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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
ALLSTAR SYSTEMS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box)
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:________________
2) Aggregate number of securities to which transaction
applies:________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined): The underlying value of the transaction is
being computed based on a bona fide estimate of the cash
purchase price to be received by the Registrant for the assets
being sold in the transaction to which this Proxy Statement
relates.
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------
2) Form, Schedule or Registration Statement No.:
--------
3) Filing Party:
------------------------
4) Date Filed:
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ALLSTAR SYSTEMS, INC.
6401 SOUTHWEST FREEWAY
HOUSTON, TEXAS 77074
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
MAY 19, 2000
A special meeting (the "Special Meeting") of the stockholders of
Allstar Systems, Inc. ("Allstar" or the "Company"), will be held on May 19, 2000
at 10:00 a.m., at our corporate office located at 6401 Southwest Freeway,
Houston, Texas for the following purposes:
1. To consider and approve the sale of certain of our assets
consisting of the Computer Products Division and specified assets of
our Information Technology ("IT Services") Division related to our El
Paso, Texas office, pursuant to Asset Purchase Agreement among Allstar,
Amherst Computer Products Southwest, L.P. ("Amherst Southwest") and
Amherst Technologies, L.L.C. ("Amherst Technologies"), dated as of
March 16, 2000 (the "Asset Purchase Agreement").
2. To consider and approve the 2000 Stock Incentive Plan (the
"2000 Stock Incentive Plan"); and
3. To transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
The Special Meeting may be adjourned from time to time without notice
other than the announcement of the adjournment at the Special Meeting or at any
adjournment or adjournments of the Special Meeting. Any business for which
notice is given may be transacted at any adjourned Special Meeting.
The accompanying Proxy Statement describes the Asset Purchase Agreement
and 2000 Stock Incentive Plan. You are encouraged to read the accompanying Proxy
Statement carefully for further information concerning the Asset Purchase
Agreement and 2000 Stock Incentive Plan.
Only stockholders of record at the close of business on April 24, 2000
will be entitled to notice of and to vote at the meeting and any adjournments or
postponement thereof.
IMPORTANT: WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED, REGARDLESS OF THE NUMBER OF SHARES
YOU HOLD. ACCORDINGLY, YOU ARE ENCOURAGED TO SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD IN THE REPLY ENVELOPE PROVIDED AS SOON AS POSSIBLE. THANK YOU FOR
ACTING PROMPTLY.
BY ORDER OF THE BOARD OF DIRECTORS,
Donald R. Chadwick
Secretary
Houston, Texas
April 26, 2000
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PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
OF ALLSTAR SYSTEMS, INC.
TO BE HELD ON MAY 19, 2000
GENERAL INFORMATION
We are first mailing this Proxy Statement and accompanying notice and
the enclosed proxy card to stockholders beginning on April 27, 2000. Our board
of directors is soliciting your proxy to vote your shares at the Special Meeting
of stockholders to be held on May 19, 2000, or at any adjournment or
postponement of the Special Meeting. We will bear all expenses incurred in
connection with this solicitation, which is expected to be primarily by mail. In
addition to solicitation by mail, our directors, officers and regular employees
may solicit your proxy by telephone, by facsimile transmission or in person, for
which they will not be compensated. If your shares are held through a broker,
bank or other nominee (i.e., in "street name"), we have requested that they
forward this Proxy Statement to you and obtain your voting instructions, for
which we will reimburse them for their reasonable out-of-pocket expenses.
If your shares were held in street name on the record date, the broker
or other nominee that was the record holder of your shares may have the
authority to vote them at the Special Meeting. If your shares are held in street
name and you want to vote your shares in person at the Special Meeting or change
your vote, you must obtain a legal proxy from your broker or nominee. If you
vote by signing and returning the enclosed proxy card, the individuals named as
proxies on the card may vote your shares, in their discretion, on any other
matter requiring a stockholder vote that comes before the meeting.
You will receive more than one Proxy Statement and proxy card or voting
instruction form if your shares are held through more than one account (i.e.,
through different names or different brokers or nominees). Each proxy card or
voting instruction form only covers those shares of common stock held in the
applicable account. If you hold shares in more than one account, you have to
provide voting instructions as to all your accounts to vote all of your shares
of common stock.
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TABLE OF CONTENTS
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GENERAL INFORMATION ..............................................................................................1
SUMMARY ..........................................................................................................1
Purpose of the Special Meeting ..........................................................................1
Proposal 1: Approval of the Asset Sale ...............................................................1
The Asset Sale .................................................................................1
Background .....................................................................................2
Purposes of the Asset Sale .....................................................................2
Sale Price .....................................................................................3
Our Planned Use of Proceeds ....................................................................3
Conditions to Closing ..........................................................................4
Interest of Management in the Asset Sale .......................................................4
Estimated Closing Date .........................................................................5
Vote Required for Approval of the Asset Sale ...................................................5
No Fairness Opinion ............................................................................5
No Dissenters' Rights ..........................................................................5
Material Federal Income Tax Consequences .......................................................5
Accounting Treatment ...........................................................................5
Recommendation of the Board of Directors .......................................................5
Proposal 2: Approval of 2000 Incentive Stock Plan ....................................................6
Shares Subject to Plan .........................................................................6
Administration .................................................................................6
Eligibility ....................................................................................6
Types of Incentive Awards ......................................................................6
Amendment and Termination ......................................................................7
Vote Required for Approval of the 2000 Stock Incentive Plan ....................................7
Recommendation of the Board of Directors .......................................................7
Summary Selected Historical Financial Information .......................................................8
Summary Selected Unaudited Pro Forma Financial Data .....................................................9
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS .......................................................................10
PROPOSAL 1: APPROVAL OF THE ASSET SALE ..........................................................................12
Background of Asset Sale ...............................................................................12
Changes in the Industry .......................................................................12
The Effects on our Common Stock ...............................................................13
The Amherst Technologies Transaction ..........................................................14
Reasons for Asset Sale; Recommendation of the Board of Directors .......................................16
Accounting Treatment of the Asset Sale .................................................................17
Material Federal Income Tax Consequences ...............................................................18
Government and Regulatory Approvals ....................................................................18
Arm's Length Transaction ...............................................................................18
No Dissenters Rights ...................................................................................18
Required Vote ..........................................................................................18
Interests of Certain Members of Management in the Transactions .........................................18
Our Business After the Asset Sale ......................................................................19
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Business Plan ..........................................................................................20
THE ASSET PURCHASE AGREEMENT ....................................................................................21
Sale of Assets .........................................................................................21
Liabilities Assumed ....................................................................................21
The Purchase Price .....................................................................................21
Inventory Purchase Price ......................................................................22
Tangible Asset Purchase Price .................................................................22
Earn Out Payment ..............................................................................22
Representations and Warranties .........................................................................22
Conduct Pending Closing ................................................................................23
Prohibition Against Solicitation .......................................................................23
Conditions to Closing ..................................................................................23
Covenant Not to Compete ................................................................................24
Termination ............................................................................................25
Effect of Termination ..................................................................................25
Indemnification ........................................................................................27
PROPOSAL 2: APPROVAL OF 2000 STOCK INCENTIVE PLAN ............................................................28
Summary Description of the Incentive Plan ..............................................................28
Shares Subject to Plan ........................................................................28
Administration ................................................................................28
Eligibility ...................................................................................28
Types of Incentive Awards .....................................................................29
Options ..............................................................................29
SARs .................................................................................29
Restricted Stock .....................................................................30
Performance Units and Performance Shares .............................................30
Other Stock-Based Awards .............................................................30
Other Tax Considerations .............................................................30
Termination of Employment and Change in Control ......................................30
Incentive Awards Transferable .................................................................31
Amendment and Termination .....................................................................31
Required Vote ..........................................................................................31
Recommendation of the Board of Directors ...............................................................31
MARKET INFORMATION ..............................................................................................32
Historical Market Price ................................................................................32
Recent Market Price ....................................................................................32
Number of Holders ......................................................................................32
FORWARD-LOOKING STATEMENTS ......................................................................................33
WHERE YOU CAN FIND MORE INFORMATION .............................................................................34
OTHER BUSINESS ..................................................................................................35
SELECTED FINANCIAL DATA .........................................................................................36
INDEX TO FINANCIAL STATEMENTS ..................................................................................F-1
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APPENDIX A .....................................................................................................A-1
Asset Purchase Agreement ..............................................................................A-1
Amendment No. 1 to Asset Purchase Agreement ..........................................................A-46
APPENDIX B .....................................................................................................B-1
Consulting and Noncompetition Agreement ...............................................................B-1
APPENDIX C .....................................................................................................C-1
Voting and Support Agreement ..........................................................................C-1
Amendment No. 1 to Voting and Support Agreement .......................................................C-6
Irrevocable Proxy and Limited Power of Attorney .......................................................C-9
APPENDIX D .....................................................................................................D-1
2000 Stock Incentive Plan .............................................................................D-1
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SUMMARY
This summary highlights selected information from this proxy statement
and may not contain all of the information that is important to you. To
understand the transactions to be acted upon at the special meeting and for a
more complete description of the legal terms of the transaction, you should read
this entire document, including the information incorporated herein by reference
and the Appendices to this proxy statement. Unless otherwise defined in this
proxy statement, capitalized terms used in this summary have the meanings
assigned to them elsewhere in this proxy statement.
PURPOSE OF THE SPECIAL MEETING
We are holding a special meeting of stockholders at our principal
executive offices located at 6401 Southwest Freeway, Houston, Texas at 10:00
a.m. local time, on May 19, 2000. At the special meeting, you will be asked to
vote to approve the following:
o the sale of our Computer Products Division and specified
assets of our IT Services Division associated with our El
Paso, Texas office for which we will receive a cash purchase
price at closing of the sale and, possibly, additional
contingent payments in the future; and
o a new incentive compensation plan we call the "2000 Incentive
Stock Plan" under which we will be able to issue stock options
and other forms of compensatory incentive awards to our
officers, directors and employees.
Our board of directors recommends that you vote "FOR" each of the
proposals at the special meeting.
James H. Long, our Chairman of the Board, Chief Executive Officer and
President, owns approximately 50.5% of the common stock. Mr. Long executed a
voting and support agreement with the proposed buyer which unconditionally
requires him to vote his shares in favor of the proposed asset sale if it is
presented to a vote of our stockholders and against any other transaction
involving a sale of our Computer Products Division or the assets of our IT
Services Division associated with our El Paso, Texas office. Mr. Long also
executed a proxy that allows two designees of Amherst Southwest to vote his
shares for the proposed asset sale and against such other transactions. Mr. Long
has also advised us that he plans to vote his stock in favor of the 2000
Incentive Stock Plan. If Mr. Long votes his stock in favor of these two
proposals at the special meeting, approval of the asset sale and the 2000
Incentive Stock Plan is assured. If one or both of Amherst Southwest's designees
votes Mr. Long's stock in favor of the proposed asset sale at the special
meeting, the asset sale is assured.
PROPOSAL 1: APPROVAL OF THE ASSET SALE
THE ASSET SALE
We propose to sell our Computer Products Division and most of the
assets of our IT Services Division located in El Paso, Texas on the terms
described in this Proxy Statement. The Computer Products Division and the El
Paso IT Services business accounted for 90.5% of revenues in our last fiscal
year. Because of the importance of these operations to our business, we are
required by Delaware law to submit the proposed asset sale to our stockholders
for their approval.
We have signed an Asset Purchase Agreement with two affiliated
entities, Amherst Computer Products Southwest, L.P. and Amherst Technologies,
L.L.C., pursuant to which we will sell our entire Computer Products Division and
the part of our IT Services Division that is associated with our El Paso,
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Texas office. The buyer, Amherst Southwest, is a newly-formed Texas limited
partnership with no prior operations. Amherst Technologies is an established
business and has guaranteed the obligations of Amherst Southwest under the Asset
Purchase Agreement. The terms of the Asset Purchase Agreement are discussed
further under the caption "The Asset Purchase Agreement."
BACKGROUND
After several months of discussion and analysis, in July of 1999 our
board of directors authorized our executive management to research and evaluate
the potential sale of our Computer Products Division. Over the next five months,
we evaluated the strategic alternatives relating to the sale of the Computer
Products Division and solicited indications of interest from various parties.
After reviewing the information obtained from this process, we determined that
the sale of our Computer Products Division and the El Paso IT Services business
was in the best interest of our stockholders.
Of the potential buyers we considered, we regarded Amherst Technologies
as the most promising based on our belief that Amherst Technologies would be
willing to offer the highest price and that it had the financial ability to
conclude the asset sale using financing available to it under an existing line
of credit. We had preliminary discussions with representatives of Amherst
Technologies beginning in August 1999 and permitted Amherst Technologies to
conduct due diligence investigations under a confidentiality agreement we
executed with an affiliate of Amherst Technologies. After an extended period of
negotiations with Amherst Technologies, during which we also considered several
alternate transactions, we entered into the Asset Purchase Agreement with
Amherst Southwest and Amherst Technologies on March 16, 2000. After execution of
that agreement, we received a higher offer from another potential buyer.
Following receipt of that offer, we entered into additional negotiations with
Amherst Technology which resulted in an amendment to the Asset Purchase
Agreement in lieu of pursuing negotiations with the new potential buyer.
Additional background information may be found under the caption "Proposal 1:
Approval of the Asset Sale --Background of the Asset Sale."
PURPOSES OF THE ASSET SALE
We believe that it is in our best interest to exit the computer
products resale business and seek new lines of business which we believe offer
better potential for increasing stockholder value. Although we have not
identified any specific businesses we propose to acquire or start, we believe
that the substantial proceeds from the asset sale will place us in a better
position to:
o explore acquisition opportunities in other computer-related
and internet-based businesses;
o move quickly to acquire a desirable business or businesses
once we identify them; and
o commit financial resources to our remaining IT Services
business and to our Stratasoft computer/telephone integration
software business which we will retain after the asset sale.
We can offer you no assurance that we will be able to locate suitable
new lines of business in which to invest the proceeds of the asset sale or that
if we do, that any such business will prove successful. We do not expect that
you will have an opportunity to vote separately to approve the new lines of
business we may choose to enter following the asset sale. The purposes of the
asset sale are discussed further under the caption "Proposal 1: Approval of the
Asset Sale -- Reasons for Asset Sale; Recommendation of the Board of Directors.
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SALE PRICE
If the asset sale is closed, we will receive at the closing a cash
purchase price consisting of the total of the following amounts:
o $14.25 million;
o the fair market value of our tangible assets used in the
Computer Products Division and El Paso IT Services business
based on Amherst Southwest's selection of tangible assets and
a third-party appraisal to be performed near the closing date;
o actual cost of inventory purchased from us by Amherst
Southwest; and
o 50% of cooperative advertising credits available from one of
our vendors.
Additionally, Amherst Southwest has paid us $250,000 as a
non-accountable expense reimbursement. Those funds are not refundable if the
transaction does not close unless the Asset Purchase Agreement is terminated due
to our acceptance of a better offer.
In addition, we will be entitled to receive contingent future payments
consisting of up to $500,000 from the proceeds of an escrow fund established at
closing which will be held in escrow for a period of at least one year following
closing from which Amherst Southwest can seek indemnity for any breaches of our
representations and warranties and covenants in the Asset Purchase Agreement.
Any amounts not paid to Amherst Southwest from the escrow fund will be paid to
us.
We also may become entitled to receive other contingent future payments
based upon the margin Amherst Southwest receives on its sales, if any, to a
specific customer during the two year period following the closing of the asset
sale.
Amherst Southwest will assume certain liabilities relating to the
Computer Products Division and El Paso IT Services business.
Amherst Southwest has placed $500,000 in escrow pending closing of the
transaction. If the transaction closes, the escrow funds will be applied to the
purchase price. If the transaction does not close, the escrow funds will be paid
to us or Amherst Southwest entirely or may be split equally between us and
Amherst Southwest depending upon the reason for the transaction not closing. The
terms of the consideration to be received are discussed further under the
caption "The Asset Purchase Agreement -- Purchase Price."
OUR PLANNED USE OF PROCEEDS
We do not plan to distribute any of the proceeds from the asset sale to
our stockholders. Rather, we expect to reinvest the proceeds in our business by:
o repaying all indebtedness to our secured lenders at the
closing of the sale;
o providing working capital for our retained businesses;
o acquiring or starting up new lines of business to be
identified in the future; and
o paying taxes that will be owed as a result of the asset sale.
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Our cash and equity position will be substantially improved after
completion of the asset sale. We estimate that our total liabilities will be
reduced by $11.8 million from approximately $41.9 million as of December 31,1999
to $30.1 million. Our stockholders equity is expected to increase by $5.6
million from approximately $11.8 million as of December 31, 1999 to $17.4
million after giving pro forma effect to the asset sale as of December 31, 1999.
The proposed sale of the Computer Products Division and El Paso IT
Services business is subject to many contingencies. We cannot assure you that
the transactions will be successfully concluded or that, if they are, that the
asset sale will have the intended beneficial effects on our financial condition
and operations. For additional description on the use of proceeds see the
discussion under the captions "Proposal 1: Approval of the Asset Sale - Our
Business after the Asset Sale" and "Proposal 1: Approval of the Asset Sale -
Business Plan."
CONDITIONS TO CLOSING
Closing the transactions contemplated by the Asset Purchase Agreement,
including the asset sale, is subject to customary closing conditions, including
approval of the asset sale by our stockholders and the truth of the
representations and warranties in the Asset Purchase Agreement. For a detailed
description of conditions to closing, see the discussion under the heading
"Asset Purchase Agreement -- Conditions to Closing."
INTEREST OF MANAGEMENT IN THE ASSET SALE
Our Chairman, Chief Executive Officer and President, James H. Long, and
one of our directors, Richard Darrel, will benefit from the asset sale in a
manner that will not be shared with other stockholders.
In connection with the Asset Purchase Agreement, James H. Long has also
agreed to enter into a Consulting and Non-Competition Agreement. The Consulting
and Non-Competition Agreement provides that Mr. Long will provide certain
consulting services to Amherst Southwest, including services pertaining to the
transition of the Computer Products Division and El Paso IT Services business,
the management information systems of the Computer Products Division and El Paso
IT Services business, relations with customers and former employees and methods
to improve business resulting from the Asset Sale. The term of such consulting
services is for a period of two years. Mr. Long will receive $20,000 per year
for his services under the agreement.
Under the terms of the Consulting and Non-Competition Agreement, Mr.
Long has also agreed not to compete with Amherst Southwest for a period of three
years, including solicitation of certain employees or customers. In
consideration of his personal covenant not to compete, Mr. Long will receive
additional payments of $230,000 per year from Amherst Southwest during the term
of the Agreement.
Mr. Long also executed a Voting and Support Agreement. Under the Voting
and Support Agreement, he unconditionally agreed to vote in favor of the asset
sale and against any other transaction involving a sale of Computer Products
Division or the assets of our IT Services Division associated with our El Paso,
Texas office. Mr. Long also executed an Irrevocable Proxy and Limited Power of
Attorney granting a proxy to two designees of Amherst Southwest to vote his
shares for the asset sale and against any such other transaction. In the Voting
and Support Agreement, Amherst Southwest agreed to indemnify Mr. Long for half
of any costs incurred by him in defending any lawsuit relating to his execution
of the proxy. Amherst Southwest is not required to pay more than $100,000 under
that indemnity obligation.
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Mr. Richard Darrell who is a member of our board of directors, will
receive approximately $350,000 from us as a fee for introducing us to Amherst
Technologies. Additionally, Mr. Darrell also will receive a fee of $250,000 from
Amherst Technologies in connection with the Asset Purchase Agreement. For
further discussions pertaining to interests of management, see the discussion
under the caption "Proposal 1: Approval of the Asset Sale - Interests of Certain
Members of Management in the Transaction."
ESTIMATED CLOSING DATE
If our stockholders approve the Asset Sale, we expect that the closing
of the asset sale will take place on or about May 31, 2000 or at such other time
we and Amherst Southwest may agree upon.
VOTE REQUIRED FOR APPROVAL OF THE ASSET SALE
You may vote "FOR" or "AGAINST" or abstain from voting on the Asset
Purchase Agreement. The affirmative vote of a majority of the outstanding shares
of common stock at the close of business on the record date for the special
meeting is required to approve the asset sale. Abstentions and broker non-votes
will have the same effect as a vote "Against" the Asset Purchase Agreement.
NO FAIRNESS OPINION
Our board of directors chose not to obtain a "fairness" opinion from an
investment banking firm in making its recommendation "FOR" the approval of the
Asset Purchase Agreement.
NO DISSENTERS' RIGHTS
Under the Delaware General Corporation Law, stockholders do not have
dissenters' or appraisal rights in connection with the asset sale.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
We will recognize taxable gain on the asset sale, which will result in
corporate income tax. Our taxable gain will be equal to the amount realized by
us in the transaction, including certain non cash and deferred payments, less
the adjusted tax basis of the assets sold. Consummation of the transaction will
not result in any federal income tax consequences to stockholders. If the asset
sale had occurred at December 31, 1999, the federal income tax on the asset sale
would have been approximately $2.9 million. For further description, see the
discussion under the caption "Proposal 1: Approval of the Asset Sale - Material
Federal Income Tax Consequences."
ACCOUNTING TREATMENT
The asset sale will be accounted for as a sale of assets in accordance
with generally accepted accounting principles. We will recognize a gain from the
asset sale based upon the excess net proceeds we receive over the net book value
of the assets sold. If the asset sale had occurred at December 31, 1999, the
gain on the asset sale, net of taxes, for financial accounting purposes would
have been approximately $5.6 million.
RECOMMENDATION OF THE BOARD OF DIRECTORS
Our board of directors has approved the asset sale and the Asset
Purchase Agreement and has determined that the asset sale and the Asset Purchase
Agreement are fair to, and in the best interests of
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our stockholders. Accordingly, our board of directors unanimously recommends
that you vote "FOR" approval of this proposal.
PROPOSAL 2: APPROVAL OF 2000 INCENTIVE STOCK PLAN
Our board of directors does not believe that the number of shares of
common stock that remain available for grant under our existing plan is
sufficient to carry out our compensation policy. Accordingly as part of our
overall effort to increase stockholder value, the board of directors unanimously
adopted the 2000 Stock Incentive Plan, subject to stockholder approval, in order
to provide us with an effective means of attracting and retaining key employees,
consultants and outside directors, encouraging their commitment, motivating
their performance, facilitating their ownership interest in the company and
enabling them to share in our long term growth and success. For further
discussion of the 2000 Stock Incentive Plan, see the details set forth under the
caption "Proposal 2: 2000 Stock Incentive Plan."
SHARES SUBJECT TO PLAN
Under the 2000 Stock Incentive Plan, we may issue Incentive Awards
covering at any one time the greater of 400,000 shares of common stock or 10% of
the number shares of common stock issued and outstanding on the first day of the
then preceding calendar quarter.
ADMINISTRATION
The 2000 Stock Incentive Plan will be administered by the Compensation
Committee of our board of directors. Subject to the express provisions of the
2000 Stock Incentive Plan, the Compensation Committee is authorized to, among
other things, select grantees under the 2000 Stock Incentive Plan and determine
the size, duration and type, as well as the other terms and conditions (which
need not be identical), of each Incentive Award.
ELIGIBILITY
Our employees, including officers (whether or not they are directors),
consultants and non-employee directors are eligible to participate in the 2000
Stock Incentive Plan.
TYPES OF INCENTIVE AWARDS
Under the 2000 Stock Incentive Plan, the Compensation Committee may
grant "Incentive Awards," which can be:
o stock options;
o stock appreciation rights;
o shares of restricted stock;
o performance units and performance shares;
o other stock-based awards; and
o cash bonuses.
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For further discussion of the Incentive Awards available under the 2000
Stock Incentive Plan, see the discussion under the heading "Proposal 2: Approval
of the 2000 Stock Incentive Plan-Summary Description of the Plan."
AMENDMENT AND TERMINATION
The board of directors may amend or terminate the 2000 Stock Incentive
Plan at any time. However, the 2000 Stock Incentive Plan may not be amended,
without stockholder approval, if the amendment would have the following effects:
o increase the number of shares of common stock which may be
issued under the 2000 Stock Incentive Plan, except in
connection with a recapitalization of the common stock;
o amend the eligibility requirements for employees to purchase
common stock under the 2000 Stock Incentive Plan; or
o extend the term of the 2000 Stock Incentive Plan.
Without a participant's written consent, no termination or amendment of the 2000
Stock Incentive Plan shall adversely affect in any material way any outstanding
Incentive Award granted to him. For further description of the power of the
board of directors to amend or terminate the 2000 Stock Incentive Plan, see the
discussion under the heading "Proposal 2: Approval of the 2000 Stock Incentive
Plan - Summary Description of the Plan".
VOTE REQUIRED FOR APPROVAL OF THE 2000 STOCK INCENTIVE PLAN
You may vote "FOR" or "AGAINST" or abstain from voting on the 2000
Stock Incentive Plan. The affirmative vote of a majority of the votes cast at
the special meeting, if a quorum is present, is required to approve the 2000
Stock Incentive Plan. Abstentions will have the same effect as a vote "Against"
the Incentive Plan. Broker non-votes will have no effect on the approval of the
2000 Stock Incentive Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
Our board of directors has approved the Incentive Plan and has
determined that the 2000 Stock Incentive Plan is fair to, and in the best
interests of, our company and our stockholders. Accordingly, our board of
directors unanimously recommends that the stockholders vote "FOR" the 2000 Stock
Incentive Plan.
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SUMMARY SELECTED HISTORICAL FINANCIAL INFORMATION
We are providing the following information to aid you in your analysis
of the financial aspects of the Asset Sale. The summary selected consolidated
financial data for each of the three years in the period ended December 31, 1999
have been derived from our audited consolidated financial statements. The table
should be read in conjunction with those statements and related notes. The data
presented below also should be read in conjunction with our Audited Consolidated
Financial Statements as of December 31, 1998 and 1999 and for each of the three
years in the period ended December 31, 1999, which are incorporated by reference
into this proxy statement. See "Where You Can Find More Information" on page 34.
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YEAR ENDED DECEMBER 31,
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1997 1998 1999
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
OPERATING DATA:
Revenue ........................ $ 123,764 $ 159,674 $ 201,817
Gross profit ................... 16,629 19,808 22,791
Operating income (loss) from
continuing operations ....... 4,102 (851) 2,608
Net income (loss) from
continuing operations ....... 2,167 (788) 1,274
Net loss from
discontinued operations, net
of taxes .................... (323) (310) (981)
Loss on disposal, net of taxes . (1,138)
--------- --------- ---------
Net income (loss) .............. $ (1,844) $ (1,098) $ (845)
========= ========= =========
DILUTED EARNINGS PER SHARE DATA:
Net income (loss) from
continuing operations ....... $ 0.61 $ (0.18) $ 0.30
Net loss from
discontinued operations ..... (0.09) (0.07) (0.23)
Loss disposal .................. (0.27)
--------- --------- ---------
Net income (loss) .............. $ 0.52 $ (0.25) $ (0.20)
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------
1997 1998 1999
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital ............ $ 12,738 $ 9,800 $ 9,567
Total assets ............... 34,855 51,028 53,916
Short-term borrowings ...... 1,572 15,958 15,869
Long-term debt ............. -0- -0- -0-
Stockholders' equity ....... 14,637 12,705 11,830
</TABLE>
8
<PAGE> 15
SUMMARY SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The following selected pro forma financial information is derived from
our unaudited pro forma consolidated financial statements appearing under the
caption "Pro Forma Financial Information" on pages F-1 to F-8. The table should
be read in conjunction with those statements and related notes.
The following selected unaudited pro forma financial data gives effect
to the asset sale. The unaudited pro forma financial data assumes the asset sale
took place on December 31, 1999 and January 1, 1998, 1997 and 1996,
respectively. The pro forma adjustments are based on available information and
assumptions that we believe are reasonable at the time made. The pro forma
financial data is presented for illustrative purposes only and is not
necessarily indicative of any future results of operations or the results that
might have occurred if the asset sale had actually occurred on the indicated
dates.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1997 1998 1999
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
OPERATING DATA:
Revenue ................................... $ 12,385 $ 15,127 $ 17,163
Gross profit .............................. 4,951 5,560 6,019
Operating loss from continuing
operations ............................. (1,549) (3,624) (1,994)
Net loss from continuing operations ....... (971) (2,333) (1,180)
Discontinued operations:
Net loss from discontinued operations,
net of income taxes .............. (323) (310) (981)
Loss on disposal, net of income taxes (1,138)
------------ ------------ ------------
Net loss .................................. $ (1,294) $ (2,643) $ (3,299)
============ ============ ============
INCOME (LOSS) PER SHARE:
Basic:
Net loss from continuing
operations .................. $ (0.28) $ (0.54) $ (0.28)
Net loss from discontinued
operations .................. (0.09) (0.07) (0.24)
Net loss on disposal ............. (0.27)
------------ ------------ ------------
Net loss per share ............... $ (0.37) $ (0.61) $ (0.79)
============ ============ ============
Diluted:
Net loss from continuing
operations .................. $ (0.28) $ (0.54) $ (0.28)
Net loss from discontinued
operations .................. (0.09) (0.07) (0.24)
Net loss on disposal ............. (0.27)
------------ ------------ ------------
Net loss per share ............... $ (0.37) $ (0.61) $ (0.79)
============ ============ ============
BALANCE SHEET DATA (END OF PERIOD):
Working capital ...................... $ 16,256
Total assets ......................... $ 47,712
Short-term borrowings ................ -0-
Long-term debt ....................... -0-
Stockholders' equity ................. $ 17,440
</TABLE>
9
<PAGE> 16
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS
Q: WHY DID YOU SEND ME THIS PROXY STATEMENT?
A: We sent you this Proxy Statement and the enclosed proxy card because
our board of directors is soliciting your proxy to vote at the special
meeting. However, you do not need to attend the special meeting to vote
your shares. Instead, you may simply complete, sign and return the
enclosed proxy card.
Q: WHAT WILL I BE VOTING ON AT THE SPECIAL MEETING?
A: You will be asked to consider a proposal to approve:
o the Asset Purchase Agreement, under which we will sell our
Computer Products Division and El Paso IT Services business;
and
o the 2000 Stock Incentive Plan.
Q: WILL ANYTHING ELSE BE VOTED ON AT THE SPECIAL MEETING?
A: We do not know of any other matters to be presented or acted upon at
the meeting. If you submit a signed proxy card without specifying your
vote, your shares will be voted "FOR" the approval of the Asset
Purchase Agreement for the sale of the Computer Products Division and
our El Paso IT Services business and the 2000 Incentive Stock Plan.
Q: WHO CAN VOTE?
A: Stockholders of record of common stock at the close of business on
April 24, 2000 (the "Record Date") will be entitled to notice of and to
vote at the Special Meeting. On the Record Date, 4,060,525 shares of
the common stock were outstanding. Each outstanding share of common
stock entitles its holder to one vote on each matter that is considered
at the meeting.
Q: WHAT DETERMINES A QUORUM?
A: The presence at the meeting, in person or by proxy, of holders of a
majority of the outstanding common stock as of the Record Date will
constitute a quorum. If you attend the meeting or vote your shares
using the enclosed proxy card, your shares will be counted toward a
quorum, even if you abstain from voting. Broker non-votes will count
for quorum purposes.
Q: WHAT HAPPENS IF A QUORUM IS NOT PRESENT?
A: If a quorum is not present, the Special Meeting may be adjourned from
time to time until a quorum is present.
Q: HOW DO I VOTE?
A: You can vote your shares in person at the Special Meeting or vote now
by giving us your proxy. By giving us your proxy, you will be directing
us on how to vote your shares at the meeting. If you do attend the
meeting, you can change your vote at that time. You can vote by
completing the enclosed proxy card or voting instruction form and
returning it in the enclosed U.S. postage prepaid envelope.
10
<PAGE> 17
Q: CAN I CHANGE MY VOTE?
A: You may change your proxy voting instructions at any time prior to the
vote at the Special Meeting. For shares held of record, you may change
your vote by any of the following:
o providing written notice to the Corporate Secretary;
o granting a new proxy; or
o voting in person at the Special Meeting.
Unless you attend the meeting and vote your shares in person, you
should change your vote using the same method that you first used to
vote your shares.
Q: WHAT DOES THE BOARD OF DIRECTORS RECOMMEND?
A: The board of directors recommends that you vote "FOR" the Asset
Purchase Agreement and the 2000 Stock Incentive Plan.
Q: WILL I HAVE DISSENTERS' RIGHTS?
A: Under Delaware law, you do not have dissenters' or appraisal rights in
connection with the sale of our Computer Products Division and our El
Paso IT Services business.
Q: WHAT WILL HAPPEN TO ALLSTAR IF THE ASSET PURCHASE AGREEMENT IS
APPROVED?
A: As a result of the approval of the Asset Purchase Agreement, our
Computer Products Division and the El Paso IT Services business, which
together represent approximately 90% of our revenues, will be sold to
Amherst Southwest. After the sale of the Computer Products Division and
El Paso IT Services business, our objective will be refocused to the
growth of our remaining IT Services business, Stratasoft, and pursuing
other opportunities in the Internet and e-commerce industry. We may at
any time cease to pursue this business objective, and may consider
other alternatives.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in
this Proxy Statement, please complete and mail your signed proxy card
in the enclosed return envelope as soon as possible, so that your
shares may be represented at the special meeting. In addition, you may
attend and vote at the special meeting in person, whether or not you
have completed, signed and mailed your proxy card.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: If you have any questions about the Asset Purchase Agreement or this
Proxy Statement, please call James H. Long, President and Chief
Executive Officer, at (713) 795-2000.
11
<PAGE> 18
PROPOSAL 1: APPROVAL OF THE ASSET SALE
BACKGROUND OF ASSET SALE
Historically, we have engaged in the business of reselling computer
hardware, business telephone systems and software products and providing related
services. We have marketed our products and services primarily in Texas from
five locations in the Houston, Dallas-Fort Worth, El Paso, Austin and San
Antonio metropolitan areas.
We conducted our business through three primary segments:
o Information Technology, which includes the Computer Products
Division and IT Services division and sells computer hardware
and software products, along with networking and data
communications products, including related integration and
support services;
o Telecom Systems which sells and supports telephone systems,
including smaller "key" telephone systems, larger private
branch exchange telephone systems, video conferencing systems
and voice mail systems; and
o CTI Software, which consists of our wholly-owned subsidiary
Stratasoft, Inc. and through which we market our software
products for computer-telephone integration, including
products for call center and other high volume calling
applications.
Changes in the Industry
The market for information and communications technology products and
services has experienced tremendous growth over the past decade and the industry
has changed significantly as the market has grown and evolved. The reselling of
popular computing hardware and software products, and the support and
maintenance of such products, have now become a mature industry. Consulting and
project management computer oriented businesses related to Internet and Intranet
network infrastructure are at the relatively early stages of development. Yet
other industries such as consulting and project management related to
Web-enabled Supply Chain Management and Customer Resource Management systems are
in their infancy. As the information technology market has evolved, both
obstacles and opportunities have been created for industry participants.
Our Computer Products business, which has evolved from a business model
created in the early 1980's, has been struggling with numerous obstacles created
by the evolution of our industry as major product manufacturers changed their
business models and their relationship with the computer reseller community.
Web-based product reselling and direct selling by the major manufacturers
created rapid change in our industry. The proliferation of new products created
an increasingly complex environment in which we and other computer resellers
were forced to operate. Many companies engaged in computer reselling experienced
difficulty adjusting to these changes and many of these companies have
experienced financial difficulty.
At the same time, the market for information technology services has
grown increasingly larger, and increasingly more complex and varied. Only a few
short years ago, it was normal for a mid-sized corporation to have a
single-source provider for all of its information technology services, but that
has changed. The increasing number of software and hardware providers, combined
with the increasing diversity of, and complexity of, computing technology used
by corporate America today demands that information technology service providers
specialize. We believe that focus and specialization create
12
<PAGE> 19
improved productivity and operational effectiveness. We also believe that
corporate America today realizes this and increasingly looks to specialized
service providers for their needs.
The proliferation of network computing, using standardized operating
systems and application software, combined with the continuing evolution of the
Internet, we believe continue to create new specialized industries. We believe
that the implementation of Web-enabled extended enterprise applications such as
supply chain management systems, customer relationship management systems, and
systems used for e-Business and e-Commerce, are changing the shape of the
information technology services industry.
In addition, business opportunities are currently being created by the
manner in which the Internet is destined to change commerce and communications.
Web commerce, both business-to-consumer and business-to-business, is expected to
create very extensive change in the buying patterns and habits of both consumer
and business buyers. We believe this is creating unprecedented changes and
opportunity for businesses that offer products and services that can be marketed
via the Internet. The Internet is also expected to radically change the method
by which we communicate. Voice-over-IP communications also are expected to
significantly change the market for long-distance communications over the next
three-to-five years.
The Effects on our Common Stock
Since our initial public offering in July of 1997, we have seen the
price of our common stock steadily decline in spite of increases in our
revenues. We believe this decline can be attributed to our inability to produce
and maintain a level of profits that was sufficient to maintain investor
interest. Changes in industry conditions have, in part, contributed to our
inability to maintain investor interest. These changes include:
o An increase in the number of computer manufacturers using a
"direct" marketing model to sell directly to consumers;
o The major manufacturers implementing new inventory policies
which caused resellers to hold lower levels of inventory;
o Decreasing gross margins caused by several factors including:
o increases in the number of Internet-based resellers,
o increases in shipping and delivering costs,
o inventory valuation losses; and
o Declines in the profitability of computer resellers causing
the entire industry sector to be affected.
Because of the ongoing unfavorable trends our industry, we questioned
the viability of staying in the computer reseller industry. We believed that for
the company to be profitable, our revenues, like those of other successful
companies in the industry, would have to increase while our expenses decreased
or remained constant. We determined that for the company to increase its
revenues, we would have to pursue an aggressive growth strategy and focus our
resources on opportunities to enter into a compatible emerging industry with
higher margins.
To implement this strategy we would require a significant amount of
additional capital. We believed that several alternatives existed that would
allow us to pursue an aggressive growth strategy, including:
13
<PAGE> 20
o raising additional capital; and
o disposition of nonperforming and/or underperforming business
units.
Given the weakening price of our common stock and negative trends in the
computer products reseller industry, we believed that we would not be able to
raise the funds necessary to finance our entrance into an emerging industry
through the public or private capital markets. Based on the negative trends in
and evolution of the computer products reseller industry, our board of directors
authorized management to evaluate the sale of the Computer Products Division.
We initially considered the possibility of seeking a cash merger or
disposition of the company as a whole, however, we rejected these possibilities
due to:
o our low stock price that would prevent a return to
stockholders;
o lack of significant interest in the company as a whole; and
o our belief in the core competency of our management to
redeploy any funds received from such sale into higher growth
potential areas.
In July 1999, we engaged two unaffiliated brokers with experience in
the computer reseller industry to assist management in evaluating our ability to
sell the Computer Products Division and identifying prospective purchasers. Each
broker prepared and distributed information packages abut the Computer Products
Division. These information packages were sent to more than 30 potential
purchasers. We received indications of interest from several prospective
purchasers. Management had preliminary discussions with representatives of the
companies that indicated an interest and determined that:
o there was not a sufficient level of interest by the
prospective purchaser to warrant further discussions, or
o the terms of the proposed transaction were not fair or in our
best interest or the best interest of our stockholders.
In July 1999, we also engaged Richard Darrell, one of the members of
our board of directors who operates ATAC, Inc., a business that specializes in
acquisitions in the technology area, to assist management in evaluating our
ability to sell the Computer Products Division and identifying prospective
purchasers. Later in the summer of 1999 Mr. Darrell again introduced Amherst
Technologies to our management. Mr. Darrell had previously introduced Amherst
Technologies in the summer of 1998 and we had held discussions regarding a
possible sale, but such discussions were inconclusive. See "Interests of Certain
Members of Management in the Transactions."
The Amherst Technologies Transaction
In August 1999, our representatives and representatives of Amherst
Technologies held preliminary discussions regarding the sale of the Computer
Products Division to Amherst Technologies and we entered into a confidentiality
agreement with Knightsbridge, Inc., an affiliate of Amherst Technologies to
conduct preliminary due diligence . The confidentiality agreement provided for a
two-year period of confidentiality and non-solicitation of employees by either
company. On September 10, 1999, we received a letter of interest from
Knightsbridge in pursuing an acquisition of our Computer Products Division.
14
<PAGE> 21
In November 1999, we entered into an agreement with Amherst
Technologies and agreed not to solicit any other offers to purchase the Computer
Products Division. Several deal structures for the acquisition of the Computer
Products Division by Amherst Technologies were discussed and reviewed by each of
our respective management teams. In the first structure proposed, we would be
acquired by Amherst Technologies. In this transaction all assets other than the
Computer Products Division and El Paso IT Services business would be distributed
to a new company and stockholders would receive cash and stock in the new
company in exchange for their shares of our common stock. The structure of the
second transaction was an asset sale. In this proposed transactions we would
sell the Computer Products Division and El Paso IT Services business to Amherst
Technologies. Amherst Technologies had rejected the prospect of a spin-off as
too complicated and time consuming. We were also unwilling to take the
transaction risks that would have been encountered in the first proposal.
On December 3, 1999, a special meeting of the board of directors was
convened to consider the proposed transactions. The board of directors
determined that the asset sale was the most viable of the alternatives and
authorized management to proceed with the negotiation for the sale of the
Computer Products Division.
Amherst Technologies determined that the Computer Products Division and
the IT Services division were so intertwined in the El Paso branch office, that
it made economic and logistic sense to sell the El Paso IT Services business
with the Computer Products Division. The characteristics of the El Paso IT
Services business are such that the El Paso IT Services business does not have
the same focus as our IT Services as a collective unit.
We continued negotiations with Amherst Technologies throughout 1999 and
into 2000 to determine if an adequate purchase price on reasonable terms for the
Computer Products Division and El Paso IT Services business could be reached.
On March 15, 2000, a special meeting of the board of directors was
convened to consider the terms of the Asset Purchase Agreement. The board of
directors determined that the consideration and terms of the Asset Purchase
Agreement to be fair and in the best interests of the stockholders and approved
the execution and delivery of the Asset Purchase Agreement.
Following execution of the Asset Purchase Agreement, a potential buyer
that previously had expressed an interest in acquiring the Computer Products
Division again expressed an interest in pursuing a transaction. On March 29,
2000, we received a letter of intent from the potential buyer proposing an
acquisition by it of the assets of the Computer Products Division and the El
Paso IT business. The proposed purchase price was $2,000,000 more than the price
provided in the Asset Purchase Agreement. In addition, the potential buyer
agreed to pay the $500,000 termination fee provided in the Asset Purchase
Agreement. The offer was conditioned on negotiation of a definitive agreement
that would be substantially similar to the Asset Purchase Agreement. The new
agreement would contain conditions to the buyer's obligation to close the
transaction similar to the conditions in the Asset Purchase Agreement plus two
significant additional conditions. First, the buyer must have completed its due
diligence investigation of our company and the results of the investigation must
have been satisfactory to the buyer in its sole discretion. Second, the buyer's
board of directors must have approved the agreement. The offer was conditioned
on it being accepted by us not later than March 31, 2000. We were unable to
convene a meeting of the board of directors to discuss the offer prior to its
expiration.
