a) provide
Purchaser and its officers, directors, employees, agents, counsel, accountants,
financial advisors, consultants and other representatives (collectively,
"Representatives") with reasonable access, upon reasonable prior notice and
during normal business hours, to the Employees and such other officers,
employees and agents of Seller who have any responsibility for the conduct of
Seller's Xerox Laser Printer Maintenance Business, to Seller's accountants and
to the Assets, and (b) furnish Purchaser and such other Persons with all such
information and data (including without limitation copies of Business Contracts,
and other Business Books and Records) concerning Seller's Xerox Laser Printer
Maintenance Business, the Assets and the Assumed Liabilities as Purchaser or any
of such other Persons reasonably may request in connection with such
investigation.
IV.03 Solicitation of Competing Offers; Payment of Purchaser's
Expenses in Event of Successful Overbid. (a) Until the conclusion of the hearing
at which the Bankruptcy Court approves this Agreement, if Seller receives from
any Person an offer, inquiry or request to acquire any or all of Seller's Xerox
Laser Printer Maintenance Business, Seller will promptly, orally and in writing,
advise Purchaser of such offer, inquiry or request and deliver a copy of same to
Purchaser.
(b) In the event that the transactions contemplated in this
Agreement are not consummated because a Person other than Purchaser acquires
Seller's Xerox Laser Printer Maintenance Business by making an overbid on
Seller's Xerox Laser Printer Maintenance Business or on substantially all of the
Business of Seller, Seller agrees to pay Purchaser twenty five thousand dollars
($25,000) to cover Purchaser's legal and due diligence expenses incurred in
connection with this Agreement. Such payment shall be made by Seller within
three business days of the closing of the sale to such Person other than
Purchaser. The provisions of this Section 4.03(b) shall be disclosed in Seller's
moving papers seeking approval of this Agreement.
IV.04 Conduct of Business. Until the Closing Date, Seller will
operate its Xerox Laser Printer Maintenance Business only in the ordinary course
consistent with past practice. Without limiting the generality of the foregoing,
Seller will:
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(a) use commercially reasonable efforts to (i) preserve intact
the present business organization and reputation of the Xerox Laser Printer
Maintenance Business, (ii) keep available (subject to dismissals and retirements
in the ordinary course of business consistent with past practice) the services
of the Employees, (iii) maintain the Assets in good working order and condition,
ordinary wear and tear excepted, (iv) maintain the good will of customers,
suppliers, lenders and other Persons to whom Seller sells goods or provides
services or with whom Seller otherwise has significant business relationships in
connection with the Xerox Laser Printer Maintenance Business and (v) continue
all current sales, marketing and promotional activities relating to Seller's
Xerox Laser Printer Maintenance Business;
(b) except to the extent required by applicable Law, (i) cause
the Business Books and Records to be maintained in the usual, regular and
ordinary manner, and (ii) not permit any material change in any pricing,
investment, accounting, financial reporting, inventory, credit, allowance or Tax
practice or policy of Seller that would adversely affect Seller's Xerox Laser
Printer Maintenance Business or the Assets; and
(c) comply, in all material respects, with all Laws and Orders
applicable to Seller's Xerox Laser Printer Maintenance Business and promptly
following receipt thereof to give Purchaser copies of any notice received from
any Governmental or Regulatory Authority or other Person alleging any violation
of any such Law
or Order.
IV.05 Certain Restrictions. Until the Closing Date,
Seller will refrain from:
(a) acquiring or disposing of any Assets and Properties used or
held for use in the conduct of the Xerox Laser Printer Maintenance Business,
other than Inventory in the ordinary course of business consistent with past
practice, or creating or incurring any Lien any Assets used or held for use in
the conduct of Seller's Xerox Laser Printer Maintenance Business;
(b) entering into, amending, modifying, terminating (partially or
completely), granting any waiver under or giving any consent with respect to any
Business Contract;
(c) violating, breaching or defaulting under in any material
respect, or taking or failing to take any action that (with or without notice or
lapse of time or both) would constitute a material violation or breach of, or
default under, any term or provision of any Business Contract;
(d) engaging with any Person in any Business Combination, unless
such Person agrees in a written instrument in
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form and substance reasonably satisfactory to Purchaser to adopt and comply with
the terms and conditions of this Agreement as though such Person was an original
signatory hereto;
(e) engaging in any transaction with respect to Seller's Xerox
Laser Printer Maintenance Business with any officer, director or Affiliate of
Seller, either outside the ordinary course of business consistent with past
practice or other than on an arm's-length basis; or
(f) entering into any Contract to do or engage in any of the
foregoing.
IV.06 Delivery of Books and Records, etc.; Removal of Property.
(a) On the Closing Date, Seller will deliver or make available to Purchaser at
the locations at which the Business is conducted all of the Business Books and
Records and such other Assets as are in Seller's possession at other locations,
and if at any time after the Closing Seller discovers in its possession or under
its control any other Business Books and Records or other Assets, it will
forthwith deliver such Business Books and Records or other Assets to Purchaser.
IV.07 Noncompetition. (a) Seller will, for a period of five years
from the Closing Date, refrain from, either alone or in conjunction with any
other Person, or directly or indirectly through its present or future
Affiliates:
(i) employing, engaging or seeking to employ or engage any Person
who within the prior twelve months had been an employee of Purchaser or
any of its Affiliates engaged in the Xerox Laser Printer Maintenance
Business, unless such employee (A) resigns voluntarily (without any
solicitation from Seller or any of its Affiliates) or (B) is terminated
by Purchaser or any of its Affiliates after the Closing Date;
(ii) causing or attempting to cause (A) any client, customer or
supplier of Purchaser's Xerox Laser Printer Maintenance Business to
terminate or materially reduce its business with Purchaser or any of its
Affiliates or (B) any officer, employee or consultant of Purchaser or
any of its Affiliates engaged in the Xerox Laser Printer Maintenance
Business to resign or sever a relationship with Purchaser or any of its
Affiliates;
(iii) disclosing (unless compelled by judicial or administrative
process) or using any confidential or secret information relating to
Purchaser's Xerox Laser Printer Maintenance Business or any client,
customer or supplier of Purchaser's Xerox Laser Printer Maintenance
Business; or
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(iv) participating or engaging in (other than through the ownership
of five percent (5%) or less of any class of securities registered under
the Securities Exchange Act of 1934, as amended), or otherwise lending
assistance (financial or otherwise) to any Person participating or
engaged in, any of the lines of business which comprised Seller's Xerox
Laser Printer Maintenance Business on the Closing Date in any
jurisdiction in which Seller participates or engages in such lines of
business on the Closing Date.
(b) The parties hereto recognize that the Laws and public
policies of the various states of the United States may differ as to the
validity and enforceability of covenants similar to those set forth in this
Section. It is the intention of the parties that the provisions of this Section
be enforced to the fullest extent permissible under the Laws and policies of
each jurisdiction in which enforcement may be sought, and that the
unenforceability (or the modification to conform to such Laws or policies) of
any provisions of this Section shall not render unenforceable, or impair, the
remainder of the provisions of this Section. Accordingly, if any provision of
this Section shall be determined to be invalid or unenforceable, such invalidity
or unenforceability shall be deemed to apply only with respect to the operation
of such provision in the particular jurisdiction in which such determination is
made and not with respect to any other provision or jurisdiction.
(c) The parties hereto acknowledge and agree that any remedy at
Law for any breach of the provisions of this Section would be inadequate, and
Seller hereby consents to the granting by any court of an injunction or other
equitable relief, without the necessity of actual monetary loss being proved, in
order that the breach or threatened breach of such provisions may be effectively
restrained.
IV.08 Notice and Cure. Seller will notify Purchaser in writing
of, and contemporaneously will provide Purchaser with true and complete copies
of any and all information or documents relating to, and will use all
commercially reasonable efforts to cure before the Closing, any event,
transaction or circumstance, as soon as practicable after it becomes Known to
Seller, occurring after the date of this Agreement that causes or will cause any
covenant or agreement of Seller under this Agreement to be breached or that
renders or will render untrue any representation or warranty of Seller contained
in this Agreement as if the same were made on or as of the date of such event,
transaction or circumstance. No notice given pursuant to this Section shall have
any effect on the representations, warranties, covenants or agreements contained
in this Agreement for purposes of determining satisfaction of any condition
contained herein or shall in any way limit Purchaser's right to seek indemnity
under Article IX.
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IV.09 Fulfillment of Conditions. Seller will execute and deliver
at the Closing each Operative Agreement that Seller is required hereby to
execute and deliver as a condition to the Closing, will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each other condition to the obligations of Purchaser contained in
this Agreement and will not take or fail to take any action that could
reasonably be expected to result in the nonfulfillment of any such condition.
IV.010 Taxes. (a) With respect to any Taxes payable by Purchaser
with respect to the Assets or the Business for a Tax period beginning before the
Closing and ending after the Closing, Seller will pay to Purchaser at least
three Business Days prior to the due date for the payment of such Tax in an
amount equal to the amount that would have resulted had the last day of the
period been the Closing Date and had the books of Seller been closed on that
date. Taxes not measured by income or transactions for which the last day of a
taxable period is not the Closing will be allocated pro rata per day between the
period ending on the Closing and the period commencing after the Closing.
(b) Seller shall pay all sales, use, transfer, real property
transfer, recording, stock transfer and other similar taxes and fees ("Transfer
Taxes") arising out of or in connection with the transactions effected pursuant
to this Agreement and shall indemnity Purchaser on an after-Tax basis with
respect to such Transfer Taxes. Seller shall file all necessary documentation
and Returns with respect to such Transfer Taxes.
ARTICLE V.
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to purchase the Assets and
to assume and to pay, perform and discharge the Assumed Liabilities are subject
to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by Purchaser
in its sole discretion):
V.01 Representations and Warranties. Each of the representations
and warranties made by Seller in this Agreement (other than those made as of a
specified date earlier than the Closing Date) shall be true and correct in all
material respects on and as of the Closing Date as though such representation or
warranty was made on and as of the Closing Date, and any representation or
warranty made as of a specified date earlier than the Closing Date shall have
been true and correct in all material respects on and as of such earlier date.
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V.02 Performance. Seller shall have performed and complied with,
in all material respects, each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by Seller at or before the
Closing.
V.03 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or which could reasonably be
expected to otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement or any of the Operative Agreements
to Purchaser, and there shall not be pending or threatened on the Closing Date
any Action or Proceeding in, before or by any Governmental or Regulatory
Authority which could reasonably be expected to result in the issuance of any
such Order or the enactment, promulgation or deemed applicability to Purchaser
or the transactions contemplated by this Agreement or any of the Operative
Agreements of any such Law.
V.04 Regulatory Consents and Approvals. All consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit Purchaser and Seller to perform their obligations
under this Agreement and the Operative Agreements and to consummate the
transactions contemplated hereby and thereby (a) shall have been duly obtained,
made or given, (b) shall be in form and substance reasonably satisfactory to
Purchaser, (c) shall not be subject to the satisfaction of any condition that
has not been satisfied or waived and (d) shall be in full force and effect, and
all terminations or expirations of waiting periods imposed by any Governmental
or Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements shall have occurred.
