Fireman’s Fund to Receive Stock : Wespercorp Settles Suit for Breach of Contract

Removing another block to its effort to regain financial stability, Wespercorp said Monday that it has reached an out-of-court settlement in a $4-million lawsuit accusing the company of breach of contract.

Under the settlement, which Wespercorp said will reduce shareholder equity by $350,000, the Santa Ana-based company will give 328,970 shares of its newly issued common stock, or 13.7% of the stock then outstanding, to Fireman’s Fund Insurance Co. which paid off on the performance bond when Wespercorp stopped working on a computer systems project three years ago.

In turn, Fireman’s, which becomes one of Wespercorp’s largest shareholders, will give $500,000 cash to Citizens Utility Co., a Stamford, Conn., public utility holding company that had ordered two computerized billing systems from Wespercorp.

The settlement allows Citizens to sell computer hardware that Wespercorp shipped before canceling the project. If the hardware is sold within a year, Wespercorp will guarantee a $100,000 sale price, paying any deficiency and sharing equally in any profit on a sale over that amount, said George Dashiell, president and chief executive of Wespercorp.

Meantime, Wespercorp has hired Harry White as president of its Western Peripherals Group, the commercial manufacturing division that accounts for about 40% of the company’s revenues.

White, 46, of San Jose, was founder and president of Tecma Inc., an 11-year-old firm that specializes in mergers and acquisitions. He also had been founder and president of Xebex Inc., a San Jose computer parts maker.

Dashiell said White’s expertise in mergers and acquisitions will come in handy because Wespercorp is seeking marketing and manufacturing rights for existing computer products made by other companies.

Acknowledging that the company has little cash or stock to pay for outright purchases, he said White instead will look for deals in which other companies are willing to take royalties in exchange for using Wespercorp’s existing manufacturing and marketing capabilities.

The settlement of the lawsuit with Fireman’s and Citizens, he said, removes “one of the major uncertainties” faced by Wespercorp, which has sustained $4.6 million in net losses in the last two years.

Still clouding the company’s future are a class-action lawsuit arising out of a secondary offering in 1983 and the Jan. 31 maturity date on a $4.5-million bank loan. He said the company is negotiating with Union Bank to extend the date.

Earlier this year, Wespercorp reached an agreement with the bank to modify its loan agreements to avoid technical defaults. It also reached a settlement with Wang Laboratories Inc. in a patent infringement suit filed by the Massachusetts-based computer giant. As part of the settlement, Wespercorp will halt production of certain Wang-compatible products within two years.