[Porter & Hedges, L.L.P. Stationary]
March 27, 2000
VIA EDGAR
U.S. Securities & Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Allstar Systems, Inc.
Ladies and Gentlemen:
On behalf of Allstar Systems, Inc., a Delaware corporation ("the Company"),
pursuant to Rule 14a-6 of the Securities Exchange Act of 1934, as amended, the
preliminary proxy statement, including a Notice of Special Meeting of
Stockholders and the accompanying appendices, for a special meeting of the
Company's stockholders, scheduled to be held on May 15, 2000, was filed on March
27, 2000, via EDGAR.
At the special meeting, stockholders will be asked to approve (i) a
disposition of certain of the Company's assets and (ii) an incentive
compensation plan. A hard copy of the proxy statement will be delivered to you
at your request. If the incentive compensation plan is approved by stockholders
at the special meeting the Company will file a registration statement on Form
S-8 to register the securities issuable under the plan.
Any questions or comments with respect to this filing should be directed to
the undersigned at 713/226-0691 or Kimberly Frye at 713/226-0628.
Very truly yours,
/s/ Bryan K. Brown
Bryan K. Brown
BKB/sd
cc: James H. long
Nick D. Nicholas [firm]
<PAGE>
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:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
ALLSTAR SYSTEMS, INC.
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box)
[ ] No fee required
[x] 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: $17,434,000
5) Total fee paid: $3,487
[ ] Fee paid previously with preliminary materials.
[ ] Checkbox 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: __________________
<PAGE>
ALLSTAR SYSTEMS, INC.
6401 SOUTHWEST FREEWAY
HOUSTON, TEXAS 77074
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
May 15, 2000
A special meeting (the "SPECIAL MEETING") of the stockholders of Allstar
Systems, Inc. ("Allstar" or the "Company"), will be held on May 15, 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 __, 2000
<PAGE>
TABLE OF CONTENTS
Page
GENERAL INFORMATION 1
SUMMARY 2
PURPOSE OF THE SPECIAL MEETING 2
PROPOSAL 1: APPROVAL OF THE ASSET SALE 3
The Asset Sale 3
Background 3
Purposes of the Asset Sale 3
Sale Price 4
Our Planned Use of Proceeds 4
Conditions to Closing 5
Interest of Management in the Asset Sale 5
Estimated Closing Date 6
Vote Required for Approval of the Asset Sale 6
No Fairness Opinion 6
No Dissenters' Rights 6
Material Federal Income Tax Consequences 6
Accounting Treatment 6
Recommendation of the Board of Directors 6
PROPOSAL 2: APPROVAL OF 2000 INCENTIVE STOCK PLAN 7
Shares Subject to Plan 7
Administration 7
Eligibility 7
Types of Incentive Awards 7
Amendment and Termination 8
Vote Required for Approval of the 2000 Stock Incentive Plan 8
Recommendation of the Board of Directors 8
SUMMARY SELECTED HISTORICAL FINANCIAL INFORMATION 9
SUMMARY SELECTED UNAUDITED PRO FORMA FINANCIAL DATA 10
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS 11
PROPOSAL 1: APPROVAL OF THE ASSET SALE 13
Background of Asset Sale 13
Changes in the Industry 13
The Effects on our Common Stock 14
The Amherst Technologies Transaction 15
Reasons For Asset Sale; Recommendation of the Board of Directors 16
Accounting Treatment of the Asset Sale 18
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 19
Our Business After the Asset Sale 19
Business Plan 20
<PAGE>
THE ASSET PURCHASE AGREEMENT 21
Sale of Assets 21
Liabilities Assumed 21
The Purchase Price 21
Inventory Purchase Price 21
Tangible Asset Purchase Price 21
Earn Out Payment 21
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 26
PROPOSAL 2: APPROVAL OF 2000 STOCK INCENTIVE PLAN 27
Summary Description of the Incentive Plan 27
Shares Subject to Plan 27
Administration 27
Eligibility 28
Types of Incentive Awards 29
Options 28
SARs 28
Restricted Stock 29
Performance Units and Performance Shares 29
Other Stock-Based Awards 29
Other Tax Considerations 29
Termination of Employment and Change in Control 29
Incentive Awards Transferable 30
Amendment and Termination 30
Required Vote 30
Recommendation of the Board of Directors 30
MARKET INFORMATION 31
Historical Market Price 31
Recent Market Price 31
Number of Holders 31
FORWARD-LOOKING STATEMENTS 32
WHERE YOU CAN FIND MORE INFORMATION 33
OTHER BUSINESS 34
SELECTED FINANCIAL DATA 35
INDEX TO FINANCIAL INFORMATION F-1
<PAGE>
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
OF ALLSTAR SYSTEMS, INC.
