<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
DATAFLEX CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------
[X] Fee paid previously with preliminary materials:
$5,107
--------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
(DATAFLEX CORPORATION LOGO)
May 21, 1998
Dear Fellow Shareholder:
You are cordially invited to attend a special meeting of the shareholders
of Dataflex Corporation (the "Company") at 10:00 a.m. on June 26, 1998, at the
Hyatt Hotel located at 300 Reunion Boulevard, Dallas, Texas 75207.
At the special meeting, you will be asked to vote on the proposed merger
between the Company, CompuCom Systems, Inc. ("CompuCom") and a subsidiary of
CompuCom ("CompuCom Subsidiary"). If the merger is completed, CompuCom or
CompuCom Subsidiary will pay $4.10 per share for each of your shares of the
Company's common stock and then the Company will become a subsidiary of
CompuCom.
Your Board of Directors has carefully reviewed and considered the terms and
conditions of the merger and has received the opinion of Raymond James &
Associates, Inc., its financial advisor, that, as of April 9, 1998, the cash to
be paid in the merger was fair to the Company and our shareholders from a
financial point of view.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS
FAIR TO AND IN THE BEST INTERESTS OF OUR SHAREHOLDERS. ACCORDINGLY, THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL AND ADOPTION OF
THE MERGER.
YOUR VOTE IS VERY IMPORTANT. The merger cannot be completed unless our
shareholders approve it. Therefore, we have scheduled a special meeting of our
shareholders to vote on the merger.
Whether or not you expect to attend the special meeting, please take the
time to vote by completing and mailing the enclosed proxy card to us. If you
sign, date, and return your proxy without indicating how you want to vote, your
proxy will be counted as a vote in favor of the merger. If you abstain or do not
vote, it will have the effect of a vote against the merger. If you decide to
attend the meeting and vote in person, you will, of course, have that
opportunity.
The enclosed proxy statement provides you with detailed information about
the proposed merger. In addition, you may obtain information about the Company
from documents that we have filed with the Securities and Exchange Commission.
We encourage you to read the entire document carefully.
Sincerely yours,
/s/ PHILIP DOGANIERO
--------------------------------------
Philip Doganiero
Chairman of the Board
<PAGE> 3
DATAFLEX CORPORATION
2145 CALUMET STREET
CLEARWATER, FLORIDA 34625
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
MAY 21, 1998
Dataflex Corporation (the "Company") will hold a special meeting of
shareholders (the "Special Meeting") on June 26, 1998, at 10:00 a.m., local
time, at the Hyatt Hotel located at 300 Reunion Boulevard, Dallas, Texas 75207,
for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of April 10, 1998 (the "Merger
Agreement"), by and among CompuCom Systems, Inc., a Delaware corporation
("CompuCom"), CompuCom Acquisition Corp., a Florida corporation and a
wholly owned subsidiary of CompuCom ("CompuCom Subsidiary"), and the
Company, pursuant to which: (i) CompuCom Subsidiary will be merged with and
into the Company (the "Merger"), with the Company continuing as the
surviving corporation and as a wholly owned subsidiary of CompuCom and (ii)
each outstanding share of common stock, no par value per share, of the
Company (the "Common Stock"), will be converted into the right to receive
$4.10 in cash, without interest.
2. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof, including
without limitation, potential adjournments or postponements of the Special
Meeting for the purpose of soliciting additional proxies in order to
approve and adopt the Merger Agreement.
The Company has fixed May 15, 1998 as the record date (the "Record Date")
for the determination of shareholders entitled to notice of and to vote at the
Special Meeting or any adjournments or postponements thereof. Only shareholders
of record at the close of business on the Record Date are entitled to notice of
and to vote at the Special Meeting or any adjournments or postponements thereof.
Because the Common Stock is listed on the Nasdaq Stock Market's National
Market, holders of Common Stock entitled to vote on the Record Date who do not
wish to accept $4.10 per share of Common Stock will not have a right of dissent
with respect to the Merger Agreement in accordance with the applicable statutory
procedures set forth in Section 607.1320 of the Florida Business Corporation
Act. If the requisite vote is obtained and the Merger is consummated, each share
of Common stock will be automatically converted into the right to receive $4.10.
See "Proposal 1 -- The Merger -- No Right of Dissent."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE TO
APPROVE THE PROPOSALS, WHICH ARE DESCRIBED IN DETAIL IN THE ACCOMPANYING PROXY
STATEMENT. To ensure that your vote will be counted, please complete, date and
sign the enclosed proxy card and return it promptly in the enclosed postage-paid
envelope, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. You may revoke
your proxy in the manner described in the accompanying Proxy Statement at any
time before it is voted at the Special Meeting. Failure to return a properly
executed proxy card or to vote at the Special Meeting will have the same effect
as a vote against the Merger.
By Order of the Board of Directors,
/s/ DEBORAH MEDLEY
--------------------------------------
Deborah Medley
Secretary
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... iii
SUMMARY..................................................... 1
The Company............................................ 1
CompuCom............................................... 1
CompuCom Subsidiary.................................... 1
Our Reasons for the Merger............................. 1
Our Recommendation..................................... 2
The Merger............................................. 2
What You Will Receive.................................. 2
The Shareholders' Meeting.............................. 2
Vote Required.......................................... 2
Interests of Certain Persons in the Merger............. 2
Conditions to the Merger............................... 2
Termination of the Merger Agreement.................... 3
Termination Fees....................................... 3
Regulatory Approvals................................... 3
Fairness Opinion of Financial Advisor.................. 3
Financing of the Merger................................ 4
Federal Income Tax Considerations...................... 4
Accounting Treatment................................... 4
No Right of Dissent.................................... 4
MARKET PRICES OF COMMON STOCK............................... 5
SELECTED CONSOLIDATED FINANCIAL DATA........................ 6
THE COMPANIES............................................... 7
The Company............................................ 7
CompuCom............................................... 7
CompuCom Subsidiary.................................... 8
THE SPECIAL MEETING......................................... 8
General................................................ 8
Matters to be Considered at the Special Meeting........ 8
Record Date; Quorum; Voting at the Special Meeting..... 8
Proxies; Revocation of Proxies......................... 9
Solicitation of Proxies................................ 10
PROPOSAL 1 -- THE MERGER.................................... 10
General................................................ 10
Background of the Merger............................... 10
The Company's Reasons for the Merger; Recommendation of
the Board of Directors................................ 12
Fairness Opinion of Financial Advisor.................. 13
Interests of Certain Persons in the Merger............. 15
Financing of the Merger................................ 17
Accounting Treatment................................... 17
Certain Federal Income Tax Consequences................ 17
Regulatory Approvals................................... 18
Certain Consequences of the Merger..................... 18
No Right of Dissent.................................... 18
THE MERGER AGREEMENT........................................ 19
The Merger............................................. 19
Effective Time......................................... 19
Conversion of Shares................................... 19
Exchange of Stock Certificates......................... 19
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Treatment of Stock Options............................. 20
Representations and Warranties......................... 21
Certain Covenants...................................... 21
Conditions to Effect the Merger........................ 24
Termination; Termination Fees and Expenses............. 24
Amendment and Waiver................................... 25
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN OTHER BENEFICIAL OWNERS........................... 26
SHAREHOLDER PROPOSALS....................................... 27
INDEPENDENT ACCOUNTANTS..................................... 27
WHERE YOU CAN FIND MORE INFORMATION......................... 27
FORWARD-LOOKING STATEMENTS.................................. 28
APPENDIX I
Agreement and Plan of Merger........................... I-1
APPENDIX II
Fairness Opinion of Financial Advisor.................. II-1
</TABLE>
ii
<PAGE> 6
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT IS THE MERGER PROPOSAL? HOW WILL I BENEFIT?
A: We have agreed to merge Dataflex Corporation (the "Company") with a
subsidiary of CompuCom Systems, Inc. ("CompuCom") in exchange for CompuCom
paying $4.10 in cash for each of your shares. Following the Merger, you will
no longer own any interest in the combined company.
Q: WHEN AND WHERE IS THE SPECIAL MEETING?
A: The Special Meeting will take place at 10:00 a.m., local time, on June 26,
1998, at the Hyatt Hotel located at 300 Reunion Boulevard, Dallas, Texas
75207.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on your proxy card how you want to vote, and sign and mail it
in the enclosed return envelope as soon as possible, so that your shares
will be represented at the Special Meeting. If you sign and send in your
proxy and do not indicate how you want to vote, your proxy will be counted
as a vote for the Merger. If you do not send in your proxy or you abstain,
it will have the effect of a vote against the Merger. The Board of Directors
of the Company recommends voting in favor of the Merger.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: Just mail or deliver a later-dated, signed proxy card so that the proxy card
is received by the Company before the Special Meeting or attend the Special
Meeting in person and tell the Secretary you want to cancel your proxy and
vote in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares for you only if you provide instructions
on how to vote. You should instruct your broker to vote your shares,
following the directions provided by your broker. Without instructions, your
broker will not vote your shares which will have the same effect as a vote
against the Merger.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the Merger is completed, we will send you written instructions for
exchanging your stock certificates.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the Merger as quickly as possible.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS?
A: The Merger will be taxable to you unless you are exempt from tax. The gain
or loss will be capital gain or loss for most shareholders. If you are an
individual shareholder and have held the stock for more than a year but not
more than 18 months, the maximum federal rate of tax on such capital gains
will be 28%. If you are an individual shareholder and have held the stock
for more than 18 months, the maximum federal rate of tax on such capital
gains will be 20%. If you are an individual shareholder and have held your
shares for one year or less, any capital gains will be taxed at ordinary
income rates. Any capital losses are deductible only to the extent of
capital gains plus, in the case of a shareholder that is an individual or a
non-corporate entity, ordinary income of up to $3,000.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: For additional information about the merger, including information about how
to complete and return your proxy card, please contact Shareholder
Communications Corporation at 800-877-8579.
iii
<PAGE> 7
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
Merger fully and for a more complete description of the legal terms of the
Merger, you should read carefully this entire document and the documents to
which we have referred you. See "Where You Can Find More Information" on page
27.
THE COMPANY
Dataflex Corporation
2145 Calumet Street
Clearwater, Florida 34625
Dataflex Corporation (the "Company") is a direct marketer of microcomputer
equipment, related products and computer services. The Company markets computer
equipment and related products supplied primarily by major manufacturers. The
Company's customers are business organizations with diverse desktop computing
requirements located throughout the United States, with a primary concentration
in the Southeast. The Company provides its customers with single-source,
value-added desktop computing solutions and services, including product sales,
system integration, network installations, help desk support, training,
consultation services and equipment repair maintenance. The Company is also a
certified Novell Education Center and a certified Microsoft Authorized Technical
Education Center capable of providing on-site or off-site manufacturer
authorized education. The Company's principal executive offices are located at
2145 Calumet Street, Clearwater, Florida 34625, and its telephone number is
(813) 562-2200.
COMPUCOM
CompuCom Systems, Inc.
7171 Forest Lane
Dallas, Texas 75230
CompuCom Systems, Inc. is a leading provider of distributed desktop
computer products and network integration services to large and medium sized
businesses throughout the United States. CompuCom helps Fortune 1000 companies
manage information technology to achieve their business goals by providing a
wide range of services in provisioning, support and technology management.
Products and services are sold by a direct sales force to over 3,500 business
customers through 41 sales and services centers located in and serving large
metropolitan areas nationwide. CompuCom's principal executive offices are
located at 7171 Forest Lane, Dallas, Texas 75230, and its telephone number is
(972) 856-3600.
COMPUCOM SUBSIDIARY
CompuCom Acquisition Corp.
7171 Forest Lane
Dallas, Texas 75230
CompuCom Acquisition Corp. ("CompuCom Subsidiary") is a wholly-owned
subsidiary of CompuCom which has been organized solely to be merged with and
into the Company. Once CompuCom Subsidiary and the Company merge, the surviving
corporation will be a wholly-owned subsidiary of CompuCom. CompuCom Subsidiary's
principal executive offices are located at 7171 Forest Lane, Dallas, Texas
75230, and its telephone number is (972) 856-3600.
OUR REASONS FOR THE MERGER
The Company's Board of Directors believes that the merger of CompuCom
Subsidiary with and into the Company (the "Merger"), including the price of
$4.10 per share, is in your best interests. We believe the microcomputer
distribution and support industry will continue to consolidate and that the
combined company will be more competitive. We believe the Merger is an
opportunity for you to take advantage of this industry consolidation and receive
an attractive price for your shares.
1
<PAGE> 8
OUR RECOMMENDATION
The Company's Board of Directors believes that the Merger is in your best
interests and unanimously recommends that you vote FOR approval of the Merger.
THE MERGER
The Agreement and Plan of Merger (without exhibits and schedules) is
attached as Appendix I to this Proxy Statement (the "Merger Agreement"). We
encourage you to read the Merger Agreement, as it is the legal document that
governs the Merger.
WHAT YOU WILL RECEIVE
Following completion of the Merger, you will receive $4.10 in cash for each
share of stock you own. You should not send in your stock certificates until
instructed to do so after the Merger is completed.
THE SHAREHOLDERS' MEETING
We are holding a special meeting of our shareholders (the "Special
Meeting") at the Hyatt Hotel, located at 300 Reunion Boulevard, Dallas Texas
75207, at 10:00 a.m., local time, on June 26, 1998. At the Special Meeting, you
will be asked to approve and adopt the Merger Agreement. If the Merger is
completed, we will not hold a 1998 annual meeting.
VOTE REQUIRED
In order to complete the Merger, a majority of the outstanding shares of
the Company must vote in favor of adopting the Merger Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain of the Company's executive officers and members of the Board of
Directors may be deemed to have interests in the Merger that may be different or
in addition to their interests solely as shareholders of the Company. Those
interests relate to, among other things: (i) severance payments to be made to
certain executive officers and other employees; (ii) compensation for services
to be rendered to CompuCom or the Surviving Corporation after the Closing of the
Merger, pursuant to employment agreements or otherwise; and (iii) the
maintenance, for a period of six years after the Closing Date, of director's and
officer's liability insurance coverage. Additionally, certain officers and
directors will receive cash in exchange for stock options previously granted to
them by the Company.
Please refer to page 15 for more information on the interests of certain
persons in the Merger.
CONDITIONS TO THE MERGER
The completion of the Merger depends upon meeting a number of conditions,
including the following:
- the approval of the Merger Agreement by holders of a majority of the
Company's Common Stock;
- the receipt of required regulatory approvals, with all waiting periods
required by law having expired;
- the absence of any governmental suit, action, injury, investigation or
proceeding which seeks to prevent consummation of the Merger; and
- the Company's receipt of the opinion of Raymond James and Associates,
Inc. ("Raymond James") that the cash to be paid in the Merger is fair to
the Company's shareholders from a financial point of view (such opinion
having been provided on April 9, 1998).
2
<PAGE> 9
TERMINATION OF THE MERGER AGREEMENT
Our Board of Directors along with CompuCom can jointly agree to terminate
the Merger Agreement at any time without completing the Merger. Either company
may also terminate the Merger Agreement if any of the following occurs:
- the Merger is not completed by August 1, 1998 (provided that the
terminating party is not then in breach of any representation or warranty
of such party or has not failed to perform any of its obligations under
the Merger Agreement);
- any governmental entity permanently prohibits the Merger;
- under certain circumstances, a third party has proposed a competing
transaction; or
- the other party breaches or materially fails to comply with any of its
representation, or warranties, or obligations under the Merger Agreement.
TERMINATION FEES
The Merger Agreement requires the Company to pay CompuCom a termination fee
of $1.0 million (the "Termination Fee") if: (i) the Company terminates the
Merger Agreement in connection with entering into a definitive agreement with
respect to a Takeover Proposal (as defined below); (ii) CompuCom terminates the
Merger Agreement because the Company breaches or fails to perform in any
material respect any covenant or agreement to be performed by it under the
Merger Agreement; or (iii) either CompuCom or the Company terminates the Merger
Agreement because the Merger has not occurred prior to August 1, 1998 and prior
to such termination a Takeover Proposal is publicly announced, and the Takeover
Proposal is consummated on or before July 31, 1998.
A "Takeover Proposal" is defined in the Merger Agreement to mean: (i) any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of 20% or more of the assets of the Company or 20% or
more of any class of equity securities of the Company; (ii) any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 20% or more of any class of equity securities of the Company; (iii) any
merger, consolidation, business combination, sale of substantially all of the
assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company, other than the Merger; or (iv) any other transaction the
consummation of which could reasonably be expected to impede, interfere with,
prevent or materially delay the Merger or which would reasonably be expected to
dilute materially the benefits to CompuCom of the transactions contemplated
hereby.
REGULATORY APPROVALS
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") prohibits the Company and CompuCom from completing the Merger until
after the companies have furnished certain information and materials to the
Antitrust Division of the Department of Justice and the Federal Trade Commission
and a required waiting period has ended. The Department of Justice has the
authority to challenge the Merger on antitrust grounds before or after the
Merger is completed. We cannot predict whether the Company and CompuCom will
obtain the required regulatory approval within the time frame contemplated by
the Merger Agreement or on conditions that would not be detrimental to either of
us or the combined company.
FAIRNESS OPINION OF FINANCIAL ADVISOR
In deciding to approve the Merger, our Board of Directors considered, in
addition to other factors, the opinion of our financial advisor, Raymond James,
that the cash to be paid in the Merger is fair to our shareholders from a
financial point of view. The Company received a written opinion of Raymond
James, dated April 9, 1998, that, as of such date, the price of $4.10 per share
was fair to holders of the Company's Common Stock from a financial point of
view. This opinion is not a recommendation to vote in favor of the Merger
Agreement. The full text of Raymond James's written opinion delivered to the
Company's Board of
3
<PAGE> 10
Directors, which describes the procedures followed, assumptions made,
limitations on the review undertaken, and other matters considered in rendering
such opinion, is set forth in Appendix II to this Proxy Statement.
FINANCING OF THE MERGER
The total funds required for the financing of the Merger will be
approximately $25.5 million, plus transaction costs. CompuCom intends to finance
the Merger with borrowed funds. See "Proposal 1 -- The Merger -- Financing of
the Merger."
FEDERAL INCOME TAX CONSIDERATIONS
The Merger will be a taxable transaction to you if you are not exempt from
tax. Generally, your gain or loss will be capital gain or loss. If you are an
individual shareholder and have held your shares for more than a year and not
more than 18 months prior to the Merger, the maximum federal tax rate on any
capital gains will be 28%. If you are an individual shareholder and have held
your shares for more than 18 months prior to the Merger, the maximum federal tax
rate on any capital gains will be 20%. If you are an individual shareholder and
have held your shares for one year or less prior to the merger, any capital
gains will be taxed at ordinary income rates. Any capital losses are deductible
to the extent of capital gains, plus, if you are an individual or a
non-corporate entity, ordinary income of up to $3,000.
ACCOUNTING TREATMENT
CompuCom will account for the Merger using the purchase method of
accounting. See "The Merger -- Accounting Treatment."
NO RIGHT OF DISSENT
Under Florida law, you will not have a right to dissent and obtain payment
of "fair value" for your shares with respect to the Merger Agreement. See
"Proposal 1 -- The Merger -- No Right of Dissent."
4
<PAGE> 11
MARKET PRICES OF COMMON STOCK
The common stock, no par value per share (the "Common Stock") of the
Company is listed and traded on the Nasdaq Stock Market's National Market
("Nasdaq"). The following table sets forth the high and low bid prices per share
of the Company's Common Stock, as reported on Nasdaq for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1996
First Quarter (beginning January 1, 1996)................... $5.125 $3.125
Second Quarter.............................................. 7.625 2.688
Third Quarter............................................... 7.375 2.625
Fourth Quarter.............................................. 3.875 2.063
1997
First Quarter............................................... $4.125 $2.313
Second Quarter.............................................. 3.875 2.625
Third Quarter............................................... 3.875 2.875
Fourth Quarter.............................................. 5.125 2.750
1998
First Quarter............................................... $4.250 $3.063
Second Quarter (through May 18, 1998)....................... 4.000 3.531
</TABLE>
On October 28, 1997, the last trading day before unusual trading activity
in the Common Stock and the public announcement of the Company engaging in
discussions regarding a possible strategic combination, the closing price of the
Common Stock as reported on Nasdaq was $3.125. On April 9, 1998, the last
trading day before public announcement of the execution of the Merger Agreement,
the closing price of the Common Stock as reported on Nasdaq was $3.781. On May
18, 1998, the closing price of the Common Stock as reported on Nasdaq was $3.969
per share with a high bid price of $4.000 and a low bid price of $3.531.
Shareholders are urged to obtain current market quotations for the Common
Stock.
5
<PAGE> 12
SELECTED CONSOLIDATED FINANCIAL DATA
We are providing the following consolidated financial information to aid
you in your analysis of the financial aspects of the Merger. We derived this
information from the Company's audited consolidated financial statements from
1993 through 1997 and unaudited consolidated financial statements for the nine
months ended December 31, 1996 and 1997. The information is only a summary and
should be read in conjunction with the Company's historical financial statements
(and related notes) contained in the Company's annual reports and other
information that has been filed with the Securities and Exchange Commission (the
"Commission"). See "Where You Can Find More Information."
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEARS ENDED MARCH 31, ENDED DECEMBER 31,
--------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1996 1997
------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue............................. $77,306 $122,348 $273,851 $472,102 $255,075 $210,899 $107,956
Cost of Revenue..................... 65,555 108,818 242,564 419,592 224,035 185,327 95,571
------- -------- -------- -------- -------- -------- --------
Gross Profit............... 11,751 13,530 31,287 52,510 31,040 25,572 12,385
Selling, General and Administrative
Expenses.......................... 10,272 10,675 24,259 42,995 25,943 21,594 9,816
Amortization of Goodwill............ -- -- 594 1,265 677 529 312
Loss on Impairment of Assets........ -- -- -- -- 3,280 -- --
Restructuring and Other Charges..... -- -- -- 5,353 -- -- --
------- -------- -------- -------- -------- -------- --------
Operating Income........... 1,479 2,855 6,434 2,897 1,140 3,448 2,256
Interest (Expense) Income, Net...... (13) 4 (2,677) (8,063) (4,552) 4,052 221
(Loss) on Dispositions of
Businesses........................ -- -- -- (4,632) (8,979) 6,230 --
Litigation Settlement and Related
Costs............................. -- (847) -- -- -- -- --
------- -------- -------- -------- -------- -------- --------
Income (Loss) Before Income Taxes... 1,466 2,012 3,757 (9,798) (12,391) (6,833) 2,035
Provision for (Benefit from) Income
Taxes............................. 653 884 1,617 (3,463) (4,636) (2,412) 812
------- -------- -------- -------- -------- -------- --------
Net (Loss) Income.......... 813 1,128 2,140 (6,335) (7,756) (4,421) 1,223
======= ======== ======== ======== ======== ======== ========
Basic (Loss) Earnings per Common
Share............................. $ .20 $ .28 $ .50 $ (1.22) $ (1.35) $ (0.78) $ .21
======= ======== ======== ======== ======== ======== ========
Diluted (Loss) Earnings per Common
Share............................. $ .20 $ .28 $ .45 $ (1.22) $ (1.35) $ (0.78) $ .20
======= ======== ======== ======== ======== ======== ========
Basic Weighted Average Common Shares
Outstanding....................... 4,060 4,013 4,262 5,214 5,731 5,644 5,961
======= ======== ======== ======== ======== ======== ========
Diluted Weighted Average Common
Shares Outstanding................ 4,080 4,085 4,733 5,214 5,731 5,644 6,182
======= ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------------------------------- -----------------
1993 1994 1995 1996 1997 1996 1997
------- ------- -------- -------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital......................... $20,973 $22,629 $ 46,971 $ 57,531 $ 8,715 $ 9,363 $ 8,895
Total Assets............................ 37,943 56,337 146,581 170,313 61,075 68,782 53,002
Long-Term Debt.......................... -- 228 52,510 54,062 3,142 4,687 2,358
Total Shareholders' Equity.............. 25,338 26,680 34,140 31,848 25,154 27,915 26,423
</TABLE>
6
<PAGE> 13
THE COMPANIES
THE COMPANY
The Company, incorporated in 1976, is a direct marketer of microcomputer
equipment, related products and computer services. The Company markets computer
equipment and related products supplied primarily by major manufacturers. The
Company's customers are business organizations with diverse desktop computing
requirements located throughout the United States, with a primary concentration
in the Southeast. The Company provides its customers with single-source,
value-added desktop computing solutions and services, including product sales,
system integration, network installations, help desk support, training,
consultation services and equipment repair maintenance. The Company is also a
certified Novell Education Center and a certified Microsoft Technical Education
Center capable of providing on-site or off-site manufacturer authorized
education.
The Company's computer services business includes dedicated on-site
remedial and nonremedial maintenance support to the Company's customers through
the Company's Mainsite(TM) program, field service repairs and maintenance,
system configuration, asset management, authorized training centers, LAN/WAN
consulting and system integration, help desk support through its toll-free
support line for all computer and computer related problems, and FlexStaff,
which provides dedicated high-end technical support on a contract basis to
customers for short and long-term requirements. In addition, the Company is a
member of a national network of service partners to enhance its ability to
deliver nationwide, on-site services to its customers.
The Company focuses its efforts on customer service. The Company conducts
ongoing training for its associates, monitors response and repair time regarding
customer requests and concerns, measures delivery time for services and conducts
customer surveys to determine the level of customer satisfaction.
Since 1996, the Company has divested its Eastern (New Jersey-based),
Midwestern (Chicago-based), and Western (California- and Arizona-based) regions
in a series of transactions. These divestitures were a reversal of the Company's
expansion strategy implemented in 1994 and 1995 and resulted from the Company's
inability to successfully integrate these acquisitions promptly and effectively.
Additionally, management determined that the Company lacked adequate capital (or
access to adequate capital) to support its expanded infrastructure, to make
necessary additional capital expenditures and to service the significant
indebtedness incurred in connection with the acquisitions. Management concluded
that it was necessary to reduce the burden of this indebtedness. Management
believed that the Company's best opportunities were in the Southeastern United
States and therefore concentrated the Company's efforts in this region. As a
result, the Company disposed of its other operations, including its Eastern
region (the original business of the Company) in 1996 and its Kindergarten
through 12th Grade Education business.
For a more detailed description of the business and properties of the
Company, see the descriptions thereof set forth in the Company's Annual Report
on Form 10-K for the year ended March 31, 1997, which is incorporated herein by
reference. See "Where You Can Find More Information." The Company's principal
executive offices are located at 2145 Calumet Street, Clearwater, Florida 34625,
and its telephone number is (813) 562-2200.
COMPUCOM
CompuCom, together with its subsidiaries is a leading provider of
distributed desktop computer products and networking integration services to
large and medium sized businesses throughout the United States. CompuCom helps
Fortune 1000 companies manage information technology to achieve their business
goals by providing a wide range of services in provisioning, support and
technology management. Products and services are sold by a direct sales force to
over 3,500 business customers through 41 sales and service centers located in
and serving large metropolitan areas nationwide.
