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(415) 233-4586
June 30, 1995
VIA EDGAR
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Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Western Micro Technology, Inc. -- Definitive Proxy
Materials -- Special Meeting of Shareholders -- July 21, 1995
Dear Commissioners:
On behalf of Western Micro Technology, Inc. (the "Company"), please find
enclosed for filing a copy of the Company's Notice of Special Meeting of
Shareholders, Proxy Statement and form of Proxy relating to its Special Meeting
of Shareholders to be held on July 21, 1995. The fee applicable to this filing
was paid at the time the Company filed its preliminary proxy material with the
Commission. For the information of the Commission only, the Company is also
concurrently providing the Commission in paper format with seven copies of the
Company's Annual Report to Shareholders, which consists of the Company's Form
10-K for the year ended December 31, 1994, as amended by the Company's Form
10-K/A Amendment No. 1 dated April 28, 1995, and a letter to Shareholders from
the Chairman of the Board.
The Company intends to mail definitive copies of the proxy materials to
shareholders on or about May 30, 1995.
By copy of this letter, three copies of the Company's preliminary proxy
materials have also been sent to the Nasdaq Stock Market.
To indicate your receipt of the enclosed materials, please stamp the
enclosed copy of this letter and return it in the enclosed self-addressed,
postage-prepaid envelope.
Very truly yours,
Katharine A. Martin
Encs.
cc: Nasdaq Stock Market
Mr. James W. Dorst
Mr. J.A. del Calvo
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Western Micro Technology, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/x/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
$13,000,000
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5) Total fee paid:
$2,600 at the time of filing preliminary proxy
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 3
WESTERN MICRO TECHNOLOGY, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of
WESTERN MICRO TECHNOLOGY, INC.:
A Special Meeting of Shareholders of Western Micro Technology, Inc.
(the "Company") will be held at 12900 Saratoga Avenue, Saratoga, California
95070, on Friday, July 21, 1995 at 10:00 a.m. for the purpose of considering and
acting upon the following proposals:
(1) To approve the sale of certain of the assets of the
Company, comprised of all of the operating assets of the Company's
electronic semiconductor components distribution business, to Reptron
Electronics, Inc., pursuant to the terms and conditions of the Asset
Purchase Agreement dated as of May 5, 1995 in the form attached as
Appendix A to this Proxy Statement; and
(2) To transact such other business as may properly come before
the meeting.
The Board of Directors has fixed the close of business on May 22, 1995
as the record date for determination of Shareholders entitled to notice of and
to vote at the Special Meeting and at any postponements or adjournments thereof.
The affirmative vote of holders of a majority of the Shares of Common Stock
outstanding as of the record date is required to approve the proposed
transaction. Shareholders are not entitled to dissenters' rights under
California General Corporation Law in connection with the proposed transaction.
The Company's 1994 Annual Report, which consists of the Company's Form
10-K for the year ended December 31, 1994, as amended by the Company's Form
10-K/A Amendment No. 1 dated April 28, 1995, and a letter to the Shareholders
from the Chairman of the Board, and the Company's Form 10-Q for the quarter
ended March 31, 1995, accompany this Notice of Meeting and Proxy Statement.
By Order of the Board of Directors
Ronald H. Mabry
Secretary
Saratoga, California
June 30, 1995
BECAUSE APPROVAL OF ITEM 1 ABOVE REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF
THE SHARES ISSUED AND OUTSTANDING, YOUR VOTE IS PARTICULARLY IMPORTANT.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE ACCOMPANYING PROXY CARD
IN THE ENCLOSED ENVELOPE. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR
PROXIES AND VOTE IN PERSON IF THEY DESIRE.
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TABLE OF CONTENTS
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SPECIAL MEETING OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PURPOSE OF THE MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SUMMARY OF PROXY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
THE SALE OF ASSETS TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Businesses to be Sold and Retained . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Certain Information Concerning the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Interests of Management in the Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Effect on Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Application of Sale Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Regulatory Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Tax Consequences to the Company and the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Recommendation of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Conditions to Consummation of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Shareholder Derivative Complaint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Termination; Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Agreement Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 19
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Unaudited Pro Forma Condensed Consolidated Balance Sheet at March 31, 1995 . . . . . . . . . . . . . . . . . . . . 29
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 1995 . . . 30
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 1994 . . . . . 31
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements at March 31, 1995 and for the Year
Ended December 31, 1994 and the Three Months Ended March 31, 1995 . . . . . . . . . . . . . . . . . . . . 32
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
APPENDIX A - Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B - Opinion of Von Gehr International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
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WESTERN MICRO TECHNOLOGY, INC.
12900 SARATOGA AVENUE
SARATOGA, CA 95070
(408) 725-1660
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PROXY STATEMENT
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SPECIAL MEETING OF SHAREHOLDERS
JULY 21, 1995
This Proxy Statement is furnished to the holders of Common Stock (the
"Common Stock") of Western Micro Technology, Inc. (the "Company") in connection
with the solicitation by the Board of Directors of the Company of proxies in the
form enclosed to be voted at a Special Meeting of Shareholders of the Company to
be held at the Company's offices at 10:00 a.m. on Friday, July 21, 1995 (the
"Special Meeting"). This proxy statement and the accompanying form of proxy are
being mailed to Shareholders on or about June 30, 1995.
PURPOSE OF THE MEETING
At the Special Meeting, the Shareholders of the Company will be asked
to consider and act upon the following proposals:
(1) To approve the sale of certain of the assets of the
Company, comprised of all of the operating assets of the Company's
electronic semiconductor components distribution business, to Reptron
Electronics, Inc., pursuant to the terms and conditions of the Asset
Purchase Agreement in the form attached as Appendix A to this Proxy
Statement; and
(2) To transact such other business as may properly come before
the meeting.
The Board of Directors knows of no other business which will come
before the meeting. The Board of Directors anticipates that the 1995 Annual
Meeting of Shareholders, at which the Shareholders will, among other things,
elect directors of the Company and vote to ratify the Company's independent
accountants, will be convened subsequent to the Special Meeting to which this
Proxy Statement relates and prior to September 15, 1995. The 1995 Annual Meeting
will be preceded by a separate notice of meeting and form of proxy statement
delivered to the Shareholders of record of the Company as of the applicable
record date for such meeting.
VOTING RIGHTS
Shareholders of record of the Company as of the close of business on
May 22, 1995 have the right to receive notice of and to vote at the Special
Meeting. On May 22, 1995, the Company had issued and outstanding 3,703,007
shares of Common Stock, the only class of voting securities outstanding. Each
share of Common Stock is entitled to one vote. For action to be taken at the
Special Meeting, the majority of the shares entitled to vote must be represented
at the meeting in person or by proxy. In addition, the affirmative vote of a
majority of the outstanding shares entitled to vote is required to approve the
Asset Purchase Agreement between the Company and Reptron Electronics, Inc.
relating to the sale of the Company's electronic semiconductor components
distribution business. As a result, abstentions and broker non-votes will
generally have the effect of negative votes. This is because, if a majority of
the outstanding shares entitled to vote is not represented at the meeting in
person or by proxy, or if the aggregate number of negative votes, abstentions
and broker non-votes is such that the affirmative votes do not constitute a
majority of the outstanding shares, the proposal will be defeated.
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PROXIES
Proxies for use at the Special Meeting are being solicited by the Board
of Directors of the Company from its shareholders.
Shares represented by properly executed proxies received by the Company
will be voted at the Special Meeting in accordance with the instructions
thereon. Shares represented by executed proxies received by the Company with no
instructions will be voted in favor of all proposals set forth in the Notice of
Meeting.
Any person giving a proxy in the form accompanying this Proxy
Statement has the power to revoke it at any time before its exercise by (i)
filing with the Secretary of the Company a signed written statement revoking
his or her proxy or (ii) submitting an executed proxy bearing a date later than
that of the proxy being revoked. A proxy may also be revoked by attending the
Special Meeting and voting in person. Attendance at the Special Meeting will
not by itself constitute the revocation of a proxy.
No persons have been authorized to give any information or to make any
representations other than those contained in this Proxy Statement in connection
with the solicitation of proxies and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any other person. This Proxy Statement does not constitute the solicitation
of a proxy in any jurisdiction to any person to whom it is not lawful to make
any such solicitation in such jurisdiction. The delivery of this Proxy Statement
does not, under any circumstances, create an implication that there has been no
change in the affairs of the Company since the date hereof or that the
information herein is correct as of any time subsequent to its date.
ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT RELATING TO REPTRON
ELECTRONICS, INC. HAS BEEN DERIVED FROM PUBLICLY AVAILABLE DOCUMENTS FILED BY
THAT ENTITY WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE COMPANY DOES
NOT WARRANT THE ACCURACY OR COMPLETENESS OF INFORMATION RELATING TO REPTRON
ELECTRONICS, INC.
The approximate date on which this Proxy Statement is being mailed to
the Company's Shareholders is June 30, 1995. This Proxy Statement is
accompanied by (a) the form of proxy card to be signed and returned in the
enclosed envelope, (b) the 1994 Annual Report of the Company, which consists of
the Company's Form 10-K for the year ended December 31, 1994, as amended by the
Form 10-K/A Amendment No. 1 dated April 28, 1995, and a letter to the
Shareholders from the Chairman of the Board, and (c) the Company's quarterly
report on Form 10-Q for the quarter ended March 31, 1995.
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SUMMARY OF PROXY STATEMENT
The following is a summary, for the convenience of Shareholders, of
certain information with regard to the Asset Purchase Agreement to be acted
upon at the Special Meeting. This summary is necessarily incomplete and
selective and is qualified in its entirety by reference to the complete Proxy
Statement and the Exhibits thereto.
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Date, Time and Place of the Special The Special Meeting of Shareholders of Western Micro Technology,
Meeting of Shareholders Inc. (the "Company") will be held at 10:00 a.m., on Friday,
July 21, 1995 at 12900 Saratoga Avenue, Saratoga, California.
Record Date Holders of record of the Company's Common Stock at the close of
business on May 22, 1995, are entitled to notice of and to vote
at the Special Meeting of Shareholders.
Purpose of the Meeting Shareholders will be asked to consider and act upon an Asset
Purchase Agreement dated as of May 5, 1995 (the "Agreement"),
between the Company and Reptron Electronics, Inc. (the
"Purchaser"), a copy of which is attached as Appendix A to this
Proxy Statement. If the Agreement is approved by the
Shareholders, and all conditions to the Agreement are met, the
Company will sell its electronic semiconductor components
distribution business to the Purchaser (the "Transaction") on
the closing date described in the Agreement (the "Closing").