TO BE HELD ON MAY 15, 2000
GENERAL INFORMATION
We are first mailing this Proxy Statement and accompanying notice and the
enclosed proxy card to stockholders beginning on April __, 2000. Our board of
directors is soliciting your proxy to vote your shares at the Special Meeting of
stockholders to be held on May 15, 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.
<PAGE>
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 May15, 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 and has executed a
voting and support agreement with the proposed buyer which requires Mr. Long to
vote his shares in favor of the proposed asset sale if it is presented to a vote
of our stockholders. 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.
<PAGE>
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, 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. 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.
<PAGE>
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.
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.
In addition, we will be entitled to receive contingent future payments
consisting of up to $500,000 from the proceeds of an escrow fund which will be
placed 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. 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.
<PAGE>
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. 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."
<PAGE>
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 our stockholders.
Accordingly, our board of directors unanimously recommends that you vote "FOR"
approval of this proposal.
<PAGE>
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.
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."
<PAGE>
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.
<PAGE>
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 appearing
under the caption "Selected Financial Data" of this proxy statement. 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 33.
(In thousands, except per share data)
Year ended December 31,
1997 1998 1999
--------- ---------- ----------
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 income (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) $ 0.31
Net income (loss) from
discontinued operations (0.09) (0.07) (0.24)
Loss disposal (0.27)
--------- --------- ---------
Net income (loss) $ 0.52 $ (0.25) $ (0.20)
========= ========= =========
As of December 31,
1997 1998 1999
---- ---- ----
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
<PAGE>
SUMMARY SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The following selected pro forma financial information is derived from our
unaudited pro forma combined condensed financial statements appearing under the
caption "PRO FORMA FINANCIAL DATA" on pages F-1 to F-7. 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, 1999, 1998 and 1997,
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>
(In thousands, except per share data)
Year ended December 31,
1997 1998 1999
--------------------------------------------------
<S> <C> <C> <C>
Operating Data:
Revenue ........................................ $ 12,385 $ 16,278 $ 19,175
Gross profit..................................... 4,951 5,700 6,577
Operating income (loss) from continuing
operations.................................... (1,647) (4,478) (1,827)
Net income (loss) from continuing operations..... (1,036) (2,896) (1,069)
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 ........................................ $ (1,359) $ (3,206) $ (3,188)
========= ========= =========
Income (loss) per share:
Basic:
Net income (loss) from continuing
operations......................... $ (0.29) $ (0.67) $ (0.26)
Net (loss) from discontinued
Operations......................... (0.09) (0.07) (0.24)
Net loss on disposal.................... (0.27)
--------- --------- ---------
Net income (loss) per share............. $ (0.38) $ (0.74) $ (0.77)
========= ========= =========
Diluted:
Net income (loss) from continuing
operations......................... $ (0.29) $ (0.67) $ (0.26)
Net (loss) from discontinued
Operations......................... (0.09) (0.07) (0.24)
Net loss on disposal.................... (0.27)
--------- --------- ---------
Net income (loss) per share............. $ (0.38) $ (0.74) $ (0.77)
========= ========= =========
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>
<PAGE>
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, [_________] 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.
<PAGE>
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.
<PAGE>
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 improved
productivity and operational effectiveness. We also believe that corporate
America today realizes this and increasingly looks to specialized service
providers for their needs.
<PAGE>
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.
<PAGE>
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:
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.
<PAGE>
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 was 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 is 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.
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;
<PAGE>
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 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.
<PAGE>
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.
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. If Mr. Long votes his
stock in favor of the Asset Purchase Agreement, approval of the asset sale is
assured. A copy of the Voting and Support Agreement is attached to this Proxy
Statement is Appendix C and incorporated herein by reference.