CompuCom is an authorized dealer of major distributed desktop computer
products, networking and related computer products, computer-related peripheral
equipment and software for a number of manufacturers, including Compaq Computer
Corporation, International Business Machines Corporation ("IBM"),
7
<PAGE> 14
Hewlett-Packard Company, Toshiba America Information Systems, Intel Corporation
and Microsoft Corporation. To further meet the needs of its customers, CompuCom
provides a variety of services including LAN/WAN project services, consulting,
asset tracking, network management, help desk, field engineering, configuration,
software management, distribution, and procurement utilizing network
applications such as Novell Netware, Windows NT, Windows and Windows 95, IBM
OS/2 Warp.
COMPUCOM SUBSIDIARY
CompuCom Subsidiary is a wholly-owned subsidiary of CompuCom which has been
organized solely to be merged with and into the Company. CompuCom Subsidiary's
principal executive offices are located at 7171 Forest Lane, Dallas, Texas
75230, and its telephone number is (972) 856-3600.
THE SPECIAL MEETING
GENERAL
This Proxy Statement is being furnished to holders of the Company's Common
Stock in connection with the solicitation of proxies by and on behalf of the
Board of Directors of the Company for use at the Special Meeting to be held at
10:00 a.m., local time, on June 26, 1998, at the Hyatt Hotel located at 300
Reunion Boulevard, Dallas, Texas 75207, and at any adjournments or postponements
thereof. This Proxy Statement and the accompanying Notice of Special Meeting of
Shareholders and Proxy Card are first being mailed on May 21, 1998 to holders of
Common Stock entitled to notice of, and to vote at, the Special Meeting.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, shareholders will be asked to consider and vote
upon a proposal to approve and adopt the Merger Agreement, dated as of April 10,
1997 (the "Merger Proposal"). The Board of Directors has determined that the
Merger Agreement and the Merger are fair to and in the best interests of the
Company's shareholders and has unanimously approved and adopted the Merger
Agreement.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. See "Proposal 1 -- The
Merger -- Background of the Merger" and "-- The Company's Reasons for the
Merger; Recommendation of the Board of Directors."
SHAREHOLDERS ARE REQUESTED PROMPTLY TO COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD TO THE COMPANY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL
MEETING WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" THE MERGER AGREEMENT.
RECORD DATE; QUORUM; VOTING AT THE SPECIAL MEETING
Only shareholders of record at the close of business on May 15, 1998 (the
"Record Date") will be entitled to notice of, and to vote at, the Special
Meeting. At the close of business on the Record Date, there were 5,966,169
shares of Common Stock outstanding and entitled to vote at the Special Meeting,
held by approximately 505 shareholders of record.
Shareholders of record on the Record Date are entitled to one vote per
share, exercisable in person or by properly executed proxy, upon each matter
properly submitted for the vote of shareholders at the Special Meeting. The
presence of the holders of at least a majority of the shares of Common Stock
outstanding on the Record Date, whether present or by properly executed and
delivered proxy, will constitute a quorum for purposes of the Special Meeting.
The affirmative vote of the holders of a majority of the outstanding shares of
Common Stock is required to approve and adopt the Merger Agreement. Abstentions
will have the effect of votes "AGAINST" the proposal to approve and adopt the
Merger Agreement.
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<PAGE> 15
Because the Company's Common Stock is listed on Nasdaq, holders of Common
Stock entitled to vote on the Record Date who do not wish to accept $4.10 per
share of Common Stock will not have a right of dissent with respect to the
Merger Agreement in accordance with applicable statutory procedures of Section
607.1320 of the Florida Business Corporation Act ("FBCA"). See "Proposal
1 -- The Merger -- No Right of Dissent."
The Board of Directors is not aware of any matters other than those set
forth in the Notice accompanying this Proxy Statement that may be brought before
the Special Meeting, and under the Company's Bylaws only business within the
purposes described in such Notice may be transacted at the Special Meeting. If
any other matters properly come before the Special Meeting, the persons named in
the accompanying Proxy Card will vote the shares represented by all properly
executed proxies on such matters and in such manner as shall be determined by a
majority of the Board of Directors, provided that no proxy which is voted
against the Merger Proposal will be voted in favor of any adjournment or
postponement of the Special Meeting.
PROXIES; REVOCATION OF PROXIES
All shares of Common Stock which are represented at the Special Meeting by
properly executed proxies received and not duly and timely revoked will be voted
at the Special Meeting in accordance with the instructions contained therein. In
the absence of contrary instructions, such shares will be voted "FOR" the
approval and adoption of the Merger Agreement.
The required vote of the shareholders on the Merger Agreement is based upon
the total number of outstanding shares of Common Stock as of the Record Date.
Therefore, the failure to submit a Proxy Card (or to vote in person at the
Special Meeting) and the abstention from voting by a shareholder will have the
same effect as a vote "AGAINST" the approval and adoption of the Merger
Agreement.
A proxy may be revoked prior to its being voted by: (i) delivering to the
Secretary of the Company, at or before the Special Meeting, a written instrument
bearing a later date than the proxy, which instrument, by its terms, revokes the
proxy; (ii) duly executing a subsequent proxy relating to the same shares and
delivering it to the Secretary of the Company at or before the Special Meeting;
(iii) or attending the Special Meeting and giving notice of revocation to the
Secretary of the Company or in open meeting prior to the proxy being voted
(although attendance at the Special Meeting without taking other affirmative
action as aforementioned will not constitute a revocation of a proxy). Any
written instrument revoking a proxy should be sent to: Dataflex Corporation,
Attention: Deborah Medley, 2145 Calumet Street, Clearwater, Florida 34625.
In the absence of representation by the holders of at least a majority of
the outstanding shares of Common Stock, or if fewer shares of Common Stock than
the number required therefor are voted in favor of approval and adoption of the
Merger Agreement, it is expected that the Special Meeting will be postponed or
adjourned in order to permit additional time for soliciting and obtaining
additional proxies or votes, and, at any subsequent reconvening of the Special
Meeting, all proxies will be voted in the same manner as such proxies would have
been voted at the original convening of the Special Meeting, except for any
proxies which have theretofore effectively been revoked or withdrawn. In the
absence of representation by the holders of at least a majority of the
outstanding shares of Common Stock, the Special Meeting may be adjourned from
time to time by the holders of a majority of the shares represented at the
Special Meeting in person or by proxy. With respect to any vote to adjourn or
postpone the Special Meeting, if fewer than a majority of the outstanding shares
of Common Stock are represented or voted in favor of approval and adoption of
the Merger Agreement, proxies voting against the proposal to approve and adopt
the Merger Agreement will not be voted in favor of any such adjournment or
postponement.
The obligations of the Company and CompuCom to consummate the Merger are
subject to, among other things, the condition that the shareholders of the
Company, by the requisite vote thereof, approve and adopt the Merger Agreement.
See "The Merger Agreement -- Conditions to Effect the Merger."
SHAREHOLDERS SHOULD NOT FORWARD ANY CERTIFICATES REPRESENTING COMMON STOCK
WITH THEIR PROXY CARDS. IN THE EVENT THE MERGER IS CONSUMMATED, CERTIFICATES
SHOULD BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS
9
<PAGE> 16
SET FORTH IN A LETTER OF TRANSMITTAL WHICH WILL BE SENT TO SHAREHOLDERS PROMPTLY
AFTER THE EFFECTIVE TIME (AS DEFINED BELOW). SEE "THE MERGER
AGREEMENT -- EXCHANGE OF STOCK CERTIFICATES."
SOLICITATION OF PROXIES
The Company will bear the costs of soliciting proxies in the accompanying
form from shareholders. In addition to soliciting proxies by mail, directors and
officers of the Company, without receiving additional compensation therefor, may
solicit proxies by telephone, by telegram, or in person. In addition, the
Company has retained Shareholder Communications Corporation at an estimated cost
of approximately $6,500, plus reimbursement of expenses, to assist the Company
in the solicitation of proxies from brokerage firms and other custodians,
nominees and fiduciaries. Arrangements also will be made with brokerage firms
and other custodians, nominees and fiduciaries to forward solicitation materials
to the beneficial owners of shares of Common Stock held of record by such
persons, and the Company will reimburse such brokerage firms, custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them
in connection therewith.
PROPOSAL 1 -- THE MERGER
GENERAL
This Proxy Statement is being furnished to holders of the Company's Common
Stock. The Board of Directors of the Company is soliciting proxies for use at
the Special Meeting and at any adjournments or postponements thereof.
At the Special Meeting, the Company's shareholders will be asked to vote
upon the Merger Proposal and the transactions contemplated thereby. The
affirmative vote of a majority of the outstanding shares of the Common Stock is
required to approve the Merger Proposal. A copy of the Merger Agreement is
attached as Appendix I and is incorporated in this Proxy Statement by reference.
All shareholders are urged to read the Merger Agreement in its entirety.
The Merger Agreement provides that, subject to the satisfaction or waiver
of certain conditions, including but not limited to the receipt of all necessary
regulatory and shareholder approvals, CompuCom Subsidiary will be merged with
and into the Company. The Company will remain as the Surviving Corporation and
thus become a wholly-owned subsidiary of CompuCom. Pursuant to the Merger, each
share of Common Stock outstanding immediately before the Effective Time, without
any action on the part of the shareholder, will be converted into the right to
receive $4.10 in cash. The Merger will become effective upon the filing of
articles of merger with the Secretary of State of Florida (the time of such
filing being herein called the "Effective Time"). See "The Merger
Agreement -- Effective Time."
BACKGROUND OF THE MERGER
Since 1996, the Company has continually reviewed its position in the
computer support and distribution industry and potential strategic business
alternatives in light of: (i) the continued consolidation of the industry; (ii)
opportunities with respect to existing or planned operations; (iii) potential
opportunities to expand its operations into new markets; and (iv) the capital
necessary to pursue expansion. At a meeting of the Company's Board of Directors
in June 1997, a committee consisting of Messrs. Schilit and Lembo was requested
to contact various investment banking firms to discuss the Company's strategic
alternatives.
At a Board meeting on July 31, 1997, Messrs. Schilit and Lembo reported on
their discussions with various investment bankers. After lengthy discussions,
the Board authorized the retention of Raymond James to act as the Company's
financial advisor in connection with its consideration of financial and
strategic alternatives for the Company to enhance shareholder value. The
engagement of Raymond James was based on the firm's position as a nationally
recognized investment banking firm and its experience in transactions of the
type contemplated by the Company.
10
<PAGE> 17
As part of its engagement, Raymond James, along with the Company, prepared
an offering memorandum detailing the Company's business and identified companies
to contact for a potential business combination with the Company. During August
and September, Raymond James contacted approximately 15 companies to discuss
potential corporate business transactions. Of the companies contacted, three
expressed significant interest in such a transaction.
From August 1997 through October 1997, the Company held meetings with two
of the three interested companies, and held telephone conferences with the
third, and each company conducted varying levels of due diligence reviews of the
Company. At Board meetings on August 22, 1997 and September 18, 1997, Raymond
James updated the Board as to the status of discussions with all potential
acquirors. At each meeting, a representative of Holland & Knight LLP ("Holland &
Knight"), the Company's corporate and securities counsel, was present. By
mid-October 1997, two of these companies had submitted preliminary non-binding
acquisition proposals to Raymond James. At a Board meeting on October 20, 1997,
Raymond James distributed an information package relating to both proposals to
members of the Board, and gave a presentation on each proposal and its value to
the Company's shareholders. The Board requested that Raymond James seek a
definitive agreement from both of these companies. Specifically, the Board
sought to encourage potential acquirors to propose a transaction whereby the
acquiror would acquire all of the stock of the Company.
On October 29, 1997, the Company announced that it was engaged in
discussions regarding a possible strategic combination in response to unusual
trading activity in the Common Stock on October 29, 1997. After this
announcement, another potential acquiror expressed an interest in the Company. A
number of discussions and meetings were held with this party in November and
December. Ultimately, this party did not submit a proposal to acquire the
Company.
By early December 1997, only one potential acquiror submitted a proposed
acquisition agreement. On December 9, 1997, the Board held a meeting to review
the proposed agreement which involved: (i) an asset purchase; (ii) the
acquiror's common stock as a substantial component of the consideration to be
received by the shareholders of the Company; and (iii) potentially significant
indemnity provisions. After a lengthy discussion regarding the proposed
transaction, including uncertainties regarding amounts that would have to be
held in reserve for payment of the Company's obligations and the likely
significant delay in distributions to shareholders of the Company, the Board
determined to reject the proposed acquisition agreement and to instead pursue a
stock transaction. Accordingly, Raymond James informed this potential acquiror
that the Company intended to pursue a stock transaction. Subsequently, this
party informed the Company that it was not interested in pursuing a stock
transaction.
In late December 1997, CompuCom entered into discussions with the Company
and began its due diligence review. CompuCom initially requested an asset
purchase transaction, which was rejected by the Company. Thereafter, CompuCom
agreed in principle to a stock transaction, subject to the Company resolving a
number of issues, primarily involving the Company's covenants not to compete
relating to the sale of its Eastern (New Jersey- based), Midwestern
(Chicago-based) and Western (California- and Arizona-based) regions.
During February and March the Company had several discussions with the
purchaser of its Western region and the purchaser of its Eastern and Midwestern
regions regarding the Company's covenants not to compete. The Company thereafter
negotiated the termination of these two covenants.
During this time, Raymond James, on behalf of the Company, continued
negotiations with CompuCom. On March 7, 1998, CompuCom delivered to the Company
a proposed merger agreement. Thereafter, on March 10, 1998, a meeting was held
at the offices of Holland & Knight between representatives of the Company,
including Messrs. Doganiero and Lembo, and representatives of CompuCom, to
discuss the terms of the proposed merger agreement and various aspects of the
proposed transaction. At that meeting, the Company and CompuCom reached a
preliminary understanding regarding CompuCom's purchase of all of the Company's
Common Stock for $4.10 per share, subject to the negotiation of a definitive
agreement. On March 13, 1998, a Board of Directors meeting was held, with one
director absent, and it was concluded that the Company would continue
discussions with CompuCom. Negotiations continued throughout 1998.
11
<PAGE> 18
On April 1, 1998, a special meeting of the Board was held, with one
director absent, to review, with the advice of Holland & Knight, the revised
proposed merger agreement and related matters. At that meeting, representatives
of Holland & Knight and Raymond James made presentations to, and had discussions
with, the Board of Directors as to various aspects of the proposed transaction.
The Board of Directors reviewed and discussed the proposed transaction. Raymond
James indicated that it was in a position to render an opinion that, as of such
date, the consideration to be paid to the Company's shareholders pursuant to the
Merger was fair to such shareholders from a financial point of view. The Board
of Directors adjourned this meeting without taking any action with respect to
the proposed merger transaction. Negotiations continued with CompuCom.
On April 4, 1998, the Board held another special meeting, with all
directors present, to review the revised proposed merger agreement. Holland &
Knight discussed all changes made to the draft of the merger agreement
previously distributed and received by the Board. Raymond James again stated its
willingness to render an opinion as to the fairness of the Merger from a
financial point of view. The Board approved the proposed agreement, subject to
the completion of negotiations on a few outstanding issues.
The Board of Directors met again on April 9, 1997. At that meeting, Holland
& Knight made a presentation updating the directors on the final negotiations
with respect to the Merger Agreement and Raymond James issued its written
opinion as to the fairness of the Merger to the shareholders of the Company from
a financial point of view. After further discussion, the Board of Directors
voted unanimously to approve the Merger Agreement and the transactions
contemplated thereby.
Following the approval of the Merger Agreement by the Company's Board of
Directors, the Company executed the Merger Agreement. On April 10, 1998, the
Company issued a press release announcing the execution of the Merger Agreement.
THE COMPANY'S REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has determined that the Merger Agreement and the
Merger are fair to and in the best interests of the Company and its shareholders
and has unanimously approved and adopted the Merger Agreement. Accordingly, the
Board of Directors recommends that shareholders vote "FOR" approval and adoption
of the Merger Agreement.
In reaching its determination that the Merger Agreement and the Merger are
fair to and in the best interests of the Company and its shareholders, the Board
of Directors considered a number of factors, including, without limitation, the
following:
(1) the present and expected environment of the computer distribution
and support industry, including the potential for further
consolidation within the industry and the need for substantial
capital in order for the Company to compete effectively, which led
to the belief that it would become more difficult for smaller
companies, like the Company, to compete in its markets and that
continued growth would require significant additional capital and
that shareholder value may be maximized by selling the Company to
a larger, better capitalized company;
(2) the historical market prices and trading information with respect
to the Common Stock, and that the price of $4.10 per share (the
"Merger Consideration") represents a premium of approximately
31.0% over the $3.13 closing price of the Common Stock on Nasdaq
on October 28, 1997, the last day prior to unusual trading
activity in the Common Stock and the public announcement of the
Company engaging in discussions regarding a possible strategic
combination;
(3) the financial condition, results of operations, business and
prospects of the Company, including the increasingly competitive
nature of the markets in which the Company operates and its
position in such markets, which helped the directors evaluate the
future prospects of the Company and determine whether the Merger
Consideration is fair and whether it is an appropriate time to
engage in the proposed Merger;
12
<PAGE> 19
(4) the terms and conditions of the Merger Agreement, including the
amount of the Merger Consideration;
(5) the Merger Consideration consists solely of cash, which although
it will result in a taxable transaction to the Company's
shareholders, it comes at a time when federal long-term capital
gains tax rates had recently been reduced and are at their lowest
level in ten years; and
(6) the presentation of Raymond James to the Board of Directors of the
Company, including Raymond James's written opinion, dated as of
April 9, 1998, to the effect that, as of the date of such opinion,
the Merger Consideration to be received by the Company's
shareholders pursuant to the Merger is fair to such shareholders.
The foregoing discussion of the information and factors considered by the
Board of Directors is not meant to be exhaustive but includes the material
factors considered by the Board of Directors. The Board of Directors did not
quantify or attach any particular weight to the various factors that it
considered in reaching its determination that the Merger Agreement and the
Merger are fair to and in the best interests of the Company and its
shareholders. As a result of its consideration of the foregoing, the Board of
Directors determined that the Merger Agreement and the Merger are fair to and in
the best interests of the Company and its shareholders and approved and adopted
the Merger Agreement. In considering the recommendation of the Board of
Directors with respect to the Merger, shareholders should be aware that the
interests of certain directors and executive officers with respect to the Merger
are or may be different from or in addition to their interests solely as
shareholders of the Company. The Board of Directors was aware of these
interests, and took these interests into account in approving the Merger
Agreement and the transactions contemplated thereby. See "Proposal 1 -- The
Merger -- Interests of Certain Persons in the Merger." ACCORDINGLY, THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT.
FAIRNESS OPINION OF FINANCIAL ADVISOR
The Board of Directors retained Raymond James to render an opinion as to
the fairness, from a financial point of view, of the Merger Consideration to be
issued to shareholders of the Company in the Merger. Raymond James is a
nationally recognized investment banking firm which regularly undertakes the
valuation of investment securities in connection with public offerings, private
placements, business combinations and similar transactions. The Company selected
Raymond James to render a fairness opinion in connection with the Merger because
of Raymond James's experience in transactions similar to the Merger, as well as
its position as a nationally recognized investment banking firm and its
involvement in the Company's consideration of various strategic alternatives
since July 1997.
Raymond James delivered to the Board of Directors an opinion letter, dated
April 9, 1998, which stated that, based on the assumptions and subject to
qualifications set forth therein, which are summarized below, as of April 9,
1998, the Merger Consideration to be received by the shareholders of the Company
in the Merger was fair, from a financial point of view, to the shareholders of
the Company. Raymond James was involved in structuring the Merger, soliciting
potential purchasers of the Company, and assisted in negotiating the terms of
the Merger. Raymond James was not requested to, and accordingly did not, express
any opinion with respect to the underlying business decision of the Company to
effect the Merger, the structure or tax consequences of the Merger Agreement or
the availability or advisability of any alternatives to the Merger. THE FULL
TEXT OF THE WRITTEN OPINION OF RAYMOND JAMES WHICH SETS FORTH THE ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED, LIMITATIONS ON AND THE SCOPE OF
REVIEW BY RAYMOND JAMES IN RENDERING ITS OPINION IS ATTACHED AS APPENDIX II TO
THIS PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. SHAREHOLDERS OF
THE COMPANY ARE URGED TO READ RAYMOND JAMES'S OPINION IN ITS ENTIRETY.
In connection with Raymond James's review of the proposed Merger and the
preparation of its opinion, Raymond James examined: (i) the financial terms and
conditions of the Merger Agreement; (ii) the audited financial statements of the
Company and its affiliates; (iii) certain unaudited financial statements and
13
<PAGE> 20
operating reports of the Company; (iv) certain internal financial analyses and
forecasts for the Company prepared by management; and (v) certain other publicly
available information on the Company. Raymond James also held discussions with
members of the Company's management to discuss the foregoing and considered
other matters which they deemed relevant to their inquiry.
Raymond James assumed and relied upon the accuracy and completeness of all
such information and did not attempt to verify independently any of such
information, nor did they make or obtain an independent appraisal of the assets
or liabilities (contingent or otherwise) of the Company and its affiliates. With
respect to financial forecasts and the information and data provided to or
otherwise reviewed by or discussed with them, Raymond James assumed that they
were reasonably prepared on bases reflecting the best currently available
estimates and judgments of management, and relied upon management to advise them
promptly if any information previously provided became inaccurate or was
required to be updated during the period of their review.
Raymond James's opinion was based upon market, economic, financial and
other circumstances and conditions existing and disclosed to them as of April 9,
1998, and such opinion specifically stated that any change in such circumstances
would require a reevaluation of their opinion, which Raymond James is under no
obligation to undertake.
In conducting their investigation and analyses and in arriving at their
opinion expressed herein, Raymond James took into account such accepted
financial and investment banking procedures and considerations as they deemed
relevant, including the review of: (i) historical and projected revenues,
operating earnings, net income and capitalization of the Company and certain
other publicly held companies in businesses Raymond James believed to be
comparable to that of the Company; (ii) the then current and projected financial
position and results of operations of the Company; (iii) the historical market
prices and trading activity of the Common Stock of the Company; (iv) financial
and operating information concerning selected business combinations which were
deemed comparable in whole or in part; and (v) the general condition of the
securities markets.
Comparable Company Analysis. Using publicly available information, as part
of its analysis, Raymond James reviewed and compared certain financial
information, ratios and stock market multiples of six publicly traded
corporations (the "Selected Companies") in businesses which Raymond James
believed to be similar in various respects to the Company. The public market
multiples and financial ratios for the Selected Companies were calculated using
the closing market prices as of April 9, 1998. With respect to the Selected
Companies, Raymond James considered enterprise value (i.e., market value of
common equity plus debt less cash and cash equivalents) as a multiple of
trailing twelve months ("TTM") revenue, earnings before interest, taxes,
depreciation and amortization ("EBITDA") and earnings before interest and taxes
("EBIT"). Raymond James also considered the price per share of common equity as
a multiple of earnings per common share ("P/E Ratio") for calendar year 1997,
TTM and calendar year 1998 estimates as given by equity analysts' research
available on the First Call database as of April 9, 1998. Such analysis
indicated that for the Selected Companies: (i) enterprise value as a multiple of
TTM revenue averaged 0.3x; (ii) enterprise value as a multiple of TTM EBITDA
averaged 7.3x; (iii) enterprise value as a multiple of TTM EBIT averaged 9.0x;
(iv) and the P/E Ratios averaged 13.8x, 13.8x and 12.0x for calendar year 1997,
TTM and calendar year 1998, respectively. The Company's estimated equity value
based on a comparable company analysis was $16.5 million, or $2.65 per share.
Precedent Business Combinations Analysis. Raymond James analyzed certain
information relating to selected business combinations involving companies
believed by Raymond James to be comparable to the Company (the "Selected
Transactions"), including Marshall Industries' acquisition of Sterling
Electronics, Vanstar's acquisition of Sysorex Information Systems, Raab
Karcher's acquisition of Wyle Electronics, Tech Data's acquisition of Macrotron
AG, Bell Industries's acquisition of Milgray Electronics, General Electric
Capital's acquisition of AmeriData Technologies, Globelle Corporation's
acquisition of GBC Technologies, Computer 2000's acquisition of AmeriQuest
Technologies and Intelligent Electronics' acquisition of Future Now, Inc. Such
analysis indicated that for the Selected Transactions: (i) enterprise value as a
multiple of TTM revenue averaged 0.4x; (ii) enterprise value as a multiple of
TTM EBITDA averaged 10.2x;
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(iii) enterprise value as a multiple of TTM EBIT averaged 12.4x; (iv) and the
market value of the common equity (the "equity value") as a multiple of TTM net
income averaged 15.3x. The Company's estimated equity value based on a precedent
business combinations analysis was $24.4 million, or $3.93 per share.
Discounted Cash Flow Analysis. Raymond James performed a discounted cash
flow analysis of the projected future free cash flows (defined as after tax
earnings before interest plus depreciation and amortization, less capital
expenditures and any increase in net working capital) for the years 1998 through
2002. The discounted cash flow analysis for the Company was developed based on
certain operating and financial assumptions, forecasts and other information
provided by the management of the Company and assuming, among other things,
discount rates of 12.5%, 15.0% and 17.5%, and terminal EBITDA multiples of
7.25x, 7.50x and 7.75x. Utilizing these assumptions, the Company's estimated
equity value based on a discounted cash flow analysis was $23.4 million, or
$3.76 per share.
Acquisition Premium Analysis. Raymond James prepared for the Board of
Directors an analysis of certain publicly available information for selected
mergers and acquisitions of public companies in transactions valued between $15
million and $75 million since January 1, 1997. Raymond James compared the
purchase price per share in the selected transaction to the target's closing
stock price one day, one week and four weeks prior to the relevant announcement
date of the impending transaction to calculate the premium over such stock
price. The mean premiums calculated were 19.8%, 24.3% and 27.7%, respectively.
Raymond James noted that these average premiums over the price per share one
day, one week and four weeks prior to October 28, 1997, the last day prior to
the Company's announcement that it was engaged in merger discussions, suggested
acquisition prices per each share of Common Stock of $3.74, $4.04, and $4.07,
respectively. Raymond James noted that the premiums to be paid to the Company's
shareholders over the Company's historic stock prices existing at the time of
the Company's announcement of merger discussions were higher than those noted in
its acquisition premium analysis and supported its conclusion.
The Company entered into an engagement letter with Raymond James on July
31, 1997, as amended on March 26, 1998, pursuant to which the Company retained
Raymond James as its exclusive financial advisor. For its services relating to
the fairness opinion referred to herein, Raymond James will receive $200,000 for
the delivery of its written fairness opinion. For its advisory services, Raymond
James received a $100,000 retainer. In addition, if the Merger is consummated,
the Company has agreed to pay Raymond James additional compensation of $700,000.
