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Q: Why did L-Soft international, Inc. file for Chapter 11 protection?
A: L-Soft international, Inc. filed a voluntary petition for Chapter 11 protection to help resolve a five-year legal dispute. Chapter 11 proceedings will provide a court-supervised framework through which L-Soft hopes to resolve this conflict in a manner that is fair to both parties. The other companies in the L-Soft group are not involved in this litigation and have no plans to file for Chapter 11.
Q: Does this mean L-Soft international, Inc. is going out of business?
A: No. L-Soft international, Inc.'s core business continues to be healthy and profitable, making it a good candidate for Chapter 11 reorganization. If it were not for the litigation, L-Soft international, Inc. would be a profitable company. Chapter 11 is sometimes confused with Chapter 7. A company that files for Chapter 7 goes out of business, whereas a company filing for Chapter 11 remains in business.
Q: What will be the effect of the filing on day-to-day operations?
A: There should be little, if any, effect on L-Soft international, Inc.'s day-to-day operations as a result of the reorganization. Employee wages and benefits will be paid normally. Customer support, development and sales will continue as before. This Chapter 11 filing is not about cutting costs or laying off employees, it is about a one-off legal action and its impact on the company.
Q: What about the other L-Soft companies in the group – are they part of this filing?
A: No, they are not. The Chapter 11 filing is limited to L-Soft international, Inc. in Maryland, and does not include any other companies in the L-Soft group. L-Soft Germany GmbH, L-Soft UK Ltd, L-Soft AB, L-Soft Sweden AB, L-Soft Services international, Inc. either were not involved in the litigation or were dismissed from the case after it was filed. These companies have no plans to file for Chapter 11.
Q: What can you tell me about the litigation that led to this filing?
A: It is about a 1995 software distribution agreement. At this point, L-Soft is not discussing the litigation itself, as the case is still pending.
Q: What other companies have resolved litigation through Chapter 11?
A: The most publicized example is Texaco, which filed for Chapter 11 protection in 1987 after being hit with the largest verdict in U.S. history – $11 billion. Within a few months, the case was settled for $3 billion, and Texaco exited Chapter 11. The lawyer who represented the plaintiff was paid $400 million.
Q: Why didn't L-Soft settle this litigation?
A: L-Soft executive management tried, and tried, and tried again. During a half-day settlement conference supervised by a U.S. Magistrate Judge, the Judge was unable to get the other side to reduce their demands by a single dollar, and they eventually just walked out on us, candidly explaining that this case only made sense for their law firms if it led to a big payment, given the amount of money the firms had already invested in litigation.
Q: Did L-Soft's suppliers force the company into Chapter 11?
A: No, L-Soft filed a voluntary petition for Chapter 11. L-Soft international, Inc. does not have any legal conflicts with its suppliers.
Q: Will customer service be interrupted by this filing?
A: There are no anticipated interruptions to customer support and service. The customer support team at L-Soft is very committed to and will continue to serve customers, and L-Soft's software engineering team will continue to develop and upgrade the solutions.
Q: What is Chapter 11 reorganization?
A: Chapter 11 refers to the section of the U.S. Bankruptcy Code that provides for court-supervised restructuring of companies. Chapter 11 proceedings are commonly referred to as business reorganization. L-Soft international, Inc. has filed a voluntary petition for Chapter 11, which will enable it to reorganize and resolve a legal conflict while continuing normal business operations. The purpose of filing for Chapter 11 protection is to reorganize and strengthen the company for the future.
Q: How does the reorganization process work?
A: The company drafts a reorganization plan that sets forth how the claims of creditors and interest holders will be treated.
Q: Who will run the day-to-day operations of the business during this period?
A: Generally, the existing management supervises the process. Chapter 11 presumes that the best management for a company that has filed for Chapter 11 is the management it already has. Once the Chapter 11 proceedings begin, the company is referred to as a debtor, more specifically to as debtor-in-possession or DIP. The debtor retains control of the business by the fact that the U.S. Bankruptcy Code (section 1107) places the debtor in possession with the rights and powers of a Chapter 11 trustee.
Q: How is the business protected?
A: The business is protected by an automatic stay that takes place upon the filing of the petition, meaning no creditor can take any action against the debtor. The stay provides "breathing space" for the debtor during which negotiations can take place to try to resolve the difficulties in the debtor's financial situation.
Q: When will the company exit from Chapter 11?
A: Companies exit Chapter 11 after the court approves the company's Chapter 11 plan of reorganization and the transactions and payments proposed in the plan have been completed. There are companies that exited Chapter 11 procedure in less than six months and others that took several years.
Q: As a buyer of L-Soft software, what should I consider when buying new software licenses or services?
A: L-Soft has the longest track record in the industry and is the only provider of the original LISTSERV® brand. Founded in 1994, L-Soft is a pioneer in email list communication. L-Soft's solutions are used for the management of email newsletters, discussion groups and opt-in email marketing campaigns. The LISTSERV® email list manager, developed in 1986, was the first product of its kind and single-handedly launched the email list management industry. Since then, L-Soft has expanded its portfolio to include email marketing and hosting solutions.
Choosing L-Soft and LISTSERV for email list communication is a good decision now and in the future. L-Soft is an international company and works with both small and large customers in nearly every industry worldwide. Most of the software development and key programming activities are conducted at L-Soft companies in Europe, which are not part of the Chapter 11 reorganization. LISTSERV celebrates its 21st anniversary in 2007. It is a product with strong roots and a stable foundation for today and the future.
If you have any questions or comments, please feel welcome to contact us at: onward@lsoft.com.
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