<PAGE>
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.
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 2 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 3 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.
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
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.
<PAGE>
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.
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.
<PAGE>
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, a copy 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. 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.
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.
<PAGE>
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 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 functuality 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;
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.
<PAGE>
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 consumated 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;
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.
<PAGE>
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 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.
<PAGE>
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 pay Amherst Technologies $500,000 as liquidated
damages.
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."
<PAGE>
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.
<PAGE>
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 B 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.
Elgibility.
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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 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.
<PAGE>
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".
HIGH LOW
---------- ----------
Fiscal 1998
First Quarter $ 5.50 $ 4.375
Second Quarter 4.25 3.625
Third Quarter 3.00 1.875
Fourth Quarter 2.9375 1.375
Fiscal 1999
First Quarter 2.1875 1.00
Second Quarter 2.875 1.0625
Third Quarter 1.71875 1.0625
Fourth Quarter 1.875 1.00
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 __, 2000, the latest trading day before the mailing of this Proxy
Statement.
HIGH LOW
---------- ----------
March 15, 2000 $ 3.25 $ 2.75
April __, 2000 $ -- $ --
Number of Holders
As of the Record Date, there were approximately 45 holders of record of
common stock.
<PAGE>
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.
<PAGE>
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.
o Our Recent Report on Form 8-K filed March 22, 2000.
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 1, 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 ___, 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.
<PAGE>
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 ___, 2000
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
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>
<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>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Proforma Financial Information
Page No.
1. Consolidated Pro Forma Balance Sheet as of
December 31, 1999 - Unaudited F-3
2. Consolidated Pro Forma Statement of Operations
for the year ended December 31, 1999 - Unaudited F-4
3. Consolidated Pro Forma Statement of Operations
for the year ended December 31, 1998 - Unaudited F-5
4. Consolidated Pro Forma Statement of Operations
for the year ended December 31, 1997 - Unaudited F-6
5. Notes to Consolidated Pro Forma Financial
Statements for the year ended December 31, 1999, 1998 and 1997. F-7
<PAGE>
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.
<PAGE>
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>
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>
<PAGE>
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>
Total Revenue.................................... $ 201,817 $ (182,642) $ 19,175
Cost of goods and services....................... 179,026 (166,428) 12,598
--------- --------- ---------
Gross profit............... 22,791 (16,214) 6,577
Selling, general and administrative expenses..... 20,183 (13,512) 1,733 (b) 8,404
--------- --------- ---------
Operating income (loss).......................... 2,608 $ (2,702) (1,827)
=========
Interest expense (income), net of other income... 648 (855)(a) (207)
--------- ---------
Income (loss) from continuing operations before
provision (benefit) for income taxes........ 1,960 (1,620)
Provision (benefit) for income taxes............. 686 (1,237)(c) (551)
--------- ---------
Net income (loss) from continuing operations..... 1,274 (1,069)
Discontinued operations:
Net loss from discontinued operations,
net of income taxes..................... (981) (981)
Loss on disposal, net of income taxes....... (1,138) (1,138)
--------- ---------
Net loss ........................................ $ (845) $ (3,188)
========= =========
Net loss per share:
Basic:
Net income (loss) from
continuing operations.............. $ 0.31 $ (0.26)
Net loss from discontinued..............
operations......................... (0.24) (0.24)
Loss on disposal........................ (0.27) (0.27)
--------- ---------
Net loss per share...................... $ (0.20) $ (0.77)
========= =========
Diluted:
Net income (loss) from
continuing operations.............. $ 0.30 $ (0.26)
Net loss from discontinued..............