As required by the Asset Purchase Agreement, we provided a copy of the
letter of intent to Amherst Technologies on the day we received it. We
subsequently held discussions with Amherst Technologies regarding amending the
Asset Purchase Agreement to increase the purchase price and providing additional
incentive for Amherst Technologies to close the transaction. Based on those
15
<PAGE> 22
discussions, subject to our board of directors' approval, we agreed that Amherst
Technologies would pay to us an additional $250,000 as a non-accountable expense
allowance. In addition, Amherst Southwest agreed to place $500,000 into an
escrow account to be credited to the purchase price at the closing. If the
closing did not occur, the escrowed funds would be paid to us or Amherst
Southwest entirely, or split equally, depending upon the reason for the
transaction not closing. On April 6, 2000, a telephonic meeting of the board of
directors was held to discuss the offer and the agreement reached between us and
Amherst Technologies. The board of directors agreed that the additional purchase
price offered by the potential buyer was not sufficient to justify abandoning
the Amherst Southwest transaction given the potential for litigation if the
Asset Purchase Agreement was terminated, the uncertainty of negotiating a
definitive agreement with the new buyer that was agreeable to us and its board
of directors and the uncertainty of the new buyer being satisfied with the
results of its due diligence investigation. In addition, the two additional
conditions to the buyer's obligation to close would have had the effect of
giving the buyer an unrestricted option not to close the transaction. The board
of directors believed that the proposal agreed upon by us and Amherst
Technologies provided additional consideration for the transaction and
additional incentive for Amherst Technologies to close the transaction
sufficient to offset the possible additional consideration that may be received
if the new offer was accepted. As result, the board of directors approved an
amendment of the Asset Purchase Agreement to incorporate the new terms.
Additionally, the board of directors approved the Voting and Support Agreement,
and Amendment No. 1 to Voting and Support Agreement, between James H. Long and
Amherst Technologies. Following that approval, we and Amherst Technologies
executed Amendment No. 1 to Asset Purchase Agreement incorporating the new terms
into the Asset Purchase Agreement.
Amherst Technologies is a company that is very similar to our Computer
Products Division and which has insignificant customer and geographic market
overlap. We believe that both our customers and our employees will find the
transition to Amherst Technologies to be agreeable, which will result in a less
painful transition than would occur in some other potentially less compatible
organizations. This transition will be important not only for our customers and
employees, but because we intend to do business with many of the same customers
in other business endeavors, we must maintain a good business relationship.
REASONS FOR ASSET SALE; RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD HAS DETERMINED THAT THE TERMS OF THE PROPOSED SALE OF THE
COMPUTER PRODUCTS DIVISION AND EL PASO IT SERVICES BUSINESS ARE FAIR TO, AND IN
THE BEST INTERESTS OF, THE STOCKHOLDERS, AND HAS APPROVED THE ASSET PURCHASE
AGREEMENT. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE TO APPROVE AND ADOPT THE ASSET PURCHASE AGREEMENT. In reaching its
conclusion, our board of directors considered a number of factors, including:
o management negotiated the purchase price with representatives
of Amherst Technologies.
o the amount and nature of the consideration to be received;
o the current and historical stock prices of the common stock;
o that Amherst Technologies will pay cash for the assets
purchased, eliminating the credit risk related to a promissory
note and the investment risk associated with receiving stock
or other securities as consideration;
o the advantages of selling the Computer Products Division and
El Paso IT Services business in a negotiated transaction
without conducting an auction, such as avoiding instability
among employees and customers and Amherst Technologies ability
to
16
<PAGE> 23
consummate the purchase of the Computer Products Division and
El Paso IT Services business without a financing contingency.
These advantages outweighed the possible advantages of an
auction, which might have resulted in a higher price or more
favorable terms.
o our financial results and the prospects for the Computer
Products Division;
o that the terms and conditions of the Asset Purchase Agreement
were favorable to us and our stockholders;
o that, based on our efforts in seeking potential acquirors and
management's assessment of the marketplace, a sale on better
terms or a better price could not be structured with another
buyer; and
o the possibility that we may be able to generate returns for
stockholders in the future through the implementation of a
post-sale strategy.
During the eight-month period prior to the execution of the Asset
Purchase Agreement, we solicited indications of interest from numerous other
companies regarding an investment in us or an acquisition of the Computer
Products Division. These companies either did not respond to our overtures, or
expressed no serious interest in moving forward with a transaction. Very late in
the negotiations with Amherst Technologies, we received a solicitation of
interest from another company, who conducted brief due diligence with respect to
the Computer Products Division. We did not receive any offer from this company
and due to the timing of their interest, we believed it was in our best
interests and our stockholders best interests to move forward with the
transaction with Amherst Technologies. The board of directors reviewed each of
the proposals received by us, but, other than Amherst Technologies' proposal, no
other proposals were approved by the board of directors.
WE DID NOT OBTAIN, AND OUR BOARD OF DIRECTORS DID NOT RELY ON, ANY
REPORT, OPINION OR APPRAISAL IN MAKINGS ITS RECOMMENDATION TO VOTE "FOR" THE
ASSET PURCHASE AGREEMENT.
The foregoing discussion of the factors considered by our board of
directors is not intended to be complete, though it does include all material
factors considered by our board of directors. The board of directors did
conclude that each of these material factors supported its conclusion regarding
the fairness of the transaction. The board of directors did not attempt to
quantify or otherwise assign relative weights to the specific factors it
considered or determine that any factor was of particular importance. In
addition, individual members of the board of directors may have given different
weight to different factors or may have concluded that some of the factors did
not support the board of directors' position and recommendations. A
determination of various weight would, in the view of the board of directors, be
impractical. The board of directors viewed its position and recommendations as
being based on the totality of the information presented to, and considered by,
the board of directors.
ACCOUNTING TREATMENT OF THE ASSET SALE
The asset sale will be accounted for as a sale of assets in accordance
with generally accepted accounting principles. We will recognize a gain from the
asset sale based upon the excess net proceeds we receive over the net book value
of the assets sold. If the asset sale had occurred at December 31, 1999, the
gain on the asset sale for financial accounting purposes would have been
approximately $5.6 million.
17
<PAGE> 24
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
We will recognize taxable gain on the asset sale, which will result in
corporate income tax. Our taxable gain will be equal to the amount realized by
us in the transaction, including certain non cash and deferred payments, less
the adjusted tax basis of the assets sold. Consummation of the transaction will
not result in any federal income tax consequences to stockholders. If the asset
sale had occurred at December 31, 1999, the federal income tax on the asset sale
would have been approximately $2.9 million.
The amount realized for income tax purposes is the sum of the
liabilities assumed by the buyers, the cash paid, and the fair market value at
closing of any future contingent payments in the asset sale. Due to recent tax
legislation, we cannot use the installment sale method to defer recognition of
gain until receipt of any deferred payment. Accordingly, we will owe income tax
based on the value of the future contingent payments at the time of closing,
even though such amounts have not been reduced to money.
Consummation of the transaction will not result in any federal income
tax consequences to stockholders.
GOVERNMENT AND REGULATORY APPROVALS
The asset sale requires approval under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended, and the regulations promulgated thereunder.
We will request early termination of the waiting period.
ARM'S LENGTH TRANSACTION
The terms of the Asset Purchase Agreement were the result of arm's
length negotiations. Neither Amherst Technologies nor us nor any of our or their
respective officers and directors holds an interest in the other.
NO DISSENTERS RIGHTS
Under Delaware General Corporation, stockholders do not have
dissenters' rights or appraisal rights in connection with the Asset Sale.
REQUIRED VOTE
The asset sale and the Asset Purchase Agreement are required to be
approved by the holders of a majority of the shares of common stock issued and
outstanding as of the Record Date. James H. Long, in his capacity as a
stockholder, has signed a Voting and Support Agreement agreeing to vote all of
his shares held as of the Record Date, which represents approximately 50.5% of
our outstanding common stock, in favor of the asset sale. In addition, Mr. Long
has granted to two designees of Amherst Technologies a proxy to vote his shares
in favor of the asset sale. If Mr. Long votes his stock, or if one or both of
Amherst Technologies's designees votes the shares, in favor of the Asset
Purchase Agreement, approval of the asset sale is assured. A copy of each of the
Voting and Support Agreement, Amendment No. 1 to Voting and Support Agreement
and the Irrevocable Proxy and Limited Power of Attorney is attached to this
Proxy Statement as Appendix B and incorporated herein by reference.
INTERESTS OF CERTAIN MEMBERS OF MANAGEMENT IN THE TRANSACTIONS
Our Chairman and Chief Executive Officer, James H. Long, and one of our
directors, Richard Darrel, will benefit from the asset sale in a manner that
will not be shared with other stockholders.
18
<PAGE> 25
In connection with the Asset Purchase Agreement, James H. Long has also
agreed to enter into a Consulting and Non-Competition Agreement. The Consulting
and Non-Competition Agreement provides that Mr. Long will provide certain
consulting services to Amherst Technologies, including services pertaining to
the transition of the Computer Products Division and El Paso IT Services
business, the management information systems of the Computer Products Division
and El Paso IT Services business, relations with customers and former employees
and methods to improve business resulting from the Asset Sale. The term of such
consulting services is for a period of two years. Mr. Long will receive $20,000
per year in consideration of such services.
In addition, under the terms of the Consulting and Non-Competition
Agreement, Mr. Long has agreed to keep certain information, including
information pertaining to the Computer Products Division and El Paso IT Services
business, confidential for a period of five years, however such limitation shall
not apply to use of information for purposes relating to our retained
businesses. Mr. Long has also agreed not to compete with Amherst Technologies
for a period of three years, including solicitation of certain employees or
customers. In consideration of such covenant not to compete, Mr. Long will
receive additional consideration in the amount of $230,000 per year during the
first two years of the three year period he is obligated not to compete with
Amherst Technologies. A copy of the Consulting and Noncompetition Agreement is
attached to this Proxy Statement as Appendix C and incorporated herein by
reference.
Mr. Long also executed a Voting and Support Agreement. Under the Voting
and Support Agreement, he unconditionally agreed to vote in favor of the asset
sale and against any other transaction involving a sale of the Computer Products
Division or the assets of our IT Services Division associated with our El Paso,
Texas office. Mr. Long also executed an Irrevocable Proxy and Limited Power of
Attorney granting a proxy to two designees of Amherst Southwest to vote his
shares for the asset sale and against any other transaction involving the
Computer Products Division or the assets of our IT Services Division associated
with our El Paso, Texas office. In the Voting and Support Agreement, Amherst
Southwest agreed to indemnify Mr. Long for half of any costs incurred by him in
defending any lawsuit relating to his execution of the proxy. Amherst Southwest
is not required to pay more than $100,000 under that indemnity obligation.
Mr. Richard Darrell who is a member of our board of directors, will
receive approximately $350,000 from us as a fee for introducing us to Amherst
Technologies. Additionally, Mr. Darrell will receive a fee of $250,000 from
Amherst Technologies.
OUR BUSINESS AFTER THE ASSET SALE
If the proposed sale of the Computer Products Division and El Paso IT
Services business is approved, assets representing approximately 90% of our
revenues will be sold to Amherst Technologies, and certain of our liabilities
will be assigned to and assumed by Amherst Technologies, and we will retain the
remaining components of our business to focus on emerging growth sectors of the
economy.
We determined that one of our strengths is in our ability to take
advantage of and capitalize on entrepreneurial opportunities. We determined that
the interests to our stockholders would be better served by changing our
direction and investing our capital, financial and managerial, to work in a high
growth industry sector rather than pursuing a growth strategy in a maturing
market. We believe that we are well suited to enter into one or more of the
following high growth areas:
o business-to-business e-commerce;
o e-business; or
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o Internet related information technology services.
We plan to reorganize our IT Services division by contributing the
assets of our IT Services division into one or more wholly-owned subsidiaries,
creating a corporate structure in which all revenue-producing operations are
conducted in separately operated subsidiary corporations. We believe that this
will allow us to better manage each business area and be more responsive to the
rapidly changing industries in which we intend to operate. Each will pursue a
specialized mission to produce focused and specialized companies. We also
believe that it will allow us to clearly define and articulate the mission of
each respective business. Each business will be lead by a separate executive
officer and management team that has a vested financial interest in their
business.
We also may make strategic investments in companies we believe offer
stockholder value, including minority interests in publicly traded companies. In
furtherance of our plan, we are considering changing our name to reflect our new
direction; that of building early stage, high growth companies that are expected
to benefit from the manner in which the Internet is changing commerce and
communications.
In addition, we discontinued the operations of our Telecom Systems
Division. We have entered into an agreement with Commworld Acquisition
Corporation and Communication World International, Inc. to sell the remaining
assets and ongoing business operations of our Telecom Systems. We have been
unsuccessful in our attempts to operate this division at any level of
profitability. We decided in the fourth quarter of 1999 to seek a divestiture of
the Telecom Systems through a sale of the division to a third party or
otherwise. Your vote on this transaction was not sought due to the size of the
transaction.
BUSINESS PLAN
Upon the consummation of the asset sale of the Computer Products
Division and El Paso IT Services business, our business objective will be to
focus our long-term attention for the future to improving the profitability of
our two remaining business units, starting new businesses, and exploring
strategic acquisition opportunities. We intend to:
o Use our cash to acquire small companies in high growth
industry sections on favorable terms or purchasing a
significant stake in such companies. We will focus on
companies whose area of business is in the Internet and
related services, business-to-business e-commerce, e-business,
and Internet related information technology services. Any such
business combination would depend on the availability of
attractive candidates and our ability to consummate any such
business combination.
o Attempt to hire management personnel to head our IT Services
division and create growth and reasonable levels of
profitability in that business.
o Apply existing resources to improve the profitability of our
business as conducted by our wholly-owned subsidiary
Stratasoft.
We believe that Stratasoft is an example of our successfully entering a
new market with a start-up operation and rapidly creating a valuable vertical
market software company producing high levels of revenue and profitability
growth in a short time. Stratasoft is working to enable its call center systems
to utilize voice-over-IP technology and as voice-over-IP becomes a viable voice
communications methodology, we expect the Stratasoft call center product to be
ready for the significant change that will be created in call center
communications.
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We have not identified any acquisition candidates or the availability
of financing arrangements, and there can be no assurance that any business
combination will be accomplished or, if accomplished, that it will result in
increased stockholder value. We may at any time cease to pursue these business
objectives, and may consider other alternatives.
We have not conducted any market studies with respect to any business,
property or industry. Nothing contained herein is, nor shall it be deemed to be,
a representation regarding our viability, or of the availability, viability or
success of any subsequent line of business or any business combinations or our
results of operations in connection with such subsequent business combinations
or business ventures.
THE ASSET PURCHASE AGREEMENT
The following is a summary of the material provisions of the Asset
Purchase Agreement. The terms and conditions of the proposed sale of the
Computer Products Division and El Paso IT Services business are contained in the
Asset Purchase Agreement. THE DESCRIPTION OF THE ASSET PURCHASE AGREEMENT SET
FORTH IN THIS PROXY STATEMENT DOES NOT PURPORT TO BE COMPLETE; HOWEVER, ALL
MATERIAL TERMS OF THE AGREEMENT ARE SUMMARIZED BELOW. STOCKHOLDERS SHOULD REVIEW
THE ASSET PURCHASE AGREEMENT AND AMENDMENT NO. 1 TO THE ASSET PURCHASE
AGREEMENT, A COPY OF EACH OF WHICH IS ATTACHED TO THIS PROXY STATEMENT AS
APPENDIX A AND IS INCORPORATED HEREIN BY REFERENCE. YOU ARE URGED TO CAREFULLY
READ THE ASSET PURCHASE AGREEMENT IN ITS ENTIRETY.
SALE OF ASSETS
Under the terms of the Asset Purchase Agreement, we will sell to
Amherst Technologies substantially all of the assets associated with our
Computer Products Division and El Paso IT Services business, including customer
contracts and purchase orders, certain inventory held in stock (the
"Inventory"), certain furniture, fixtures and equipment owned by us pertaining
to the Computer Products Division and El Paso IT Services business (the
"Tangible Assets"), supplier contracts, supplier warranties and operating
records associated with the Computer Products Division or El Paso IT Services
business (collectively, the "Acquired Assets"). Specifically excluded from the
asset sale are cash or cash equivalents, certain inventory and contracts,
software designed by us, certain of our books and records, and all accounts and
notes receivables.
LIABILITIES ASSUMED
Amherst Technologies will assume our executory obligations for
continued performance under certain contracts related to the Computer Products
Division or El Paso IT Services business that become performable or payable on
or after the Closing of the transactions contemplated by the asset sale and that
were incurred in the ordinary course of the business of the Computer Products
Division or El Paso IT Services business. In addition, Amherst Technologies will
assume our obligations and duties under certain real property leases associated
with the Computer Products Division or El Paso IT Services business.
THE PURCHASE PRICE
The purchase price consists of an aggregate cash payment equal to
$14.25 million, plus the fair market value on the Closing Date of the Inventory,
Tangible Assets and certain cooperative advertising credits and a $250,000
payment as a non-accountable expense reimbursement. An additional $500,000 will
be held in escrow (the "Holdback") to satisfy certain of our indemnification and
reimbursement obligations under the terms of the Asset Purchase Agreement.
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Inventory Purchase Price
The portion of the purchase price paid for the Inventory shall be
determined based on the cost we paid for the Inventory at the time of purchase.
Tangible Asset Purchase Price
The portion of the purchase price paid for the Tangible Assets will be
determined based upon the fair market value of the Tangible Assets as determined
by a dealer in used items, approved by us and Amherst Technologies.
Earn Out Payment
We will also be entitled to receive from Amherst Technologies, for a
period of two years after Closing, an Earn Out Payment calculated as 50% of the
SBC Modified Gross Profit. "SBC Modified Gross Profit" means (x) (1) the
difference between all sales by Amherst Technologies to SBC Communications, Inc.
("SBC"), if any, less customer returns, adjustments and cancellations, and (2)
the cost of goods sold to SBC relating to such sales, minus (y) sales
commissions and any amounts paid to Mintech, Inc., a Texas corporation
("Mintech"), resulting from such sales, not to exceed the sales commissions that
would otherwise be payable under our sales commission programs with Mintech in
effect at the closing. Amherst Technologies shall not be required to make any
Earn Out Payments to us with respect to sales in excess of $240 million in the
aggregate. There can be no assurances that Amherst Technologies will make any
sales to SBC and that we will be entitled to any Earn Out Payment.
REPRESENTATIONS AND WARRANTIES
The Asset Purchase Agreement contains various representations and
warranties customary for transactions of this type, including representations
and warranties related to, among other things:
o the organization, valid existence and good standing of the
parties and similar corporate matters;
o the authorization, execution, delivery and enforceability of
the Asset Purchase Agreement;
o the lack of conflicts under charters or bylaws or violations
of agreements or applicable laws;
o the title to the Acquired Assets, the lack of encumbrances
upon such assets;
o the condition of the Acquired Assets and extent of
manufacturers' warranties;
o the functionality and operating condition of the software
owned by us to operate our management information system, plus
all records pertaining to the Computer Products Division and
El Paso IT Services business maintained on our computer
system;
o the accuracy and completeness of each parties financial
statements;
o the conduct of the Computer Products Division and El Paso IT
Services business since the most recent financial statements
and the absence of certain changes;
o the absence of undisclosed liabilities;
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o contracts pertaining to the Computer Products Division or El
Paso IT Services business;
o lack of certain business relations by holders of 5% or more of
our capital stock;
o lack of any bonus arrangements with SBC;
o the terms and availability of financing by Amherst
Technologies with respect to the Asset Sale; and
o the accuracy and completeness of disclosures and disclaimer of
other representations and warranties.
CONDUCT PENDING CLOSING
We have agreed that prior to the closing of the asset sale, we will not
engage in any practice or action outside the ordinary course of business of the
Computer Products Division and El Paso IT Services business. This includes
selling any of the assets to be acquired by Amherst Technologies, other than in
the ordinary course of business. In addition, we have agreed to keep our
Computer Products Division and El Paso IT Services business substantially
intact, including our present operations, physical facilities and working
conditions.
PROHIBITION AGAINST SOLICITATION
The terms Asset Purchase Agreement prohibit us from soliciting, and we
have agreed not to permit our officers or advisors to solicit, any offers,
engage in negotiations or provide information to any other potential purchaser
or the Computer Products Division or El Paso IT Services business. However, we
may furnish information in response to requests that were not solicited by us
and may negotiate with other potential purchasers if a potential purchaser
submits a written proposal to our board of directors and the board of directors
determines, in good faith, that such proposal, if consummated would result in a
transaction more favorable to our stockholders from a financial point of view,
and such action is necessary for the board of directors to comply with its
fiduciary duties to its stockholders under applicable law. The Asset Purchase
Agreement also requires that we immediately inform Amherst Technologies of any
proposal and provide them with all documents and correspondence relating to the
proposal.
CONDITIONS TO CLOSING
The asset sale will be consummated only if approved by the affirmative
vote of a majority of the votes cast at the Special Meeting. If the asset sale
is approved by the stockholders at the Special Meeting, we anticipate
consummating the transaction on or about May 31, 2000.
The closing of the transactions contemplated by the Asset Purchase
Agreement also is subject to the satisfaction or waiver of various conditions.
The failure of any such condition to be satisfied, if not waived, would prevent
consummation of the asset sale.
The obligations of both parties to consummate the asset sale also is
subject to:
o there being no governmental orders or pending proceedings
preventing the asset sale or generally imposing restrictions
on Amherst Technology's use of the purchased assets or
operation of its business after the closing date;
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o the parties having received all required governmental
approvals to consummate the asset sale, including the
applicable waiting periods under the Hart-Scott-Rodino Act.
o each of our lessors consenting to the assumption or sublease
to Amherst Technologies with respect to the assumed leases and
the delivery of all assignments and sublease agreements; and
o all third party consents required to transfer the supplier
contracts except those that the failure to obtain would not
cause a material adverse effect.
In addition, the obligations of Amherst Technologies to consummate the
transactions to be performed by it in connection with the closing include the
satisfaction of the following conditions:
o our representations and warranties contained in the Asset
Purchase Agreement must be true and correct in all respects as
of the closing date;
o we must have performed and complied with all of our covenants
under the Asset Purchase Agreement in all material respects;
o we must have obtained all third party consents required to
transfer our contracts with the top 10 customers of the
Computer Products Division;
o Amherst Technologies shall have received confirmation
reasonably satisfactory to it that all of the employees
identified as "key employees" and 90% of the employee
identified as "other employees" have accepted employment with
Amherst Technologies; and
o James H. Long shall have executed and delivered the Consulting
and Non-Competition Agreement.
Our obligations to consummate the transactions to be performed by us in
connection with the closing include the satisfaction of the following
conditions:
o the representations and warranties of Amherst Technologies
contained in the Asset Purchase Agreement must be true and
correct in all respects as of the closing date;
o Amherst Technologies must have performed and complied with all
of its covenants under the Asset Purchase Agreement in all
material respects through the closing; and
o Amherst Technologies shall have provided to us copies of all
necessary permits and certificates issued by the State of
Texas.
COVENANT NOT TO COMPETE
We have agreed, for a period of three years, to not compete with
Amherst Technologies and to not solicit certain customers and employees. These
provisions provide, in part, that we may not, nor allow our affiliates to,
engage anywhere in North America in the sale or distribution of computer
hardware and software in substantially the manner conducted by the Computer
Products Division or solicit any employees to leave Amherst Technologies. The
Asset Purchase Agreement specifically states that we may not employ Frank Cano
in any capacity. This covenant does not prohibit us from conducting our business
associated with Stratasoft which is primarily engaged in the development and
marketing of proprietary software for the integration of business telephone
systems and networked computer systems, which are sometimes bundled with
computer hardware sold through our Computer
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Products Division. It also does not exclude any continuing business from
contracts that could not be assigned under the terms of the Asset Purchase
Agreement. In addition, we may not solicit any customer for IT Services that was
a customer in the El Paso Business Area which is defined in the Asset Purchase
Agreement to include, not only a 200 mile radius around El Paso, but also the
State of New Mexico (the "El Paso Business Area"). This limitation to IT
Services is only for the El Paso Business Area.
Amherst Technologies has also agreed not to solicit certain customers
for IT Services for a period of three years, except to provide IT Services in
the El Paso Business Area, sell computer network and cabling equipment and
providing warranty services on products sold by Amherst Technologies after
consummation of the Asset Purchase Agreement. Amherst Technologies has also
agreed not to solicit certain of our employees or to interfere with any of our
relationships with vendors and customers.
TERMINATION
The Asset Purchase Agreement provides that it may be terminated at any
time before the closing date for any of the following:
o by the mutual written agreement of Amherst Technologies,
Amherst Southwest and us;
o by either party, if any representation, warranty or covenant
contained in the Asset Purchase Agreement made by the other
party has been breached and the breach has continued without
cure for a period of 10 days after notice of the breach;
o by either party if the conditions to such party's obligations
under the Asset Purchase Agreement have not been met by the
nonfailing party on or prior to June 30, 2000, but only if the
party terminating has not caused the condition giving rise to
termination to be not satisfied through its own actions or
inactions.
o by either party if our board of directors shall have approved
any acquisition proposal other than with Amherst Technologies;
o by Amherst Technologies if notice is given 5 days after
delivery of the 1999 year-end financial statements; or
o by either party if notice is given by the other party with
respect to a matter that could have a material adverse effect
on the parties ability to consummate the transaction or that
would result in a breach of any representation, warranty, or
covenant made by the notifying party.
EFFECT OF TERMINATION
Except as otherwise described in this paragraph, upon any termination
of the Asset Purchase Agreement, the Asset Purchase Agreement will become void
and neither party shall be liable to the other under the Asset Purchase
Agreement. But, if the Asset Purchase Agreement is terminated as a result of our
board of directors approving an acquisition proposal from anyone other than
Amherst Technologies, we have agreed to take the following actions as liquidated
damages.
o pay Amherst Technologies $500,000;
o cause the previously escrowed $500,000 (plus any interest
earned thereon) to be paid to Amherst Southwest;
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o refund to Amherst Southwest the $250,000 non-accountable
expense reimbursement previously paid to us;
o assume all of Amherst Southwest's rights and obligations under
an office lease in Houston; and
o assume all of Amherst Southwest's rights and obligations to
indemnify James H. Long for half of any costs incurred by him
in defending any lawsuit against him relating to his execution
of the Irrevocable Proxy and Limited Power of Attorney.
In addition, Amherst Technologies and Amherst Southwest have agreed
that for a period of two years after termination of the Asset Purchase
Agreement, they will be bound to certain confidentiality and non-solicitation
provisions set forth in a Confidentiality Agreement dated August 27, 1999,
between Allstar and Knightsbridge. See "Proposal 1: Approval of the Asset
Sale--Background of the Asset Sale."
If the closing does not occur by June 30, 2000, the $500,000 previously
placed in escrow by Amherst Southwest, plus any interest thereon, will be paid
to us, except Amherst Southwest will receive the entire amount if the closing
does not occur due to one or more of the following:
o we breach any of our following representations in the Asset
Purchase Agreement:
o our organization, valid existence and good standing
and similar corporate matters;
o the authorization, execution, delivery and
enforceability of the Asset Purchase Agreement; and
o James H. Long's ownership of a majority of our
outstanding voting shares;
o the functionality and operating condition of the
software owned by us to operate our management
information system, plus all records pertaining to
the Computer Products Division and El Paso IT
Services business maintained on our computer system;
o we breach our obligations in the Asset Purchase Agreement
regarding filing, clearing and mailing this proxy statement
and including our board of directors' recommendation that the
asset sale be approved;
o any of the following conditions to Amherst Southwest's
obligation to close in the Asset Purchase Agreement is not
satisfied:
o the expiration or termination of all waiting periods
under the Hart-Scott-Rodino Act and the receipt of
all required consents and governmental approvals;
o Amherst Southwest's receipt of the legal opinion of
our counsel;
o the execution by us and the escrow agent of the
escrow agreement relating to the $500,000 to be
placed in escrow on closing; and
o the execution by us of the assignment, bill of sale
and assumption agreement conveying the purchased
assets to Amherst Southwest; and
o the Asset Purchase Agreement is terminated by mutual agreement
of the parties.
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INDEMNIFICATION
Subject to certain limitations, pursuant to the terms of the Asset
Purchase Agreement, each of the parties has agreed to indemnify the other party
and its officers, directors, successors and assigns, from and against any and
all damages, claims, liabilities, losses, costs and expenses (including
reasonable legal fees) in connection with or resulting from the following:
o with respect to our company, any of the liabilities and
obligations expressly assumed by Amherst Technologies or the
ownership of any assets or operations pertaining to the
Computer Products Division or El Paso IT Services business
after the closing;
o with respect to Amherst Technologies, any of the liabilities
and obligations not expressly assumed by Amherst Technologies
under the terms of the Asset Purchase Agreement or the
ownership of any assets or operations pertaining to the
Computer Products Division or El Paso IT Services business
before the closing;
o any inaccuracy in any representation or breach of any warranty
of the party contained in the Asset Purchase Agreement or any
related agreement; or
o any failure by the party to perform or observe in full any
covenant or agreement required to be performed by the Asset
Purchase Agreement or any related agreement.
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PROPOSAL 2: APPROVAL OF 2000 STOCK INCENTIVE PLAN
As of March 16, 2000, no shares of common stock were available for
grant pursuant to our existing incentive plan. The board of directors does not
believe that such remaining amount under this plan is sufficient to carry out
its compensation policy. Accordingly as part of our overall effort to increase
stockholder value, on March 15, 2000, the board of directors adopted, subject to
stockholder approval, the 2000 Stock Incentive Plan in order to provide us with
an effective means of attracting and retaining key employees, consultants and
outside directors, encouraging their commitment, motivating their performance,
facilitating their ownership interest in the company and enabling them to share
in our long term growth and success.
The following summary of the material terms of the 2000 Stock Incentive
Plan. The description of the 2000 Stock Incentive Plan set forth in this Proxy
Statement does not purport to be complete. Stockholders should review the 2000
Stock Incentive Plan, a copy of which is attached to this Proxy Statement as
Appendix D and is incorporated herein by reference. You are urged to carefully
read the Incentive Plan in its entirety.
SUMMARY DESCRIPTION OF THE INCENTIVE PLAN
Shares Subject to Plan
Under the 2000 Stock Incentive Plan, we may issue Incentive Awards
covering at any one time the greater of 400,000 shares of common stock or 10% of
the number of shares of common stock issued and outstanding on the first day of
the then preceding calendar quarter. No more than 400,000 shares of common stock
will be available for incentive stock options ("ISO's"). The number of
securities available under the 2000 Stock Incentive Plan and outstanding
Incentive Awards are subject to adjustments to prevent the dilution of rights of
plan participants resulting from stock dividends, stock splits, recapitalization
or similar transactions or resulting from a change in applicable laws or other
circumstances.
Administration
The 2000 Stock Incentive Plan will be administered by the Compensation
Committee. The Compensation Committee may delegate its duties under the 2000
Stock Incentive Plan, except for the authority to grant Incentive Awards or take
other action on persons who are subject to Section 16 of the Exchange Act or
Section 162(m) of the Code. In the case of an Incentive Award to an outside
director, the board of directors acts as the Compensation Committee. Subject to
the express provisions of the 2000 Stock Incentive Plan, the Compensation
Committee is authorized to, among other things, select grantees under the
Incentive Plan and determine the size, duration and type, as well as the other
terms and conditions (which need not be identical), of each Incentive Award. The
Compensation Committee also construes and interprets the 2000 Stock Incentive
Plan and any related agreements. All determinations and decisions of the
Compensation Committee are final, conclusive and binding on all parties. We will
indemnify members of the Compensation Committee against any damage, loss,
liability, cost or expenses in connection with any claim by reason of any act or
failure to act under the 2000 Stock Incentive Plan, except for an act or
omission constituting willful misconduct or gross negligence.
Eligibility
Our employees, including officers (whether or not they are directors),
and our consultants and non-employee directors are eligible to participate in
the 2000 Stock Incentive Plan.
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Types of Incentive Awards
Under the 2000 Stock Incentive Plan, the Committee may grant "Incentive
Awards," which can be:
o ISO's, as defined in Section 422 of the Code;
o "nonstatutory" stock options ("NSOs");
o stock appreciation rights ("SARs");
o shares of restricted stock;
o performance units and performance shares;
o other stock-based awards; and
o cash bonuses.
ISOs and NSOs together are called "Options." The terms of each Incentive Award
will be reflected in an incentive agreement between us and the participant.
Options. Generally, Options must be exercised within 10 years of the
grant date, except ISO grants to a 10% or greater stockholder which shall be 5
years. The exercise price of each ISO may not be less than 100% of the fair
market value of a share of common stock on the date of grant (110% in the case
of a 10% or greater stockholder). The Compensation Committee has the discretion
to determine the exercise price of each NSO granted under the 2000 Stock
Incentive Plan. To the extent the aggregate fair market value of shares of
common stock for which ISOs are exercisable for the first time by any employee
during any calendar year exceeds $100,000, those Options must be treated as
NSOs.
The exercise price of each Option is payable in cash or, in the
Compensation Committee's discretion, by the delivery of shares of common stock
owned by the optionee, or the withholding of shares that would otherwise be
acquired on the exercise of the Option, or by any combination of the three.
An employee will not recognize income for federal income tax purposes,
nor will we be entitled to a deduction, when an NSO is granted. However, when an
NSO is exercised, the optionee will recognize ordinary income in an amount equal
to the difference between the fair market value of the shares received and the
exercise price of the NSO. We will generally recognize a tax deduction in the
same amount at the same time, or by a cashless exercise with a broker.
This summary is not a complete statement of the relevant provisions of
the Internal Revenue Code, and does not address the effect of any state, local
or foreign taxes.
SARs. Upon the exercise of an SAR, the holder will receive cash, the
aggregate value of which equals the amount by which the fair market value per
share of the common stock on the exercise date exceeds the exercise price of the
SAR, multiplied by the number of shares underlying the exercised portion of the
SAR. An SAR may be granted in tandem with or independently of an NSO. SARs will
be subject to such conditions and will be exercisable at such times as
determined by the Compensation Committee, but the exercise price per share must
be at least the fair market value of a share of common stock on the date of
grant.
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Restricted Stock. Restricted stock may be subject to a substantial risk
of forfeiture, a restriction on transferability or our rights of repurchase or
first refusal, as determined by the Compensation Committee. Unless the
Compensation Committee determines otherwise, during the period of restriction,
the grantee will have all other rights of a stockholder, including the right to
vote and receive dividends on the shares.
Performance Units and Performance Shares. For each performance period
(to be determined by the Compensation Committee), the committee will establish
specific financial or non-financial performance objectives, the number of
performance units or performance shares and their contingent values. The values
may vary depending on the degree to which such objectives are met.
Other Stock-Based Awards. Other stock-based awards are denominated or
payable in, valued in whole or in part by reference to, or otherwise related to,
shares of common stock. Subject to the terms of the 2000 Stock Incentive Plan,
the Compensation Committee may determine any terms and conditions of other
stock-based awards, provided that, in general, the amount of consideration to be
received by us shall be either (1) no consideration other than services actually
rendered or to be rendered (in the case of the issuance of shares), or (2) in
the case of an award in the nature of a purchase rights, consideration (other
than services rendered) at least equal to 50% of the fair market value of the
shares covered by such grant on the grant date.
Other Tax Considerations. Upon accelerated exercisability of Options
and accelerated lapsing of restrictions upon restricted stock or other Incentive
Awards in connection with a Change in Control (as defined in the 2000 Stock
Incentive Plan), certain amounts associated with such Incentive Awards could,
depending upon the individual circumstances of the participant, constitute
"excess parachute payments" under Section 280G of the Internal Revenue Code.
Such a determination would subject the participant to a 20% excise tax on those
payments and deny us a corresponding deduction. The limit on deductibility of
compensation under Section 162(m) of the Code is also reduced by the amount of
any excess parachute payments. Whether amounts constitute excess parachute
payments depends upon, among other things, the value of the Incentive Awards
accelerated and the past compensation of the participant.
Taxable compensation earned by executive officers who are subject to
Section 162(m) of the Internal Revenue Code with respect to Incentive Awards is
subject to certain limitations set forth in the 2000 Stock Incentive Plan. Those
limitations are generally intended to satisfy the requirements for "qualified
performance-based compensation," but we may not be able to satisfy these
requirements in all cases, and may, in our sole discretion, determine in one or
more cases that it is best not to satisfy these requirements even if it can.
Termination of Employment and Change in Control. Except as otherwise
provided in the applicable incentive agreement, if a participant's employment or
other service with us (or our subsidiaries) is terminated other than due to his
death, Disability, Retirement or for Cause (each capitalized term being defined
in the 2000 Stock Incentive Plan), his then exercisable Options will remain
exercisable until the earlier of (a) the expiration date of such Options and (b)
three months after termination. If his termination is due to Disability or
death, his then exercisable Options will remain exercisable until the earlier of
(a) the expiration date of such options and (b) one year following termination.
On retirement, his then exercisable Options will remain exercisable for six
months (except for ISOs, which will remain exercisable for three months). On a
termination for Cause, all his Options will expire at the termination date.
Upon a Change in Control effecting us, any restrictions on restricted
stock and other stock-based awards will be deemed satisfied, all outstanding
Options and SARs may become immediately exercisable and all the performance
shares and units and any other stock-based awards may become fully vested and
deemed earned in full, at the discretion of the Compensation Committee. These
provisions could in
30
<PAGE> 37
some circumstances have the effect of an "anti-takeover" defense because, as a
result of these provisions, a Change in Control effecting us could be more
difficult or costly.
Incentive Awards Transferable.
Incentive Awards generally may not be assigned, sold or otherwise
transferred by a participant, other than by will or by the laws of descent and
distribution, or be subject to any lien, assignment or charge, as determined by
the Compensation Committee.
Amendment and Termination.
Our board of directors may amend or terminate the 2000 Stock Incentive
Plan at any time. However, the Incentive Plan may not be amended, without
stockholder approval, if the amendment would have the following effects:
o increase the number of shares of common stock which may be
issued under the 2000 Stock Incentive Plan, except in
connection with a recapitalization of the common stock;
o amend the eligibility requirements for employees to purchase
common stock under the 2000 Stock Incentive Plan; or
o extend the term of the 2000 Stock Incentive Plan.
Without a participant's written consent, no termination or amendment of
the 2000 Stock Incentive Plan shall adversely affect in any material way any
outstanding Incentive Award granted to him.
REQUIRED VOTE
Approval of the 2000 Stock Incentive Plan requires the affirmative vote
of a majority of the votes cast, in person or by proxy, at the special meeting,
assuming a quorum is present.
RECOMMENDATION OF THE BOARD OF DIRECTORS
Our board of directors unanimously recommends that the stockholders
vote "FOR" approval of the 2000 Stock Incentive Plan.
31
<PAGE> 38
MARKET INFORMATION
HISTORICAL MARKET PRICE
The following table sets forth the high and low sales price of the
common stock, as reported on the NASDAQ National Market (prior to July 7, 1997)
and on the NASDAQ Small Cap Market thereafter under the trading symbol "ALLS".
<TABLE>
<CAPTION>
HIGH LOW
----------------- -----------------
<S> <C> <C>
1998
First Quarter................................... $ 5.50 $ 4.375
Second Quarter.................................. 5.125 3.625
Third Quarter................................... 4.125 1.875
Fourth Quarter.................................. 3.25 1.25
1999
First Quarter................................... $ 2.1875 $ 1.00
Second Quarter.................................. 2.875 1.0625
Third Quarter................................... 1.75 1.0625
Fourth Quarter.................................. 1.875 1.00
</TABLE>
RECENT MARKET PRICE
The following table sets forth the closing price and the high and low
sales price per share of the common stock on the NASDAQ Small Cap Market on
March 15, 2000, the last trading day preceding the public announcement of the
proposed sale of the Computer Products Division and El Paso IT Services
business, and on April 25, 2000, the latest trading day before the date of this
Proxy Statement.
<TABLE>
<CAPTION>
HIGH LOW
----------------- -----------------
<S> <C> <C>
March 15, 2000....................................... $ 3.25 $ 2.75
April 25, 2000....................................... $ 2.6875 $ 2.875
</TABLE>
NUMBER OF HOLDERS
As of the Record Date, there were approximately 47 holders of record of
common stock.
32
<PAGE> 39
FORWARD-LOOKING STATEMENTS
Certain statements in this Proxy Statement constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Statements about the expected impact
of the sale of the Computer Products Division and El Paso IT Services business
on our business, financial performance and condition, statements regarding our
future plans, and statements about the accounting and tax treatment of that
transaction are forward-looking statements. Further, any statements contained
herein that are not statements of historical fact may be deemed to be
forward-looking statements.
Without limiting the foregoing, the words "projects," believes,"
"anticipates," "plans," "expects," "intends" and similar expressions are
intended to identify forward-looking statements. There are a number of important
factors that could cause our results after the sale of the Computer Products
Division and El Paso IT Services business to differ materially from those
indicated by such forward-looking statements, including factors related to the
impact of general economic conditions, such as the rate of employment,
inflation, interest rates, and the condition of the capital markets and our
ability to successfully integrate into a new line of business. This list of
factors is not exclusive. We undertake no obligation to update any
forward-looking statements.
33
<PAGE> 40
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, Proxy Statements and
other information with the SEC. You may read and copy any reports, statements or
other information we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from commercial document retrieval
services and at the web site maintained by the SEC at "http://www.sec.gov."
We filed a Proxy Statement with the SEC for the Special Meeting. As
allowed by SEC rules, this Proxy Statement does not contain all the information
you may consider important.
The SEC allows us to "incorporate by reference" information into this
Proxy Statement, which means that we can disclose important information to you
by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this Proxy
Statement, except for any information superseded by information in, or
incorporated by reference in, this Proxy Statement. This Proxy Statement
incorporates by reference the documents set forth below that we have previously
filed with the SEC. These documents contain important information about our
company and its finances. The following documents are incorporated by reference
into this Proxy Statement:
o Our Annual Report on Form 10-K, for the year ended December
31, 1999, a copy of which is being mailed to all stockholders
with this proxy statement.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC.
Documents incorporated by reference are available from us without charge,
excluding all exhibits. Stockholders may obtain documents incorporated by
reference in this Proxy Statement by requesting them in writing or by telephone
from:
Allstar Systems, Inc.
6401 Southwest Freeway
Houston, Texas 77074
Attn: James H. Long, President and Chief Executive Officer
If you would like to request documents from us, please do so by May 8,
2000 to receive them before the Special Meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROXY STATEMENT TO VOTE ON EACH OF THE PROPOSALS. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED
IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED APRIL 26, 2000. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THE PROXY STATEMENT IS
ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE, AND THE MAILING OF THIS PROXY
STATEMENT TO STOCKHOLDERS SHALL NOT CREATE ANY IMPLICATION TO THE CONTRARY.
34
<PAGE> 41
OTHER BUSINESS
The board of directors does not intend to bring any matters before the
special meeting other than those set forth in the accompanying notice. The board
of directors knows of no other matters to be brought before the special meeting
by others. However, if any other matters are brought before the meeting, the
proxies named in the enclosed form of proxy will vote in accordance with their
judgment on such matters.