The Board of Directors knows of no other business which will
come before the meeting.
The Proposed Transaction Pursuant to the Transaction, the Purchaser will purchase assets
consisting of the Company's inventory related to its electronic
semiconductor components distribution business as well as
certain receivables, machinery, furniture, fixtures and
equipment relating to such business (collectively, the "Target
Business"), for approximately the book value of the assets and
the Purchaser will assume certain trade payable and branch lease
obligations relating to the Target Business.
Although the exact amount of the purchase price for the Target
Business will not be known until the Closing, the Company
expects to receive net cash proceeds of approximately $12.5
million, of which approximately $1.0 million (the "Holdback")
will be held in escrow for six months to serve as a source of
certain rights specified in the Agreement. Thereafter, the
Holdback (less the sum of all claims against the Holdback paid
or still in process of resolution) will be paid to the Company.
Accordingly, if sufficient claims and indemnification are
allowed against the Holdback, the total amount of the net cash
proceeds for the Target Business may not exceed approximately
$11.5 million. See "Sale of Assets Transaction--Purchase Price"
(page 9).
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Of the net purchase price proceeds, the Company expects to use
approximately $9.0 million to pay down substantially all of its
outstanding debt, and to use the balance for general working
capital purposes with respect to its remaining business
operations. The Company has no present intent to pay a special
dividend to Shareholders or to otherwise distribute to its
Shareholders any proceeds received from the Transaction.
Required Vote In order for the Transaction to be consummated, the Agreement
must be approved by the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock.
Recommendations of the Board of The Board of Directors of the Company unanimously recommends
Directors that Shareholders vote to approve the Agreement and the
Transaction. The Board of Directors believes that the terms of
the Agreement are fair and that the transactions contemplated by
the Agreement are in the best interests of the Company and its
Shareholders. In recommending that Shareholders approve the
Agreement, the Board of Directors has considered various factors
including the cash and non-cash consideration offered by the
Purchaser, the historical and current financial condition and
results of operations of the Target Business, the future
prospects of such business, the opinion of the Company's
financial advisors, the likelihood of consummating the
Transaction, the compatibility of the Target Business with that
of the Purchaser, and the effect of the Transaction on the
Company's employees and customers. See "Sale of Assets
Transaction--Recommendation of the Board of Directors" (page 14).
Opinion of Financial Advisor The Company's financial advisor, Von Gehr International, has
rendered a written opinion that the cash consideration to be
received by the Company in the Transaction is fair from a
financial point of view. (A copy of the opinion, including a
description of the matters considered, assumptions made and
reviews undertaken in rendering such opinion, appears as
Appendix B and should be read in its entirety.) See "Sale of
Assets Transaction--Opinion of Financial Advisor" (page 11).
Conditions of Transaction Consummation of the Transaction is subject to approval by the
Shareholders and to a number of other conditions, including:
(i) approval by all necessary governmental authorities and
other third parties; (ii) the execution and delivery by the
Company and the Purchaser of a
Non-Competition/Royalty/No-Solicitation Agreement; (iii) the
absence of litigation seeking to enjoin the transaction; (iv) the
discharge of any security interests attached to property subject
to the Transaction; and (v) certain other standard closing
conditions. See "Sale of Assets Transaction--Conditions to
Consummation of the Transaction" (page 16).
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Effective Time of the Transaction The Transaction is anticipated to be consummated within ten
business days following Shareholder approval of the Agreement
and satisfaction or waiver of each other condition precedent
described in the Agreement.
Termination of Agreement The Agreement may be terminated at any time prior to the
Closing: (i) by the Purchaser, if any of the conditions to
the Purchaser's obligations to perform under the Agreement are
not satisfied or waived; (ii) by the Company, if any of the
conditions to the Company's obligations to perform under the
Agreement are not satisfied or waived; or (iii) by mutual
written consent of the Company and the Purchaser.
Effect of the Transaction upon Directors, In the event the Agreement is approved by the Shareholders, at
Officers and Employees the Closing Ronald H. Mabry, Chairman of the Board and Chief
Executive Officer of the Company, will resign from the Company
and will, as a condition of the Transaction, join the Purchaser
to head the electronic components distribution business being
acquired. With the exception of Mr. Mabry, no employee or
officer of the Company has been guaranteed employment by the
Purchaser following the Closing of the Transaction, although the
parties anticipate that certain of the Company's employees
principally involved in the Target Business will, with the
Company's consent, be hired by the Purchaser. No other director
is receiving any consideration, from Reptron or otherwise, as a
result of this transaction. As a condition of the Transaction,
the Company and the Purchaser will enter into a written
agreement pursuant to which, among other things, (i) neither
party will solicit for hire employees of the other party without
the other party's prior written consent, and (ii) if either
party hires an employee or executive of the other party, the
hiring party will pay the other party a specified fee. See
"Sale of Assets Transaction--Interests of Management in the
Transaction" (page 12), "--Effect on Employees" (page 13), and
"--Agreement Not to Compete" (page 17).
Certain Federal Income Tax The sale of assets by the Company will be a taxable transaction
Consequences to the Company. The Company will recognize gain measured by the
difference, if any, between the amount realized from the sale of
the assets and the Company's adjusted tax basis in such assets.
Because the assets are proposed to be sold for approximately
their book value, the Company currently estimates that the
Transaction will result in an immaterial taxable gain. The sale
of assets by the Company will not have any federal income tax
consequences to Shareholders.
No Dissenters' Rights Under the California General Corporation Law, holders of Common
Stock are not entitled to dissenters' rights in connection with
the Transaction.
Selected Financial Data Concerning the The Proxy Statement contains a table setting forth certain
Company unaudited pro forma consolidated financial information
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regarding the Company, giving effect to the proposed Transaction
under the purchase method of accounting and the assumptions and
adjustments described in the notes thereto. In addition, certain
audited and unaudited consolidated financial information
regarding the Company is contained in the Company's 1994 Annual
Report (which includes the annual report on Form 10-K (as
amended) for the year ended December 31, 1994) and the Company's
quarterly report on Form 10-Q for the quarter ended March 31,
1995, both of which accompany this Proxy Statement.
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THE SALE OF ASSETS TRANSACTION
GENERAL
Pursuant to the terms of the Transaction, the Company will sell to the
Purchaser certain of its assets, comprised of all of the operating assets
relating to its electronic component distribution businesses, for aggregate
consideration of approximately the net book value of the inventory, receivables,
furniture and fixtures of the Target Business. The discussion in this Proxy
Statement of the Transaction and the description of the Agreement's principal
terms are subject to and qualified in their entirety by reference to the Asset
Purchase Agreement, a copy of which is attached to this Proxy Statement as
Appendix A and which is incorporated herein by reference.
BACKGROUND
Prior to 1991, the Company's principal business was as a regional
distributor of advanced electronic semiconductor components. In fiscal 1991,
the Company expanded its business to include the distribution of computer
systems, peripheral equipment and software, the markets for which are among
the fastest growing in the electronics industry. For the fiscal year ended
December 31, 1994, the Company's computer systems (including peripheral
equipment and software) group accounted for approximately half of the Company's
overall distribution revenues.
In recent years competition in the electronic semiconductor components
distribution market has significantly increased. The Company's components
distribution business historically has been comprised mainly of Japanese product
lines, as a result of which U.S. semiconductor manufacturers tended to form
relationships with other distributors. The Company's Japanese lines, primarily
dynamic random access memories, generally have been subject to restrictive
quotas, allocations and price fluctuations. In recent years, as U.S. product
lines have become more competitive, the relationships between U.S. semiconductor
manufacturers and their distributors have continued to expand. In addition,
foreign and domestic semiconductor manufacturers increasingly are limiting the
number of distributors they do business with, seeking to form alliances with
national distributors who can service customers from multiple strategic
locations throughout the United States. The heightened competitive environment
which exists in the Target Business' marketplaces, including competition the
Company has faced and continues to face from companies with substantially
greater resources and broader geographical presence than the Company, has in
recent periods adversely impacted the Target Business' profit margins and sales
revenues and resulted in the termination of franchisor accounts and is expected
to continue to do so in foreseeable future periods.
In response to these factors, Company management in 1994 explored
proposals to improve the results of operations of its semiconductor components
business. Recognizing that the Company might lack sufficient capital resources
to expand on its own its business to the degree necessary to effectively
compete in the components market on a long term basis, management determined
it would be in the best interests of the Company and the Shareholders to
explore the feasibility of a merger transaction with another company in order
to significantly increase the resources and geographic presence of the
resulting business. In June 1994, the Company was introduced by one of its
lenders to Von Gehr International, a financial advisory firm based in Palo
Alto, California (the "Advisor"), which thereafter submitted to Company
management a proposal to assist the Company with respect to potential merger
transactions. Although the Company declined to engage the services of the
Advisor at this time, members of Company management maintained a dialogue with
the Advisor over the ensuing several months. During this time, discussions were
also initiated with certain national and regional electronics distribution
companies, including the Purchaser, although no offers were received regarding
a merger or acquisition of the Company as a whole.
In February 1995, as the results of operations of the Company's components
business continued to decline and the Company's search for a merger candidate
continued to produce no offers, the Company received from the Purchaser an
expression of interest to purchase the Company's electronics semiconductor
components business. Concurrently, the financial performance and business
prospects of the Company's
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computer systems business were continuing to increase. Accordingly, the
Purchaser's interest prompted the Company to undertake an analysis of the
viability and future growth prospects of its computer systems business on a
standalone basis. This analysis confirmed management's belief that keeping the
components business would not be in the Company's short or long-term best
interests and its recognition that liquidating the Company's components
inventory and related assets would produce considerably less value for the
Shareholders than the sale of the components business as a going concern.
Moreover, divestiture of the components business on terms favorable to the
Company would enable the Company to focus on continuing to expand its computer
systems business.
In February 1995, the Company engaged the Advisor to assist it in locating
a potential merger candidate or a buyer for the Company's electronic
semiconductor components business. As part of a single fee arrangement
requested by the Company, the Advisor also agreed to render advisory services
in connection with structuring any proposed merger or sale transaction and to
issue a fairness opinion to the Company with respect to the consideration to be
received by the Company or its Shareholders from such a transaction. Because
the Company had already had preliminary discussions with the Purchaser, the
Advisor agreed to reduce the advisory fee payable to it by 50% in the event a
transaction with the Purchaser was completed by August 17, 1995. See "Opinion
of Financial Advisor" below at p. 11.