V.05 Third Party Consents. All consents (or in lieu thereof
waivers) to the performance by Purchaser and Seller of their obligations under
this Agreement and the Operative Agreements or to the consummation of the
transactions contemplated hereby and thereby as are required under any Contract
to which Purchaser or Seller is a party or by which any of their respective
Assets and Properties are bound (a) shall have been obtained, (b) shall be in
form and substance reasonably satisfactory to Purchaser, (c) shall not be
subject to the satisfaction of any condition that has not been satisfied or
waived and (d) shall be in full force and effect, except where the failure to
obtain any such consent (or in lieu thereof waiver) could not reasonably be
expected, individually or in the aggregate with other such failures, to
materially adversely affect Purchaser, the Assets, the Assumed Liabilities or
Seller's Xerox Laser Printer Maintenance Business or otherwise result in a
material diminution of the benefits of the transactions contemplated by this
Agreement
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and the Operative Agreements to Purchaser. The foregoing shall not apply to the
executory contracts and unexpired leases that are assumed by Seller and assigned
to Purchaser pursuant to the order of the Bankruptcy Court approving this
Agreement, or to the consents or waivers given or deemed given in the course of
the Bankruptcy Court proceedings that led up to the Bankruptcy Court order
approving this Agreement.
V.06 Deliveries. Seller shall have delivered to Purchaser the
General Assignment and the other Assignment Instruments.
V.07 Proceedings. (a) All proceedings to be taken on the part of
Seller in connection with the transactions contemplated by this Agreement and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Purchaser, and Purchaser shall have received copies of all such
documents and other evidences as Purchaser may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
(b) Seller has disclosed to the Bankruptcy Court in its moving
papers seeking approval of this Agreement that a director of the Seller acted as
a broker in this transaction and is entitled to receive a brokerage fee from
Purchaser separate and apart from the consideration paid by Purchaser to Seller
under this Agreement, and the amount of the brokerage fee also shall be
disclosed in the same manner.
V.08 Approval of Board of Directors of Purchaser. The Board of
Directors shall have approved this Agreement.
V.09 Bankruptcy Court Order. (a) (i) The Bankruptcy Court shall
have entered an order in form and substance satisfactory to Purchaser that
provides for, among other things: approval of the sale of the Assets to
Purchaser pursuant to Bankruptcy Code Section 363; a finding that the sale of
the Assets to Purchaser shall be free and clear of all liens, claims and
encumbrances of any nature whatsoever; a finding that Purchaser purchased the
Assets in good faith for the purposes of Bankruptcy Code Section 363(m);
approval pursuant to Bankruptcy Code Section 365 of the assumption by Seller and
assignment to Purchaser of each of the Business Contracts of Interscience; and
(ii) the time for the filing of a motion for reconsideration or an appeal of the
order approving this Agreement shall have passed and no such motion or appeal is
pending, except however that (iii) Purchaser may waive the requirement of (ii)
above and Seller agrees that in the event of such waiver, Seller will cooperate
with Purchaser's requested Closing Date.
(b) In addition to the provisions of Section 5.010(a) above, the
Bankruptcy Court order approving this Agreement and the
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sale of the Assets to Purchaser shall provide expressly that all rights of
Seller to conduct its Xerox Laser Printer Maintenance Business acquired as
successor to the rights of LSE, whether those rights are contractual or pursuant
to court order, are assumed by Interscience and transferred and assigned to
Purchaser without limitation pursuant to Bankruptcy Code Sections 363 and 365.
ARTICLE VI.
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
VI.01 Survival of Representations, Warranties, Covenants and
Agreements. Notwithstanding any right of Purchaser (whether or not exercised) to
investigate the Business or any right of any party (whether or not exercised) to
investigate the accuracy of the representations and warranties of the other
party contained in this Agreement, Purchaser and Seller have the right to rely
fully upon the representations, warranties, covenants and agreements of the
other contained in this Agreement. The representations, warranties, covenants
and agreements of Purchaser and Seller contained in this Agreement will survive
the Closing (a) for one year with respect to (i) the representations and
warranties contained in Section 2.02 and Section 3.02 (Authority) and 2.21
(Disclosure) and (ii) the covenants and agreements contained in Sections 1.01
(Assets), 1.02 (Liabilities), 1.05 (Further Assurances), 10.04 (Expenses) and
10.06 (Confidentiality), and (b) with respect to all other covenants,
representations and warranties, until sixty (60) days following the last date on
which such covenant or agreement is to be performed or, if no such date is
specified, one year; provided that any representation, warranty, covenant or
agreement that would otherwise terminate in accordance with clause (a), or (b)
above will continue to survive if an Indemnity Notice shall have been timely
given on or prior to such termination date, until the related claim for
indemnification has been satisfied or otherwise resolved. ARTICLE VII.
INDEMNIFICATION
VII.01 Indemnification.
(a) Seller shall indemnify the Purchaser in respect of, and hold
Purchaser harmless from and against, any and all Losses suffered, incurred or
sustained by Purchaser or to which Purchaser becomes subject, resulting from,
arising out of or relating to (i) any breach of representation or warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Seller contained in this Agreement (determined in all cases as if the terms
"material" or "materially" were not included therein) or (ii) the Retained
Liabilities. Solely to the
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extent permitted under the Bankruptcy Code or other applicable law, Purchaser
shall have the right to set off its indemnity claims hereunder against its
payments obligations under the earnout provisions of Section 1.03(c).
(b) Purchaser shall indemnify Seller in respect of, and hold
Seller harmless from and against, any and all Losses suffered, incurred or
sustained by Seller or to which Seller becomes subject, resulting from, arising
out of or relating to (i) any breach of representation or warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Purchaser contained in this Agreement (determined in all cases as if the terms
"material" or "materially" were not included therein) or (ii) the Assumed
Liabilities.
ARTICLE VIII.
TERMINATION
VIII.01 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written
agreement of Seller and Purchaser;
(b) at any time before the Closing, by Purchaser, in the event
(i) of a material breach hereof by the non-terminating party if such
non-terminating party fails to cure such breach within five (5) Business Days
following notification thereof by the terminating party or (ii) upon
notification of the non-terminating party by the terminating party that the
satisfaction of any condition to the terminating party's obligations under this
Agreement becomes impossible or impracticable with the use of commercially
reasonable efforts if the failure of such condition to be satisfied is not
caused by a breach hereof by the terminating party; or
(c) at any time after November , 1997, by Seller or Purchaser
upon notification of the non-terminating party by the terminating party if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of this Agreement by the terminating party.
VIII.02 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 8.01, this Agreement will forthwith become null
and void, and there will be no liability or obligation on the part of Seller or
Purchaser (or any of their respective officers, directors, employees, agents or
other representatives or Affiliates), except as provided in the next succeeding
sentence and except that the provisions with respect to
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expenses in Section 10.04 and confidentiality in Section 10.06 will continue to
apply following any such termination. Notwithstanding any other provision in
this Agreement to the contrary, upon termination of this Agreement pursuant to
Section 8.01 (b) or (c), Seller will remain liable to Purchaser for any willful
breach of this Agreement by Seller existing at the time of such termination, and
Purchaser will remain liable to Seller for any willful breach of this Agreement
by Purchaser existing at the time of such termination, and Seller or Purchaser
may seek such remedies, including damages and fees of attorneys, against the
other with respect to any such breach as are provided in this Agreement or as
are otherwise available at Law or in equity.
ARTICLE IX.
DEFINITIONS
IX.01 Definitions. (a) Defined Terms. As used in
this Agreement, the following defined terms have the meanings
indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means any Person that directly, or indirectly through
one of more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control of a
Person means the power, direct or indirect, to direct or cause the direction of
the management and policies of such Person whether by Contract or otherwise and,
in any event and without limitation of the previous sentence, any Person owning
ten percent (10%) or more of the voting securities of another Person shall be
deemed to control that Person.
"Agreement" means this Asset Purchase Agreement and the Exhibits,
and Schedules hereto and the certificates delivered in accordance herewith, as
the same shall be amended from time to time.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including without
limitation cash, cash equivalents, accounts and notes receivable, Investment
Assets, chattel paper, documents, instruments, general intangibles, real estate,
equipment, inventory, goods and Intellectual Property.
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"Benefit Plan" means any Plan established by Seller, or any
predecessor or Affiliate of Seller, existing at the Closing Date or prior
thereto, to which Seller contributes or has contributed on behalf of any
Employee, former Employee or director, or under which any Employee, former
Employee or director of Seller or any beneficiary thereof is covered, is
eligible for coverage or has benefit rights.
"Books and Records" of any Person means all files, documents,
instruments, papers, books and records relating to the business, operations,
condition of (financial or other), results of operations and Assets and
Properties of such Person, including without limitation financial statements,
Tax Returns and related work papers and letters from accountants, budgets,
pricing guidelines, ledgers, journals, deeds, title policies, minute books,
stock certificates and books, stock transfer ledgers, Contracts, Licenses,
customer lists, computer files and programs, retrieval programs, operating data
and plans and environmental studies and plans.
"Business" has the meaning ascribed to it in the
recitals to this Agreement.
"Business Combination" means with respect to any Person, any
merger, consolidation or combination to which such Person is a party, any sale,
dividend, split or other disposition of capital stock or other equity interests
of such Person or any sale, dividend or other disposition of all or
substantially all of the Assets and Properties of such Person.
"Business Day" means a day other than Saturday, Sunday or any day
on which banks located in the State[s] of [location of Seller's principal
executive offices] and [location of Purchaser's principal executive offices] are
authorized or obligated to close.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the rules and
regulations promulgated thereunder.
"CERCLIS" means the Comprehensive Environmental
Response and Liability Information System, as provided for by
40 C.F.R. ?300.5.
"Closing" means the closing of the transactions
contemplated by Section 1.04.
"Closing Date" means (a) November 26, 1997, or (b) such other
date as Purchaser and Seller mutually agree upon in writing.
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral).
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"Employee" means, as of the Closing Date, each current and former
employee, officer or consultant of Seller.
"Environmental Claim" means, with respect to any Person, any
written or oral notice, claim, demand or other communication (collectively, a
"claim") by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, Governmental or Regulatory Authority
response costs, damages to natural resources or other property, personal
injuries, fines or penalties arising out of, based on or resulting from (a) the
presence, or Release into the environment, of any Hazardous Material at any
location, whether or not owned by such Person, or (b) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law. The term
"Environmental Claim" shall include, without limitation, any claim by any
Governmental or Regulatory Authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and any claim by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence of Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" means any Law or Order relating to the
regulation or protection of human health, safety or the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air, soil, surface
water, ground water, wetlands, land or subsurface strata), or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
"Hazardous Material" means (A) any petroleum or petroleum
products, flammable explosives, radioactive materials, asbestos in any form that
is or could become friable, urea formaldehyde foam insulation and transformers
or other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls (PCBs); (B) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import under any Environmental
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Law; and (C) any other chemical or other material or substance, exposure to
which is now or hereafter prohibited, limited or regulated by any Governmental
or Regulatory Authority under any Environmental Law.