By Order of the Board of Directors,
Donald R. Chadwick
Secretary
April 26, 2000
35
<PAGE> 42
SELECTED FINANCIAL DATA
The following table sets forth our consolidated financial and operating
data as of and for each of the years in the five-year period ended December 31,
1999. Our selected financial data as of and for the five-year period ended
December 31, 1999 has been derived from our audited consolidated financial
statements. The following data should be read together with our historical
consolidated financial statements and the notes thereto and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Proxy Statement or incorporated by reference in this
Proxy Statement.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
(In Thousands except share and per share amounts)
1995 1996 1997 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue $ 89,627 $ 116,535 $ 123,764 $ 159,674 $ 201,817
Cost of sales and services 78,734 101,837 107,135 139,866 179,026
--------- --------- --------- --------- ---------
Gross profit 10,893 14,698 16,629 19,808 22,791
Selling, general and
Administrative expenses 8,496 11,121 12,527 20,659 20,183
--------- --------- --------- --------- ---------
Operating income (loss) 2,397 3,577 4,102 (851) 2,608
Interest expense (net of
other income) 1,212 1,145 642 319 648
--------- --------- --------- --------- ---------
Income (loss) from continuing
operations before provision
(benefit) for income taxes 1,185 2,432 3,460 (1,170) 1,960
Provision (benefit) for income taxes 452 933 1,293 (382) 686
--------- --------- --------- --------- ---------
Net income (loss) from
continuing operations 733 1,499 2,167 (788) 1,274
Discontinued Operations:
Net income (loss) from
discontinued operations, net
of taxes (214) 104 (323) (310) (981)
Loss on disposal, net of taxes (1,138)
--------- --------- --------- --------- ---------
Net income (loss) $ 519 $ 1,603 $ 1,844 $ (1,098) $ (845)
========= ========= ========= ========= =========
Net income (loss) per share:
Basic:
Net income (loss) from
continuing operations $ 0.17 $ 0.36 $ 0.62 $ (0.18) $ 0.31
Net income (loss) from
discontinued operations (0.05) 0.02 (0.10) (0.07) (0.24)
Loss on disposal (0.27)
--------- --------- --------- --------- ---------
Net income (loss) per share $ 0.12 $ 0.38 $ 0.52 $ (0.25) $ (0.20)
========= ========= ========= ========= =========
Diluted:
Net income (loss) from
continuing operations $ 0.17 $ 0.36 $ 0.61 $ (0.18) $ 0.30
Net income (loss) from
discontinued operations (0.05) 0.02 (0.09) (0.07) (0.23)
Loss on disposal (0.27)
--------- --------- --------- --------- ---------
Net income (loss) per share $ 0.12 $ 0.38 $ 0.52 $ (0.25) $ (0.20)
========= ========= ========= ========= =========
</TABLE>
36
<PAGE> 43
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------
(In Thousands)
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $ 1,732 $ 2,291 $12,738 $ 9,800 $ 9,567
Total assets 24,266 24,720 34,855 51,028 53,916
Short-term borrowings 9,912 9,975 1,572 15,958 15,869
Long-term debt -0- -0- -0- -0- -0-
Stockholders' equity 2,724 4,327 14,637 12,705 11,830
</TABLE>
37
<PAGE> 44
INDEX TO FINANCIAL STATEMENTS
Proforma Financial Information
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
1. Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1999 F-3
2. Unaudited Consolidated Pro Forma Statement of Operations for the year F-4
ended December 31, 1999
3. Unaudited Consolidated Pro Forma Statement of Operations for the year F-5
ended December 31, 1998
4. Unaudited Consolidated Pro Forma Statement of Operations for the year F-6
ended December 31, 1997
5. Notes to Unaudited Pro Forma Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE> 45
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated balance sheet as of December 31,
1999 and for each year in the periods ended December 31, 1999, 1998 and 1997
give effect to the proposed sale of the Computer Products business segment and
certain assets of the El Paso, Texas office of the IT Services business segment
as if it had occurred on December 31, 1999 and January 1, 1998, 1997 and 1996,
respectively. The unaudited pro forma consolidated financial statements have
been prepared from, and should be read in conjunction with, the historical
consolidated financial statements of Allstar Systems, Inc. ("Allstar") as
reported in its annual report on Form 10-K for the year ended December 31, 1999.
Allstar's management evaluates the performance of its reportable segments based
on operating income. As a result, the determination of operating income of the
Computer Products business segment has been presented in the unaudited pro forma
consolidated statements of operations for the years ended December 31, 1999,
1998 and 1997.
The pro forma adjustments which give effect to the transaction
described above are based upon currently available information and upon certain
assumptions that management believes are reasonable. There can be no assurances
that the actual adjustments will not vary from those reflected in the unaudited
pro forma consolidated financial statements.
The unaudited pro forma consolidated financial statements are provided
for informational purposes only and are not necessarily indicative of the
financial position or operating results that would have occurred or that may
occur in the future if the transaction described had occurred as presented in
such statements.
F-2
<PAGE> 46
ALLSTAR SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(In thousands, except share and par value amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS Pro Forma
Historical Adjustments Pro Forma
----------- ----------- -----------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents ................ $ 4,647 $ 1,065 (a) $ 5,712
Accounts receivable, net ................. 37,726 (1,250) (b) 36,476
Accounts receivable - affiliates ......... 423 (43) (b) 380
Inventory ................................ 7,442 (4,179) (b) 3,263
Deferred taxes ........................... 836 (586) (b) 250
Other current assets ..................... 384 (132) (b) 252
----------- ----------- -----------
Total current assets ........ 51,458 (5,125) 46,333
Property and equipment, net ................... 2,280 (1,079) (b) 1,201
Other assets .................................. 178 178
----------- ----------- -----------
$ 53,916 $ (6,204) $ 47,712
=========== =========== ===========
LIABILITIES STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable ............................ $ 15,869 $ (15,869) (a) $
Accounts payable ......................... 21,687 602 (b) 22,289
Accrued expenses ......................... 3,896 3,453 (b) 7,349
Net liabilities related to discontinued
operations ........................... 199 199
Deferred service revenues ................ 240 240
----------- ----------- -----------
Total current liabilities ... 41,891 (11,814) 30,077
Deferred credit - stock warrants .............. 195 195
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value,
5,000,000 authorized, no shares issued
Common stock, $.01 par value, 15,000,000
authorized, 4,442,325 shares issued .. 44 44
Additional paid in capital ............... 10,037 10,037
Unearned equity compensation ............. (1) (1)
Treasury stock, at cost, 381,800 shares .. (972) (972)
Retained earnings ........................ 2,722 5,610 (b) 8,332
----------- ----------- -----------
Total stockholders' equity .. 11,830 5,610 17,440
----------- ----------- -----------
$ 53,916 $ (6,204) $ 47,712
=========== =========== ===========
</TABLE>
F-3
<PAGE> 47
ALLSTAR SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(In thousands, except share and per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Computer
Historical Products Pro Forma
Allstar Business Adjustments Pro Forma
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total revenue ................................... $ 201,817 $ (182,642) (2,012) (b) $ 17,163
Cost of goods and services ...................... 179,026 (166,428) (1,454) (b) 11,144
------------ ------------ ------------ ------------
Gross profit .............. 22,791 (16,214) (558) 6,019
Selling, general and administrative expenses .... 20,183 (13,512) 1,342 (c) 8,013
------------ ------------ ------------
Operating income (loss) ......................... 2,608 $ (2,702) (1,994)
============
Interest expense (income), net of other income .. 648 (855) (a) (207)
------------ ------------
Income (loss) from continuing operations before
provision (benefit) for income taxes ....... 1,960 (1,787)
Provision (benefit) for income taxes ............ 686 (1,293) (d) (607)
------------ ------------
Net income (loss) from continuing operations .... 1,274 (1,180)
Discontinued operations:
Net loss from discontinued operations,
net of taxes ........................... (981) (981)
Loss on disposal, net of taxes ............. (1,138) (1,138)
------------ ------------
Net loss ........................................ $ (845) $ (3,299)
============ ============
Net income (loss) per share:
Basic:
Net income (loss) from
continuing operations ............. $ 0.31
$ (0.28)
Net loss from discontinued
operations ........................ (0.24) (0.24)
Loss on disposal ....................... (0.27) (0.27)
------------ ------------
Net loss per share ..................... $ (0.20) $ (0.79)
============ ============
Diluted:
Net income (loss) from
continuing operations ............. $ 0.30 $ (0.28)
Net loss from discontinued
operations ........................ (0.23) (0.24)
Loss on disposal ....................... (0.27) (0.27)
------------ ------------
Net loss per share ..................... $ (0.20) $ (0.79)
============ ============
Weighted average number of shares outstanding:
Basic ...................................... 4,168,140 4,168,140
Diluted .................................... 4,226,911 4,168,140
</TABLE>
F-4
<PAGE> 48
ALLSTAR SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands, except share and per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Computer
Historical Products Pro Forma
Allstar Business Adjustments Pro Forma
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total revenue .................................. $ 159,674 $ (143,396) (1,151) (b) $ 15,127
Cost of goods and services ..................... 139,866 (129,288) (1,011) (b) 9,567
------------ ------------ ------------ ------------
Gross profit ............. 19,808 (14,108) (140) 5,560
Selling, general and administrative expenses ... 20,659 (13,548) 2,073 (c) 9,184
------------ ------------ ------------
Operating loss ................................. (851) $ (560) (3,624)
============
Interest expense (income), net of other income.. 319 (409) (a) (90)
------------ ------------
Loss from continuing operations before
provision for income taxes ................ (1,170) (3,534)
Benefit for income taxes ....................... (382) (819) (d) (1,201)
------------ ------------
Net loss from continuing operations ............ (788) (2,333)
Discontinued operations:
Net loss from discontinued operations,
net of taxes .......................... (310) (310)
------------ ------------
Net loss ....................................... $ (1,098) $ (2,643)
============ ============
Net loss per share:
Basic:
Net loss from
continuing operations ............ $ (0.18) $ (0.54)
Net loss from discontinued
operations ....................... (0.07) (0.07)
------------ ------------
Net loss per share .................... $ (0.25) $ (0.61)
============ ============
Diluted:
Net loss from
continuing operations ............ $ (0.18) $ (0.54)
Net loss from discontinued
operations ....................... (0.07) (0.07)
------------ ------------
Net loss per share .................... $ (0.25) $ (0.61)
============ ============
Weighted average number of shares outstanding:
Basic ..................................... 4,345,883 4,345,883
Diluted ................................... 4,345,883 4,345,883
</TABLE>
F-5
<PAGE> 49
ALLSTAR SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands, except share and per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Computer
Historical Products Pro Forma
Allstar Business Adjustments Pro Forma
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Total revenue ................................... $ 123,764 $ (111,379) $ 12,385
Cost of goods and services ...................... 107,135 (99,701) 7,434
------------ ------------ ------------
Gross profit .............. 16,629 (11,678) 4,951
Selling, general and administrative expenses .... 12,527 (7,426) 1,399 (c) 6,500
------------ ------------ ------------
Operating income (loss) ......................... 4,102 $ (4,252) (1,549)
============
Interest expense (income), net of other income .. 642 (720)(a) (78)
------------ ------------
Income (loss) from continuing operations before
provision (benefit) for income taxes ....... 3,460 (1,471)
Provision (benefit) for income taxes ............ 1,293 (1,793)(d) (500)
------------ ------------
Net income (loss) from continuing operations .... 2,167 (971)
Discontinued operations:
Net loss from discontinued operations,
net of taxes ........................... (323) (323)
------------ ------------
Net income (loss) ............................... $ 1,844 $ (1,294)
============ ============
Net loss per share:
Basic:
Net income (loss) from
continuing operations ............. $ 0.62 $ (0.28)
Net loss from discontinued
operations ........................ (0.10) (0.09)
------------ ------------
Net income (loss) per share ............ $ 0.52 $ (0.37)
============ ============
Diluted:
Net income (loss) from
continuing operations ............. $ 0.61 $ (0.28)
Net loss from discontinued
operations ........................ (0.09) (0.09)
------------ ------------
Net income (loss) per share ............ $ 0.52 $ (0.37)
============ ============
Weighted average number of shares outstanding:
Basic ...................................... 3,519,821 3,519,821
Diluted .................................... 3,526,787 3,519,821
</TABLE>
F-6
<PAGE> 50
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET:
(a) Expected proceeds from the transaction are calculated using the following
assumptions:
<TABLE>
<S> <C>
Cash to be received from purchaser at closing:
Proceeds from the sale of Computer Products business $ 14,250
Proceeds from the sale of property and equipment 505
Proceeds from the sale of inventory at cost 2,179
--------
Total cash to be received 16,934
Less cash assumed on the repayment of notes payable (15,869)
--------
Expected net proceeds $ 1,065
--------
</TABLE>
(b) Represents the estimated gain on the proposed transaction calculated as
follows:
<TABLE>
<S> <C> <C>
Net book value of Property and equipment $ 1,079
Cost of inventory sold 2,179
Expenses attributable to the transaction 1,149 (3)
Loss on accounts receivables retained 1,852 (1)
Loss on inventory retained 2,000 (1)
Disposal of other retained assets 175
--------
8,434
Cash to be received 16,934
--------
Pre-tax gain 8,500
Estimated income tax at statutory rate (34%) 2,890 (2)
--------
Estimated gain on the proposed transaction $ 5,610
========
</TABLE>
(1) In connection with the transaction Allstar will retain accounts
receivable of the Computer Products business. Allstar believes that
without the ongoing customer relationships it will experience an
increase in account write-offs. In addition, Allstar will retain
certain inventory that it plans to sell at auction.
(2) Allstar expects to utilize its net operating loss carryforward in the
determination of its tax liability.
(3) Allstar expects to incur direct expenses as a result of the
transaction, which include a finder's fee, professional expenses and
employee costs. The purchaser has reimbursed Allstar $250 of such
costs.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS:
(a) The application of cash expected to be received would be used to repay
notes payable, thereby eliminating interest expense.
F-7
<PAGE> 51
(b) Represents revenue and cost of goods and service relating to the
disposition of El Paso service operations which operated only in 1998 and
1999.
(c) Reflects adjustment for internal overhead allocated to the Computer
Products business segment for selling, general and administrative
departments retained, net of selling, general and administrative expenses
to be eliminated in connection with the sale of El Paso service operations
(d) The adjustment to the tax provision (benefit) reflects pro forma income
(loss) from continuing operations at Allstar's effective tax rate of
approximately 34%.
F-8
<PAGE> 52
APPENDIX A
ASSET PURCHASE AGREEMENT
BY AND AMONG
AMHERST COMPUTER PRODUCTS SOUTHWEST, LP,
AMHERST TECHNOLOGIES, L.L.C.
AND
ALLSTAR SYSTEMS, INC.
March 16, 2000
A-1
<PAGE> 53
ASSET PURCHASE AGREEMENT
This Agreement is entered as of March 16, 2000, by and among Amherst
Computer Products Southwest, LP, a Texas limited partnership ("Amherst
Southwest"), Amherst Technologies, L.L.C., a Nevada limited liability company
("AmTech"), and Allstar Systems, Inc., a Delaware corporation ("Allstar"). Each
of Amherst Southwest and Allstar is referred to herein singularly as a "Party"
and collectively as the "Parties," except that for purposes of Article XI, the
terms "Party" and "Parties" shall include AmTech.
R E C I T A L S :
A. Allstar conducts business through three divisions and one
wholly-owned subsidiary. One of Allstar's divisions, the CP Division, is
principally engaged in the business of reselling new computer hardware and
software. Allstar's El Paso IT Business is principally engaged in IT Services.
B. On the terms and conditions set forth in this Agreement, Allstar
desires to sell and Amherst Southwest desires to purchase specified assets of
the CP Division and El Paso IT Business.
In consideration of the premises and the mutual promises herein made,
and in consideration of the representations, warranties, and covenants herein
contained, Allstar, Amherst Southwest and AmTech agree as follows.
ARTICLE I
Definitions.
"Accounts Receivable" has the meaning set forth in Section 3.3(a)
below.
"Acquired Assets" has the meaning set forth in Section 2.1 below.
"Acquired Customer Contracts" has the meaning set forth in Section
2.1(a) below.
"Acquisition Proposal" has the meaning set forth in Section 6.9 below.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Allocated Inventory" has the meaning set forth in Section 2.1(b)
below.
"Allstar's Cost" means Allstar's direct cost of the Inventory in
question, including shipping charges, as reflected in an invoice from the
supplier or manufacturer of such Inventory.
"Allstar Indemnitee" has the meaning set forth in Section 10.2 below.
"Allstar's Stockholders" means any Person who or which holds any
Allstar Shares.
"Allstar Shares" means shares of capital stock of Allstar entitled to
vote on the transactions contemplated by this Agreement.
A-2
<PAGE> 54
"Amherst Material Adverse Effect" has the meaning set forth in Section
5.3 below.
"Amherst Southwest" has the meaning set forth in the preface above.
"Amherst Southwest Indemnitee" has the meaning set forth in Section
10.1 below.
"Amherst Southwest Orders" has the meaning set forth in Section 3.4(a)
below.
"AmTech" has the meaning set forth in the preface above.
"AmTech Financial Statements" has the meaning set forth in Section 5.11
below.
"Appraised Value" when used with respect to the Tangible Assets that
become Acquired Assets, means the fair market value of such Tangible Assets as
determined using the valuation criteria described in this paragraph by a dealer
in used items of the sort appraised selected by Amherst Southwest and Allstar
pursuant to Section 2.7. In determining the Appraised Value, the appraised price
of each item of Tangible Assets shall: (a) be that which would be paid by a
willing buyer to a willing seller regularly engaged as a dealer of used items of
the sort appraised; (b) be based on the circumstance that neither the buyer or
seller of the item were motivated by unusual needs or influences; (c) be for use
of the item by the buyer in the same manner as the item is used by Allstar in
its CP Division; and (d) reflect the price of the item, with payment in full for
the item occurring thirty days after invoice date.
"Arbitrating Accountant" has the meaning set forth in Section 11.13
below.
"Assignment, Bill of Sale and Assumption Agreement" means an
Assignment, Bill of Sale and Assumption Agreement substantially in the form of
Exhibit A attached hereto, as appropriately completed at the Closing.
"Assumed Leases" has the meaning set forth in Section 2.3(a)(3) below.
"Assumed Liabilities" has the meaning set forth in Section 2.3 below.
"Business Day" means a day other than a Saturday, Sunday or other day
on which the commercial banks in Houston, Texas are authorized or required to
close.
"Capital Leases" has the meaning set forth in Section 2.1(j) below.
"Closing" has the meaning set forth in Section 2.10 below.
"Closing Date" has the meaning set forth in Section 2.10 below.
"Code" has the meaning set forth in Section 2.12 below.
"Cooperative Advertising Credits" has the meaning set forth in Section
2.1(h) below.
"Cooperative Advertising Credit Purchase Price" has the meaning set
forth in Section 2.1(h) below.
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"CP Division" means Allstar's business division (known as the Computer
Products Division) which is engaged in the sale and distribution of computer
hardware, software and related products, and does not include the Retained
Businesses or the Excluded Assets.
"Customer and Sales Records" means the identity of all customers of the
CP Division and the El Paso IT Business and all books and records (whether in
written or electronic form) of Allstar relating to such customers and sales to
such customers, including customer lists, mailing lists, sales histories,
pricing data, files and correspondence relating to sales to customers, billing
and collection records, advertising materials, catalogues and price lists,
including all records, correspondence, notes, bids, proposals and information of
Allstar relating to the actual or proposed business relationship with SBC.
"Customer Inventory" has the meaning set forth in Section 2.1(c) below.
"Damages" has the meaning set forth in Article X below.
"Daily Purchasing Report" has the meaning set forth in Section 3.4(d)
below.
"Disclosure Schedule" has the meaning set forth in Article IV below.
"Dispute" has the meaning set forth in Section 11.13 below.
"Earn Out" has the meaning set forth in Section 2.9 below.
"Earn Out Calculation Period" with respect to the first Earn Out
Payment Date shall mean the period from the Closing Date through the end of the
calendar quarter in which the Closing Date occurs; with respect to each
subsequent Earn Out Payment Date other than the final Earn Out Payment Date, the
Earn Out Calculation Period shall be the calendar quarter immediately preceding
the Earn Out Payment Date; and with respect to the final Earn Out Payment Date
shall mean the period from the end of the immediately preceding calendar quarter
through the second anniversary of the Closing Date. For purposes of computing
the Earn Out, a calendar quarter shall mean the three month period ending on the
last day of March, June, September and December.
The "Earn Out Payment" due on each Earn Out Payment Date shall be
calculated as fifty percent (50%) of the SBC Modified Gross Profit for the
preceding Earn Out Calculation Period.
"Earn Out Payment Date" shall mean the 45th day following the end of
each calendar quarter, with the first Earn Out Payment Date being May 15, 2000
and the last Earn Out Payment Date being May 15, 2002, or if any Earn Out
Payment Date falls on a date that is not a Business Day, the then Earn Out
Payment date shall fall on the next Business Day.
"Effective Time" means 12:01 a.m. Central Time on the Closing Date.
"El Paso Business Area" means the area within a 200 mile radius of the
El Paso, Texas city hall, and all of the State of New Mexico.
"El Paso IT Business" means the business of Allstar's El Paso, Texas
business office, which is engaged in IT Services, and does not include the
Excluded Assets.
"Encumbrance" means (a) any third party claim, restriction, preference,
priority, right or other preferential arrangement of any kind or nature
whatsoever, except for any of the foregoing arising in the
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Ordinary Course of Business, or (b) any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (i) mechanic's, materialmen's,
landlord's and similar liens, (ii) liens for taxes not yet due and payable,
(iii) purchase money liens and liens securing rental payments under capital
lease arrangements, and (iv) other liens arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money.
"Escrow Agent" has the meaning set forth in Section 2.8 below.
"Escrow Agreement" has the meaning set forth in Section 2.8 below.
"Escrow Period" has the meaning set forth in Section 2.8 below.
"Excluded Assets" has the meaning set forth in Section 2.2 below.
"Excluded Liability" has the meaning set forth in Section 2.4 below.
"Financial Statements" has the meaning set forth in Section 4.9 below.
"Financing Letter" has the meaning set forth in Section 5.6 below.
"Fulfillment Price" means the current lowest price at which a Party
could obtain the specified goods from such Party's customary third party vendors
without regard to manufacturer or dealer rebates based on future purchases by
such Party or its Affiliates.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States for accrual basis accounting as applied on a
consistent basis.
"Governmental Approval" means any consent, approval, authorization,
waiver, permit, grant, franchise, concession, agreement, license, exemption or
order of, registration, certificate, declaration or filing with, or report or
notice to, any federal, state or local government, or any political subdivision
thereof, any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including, without
limitation, any governmental authority, agency, department, board, commission or
instrumentality of the United States, any state of the United States or any
political subdivision thereof, and any tribunal or arbitrator(s) of competent
jurisdiction, and any self-regulatory organization.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Holdback" has the meaning set forth in Section 2.8 below.
"Inventory" means all goods held for resale by the CP Division,
wherever located, but excluding any such goods related to Allstar's Retained
Businesses.
"Inventory in Transit" has the meaning set forth in Section 2.6(b)
below.
"Inventory Purchase Price" means Allstar's Cost of the Allocated
Inventory and the Customer Inventory at the Effective Time, as determined
pursuant to Section 2.6.
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"IT Services" means the following: (1) warranty and non-warranty repair
and replacement of computer hardware and software, (2) diagnostic services and
support for computer hardware and software, (3) outsourced network management,
(4) on-site service parts stocking and computer asset management and tracking,
(5) recommendation, sale and installation, on a turn-key basis, of voice and
data networking solutions, including network hubs, routers, servers and cabling,
but excluding, without limitation, the sale of desktop PCs and "off-the-shelf"
office software, (6) long-term and short-term technical staffing and recruiting,
(7) computer system design and project management of major roll-outs,
installations and networks, (8) programming services and website development,
and (9) sale, licensing or sublicensing of software owned, licensed or developed
by Allstar, its Affiliates or its Retained Businesses.
"Key IT Customers" has the meaning set forth in Section 8.3 below.
"Leased Premises" means those leased real properties of Allstar in the
Assumed Leases listed on Schedule 2.3(a)(3) attached hereto.
"Liability" means any liability, whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and whether due or to become due.
"Majority Shares" has the meaning set forth in Section 4.4 below.
"Material Adverse Effect" means any event, occurrence, fact, condition,
change or effect that is materially adverse to the business, operations, results
of operations or condition (financial or otherwise) of the CP Division, the El
Paso IT Business or the Acquired Assets, taken as a whole.
"Mintech" means Mintech, Inc., a Texas corporation.
"MinTech Agreements" means (i) that certain Finance Agreement, dated as
of September 30, 1998, between Allstar and Mintech, and (ii) that certain
Revolving Loan Agreement, dated September 30, 1998, between Allstar and Mintech,
true and correct copies of which have been provided to Amherst Southwest.
"MIS Software" means that certain software package custom designed by
Allstar to run its management information systems and which is referred to by
Allstar as the "Universe System."
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, partnership, corporation, association,
limited liability company, trust, joint venture, unincorporated organization or
governmental entity, or any department, agency or political subdivision thereof.
"Prohibited Business" means the sale or disposition of computer
hardware and software in substantially the manner conducted by the CP Division;
provided, however, that "Prohibited Business" shall not include (1) the Retained
Businesses, (2) the sale, licensing or sublicensing of software owned, licensed
or developed by Allstar, its Affiliates or the Retained Businesses, or (3) any
activities of Allstar or any of its Affiliates relating to (i) the sale or other
disposition and installation of Retained Inventory, as permitted by Section
3.4(e) hereof, (ii) the exercise of Allstar's rights and the performance by
Allstar
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of any of its obligations under Sections 3.3 or 3.4, or (iii) the performance by
Allstar of any arrangements made by Amherst Southwest and Allstar pursuant to
Section 2.13(d) hereof regarding non-assignable contracts.
"Prohibited Persons" has the meaning set forth in Section 8.3 below.
"Proxy Statement" has the meaning set forth in Section 6.3 below.
"Purchase Price" has the meaning set forth in Section 2.5 below.
"Retained Businesses" means the following businesses conducted
currently by Allstar or its Affiliates: (a) the business of Allstar's Telecom
Division, which consists of the sale and servicing of business telephone
systems, including computer hardware and software for data and voice
integration, wide area connectivity and telephone system networking, and
wireless communications, where the sale of such computer hardware and software
products is ancillary and is required as an integral part of the provision of a
product or service by Allstar's Telecom Division and where such computer
hardware is sold at a gross profit margin to Allstar in excess of 30%; (b) the
business of Stratasoft, which is primarily engaged in the development and
marketing of proprietary software for the integration of business telephone
systems and networked computer systems, which are sometimes bundled with
computer hardware supplied by Allstar or Stratasoft at the customer's request,
but only where such computer hardware is sold at a gross profit margin to
Allstar in excess of 30%; and (c) the business of Allstar's IT Services
Division, which is engaged in providing IT Services, excluding the El Paso IT
Business within the El Paso Business Area.
"Retained Customer Contracts" has the meaning set forth in Section
2.2(a) below.
"Retained Inventory" has the meaning set forth in Section 2.2(c) below.
"SBC" means SBC Communications, Inc., its successors, assigns and
Affiliates, or any leasing company or companies or other agents designated by
SBC Communications, Inc., or its successors, assigns and Affiliates.
"SBC Agreement" means any contract or agreement for the sale of
computer hardware or software that may be entered into between Allstar, Mintech
or any of their respective Affiliates, on the one hand, and SBC, on the other
hand, at any time prior to the Closing Date, as such contract or agreement may
be amended, restated or otherwise modified prior to the Closing Date.
"SBC Gross Profit" means the difference between SBC Net Sales and the
cost of goods sold to SBC relating to such SBC Net Sales. For these purposes,
the cost of goods sold shall include (a) the direct cost to Amherst Southwest
and its Affiliates for inventory purchased to fulfill such SBC Net Sales,
together with the cost of shipping and freight, and (b) the direct costs to
Amherst Southwest and its Affiliates of providing, or the costs to Amherst
Southwest and its Affiliates of subcontracting to third parties to provide, the
installation, configuration and other tasks required to fulfill such SBC Net
Sales. The cost of goods sold shall not include any selling, general or
administrative expenses of Amherst Southwest or its Affiliates.
"SBC Gross Sales" means all sales to SBC by Amherst Southwest and its
Affiliates.
"SBC Modified Gross Profit" means SBC Gross Profit minus sales
commissions and any amounts paid to MinTech on SBC Net Sales included in the
calculation of SBC Gross Profit; provided,
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however, that sales commissions for purposes of calculating SBC Modified Gross
Profit shall not exceed the sales commissions that would be payable under
Allstar's sales commission programs and arrangements with MinTech in effect at
the Closing.
"SBC Net Sales" means SBC Gross Sales, less customer returns,
adjustments and cancellations.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Server" has the meaning set forth in Section 3.1 below.
"Stratasoft" means Stratasoft, Inc., a wholly-owned subsidiary of
Allstar.
"Supplier and Purchasing Records" shall mean the identity of all
suppliers of the CP Division and the El Paso IT Business and all books and
records of Allstar relating to such suppliers and purchases from such suppliers,
including supplier lists, purchasing histories, supplier catalogues and price
lists, correspondence with suppliers, invoicing and payment records, rebate and
volume discount policies of suppliers, cooperative advertising files and
records.
"Supplier Contracts" has the meaning set forth in Section 2.1(f) below.
"Supplier Warranties" has the meaning set forth in Section 2.1(g)
below.
"Tangible Asset Purchase Price" means the Appraised Value of the
Tangible Assets.
"Tangible Assets" shall mean all furniture, fixtures and equipment
listed on Schedule 2.7 and owned by Allstar at the Effective Time, which
Schedule shall be prepared pursuant to Section 2.7 after the execution and
delivery of this Agreement, including any additional similar items of furniture,
fixtures and equipment subsequently acquired by Allstar, but excluding any items
subsequently disposed of prior to the Effective Time, in each case in the
Ordinary Course of Business.
"Tax" means any state, county, or local personal property tax.
"Transferred Employees" has the meaning set forth in Section 3.2(a)
below.
ARTICLE II
Purchase and Sale.
2.1 Purchase and Sale of Assets. On and subject to the terms and conditions
of this Agreement, at the Closing, Amherst Southwest agrees to purchase
from Allstar, and Allstar agrees to sell, transfer, convey, and deliver
to Amherst Southwest, all right, title and interest of Allstar in and
to the assets described below (other than Excluded Assets), whether now
existing or hereafter acquired, as such assets may exist at the
Effective Time (collectively, the "Acquired Assets"):
(a) each customer contract and purchase order of: (1) the CP
Division at the Effective Time, including the SBC Agreement, if, and
only to the extent that, shipment of goods to the customer (or in
accordance with the customer's instructions) by Allstar or Allstar's
supplier has not yet occurred at the Effective Time, and (2) the El
Paso IT Business, if, and only
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to the extent that, the IT Services have not been provided at the
Effective Time (collectively, the "Acquired Customer Contracts");
(b) all Inventory held in stock that has been allocated to
fill (in whole or in part) an Acquired Customer Contract, whether or
not in the configuration required by the Acquired Customer Contract,
but excluding Inventory in Transit and Customer Inventory (the
"Allocated Inventory");
(c) all Inventory held in stock and that has been ordered
pursuant to a request from those customers of Allstar identified on
Schedule 2.1(c), but excluding Allocated Inventory and Inventory in
Transit ("Customer Inventory");
(d) the Tangible Assets;
(e) a duplicate copy of all Customer and Sales Records and a
duplicate copy of all Supplier and Purchasing Records;
(f) each contract with, and certification from, manufacturers
and suppliers of computer hardware and software products identified on
Schedule 2.1(f) (collectively "Supplier Contracts");
(g) all guarantees, warranties, indemnities and similar rights
in favor of Allstar with respect to any Acquired Asset (collectively,
"Supplier Warranties");
(h) all rights or credits to receive funds for advertising
expenses (or reimbursements of such expenses) at the Effective Time
under cooperative advertising programs offered by Hewlett-Packard
("Cooperative Advertising Credits"), including such rights and credits
listed on Schedule 2.1(h), and any additional Cooperative Advertising
Credits subsequently acquired by Allstar, but excluding any Cooperative
Advertising Credits subsequently used by Allstar prior to the Effective
Time, or which expire prior to the Effective Time, in each case in the
Ordinary Course of Business, at an aggregate purchase price (the
"Cooperative Advertising Credit Purchase Price") equal to 50% of the
amount of the Cooperative Advertising Credits, if, and only to the
extent that, Hewlett-Packard consents to the sale of such Cooperative
Advertising Credits to Amherst Southwest prior to the Closing Date;
(i) the intangible assets consisting of business ideas and
information, know-how, copyrights and advertising and marketing
concepts used by the CP Division in connection with the sale of
computer hardware, software and related products and all goodwill
associated therewith and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions; and
(j) all capital leases of equipment listed on Schedule 2.1(j)
(the "Capital Leases").
At the Closing, Allstar shall assign the Acquired Assets to Amherst Southwest as
of the Effective Time by the execution and delivery to Amherst Southwest of the
Assignment, Bill of Sale and Assumption Agreement in the form of Exhibit A,
appropriately completed as of the Closing.
2.2 Excluded Assets. Allstar will retain and Amherst Southwest will not
acquire any right, title or interest in any assets not identified in
Section 2.1, including the following assets (collectively, the
"Excluded Assets"):
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(a) each customer contract and purchase order of: (1) the CP
Division at the Effective Time, including the SBC Agreement, if (and
only to the extent that) shipment of goods to the customer (or in
accordance with the customer's instructions) by Allstar or Allstar's
suppliers occurs before the Effective Time, and (2) the El Paso IT
Business, if, and only to the extent that, the IT Services have been
provided at the Effective Time (collectively, the "Retained Customer
Contracts"), it being agreed that with respect to each customer
contract and purchase order under which (1) shipment of goods occurs in
part before and in part after the Effective Time, such contract and
purchase order shall be considered both an Acquired Customer Contract
to the extent shipments thereunder occur after the Effective Time and a
Retained Customer Contract to the extent that shipments thereunder
occur before the Effective Time, and (2) IT Services are performed in
part before and in part after the Effective Time, such contract and
purchase order shall be considered both an Acquired Customer Contract
to the extent the performance of IT Services thereunder occurs after
the Effective Time and a Retained Customer Contract to the extent that
performance of IT Services thereunder occurs before the Effective Time.
(b) all Inventory that is in transit from Allstar's suppliers
to Allstar or is in transit from Allstar's suppliers directly to (or as
ordered by) Allstar's customers, in each case at the Effective Time
("Inventory in Transit");
(c) Inventory at the Effective Time not constituting Allocated
Inventory or Customer Inventory (all such items of Inventory, together
with Inventory in Transit, are herein referred to as "Retained
Inventory");
(d) rights and benefits under contracts included in the
Acquired Assets but only to the extent that such rights and benefits
accrue before the Effective Time, including Acquired Customer
Contracts, Supplier Contracts, Supplier Warranties, and Assumed Leases;
provided, however, that Cooperative Advertising Credits shall be
included in the Acquired Assets even though they may have accrued
before the Effective Time and only if, and to the extent that,
Hewlett-Packard consents to the sale of such Cooperative Advertising
Credits to Amherst Southwest prior to the Closing Date;
(e) the assets described in Schedule 2.2(e);
(f) assets not used by the CP Division or the El Paso IT
Business in the Ordinary Course of Business, including assets used
primarily by Allstar in its Retained Businesses;
(g) assets used by Allstar to perform corporate, general and
administrative functions, including Allstar's accounting systems and
computer hardware and software used to operate such systems;
(h) the MIS Software; provided, however, that Allstar shall
license the MIS Software to Amherst Southwest as provided in Section
3.1;
(i) Allstar's name or any trade names or service marks used by
Allstar or any of its subsidiaries, and any name or mark derived
therefrom, including "Allstar Systems" and "Allstar Computer" or any
other name containing "Allstar" or "All Star"; provided, however, that
Amherst Southwest shall be entitled to use the name "Allstar Computer"
under Section 8.1 to the extent therein provided;
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(j) all Accounts Receivable; including receivables due from
suppliers and rebates due from suppliers;
(k) all notes receivable;
(l) all cash and cash equivalents;
(m) all real property (except the Assumed Leases);
(n) the originals of all Customer and Sales Records, all
Supplier and Purchasing Records, all Personnel Records and all other
books and records, but excluding the duplicate copies of the foregoing
which are sold to Amherst under Section 2.1;
(o) the Mintech Agreements; and
(p) all intangible assets consisting of business ideas and
information, know-how, copyrights and advertising and marketing
concepts by the El Paso IT Business in connection with the sale of
computer hardware.
2.3 Assumption of Liabilities.
(a) At the Closing, upon the terms and conditions set forth in
this Agreement, Amherst Southwest agrees to assume and thereafter to
fully perform and pay in full when due, in accordance with their
respective terms, the following (and only the following) (the "Assumed
Liabilities"):
(1) all liabilities, obligations and commitments
under all contracts and purchase orders included in the
Acquired Assets that arise from and after the Effective Time,
including those under the Acquired Customer Contracts,
Supplier Contracts and Capital Leases;
(2) liabilities, obligations and commitments set
forth on Schedule 2.3(a)(2);
(3) Allstar's obligations and duties under the real
property leases listed on Schedule 2.3(a)(3) (the "Assumed
Leases"), either by direct assumption of each Assumed Lease or
by sublease arrangements mutually acceptable to Amherst
Southwest, Allstar and the landlord under the Assumed Leases.
(b) At the Closing, Amherst Southwest shall assume the Assumed
Liabilities as of the Effective Time by the execution and delivery to
Allstar of the Assignment, Bill of Sale and Assumption Agreement in the
form of Exhibit A, appropriately completed as of the Closing.
2.4 Excluded Liabilities. Amherst Southwest will not assume or have any
responsibility whatsoever, with respect to any other obligation or
liability of Allstar, whether known or unknown, disclosed or
undisclosed, matured or unmatured, contingent or otherwise (the
"Excluded Liabilities"), except for the Assumed Liabilities.
2.5 Purchase Price. The purchase price payable by Amherst Southwest (the
"Purchase Price") shall be (a) Fourteen Million Two Hundred Fifty
Thousand Dollars ($14,250,000) payable at the Closing by delivery to
Allstar by wire transfer of immediately available funds; plus (b) Five
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Hundred Thousand Dollars ($500,000) (the "Holdback") payable as set
forth in Section 2.8 below; plus (c) the Earn Out; plus (d) the
Inventory Purchase Price, payable at the Closing by delivery to Allstar
by wire transfer of immediately available funds; plus (e) the Tangible
Asset Purchase Price, payable at the Closing by delivery to Allstar by
wire transfer of immediately available funds; plus (f) the Cooperative
Advertising Credit Purchase Price, as payment in full for the
Cooperative Advertising Credits, payable at the Closing by delivery to
Allstar by wire transfer of immediately available funds; plus (g) the
assumption and performance by Amherst Southwest of the Assumed
Liabilities.
2.6 Inventory.
(a) Not more than one week before the Closing Date, Allstar,
with representatives of Amherst Southwest present, shall conduct a
physical inventory of all items of Inventory, which Inventory shall be
adjusted for receipts, shipments and adjustments through the Closing
Date, and shall then prepare the following two schedules therefrom:
(1) Schedule 2.6(a), which shall list all items of
Allocated Inventory, Allstar's Cost of each such item, the
identity of the customer to which the item is allocated,
Allstar's order number, the customer's purchase order number
(if any), and the warehouse number for such item as carried on
Allstar's books and records; and
(2) Schedule 2.6(b), which shall list all items of
Customer Inventory, Allstar's Cost of each such item, the
identity of the customer that requested the inventory and the
warehouse number for such item as carried on Allstar's books
and records.
At or prior to the Closing, Amherst Southwest and Allstar shall each
signify in writing their respective approval of Schedules 2.6(a) and
2.6(b), which approval shall not be unreasonably withheld, conditioned
or delayed, and which approval shall include the approval by Amherst
Southwest and Allstar of the quantities of Allocated Inventory and
Customer Inventory reflected on Schedules 2.6(a) and 2.6(b). Upon
written approval by Amherst Southwest and Allstar of Schedules 2.6(a)
and 2.6(b), such schedules shall become part of this Agreement for all
purposes without further action of the Parties. The total of Allstar's
Cost for such Allocated Inventory and Customer Inventory reflected on
such schedules shall become the Inventory Purchase Price to be paid
under this Agreement for the Allocated Inventory and the Customer
Inventory.
(b) The Parties acknowledge and agree that there may be items
of Allocated Inventory and Customer Inventory that were either
erroneously omitted from, or erroneously included in, the calculation
of the Inventory Purchase Price for those categories of Acquired Assets
at the Closing. Accordingly, the Parties agree to exchange pertinent
information concerning any such items and to confer in good faith to
resolve the proper treatment of any items erroneously omitted or
erroneously included in the calculation of the Inventory Purchase Price
under this Agreement. Any amount owed by one Party to another as a
result of such errors shall be paid to the Party to which it is due on
or before the 90th day after the Closing Date.
2.7 Tangible Assets. Promptly after the execution and delivery of this
Agreement, Allstar, with representatives of Amherst Southwest present,
shall conduct an inventory of all Tangible Assets and shall prepare
Schedule 2.7 which shall list all such items and their location. At or
prior to the Closing, Amherst Southwest and Allstar shall each signify
in writing their respective approval of Schedule 2.7, which approval
shall not be unreasonably withheld, conditioned or
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delayed. Upon written approval by Amherst Southwest and Allstar of
Schedule 2.7, such schedule shall become part of this Agreement for all
purposes without further action of the Parties. The Parties further
agree to jointly engage a dealer in used items of the sort included in
the Tangible Assets to determine the Appraised Value of the Tangible
Assets listed on Schedule 2.7, and that the aggregate Appraised Value
of the items on Schedule 2.7 shall constitute the Tangible Asset
Purchase Price to be paid under this Agreement for the Tangible Assets.
The cost of such valuation, if any, shall be paid one-half by Allstar
and one-half by Amherst Southwest, regardless of whether the Closing
occurs.
2.8 Holdback. On the Closing Date, the Holdback shall be paid by wire
transfer to Bank of America, N.A., Houston, Texas (the "Escrow Agent"),
to be held by the Escrow Agent to satisfy any claims by Amherst
Southwest against Allstar pursuant to Sections 10.1(a) and 10.1(b) of
this Agreement for a period of one (1) year after the Closing Date (the
"Escrow Period"), in accordance with the terms of the Escrow Agreement
in the form attached to this Agreement as Exhibit B (the "Escrow
Agreement"). Interest on the Holdback shall be paid in accordance with
the terms of the Escrow Agreement. Following the expiration of the
Escrow Period, the Parties shall cause the remaining balance of the
Holdback together with interest or income thereon, if any, after the
payment of all such claims and reservation of amounts reasonably deemed
sufficient to satisfy unresolved claims, to be distributed by the
Escrow Agent to Allstar within five (5) Business Days in accordance
with the terms of the Escrow Agreement.