The Company has also agreed to reimburse Raymond James for its reasonable out-
of-pocket expenses and has agreed to indemnify Raymond James against certain
liabilities that may arise in connection with its engagement, including
liabilities that may arise under federal securities laws. In the ordinary course
of its business, Raymond James may trade the Common Stock of the Company for its
own account and for the account of its customers and, accordingly, may at any
time hold a long or short position in such Common Stock.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors with respect to
the Merger, shareholders of the Company should be aware that certain directors
and executive officers of the Company have interests in the Merger that may be
different or in addition to their interests solely as shareholders of the
Company. The Board was aware of these interests and considered them, among other
factors, in approving the Merger Agreement. These interests are summarized
below.
Severance Payments. At the Effective Time, the persons who are the
directors and officers of CompuCom Subsidiary will become the directors and
officers of the Surviving Corporation, and the current directors and officers of
the Company will resign as directors and officers. Richard C. Rose, the Chief
Executive Officer of the Company immediately before the Effective Time will
continue as an executive officer of the Surviving Corporation after the
Effective Time, pursuant to an agreement between Mr. Rose and CompuCom. In this
regard, Mr. Rose has entered into a termination of employment agreement pursuant
to which Mr. Rose's existing employment agreement with the Company (including
its severance provisions) will be terminated and CompuCom or the Surviving
Corporation will pay Mr. Rose on the Closing Date, a lump sum payment of
$329,400. In addition, on the Closing Date CompuCom will execute in Mr. Rose's
favor, a
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promissory note in the amount of $658,800, payable in two equal installments on
the first and second anniversary dates of the Closing Date, with interest
accruing at an annual rate of 6% simple interest, payable annually. Further, as
of March 31, 1998, Mr. Rose was indebted to the Company in the amount of
$247,700.12, with interest accruing at a rate of approximately $796.09 per month
(the "Accrued Interest"). Upon consummation of the Merger, Mr. Rose has agreed
to pay the Surviving Corporation a lump sum payment of $84,159.84, together with
Accrued Interest, and to execute a promissory note for the remaining $163,540,
payable in two equal installments on the first and second anniversary dates of
the Closing Date, with interest accruing at an annual rate of 6% simple
interest, payable annually.
The Company has an employment agreement containing a severance provision
with Anthony G. Lembo, its President, Chief Operating Officer and Chief
Financial Officer, effective January 1, 1998. Mr. Lembo's employment agreement
is for a period of 14 months and provides for an annual base salary of $175,000
("Base Salary") or such greater amount as may be approved from time to time by
the Company's Board of Directors. The employment agreement provides that Mr.
Lembo shall receive severance benefits if he is terminated by the Company
without cause. In such a case, Mr. Lembo would receive his Base Salary, as in
effect upon his termination, for the remaining term of his employment agreement.
Accordingly, Mr. Lembo will be entitled to receive approximately $131,250 in
severance upon the consummation of the Merger, if CompuCom elects to terminate
him.
Employment Agreements. None of the executive officers of the Company will
be offered employment agreements by CompuCom or the Surviving Corporation.
However, Richard C. Rose will continue as an executive officer of the Surviving
Corporation.
Related Party Disclosures. Barry M. Alpert, a member of the Company's
Board of Directors, is a Managing Director of Raymond James. Raymond James will
receive a fee in connection with this transaction of approximately $1.0 million.
Interests in Common Stock and Options. As of May 15, 1998, the executive
officers and directors of the Company owned an aggregate of 56,449 shares of
Common Stock, which will be treated in the same manner as shares of Common Stock
held by other shareholders. The aggregate consideration which will be received
in the Merger by the executive officers and directors of the Company in respect
of such shares would be approximately $231,441.
As of May 15, 1998, the executive officers of the Company held Options (as
defined below) to acquire 486,022 shares of Common Stock pursuant to the
Company's option plans, and the non-employee directors of the Company held
Options to acquire 50,000 shares of Common Stock pursuant to the Company's
option plans. Of the 486,022 shares of Common Stock that are subject to Options
granted to the Company's executive officers, 250,250 shares subject to such
Options have exercise prices equal to or greater than $4.10 per share, and no
consideration will be paid for such Options. Pursuant to the Merger Agreement,
at the Effective Time (i) each unexpired and unexercised option to purchase
shares of Common Stock (individually an "Option" and collectively the "Options")
previously granted by the Company under any of the Company's option plans will
become exercisable in full, and (ii) each holder of an Option will be entitled
to receive from the Company in cancellation thereof a payment (subject to
applicable income tax withholding and employment taxes) of an amount in cash
equal to the product of (A) the excess, if any, of the Merger Consideration over
the per share exercise price of such Option and (B) the number of shares subject
to such Option. The aggregate consideration which would be received by the
executive officers and the non-employee directors of the Company upon
consummation of the Merger pursuant to the foregoing formula would be
approximately $366,999 and $73,750, respectively. See "The Merger
Agreement -- Treatment of Stock Options."
Indemnification and Insurance. The Merger Agreement provides for certain
arrangements with respect to the ongoing obligations of CompuCom to indemnify,
and maintain insurance on behalf of, the directors and executive officers of the
Company in respect of certain liabilities. See "The Merger Agreement -- Certain
Covenants -- Director and Officer Insurance and Indemnification."
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FINANCING OF THE MERGER
The total funds required for the financing of the Merger will be
approximately $25.5 million, plus transaction costs. CompuCom intends to finance
the Merger with borrowed funds under its existing credit facility. CompuCom is
currently seeking an increase in the amount of available funds under its credit
facility. CompuCom has represented that it has sufficient access to funds
necessary to consummate the Merger.
ACCOUNTING TREATMENT
CompuCom will account for the Merger as a "purchase" in accordance with
generally accepted accounting principles. Therefore, the aggregate consideration
paid by CompuCom in connection with the Merger will be allocated to the
Company's assets and liabilities based upon their fair values, with any excess
being treated as goodwill. The assets and liabilities and results of operations
of the Company will be consolidated into the assets and liabilities and results
of operations of CompuCom subsequent to the consummation of the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes the material United States federal
income tax consequences relevant to the Merger. The discussion is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed
Treasury regulations promulgated thereunder, rulings, administrative
pronouncements and judicial decisions, changes to which could materially affect
the tax consequences described below and could be made on a retroactive basis.
The receipt of cash in exchange for Common Stock pursuant to the Merger
will be a taxable transaction for federal income tax purposes and may also be a
taxable transaction under applicable state, local and foreign income and other
tax laws. The tax consequences of such receipt may vary depending upon, among
other things, the particular circumstances of the shareholder. In general, a
shareholder will recognize gain or loss for federal income tax purposes equal to
the difference between the adjusted tax basis of his Common Stock and the amount
of cash received in exchange therefor in the Merger. Such gain or loss will be
capital gain or loss if the Common Stock is a capital asset in the hands of the
shareholder and will be either long-term or short-term if the shareholder is a
corporation; or long-term, mid-term or short-term if the shareholder is an
individual or a non-corporate entity, depending on the shareholder's holding
period at the Effective Time.
In the case of a shareholder that is an individual or a non-corporate
entity that has held the Common Stock as a capital asset for: (i) 12 months or
less prior to the Effective Time, any gain will be taxed at ordinary income
rates; (ii) more than 12 months, but not more than 18 months prior to the
Effective Time, the maximum federal capital gains tax rate is 28%; or (iii) more
than 18 months prior to the Effective Time, the maximum federal capital gains
tax rate is 20%.
To determine the deductibility of capital losses, all capital gains and
losses incurred during the year must be totaled. Any capital losses are
deductible only to the extent of any capital gains plus, in the case of a
shareholder that is an individual or a non-corporate entity, ordinary income of
up to $3,000. Individuals and non-corporate entities may carry over a net
capital loss for an unlimited time until the loss is exhausted, but may not
carry the loss back to years prior to the year of the loss.
The receipt of cash by a shareholder of the Company pursuant to the Merger
may be subject to backup withholding at a rate of 31% unless the shareholder (i)
is a corporation or comes within certain other exempt categories or (ii)
provides a certified taxpayer identification number on Form W-9 and otherwise
complies with the backup withholding rules. Backup withholding is not an
additional tax; any amounts so withheld may be credited against the federal
income tax liability of the shareholder subject to the withholding.
The foregoing discussion does not address all aspects of federal income
taxation that may be relevant to a shareholder and may not apply to
shareholders: (i) who acquired their Common Stock pursuant to the exercise of
employee stock options or other compensation arrangements with the Company; (ii)
who are not citizens or residents of the United States; or (iii) who are subject
to special tax treatment under the Code
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(such as dealers in securities, insurance companies, other financial
institutions, regulated investment companies and tax-exempt entities).
DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, SHAREHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
MERGER, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL OR FOREIGN INCOME OR
OTHER TAX LAWS.
REGULATORY APPROVALS
CompuCom and the Company are not aware of any governmental or regulatory
requirements for consummation of the Merger other than compliance with
applicable federal securities laws and Florida corporate law and the expiration
or termination of the waiting period applicable to the Merger under the HSR Act
and the rules and regulations thereunder. Under the HSR Act, certain acquisition
transactions, such as the Merger, may not be consummated unless required
information has been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the Federal Trade Commission (the "FTC")
and the specified waiting period requirements have been satisfied. On April 24,
1998, CompuCom and the Company each filed with the Antitrust Division and the
FTC a Notification and Report Form with respect to the Merger. The applicable
waiting period for the Merger will terminate on May 24, 1998. Termination of the
waiting period under the HSR Act permits consummation of the Merger without
violating the HSR Act provision prohibiting such consummation prior to the
expiration of the waiting period.
Notwithstanding the termination or expiration of the waiting period, at any
time before or after the Effective Time, the Antitrust Division or the FTC could
take actions under the antitrust laws as either of them deem necessary and
desirable in the public interest, including seeking to enjoin the Merger or
seeking divestitures of substantial assets of CompuCom or the Company. In
addition, in appropriate circumstances, state officials and private parties may
also bring legal actions under the antitrust laws. Under the Merger Agreement,
in the event suit is instituted challenging the Merger as violative of the
antitrust laws, CompuCom and the Company have agreed to use reasonable efforts
to resist or resolve such a suit. If injunctive relief is sought or obtained in
a challenge to the Merger, the consummation of the Merger could be delayed. If
the Merger is not consummated by August 1, 1998, the Merger Agreement could be
terminated by CompuCom or the Company.
CERTAIN CONSEQUENCES OF THE MERGER
As a result of the Merger, CompuCom Subsidiary will be merged with and into
the Company and the Company will become a wholly-owned subsidiary of CompuCom.
Following consummation of the Merger, the Common Stock will be delisted from
Nasdaq, deregistered under the Exchange Act and will no longer be publicly
traded.
NO RIGHT OF DISSENT
Although the Board of Directors recommends that shareholders vote "FOR"
approval and adoption of the Merger Agreement, all holders of shares of Common
Stock who are entitled to vote may vote for, against, or abstain from voting
for, the approval and adoption of the Merger Agreement. However, because the
Company's Common Stock is listed on Nasdaq, any shareholder who does not wish to
accept $4.10 per share for his shares of Common Stock will not have a right to
dissent and obtain payment of "fair value" for his shares with respect to the
Merger Agreement in accordance with applicable statutory procedures of Section
607.1320 of the FBCA. If the requisite vote is obtained and the Merger is
consummated, all shares of Common stock will be automatically converted into the
right to receive $4.10.
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THE MERGER AGREEMENT
THE FOLLOWING IS A BRIEF SUMMARY OF THE MATERIAL PROVISIONS OF THE MERGER
AGREEMENT, A COPY OF WHICH IS ATTACHED AS APPENDIX I TO THIS PROXY STATEMENT AND
IS INCORPORATED HEREIN BY REFERENCE. SUCH SUMMARY IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE MERGER AGREEMENT. SHAREHOLDERS OF THE COMPANY ARE URGED TO
READ THE MERGER AGREEMENT IN ITS ENTIRETY FOR A MORE COMPLETE DESCRIPTION OF THE
TERMS AND CONDITIONS OF THE MERGER.
THE MERGER
Following the approval of the Merger by the shareholders of the Company,
the receipt of all regulatory approvals and the satisfaction or waiver of the
other conditions to the Merger, CompuCom Subsidiary will be merged with and into
the Company, at which time the separate corporate existence of CompuCom
Subsidiary will cease and the Company will be the Surviving Corporation and a
wholly-owned subsidiary of CompuCom, and the holders of Common Stock will become
entitled to receive, without interest, $4.10 in cash per share of Common Stock.
From and after the Effective Time, the Surviving Corporation will possess all
the assets, rights, privileges, powers and franchises and be subject to all of
the liabilities, restrictions, disabilities and duties of the Company and
CompuCom Subsidiary, as provided under Florida law. The Articles of
Incorporation and Bylaws of CompuCom Subsidiary, in effect immediately prior to
the Effective Time, shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation.
EFFECTIVE TIME
If the Merger Agreement is approved by the Company's shareholders, and the
other conditions to the Merger are satisfied or waived, the Closing will take
place on the third business day (the "Closing Date") following the date on which
the last of the conditions is satisfied or waived, or at such other date agreed
to by the Company and CompuCom. On the Closing Date, CompuCom and the Company
will cause articles of merger to be filed with the Secretary of State of the
State of Florida as provided in Sections 607.1101 and 607.1105 of the FBCA. The
Merger will become effective upon the filing of such articles of merger or such
later time as is specified therein. See "-- Conditions to Effect the Merger."
Subject to the satisfaction or waiver of the other conditions to the obligations
of the Company and CompuCom to consummate the Merger, it is presently expected
that the Effective Time of the Merger will occur shortly after the Special
Meeting, and in any event, by August 1, 1998.
CONVERSION OF SHARES
The Merger will be effected by a merger of CompuCom Subsidiary with and
into the Company, with the Company as the surviving corporation (the "Surviving
Corporation"). At the Effective Time: (i) each issued and outstanding share of
Common Stock (other than shares that are canceled as described below) will be
converted into the right to receive the Merger Consideration; (ii) each issued
and outstanding share of common stock of CompuCom Subsidiary will be converted
into one share of the Surviving Corporation; and (iii) each share of Common
Stock that is owned by the Company as treasury stock will be canceled and will
cease to exist and no consideration will be delivered in exchange therefor.
Consequently, as a result of the Merger, the Company will become a wholly-owned
subsidiary of CompuCom.
EXCHANGE OF STOCK CERTIFICATES
Prior to the Effective Time, CompuCom shall deposit or cause to be
deposited with a bank, trust company or other entity reasonably satisfactory to
the Company appointed to act the disbursing agent for the purpose of paying the
Merger Consideration (the "Disbursing Agent"), cash in an aggregate amount
sufficient to pay the Merger Consideration. As soon as practicable after the
Effective Time, the Disbursing Agent will mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Common Stock a notice and letter of
transmittal advising such holder of the
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effectiveness of the Merger and the procedure for effecting the surrender of
such certificates to the Disbursing Agent in exchange for payment of the Merger
Consideration. Upon surrender of certificates for cancellation to the Disbursing
Agent, together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, the holder of such certificates will
be entitled to receive cash in an amount equal to the product of (x) the number
of shares of Common Stock represented by such certificates and (y) the Merger
Consideration, and the certificates so surrendered will promptly be canceled.
No Further Ownership Rights in the Common Stock. The Merger Consideration
paid upon the surrender for exchange of certificates which immediately prior to
the Effective Time represented shares of Common Stock will be deemed to have
been issued in full satisfaction of all rights pertaining to the shares of
Common Stock theretofore represented by such certificates, and from and after
the Effective Time there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of the Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, certificates which immediately prior to the Effective Time
represented shares of Common Stock are presented to the Surviving Corporation
for any reason, such certificates will be canceled and exchanged in the manner
described above.
Failure to Exchange. Promptly following the six-month anniversary of the
Effective Time, any cash which remains undistributed to the former shareholders
of the Company will be delivered by the Disbursing Agent to the Surviving
Corporation, and any former shareholder of the Company who has not previously
exchanged certificates which immediately prior to the Effective Time represented
shares of Common Stock will thereafter look only to the Surviving Corporation
for payment of such former shareholder's claim for Merger Consideration.
No Liability. None of CompuCom, the Surviving Corporation or the
Disbursing Agent will be liable to any holder of shares of Common Stock for any
cash constituting the Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. The
Surviving Corporation or the Disbursing Agent will be entitled to deduct and
withhold from the consideration otherwise payable pursuant to the Merger
Agreement to any holder of certificates which prior to the Effective Time
represented shares of Common Stock such amounts as it is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld, such withheld amounts shall be treated for all purposes of the Merger
Agreement as having been paid to the holder of the shares of Common Stock in
respect of which such deduction and withholding was made.
HOLDERS OF COMMON STOCK SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE A TRANSMITTAL FORM FROM CHASEMELLON SHAREHOLDER SERVICES, L.L.C., THE
DISBURSING AGENT THEREFOR.
TREATMENT OF STOCK OPTIONS
At the Effective Time, each unexpired and unexercised outstanding Option,
whether or not then vested or exercisable in accordance with its terms, will
become exercisable in full and each holder of an Option will be entitled to
receive from the Company (or the Surviving Corporation) in cancellation thereof
a payment (subject to applicable income tax withholding and employment taxes) in
cash in an amount equal to the excess, if any, of the Merger Consideration over
the per share exercise price of such Option, multiplied by the number of shares
of Common Stock subject to such Option (the "Option Settlement Amount").
From and after the Effective Time, all Options will represent only the
right of the holders of such Option to receive payment of the Option Settlement
Amount upon the surrender thereof. The surrender of an Option will be deemed a
release of any and all rights the holder had or may have in respect of such
Option. The Merger Agreement further provides that the Company will terminate
all stock option plans and will further take all permitted actions necessary to
ensure that, following the Effective Time, no participant in any agreement,
plan, program or arrangement of the Company shall have any right thereunder to
acquire securities or other ownership interests of the Company, the Surviving
Corporation or any subsidiary thereof.
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REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties by
each of the Company, CompuCom and CompuCom Subsidiary relating to, among other
things: (i) corporate organization, existence and good standing; (ii) corporate
power and authority to enter into and perform the Merger Agreement; (iii) the
validity and binding effect of the Merger Agreement; (iv) consents and approvals
of governmental bodies and third parties; (v) the absence of conflicts with the
Merger posed by the respective companies' charter documents and contracts, and
applicable laws; and (vi) the accuracy of the information supplied by the
respective party contained in this Proxy Statement.
The Merger Agreement contains additional representations and warranties by
the Company relating to: (i) its capital structure; (ii) the accuracy of all
reports, schedules, statements and other documents filed by the Company with the
Commission; (iii) the compliance of the Company's financial statements filed
with the Commission in all material respects with applicable accounting
requirements, federal securities laws and Commission rules and regulations; (iv)
the absence of undisclosed liabilities that could, individually or in the
aggregate, have a material adverse effect on the Company's business, operations
or condition; (v) the absence of certain changes or events that, individually or
in the aggregate, have or may be expected to have a material adverse effect on
the Company's business, operations or condition; (vi) the nature and origin of
its accounts receivable; (vii) certain tax matters; (viii) the Company's
material agreements; (ix) the validity of its intellectual property; (x) the
absence of any undisclosed litigation; (xi) the Company's compliance with
applicable laws; (xii) matters relating to its employee benefit plans; (xiii)
labor matters; (xiv) its customers; (xv) the adequacy of assets necessary for
the conduct of its business; (xvi) the ownership or holding of material licenses
and permits to carry on its business; (xvii) the Company's owned and leased real
property, facilities and equipment; (xviii) insurance; (xix) the accuracy of its
books and records; (xx) the absence of certain business practices; (xxi) its
bank accounts; (xxii) the absence of broker fees in connection with the Merger;
and (xxiii) the receipt of a fairness opinion in connection with the Merger.
CompuCom also makes a representation and warranty relating to the
possession or access to funds sufficient to perform CompuCom's obligations under
the Merger Agreement.
CERTAIN COVENANTS
Conduct of Business. The Company has agreed that, at all times before the
Closing Date, it will conduct its business and operations in the usual and
ordinary course consistent with past practices and, except as contemplated by
the Merger Agreement, will not take certain actions without the prior written
consent of CompuCom, which actions include, without limitation: (i) the issuance
of any shares of any class of the Company's capital stock or other equity
interests in the Company, except for the issuance of the Company Common Stock
upon the exercise of, and in accordance with, vested options and warrants; (ii)
the split up, combination or reclassification of any of the Company's capital
stock or other equity interests; (iii) the grant of any options, warrants or
other rights to subscribe for or purchase any shares of the Company's capital
stock, other equity interests in the Company or any security directly or
indirectly convertible into or exchangeable for any shares of any class of the
Company's capital stock or any equity interest in the Company; (iv) the
purchase, redemption or other acquisition of any shares of the Company's capital
stock or other equity securities; (v) the declaration, setting aside for payment
or payment of any dividend on, or the making of any other distribution or
payment with respect to, any share of any class of the Company's capital stock
or any other equity interest in the Company; (vi) the grant or payment of any
increase in the salaries or other compensation of any of its officers or
directors, or any of its employees, agents or consultants (other than in the
ordinary course of business consistent with past practice); (vii) the creation,
assumption, guarantee, endorsement, refinancing, modification, extension,
renewal or otherwise becoming liable for any debt, obligation or other liability
for money borrowed (except pursuant to existing or planned lines of credit) or
any other debt, obligation or other liability (except in the ordinary course of
business consistent with past practice); (viii) the disposition or assignment of
any of the Company's material fixed or internal use assets or properties or the
permitting of any of its assets or properties to be subjected to any liens, or
the sale of any part of the Company's operations or business to any other person
or entity; (ix) the change or removal of the Company's independent certified
public accountants; (x) except as disclosed in a disclosure schedule to the
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Merger Agreement, the making of any capital expenditure in excess of $10,000 or
the making of capital expenditures in excess of $20,000 in the aggregate; or
(xi) the entering into, directly or indirectly, of any transaction with any
affiliate of the Company.
Each of CompuCom and the Company has agreed to: (i) cooperate to make
certain filings and obtain certain consents necessary to consummate the
transactions completed by the Merger Agreement; (ii) provide prompt notice of
certain events with respect to the Merger Agreement; (iii) cooperate in the
preparation of this Proxy Statement; and cooperate with respect to making any
public announcements regarding the proposed transaction.
No Solicitation. The Company, on behalf of itself, its officers,
directors, employees, representatives and agents, has agreed to: (i) immediately
cease any ongoing discussions or negotiations with respect to a Takeover
Proposal (as defined below); (ii) not authorize or permit any of its officers,
directors or employees, or any investment banker, financial advisor, attorney,
accountant or other representative retained by the Company to, directly or
indirectly, solicit, initiate or encourage (including by way of furnishing
information concerning the Company) or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes or which may
reasonably be expected to lead to, a Takeover Proposal; and (iii) not
participate in any discussions or negotiations regarding any Takeover Proposal,
unless the Board of Directors of the Company determines in good faith, after
consultation with outside legal counsel, that it is necessary to furnish
information with respect to the Company and participate in negotiations
regarding an unsolicited Takeover Proposal in order to comply with its fiduciary
duties to the Company's shareholders under applicable law.
A "Takeover Proposal" is defined in the Merger Agreement to mean: (i) any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of 20% or more of the assets of the Company or 20% or
more of any class of equity securities of the Company; (ii) any tender offer or
exchange offer that, if consummated, would result in any person beneficially
owning 20% or more of any class of equity securities of the Company; (iii) any
merger, consolidation, business combination, sale of substantially all of the
assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company, other than the Merger; or (iv) any other transaction, the
consummation of which could reasonably be expected to impede, interfere with,
prevent or materially delay the Merger or which would reasonably be expected to
dilute materially the benefits to CompuCom of the Merger.
The Company's Board of Directors has also agreed not to withdraw its
approval of the Merger, approve or recommend a Takeover Proposal or cause the
Company to enter into any agreement with respect to a Takeover Proposal, unless
it is necessary to do so in order to comply with its fiduciary duties to the
Company's shareholders under applicable law. The Company has agreed to inform
CompuCom of any Takeover Proposal, including any such proposal which the
Company's Board determines in good faith, based on the advice of a financial
advisor of nationally recognized reputation, to be more favorable to the
Company's shareholders than the Merger (a "Superior Proposal"), the material
terms and conditions of such Takeover Proposal, and the identity of the person
making such Takeover Proposal.
The Merger Agreement provides that, if the Company proposes to enter into
an agreement with respect to any Takeover Proposal, it shall concurrently pay to
CompuCom the Termination Fee (in the amount of $1,000,000).
Shareholders' Meeting. The Merger Agreement provides that the Company will
call a meeting of its shareholders to be held as promptly as practicable for the
purpose of voting upon the Merger Agreement and the Merger. Subject to the
discussion above under "-- No Solicitation," the Company agreed to recommend to
its shareholders adoption of the Merger Agreement and approval of such matters
and to use its best efforts to hold such meeting as soon as practicable after
the date of the Merger Agreement. The Company agreed to use all reasonable
efforts to solicit from its shareholders proxies in favor of such matters unless
doing so would be inconsistent with the Company's Board of Directors' fiduciary
duties to its shareholders under applicable law based on the advice of outside
legal counsel.
Governmental Approvals. The Company shall use its commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under
22
<PAGE> 29
applicable domestic, foreign or international law, treaty, ordinance, statute,
rule or regulation and otherwise to consummate and make effective the
transactions contemplated by the Merger Agreement and shall use its commercially
reasonable efforts to obtain all necessary actions or non-actions, extensions,
waivers, consents, approvals, permits, notices, actions, authorizations,
licenses and clearances and to effect all registrations, filings and notices
with, to or from other third parties or governmental entities required of the
Company that are necessary or reasonably desirable to effect the Merger and the
transactions contemplated thereby, including efforts to cooperate with CompuCom,
as promptly as practicable, to make any filings required pursuant to the HSR Act
and to promptly and diligently provide any additional information required or
reasonably requested in order to comply with the requirements of the HSR Act.