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnity Notice" means written notification of a claim for
indemnity under Article IX, specifying the nature of and basis for such claim,
together with the amount or, if not then reasonably determinable, the estimated
amount, determined in good faith, of the Loss arising from such claim.
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, designs, methodologies, computer programs (including all
source codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.
"Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by Seller (other
than trade receivables generated in the ordinary course of business of the
Seller).
"IRS" means the United States Internal Revenue Service.
"Knowledge of Seller" or "Known to Seller" means the knowledge of
any officer, director or employee of Seller.
"Laws" means all laws, statutes, rules, regulations, ordinances
and other pronouncements having the effect of law of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision or of any Governmental or Regulatory Authority.
32
<PAGE> 37
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation interest, court
costs, fees of attorneys, accountants and other experts or other expenses of
litigation or other proceedings or of any claim, default or assessment).
"NPL" means the National Priorities List under CERCLA.
"Operative Agreements" means, collectively, the General
Assignment and the other Assignment Instruments, and any support or other
agreements to be entered into in connection with the transaction.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Person" means any natural person, corporation, limited liability
company, general partnership, limited partnership, proprietorship, other
business organization, trust, union, association or Governmental or Regulatory
Authority.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment,
33
<PAGE> 38
including, without limitation, the movement of Hazardous Materials through
ambient air, soil, surface water, ground water, wetlands, land or subsurface
strata.
"Taxes" means any federal, state, county, local or foreign taxes,
charges, fees, levies, other assessments, or withholding taxes or charges
(including, without limitation) income, gross receipts, ad valorem, real or
personal property, license, payroll, wage withholding, employment, social
security, or occupation tax) imposed by any governmental entity, and includes
any interest and penalties (civil or criminal) on or additions to any taxes and
any expenses incurred in connection with the determination, settlement or
litigation of any Tax liability.
"Tax Return" means a report, return or other information
(including any amendments) required to be supplied to a governmental entity by
the Company with respect to Taxes including, where permitted or required,
combined or consolidated returns for any group of entities that includes Seller.
(b) Construction of Certain Terms and Phrases. Unless the context
of this Agreement otherwise requires, (i) words of any gender include each other
gender; (ii) words using the singular or plural number also include the plural
or singular number, respectively; (iii) the terms "hereof," "herein," "hereby"
and derivative or similar words refer to this entire Agreement; (iv) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement; and (v) the phrases "ordinary course of business" and "ordinary
course of business consistent with past practice" refer to the business and
practice of Seller in connection with the Business. Whenever this Agreement
refers to a number of days, such number shall refer to calendar days unless
Business Days are specified. All accounting terms used herein and not expressly
defined herein shall have the meanings given to them under GAAP. All other terms
used herein and not expressly defined herein shall have the meanings given to
them under title 11 of the United States Code, the Bankruptcy Code.
ARTICLE X.
MISCELLANEOUS
X.01 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
34
<PAGE> 39
If to Purchaser, to:
--------------------
Anacomp, Inc.
12365 Crosthwaite Circle
Poway, CA 92064
Telephone No. (619) 679-9736
Facsimile No. (619) 679-8359
Attn: Mr. Ralph W. Koehrer
President and Chief Executive Officer
with a required copy to:
------------------------
Anacomp, Inc.
12365 Crosthwaite Circle
Poway, CA 92064
Telephone No. (619) 679-9736
Facsimile No. (619) 748-8729
Attn: George C. Gaskin, Esq.
Senior Vice President,
General Counsel and Secretary
35
<PAGE> 40
with a required copy to:
------------------------
Milbank, Tweed, Hadley & McCloy
Thirtieth Floor
601 South Figueroa Street
Los Angeles, CA 90017
Facsimile No.: 213/629-5063
Attn: Robert J. Moore, Esq.
If to Seller, to:
-----------------
Interscience Computer Corp.
5171 Clareton Drive
Agoura Hills, CA 91301
Attn: Water Kornbluh
with a required copy to:
------------------------
Biegenzahn Weinberg
21031 Ventura Blvd.
Suite 905
Woodland Hills, CA 91364
Facsimile No.: (818) 594-8828
Attn: Joel Weinberg, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
X.02 Bulk Sales Act. The parties hereby waive compliance with the
bulk sales act or comparable statutory provisions of each applicable
jurisdiction.
X.03 Entire Agreement. This Agreement and the Operative
Agreements supersede all prior discussions and agreements between the parties
with respect to the subject matter hereof and thereof, including without
limitation that certain letter from Purchaser to Seller dated October 14, 1997,
and countersigned by Seller on October 14, 1997, and contains the sole and
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof.
36
<PAGE> 41
X.04 Expenses. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated hereby are consummated,
each party will pay its own costs and expenses incurred in connection with the
negotiation, execution and closing of this Agreement and the Operative
Agreements and the transactions contemplated hereby and thereby.
X.05 Public Announcements. Except with respect to those
disclosures that Interscience is required to make in its capacity as a chapter
11 debtor, and those disclosures Seller or Purchaser is required to make as a
publicly reporting company, at all times at or before the Closing, Seller and
Purchaser will not issue or make any reports, statements or releases to the
public or generally to the employees, customers, suppliers or other Persons to
whom Seller sells goods or provides services in connection with the Xerox Laser
Printer Maintenance Business or with whom Seller otherwise has significant
business relationships in connection with the Xerox Laser Printer Maintenance
Business with respect to this Agreement or the transactions contemplated hereby
without the consent of the other, which consent shall not be unreasonably
withheld. If either party is unable to obtain the approval of its public report,
statement or release from the other party and such report, statement or release
is, in the opinion of legal counsel to such party, required by Law in order to
discharge such party's disclosure obligations, then such party may make or issue
the legally required report, statement or release and promptly furnish the other
party with a copy thereof. Seller and Purchaser will also obtain the other
party's prior approval of any press release to be issued immediately following
the Closing announcing the consummation of the transactions contemplated by this
Agreement.
X.06 Confidentiality. Except with respect to those disclosures
that Interscience is required to make in its capacity as a chapter 11 debtor,
and those disclosures Seller or Purchaser is required to make as a publicly
reporting company, each party hereto will hold, and will use its best efforts to
cause its Affiliates, and their respective Representatives to hold, in strict
confidence from any Person unless (i) compelled to disclose by judicial or
administrative process (including without limitation in connection with
obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Governmental or Regulatory Authorities) or by other
requirements of Law or (ii) disclosed in an Action or Proceeding brought by a
party hereto in pursuit of its rights or in the exercise of its remedies
hereunder, all documents and information concerning the other party or any of
its Affiliates furnished to it by the other party or such other party's
Representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously known by the party receiving such documents
or information, (b) in the public domain (either prior to or after the
furnishing of such documents or information hereunder) through
37
<PAGE> 42
no fault of such receiving party or (c) later acquired by the receiving party
from another source if the receiving party is not aware that such source is
under an obligation to another party hereto to keep such documents and
information confidential. Following the Closing, the foregoing restrictions will
not apply to Purchaser's use of documents and information concerning the Xerox
Laser Printer Maintenance Business, the Assets or the Assumed Liabilities
furnished by Seller hereunder; except, however, that Purchaser shall maintain
the confidentiality of any information regarding Seller's Non-Xerox Business
obtained by Purchaser pursuant to this Agreement. In the event the transactions
contemplated hereby are not consummated, upon the request of the other party,
each party hereto will, and will cause its Affiliates and their respective
Representatives to, promptly (and in no event later than five (5) Business Days
after such request) redeliver or cause to be redelivered all copies of documents
and information furnished by the other party in connection with this Agreement
or the transactions contemplated hereby and destroy or cause to be destroyed all
notes, memoranda, summaries, analyses, compilations and other writings related
thereto or based thereon prepared by the party furnished such documents and
information or its Representatives.
X.07 Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by Law or otherwise afforded, will be cumulative
and not alternative.
X.08 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
X.09 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Article IX.
X.010 No Assignment; Binding Effect. Neither this Agreement nor
any right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except (a) for assignments and transfers by operation of Law
and (b) that Purchaser may assign any or all of its rights, interests and
obligations hereunder (including without limitation its rights
38
<PAGE> 43
under Article IX) to (i) an Affiliate or wholly-owned subsidiary, provided that
any such Affiliate or subsidiary agrees in writing to be bound by all of the
terms, conditions and provisions contained herein, (ii) any post-Closing
purchaser of the Xerox Laser Printer Maintenance Business or a substantial part
of the Assets or (iii) any financial institution providing purchase money or
other financing to Purchaser from time to time as collateral security for such
financing, but no such assignment referred to in clause (i) or (ii) shall
relieve Purchaser of its obligations hereunder. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
X.011 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
X.012 Consent to Jurisdiction and Service of Process. Seller and
Purchaser hereby appoint the persons or entities named on the attached Schedule
H to serve as their lawful agent and attorney to accept and acknowledge service
of any and all process against it in any action, suit or proceeding arising out
of or relating to this Agreement or any of the Operative Agreements or any of
the transactions contemplated hereby or thereby and upon whom such process may
be served, with the same effect as if such party were a resident of the State of
California and had been lawfully served with such process in such jurisdiction,
and waives all claims of error by reason of such service, provided that in the
case of any service upon such agent and attorney, the party effecting such
service shall also deliver a copy thereof to the other party at the address and
in the manner specified in Section 10.01. Seller and Purchaser will enter into
such agreements with such agents as may be necessary to constitute and continue
the appointment of such agents hereunder. In the event that such agent and
attorney resigns or otherwise becomes incapable of acting as such, such party
will appoint a successor agent and attorney within fifteen days reasonably
satisfactory to the other party, with like powers. Each party hereby irrevocably
submits to the jurisdiction of (a) the Bankruptcy Court in such action, suit or
proceeding arising out of or relating to this Agreement or any of the Operative
Agreements or any of the transactions contemplated hereby and agrees that any
such action, suit or proceeding shall be brought only in such court, provided,
except, however, that in the event the Bankruptcy Court declines or abstains
from accepting jurisdiction over such action, suit or proceeding, then, (b) the
District Courts for the Central or Southern Districts of California or any court
of the State of California located in the County of Los Angeles or County of San
Diego , provided, however, that such consent to jurisdiction is solely for the
purpose referred to in this Section and shall not be deemed to be a general
submission to the jurisdiction of said courts or in the State of California
other than for such purpose.
39
<PAGE> 44
Each party hereby irrevocably waives, to the fullest extent permitted by Law,
any objection that it may now or hereafter have to the laying of the venue of
any such action, suit or proceeding brought in such a court and any claim that
any such action, suit or proceeding brought in such a court has been brought in
an inconvenient forum.
X.013 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof
and (c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.
X.014 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of California applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
X.015 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party as of the date first
above written.