2.9 Earn Out.
(a) On each Earn Out Payment Date, Amherst Southwest shall pay
to Allstar the Earn Out Payment, if any, for the immediately preceding
Earn Out Calculation Period. Each Earn Out Payment shall be calculated
as fifty percent (50%) of the SBC Modified Gross Profit for the
appropriate Earn Out Period, but Amherst Southwest shall have no
obligation to make any Earn Out Payments to Allstar with respect to SBC
Modified Gross Profit on SBC Net Sales in excess of Two Hundred Forty
Million Dollars ($240,000,000) in the aggregate.
(b) All Earn Out Payments shall be calculated in accordance
with GAAP, but paid only for SBC Modified Gross Profit actually
received by Amherst Southwest on a cash basis, and shall be made by
Amherst Southwest by wire transfer of immediately available funds on or
before the Earn Out Payment Date to such bank account as Allstar may
specify from time to time in writing. Allstar's share of any SBC
Modified Gross Profit that is accrued but not actually received by
Amherst Southwest at the end of an Earn Out Calculation Period shall be
included in the Earn Out Payment to Allstar for the Earn Out
Calculation Period in which such payment was actually received by
Amherst Southwest or, if such payment is received after the end of the
last Earn Out Payment Date, within thirty (30) days after the date such
payment was received by Amherst Southwest.
(c) All Earn Out Payments shall be accompanied by a written
report of Amherst Southwest detailing the calculation of such Earn Out
Payment, which report shall be prepared in accordance with GAAP and
shall include invoice numbers, and for each invoice, the cost of goods
sold, sales commissions, freight in, freight out and subcontracted
costs. All Earn Out Payments shall also be accompanied by a written
report of Amherst Southwest's independent auditor (which shall be a
firm with national recognition) certifying that such auditors have
reviewed Amherst Southwest's written report, compared the information
contained in Amherst Southwest's report to a sampling of the original
records of Amherst Southwest and vouched such
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sampling in accordance with generally accepted auditing standards, and
verified that the calculations in the report are accurate.
(d) In the event that Allstar disagrees with, or has questions
concerning, an Earn Out Payment, Allstar may, within 30 days after
receipt of Amherst Southwest's written report, request a meeting with
the Chief Financial Officer of Amherst Southwest for the purpose of
discussing such written report. Amherst Southwest and Allstar shall
cause such meeting to occur within a reasonable period of time not more
than 30 days after the date of Allstar's request, at a mutually
acceptable time and place. Amherst Southwest and Allstar shall
cooperate in good faith and in a commercially reasonable manner to
resolve any disputes concerning the calculation of any Earn Out
Payment. If such disputes cannot be mutually resolved within 30 days
after the date of the meeting, either Party may submit the dispute to
resolution in accordance with Section 11.13 of this Agreement.
(e) Amherst Southwest agrees that it and its Affiliates will
use good faith, commercially reasonable efforts to perform the SBC
Agreement in accordance with its terms. Neither Amherst Southwest nor
its Affiliates shall enter into any transaction or take any action with
any Affiliate the effect of which is to decrease the Earn Out Payments
payable to Allstar hereunder.
(f) The Earn Out Payments payable to Allstar hereunder are
herein referred to collectively as the "Earn Out."
2.10 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Porter &
Hedges, L.L.P. in Houston, Texas, commencing at 9:00 a.m. Central Time
on the Business Day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to
actions the respective Parties will take at the Closing itself) or such
other date as the Parties may mutually determine (the "Closing Date").
2.11 Deliveries at the Closing. At the Closing, (a) Allstar will deliver to
Amherst Southwest the various certificates, instruments, and documents
referred to in Section 7.1 below; (b) Amherst Southwest will deliver to
Allstar the various certificates, instruments, and documents referred
to in Section 7.2 below; and (c) Allstar will execute, acknowledge (if
appropriate), and deliver to Amherst Southwest such other instruments
of sale, transfer, conveyance, and assignment as Amherst Southwest and
its counsel reasonably may request.
2.12 Allocation of Purchase Price. The sale of the Acquired Assets may
constitute an "applicable asset acquisition" as defined in section
1060(c) of the Internal Revenue Code ("Code"). The Parties have agreed,
pursuant to section 1060(a) of the Code, to allocate the Purchase Price
among the Acquired Assets under the "residual method" in section
1.1060-1T of the Treasury Regulations. The Parties agree to use good
faith, commercially reasonable efforts to agree upon the allocation of
the Purchase Price before the Closing Date, and to reflect this
agreement by letter agreement which when executed by the Parties shall
become part of this Agreement for all purposes. In accordance with
section 1.1060-1T(h) of the Treasury Regulations, Allstar and Amherst
Southwest will each file Form 8594 with their federal income tax
returns for the taxable year that includes the Closing Date and such
Forms 8594 shall reflect the allocation of the Purchase Price so agreed
upon.
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2.13 Consent of Third Parties.
(a) Despite anything to the contrary in this Agreement, this Agreement
shall not constitute an assignment or transfer of, or an agreement to assign or
transfer, any Governmental Approval, contract, instrument, lease, permit or
other agreement or arrangement or any claim, right or benefit arising thereunder
or resulting therefrom if an assignment or transfer or an attempt to make such
an assignment or transfer without the consent of a third party would constitute
a breach or violation thereof or would violate any applicable law or regulation,
or would otherwise affect adversely the rights of Allstar or Amherst Southwest
thereunder; and any transfer or assignment by Allstar of any interest under any
such Governmental Approval, contract, instrument, lease, permit or other
agreement or arrangement that requires the consent or approval of a third party
shall be made subject to such consent or approval being first obtained.
(b) Allstar will give any required notices, and the Parties agree to
cooperate and use their respective commercially reasonable efforts, in order to
obtain necessary third party consents to the sale and transfer of the Acquired
Assets as contemplated by this Agreement; provided, however, that with respect
to the Acquired Customer Contracts, Allstar shall only be required to notify and
seek any necessary approvals from the customers listed on Schedule 7.1(h).
Amherst Southwest agrees, if requested by any third party from whom Allstar is
seeking such consent, to supply performance bonds in replacement of any current
performance bonds supplied by Allstar with respect to any Acquired Customer
Contracts. In the event any such consent or approval is not obtained on or
before the Closing Date, Allstar and Amherst Southwest shall continue to
cooperate and to use their respective commercially reasonable efforts to obtain
such consent for a period of 90 days following the Closing. Neither Allstar nor
Amherst Southwest shall be required to pay or incur more than nominal
out-of-pocket expenses in obtaining any third party consent or approval,
including for consent or processing fees requested by third parties.
(c) Each of the Parties will give any notices to, make any filings
with, and use its commercially reasonable efforts to obtain any Governmental
Approval in connection with the consummation of the transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, each of the
Parties will file any Notification and Report Forms and related material that it
may be required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the Hart-Scott-Rodino
Act, will use its reasonable commercial efforts to obtain (and Allstar and
Amherst Southwest will cause each of their respective Affiliates and
Subsidiaries to use their reasonable commercial efforts to obtain) an early
termination of the applicable waiting period, and will make (and Allstar and
Amherst Southwest will cause each of their respective Affiliates and
Subsidiaries to make) any further filings pursuant thereto that may be
necessary, proper, or advisable in connection therewith.
(d) With respect to any consents or approvals that are not obtained on
or before the Closing Date, Allstar and Amherst Southwest shall cooperate in any
lawful arrangement that is reasonable for both Amherst Southwest and Allstar
(considering all relevant factors including practicality, financial burden and
risk) to provide that Amherst Southwest shall receive the interest of Allstar in
the net benefits under any such Governmental Approval, contract, instrument,
lease, permit or other agreement or arrangement or any claim, right or benefit
arising thereunder or resulting therefrom. Such arrangements may include (if
lawful and reasonable considering all relevant factors) the performance by
Allstar as agent for the benefit of Amherst Southwest and the payment by Amherst
Southwest (in advance if so requested by Allstar) of all corresponding
liabilities for the enjoyment of such benefit to the extent that Amherst
Southwest would have been responsible therefor under this Agreement if the
necessary third
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party consent or approval had been obtained. Allstar and Amherst Southwest agree
to use their respective good faith, commercially reasonable efforts to negotiate
and document any such arrangements.
(e) Nothing in this Section 2.13 shall be deemed a waiver by Amherst
Southwest or Allstar of their respective rights to have received all necessary
consents and approvals required to be obtained under Sections 7.1 and 7.2 of
this Agreement as a condition to their respective obligations to proceed with
the Closing, except that if Allstar is unable to obtain any such consent due to
the refusal of Amherst Southwest to provide the party from whom consent is being
sought with copies of its financial statements, then Amherst Southwest shall be
deemed to have waived its right to receive the consent of such party as a
condition to Closing under Section 7.1.
ARTICLE III
Other Agreements
3.1 Licensing of MIS Software. On the Closing Date, Allstar shall assign,
transfer, convey and deliver to Amherst Southwest a Compaq computer
server (the "Server"). The Server shall be loaded with the MIS Software
and all other compiled software used by the CP Division; provided,
however, that the source code for the MIS Software and such other
software shall not be provided to Amherst Southwest. In addition, the
Server shall be loaded with any Customer and Sales Records and Supplier
and Purchasing Records maintained by Allstar on its computer system.
Effective as of the Closing, Allstar hereby grants to Amherst Southwest
a limited, royalty-free, worldwide license and right to use the MIS
Software solely for the management of its information systems in
connection with the operations of the CP Division and the El Paso IT
Business for a period of twelve (12) months following the Closing Date.
Amherst Southwest may not copy the MIS Software or use it for any other
purpose. Within 10 Business Days after the first anniversary of the
Closing Date, Amherst Southwest will cease using the MIS Software for
all purposes except to the extent necessary to retrieve historical data
relating to the twelve (12) month period following the Closing Date,
and will provide a sworn affidavit, reasonably acceptable to Allstar
and Amherst Southwest and executed by an executive officer of Amherst
Southwest, certifying that Amherst Southwest is no longer using the MIS
Software except for such historical purposes. For a period of one (1)
year after the Closing Date, Allstar agrees to use its commercially
reasonable efforts to provide technical support reasonably requested by
Amherst Southwest with respect to the MIS Software at a cost of $45 per
hour for normal support including training, answering questions and
normal MIS Software maintenance, and at a cost of $85 per hour services
by Allstar's Senior Systems Analyst or its Vice President of MIS
Systems.
3.2 Employment of CP Division Employees.
(a) Schedule 3.2(a) lists the employees of Allstar who will be
offered employment by Amherst Southwest from and after the Closing
Date, and categorizes each such employee as either a "Key Employee" or
"Other Employee." Allstar shall use its reasonable efforts to encourage
employees listed on Schedule 3.2(a) to make available their employment
services to Amherst Southwest. At least 30 days prior to the Closing
Date, Amherst Southwest shall offer employment to those employees
listed on Schedule 3.2(a) on terms and conditions acceptable to Amherst
Southwest in its sole discretion; provided that Amherst Southwest shall
offer employment to such employees at wage and salary
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levels at least equal to their wage and salary levels from Allstar in
effect immediately prior to the Closing. Those employees who accept
such offers of employment effective as of the Closing Date are
hereinafter referred to as the "Transferred Employees."
(b) Amherst Southwest shall provide the Transferred Employees
and their dependents and beneficiaries coverage under any welfare and
fringe benefits plans, programs, policies or arrangements established
by Amherst Southwest in its sole discretion for such Persons.
3.3 Accounts Receivable.
(a) Allstar and Amherst Southwest acknowledge and agree that
all customer accounts receivable of the CP Division and the El Paso IT
Business which arise prior to the Effective Time (including those
arising from Retained Customer Contracts, from the sale by Allstar of
Retained Inventory and under the Mintech Agreements), and all trade
accounts receivable of Allstar and all rebates receivable from vendors
(other than the Cooperative Advertising Credits) arising at any time
(the "Accounts Receivable") are and shall remain the assets of Allstar.
Subject to the rights of Amherst Southwest contained in the last
sentence of this Section 3.3(a), Allstar shall have sole and exclusive
authority to invoice and collect Accounts Receivable and to issue
correction invoices and credit memos with respect to such accounts, and
nothing in this Agreement shall prevent Allstar from retaining all
rights of a creditor under applicable law, including, without
limitation, the right to take legal action against its account debtors
seeking to collect amounts owed. Allstar shall use its commercially
reasonable efforts to keep Amherst Southwest reasonably informed of any
disputes with any customers relating to Accounts Receivable and
Allstar's denial of any customer request for a credit or correction in
respect of an Account Receivable. Notwithstanding the foregoing, in the
event that Allstar proposes to take collection action in respect of an
Account Receivable, Allstar shall first give Amherst Southwest written
notice at least five (5) Business Days in advance of taking any such
collection action.
(b) Amherst Southwest and Allstar shall cooperate with each
other and use commercially reasonable efforts to maximize the
collection by Allstar of all Accounts Receivable. Amherst Southwest
shall allow Allstar reasonable access to Transferred Employees for that
purpose, but Allstar shall not unreasonably disrupt the duties of
Transferred Employees in so exercising its rights of access to
Transferred Employees.
(c) Any payment received by one Party after the Closing Date
that properly belongs to another Party shall be held in trust for the
benefit of the Party properly entitled to the payment and shall be paid
over by the receiving Party to the proper Party as herein provided.
(d) In the event that Amherst Southwest receives a payment on
an Account Receivable that is identified by Allstar's invoice number,
or that is otherwise accompanied by information identifying it as a
payment belonging to Allstar (an "Allstar Payment"), Amherst Southwest
shall turn such Allstar Payment over to Allstar. Such Allstar Payments
shall be turned over to Allstar without representation, warranty, or
guaranty by, or recourse against, Amherst Southwest.
(e) Allstar acknowledges that after the Closing, Amherst
Southwest will generate accounts receivable from former customers of
the CP Division and the El Paso IT Business. In
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the event that Allstar receives a payment that is identified by Amherst
Southwest's invoice number, or that is otherwise accompanied by
information identifying it as a payment belonging to Amherst Southwest
(an "Amherst Southwest Payment"), Allstar shall turn such Amherst
Southwest Payment over to Amherst Southwest. Such Amherst Southwest
Payments shall be turned over to Amherst Southwest without
representation, warranty, or guaranty by, or recourse against, Allstar.
(f) In the event that either Party receives a payment from a
former customer of Allstar on or after the Closing Date as to which the
owner is not clearly indicated on or with the payment (an "Unidentified
Payment"), the Party receiving the payment shall, within five (5)
Business Days after its receipt, notify the other of the amount of the
Unidentified Payment and the customer from which it was received, and
the Parties shall exchange pertinent records and otherwise cooperate in
good faith to determine the Party to which the Unidentified Payment
belongs. If the Parties are unable to resolve ownership of the
Unidentified Payment from their records, the Party who received the
payment shall promptly contact the customer from whom the payment was
received to obtain instructions as to which invoice(s) the customer
intended its payment to be applied, and the instructions of the
customer shall be binding on the Parties.
(g) Each Allstar Payment and each Amherst Southwest Payment
shall be paid over by the Party to which it belongs within five (5)
Business Days after receipt. Each Unidentified Payment shall be paid to
the Party to which it belongs within five (5) Business Days after
ownership of the payment is resolved. All payments belonging to another
Party but not timely paid over to the proper Party shall bear interest
from and after the next Business Day after the payment was due until
paid at the rate of 15% per annum.
3.4 Post-Closing Inventory Matters.
(a) Fulfillment of Amherst Southwest Orders. Prior to the
shipment of each order shipped after the Effective Time by Amherst
Southwest, without regard to whether such order was received before or
after the Effective Time (each an "Amherst Southwest Order"), Amherst
Southwest shall communicate such order to Allstar via a mutually agreed
upon method, and shall indicate in such communication the Fulfillment
Price for each of the goods needed to fill the Amherst Southwest Order.
If Allstar has any of the goods specified in the communication in its
Retained Inventory, and is willing to sell such goods to Amherst
Southwest, then Allstar shall so notify Amherst Southwest within thirty
(30) minutes if the order is communicated before 7:30 p.m. Central Time
on a Business Day, or otherwise by 9:00 a.m. Central Time on the next
Business Day, and Amherst Southwest shall purchase, and Allstar shall
sell to Amherst Southwest, such goods at the Fulfillment Price. Payment
for such purchases shall be made in full within 30 days after the
invoice date. If, and to the extent that, Amherst Southwest is unable
to obtain the specified goods from Allstar as described in this
Section, or if Allstar fails to notify Amherst Southwest within the
time periods set forth in this Section, Amherst Southwest may fulfill
the Amherst Southwest Order from its own inventory or from such other
source as Amherst Southwest may determine. Amherst Southwest's
obligations under this Section 3.4(a) shall expire six (6) months after
the Closing Date.
(b) Fulfillment of Retained Customer Contracts. Despite
anything in this Agreement to the contrary, Allstar shall be entitled
to fulfill after the Closing Date each Retained Customer Contract.
Allstar shall first satisfy a Retained Customer Contract from its
Retained Inventory. If, and to the extent that, Allstar does not have
sufficient quantities or types of
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Retained Inventory on hand to fulfill a Retained Customer Contract,
then Allstar shall, prior to filling the order from any other source,
communicate such order to Amherst Southwest by a mutually agreed upon
method, and shall indicate in such communication the Fulfillment Price
for each of the goods needed to fill the Retained Customer Contract. If
Amherst Southwest has any of the goods specified in the communication
in its inventory, and is willing to sell such goods to Allstar at the
Fulfillment Price, then Amherst Southwest shall so notify Allstar
within thirty (30) minutes if the order is communicated before 7:30
p.m. Central Time on a Business Day, or otherwise by 9:00 a.m. Central
Time on the next Business Day, and Allstar shall purchase and Amherst
Southwest shall sell the goods at the Fulfillment Price. Payment for
such purchases shall be made in full within 30 days after the invoice
date. If, and to the extent that, Allstar is unable to obtain goods to
fulfill Retained Customer Contracts from its Retained Inventory or from
Amherst Southwest as described in this Section, or if Amherst Southwest
fails to notify Allstar within the time periods set forth in this
Section, Allstar may fulfill the Retained Customer Contracts from any
other source as Allstar may determine.
(c) Defective Goods, Shortages, Returns and Cancellations.
(1) Defective Goods and Shortages. Amherst Southwest
shall have the right and obligation to satisfy delivery
requirements with respect to defective goods and shortages of
goods delivered with respect to all Acquired Customer
Contracts and, likewise, Allstar shall have the right and
obligation to satisfy delivery requirements with respect to
defective goods and shortages of goods delivered with respect
to all Retained Customer Contracts. Redeliveries to replace
defective goods and shipments of goods shorted from earlier
shipments shall be made in accordance with Section 3.4(a).
(2) Returns. Goods returned by customers after the
Closing Date with respect to Acquired Customer Contracts and
Amherst Southwest Orders fulfilled out of Allstar's Retained
Inventory shall be handled by Amherst Southwest. Allstar shall
within two (2) Business Days after notice by Amherst Southwest
of a return of defective goods, credit Amherst Southwest for
the amount paid by Amherst Southwest on any returned defective
goods that were purchased by Amherst Southwest out of
Allstar's Retained Inventory, other than returns arising under
Acquired Customer Contracts, which returns shall be the sole
responsibility of Amherst Southwest. Goods returned to Allstar
and goods returned to Amherst Southwest that were purchased
out of Allstar's Retained Inventory (other than returns
arising under Acquired Customer Contracts) shall be considered
Retained Inventory for all purposes. If any Party receives
delivery of returned goods which are to be handled by another
Party under this Agreement, the receiving Party shall within
five (5) Business Days after such receipt so notify the other
Party and redeliver the goods to the proper recipient at the
cost and expense of the Party to which the goods should be
properly returned.
(3) Cancellations. Cancellations of customer orders
for goods to be fulfilled by Amherst Southwest from Allocated
Inventory shall be handled by Amherst Southwest, at its sole
cost and expense.
(4) Segregation of Retained Inventory. Amherst
Southwest and Allstar acknowledge and agree that inventory of
both Amherst Southwest and Allstar shall be stored in the same
Dallas, Texas warehouse which is the subject of one of the
Assumed Leases. For a period of six months after the Closing
Date, Amherst Southwest shall
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sublease to Allstar, at a monthly rental based upon the cost
of the square footage used, and pursuant to a sublease
agreement mutually acceptable to the Parties and the landlord,
a portion of such warehouse for the storage of all Retained
Inventory. Such subleased space shall be separated by means of
a chain-link fence erected by and at the expense of Allstar.
Allstar shall have unlimited access to such subleased space
and Retained Inventory during Amherst Southwest's normal
business hours and may station employees of Allstar in such
subleased space.
(d) Verification. During the six (6) month period following
the Closing Date, Amherst Southwest shall provide to Allstar for each
Business Day, by 9:00 a.m. Central Time on the following Business Day,
a copy of a Daily Purchasing Report for the purpose of enabling Allstar
to verify Amherst Southwest's compliance with its obligations under
this Section. Any such information received shall be considered
confidential and subject to Section 8.4. In the event that Allstar
believes that Amherst Southwest is not in compliance with its
obligations under this Section, Allstar must give Amherst Southwest
written notice thereof on the Business Day immediately following the
Business Day on which such Daily Purchasing Report was received by
Allstar. Failure to give such timely notice shall constitute a waiver
by Allstar of Amherst Southwest's noncompliance with its obligations
under this Section with respect to the Daily Purchasing Report in
question. In the event of such notice, the Parties shall cooperate in
good faith to resolve the dispute. If such dispute is not mutually
resolved within 30 days after the date of written notice of the dispute
to Amherst Southwest, either party may submit the dispute for
resolution in accordance with Section 11.13 of this Agreement.
(e) Disposition of Retained Inventory. Notwithstanding
anything to the contrary in this Agreement, at any time and from time
to time after the Closing Date, Allstar may dispose of any of the
Retained Inventory through warehouse sales, bulk disposition, returns
to vendors, public advertisement, retail sales or sales to resellers,
or by any other means, all in addition to the sales transactions
contemplated by this Agreement; provided, however, that Allstar shall
not sell Retained Inventory to those Persons who were customers of the
CP Division or El Paso IT Business prior to the Effective Time.
ARTICLE IV
Representations and Warranties of Allstar
Allstar represents and warrants to Amherst Southwest that the
statements contained in this Article IV are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article IV), except as set forth in the
disclosure schedule accompanying this Agreement (the "Disclosure Schedule").
4.1 Organization of Allstar. On the date hereof Allstar is, and on the
Closing Date Allstar will be: (a) a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware;
and (b) duly qualified or licensed to do business and in good standing
as a foreign corporation authorized to do business in all jurisdictions
in which the ownership, use and operation of the CP Division, the El
Paso IT Business and the Acquired Assets would make such
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qualification or licensing necessary, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect.
4.2 Authorization of Transaction. Allstar has full corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder, subject only on the date hereof (but not on the
Closing Date) to the approval of Allstar's Stockholders of the
execution, delivery and performance of this Agreement by Allstar.
Without limiting the generality of the foregoing, the board of
directors of Allstar has, and as of the Closing Date Allstar's
Stockholders holding a majority of outstanding Allstar Shares have,
duly authorized the execution, delivery and performance of this
Agreement by Allstar. This Agreement constitutes the valid and legally
binding obligation of Allstar, enforceable in accordance with its terms
and conditions, except as such enforcement may be limited by
bankruptcy, insolvency, moratorium and similar laws affecting
creditors' rights generally and to general principles of equity, and
except that Allstar makes no representation or warranty with respect to
the enforceability against Allstar and its Affiliates of Section 8.2(a)
to the extent it purports to restrict activities outside of the states
of Texas, New Mexico, Oklahoma, Louisiana, Arkansas, Florida and
California.
4.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including, without limitation, the assignments and assumptions
referred to in Article II above), will (a) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, governmental agency, or
court to which Allstar is subject, the violation of which would have a
Material Adverse Effect, or any provision of the charter or bylaws of
Allstar or (b) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or, except for
required by third party consents and approvals, require any notice
under, any agreement, contract, lease, license, instrument, or other
arrangement constituting or relating to an Acquired Asset to which
Allstar is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Encumbrance upon
any of its assets), except where said failure to give notice, file or
obtain authorization, consent or approval could not have a Material
Adverse Effect. Except for filings and approvals required by the
Securities Exchange Act and Hart-Scott-Rodino Act, Allstar does not
need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions
contemplated by this Agreement and to convey title to the Acquired
Assets to Amherst Southwest free and clear of all Encumbrances.
4.4 Majority Status. James H. Long owns legally and beneficially a majority
of the issued and outstanding shares of Allstar having voting rights
(the "Majority Shares"), and has all rights to vote such Majority
Shares, free of any proxies and other agreements or arrangements with
respect to the ownership or voting of the Majority Shares, except for
that certain Voting and Support Agreement dated as of the date hereof
between James H. Long and Amherst Southwest pursuant to which Mr. Long
has agreed, among other things, to vote his Majority Shares in favor of
the transactions contemplated by this Agreement, subject to the terms
and conditions set forth therein.
4.5 Brokers' Fees. Allstar has no Liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Amherst Southwest
could become liable or obligated. Other than the fee payable by Allstar
to Richard Darrell, which fee shall remain Allstar's Liability, Allstar
has no Liability or
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obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
Allstar acknowledges that Richard Darrell, a member of Allstar's Board
of Directors, has also acted as broker for Amherst Southwest in
connection with the transactions contemplated by this Agreement and
that Amherst Southwest has agreed to pay a fee to Mr. Darrell. Allstar
has complied with Section 144 of the Delaware General Corporate Law and
any applicable provisions of Allstar's governing corporate documents,
and the transactions contemplated hereby are not void or voidable by
reason of such relationships and fee.
4.6 Title to and Condition of Acquired Assets. Allstar has, and, subject to
the receipt of any required third party consents and approvals to the
assignment thereof to Amherst Southwest, on the Closing Date will
transfer and assign to Amherst Southwest, good and marketable title to
the Acquired Assets owned by Allstar and good and valid leasehold
interests in the Acquired Assets leased by Allstar, free and clear of
all Encumbrances. Each of the Tangible Assets is in good and operating
condition, reasonable wear and tear excepted.
4.7 Inventory. All Allocated Inventory and Customer Inventory consists of
products which are currently available for shipping in the computer
distribution channel, are not discontinued or announced as discontinued
(other than end-of-life products held at the request of and for sale to
existing customers of Allstar), are salable to the customer to whom
such products were allocated or for whom such products are held in the
ordinary course of business, and, when sold by Amherst Southwest or
Allstar to the initial customer, will carry the full extent of any
applicable manufacturer's warranties. Schedule 4.7(a) sets forth all
items of Allocated Inventory as of September 30, 1999; Schedule 4.7(b)
sets forth all items of Allocated Inventory as of December 31, 1999;
Schedule 4.7(c) sets forth all items of Customer Inventory as of
September 30, 1999; and Schedule 4.7(d) sets forth all items of
Customer Inventory as of December 31, 1999 (the foregoing schedules are
collectively referred to as "Schedule 4.7"). Schedule 4.7 sets forth
Allstar's Cost with respect to each item listed thereon. All
information included in Schedules 2.6(a), 2.6(b), 2.7 and 4.7 shall be
true and correct in all material respects, except that Allstar makes no
representation and warranty as to the quantity of items on Schedules
2.6(a) and 2.6(b), except to the extent that Amherst Southwest has paid
for such quantity of items at the Closing in the Inventory Purchase
Price.
4.8 MIS Software; Server; Daily Purchasing Reports. The MIS Software
contained on the Server delivered to Amherst Southwest at the Closing,
on a "plug-and-play" basis without modification or customization, will
be fully able to generate daily purchasing reports ("Daily Purchasing
Reports") containing the information with respect to purchasing and
sales listed on Schedule 4.8. The Server, when delivered to Amherst
Southwest pursuant to this Agreement, will be fully functional and in
good operating condition, and will contain fully functional copies of
the MIS Software and all other compiled software used by the CP
Division and El Paso IT Business, plus all Customer and Sales Records
and Supplier and Purchasing Records maintained by Allstar on its
computer system.
4.9 Financial Statements. Attached hereto as Exhibit C are the following
financial statements (collectively the "Financial Statements"): (a) pro
forma income statement as of and for the fiscal years ended December
31, 1997 and December 31, 1998 of the CP Division; (b) separate,
unconsolidated pro forma income statements and balance sheets as of and
for the 9 months ended September 30, 1999 of the CP Division and the El
Paso IT Business; (c) audited consolidated statements of income and
cash flow and balance sheets for the fiscal years ended December 31,
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1997 and 1998 of Allstar; and (d) consolidated statements of income and
cash flow and balance sheets for the 9 months ended September 30, 1999
of Allstar. The Financial Statements (including any notes thereto)
present fairly the financial condition of Allstar, the CP Division or
the El Paso IT Business, as the case may be, as of such dates and the
results of operations of Allstar, the CP Division or the El Paso IT
Business, as the case may be, for such periods, all in conformity with
GAAP, except as otherwise set forth in the notes thereto and provided,
however, that the Financial Statements set forth in (a), (b) and (d)
above lack footnotes, schedules and other presentation items and are
subject to normal year-end and other adjustments. The Financial
Statements are correct and complete in all material respects, and are
consistent with the books and records of Allstar (which books and
records are correct and complete in all material respects).
4.10 Events Subsequent to December 31, 1998. Except as set forth on the
Disclosure Schedule, since December 31, 1998, (a) there has not been
any material adverse change in the business, operations, or future
prospects of the CP Division, the El Paso IT Business and the Acquired
Assets, taken as a whole (provided, however, that the failure to enter
into the SBC Agreement shall not be deemed to be a material adverse
change), and (b) there has not been any material adverse occurrence,
event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving the CP Division, the El Paso IT
Business and the Acquired Assets, except as contemplated by this
Agreement.
4.11 Undisclosed Liabilities. Since the date of the most recent balance
sheet for the CP Division, the El Paso IT Business or Allstar, as
applicable, included in the Financial Statements, Allstar has not
incurred any Liabilities relating to the CP Division, the El Paso IT
Business or the Acquired Assets that remain unpaid and which would have
been required to be reflected in such most recent balance sheet had
such liabilities been in existence on the date of such most recent
balance sheet, other than (a) Liabilities incurred in the Ordinary
Course of Business since the date of such most recent balance sheet, or
that individually or in the aggregate would not have a Material Adverse
Effect, (b) broker's fees payable to Richard Darrell as contemplated by
Section 4.5, or (c) costs and expenses incurred in connection with the
transactions contemplated by this Agreement, which costs and expenses
shall remain the obligations of Allstar.
4.12 Contracts. Schedule 4.12 lists the following contracts and other
agreements to which Allstar is a party and that are included in the
Acquired Assets (subject only to the receipt of all necessary consents
to the assignment of such contracts and agreements to Amherst
Southwest):
(a) any agreement (or group of related agreements) for the
lease of real or personal property to or from any Person providing for
lease payments, other than the Assumed Leases and Capital Leases;
(b) all Customer Contracts as of the date of this Agreement
(the Parties acknowledge that purchase orders included on Schedule 4.12
are subject to change in the Ordinary Course of Business);
(c) any agreement (or group of related agreements) not
included in Schedule 4.12 pursuant to Section 4.12(b) or in other
Schedules delivered pursuant to this Agreement for the purchase or sale
of supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which will extend
over a period of more than one year;
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(d) any agreement concerning a partnership or joint venture;
(e) any agreement or group of related agreements, other than
Capital Leases, under which it has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any capitalized
lease obligation, or under which it has imposed an Encumbrance on any
of the Acquired Assets, tangible or intangible;
(f) any agreement concerning confidentiality or
non-competition with respect to the business of the CP Division;
(g) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect.
Allstar has delivered to Amherst Southwest a correct and complete copy
of each written agreement required to be listed in the Disclosure
Schedule (as amended to date) pursuant to Section 4.12 and a written
summary setting forth the terms and conditions of each oral agreement
referred to in the Disclosure Schedule. With respect to each such
agreement and each Supplier Contract, Capital Lease and Assumed Lease:
(A) the agreement is legal, valid, binding, enforceable, and in full
force and effect; (B) the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby,
subject to the receipt of all necessary consents to the assignment of
such agreements to Amherst Southwest) and, with respect to enforcement,
except as such enforcement may be limited by bankruptcy, insolvency,
moratorium and other similar laws affecting creditors' rights generally
and to general principles of equity, (C) Allstar is not in breach or
default, and to Allstar's knowledge, no other party is in breach or
default, under the agreement, and, to Allstar's knowledge, no event has
occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under
the agreement; and (D) Allstar has not repudiated, and to Allstar's
knowledge, no other party has repudiated, any provision of the
agreement.
4.13 Certain Business Relationships With Allstar. None of Allstar's
officers, directors or stockholders owning more than 5% of the
outstanding Allstar Shares or their Affiliates has been involved in any
business arrangement or relationship with Allstar relating to its CP
Division or El Paso IT Business within the past 12 months. Neither
Allstar nor any of its Affiliates is a party to any contract or
agreement with Mintech or its Affiliates other than the Mintech
Agreements.
4.14 No SBC Bonus Arrangements. Allstar does not now have or contribute to,
and will not create or contribute to, any program or arrangement for
the payment of bonuses on sales to SBC.
4.15 Disclosure; Disclaimer of Other Representations and Warranties. The
representations and warranties contained in this Article V do not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this Article IV not misleading when taken in the context
of other Schedules and documents required to be delivered by Allstar
pursuant to this Agreement. EXCEPT AS EXPRESSLY SET FORTH IN THIS
ARTICLE IV, ALLSTAR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF ANY OF ITS ASSETS
(INCLUDING, WITHOUT LIMITATION, THE ACQUIRED ASSETS), LIABILITIES OR
OPERATIONS, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO
MERCHANTABILITY OR FITNESS FOR ANY
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PARTICULAR PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES
ARE HEREBY EXPRESSLY DISCLAIMED.
ARTICLE V
Representations and Warranties of Amherst Southwest and AmTech.
Amherst Southwest represents and warrants to Allstar that the
statements contained in Sections 5.1 through 5.6 of this Article V, and AmTech
represents and warrants to Allstar that the statements contained in Sections 5.7
through 5.12 of this Article V, are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article V), except as set forth in the Disclosure
Schedule.
5.1 Organization of Amherst Southwest. Amherst Southwest is a limited
partnership duly formed, validly existing, and in good standing under
the laws of the State of Texas. AmTech is the 99% limited partner of
Amherst Southwest, and ACP Sales SE, LLC is the 1% general partner of
Amherst Southwest. At the Closing, Amherst Southwest will have a valid
Texas Sales and Use Tax Resale Certificate and a Texas Sales and Use
Tax Permit, true and correct copies of which will be delivered to
Allstar at Closing. Amherst Southwest is a newly formed limited
partnership, and has not conducted any business, incurred any
liabilities or acquired any assets other than in connection with the
transactions contemplated by this Agreement.
5.2 Authorization of Transaction. Amherst Southwest has full power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of Amherst Southwest, enforceable in accordance with
its terms and conditions, except as such enforcement may be limited by
bankruptcy, insolvency, moratorium and similar laws affecting
creditors' rights generally and to general principles of equity.
5.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Article II
above), will (a) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
Amherst Southwest is subject, the violation of which would have a
material adverse effect on the operations, results of operations or
condition (financial or otherwise) of Amherst Southwest (an "Amherst
Material Adverse Effect"), or any provision of its certificate of
limited partnership or agreement of limited partnership or (b) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which Amherst Southwest is a party or by which it is bound or to
which any of its assets is subject. Except for filings and approvals
required by the Hart-Scott-Rodino Act, Amherst Southwest does not need
to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and
assumptions referred to in Article II above).
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5.4 Brokers' Fees. Except and to extent set forth in Section 4.5 above,
Amherst Southwest has no Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Allstar could
become liable or obligated.
5.5 Financing Commitment. AmTech has delivered to Allstar a true and
correct copy of a letter from IBM Credit Corp. (the "Lender") to
Allstar, pursuant to which Lender has advised Allstar that AmTech has
acquisition financing available under its credit facility with Lender
sufficient to finance the Purchase Price for the Acquired Assets,
subject to the terms and conditions of such credit facility (the
"Financing Letter"). Since the date of such Financing Letter, no event
or condition has occurred, or has failed to occur, that could
reasonably be expected to have a material adverse effect on Amherst
Southwest's or AmTech's ability to finance the Purchase Price as set
forth in the Financing Letter.
5.6 Amherst Southwest Information. All information and data provided by
Amherst Southwest for inclusion in the Proxy Statement will not contain
any untrue statement of a material fact or admit to state a material
fact necessary in order to make the statements contained therein not
misleading.
5.7 Organization of AmTech. AmTech is a limited liability company duly
formed, validly existing, and in good standing under the laws of the
State of Nevada.
5.8 Authorization of Transaction. AmTech has full limited liability company
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the valid
and legally binding obligation of AmTech, enforceable in accordance
with its terms and conditions, except as such enforcement may be
limited by bankruptcy, insolvency, moratorium and similar laws
affecting creditors' rights generally and to general principles of
equity.
5.9 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will (a) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
AmTech is subject, the violation of which would have a material adverse
effect on the operations, results of operations or condition (financial
or otherwise) of AmTech, or any provision of its articles of
organization, agreement of limited liability company and other
organizational documents, or (b) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which AmTech is a party or by which
it is bound or to which any of its assets is subject. Except for
filings and approvals required by the Hart-Scott-Rodino Act, AmTech
does not need to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
5.10 Brokers' Fees. Except and to the extent set forth in Section 4.5 above,
AmTech has no Liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Allstar could become liable or
obligated.
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5.11 AmTech Financial Statements. AmTech has provided Allstar with true and
correct copies of the following financial statements of AmTech
(collectively the "AmTech Financial Statements"): (a) balance sheet and
income statement as of and for the fiscal year ended December 31, 1998;
and (b) balance sheet and income statement as of and for the nine
months ended September 30, 1999. The AmTech Financial Statements
(including the Notes thereto) have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered
thereby, except as noted therein, present fairly the financial
condition of AmTech as of such dates and the results of operations of
AmTech for such periods, are correct and complete, and are consistent
with the books and records of AmTech (which books and records are
correct and complete in all material respects); provided, however, that
the AmTech Financial Statements as of, and for the period ended
September 30, 1999 lack footnotes, schedules and other presentation
items and are subject to normal year-end and other adjustments.
5.12 AmTech Information. All information and data provided by AmTech for
inclusion in the Proxy Statement will not contain any untrue statement
of a material fact or admit to state a material fact necessary in order
to make the statements contained therein no misleading.
ARTICLE VI
Pre-Closing Covenants.
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
6.1 General. Each of the Parties will use its commercially reasonable
efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver,
of the closing conditions set forth in Article VII below).
6.2 Notices and Consents. Allstar will give any notices to third parties,
and Allstar will use its commercially reasonable efforts to obtain any
third party consents, that Amherst Southwest reasonably may request in
connection with the transactions contemplated by this Agreement;
provided that, with respect to the Acquired Customer Contracts, Allstar
shall only be required to take such actions with respect to the
customers listed on Schedule 7.1(h). Without limiting the generality of
the foregoing, the Parties shall cooperate in good faith using
commercially reasonable efforts to obtain the consent of SBC to the
performance by Amherst Southwest of the obligations of Allstar under
the SBC Agreement. Each of the Parties will give any notices to, make
any filings with, and use its commercially reasonable efforts to obtain
any Governmental Approvals that the other Party reasonably may request
in connection with the transactions contemplated by this Agreement.
6.3 Compliance with Securities Laws; Stockholder Approval. As promptly as
practicable after the execution of this Agreement, Allstar shall
prepare and file with the SEC a proxy statement (the "Proxy Statement")
to solicit the proxies of the stockholders of Allstar with respect to
the transactions contemplated by this Agreement. Allstar shall use its
commercially reasonable efforts to cause such Proxy Statement to be
cleared by the SEC for mailing to the Allstar Stockholders as promptly
as practicable, shall mail such Proxy Statement and related proxy
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solicitation materials to the Allstar Stockholders as promptly as
practicable thereafter, and shall as promptly as practicable hold a
special meeting of the Allstar Stockholders to act upon resolutions
approving the transactions contemplated by this Agreement. The Proxy
Statement and related proxy solicitation materials shall include the
recommendation of Allstar's board of directors in favor of approval of
this Agreement and the transactions contemplated hereby, unless
Allstar's board of directors has approved an Acquisition Proposal other
than Amherst Southwest's under the circumstances and subject to the
limitations contained in Section 6.9 below. Amherst Southwest and
AmTech shall promptly provide to Allstar and its counsel such
information concerning Amherst Southwest or AmTech as applicable and
their respective Affiliates as is required in the determination of
counsel for Amherst Southwest to be included in the Proxy Statement
under the Securities Exchange Act and the rules and regulations
promulgated thereunder; provided, however, that Allstar shall not be
required to file a Proxy Statement which, in the determination of
counsel to Allstar, omits to include information believed in good faith
by counsel to Allstar to be required in the Proxy Statement under the
Securities Exchange Act and the rules and regulations promulgated
thereunder. Allstar shall concurrently with their preparation and/or
receipt provide Amherst Southwest with complete copies of each draft of
the Proxy Statement and related proxy materials and all other filings
and communications with and from the SEC in connection therewith.
6.4 Operation of Business. With respect to the operation of the CP Division
and the El Paso IT Business, Allstar will not engage in any practice,
take any action, or enter into any transaction outside the Ordinary
Course of Business of the CP Division or the El Paso IT Business.
Without limiting the generality of the foregoing, Allstar will not
sell, transfer or otherwise dispose of, or agree to sell, transfer, or
otherwise dispose of, any of the Acquired Assets, other than in the
Ordinary Course of Business, or subject any of the Acquired Assets to
any Encumbrance.
6.5 Preservation of Business. Allstar will keep its CP Division and El Paso
IT Business substantially intact, including its present operations,
physical facilities and working conditions, and will use reasonable
commercial efforts to keep its relationships with lessors, licensors,
suppliers, customers, and employees substantially intact.
6.6 Access. Allstar will permit representatives of Amherst Southwest to
have full access at all reasonable times, upon reasonable prior notice
to Allstar, and in a manner so as not to interfere with the normal
business operations of Allstar, to all premises, properties, books,
records (including tax records), contracts, and documents of or
pertaining to the CP Division, the El Paso IT Business, the Acquired
Assets and Assumed Liabilities. Any such Amherst Southwest
representatives shall be escorted at all times by an Allstar
representative specified by the Chief Executive Officer of Allstar.
6.7 Training of Personnel; Access to Server. Beginning two weeks before the
estimated Closing Date:
(a) Allstar will allow Amherst Southwest reasonable access to
the sales management and sales representatives of the CP Division and
El Paso IT Business who are listed on Schedule 3.2(a) for training
sessions with Amherst Southwest. A representative of Allstar designated
by the Chief Executive Officer of Allstar shall be present at all times
for such training sessions. All training sessions will be scheduled so
as to cause minimal disruption to the business of the CP Division and
the El Paso IT Business. Except in and for the purposes of such
training sessions, without the prior consent of the Chief Executive
Officer, neither Amherst
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Southwest nor its Affiliates shall make any contact with any employees
of Allstar other than James H. Long, Donald R. Chadwick and Frank Cano,
and Amherst Southwest shall promptly report to Allstar any contact with
Ron Dupler or Gerald Birin initiated by any such employee of Allstar
and the substance of the contact in reasonable detail; and
(b) Allstar will provide Amherst Southwest with access to the
MIS Software and the Server hosting the MIS Software for purposes of
verifying the functionality of the MIS Software and the Server and
facilitating Amherst Southwest's transitional use of the MIS Software
after the Closing pursuant to Section 3.1.