In late February, 1995, representatives of the Company met with
representatives of the Purchaser, at which time an executive of the Purchaser
reiterated the Purchaser's lack of interest in merging with the Company but
renewed its expression of interest in acquiring the Target Business. Following
this meeting, information was exchanged by the parties pursuant to an agreement
of confidentiality. On March 6-7, 1995, members of Company management and the
Advisor met with representatives of the Purchaser, during which meetings the
Purchaser initially proposed a purchase price for the Target Business, subject
to the satisfaction of certain conditions including, among other things,
completion of its due diligence investigation and the agreement of Ronald Mabry,
the Company's President and Chairman of the Board, to join the Purchaser and run
the Target Business following the sale.
On March 22, 1995, a Special Committee of the Company's Board of Directors
(the "Committee") was formed to negotiate with the Purchaser the terms of the
potential asset sale transaction on behalf of the Company. The Committee
consisted of Ralph Gesell, William Welling, William Sickler and Gregorio Reyes,
constituting four of the Company's five directors. Ronald Mabry, the fifth
director, was not named to and did not participate on the Committee in order to
avoid any conflict of interest that would arise from the Purchaser's stated
intention of hiring Mr. Mabry upon completion of the Transaction. See "Interests
of Management in the Transaction" (p. 12) below. None of the directors on the
Committee are employees of the Company and none of such persons are to receive
any consideration as a result of the Transaction. The Board of Directors granted
to the Committee full power and authority to negotiate and approve the terms of
a transaction with the Purchaser relating to the sale of the Target Business.
The Board also authorized the Advisor to represent the Company in any such
negotiations and, in so doing, to report directly and exclusively to the
Committee.
The Committee met on at least 6 occasions during late March and April
1995. In evaluating a potential transaction with the Purchaser, the Company
considered the potential synergies, operating efficiencies and cost savings
opportunities which it believed were unique to the Purchaser due to the
Purchaser's significant presence in the Target Business markets and which,
accordingly, the Company believed would maximize the consideration it would
receive for the Target Business. As part of these deliberations, the Committee
actively considered alternatives to the proposed Transaction, including
liquidating the electronic components division, sale of the entire Company,
sale of the components division to a different buyer and retaining the
electronic components division. After extensive consideration of the prior
unsuccessful attempts to sell the Company and to improve the performance of the
electronic components division, and of the costs involved in liquidating the
division, it was unanimously decided that the Purchaser's proposal offered the
best opportunity to maximize and maintain Shareholder value of all the possible
alternatives and that therefore the Company should further explore the
Purchaser's proposal. The Advisor was therefore directed to proceed with the
negotiations with the Purchaser and to report directly to the Committee on its
progress in obtaining the best price and other terms for the Target Business.
Also, during this time, the Purchaser undertook an extensive due diligence
investigation with respect to the assets of the Target Business.
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On April 14, 1995, the Company and the Purchaser signed a letter of intent
relating to the sale of the Target Business. Pursuant to the letter of intent,
the Purchaser would acquire the Company's semiconductor components-related
inventory and certain receivables, furniture and equipment, and assume certain
payables, for cash at a price of approximately net book value, and the Purchaser
would assume certain of the Company's lease obligations. The parties agreed that
the basic terms of the letter of intent would be formalized in a definitive
asset purchase agreement. Following additional negotiations between the Company
and the Purchaser, the Agreement was executed by the parties effective May 5,
1995. On May 5, 1995, the market price per share for the Company's Common Stock
was $3.00. On April 13, 1995, the last trading day prior to the date the
proposed Transaction was publicly announced, the per share price for the Common
Stock was $6.00.
PURCHASE PRICE
Pursuant to the terms of the Agreement, the purchase price for the assets
of the Target Business will be the sum of: (i) $100,000 plus (ii) the sum of the
net book value (determined in accordance with generally accepted accounting
principles) of the accounts receivable, inventory and machinery, equipment,
furniture and fixtures related to the Target Business and specifically described
in the Agreement.
At the Closing, the Purchaser will wire transfer to the Company an amount
equal to the difference between (a) the purchase price and (b) the sum of the
Holdback (defined below) plus the accounts payable related to the Target
Business. On the Closing, the Purchaser will deposit in escrow an amount (the
"Holdback") equal to the greater of $1.0 million or the sum of (i) accounts
receivable of any customer of the Target Business any portion of which is aged
over 90 days as of the Closing, plus (ii) certain inventory related to the
Target Business designated by the parties as of the Closing. On May 5, 1995, at
the time the Agreement was signed, the value of such designated accounts
receivable and inventories was $1,857,578. However, based on current inventory
and accounts receivable levels, the Company believes that the amount of the
Holdback, and therefore the portion of the purchase price that will be deposited
in escrow at Closing, will be approximately $1 million.
The Holdback will be held in escrow for six months to serve as a source of
certain rights of indemnification specified in the Agreement. During the term of
the escrow, Purchaser will be entitled to recover from the escrow, up to the
amount of the Holdback, (i) all losses relating to a breach or inaccuracy of
Seller's representations and warranties, (ii) the aggregate amount of the unpaid
balance due under the designated accounts receivable as of the date six months
after the Closing date and (iii) the aggregate book value of the unsold
designated inventory as of the date six months after the Closing date. Purchaser
is required to assign to the Company all designated accounts receivable and
designated inventory for which any claims are made against the Holdback. Any
portion of the Holdback with respect to which no valid claims are timely made
within six months of the Closing date will be distributed to the Company.
All claims against the Holdback must be made within six months of the
Closing date. The escrow fund will remain in existence until all assets are
distributed. The Escrow Agent is Bank of America, N.T. & S.A.
Although the exact amount of the purchase price for the Target Business
will not be known until the Closing, the Company expects to receive net cash
proceeds of approximately $12.5 million after payment of applicable
transactional fees (estimated to be approximately $500,000), of which
approximately $1.0 million will represent the escrowed Holdback. Accordingly,
if sufficient claims and indemnification are allowed against the Holdback, the
total amount of the net cash proceeds for the Target Business may not exceed
approximately $11.5 million.
At the Closing, the parties will execute a schedule allocating the purchase
price among the assets sold to the Purchaser. The Transaction will be accounted
for by the parties using the purchase method of accounting.
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BUSINESSES TO BE SOLD AND RETAINED
The assets of the Target Business to be sold by the Company consist of
accounts receivable, inventory, documents and business records, machinery,
furniture, fixtures and equipment, product and technical information, real
estate and personal property leases, purchase and sales orders, requests for
quotation, insurance contracts, claims, rights and choses in action, and
personnel records of those Company employees the parties have agreed will be
hired by the Purchaser. In addition, the Purchaser will assume liabilities
relating to the Target Business, including, but not limited to, accounts payable
and obligations under branch lease contracts.
The heightened competitive environment which exists in the Target Business'
marketplaces, including competition the Company currently faces from companies
with substantially greater resources and broader geographical presence than the
Company, has in recent periods adversely impacted the Target Business' profit
margins and resulted in the termination of franchisor accounts. In particular,
during the eight month period ending May 31, 1995 (unaudited), monthly sales
revenue for the Target Business declined approximately 29%, from $4.5 million to
$3.2 million, and the Target Business' monthly gross profits declined
approximately 20%, from $727,000 to $580,000. The negative trend with respect to
the Target Business has affected the overall performance of the Company.
Compared on a consistent basis, the Target Business accounted for approximately
85.4% of the Company's losses in fiscal year 1994 and approximately 97.2% of the
Company's losses during the first quarter of 1995. The Company believes that the
continuing loss of franchisor accounts has made it increasingly difficult to
maintain the critical sales mass necessary to sustain the Company's remaining
lines, and is adversely affecting the Company's competitiveness. These factors,
among others, were carefully considered by the Board of Directors of the Company
in the course of reaching its decision to approve the transaction. See
"Recommendation of the Board of Directors" at page 14 below.
After the Closing date, the Company will retain its computer systems,
peripheral equipment and software distribution businesses. Management believes
that divestiture of the Target Business will enable the Company to focus more of
its financial and managerial resources on its computer systems distribution
business, the market for which is one of the fastest growing in the electronics
industry. The Company currently plans to utilize the remaining portion of the
net proceeds of this Transaction, after repayment of short-term debt, for the
general working capital needs of the businesses being retained. See "Application
of Sale Proceeds" below.
SHAREHOLDER APPROVAL
As of March 31, 1995, the assets of the Target Business constituted
approximately 37% of the Company's total assets. In addition, the Company
derived approximately 48% of its revenues from the Target Business for the
quarter ended March 31, 1995. In the event the operating assets of the Target
Business were construed to constitute substantially all of the Company's assets
from a historical revenue or book value of assets perspective, the Transaction
could be construed as constituting the sale by the Company of "substantially all
of its assets" and not "in the usual and regular course of its business" within
the meaning of section 1001(a) of the California General Corporation Law. In
such event, the Transaction could not be deemed effective without Shareholder
approval. In addition, the Agreement requires, as a condition to the Closing,
that the Transaction receive Shareholder approval. The affirmative vote of a
majority of the shares of the Company's Common Stock outstanding at the Record
Date is required to approve the Transaction and the Agreement. The Transaction
also is the subject of a derivative shareholder demand. See "Shareholder
Derivative Demand" at page 16 below.
Information regarding the ownership of the Company's Common Stock by
certain beneficial owners and management is provided under the caption "Security
Ownership of Directors, Executive Officers and Certain Shareholders" at page 18
below.
CERTAIN INFORMATION CONCERNING THE PURCHASER
Reptron Electronics, Inc., listed on the Nasdaq National Market (REPT), is
an integrated electronics company operating as a multi-regional distributor of
electronic components, through its Reptron Distribution unit, and as a contract
manufacturer of electronic products, through its K-Byte Manufacturing unit. The
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Purchaser was founded in 1973 and completed its initial public offering on March
28, 1994. The Purchaser's net sales in 1994 were approximately $164 million, of
which approximately $96 million was attributable to its electronic components
distribution business. The Reptron Distribution unit is authorized to sell
approximately 50 vendor lines of semiconductors, passive products and
electromechanical components. Reptron Distribution, which has 14 sales offices
located primarily in the mid-western, southeastern,and northeastern United
States, also provides value-added services including inventory replenishment
systems, in-house stores, component programming, kitting, electronic data
interchange, concurrent engineering and contract manufacturing (through K-Byte
Manufacturing). The Purchaser's principal executive offices are located at 14401
McCormick Drive, Tampa, Florida 33626.