INTERSCIENCE COMPUTER CORP.,
a California corporation, Seller
By:
-----------------------------------
Name:
Title:
LASER SUPPORT AND ENGINEERING,
a California corporation, Seller
By:
-----------------------------------
Name:
Title:
40
<PAGE> 45
ANACOMP, INC.,
an Indiana corporation, Purchaser
By:
-----------------------------------
Name:
Title:
41
<PAGE> 1
EXHIBIT 1.3
SETTLEMENT AGREEMENT AND RELEASE OF CLAIMS
THIS SETTLEMENT AGREEMENT AND RELEASE OF CLAIMS ("Settlement
Agreement") is made this 31st day of October, 1997, between John Hively, John
Greb, Dennis Casey and Barry Lynn (collectively the "Claimants") on the one hand
and Interscience Computer Corporation, a California corporation ("Debtor") on
the other hand. The Claimants and the Debtor are referred to collectively herein
as the "Parties."
R E C I T A L S
A. On or about January 8, 1997, the Claimants sold a business
known as Laser Support and Engineering, Inc. to the Debtor. Various disputes
arose concerning Laser Support and Engineering, Inc. and the Claimants and the
Debtor each filed lawsuits in Orange County Superior Court to resolve these
disputes.
B. The Claimants sought an injunction against the Debtor in aid of
their enforcement of their claims. In lieu of the injunction, the Orange County
Superior Court entered an order permitting the Debtor to file a bond (the Bond")
to secure its obligations to Claimants. On or about Septem-ber 5, 1996 Debtor
posted the Bond in the amount of $952,000.
C. The Parties then attempted to resolve their claims through
binding arbitration at JAMS/ENDDISPUTE in Orange,
EXHIBIT 1.3
1
<PAGE> 2
California. On March 4, 1997 the arbitrator entered his
award finding in favor of the Claimants.
D. On March 5, 1997 the Debtor filed for relief under Chapter 11
of the Bankruptcy Code and additional disputes arose among the parties
concerning the amounts owed to the Claimants, the Bond, and other matters.
E. The Parties now desire to resolve all the differences between
them, to avoid the uncertainty and aggravation of litigation, and to buy their
peace.
F. The Parties enter into this Settlement Agreement in reliance on
the fact that the Official Committee of Unsecured Creditors of Interscience
Computer Corporation and the Debtor's principal lender, Sanwa Bank of
California, have each agreed not to oppose a settlement between the Debtor and
the Claimants on the terms specified herein.
AGREEMENT
1. Recitals Are Contractual. The foregoing recitals are
referred to and incorporated herein by reference.
2. Payment to Claimants. In consideration of all the
agreements set forth herein, the Debtor shall pay to the Claimants the sum of
$760,000 payable on or before November 30, 1997. The funds shall be payable to
the Claimants jointly care of the Palmieri, Tyler, Wiener, Wilhelm & Waldron LLP
Client Trust Account.
2
<PAGE> 3
3. Mutual General Releases. Contingent upon the Parties'
of each fully complying with their obligations set forth in this Settlement
Agreement, the Claimants hereby release the Debtor and the Debtor hereby
releases the Claimants from any and all claims, causes of action obligations or
liabilities of any nature whatsoever, whether known or unknown, fixed or
contingent, which they may have or may hereafter have, against one another.
Without limiting the foregoing, the Debtor hereby releases John Hively of any
claims arising out of or relating to his employment agreement with the Debtor.
Notwithstanding the foregoing, this mutual general release shall not apply to
the duties and obligations of the Parties as set forth in this Settlement
Agreement.
4. Release of Bond. Contingent upon the receipt and
certification of all funds required to be paid herein and upon execution of this
Settlement Agreement and approval thereof by the bankruptcy court as required by
law, the Claimants shall take such actions and execute such documents as are
necessary to release their claim on the Bond and to dismiss the proceedings
before the Orange County Superior Court and JAMS/ENDDISPUTE. The Claimants
further agree that, contingent upon the Debtor's performance of all obligations
required herein, the consideration paid by the Debtor to the Claimants pursuant
to this agreement shall
3
<PAGE> 4
constitute a complete satisfaction of the Claimants' claim against the Debtor.
5. Good Faith. Each of the Parties represents and warrants
that this Settlement Agreement is entered into in good faith.
6. No Assignment. Each of the Parties repre- sents and
warrants that it has not assigned, transferred or purported to have assigned or
transferred to any person or entity any claim, cause of action or right based
upon the disputes or litigation referenced herein.
7. Waiver of Civil Code Section 1542. Each of the Parties
expressly waives and relinquishes each of the rights and benefits which it might
otherwise have or claims to have under the provisions of Section 1542 of the
California Civil Code, which provides:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the Debtor.
8. Agreement Binding. This Settlement Agreement shall be
binding upon and shall inure to the benefit of all the predecessors, successors,
heirs, agents, trustees, attorneys and assigns of each of the Parties hereto.
4
<PAGE> 5
9. California Law. This Settlement Agreement shall be
construed and interpreted under and according to the laws of the State of
California.
10. Attorneys' Fees. Each of the Partes agrees to bear its
own attorneys' fees and costs in connection with the disputes referenced herein.
However, should any party hereto commence or maintain any action or proceeding
at law or in equity, including motions, applications, counterclaims or
cross-complains, against any other party hereto raising claims arising out of or
connected to this Settlement Agreement, the prevailing party in said action or
proceeding shall be entitled to recover its attorneys' fees and costs.
11. No Admission of Liability. This Settlement Agreement
is made as a compromise of disputed claims. This Settlement Agreement is made to
avoid the cost, expense and risk of litigation only, and the making of this
Settlement Agreement does not constitute admission of liability or other
obligation on the part of any other Parties.
12. Representation by Counsel; Entire Agreement. The
execution of this Settlement Agreement is free and voluntary. The Parties hereby
acknowledge that they have been represented by counsel in the negotiation of
this Settlement Agreement. No promise or inducement to enter into this
Settlement Agreement, except as expressly stated herein, is made by or to the
Parties. This Settlement Agreement contains the entire agreement between the
Parties
5
<PAGE> 6
and the terms hereof supersede all prior discussions, understanding, or
agreements between the Parties relative to the subject matter hereof. The terms
hereof are intended to constitute a binding contract.
13. Interpretation. The Parties agree that the terms of
this Settlement Agreement were arrived at after bargaining and negotiation among
the Parties and each of the provisions hereof shall be construed as having been
drafted by each of the Parties hereto.
14. Modification. This Settlement Agreement may only be
amended or modified by a writing signed by the party against whom enforcement is
sought.
15. Counterparts. This Settlement Agreement may be
executed in counterparts, and each such counterparts shall be deemed to be a
duplicate original of the Settlement Agreement. All such counterparts taken
together shall constitute a single contract. The Parties expressly authorize
that counterparts may be executed and delivered via facsimile transmission.
CLAIMANTS
------------------------------
John Hively
------------------------------
John Greb
------------------------------
Dennis Casey
6
<PAGE> 7
------------------------------
Barry Lynn
APPROVED AS TO FORM:
PALMIERI, TYLER, WIENER,
WILHELM & WALDRON LLP
By:
------------------------
Scott R. Carpenter
Attorneys for Claimants
INTERSCIENCE COMPUTER
CORPORATION, DEBTOR-IN-
POSSESSION
By:
---------------------------
Walter Kornbluh, President
APPROVED AS TO FORM:
BIEGENZHAN WEINBERG
By:
------------------------
Joel B. Weinberg
Attorneys for Debtor
APPROVED AS TO FORM AND CONTENT:
OFFICIAL COMMITTEE OF UNSECURED
CREDITORS OF INTERSCIENCE
COMPUTER CORPORATION
By:
------------------------
APPROVED AS TO FORM AND CONTENT:
SANWA BANK OF CALIFORNIA
By:
------------------------
7
<PAGE> 1
EXHIBIT 1.4
Dated: April 1, 1998
INTERSCIENCE COMPUTER CORPORATION
and
NORMAN BAKER
and
FRANK LA CHAPPELLE
SHARE SALE DEED
RELATING TO SHARES IN
INTERSCIENCE PLC
Owen White
Senate House
62-70 Bath Road
Slough
Berkshire
SL1 3SR
Tel.No. 01753 536846
Fax No. 01753 691360
e-mail: [email protected]
EXHIBIT 1.4
1
<PAGE> 2
SHARE SALE DEED
DATE 19
PARTIES
1 `The Vendor': Interscience Computer Corporation a United States
corporation (Commission File Nol-12312) whose
principal place of business is at 5236 Coludny
Drive Suite 100 Agoura Hills California 91301
United States of America
2 `The Purchaser': Norman Baker of 48 Old Slade Lane Richings Park Iver
Buckinghamshire SL8 9DR
3 `The Vendor-Director': Frank La Chappelle of One Stirrup Lane, Bell
Canyon, California 91307, United States of
America.
RECITALS
A) The Company has an authorized share capital of pound sterling 100,000 made up
of 100,000 ordinary shares of pound sterling 1 each of which one has previously
been issued to and is at the date hereof owned by the Purchaser and the
forty-nine thousand nine hundred and ninety-nine have previously been issued to
and are at the date hereof owned by the Vendor.
OPERATIVE PROVISIONS
1 INTERPRETATION
1.1 In this Deed the following words and expressions have the
following meanings:
`COMPANY' Interscience plc
`SHARES' the 49,999 issued Ordinary Shares of El each of the
Company presently owned by the Vendor
`WARRANTIES' the warranties and representations by the Vendor
and the Vendor-Director in clause 5 and Schedule 2
2
<PAGE> 3
1.2 All references in this Deed to a statutory provision shall
be construed as including references to:
1.2.1 any statutory modification, consolidation or
re-enactment (whether before or after the date of this Deed) for the time being
in force;
1.2.2 any statutory provisions of which a statutory
provision is a consolidation, re-enactment or modification.
1.3 Clause headings in this Deed are for ease of reference only
and do not affect the construction of any provision.
2 AGREEMENT FOR SALE
2.1 Subject to the terms and conditions of this Deed the Vendor
shall sell as with fall title guarantee and the Purchaser shall purchase the
Shares, with all rights attaching to them and with effect from the date of this
Deed.
3 PURCHASE CONSIDERATION
3.1 The purchase consideration for the Shares shall be the sum
of US $10,000 which shall be paid in fall immediately upon completion of this
Deed by bankers draft
4 COMPLETION
4.1 Completion of the purchase of the Shares shall take place at
the principal place of business of the Vendor immediately after the signing of
this Deed.
4.2 The Vendor shall deliver to the Purchaser duly completed and
signed transfers in favor of the Purchaser or as it may direct of the Shares
together with the relative share certificates.
