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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 3, 2001
TEKGRAF, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 000-23221 58-2033795
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
980 Corporate Woods Parkway
Vernon Hills, Illinois 60061
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 913-5888
None
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
On January 3, 2001, the Company closed a transaction pursuant to which it
settled a lawsuit involving shareholders who exercised dissenters' rights with
regard to the Company's conversion of all Class B Common Stock to Class A Common
Stock pursuant to a vote at a special meeting of shareholders held on January
21, 2000. The terms of the settlement are set forth in a Settlement Agreement
and Mutual Releases dated December 21, 2000 ("Settlement Agreement"), a copy of
which is filed as Exhibit 99.1 hereto. The Settlement Agreement relates to the
Shareholders of record who owned 1,191,333 shares of Class B Common Stock as of
the relevant date exercised dissenters' rights and demanded payment for their
shares, plus accrued interest, pursuant to Georgia law. Because the dissenting
shareholders and the Company could not reach agreement as to the fair value of
the shares as of the relevant date, the Company filed a petition in the Superior
Court of Fulton County, Georgia on May 26, 2000, seeking the determination of
the fair value of the dissenters' shares and accrued interest, pursuant to
Georgia law (the "Dissenters' Lawsuit").
The Company previously entered into a transaction that resulted in a
partial settlement of the Dissenters' Lawsuit. As of October 31, 2000, the
Company sold the assets of its Tekgraf Systems division to Micro Environments,
LLC, a limited liability company controlled by Anita, Ltd., one of the
dissenting shareholders in the Dissenters' Lawsuit. As consideration for the
assets of the Tekgraf Systems division, Anita, Ltd. transferred to the Company
293,334 shares (subject to adjustment) of Class A Common Stock at issue in the
Dissenters' Lawsuit. Pursuant to the Settlement Agreement effective January 3,
2001, Anita, Ltd. made the final adjustment payment for the assets of the
Tekgraf Systems division by surrendering to the Company an additional 82,418
shares of Class A Common Stock at issue in the Dissenters' Lawsuit.
Pursuant to the Settlement Agreement, all rights of the defendants to the
remaining shares at issue in the Dissenters' Lawsuit were transferred to the
Company. The Company agreed to pay an aggregate amount of $1,875,000 to resolve
the Dissenters' Lawsuit, and the parties will jointly request that the Court
enter an order of dismissal with prejudice and without costs. In addition, the
Company agreed to pay $168,750 to Anita, Ltd. in exchange for 75,000 Class A
Shares and 75,000 warrants that were not subject to the Dissenters' Lawsuit.
On January 3, 2001, the Company paid $275,000 and delivered a Unsecured
Installment Note dated December 21, 2000 (the "Note") for the remaining
$1,768,750. The Note, a copy of which is filed as Exhibit 99.2 hereto, provides
that the Company will make monthly payments commencing on March 15, 2001 and
ending on December 14, 2001. The Note will not bear interest, except upon an
Event of Default (as defined in the Note). From the date of an Event of Default,
interest will accrue on all remaining payments at a rate equal to the Prime Rate
(as defined in the Note) plus 2%. Certain mutual releases and covenants not to
sue will automatically be revoked if the Company fails to make any of the
payments as provided for in the Note, and the Settlement Agreement provides that
the 75,000 Class A Shares and 75,000 warrants held by Anita, Ltd. will be
surrendered when the Company makes the March 15, 2001 payment.
As further described in the Settlement Agreement, the Company also agreed
to indemnify the defendants and certain related parties against claims for or
relating to any alleged failure of the
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Company or the defendants to comply with any alleged net asset value obligations
("NAV Obligations") relating to the Company's June 1997 acquisition of all of
the outstanding stock of five regional distributors of computer graphics
products. The Company agreed to use reasonable, good faith efforts to obtain
certain mutual releases from the persons who sold stock to the Company in the
June 1997 acquisitions, and the Company's indemnification obligations will
terminate with respect to those who execute and deliver the mutual releases. As
part of the Settlement Agreement, two shareholders who sold stock to the Company
as part of the June 1997 acquisitions executed and delivered mutual releases.
Those two shareholders are Thomas A. Gust and William M. Rychel, the Company's
Chief Executive Officer.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
99.1 Settlement Agreement and Mutual Releases dated December 21, 2000
99.2 Unsecured Installment Note dated December 21, 2000
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEKGRAF, INC.
Date: January 4, 2001 By: /s/ William M. Rychel
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William M. Rychel
President and Chief Executive Officer
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INDEX TO EXHIBITS
Exhibit
Number Description
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99.1 Settlement Agreement and Mutual Releases dated December 21, 2000
99.2 Unsecured Installment Note dated December 21, 2000
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