operations......................... (0.23) (0.24)
Loss on disposal........................ (0.27) (0.27)
--------- ---------
Net loss per share...................... $ (0.20) $ (0.77)
========= =========
Weighted average number of shares outstanding:
Basic ................................... 4,168,140 4,168,140
Diluted ................................... 4,226,925 4,168,140
</TABLE>
<PAGE>
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>
Total Revenue.................................. $ 159,674 $ (143,396) $ 16,278
Cost of goods and services..................... 139,866 (129,288) 10,578
--------- --------- ---------
Gross profit............. 19,808 (14,108) 5,700
Selling, general and administrative expenses... 20,659 (13,548) 3,067 (b) 10,178
--------- --------- ---------
Operating income (loss)........................ (851) $ (560) (4,478)
=========
Interest expense (income), net of other income. 319 (409)(a) (90)
--------- ---------
Loss from continuing operations before
provision for income taxes................ (1,170) (4,388)
Benefit for income taxes....................... (382) (1,110)(c) (1,492)
--------- ---------
Net income from continuing operations.......... (788) (2,896)
Discontinued operations:
Net loss from discontinued operations,
net of taxes.......................... (310) (310)
--------- ---------
Net loss ...................................... $ (1,098) $ (3,206)
========= =========
Net loss per share:
Basic:
Net loss from
continuing operations............ $ (0.18) $ (0.67)
Net loss from discontinued............
operations....................... (0.07) (0.07)
--------- ---------
Net loss per share.................... $ (0.25) $ (0.74)
========= =========
Diluted:
Net loss from
continuing operations............ $ (0.18) $ (0.67)
Net loss from discontinued............
operations....................... (0.07) (0.07)
--------- ---------
Net loss per share.................... $ (0.25) $ (0.74)
========= =========
Weighted average number of shares outstanding:
Basic ................................. 4,345,883 4,345,883
Diluted ................................. 4,345,883 4,345,883
</TABLE>
<PAGE>
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>
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) 1,497 (b) 6,598
--------- --------- ---------
Operating income (loss)........................ 4,102 $ (4,252) (1,647)
=========
Interest expense (income), net of other income. 642 (720)(a) (78)
---------
Income (loss) from continuing operations before
provision (benefit) for income taxes...... 3,460 (1,569)
Provision (benefit) for income taxes........... 1,293 1,826)(c) (533)
--------- ---------
Net income (loss) from continuing operations... 2,167 (1,036)
Discontinued operations:
Net loss from discontinued operations,
net of taxes.......................... (323) (323)
--------- ---------
Net loss ...................................... $ 1,844 $ (1,359)
========= =========
Net loss per share:
Basic:
Net income (loss) from
continuing operations............ $ 0.62 $ (0.29)
Net loss from discontinued
operations....................... (0.10) (0.09)
--------- ---------
Net income (loss) per share........... $ 0.52 $ (0.38)
========= =========
Diluted:
Net income (loss) from
continuing operations............ $ 0.61 $ (0.29)
Net loss from discontinued............
operations....................... (0.09) (0.09)
--------- ---------
Net income (loss) per share........... $ 0.52 $ (0.38)
========= =========
Weighted average number of shares outstanding:
Basic ................................. 3,519,821 3,519,821
Diluted ................................. 3,526,787 3,519,821
</TABLE>
<PAGE>
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:
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
---------
(b) Represents the estimated gain on the proposed
transaction calculated as follows:
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
=========
(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.
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.
(b) Reflects adjustment for internal overhead allocated to the Computer
Products business segment for selling, general and administrative
departments retained.
(c) The adjustment to the tax provision (benefit) reflects pro forma income
(loss) from continuing operations at Allstar's effective tax rate of
approximately 34%.
<PAGE>
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
<PAGE>
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 6.8 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.
<PAGE>
"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.
"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.
<PAGE>
"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.
"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.
<PAGE>
"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 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.
<PAGE>
"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.
"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.
<PAGE>
"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 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.
<PAGE>
"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, 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.
<PAGE>
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 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;
<PAGE>
(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"):
(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;
<PAGE>
(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;
(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);
<PAGE>
(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
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.
<PAGE>
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 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.
<PAGE>
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 sampling in accordance with generally accepted auditing
standards, and verified that the calculations in the report are
accurate.
<PAGE>
(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.
<PAGE>
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.
<PAGE>
(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 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.
<PAGE>
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 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.
<PAGE>
(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 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.
<PAGE>
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 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.
<PAGE>
(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) and 3.4(b), as applicable.
(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 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.
<PAGE>
(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 qualification or
licensing necessary, except where the failure to be so licensed or
qualified would not have a Material Adverse Effect.
<PAGE>
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.
<PAGE>
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 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.
<PAGE>
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, 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.
<PAGE>
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;
(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.
<PAGE>
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 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.