Director and Officer Insurance and Indemnification. From and after the
Effective Time, CompuCom and CompuCom Subsidiary (or any successor to such
parties) shall jointly and severally indemnify, defend and hold harmless the
officers, directors and employees of the Company against all losses, expenses,
claims, damages or liabilities arising out of claims brought or made by third
parties, including, without limitation, derivative claims, in connection with
the transactions contemplated by the Merger Agreement to the fullest extent
permitted or required under applicable law and shall advance expenses prior to
the final disposition of such claims and liabilities to which this sentence
applies. CompuCom agrees that all rights to indemnification now existing in
favor of the directors, officers or employees of the Company or any of its
subsidiaries (including, without limitation, any person who was or becomes a
director, officer or employee prior to the Effective Time (the "Indemnified
Parties") under Florida law or as provided in the Company's Articles of
Incorporation or Bylaws with respect to matters occurring on or prior to the
Effective Time shall survive the Merger and shall continue in full force and
effect for a period of not less than six years after the Effective Time (or, in
the case of claims or other matters occurring on or prior to the expiration of
such six year period which have not been resolved prior to the expiration of
such six year period, until such matters are finally resolved) and CompuCom
shall honor, and shall cause the Company to honor, all such rights. CompuCom
shall cause to be maintained in effect for not less than six years from the
Effective Time the current policies of the directors' and officers' liability
insurance maintained by the Company (provided that CompuCom may substitute
therefor policies of at least the same coverage containing terms and conditions
which are no less advantageous) with respect to matters occurring on or prior to
the Effective Time; provided that in no event shall CompuCom or the Company be
required to expend annually more than 150% of the amount that the Company spent
for these purposes in the last fiscal year to maintain or procure insurance
coverage pursuant to the Merger Agreement; and provided further that if CompuCom
or the Company are unable to obtain the insurance called for by the Merger
Agreement, CompuCom or the Company will obtain as much comparable insurance as
is available for such amount per year.
Financial Statements and Reports. As promptly as reasonably practicable
after each calendar month ending between the date of the Merger Agreement and
the Closing Date, but in no event later than 30 days after the end of each such
month, the Company will deliver to CompuCom true and correct copies of the
unaudited financial statements (including a balance sheet, a statement of
operations and changes in shareholders' equity and cash flows) of the Company as
of and for the month then ended, prepared in accordance with generally accepted
accounting principles, and which shall present fairly the financial condition
and assets and liabilities (whether accrued, absolute, contingent or otherwise)
of the Company as of the end of such month and the results of operations of the
Company for and during the period then ended, subject to normal and recurring
year-end audit adjustments. As promptly as reasonably practicable, the Company
will deliver to CompuCom true and complete copies of such other material
financial statements, reports or analyses as may be prepared or received by the
Company and as relate to the Company's business and operations, and such other
information with respect to the foregoing as CompuCom reasonably may request,
including, without limitation, normal internal reports and special reports (such
as those of consultants).
Other Covenants. Each of CompuCom and the Company has agreed: (i) prior to
Closing, to enter into an agreement reasonably acceptable to CompuCom providing
for the waiver of the covenants not to compete contained in the Asset Purchase
Agreement dated August 30, 1996 between Ameridata of New Jersey and the Company
(which agreement was executed on February 11, 1998); (ii) to confer with the
other party on a
23
<PAGE> 30
regular and frequent basis regarding ongoing operations and to give prompt
notice to the other of, and use all commercially reasonable efforts to cure
before the Closing Date, any event, transaction or circumstance which causes or
will cause any covenant or agreement under the Merger Agreement to be breached
or that renders or will render untrue in any material respect any representation
or warranty contained in the Merger Agreement; (iii) to file this Proxy
Statement; (iv) to give CompuCom and its representatives access to all its
personnel, properties, books, contracts, commitments and records, and to furnish
related information reasonably requested by CompuCom and certain additional
financial reports and other information relating to the Company's operations and
periods between the date of the Merger Agreement and the Effective Time; (v) to
consult with the other party before issuing, and use all reasonable efforts to
agree upon, any press release or other public statement concerning the
transactions contemplated by the Merger Agreement; and (vi) to use its
reasonable best efforts to take all appropriate action to consummate the
transactions contemplated by the Merger Agreement.
CONDITIONS TO EFFECT THE MERGER
The respective obligations of the Company, CompuCom and CompuCom Subsidiary
to effect the Merger are subject to the satisfaction prior to the Closing Date
of the following conditions: (i) the Merger and the Merger Agreement shall have
been approved and adopted by the shareholders of the Company; (ii) no order,
executive order, stay, decree, judgment or injunction or statute, rule or
regulation shall be in effect that makes the Merger illegal or otherwise
prohibits the consummation of the Merger; and (iii) all governmental
authorizations, consents, orders or approvals shall have been obtained, all
statutory waiting periods in respect thereof (including under the HSR Act) shall
have expired and no such approval shall contain any material conditions,
limitations or restrictions.
The obligation of the Company to effect the Merger is also subject to the
satisfaction of the following conditions (i) the representations and warranties
of CompuCom and CompuCom Subsidiary in the Merger Agreement that are qualified
as to materiality shall be true and correct and such representations and
warranties that are not so qualified shall be true and correct in all material
respects as of the date of the Merger Agreement and the date of the Merger,
except to the extent such representations speak as of a particular date, which
shall be true and correct in all material respects, as applicable, as of such
date and (ii) CompuCom and CompuCom Subsidiary shall have performed their
obligations required to be performed by them under the Merger Agreement.
In addition, the obligations of CompuCom and CompuCom Subsidiary to effect
the Merger are also subject to the satisfaction of the following conditions (i)
the representations and warranties of the Company in the Merger Agreement that
are qualified as to materiality shall be true and correct and such
representations and warranties that are not so qualified shall be true and
correct in all material respects as of the date of the Merger Agreement and the
date of the Merger, except to the extent such representations speak as of a
particular date, which shall be true and correct in all material respects, as
applicable, as of such date; and (ii) the Company shall have performed the
obligations required to be performed by it under the Merger Agreement.
TERMINATION; TERMINATION FEES AND EXPENSES
The Merger Agreement may be terminated prior to the Effective Time: (i) by
the mutual written consent of CompuCom and the Company; (ii) by CompuCom or the
Company if the Merger has not been consummated prior to August 1, 1998, if the
terminating party is not in breach of any representation or warranty of such
party or has not failed to perform any of its obligations under the Merger
Agreement which results in the failure of any condition to consummation of the
Merger; (iii) or by CompuCom or the Company if any government, arbitration
panel, court or any governmental department, commission, board or agency shall
have issued an order, decree or ruling or taken any action permanently
enjoining, restraining or otherwise prohibiting the Merger, and such order,
decree or ruling or other action shall become final and nonappealable.
In addition, CompuCom has the right, unless it is then in breach of its
obligations under the Merger Agreement, to terminate the Merger Agreement prior
to the Effective Time if (i) any of the representations
24
<PAGE> 31
and warranties of the Company contained in the Merger Agreement shall not have
been (or shall cease to be) true and correct in all material respects and (ii)
the Company shall have breached or failed to perform in any material respect any
covenant or agreement to be performed by the Company under the Merger Agreement.
The Company shall, unless it is then in breach of its obligations under the
Merger Agreement, have the right to terminate the Merger Agreement prior to the
Effective Time if: (i) the Company enters into a definitive agreement with
respect to a Takeover Proposal, provided that the Company complies with all of
the provisions of the Merger Agreement in such event, including payment of the
Termination Fee; (ii) any of the representations and warranties of CompuCom or
CompuCom Subsidiary contained in the Merger Agreement shall not have been (or
shall cease to be) true and correct in all material respects; or (iii) CompuCom
or CompuCom Subsidiary shall have breached or failed to perform in any material
respect any covenant or agreement to be performed by them under the Merger
Agreement.
In the event the Merger Agreement is terminated, the Merger Agreement will
be void and have no effect, without any liability on the part of any party, its
directors or officers, with the exception of the provisions of the Merger
Agreement relating to the payment of the Termination Fee (if the termination
stems from the Company entering into a definitive agreement with respect to a
Takeover Proposal). Termination of the Merger Agreement as described above will
not relieve any party from liability for any breach of the Merger Agreement.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties thereto, by action taken
or authorized by their respective Boards of Directors, at any time before or
after approval of the matters presented in connection with the Merger by the
shareholders of the Company, but, after any such approval, no amendment may be
made which (i) by law requires further approval by such shareholders and (ii) is
in any manner adverse to the shareholders of the Company, in each case without
such further approval. The Merger Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties. At any time prior
to the Effective Time, the parties to the Merger Agreement, by action taken or
authorized by their respective Boards of Directors, may, to the extent legally
allowed: (i) extend the time for the performance of any of the obligations or
other acts of the other parties to the Merger Agreement; (ii) waive any
inaccuracies in the representations and warranties contained in the Merger
Agreement or in any document delivered pursuant to the Merger Agreement; and
(iii) waive compliance with any of the agreements or conditions contained in the
Merger Agreement. Any agreement on the part of a party to the Merger Agreement
to any such extension or waiver will be valid only if set forth in a written
instrument signed on behalf of such party.
25
<PAGE> 32
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN OTHER BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common stock, as of March 31, 1998, by: (i) each
person or group who is known by the Company to be the beneficial owner of more
than 5% of the outstanding shares of the Common Stock; (ii) each director of the
Company; (iii) each executive officer of the Company; and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
NATURE OF OF
BENEFICIAL OUTSTANDING
OWNERSHIP(1) SHARES
------------ -----------
<S> <C> <C>
Philip Doganiero(2)......................................... 28,000 *
Anthony G. Lembo(2)......................................... 17,500 *
Richard C. Rose(3).......................................... 364,204 5.78%
U.S. Bancorp(4)............................................. 495,782 8.31%
Pioneering Management Corporation(5)........................ 423,500 7.10%
Dimensional Fund Advisors, Inc.(6).......................... 301,953 5.06%
W. Keith Schilit(7)......................................... 25,000 *
Barry M. Alpert(7).......................................... 25,000 *
All Directors and Named Executive Officers as a Group (5
persons)(8)............................................... 459,704 7.22%
</TABLE>
- ---------------
* Less than 1%.
(1) Beneficial ownership of shares, as determined in accordance with applicable
Commission rules, includes shares as to which a person shares voting power
and/or investment power. The Company has been informed that all shares shown
are held of record with sole voting and investment power, except as
otherwise indicated.
(2) The number of shares shown in the table above includes 10,000 shares that
are subject to options that are currently exercisable.
(3) The number of shares shown in the table above includes 333,255 shares that
are subject to options that are currently exercisable. Of the 333,255 shares
that are subject to options that are currently exercisable, 250,250 shares
are subject to options that have exercise prices greater than $4.10 per
share, and no consideration will be paid to Mr. Rose for such shares. The
business address for Mr. Rose is 2145 Calumet Street, Clearwater, Florida
34625.
(4) The number of shares shown is based on a Schedule 13G amendment filed with
the Commission on February 13, 1998. According to such Schedule 13G, U.S.
Bancorp has sole voting power over 493,282 shares and sole dispositive power
over 492,682 shares. The business address for U.S. Bancorp is 601 2nd Avenue
South, Minneapolis, MN 55402-4302.
(5) The number of shares shown is based on a Schedule 13G/A filed with the
Commission on January 5, 1998. The business address for Pioneering
Management Corporation is 60 State Street, Boston, Massachusetts 02109.
(6) The number of shares shown is based on a Schedule 13G filed with the
Commission on February 10, 1998. According to such Schedule 13G, Dimensional
Fund Advisors, Inc. has sole voting power over 193,928 shares and sole
dispositive powers over 301,953 shares. The business address for Dimensional
Fund Advisors, Inc. is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA
90401.
(7) The number of shares shown in the table above includes 25,000 shares that
are subject to options that are currently exercisable.
(8) The number of shares shown in the table above includes 459,704 shares
beneficially owned by Messrs. Lembo, Rose, Doganiero, Schilit and Alpert, of
which 403,255 shares are subject to options that are immediately
exercisable.
26
<PAGE> 33
SHAREHOLDER PROPOSALS
The Company will hold a 1998 Annual Meeting only if the Merger is not
consummated. In the event of such a meeting, in order to have been considered
for inclusion in the Company's proxy materials for the 1998 Annual Meeting of
Shareholders, shareholder proposals must have been received at the Company's
principal executive offices in Clearwater, Florida no later than April 23, 1998.
The Company had not received any shareholder proposals by such date.
INDEPENDENT ACCOUNTANTS
Representatives of Price Waterhouse LLP are not expected to attend the
Special Meeting.
WHERE YOU CAN FIND MORE INFORMATION
The Company files annual, quarterly and special reports, proxy statements
and other information with the Commission. You may read and copy any reports,
statements or other information we file at the Commission's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the Commission at 1-800-SEC-0330 for further information on the public reference
rooms. Our filings are also available to the public from commercial document
retrieval services and at the web site maintained by the Commission at
"http://www.sec.gov."
The Commission 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 Commission.
The information incorporated by reference is deemed to be part of this Proxy
Statement, except for any information superseded by information in this Proxy
Statement. This Proxy Statement incorporates by reference the documents set
forth below that we have previously filed with the Commission. These documents
contain important information about us and our finances.
<TABLE>
<CAPTION>
FILINGS (FILE NO. 0-15551) PERIOD
- -------------------------- ------
<S> <C>
Annual Report on Form 10-K............ Year ended March 31, 1997
Annual Report on Form 10-K/A
(Amendment No. 1)................... Year ended March 31, 1997
Annual Report on Form 10-K/A
(Amendment No. 2)................... Year ended March 31, 1997
Quarterly Reports on Form 10-Q........ Quarters ended June 30, 1997, September 30, 1997
and December 30, 1997
Current Reports on Form 8-K........... April 18, 1997, October 22, 1997, April 24, 1998
and May 13, 1998
</TABLE>
We are also incorporating by reference additional documents that we may
file with the Commission between the date of this Proxy Statement and the date
of the Special Meeting of our shareholders.
This Proxy Statement is accompanied by a copy of the Company's Form 10-K
and Form 10-K/A for the fiscal year ended March 31, 1997, Form 10-Q for the
quarter ended December 30, 1997 and Form 8-K, dated May 13, 1998. You can obtain
any of the other documents incorporated by reference through us or the
Commission. Documents incorporated by reference are available from us without
charge, excluding all exhibits, unless we have specifically incorporated by
reference an exhibit in this Proxy Statement. Shareholders may obtain documents
incorporated by reference in this Proxy Statement by requesting them in writing
or by telephone at the following address:
Dataflex Corporation
Attention: Deborah Medley
2145 Calumet Street
Clearwater, Florida 34625
(813) 562-2200
27
<PAGE> 34
If you would like to request documents from us, please do so by June 1,
1998 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 THE MERGER. 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 MAY 19, 1998. YOU SHOULD
NOT ASSUME THAT THE INFORMATION CONTAINED IN THE PROXY STATEMENT IS ACCURATE AS
OF ANY DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF THE PROXY STATEMENT
TO SHAREHOLDERS NOR THE COMPLETION OF THE MERGER SHALL CREATE ANY IMPLICATION TO
THE CONTRARY.
FORWARD-LOOKING STATEMENTS
Certain information contained or incorporated by reference in this Proxy
Statement as to the future financial or operating performance of the Company,
may constitute "forward-looking statements." The Private Securities Litigation
Reform Act of 1995 provides certain "safe harbor" protections for
forward-looking statements in order to encourage companies to provide
prospective information about their businesses. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance, and underlying assumptions and other statements which are
other than statements of historical facts.
The forward-looking statements set forth or incorporated by reference in
this Proxy Statement are based upon various assumptions, many of which are
based, in turn, upon further assumptions, including without limitation,
management's examination of historical operating trends, data contained in the
Company's records and other data available from third parties. Although the
Company believes that such assumptions were reasonable when made, because such
assumptions are inherently subject to significant uncertainties and
contingencies which are difficult or impossible to predict and are beyond the
Company's control, there can be no assurance, and no representation or warranty
is made, that management's expectations, beliefs or projections will result or
be achieved or accomplished. In addition to the other factors and matters
discussed elsewhere herein and in the documents incorporated by reference
herein, factors that, in the view of the Company, could cause actual results to
differ materially from those discussed in the forward-looking statements
include: completion of the transactions described herein; competition and
consolidation within the computer distribution and support industry; general
business and economic conditions; and other factors described from time to time
in the Company's reports filed with the Commission.
None of the Company, CompuCom or any of their respective agents, employees
or advisors intend or have any duty or obligation to supplement, amend, update
or revise any of the forward-looking statements contained or incorporated by
reference in this Proxy Statement. Neither the Company nor CompuCom independent
auditors have examined or compiled such statements or applied any procedures
with respect to such statements. Accordingly, such auditors have not expressed
any opinion or other form of assurance with respect to such statements.
28
<PAGE> 35
APPENDIX I
AGREEMENT AND PLAN OF MERGER
AMONG
COMPUCOM SYSTEMS, INC.,
COMPUCOM ACQUISITION CORP.
AND
DATAFLEX CORPORATION
DATED AS OF APRIL 10, 1998
<PAGE> 36
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS..................................................................................1
1.1 Definitions..................................................................................1
ARTICLE II DISCLOSURE SCHEDULE..........................................................................1
2.1 Disclosure Schedule..........................................................................1
ARTICLE III THE MERGER...................................................................................2
3.1 Merger.......................................................................................2
3.2 Closing......................................................................................2
3.3 Articles of Incorporation and Bylaws of Surviving Corporation................................2
3.4 Directors and Officers.......................................................................2
ARTICLE IV CONVERSION OF THE COMPANY'S CAPITAL STOCK....................................................3
4.1 Conversion of the Company's Capital Stock....................................................3
4.2 Payment......................................................................................3
4.3 No Further Rights............................................................................4
4.4 Closing of the Company's Transfer Books......................................................4
4.5 Stock Options................................................................................4
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................5
5.1 Organization, Standing, etc. of the Company..................................................5
5.2 Authorization and Execution..................................................................6
5.3 No Consents..................................................................................6
5.4 Absence of Conflicts; Governmental Authorizations............................................6
5.5 Capitalization...............................................................................7
5.6 SEC Reports and Financial Statements.........................................................7
5.7 Absence of Certain Changes or Events.........................................................8
5.8 Absence of Undisclosed Liabilities...........................................................8
5.9 Accounts Receivable..........................................................................8
5.10 Tax Returns..................................................................................9
5.11 Agreements, Contracts and Commitments........................................................9
5.12 Intellectual Property.......................................................................12
5.13 Litigation..................................................................................14
5.14 Compliance with Legal Requirements..........................................................14
5.15 Employee Benefit Plans......................................................................15
</TABLE>
- i -
<PAGE> 37
<TABLE>
<S> <C> <C>
5.16 Absence of Labor Difficulties...............................................................17
5.17 Customers...................................................................................17
5.18 Assets Necessary to Business................................................................17
5.19 Licenses and Permits........................................................................17
5.20 Title to Properties.........................................................................18
5.21 Insurance...................................................................................18
5.22 Books and Records...........................................................................18
5.23 Absence of Certain Business Practices.......................................................19
5.24 Bank Accounts...............................................................................19
5.25 Default.....................................................................................19
5.26 Subsidiaries................................................................................19
5.27 No Broker's or Finder's Fees................................................................19
5.28 Opinion of Financial Advisor................................................................19
5.29 Information Supplied........................................................................20
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF COMPUCOM AND THE COMPUCOM SUBSIDIARY......................20
6.1 Organization, Standing, etc., of CompuCom...................................................20
6.2 Organization, Standing, etc., of CompuCom Subsidiary........................................20
6.3 Authorization and Execution.................................................................21
6.4 Absence of Conflicts; Governmental Authorizations...........................................21
6.5 Financing...................................................................................21
6.6 Information Supplied........................................................................22
ARTICLE VII COVENANTS OF THE COMPANY....................................................................22
7.1 Investigations..............................................................................22
7.2 Operation of the Company....................................................................22
7.3 No Solicitation.............................................................................25
7.4 Board Approval, Fairness Opinion, Shareholder Approval
and Proxy Statement.........................................................................27
7.5 Consents....................................................................................28
7.6 Financial Statements and Reports............................................................28
7.7 Termination of Covenants Not to Compete.....................................................28
7.8 Rose Employment Contract....................................................................28
7.9 Notice and Cure.............................................................................28
7.10 Commercially Reasonable Efforts and Consents................................................29
7.11 Company Profit Sharing Plan.................................................................29
7.12 Agreements and Covenants....................................................................29
ARTICLE VIII COVENANTS OF COMPUCOM AND THE COMPUCOM SUBSIDIARY...........................................29
8.1 Conduct of Business of the CompuCom Subsidiary..............................................29
8.2 Obligation of CompuCom to Make Merger Effective and
</TABLE>
- ii -
<PAGE> 38
<TABLE>
<S> <C> <C>
the CompuCom Subsidiary's Shareholder Consent...............................................29
8.3 Notice and Cure.............................................................................29
8.4 Commercially Reasonable Efforts and Consents................................................30
8.5 Information for Proxy Statement for the Company's Shareholders..............................30
8.6 Indemnification Rights......................................................................30
ARTICLE IX CONDITIONS..................................................................................31
9.1 General Conditions..........................................................................31
9.2 Conditions to the Obligation of CompuCom and the
CompuCom Subsidiary.........................................................................32
9.3 Conditions to Obligations of the Company....................................................32
ARTICLE X TERMINATION; PAYMENT OF EXPENSES............................................................32
10.1 Termination of Agreement and Abandonment of Merger..........................................32
10.2 Effect of Termination.......................................................................33
10.3 Amendment...................................................................................34
10.4 Extension; Waiver...........................................................................34
10.5 Fees and Expenses...........................................................................34
ARTICLE XI GENERAL.....................................................................................34
11.1 Release of Information......................................................................34
11.2 Notices.....................................................................................35
11.3 Successors and Assigns......................................................................35
11.4 Further Assurances..........................................................................36
11.5 Specific Performance........................................................................36
11.6 Severability................................................................................36
11.7 Entire Agreement............................................................................36
11.8 Governing Law...............................................................................37
11.9 Certain Construction Rules..................................................................37
11.10 Survival of Covenants, Representations and Warranties.......................................37
11.11 Counterparts................................................................................37
SCHEDULE 1.1 DEFINITIONS.................................................................................39
</TABLE>
- iii -
<PAGE> 39
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of April 10,
1998, among CompuCom Systems, Inc., a Delaware corporation ("CompuCom"), and
CompuCom Acquisition Corp., a Florida corporation and a wholly owned subsidiary
of CompuCom (the "CompuCom Subsidiary"), and Dataflex Corporation, a Florida
corporation (the "Company").
WHEREAS, the respective Boards of Directors of CompuCom, the CompuCom
Subsidiary and the Company have each approved the merger of the CompuCom
Subsidiary into the Company (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement, whereby each share of the Common Stock,
no par value per share, of the Company (the "Company Common Stock"), other than
shares of Company Common Stock owned directly or indirectly by CompuCom or the
Company, will be converted into the right to receive $4.10 per share in cash,
without interest thereon (the "Merger Consideration") and the Board of Directors
of the Company has adopted resolutions recommending that the Company's
stockholders approve the Merger; and
WHEREAS, CompuCom, the CompuCom Subsidiary and the Company desire to
make certain representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual agreements,
representations and warranties contained herein, and subject to the conditions
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the terms set forth in
Schedule 1.1 shall have the respective meanings set forth therein.
ARTICLE II
DISCLOSURE SCHEDULE
2.1 Disclosure Schedule. The Company has prepared, executed and
delivered to CompuCom as of the date of this Agreement, a disclosure schedule
(the "Disclosure Schedule"), setting forth, among other things, certain
information that, to the extent and as provided in this Agreement, qualifies
certain representations and warranties of the Company made in this Agreement.
The Disclosure Schedule will be arranged in sections corresponding to sections
of this Agreement to be modified by the disclosures set forth in the Disclosure
Schedule. Information contained in a Section or subsection of the Disclosure
Schedule (or expressly incorporated therein) shall qualify only those
representations and warranties of the Company made in the identically numbered
Section
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or subsection of this Agreement, and shall not be deemed to qualify the
representations or warranties made in any other Section or subsection.
ARTICLE III
THE MERGER
3.1 Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as hereinafter defined), in accordance with this Agreement
and the Florida Business Corporation Act (the "FBCA"), the CompuCom Subsidiary
shall merge with and into the Company and the separate existence and corporate
organization of the CompuCom Subsidiary (except as may be continued by operation
of law) shall cease and the Company shall survive the Merger as the surviving
corporation (the "Surviving Corporation"). The Surviving Corporation shall
succeed to and possess all the estates, properties (real, personal and mixed)
rights, privileges, powers, franchises, immunities, purposes, and all and every
other interest of, or belonging to, the Company or the CompuCom Subsidiary, all
without further act or deed; and the Surviving Corporation shall be subject to
all the debts, liabilities, obligations, restrictions, disabilities, penalties
and duties of the Company and the CompuCom Subsidiary, all without further act
or deed. CompuCom shall not assume any debts, liabilities, obligations,
restrictions, disabilities, penalties or duties of the Company, the CompuCom
Subsidiary or the Surviving Corporation.
3.2 Closing. The Closing of the Merger (the "Closing") shall take place
at the offices of Strasburger & Price, L.L.P., 901 Main Street, Dallas, Texas at
10:00 a.m., Dallas, Texas time, on a date to be specified by CompuCom or the
CompuCom Subsidiary, which shall be no later than the third business day after
satisfaction or waiver of the conditions set forth in Article IX, or at such
other time and place or on such other date as CompuCom and the Company may
agree. On the Closing Date, the Articles of Merger (which shall be completed as
appropriate to reflect the terms of this Agreement) shall be executed,
delivered, filed and recorded in accordance with the FBCA, unless otherwise
agreed by the parties in writing. The Merger shall become effective when such
Articles of Merger are duly filed with the Secretary of State of the State of
Florida, or at such other time as the CompuCom Subsidiary and the Company shall
agree should be specified in the Articles of Merger (the time the Merger becomes
effective being hereinafter referred to as the "Effective Time").
3.3 Articles of Incorporation and Bylaws of Surviving Corporation. From
and after the Effective Time, the Articles of Incorporation, as amended, of the
CompuCom Subsidiary immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation, until further amended in
accordance with the laws of the FBCA. From and after the Effective Time, the
Bylaws, as amended, of the CompuCom Subsidiary immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation, until further
amended in accordance with the laws of the FBCA.
3.4 Directors and Officers. The directors of the CompuCom Subsidiary
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation and the officers of the Company immediately prior to the Effective
Time shall be the officers of the Surviving Corporation,
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with each to serve as such until his or her respective successor is duly elected
and qualified in the manner provided in the Articles of Incorporation and Bylaws
of the Surviving Corporation, or his or her earlier death, resignation or
removal.
ARTICLE IV
CONVERSION OF THE COMPANY'S CAPITAL STOCK
4.1 Conversion of the Company's Capital Stock. Subject to the terms and
conditions of this Agreement, on the Effective Time, by virtue of the Merger and
without any action on the part of the CompuCom Subsidiary, the Company or the
holder of any of the following securities:
(a) Each share of the Company Common Stock issued and outstanding
immediately prior to the Effective Time, other than shares to be cancelled
pursuant to Section 4.1(b) below, shall be converted into and represent the
right to receive the Merger Consideration.