4.3 There shall be delivered or made available to the Purchaser:
4.3.1 the seal and certificate of incorporation of the
Company;
4.3.2 the statutory books of the Company, complete and
up-to-date;
4.3.3 the resignation of the Vendor-Director with his
written acknowledgement executed as a deed in such form as the Purchaser
requires that he has no claim against the Company on any grounds whatsoever
3
<PAGE> 4
4.4 Board Meetings of the Company shall be held at which:
4.4.1 such persons as the Purchaser may nominate shall be
appointed additional directors;
4.4.2 the transfers referred to in clauses shall be
approved (subject to stamping); and
4.4.3 the resignation of the Vendor-Director shall be
accepted
4.5 Upon completion of the matters referred to in clauses 4.2 to
4.4 the Purchaser shall deliver to the Vendor' solicitors a banker's draft for
the amount of the purchase consideration for the Shares.
5 WARRANTIES AND UNDERTAKINGS BY THE VENDOR AND THE VENDOR-DIRECTOR
5.1 The Vendor and the Vendor-Director jointly and severally
warrant to the Purchaser that the Warranties set out in Schedule 2 are true and
accurate in all respects.
5.2 Each of the Warranties is without prejudice to any other
warranty or undertaking and, except where expressly stated, no clause contained
in this Deed governs or limits the extent or application of any other clause.
5.3 The rights and remedies of the Purchaser in respect of any
breach of the Warranties shall not be affected by completion of the purchase of
the Shares, by any investigation made by or on behalf of the Purchaser into the
affairs of the Company, by any failure to exercise or delay in exercising any
right or remedy or by any other event or matter whatsoever, except a specific
and duly authorized written waiver or release.
5.4 The Vendor and the Vendor-Director jointly and severally
undertake to use their utmost endeavors to procure that with effect from
Completion of this Deed the Company and all its assets shall be released from
any guarantee or surety given in relation to the indebtedness of the Vendor
and/or the Company and/or any company within the same group of companies as the
Company and/or the Vendor and in particular (but without prejudice to the
generality of the foregoing) to procure the immediate release of the Company
from the guarantee dated [July 1996] and executed by the Company in favour of
the [Sanwa Bank] The Vendor and the Vendor-Director further undertake to
indemnify the Company immediately upon demand against any and all liabilities,
damages, losses, costs or expenses (including without limitation consequential
losses) it may incur as a result of the failure of the Vendor and/or the
Vendor-Director to procure the release of the Company as set in this clause 5.4.
4
<PAGE> 5
6 RESTRICTIVE AGREEMENT
6.1 For the purpose of assuring to the Purchaser the full
benefit of the businesses and goodwill of the Company, each of the Vendor and
the Vendor-Director jointly and severally undertake as separate and independent
agreements that he will not without the express prior authority of the
Purchaser:
6.1.1 at any time after Completion disclose to any person,
or himself use for any purpose, and shall use his best endeavors to prevent the
publication or disclosure of, any information concerning the business, accounts
or finances of the Company or any of its clients' or customers transactions or
affairs, which may, or may have, come to his knowledge;
6.1.2 for a period of one year after Completion either on
his own account or for any other person directly or indirectly solicit,
interfere with or endeavor to entice away from the Company any person who to his
knowledge is now or has during the one year preceding the date of this Deed been
a client, customer or employee of, or in the habit of dealing with, the Company;
6.1.3 for a period of one year after Completion, either
alone or jointly with or as manager, agent for or employee of any person,
directly or indirectly carry on or be engaged or concerned or interested (a) in
the business of the sale and/or supply of fusing agent for use in printers; or
(b) in any other business similar to any business carried on by the Company at
the date of this Deed.
7 COMMUNICATIONS
7.1 All communications between the parties with respect to this
Deed shall be delivered by hand or sent by first class prepaid post (except
where the address for service of the addressee is in a different country to that
from which the communication is being despatched in which case such
communication shall be sent by airmail) to the address of the addressee as set
out in this Deed or to such other address as the addressee may from time to time
have notified for the purpose of and in accordance with this clause.
7.2 Communications addressed to the Purchaser shall be marked
for his personal attention.
7.3 In proving service by post or airmail it shall only be
necessary to prove that the communication was contained in an envelope which was
duly addressed and posted in accordance with this clause.
7.4 Communications served between the parties shall be deemed to
have been served on the addressee, if delivered by hand, immediately upon
delivery, if sent by first
5
<PAGE> 6
class prepaid post, on the second business day after posting and, if sent by
airmail, on the seventh business day after posting in accordance with this
clause.
SCHEDULE 1
Details of the Company
PART 1: THE COMPANY INTERSCIENCE PLC
Company number: 2865344
Date of incorporation: 25.10.1993
Share capital:
Authorized [pound sterling]100,000 divided into
[pound sterling]1 shares
Issued 50,000 ordinary
Registered office: Enterprise House Ashford Road Ashford Middlesex
TW15 1XB
Directors: Norman Baker of 48 Old Slade Lane Richings Park
Iver Buckinghamshire SL8 9DR
Frank J La Chappelle of One Stirrup Lane, Bell Canyon
California 91307 United States of America
SCHEDULE 2
Warranties
1.1 The Shares constitute the whole of the issued and allotted
share capital of the Company.
1.2 There are no agreements or arrangements in force, other than
this Deed, which grant to any person the right to call for the issue, allotment
or transfer of any share or loan capital of the Company.
1.3 No power of attorney given by the Company is in force.
6
<PAGE> 7
EXECUTED AS A DEED BY )
INTERSCIENCE COMPUTER CORPORATION ) /s/ Walter Kornbluh
--------------------------
and signed by:- ) President
SIGNED AS A DEED by the above-named )
NORMAN BAKER )
in the presence of:- ) /s/ NORMAN BAKER
----------------
SIGNED AS A DEED by the above-named )
FRANK LA CHAPPELLE )
in the presence of:- ) /s/ FRANK LA CHAPPELLE
----------------------
7
<PAGE> 1
EXHIBIT 1.5
Dated: April 1, 1998
INTERSCIENCE COMPUTER CORPORATION
and
INTERSCIENCE PLC
LICENSE AGREEMENT
Owen White
Senate House
62-70 Bath Road
Slough
Berkshire
SK1 3SR
Tel. No. 01753-536846
Fax No. 01753-691360
e-mail: [email protected]
EXHIBIT 1.5
1
<PAGE> 2
PATENT LICENCE AGREEMENT
Date: ________________, 19__
PARTIES:
1. "The Licensor": Interscience Computer Corporation a
corporation organised under the laws of the State of California United States of
America (Commission File No. 1-12312) whose principal place of business is at
5236 Coludny Drive, Suite 100, Agoura Hills, California 91301 United States of
America.
2. "The Licensee": Interscience plc an English company
(Registration No. 2865344) whose registered office is at Enterprise House
Ashford Road, Ashford, Middlesex TW15 IXB.
RECITALS:
(A) The Licensor has developed and is the beneficial owner of the
patent (as defined below) relating to the commercial use of the Fusing Agent (as
defined below).
(B) The Licensee wishes to receive and the Licensor is willing to
grant a licence on the terms and conditions hereinafter set forth to work under
the said Patent in order to sell supply or otherwise deal in the Fusing Agent
and the Products.
OPERATIVE PROVISIONS:
1.1 In this Agreement the following terms shall have the
following meanings unless the context otherwise requires:
"Copyright": all copyright and rights in the nature of copyright
to which either party may now be or may subsequently become entitled in or in
respect of all drawings and other documents. recordings in any form and all
other materials bearing or embodying any part of the Technical Information
including without limitation any such materials consisting of or containing
software or databases
"Case": a case or other packaging containing 4 Products
"Effective Date": _____________, 1998
"Fusing Agent": the hydrochlorofluorocarbon solution more
particularly identified in the application for the Patent
<PAGE> 3
"Improvements": all improvements, modifications or adaptations to
any part of the Technical Information which might reasonably be of commercial
interest to either party in the design manufacture or supply of the Products or
in the operation of the Process and which may be made or acquired by either
party during the term of this Agreement of the Process and which may be made or
acquired by either party during the term of this Agreement.
"Patents":
(i) the patents and applications short particulars of which set
out in Schedule A hereto;
(ii) all patent applications that may hereafter be filed in the
Territory by or on behalf of the Licensor which either are based on or claim
priority from any of the foregoing patents and applications or which are in
respect of any Improvements to which the Licensor is exclusively entitled and
which the Licensor is due to disclose to the Licensee under clause 3.1 below;
and
(iii) all patents which may be granted pursuant to any of the
foregoing patent applications.
"Process": the cold fusion of toner to paper in a printing
process utilising a specific hydrochlorofluorocarbon solution as a fusing agent
as more particularly described in the application for the Patent.
"Products": bottles or other containers specifically designed for
use in the Process and containing quantities of Fusing Agent
"Technical Information": all identifiable know-how, experience.
data and all other technical or commercial information relating to the Fusing
Agent. Products or the Process whether in human or machine readable form and
whether stored electronically or otherwise and which might reasonably be of
commercial interest to either party in the design manufacture or supply of the
Products or in the operation of the Process
"Territory": the United Kingdom, the Channel Islands. the Isle of
Man. the Republic of Ireland, all member states of the European Union at the
date of this Agreement and any other country as may be agreed in writing between
the parties from time to time to be included within the Territory.
2.1 The Licensor hereby grants to the Licensee an exclusive
licence to use sell supply or otherwise deal in Fusing Agent and Products
anywhere in the Territory.
2
<PAGE> 4
2.2 The Licensee shall be entitled to sub-license any subsidiary
(as defined in s 736 of the Companies Act 1985 as amended) of the Licensee for
so long as it is such a subsidiary under the rights granted or to be granted
under clause 2.1 hereof provided that
2.2.1 the sub-licence should be in writing and shall
contain obligations on the sub-licensee at least as onerous as those set out in
this Agreement; and
2.2.2 the Licensee shall remain responsible for all acts
and omissions of such sub-licensees as though they were by the Licensee; and
2.2.3 the Licensee shall Forthwith notify the Licensor in
writing of any sub-licence granted pursuant to this clause and shall at the same
time provide the Licensor with a copy of such sub-licence which will not be
granted without the Licensor's approval which will not be unreasonably withheld.
2.2.4 the Licensee will not for the term of this Agreement
exploit the Patents outside the Territory.
2.3 The parties hereto agree to execute a formal licence
agreement for the purposes of registering any patent licence granted pursuant to
clause 2.2 above.
3. Improvements
3.1 Either party shall forthwith disclose to the other
party in confidence and in such detail as that other party may reasonably
require all Improvements that it may develop or acquire during the term of this
Agreement except in so far as such disclosure would disclose information derived
from and subject to confidentiality obligations in favour of a third party.
3.2 Save as otherwise provided herein, Improvements
arising from work carried out by the Licensor and/or the Licensee shall be for
the benefit of both the Licensor and the Licensee.
3.3 Subject to clause 7.6 below. Improvements arising from
work carried out jointly shall belong to the parties equally unless they shall
otherwise agree. Each party shall have the irrevocable right to use such joint
Improvements independently of the other and to the extent necessary for such use
each shall grant to the other a royalty free irrevocable perpetual non-exclusive
licence under all jointly held intellectual property rights relating thereto
including the right to assign and to grant sub-licences thereunder. Each party
undertakes that on request it will confirm
3
<PAGE> 5
to any prospective licensee of the other the right of that other to grant such a
licence pursuant to this clause.