<PAGE>
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).
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.
<PAGE>
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.
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.
<PAGE>
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
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.
<PAGE>
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 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.
<PAGE>
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 written information
constituting and/or relating to such Acquisition Proposal, except for
such documents, correspondence and written information (i) relating
solely to the business of the person or entity making such Acquisition
Proposal, and (ii) which Allstar shall be prohibited from disclosing to
Amherst Southwest pursuant to the terms of a written confidentiality
agreement entered into in good faith by Allstar and such person or
entity.
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.
<PAGE>
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 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));
<PAGE>
(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.
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;
<PAGE>
(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;
(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
<PAGE>
(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.
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.
<PAGE>
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 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
<PAGE>
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 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.
<PAGE>
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, 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;
<PAGE>
(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 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).
<PAGE>
9.4 Certain Covenants Upon Termination. If this Agreement is terminated
pursuant to this Article IX (except in the event of termination of this
Agreement under Sections 9.1(b)(3) or 9.1(c)(3), in which case the
covenants in this Section 9.4 shall be void and of no effect), 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
(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).
<PAGE>
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).
(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.
<PAGE>
(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 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.
<PAGE>
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.
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
<PAGE>
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 GoverningLaw. 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 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.
<PAGE>
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 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.
<PAGE>
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.
11.16 Time is of the essence in the performance of this Agreement.
*****
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
AMHERST COMPUTER PRODUCTS SOUTHWEST, LP
By: /s/Gerald Birin
Title: Chief Financial Officer
ALLSTAR SYSTEMS, INC.
By: /s/James H. Long
Title: Chairman and Chief Executive Officer
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/Gerald Birin
Title: Chief Financial Officer
<PAGE>
APPENDIX B
ALLSTAR SYSTEMS, INC.
2000 STOCK INCENTIVE PLAN
(As Effective March 15, 2000)
TABLE OF CONTENTS
Page
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..............................1
(c) Board...........................................2
(d) Cause...........................................2
(e) CEO.............................................2
(f) Control in Control..............................2
(g) Code............................................2
(h) Committee.......................................2
(i) Common Stock....................................3
(j) Company.........................................3
(k) Consultant......................................3
(l) Covered Employee................................4
(m) Deferred Stock..................................4
(n) Disability......................................4
(o) Employee........................................4
(p) Employment......................................4
(q) Exchange Act....................................5
(r) Fair Market Value...............................5
(s) Immediate Family................................5
(t) Incentive Award.................................5
(u) Incentive Agreement.............................6
(v) Incentive Stock Option..........................6
(w) Independent SAR.................................6
(x) Insider.........................................6
(y) Nonstatutory Stock Option.......................6
(z) Option Price....................................6
(aa) Other Stock-Based Award.........................6
(bb) Outside Director................................6
(cc) Parent..........................................6
(dd) Performance-Based Exception.....................7
(ee) Performance Period..............................7
(ff) Performance Share or Performance Unit...........7
(gg) Plan............................................7
(hh) Publicly Held Corporation.......................7
(ii) Restricted Stock................................7
(jj) Restricted Stock Award..........................7
(kk) Restriction Period..............................7
(ll) Retirement......................................7
(mm) Share...........................................8
(nn) Share Pool......................................8
(oo) Spread..........................................8
(pp) Stock Appreciation Right or SAR.................8
(qq) Stock Option or Option..........................8
(rr) Subsidiary......................................8
(ss) Supplemental Payment............................8
(tt) Tandem SAR......................................8
<PAGE>
1.3 Plan Administration......................................9
(a) Authority of the Committee......................9
(b) Meetings........................................9
(c) Decisions Binding...............................9
(d) Modification of Outstanding Incentive Awards....9
(e) Delegation of Authority........................10
(f) Expenses of Committee..........................10
(g) Surrender of Previous Incentive Awards.........10
(h) Indemnification................................10
1.4 Shares of Common Stock Available for Incentive Awards...11
1.5 Share Pool Adjustments for Awards and Payouts...........12