OPINION OF FINANCIAL ADVISOR
The Advisor was retained by the Company in February 1995 to assist it in
locating a buyer for the Company or one of its component businesses and to
render to the Company its opinion as to the fairness, from a financial point of
view, to the Company's Shareholders of the consideration to be received by the
Company pursuant to any such sale transaction. See "Background" above at p. 7.
The Advisor has rendered a written opinion dated May 5, 1995 to the Company's
Board of Directors to the effect that, as of such date, the payment in cash by
the Purchaser to the Company of the net book value of the Target Business, as
set forth in the Agreement, is fair, from a financial point of view, to the
Shareholders of the Company. Since the purchase price under the Agreement is
based upon a formula tied to the net book value of the Target Business on the
Closing Date, the Company believes it is not necessary, and the Advisor is not
obligated, to update the fairness opinion subsequent to the date the opinion was
issued and prior to the date this proxy statement is delivered to the
Shareholders. The full text of the written opinion of the Advisor is attached to
this Proxy Statement as Appendix B. Such opinion should be read in its entirety
for a description of the matters considered, assumptions made and limits of
review by the Advisor in arriving at its opinion.
In arriving at its opinion, the Advisor participated in the negotiations
regarding the Transaction, reviewed a copy of the definitive Agreement
(including Exhibits thereto) and reviewed audited historical financial
information about the Company as well as product and other information furnished
to it by the Company. The Advisor also held discussions with members of the
Company's senior management regarding the historic and current business
operations and future risks and prospects of the Company, including their
expectation for certain strategic benefits of the Transaction. See
"Recommendation of the Board of Directors" on page 14 below. As part of these
discussions, the Advisor reviewed other types of sale transactions--primarily
the proposed sale by merger of the entire Company--contemplated by the Company
over the preceding twenty-four months, and the Advisor independently pursued
efforts to sell the entire Company without success. The Purchaser's offer to
acquire the Target Business was in fact the only offer received by the Company
subsequent to the date the Advisor was retained.
In deriving its fairness opinion, the Advisor considered the value of the
Target Business by comparing the Target Business actual and projected financial
performance with that of (i) certain financial and securities data of Bell
Microproducts, Marshall Industries and Sterling Electronics Corporation, as well
as various other public companies engaged in businesses the Advisor considered
comparable and (ii) certain financial data and transaction values for several
public and private electronic distribution companies that were sold over the
last eighteen months. These transactions included Arrow Electronics' acquisition
of Anthem Electronics, Nu Horizons Electronics' acquisition of Merit
Electronics, All American Semiconductor, Inc.'s acquisition of GCI Corporation,
Bell Microproducts' acquisition of Vantage Components and Avnet, Inc.'s
acquisition of Penstock, Inc., as well as various other transactions the Advisor
deemed comparable. In developing a value for the Target Business, the Advisor
specifically considered the average values for the comparable population of
price/earnings, ratio of market capitalization to last twelve months sales and
ratio of market capitalization to book value. The Advisor further considered the
average valuations established for completed transactions based on the ratio of
total transaction consideration to prior year revenue, transaction
value/earnings ratio, and the ratio of transaction value to book value. The
Target Businesses financial performance was determined to be significantly below
that of the comparable population; it was not profitable, had lower revenue
growth rates and poor future prospects based on anticipated loss of franchises.
Similarly, the Target Business financial performance was considered to be below
that of the completed transactions. Accordingly, the Advisor
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discounted the valuation derived to reflect the Target Businesses financial
performance as compared to the comparable population and completed transactions,
as well as to reflect the fact that the Target Business did not include the
infrastructure of a free standing business and that the Company name was not
being sold as part of the Transaction. In considering alternatives to maximize
shareholder value, the Advisor also analyzed liquidating the Target Business as
an alternative to its sale to the Purchaser. The Advisor concluded that the cost
of an orderly liquidation of the assets of the Target Business would decrease
substantially the resulting value to the Shareholders compared to that
realizable from the proposed Transaction. Based on all of the above, the
prospect of continuing operating losses as well as the loss of other franchises,
the Advisor concluded that consummating the Transaction as quickly as possible
and thereby focusing on the computer business would maximize shareholder value.
The Advisor did not make any independent evaluation of the Company's
assets or intellectual property nor did it review any of the Company's
corporate records. In addition, the Advisor assumed, without independent
verification, the accuracy, completeness and fairness of all of the financial
statements, product information, marketing strategies and other information
regarding the Company that was provided to the Advisor by the Company and its
representatives. The Company believes the Advisor's lack of independent
verification of its historical financial statements is justified and reasonable
under the circumstances, since all of the financial statements provided to the
Advisor were audited by Coopers & Lybrand, the Company's independent
accountants. The audited statements covered all but the interim period
from January 1, 1995 through May 5, 1995, the date the opinion was issued.
Except as described above, neither the Company nor any affiliate provided
instructions to the Advisor or imposed any limitations on the scope of the
Advisor's investigation.
Neither the Advisor nor any of its principals or affiliates has or, over
the past two years, has had any material relationship with the Company or the
Purchaser, other than the Advisor's engagement by the Purchaser, described
above, to assist it in completing the Transaction. See "Background" on pages 7-9
above. The rendering of fairness opinions by financial advisors who are
advising, on a contingency fee basis, one or more of the parties to a merger or
acquisition transaction is not unusual or inappropriate and, accordingly, the
Company believes that the Advisor's economic interest in the successful
completion of the Transaction does not present a material conflict of interest
nor would it, under the circumstances, influence the rendering of the Advisor's
fairness opinion.
For all of the Advisor's services provided in connection with the
Transaction, including the rendering of its written fairness opinion referred
to above, the Company has agreed to pay the Advisor a single fee based upon a
percentage of the aggregate consideration received by the Company for the
Target Business. Although the exact amount of the fee payable to the Advisor
will not be known until after the Closing, in the event the net proceeds
received from the Purchaser consisted of $12.5 million in cash, the fee payable
to the Advisor if the Transaction closed on or before August 17, 1995 would be
approximately $165,000. The Company has agreed to indemnify and hold the
Advisor harmless from certain liabilities, including liabilities under the
federal securities laws, and has agreed to reimburse the Advisor for its
reasonable out-of-pocket expenses (including reasonable professional fees and
disbursements) incurred in connection with its services which the Advisor
anticipates will be less than $2,000.
INTERESTS OF MANAGEMENT IN THE TRANSACTION
One of the conditions to the obligations of the Purchaser under the
Agreement is the execution by Mr. Ronald Mabry, Chairman of the Board and Chief
Executive Officer of the Company, of an employment agreement with the
Purchaser. Mr. Mabry and the Purchaser are parties to a letter agreement dated
May 8, 1995 setting forth the key terms and conditions of Mr. Mabry's
employment by the Purchaser in the event the Transaction is completed. Pursuant
to the letter agreement, upon the Closing of the Transaction, Mr. Mabry would
be hired by the Purchaser as a Vice President responsible for business
operations west of the Mississippi River. The term of Mr. Mabry's employment
would run from the Closing date through December 31, 1996. For his services,
Mr. Mabry would be paid a base salary of $200,000 per year and, provided he
remain in the employ of the Purchaser, a monthly performance bonus of
approximately $8,000 as well as standard employee benefits currently provided
to officers of the Purchaser and certain expense allowances. The salary and
bonus
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elements of Mr. Mabry's prospective employment arrangement with the Purchaser
are not materially different from those under his current employment agreement
with the Company. See "Employment Agreements" at page 27 below. In addition, in
consideration for Mr. Mabry's covenant not to compete with the Purchaser from
the Closing date through June 30, 1997, the Purchaser would pay to Mr. Mabry
$200,000 in four $50,000 installments on the Closing date, January 1 and July 1,
1996, and January 1, 1997. No other director or officer of the Company is a
party to any agreement or arrangement to receive compensation or other
consideration from the Purchaser as a result of consummating the Transaction.
In May 1995, the Company and Mr. Mabry entered into an oral agreement,
which the parties intend to memorialize with a letter agreement, providing,
among other things, that in the event the Transaction is consummated,
Mr. Mabry's current employment agreement with the Company would terminate and
Mr. Mabry would resign as an officer, director and employee of the Company. Mr.
Mabry would be paid a cash severance amount of $75,000, of which $50,000 would
be repaid to the Company to discharge the outstanding balance of an existing
loan to Mr. Mabry. In addition, pursuant to the parties' agreement, the Company
would pay to Mr. Mabry a percentage of the funds released to the Company from
the Holdback (measured as a function of the Holdback receivables collected and
Holdback inventory sold after the Closing of the Transaction), up to an
aggregate payment to him of $120,000. This payment is intended to incentivize
Mr. Mabry, while in the employ of Purchaser, to collect the receivables and
sell the inventory which comprise the Holdback. Moreover, on the Closing date,
all options (both vested and unvested) to purchase Company stock held by Mr.
Mabry would terminate and Mr. Mabry would waive all rights to severance or
otherwise under his existing employment agreement with the Company, which
provides for payment of up to $300,000 (one year salary continuation and bonus)
upon a termination without cause. For a definition of "Cause" and a
description of the other material terms of Mr. Mabry's existing employment
agreement, see "Employment Agreements" at page 27 below. The effectiveness of
Mr. Mabry's letter agreement with the Purchaser and his agreement with the
Company described above is contingent upon the consummation of the Transaction.
To avoid any conflict of interest that might exist as a result of
Mr. Mabry's prospective employment with the Purchaser, Mr. Mabry was not
appointed to the Special Committee of the Board of Directors of the Company
formed in March 1995 to evaluate, negotiate and approve the terms of the
Agreement and the Transaction. Moreover, the Company was not involved in the
negotiations regarding the terms of Mr. Mabry's prospective employment with
the Purchaser.
The Company intends to enter into a letter agreement with P. Scott Munro,
President of the Company's Systems Division, providing that, in the event the
Transaction is consummated, Mr. Munro would be appointed Chief Executive Officer
and President of the Company. The letter agreement will provide for at-will
employment commencing on the Closing date at an annualized salary of $190,000
per year and up to $100,000 annually in performance bonuses, standard employee
benefits, and the grant of options to purchase 60,000 shares of Common Stock of
the Company. The Company anticipates that, in the event the Transaction is
consummated, Mr. Munro would be nominated for election to the Board of Directors
at the Company's next annual meeting of shareholders. The Company also intends
to enter into a letter agreement with Donald A. Cochrane, Vice President and
General Manager of the Company's Reseller Division, providing that, in the event
the Transaction is consummated, Mr. Cochrane would be appointed Senior Vice
President of Marketing and Sales for the Company. Mr. Cochrane's letter
agreement will provide for at-will employment, an annual salary of $130,000,
performance bonuses of up to 60,000 per year, and the grant of options to
purchase 37,500 shares of Common Stock. The effectiveness of the Company's
letter agreements with Mr. Munro and Mr. Cochrane would be contingent upon the
consummation of the Transaction. No other officer or director of the Company has
a material personal interest in any contract or agreement the effectiveness of
which is contingent upon the consummation of the Transaction.