4. Payment and Royalty Waiver
4.1 The period from the Effective Date to the first
anniversary of the Effective Date shall be a royalty-free period and the
Licensee shall not be obliged to make any payment of royalties to the Licensor
in respect of Products or Cases of Products or Fusing Agent sold or otherwise
supplied by the Licensee within the Territory.
4.2 The Licensee shall from the first anniversary of the
Effective Date and for the continuance of this Agreement thereafter pay to the
Licensor a royalty of US $10 per Case of Products sold or otherwise supplied by
the Licensee for money or money's worth.
4.3 Payments due under clause 4.2 shall be made within 30
days of the end of each calendar quarter in respect of royalties accruing on
Cases of Products sold or otherwise supplied and invoiced in that calendar
quarter.
4.4 All sums due under this Agreement:
4.4.1 are exclusive of any value added or sales
tax or equivalent which shall be payable in addition on the rendering by the
Licensor of any appropriate invoice;
4.4.2 shall be paid in United States dollars to
the credit of a bank account to be designated in writing by the Licensor.
Conversion into United States dollars shall be calculated:
4.4.2.1 in the case of each royalty payment at the
rate of exchange ruling on the last day of the calendar quarter in respect of
which the payment is due,
4.4.2.2 in the case of all other payments at the
rate of exchange ruling on the day payment is made or due whichever is earlier:
4.5 The Licensee shall submit to the Licensor within 30
days of the end of each calendar quarter a statement setting forth with respect
to the operations of the Licensee hereunder during that period the quantity of
Products used sold or supplied. The Licensor shall have the night to audit the
Licensee's records during normal business hours with one week notice.
4
<PAGE> 6
4.6 The Licensor agrees to maintain confidential all
financial information received with respect to the Licensee's operations
pursuant to the clauses 4.5
5. Registration
5.1 The Licensee and the Licensor shall procure the
registration of any licence agreement executed under clause 2.'j hereof within
60 days of the Effective Date and shall bear the costs of such registration at
the appropriate patent office equally between them.
6. Patents
6.1 The Licensor shall be entitled (but shall not be
obliged) to take all steps (including any proceedings) as may be necessary to
halt any infringement by a third party of any of the Patents or its Copyright in
the Territory.
6.2 In the event of any infringement by a third party of
any of the Patents or its Copyright the Licensee may take all legitimate steps
to halt such infringement. Subject to receiving advice from experienced Patent
Counsel that infringement proceedings, including any interlocutory proceedings
where relevant, stand a reasonable chance of success the Licensee may request
the Licensor to lend its name to such proceedings and provide reasonable
assistance and the Licensor will do so.
6.3 The Licensor warrants to the Licensee that the exercise
of the rights granted or to be granted to the Licensee hereunder will not as
matters stand at the date of this Agreement result in the infringement of valid
patents or other intellectual property rights of third parties. Should the
Licensee be sued for infringement of any patents or other intellectual property
rights of the third party by reason of its use or sale or supply of the Products
the Licensor shall on request provide reasonable assistance to the Licensee in
its defence to such action.
6.4 Where either party has developed or acquired an
Improvement to which clause 3.1 above applies it shall not publish the same or
do anything that might prejudice the validity of any patent that might
subsequently be granted on it until the other party has had at least 30 working
days from disclosure in writing of all information relating to it to consider
whether patent or other protection should be applied for. The party which has
developed or acquired such Improvement will on request notify the other whether
it intends to seek any relevant protection. If it does not wish to do so and if
the other party within the 30 working day period notifies the party which has
developed or acquired such Improvement that it would like to seek patent or
other protection, and if it is agreed between the parties that the other party
5
<PAGE> 7
may do so, then this obligation shall continue for such time as may be
reasonably required to prepare and file an application for patent or other
protection.
6.5 Either party to this Agreement may at any time in
respect of an Improvement elect not to pursue further an application for patent
protection either jointly or on its own behalf or to maintain any such patent
protection as it may have obtained and the party so electing shall notify, the
other party and shall if so requested assign all rights it may have therein for
nominal consideration to that other party provided that the party electing not
to pursue the application or the resulting patent shall be entitled to a full
non-exclusive royalty free worldwide perpetual and irrevocable licence under all
relevant rights with the right to assign and to sub-license.
6.6 Subject to the provisions of clause 6.5 hereof the
Licensor and the Licensee shall share equally the costs of filing and
prosecuting any future joint patent applications to grant and of maintaining
such granted patents in all countries.
7. Term and Termination
7.1 Unless terminated earlier in accordance with the
following provisions of this clause this Agreement shall come into effect on the
Effective Date and shall continue thereafter without limit of time until
terminated as set out herein.
7.2 Without prejudice to any other rights it may have under
this Agreement or otherwise the Licensee shall be entitled to terminate the
Agreement with immediate effect if for any reason whatsoever the Patent (or any
part of it) becomes invalid or expires or the registration of the Patent (or any
part of it) is successfully challenged by any third party or if the Patent (or
any part of it) ceases to be registered.
7.3 If either party is in breach of any obligation on it
hereunder and, in the case of a breach capable of remedy, it shall not have
been remedied by the defaulting party within 21 days of written notice
specifying the breach and requiring its remedy, or if either party becomes
insolvent, has a receiver appointed over the whole or any part of its assets,
enters into any compound with creditors, or has an order made or resolution
passed for it to be wound up (otherwise than in furtherance of a scheme for
amalgamation or reconstruction) or if the ownership or control of either party
shall pass into the hands of any legal person, which the other party in its
reasonable discretion considers unsuitable for any reason whatsoever then the
other party or in the case of breach the party not in breach of the obligation
or condition may terminate this Agreement with immediate effect by notice
without prejudice to the accrued rights of either party.
6
<PAGE> 8
7.4 If that Consultancy Agreement between the Licensee and
Frank J. LaChapelle dated April 1, 1998 is breached and not cured within 30 days
of such breach.
7.5 Termination of this Agreement for any reason shall not
bring to an end:
7.5.1 the confidentiality obligations on the
parties hereto;
7.5.2 the Licensee's obligations to pay royalties
or other sums which have accrued due;
7.5.3 the licences (if any) under clauses 3.3 and
6.6.
7.6 On termination of this Agreement for any reason the
Licensee shall continue to have the right for a period of 6 months from the date
of termination to complete deliveries on contracts in force at that date and to
dispose of Fusing Agent and/or Products already in its possession.
8. Force Majeure
8.1 If either party to this Agreement is prevented or
delayed in the performance of any of its obligations under this Agreement by
force majeure, and if such party gives written notice thereof to the other party
specifying the matters constituting force majeure, together with such evidence
as it reasonably can give and specifying the period for which it is estimated
that such prevention or delay will continue then the party in question shall be
excused the performance or the punctual performance as the case may be as from
the date of such notice for so long as such cause of prevention or delay shall
continue.
8.2 For the purpose of this Agreement 'force majeure' shall
be deemed to be any cause affecting the performance of this Agreement arising
from or attributable to acts, events, omissions or accidents beyond the
reasonable control of the party to perform and without prejudice to the
generality thereof shall include the following:
8.2.1 strikes, lock-outs or other industrial
action;
8.2.2 civil commotion, riot, invasion, war threat
or preparation for war;
8.2.3 fire, explosion, storm, flood, earthquake,
subsidence, epidemic or other natural physical disaster;
7
<PAGE> 9
8.2.4 impossibility of the use of railways,
shipping, aircraft, motor transport or other means of public or private
transport;
8.2.5 political interference with the normal
operations of any party.
9. General
9.1 This Agreement shall be binding upon and enure to the
benefit of the parties hereto and their respective legal successors but shall
not otherwise be assignable by either party without the prior written consent of
the other.
9.2 No variation or amendment of this Agreement shall bind
either party unless made in writing in the English language and agreed to in
writing by duly authorised officers of both parties.
9.3 If any provision of this Agreement is agreed by the
parties to be illegal void or unenforceable under any law that is applicable
hereto or if any court or other authority of competent jurisdiction in a final
decision so determines this Agreement shall continue in force save that such
provision shall be deemed to be excised herefrom with effect from the date of
such agreement or decision or such earlier date as the parties may agree.
9.4 The headings in this Agreement are for convenience only
and are not intended to have any legal effect.
9.5 A failure by either party hereto to exercise or enforce
any rights conferred upon it by this Agreement shall not be deemed to be a
waiver of any such rights or operate so as to bar the exercise or enforcement
thereof at any subsequent time or times.
10. Notices
10.1 All communications between the parties with respect to
this agreement shall be delivered by hand or sent by first class prepaid post
(except where the address for service of the addressee is in a different country
to that from which the communication is being despatched in which case such
communication shall be sent by airmail) to the address of the addressee as set
out in this agreement or to such other address as the addressee may from time to
time have notified for the purpose of and in accordance with this clause.
8
<PAGE> 10
10.2 In proving service by post or airmail it shall only be
necessary to prove that the communication was contained in an envelope which was
duly addressed and posted in accordance with this clause.
10.3 Communications between the parties shall be deemed to
have been served on the addressee. if delivered by hand, immediately upon
delivery, if sent by first class prepaid post. on the second business day after
posting and, if sent by airmail, on the seventh business day after posting.
11. Governing Law and Disputes
11.1 The construction validity and performance of this
Agreement shall be governed in all respects by English Law.
11.2 All disputes arising in any way out of or affecting
this Agreement shall be subject to the exclusive jurisdiction of the English
courts to which the parties hereto agree to submit.
9
<PAGE> 11
SCHEDULE A
The Patents
<TABLE>
<CAPTION>
Description Date of Filing Application No. Patent Published
- ----------- -------------- --------------- ----------------
<S> <C> <C> <C>
UK Patent GB2273682B 10.12.1993 9325285.6 28.02.1996
</TABLE>
SIGNED for and on behalf of
the LICENSOR by:
/s/ WALTER KORNBLUH
- -------------------------------------
President
SIGNED for and on behalf of
the LICENSEE by
/s/
- -------------------------------------
(Director/Secretary)
10
<PAGE> 1
EXHIBIT 1.6
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement"), dated as of May 1,
1998, is made and entered into by and between ABOG, INC., a California
corporation doing business as Landmark Computer Group (the "Purchaser"), and
INTERSCIENCE COMPUTER CORPORATION, a California corporation (the "Seller").
Capitalized terms not otherwise defined herein have the meanings set forth in
Section 8.1.
RECITALS:
WHEREAS, Seller is engaged in the business of, among other things,
servicing and maintaining laser printers (and the sale of consumable products in
connection therewith) through maintenance contracts with its customers (the
"Business") including the service and maintenance of high speed laser printers
manufactured by Siemens Nixdorf Printing Systems (the "Siemens Laser Printer
Maintenance Business"); and
WHEREAS, Seller desires to sell, transfer and assign to Purchaser, and
Purchaser desires to purchase and acquire from Seller, certain of the assets of
Seller relating to the operation of the Siemens Laser Printer Maintenance
Business and in connection therewith, Purchaser has agreed to assume certain of
the liabilities of Seller relating to Seller's Siemens Laser Printer Maintenance
Business, all on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I.