(b) Each share of the Company Common Stock, if any, held in the
Company's treasury immediately prior to the Effective Time shall be canceled and
retired without payment of any consideration therefor.
(c) Each share of common stock of the CompuCom Subsidiary issued
and outstanding immediately prior to the Effective Time shall be converted into
and become one fully paid and nonassessable share of Common Stock, no par value
per share, of the Surviving Corporation.
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4.2 Payment.
(a) Prior to the Effective Time, CompuCom shall designate a bank,
trust company or other entity reasonably satisfactory to the Company to act as
the disbursing agent (the "Disbursing Agent") in effecting the exchange of the
Merger Consideration for certificates of shares of the Company Common Stock
("Certificates"). On or before the Effective Time, CompuCom or the CompuCom
Subsidiary shall deposit with the Disbursing Agent cash sufficient to make the
payments contemplated by Section 4.1 to be made to the shareholders. As soon as
practicable after the Effective Time, CompuCom shall cause the Disbursing Agent
to send a notice and a transmittal form to each holder of record of shares of
the Company Common Stock advising such holder of the effectiveness of the Merger
and the procedure for surrendering to the Disbursing Agent such holder's
Certificates for exchange into the Merger Consideration. Each such holder, upon
proper surrender of such Certificates to the Disbursing Agent together with and
in accordance with such transmittal form, shall be entitled to receive in
exchange therefor the Merger Consideration deliverable in respect of the Company
Common Stock theretofore evidenced by the Certificates so surrendered, subject
to any Taxes required to be withheld. Upon surrender of such Certificates to the
Disbursing Agent, CompuCom shall cause the Disbursing Agent promptly to deliver
the Merger Consideration to the Person entitled thereto. Until properly
surrendered, each such Certificate shall be deemed for all purposes to evidence
only the right to receive the Merger Consideration multiplied by the number of
shares of the Company Common Stock represented by such Certificate. Until
properly surrendered, holders of Certificates will not be entitled to payment of
the Merger Consideration to which they would otherwise be entitled. No interest
will be paid or accrued on the cash payable upon the surrender of a Certificate.
All costs and expenses of the Disbursing Agent shall be borne by CompuCom.
(b) If the Merger Consideration (or any portion thereof) is to be
delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of such Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
Person requesting such transfer pay to the Disbursing Agent any transfer or
other Taxes payable by reason of the foregoing or establish to the satisfaction
of the Disbursing Agent that such Taxes have been paid or are not required to be
paid. Notwithstanding the foregoing, neither the Disbursing Agent nor any party
hereto shall be liable to a holder of shares of Company Common Stock for any
Merger Consideration delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, the Surviving Corporation will
issue, in exchange for such lost, stolen or destroyed Certificate, the Merger
Consideration deliverable in respect thereof as determined in accordance with
this Article IV. When authorizing such issue of the Merger Consideration in
exchange therefor, the Board of Directors of the Surviving Corporation may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificate to give the Surviving
Corporation a bond in such sum as it may direct, or such other secured or
unsecured indemnity agreement as such Board of Directors may require, as
indemnity against any claim that
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may be made against the Surviving Corporation with respect to the Certificate
alleged to have been lost, stolen or destroyed.
(d) Promptly following the six-month anniversary of the Effective
Time, the Disbursing Agent shall return to the Surviving Corporation all Merger
Consideration in its possession relating to the transactions described in this
Agreement, and the Disbursing Agent's duty shall thereupon terminate.
Thereafter, each holder of a Certificate may surrender such Certificate to the
Surviving Corporation, in accordance with the procedures above, and (subject to
applicable abandoned property, escheat and similar laws) receive in exchange
therefor the Merger Consideration, without any interest thereon and subject to
any Taxes required to be withheld.
4.3 No Further Rights. From and after the Effective Time, holders of
Certificates shall cease to have any rights as shareholders of the Company,
except as provided herein or by law.
4.4 Closing of the Company's Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of the
Company Common Stock shall thereafter be made. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Disbursing Agent,
they shall be cancelled and exchanged for the Merger Consideration, as provided
in this Article IV.
4.5 Stock Options.
(a) The Company will (i) terminate, to the extent permitted by the
terms thereof, the Company's two Incentive Stock Option Plans and its five
Incentive and Nonqualified Stock Option Plans (collectively the "Company Option
Plans") immediately before the Effective Time, without prejudice to the rights
of the holders of outstanding Options issued pursuant to the Company Option
Plans, (ii) grant no additional Options after the date of this Agreement under
the Company Option Plans and (iii) grant no other options, warrants, rights,
convertible securities or other agreements or commitments pursuant to which the
Company is required to issue any shares of its capital stock or any securities
convertible into or exchangeable for its capital stock.
(b) The Company will, at or before the Closing, cancel and cause
the surrender of all outstanding Options, regardless of whether the Options are
then exercisable.
(c) In settlement of the surrender and cancellation of each Option,
each holder of Options (regardless of whether such Options are then exercisable)
will be entitled to receive an amount in cash, without any interest thereon,
equal to the product of (i)(A) the Merger Consideration, minus (B) the exercise
price per share of Company Common Stock under the Option, multiplied by (ii) the
number of shares of Company Common Stock covered by such Option; provided,
however, that the amounts payable pursuant to Options shall be reduced by any
applicable federal and state withholding Taxes. Options shall be surrendered and
cancelled at the Closing and, upon such surrender and cancellation, will be paid
for by the Surviving Corporation on the business day next following the Closing.
On or prior to Closing, the Company shall use its commercially reasonable
efforts to take all actions (including, without limitation, obtaining the
necessary Consents from each holder of Options) required to effect the matters
set forth in this Section 4.5, including, without limitation, the written
Consent to the surrender and cancellation of all of such holder's
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Options and those necessary to effect the surrender, cancellation and
settlement of Options pursuant to this Section 4.5.
ARTICLE V
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to CompuCom and the CompuCom
Subsidiary as follows:
5.1 Organization, Standing, etc. of the Company. The Company is a
corporation duly organized, validly existing, and with active status under the
laws of the State of Florida, has all requisite corporate power and authority to
own its assets and to carry on its business as presently conducted and, except
as set forth in Section 5.1 of the Disclosure Schedule, is duly qualified as a
foreign corporation to do business in and is in good standing in each
jurisdiction in which the character of the assets owned or held under lease by
it or the nature of the business transacted by it makes such qualification
necessary except where the failure to be so qualified would not be reasonably
expected to have a Material Adverse Effect. Section 5.1 of the Disclosure
Schedule sets forth a true and complete list of (a) all jurisdictions where the
Company is qualified to do business and (b) each business name which has been
used by the Company since January 1, 1990 and the city and state in which the
principal office of each such business was conducted since January 1, 1990. The
Company has heretofore furnished to CompuCom true and complete copies of its
Articles of Incorporation and all amendments thereto to the date hereof and its
Bylaws as presently in effect. The Company has all requisite corporate power and
authority to execute and deliver, and perform its obligations under, this
Agreement and to consummate the transactions contemplated hereby.
5.2 Authorization and Execution. The execution and delivery of this
Agreement and, subject to obtaining the requisite shareholders' approval, the
performance by the Company of this Agreement and the consummation by it of the
Merger and the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company. The
Board of Directors of the Company, at meetings duly called and held, has (a)
determined that the transactions contemplated by this Agreement, including the
Merger, are fair to and in the best interests of the shareholders of the
Company, (b) approved this Agreement and the transactions contemplated hereby,
including, without limitation, the Merger, and (c) resolved to recommend that
the Company's shareholders approve and adopt this Agreement, the Merger and the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, assuming this Agreement is enforceable against CompuCom and the CompuCom
Subsidiary, except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or
by general equitable principles.
5.3 No Consents. Except as set forth in Section 5.4(b) and as set forth
in Section 5.11(x) of the Disclosure Schedule, the execution and delivery by the
Company of this Agreement and the
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consummation of the transactions contemplated hereby will not require any
Consent or other action by or in respect of, or declaration or filing with, any
Tribunal or any other Person.
5.4 Absence of Conflicts; Governmental Authorizations.
(a) The execution and delivery by the Company of this Agreement,
the performance by the Company of its obligations hereunder and the consummation
by the Company of the transactions contemplated hereby will not (i) conflict
with or result in any violation of any provision of the Company's Articles of
Incorporation or Bylaws, each as amended to date; (ii) materially conflict with,
result in any material violation or material breach of, constitute a default
under, give rise to any right of termination or acceleration (with or without
notice or the lapse of time or both) pursuant to, or result in being declared
void or voidable, any term or provision of any note, bond, mortgage, indenture,
lease, license, Contract or other instrument to which the Company is a party or
by which any of its or his properties or assets are or may be bound; (iii)
materially violate any term of any Legal Requirement applicable to the Company
or its or his properties or assets; or (iv) result in the creation of, or impose
on the Company the obligation to create, any Lien upon any properties or assets
of the Company .
(b) Except for applicable requirements, if any, of the Exchange Act
(including the filing with the SEC of a proxy statement relating to any required
approval by the Company's shareholders of this Agreement (the "Proxy
Statement")), the Securities Act of 1933 (the "33 Act"), the premerger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the Nasdaq National Market, the filing and
recordation of appropriate merger documents as required by the FBCA, filings
required pursuant to any state securities or "blue sky" laws and such other
notices, reports or other filings the failure of which to be made would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
or prevent or materially impair the consummation of the transactions
contemplated hereby, the Company is not required to submit any notice, report or
other filing to any Tribunal, domestic or foreign, in connection with the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
5.5 Capitalization. The authorized capital stock of the Company
consists solely of 20,000,000 shares of Company Common Stock of which 5,963,669
shares are issued and outstanding on the date hereof, 1,960,000 shares have been
reserved for issuance upon the exercise of the Options, 944,022 shares are
issuable upon exercise of outstanding Options, and no shares are held in the
treasury. All of the outstanding shares of Company Common Stock have been duly
authorized and are validly issued, fully paid and nonassessable and free of
preemptive rights. All of the issued shares of Company Common Stock were issued,
and to the extent purchased by the Company or transferred, have been so
purchased or transferred, in compliance with all applicable Legal Requirements,
including federal and state securities laws, and any preemptive rights and any
other statutory or contractual rights of any shareholders of the Company. Except
for the Options, there are no subscriptions, options, warrants, rights
(including "phantom" stock rights), convertible securities or other agreements
or commitments (contingent or otherwise) of any character (written or oral)
pursuant to which the Company is required to issue any shares of its capital
stock or any securities convertible into or exchangeable for its capital stock,
or is otherwise required to give any Person the right to receive any benefits or
rights similar to any rights enjoyed by or accruing to the
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<PAGE> 46
holders of shares of Company Common Stock or any rights to participate in the
equity or net income of the Company. Section 5.5 of the Disclosure Schedule sets
forth the number and exercise price of all outstanding Options. As of the
Closing Date, there will be no outstanding subscriptions, options (including the
Options), warrants, rights or any other agreements or commitments of any kind or
any convertible or exchangeable securities of the sort described in the
immediately preceding sentence. There are not any shareholders' agreements,
voting trusts or other agreements or understandings between or among
shareholders or to which the Company is a party or by which it is bound with
respect to the transfer or voting of any capital stock of the Company.
5.6 SEC Reports and Financial Statements. The Company has filed with
the SEC, and has heretofore made available to CompuCom true and complete copies
of, all forms, reports, schedules, statements and other documents required to be
filed by it since March 31, 1995, under the Exchange Act or the 33 Act (such
forms, reports, schedules, statements and other documents, including any
financial statements or schedules included therein, are referred to as the
"Company SEC Documents"). The Company SEC Documents, at the time filed, (a) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the 33 Act, as the case may be, and the
applicable rules and regulations of the SEC thereunder. Except to the extent
revised or superseded by a subsequently filed Company Filed SEC Document (as
defined in Section 5.7) (a copy of which has been made available to CompuCom
prior to the date hereof), the Company SEC Documents, considered as a whole as
of their date, do not contain an untrue statement of a material fact or omit to
state a material fact required to be stated or incorporated by reference therein
are necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being understood
that the foregoing does not cover future events resulting from public
announcement of the Merger). The financial statements of the Company included in
the Company SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP as
may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Forms 10-Q and 8-K of the SEC) and fairly present in
all material respects (subject, in the case of the unaudited statements, to
normal, recurring audit adjustments) the financial position of the Company as of
the dates thereof and the results of operations and cash flows for the periods
then ended.
5.7 Absence of Certain Changes or Events. Except as disclosed (a) in
the Company SEC Documents filed and publicly available to the date of this
Agreement (the "Company Filed SEC Documents"), (b) in the Company's financial
statements dated as of March 31, 1997 audited by Price Waterhouse, LLP (the
"Company 1997 Financial Statements"), a copy of which has been delivered to
CompuCom by the Company, or (c) in Section 5.7 of the Disclosure Schedule, since
March 31, 1997, the Company has conducted its business only in the ordinary
course, and there has not then, occurred or arisen any change in, or any event
(including, without limitation, any damage, destruction or loss whether or not
covered by insurance), condition or state of facts of any character that
individually or in the aggregate has or may be expected to have a Material
Adverse Effect except adverse conditions in the economy in general or industry
wide conditions.
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<PAGE> 47
5.8 Absence of Undisclosed Liabilities. Except as specifically
reflected in the Company 1997 Financial Statements, there were as of the date of
the Company 1997 Financial Statements no liabilities, Indebtedness or
obligations (whether absolute or contingent, asserted or unasserted, due or to
become due) against, relating to or affecting the Company that could reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect. Since the date of the Company 1997 Financial Statements, the Company has
not incurred any liabilities, Indebtedness or obligations (whether absolute or
contingent, asserted or unasserted, due or to become due) other than
liabilities, Indebtedness and obligations incurred after such date in the
ordinary course of business consistent with past practice and which would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
5.9 Accounts Receivable. All Accounts Receivable existing as of the
date hereof arose out of bona fide business transactions in the ordinary course
of business consistent with past practices (including regular credit practices).
To the Knowledge of the Company, adequate reserves have been accrued and
maintained in the Company 1997 Financial Statements and in the financial
statements of the Company included in the Form 10-Q of the Company filed with
the SEC for the quarterly period ended December 31, 1997, to provide for all
doubtful accounts of, valid counterclaims or setoffs by, rebates, discounts and
allowances to, and returns from, any customers of the Company, and such reserves
were established in a manner consistent with the Company's collection experience
in prior years except as set forth in Section 5.9 of the Disclosure Schedule.
Each Account Receivable constitutes a legal, valid and binding account
receivable, and to the Knowledge of the Company, no Account Receivable is
subject to any known disputes, defenses, assignments, restrictions,
counterclaims or setoffs by, and rebates, discounts or allowances to, or any
returns from, any customer except as set forth in Section 5.9 of the Disclosure
Schedule. To the Knowledge of the Company, each Account Receivable, net of
reserves, is collectible in accordance with the Company's regular collection
practices and without recourse to legal proceedings except as set forth in
Section 5.9 of the Disclosure Schedule. The Company has furnished CompuCom with
a true and complete copy of its Accounts Receivable Aging Report, dated March
13, 1998.
5.10 Tax Returns. Except as set forth in Section 5.10 of the Disclosure
Schedule, with respect to all reporting periods applicable to the Company ended
on or before the date hereof, the Company has accurately prepared and timely
filed all returns and reports (including, without limitation, sales tax returns
and reports) required by law, and has paid (or made adequate provision on its
books for the payment of) all Taxes, fees and assessments determined to be owed
in accordance therewith, when due or within prior extensions of time. Except as
set forth in Section 5.10 of the Disclosure Schedule, none of the Company's
federal or state tax returns or reports (including, without limitation, sales
tax returns and reports) for tax periods ending after 1991 has been or is
currently being audited by any taxing authority. To the Knowledge of the
Company, there is no audit threatened or proposed by any taxing authority. There
are no outstanding agreements, waivers or other arrangements extending the
period of limitation applicable to any claim for, or the period for the
collection or assessment of, any Tax due from the Company. To the Knowledge of
the Company, there are no actual or proposed Tax adjustments or assessments
against the Company or any basis for any such assessment, and all Tax
liabilities have either been paid or are adequately provided for on the books of
the Company. No closing agreement pursuant to Section 7121 of the Code or any
similar provision of any state, local or foreign law has been entered into by or
with respect to the Company. The Company is not a party to, is not bound by and
does not have any
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obligation under any Tax sharing agreement or similar arrangement. The Company
has paid or is withholding and will pay when due to the proper taxing
authorities all withholding amounts required to be withheld through the date
hereof with respect to all Taxes on income, unemployment, social security or
other similar programs or benefits with respect to salary and other compensation
of directors, officers and employees of the Company.
5.11 Agreements, Contracts and Commitments. Sections 5.11(a) through
5.11(x) of the Disclosure Schedule, respectively, contain a true and complete
list as of the date hereof of all Contracts and other documents of the following
types, written or oral, to which the Company is a party or by which the business
or any of the assets of the Company are bound as of the date hereof (true and
complete copies, or if none, written descriptions, of which have been provided
or made available to CompuCom, together with all exhibits, amendments or
modifications thereto):
(a) all notes, loans, credit agreements, letters of credit,
mortgages, guarantees, surety or indemnification agreements, indentures,
security agreements and other Contracts and instruments in an amount in excess
of $25,000 annually (i) relating to the borrowing of money by or on behalf of,
or the extension of credit to, the Company, (ii) evidencing any Indebtedness or
other liabilities of the Company or the guarantee by the Company of the
Indebtedness or other liabilities of any other Person, or (iii) evidencing any
keep-well or similar obligations of the Company with respect to any other
Person;
(b) all Contracts or other instruments (excluding real property
leases or subleases) evidencing, creating or suffering to exist any Liens of any
kind on the properties and assets of the Company;
(c) all material licenses or permits from any Tribunal required to
conduct the business of the Company as presently conducted;
(d) all employment, agency, consultation, severance and collective
bargaining Contracts, including, without limitation, Contracts to employ, and
other Contracts with, (i) any present officer, director, employee, agent,
consultant or other similar representative of the Company or (ii) any former
officer, director, employee, agent, consultant or similar representative of the
Company that left the employ or engagement of the Company within the preceding
12 months to whom the Company has any continuing payment obligations;
(e) all sales, agency, representatives, broker, finders,
franchise, dealers or distributorship Contracts;
(f) all Contracts, orders or commitments for the purchase by the
Company of raw materials, supplies, finished products or any other properties
and assets in an amount exceeding $5,000;
(g) all Contracts, orders or commitments in an amount in excess of
$50,000 annually for the disposition of or license, sale or lease to customers
or any other Persons of products or services (including, without limitation, any
item of Software and any related maintenance or support services) or any other
properties or assets of the Company, with specific designation of those
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Contracts, orders or commitments that are not evidenced by form Contracts
previously provided to CompuCom;
(h) all noncompetition, nondisclosure, confidentiality and similar
Contracts, other than those that were entered into in the ordinary course of
business consistent with past practice and that do not contain any covenant,
provision or obligation limiting in any manner whatsoever (whether during any
particular period of time from and after the Closing Date, in certain geographic
areas or otherwise) the ability of (i) the Company, or to the Knowledge of the
Company any of the employees of the Company, to engage in any line of business,
to compete with any Person or to obtain from, or provide to, any Person any
products or services or (ii) any Person to compete with or provide products or
services to the Company;
(i) all Contracts or commitments in an amount in excess of $50,000
annually that provide for the provision of any goods, or the rendition of any
services, to the Company and that are not terminable on notice of 30 days or
less without penalty or premium other than customary maintenance agreements
relating to computer equipment or Software used by the Company, the terms of
which contain no liabilities (other than to pay for the maintenance services) or
material obligations;
(j) all Contracts or commitments for capital expenditures relating
to the business of the Company in an amount in excess of $10,000 for any single
item;
(k) all partnership, joint venture, profit sharing or similar
Contracts;
(l) all leases or subleases of real property used in the Company's
business, operations and affairs, and all other leases, subleases or rental or
use Contracts that involve a consideration or expenditure of more than $5,000
for the entire term thereof;
(m) all Contracts or arrangements (including, without limitation,
those relating to allocations of expenses, personnel, services, equipment or
facilities) between or among the Company on the one hand and any Affiliates of
the Company on the other;
(n) all Contracts or commitments that involve a consideration or
expenditure of more than $50,000 for the entire term thereof;
(o) all Contracts pursuant to which the Company may have granted,
or agreed to grant, to another Person exclusive rights with respect to any goods
or services, items of Software or territory;
(p) all outstanding proxies, powers of attorney or similar
delegations of authority of the Company;
(q) all Contracts pursuant to which the Company may have granted,
or agreed to grant (whether or not any requirement such as the giving of notice,
the lapse of time or the happening of any further condition, event or act has
been satisfied), to another Person the right to sublicense or transfer any
Software;
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(r) all Contracts pursuant to which the Company or any of its
Affiliates may have delivered to another Person, or granted or agreed to grant
(whether or not any requirement such as the giving of notice, the lapse of time
or the happening of any further condition, event or act has been satisfied) to
another Person the rights to obtain, any source code to any Software (including,
without limitation, any source code escrow Contract);
(s) all Contracts pursuant to which the Company or any of its
Affiliates may have delivered to another Person, or granted or agreed to grant
(whether or not any requirement such as the giving of notice, the lapse of time
or the happening of any further condition, event or act has been satisfied) to
another Person the rights to obtain, any Software "keys" allowing access to
additional modules or programs of any Software;
(t) all performance bonds posted by the Company or any of its
Affiliates;
(u) [this paragraph intentionally left blank];
(v) to the extent not required to be disclosed elsewhere in this
Section 5.11, all material Contracts not entered into in the ordinary course of
business consistent with past practice;
(w) to the extent not required to be disclosed elsewhere in this
Section 5.11, all Contracts that are material to the Company; and
(x) all Contracts and commitments requiring the Consent of, or the
waiver by, any suppliers, distributors, customers, licensees, licensors,
insurers or other Persons in connection with the execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby on the part of the Company.
Each Contract disclosed or required to be disclosed pursuant to any
clause of Section 5.11 is in full force and effect, constitutes a legal, valid
and binding obligation of the Company and, to the Knowledge of the Company, the
other parties thereto, and is enforceable against each of them in accordance
with its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or
by general equitable principles. Except for obtaining the Consents required
under any of the Contracts set forth in Section 5.11(x) of the Disclosure
Schedule, the terms of each such Contract allow the succession of the Company by
the Surviving Corporation as party thereto (and at the Effective Time, the
Surviving Corporation will so succeed the Company) pursuant to the transactions
contemplated hereby without requiring any payment to any Person or any waiting
period, payment of any charge, fee or expense or any notice to any Person,
including, without limitation, any transfer fee, relicensing fee or other fee
with respect to Software. Except in the case of any Contracts as to which
Consent is required as disclosed in Section 5.11(x) of the Disclosure Schedule,
the enforceability of each Contract disclosed or required to be disclosed
pursuant to any clause of Section 5.11, and the enjoyment of all the rights and
benefits thereunder, will not be affected in any manner by the execution and
delivery of this Agreement, the performance by the parties of their obligations
hereunder and the consummation of the transactions contemplated hereby. Except
as set forth in Section 5.17 of the Disclosure Schedule, neither the Company
nor, to the Knowledge of the Company, any other party to any such Contract is in
breach or default thereunder, no notice of default, defense, offset,
counterclaim, termination, cancellation or acceleration has been received by any
party thereto in connection therewith and, to the Knowledge of the Company, no
event has occurred that would constitute a breach, violation or default or give
rise to any right of offset,
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counterclaim, termination, cancellation or acceleration thereunder (with or
without notice or lapse of time or both). The Company does not have any present
expectation or intention of not fully performing any such Contract substantially
in accordance with its terms. The Company does not have any Knowledge of any
threat to cancel, or not to renew or extend, any such Contract by any party
thereto. There are no material disputes with respect to any such Contract.
5.12 Intellectual Property.
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(a) General. (i) Section 5.12(a)(i) and Section 5.12(b)(i) of the
Disclosure Schedule set forth a true and complete list of all items of
Intellectual Property (A) which are owned by the Company and (B) which also are
used or held for use in the business and operations of the Company
(collectively, the "Owned IP"), except for Trade Secrets and Miscellaneous
Software Components. To the Knowledge of the Company, all trademark
registrations and copyright registrations which are part of the Owned IP are in
good standing, are valid and subsisting, and are in full force and effect in
accordance with their terms; (ii) Section 5.12(a)(ii) and Section 5.12(b)(ii) of
the Disclosure Schedule set forth a true and complete list of all items of
Intellectual Property (A) which the Company does not own, but in which the
Company has a right or rights (by license or otherwise), and (B) which also are
used or held for use in the business and operations of the Company
(collectively, the "Not-Owned IP"), except for Trade Secrets and Miscellaneous
Software Components. The right of the Company to use the Not-Owned IP in the
business and operations of the Company is solely evidenced by the written
license agreements or other Contracts set forth in Section 5.12(a)(ii) and
Section 5.12(b)(ii) of the Disclosure Schedule; (iii) the development, license,
use, sale, distribution and modification of the Owned IP by the Company in
connection with the business and operations of the Company, and, to the
Knowledge of the Company, the license, use, sale, distribution and modification
of the Not-Owned IP by the Company in connection with the business and
operations of the Company, has not infringed on or otherwise violated the rights
of any other Person or constituted an unlawful disclosure, use or
misappropriation of the right or rights of any other Person. The continued and
future license, use, sale, distribution or modification of the Owned IP and the
Not-Owned IP by the Surviving Corporation, shall not constitute an infringement
or other violation of the rights of any other Person or constitute an unlawful
disclosure, use or misappropriation of the right or rights of any other Person
(other than to the extent resulting from material changes to the Owned IP or the
Not-Owned IP, as the case may be, made by the Surviving Corporation or other
Persons after the Closing Date). The Company is not in violation of, or in
default (with or without notice or lapse of time or both) under, any Contract or
other Legal Requirement relating to the Company IP; (iv) (A) there is no action,
suit, inquiry, formal or informal complaint, investigation or other proceeding
that is pending, or to the Knowledge of the Company, threatened, with respect to
and (B) there is no outstanding Order concerning, (X) any right of the Company
to develop, license, use, sell, distribute or modify the Owned IP or (Y) any
right under a Contract or any other right of the Company to license, use, sell,
distribute or modify the Not-Owned IP; (v) the Company has the right, which
(subject to the expiration of copyrights and patents by operation of law or the
loss of Trade Secrets as a result of actions taken by other Persons) is non-
terminable and not subject to expiration or revocation, to develop, license,
control or regulate the use of, sell, distribute and modify the Owned IP without
any valid legal or equitable claim by, or payment or other obligation owing to,
or Consent from, any Person. The Surviving Corporation will retain at the
Effective Time all of such rights on the same basis and geographic scope as that
enjoyed by the Company immediately prior to the Effective Time, without
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any diminution or alteration as a result of the Merger; (vi) except as set forth
in Section 5.12(a)(vi) of the Disclosure Schedule (and subject only to the
express terms of those Contracts that are referred to in Section 5.12(a)(ii) and
Section 5.12(b)(ii) of the Disclosure Schedule to the extent that true and
complete copies have been provided to CompuCom), the Company has the right,
which is non-terminable and not subject to expiration or revocation, to license,
use, sell, distribute or modify the Not-Owned IP without any valid legal or
equitable claim by, or payment or other obligation owing to, any other Person.