6.8 Exclusivity. From the date of this Agreement through the Closing Date,
Allstar will not, and will cause its directors, officers, stockholders,
accountants, financial advisors, attorneys and agents not to: (a)
solicit, initiate, or encourage the submission of any proposal or offer
from any Person relating to the acquisition of any capital stock or
other voting securities, or any substantial portion of the assets, of
Allstar or the CP Division or El Paso IT Business (including any
acquisition structured as a merger, consolidation, or share exchange,
but excluding from the prohibitions of this subsection (a) any sale or
other disposition of the assets of Allstar's Telecom Division); or (b)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in
any other manner any effort or attempt by any Person to do or seek any
of the foregoing. Allstar will notify Amherst Southwest in writing on
the next Business Day if any Person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing. Notwithstanding the
foregoing, nothing in this Agreement shall prohibit Allstar or its
board of directors from furnishing information to, or entering into
discussions or negotiations with, any person or entity in connection
with an unsolicited bona fide written proposal to acquire the Acquired
Assets or all or substantially all of the capital stock or assets of
Allstar, whether by means of merger, consolidation or other business
combination (an "Acquisition Proposal"), by such person or entity or
recommending an Acquisition Proposal to the stockholders of Allstar if,
and only to the extent that, the board of directors of Allstar believes
in good faith that such Acquisition Proposal would, if consummated,
result in a transaction more favorable to Allstar's stockholders from a
financial point of view than the transactions contemplated under this
Agreement and the board of directors of Allstar determines in good
faith that such action is necessary for the board of directors to
comply with its fiduciary duties to stockholders under applicable law.
Allstar shall immediately notify Amherst Southwest in writing of the
receipt of any Acquisition Proposal, and shall immediately provide
Amherst Southwest with copies of all documents, correspondence and
information constituting and/or relating to such Acquisition Proposal.
6.9 Updating Information. Prior to the Closing Date, if Allstar, Amherst
Southwest or AmTech discovers that any representation or warranty made
by it in this Agreement or in any Schedule was false or misleading in
any material respect when made, or that any event has occurred such
that any such representation, warranty or Schedule would, if made or
delivered as of the time of the occurrence of such event, or after
giving effect thereto, be incomplete or incorrect in any material
respect, such party shall notify the other party in reasonable detail
of the facts with respect thereto. If the subject matter of any such
notification would have a Material Adverse Effect, or would materially
and adversely affect the ability of the Parties to consummate the
transactions contemplated by this Agreement, or would result in a
material breach of any representation, warranty or covenant of the
notifying party contained in this Agreement, the receipt of such
notification shall give Amherst Southwest or Allstar, as applicable,
the right to terminate this Agreement pursuant to Section 9.1(b)(4) or
Section 9.1(c)(4), as applicable.
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6.10 1999 Financial Statements. On or before March 31, 2000, Allstar shall
deliver to Amherst Southwest audited consolidated statements of income
and cash flow and balance sheets for the fiscal year ended December 31,
1999, of Allstar, prepared in accordance with GAAP and that present
fairly the financial condition of Allstar as of such date and the
results of operations of Allstar for such period, except as otherwise
set forth in the notes thereto. Such financial statements shall be
correct and complete in all material respects, and consistent with the
books and records of Allstar (which books and records shall be correct
and complete in all material respects). Within five (5) Business Days
after delivery to Amherst Southwest of such financial statements,
Amherst Southwest may terminate this Agreement if such financial
statements indicate a Material Adverse Effect (other than as a result
of any matter disclosed on the Disclosure Schedule to Section 4.10) has
occurred when compared to the audited consolidated statements of income
and cash flow and balance sheets for the fiscal year ended December 31,
1998 of Allstar included in the Financial Statements.
ARTICLE VII
Conditions to Obligation to Close.
7.1 Conditions to Obligation of Amherst Southwest. The obligation of
Amherst Southwest to consummate the transactions to be performed by it
in connection with the Closing is subject to satisfaction of the
following conditions:
(a) Amherst Southwest shall have received confirmations
reasonably satisfactory to it that all of the employees identified on
Schedule 3.2(a) as "Key Employees" (including Frank Cano) and at least
90% of the employees identified on Schedule 3.2(a) as "Other Employees"
will become employed by Amherst Southwest from and after the Closing
Date;
(b) the representations and warranties set forth in Article IV
above shall be true and correct in all material respects at and as of
the Closing Date;
(c) Allstar shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(d) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (1) prevent consummation of any of the transactions contemplated
by this Agreement, (2) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, (3) affect
adversely the right of Amherst Southwest to acquire or own any material
portion of the Acquired Assets, or (4) result in the imposition on or
against Amherst Southwest of any material Damages;
(e) Allstar shall have delivered a certificate to the effect
that each of the conditions specified in Sections 7.1(b), (c) and (d)
has been satisfied in all respects;
(f) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated and the Parties shall have received all other
authorizations, consents, and approvals and Governmental Approvals
necessary to
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consummate the transactions contemplated hereby (except those relating
to Acquired Customer Contracts and Supplier Contracts, which are
covered by Sections 7.1(g) and (h));
(g) all other third party consents and Governmental Approvals
for the assignment of the Supplier Contracts to Amherst Southwest shall
have been obtained, except where the failure to obtain such consent
would not have a Material Adverse Effect;
(h) all other third party consents and Governmental Approvals
for the assignment to Amherst Southwest of those Acquired Customer
Contracts relating to the top ten (10) customers of the CP Division
based on 1999 invoiced revenue, as reflected on Schedule 7.1(h), and
except as provided in Section 2.13(e), shall have been obtained;
(i) each lessor shall have consented to the assumption by or
sublease to Amherst Southwest of the applicable Assumed Lease, and
Amherst Southwest, Allstar and such lessor, as applicable, shall have
entered into an assignment or sublease agreement in form and substance
reasonably satisfactory to such parties with respect to each Assumed
Lease;
(j) James H. Long shall have executed and delivered to Amherst
Southwest a Consulting and Non-Competition Agreement substantially in
the form attached hereto as Exhibit D;
(k) Amherst Southwest shall have received from counsel to
Allstar an opinion substantially in form and substance as set forth in
Exhibit E attached hereto, addressed to Amherst Southwest, and dated as
of the Closing Date;
(l) Allstar and the Escrow Agent shall have executed and
delivered the Escrow Agreement;
(m) Allstar shall have executed and delivered the Assignment,
Bill of Sale and Assumption Agreement;
(n) Allstar shall have executed and delivered to Amherst
Southwest the purchase price allocation letter referred to in Section
2.12;
(o) Allstar shall have caused to be completed and delivered to
Amherst Southwest a customer satisfaction survey of the customers of
the CP Division, conducted at the expense of Amherst Southwest by an
independent market research firm reasonably acceptable to Amherst
Southwest;
(p) Mintech shall have entered into contracts with Amherst
Southwest with substantially similar terms and provisions as the
Mintech Agreements; and
(q) all actions to be taken by Allstar in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Amherst Southwest.
Amherst Southwest may waive any condition specified in this Section 7.1;
provided such waiver is in writing.
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7.2 Conditions to Obligation of Allstar. The obligation of Allstar to
consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Article V
above shall be true and correct in all material respects at and as of
the Closing Date;
(b) Amherst Southwest shall have performed and complied with
all of its covenants hereunder in all material respects through the
Closing;
(c) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (1) prevent
consummation of any of the transactions contemplated by this Agreement,
(2) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect), or (3) result in
the imposition on or against Allstar of any material Damages;
(d) Amherst Southwest shall have delivered to Allstar a
certificate to the effect that each of the conditions specified above
in Sections 7.2(a)-(c) is satisfied in all respects;
(e) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated and the Parties shall have received all other
authorizations, consents and approvals and Governmental Approvals
necessary to consummate the transactions contemplated hereby (except
those relating to Supplier Contracts and Acquired Customer Contracts,
which are covered by Sections 7.2(g) and (h));
(f) each lessor shall have consented to the assumption by or
sublease to Amherst Southwest of the applicable Assumed Lease, and
Amherst Southwest, Allstar and such lessor, as applicable, shall have
entered into an assignment or sublease agreement in form and substance
reasonably satisfactory to such parties with respect to each Assumed
Lease;
(g) all third party consents and Governmental Approvals for
the assignment of the Supplier Contracts to Amherst Southwest shall
have been obtained, except where the failure to obtain such consent
would not have a Material Adverse Effect;
(h) all other third party consents and Governmental Approvals
for the assignment to Amherst Southwest of those Acquired Customer
Contracts relating to the top ten (10) customers of the CP Division
based on 1999 invoiced revenue, as reflected on Schedule 7.1(h) and
except as provided in Section 2.13(e), shall have been obtained;
(i) Amherst Southwest and the Escrow Agent shall have executed
and delivered the Escrow Agreement;
(j) Amherst Southwest shall have executed and delivered the
Assignment, Bill of Sale and Assumption Agreement;
(k) Allstar shall have received from counsel to Amherst
Southwest an opinion substantially in form and substance as set forth
in Exhibit F attached hereto, addressed to Allstar and dated as of the
Closing Date;
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(l) Amherst Southwest shall have obtained and provided to
Allstar true and correct copies of a valid Texas Sales and Use Tax
Certificate and a Texas Sales and Use Tax Permit;
(m) Amherst Southwest shall have executed and tendered to
Allstar the purchase price allocation letter contemplated by Section
2.12; and
(n) all actions to be taken by Amherst Southwest in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Allstar.
Allstar may waive any condition specified in this Section 7.2; provided such
waiver is in writing.
ARTICLE VIII
Post-Closing Covenants.
8.1 Transitional Use of Name. Effective as of the Closing Date, Allstar
hereby grants to Amherst Southwest the limited, royalty-free right and
license to use the trade name "Allstar Computer," but only in
connection with Amherst Southwest's continuation of the business of the
CP Division and El Paso IT Business, for a period of six (6) months
after the Closing Date. Amherst Southwest agrees that neither Amherst
Southwest nor its Affiliates shall use the name "Allstar Systems" or
any other name incorporating the name "Allstar" or "All Star," unless
agreed to in writing by Allstar. Following the expiration of said six
(6) month period, such license shall terminate automatically, and
Amherst Southwest shall have no further right to use the trade names
"Allstar Computer," "Allstar," or "All Star" or any derivations thereof
or names substantially similar thereto.
8.2 Covenant Not to Compete; Non-Solicitation. As an inducement for Amherst
Southwest to enter into this Agreement, Allstar agrees that from and
after the Closing and continuing for three (3) years from the Closing
Date, neither Allstar nor any Affiliate of Allstar, shall do any one or
more of the following, directly or indirectly, including through its
officers or directors:
(a) engage or participate, anywhere in North America, as an
owner, member, stockholder, officer, director, partner, employee,
consultant or otherwise in a Prohibited Business; provided, however,
that this Section shall not prohibit any such person from owning up to
5% of any class of securities registered under the Securities Exchange
Act;
(b) solicit any Person that is or was a customer of the CP
Division for or on behalf of any Prohibited Business, or solicit any
Person that is or was a customer of the El Paso IT Business for any IT
Services to be provided in the El Paso Business Area;
(c) induce or attempt to induce any employee of Amherst
Southwest or its Affiliates to leave the employ of Amherst Southwest or
its Affiliates, or in any way interfere with the relationship between
Amherst Southwest or its Affiliates and any employee, vendor, supplier
or other business relation of Amherst Southwest; or
(d) employ Frank Cano in any capacity.
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In the event of any breach of this Section 8.2, the time period of the breached
covenant shall be extended for the period of such breach. Allstar recognizes
that the territorial, time and scope limitations set forth in this Section 8.2
are included herein for the protection of Amherst Southwest and in the event
that any such territorial, time or scope limitation is deemed to be unreasonable
by a court or other tribunal of competent jurisdiction, Amherst Southwest and
Allstar agree to the reduction of either or any of said territorial, time or
scope limitations to such an area, period or scope as said tribunal shall deem
reasonable under the circumstances. Allstar shall not contest as unreasonable or
unenforceable the territorial coverage, duration or scope of this Section 8.2 in
any suit, action or other proceeding before a court, arbitrator or other
tribunal or governmental authority.
8.3 Non-Solicitation by Amherst Southwest and AmTech. As an inducement for
Allstar to enter into this Agreement, each of Amherst Southwest and
AmTech agrees that from and after the Closing and continuing for the
lesser of (a) three (3) years from the Closing Date, or (b) the date on
which Allstar and its Affiliates cease to provide IT Services due to a
cessation of business, other than a cessation due to a sale of its IT
Services business to a third party primarily engaged in a Prohibited
Business (whether such sale is by merger, consolidation, sale of
substantially all of the assets of its IT Services business or
otherwise), neither Amherst Southwest, AmTech nor any Affiliate of
Amherst Southwest or AmTech, nor any officer or director of Amherst
Southwest, AmTech or their respective Affiliates ("Prohibited
Persons"), shall, directly or indirectly:
(1) solicit any of the customers of Allstar listed on
Schedule 8.3 (which schedule shall be delivered at or prior to
the Closing) (the "Key IT Customers") for IT Services;
provided, however, that this Section shall not prohibit any
Prohibited Person, from (i) providing to SBC or any customer
of the El Paso IT Business, or soliciting SBC or any customer
of the El Paso IT Business for, IT Services to be provided
solely within the El Paso Business Area, (ii) selling computer
networking equipment and cabling, and (iii) providing warranty
service on any product sold by Amherst Southwest, AmTech or
any of their respective Affiliates, even if such warranty
service is provided to a Key IT Customer of Allstar; or
(2) induce or attempt to induce any employee of
Allstar or its Affiliates who is not listed on Schedule 3.2(a)
to leave the employ of Allstar or its Affiliates or in any way
interfere with the relationship between Allstar or any of its
Affiliates, on the one hand, and any employee, vendor or
customer of Allstar or any of its Affiliates, on the other
hand.
In the event of any breach of this Section, the time period of the breached
covenant shall be extended for the period of such breach. Each of Amherst
Southwest and AmTech recognizes that the territorial, time and scope limitations
set forth in this Section are reasonable and are required for the protection of
Allstar and in the event that any such territorial, time or scope limitation is
deemed to be unreasonable by a court or other tribunal of competent
jurisdiction, Allstar and Amherst Southwest and AmTech agree to the reduction of
either or any of said territorial, time or scope limitations to such an area,
period or scope as said tribunal shall deem reasonable under the circumstances.
8.4 Disclosure of Confidential Information. As a further inducement for
Amherst Southwest to enter into this Agreement, Allstar agrees that for
a period of five (5) years after the Closing Date, Allstar shall, and
shall cause its Affiliates to, hold in strictest confidence, and not,
without the prior written approval of Amherst Southwest, use or
disclose to any person, firm or corporation other than Amherst
Southwest (other than as required by law) any information of any kind
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relating to (a) the Acquired Assets, (b) the AmTech Financial
Statements, or (c) the business, financial condition, results of
operations or ownership of Amherst Southwest or AmTech (including in
each case, without limitation, all such information that is in written,
computerized, machine readable, model, sample, or other form capable of
physical delivery), except that the confidentiality obligations of this
Section shall not apply to: (a) such information as was generally
available to the public prior to the Closing Date or thereafter becomes
available to the public other than as a result of the breach of this
Agreement by Allstar; (b) the use or disclosure by Allstar or its
Affiliates of information to the extent required to enforce its rights
under this Agreement or in connection with the transactions
contemplated hereby; or (c) any disclosure of information to the extent
disclosure of such information is required by law, including
post-closing reporting obligations of Allstar under the Securities
Exchange Act; provided that Allstar may use information which relates
to the Customer and Sales Records and Supplier and Purchasing Records
in any manner not related to any Prohibited Business or the provision
of IT Services in the El Paso Business Area, and provided further that
in no event shall Allstar disclose the AmTech Financial Statements or
any financial information of AmTech or Amherst Southwest without the
prior written consent of Amherst Southwest, unless (y) such information
is required to be disclosed pursuant to a valid order of a court or
regulatory agency or other governmental body, in which case Allstar
shall immediately provide Amherst Southwest with written notice and a
copy of such order so that Amherst Southwest may seek a protective
order or other relief prior to such disclosure by Allstar; or (z)
Allstar reasonably believes, based upon the advice of its counsel, that
disclosure by Allstar of such information to a court or arbitrator is
necessary in connection with the enforcement by Allstar of its rights
under this Agreement or any document or agreement executed in
connection herewith, in which case Allstar shall provide Amherst
Southwest with written notice of Allstar's intent to disclose such
information to such court or arbitrator so that Amherst Southwest may
seek any available assurances of confidentiality from such court or
arbitrator. Any breach by Allstar of its obligations contained in the
immediately preceding sentence shall be deemed a material breach of
this Agreement and shall, if such breach occurs prior to the Closing,
entitle Amherst Southwest to terminate this Agreement without
opportunity for Allstar to cure, or, if such breach occurs after the
Closing, entitle Amherst Southwest to refer such alleged breach to
arbitration in accordance in Section 11.13, in each case in addition to
seeking such other remedies to which Amherst Southwest may be entitled
under this Agreement, at law or in equity. The award of the arbitrator
for such breach may include the right of Amherst Southwest to set off
any Damages found by such arbitrator to have been suffered by Amherst
Southwest as a result of such breach against any amounts payable to
Allstar under this Agreement.
8.5 Maintenance and Use of Original Documents. If at any time from the
Closing Date through the fifth anniversary of the Closing Date, Amherst
Southwest shall require access to or use of any of the originals of
Customer and Sales Records, Supplier and Purchasing Records and other
original books and records of Allstar relating to the CP Division or
the El Paso IT Business, Allstar shall provide such access and use to
Amherst Southwest upon reasonable advance notice. Allstar shall not
destroy or otherwise dispose of any such original documents prior to
the fifth anniversary of the Closing Date without the prior written
approval of Amherst Southwest.
8.6 Taxes. Within two (2) Business Days after Allstar's receipt of a bill
for Taxes and determination of Taxes payable by it with respect to the
Acquired Assets for any period occurring in 2000, which Taxes are
payable by Allstar in arrears in 2001, Allstar shall provide to Amherst
Southwest a copy of the bill and all other materials and filings with
respect to such Taxes, a written report detailing Allstar's calculation
of the Taxes due, and all information and supporting
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documentation concerning such calculations. Within fifteen (15)
Business Days of receipt of all such information, Amherst Southwest
shall pay to Allstar its pro rata share of such Taxes determined by
multiplying the total amount of Taxes paid by Allstar with respect to
the Acquired Assets by a fraction, the numerator of which is the number
of days elapsed from the Closing Date through December 31, 2000, and
the denominator of which is 365. Notwithstanding the foregoing, if the
Taxes payable by Amherst Southwest pursuant to the preceding formula
with respect to any Tax on the Tangible Assets or Inventory is greater
than the Taxes that would be payable for such period by Amherst
Southwest if such Taxes were calculated using the Appraised Value of
the Tangible Assets as determined in Section 2.7 or the Inventory
Purchase Price, as appropriate, then Amherst Southwest shall only be
obligated to pay such lesser amount of Taxes to Allstar based upon the
lower value of Inventory and Acquired Assets used by the Parties under
this Agreement.
8.7 IT Services and Certifications. The Parties agree as follows with
respect to IT Services:
(a) To the extent that Allstar and its Affiliates provide IT
Services to customers that are also customers of the CP Division or
Amherst Southwest post-Closing, such IT Services shall be provided in a
commercially reasonable manner consistent with Allstar's past
practices.
(b) For a period of one year after the Closing Date, Allstar
will take no action to reduce its IT Services personnel from
commercially reasonable levels.
8.8 Employee Loans. After the Closing, Amherst Southwest shall observe all
written wage assignments delivered to Amherst Southwest and signed by
Transferred Employees instructing Amherst Southwest to withhold from
such employees and pay over to Allstar amounts previously advanced by
Allstar to such employees. Allstar shall indemnify and hold harmless
Amherst Southwest, its Affiliates and their respective directors,
officers, employees and agents, from and against all Damages any of
them may incur arising out of or relating to the observance of such
wage assignments or the performance by Amherst Southwest of its
obligations contained in this Section.
8.9 Mintech Business. On and after the Effective Time, Allstar shall cease
selling computer hardware and software to Mintech and shall not make
any additional loans or advances to Mintech pursuant to the Mintech
Agreements or otherwise. The Parties agree that during a period of 120
days after the Closing Date, as between the Parties: (a) Allstar shall
continue for such period to be a first position secured party with
respect to the obligations of Mintech arising prior to the Effective
Time under the Mintech Agreements, and (b) Amherst Southwest shall be
for such period a junior secured party with respect to the obligations
of Mintech to Amherst Southwest arising after the Effective Time. Upon
termination of such 120 day period: (x) Allstar shall execute and
deliver to Amherst Southwest such assignment documents and instruments
as Amherst Southwest reasonably may request in order to assign to
Amherst Southwest all first position Encumbrances in favor of Allstar
under the Mintech Agreements, and (y) Amherst Southwest shall execute
and deliver to Allstar such assignment documents as Allstar reasonably
may request in order to assign to Allstar all junior Encumbrances in
favor of Amherst Southwest with respect to the obligations of Mintech
to Amherst Southwest.
8.10 Intangible Asset License. Effective as of the Closing Date, Allstar
hereby grants to Amherst Southwest a limited, royalty free and
irrevocable right and license to use, solely in the El Paso Business
Area, the intangible assets consisting of the business ideas and
information, know-how,
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copyrights and advertising and marketing concepts used by the El Paso
IT Business in connection with the sale of computer hardware, software
and related products in the El Paso Business Area.
ARTICLE IX
Termination.
9.1 Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(a) Amherst Southwest, AmTech and Allstar may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) Amherst Southwest may terminate this Agreement by giving
written notice to Allstar pursuant to Section 6.10 or, at any time
prior to the Closing, (1) in the event that Allstar has breached any
representation, warranty, or covenant contained in this Agreement,
Amherst Southwest has notified Allstar of the breach, and the breach
has continued without cure for a period of ten (10) days after the
notice of breach, (2) if the Closing shall not have occurred on or
before June 30, 2000, by reason of the failure of any condition
precedent under Section 7.1 hereof (unless the failure results
primarily from Amherst Southwest or AmTech breaching any
representation, warranty, or covenant contained in this Agreement) and
other than by reason of the occurrence of the event specified in
9.1(b)(3), (3) in the event that the board of directors of Allstar
shall have approved any Acquisition Proposal other than that of Amherst
Southwest, or (4) if any notification delivered by Allstar pursuant to
Section 6.9 gives rise to Amherst Southwest's right of termination
pursuant to Section 6.9; and
(c) Allstar may terminate this Agreement by giving written
notice to Amherst Southwest and AmTech at any time prior to the Closing
(1) in the event Amherst Southwest or AmTech has breached any
representation, warranty, or covenant contained in this Agreement,
Allstar has notified Amherst Southwest or AmTech (as the case may be)
of the breach, and the breach has continued without cure for a period
of ten (10) days after the notice of breach, (2) if the Closing shall
not have occurred on or before June 30, 2000, by reason of the failure
of any condition precedent under Section 7.2 hereof (unless the failure
results primarily from Allstar itself breaching any representation,
warranty, or covenant contained in this Agreement), and other than by
reason of the occurrence of the event specified in 9.1(c)(3), (3) in
the event that the board of directors of Allstar shall have approved
any Acquisition Proposal other than that of Amherst Southwest or (4) if
any notification delivered by Amherst Southwest or AmTech pursuant to
Section 6.9 gives rise to Allstar's right of termination pursuant to
Section 6.9.
9.2 Termination Fee. In the event that this Agreement is terminated by
Amherst Southwest pursuant to Section 9.1(b)(3) or by Allstar pursuant
to Section 9.1(c)(3), Allstar shall within two Business Days after such
termination pay to Amherst Southwest Five Hundred Thousand Dollars
($500,000) as compensation for lost opportunities and reimbursement of
out-of-pocket expenses, and AmTech and Amherst Southwest agree that
upon payment of such amount to Amherst Southwest, Allstar shall have no
further liability to either of them arising under this Agreement.
9.3 Effect of Termination. Except as provided in Section 9.2 and except for
the provisions of Sections 9.4 and 11.13, if any Party terminates this
Agreement pursuant to Section 9.1 above, all
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rights and obligations of the Parties hereunder shall terminate without
any Liability of any Party to any other Party (except for any Liability
of any Party then in breach).
9.4 Certain Covenants Upon Termination. If this Agreement is terminated
pursuant to this Article IX, each of Amherst Southwest and AmTech
agrees (a) to be bound by the terms and provisions of that certain
Confidentiality Agreement dated August 27, 1999, between Allstar and
Knightsbridge, Inc., a Nevada corporation ("Knightsbridge"), which is
incorporated into this Section 9.4 as if set forth herein in its
entirety, as if they were each substituted for Knightsbridge as parties
thereto, (b) that the non-solicitation covenants contained in Section 4
of such Confidentiality Agreement shall extend for a period of two (2)
years from and after the date of termination of this Agreement, and (c)
that for a period of one (1) year after the date of termination of this
Agreement, no Prohibited Person shall, directly or indirectly, solicit
any of the top ten (10) customers of the CP Division listed on Schedule
7.1(h) for the sale or disposition of computer hardware and software in
substantially the manner conducted by the CP Division; provided,
however, that this Section shall not prohibit any Prohibited Person
from soliciting or selling to any of such customers to which any of the
Prohibited Persons have sold computer hardware or software at any time
within the twelve (12) month period ending on the date of this
Agreement.
ARTICLE X
Indemnification.
The Parties shall be entitled to indemnification as provided in this
Article X. As used herein, the term "Damages" shall mean all liabilities,
demands, claims, actions or causes of action, regulatory, legislative or
judicial proceedings or investigations, assessments, levies, losses, fines,
penalties, damages, costs and expenses, including, without limitation,
reasonable attorneys', accountants', investigators', and experts' fees and
expenses, sustained or incurred in connection with the defense or investigation
of any such claim.
10.1 Indemnification by Allstar. Subject to the limitations contained in
this Article X, Allstar shall indemnify and hold harmless Amherst
Southwest, its Affiliates and its and their respective partners,
members, managers, officers, directors, shareholder, agents and
employees, and their successors and assigns (each an "Amherst Southwest
Indemnitee" and collectively the "Amherst Southwest Indemnitees")
against and from all Damages sustained or incurred by any Amherst
Southwest Indemnitee, as a result of or arising out of or by virtue of:
(a) any breach of any representation and warranty made by
Allstar to Amherst Southwest herein or in any closing document
delivered to Amherst Southwest in connection herewith;
(b) the breach by Allstar or failure of Allstar, directly or
indirectly, including by virtue of action taken by its directors or
officers acting in their capacity as such, to comply with any of the
covenants or obligations of Allstar under this Agreement, or the
failure of Allstar to comply with any applicable bulk transfer laws or
regulations;
(c) any Excluded Liability; or
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(d) the ownership, use or operation by Allstar of the Acquired
Assets, the CP Division or the El Paso IT Business prior to the
Effective Time (other than with respect to the Assumed Liabilities).
10.2 Indemnification by Amherst Southwest. Subject to the limitations
contained in this Article X, Amherst Southwest shall indemnify and hold
harmless Allstar, its Affiliates and its and their respective officers,
directors, shareholders, agents and employees and their successors and
assigns (each an "Allstar Indemnitee" and collectively the "Allstar
Indemnitees") against and from all Damages sustained or incurred by any
Allstar Indemnitee, as a result of or arising out of or by virtue of:
(a) any breach of any representation and warranty made by
Amherst Southwest or AmTech to Allstar herein or in any closing
document delivered to Allstar in connection herewith;
(b) the breach by Amherst Southwest or AmTech or failure of
Amherst Southwest or AmTech, directly or indirectly, including by
virtue of any action taken by their respective partners, members,
managers or officers in their capacity as such, to comply with any of
the covenants or obligations of Amherst Southwest or AmTech under this
Agreement, or the failure of Amherst Southwest or AmTech to comply with
any applicable bulk transfer laws or regulations;
(c) any Assumed Liability; or
(d) the ownership, use or operation of the Acquired Assets,
the CP Division or the El Paso IT Business from and after the Effective
Time, the use by Amherst Southwest of the names licensed to it under
Section 8.1 of this Agreements or the use of the intangible assets
licensed to Amherst Southwest pursuant to Section 8.10.
10.3 Indemnification Thresholds and Limits. Neither the Allstar Indemnitees
nor the Amherst Southwest Indemnitees shall be entitled to
indemnification pursuant to the terms of this Article X until the
aggregate amount of all claims for indemnification by such indemnitees
exceeds $100,000, but once such claims exceed $100,000, the Allstar
Indemnitees, on the one hand, or the Amherst Southwest Indemnitees, on
the other hand, shall be entitled to indemnification for all
indemnification claims up to a maximum of $500,000 plus interest earned
on such amount while it is held in the Escrow, as provided in Section
10.4 below. Notwithstanding the foregoing, there shall be no threshold
or time or dollar limit on (a) claims for indemnification pursuant to
Sections 10.1(c) or (d) or Sections 10.2(c) or (d); and (b) breach by a
Party of its obligations to make payments to the other Party pursuant
to Sections 2.3, 2.5, 2.7, 2.9, 3.3, 3.4, 8.6, 8.7 or 9.2.
10.4 Holdback; Claims.
(a) On the Closing Date, the Holdback will be deposited into
the Escrow with the Escrow Agent pursuant to the terms of the Escrow
Agreement. Amherst Southwest agrees that it shall have recourse solely
to the Escrow and solely during the Escrow Period for claims against
Allstar for indemnification under Section 10.1(a) and 10.1(b).
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(b) Amherst Southwest Indemnitees shall be entitled to make
claims for indemnification from the Holdback which arise during the
Escrow Period, provided such claims are asserted by Amherst Southwest
within the Escrow Period. Within ten (10) days following the end of the
Escrow Period, if no such claims for indemnification are asserted prior
to the expiration of the Escrow Period, or if any such claims were
asserted prior to the Expiration of the Escrow Period, no such claims
remain pending, the Escrow Agent shall disburse the remaining funds,
after payment of prior claims by Amherst Southwest that are undisputed
by Allstar or that have been fully and finally resolved in accordance
with Section 11.13 of this Agreement. If any such claims asserted prior
to the expiration of the Escrow Period are pending, then the Escrow
Agent shall make reasonable provision for such pending claims and
disburse the balance, if any, of the Holdback within ten (10) days
following the end of the Escrow Period, pursuant to the terms of the
Escrow Agreement.
(c) In the event an indemnified party seeks or expects to seek
indemnity for any Damage arising out of or in connection with a claim,
demand, cause of action or proceeding by a third party, the
indemnifying shall promptly notify the indemnified party in writing of
the nature of the Damage. The indemnifying party shall have the right
to assume the defense thereof and the indemnifying party shall not be
liable to any indemnified parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such indemnified
parties in connection with the defense thereof, except that if the
indemnifying party elects not to assume such defense or counsel for the
indemnifying parties advise that because of conflicts of interest
between the indemnifying party and the indemnified parties such counsel
cannot, as a matter of professional responsibility, represent both the
indemnified parties and the indemnifying parties (it being agreed by
the Parties that the indemnified party shall not be obligated to waive
any conflict of interest of such counsel), then the indemnified parties
may retain counsel satisfactory to them, and the indemnifying party
shall pay all reasonable fees and expenses of such counsel for the
indemnified parties promptly as statements therefor are received. In no
event shall an indemnifying party be liable for the fees and expenses
of more than one separate law firm for all indemnified parties. So long
as the indemnifying party is defending in good faith such third party
Damage, the indemnified party shall not settle or compromise such third
party claim without the indemnifying party's prior written consent. The
indemnified party shall make available to the indemnifying party or its
representatives all personnel records and other materials reasonably
required by them for use in contesting any third party Damage and shall
cooperate fully with the indemnifying party in the defense of such
Damage.
(d) In case any event shall occur which would otherwise
entitle an indemnified party to assert a claim for indemnification
hereunder, no loss, damage or expense shall be deemed to have been
sustained by such party to the extent of (1) any tax savings realized
by such party with respect thereto, or (2) any proceeds received by
such party from any insurance policies with respect thereto.
10.5 Exclusive Remedy. Notwithstanding any provision herein to the contrary,
the indemnification provisions of this Article shall be the sole and
exclusive remedy of each of the Parties for any Damages in any way
based on, arising out of or attributable to matters specified in
Sections 10.1(a) 10.1(b), 10.2(a) and 10.2(b), whether such Damages are
based on contract or tort, at law or in equity, or otherwise, except
for the rights of a Party to seek equitable remedies or specific
performance in accordance with Section 11.14. Each of the Parties
hereby irrevocably waives any other remedies available to it, whether
at law or in equity, for any such Damages, except for its rights to
seek equitable remedies in accordance with Section 11.14. Nothing
contained in this
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Section shall limit or otherwise effect the remedies available to a
Party for Damages in any way based on, arising out of or attributable
to matters specified in Sections 10.1(c) 10.1(d), 10.2(c) and 10.2(d).
ARTICLE XI
General Terms.
11.1 Survival of Representations and Warranties. All of the representations
and warranties contained in this Agreement shall survive for a period
of one year after Closing Date and shall thereafter terminate and be of
no force and effect, except to the extent that a written claim for
breach of a representation or warranty has been received by an
indemnifying party within such one-year period.
11.2 Press Releases and Public Announcements. No Party shall issue any press
release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written
approval of the other Party; provided, however, that any Party may make
any public disclosure which, in the written opinion of counsel to such
Party, is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will advise the other Party prior to making the
disclosure and provide such other Party with a written statement
certifying that the disclosing Party's counsel has provided it with a
written opinion stating that such disclosure is required as provided in
this Section).
11.3 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
11.4 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by
or among the Parties, written or oral, to the extent they related in
any way to the subject matter hereof.
11.5 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Parties and their respective successors and
permitted assigns, and the agreements of Allstar contained in Section
8.2 shall be binding upon any Person who acquires all or a substantial
portion of the assets of Allstar. Neither Allstar, Amherst Southwest
nor AmTech may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval
of the other Parties; provided, however, that (a) Amherst Southwest may
(i) assign any or all of its rights and interests hereunder to one or
more of its Affiliates and (ii) designate one or more of its Affiliates
to perform its obligations hereunder (in any or all of which cases
Amherst Southwest nonetheless shall remain responsible for the
performance of all of its obligations hereunder); and (b) Allstar may
undertake a reorganization prior to the Closing Date pursuant to which
it shall transfer all of the Acquired Assets into a limited partnership
directly or indirectly wholly-owned by Allstar, and designate such
limited partnership to convey the Acquired Assets to Amherst Southwest
as provided hereunder (in which case Allstar nonetheless shall remain
responsible for the performance of all of its obligations hereunder).
11.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
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11.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two Business Days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to Allstar: Allstar Systems, Inc.
6401 Southwest Freeway
Houston, TX 77074
Attention: James H. Long
with a copy to: Porter & Hedges, L.L.P.
700 Louisiana, Suite 3500
Houston, Texas 77002
Attention: Nick D. Nicholas
Facsimile: 713-228-1331
If to AmTech or Amherst Southwest:
Amherst Southwest, LP
10 Columbia Drive
Amherst, NH 03031
Attn: Chief Financial Officer
with a copy to: D'Ancona & Pflaum LLC
111 East Wacker Drive
Suite 2800
Chicago, Illinois 60601
Attention: Suzanne L. Saxman, Esq.
Facsimile: 312-602-3064
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
11.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without
giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the
State of Delaware.
11.9 Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by the
Parties. Allstar may consent to any such amendment at any time prior to
the Closing with the prior authorization of its board of directors. No
waiver by Allstar or Amherst Southwest of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any
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prior or subsequent default, misrepresentation, or breach of warranty
or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
11.10 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
11.11 Expenses. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
11.12 Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question
of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of
proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. The Exhibits and
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
11.13 Arbitration Provisions.
(a) All disputes arising out of or relating to (i) this
Agreement or any agreement or instrument delivered pursuant to the
terms hereof, or the transactions contemplated hereby or thereby, or
(ii) the validity, interpretation, breach, or violation or termination
hereof or thereof (including disputes arising under this Section 11.13
(each a "Dispute"), shall be finally and solely determined and settled
by a nationally recognized certified public accounting firm selected by
mutual agreement of the parties, which firm is not rendering (and
during the preceding two-year period, has not rendered) services to any
of the parties or their respective Affiliates (the "Arbitrating
Accountant"). In connection with the resolution of any Dispute
hereunder, the Arbitrating Accountant shall have access to all
documents, records, work papers, facilities and personnel necessary to
perform its function as arbitrator. The award of the Arbitrating
Accountant shall be (1) the sole and exclusive remedy of the parties,
(2) enforceable in any court of competent jurisdiction and (3) final
and binding (absent manifest error) on the parties hereto.
Notwithstanding the foregoing, either party may seek injunctive relief
in a court of competent jurisdiction in accordance with Section 11.14.
Amherst Southwest, on the one hand, and Allstar, on the other hand,
shall each pay one-half of the fees and expenses of the Arbitrating
Accountant with respect to any Dispute.
(b) In the event that the parties are unable to mutually agree
on the Arbitrating Accountant within thirty (30) days, the Dispute
shall be finally and solely determined and settled by arbitration in
Houston, Texas in accordance with the Commercial Arbitration Rules of
the American Arbitration Association and this Section 11.13. Such
arbitration shall be conducted by a single arbitrator, whom the Parties
shall request to be experienced in legal, financial and accounting
matters. In any such arbitration proceedings, the arbitrator shall
adopt and apply the provisions of the Federal Rules of Civil Procedure
relating to discovery so that each party shall allow and may obtain
discovery of any matter not privileged which is relevant to the subject
matter involved in the arbitration to the same extent as if such
arbitration were a civil action pending in a United States District
Court for the Southern District of Texas. The arbitrator may proceed to
an award notwithstanding the failure of any party to participate in
such proceedings. The prevailing party in the arbitration proceeding
shall be entitled to an award of reasonable
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attorneys' fees incurred in connection with the arbitration in such
amount as may be determined by the arbitrator. The award of the
arbitrator shall be (i) the sole and exclusive remedy of the parties,
(ii) enforceable in any court of competent jurisdiction and (iii) final
and binding (absent manifest error) on the parties hereto.
Notwithstanding the foregoing, either party may seek injunctive relief
in a court of competent jurisdiction in accordance with Section 11.14.
11.14 Specific Performance. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the
Parties agrees that the other Party shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Agreement
and to enforce specifically this Agreement and the terms and provisions
hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter,
in addition to any other remedy to which it may be entitled, at law or
in equity. In any such action, the Party against whom injunctive relief
is sought shall be entitled to assert any matters in the nature of
defenses (but not counterclaims or cross actions) without regard to the
arbitration agreements contained in Section 11.13.
11.15 Knowledge, Gender and Certain References. A representation or statement
made herein to the knowledge of Allstar means the actual, but not
constructive or imputed, knowledge of James H. Long, Donald R.
Chadwick, Frank Cano and each member of the board of directors of
Allstar. Unless otherwise specified, all references herein to days,
weeks, months or years shall be calendar days, weeks, months, or years.
Whenever the context requires, the gender of all words used herein
shall include the masculine, feminine and neuter, and the number of all
words shall include the singular and plural. References to Articles or
Sections shall be to Articles or Sections of this Agreement unless
otherwise specified. The headings and captions used in this Agreement
are solely for convenient reference and shall not affect the meaning or
interpretation of any Article, Section or Paragraph herein or this
Agreement. The words "hereof," "herein" or "hereunder" shall refer to
this Agreement as a whole not to any particular Article, Section or
Paragraph. The words "including" or "include" are used herein in an
illustrative sense and not to limit a more general statement. When
computing time periods described by a number of days before or after a
stated date or event, the stated date or date on which the specified
event occurs shall not be counted and the last day of the period shall
be counted. Unless otherwise specified herein any obligation otherwise
due on a non-Business Day shall not be due until the next Business Day.
11.16 Time is of the Essence. Time is of the essence in the performance of
this Agreement.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
AMHERST COMPUTER PRODUCTS SOUTHWEST, LP
By: /s/ S.G. Birin
----------------------------------------
S.G. Birin, CFO
ALLSTAR SYSTEMS, INC.
By: /s/ James H. Long
----------------------------------------
James H. Long, CEO
AMHERST TECHNOLOGIES, L.L.C., solely with
respect to Sections 5.5, 5.7, 5.8, 5.9,
5.10, 5.11, 5.12, 8.3 and Article XI.
By: /s/ S.G. Birin
----------------------------------------
S.G. Birin, CFO
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AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT
This Amendment to Asset Purchase Agreement (the "Amendment"),
dated as of April 6, 2000, is entered into by and among Amherst Computer
Products Southwest, LP, a Texas limited partnership ("Amherst Southwest"),
Amherst Technologies, L.L.C., a Nevada limited liability company ("AmTech"), and
Allstar Systems, Inc., a Delaware corporation ("Allstar").
BACKGROUND:
A. Amherst Southwest, AmTech and Allstar have heretofore entered into
that certain Asset Purchase Agreement, dated as of March 16, 2000 (the "Asset
Purchase Agreement"). All capitalized terms used and not otherwise defined
herein shall have the meanings ascribed to them in the Asset Purchase Agreement.
B. The parties desire to make certain amendments to the Asset Purchase
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, Amherst Southwest, AmTech and Allstar agree as follows.
AGREEMENTS
1. Status of the Asset Purchase Agreement. Except as specifically set
forth herein, the Asset Purchase Agreement shall remain in full force and effect
and shall not be waived, modified, superseded or otherwise affected by this
Amendment. This Amendment is not to be construed as a release, waiver or
modification of the terms, conditions, representations, warranties, covenants,
rights or remedies set forth in the Asset Purchase Agreement, except as
specifically set forth herein.
2. Amendments to the Asset Purchase Agreement.
(i) The following provision shall be added as Section 2.14 of
the agreement:
"2.14 Pre-Closing Escrow; Expense Reimbursement.
(a) On or before April 10, 2000, Amherst Southwest
shall wire transfer $500,000 into an escrow account with the
Escrow Agent to be established by the parties, such funds
(together with interest or income earned thereon) to be
applied against the Purchase Price upon Closing; provided
however, if the Closing of the transactions contemplated by
the Asset Purchase Agreement does not occur by June 30, 2000,
then the parties shall cause the $500,000 escrow amount
(together with interest or income earned thereon) to be paid
on or before July 5, 2000, as follows:
(1) If the Closing does not occur solely
because of the breach by Allstar of its
representations or obligations in, or a failure of
the conditions under, the following sections of the
Agreement, the funds in escrow shall be paid to
Amherst Southwest: Sections 4.1, 4.2, 4.4, 4.8, 6.3,
7.1(f), 7.1(k), 7.1(l), 7.1(m), and 9.1(a).