SALE OF ASSETS AND CLOSING
1.1 Assets.
1.1.1 Assets Transferred. On the terms and subject to the
conditions set forth in this Agreement, Seller will
sell, transfer, convey, assign and deliver to Purchaser,
and Purchaser will purchase and pay for, at the Closing,
all of Seller's right, title and interest in, to and
under the following Assets of Seller which were used by
Seller in connection with the Siemens Laser Printer
Maintenance Business as the same shall exist on the
Closing Date (collectively, the "Assets"):
1.1.2 Business Contracts With Customers. Certain purchase
orders, computer maintenance or service agreements and
other contracts listed on attached Schedule 1.1.2 hereto
which are utilized in or part and
<PAGE> 2
parcel of the conduct of the Siemens Laser Printer
Maintenance Business (the "Business Contracts").
1.1.3 Excluded Assets. Notwithstanding anything in this
Agreement to the contrary, except for those assets
explicitly set forth in section 1.1.1 above all other
assets, are excluded from said sale including any
inventory used to service said accounts.
1.2 Liabilities.
1.2.1 Assumed Liabilities. In connection with the sale,
transfer, conveyance, assignment and delivery of the
Assets pursuant to this Agreement, on the terms and
subject to the conditions set forth in this Agreement,
at the Closing, Purchaser will assume and agree to pay,
perform and discharge when due the following obligations
of Seller arising in connection with the operation of
the Siemens Laser Printer Maintenance Business, as the
same shall exist on the Closing Date (the "Assumed
Liabilities"), and no others.
1.2.2 Obligations Under Contracts and Licenses. With respect
to the Siemens Laser Printer Maintenance Business those
obligations of Seller under the Business Contracts
listed in attached Schedule 1.1.2, and hold Seller
harmless from any further service obligations.
1.3 Purchase Price; and Allocation.
1.3.1 Purchase Price. The purchase price for the Assets shall
be as follows (collectively "the Purchase Price"):
1.3.2 The purchase price for the Business Contracts shall be
as follows:
1.3.3 Purchaser shall pay Seller up to the aggregate sum of
$40,320.00 as determined by the following formula: a
number which is the product of (a) Eighty Percent (80%)
and (b) the base revenue for the 12 months following
Closing (the "Relevant Period") of the contracts set
forth in the attached Schedule 1.1.2. To the extent
that the third party to any of the contracts set forth
in Schedule 1.1.2 cancel or are terminated under the
terms of the Operative Agreements, through no fault of
Buyer or Seller, then the payment provided herein shall
be reduced by the allocable amount of base revenue
accruing from the contract so canceled from the date of
cancellation to the end of the Relevant Period. To the
extent that Seller shall supply additional Siemens laser
printers during the Relevant Period to third parties,
the monthly base revenues for additional service
contracts related to such machines shall
<PAGE> 3
be added to the base revenue for the period commencing
with the date such machine is placed into service and
concluding at the end of the service contract for that
machine.
1.3.4 Purchaser shall pay Seller in accordance with the
schedule provided in the attached Schedule 1.3.1. To
secure the timely payment of the amounts set forth in
attached Schedule 1.3.1, Purchaser and Seller shall
execute and deliver at Closing a security agreement and
UCC 1 financing statement which creates a security
interest in the Assets and proceeds and products thereof
in favor of Seller in the forms attached hereto as
Schedules 1.3.1. and 1.3.1.A., respectively.
1.3.5 During the Relevant Period Seller agrees to sell to
Purchaser certain Siemens consumables in the quantities
and prices set forth in attached Schedule 1.3.1.A.
Purchaser shall pay Seller cash on delivery for the
Siemens consumables set forth in attached Schedule
1.3.1.A. At the conclusion of the Relevant Period,
Seller shall have no further obligation to honor the
price and quantity terms provided in attached Schedule
1.3.1.A.
1.4 Payment of Sales, Use and Transfer Taxes. Purchaser shall pay
all sales, use, transfer, and other similar taxes and fees
("Transfer Taxes") arising out of or in connection with the
transactions effected pursuant to the Operative Agreements.
1.5 Closing. The Closing will take place at the offices of
Interscience Computer Corporation in Agoura, California, or at
such other place as Purchaser and Seller mutually agree, at
10:00 A.M. local time, on the Closing Date. At the Closing,
Purchaser will sign the agreement and payment schedule.
Simultaneously, (a) Seller will assign and transfer to Purchaser
all of its right, title and interest in and to the Assets, by
delivery of (I) a General Assignment and Bill of Sale
substantially in the form of Exhibit A hereto (the "General
Assignment"), duly executed by Seller, and (II) such other good
and sufficient instruments of conveyance.
<PAGE> 4
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
2.1 Organization of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the Laws of the
State of California, is qualified to do business in the State of
California.
2.2 Authority. Seller has full corporate power and authority to
execute and deliver this Agreement and the Operative Agreements
to which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated
hereby and thereby, including without limitation to sell and
transfer (pursuant to this Agreement) the Assets. The execution
and delivery by Seller of this Agreement and the Operative
Agreements to which it is a party, and the performance by Seller
of its obligations hereunder and thereunder is the authorized
act of Seller. This Agreement and the Operative Agreements, to
which the Seller is a party, have been duly and validly executed
and delivered by Seller and will constitute, legal, valid and
binding obligations of Seller enforceable against Seller in
accordance with their terms.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
3.1 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the Laws of the State of
California. Purchaser has full corporate power and authority to
enter into this Agreement and the Operative Agreements to which
it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated
hereby and thereby.
3.2 Authority. The execution and delivery by Purchaser of this
Agreement and the Operative Agreements to which it is a party,
and the performance by Purchaser of its obligations hereunder
and thereunder, have been duly and validly authorized by the
Board of Directors of Purchaser, no other corporate action on
the part of Purchaser or its stockholders being necessary. This
Agreement has been duly and validly executed and delivered by
Purchaser and constitutes, and upon the execution and delivery
by Purchaser of the Operative Agreements to which it is a party,
such Operative Agreements will constitute,
<PAGE> 5
legal, valid and binding obligations of Purchaser enforceable
against Purchaser in accordance with their terms.
3.3 No Conflicts. The execution and delivery by Purchaser of this
Agreement does not, and the execution and delivery by Purchaser
of the Operative Agreements to which it is a party, the
performance by Purchaser of its obligations under this Agreement
and such Operative Agreements and the consummation of the
transactions contemplated hereby and thereby will not conflict
with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate or articles of
incorporation or by-laws or other comparable corporate charter
document of Purchaser or constitute (with or without notice or
lapse of time or both) a default under, require Purchaser to
obtain any consent, approval or action of, make any filing with
or give any notice to any Person as a result or under the terms
of, any contract or License to which Purchaser is a party.
3.4 Legal Proceedings. There are no Actions or Proceedings pending
or, to the knowledge of Purchaser, threatened against, relating
to or affecting Purchaser or any of its Assets and Properties
which could reasonably be expected to result in the issuance of
an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative
Agreements.
ARTICLE IV
MISCELLANEOUS
4.1 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been
duly given only if delivered personally or by facsimile
transmission or mailed (first class postage prepaid) to the
parties at the following addresses or facsimile numbers:
If to Purchaser, to:
ABOG, INC.
1900 Petra Lane
Unit E
Placentia, CA 92670
Attn; Mr. Stephen B. Kroesen
Facsimile No. (714) 572-6821
<PAGE> 6
If to Seller, to:
Interscience Computer Corporation
5236 Colodny Drive
Suite 100
Agoura Hills, CA 91301
Facsimile No.: (818) 707-1627
Attn: Mr. Walter Kornbluh
All such notices, requests and other communications will (I) if
delivered personally to the address as provided in this Section, be deemed given
upon delivery, (II) if delivered by facsimile transmission to the facsimile
number as provided in this Section, be deemed given upon receipt, and (III) if
delivered by mail in the manner described above to the address as provided in
this Section, be deemed given upon receipt (in each case regardless of whether
such notice, request or other communication is to be delivered pursuant to this
Section). Any party from time to time may change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other party hereto.
4.2 Entire Agreement. This Agreement and the Operative Agreements
supersede all prior discussions and agreements between the
parties with respect to the subject matter hereof and thereof
and contains the sole and entire agreement between the parties
hereto with respect to the subject matter hereof and thereof.
4.3 Expenses. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated hereby
are consummated, each party will pay its own costs and expenses
incurred in connection with the negotiation, execution and
closing of this Agreement and the Operative Agreements and the
transactions contemplated hereby and thereby.
4.4 Confidentiality. Each party hereto will hold, and will use its
best efforts to cause their respective representatives to hold,
in strict confidence from any Person unless (I) compelled to
disclose by judicial or administrative process (including
without limitation in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated
hereby of Governmental or Regulatory Authorities) or by other
requirements of Law or (II) disclosed in an Action or Proceeding
brought by a party hereto in pursuit of its rights or in the
exercise of its remedies hereunder, all documents and
information concerning the other party or any of its Affiliates
furnished to it by the other party or such other party's
Representatives in connection with this Agreement or the
transactions contemplated hereby, except to the extent that such
documents or information can be shown to have been (a)
previously known by the party receiving such documents or
information, (b) in the public domain (either prior to or after
the furnishing of such documents or information hereunder)
through no fault of such receiving party or (c) later
<PAGE> 7
acquired by the receiving party from another source if the
receiving party is not aware that such source is under an
obligation to another party hereto to keep such documents and
information confidential. Following the Closing, the foregoing
restrictions will not apply to Purchaser's use of documents and
information furnished by Seller hereunder concerning the Siemens
Laser Printer Maintenance Business, the Assets or the Assumed
Liabilities; except, however, that Purchaser shall maintain the
confidentiality of any information regarding the Siemens Laser
Printer Maintenance Business obtained by Purchaser pursuant to
this Agreement. In the event the transactions contemplated
hereby are not consummated, upon the request of the other party,
each party hereto will, and will cause its Affiliates and their
respective Representatives to, promptly (and in no event later
than five (5) Business Days after such request) redeliver or
cause to be redelivered all copies of documents and information
furnished by the other party in connection with this Agreement
or the transactions contemplated hereby and destroy or cause to
be destroyed all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon
prepared by the party furnished such documents and information
or its Representatives.
4.5 Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof,
but no such waiver shall be effective unless set forth in a
written instrument duly executed by or on behalf of the party
waiving such term or condition. No waiver by any party of any
term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the
same or any other term or condition of this Agreement on any
future occasion. All remedies, either under this Agreement or by
Law or otherwise afforded, will be cumulative and not
alternative.
4.6 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on
behalf of each party hereto.
4.7 No Third Party Beneficiary. The terms provisions of this
Agreement are intended solely for the benefit of each party
hereto and their respective successors or permitted assigns, and
it is not the intention of the parties to confer third-party
beneficiary rights upon any other Person.