1.6 Common Stock Available..................................12
1.7 Participation...........................................13
(a) Eligibility....................................13
(b) Incentive Stock Option Eligibility.............13
1.8 Types of Incentive Awards...............................13
SECTION 2. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS....................13
2.1 Grant of Stock Options..................................13
2.2 Stock Option Terms......................................14
(a) Written Agreement..............................14
(b) Number of Shares...............................14
(c) Exercise Price.................................14
(d) Term...........................................14
(e) Exercise.......................................14
(f) $100,000 Annual Limit on Incentive Stock
Options......................................15
2.3 Stock Option Exercises..................................15
(a) Method of Exercise and Payment.................15
(b) Restrictions on Share Transferability..........16
(c) Notification of Disqualifying Disposition
of Shares from Incentive Stock
Options........................................17
(d) Proceeds of Option Exercise....................17
2.4 Stock Appreciation Rights in Tandem with
Nonstatutory Stock Options............................17
(a) Grant..........................................17
(b) General Provisions.............................17
(c) Exercise.......................................18
(d) Settlement.....................................18
2.5 Stock Appreciation Rights Independent of
Nonstatutory Stock Options............................18
(a) Grant..........................................18
(b) General Provisions.............................18
(c) Exercise.......................................18
(d) Settlement.....................................19
2.6 Reload Options..........................................19
2.7 Supplemental Payment on Exercise of Nonstatutory
Stock Options or Stock Appreciation Rights...........19
SECTION 3. RESTRICTED STOCK...............................................20
3.1 Award of Restricted Stock...............................20
(a) Grant..........................................20
(b) Immediate Transfer Without Immediate
Delivery of Restricted Stock.................20
3.2 Restrictions............................................21
(a) Forfeiture of Restricted Stock.................21
(b) Issuance of Certificates.......................21
(c) Removal of Restrictions........................21
3.3 Delivery of Shares of Common Stock......................22
3.4 Supplemental Payment on Vesting of Restricted Stock.....22
<PAGE>
SECTION 4. PERFORMANCE UNITS AND PERFORMANCE SHARES.......................22
4.1 Performance Based Awards................................22
(a) Grant..........................................22
(b) Performance Criteria...........................22
(c) Modification...................................23
(d) Payment........................................23
(e) Special Rule for Covered Employees.............23
4.2 Supplemental Payment on Vesting of Performance
Units or Performance Shares...........................24
SECTION 5. OTHER STOCK-BASED AWARDS.......................................24
5.1 Grant of Other Stock-Based Awards.......................24
5.2 Other Stock-Based Award Terms...........................24
(a) Written Agreement..............................24
(b) Purchase Price.................................24
(c) Performance Criteria and Other Terms...........25
(d) Payment........................................25
(e) Dividends......................................25
SECTION 6. PROVISIONS RELATING TO PLAN PARTICIPATION......................25
6.1 Plan Conditions.........................................25
(a) Incentive Agreement............................25
(b) No Right to Employment.........................26
(c) Securities Requirements........................26
6.2 Transferability.........................................27
6.3 Rights as a Stockholder.................................27
(a) No Stockholder Rights..........................27
(b) Representation of Ownership....................28
6.4 Listing and Registration of Shares of Common Stock......28
6.5 Change in Stock and Adjustments.........................28
(a) Changes in Law or Circumstances................28
(b) Exercise of Corporate Powers...................29
(c) Recapitalization of the Company................29
(d) Issue of Common Stock by the Company...........29
(e) Assumption under the Plan of Outstanding
Stock Options................................29
(f) Assumption of Incentive Awards by a Successor..30
6.6 Termination of Employment, Death, Disability
and Retirement........................................31
(a) Termination of Employment......................31
(b) Termination of Employment for Cause............31
(c) Retirement.....................................31
(d) Disability or Death............................32
(e) Continuation...................................32
6.7 Change in Control.......................................33
6.8 Exchange of Incentive Awards............................35
6.9 Financing...............................................35
SECTION 7. GENERAL........................................................35
7.1 Effective Date and Grant Period.........................35
7.2 Funding and Liability of Company........................35
7.3 Withholding Taxes.......................................36
(a) Tax Withholding................................36
(b) Share Withholding..............................36
(c) Incentive Stock Options........................36
(d) Loans..........................................36
7.4 No Guarantee of Tax Consequences........................36
7.5 Designation of Beneficiary by Participant...............37
7.6 Deferrals...............................................37
7.7 Amendment and Termination...............................37
7.8 Requirements of Law.....................................37
(a) Governmental Entities and Securities Exchanges.37
(b) Securities Act Rule 701........................38
7.9 Rule 16b-3 Securities Law Compliance for Insiders.......38
7.10 Compliance with Code Section 162(m) for
Publicly Held Corporation.............................39
7.11 Successors to Company...................................39
7.12 Miscellaneous Provisions................................39
7.13 Severability............................................39
7.14 Gender, Tense and Headings..............................39
7.15 Governing Law...........................................40
<PAGE>
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 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.