The Surviving Corporation will retain at the Effective Time all of such rights
on the same basis or geographic scope as that enjoyed by the Company immediately
prior to the Effective Time, without any diminution or alteration as a result of
the Merger. Section 5.12(a)(vi) of the Disclosure Schedule sets forth a true,
complete and correct list of all Consents required to permit the Surviving
Corporation to license, use, sell, distribute and modify the Not-Owned IP on the
same basis and geographic scope as that enjoyed by the Company immediately prior
to the Effective Time, without any diminution or alteration as a result of the
Merger; (vii) except as set forth in Section 5.11(g) of the Disclosure Schedule,
the Company has not granted or obligated itself to grant to any Person any
outstanding license, option or other right to develop, license, sell, distribute
or modify (including, without limitation, any rights under any source code
escrow Contract) in any manner, in whole or in part, any of the Owned IP or
Not-Owned IP. No Person has either asserted any right to develop, license, use,
sell, distribute or modify the Owned IP except in accordance with a license or
other Contract set forth in Section 5.11(g) of the Disclosure Schedule, or
offered to grant the Company a license or any other right of use with respect to
the Owned IP. The Company is under no obligation to compensate any Person for
any development, license, use, sale, distribution or modification of any of the
Owned IP. To the Knowledge of the Company, no Person, other than the Company,
has either applied for any patent or registered any claim to copyright with
respect to any part of the Owned Software; and (viii) to the Knowledge of the
Company, (A) none of the Owned IP has been infringed by any Person, and (B) none
of the Owned IP is being used by any Person except pursuant to a Contract set
forth in Section 5.11(g) of the Disclosure Schedule.
(b) Software. The Company does not own any material Software.
Section 5.12(b) of the Disclosure Schedule sets forth a true and complete list
of all items of Software other than Miscellaneous Software Components (A) which
the Company does not own but in which the Company has a right or rights (by
license or otherwise), and (B) which also are used or held for use in the
business and operations of the Company, other than licenses for generally
available commercial Software used on personal computers having an individual
acquisition cost of $1,000 or less (the "Not-Owned Software").
(c) Development and Protection of the Owned IP. The Company has
taken all reasonable measures to protect in all material respects the
confidential and proprietary nature of the Trade Secrets and the source code,
object code and access codes for the Not-Owned Software (the "Confidential
Software"). To the Knowledge of the Company, all Know-How material to the
Software of the Company has been reduced to writing. Such descriptions explain
such Know-How and enable its intended use by the Surviving Corporation. To the
Knowledge of the Company, the Company has taken all reasonable measures to
protect in all material respects the confidential and proprietary nature of the
information related to the business strategy, finances, marketing plans or
employees of the Company which has not been published and is not generally known
to the public and to the Knowledge of the Company, no employee is in violation
of any confidentiality Contract with any former employer or business associate.
Section 5.12(c)(iv) of the Disclosure Schedule sets forth a list of all key
employees who have signed Confidentiality Contracts with former employers or
business associates.
5.13 Litigation. Except as set forth in Section 5.13 of the Disclosure
Schedule, there is no action, suit, inquiry, formal or informal complaint,
investigation or other proceeding that is pending or, to the Knowledge of the
Company, threatened, involving the Company, its properties or assets, or any of
its directors, officers or agents (in their capacities as such), at law or in
equity, in or before any Tribunal.
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5.14 Compliance with Legal Requirements.
(a) The Company is not in violation of, or in default under (or
with or without notice or lapse of time or both, would be in violation of, or
default under), and has not received any notice alleging any such violation or
default under, any provision of its Articles of Incorporation or Bylaws or any
material term or provision of any note, bond, mortgage, indenture, lease,
license, Contract or other instrument to which it is a party or by which any of
its properties or assets are or may be bound. To the Knowledge of the Company,
the Company is not, and has not been, in violation of, or default under (or with
or without notice or lapse of time or both, would be in violation of, or default
under), and has not received any notice alleging any such violation or default
under, any provision of any material Legal Requirement applicable to it or its
properties or assets.
(b) Without limiting the generality of Section 5.14(a), the
Company has not received, and does not have any Knowledge of any information
which would indicate that the Company will or may receive, written notice from
any Tribunal that the Company (i) does not possess all material permits,
licenses and other authorizations, or has not filed all environmental notices,
which are required under applicable Environmental Laws, (ii) is in conflict with
or in material default or material violation of any material terms and
conditions of the required permits, licenses and authorizations or of any notice
filing requirements or (iii) is in material conflict with or in material default
or material violation of any Environmental Laws. There is not, and as of the
Effective Time there will not be, any condition, event, fact, circumstance or
other matter existing or occurring which does or reasonably may be expected to
(x) interfere with, or prevent material compliance or continued material
compliance with any Environmental Laws in connection with, the ownership, use or
operation by the Company of any of its properties or assets, (y) require any
reporting, assessment or remedial action of any kind under Environmental Laws in
connection with the ownership, use or operation by the Company of any of its
properties or assets or (z) give rise to any material common law or legal
liability under Environmental Laws, including, without limitation, CERCLA, or
any similar Legal Requirements in connection with the ownership, use or
operation by the Company of any of its properties or assets.
(c) The Company is in compliance with and has complied with, in
all material respects, the requirements of the Americans with Disabilities Act.
(d) The Company is not presently subject to any outstanding Order
from any Tribunal under any Legal Requirement, nor is the Company subject to any
outstanding claims, Liens, judicial or administrative proceedings or
investigations arising under any Legal Requirement.
(e) To the Knowledge of the Company, there is no proposed Legal
Requirement that could reasonably be expected to have a Material Adverse Effect.
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5.15 Employee Benefit Plans.
(a) Schedule 5.15(a)(i) of the Disclosure Schedule hereto sets
forth a true and complete list of: (i) all "employee benefit plans" (as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) and any other employee benefit arrangements or payroll
practices (including, without limitation, severance pay, vacation pay, company
awards, salary continuation for disability, sick leave, deferred compensation,
bonus or other incentive compensation and stock purchase arrangements or
policies) maintained by the Company or to which the Company contributes or is
obligated to contribute with respect to employees of the Company (collectively,
the "Employee Benefit Plans"), and, in a separate category, all Employee Benefit
Plans which are "pension plans" (as defined in Section 3(2) of ERISA ("Pension
Plans")). Section 5.15(a)(ii) of the Disclosure Schedule sets forth the name,
title, current salary rate (including bonus and commissions), and current base
salary rate of the 10 most highly compensated present employees of the Company.
There is no trade or business (whether or not incorporated) which is under
common control, or treated as a single employer, with the Company under Section
414 of the Code. No Employee Benefit Plans cover persons employed outside of the
United States. No Pension Plans are subject to Section 4063 or 4064 of ERISA
(collectively, the "Multiemployer Plans"). No Employee Benefit Plans that are
welfare plans as defined in Section 3(1) of ERISA provide benefits after
termination of employment (other than as required by Section 4980B of the Code
and at the former employee's own expense). No Employee Benefit Plan is a
"defined benefit plan" as defined in Section 3(35) of ERISA.
(b) To the knowledge of the Company, each of the Employee Benefit
Plans intended to qualify under Section 401 of the Code (collectively, the
"Qualified Plans") so qualifies, and nothing has occurred with respect to the
operation of any such plan which could reasonably be expected to cause the loss
of such qualification or the imposition of any material liability, penalty or
tax under ERISA or the Code. To the Knowledge of the Company, any entity
maintained or contributed to by the Company and which is intended to be an
association described in Section 501(c)(9) of the Code is exempt from federal
income Tax under Section 501(a) of the Code.
(c) To the Knowledge of the Company, all contributions and
premiums required by law or by the terms of each Employee Benefit Plan or any
agreement relating thereto have been timely made (without regard to any waivers
granted with respect thereto).
(d) There has been no "reportable event,"as that term is defined
in Section 4043 of ERISA and the regulations thereunder, with respect to any of
the Qualified Plans which would require the giving of notice, or any event
requiring notice to be provided, under Section 4063(a) of ERISA.
(e) To the Knowledge of the Company, there has been no violation
of ERISA that could reasonably be expected to result in a material liability
with respect to the filing of applicable returns, reports, documents or notices
regarding any of the Employee Benefit Plans with the Secretary of Labor or the
Secretary of the Treasury or the furnishing of such notices or documents to the
participants or beneficiaries of the Employee Benefit Plans.
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(f) Except as set forth in Section 5.15(f) of the Disclosure
Schedule, true and complete copies of the following documents, with respect to
each of the Employee Benefit Plans (as applicable) have been delivered by the
Company to CompuCom: (i) any plans and related trust documents, and all
amendments thereto, (ii) the most recent Forms 5500 and schedules thereto, (iii)
the most recent summary plan description, and (v) written descriptions of all
non-written agreements relating to the Employee Benefit Plans.
(g) There are no pending Legal Proceedings which have been
asserted or instituted against any Employee Benefit Plan, the assets of any such
plan or the Company, or the plan administrator or fiduciary of any Employee
Benefit Plan with respect to the operation of any such plan (other than routine,
uncontested benefit claims). To the Knowledge of the Company, neither the
Company nor any fiduciary of any plan which is not a Multiemployer Plan has
engaged in a nonexempt prohibited transaction described in Sections 406 of ERISA
or 4975 of the Code.
(h) To the Knowledge of the Company, each of the Employee Benefit
Plans has been maintained and administered, in all material respects, in
accordance with its terms and all provisions of applicable Legal Requirements.
All amendments and actions required to bring each of the Employee Benefit Plans
into conformity with all of the applicable provisions of ERISA and other
applicable Legal Requirements have been made or taken except to the extent that
such amendments or actions are not required by law to be made or taken until a
date after the Closing Date and are disclosed in Schedule 5.15(h) of the
Disclosure Schedule.
(i) Each Employee Benefit Plan complies in all material respects
with all applicable requirements of (i) the Age Discrimination in Employment Act
of 1967, as amended, and the regulations thereunder; (ii) Title VII of the Civil
Rights Act of 1964, as amended, and the regulations thereunder; (iii) the health
care continuation provisions of COBRA; and (iv) the Medicare Secondary Payor
Provisions of Section 1862(b) of the Social Security Act.
(j) Except as set forth in Section 5.15(j) of the Disclosure
Schedule, the Company is not a party to any agreement, contract or arrangement
that would result in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
(k) The Company will not have by reason of the transaction
contemplated by this Agreement, any obligation to make any payment to any
employee pursuant to any Employee Benefit Plan.
5.16 Absence of Labor Difficulties. The Company is not a party to any
labor union or collective bargaining agreement. There is no labor union or
organizing activity pending or, to the Knowledge of the Company, threatened with
respect to the Company or its business. To the Knowledge of the Company, the
Company is not engaged in any unfair labor practice. There is no unfair labor
practice complaint against the Company pending before the National Labor
Relations Board or any other agency. There is no labor strike, dispute, slowdown
or stoppage pending or, to the Knowledge of the Company, threatened against or
involving the Company. No grievance or other labor dispute or proceeding or any
arbitration proceeding arising out of or under any collective bargaining or
other employee agreement is pending or, to the Knowledge of the Company,
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threatened against the Company. The Company is not aware of any other actual or
potential labor problem which could reasonably be expected to have a Material
Adverse Effect.
5.17 Customers. Section 5.17 of the Disclosure Schedule sets forth each
customer or group of affiliated customers accounting for 5% or more of the
revenue of the Company during the eleven-month period ended February 28, 1998.
Except as disclosed in Section 5.17 of the Disclosure Schedule, no customer or
group of affiliated customers listed in Section 5.17 of the Disclosure Schedule
has terminated or, to the Knowledge of the Company, has, in writing or by an
express oral statement, threatened to terminate or advised it will terminate its
relationship with the Company.
5.18 Assets Necessary to Business. The properties and assets owned or
leased by the Company (all of which, after the Effective Time, will be owned or
leased by the Surviving Corporation) are sufficient to carry on the business and
operations currently conducted by the Company. Except as set forth in Section
5.18 of the Disclosure Schedule, such properties and assets are materially fit
for the purposes for which they are presently being used in the business and
operations of the Company and are in good operating condition and repair. The
transactions contemplated hereby will not deprive the Company (or, after the
Effective Time, the Surviving Corporation) of the benefits of any properties or
assets used, or available for use, in its business or operations or of the
benefits of any rights relating thereto (whether by reason of a violation of the
terms of any Contract or commitment or a failure to obtain any Consent from any
Tribunal or any other Person or for any other cause) or the imposition of any
liabilities on the Company or any other Person.
5.19 Licenses and Permits.
(a) Except as set forth in Section 5.19(a) of the Disclosure
Schedule, the Company owns or validly holds all material licenses, franchises,
privileges, Consents, exemptions, certificates, registrations, orders and
similar documents and instruments that are required by any Legal Requirement in
connection with the conduct of the business and operations of the Company as
currently conducted.
(b) Except as would not have a Material Adverse Effect, all such
licenses, franchises, privileges, Consents, exemptions, certificates,
registrations, orders and similar documents and instruments are valid, binding
and in full force and effect, and no proceeding is pending or, to the Knowledge
of the Company, threatened for the revocation of any such license, franchise,
privilege, permit, Consent, exemption, certificate, registration, order or
similar document or instrument.
(c) All such licenses, franchises, privileges, Consents,
exemptions, certificates, registrations, orders and similar documents and
instruments will, upon consummation of the transactions contemplated by this
Agreement, be valid, binding and in full force and effect on identical terms and
conditions, which terms and conditions will, upon consummation of the
transactions contemplated by this Agreement, permit the conduct of the business
and operations of the Company, in substantially the same manner as prior to the
date hereof.
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5.20 Title to Properties. Except as provided pursuant to the express
provisions of the Contracts set forth in Section 5.11(b) of the Disclosure
Schedule, the Company has good, valid and indefeasible title to all properties
and assets owned by it and valid leasehold or license interests in all
properties and assets leased by it (whether real, personal or mixed), in each
case free and clear of all Liens of any kind. All leases of properties or assets
(whether real, personal or mixed) used by the Company in its business and
operations are valid, subsisting and effective in accordance with their terms
and the Company enjoys peaceful possession of all such properties and assets.
All material improvements and fixtures constituting a part of any real property
leased by the Company are in good operating condition and repair and are
suitable for their current uses. No improvement constituting a part of such real
property encroaches upon any real property of any other Person.
5.21 Insurance. The properties and assets of the Company that are of an
insurable character are insured against loss or damage by fire or other risks to
the extent and in the manner customary for companies engaged in similar
businesses and operating similar properties. Schedule 5.21 of the Disclosure
Schedule sets forth a true and complete description of the policies of insurance
presently in force, specifying with respect to each such policy the name of the
insurer, type of coverage, term of policy, deductible amount, limits of
liability and annual premium. All such insurance is in full force and effect and
is maintained with reputable insurance companies and associations. To the
Knowledge of the Company, there are no circumstances existing that would enable
such insurers to avoid liability under the policies issued by them. There are no
Persons other than the Company having an interest under such policies. The
Company has received no notice of cancellation or termination with respect to
any such policy. Premiums in respect of each such insurance policy are fully
paid to the date hereof. The insurance coverage provided by such policies of
insurance will not in any material respect be affected by, and will not
terminate or lapse by reason of, the transactions contemplated by this
Agreement. At no time since January 1, 1995 has any insurance company or
association canceled or reduced any insurance coverage covering any of the
properties or assets of the Company or given any notice or other indication of
its intention to cancel or reduce any such coverage. The loss of any properties
or assets of the Company not covered by insurance would not reasonably be
expected to have a Material Adverse Effect.
5.22 Books and Records. The minute books and records of the Company
contain a true, complete and correct record of all material actions taken at all
meetings and by all written consents in lieu of meetings of the Board of
Directors, or any committees thereof, and shareholders of the Company. The stock
ledger and related stock transfer records of the Company contain a true,
complete and correct record of the original issuance, transfer and other
capitalization matters of the capital stock of the Company. The accounting,
financial reporting, tax and business books and records of the Company (a)
accurately and fairly reflect in all material respects the business and
condition of the Company and the transactions and the assets and liabilities of
the Company with respect thereto, and (b) have been maintained in all material
aspects in accordance with good business and bookkeeping practices. Without
limiting the generality of the foregoing, the Company has not engaged in any
material transaction with respect to its business or operations, maintained by
any bank account therefor or used any funds of the Company in the conduct
thereof except for transactions, bank accounts and funds that have been and are
reflected in the normally maintained books and records of the business.
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5.23 Absence of Certain Business Practices. To the Knowledge of the
Company, neither the Company nor any of its Affiliates, directors, officers,
employees or agents has, directly or indirectly, given or agreed to give any
gift or similar benefit to any customer, supplier, competitor or governmental
employee or official (domestic or foreign) that could subject the Company to any
material damage or penalty in any civil, criminal or governmental litigation or
proceeding.
5.24 Bank Accounts. Section 5.24 of the Disclosure Schedule sets forth
a true and complete list of the names and locations of all banks, trust
companies, securities brokers and other financial institutions at which the
Company has an account or safe deposit box or maintains a banking, custodial,
trading or other similar relationship, and a true and complete list and
description of each such account, box and relationship, indicating in each case
the account number and the names of the respective officers, employees, agents
or other similar representatives of the Company authorized to transact business
with respect thereto.
5.25 Default. Since January 1, 1995, no Indebtedness of the Company has
been the subject of a notice of acceleration of the maturity of such
Indebtedness. The Company is not in default under Indebtedness such as would
permit the acceleration thereof.
5.26 Subsidiaries. Except as set forth in Section 5.26 of the
Disclosure Schedule, the Company has no subsidiaries and does not control
(directly or indirectly, through the ownership of securities, by Contract, by
proxy, alone or in combination with others, or otherwise) any corporation,
partnership, business organization or other Person. The Company does not have
any equity interest in any Person.
5.27 No Broker's or Finder's Fees. No broker, investment banker,
financial advisor or other person, other than Raymond James & Associates, Inc.,
the fees and expenses of which will be paid by the Company, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement, based upon
arrangements made by or on behalf of the Company. The estimated fees and
expenses incurred and to be incurred by the Company in connection with this
Agreement and the transactions contemplated by this Agreement (including the
fees of the Company's legal counsel and the legal counsel for its financial
advisor) are set forth in a letter dated April 9, 1998 from the Company to
CompuCom, excluding expenses related to the solicitation of proxies.
5.28 Opinion of Financial Advisor. The Company has received the opinion
of Raymond James & Associates, Inc., dated April 4, 1998, to the effect that, as
of that date, the consideration to be received in the Merger by the Company's
shareholders is fair from a financial point of view, and
a complete and correct signed copy of such opinion has been, or promptly upon
receipt thereof will be, delivered to CompuCom.
5.29 Information Supplied. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by reference
in the Proxy Statement, will at the time the Proxy Statement is first mailed to
the Company's shareholders or at the time of the Shareholders Meeting (as
defined in Section 7.4), contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. The
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Proxy Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by CompuCom or the CompuCom Subsidiary specifically for inclusion or
incorporation by reference therein.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF COMPUCOM AND THE COMPUCOM SUBSIDIARY
CompuCom and the CompuCom Subsidiary, jointly and severally, hereby
represent and warrant to the Company as follows:
6.1 Organization, Standing, etc., of CompuCom. CompuCom is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own its assets and to carry on its business as presently conducted.
CompuCom has all requisite corporate power and authority to execute and deliver,
and perform its obligations under, this Agreement and to consummate the
transactions contemplated hereby.
6.2 Organization, Standing, etc., of CompuCom Subsidiary.
(a) The CompuCom Subsidiary is a newly formed corporation duly
organized, validly existing with active status under the laws of the State of
Florida and has all requisite corporate power and authority to own its assets
and to carry on its business as presently conducted. The CompuCom Subsidiary has
all requisite corporate power and authority to execute and deliver, and perform
its obligations under, this Agreement and to consummate the transactions
contemplated hereby.
(b) At the Effective Time, the duly authorized capital stock of
the CompuCom Subsidiary will consist of 1,000 shares of common stock, no par
value, 1,000 shares of which will be validly issued, fully paid and
nonassessable and owned of record and beneficially by CompuCom. There are no
outstanding options, warrants or other rights to subscribe for or purchase
capital stock (or securities convertible into or exchangeable for capital stock)
of the CompuCom Subsidiary. The CompuCom Subsidiary has not engaged in any
activities other than as contemplated by the terms of this Agreement.
6.3 Authorization and Execution. The execution and delivery of this
Agreement and the performance of each of CompuCom and the CompuCom Subsidiary of
this Agreement and the consummation by each of them of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of CompuCom and the CompuCom Subsidiary. This
Agreement has been duly and validly executed and delivered by each of CompuCom
and the CompuCom Subsidiary and constitutes a legal, valid and binding agreement
of each of CompuCom and the CompuCom Subsidiary enforceable against CompuCom and
the CompuCom Subsidiary, as applicable, in accordance with its terms, assuming
this Agreement is
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enforceable against the Company, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws or by general principles of equity.
6.4 Absence of Conflicts; Governmental Authorizations.
(a) The execution and delivery by each of CompuCom and the
CompuCom Subsidiary of this Agreement, the performance by each of them of their
respective obligations hereunder and the consummation by each of them of the
transactions contemplated hereby will not (i) conflict with or result in any
violation of any provision of the Certificate of Incorporation or Articles of
Incorporation of CompuCom or the CompuCom Subsidiary, as applicable, or the
Bylaws of CompuCom or the CompuCom Subsidiary, each as amended to date; (ii)
materially conflict with, result in any material violation or material breach
of, constitute a default under, give rise to any right of termination or
acceleration (with or without notice or the lapse of time or both) pursuant to,
or result in being declared void or voidable, any term or provision of any note,
bond, mortgage, indenture, lease, license, Contract or other instrument to which
CompuCom or the CompuCom Subsidiary is a party or by which any of their
respective properties or assets are or may be bound; (iii) materially violate
any term of any Legal Requirement applicable to CompuCom or the CompuCom
Subsidiary or their respective properties or assets; or (iv) result in the
creation of, or impose on CompuCom or the CompuCom Subsidiary the obligation to
create, any Lien upon any properties or assets of CompuCom or the CompuCom
Subsidiary.
(b) Except for applicable requirements, if any, of the 33 Act, the
Exchange Act, the premerger notification requirements of the HSR Act, the Nasdaq
National Market, the filing and recordation of appropriate merger documents as
required by the FBCA, filings required pursuant to any state securities or "blue
sky" laws, and such other notices, reports or other filings the failure of which
to be made would not, individually or in the aggregate, have a Material Adverse
Effect on CompuCom or prevent or materially impair the consummation of the
transactions contemplated hereby, CompuCom is not required to submit any notice,
report or other filing to any Tribunal, domestic or foreign, in connection with
the execution, delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby.
6.5 Financing. CompuCom or the CompuCom Subsidiary possess, or have
access to, all funds necessary to pay the Merger Consideration and related fees
and expenses, and have the financial capacity to perform their other obligations
under this Agreement. Upon the terms and subject to the conditions of this
Agreement, CompuCom or the CompuCom Subsidiary will pay the Merger
Consideration.
6.6 Information Supplied. None of the information supplied or to be
supplied by CompuCom or the CompuCom Subsidiary specifically for inclusion or
incorporation by reference in the Proxy Statement will, at the time the Proxy
Statement is first mailed to the Company's shareholders or at the time of the
Shareholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
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ARTICLE VII
COVENANTS OF THE COMPANY
The Company covenants and agrees with CompuCom or the CompuCom
Subsidiary that, at all times before the Closing, the Company at its expense
will comply with all covenants and provisions of this Article VII, except to the
extent otherwise expressly required or permitted by this Agreement.
7.1 Investigations. The Company will provide CompuCom and CompuCom's
counsel, accountants and other representatives and agents with reasonable
access, upon prior notice and during normal business hours, to all facilities,
officers, directors, employees, agents, accountants, actuaries, assets,
properties, books and records of the Company and will furnish CompuCom with such
financial and operating data and other information with respect to the business
and properties of the Company or the transactions contemplated hereby as
CompuCom shall from time to time request; provided, however, that such
investigation (a) shall be conducted in such manner as not to interfere
unreasonably with the operation of the business of the Company, and (b) shall
not affect any of the representations and warranties hereunder. The Company will
also provide CompuCom with timely notice of and access to minutes of all
meetings (and all actions by written consent in lieu thereof) of the board of
directors, or any committee thereof, and shareholders of the Company. In the
event of termination of this Agreement, CompuCom will return or cause to be
returned to the Company all documents and other material obtained from the
Company in connection with the transactions contemplated hereby and will keep
confidential any such information unless such information is ascertainable from
public or published information or is required to be disclosed by applicable
Legal Requirements.