4.8 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any
party hereto without the prior written consent of the other
party hereto and any attempt to do so will be void, except (a)
for assignments and transfers by operation of Law and (b) that
Purchaser may assign any or all of its rights, interests and
obligations hereunder to (I) an Affiliate or wholly-owned
subsidiary, provided that any such Affiliate or subsidiary
agrees in writing to be bound by all of the terms,
<PAGE> 8
conditions and provisions contained herein, (II) any
post-Closing purchaser of the Siemens Laser Printer Maintenance
Business or a substantial part of the Assets or (III) any
financial institution providing purchase money or other
financing to Purchaser from time to time as collateral security
for such financing, but no such assignment referred to in clause
(I) or (II) shall relieve Purchaser of its obligations
hereunder. Subject to the preceding sentence, this Agreement is
binding upon, insures to the benefit of and is enforceable by
the parties hereto and their respective successors and assigns.
4.9 Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the
provisions hereof.
4.10 Consent to Jurisdiction. Each party hereby irrevocably submits
to the jurisdiction of the Superior court of the State of
California for the County of Riverside in such action, suit or
proceeding arising out of or relating to this Agreement or any
of the Operative Agreements or any of the transactions
contemplated hereby and agrees that any such action, suit or
proceeding shall be brought only in such court. Each party
hereby irrevocably waives, to the fullest extent permitted by
Law, any objection that it may now or hereafter have to the
laying of the venue of any such actin, suit or proceeding
brought in such court and any claim that any such action, suit
or proceeding brought in such a court has been brought in an
inconvenient forum.
4.11 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or
future Law, and if the rights or obligations of any party hereto
under this Agreement will not be materially and adversely
affected thereby, (a) such provision will be fully severable,
(b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised
a part hereof and (c) the remaining provisions of this Agreement
will remain in full force and effect and will not be affected by
the illegal, invalid or unenforceable provision or by its
severance herefrom.
4.12 Governing Law. This Agreement shall be governed by and construed
in accordance with the Laws of the State of California
applicable to a contract executed and performed in such State,
without giving effect to the conflicts of laws principles
thereof.
4.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all
of which together will constitute one and the same instrument.
<PAGE> 9
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officer of each party as of the date first above written.
INTERSCIENCE COMPUTER CORPORATION
a California corporation, Seller
By:________________________________
Name:
Title:
A.B.O.G. INC., a California corporation,
doing business as Landmark Computer Group
By:________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 1.7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement"), dated as of May 4,
1998, is made and entered into by and between CSI COMPUTER SPECIALISTS INC., a
Delaware corporation (the "Purchaser"), and INTERSCIENCE COMPUTER CORPORATION, a
California corporation (the "Seller").
RECITALS:
WHEREAS, Seller is engaged in the business of, among other things,
servicing and maintaining laser printers (and the sale of consumable products in
connection therewith) through maintenance contracts with its customers (the
"Business") including the service and maintenance of high speed laser printers
manufactured by Siemens Nixdorf Printing Systems (the "Siemens Laser Printer
Maintenance Business"); and
WHEREAS, Seller desires to sell, transfer and assign to Purchaser, and
Purchaser desires to purchase and acquire from Seller, certain of the assets of
Seller relating to the operation of the Siemens Laser Printer Maintenance
Business and in connection therewith, Purchaser has agreed to assume certain of
the liabilities of Seller relating to Seller's Siemens Laser Printer Maintenance
Business, all on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I.
SALE OF ASSETS AND CLOSING
1.1 Assets.
1.1.1 Assets Transferred. On the terms and subject to the
conditions set forth in this Agreement, Seller will
sell, transfer, convey, assign and deliver to Purchaser,
and Purchaser will purchase and pay for, at the Closing,
all of Seller's right, title and interest in, to and
under the following Assets of Seller which were used by
Seller in connection with the Siemens Laser Printer
Maintenance Business as the same shall exist on the
Closing Date (collectively, the "Assets"):
1.1.1.1 Business Contracts With Customers. Certain
purchase orders, computer maintenance or service
agreements and other contracts listed on
attached Schedule 1.1.1.1 hereto which are
utilized in or part and parcel of the conduct of
the Siemens Laser Printer Maintenance Business
(the "Business Contracts"). Seller represents
that these Business Contracts are
<PAGE> 2
transferable by Seller; in lieu of language to
that effect in the Business Contracts. Seller
will provide consents signed by its customers
agreeing to this transfer.
1.1.1.2 Books and Records. Copies of all Books and
Records used or held for use relating to the
Assets, including copies of all maintenance and
other technical manuals used in connection with
the Siemens Laser Printer Maintenance Business
and the Business Contracts (the "Business Books
and Records").
1.1.1.3 Other Assets and Properties. All other Assets
and Properties of Seller (and its assignment
estate) listed on attached Schedule 1.1.1.3
(the "Other Assets") and used or held for use in
connection with the Siemens Laser Printer
Maintenance Business except the Excluded Assets
(as defined in Section 1.1.2).
1.1.2 Excluded Assets. Notwithstanding anything in this
Agreement to the contrary, except for those assets
explicitly set forth in section 1.1.1. above, all
other assets are excluded from said sale including any
inventory used to service said accounts.
1.1.2.1 Accounts Receivable. All accounts receivable and
the proceeds thereof, as of closing date,
representing revenues and proceeds of sales
made, completed and delivered by Seller prior to
closing including without limitation, all
payments, notes, bonds and other evidences of
Indebtedness of and rights to receive payments
arising out of sales or otherwise occurring in
the conduct of the Siemens Laser Printer
Maintenance Business and any rights of Seller
with respect to any third party collection
procedures or any other Actions or Proceedings
which have been commenced in connection
therewith (the "Accounts Receivable").
1.1.2.2 Inventory and Other Parts. Inventory or other
parts manufactured by Seller or used by Seller
in connection with the Siemens Laser Printer
Maintenance Business, including all finished
goods, raw materials, replacement parts,
consumable products and manufacturing supplies
(the "Inventory") located at sites and at the
storage unit in Maryland will be negotiated by
separate agreement.
1.2 Liabilities.
1.2.1 Assumed Liabilities. In connection with the sale,
transfer, conveyance, assignment and delivery of the
Assets pursuant to this Agreement, on the terms and
subject to the conditions set forth in this Agreement,
at the Closing, Purchaser will assume and agree to pay
<PAGE> 3
perform and discharge when due the following obligations
of Seller arising in connection with the operation of
the Siemens Laser Printer Maintenance Business, as the
same shall exist on the Closing Date (the "Assumed
Liabilities"), and no others.
1.2.1.1 Obligations Under Contracts and Licenses. With
respect to the Siemens Laser Printer Maintenance
Business, those obligations of Seller under the
Business Contracts listed in attached Schedule
1.1.1.1, hereto to be performed as those
Business Contracts are modified and assumed, to
the satisfaction of Purchaser in Purchaser's
sole and complete discretion, on or after the
Closing Date, and excluding any such obligations
arising or to be performed prior to the Closing
Date.
1.3 Purchase Price; and Allocation.
1.3.1 The purchase price for the Business Contracts
(collectively "the Purchase Price"), shall be as
follows: $10,000.00 in Cash at closing.
1.3.2 Payment of Sales, Use and Transfer Taxes. Purchaser
shall pay all sales, use, transfer, and other similar
taxes and fees ("Transfer Taxes") arising out of or in
connection with the transactions effected pursuant to
this Agreement.
1.3.3 No Conflicts. The execution and delivery by Purchaser
of this Agreement does not, and the execution and
delivery by Purchaser of the Business Contracts to which
it is a party, the performance by Purchaser of its
obligations under this Agreement and such Business
Contracts and the consummation of the transactions
contemplated hereby and thereby will not conflict with
or result in a violation or breach of any of the terms,
conditions or provisions of the certificate or articles
of incorporation or by-laws or other comparable
corporate charter document of Purchaser or constitute
(with or without notice or lapse of time or both) a
default under, require Purchaser to obtain any consent,
approval or action of, make any filing with or give any
notice to any Person as a result or under the terms of,
any Contract or License to which Purchaser is a party.
ARTICLE II
MISCELLANEOUS
<PAGE> 4
2.1 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been
duly given only if delivered personally or by facsimile
transmission or mailed (first class postage prepaid) to the
parties at the following addresses or facsimile numbers:
If to Purchaser, to:
CSI, Computer Specialists Inc.
904 Wind River Lane
Suite 100
Gaithersburg, MD 20878
Facsimile No.:
Attn: Mr. Bill Pershin
If to Seller, to:
Interscience Computer Corporation
5236 Colodny Drive
Suite 100
Agoura Hills, CA 91301
Facsimile No.: (818) 707-1627
Attn: Mr. Walter Kornbluh
All such notices, requests and other communications will (I) if
delivered personally to the address as provided in this Section, be deemed given
upon delivery, (II) if delivered by facsimile transmission to the facsimile
number as provided in this Section, be deemed given upon receipt, and (III) if
delivered by mail in the manner described above to the address as provided in
this Section, be deemed given upon receipt (in each case regardless of whether
such notice, request or other communication is to be delivered pursuant to this
Section). Any party from time to time may change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other party hereto.
2.2 Entire Agreement. This Agreement and the Business Contracts
supersede all prior discussions and agreements between the
parties with respect to the subject matter hereof and thereof
and contains the sole and entire agreement between the parties
hereto with respect to the subject matter hereof and thereof.
2.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all
of which together will constitute one and the same instrument.
<PAGE> 5
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officer of each party as of the date first above written.
INTERSCIENCE COMPUTER CORPORATION
a California corporation, Seller
By:____________________________________
Name:
Title:
CSI, COMPUTER SPECIALISTS INC.,
a Delaware corporation, Purchaser
By:____________________________________
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AS OF SEPTEMBER 30, 1997, P&l FOR YEAR END SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10 KSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 586,811
<SECURITIES> 0
<RECEIVABLES> 1,514,891
<ALLOWANCES> 394,263
<INVENTORY> 868,475
<CURRENT-ASSETS> 2,773,678
<PP&E> 1,109,832
<DEPRECIATION> 809,015
<TOTAL-ASSETS> 3,422,152
<CURRENT-LIABILITIES> 1,316,481
<BONDS> 0
0
3,590,000
<COMMON> 4,241,748
<OTHER-SE> (11,101,966)
<TOTAL-LIABILITY-AND-EQUITY> 3,422,152
<SALES> 4,270,000
<TOTAL-REVENUES> 11,235,303
<CGS> 2,348,500
<TOTAL-COSTS> 9,196,857
<OTHER-EXPENSES> 13,252,283
<LOSS-PROVISION> 394,263
<INTEREST-EXPENSE> 158,922
<INCOME-PRETAX> (11,509,524)
<INCOME-TAX> 12,610
<INCOME-CONTINUING> (11,522,134)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,522,134
<EPS-PRIMARY> (4.56)
<EPS-DILUTED> 0
</TABLE>