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(2) If the Closing does not occur solely
because of the failure of the condition of Section
7.1(d) of the Agreement, the funds in escrow shall be
split evenly between and paid to Amherst Southwest
and Allstar.
(3) If the Closing does not occur for any
reason other than one which expressly entitles
Amherst Southwest to receive all or a portion of the
escrow funds under paragraphs 1 or 2 above, the
escrow funds shall be paid to Allstar. The form of
Escrow Agreement shall be in substantially the form
of Exhibit A and attached to the Asset Purchase
Agreement as Exhibit G.
(b) On or before April 10, 2000, Amherst Southwest
agrees to pay to Allstar by wire transfer the sum of $250,000
in addition to the Purchase Price as a non-accountable expense
reimbursement."
(ii) Section 9.2 of the Agreement is hereby deleted
in its entirety and replaced with the following:
"9.2 Termination Fee. In the event that this
Agreement is terminated by Amherst Southwest pursuant
to Section 9.1(b)(3) or by Allstar pursuant to
Section 9.1(c)(3), Allstar shall within 2 Business
Days after such termination pay or cause to be paid
to Amherst Southwest, as compensation for lost
opportunities and reimbursement of out-of-pocket
expenses: (i) Five Hundred Thousand Dollars
($500,000), (ii) the amount of the escrow funds
(together with interest or income earned thereon)
under that certain Escrow Agreement dated as of April
6, 2000 among Allstar, Amherst Southwest and the
Escrow Agent thereunder, (iii) the amount of $250,000
previously paid by Amherst Southwest to Allstar
pursuant to Section 2.14(b), as a non-accountable
expense reimbursement, and Allstar shall assume and
Amherst Southwest shall assign to Allstar all rights
and obligations of Amherst Southwest under (1) the
Lease between Amherst Southwest and Weingarten Realty
Advisors for the premises located at 11727 W. Sam
Houston Parkway South, Suite D, Houston, Texas 77031,
and (2) Section 3 of the Voting Agreement, as
amended. AmTech and Amherst Southwest agree that upon
such payments to Amherst Southwest and the assumption
of such obligations by Allstar, Allstar shall have no
further liability to either of them arising under
this Agreement."
3. Effectiveness of this Amendment. The effectiveness of this Amendment
is contingent upon the execution of Amendment No. 1 to the Voting and Support
Agreement dated as of April 6, 2000 by and among Amherst Southwest and James H.
Long (the "Voting Agreement Amendment").
4. Representations and Warranties of Entities. Each of Amherst
Southwest, AmTech and Allstar represents and warrants that its execution,
delivery and performance of this Amendment has been duly authorized by all
necessary corporate and partnership action and that this Amendment is a legal,
valid and binding obligation of the parties in accordance with its terms.
Allstar further represents and warrants that its board of directors has approved
the Voting and Support Agreement dated as of March 16, 2000 between Amherst
Southwest, and James H. Long, and the Voting Agreement Amendment, in a manner
sufficient to make the restrictions contained in Section 203 of the Delaware
General Corporation Law inapplicable to the transactions contemplated by the
Asset Purchase Agreement, as amended.
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5. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
6. Governing Law. This Amendment shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first above written.
AMHERST COMPUTER PRODUCTS
SOUTHWEST, LP
By: /s/ S.G. Birin
--------------------------------------
Title: CFO
-----------------------------------
ALLSTAR SYSTEMS, INC.
By: /s/ James H. Long
------------------------------------
Title: Chief Executive Officer
---------------------------------
AMHERST TECHNOLOGIES, L.L.C.
By: /s/ S.G. Birin
-------------------------------------
Title: CFO
---------------------------------
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APPENDIX B
CONSULTING AND NON-COMPETITION AGREEMENT
This Agreement (the "Agreement") is entered into this ___ day of
__________, 2000, by and between Amherst Computer Products Southwest, LP, a
Texas limited partnership ("Amherst Southwest"), and James H. Long ("Long").
BACKGROUND
Amherst Southwest, Amherst Technologies, LLC, a Nevada limited
liability company, and Allstar Systems, Inc., a Delaware corporation ("Allstar")
are parties to an Asset Purchase Agreement dated as of March 16, 2000 (the
"Purchase Agreement"), pursuant to which Amherst Southwest is purchasing certain
assets of the CP Division and the El Paso IT Business. It is a condition under
the Purchase Agreement to the respective obligations of the parties that Amherst
Southwest and Long shall have entered into this Agreement. Capitalized terms not
otherwise defined herein shall have the meanings assigned to them in the
Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth
below, and for other good and valuable consideration, the parties agree as
follows:
ARTICLE I
Consulting Services
1.1 Consulting.
(a) Long agrees to provide consulting services as reasonably
requested by Amherst Southwest or its Affiliates, all on the terms and
conditions set forth in this Agreement. The services which may be requested of
Long shall consist of consultations between Long and the executive management of
Amherst Southwest and its Affiliates concerning: (1) the transition of the
business management of the CP Division and the El Paso IT Business
(collectively, the "Acquired Business") from Allstar to Amherst Southwest and
methods and procedures to improve the efficiency of that transition; (2) the
management information systems of the Acquired Business; (3) relations between
Amherst Southwest and customers of the Acquired Business; (4) relations between
Amherst Southwest and Transferred Employees; (5) methods to improve the
financial and operating performance of the Acquired Business; and (6) such other
matters relating to the Acquired Business as Amherst Southwest reasonably may
request. The consulting services provided by Long hereunder are referred to as
the "Services."
(b) Despite anything in this Agreement to the contrary, Long
shall not be required to render consulting services relating to: (1) any
business of Amherst Southwest or its Affiliates other than Acquired Business; or
(2) any matter involving a dispute or potential dispute between Allstar or any
of its Affiliates (including Long) on the one hand, and Amherst Southwest or any
of its Affiliates, on the other.
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(c) Long shall not be required to devote more than the
following number of hours to the performance of Services hereunder: (1) 40 hours
per week during the first two week period following the Closing Date; (2) 10
hours in any five day period after the two week period following the Closing
Date; (3) 200 hours in the twelve month period following the Closing Date; and
(4) 100 hours in the twelve month period thereafter.
1.2 Compensation; Expense Reimbursement. Long's consulting compensation
under this Article I shall be as follows:
(a) $20,000 per year payable in equal monthly installments of
$1,666.67 each at the end of each calendar month during the Term; plus
(b) if Amherst Southwest requests and Long agrees to provide
Services in excess of the hourly maximums required of Long under Section 1.1(c),
$200 per hour for any such hourly services in excess of such hourly maximums;
plus
(c) reimbursement of Long's reasonable travel expenses and
other out-of-pocket expenses incurred by Long in the performance of his duties
hereunder, all in accordance with the policies of Amherst Southwest and its
Affiliates for reimbursement of business expenses incurred by their executive
officers.
1.3 Term. The term of this Agreement shall be from the date of the
Closing (as defined in the Purchase Agreement) (the "Effective Date") for a
period of twenty-four (24) months thereafter (the "Term").
1.4 Manner of Performance. During the Term, Long shall perform the
Services requested of him to the best of his ability to advance the business and
welfare of Amherst Southwest. Long will abide by all laws, rules and regulations
that apply to the performance of the Services and Amherst Southwest shall not
request that Long provide any Services that would violate any such laws, rules
or regulations.
1.5 Independent Contractor. The parties agree that Long is an
independent contractor and that Long shall not be considered under this
Agreement or otherwise to be an employee or agent of Amherst Southwest. Long
shall be legally responsible for his own taxes. Long shall not have the power to
legally bind Amherst Southwest and is not granted and shall not exercise the
right or authority to assume or create any obligation or responsibility,
including, without limitation, contractual obligations, on behalf of Amherst
Southwest. If and when Amherst Southwest requests in writing, Long agrees to
provide Amherst Southwest with necessary documentation to support Long's
independent contractor status under all applicable laws.
ARTICLE II
Confidential Information.
2.1 Confidentiality. Long agrees that for a period of five (5) years
after the Closing Date, he shall hold in strictest confidence, and not, without
the prior written approval of Amherst Southwest, use or disclose to any person,
firm or corporation other than Amherst Southwest (other than as required by law)
any information of any kind relating to (a) the Acquired Assets, (b) the AmTech
Financial Statements, or (c) the business, financial condition, results of
operations or ownership of
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Amherst Southwest or AmTech (including in each case, without limitation, all
such information that is in written, computerized, machine readable, model,
sample, or other form capable of physical delivery) (collectively, the
"Confidential Information"), except that the confidentiality obligations of this
Section shall not apply to: (a) such information as was generally available to
the public prior to the Closing Date or thereafter becomes available to the
public other than as a result of the breach of this Agreement by Long; (b) the
use or disclosure by Long of information to the extent required to enforce his
rights under this Agreement or in connection with the transactions contemplated
hereby; or (c) any disclosure of information to the extent disclosure of such
information is required by law; provided that Long may use information which
relates to the Customer and Sale Records and Supplier and Purchasing Records in
any manner not related to any Prohibited Business or the provision of IT
Services in the El Paso Business Area, and provided further that in no event
shall Long disclose the AmTech Financial Statements or any financial information
of AmTech or Amherst Southwest without the prior written consent of Amherst
Southwest, unless (y) such information is required to be disclosed pursuant to a
valid order of a court or regulatory agency or other governmental body, in which
case Long shall immediately provide Amherst Southwest with written notice and a
copy of such order so that Amherst Southwest may seek a protective order or
other relief prior to such disclosure by Long, or (z) Long reasonably believes,
based upon the advice of his counsel, that disclosure by Long of such
information to a court or arbitrator is necessary in connection with the
enforcement by Long of his rights under this Agreement or by Allstar of its
rights under the Purchase Agreement or any document or agreement executed in
connection therewith, in which case Long shall provide Amherst Southwest with
written notice of Long's intent to disclose such information to such court or
arbitrator so that Amherst Southwest may seek any available assurances of
confidentiality from such court or arbitrator. Any breach by Long of his
obligations contained in the immediately preceding sentence shall be deemed a
material breach of this Agreement and shall entitle Amherst Southwest to refer
such alleged breach to dispute resolution in accordance in Article IV, in
addition to seeking such other remedies to which Amherst Southwest may be
entitled under this Agreement, at law or in equity. The award of the Arbitrating
Accountant or arbitrator, as the case may be, for such breach may include the
right of Amherst Southwest to set off any Damages found by such Arbitrating
Accountant or arbitrator to have been suffered by Amherst Southwest as a result
of such breach against any amounts payable to Long under this Agreement.
2.2 Use and Return. All Confidential Information that comes into Long's
possession shall be the property of Amherst Southwest and shall not be used by
Long in any way except in the course of his performing Services under this
Agreement, and for the benefit of Amherst Southwest. Long will not remove any
Confidential Information from premises owned or leased by Amherst Southwest, and
upon termination of this Agreement, all Confidential Information will be turned
over to Amherst Southwest through its duly authorized representative.
ARTICLE III
Non-Competition; Non-Solicitation.
3.1 Covenants. As an inducement for Amherst Southwest to enter into
this Agreement, Long agrees that:
(a) for a period of three (3) years from the date hereof or
the longest time permitted by applicable law, whichever is shorter, Long shall
not do any one or more of the following, directly or indirectly:
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(1) engage or participate, anywhere in North America,
as an owner, member, stockholder, officer, director, partner,
employee, consultant or otherwise in a Prohibited Business (as
defined below); provided, however, that this Section shall not
prohibit Long from owning up to 5% of any class of securities
registered under the Securities Exchange Act;
(i) solicit any Person that is or was a
customer of the CP Division for or on behalf of any Prohibited Business, or
solicit any Person that is or was a customer of the El Paso IT Business for any
IT Services to be provided in the El Paso Business Area;
(ii) induce or attempt to induce any
employee of Amherst Southwest or its Affiliates to leave the employ of Amherst
Southwest or its Affiliates, or in any way interfere with the relationship
between Amherst Southwest or its Affiliates and any employee, vendor, supplier
or other business relation of Amherst Southwest; or
(iii) employ Frank Cano in any capacity.
In consideration of Long's individual covenant not to compete
in this Agreement, Amherst Southwest shall pay to Long a fee in the
amount of $230,000 per year, payable in equal monthly installments of
$19,166.67 at the end of each month during the term of this Agreement.
(b) Definitions. As used in this Section, the following terms
shall have the following meanings:
(i) "Prohibited Business" means the sale or
disposition of computer hardware and software in substantially the manner
conducted by the CP Division; provided, however, that "Prohibited Business"
shall not include (1) the Retained Businesses, (2) the sale, licensing or
sublicensing of software owned, licensed or developed by Allstar, its Affiliates
or the Retained Businesses, or (3) any activities of Allstar or any of its
Affiliates relating to (i) the sale or other disposition and installation of
Retained Inventory, as permitted by Section 3.4(e) of the Purchase Agreement,
(ii) the exercise of Allstar's rights and the performance by Allstar of any of
its obligations under Sections 3.3 or 3.4 of the Purchase Agreement, or (iii)
the performance by Allstar of any arrangements made by Amherst Southwest and
Allstar pursuant to Section 2.13(d) of the Purchase Agreement regarding
non-assignable contracts..
(ii) "Retained Businesses" means the following
businesses conducted currently by Allstar or its Affiliates: (a) the business of
Allstar's Telecom Division, which consists of the sale and servicing of business
telephone systems, including computer hardware and software for data and voice
integration, wide area connectivity and telephone system networking, and
wireless communications, where the sale of such computer hardware and software
products is ancillary and is required as an integral part of the provision of a
product or service by Allstar's Telecom Division and where such computer
hardware is sold at a gross profit to Allstar in excess of 30%; (b) the business
of Stratasoft, which is primarily engaged in the development and marketing of
proprietary software for the integration of business telephone systems and
networked computer systems, which are sometimes bundled with computer hardware
supplied by Allstar or Stratasoft at the customer's request, but only where such
computer hardware is sold at a gross profit to Allstar in excess of 30%; and (c)
the business of Allstar's IT Services Division, which is engaged in providing IT
Services, excluding the El Paso IT Business within the El Paso Business Area.
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(iii) "IT Services" means the following: (1) warranty
and non-warranty repair and replacement of computer hardware and software, (2)
diagnostic services and support for computer hardware and software, (3)
outsourced network management, (4) on-site service parts stocking and computer
asset management and tracking, (5) recommendation, sale and installation, on a
turn-key basis, of voice and data networking solutions, including network hubs,
routers, servers and cabling, but excluding, without limitation, the sale of
desktop PCs and "off-the-shelf" office software, (6) long-term and short-term
technical staffing and recruiting, (7) computer system design and project
management of major roll-outs, installations and networks, (8) programming
services and website development, and (9) sale, licensing or sublicensing of
software owned, licensed or developed by Allstar, its Affiliates or its Retained
Businesses.
3.2 Territorial, Time and Scope Limitations. Long recognizes that the
territorial, time and scope limitations set forth in Article II and Section 3.1
are included herein for the protection of Amherst Southwest. In the event that
any such territorial, time or scope limitation is deemed to be unreasonable by a
court of competent jurisdiction, Amherst Southwest and Long agree to the
reduction of either or any of the territorial, time or scope limitations to such
an area, period or scope as the court shall deem reasonable under the
circumstances. Long shall not contest as unreasonable or unenforceable the
territorial coverage, duration or scope of this Section 3 in any suit, action or
other proceeding before a court, arbitrator or other tribunal or governmental
authority.
3.3 Injunctive Relief. Long specifically recognizes that any breach of
Section 3.1 or Article II will cause irreparable injury to Amherst Southwest and
that actual damages may be difficult to ascertain and in any event, may be
inadequate. Accordingly (and without limiting the availability of legal or
equitable, including injunctive, remedies under any other provisions of this
Agreement), Long agrees that in the event of any such breach, Amherst Southwest
shall be entitled to injunctive relief in addition to such other legal and
equitable remedies that may be available. In the event that Amherst Southwest
seeks injunctive relief against Long in any court proceeding, Long shall be
entitled to assert in any such proceeding any matters in the nature of defenses
(but not counterclaims or cross actions) without regard to the arbitration
agreements contained in Article IV.
3.4 Survival. The obligations which Long has undertaken in this
Agreement (and specifically those obligations outlined in Sections 3.1 and
Article II) shall survive the termination of this Agreement.
ARTICLE IV
Dispute Resolution.
4.1 Arbitrating Accountant. All disputes arising out of or relating to
(i) this Agreement or any agreement or instrument delivered pursuant to the
terms hereof, or the transactions contemplated hereby or thereby, or (ii) the
validity, interpretation, breach, or violation or termination hereof or thereof
(including disputes arising under this Section 4.1 (each a "Dispute"), shall be
finally and solely determined and settled by a nationally recognized certified
public accounting firm selected by mutual agreement of the parties, which firm
is not rendering (and during the preceding two-year period, has not rendered)
services to any of the parties or their respective Affiliates (the "Arbitrating
Accountant"). In connection with the resolution of any Dispute hereunder, the
Arbitrating Accountant shall have access to all documents, records, work papers,
facilities and personnel necessary to perform its function as arbitrator. The
award of the Arbitrating Accountant shall be (1) the sole and exclusive remedy
of the parties, (2) enforceable in any court of competent jurisdiction and (3)
final and binding
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(absent manifest error) on the parties hereto. Notwithstanding the foregoing,
Amherst Southwest may seek injunctive relief in a court of competent
jurisdiction in accordance with Section 3.3 above, without resort to
arbitration. In the event that Amherst Southwest seeks injunctive relief against
Long in any court proceeding, Long shall be entitled to assert in any such
proceeding any matters in the nature of defenses (but not counterclaims or cross
actions) without regard to the arbitration agreements contained in this Section
4.1. Amherst Southwest, on the one hand, and Long, on the other hand, shall each
pay one-half of the fees and expenses of the Arbitrating Accountant with respect
to any Dispute.
4.2 AAA Arbitration. In the event that the parties are unable to
mutually agree on the Arbitrating Accountant within thirty (30) days, the
Dispute shall be finally and solely determined and settled by arbitration in
Houston, Texas, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association and this Section 4.2. Such arbitration shall be
conducted by a single arbitrator, whom the parties shall request to be
experienced in legal, financial and accounting matters. In any such arbitration
proceedings, the arbitrator shall adopt and apply the provisions of the Federal
Rules of Civil Procedure relating to discovery so that each party shall allow
and may obtain discovery of any matter not privileged which is relevant to the
subject matter involved in the arbitration to the same extent as if such
arbitration were a civil action pending in a United States District Court for
the Southern District of Texas. The arbitrator may proceed to an award
notwithstanding the failure of any party to participate in such proceedings. The
prevailing party in the arbitration proceeding shall be entitled to an award of
reasonable attorneys' fees incurred in connection with the arbitration in such
amount as may be determined by the arbitrator. The award of the arbitrator shall
be (i) the sole and exclusive remedy of the parties, (ii) enforceable in any
court of competent jurisdiction and (iii) final and binding (absent manifest
error) on the parties hereto. Notwithstanding the foregoing, Amherst Southwest
may seek injunctive relief in a court of competent jurisdiction in accordance
with Section 3.3 above, without resort to arbitration. In the event that Amherst
Southwest seeks injunctive relief against Long in any court proceeding, Long
shall be entitled to assert in any such proceeding any matters in the nature of
defenses (but not counterclaims or cross actions) without regard to the
arbitration agreements contained in this Section 4.2. Amherst Southwest, on the
one hand, and Long, on the other hand, shall each pay one-half of the fees and
expenses of the arbitrator with respect to any Dispute.
ARTICLE V
General Provisions
5.1 Severability. The provisions of the Agreement shall be severable,
and in the event that any provision of it is found by any court to be
unenforceable, in whole or in part, the remainder of this Agreement shall
nevertheless be enforceable and binding.
5.2 Scope of Agreement. This Agreement sets forth the entire agreement
between Amherst Southwest and Long with respect to the subject matter hereof,
and supersedes any previous oral or written agreements between Amherst Southwest
and Long with respect to the subject matter hereof.
5.3 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of, the parties hereto and their respective successors,
permitted assigns, heirs and personal representatives. This Agreement is not
assignable by Long. This Agreement shall inure to the benefit of Amherst
Southwest, its successors and assigns, but in the case of any such assignment,
Amherst Southwest shall remain liable and responsible for the performance of all
of its obligations hereunder and shall guaranty the timely and full payment and
performance of all such obligations.
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5.4 Amendment. No amendment, supplement, alteration, modification or
change in this Agreement shall be binding unless executed in writing by all the
parties hereto.
5.5 Waiver. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided in writing.
5.6 Headings. The section headings have been inserted for convenience
of reference only and shall in no way modify or restrict any of the terms and
conditions of this Agreement.
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same Agreement.
5.8 Governing Law. This Agreement shall be governed by and construed in
accordance with domestic laws of the State of Delaware without giving effect to
any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
5.9 Individual Undertaking. The parties hereto acknowledge and agree
that the representations, warranties and agreements of Long contained in this
Agreement are made by Long in his individual capacity and not on behalf of
Allstar, and not in his capacity as an officer, director or employee of Allstar.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date set forth above.
LONG: AMHERST COMPUTER PRODUCTS
SOUTHWEST, LP
By:
- ------------------------------- -----------------------------------
James H. Long S.G. Birin, CFO
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APPENDIX C
VOTING AND SUPPORT AGREEMENT
This Voting and Support Agreement (this "Agreement") is dated as of
March 16, 2000, between Amherst Computer Products Southwest, LP, a Texas limited
partnership ("Amherst Southwest"), and James H. Long ("Long").
BACKGROUND
A. Amherst Southwest and Allstar Systems, Inc., a Delaware corporation
("Allstar"), are entering into an Asset Purchase Agreement concurrently herewith
(the "Asset Purchase Agreement"). Capitalized terms not otherwise defined herein
shall have the meanings assigned to them in the Asset Purchase Agreement.
B. Long is the owner of a majority of the outstanding voting shares in
Allstar, and desires to enter into the agreements set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, Amherst Southwest and Long agree as follows.
AGREEMENTS
1. Representations and Warranties of Long. Long represents and warrants
to Amherst Southwest that the statements contained in this Section 1 are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 1).
(a) Authorization. Long has full power and authority to execute and deliver
this Agreement and to perform his obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Long,
enforceable in accordance with its terms and conditions except as such
enforcement may be limited by bankruptcy, insolvency, moratorium and
similar laws affecting creditors' rights generally and to general
principles of equity.
(b) Noncontravention. Neither the execution and the delivery of this
Agreement by Long, nor the performance by Long of his obligations
hereunder, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, stipulation, ruling, or
other restriction of any government, governmental agency, or court to
which Long is subject or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Long is a party, by which he
is bound or to which any of his assets is subject.
(c) Majority Status. Long owns legally and beneficially a majority of the
issued and outstanding shares of Allstar having voting rights (the
"Majority Shares").
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2. Covenants of Long.
(a) Majority Approval. Long agrees to vote all of the Majority Shares in
favor of the Asset Purchase Agreement and the transactions contemplated
thereby, subject to termination of this Agreement as provided in
Section 3 below.
(b) Exclusivity. From the date of this Agreement through the Closing Date,
Long will not (1) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of
the assets, of Allstar or the CP Division or the El Paso IT Business
(including any acquisition structured as a merger, consolidation, or
share exchange, but excluding from the prohibitions of this subsection
(1) any sale or other disposition of the assets of Allstar's Telecom
Division) or (2) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt
by any Person to do or seek any of the foregoing. Long will notify
Amherst Southwest in writing on the next Business Day if any Person
makes any proposal, offer, inquiry, or contact with respect to any of
the foregoing.
(c) Press Releases and Public Announcements. Long shall not issue any press
release or make any public announcement relating to the subject matter
of the Asset Purchase Agreement prior to the Closing without the prior
written approval of Amherst Southwest; provided, however, that Long may
make any public disclosure which, in the written opinion of counsel to
Long, is required by applicable law or any listing or trading agreement
concerning the publicly-traded securities of Allstar (in which case
Long will advise Amherst Southwest and provide Amherst Southwest with a
copy of such opinion of counsel prior to making the disclosure).
(d) General. If any further action is necessary or desirable to carry out
the purposes of this Agreement, each of the parties will take such
further action (including the execution and delivery of such further
instruments and documents) as the other party reasonably requests.
3. Termination. This Agreement shall terminate if and only if (a) the
Closing of the transactions contemplated by the Asset Purchase Agreement shall
have occurred; (b) the Asset Purchase Agreement is terminated prior to the
Closing in accordance with and pursuant to the terms thereof; or (c) the parties
enter into a written agreement to terminate it.
4. General Terms.
(a) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their
respective successors and permitted assigns.
(b) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes any prior understandings,
agreements, or representations by or among the parties, written or
oral, to the extent they related in any way to the subject matter
hereof.
(c) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties named herein and their respective
successors and permitted assigns. Long may not assign either this
Agreement or any of his rights, interests, or obligations hereunder
without the prior written approval of Amherst Southwest. Amherst
Southwest may assign any or all of its rights
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and interests hereunder to one or more of its Affiliates, and designate
one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases Amherst Southwest nonetheless shall remain
liable and responsible for the performance of all of its obligations
hereunder).
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
(e) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to Long: c/o Allstar Systems, Inc.
6401 Southwest Freeway
Houston, TX 77074
Attention: James H. Long
If to Amherst Southwest: Amherst Computer Products Southwest, LP
c/o Amherst Technologies, L.L.C.
10 Columbia Drive
Amherst, NH 03031
Attn: Chief Financial Officer
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above (using any
other means, including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of
the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
Delaware.
(g) Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by
Amherst Southwest and Long. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of
any prior or subsequent such occurrence.
(h) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
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(i) Expenses. Each of the parties will bear his or its own costs and
expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
(j) Construction. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question
of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
(k) Specific Performance. Each of the parties acknowledges and agrees that
the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the
parties agrees that the other party shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Agreement
and to enforce specifically this Agreement and the terms and provisions
hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the parties and the matter,
in addition to any other remedy to which they may be entitled, at law
or in equity.
(l) Individual Capacity. The parties hereto acknowledge and agree that the
representations, warranties and agreements of Long contained in this
Agreement are made by Long in his individual capacity and not on behalf
of Allstar, and not in his capacity as an officer, director or employee
of Allstar.
*****
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
AMHERST COMPUTER PRODUCTS SOUTHWEST, LP
By: /s/ S.G. Birin
---------------------------
S.G. Birin, CFO
/s/ James H. Long
---------------------------------------
James H. Long
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AMENDMENT NO. 1
TO
VOTING AND SUPPORT AGREEMENT
This Amendment to Voting and Support Agreement (the "Amendment") dated
as of April 6, 2000 is entered into between Amherst Computer Products Southwest,
LP, a Texas limited partnership ("Amherst Southwest"), and James H. Long
("Long").
BACKGROUND
A. Amherst Southwest and Allstar Systems, Inc., a Delaware corporation
("Allstar"), have entered into an Asset Purchase Agreement dated as of March 16,
2000, as amended (the "Asset Purchase Agreement"), and Amherst Southwest and
Long have previously entered into a Voting and Support Agreement dated as of
March 16, 2000 (the "Voting Agreement"). Capitalized terms not otherwise defined
herein shall have the meanings assigned to them in the Asset Purchase Agreement.
B. Amherst and Long desire to make certain amendments to the Voting
Agreement to provide for Long, in addition to voting all of the Majority Shares
in favor of the Asset Purchase Agreement and the transactions contemplated
thereby, to (i) vote all of his Majority Shares against any other Acquisition
Proposal or any other sale or exchange of assets, lease transaction, merger,
consolidation, other business combination, or corporate reorganization, other
than that contemplated by the Asset Purchase Agreement, and to (ii) execute an
irrevocable proxy whereby he appoints Amherst Southwest's designees as attorneys
and proxies, with full power of substitution, to vote on behalf of Long, the
Majority Shares of which Long may be entitled to vote in favor of the
transactions contemplated by the Asset Purchase Agreement and to vote on behalf
of Long, the Majority Shares of which Long may be entitled to vote, against any
other Acquisition Proposal, whether solicited or unsolicited.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, Amherst Southwest and Long agree as follows.
AGREEMENTS
1. Status of the Voting Agreement. Except as specifically set forth
herein, the Voting Agreement shall remain in full force and effect and shall not
be waived, modified, superseded or otherwise affected by this Amendment. This
Amendment is not to be construed as a release, waiver or modification of the
terms, conditions, representations, warranties, covenants, rights or remedies
set forth in the Voting Agreement, except as specifically set forth herein.
2. Amendment to the Voting Agreement.
(a) Section 2(a) of the Voting Agreement is hereby deleted in
its entirety and replaced by the following:
"(a) Majority Approval. Long agrees to vote all of
the Majority Shares in favor of the Asset Purchase Agreement
and the transactions contemplated thereby, and agrees to vote
all of the Majority Shares against any other Acquisition
Proposal, whether solicited or unsolicited. In addition,
immediately upon execution of this Agreement, Long further
agrees to execute an irrevocable proxy in the form attached as
Exhibit A."
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(b) Section 3 of the Voting Agreement is hereby renumbered to
become Section 4, and all terms previously stated therein shall remain in full
force and effect, and a new Section 3 of the Voting Agreement is hereby
inserted, which shall read as follows:
"3. Indemnification. Amherst Southwest
agrees to indemnify Long for one-half of any costs incurred in
defense of any lawsuit filed against Long complaining of
Long's execution of the proxy provided for under Section 2(a)
of the Voting Agreement, but in no event shall Amherst
Southwest be required to pay more than $100,000 in the
aggregate pursuant to this indemnification provision."
(c) The prior Section 4 of the Voting Agreement is hereby
renumbered to become Section 5, and all terms previously stated therein shall
remain in full force and effect unless amended hereby.
(d) Exhibit A attached to this Amendment shall be attached as
Exhibit A to the Voting Agreement.
3. Effectiveness of this Amendment. The effectiveness of this Amendment
is contingent upon the execution of Amendment No. 1 to Asset Purchase Agreement
dated as of April 6, 2000 by and among Amherst Southwest, Amherst Technologies,
L.L.C., a Nevada limited liability company ("AmTech"), and Allstar. This
Amendment shall automatically terminate if the escrow payment or the expense
reimbursement therein required is not timely made by Amherst Southwest.
4. Representations and Warranties of Entities. Each of Amherst
Southwest and Long represents and warrants that its execution, delivery and
performance of this Amendment is duly authorized and that this Amendment is a
legal, valid and binding obligation of such party in accordance with its terms.
Long further represents and warrants that sufficient approval of the board of
directors of Allstar had been obtained for the Voting and Support Agreement
dated as of March 16, 2000 between Amherst Southwest, and James H. Long, and
this Amendment, in a manner sufficient to make the restrictions contained in
Section 203 of the Delaware General Corporation Law inapplicable to the
transactions contemplated by the Asset Purchase Agreement, as amended.
5. Counterparts. This Amendment may be executed in counterparts, each
of which shall be deemed an original and both of which together shall constitute
one and the same instrument.
6. Governing Law. This Amendment shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
7. Further Assurances. Long agrees to take all action and execute any
documents in his capacity as a stockholder of Allstar consistent with a request
by the Company to its stockholders generally to approve the Asset Purchase
Agreement, including execution of a ballot card.
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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first above written.
AMHERST COMPUTER PRODUCTS
SOUTHWEST, LP
By: /s/ James H. Long By: /s/ S.G. Birin
--------------------------------- ---------------------------------
James H. Long S.G. Birin, CFO
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APPENDIX D
ALLSTAR SYSTEMS, INC.
2000 STOCK INCENTIVE PLAN
(AS EFFECTIVE MARCH 16, 2000)
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. GENERAL PROVISIONS RELATING TO
PLAN GOVERNANCE, COVERAGE AND BENEFITS..........................................................1
1.1 Purpose.........................................................................................1
1.2 Definitions.....................................................................................1
(a) Appreciation...........................................................................1
(b) Authorized Officer.....................................................................2
(c) Board..................................................................................2
(d) Cause..................................................................................2
(e) CEO....................................................................................2
(g) Code...................................................................................2
(h) Committee..............................................................................2
(i) Common Stock...........................................................................3
(j) Company................................................................................3
(k) Consultant.............................................................................3
(l) Covered Employee.......................................................................3
(m) Deferred Stock.........................................................................3
(n) Disability.............................................................................4
(o) Employee...............................................................................4
(p) Employment.............................................................................4
(q) Exchange Act...........................................................................4
(r) Fair Market Value......................................................................4
(s) Grantee................................................................................5
(t) Immediate Family.......................................................................5
(u) Incentive Award........................................................................5
(v) Incentive Agreement....................................................................5
(w) Incentive Stock Option.................................................................5
(x) Independent SAR........................................................................5
(y) Insider................................................................................6
(z) Nonstatutory Stock Option..............................................................6
(aa) Option Price...........................................................................6
(bb) Other Stock-Based Award................................................................6
(cc) Outside Director.......................................................................6
(dd) Parent.................................................................................6
(ee) Performance-Based Exception............................................................6
(ff) Performance Period.....................................................................6
(gg) Performance Share or Performance Unit..................................................6
(hh) Plan...................................................................................6
(ii) Publicly Held Corporation..............................................................6
(jj) Restricted Stock.......................................................................7
</TABLE>
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<TABLE>
<S> <C> <C>
(kk) Restricted Stock Award.................................................................7
(ll) Restriction Period.....................................................................7
(mm) Retirement.............................................................................7
(nn) Share..................................................................................7
(oo) Share Pool.............................................................................7
(pp) Spread.................................................................................7
(qq) Stock Appreciation Right or SAR........................................................7
(rr) Stock Option or Option.................................................................7
(ss) Subsidiary.............................................................................7
(tt) Supplemental Payment...................................................................7
(uu) Tandem SAR.............................................................................7
1.3 Plan Administration.............................................................................8
(a) Authority of the Committee.............................................................8
(b) Meetings...............................................................................8
(c) Decisions Binding......................................................................8
(d) Modification of Outstanding Incentive Awards...........................................8
(e) Delegation of Authority................................................................9
(f) Expenses of Committee..................................................................9
(g) Surrender of Previous Incentive Awards.................................................9
(h) Indemnification........................................................................9
1.4 Shares of Common Stock Available for Incentive Awards..........................................10
1.5 Share Pool Adjustments for Awards and Payouts..................................................11
1.6 Common Stock Available. ......................................................................11
1.7 Participation..................................................................................12
(a) Eligibility...........................................................................12
(b) Incentive Stock Option Eligibility....................................................12
1.8 Types of Incentive Awards......................................................................12
SECTION 2. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS....................................................12
2.1 Grant of Stock Options.........................................................................12
2.2 Stock Option Terms.............................................................................13
(a) Written Agreement.....................................................................13
(b) Number of Shares......................................................................13
(c) Exercise Price........................................................................13
(d) Term..................................................................................13
(e) Exercise..............................................................................13
(f) $100,000 Annual Limit on Incentive Stock Options......................................14
2.3 Stock Option Exercises.........................................................................14
(a) Method of Exercise and Payment........................................................14
(b) Restrictions on Share Transferability.................................................15
(c) Notification of Disqualifying Disposition of Shares
from Incentive Stock Options..........................................................16
(d) Proceeds of Option Exercise...........................................................16
</TABLE>
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<TABLE>
<S> <C> <C>
2.4 Stock Appreciation Rights in Tandem with Nonstatutory Stock Options............................16
(a) Grant.................................................................................16
(b) General Provisions....................................................................16
(c) Exercise..............................................................................16
(d) Settlement............................................................................17
2.5 Stock Appreciation Rights Independent of Nonstatutory Stock Options............................17
(a) Grant.................................................................................17
(b) General Provisions....................................................................17
(c) Exercise..............................................................................17
(d) Settlement............................................................................17
2.6 Reload Options.................................................................................18
2.7 Supplemental Payment on Exercise of Nonstatutory
Stock Options or Stock Appreciation Rights.....................................................18
SECTION 3. RESTRICTED STOCK...............................................................................18
3.1 Award of Restricted Stock......................................................................18
(a) Grant.................................................................................18
(b) Immediate Transfer Without Immediate Delivery of
Restricted Stock......................................................................18
3.2 Restrictions...................................................................................19
(a) Forfeiture of Restricted Stock........................................................19
(b) Issuance of Certificates..............................................................20
(c) Removal of Restrictions...............................................................20
3.3 Delivery of Shares of Common Stock.............................................................20
3.4 Supplemental Payment on Vesting of Restricted Stock............................................20
SECTION 4. PERFORMANCE UNITS AND PERFORMANCE SHARES.......................................................21
4.1 Performance Based Awards.......................................................................21
(a) Grant.................................................................................21
(b) Performance Criteria..................................................................21
(c) Modification..........................................................................21
(d) Payment...............................................................................21
(e) Special Rule for Covered Employees....................................................22
4.2 Supplemental Payment on Vesting of Performance Units or
Performance Shares.............................................................................22
SECTION 5. OTHER STOCK-BASED AWARDS.......................................................................22
5.1 Grant of Other Stock-Based Awards..............................................................22
5.2 Other Stock-Based Award Terms..................................................................23
(a) Written Agreement.....................................................................23
(b) Purchase Price........................................................................23
(c) Performance Criteria and Other Terms..................................................23
(d) Payment...............................................................................23
(e) Dividends.............................................................................23
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 6. PROVISIONS RELATING TO PLAN PARTICIPATION......................................................24
6.1 Plan Conditions................................................................................24
(a) Incentive Agreement...................................................................24
(b) No Right to Employment................................................................24
(c) Securities Requirements...............................................................24
6.2 Transferability................................................................................25
6.3 Rights as a Stockholder........................................................................26
(a) No Stockholder Rights.................................................................26
(b) Representation of Ownership...........................................................26
6.4 Listing and Registration of Shares of Common Stock.............................................26
6.5 Change in Stock and Adjustments................................................................26
(a) Changes in Law or Circumstances.......................................................26
(b) Exercise of Corporate Powers..........................................................27
(c) Recapitalization of the Company.......................................................27
(d) Issue of Common Stock by the Company..................................................27
(e) Assumption under the Plan of Outstanding Stock Options................................28
(f) Assumption of Incentive Awards by a Successor.........................................28
6.6 Termination of Employment, Death, Disability and Retirement....................................29
(a) Termination of Employment.............................................................29
(b) Termination of Employment for Cause...................................................30
(c) Retirement............................................................................30
(d) Disability or Death...................................................................30
(e) Continuation..........................................................................30
6.7 Change in Control..............................................................................31
6.8 Exchange of Incentive Awards...................................................................33
6.9 Financing......................................................................................33
SECTION 7. GENERAL........................................................................................33
7.1 Effective Date and Grant Period................................................................33
7.2 Funding and Liability of Company...............................................................34
7.3 Withholding Taxes..............................................................................34
(a) Tax Withholding.......................................................................34
(b) Share Withholding.....................................................................34
(c) Incentive Stock Options...............................................................34
(d) Loans.................................................................................35
7.4 No Guarantee of Tax Consequences...............................................................35
7.5 Designation of Beneficiary by Participant......................................................35
7.6 Deferrals......................................................................................35
7.7 Amendment and Termination......................................................................35
7.8 Requirements of Law............................................................................36
7.9 Rule 16b-3 Securities Law Compliance for Insiders..............................................37
</TABLE>
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<TABLE>
<S> <C> <C>
7.10 Compliance with Code Section 162(m) for Publicly Held Corporation..............................37
7.11 Successors to Company..........................................................................37
7.12 Miscellaneous Provisions.......................................................................38
7.13 Severability...................................................................................38
7.14 Gender, Tense and Headings.....................................................................38
7.15 Governing Law..................................................................................38
</TABLE>
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ALLSTAR SYSTEMS, INC.
2000 STOCK INCENTIVE PLAN
SECTION 1.
GENERAL PROVISIONS RELATING TO
PLAN GOVERNANCE, COVERAGE AND BENEFITS
1.1 PURPOSE
The purpose of the Plan is to foster and promote the long-term
financial success of Allstar Systems, Inc. (the "COMPANY") and its Subsidiaries
and to increase stockholder value by: (a) encouraging the commitment of selected
key Employees, Consultants and Outside Directors, (b) motivating superior
performance of key Employees, Consultants and Outside Directors by means of
long-term performance related incentives, (c) encouraging and providing key
Employees, Consultants and Outside Directors with a program for obtaining
ownership interests in the Company which link and align their personal interests
to those of the Company's stockholders, (d) attracting and retaining key
Employees, Consultants and Outside Directors by providing competitive incentive
compensation opportunities, and (e) enabling key Employees, Consultants and
Outside Directors to share in the long-term growth and success of the Company.
The Plan provides for payment of various forms of incentive
compensation. It is not intended to be a plan that is subject to the Employee
Retirement Income Security Act of 1974, as amended (ERISA). The Plan will be
interpreted, construed and administered consistent with its status as a plan
that is not subject to ERISA.
Subject to approval by the Company's stockholders pursuant to Section
7.1, the Plan will become effective as of March 15, 2000 (the "EFFECTIVE DATE").
The Plan will commence on the Effective Date, and will remain in effect, subject
to the right of the Board to amend or terminate the Plan at any time pursuant to
Section 7.7, until all Shares subject to the Plan have been purchased or
acquired according to its provisions. However, in no event may an Incentive
Award be granted under the Plan after the expiration of ten (10) years from the
Effective Date.
1.2 DEFINITIONS
The following terms shall have the meanings set forth below:
(a) APPRECIATION. The difference between the option exercise
price per share of the Nonstatutory Stock Option to which a Tandem SAR
relates and the Fair Market Value of a share of Common Stock on the
date of exercise of the Tandem SAR.
(b) AUTHORIZED OFFICER. The Chairman of the Board, the CEO or
any other senior officer of the Company to whom either of them delegate
the authority to execute any
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Incentive Agreement for and on behalf of the Company. No officer or
director shall be an Authorized Officer with respect to any Incentive
Agreement for himself.
(c) BOARD. The Board of Directors of the Company.
(d) CAUSE. When used in connection with the termination of a
Grantee's Employment, shall mean the termination of the Grantee's
Employment by the Company or any Subsidiary by reason of (i) the
conviction of the Grantee by a court of competent jurisdiction as to
which no further appeal can be taken of a crime involving moral
turpitude or a felony; (ii) the proven commission by the Grantee of a
material act of fraud upon the Company or any Subsidiary, or any
customer or supplier thereof; (iii) the willful and proven
misappropriation of any funds or property of the Company or any
Subsidiary, or any customer or supplier thereof; (iv) the willful,
continued and unreasonable failure by the Grantee to perform the
material duties assigned to him which is not cured to the reasonable
satisfaction of the Company within 30 days after written notice of such
failure is provided to Grantee by the Board or a designated officer of
the Company or a Subsidiary; (v) the knowing engagement by the Grantee
in any direct and material conflict of interest with the Company or any
Subsidiary without compliance with the Company's or Subsidiary's
conflict of interest policy, if any, then in effect; or (vi) the
knowing engagement by the Grantee, without the written approval of the
Board, in any material activity which competes with the business of the
Company or any Subsidiary or which would result in a material injury to
the business, reputation or goodwill of the Company or any Subsidiary.
(e) CEO. The Chief Executive Officer of the Company.