7.2 Operation of the Company. The Company will carry on its business
solely in the usual and ordinary course consistent with past practice. Without
limiting the generality of the foregoing:
(a) The Company will not, without the prior written consent of
CompuCom: (i) authorize, issue or commit to issue any shares of its capital
stock of any class (whether or not from treasury stock) or other equity
interests in the Company, except for the issuance of shares of Company Common
Stock upon the exercise of, and in accordance with, the Options; (ii) split up,
combine or reclassify any of its capital stock or other equity interests in the
Company; (iii) grant, commit to grant, issue or commit to issue any options,
warrants or other rights (including Options) to subscribe for or purchase any
shares of its capital stock, other equity interests in the Company or any
security directly or indirectly convertible into or exchangeable for, or which
in any manner confers upon the holder thereof the right to acquire, any shares
of any class of its capital stock or other equity securities; (iv) purchase,
redeem or otherwise acquire any shares of its capital stock of any class or any
equity interests in the Company, or any interest in or right to acquire any such
shares or other equity interests in the Company; (v) declare, set aside for
payment or pay any dividend on, or make any other distribution or payment with
respect to, any share of its capital stock of any class or any other equity
interests; (vi) grant or pay any increase in the salaries or other
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compensation (including, without limitation, perquisites) of any of its officers
or directors, grant or pay any bonus to any of its officers or directors other
than paying bonuses to officers which have been earned as of the date of this
Agreement pursuant to existing bonus plans of the Company, enter into any
employment agreement or make any loan to or enter into any material transaction
of any other nature with any of its officers or directors, take any action to
institute any new severance or termination pay practices with respect to any of
its officers or directors, or increase the benefits payable under its severance
or termination pay practices applicable to its officers or directors; (vii)
grant or pay any increase in the salaries or other compensation (including,
without limitation, perquisites) of any of its employees, agents or consultants
other than in the ordinary course of business consistent with past practice,
grant or pay any bonus to any of its employees, agents or consultants other than
in the ordinary course of business consistent with past practice, enter into any
employment agreement or make any loan to or enter into any material transaction
of any other nature with any of its employees, agents or consultants, take any
action to institute any new severance or termination pay practice with respect
to any of its employees, agents or consultants, or increase the benefits payable
under its severance or termination pay practices applicable to its employees,
(viii) grant any increase in the pension, retirement or other employment
benefits of any character of, or grant any new benefits to, any of its officers,
directors, or employees other than benefits to new employees no greater than
those provided to existing employees, or, other than as contemplated by Section
4.6 or Section 7.11, amend or terminate, partially or completely, any Plan
described in Section 5.15; (ix) create, incur, assume, guarantee, endorse,
refinance, modify, extend, renew or otherwise become liable for (a) any debt,
obligation or other liability for money borrowed except pursuant to existing or
planned lines of credit disclosed in, and the disclosure set forth in, Section
5.11(a) of the Disclosure Schedule or (b) any other debt, obligation or other
liability, except in the ordinary course of business consistent with past
practice, cancel, pay, agree to cancel or pay, or otherwise provide for a
complete or partial discharge in advance of a scheduled payment date with
respect to, any debt, obligation or other liability, or waive, cancel or
compromise any right to receive any direct or indirect payment or other benefit
under any debt, obligation or other liability owing to the Company, except as
otherwise contemplated hereby or in the ordinary course of business consistent
with past practice; (x) dispose of or assign any of its material assets or
properties or permit any of its assets and properties to be subjected to any
Liens, except to the extent such disposition of any such Lien is made or
incurred in the ordinary course of business consistent with past practice, or
sell any part of its operations or business to any other Person; (xi) enter into
any lease or contract for the purchase or sale of any property, real or
personal, except in the ordinary course of business consistent with past
practice, or terminate, modify, assign, release, relinquish or waive any right
of the Company under any existing real property lease, or increase its
obligations under real property leases, except in the ordinary course of
business consistent with past practice and in accordance with the express terms
of existing real property leases listed in Section 5.11(l) of the Disclosure
Schedule; (xii) fail to maintain all material equipment and other material
assets and properties in good working condition and repair according to the
standards it has maintained to the date of this Agreement, subject only to
ordinary wear and tear; (xiii) change or remove (x) the independent certified
public accountants for the Company, (y) any operational, financial reporting
accounting practice or policy or any assumption underlying such a practice or
policy, or (z) any method of calculating any bad debt, contingency or other
reserve for financial reporting purposes or for other accounting purposes; (xiv)
except as set forth in Section 7.2(a)(xiii) of the Disclosure Schedule pursuant
to documentation to which CompuCom consents in writing in advance, amend, modify
or repeal, or propose to do, or permit or consent to any amendment, modification
or repeal of its Articles of Incorporation or
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Bylaws or take any action with respect to such action; (xv) license any of its
technology, Intellectual Property or Software except in the ordinary course of
business consistent with past practice; (xvi) (A) merge, consolidate or
otherwise combine or agree to merge, consolidate or otherwise combine with any
other Person, (B) acquire all or substantially all, or a portion of all, the
assets, capital stock or other equity securities of any other Person, or any
business division of any other Person or (C) otherwise organize or acquire
control or ownership of any other Person; (xvii) violate, breach or default, or
take or fail to take any action that (with or without notice or lapse of time or
both) would constitute a material violation, material breach or default under,
any term or provision of any material Contract to which the Company is a party
or by which any of its properties or assets is or may be bound and as to which
such violation, breach or default could affect the validity or enforceability of
this Agreement or any of the transactions contemplated hereby or, individually
or in the aggregate, has or could reasonably be expected to have a Material
Adverse Effect; (xviii) delay or postpone beyond normal past practice the
payment of any material account payable or other debt, obligation or other
liability; (xix) permit any increase in its aggregate obligations under
operating leases involving personal property having a fair market value in
excess of $5,000; (xx) permit any increase in its aggregate obligations under
capital leases involving assets having a fair market value in excess of $10,000;
(xxi) except as disclosed in Section 5.11(j) of the Disclosure Schedule, make
any capital expenditure in excess of $10,000 or make capital expenditures in
excess of $20,000 in the aggregate; (xxii) enter into, or become obligated
under, any Contract, or change, amend, terminate or otherwise modify any
Contract, except in the ordinary course of business consistent with past
practice; (xxiii) enter into, directly or indirectly, any new transaction with
any Affiliate of the Company; (xxiv) buy additional inventory pursuant to any
vendor inventory buy-in program; or (xxv) without limitation of the matters set
forth in this Article VI, enter into or become bound by any Contract,
commitment, instrument or other document after the date hereof which is of a
type, which would have been required to be disclosed pursuant to any clause of
Section 5.11 had the Company been a party to, or had its business or any of its
assets been bound by, such Contract, commitment, instrument or other document as
of the date of this Agreement.
(b) The Company will promptly advise CompuCom in writing of the
commencement or threat of any claim, litigation, action, suit, inquiry or
proceeding involving the Company, its properties or assets, or any of its
directors, officers or agents (in their capacities as such).
(c) The Company shall furnish CompuCom with a copy of all
amendments to the Company's Annual Report on Form 10-K, filed with the SEC for
the year ended March 31, 1997 (the "Company 10-K") and of any other form filed
with the SEC under the Exchange Act from the date of filing of the Company 10-K
to the Effective Time of the Merger.
(d) The Company will use its reasonable commercial efforts to (i)
preserve intact its present business organization, reputation and customer
relations, (ii) keep available the services of its present officers, directors,
employees, agents, consultants and other similar representatives, (iii) maintain
all its licenses, qualifications and authorizations to do business in each
jurisdiction in which it is so licensed, qualified or authorized, (iv) maintain
in full force and effect all contracts, documents and arrangements referred to
in Section 5.11, and (v) continue all current marketing and selling activities
relating to the business, operations or affairs of the Company.
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(e) The Company will comply, in all material respects, with all
Legal Requirements applicable to its business, operations or affairs.
7.3 No Solicitation.
(a) The Company and its officers, directors, employees,
representatives and agents shall immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to a Takeover
Proposal (as hereinafter defined). The Company shall not authorize or permit any
of its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it to,
directly or indirectly (i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action to facilitate, any inquiries
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, any Takeover Proposal or (ii) participate in any discussions or
negotiations regarding any Takeover Proposal; provided, however, that if, at any
time prior to the acceptance for payment of shares of the Company Common Stock
pursuant to the Merger, the Board of Directors of the Company determines in good
faith, after consultation with outside counsel, that it is necessary to do so in
order to comply with its fiduciary duties to the Company's shareholders under
applicable law, the Company may, in response to an unsolicited Takeover
Proposal, and subject to compliance with Section 7.3(c), (A) furnish information
with respect to the Company to any Person pursuant to a confidentiality
agreement in a form approved by the Company and CompuCom (such approval not to
be unreasonably withheld) and (B) participate in negotiations regarding such
Takeover Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
director or executive officer of the Company or any investment banker, financial
advisor, attorney, accountant or other representative of the Company, whether or
not such Person is purporting to act on behalf of the Company or otherwise,
shall be deemed to be a breach of this Section 7.3(a) by the Company. For
purposes of this Agreement, "Takeover Proposal" means any inquiry, proposal or
offer from any Person relating to any direct or indirect acquisition or purchase
of twenty percent or more of the assets of the Company or twenty percent or more
of any class of equity securities of the Company, any tender offer or exchange
offer that if consummated would result in any Person beneficially owning twenty
percent or more of any class of equity securities of the Company, any merger,
consolidation, business combination, sale of substantially all of the assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company, other than the transactions contemplated by this Agreement, or any
other transaction the consummation of which could reasonably be expected to
impede, interfere with, prevent or materially delay the Merger or which would
reasonably be expected to dilute materially the benefits to CompuCom of the
transactions contemplated hereby.
(b) Except as set forth in this Section 7.3, neither the Board of
the Directors of the Company nor any committee thereof shall (i) withdraw or
modify or propose to withdraw or modify, in a manner adverse to CompuCom, the
approval or recommendation by such Board of Directors or such committee of this
Agreement or the Merger, (ii) approve or recommend, or propose to approve or
recommend, any Takeover Proposal or (iii) cause the Company to enter into any
agreement with respect to any Takeover Proposal. Notwithstanding the foregoing,
in the event that prior to the Merger, the Board of Directors of the Company
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the Company's
shareholder under applicable law, the Board of Directors of the Company
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may (subject to the other provisions of this Section 7.3) withdraw or modify its
approval or recommendation of this Agreement and the Merger, approve or
recommend a Superior Proposal (as defined below), cause the Company to enter
into an agreement with respect to a Superior Proposal or terminate this
Agreement, but in each case only at a time that is after the second business day
following CompuCom's receipt of written notice (a "Notice of Superior Proposal")
advising CompuCom that the Board of Directors of the Company has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the Person making such Superior Proposal. In the event
that a Notice of Superior Proposal is delivered and any material term or
condition of the Superior Proposal described therein is subsequently changed,
the Company shall deliver a supplemental Notice of Superior Proposal describing
such change and may withdraw or modify its approval or recommendation of this
Agreement and the Merger, approve or recommend the modified Superior Proposal or
cause the Company to enter into an agreement with respect to the modified
Superior Proposal only at a time that is after the second business day following
CompuCom's receipt of the supplemental Notice of Superior Proposal. In addition,
if the Company proposes to enter into an Agreement with respect to any Takeover
Proposal, it shall concurrently with entering into such agreement pay, or cause
to be paid to CompuCom (x) the Termination Fee (as defined in Section 10.5) and
(y) any Indebtedness owed to CompuCom with respect to product sold or services
provided by CompuCom to the Company or supplied or provided by CompuCom to any
of the Company's customers at the request of the Company. For purposes of this
Agreement, a "Superior Proposal" means any bonafide proposal made by a third
party to acquire, directly or indirectly, for consideration consisting of cash
and/or securities, more than fifty percent of the shares of the Company Common
Stock then outstanding or all or substantially all the assets of the Company and
otherwise on terms which the Board of Directors of the Company determines in its
good faith judgment (based on the advice of a financial advisor of nationally
recognized reputation) to be more favorable to the Company's shareholders than
the Merger.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 7.3, the Company shall immediately advise
CompuCom orally and in writing of any request for information or of any Takeover
Proposal, the material terms and conditions of such request or Takeover Proposal
and the identity of the Person making such request or Takeover Proposal. The
Company will keep CompuCom fully informed of the status and details (including
amendments or proposed amendments) of any such request or Takeover Proposal.
(d) Nothing contained in this Section 7.3 shall prohibit the
Company from making any disclosure to the Company's shareholders if, in the good
faith judgment of the Board of Directors of the Company, after consultation with
outside counsel, failure so to disclose would be inconsistent with its fiduciary
duties to the Company's shareholders under applicable law; provided, however,
neither the Company nor its Board of Directors nor any committee thereof shall,
except as permitted by Section 7.3(b), withdraw or modify, or propose to
withdraw or modify, its position with respect to this Agreement or the Merger or
approve or recommend, or propose to approve or recommend, a Takeover Proposal.
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7.4 Board Approval, Fairness Opinion, Shareholder Approval and Proxy
Statement.
(a) The Company hereby approves of and consents to the Merger and
represents that the Board of Directors of the Company, at a meeting duly called
and held, duly adopted resolutions approving this Agreement and the Merger,
determining that the terms of the Merger are fair to, and in the best interest
of, the Company's shareholders and recommending that the Company's shareholders
accept the Merger and approve and adopt this Agreement and the Merger. The
Company represents that its Board of Directors has received the opinion of
Raymond James & Associates, Inc. dated as of April 9, 1998 that the proposed
consideration to be received by the holders of the Company Common Stock pursuant
to the Merger is fair to such holders from a financial point of view, and a
complete and correct signed copy of such opinion has been delivered by the
Company to CompuCom.
(b) The Company will, at CompuCom's request, as soon as practicable
following execution of this Agreement, duly call, give notice of, and convene
and hold a meeting of its shareholders (the "Shareholders Meeting") for the
purpose of obtaining the requisite approval of the Company's shareholders with
respect to the Merger. The Company will, through its Board of Directors,
recommend to its shareholders that the shareholders vote in favor of, or
otherwise consent to, the approval of this Agreement, the Merger and the
transactions contemplated hereby, except as contemplated by Section 7.3. Without
limiting the generality of the foregoing, the Company agrees that its
obligations pursuant to the first sentence of this Section 7.4(b) shall not be
affected by (i) the commencement, public proposal, public disclosure or
communication to the Company of any Takeover Proposal or (ii) the withdrawal or
modification by the Board of Directors of the Company of its approval or
recommendation of this Agreement or the Merger.
(c) The Company will, at CompuCom's request, as soon as
reasonably practicable following execution of this Agreement prepare and file a
preliminary Proxy Statement with the SEC and will use its commercially
reasonable efforts to respond to any comments of the SEC or its staff and to
cause the Proxy Statement to be mailed to the Company's shareholders as promptly
as practicable after responding to all such comments to the satisfaction of the
staff of the SEC. CompuCom and its counsel shall be given reasonable opportunity
to review and comment upon the Proxy Statement prior to its filing with the SEC
or dissemination to shareholders of the Company. The Company will notify
CompuCom promptly of the receipt of any written comments from the SEC or its
staff and of any requests by the SEC or its staff for amendments or supplements
to the Proxy Statement or for additional information and will supply CompuCom
with copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Proxy Statement or the Merger. Each of the Company, CompuCom
and the CompuCom Subsidiary agrees promptly to correct any information provided
by it for use in the Proxy Statement if and to the extent that such information
shall have become false or misleading in any material respect, and the Company
further agrees to take all steps necessary to amend or supplement the Proxy
Statement and to cause the Proxy Statement as so amended or supplemented to be
filed with the SEC and disseminated to the Company's shareholders, in each case
as and to the extent required by applicable Federal securities laws. If at any
time prior to the Shareholders Meeting there shall occur any event that should
be set forth in an amendment or supplement to the Proxy Statement, the Company
will promptly prepare and mail to its
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shareholders such an amendment or supplement. The Company will not mail any
Proxy Statement, or any amendment or supplement thereto, to which CompuCom
reasonably objects.
(d) CompuCom agrees to cause all shares of the Company Common
Stock owned by CompuCom or any subsidiary of CompuCom to be voted in favor of
the approval of the Merger by the shareholders of the Company.
7.5 Consents. The Company shall use its commercially reasonable efforts
to obtain the Consent of each Person listed in Section 5.11(x) of the Disclosure
Schedule, each of whose Consent is required in connection with the execution,
delivery or performance of this Agreement.
7.6 Financial Statements and Reports.
(a) As promptly as reasonably practicable after each calendar
month ending between the date hereof and the Closing Date, but in no event later
than 30 days after the end of each such month, the Company will deliver to
CompuCom true and correct copies of the unaudited financial statements
(including a balance sheet, a statement of operations and changes in
shareholders' equity and cash flows) of the Company as of and for the month then
ended, prepared in accordance with GAAP, and which shall present fairly the
financial condition and assets and liabilities (whether accrued, absolute,
contingent or otherwise) of the Company as of the end of such month and the
results of operations of the Company for and during the period then ended,
subject to normal and recurring year-end audit adjustments.
(b) As promptly as reasonably practicable, the Company will
deliver to CompuCom true and complete copies of such other material financial
statements, reports or analyses as may be prepared or received by the Company
and as relate to the Company's business and operations, and such other
information with respect to the foregoing as CompuCom reasonably may request,
including, without limitation, normal internal reports and special reports (such
as those of consultants).
7.7 Termination of Covenants Not to Compete. Prior to Closing, the
Company shall enter into agreements reasonably acceptable to CompuCom providing
for an unqualified waiver of, or otherwise rendering no longer effective, the
covenants not to compete contained in Article XII of that certain Asset Purchase
Agreement dated August 30, 1996 between Ameridata of New Jersey, Inc. and the
Company.
7.8 Rose Employment Contract. Prior to the Closing, the Company shall
terminate (contingent upon the consummation of the transactions contemplated by
this Agreement) its existing employment agreement with Richard C. Rose, Chief
Executive Officer of the Company, and Mr. Rose and CompuCom shall have agreed
upon terms and conditions mutually acceptable to each of them with respect to
Mr. Rose's employment with CompuCom following consummation of the transactions
provided for in this Agreement.
7.9 Notice and Cure. The Company will notify CompuCom promptly in
writing of, and contemporaneously will provide CompuCom with true and complete
copies of any and all information or documents relating to, and will use its
commercially reasonable efforts to cure before the Effective Time, any event,
transaction or circumstance that results in or will result in any
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covenant or agreement of the Company under this Agreement being breached, or
that renders or will render untrue any representation or warranty of the Company
contained in this Agreement as if the same were made on or as of the date of
such event, transaction or circumstance. The Company will use its commercially
reasonable efforts to cure, at the earliest practicable date and prior to the
Effective Time, any violation or breach of any representation, warranty,
covenant or agreement made by the Company in this Agreement, whether occurring
or arising before or after the date of this Agreement.
7.10 Commercially Reasonable Efforts and Consents. Subject to the terms
and conditions herein provided, the Company shall use its commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under applicable
Legal Requirements and otherwise to consummate and make effective the
transactions contemplated by this Agreement and shall use its commercially
reasonable efforts to obtain all necessary actions or non-actions, extensions,
waivers, Consents, licenses and clearances and to effect all registrations,
filings and notices with, to or from other Persons or Tribunals required of the
Company that are necessary or reasonably desirable to effect the Merger and the
transactions contemplated hereby. Such commercially reasonable efforts shall
include efforts to cooperate with CompuCom to, as promptly as practicable, make
any filings required pursuant to the HSR Act and to promptly and diligently
provide any additional information required or reasonably requested in order to
comply with the requirements of the HSR Act.
7.11 Company Profit Sharing Plan. The Company shall take all actions
necessary to terminate the Company's Section 401(k) Salary Savings Plan
effective immediately prior to Closing.
7.12 Agreements and Covenants. The Company shall not make any
commitment, either in writing or orally, which would violate any of the
provisions set forth in this Article VII.
ARTICLE VIII
COVENANTS OF COMPUCOM AND THE COMPUCOM SUBSIDIARY
CompuCom covenants and agrees with the Company that (except for the
provisions of Section 8.6, which shall only apply after the Closing) CompuCom at
its expense will comply with all covenants and provisions of this Article VIII,
except to the extent otherwise expressly required or permitted by this
Agreement.
8.1 Conduct of Business of the CompuCom Subsidiary. During the period
from the date of this Agreement to the Effective Time, the CompuCom Subsidiary
shall not engage in any activities of any nature except as provided in or
contemplated by this Agreement.
8.2 Obligation of CompuCom to Make Merger Effective and the CompuCom
Subsidiary's Shareholder Consent. CompuCom shall cause the CompuCom Subsidiary
to take all actions necessary on its part to carry out the transactions
contemplated hereby. CompuCom, as the sole shareholder of the CompuCom
Subsidiary, will consent in writing to the approval of this Agreement and the
Merger in accordance with the FBCA.
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8.3 Notice and Cure. CompuCom will notify the Company promptly in
writing of, and contemporaneously will provide the Company with true and
complete copies of any and all information or documents relating to, and will
use its commercially reasonable efforts to cure before the Effective Time, any
event, transaction or circumstance occurring after the date of this Agreement
that results in or will result in any covenant or agreement of CompuCom under
this Agreement to be breached, or that renders or will render untrue any
representation or warranty of CompuCom contained in this Agreement as if the
same were made on or as of the date of such event, transaction or circumstance.
CompuCom also will use its commercially reasonable efforts to cure, at the
earliest practicable date and before the Effective Time, any violation or breach
of any representation, warranty, covenant or agreement made by it in this
Agreement, whether occurring or arising before or after the date of this
Agreement.
8.4 Commercially Reasonable Efforts and Consents. Subject to the terms
and conditions herein provided, CompuCom shall use its commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable Legal
Requirements and otherwise to consummate and make effective the transactions
contemplated by this Agreement and shall use its commercially reasonable efforts
to obtain all necessary actions or non-actions, extensions, waivers, Consents,
Licenses and clearances and to effect all registrations, filings and notices
with, to or from other Persons or Tribunals required of CompuCom or the CompuCom
Subsidiary that are necessary or reasonably desirable to effect the Merger and
the transactions contemplated hereby. Such commercially reasonable efforts shall
include efforts to cooperate with the Company to, as promptly as practicable,
make any filings required pursuant to the HSR Act and to promptly and diligently
provide any additional information required or reasonably requested in order to
comply with the requirements of the HSR Act.
8.5 Information for Proxy Statement for the Company's Shareholders.
CompuCom will furnish to the Company such data and information relating to it as
the Company may reasonably request for the purpose of including such data and
information in the Proxy Statement and any amendments or supplements thereto
used by the Company to obtain the necessary shareholder approval of the Merger.
8.6 Indemnification Rights.
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(a) From and after the Effective Time, to the extent not covered by
the insurance set forth in the next succeeding sentence, CompuCom and the
CompuCom Subsidiary (or any successor to such parties) shall jointly and
severally indemnify, defend and hold harmless the officers, directors and
employees of the Company or any of its subsidiaries against all losses,
expenses, claims, damages or liabilities arising out of claims brought or made
by third parties, including, without limitation, derivative claims, in
connection with the transactions contemplated by this Agreement to the fullest
extent permitted or required under applicable law and shall advance expenses
prior to the final disposition of such claims and liabilities to which this
sentence applies. CompuCom agrees that all rights to indemnification now
existing in favor of the directors, officers or employees of the Company or any
of its subsidiaries (including, without limitation, any Person who was or
becomes a director, officer or employee prior to the Effective Time (the
"Indemnified Parties") under Florida Law or as provided in the Company's
Articles of Incorporation or By-Laws with respect to matters occurring on or
prior to the Effective Time shall survive the Merger and shall continue in full
force and effect for a period of not less than six years after the Effective
Time (or, in the case of claims or other matters occurring on or prior to the
expiration of such six year period which have not been resolved prior to the
expiration of such six year period, until such matters are finally resolved) and
CompuCom shall honor, and shall cause the Company to honor, all such rights.
CompuCom shall cause to be maintained in effect for not less than six years from
the Effective Time the current policies of the directors' and officers'
liability insurance maintained by the Company (provided that CompuCom may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous) with respect to matters occurring on
or prior to the Effective Time; provided that in no event shall CompuCom or the
Company be required to expend annually more than 150% of the amount that the
Company spent for these purposes in the last fiscal year to maintain or procure
insurance coverage pursuant hereto; and provided further that if CompuCom or the
Company are unable to obtain the insurance called for by this section CompuCom
or the Company will obtain as much comparable insurance as is available for such
amount per year.
(b) Without limiting the foregoing, in the event any claim, action,
suit, proceeding or investigation to which the provisions of this Section 8.6
are applicable is brought against any Indemnified Party (whether arising before
or after the Effective Time), (i) any counsel retained by the Indemnified
Parties for any period after the Effective Time shall be subject to the approval
of CompuCom (such approval to not be unreasonably withheld); (ii) after the
Effective Time, CompuCom shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received; and (iii) after the Effective Time, CompuCom will use commercially
reasonable efforts to assist in the vigorous defense of any such matter,
provided that CompuCom shall not be liable for any settlement of any claim
effected without its written consent, which consent, however, shall not be
unreasonably withheld. Any Indemnified Party wishing to claim indemnification
under this Section 8.6, upon learning of any such claim, action, suit,
proceeding or investigation, shall notify CompuCom (but the failure so to notify
CompuCom shall not relieve it from any liability which it may have under this
Section 8.6 except to the extent such failure materially prejudices CompuCom).
CompuCom shall be liable for the fees and expenses hereunder with respect to
only one law firm, in addition to local counsel in each applicable jurisdiction,
to represent the Indemnified Parties as a group with respect to each such matter
unless there is, under applicable standards of professional conduct, a conflict
between the
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positions of any two or more Indemnified Parties that would preclude or render
inadvisable joint or multiple representation of such parties.
ARTICLE IX
CONDITIONS
9.1 General Conditions. Notwithstanding any other provisions of this
Agreement, the obligations of all of the parties hereto to effect the Merger
shall be subject to satisfaction prior to the Closing Date of the following
conditions:
(a) The Company's Shareholder Approval. The shareholders of the
Company shall have approved the Merger in the manner required under the FBCA,
the Company's Articles of Incorporation and as provided for in Section 7.4.
(b) HSR Act Waiting Period Expired. All applicable waiting periods
specified under the HSR Act with respect to the transactions provided for in
this Agreement shall have expired or been terminated.
(c) No Violations or Proceedings. Consummation of the Merger shall
not violate any Order of any Tribunal having competent jurisdiction, and no
action or proceeding shall have been instituted by any Person or threatened by
any Tribunal which, in either such case, in the good faith judgment of either
CompuCom or the Company has a reasonable probability of resulting in an Order,
restraining, prohibiting or rendering unlawful the consummation of the
transactions contemplated by this Agreement or the ownership and operation by
CompuCom after the Effective Time of the Surviving Corporation or all of the
material assets and business of the Company.
9.2 Conditions to the Obligation of CompuCom and the CompuCom
Subsidiary. Notwithstanding any other provisions of this Agreement, the
obligations of CompuCom and the CompuCom Subsidiary to effect the Merger shall
be subject to satisfaction prior to the Closing Date of the following
conditions:
(a) Representations and Warranties True and Correct. The
representations and warranties of the Company that are qualified as to
materiality shall have been true and correct and such representations and
warranties that are not so qualified shall have been true and correct in all
material respects, in each case as of the date of this Agreement and the date of
the Merger, except in the case of any representation and warranty that speaks as
of a particular date, which shall be true and correct or true and correct in all
material respects, as applicable, as of such date.
(b) Satisfaction of Obligations. The Company shall have
performed its obligations, and shall have complied with its covenants and
agreements, under this Agreement.
9.3 Conditions to Obligations of the Company. Notwithstanding any other
provisions of this Agreement, the obligations of the Company to effect the
Merger shall be subject to satisfaction prior to the Closing Date of the
following conditions:
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(a) Representations and Warranties. The representations and
warranties of CompuCom and CompuCom Subsidiary in this Agreement that are
qualified as to materiality shall have been true and correct and such
representations and warranties that are not so qualified shall have been true
and correct in all material respects, in each case as of the date of this
Agreement and the date of the Merger, except in the case of any representation
and warranty that speaks as of a particular date, which shall be true and
correct or true and correct in all material respects, as applicable, as of such
date.