<PAGE>
(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.
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.
<PAGE>
(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 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.
<PAGE>
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 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.
Grantee. Any Employee, Consultant or Outside Director who is granted an
Incentive Award under the Plan.
(s) 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.
(t) 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.
(u) 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).
(v) 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.
(w) Independent SAR. A Stock Appreciation Right described in Section
2.5.
(x) 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 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.
<PAGE>
(y) 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.
(z) Option Price. The exercise price at which a Share may be purchased
by the Grantee of a Stock Option.
(aa) 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.
(bb) 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.
(cc) Parent. Any corporation (whether now or hereafter existing) which
constitutes a "parent" of the Company, as defined in Section 424(e) of the
Code.
(dd) 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.
(ee) 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.
(ff) 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.
(gg) Plan. Allstar Systems, Inc. 2000 Stock Incentive Plan, as set
forth herein and as it may be amended from time to time.
(hh) Publicly Held Corporation. A corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act.
(ii) Restricted Stock. Shares of Common Stock issued or transferred to
a Grantee pursuant to Section 3.
(jj) Restricted Stock Award. An authorization by the Committee to
issue or transfer Restricted Stock to a Grantee.
(kk) 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.
(ll) 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.
(mm) Share. A share of the Common Stock of the Company.
<PAGE>
(nn) 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.
(oo) 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.
(pp) Stock Appreciation Right or SAR. A Tandem SAR described in
Section 2.4 or an Independent SAR described in Section 2.5.
(qq) 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.
(rr) Subsidiary. Any corporation (whether now or hereafter existing)
which constitutes a "subsidiary" of the Company, as defined in Section
424(f) of the Code.
(ss) 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.
(tt) 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).
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.
<PAGE>
(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.
(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.
<PAGE>
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.
(d) The limitations of subsections (a), (b) and (c) above shall be
construed and administered so as to comply with the Performance-Based
Exception.
<PAGE>
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.
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.
<PAGE>
(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 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.
<PAGE>
(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.
(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.
<PAGE>
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 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).
<PAGE>
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 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."
<PAGE>
(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 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.
<PAGE>
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 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.
<PAGE>
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.
(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.
<PAGE>
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 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.
<PAGE>
(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 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.
<PAGE>
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 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.
<PAGE>
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 representations, and that
such certificates bear such legends, as the Committee, in its discretion,
deems necessary or desirable.
<PAGE>
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 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.
<PAGE>
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 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.
<PAGE>
(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 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.
<PAGE>
(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.
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).
<PAGE>
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.
(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.
<PAGE>
(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 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
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;
<PAGE>
(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.
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.
<PAGE>
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 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.
<PAGE>
(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.
(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.
<PAGE>
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.
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 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.
<PAGE>
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.
(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.
<PAGE>
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: CEO
<PAGE>
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").
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 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.
(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.
*****
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
AMHERST COMPUTER PRODUCTS SOUTHWEST, LP
By: /s/Gerald Birin
Title: Chief Financial Officer
/s/James H. Long
James H. Long
<PAGE>
PROXY ALLSTAR SYSTEMS, INC.
6401 SOUTHWEST FREEWAY
HOUSTON, TEXAS 77074
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ALLSTAR SYSTEMS, INC.
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 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 15, 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.
__ FOR __ AGAINST __ ABSTAIN
2. APPROVAL OF THE 2000 STOCK INCENTIVE PLAN.
__ FOR __ AGAINST __ ABSTAIN
CONTINUED ON OTHER SIDE
<PAGE>
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.
Dated...............................,2000
.........................................
Stockholder's Signature
.........................................
Stockholder'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. Executors, 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