EFFECT ON EMPLOYEES
The Company currently has approximately 130 full-time employees, of which
approximately 82 employees currently are employed in connection with the
operations of the Target Business. With the exception of Mr. Mabry, no employee
or officer of the Company has been guaranteed employment by the Purchaser
following the Closing of the Transaction, although the parties anticipate that
certain of the
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Company's employees principally involved in the Target Business will, with the
Company's consent, be hired by the Purchaser.
APPLICATION OF SALE PROCEEDS
Although the exact amount of the cash proceeds to the Company from the
Transaction will not be known until after the Closing and the expiration of the
Holdback escrow, the Company currently anticipates that the net cash proceeds it
will receive from the sale of the Target Business will be approximately $12.5
million, after payment of applicable transactional fees (estimated to be
approximately $500,000) (assuming the entire Holdback is returned to the
Company).
The Company currently plans to utilize approximately $9 million of these
proceeds to repay substantially all of its outstanding short term debt. The
balance will be used for general working capital needs. Other than the Target
Business, the Company's primary business focus has been in the high-end computer
systems areas and it is likely that the Company will seek internal and external
expansion in this area. Internally, the Company plans to refocus and restructure
its sales staff. In the future, the Company may consider expanding the business
through acquisitions; however, no particular acquisition candidate has been
identified by the Company, nor has the Company explored any such potential
acquisitions.
Pending the use of the proceeds as described above, the Company intends to
invest the proceeds in secure short term liquid obligations such as certificates
of deposit, obligations of the United States Government, etc.
REGULATORY APPROVAL
Under the Hart-Scott-Rodino Act (the "HSR Act"), and the rules promulgated
by the Federal Trade Commission (the "FTC"), the Transaction could not be
consummated until notifications have been given and certain information has
been furnished to the FTC and the Antitrust Division of the Department of
Justice (the "Antitrust Division") and specified waiting period requirements
have been satisfied. The Company and the Purchaser each filed notification and
report forms under the HSR Act with the FTC and the Antitrust Division in
April 1995. On May 8, 1995, the Company and the Purchaser were each notified by
the FTC that the specified waiting period requirements had been satisfied.
TAX CONSEQUENCES TO THE COMPANY AND THE SHAREHOLDERS
The sale of assets by the Company will be a taxable transaction to the
Company. The Company will recognize gain measured by the difference, if any,
between the amount realized from the sale of the assets and the Company's
adjusted tax basis in such assets. Because the assets are being sold at close to
net book value, the Company currently estimates that the Transaction will result
in an immaterial taxable gain.
The consummation of the Transaction will not be a taxable event for income
tax purposes for the Shareholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Committee and the Company's Board of Directors unanimously determined
that the terms of the Transaction are fair and in the best interest of the
Company and its Shareholders and recommends a vote in favor of the Transaction.
In the course of reaching its decision to approve the Transaction, the
Committee and the Board consulted with its legal and financial advisors as well
as the Company's management and considered the following factors:
(1) The heightened competitive environment that exists in the Target
Business' marketplaces, which in recent periods has adversely impacted
the Target Business' gross sales revenues and profit margins (see
"Businesses to be Sold and Retained" at page 10 above) and resulted in
the termination of franchisor accounts and will continue to do so in
foreseeable future
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periods. The negative trend of the Target Business' performance has
increased in recent months, significantly adversely affecting the
competitiveness of the Target Business' sales force. The level of
management effort directed toward the Target Business has been
disproportionate to its sales volume relative to the Company's other
business activities, which in turn has detracted from the resources
which could be directed towards the computer systems business.
(2) The Board's desire to focus the Company's resources on its computer
systems distribution business where it believes that the Company has
greater competitive advantages and probability of success.
(3) The anticipated positive effects upon the Company's balance sheet and
results of operations from the Transaction and the use of the net
proceeds therefrom to retire indebtedness and expand the Company's
computer systems distribution business. Among other factors considered
were the positive effects of using the proceeds from the Transaction
to eliminate all of the Company's short-term debt, currently
approximately $9 million, which would result in annual interest
savings of approximately $900,000. In addition, the Transaction would
allow the Company to eliminate a rapidly deteriorating asset and
earnings base, substitute the Target Business' relatively illiquid
assets for cash, and recraft its infrastructure to create a more
efficient business with a minimal loss of jobs.
(4) The absence of any serious offers from any other third parties
regarding a possible acquisition of the Target Business or a possible
merger with the Company.
(5) The opinion of Von Gehr International, the Company's financial
advisor, that the purchase price is fair, from a financial point of
view, to the Company and its Shareholders.
Considering all of the above factors, the Committee and the Board concluded
that the Company should become tightly focused on its systems distribution
business and that it is likely that in an increasingly competitive environment
the Target Business would not have a value higher than that which existed at
the time that the Transaction was approved. The Committee and the Board also
considered that the potential for a reduction in the value of the Target
Business, as well as the adverse effect the Target Business has recently had on
the Company's overall results of operations, might negatively impact the
Company's public stock price. In addition, management, with its intimate
knowledge of the areas of operation of the Target Business and with the
assistance and advice of the Company's financial advisor, had concluded that it
was unlikely that any purchaser other than the Purchaser would be willing to
pay a price higher than that to be received in the Transaction and
communicated this to the Committee and the Board. See "Background" above.
REPRESENTATIONS AND WARRANTIES
The Company has made certain customary representations and warranties in
the Agreement as to the Company, the authorization, validity and enforceability
of the Agreement and similar corporate matters. The Company has also made
certain representations and warranties regarding the Target Business including,
among other things, the accounts receivable, inventory, title to properties and
location of tangible assets relating thereto; compliance with certain
government regulations; the absence of third party options or claims; the
completeness of the Company's disclosure; pending and threatened litigation;
existing contracts, commitments and warranty claims; the absence of existing
noncompetition, confidentiality and indemnification agreements; and brokers and
finders fees. The representations and warranties contained in the Agreement
will survive the closing date for various periods of time and, to the extent
that any of the representations and warranties shall prove to be inaccurate,
the Company has agreed, subject to certain limitations contained in the
Agreement, to indemnify the Purchaser against loss or expense which may be
incurred by it on account of any such inaccuracies.
-15-
<PAGE> 20
COVENANTS
The Company has agreed, until the Closing, among other things, (a) to
provide access to the Purchaser to various records and information prior to the
Closing; (b) except as contemplated by the Agreement, to conduct and maintain
the business operations of the Target Business in the usual and ordinary course
as theretofore conducted; (c) to duly and timely file all reports and returns
required to be filed with governmental agencies and promptly pay when due all
taxes, assessments and governmental charges; (d) to not, directly or
indirectly, solicit, initiate or consider any proposals or offers from any
person or entity related to the sale or purchase of the Target Business or the
purchase of equity securities of the Company; (e) to sell certain designated
inventory of the Target Business only upon receipt of a written acknowledgement
by the customer that the products sold are noncancellable and nonreturnable;
(f) to use its best efforts to sell certain lines of products in its inventory;
(g) to file with the SEC a preliminary form of this Proxy Statement within ten
business days of the date the Agreement was executed; and (h) to not take any
action that would cause a breach or default in any of its contracts or
obligations or that would or could reasonably be expected to result in any of
the Company's representations and warranties contained in the Agreement
becoming untrue or any of the conditions to the Transaction not being
satisfied.
INDEMNIFICATION
The Company is obligated to indemnify the Purchaser and its affiliates for,
among other things, (i) any breach of the Company's representations, warranties
or covenants under the Agreement; (ii) any claim by any employee or former
employee of the Company relating to discrimination, sexual harassment or other
failure of the Company to comply with federal and state equal opportunity and
fair employment laws; and (iii) any claim regarding injury to any person as
result of the purchase or use of any product sold by the Company prior to the
Closing. These indemnification obligations generally terminate after six months
following the Closing Date, other than which respect to items (ii) and (iii)
above, for which such identification obligations will survive for two years
following the Closing. The Agreement provides that the Company's maximum
liability for the indemnification described in (i) above shall be limited to the
total amount of the Holdback placed into escrow at the Closing; provided,
however, that the Company's representations to the Purchaser regarding corporate
existence, power and authority to enter into enforceable obligations and title
to the assets being sold will not be limited to the Holdback amount.
The Purchaser is obligated to indemnify the Company and its affiliates
for any liabilities that may arise as a result of any breach by the Purchaser
of its representations, warranties and covenants under the Agreement.
CONDITIONS TO CONSUMMATION OF TRANSACTION
Each of the Company's and the Purchaser's respective obligation to
consummate the Transaction is conditioned upon satisfaction (or waiver) of the
following conditions as of the Closing: (a) the Transaction shall have been
approved by the Company's Shareholders; (b) the Non-Competition Agreement shall
have been executed and delivered; (c) no litigation shall have been commenced
or threatened, the effect of which could restrain or prevent consummation of
the Transaction or materially adversely effect the Target Business (see
"Shareholder Derivative Complaint" below); and (d) receipt of the consent from
each governmental agency having jurisdiction over the Transaction and
approval from each third party which is necessary for the Purchaser to acquire
and operate the Target Business.
The Purchaser's obligations to consummate the Transaction shall be further
conditioned upon satisfaction (or waiver) of the following conditions as of the
Closing: (a) any security interest shall be discharged with respect to any
property comprising the Target Business; (b) the Company's representations and
warranties shall remain valid and the Company shall have fully performed its
covenants as contained in the Agreement; (c) the Purchaser shall receive
assignments of the real and personal property leases relating to the Target
Business; (d) the parties shall have executed and delivered the Non-Competition
Agreement in substantially the form attached to the Agreement as Exhibit B
thereto; (e) the Purchaser shall have received
-16-
<PAGE> 21
from a lender to the Initial Purchaser the written waiver of applicable loan
covenants; and (f) Mr. Ronald Mabry shall have executed and delivered his
employment agreement with the Purchaser.