(f) CONTROL IN CONTROL. Any of the events described in and
subject to Section 6.7.
(g) CODE. The Internal Revenue Code of 1986, as amended, and
the regulations and other authority promulgated thereunder by the
appropriate governmental authority. References herein to any provision
of the Code shall refer to any successor provision thereto.
(h) COMMITTEE. A committee appointed by the Board consisting
of at least one member as appointed by the Board to administer the
Plan. However, if the Company is a Publicly Held Corporation, the Plan
shall be administered by a committee appointed by the Board consisting
of not less than two directors who fulfill the "non-employee director"
requirements of Rule 16b-3 under the Exchange Act and the "outside
director" requirements of Section 162(m) of the Code. In either case,
the Committee may be the Compensation Committee of the Board, or any
subcommittee of the Compensation Committee, provided that the members
of the Committee satisfy the requirements of the previous provisions of
this paragraph.
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The Board shall have the power to fill vacancies on the
Committee arising by resignation, death, removal or otherwise. The
Board, in its sole discretion, may bifurcate the powers and duties of
the Committee among one or more separate committees, or retain all
powers and duties of the Committee in a single Committee. The members
of the Committee shall serve at the discretion of the Board.
Notwithstanding the preceding paragraphs of this Section
1.2(g), the term "Committee" as used in the Plan with respect to any
Incentive Award for an Outside Director shall refer to the entire
Board. In the case of an Incentive Award for an Outside Director, the
Board shall have all the powers and responsibilities of the Committee
hereunder as to such Incentive Award, and any actions as to such
Incentive Award may be acted upon only by the Board (unless it
otherwise designates in its discretion). When the Board exercises its
authority to act in the capacity as the Committee hereunder with
respect to an Incentive Award for an Outside Director, it shall so
designate with respect to any action that it undertakes in its capacity
as the Committee.
(i) COMMON STOCK. The common stock of the Company, $.01 par
value per share, and any class of common stock into which such common
shares may hereafter be converted, reclassified or recapitalized.
(j) COMPANY. Allstar Systems, Inc., a corporation organized
under the laws of the State of Delaware and any successor in interest
thereto.
(k) CONSULTANT. An independent agent, consultant, attorney, an
individual who has agreed to become an Employee within the next six
months, or any other individual who is not an Outside Director or
employee of the Company (or any Parent or Subsidiary) and who, in the
opinion of the Committee, is in a position to contribute to the growth
or financial success of the Company (or any Parent or Subsidiary), (ii)
is a natural person and (iii) provides bona fide services to the
Company (or any Parent or Subsidiary), which services are not in
connection with the offer or sale of securities in a capital raising
transaction, and do not directly or indirectly promote or maintain a
market for the Company's securities.
(l) COVERED EMPLOYEE. A named executive officer who is one of
the group of covered employees, as defined in Section 162(m) of the
Code and Treasury Regulation ss. 1.162-27(c) (or its successor), during
any such period that the Company is a Publicly Held Corporation.
(m) DEFERRED STOCK. Shares of Common Stock to be issued or
transferred to a Grantee under an Other Stock-Based Award granted
pursuant to Section 5 at the end of a specified deferral period, as set
forth in the Incentive Agreement pertaining thereto.
(n) DISABILITY. As determined by the Committee in its
discretion exercised in good faith, a physical or mental condition of
the Employee that would entitle him to
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payment of disability income payments under the Company's long term
disability insurance policy or plan for employees, as then effective,
if any; or in the event that the Grantee is not covered, for whatever
reason, under the Company's long-term disability insurance policy or
plan, "Disability" means a permanent and total disability as defined in
Section 22(e)(3) of the Code. A determination of Disability may be made
by a physician selected or approved by the Committee and, in this
respect, the Grantee shall submit to any reasonable examination by such
physician upon request.
(o) EMPLOYEE. Any employee of the Company (or any Parent or
Subsidiary) within the meaning of Section 3401(c) of the Code who, in
the opinion of the Committee, is in a position to contribute to the
growth, development or financial success of the Company (or any Parent
or Subsidiary), including, without limitation, officers who are members
of the Board.
(p) EMPLOYMENT. Employment by the Company (or any Parent or
Subsidiary), or by any corporation issuing or assuming an Incentive
Award in any transaction described in Section 424(a) of the Code, or by
a parent corporation or a subsidiary corporation of such corporation
issuing or assuming such Incentive Award, as the parent-subsidiary
relationship shall be determined at the time of the corporate action
described in Section 424(a) of the Code. In this regard, neither the
transfer of a Grantee from Employment by the Company to Employment by
any Parent or Subsidiary, nor the transfer of a Grantee from Employment
by any Parent or Subsidiary to Employment by the Company, shall be
deemed to be a termination of Employment of the Grantee. Moreover, the
Employment of a Grantee shall not be deemed to have been terminated
because of an approved leave of absence from active Employment on
account of temporary illness, authorized vacation or granted for
reasons of professional advancement, education, health, or government
service, or during military leave for any period (if the Grantee
returns to active Employment within 90 days after the termination of
military leave), or during any period required to be treated as a leave
of absence by virtue of any applicable statute, Company personnel
policy or agreement. Whether an authorized leave of absence shall
constitute termination of Employment hereunder shall be determined by
the Committee in its discretion.
Unless otherwise provided in the Incentive Agreement, the term
"Employment" for purposes of the Plan is also defined to include (i)
compensatory or advisory services performed by a Consultant for the
Company (or any Parent or Subsidiary) and (ii) membership on the Board
by an Outside Director.
(q) EXCHANGE ACT. The Securities Exchange Act of 1934, as
amended.
(r) FAIR MARKET VALUE. If the Company is not a Publicly Held
Corporation at the time a determination of the Fair Market Value of the
Common Stock is required to be made hereunder, the determination of
Fair Market Value for purposes of the Plan shall be made by the
Committee in its discretion. In this respect, the Committee may rely on
such
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financial data, appraisals, valuations, experts, and other sources, in
its discretion, as it deems advisable under the circumstances.
If the Company is a Publicly Held Corporation, the Fair Market
Value of one share of Common Stock on the date in question is deemed to
be (i) the closing sales price on the immediately preceding business
day of a share of Common Stock as reported on the New York Stock
Exchange or other principal securities exchange on which Shares are
then listed or admitted to trading, or (ii) if not so reported, the
average of the closing bid and asked prices for a Share on the
immediately preceding business day as quoted on the National
Association of Securities Dealers Automated Quotation System
("NASDAQ"), or (iii) if not quoted on NASDAQ, the average of the
closing bid and asked prices for a Share as quoted by the National
Quotation Bureau's "Pink Sheets" or the National Association of
Securities Dealers' OTC Bulletin Board System. If there was no public
trade of Common Stock on the date in question, Fair Market Value shall
be determined by reference to the last preceding date on which such a
trade was so reported.
(s) GRANTEE. Any Employee, Consultant or Outside Director who
is granted an Incentive Award under the Plan.
(t) IMMEDIATE FAMILY. With respect to a Grantee, the Grantee's
child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships.
(u) INCENTIVE AWARD. A grant of an award under the Plan to a
Grantee, including any Nonstatutory Stock Option, Incentive Stock
Option, Reload Option, Stock Appreciation Right, Restricted Stock
Award, Performance Unit, Performance Share, or Other Stock-Based Award,
as well as any Supplemental Payment.
(v) INCENTIVE AGREEMENT. The written agreement entered into
between the Company and the Grantee setting forth the terms and
conditions pursuant to which an Incentive Award is granted under the
Plan, as such agreement is further defined in Section 6.1(a).
(w) INCENTIVE STOCK OPTION. A Stock Option granted by the
Committee to an Employee under Section 2 which is designated by the
Committee as an Incentive Stock Option and intended to qualify as an
Incentive Stock Option under Section 422 of the Code.
(x) INDEPENDENT SAR. A Stock Appreciation Right described in
Section 2.5.
(y) INSIDER. If the Company is a Publicly Held Corporation, an
individual who is, on the relevant date, an officer, director or ten
percent (10%) beneficial owner of any class
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of the Company's equity securities that is registered pursuant to
Section 12 of the Exchange Act, all as defined under Section 16 of the
Exchange Act.
(z) NONSTATUTORY STOCK OPTION. A Stock Option granted by the
Committee to a Grantee under Section 2 that is not designated by the
Committee as an Incentive Stock Option.
(aa) OPTION PRICE. The exercise price at which a Share may be
purchased by the Grantee of a Stock Option.
(bb) OTHER STOCK-BASED AWARD. An award granted by the
Committee to a Grantee under Section 5.1 that is valued in whole or in
part by reference to, or is otherwise based upon, Common Stock.
(cc) OUTSIDE DIRECTOR. A member of the Board who is not, at
the time of grant of an Incentive Award, an employee of the Company or
any Parent or Subsidiary.
(dd) PARENT. Any corporation (whether now or hereafter
existing) which constitutes a "parent" of the Company, as defined in
Section 424(e) of the Code.
(ee) PERFORMANCE-BASED EXCEPTION. The performance-based
exception from the tax deductibility limitations of Section 162(m) of
the Code, as prescribed in Code ss. 162(m) and Treasury Regulation ss.
1.162-27(e) (or its successor), which is applicable during such period
that the Company is a Publicly Held Corporation.
(ff) PERFORMANCE PERIOD. A period of time determined by the
Committee over which performance is measured for the purpose of
determining a Grantee's right to and the payment value of any
Performance Unit, Performance Share or Other Stock-Based Award.
(gg) PERFORMANCE SHARE OR PERFORMANCE UNIT. An Incentive Award
representing a contingent right to receive cash or shares of Common
Stock (which may be Restricted Stock) at the end of a Performance
Period and which, in the case of Performance Shares, is denominated in
Common Stock, and, in the case of Performance Units, is denominated in
cash values.
(hh) PLAN. Allstar Systems, Inc. 2000 Stock Incentive Plan, as
set forth herein and as it may be amended from time to time.
(ii) PUBLICLY HELD CORPORATION. A corporation issuing any
class of common equity securities required to be registered under
Section 12 of the Exchange Act.
(jj) RESTRICTED STOCK. Shares of Common Stock issued or
transferred to a Grantee pursuant to Section 3.
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(kk) RESTRICTED STOCK AWARD. An authorization by the Committee
to issue or transfer Restricted Stock to a Grantee.
(ll) RESTRICTION PERIOD. The period of time determined by the
Committee and set forth in the Incentive Agreement during which the
transfer of Restricted Stock by the Grantee is restricted.
(mm) RETIREMENT. The voluntary termination of Employment from
the Company or any Parent or Subsidiary constituting retirement for age
on any date after the Employee attains the normal retirement age of 65
years, or such other age as may be designated by the Committee in the
Employee's Incentive Agreement.
(nn) SHARE. A share of the Common Stock of the Company.
(oo) SHARE POOL. The number of shares authorized for issuance
under Section 1.4, as adjusted for awards and payouts under Section 1.5
and as adjusted for changes in corporate capitalization under Section
6.5.
(pp) SPREAD. The difference between the exercise price per
Share specified in any Independent SAR grant and the Fair Market Value
of a Share on the date of exercise of the Independent SAR.
(qq) STOCK APPRECIATION RIGHT OR SAR. A Tandem SAR described
in Section 2.4 or an Independent SAR described in Section 2.5.
(rr) STOCK OPTION OR OPTION. Pursuant to Section 2, (i) an
Incentive Stock Option granted to an Employee, or (ii) a Nonstatutory
Stock Option granted to an Employee, Consultant or Outside Director,
whereunder such option the Grantee has the right to purchase Shares of
Common Stock. In accordance with Section 422 of the Code, only an
Employee may be granted an Incentive Stock Option.
(ss) SUBSIDIARY. Any corporation (whether now or hereafter
existing) which constitutes a "subsidiary" of the Company, as defined
in Section 424(f) of the Code.
(tt) SUPPLEMENTAL PAYMENT. Any amount, as described in
Sections 2.7, 3.4 and/or 4.2, that is dedicated to payment of income
taxes which are payable by the Grantee resulting from an Incentive
Award.
(uu) TANDEM SAR. A Stock Appreciation Right that is granted in
connection with a related Stock Option pursuant to Section 2.4, the
exercise of which shall require forfeiture of the right to purchase a
Share under the related Stock Option (and when a Share is purchased
under the Stock Option, the Tandem SAR shall similarly be canceled).
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1.3 PLAN ADMINISTRATION
(a) AUTHORITY OF THE COMMITTEE. Except as may be limited by
law and subject to the provisions herein, the Committee shall have full
power to (i) select Grantees who shall participate in the Plan; (ii)
determine the sizes, duration and types of Incentive Awards; (iii)
determine the terms and conditions of Incentive Awards and Incentive
Agreements; (iv) determine whether any Shares subject to Incentive
Awards will be subject to any restrictions on transfer; (v) construe
and interpret the Plan and any Incentive Agreement or other agreement
entered into under the Plan; and (vi) establish, amend, or waive rules
for the Plan's administration. Further, the Committee shall make all
other determinations which may be necessary or advisable for the
administration of the Plan.
(b) MEETINGS. The Committee shall designate a chairman from
among its members who shall preside at all of its meetings, and shall
designate a secretary, without regard to whether that person is a
member of the Committee, who shall keep the minutes of the proceedings
and all records, documents, and data pertaining to its administration
of the Plan. Meetings shall be held at such times and places as shall
be determined by the Committee and the Committee may hold telephonic
meetings. The Committee may take any action otherwise proper under the
Plan by the affirmative vote, taken with or without a meeting, of a
majority of its members. The Committee may authorize any one or more of
their members or any officer of the Company to execute and deliver
documents on behalf of the Committee.
(c) DECISIONS BINDING. All determinations and decisions made
by the Committee shall be made in its discretion pursuant to the
provisions of the Plan, and shall be final, conclusive and binding on
all persons including the Company, its shareholders, Employees,
Grantees, and their estates and beneficiaries. The Committee's
decisions and determinations with respect to any Incentive Award need
not be uniform and may be made selectively among Incentive Awards and
Grantees, whether or not such Incentive Awards are similar or such
Grantees are similarly situated.
(d) MODIFICATION OF OUTSTANDING INCENTIVE AWARDS. Subject to
the stockholder approval requirements of Section 7.7 if applicable, the
Committee may, in its discretion, provide for the extension of the
exercisability of an Incentive Award, accelerate the vesting or
exercisability of an Incentive Award, eliminate or make less
restrictive any restrictions contained in an Incentive Award, waive any
restriction or other provisions of an Incentive Award, or otherwise
amend or modify an Incentive Award in any manner that is either (i) not
adverse to the Grantee to whom such Incentive Award was granted or (ii)
consented to by such Grantee. With respect to an Incentive Award that
is an incentive stock option (as described in Section 422 of the Code),
no adjustment to such option shall be made to the extent constituting a
"modification" within the meaning of Section 424(h)(3) of the Code
unless otherwise agreed to by the optionee in writing.
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(e) DELEGATION OF AUTHORITY. The Committee may delegate to
designated officers or other employees of the Company any of its duties
and authority under the Plan pursuant to such conditions or limitations
as the Committee may establish from time to time; provided, however, if
the Company is a Publicly Held Corporation, the Committee may not
delegate to any person the authority to (i) grant Incentive Awards, or
(ii) take any action which would contravene the requirements of Rule
16b-3 under the Exchange Act or the Performance-Based Exception under
Section 162(m) of the Code.
(f) EXPENSES OF COMMITTEE. The Committee may employ legal
counsel, including, without limitation, independent legal counsel and
counsel regularly employed by the Company, and other agents as the
Committee may deem appropriate for the administration of the Plan. The
Committee may rely upon any opinion or computation received from any
such counsel or agent. All expenses incurred by the Committee in
interpreting and administering the Plan, including, without limitation,
meeting expenses and professional fees, shall be paid by the Company.
(g) SURRENDER OF PREVIOUS INCENTIVE AWARDS. The Committee may,
in its absolute discretion, grant Incentive Awards to Grantees on the
condition that such Grantees surrender to the Committee for
cancellation such other Incentive Awards (including, without
limitation, Incentive Awards with higher exercise prices) as the
Committee directs. Incentive Awards granted on the condition precedent
of surrender of outstanding Incentive Awards shall not count against
the limits set forth in Section 1.4 until such time as such previous
Incentive Awards are surrendered and cancelled.
(h) INDEMNIFICATION. Each person who is or was a member of the
Committee, or of the Board, shall be indemnified by the Company against
and from any damage, loss, liability, cost and expense that may be
imposed upon or reasonably incurred by him in connection with or
resulting from any claim, action, suit, or proceeding to which he may
be a party or in which he may be involved by reason of any action taken
or failure to act under the Plan, except for any such act or omission
constituting willful misconduct or gross negligence. Such person shall
be indemnified by the Company for all amounts paid by him in settlement
thereof, with the Company's approval, or paid by him in satisfaction of
any judgment in any such action, suit, or proceeding against him,
provided he shall give the Company an opportunity, at its own expense,
to handle and defend the same before he undertakes to handle and defend
it on his own behalf. The foregoing right of indemnification shall not
be exclusive of any other rights of indemnification to which such
persons may be entitled under the Company's Articles or Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power
that the Company may have to indemnify them or hold them harmless.
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1.4 SHARES OF COMMON STOCK AVAILABLE FOR INCENTIVE AWARDS
Subject to adjustment under Section 6.5, there shall be available for
Incentive Awards that are granted wholly or partly in Common Stock (including
rights or Options that may be exercised for or settled in Common Stock) the
greater of (a) 400,000 Shares of Common Stock or (b) ten percent (10%) of the
number of issued and outstanding Shares on the first day of the then-current
fiscal quarter of the Company. Not more than the total number of Shares reserved
for issuance under the Plan (pursuant to the previous sentence) shall be
available for grants of Incentive Stock Options. The number of Shares of Common
Stock that are the subject of Incentive Awards under this Plan, that are
forfeited or terminated, expire unexercised, are settled in cash in lieu of
Common Stock or in a manner such that all or some of the Shares covered by an
Incentive Award are not issued to a Grantee or are exchanged for Incentive
Awards that do not involve Common Stock, shall again immediately become
available for Incentive Awards hereunder. The Committee may from time to time
adopt and observe such procedures concerning the counting of Shares against the
Plan maximum as it may deem appropriate. The Board and the appropriate officers
of the Company shall from time to time take whatever actions are necessary to
file any required documents with governmental authorities, stock exchanges and
transaction reporting systems to ensure that Shares are available for issuance
pursuant to Incentive Awards.
During any period that the Company is a Publicly Held Corporation, then
unless and until the Committee determines that a particular Incentive Award
granted to a Covered Employee is not intended to comply with the
Performance-Based Exception, the following rules shall apply to grants of
Incentive Awards to Covered Employees:
(a) Subject to adjustment as provided in Section 6.5, the
maximum aggregate number of Shares of Common Stock (including Stock
Options, SARs, Restricted Stock, Performance Units and Performance
Shares paid out in Shares, or Other Stock-Based Awards paid out in
Shares) that may be granted or that may vest, as applicable, in any
calendar year pursuant to any Incentive Award held by any individual
Covered Employee shall be the greater of (i) 400,000 Shares or (ii) 10%
of the number of issued and outstanding Shares on the first day of the
then-current fiscal quarter of the Company.
(b) The maximum aggregate cash payout (including SARs,
Performance Units and Performance Shares paid out in cash, or Other
Stock-Based Awards paid out in cash) with respect to Incentive Awards
granted in any calendar year which may be made to any Covered Employee
shall be Twenty Million dollars ($20,000,000).
(c) With respect to any Stock Option or Stock Appreciation
Right granted to a Covered Employee that is canceled or repriced, the
number of Shares subject to such Stock Option or Stock Appreciation
Right shall continue to count against the maximum number of Shares that
may be the subject of Stock Options or Stock Appreciation Rights
granted to such Covered Employee hereunder and, in this regard, such
maximum number shall be determined in accordance with Section 162(m) of
the Code.
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(d) The limitations of subsections (a), (b) and (c) above
shall be construed and administered so as to comply with the
Performance-Based Exception.
1.5 SHARE POOL ADJUSTMENTS FOR AWARDS AND PAYOUTS.
The following Incentive Awards and payouts shall reduce, on a one Share
for one Share basis, the number of Shares authorized for issuance under the
Share Pool:
(a) Stock Option;
(b) SAR (except a Tandem SAR);
(c) Restricted Stock;
(d) A payout of a Performance Share in Shares;
(e) A payout of a Performance Unit in Shares; and
(f) A payout of an Other Stock-Based Award in Shares.
The following transactions shall restore, on a one Share for one Share
basis, the number of Shares authorized for issuance under the Share Pool:
(a) A Payout of an SAR, Tandem SAR, Restricted Stock Award, or
Other Stock- Based Award in the form of cash;
(b) A cancellation, termination, expiration, forfeiture, or
lapse for any reason (with the exception of the termination of a Tandem
SAR upon exercise of the related Stock Option, or the termination of a
related Stock Option upon exercise of the corresponding Tandem SAR) of
any Shares subject to an Incentive Award; and
(c) Payment of an Option Price with previously acquired Shares
or by withholding Shares which otherwise would be acquired on exercise
(i.e., the Share Pool shall be increased by the number of Shares turned
in or withheld as payment of the Option Price).
1.6 COMMON STOCK AVAILABLE.
The Common Stock available for issuance or transfer under the Plan
shall be made available from Shares now or hereafter (a) held in the treasury of
the Company, (b) authorized but unissued shares, or (c) shares to be purchased
or acquired by the Company. No fractional shares shall be issued under the Plan;
payment for fractional shares shall be made in cash.
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1.7 PARTICIPATION
(a) ELIGIBILITY. The Committee shall from time to time
designate those Employees, Consultants and/or Outside Directors, if
any, to be granted Incentive Awards under the Plan, the type of
Incentive Awards granted, the number of Shares, Stock Options, rights
or units, as the case may be, which shall be granted to each such
person, and any other terms or conditions relating to the Incentive
Awards as it may deem appropriate to the extent consistent with the
provisions of the Plan. A Grantee who has been granted an Incentive
Award may, if otherwise eligible, be granted additional Incentive
Awards at any time.
(b) INCENTIVE STOCK OPTION ELIGIBILITY. No Consultant or
Outside Director shall be eligible for the grant of any Incentive Stock
Option. In addition, no Employee shall be eligible for the grant of any
Incentive Stock Option who owns or would own immediately before the
grant of such Incentive Stock Option, directly or indirectly, stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company, or any Parent or
Subsidiary. This restriction does not apply if, at the time such
Incentive Stock Option is granted, the Incentive Stock Option exercise
price is at least one hundred and ten percent (110%) of the Fair Market
Value on the date of grant and the Incentive Stock Option by its terms
is not exercisable after the expiration of five (5) years from the date
of grant. For the purpose of the immediately preceding sentence, the
attribution rules of Section 424(d) of the Code shall apply for the
purpose of determining an Employee's percentage ownership in the
Company or any Parent or Subsidiary. This paragraph shall be construed
consistent with the requirements of Section 422 of the Code.
1.8 TYPES OF INCENTIVE AWARDS
The types of Incentive Awards under the Plan are Stock Options, Stock
Appreciation Rights and Supplemental Payments as described in Section 2,
Restricted Stock and Supplemental Payments as described in Section 3,
Performance Units, Performance Shares and Supplemental Payments as described in
Section 4, Other Stock-Based Awards and Supplemental Payments as described in
Section 5, or any combination of the foregoing.
SECTION 2.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 GRANT OF STOCK OPTIONS
The Committee is authorized to grant (a) Nonstatutory Stock Options to
Employees, Consultants and/or Outside Directors and (b) Incentive Stock Options
to Employees only, in accordance with the terms and conditions of the Plan, and
with such additional terms and conditions, not inconsistent with the Plan, as
the Committee shall determine in its discretion. Successive grants
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may be made to the same Grantee whether or not any Stock Option previously
granted to such person remains unexercised.
2.2 STOCK OPTION TERMS
(a) WRITTEN AGREEMENT. Each grant of an Stock Option shall be
evidenced by a written Incentive Agreement. Among its other provisions,
each Incentive Agreement shall set forth the extent to which the
Grantee shall have the right to exercise the Stock Option following
termination of the Grantee's Employment. Such provisions shall be
determined in the discretion of the Committee, shall be included in the
Grantee's Incentive Agreement, need not be uniform among all Stock
Options issued pursuant to the Plan.
(b) NUMBER OF SHARES. Each Stock Option shall specify the
number of Shares of Common Stock to which it pertains.
(c) EXERCISE PRICE. The exercise price per Share of Common
Stock under each Stock Option shall be determined by the Committee;
provided, however, that in the case of an Incentive Stock Option, such
exercise price shall not be less than 100% of the Fair Market Value per
Share on the date the Incentive Stock Option is granted (110% for 10%
or greater shareholders pursuant to Section 1.7(b)). To the extent that
the Company is a Publicly Held Corporation and the Stock Option is
intended to qualify for the Performance-Based Exception, the exercise
price shall not be less than 100% of the Fair Market Value per Share on
the date the Stock Option is granted. Each Stock Option shall specify
the method of exercise which shall be consistent with the requirements
of Section 2.3(a).
(d) TERM. In the Incentive Agreement, the Committee shall fix
the term of each Stock Option which shall be not more than ten (10)
years from the date of grant (five years for ISO grants to 10% or
greater shareholders pursuant to Section 1.7(b)). In the event no term
is fixed, such term shall be ten (10) years from the date of grant.
(e) EXERCISE. The Committee shall determine the time or times
at which a Stock Option may be exercised in whole or in part. Each
Stock Option may specify the required period of continuous Employment
and/or the performance objectives to be achieved before the Stock
Option or portion thereof will become exercisable. Each Stock Option,
the exercise of which, or the timing of the exercise of which, is
dependent, in whole or in part, on the achievement of designated
performance objectives, may specify a minimum level of achievement in
respect of the specified performance objectives below which no Stock
Options will be exercisable and a method for determining the number of
Stock Options that will be exercisable if performance is at or above
such minimum but short of full achievement of the performance
objectives. All such terms and conditions shall be set forth in the
Incentive Agreement.
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(f) $100,000 ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS.
Notwithstanding any contrary provision in the Plan, to the extent that
the aggregate Fair Market Value (determined as of the time the
Incentive Stock Option is granted) of the Shares of Common Stock with
respect to which Incentive Stock Options are exercisable for the first
time by any Grantee during any single calendar year (under the Plan and
any other stock option plans of the Company and its Subsidiaries or
Parent) exceeds the sum of $100,000, such Incentive Stock Option shall
be treated as a Nonstatutory Stock Option to the extent in excess of
the $100,000 limit, and not an Incentive Stock Option, but all other
terms and provisions of such Stock Option shall remain unchanged. This
paragraph shall be applied by taking Incentive Stock Options into
account in the order in which they were granted and shall be construed
in accordance with Section 422(d) of the Code. In the absence of such
regulations or other authority, or if such regulations or other
authority require or permit a designation of the Options which shall
cease to constitute Incentive Stock Options, then such Incentive Stock
Options, only to the extent of such excess, shall automatically be
deemed to be Nonstatutory Stock Options but all other terms and
conditions of such Incentive Stock Options, and the corresponding
Incentive Agreement, shall remain unchanged.
2.3 STOCK OPTION EXERCISES
(a) METHOD OF EXERCISE AND PAYMENT. Stock Options shall be
exercised by the delivery of a signed written notice of exercise to the
Company as of a date set by the Company in advance of the effective
date of the proposed exercise. The notice shall set forth the number of
Shares with respect to which the Option is to be exercised, accompanied
by full payment for the Shares.
The Option Price upon exercise of any Stock Option shall be
payable to the Company in full either: (i) in cash or its equivalent,
or (ii) subject to prior approval by the Committee in its discretion,
by tendering previously acquired Shares having an aggregate Fair Market
Value at the time of exercise equal to the total Option Price (provided
that the Shares which are tendered must have been held by the Grantee
for at least six (6) months prior to their tender to satisfy the Option
Price), or (iii) subject to prior approval by the Committee in its
discretion, by withholding Shares which otherwise would be acquired on
exercise having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price, or (iv) subject to prior approval by
the Committee in its discretion, by a combination of (i), (ii), and
(iii) above. Any payment in Shares of Common Stock shall be effected by
the delivery of such Shares to the Secretary of the Company, duly
endorsed in blank or accompanied by stock powers duly executed in
blank, together with any other documents as the Secretary or Committee
may require from time to time.
The Committee, in its discretion, also may allow the Option
Price to be paid with such other consideration as shall constitute
lawful consideration for the issuance of Shares (including, without
limitation, effecting a "cashless exercise" with a broker of the
Option), subject to applicable securities law restrictions and tax
withholdings, or by any other means
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which the Committee determines to be consistent with the Plan's purpose
and applicable law. A "cashless exercise" of an Option is a procedure
by which a broker provides the funds to the Grantee to effect an Option
exercise, to the extent consented to by the Committee in its
discretion. At the direction of the Grantee, the broker will either (i)
sell all of the Shares received when the Option is exercised and pay
the Grantee the proceeds of the sale (minus the Option Price,
withholding taxes and any fees due to the broker) or (ii) sell enough
of the Shares received upon exercise of the Option to cover the Option
Price, withholding taxes and any fees due the broker and deliver to the
Grantee (either directly or through the Company) a stock certificate
for the remaining Shares. Dispositions to a broker effecting a cashless
exercise are not exempt under Section 16 of the Exchange Act (if the
Company is a Publicly Held Corporation).
In the discretion of the Committee, an Option may be exercised
by a broker-dealer acting on behalf of the Grantee if (i) the
broker-dealer has received from the Grantee a duly endorsed Incentive
Agreement evidencing such Option and instructions signed by the Grantee
requesting the Company to deliver the shares of Common Stock subject to
such Option to the broker-dealer on behalf of the Grantee and
specifying the account into which such shares should be deposited, (ii)
adequate provision has been made with respect to the payment of any
withholding taxes due upon such exercise, and (iii) the broker-dealer
and the Grantee have otherwise complied with Section 220.3(e)(4) of
Regulation T, 12 CFR Part 220 (or its successor).
As soon as practicable after receipt of a written notification
of exercise and full payment, the Company shall deliver, or cause to be
delivered, to or on behalf of the Grantee, in the name of the Grantee
or other appropriate recipient, Share certificates for the number of
Shares purchased under the Stock Option. Such delivery shall be
effected for all purposes when the Company or a stock transfer agent of
the Company shall have deposited such certificates in the United States
mail, addressed to Grantee or other appropriate recipient.
Subject to Section 6.2, during the lifetime of a Grantee, each
Option granted to him shall be exercisable only by the Grantee (or his
legal guardian in the event of his Disability) or by a broker-dealer
acting on his behalf pursuant to a cashless exercise under the
foregoing provisions of this Section 2.3(a).
(b) RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may
impose such restrictions on any Shares acquired pursuant to the
exercise of a Stock Option as it may deem advisable, including, without
limitation, restrictions under (i) any stockholders' agreement,
buy/sell agreement, stockholders' agreement, right of first refusal,
non-competition, and any other agreement between the Company and any of
its securities holders or employees, (ii) any applicable federal
securities laws, (iii) the requirements of any stock exchange or market
upon which such Shares are then listed and/or traded, or (iv) any blue
sky or state securities law applicable to such Shares. Any certificate
issued to evidence Shares issued upon the exercise
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of an Incentive Award may bear such legends and statements as the
Committee shall deem advisable to assure compliance with federal and
state laws and regulations.
Any Grantee or other person exercising an Incentive Award may
be required by the Committee to give a written representation that the
Incentive Award and the Shares subject to the Incentive Award will be
acquired for investment and not with a view to public distribution;
provided, however, that the Committee, in its sole discretion, may
release any person receiving an Incentive Award from any such
representations either prior to or subsequent to the exercise of the
Incentive Award.
(c) NOTIFICATION OF DISQUALIFYING DISPOSITION OF SHARES FROM
INCENTIVE STOCK OPTIONS. Notwithstanding any other provision of the
Plan, a Grantee who disposes of Shares of Common Stock acquired upon
the exercise of an Incentive Stock Option by a sale or exchange either
(i) within two (2) years after the date of the grant of the Incentive
Stock Option under which the Shares were acquired or (ii) within one
(1) year after the transfer of such Shares to him pursuant to exercise,
shall promptly notify the Company of such disposition, the amount
realized and his adjusted basis in such Shares.
(d) PROCEEDS OF OPTION EXERCISE. The proceeds received by the
Company from the sale of Shares pursuant to Stock Options exercised
under the Plan shall be used for general corporate purposes.
2.4 STOCK APPRECIATION RIGHTS IN TANDEM WITH NONSTATUTORY STOCK OPTIONS
(a) GRANT. The Committee may, at the time of grant of a
Nonstatutory Stock Option, or at any time thereafter during the term of
the Nonstatutory Stock Option, grant Stock Appreciation Rights with
respect to all or any portion of the Shares of Common Stock covered by
such Nonstatutory Stock Option. A Stock Appreciation Right in tandem
with a Nonstatutory Stock Option is referred to herein as a "Tandem
SAR."
(b) GENERAL PROVISIONS. The terms and conditions of each
Tandem SAR shall be evidenced by an Incentive Agreement. The Option
Price per Share of a Tandem SAR shall be fixed in the Incentive
Agreement and shall not be less than one hundred percent (100%) of the
Fair Market Value of a Share on the grant date of the Nonstatutory
Stock Option to which it relates.
(c) EXERCISE. A Tandem SAR may be exercised at any time the
Nonstatutory Stock Option to which it relates is then exercisable, but
only to the extent such Nonstatutory Stock Option is exercisable, and
shall otherwise be subject to the conditions applicable to such
Nonstatutory Stock Option. When a Tandem SAR is exercised, the
Nonstatutory Stock Option to which it relates shall terminate to the
extent of the number of Shares with respect to which the Tandem SAR is
exercised. Similarly, when a Nonstatutory Stock Option is exercised,
the Tandem SARs relating to the Shares covered by such Nonstatutory
Stock
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Option exercise shall terminate. Any Tandem SAR which is outstanding on
the last day of the term of the related Nonstatutory Stock Option shall
be automatically exercised on such date for cash, without the need for
any action by the Grantee, to the extent of any Appreciation.
(d) SETTLEMENT. Upon exercise of a Tandem SAR, the holder
shall receive, for each Share with respect to which the Tandem SAR is
exercised, an amount equal to the Appreciation. The Appreciation shall
be payable in cash, Common Stock, or a combination of both, as
specified in the Incentive Agreement (or in the discretion of the
Committee if not so specified). The Appreciation shall be paid within
30 calendar days of the exercise of the Tandem SAR. The number of
Shares of Common Stock which shall be issuable upon exercise of a
Tandem SAR shall be determined by dividing (1) by (2), where (1) is the
number of Shares as to which the Tandem SAR is exercised multiplied by
the Appreciation in such shares and (2) is the Fair Market Value of a
Share on the exercise date.
2.5 STOCK APPRECIATION RIGHTS INDEPENDENT OF NONSTATUTORY STOCK OPTIONS
(a) GRANT. The Committee may grant Stock Appreciation Rights
independent of Nonstatutory Stock Options ("Independent SARs").
(b) GENERAL PROVISIONS. The terms and conditions of each
Independent SAR shall be evidenced by an Incentive Agreement. The
exercise price per share of Common Stock shall be not less than one
hundred percent (100%) of the Fair Market Value of a Share of Common
Stock on the date of grant of the Independent SAR. The term of an
Independent SAR shall be determined by the Committee.
(c) EXERCISE. Independent SARs shall be exercisable at such
time and subject to such terms and conditions as the Committee shall
specify in the Incentive Agreement for the Independent SAR grant.
(d) SETTLEMENT. Upon exercise of an Independent SAR, the
holder shall receive, for each Share specified in the Independent SAR
grant, an amount equal to the Spread. The Spread shall be payable in
cash, Common Stock, or a combination of both, in the discretion of the
Committee or as specified in the Incentive Agreement. The Spread shall
be paid within 30 calendar days of the exercise of the Independent SAR.
The number of Shares of Common Stock which shall be issuable upon
exercise of an Independent SAR shall be determined by dividing (1) by
(2), where (1) is the number of Shares as to which the Independent SAR
is exercised multiplied by the Spread in such Shares and (2) is the
Fair Market Value of a Share on the exercise date.
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2.6 RELOAD OPTIONS
At the discretion of the Committee, the Grantee may be granted under an
Incentive Agreement, replacement Stock Options under the Plan that permit the
Grantee to purchase an additional number of Shares equal to the number of
previously owned Shares surrendered by the Grantee to pay for all or a portion
of the Option Price upon exercise of his Stock Options. The terms and conditions
of such replacement Stock Options shall be set forth in the Incentive Agreement.
2.7 SUPPLEMENTAL PAYMENT ON EXERCISE OF NONSTATUTORY STOCK OPTIONS OR STOCK
APPRECIATION RIGHTS
The Committee, either at the time of grant or as of the time of
exercise of any Nonstatutory Stock Option or Stock Appreciation Right, may
provide in the Incentive Agreement for a Supplemental Payment by the Company to
the Grantee with respect to the exercise of any Nonstatutory Stock Option or
Stock Appreciation Right. The Supplemental Payment shall be in the amount
specified by the Committee, which amount shall not exceed the amount necessary
to pay the federal and state income tax payable with respect to both the
exercise of the Nonstatutory Stock Option and/or Stock Appreciation Right and
the receipt of the Supplemental Payment, assuming the holder is taxed at either
the maximum effective income tax rate applicable thereto or at a lower tax rate
as deemed appropriate by the Committee. The Committee shall have the discretion
to grant Supplemental Payments that are payable solely in cash or Supplemental
Payments that are payable in cash, Common Stock, or a combination of both, as
determined by the Committee at the time of payment.
SECTION 3.
RESTRICTED STOCK
3.1 AWARD OF RESTRICTED STOCK
(a) GRANT. In consideration of the performance of Employment
by any Grantee who is an Employee, Consultant or Outside Director,
Shares of Restricted Stock may be awarded under the Plan by the
Committee with such restrictions during the Restriction Period as the
Committee may designate in its discretion, any of which restrictions
may differ with respect to each particular Grantee. Restricted Stock
shall be awarded for no additional consideration or such additional
consideration as the Committee may determine, which consideration may
be less than, equal to or more than the Fair Market Value of the shares
of Restricted Stock on the grant date. The terms and conditions of each
grant of Restricted Stock shall be evidenced by an Incentive Agreement.
(b) IMMEDIATE TRANSFER WITHOUT IMMEDIATE DELIVERY OF
RESTRICTED STOCK. Unless otherwise specified in the Grantee's Incentive
Agreement, each Restricted Stock Award shall constitute an immediate
transfer of the record and beneficial ownership of the
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Shares of Restricted Stock to the Grantee in consideration of the
performance of services as an Employee, Consultant or Outside Director,
as applicable, entitling such Grantee to all voting and other ownership
rights in such Shares.
As specified in the Incentive Agreement, a Restricted Stock
Award may limit the Grantee's dividend rights during the Restriction
Period in which the shares of Restricted Stock are subject to a
"substantial risk of forfeiture" (within the meaning given to such term
under Code Section 83) and restrictions on transfer. In the Incentive
Agreement, the Committee may apply any restrictions to the dividends
that the Committee deems appropriate. Without limiting the generality
of the preceding sentence, if the grant or vesting of Shares of
Restricted Stock granted to a Covered Employee, if applicable, is
designed to comply with the requirements of the Performance-Based
Exception, the Committee may apply any restrictions it deems
appropriate to the payment of dividends declared with respect to such
Shares of Restricted Stock, such that the dividends and/or the Shares
of Restricted Stock maintain eligibility for the Performance-Based
Exception. In the event that any dividend constitutes a derivative
security or an equity security pursuant to the rules under Section 16
of the Exchange Act, if applicable, such dividend shall be subject to a
vesting period equal to the remaining vesting period of the Shares of
Restricted Stock with respect to which the dividend is paid.
Shares awarded pursuant to a grant of Restricted Stock may be
issued in the name of the Grantee and held, together with a stock power
endorsed in blank, by the Committee or Company (or their delegates) or
in trust or in escrow pursuant to an agreement satisfactory to the
Committee, as determined by the Committee, until such time as the
restrictions on transfer have expired. All such terms and conditions
shall be set forth in the particular Grantee's Incentive Agreement. The
Company or Committee (or their delegates) shall issue to the Grantee a
receipt evidencing the certificates held by it which are registered in
the name of the Grantee.
3.2 RESTRICTIONS
(a) FORFEITURE OF RESTRICTED STOCK. Restricted Stock awarded
to a Grantee may be subject to the following restrictions until the
expiration of the Restriction Period: (i) a restriction that
constitutes a "substantial risk of forfeiture" (as defined in Code
Section 83), or a restriction on transferability; (ii) unless otherwise
specified by the Committee in the Incentive Agreement, the Restricted
Stock that is subject to restrictions which are not satisfied shall be
forfeited and all rights of the Grantee to such Shares shall terminate;
and (iii) any other restrictions that the Committee determines in
advance are appropriate, including, without limitation, rights of
repurchase or first refusal in the Company or provisions subjecting the
Restricted Stock to a continuing substantial risk of forfeiture in the
hands of any transferee. Any such restrictions shall be set forth in
the particular Grantee's Incentive Agreement.
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(b) ISSUANCE OF CERTIFICATES. Reasonably promptly after the
date of grant with respect to Shares of Restricted Stock, the Company
shall cause to be issued a stock certificate, registered in the name of
the Grantee to whom such Shares of Restricted Stock were granted,
evidencing such Shares; provided, however, that the Company shall not
cause to be issued such a stock certificate unless it has received a
stock power duly endorsed in blank with respect to such Shares. Each
such stock certificate shall bear the following legend or any other
legend approved by the Company:
The transferability of this certificate and the shares of
stock represented hereby are subject to the restrictions,
terms and conditions (including forfeiture and restrictions
against transfer) contained in the Allstar Systems, Inc. 2000
Stock Incentive Plan and an Incentive Agreement entered into
between the registered owner of such shares and Allstar
Systems, Inc. A copy of the Plan and Incentive Agreement are
on file in the corporate offices of Allstar Systems, Inc.
Such legend shall not be removed from the certificate evidencing such
Shares of Restricted Stock until such Shares vest pursuant to the terms
of the Incentive Agreement.
(c) REMOVAL OF RESTRICTIONS. The Committee, in its discretion,
shall have the authority to remove any or all of the restrictions on
the Restricted Stock if it determines that, by reason of a change in
applicable law or another change in circumstance arising after the
grant date of the Restricted Stock, such action is appropriate.
3.3 DELIVERY OF SHARES OF COMMON STOCK
Subject to withholding taxes under Section 7.3 and to the terms of the
Incentive Agreement, a stock certificate evidencing the Shares of Restricted
Stock with respect to which the restrictions in the Incentive Agreement have
been satisfied shall be delivered to the Grantee or other appropriate recipient
free of restrictions. Such delivery shall be effected for all purposes when the
Company shall have deposited such certificate in the United States mail,
addressed to the Grantee or other appropriate recipient.