(b) Satisfaction of Obligations. CompuCom and CompuCom Subsidiary
shall have performed their obligations, and shall have complied with their
covenants and agreements, under this Agreement.
ARTICLE X
TERMINATION; PAYMENT OF EXPENSES
10.1 Termination of Agreement and Abandonment of Merger. Anything
herein to the contrary notwithstanding, this Agreement and the Merger
contemplated hereby may be terminated at any time before the Effective Time,
whether before or after approval of this Agreement by the shareholders of the
Company, as follows:
(a) Mutual Consent. By mutual written consent of CompuCom and the
Company.
(b) CompuCom or the Company. By either CompuCom or the Company (i)
if the Merger shall not have occurred prior to August 1, 1998; provided,
however, that the right to terminate the Agreement pursuant to this Section
10.1(b)(i) shall not be available to any party whose failure to perform any of
its obligations under the Agreement results in the failure of any such condition
or if the failure of such condition results from facts or circumstances that
constitute a breach of a representation or warranty under the Agreement by such
party; or (ii) if any Tribunal shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the acceptance for payment of, or payment for, shares of the Company
Common Stock pursuant to the Merger and such order, decree or ruling or other
action shall have become final and nonappealable.
(c) CompuCom or the CompuCom Subsidiary. By CompuCom or the
CompuCom Subsidiary if (i) any of the representations and warranties of the
Company contained in this Agreement shall not have been, or shall cease to be,
true and correct in all material respects (whether because of circumstances or
events occurring in whole or in part prior to, on or after the date of this
Agreement), or (ii) the Company shall have breached or failed to perform in any
material respect any covenant or agreement to be performed by it pursuant to
this Agreement; provided, that CompuCom or CompuCom Subsidiary may not terminate
the Agreement pursuant to this Section 10.1(c) if CompuCom or CompuCom
Subsidiary is at such time in breach of its obligations under this Agreement.
(d) Company. By the Company (i) in connection with entering into a
definitive agreement in accordance with Section 7.3(b), provided it has complied
with all provisions thereof, including the notice provisions therein, and that
it makes simultaneous payment of the Termination Fee and has paid any
Indebtedness owing to CompuCom as provided in Section 7.3; or (ii) if (A) any of
the representations and warranties of CompuCom or the CompuCom Subsidiary
contained in this Agreement shall not have been, or shall cease to be, true and
correct in all material respects (whether because of circumstances or events
occurring in whole or in part prior to, on or after the date of this Agreement)
or (B) CompuCom or the CompuCom Subsidiary shall have breached or failed to
perform in any material respect any covenant or agreement to be performed by
them pursuant to this Agreement, provided, that the Company may not terminate
the Agreement pursuant to this Section 10.1(d) if the Company is at such time in
breach of its obligations under this Agreement.
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10.2 Effect of Termination. In the event of a termination of this
Agreement by either the Company or CompuCom as provided in Section 10.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the party of CompuCom, CompuCom Subsidiary or the Company or their
respective officers or directors, except with respect to Section 5.27, this
Section 10.2 and Article XII; provided, however, that nothing herein shall
relieve any party for liability for any breach hereof.
10.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after obtaining the approval of the Company's shareholders (if
required by law), but, after any such approval, no amendment shall be made which
by law requires further approval by such shareholders without obtaining such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
10.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (c) subject to the
proviso of Section 10.3, waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under the Agreement or otherwise shall not
constitute a waiver of those rights.
10.5 Fees and Expenses.
(a) Except as provided below in this Section 10.5, all fees and
expenses incurred in connection with the Merger, this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such fees or expenses, whether or not the Merger is consummated.
(b) If (i) the Company shall terminate this Agreement pursuant to
Section 10.1(d)(i), (ii) CompuCom shall terminate this Agreement pursuant to
Section 10.1(c)(ii) hereof, or (iii) either the Company or CompuCom terminates
this Agreement pursuant to Section
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10.1(b)(i) and (A) prior thereto there shall have been publicly announced
another Takeover Proposal and (B) a Takeover Proposal shall be consummated on or
prior to July 31, 1998, the Company shall pay to CompuCom an amount equal to
$1,000,000 (the "Termination Fee") which shall be payable in same day funds. The
Termination Fee shall be paid (x) in the case of terminations referenced in
subparts (i) and (ii) above, concurrently with any such termination and (y) in
the case of termination referenced in subpart (iii) above, at the time of the
commencement of the Takeover Proposal as described in subpart (iii) above.
ARTICLE XI
GENERAL
11.1 Release of Information. The Company and CompuCom shall, subject to
their respective legal obligations (including requirements of the Nasdaq
National Market and other similar regulatory bodies), cooperate with each other
in releasing information concerning this Agreement and the transactions
contemplated hereby. Each of the Company and CompuCom shall furnish to the other
drafts of all releases prior to publication and agree to promptly consult with
each other prior to issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and in making
any filings with any federal or state governmental or regulatory agency or with
the Nasdaq National Market with respect thereto; provided, however, that each
party shall have the right, in the event of any disagreement between CompuCom
and the Company about the timing or content of any such releases or other public
statements or filings, to issue such releases or other public statements or to
file such filings as it is advised by counsel that it is required to make to
assure continued compliance with federal and state securities laws.
11.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (which
is confirmed), sent by overnight courier (provided proof of delivery) or mailed
by registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by light notice):
(a) If to CompuCom or the CompuCom Subsidiary, to:
CompuCom Systems, Inc.
7171 Forest Lane
Dallas, Texas 75230
Attention: Lazane Smith, Sr. Vice President, Finance and
Chief Financial Officer
Telecopy No.: (972) 856-5395
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With a copy (which shall not constitute effective
notice) to:
Strasburger & Price, L.L.P.
901 Main Street, Suite 4300
Dallas, Texas 75202
Attention: Frederick J. Fowler, Esq.
Telecopy No.: (214) 651-4330
(b) If to the Company, to:
Dataflex Corporation
2145 Calumet Street
Clearwater, Florida 33765
Attention: Philip Doganiero, Chairman of the Board
Telecopy No.: (813) 562-2243
With a copy (which shall not constitute effective
notice) to:
Holland & Knight, LLP
400 N. Ashley Street, Suite 2050
Tampa, Florida 33602
Attention: Robert J. Grammig, Esq.
Telecopy No.: (813) 229-0134
11.3 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors,
heirs, executors, administrators, legal representatives and permitted assigns,
provided that neither this Agreement nor any rights or obligations hereunder may
be assigned without the written consent of the other parties except that (i)
CompuCom may assign any or all of its rights hereunder to any Affiliate of
CompuCom, and (ii) the CompuCom Subsidiary may assign any or all of its rights
hereunder to any other newly organized corporation under the laws of the State
of Florida, all of the capital stock of which is owned directly or indirectly by
CompuCom; provided, however, CompuCom shall remain liable on a direct and
primary basis for the performance of any such direct or indirect subsidiary.
Nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person (other than the parties hereto, any permitted assignee, holders
of shares of Company Common Stock, holders of Options and Indemnities) any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement, and no Person (other than as so specified) shall be deemed a third
party beneficiary under or by reason of this Agreement.
11.4 Further Assurances. Each party hereto agrees to use its
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things that may be necessary or appropriate to
consummate and to make effective the transactions contemplated by this
Agreement, including, without limitation, the execution and delivery of such
other certificates, agreements, instruments and documents and the provision of
all such information as may be necessary or appropriate as aforesaid.
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11.5 Specific Performance. All remedies, either under this Agreement or
by law or otherwise afforded to any party hereto, shall be cumulative and not
alternative. Each party hereto acknowledges and agrees to any breach of the
agreements and covenants contained in this Agreement would cause irreparable
injury to the other parties hereto for which such parties would have no adequate
remedy at law. In addition to any other remedy to which any party hereto may be
entitled, each party hereto agrees that temporary and permanent injunctive and
other equitable relief and specific performance may be granted without proof of
actual damages or inadequacy of legal remedy in any proceeding that may be
brought to enforce any of the provisions of this Agreement.
11.6 Severability. If any provision of this Agreement or the
application of any such provision to any Person or circumstance, shall be
declared judicially to be invalid, unenforceable or void, such decision shall
not have the effect of invalidating or voiding the remainder of this Agreement,
it being the intent and agreement of the parties that this Agreement shall be
deemed amended by modifying such provision to the extent necessary to render it
valid, legal and enforceable while preserving its intent or, if such
modification is not possible, by substituting therefor another provision that is
valid, legal and enforceable and that achieves the same objective.
11.7 Entire Agreement. This Agreement (including the exhibits and
schedules including, without limitation, the Disclosure Schedule hereto) and the
documents and instruments executed and delivered in connection herewith
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous agreements and
understandings, whether written or oral, among the parties or any of them with
respect to the subject matter hereof, and there are no representations,
understandings or agreements relating to the subject matter hereof that are not
fully expressed in this Agreement and the documents and instruments executed and
delivered in connection herewith. All exhibits and schedules attached to this
Agreement are expressly made a part of, and incorporated by reference into, this
Agreement.
11.8 Governing Law. This Agreement shall be construed in accordance
with, and the rights of the parties shall be governed by, the substantive laws
of the State of Florida, without giving effect to any choice-of-law rules that
may require the application of the laws of another jurisdiction.
11.9 Certain Construction Rules. The article and section headings and
the table of contents contained in this Agreement are for convenience of
reference only and shall in no way define, limit, extend or describe the scope
or intent of any provisions of this Agreement. Whenever the context may require,
any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa. In addition, as used in this Agreement,
unless otherwise provided to the contrary, (a) all references to days, months or
years shall be deemed references to calendar days, months or years and (b) any
reference to a "Section," "Article," "Exhibit" or "Schedule" shall be deemed to
refer to a section or article of this Agreement or an exhibit or schedule
attached to this Agreement. The words "hereof," "herein," and "hereunder" and
words of similar import referring to this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Unless otherwise
specifically provided for herein, the term "or" shall not be deemed to be
exclusive.
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11.10 Survival of Covenants, Representations and Warranties. The
respective covenants, representations and warranties of CompuCom, the Company
and the CompuCom Subsidiary contained herein shall expire and be terminated on
the Effective Time, unless specifically herein provided.
11.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one instrument binding on all the parties,
notwithstanding that all the parties are not signatories to the original or the
same counterpart.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first above written.
THE COMPANY:
DATAFLEX CORPORATION
By: /S/ RICHARD C. ROSE
------------------------------------
Richard C. Rose
Chief Executive Officer
COMPUCOM:
COMPUCOM SYSTEMS, INC.
By: /S/ EDWARD ANDERSON
------------------------------------
Edward Anderson
Chief Executive Officer
THE COMPUCOM SUBSIDIARY:
COMPUCOM ACQUISITION CORP.
By: /S/ M. LAZANE SMITH
------------------------------------
Name: M. Lazane Smith
-------------------------------
Title: President
------------------------------
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SCHEDULE 1.1
DEFINITIONS
"33 Act" has the meaning specified in Section 5.4(b).
"Accounts Receivable" as of any specified date means the accounts
receivable (including, without limitation, any "accounts" as defined under the
Uniform Commercial Code of the State of Florida) and notes receivable of the
Company as of that date, including any Indebtedness arising from the sale or
license of goods or the performance of services by the Company and the right to
payment of any interest or finance charges or similar fees or charges relating
thereto.
"Affiliate" means, with respect to any specified Person, any other
Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with such specified
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
Contract or otherwise.
"Agreement" has the meaning specified in the preamble hereof.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and as in effect on the date hereof.
"Certificates" has the meaning specified in Section 4.3.
"Closing" has the meaning specified in Section 2.2.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated and the rulings issued thereunder.
"Company" has the meaning specified in the preamble hereof.
"Company 10-K" has the meaning specified in Section 7.2(c).
"Company 1997 Financial Statements" has the meaning specified in
Section 5.7.
"Company Common Stock" has the meaning specified in the recitals
hereof.
"Company Filed SEC Documents" has the meaning specified in Section 5.7.
"Company IP" means, collectively, the Owned IP and the Not-Owned IP.
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<PAGE> 80
"Company Option Plans" has the meaning specified in Section 4.6(a).
"Company SEC Documents" has the meaning specified in Section 5.6.
"CompuCom" has the meaning specified in the preamble hereof.
"CompuCom Subsidiary" has the meaning specified in the preamble hereof.
"Confidential Software" has the meaning specified in Section
5.12(c)(ii).
"Confidentiality Contract" has the meaning specified in Section
5.12(c)(ii).
"Consent" means any consent, approval, permit, notice, action,
authorization or giving of notice to any Person not a party to this Agreement.
"Contract" means, with respect to any Person, any contract, agreement,
understanding or other instrument or obligation (whether oral or written,
pending or executory) to which such Person is a party or by which such Person or
such Person's properties or assets are or may be bound.
"Disbursing Agent" has the meaning specified in Section 3.3(a).
"Disclosure Schedule" has the meaning specified in Section 2.1.
"Effective Time" means the date and time at which the Merger becomes
effective as provided in Section 3.2.
"Employee Benefit Plans" has the meanings specified in Section 5.15(a).
"Environmental Laws" mean any Legal Requirement relating to (i)
emissions, discharges, releases, threatened releases, or the presence of
pollutants, contaminants, toxic materials, waste, Hazardous Substances or other
substances into or in the environment, including, but not limited to, ambient
air, surface water, groundwater, publicly owned treatment works, septic systems
or land; (ii) the use, treatment, storage, disposal, handling, manufacturing,
sale, transportation or shipment of any Hazardous Substance, toxic materials,
waste, material, substances, products or by-products as defined in CERCLA; or
(iii) otherwise relating to the pollution or protection of health, safety or
environment.
"ERISA" has the meaning specified in Section 5.15(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FBCA" has the meaning specified in Section 3.1.
"GAAP" means generally accepted accounting principles and practices
which are recognized as such by the American Institute of Certified Public
Accountants acting through its Accounting
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Principles Board or other appropriate board or committee (other than the
Emerging Standards Committee), and which are consistently applied for all
periods so as to present fairly the financial condition, the results of
operations and the cash flows of the relevant Person or Persons.
"Hazardous Substance" means hazardous substance as defined in CERCLA,
any petroleum or petroleum based substance, natural gas or any other hazardous,
toxic or noxious pollutant, material or substance.
"HSR Act" has the meaning specified in Section 5.4(b).
"Indebtedness" means, with respect to any Person, all obligations,
contingent or otherwise, which in accordance with GAAP would be required to be
presented upon the such Person's balance sheet as liabilities, but in any event
including liabilities secured by any Lien existing on property owned or acquired
by such Person or a subsidiary thereof, whether or not the liability secured
thereby shall have been assumed by or shall otherwise be the Person's legal
liability, capitalized lease obligations and all guarantees, endorsements and
other contingent obligations in respect of Indebtedness of other Persons.
"Indemnified Parties" has the meaning specified in Section 8.6(a).
"Intellectual Property" shall mean and include (a) all domestic and
foreign patents (including, without limitation, certificates of invention and
other patent equivalents), patent applications and patents issuing therefrom as
well as any division, continuation or continuation in part thereof, and any
reissue, extension, revival or renewal of any patent; (b) all domestic and
foreign trademarks (whether registered or at common law), trade names, service
marks, assumed names, trade dress, logos and registrations for and applications
to register any of the same; (c) copyrights and registration of claim to
copyright, (d) novel devices, processes, compositions of matter, methods,
techniques, observations, discoveries, apparatuses, designs, expressions,
theories and ideas, whether or not patentable; (e) Software; and (f) Trade
Secrets.
"Know-How" means scientific, engineering, mechanical, electrical,
financial, marketing or practical knowledge or experience useful in the business
and operations of the Company.
"Knowledge" means with respect to a particular fact or other matter,
the actual current knowledge of David Castel, Stephen Terp, Steve Morse, Mickey
Bland, Deborah Medley, Daniel Bisaillon, Judy Wilkey, Mariano Dy-liacco and the
executive officers and directors of the Company after having conducted a
reasonably comprehensive investigation concerning the existence of such fact or
other matter.
"Legal Requirement" means any domestic, foreign or international law,
treaty, ordinance, statute, rule or regulation of any Tribunal or any Order.
"Lien" means, with respect to any properties or assets, any mortgage,
pledge, hypothecation, assignment, security interest, lien, tax lien,
assessment, lease, sublease, adverse claim, levy, charge, liability or
encumbrance, or preference, priority or other security agreement or preferential
arrangement of any kind or character whatsoever (including, without limitation,
any conditional sale
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or other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement under the Uniform Commercial Code or comparable
law of any jurisdiction) in respect of such properties or assets.
"Material Adverse Effect" means a material adverse effect (which shall
be deemed to include, without limitation, any adverse effect aggregating
$150,000 or more) on the business, operations, affairs, condition (financial or
otherwise), results of operations, properties, assets, liabilities or prospects
of the Company or, after the Effective Time, the Surviving Corporation.
"Merger" has the meaning specified in the preambles.
"Merger Consideration" has the meaning specified in the preambles.
"Miscellaneous Software Components" has the meaning specified in the
definition of "Software."
"Multiemployer Plans" has the meaning specified in Section 5.15(a).
"Notice of Superior Proposal" has the meaning specified in Section
7.3(b).
"Not-Owned IP" has the meaning specified in Section 5.12(a)(ii).
"Not-Owned Software" has the meaning specified in Section 5.12(b)(ii).
"Options" means options of the Company to purchase shares of Company
Common Stock, as granted pursuant to the Company's two Incentive Stock Option
Plans and its five Incentive and Nonqualified Stock Option Plans.
"Order" means any decision, judgment, order, writ, injunction, decree,
award or determination of any Tribunal.
"Owned IP" has the meaning specified in Section 5.12(a)(i).
"Owned Software" has the meaning specified in Section 5.12(b)(i).
"Pension Plans" has the meaning specified in Section 5.15(a).
"Person" means any corporation, association, partnership, joint
venture, organization, individual, business, trust or any other entity or
organization of any kind or character, including a Tribunal.
"Proxy Statement" has the meaning specified in Section 5.4(b).
"Qualified Plans" has the meaning specified in Section 5.15(b).
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<PAGE> 83
"Schedule 14D-1" has the meaning specified in Section 2.1(b).
"Schedule 14D-9" has the meaning specified in Section 2.2(b).
"SEC" means the Securities and Exchange Commission.
"Shareholders Meeting" has the meaning specified in Section 7.4(b).
"Software" means the expression of an organized set of instructions in
a natural or coded language which is contained on a physical media of any nature
(e.g., written, electronic, magnetic, optical or otherwise) and which may be
used with a computer or other automated data processing equipment device of any
nature which is based on digital technology, to make such computer or other
device operate in a particular manner and for a certain purpose, as well as any
related documentation for such set of instructions. The term shall include
computer programs in source and object code, test or other significant data
libraries, user documentation for computer programs, and any of the following
which is contained on a physical media of any nature and which is used in the
design, development, modification, enhancement, testing, installation,
maintenance, diagnosis or assurance of the performance of a computer program
(collectively, "Miscellaneous Software Components"): flow diagrams, masks, input
and output formats, file layouts, database formats, test programs, installation
and operating instructions, diagnostic and maintenance instructions, and other
similar materials and information.
"Superior Proposal" has the meaning specified in Section 7.3(b).
"Surviving Corporation" has the meaning specified in Section 3.1.
"Takeover Proposal" has the meaning specified in Section 7.3(a).
"Taxes" means all taxes, charges, fees, levies or other similar
assessments or liabilities (including, without limitation, income, receipts, ad
valorem, value added, excise, property (whether real property or personal
property), windfall profit, sales, occupation, service, stamp, use, licensing,
withholding, employment, payroll, share, capital, surplus, franchise,
occupational or other taxes imposed by any Tribunal, whether computed on a
separate, consolidated, unitary or combined basis or in any other manner, and
includes any interest, fines, penalties, assessments, deficiencies, or additions
to tax.
"Termination Fee" has the meaning specified in Section 10.5.
"Trade Secrets" means any formula, design, device or compilation of
information which is used or held for use in the business and operations of the
Company, which gives the holder thereof an advantage or opportunity for
advantage over competitors which do not have or use the same, and which is not
generally known by the public. Trade Secrets can include, by way of example,
information contained on drawings and other documents, and information relating
to research, development or testing; provided, however, that for purposes of
this Agreement, Trade Secrets shall not include Software.
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<PAGE> 84
"Tribunal" means any government, any arbitration panel, any court or
any governmental department, commission, board, bureau, agency or
instrumentality of the United States or any foreign or domestic state, province,
commonwealth, nation, territory, possession, country, parish, town, township,
village or municipality.
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<PAGE> 85
APPENDIX II
[RAYMOND JAMES LETTERHEAD]
Aril 9, 1998
Board of Directors
Dataflex Corporation
2145 Calumet Street
Clearwater, FL 33765
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of the outstanding common stock, no par value, (the
"Common Stock") of Dataflex Corporation ("Dataflex") of the consideration to be
received in connection with the proposed merger (the "Merger") of CompuCom
Systems, Inc. ("CompuCom") with Dataflex pursuant and subject to the Agreement
and Plan of Merger among Dataflex, CompuCom and CompuCom Acquisition Corp. (the
"Agreement"). The consideration to be offered by CompuCom in exchange for all
the outstanding Common Stock of Dataflex will be $4.10 per share.
In connection with our review of the proposed Merger and the preparation of our
opinion herein, we have, among other things:
1. reviewed the financial terms and conditions as stated in the Agreement;
2. reviewed the audited financial statements of Dataflex as of and for the
years ended March 31, 1997 and 1996;
3. reviewed the Dataflex Quarterly Reports filed on Form 10-Q for the quarters
ended June 30, 1997, September 30, 1997 and December 31, 1997;
4. reviewed other Dataflex financial and operating information requested from
and/or provided by Dataflex;
5. discussed with the management of Dataflex the financial projections and
anticipated growth rates and margins of Dataflex through the year ended
December 31, 2002;
6. reviewed certain other publicly available information on Dataflex; and
7. discussed with members of the senior management of Dataflex certain
information relating to the aforementioned and any other matters which we
have deemed relevant to our inquiry.
We have assumed and relied upon the accuracy and completeness of all
information supplied or otherwise made available to us by Dataflex, CompuCom or
any other party and have not attempted to verify independently any of such
information. We have not made or obtained an independent appraisal of the
assets or liabilities (contingent or otherwise) of Dataflex. With
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<PAGE> 86
Dataflex Corporation
April 9, 1998
Page 2
respect to financial forecasts and other information and data provided to or
otherwise reviewed by or discussed with us, we have assumed that such forecasts
and other information and data have been reasonably prepared in good faith on
bases reflecting the best currently available estimates and judgments of
management, and we have relied upon each party to advise us promptly if any
information previously provided became inaccurate or was required to be updated
during the period of our review.
Our opinion is based upon market, economic, financial and other circumstances
and conditions existing and disclosed to us as of April 9, 1998 and any
material change in such circumstances and conditions would require a
reevaluation of this opinion, which we are under no obligation to undertake.
We express no opinion as to the underlying business decision to effect the
Merger, the structure or tax consequences of the Agreement or the availability
or advisability of any alternatives to the Merger.
In conducting our investigation and analyses and in arriving at our opinion
expressed herein, we have taken into account such accepted financial and
investment banking procedures and considerations as we have deemed relevant,
including the review of (i) historical and projected revenues, operating
earnings, net income and capitalization of Dataflex and certain other publicly
held companies in businesses we believe to be comparable to Dataflex; (ii) the
current and projected financial position and results of operations of Dataflex;
(iii) the historical market prices and trading activity of the Common Stock of
Dataflex; (iv) financial and operating information concerning selected business
combinations which we deemed comparable in whole or in part; and (v) the
general condition of the securities markets.
Raymond James & Associates, Inc. ("Raymond James") is actively engaged in the
investment banking business and regularly undertakes the valuation of investment
securities in connection with public offerings, private placements, business
combinations and similar transactions. Raymond James has been engaged to render
financial advisory services to Dataflex in connection with the proposed Merger
and will receive a fee for such services, which fee is contingent upon
consummation of the Merger. Raymond James will also receive a fee upon the
delivery of this opinion. In addition Dataflex has agreed to indemnify us
against certain liabilities arising out of our engagement.
In the ordinary course of our business, Raymond James may trade in the
securities of Dataflex for our own account or for the accounts of our customers
and, accordingly, may at any time hold a long or short position in such
securities.
It is understood that this letter is for the information of the Board of
Directors of Dataflex only in evaluating the proposed Merger and does not
constitute a recommendation to any shareholder of Dataflex regarding how said
shareholder should vote on the proposed Merger.
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<PAGE> 87
Board of Directors
Dataflex Corporation
April 9, 1998
Page 3
Furthermore, this letter should not be construed as creating any fiduciary duty
on the part of Raymond James to any such party. This opinion is not to be quoted
or referred to, in whole or in part, without our prior written consent, which
will not be unreasonably withheld. We have consented to the inclusion of this
letter in the Proxy Statement filed by Dataflex Corporation with the Securities
and Exchange Commission.
Based upon and subject to the foregoing, it is our opinion that, as of
April 9, 1998, the consideration to be received by the shareholders of Dataflex
pursuant to the Agreement is fair, from a financial point of view, to the
holders of Dataflex's outstanding Common Stock.
Very truly yours,
/S/ RAYMOND JAMES & ASSOCIATES, INC.
RAYMOND JAMES & ASSOCIATES, INC.
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<PAGE> 88
APPENDIX
DATAFLEX CORPORATION
2145 CALUMET STREET
CLEARWATER, FLORIDA 34625
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder hereby appoints Philip Doganiero, Richard C.
Rose and Anthony G. Lembo, or any of them, as Proxies, each with the power to
appoint his substitute, and hereby authorizes them or their substitutes to
represent and to vote, as designated below, all the shares of common stock of
Dataflex Corporation held of record by the undersigned shareholder on May 15,
1998, at the Special Meeting of Shareholders to be held on June 26, 1998 or any
adjournment thereof.
1. To consider and vote upon a proposal to approve and adopt an Agreement and
Plan of Merger, dated as of April 10, 1998, by and among CompuCom Systems,
Inc. ("CompuCom"), CompuCom Acquisition Corp., a wholly owned subsidiary of
CompuCom ("CompuCom Subsidiary"), and the Company, pursuant to which: (i)
CompuCom Subsidiary will be merged with and into the Company, with the
Company continuing as the surviving corporation and as a wholly owned
subsidiary of CompuCom and (ii) each outstanding share of common stock, no
par value per share, of the Company, will be converted into the right to
receive $4.10 in cash, without interest.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued and to be dated and signed on reverse side)
(continued from other side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE, AND
RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
Dated: , 1998
------------------
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Signature
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Signature if held jointly