SHAREHOLDER DERIVATIVE COMPLAINT
On May 22, 1995, Joel Feldman, a shareholder of the Company, by and
through his attorneys, made written derivative demand upon the Board, inter
alia, to cancel, terminate or otherwise not consummate the Transaction on the
grounds that the proceeds to be paid the Company on account of the Transaction
allegedly are unconscionable, unfair and grossly inadequate. Counsel for the
Company responded to the derivative demand by notifying the shareholder's
attorneys of the Company's intention to hold a special meeting of Shareholders
to consider a proposal to approve the Transaction. On June 27, 1995, the
Company learned that the shareholder's attorneys had filed a derivative action
on June 21, 1995 in Case No. CV750498 in the Superior Court of the State of
California, County of Santa Clara, Joel Feldman, Plaintiff, vs. R. Mabry, R.
Gesell, G. Reyes, K. William Sickler, W. Welling, Western Micro Technology, and
Reptron Electronics, Inc., Defendants, and Western Micro Technology, Inc.,
Nominal Defendant. The complaint in the derivative action (the "Complaint") is
filed purportedly on behalf of a class of persons consisting of all
shareholders of the Company and names the Company, the Purchaser and the entire
Board as defendants. The Complaint seeks to enjoin the consummation of the
Transaction under the terms presently proposed. The Complaint also seeks
recovery of compensatory and punitive damages and attorneys' fees based on
allegations that defendants participated in the breach of fiduciary duties owed
to the Company, including asserted abuse of control and waste of corporate
assets. The Company intends to respond to the Complaint and to defend the
shareholder derivative action as may be required by law or as reasonably
necessary to protect the interests of the Company and its shareholders.
TERMINATION; AMENDMENT AND WAIVER
The Agreement may be terminated and the Transaction abandoned at any
time prior to the Closing, notwithstanding approval by the Shareholders of the
Company, by (i) the mutual consent of the Company and the Purchaser; or (ii)
either the Company or the Purchaser, if there is a material misrepresentation
or breach or a failure to satisfy by the other party of any representation,
warranty, condition or agreement in the Agreement which has not be waived. The
parties may modify or amend the Agreement by written agreement to the extent
permitted by applicable law. The conditions to each party's obligation to
consummate the Transaction may be waived only in a writing signed by the
waiving party with notice under the Agreement.
AGREEMENT NOT TO COMPETE
In the Agreement, the Company has covenanted that it will execute and
deliver at the Closing a Non-Competition/Royalty/No-Solicitation Agreement, the
form of which is attached to the Agreement as Exhibit B thereto (the
"Non-Competition Agreement"). Pursuant to the Non-Competition Agreement, the
Company will agree not to compete with the Purchaser by selling, directly or
indirectly, anywhere in the United States, any semiconductor component
products, electromechanical components (other than power supplies) or passive
electronic components for a period of two (2) years following the Closing.
Notwithstanding the foregoing, the Company will be permitted to sell, directly
or indirectly, semiconductor component products that are bundled with or
incorporated on or in a board, card, module, PC or other computer system or as
a replacement part for any of the same. If the Company breaches its
non-competition covenant, it will be obligated to pay the Purchaser all gross
profits relating to the sale of products in violation of the covenant.
The Non-Competition Agreement also will require the Purchaser, during
the two-year period following the Closing, to pay to the Company any and all
gross profit relating to the sale, directly or indirectly, by the Purchaser of
certain designated products to certain specified customers. The Purchaser will
be required to maintain complete and accurate records of all such sales and to
provide the Company with access to such records for examination purposes.
In addition, the Company and the Purchaser will agree under the
Non-Competition Agreement that, during the two-year period following the
Closing, neither party will, directly or indirectly, solicit for hire
-17-
<PAGE> 22
employees of the other party, except as may be contemplated by the Agreement,
without the other party's prior written consent. Moreover, if either party hires
an employee or executive officer of the other party or a person who has
terminated employment with such other party within the prior 90 days, the hiring
party agrees to pay the other party a specified penalty.
EXPENSES
Whether or not the Transaction is consummated, all costs and expenses
incurred in connection with the Agreement and the Transaction shall be paid by
the party incurring such expenses.
-18-
<PAGE> 23
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN SHAREHOLDERS
The following table sets forth information as to the beneficial
ownership of the Company's Common Stock as of April 30, 1995 (unless otherwise
indicated), of each person known to the Company to be the beneficial owner of
more than five percent (5%) of its Common Stock, no par value, and the number
of shares owned by each director, each named executive officer and all
executive officers and directors as a group.
<TABLE>
<CAPTION>
Shares
Beneficially
Name of Beneficial Owner Owned Percent
------------------------ ------------ -------
<S> <C> <C>
Bernard T. Marren 371,400 10.03%
c/o Western Micro Technology, Inc.
12900 Saratoga Avenue
Saratoga, CA 95070
Marshall G. Cox 60,000 2.16%
William H. Welling 47,426(1)(2) 1.28%
c/o Venture Growth Associates II
3000 Sand Hill Road, Bldg. 3, Suite 125
Menlo Park, CA 94025
Ronald H. Mabry 0 --
P. Scott Munro 11,718(1) *
Nancy A. Angeli 5,731(1) *
John H. Ashbaugh 0 --
Ralph E. Gesell 0 --
Gregorio Reyes 12,500(1) *
K. William Sickler 2,600(1) *
All Executive Officers and Directors as a Group 511,375(3) 13.81%
(8 persons)
</TABLE>
- ----------
* Less than one percent.
(1) Includes shares purchasable under the Company's Amended and Restated
Incentive and Non-Incentive Stock Option Plan (the "Stock Option
Plan"), as of April 30, 1995 or within 60 days thereafter as set forth
below. See also "Change in Control" at page 26 below.
P. Scott Munro: 2,968 shares at $2.13
2,500 shares at $2.25
2,500 shares at $2.75
3,750 shares at $3.63
Nancy A. Angeli: 1,250 shares at $2.00
1,981 shares at $2.13
2,500 shares at $2.25
-19-
<PAGE> 24
Gregorio Reyes: 2,500 shares at $8.25
K. William Sickler: 2,500 shares at $8.25
William H. Welling: 2,500 shares at $8.25
(2) Shares attributed to William H. Welling are held of record by Venture
Growth Associates II, the general partner of which is BW Partners, of
which Mr. Welling is a general partner. Mr. Welling disclaims
beneficial ownership of such shares except to the extent of his
proportionate interest in Venture Growth Associates II.
(3) Includes shares purchasable by executive officers and directors which
were granted under the Company's Stock Option Plan in the following
increments: 1,250 shares at $2.00 per share, 4,949 shares at $2.13 per
share, 5,000 shares at $2.25 per share, 2,500 shares at $2.75 per
share, 3,750 shares at $3,63 per share, and 7,500 shares at $8.25 per
share.
-20-
<PAGE> 25
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
compensation paid to the Company's Chief Executive Officer, each of the
Company's other executive officers and the Company's former Chief Executive
Officer (the "named executive officers"), for the fiscal years ended December
31, 1994, 1993 and 1992.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensa-
tion Awards
-----------
Annual Compensation
-----------------------------------
Securities
Fiscal Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation
--------------------------- ------ ------ ----- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Ronald H. Mabry(1) 1994 $155,000 $75,000 $32,811(2) 300,000(3) --
Chairman of the Board,
Chief Executive Officer,
President and Secretary
P. Scott Munro 1994 $171,234 $75,550 100,000(3) $3,414(4)
President, Systems 1993 $146,853 $60,670 0 $4,199
Division 1992 $ 92,894 $54,001 35,000 $6,978
Nancy A. Angeli(5) 1994 $101,000 $ 4,857 50,000(3) $4,492(6)
Chief Financial Officer 1993 $ 91,000 $ 6,191 0 $1,450
and Sr. Vice President, 1992 $ 71,556 0 5,000 $ 33
Finance
John H. Ashbaugh(7) 1994 $ 86,140 $10,000 50,000 0
Senior Vice President -
Marketing
Marshall G. Cox(8) 1994 $278,219 0 0 $33,349(9)
Former Chief Executive 1993 $270,631 $25,000 -- 0 $36,415
Officer, President and 1992 $212,500 $15,000 -- 50,000 $11,544
Chief Operating Officer
- ----------
</TABLE>
(1) Mr. Mabry was hired in April 1994. Mr. Mabry's salary includes $5,000,
which represents imputed interest on an interest free loan. See
"Employment Agreements" on page 27 below.
(2) Includes costs of relocating Mr. Mabry from Southern California,
including a housing allowance, an allowance for weekly round trips to
Southern California and the costs associated with leasing and
maintaining a company car.
(3) Certain of the Company's executive officers received stock options in
1994, which options were subsequently repriced later in the year. The
rules of the Securities and Exchange Commission require that both the
original option grant and the repriced option be reported as separate
grants of stock options. However, since the original options received
in 1994 were canceled at the time of repricing, the grantees were
entitled only to the amount of the shares covered by the repriced
options. See also "Change in Control" at page 26 below.
(4) Consists of medical costs covered by the Company's medical
reimbursement plan.
(5) Effective February 16, 1995, Ms. Angeli resigned from the Company.
(6) Consists of medical costs covered by the Company's medical
reimbursement plan.
(7) Mr. Ashbaugh was hired in June 1994.
-21-
<PAGE> 26
(8) Mr. Cox resigned as the Company's Chief Executive Officer, President
and Chief Operating Officer effective as of February 8, 1994. Pursuant
to the terms of his Employment Agreement, he is entitled to $280,000
annually in the form of salary continuation. See "Employment
Agreements."
(9) (1) $32,140 for 1994 premium on a $1,000,000 split dollar life
insurance policy on Mr. Cox and (2) $1,209 for medical costs covered by
the Company's executive medical reimbursement plan.
The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1994 to the Company's named
executive officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Percent of Potential Realized Value
Number of Total at Assumed Annual Rates
Securities Options of Stock Price Appreciation
Underlying Granted to for Option Term
Options Employees in Exercise or Base Expiration ---------------------------
Granted Fiscal Year Price ($/Share) Date 5% 10%
---------- ------------ ---------------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Ronald H. Mabry 150,000(1)(2) 24.6% $8.50 4/4/2000 $658,148.21 $1,607,773.74
-2003
150,000(1) 24.6% $6.00 6/10/2005 $841,582.18 $2,377,225.37
-2008
P. Scott Munro 25,000(1)(2) 4.1% $8.13 2/25/2000 $104,916.57 $ 256,298.05
-2003
50,000(1) 8.2% $6.00 9/16/2005 $280,527.39 $ 792,408.46
-2008
25,000(1) 4.1% $6.00 9/16/2005 $140,263.70 $ 396,204.23
-2008
Nancy A. Angeli 25,000(1)(2) 4.1% $8.13 2/25/2000 $104,916.57 $ 256,298.05
-2003
25,000(1) 4.1% $6.00 6/10/2000 $ 77,429.20 $ 189,149.85
-2003
John H. Ashbaugh 50,000(1) 8.2% $6.00 9/16/2000 $154,858.40 $ 378,299.70
-2003
Marshall G. Cox -- -- -- --
- ----------
</TABLE>
(1) These options vest 25% over a four-year period. See also "Change in
Control" at page 26 below.