3.4 SUPPLEMENTAL PAYMENT ON VESTING OF RESTRICTED STOCK
The Committee, either at the time of grant or vesting of Restricted
Stock, may provide for a Supplemental Payment by the Company to the holder in an
amount specified by the Committee, which amount shall not exceed the amount
necessary to pay the federal and state income tax payable with respect to both
the vesting of the Restricted Stock and receipt of the Supplemental Payment,
assuming the Grantee is taxed at either the maximum effective income tax rate
applicable thereto or at a lower tax rate as deemed appropriate by the
Committee. The Committee shall have the discretion to grant Supplemental
Payments that are payable solely in cash or Supplemental Payments that are
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payable in cash, Common Stock, or a combination of both, as determined by the
Committee at the time of payment.
SECTION 4.
PERFORMANCE UNITS AND PERFORMANCE SHARES
4.1 PERFORMANCE BASED AWARDS
(a) GRANT. The Committee is authorized to grant Performance
Units and Performance Shares to selected Grantees who are Employees,
Outside Directors or Consultants. Each grant of Performance Units
and/or Performance Shares shall be evidenced by an Incentive Agreement
in such amounts and upon such terms as shall be determined by the
Committee. The Committee may make grants of Performance Units or
Performance Shares in such a manner that more than one Performance
Period is in progress concurrently. For each Performance Period, the
Committee shall establish the number of Performance Units or
Performance Shares and their contingent values which may vary depending
on the degree to which performance criteria established by the
Committee are met.
(b) PERFORMANCE CRITERIA. At the beginning of each Performance
Period, the Committee shall (i) establish for such Performance Period
specific financial or non-financial performance objectives that the
Committee believes are relevant to the Company's business objectives;
(ii) determine the value of a Performance Unit or the number of Shares
under a Performance Share grant relative to performance objectives; and
(iii) notify each Grantee in writing of the established performance
objectives and, if applicable, the minimum, target, and maximum value
of Performance Units or Performance Shares for such Performance Period.
(c) MODIFICATION. If the Committee determines, in its
discretion exercised in good faith, that the established performance
measures or objectives are no longer suitable to the Company's
objectives because of a change in the Company's business, operations,
corporate structure, capital structure, or other conditions the
Committee deems to be appropriate, the Committee may modify the
performance measures and objectives to the extent it considers to be
necessary. The Committee shall determine whether any such modification
would cause the Performance Unit or Performance Share to fail to
qualify for the Performance-Based Exception, if applicable.
(d) PAYMENT. The basis for payment of Performance Units or
Performance Shares for a given Performance Period shall be the
achievement of those performance objectives determined by the Committee
at the beginning of the Performance Period as specified in the
Grantee's Incentive Agreement. If minimum performance is not achieved
for a Performance Period, no payment shall be made and all contingent
rights shall cease. If minimum performance is achieved or exceeded, the
value of a Performance Unit or Performance Share may be based on the
degree to which actual performance exceeded the preestablished
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minimum performance standards. The amount of payment shall be
determined by multiplying the number of Performance Units or
Performance Shares granted at the beginning of the Performance Period
times the final Performance Unit or Performance Share value. Payments
shall be made, in the discretion of the Committee as specified in the
Incentive Agreement, solely in cash or Common Stock, or a combination
of cash and Common Stock, following the close of the applicable
Performance Period.
(e) SPECIAL RULE FOR COVERED EMPLOYEES. The Committee may
establish performance goals applicable to Performance Units or
Performance Shares awarded to Covered Employees in such a manner as
shall permit payments with respect thereto to qualify for the
Performance-Based Exception, if applicable. If a Performance Unit or
Performance Share granted to a Covered Employee is intended to comply
with the Performance-Based Exception, the Committee in establishing
performance goals shall be guided by Treasury Regulation ss.
1.162-27(e)(2) (or its successor).
4.2 SUPPLEMENTAL PAYMENT ON VESTING OF PERFORMANCE UNITS OR PERFORMANCE
SHARES
The Committee, either at the time of grant or at the time of vesting of
Performance Units or Performance Shares, may provide for a Supplemental Payment
by the Company to the Grantee in an amount specified by the Committee, which
amount shall not exceed the amount necessary to pay the federal and state income
tax payable with respect to both the vesting of such Performance Units or
Performance Shares and receipt of the Supplemental Payment, assuming the Grantee
is taxed at either the maximum effective income tax rate applicable thereto or
at a lower tax rate as seemed appropriate by the Committee. The Committee shall
have the discretion to grant Supplemental Payments that are payable in cash,
Common Stock, or a combination of both, as determined by the Committee at the
time of payment.
SECTION 5.
OTHER STOCK-BASED AWARDS
5.1 GRANT OF OTHER STOCK-BASED AWARDS
Other Stock-Based Awards may be awarded by the Committee to selected
Grantees that are denominated or payable in, valued in whole or in part by
reference to, or otherwise related to, Shares of Common Stock, as deemed by the
Committee to be consistent with the purposes of the Plan and the goals of the
Company. Other types of Stock-Based Awards include, without limitation, Deferred
Stock, purchase rights, Shares of Common Stock awarded which are not subject to
any restrictions or conditions, convertible or exchangeable debentures, other
rights convertible into Shares, Incentive Awards valued by reference to the
value of securities of or the performance of a specified Subsidiary, division or
department, and settlement in cancellation of rights of any person with a vested
interest in any other plan, fund, program or arrangement that is or was
sponsored, maintained or participated in by the Company or any Parent or
Subsidiary. As is the case with other Incentive Awards, Other
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Stock-Based Awards may be awarded either alone or in addition to or in tandem
with any other Incentive Awards.
5.2 OTHER STOCK-BASED AWARD TERMS
(a) WRITTEN AGREEMENT. The terms and conditions of each grant
of an Other Stock-Based Award shall be evidenced by an Incentive
Agreement.
(b) PURCHASE PRICE. Except to the extent that an Other
Stock-Based Award is granted in substitution for an outstanding
Incentive Award or is delivered upon exercise of a Stock Option, the
amount of consideration required to be received by the Company shall be
either (i) no consideration other than services actually rendered (in
the case of authorized and unissued shares) or to be rendered, or (ii)
in the case of an Other Stock-Based Award in the nature of a purchase
right, consideration (other than services rendered or to be rendered)
at least equal to 50% of the Fair Market Value of the Shares covered by
such grant on the date of grant (or such percentage higher than 50%
that is required by any applicable tax or securities law).
(c) PERFORMANCE CRITERIA AND OTHER TERMS. In its discretion,
the Committee may specify such criteria, periods or goals for vesting
in Other Stock-Based Awards and payment thereof to the Grantee as it
shall determine; and the extent to which such criteria, periods or
goals have been met shall be determined by the Committee. All terms and
conditions of Other Stock-Based Awards shall be determined by the
Committee and set forth in the Incentive Agreement. The Committee may
also provide for a Supplemental Payment similar to such payment as
described in Section 4.2.
(d) PAYMENT. Other Stock-Based Awards may be paid in Shares of
Common Stock or other consideration related to such Shares, in a single
payment or in installments on such dates as determined by the
Committee, all as specified in the Incentive Agreement.
(e) DIVIDENDS. The Grantee of an Other Stock-Based Award shall
be entitled to receive, currently or on a deferred basis, dividends or
dividend equivalents with respect to the number of Shares covered by
the Other Stock-Based Award, as determined by the Committee and set
forth in the Incentive Agreement. The Committee may also provide in the
Incentive Agreement that such amounts (if any) shall be deemed to have
been reinvested in additional Shares of Common Stock.
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SECTION 6.
PROVISIONS RELATING TO PLAN PARTICIPATION
6.1 PLAN CONDITIONS
(a) INCENTIVE AGREEMENT. Each Grantee to whom an Incentive
Award is granted shall be required to enter into an Incentive Agreement
with the Company, in such a form as is provided by the Committee. The
Incentive Agreement shall contain specific terms as determined by the
Committee, in its discretion, with respect to the Grantee's particular
Incentive Award. Such terms need not be uniform among all Grantees or
any similarly- situated Grantees. The Incentive Agreement may include,
without limitation, vesting, forfeiture and other provisions particular
to the particular Grantee's Incentive Award, as well as, for example,
provisions to the effect that the Grantee (i) shall not disclose any
confidential information acquired during Employment with the Company,
(ii) shall abide by all the terms and conditions of the Plan and such
other terms and conditions as may be imposed by the Committee, (iii)
shall not interfere with the employment or other service of any
employee, (iv) shall not compete with the Company or become involved in
a conflict of interest with the interests of the Company, (v) shall
forfeit an Incentive Award if terminated for Cause, (vi) shall not be
permitted to make an election under Section 83(b) of the Code when
applicable, and (vii) shall be subject to any other agreement between
the Grantee and the Company regarding Shares that may be acquired under
an Incentive Award including, without limitation, a stockholders'
agreement or other agreement restricting the transferability of Shares
by Grantee. An Incentive Agreement shall include such terms and
conditions as are determined by the Committee, in its discretion, to be
appropriate with respect to any individual Grantee. The Incentive
Agreement shall be signed by the Grantee to whom the Incentive Award is
made and by an Authorized Officer.
(b) NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any
instrument executed pursuant to the Plan shall create any Employment
rights (including without limitation, rights to continued Employment)
in any Grantee or affect the right of the Company to terminate the
Employment of any Grantee at any time without regard to the existence
of the Plan.
(c) SECURITIES REQUIREMENTS. The Company shall be under no
obligation to effect the registration pursuant to the Securities Act of
1933 of any Shares of Common Stock to be issued hereunder or to effect
similar compliance under any state laws. Notwithstanding anything
herein to the contrary, the Company shall not be obligated to cause to
be issued or delivered any certificates evidencing Shares pursuant to
the Plan unless and until the Company is advised by its counsel that
the issuance and delivery of such certificates is in compliance with
all applicable laws, regulations of governmental authorities, and the
requirements of any securities exchange on which Shares are traded. The
Committee may require, as a condition of the issuance and delivery of
certificates evidencing Shares of Common Stock pursuant to the terms
hereof, that the recipient of such Shares make such covenants,
agreements and
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representations, and that such certificates bear such legends, as the
Committee, in its discretion, deems necessary or desirable.
If the Shares issuable on exercise of an Incentive Award are
not registered under the Securities Act of 1933, the Company may
imprint on the certificate for such Shares the following legend or any
other legend which counsel for the Company considers necessary or
advisable to comply with the Securities Act of 1933:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON RECEIPT BY
THE CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION, IN FORM AND SUBSTANCE SATISFACTORY TO THE
CORPORATION, THAT REGISTRATION IS NOT REQUIRED FOR SUCH SALE
OR TRANSFER.
6.2 TRANSFERABILITY
Incentive Awards granted under the Plan shall not be transferable or
assignable other than: (a) by will or the laws of descent and distribution or
(b) pursuant to a qualified domestic relations order (as defined by Section
414(p) of the Code); provided, however, only with respect to Incentive Awards
consisting of Nonstatutory Stock Options, the Committee may, in its discretion,
authorize all or a portion of the Nonstatutory Stock Options to be granted on
terms which permit transfer by the Grantee to (i) the members of the Grantee's
Immediate Family, (ii) a trust or trusts for the exclusive benefit of such
Immediate Family, (iii) a partnership in which such members of such Immediate
Family are the only partners, or (iv) any other entity owned solely by members
of the Immediate Family; provided that (A) there may be no consideration for any
such transfer, (B) the Incentive Agreement pursuant to which such Nonstatutory
Stock Options are granted must be approved by the Committee, and must expressly
provide for transferability in a manner consistent with this Section 6.2, and
(C) subsequent transfers of transferred Nonstatutory Stock Options shall be
prohibited except in accordance with clauses (a) and (b) (above) of this
sentence. Following any permitted transfer, the Nonstatutory Stock Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that the term "Grantee" shall be deemed
to refer to the transferee. The events of termination of employment, as set out
in Section 6.6 and in the Incentive Agreement, shall continue to be applied with
respect to the original Grantee, and the Incentive Award shall be exercisable by
the transferee only to the extent, and for the periods, specified in the
Incentive Agreement.
Except as may otherwise be permitted under the Code, in the event of a
permitted transfer of a Nonstatutory Stock Option hereunder, the original
Grantee shall remain subject to withholding taxes upon exercise. In addition,
the Company and the Committee shall have no obligation to provide
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any notices to any Grantee or transferee thereof, including, for example, notice
of the expiration of an Incentive Award following the original Grantee's
termination of employment.
No transfer by will or by the laws of descent and distribution shall be
effective to bind the Company unless the Committee has been furnished with a
copy of the deceased Grantee's enforceable will or such other evidence as the
Committee deems necessary to establish the validity of the transfer. Any
attempted transfer in violation of this Section 6.2 shall be void and
ineffective. All determinations under this Section 6.2 shall be made by the
Committee in its discretion.
6.3 RIGHTS AS A STOCKHOLDER
(a) NO STOCKHOLDER RIGHTS. Except as otherwise provided in
Section 3.1(b) for grants of Restricted Stock, a Grantee of an
Incentive Award (or a permitted transferee of such Grantee) shall have
no rights as a stockholder with respect to any Shares of Common Stock
until the issuance of a stock certificate for such Shares.
(b) REPRESENTATION OF OWNERSHIP. In the case of the exercise
of an Incentive Award by a person or estate acquiring the right to
exercise such Incentive Award by reason of the death or Disability of a
Grantee, the Committee may require reasonable evidence as to the
ownership of such Incentive Award or the authority of such person and
may require such consents and releases of taxing authorities as the
Committee may deem advisable.
6.4 LISTING AND REGISTRATION OF SHARES OF COMMON STOCK
The exercise of any Incentive Award granted hereunder shall only be
effective at such time as counsel to the Company shall have determined that the
issuance and delivery of Shares of Common Stock pursuant to such exercise is in
compliance with all applicable laws, regulations of governmental authorities and
the requirements of any securities exchange on which Shares of Common Stock are
traded. The Committee may, in its discretion, defer the effectiveness of any
exercise of an Incentive Award in order to allow the issuance of Shares of
Common Stock to be made pursuant to registration or an exemption from
registration or other methods for compliance available under federal or state
securities laws. The Committee shall inform the Grantee in writing of its
decision to defer the effectiveness of the exercise of an Incentive Award.
During the period that the effectiveness of the exercise of an Incentive Award
has been deferred, the Grantee may, by written notice to the Committee, withdraw
such exercise and obtain the refund of any amount paid with respect thereto.
6.5 CHANGE IN STOCK AND ADJUSTMENTS
(a) CHANGES IN LAW OR CIRCUMSTANCES. Subject to Section 6.7
(which only applies in the event of a Change of Control), in the event
of any change in applicable laws or any change in circumstances which
results in or would result in any dilution of the rights granted under
the Plan, or which otherwise warrants equitable adjustment because it
interferes with the intended operation of the Plan, then, if the
Committee should determine, in its
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absolute discretion, that such change equitably requires an adjustment
in the number or kind of shares of stock or other securities or
property theretofore subject, or which may become subject, to issuance
or transfer under the Plan or in the terms and conditions of
outstanding Incentive Awards, such adjustment shall be made in
accordance with such determination. Such adjustments may include
changes with respect to (i) the aggregate number of Shares that may be
issued under the Plan, (ii) the number of Shares subject to Incentive
Awards, and (iii) the price per Share for outstanding Incentive Awards.
Any adjustment under this paragraph of an outstanding Incentive Stock
Option shall be made only to the extent not constituting a
"modification" within the meaning of Section 424(h)(3) of the Code
unless otherwise agreed to by the Grantee in writing. The Committee
shall give notice to each applicable Grantee of such adjustment which
shall be effective and binding.
(b) EXERCISE OF CORPORATE POWERS. The existence of the Plan or
outstanding Incentive Awards hereunder shall not affect in any way the
right or power of the Company or its stockholders to make or authorize
any or all adjustments, recapitalization, reorganization or other
changes in the Company's capital structure or its business or any
merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stocks ahead of or affecting
the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part
of its assets or business, or any other corporate act or proceeding
whether of a similar character or otherwise.
(c) RECAPITALIZATION OF THE COMPANY. Subject to Section 6.7
(which only applies in the event of a Change in Control), if while
there are Incentive Awards outstanding, the Company shall effect any
subdivision or consolidation of Shares of Common Stock or other capital
readjustment, the payment of a stock dividend, stock split, combination
of Shares, recapitalization or other increase or reduction in the
number of Shares outstanding, without receiving compensation therefor
in money, services or property, then the number of Shares available
under the Plan and the number of Incentive Awards which may thereafter
be exercised shall (i) in the event of an increase in the number of
Shares outstanding, be proportionately increased and the Fair Market
Value of the Incentive Awards awarded shall be proportionately reduced;
and (ii) in the event of a reduction in the number of Shares
outstanding, be proportionately reduced, and the Fair Market Value of
the Incentive Awards awarded shall be proportionately increased. The
Committee shall take such action and whatever other action it deems
appropriate, in its discretion, so that the value of each outstanding
Incentive Award to the Grantee shall not be adversely affected by a
corporate event described in this subsection (c).
(d) ISSUE OF COMMON STOCK BY THE COMPANY. Except as
hereinabove expressly provided in this Section 6.5 and subject to
Section 6.7 in the event of a Change in Control, the issue by the
Company of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon any conversion of
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shares or obligations of the Company convertible into such shares or
other securities, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number of, or Fair Market Value of,
any Incentive Awards then outstanding under previously granted
Incentive Awards; provided, however, in such event, outstanding Shares
of Restricted Stock shall be treated the same as outstanding
unrestricted Shares of Common Stock.
(e) ASSUMPTION UNDER THE PLAN OF OUTSTANDING STOCK OPTIONS.
Notwithstanding any other provision of the Plan, the Committee, in
its absolute discretion, may authorize the assumption and continuation
under the Plan of outstanding and unexercised stock options or other
types of stock-based incentive awards that were granted under a stock
option plan (or other type of stock incentive plan or agreement) that
is or was maintained by a corporation or other entity that was merged
into, consolidated with, or whose stock or assets were acquired by, the
Company as the surviving corporation. Any such action shall be upon
such terms and conditions as the Committee, in its discretion, may deem
appropriate, including provisions to preserve the holder's rights under
the previously granted and unexercised stock option or other
stock-based incentive award, such as, for example, retaining an
existing exercise price under an outstanding stock option. Any such
assumption and continuation of any such previously granted and
unexercised incentive award shall be treated as an outstanding
Incentive Award under the Plan and shall thus count against the number
of Shares reserved for issuance pursuant to Section 1.4. In addition,
any Shares issued by the Company through the assumption or substitution
of outstanding grants from an acquired company shall reduce the Shares
available for grants under Section 1.4.
(f) ASSUMPTION OF INCENTIVE AWARDS BY A SUCCESSOR. Subject to
the accelerated vesting and other provisions of Section 6.7 that apply
in the event of a Change in Control, in the event of a Corporate Event
(defined below), each Grantee shall be entitled to receive, in lieu of
the number of Shares subject to Incentive Awards, such shares of
capital stock or other securities or property as may be issuable or
payable with respect to or in exchange for the number of Shares which
Grantee would have received had he exercised the Incentive Award
immediately prior to such Corporate Event, together with any
adjustments (including, without limitation, adjustments to the Option
Price and the number of Shares issuable on exercise of outstanding
Stock Options). For this purpose, Shares of Restricted Stock shall be
treated the same as unrestricted outstanding Shares of Common Stock. A
"Corporate Event" means any of the following: (i) a dissolution or
liquidation of the Company, (ii) a sale of all or substantially all of
the Company's assets, or (iii) a merger, consolidation or combination
involving the Company (other than a merger, consolidation or
combination (A) in which the Company is the continuing or surviving
corporation and (B) which does not result in the outstanding Shares
being converted into or exchanged for different securities, cash or
other property, or any combination thereof). The Committee shall take
whatever other action it deems appropriate to preserve the rights of
Grantees holding outstanding Incentive Awards.
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Notwithstanding the previous paragraph of this Section 6.5(f),
but subject to the accelerated vesting and other provisions of Section
6.7 that apply in the event of a Change in Control, the Committee, in
its discretion, if it determines that such action is in the best
interests of the Company, shall have the right and power to:
(i) cancel, effective immediately prior to the
occurrence of the Corporate Event, each outstanding Incentive
Award (whether or not then exercisable) and, in full
consideration of such cancellation, pay to the Grantee an
amount in cash equal to the excess of (A) the value, as
determined by the Committee, of the property (including cash)
received by the holders of Common Stock as a result of such
Corporate Event over (B) the exercise price of such Incentive
Award, if any; provided, however, this subsection (i) shall be
inapplicable to an Incentive Award granted within six (6)
months before the occurrence of the Corporate Event but only
if the Grantee is an Insider and such disposition is not
exempt under Rule 16b-3 (or other rules preventing liability
of the Insider under Section 16(b) of the Exchange Act) and,
in that event, the provisions hereof shall be applicable to
such Incentive Award after the expiration of six (6) months
from the date of grant; or
(ii) provide for the exchange of each Incentive Award
outstanding immediately prior to such Corporate Event (whether
or not then exercisable) for another award with respect to the
Common Stock or other property for which such Incentive Award
is exchangeable and, incident thereto, make an equitable
adjustment as determined by the Committee, in its discretion,
in the exercise price of the Incentive Award, if any, or in
the number of Shares or amount of property (including cash)
subject to the Incentive Award.
The Committee, in its discretion, shall have the authority to take
whatever action it deems to be necessary or appropriate to effectuate
the provisions of this subsection (f).
6.6 TERMINATION OF EMPLOYMENT, DEATH, DISABILITY AND RETIREMENT
(a) TERMINATION OF EMPLOYMENT. Unless otherwise expressly
provided in the Grantee's Incentive Agreement, if the Grantee's
Employment is terminated for any reason other than due to his death,
Disability, Retirement or for Cause, any non-vested portion of any
Stock Option or other applicable Incentive Award at the time of such
termination shall automatically expire and terminate and no further
vesting shall occur after the termination date. In such event, except
as otherwise expressly provided in his Incentive Agreement, the Grantee
shall be entitled to exercise his rights only with respect to the
portion of the Incentive Award that was vested as of his termination of
Employment date for a period that shall end on the earlier of (i) the
expiration date set forth in the Incentive Agreement or (ii) ninety
(90) days after the date of his termination of Employment.
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(b) TERMINATION OF EMPLOYMENT FOR CAUSE. Unless otherwise
expressly provided in the Grantee's Incentive Agreement, in the event
of the termination of a Grantee's Employment for Cause, all vested and
non-vested Stock Options and other Incentive Awards granted to such
Grantee shall immediately expire, and shall not be exercisable to any
extent, as of 12:01 a.m. (CST) on the date of such termination of
Employment.
(c) RETIREMENT. Unless otherwise expressly provided in the
Grantee's Incentive Agreement, upon the termination of Employment due
to the Retirement of any Employee who is a Grantee:
(i) any non-vested portion of any outstanding Option
or other Incentive Award shall immediately terminate and no
further vesting shall occur; and
(ii) any vested Option or other Incentive Award shall
expire on the earlier of (A) the expiration date set forth in
the Incentive Agreement for such Incentive Award; or (B) the
expiration of (1) six months after the date of his termination
of Employment due to Retirement in the case of any Incentive
Award other than an Incentive Stock Option or (2) three months
after his termination date in the case of an Incentive Stock
Option.
(d) DISABILITY OR DEATH. Unless otherwise expressly provided
in the Grantee's Incentive Agreement, upon termination of Employment as
a result of the Grantee's Disability or death:
(i) any nonvested portion of any outstanding Option
or other applicable Incentive Award shall immediately
terminate upon termination of Employment and no further
vesting shall occur; and
(ii) any vested Incentive Award shall expire on the
earlier of either (A) the expiration date set forth in the
Incentive Agreement or (B) the one year anniversary date of
the Grantee's termination of Employment date.
In the case of any vested Incentive Stock Option held by an
Employee following termination of Employment, notwithstanding the
definition of "Disability" in Section 1.2, whether the Employee has
incurred a "Disability" for purposes of determining the length of the
Option exercise period following termination of Employment under this
paragraph (d) shall be determined by reference to Section 22(e)(3) of
the Code to the extent required by Section 422(c)(6) of the Code. The
Committee shall determine whether a Disability for purposes of this
subsection (d) has occurred.
(e) CONTINUATION. Subject to the conditions and limitations of
the Plan and applicable law and regulation in the event that a Grantee
ceases to be an Employee, Outside Director or Consultant, as
applicable, for whatever reason, the Committee and Grantee may
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mutually agree with respect to any outstanding Option or other
Incentive Award then held by the Grantee (i) for an acceleration or
other adjustment in any vesting schedule applicable to the Incentive
Award, (ii) for a continuation of the exercise period following
termination for a longer period than is otherwise provided under such
Incentive Award, or (iii) to any other change in the terms and
conditions of the Incentive Award. In the event of any such change to
an outstanding Incentive Award, a written amendment to the Grantee's
Incentive Agreement shall be required.
6.7 CHANGE IN CONTROL
Notwithstanding any contrary provision in the Plan, in the event of a
Change in Control (as defined below), the following actions shall automatically
occur as of the day immediately preceding the Change in Control date unless
expressly provided otherwise in the Grantee's Incentive Agreement:
(a) all of the Stock Options and Stock Appreciation Rights
then outstanding shall become 100% vested and immediately and fully
exercisable;
(b) all of the restrictions and conditions of any Restricted
Stock and any Other Stock-Based Awards then outstanding shall be deemed
satisfied, and the Restriction Period with respect thereto shall be
deemed to have expired, and thus each such Incentive Award shall become
free of all restrictions and fully vested; and
(c) all of the Performance Shares, Performance Units and any
Other Stock-Based Awards shall become fully vested, deemed earned in
full, and promptly paid within thirty (30) days to the affected
Grantees without regard to payment schedules and notwithstanding that
the applicable performance cycle, retention cycle or other restrictions
and conditions have not been completed or satisfied.
Notwithstanding any other provision of this Plan, unless otherwise
expressly provided in the Grantee's Incentive Agreement, the provisions of this
Section 6.7 may not be terminated, amended, or modified to adversely affect any
Incentive Award theretofore granted under the Plan without the prior written
consent of the Grantee with respect to his outstanding Incentive Awards subject,
however, to the last paragraph of this Section 6.7.
For all purposes of this Plan, a "CHANGE IN CONTROL" of the Company
means the occurrence of any one or more of the following events:
(a) The acquisition by any individual, entity or group (within
the meaning of 14(d)(2) of the Exchange Act (a "PERSON")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares
of common stock of the Company (the "OUTSTANDING COMPANY STOCK") or
(ii) the combined voting power of the then outstanding voting
securities of the Company
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entitled to vote generally in the election of directors (the
"OUTSTANDING COMPANY VOTING SECURITIES"); provided, however, that the
following acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Company or any Subsidiary, (ii) any
acquisition by the Company or any Subsidiary or by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
Subsidiary, or (iii) any acquisition by any corporation pursuant to a
reorganization, merger, consolidation or similar business combination
involving the Company (a "MERGER"), if, following such Merger, the
conditions described in clauses (i) and (ii) Section 6.7(c) (below) are
satisfied;
(b) Individuals who, as of the Effective Date, constitute the
Board of Directors of the Company (the "INCUMBENT BOARD") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the
Effective Date whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board;
(c) Approval by the shareholders of the Company of a Merger,
unless immediately following such Merger, (i) substantially all of the
holders of the Outstanding Company Voting Securities immediately prior
to Merger beneficially own, directly or indirectly, more than 50% of
the common stock of the corporation resulting from such Merger in
substantially the same proportions as their ownership of Outstanding
Company Voting Securities immediately prior to such Merger and (ii) at
least a majority of the members of the board of directors of the
corporation resulting from such Merger were members of the Incumbent
Board at the time of the execution of the initial agreement providing
for such Merger;
(d) The sale or other disposition of all or substantially all
of the assets of the Company, unless immediately following such sale or
other disposition, (i) substantially all of the holders of the
Outstanding Company Voting Securities immediately prior to the
consummation of such sale or other disposition beneficially own,
directly or indirectly, more than 50% of the common stock of the
corporation acquiring such assets in substantially the same proportions
as their ownership of Outstanding Company Voting Securities immediately
prior to the consummation of such sale or disposition, and (ii) at
least a majority of the members of the board of directors of such
corporation were members of the Incumbent Board at the time of
execution of the initial agreement or action of the Board providing for
such sale or other disposition of assets of the Company; or
(e) Any other event that a majority of the Board, in its sole
discretion, determines to constitute a Change in Control hereunder.
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Notwithstanding the occurrence of any of the foregoing events of this
Section 6.7 which would otherwise result in a Change in Control, the Board may
determine in its discretion, if it deems it to be in the best interest of the
Company, that an event or events otherwise constituting or reasonably leading to
a Change in Control shall not be deemed a Change in Control hereunder. Such
determination shall be effective only if it is made by the Board prior to the
occurrence of an event that otherwise would be, or reasonably lead to, a Change
in Control, or after such event only if made by the Board a majority of which is
composed of directors who were members of the Board immediately prior to the
event that otherwise would be, or reasonably lead to, a Change in Control.
6.8 EXCHANGE OF INCENTIVE AWARDS
The Committee may, in its discretion, permit any Grantee to surrender
outstanding Incentive Awards in order to exercise or realize his rights under
other Incentive Awards or in exchange for the grant of new Incentive Awards, or
require holders of Incentive Awards to surrender outstanding Incentive Awards
(or comparable rights under other plans or arrangements) as a condition
precedent to the grant of new Incentive Awards.
6.9 FINANCING
The Company may extend and maintain, or arrange for and guarantee, the
extension and maintenance of financing to any Grantee to purchase Shares
pursuant to exercise of an Incentive Award upon such terms as are approved by
the Committee in its discretion.
SECTION 7.
GENERAL
7.1 EFFECTIVE DATE AND GRANT PERIOD
This Plan is adopted by the Board effective as of March 15, 2000 (the
"EFFECTIVE DATE") subject to the approval of the stockholders of the Company
within one year from the Effective Date. Incentive Awards may be granted under
the Plan at any time prior to receipt of such stockholder approval; provided,
however, if the requisite stockholder approval is not obtained then any
Incentive Awards granted hereunder shall automatically become null and void and
of no force or effect. Unless sooner terminated by the Board, no Incentive Award
shall be granted under the Plan after ten (10) years from the Effective Date.
7.2 FUNDING AND LIABILITY OF COMPANY
No provision of the Plan shall require the Company, for the purpose of
satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made, or otherwise
to segregate any assets. In addition, the Company shall not be
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required to maintain separate bank accounts, books, records or other evidence of
the existence of a segregated or separately maintained or administered fund for
purposes of the Plan. Although bookkeeping accounts may be established with
respect to Grantees who are entitled to cash, Common Stock or rights thereto
under the Plan, any such accounts shall be used merely as a bookkeeping
convenience. The Company shall not be required to segregate any assets that may
at any time be represented by cash, Common Stock or rights thereto. The Plan
shall not be construed as providing for such segregation, nor shall the Company,
the Board or the Committee be deemed to be a trustee of any cash, Common Stock
or rights thereto. Any liability or obligation of the Company to any Grantee
with respect to an Incentive Award shall be based solely upon any contractual
obligations that may be created by this Plan and any Incentive Agreement, and no
such liability or obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company. Neither the Company,
the Board nor the Committee shall be required to give any security or bond for
the performance of any obligation that may be created by the Plan.
7.3 WITHHOLDING TAXES
(a) TAX WITHHOLDING. The Company shall have the power and the
right to deduct or withhold, or require a Grantee to remit to the
Company, an amount sufficient to satisfy federal, state, and local
taxes, domestic or foreign, required by law or regulation to be
withheld with respect to any taxable event arising as a result of the
Plan or an Incentive Award hereunder. Upon the lapse of restrictions on
Restricted Stock, the Committee, in its discretion, may elect to
satisfy the tax withholding requirement, in whole or in part, by having
the Company withhold Shares having a Fair Market Value on the date the
tax is to be determined equal to the minimum statutory total tax which
could be imposed on the transaction.
(b) SHARE WITHHOLDING. With respect to tax withholding
required upon the exercise of Stock Options or SARs, upon the lapse of
restrictions on Restricted Stock, or upon any other taxable event
arising as a result of any Incentive Awards, Grantees may elect,
subject to the approval of the Committee in its discretion, to satisfy
the withholding requirement, in whole or in part, by having the Company
withhold Shares having a Fair Market Value on the date the tax is to be
determined equal to the minimum statutory total tax which could be
imposed on the transaction. All such elections shall be made in
writing, signed by the Grantee, and shall be subject to any
restrictions or limitations that the Committee, in its discretion,
deems appropriate.
(c) INCENTIVE STOCK OPTIONS. With respect to Shares received
by a Grantee pursuant to the exercise of an Incentive Stock Option, if
such Grantee disposes of any such Shares within (i) two years from the
date of grant of such Option or (ii) one year after the transfer of
such shares to the Grantee, the Company shall have the right to
withhold from any salary, wages or other compensation payable by the
Company to the Grantee an amount sufficient to satisfy federal, state
and local tax withholding requirements attributable to such
disqualifying disposition.
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(d) LOANS. The Committee may provide for loans, on either a
short term or demand basis, from the Company to a Grantee who is an
Employee or Consultant to permit the payment of taxes required by law.
7.4 NO GUARANTEE OF TAX CONSEQUENCES
Neither the Company nor the Committee makes any commitment or guarantee
that any federal, state or local tax treatment will apply or be available to any
person participating or eligible to participate hereunder.
7.5 DESIGNATION OF BENEFICIARY BY PARTICIPANT
Each Grantee may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his death before he receives any
or all of such benefit. Each such designation shall revoke all prior
designations by the same Grantee, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Grantee in writing with
the Committee during the Grantee's lifetime. In the absence of any such
designation, benefits remaining unpaid at the Grantee's death shall be paid to
the Grantee's estate.
7.6 DEFERRALS
The Committee may permit a Grantee to defer such Grantee's receipt of
the payment of cash or the delivery of Shares that would, otherwise be due to
such Grantee by virtue of the lapse or waiver of restrictions with respect to
Restricted Stock, or the satisfaction of any requirements or goals with respect
to Performance Units, Performance Shares or Other Stock-Based Awards. If any
such deferral election is permitted, the Committee shall, in its discretion,
establish rules and procedures for such payment deferrals to the extent required
for tax deferral of compensation under the Code.
7.7 AMENDMENT AND TERMINATION
The Board and CEO shall each have the power and authority to terminate
or amend the Plan at any time; provided, however, the Board or CEO shall not,
without the approval of the stockholders of the Company within the time period
required by applicable law, (a) except as provided in Section 6.5, increase the
maximum number of Shares which may be issued under the Plan pursuant to Section
1.4, (b) amend the requirements as to the class of Employees eligible to
purchase Common Stock under the Plan, (c) extend the term of the Plan, or, if
the Company is a Publicly Held Corporation (i) increase the maximum limits on
Incentive Awards to Covered Employees as set for compliance with the
Performance-Based Exception, or (ii) decrease the authority granted to the
Committee under the Plan in contravention of Rule 16b-3 under the Exchange Act.
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No termination, amendment, or modification of the Plan shall adversely
affect in any material way any outstanding Incentive Award previously granted to
a Grantee under the Plan, without the written consent of such Grantee or other
designated holder of such Incentive Award.
In addition, to the extent that the Committee determines that (a) the
listing for qualification requirements of any national securities exchange or
quotation system on which the Company's Common Stock is then listed or quoted,
if applicable, or (b) the Code (or regulations promulgated thereunder), require
stockholder approval in order to maintain compliance with such listing
requirements or to maintain any favorable tax advantages or qualifications, then
the Plan shall not be amended in such respect without approval of the Company's
stockholders.
7.8 REQUIREMENTS OF LAW
(a) GOVERNMENTAL ENTITIES AND SECURITIES EXCHANGES. The
granting of Incentive Awards and the issuance of Shares under the Plan
shall be subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental agencies or national securities
exchanges as may be required. Certificates evidencing shares of Common
Stock delivered under this Plan (to the extent that such shares are so
evidenced) may be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the rules and
regulations of the Securities and Exchange Commission, any securities
exchange or transaction reporting system upon which the Common Stock is
then listed or to which it is admitted for quotation, and any
applicable federal or state securities law, if applicable. The
Committee may cause a legend or legends to be placed upon such
certificates (if any) to make appropriate reference to such
restrictions.
(b) SECURITIES ACT RULE 701. If no class of the Company's
securities is registered under Section 12 of the Exchange Act, then
unless otherwise determined by the Committee, grants of Incentive
Awards to "Rule 701 Grantees" (as defined below) and issuances of the
underlying shares of Common Stock, if any, on the exercise or
conversion of such Incentive Awards are intended to comply with all
applicable conditions of Securities Act Rule 701 ("Rule 701"),
including, without limitation, the restrictions as to the amount of
securities that may be offered and sold in reliance on Rule 701, so as
to qualify for an exemption from the registration requirements of the
Securities Act. Any ambiguities or inconsistencies in the construction
of an Incentive Award or the Plan shall be interpreted to give effect
to such intention. In accordance with Rule 701, each Grantee shall
receive a copy of the Plan on or before the date an Incentive Award is
granted to him, as well as the additional disclosure required by Rule
701(e) if the aggregate sales price or amount of securities sold during
any consecutive 12-month period exceeds $5,000,000 as determined under
Rule 701(e). If Rule 701 (or any successor provision) is amended to
eliminate or otherwise modify any of the requirements specified in Rule
701, then the provisions of this subsection 7.8(b) shall be interpreted
and construed in accordance with Rule 701 as so amended. For purposes
of this subsection 7.8(b), as determined in accordance with Rule 701,
"Rule 701 Grantees" shall mean any Grantee other than a director of the
Company, the Company's chairman, chief
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executive officer, president, chief financial officer, controller and
any vice president of the Company, and any other key employee of the
Company who generally has access to financial and other business
related information and possesses sufficient sophistication to
understand and evaluate such information.
7.9 RULE 16B-3 SECURITIES LAW COMPLIANCE FOR INSIDERS
If the Company is a Publicly Held Corporation, transactions under the
Plan with respect to Insiders are intended to comply with all applicable
conditions of Rule 16b-3 under the Exchange Act. Any ambiguities or
inconsistencies in the construction of an Incentive Award or the Plan shall be
interpreted to give effect to such intention, and to the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be deemed null
and void to the extent permitted by law and deemed advisable by the Committee in
its discretion.
7.10 COMPLIANCE WITH CODE SECTION 162(M) FOR PUBLICLY HELD CORPORATION
If the Company is a Publicly Held Corporation, unless otherwise
determined by the Committee with respect to any particular Incentive Award, it
is intended that the Plan shall comply fully with the applicable requirements so
that any Incentive Awards subject to Section 162(m) that are granted to Covered
Employees shall qualify for the Performance-Based Exception, except for grants
of Nonstatutory Stock Options with an Option Price set at less than the Fair
Market Value of a Share on the date of grant. If any provision of the Plan or an
Incentive Agreement would disqualify the Plan or would not otherwise permit the
Plan or Incentive Award to comply with the Performance-Based Exception as so
intended, such provision shall be construed or deemed to be amended to conform
to the requirements of the Performance-Based Exception to the extent permitted
by applicable law and deemed advisable by the Committee; provided, however, no
such construction or amendment shall have an adverse effect on the prior grant
of an Incentive Award or the economic value to a Grantee of any outstanding
Incentive Award.
7.11 SUCCESSORS TO COMPANY
All obligations of the Company under the Plan with respect to Incentive
Awards granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of
the business and/or assets of the Company.
7.12 MISCELLANEOUS PROVISIONS
(a) No Employee, Consultant, Outside Director, or other person
shall have any claim or right to be granted an Incentive Award under
the Plan. Neither the Plan, nor any action taken hereunder, shall be
construed as giving any Employee, Consultant, or Outside Director any
right to be retained in the Employment or other service of the Company
or any Parent or Subsidiary.
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(b) The expenses of the Plan shall be borne by the Company.
(c) By accepting any Incentive Award, each Grantee and each
person claiming by or through him shall be deemed to have indicated his
acceptance of the Plan.
7.13 SEVERABILITY
In the event that any provision of this Plan shall be held illegal,
invalid or unenforceable for any reason, such provision shall be fully
severable, but shall not affect the remaining provisions of the Plan, and the
Plan shall be construed and enforced as if the illegal, invalid, or
unenforceable provision was not included herein.
7.14 GENDER, TENSE AND HEADINGS
Whenever the context so requires, words of the masculine gender used
herein shall include the feminine and neuter, and words used in the singular
shall include the plural. Section headings as used herein are inserted solely
for convenience and reference and constitute no part of the interpretation or
construction of the Plan.
7.15 GOVERNING LAW
The Plan shall be interpreted, construed and constructed in accordance
with the laws of the State of Texas without regard to its conflicts of law
provisions, except as may be superseded by applicable laws of the United States.
IN WITNESS WHEREOF, the Company has caused this Plan to be duly
executed in its name and on its behalf by its duly authorized officer.
ALLSTAR SYSTEMS, INC.
By: /s/ James H. Long
--------------------------------------
Name: James H. Long
------------------------------------
Title: Chief Executive Officer
-----------------------------------
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ALLSTAR SYSTEMS, INC.
PROXY 6401 SOUTHWEST FREEWAY
HOUSTON, TEXAS 77074
THIS PRODUCT IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ALLSTAR SYSTEMS,
INC. SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 19, 2000
The undersigned stockholder of Allstar Systems, Inc. (the "Company") hereby
appoints each of James H. Long and Donald R. Chadwick attorneys and proxies of
the undersigned, with full power of substitution, to vote on behalf of the
undersigned at the Allstar Systems, Inc. Special Meeting of Stockholders of the
Company to be held at the Company's corporate offices at 6401 Southwest Freeway,
Houston, Texas 77074, on May 19, 2000, at 10:00 a.m., central time, and at any
adjournments of said meeting, all of the shares of Company Common Stock which
the undersigned may be entitled to vote.
1. APPROVAL OF THE ASSET PURCHASE AGREEMENT PURSUANT TO WHICH WE WILL SALE
OUR COMPUTER PRODUCTS DIVISION AND EL PASO IT SERVICES BUSINESS TO
AMHERST COMPUTER PRODUCTS SOUTHWEST, L.P.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. APPROVAL OF THE 2000 STOCK INCENTIVE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
CONTINUED ON OTHER SIDE
<PAGE> 161
CONTINUED FROM OTHER SIDE
3. In their discretion, upon such other matters as may properly come
before the meeting; hereby revoking any proxy or proxies regarding such
matters heretofore given by the undersigned.
The board of directors recommends a vote FOR each proposal above and if no
specification is made, the shares will be voted FOR approval of the Asset
Purchase Agreement and FOR approval of the Incentive Plan. The undersigned
hereby acknowledges receipt of the Notice of Special Meeting of Allstar
Stockholders and the Proxy Statement furnished herewith.
Date ,2000
-----------------------
--------------------------------
Stockholders's Signature
--------------------------------
Stockholders's Signature
Signature should agree with name printed hereon. If Stock is held in the name of
more than one person, EACH joint owner should sign. Executives, administrators,
trustees, guardians, and attorneys should indicate the capacity in which they
sign. Attorneys should submit powers of attorney.
PLEASE SIGN AND RETURN IN THE ENVELOPE ENCLOSED