(2) These options were repriced in October 1994. The rules of the
Securities and Exchange Commission require that both the original
option grant and the repriced option be reported as separate stock
option grants. However, since the original options received in 1994
were canceled at the time of repricing, the grantees were entitled only
to the amount of shares covered by the repriced options.
-22-
<PAGE> 27
The following table shows the number of shares of Common Stock
represented by outstanding stock options held by each of the named executive
officers as of December 31, 1994. The Company's Common Stock price as at close
of business on December 30, 1994 was $6.38.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised Options In-the-Money
at FY-End Options at FY-End
Shares Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized Unexercisable Unexercisable
---- --------------- -------------- -------------------- -----------------
<S> <C> <C> <C> <C>
Ronald H. Mabry 0 $0 0/150,000 $0/$57,000
P. Scott Munro 1,719 $11,818 11,718/90,000 $42,360/$78,888
Nancy A. Angeli 0 $0 5,731/27,500 $24,229/$19,825
John H. Ashbaugh 0 $0 0/50,000 $0/$19,000
Marshall G. Cox 0 $0 0/0 $0/0
</TABLE>
-23-
<PAGE> 28
During the last fiscal year, the Company repriced stock options
previously awarded to the named executive officers. The following table provides
information concerning all options held by any executive officer that have been
repriced in the last 10 fiscal years.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Length of
Original Option
No. of Term
Securities Market Price Exercise Remaining
Underlying No. of of Stock Price at New at Date of
Options Options at Time of Time of Exercise Repricing
Name and Position Date Repriced Granted Repricing Repricing Price (in years)
----------------- ---- ---------- ------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald H. Mabry 4/4/94 37,500 37,500 $6.00 $8.50 $6.00 5.8
Chief Executive Officer 4/4/94 37,500 37,500 $6.00 $8.50 $6.00 6.8
and President 4/4/94 37,500 37,500 $6.00 $8.50 $6.00 7.8
4/4/94 37,500 37,500 $6.00 $8.50 $6.00 8.8
Nancy A. Angeli 2/25/94 6,250 6,250 $6.00 $8.13 $6.00 5.7
Chief Financial Officer 2/25/94 6,250 6,250 $6.00 $8.13 $6.00 6.7
and Sr. Vice President, 2/25/94 6,250 6,250 $6.00 $8.13 $6.00 7.7
Finance 2/25/94 6,250 6,250 $6.00 $8.13 $6.00 8.7
11/10/89 1,250 1,250 $2.13 $5.13 $2.13 4.9
11/10/89 1,250 625 $2.13 $5.13 $2.13 5.9
11/10/89 1,250 625 $2.13 $5.13 $2.13 6.9
11/10/89 1,250 625 $2.13 $5.13 $2.13 7.9
11/23/88 500 500 $2.13 $6.50 $2.13 3.9
11/23/88 500 500 $2.13 $6.50 $2.13 4.9
11/23/88 500 250 $2.13 $6.50 $2.13 5.9
11/23/88 500 250 $2.13 $6.50 $2.13 6.9
2/12/88 675 675 $2.13 $3.25 $2.13 2.2
2/12/88 675 675 $2.13 $3.25 $2.13 3.2
2/12/88 675 675 $2.13 $3.25 $2.13 4.2
2/12/88 675 338 $2.13 $3.25 $2.13 5.2
12/24/87 2,000 2,000 $2.13 $3.25 $2.13 5.2
12/24/87 1,000 1,000 $2.13 $3.25 $2.13 6.2
12/24/87 1,000 1,000 $2.13 $3.25 $2.13 7.2
12/24/87 5,600 5,600 $2.13 $3.25 $2.13 0.8
3/2/87 5,000 4,000 $3.25 $6.00 $3.25 7.2
10/2/85 10,000 6,800 $3.25 $6.00 $3.25 1.4
P. Scott Munro 2/25/94 6,250 6,250 $6.00 $8.13 $6.00 5.4
President, Systems 2/25/94 6,250 6,250 $6.00 $8.13 $6.00 6.4
Division 2/25/94 6,250 6,250 $6.00 $8.13 $6.00 7.4
2/25/94 6,250 6,250 $6.00 $8.13 $6.00 8.4
8/24/90 2,500 1,250 $2.13 $3.38 $2.13 5.7
8/24/90 2,500 1,250 $2.13 $3.38 $2.13 6.7
8/24/90 2,500 1,250 $2.13 $3.38 $2.13 7.7
8/24/90 2,500 1,250 $2.13 $3.38 $2.13 8.7
11/10/89 1,250 1,250 $2.13 $5.13 $2.13 4.9
11/10/89 1,250 625 $2.13 $5.13 $2.13 5.9
11/10/89 1,250 625 $2.13 $5.13 $2.13 6.9
11/10/89 1,250 625 $2.13 $5.13 $2.13 7.9
George R. McGurn 7/24/90 3,750 1,875 $2.13 $4.00 $2.13 5.6
Vice President, Sales 7/24/90 3,750 1,875 $2.13 $4.00 $2.13 6.6
and Marketing, Eastern 7/24/90 3,750 1,875 $2.13 $4.00 $2.13 7.6
United States 7/24/90 3,750 1,875 $2.13 $4.00 $2.13 8.6
11/10/89 2,500 2,500 $2.13 $5.13 $2.13 4.9
11/10/89 2,500 1,250 $2.13 $5.13 $2.13 5.9
11/10/89 2,500 1,250 $2.13 $5.13 $2.13 6.9
11/10/89 2,500 1,250 $2.13 $5.13 $2.13 7.9
2/12/88 1,250 1,250 $2.13 $3.25 $2.13 2.2
2/12/88 1,250 1,250 $2.13 $3.25 $2.13 3.2
2/12/88 1,250 1,250 $2.13 $3.25 $2.13 4.2
2/12/88 1,250 625 $2.13 $3.25 $2.13 5.2
12/24/87 20,000 20,000 $2.13 $3.25 $2.13 0.5
6/10/86 25,000 20,000 $3.25 $7.50 $3.25 3.5
</TABLE>
-24-
<PAGE> 29
<TABLE>
<CAPTION>
Length of
Original Option
No. of Term
Securities Market Price Exercise Remaining
Underlying No. of of Stock Price at New at Date of
Options Options at Time of Time of Exercise Repricing
Name and Position Date Repriced Granted Repricing Repricing Price (in years)
----------------- ---- ---------- ------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Former Executive Officers
Paul A. Araquistain 11/10/89 2,500 2,500 $2.13 $5.13 $2.13 4.9
Chief Financial Officer 11/10/89 2,500 1,250 $2.13 $5.13 $2.13 5.9
and Sr. Vice President 11/10/89 2,500 1,250 $2.13 $5.13 $2.13 6.9
11/10/89 2,500 1,250 $2.13 $5.13 $2.13 7.9
2/12/88 7,000 7,000 $2.13 $3.25 $2.13 2.2
2/12/88 7,000 7,000 $2.13 $3.25 $2.13 3.2
2/12/88 7,000 7,000 $2.13 $3.25 $2.13 4.2
2/12/88 7,000 3,500 $2.13 $3.25 $2.13 5.2
12/24/87 1,000 1,000 $2.13 $3.25 $2.13 2.6
12/24/87 1,000 1,000 $2.13 $3.25 $2.13 3.6
12/24/87 1,000 1,000 $2.13 $3.25 $2.13 4.6
12/24/87 1,000 5,000 $2.13 $3.25 $2.13 5.6
7/26/87 1,250 1,000 $3.25 $6.50 $3.25 5.6
7/26/87 1,250 1,000 $3.25 $6.50 $3.25 6.6
7/26/87 1,250 1,000 $3.25 $6.50 $3.25 7.6
7/26/87 1,250 1,000 $3.25 $6.50 $3.25 8.6
Reiny C. Giesecke 11/10/89 3,750 3,750 $2.13 $5.13 $2.13 4.9
Vice President 11/10/89 3,750 1,875 $2.13 $5.13 $2.13 5.9
11/10/89 3,750 1,875 $2.13 $5.13 $2.13 6.9
11/10/89 3,750 1,875 $2.13 $5.13 $2.13 7.9
2/12/88 4,000 4,000 $2.13 $3.25 $2.13 2.2
2/12/88 4,000 4,000 $2.13 $3.25 $2.13 3.2
2/12/88 4,000 4,000 $2.13 $3.25 $2.13 4.2
2/12/88 4,000 2,000 $2.13 $3.25 $2.13 5.2
12/24/87 24,000 24,000 $2.13 $3.25 $2.13 0.7
8/29/86 30,000 24,000 $3.25 $7.00 $3.25 3.3
Sherlene R. Pjesky 7/24/90 1,407 704 $2.13 $4.00 $2.13 5.6
Vice President, 7/24/90 1,406 704 $2.13 $4.00 $2.13 6.6
Operations 7/24/90 1,406 703 $2.13 $4.00 $2.13 7.6
7/24/90 1,406 702 $2.13 $4.00 $2.13 8.6
11/23/88 500 500 $2.13 $6.50 $2.13 3.9
11/23/88 500 500 $2.13 $6.50 $2.13 4.9
11/23/88 500 250 $2.13 $6.50 $2.13 5.9
11/23/88 500 250 $2.13 $6.50 $2.13 6.9
2/12/88 219 219 $2.13 $3.25 $2.13 2.2
2/12/88 219 219 $2.13 $3.25 $2.13 3.2
2/12/88 219 219 $2.13 $3.25 $2.13 4.2
2/12/88 218 218 $2.13 $3.25 $2.13 5.2
3/2/87 2,500 2,000 $3.25 $6.00 $3.25 7.2
10/2/85 2,500 1,500 $3.25 $6.00 $3.25 2.5
Keith W. Steenland 11/10/89 2,500 2,500 $2.13 $5.13 $2.13 4.9
Executive Vice 11/10/89 2,500 1,250 $2.13 $5.13 $2.13 5.9
President, Distribution 11/10/89 2,500 1,250 $2.13 $5.13 $2.13 6.9
Group 11/10/89 2,500 1,250 $2.13 $5.13 $2.13 7.9
2/12/88 1,500 1,500 $2.13 $3.25 $2.13 2.2
2/12/88 1,500 1,500 $2.13 $3.25 $2.13 3.2
2/12/88 1,500 1,500 $2.13 $3.25 $2.13 4.2
2/12/88 1,500 750 $2.13 $3.25 $2.13 5.2
12/24/87 24,000 24,000 $2.13 $3.25 $2.13 0.7
8/29/86 30,000 24,000 $3.25 $7.00 $3.25 2.6
James R. Magri 7/24/90 3,750 1,875 $2.13 $4.00 $2.13 5.6
Vice President, Sales 7/24/90 3,750 1,875 $2.13 $4.00 $2.13 6.6
and Marketing, 7/24/90 3,750 1,875 $2.13 $4.00 $2.13 7.6
Northwest 7/24/90 3,750 1,875 $2.13 $4.00 $2.13 8.6
11/23/88 750 750 $2.13 $6.50 $2.13 3.9
11/23/88 750 750 $2.13 $6.50 $2.13 4.9
11/23/88 750 375 $2.13 $6.50 $2.13 5.9
11/23/88 750 375 $2.13 $6.50 $2.13 6.9
4/8/88 6,000 6,000 $2.13 $4.25 $2.13 3.3
4/8/88 3,000 3,000 $2.13 $4.25 $2.13 4.3
4/8/88 3,000 1,500 $2.13 $4.25 $2.13 5.3
</TABLE>
-25-
<PAGE> 30
<TABLE>
<CAPTION>
Length of
Original Option
No. of Term
Securities Market Price Exercise Remaining
Underlying No. of of Stock Price at New at Date of
Options Options at Time of Time of Exercise Repricing
Name and Position Date Repriced Granted Repricing Repricing Price (in years)
----------------- ---- ---------- ------- ---------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard E. Hoff 11/10/89 2,500 2,500 $2.13 $5.13 $2.13 4.9
Vice President, 11/10/89 2,500 1,250 $2.13 $5.13 $2.13 5.9
Manufacturing Services 11/10/89 2,500 1,250 $2.13 $5.13 $2.13 6.9
11/10/89 2,500 1,250 $2.13 $5.13 $2.13 7.9
Michael J. Rohleder 3/2/87 6,000 4,800 $3.25 $6.00 $3.25 8.2
Vice President, 10/2/85 19,000 15,200 $3.25 $6.00 $3.25 2.5
Component Sales 10/2/85 6,000 4,800 $3.25 $6.00 $3.25 1.8
Raymond Woo 3/2/87 6,000 4,800 $3.25 $6.00 $3.25 8.2
Vice President, Systems 10/2/85 19,440 15,552 $3.25 $6.00 $3.25 2.5
Sales 10/2/85 6,660 5,328 $3.25 $6.00 $3.25 1.8
George M. Liu 11/10/89 2,500 2,500 $2.13 $5.13 $2.13 4.9
Vice President, 11/10/89 2,500 1,250 $2.13 $5.13 $2.13 5.9
Engineering and 11/10/89 2,500 1,250 $2.13 $5.13 $2.13 6.9
Technical Staff 11/10/89 2,500 1,250 $2.13 $5.13 $2.13 7.9
12/24/87 6,400 600 $2.13 $3.25 $2.13 5.5
12/24/87 4,800 600 $2.13 $3.25 $2.13 5.6
7/28/87 1,500 1,200 $3.25 $6.50 $3.25 5.6
7/28/87 1,500 1,200 $3.25 $6.50 $3.25 6.6
7/28/87 1,500 1,200 $3.25 $6.50 $3.25 7.6
7/28/87 1,500 1,200 $3.25 $6.50 $3.25 8.6
6/2/87 2,000 1,600 $3.25 $7.00 $3.25 5.4
6/2/87 2,000 1,600 $3.25 $7.00 $3.25 6.4
6/2/87 2,000 1,600 $3.25 $7.00 $3.25 7.4
6/2/87 2,000 1,600 $3.25 $7.00 $3.25 8.4
10/2/85 6,000 4,800 $3.25 $6.00 $3.25 1.8
Michael M. Rossen 3/2/87 10,000 8,000 $3.25 $6.00 $3.25 7.2
Vice President, Sales
Systems Division
Marshall G. Cox None
Chief Executive Repriced
Officer, President, and
Chief Operating Officer
</TABLE>
COMPENSATION OF DIRECTORS
Outside directors (i.e., those who are not employees of the Company)
receive an annual retainer of $20,000, plus $750 for each Board meeting
attended. The Company also pays for director's liability insurance.
At the 1994 Annual Meeting, however, the Company approved the adoption
of the Company's 1994 Stock Option Plan. Among many other benefits, the 1994
Stock Option Plan provides for the grant of an option of 10,000 shares of the
Company's Common Stock to certain directors who are not employees following
their initial election and at every fourth regular annual meeting thereafter
while they serve on the Board of Directors. Current non-employee directors will
receive an option for 10,000 shares at the annual meeting following the full
vesting of any option they currently hold if they are elected at such annual
meeting and at every fourth regular annual meeting thereafter at which they are
elected. The exercise price will be the fair market value of the shares on the
date of each respective grant.
CHANGE IN CONTROL
Certain stock options outstanding under the Company's Amended and
Restated Incentive and Non-Incentive Stock Option Plan, including options held
by the named executive officers, will become fully vested and exercisable if the
optionee's employment terminates within 12 months following a change in control
of the Company. A change in control means the occurrence of any of the following
events: (1) shareholder approval of a merger or consolidation of the Company
with any other corporation, which results in a change in 50% or more of the
total voting power of the Company, (2) shareholder approval of a plan of
complete liquidation of
-26-
<PAGE> 31
the Company or an agreement for the sale or disposition of all or substantially
all of the Company's assets, or (3) any person becomes the beneficial owner or
more than 50% of the Company's total outstanding securities. The Board of
Directors of the Company has determined that the consummation of the Transaction
in accordance with the terms and conditions of the Agreement will not constitute
a change of control of the Company as defined under the Amended and Restated
Incentive and Non-Incentive Stock Option Plan.
EMPLOYMENT AGREEMENTS
The Company entered into a two-year Employment Agreement with Ronald H.
Mabry dated April 1, 1994. Pursuant to the terms of the Agreement, Mr. Mabry is
paid a base salary of $200,000 per year and is eligible to receive a bonus of up
to $100,000 a year ($50,000 of which is guaranteed and the other $50,000 of
which is subject to the achievement of certain performance goals). If Mr. Mabry
is terminated without cause at any time during the term of the Agreement, he is
entitled to receive for a period of 12 months after his termination his base
salary, the employee benefits made available to the Company's executive officers
and salaried employees generally, and a bonus. The bonus is calculated at a rate
equal to that of the bonus received by Mr. Mabry during the six months preceding
his termination. For example, if in the six months prior to his termination Mr.
Mabry received $50,000 in bonuses, he would receive a $100,000 bonus during the
12-month period. In the event that Mr. Mabry's responsibilities are reduced
following a change in control and such reduction in responsibilities is not for
cause, any resignation of employment by Mr. Mabry as a consequence of such
reduction in responsibilities is treated as a termination of employment without
cause. Under his employment agreement, "Cause" is deemed to exist in the event
Mr. Mabry: (i) is convicted of a felony, or (ii) in carrying out his duties, is
guilty of (A) gross negligence, or (B) gross misconduct resulting, in either
case, in material harm to the Company. The Company has also agreed to pay for
relocation expenses and for the use of an automobile. See Footnote (2) of the
Summary Compensation Table.
In March 1994, prior to his becoming an officer of the Company, the
Company loaned Mr. Mabry $50,000 as an inducement to Mr. Mabry to accept the
position of Chief Executive Officer and President. The promissory note in
connection with such loan has a five-year term and provides for no interest. The
note becomes immediately payable at the Company's option if Mr. Mabry resigns or
is terminated for cause. In addition, if he exercises any stock option granted
to him by the Company, sells any or all of such shares and recognizes a gain on
such sale, all such gain shall be used to pay any outstanding balance due on the
note.
The Company entered into a two-year Employment Agreement with P. Scott
Munro dated June 1, 1994. Pursuant to the terms of the Agreement, Mr. Munro is
paid a base salary of $175,000 per year and is eligible to receive a bonus of up
to $75,000 a year ($18,750 of which is guaranteed and the other $56,250 is
subject to the achievement of certain performance goals.) If, during the term of
the Agreement, Mr. Munro is terminated without cause, he is entitled to continue
to receive his base salary and employee benefits in effect immediately prior to
such termination, plus his bonus (payable at a rate equal to that of the bonuses
received during the six months prior to such termination) for a period of 12
months following his termination. In the event that Mr. Munro's responsibilities
are reduced following a change in control and such reduction in responsibilities
is not for cause, any resignation of employment by Mr. Munro as a consequence of
such reduction in responsibilities is treated as a termination of employment
without cause.
The Company entered into a one-year Employment Agreement with John
Ashbaugh dated July 29, 1994. Pursuant to the terms of the Agreement, Mr.
Ashbaugh is paid a base salary of $160,000 per year and is eligible to receive a
bonus of up to $40,000 a year ($20,000 of which is guaranteed and the other
$20,000 is subject to the achievement of certain performance goals.) Mr.
Ashbaugh was also granted an option to purchase 50,000 shares, which vests at
the rate of 25% per year (subject to cliff-vesting in the first year) and is
entitled to a company car. If, during the term of the Agreement, Mr. Ashbaugh is
terminated without cause, he is entitled to continue to receive his base salary
and employee benefits in effect immediately prior to such termination, plus his
bonus (payable at a rate equal to that of the bonuses received during the six
months prior to such termination) for a period ending upon the earlier of: (i)
12 months following his termination, (ii) the date he accepts employment
elsewhere, or (iii) the end of the term of this Agreement. In the event that Mr.
Ashbaugh's responsibilities are reduced following a change in control and such
reduction in responsibilities is not for cause, any resignation of employment by
Mr. Ashbaugh as a consequence of such reduction in responsibilities is treated
as a termination of employment without cause.
-27-
<PAGE> 32
The Company entered into an Employment Agreement with Marshall G. Cox
as part of a Settlement Agreement dated April 26, 1993. The Settlement Agreement
was the result of a proxy dispute that began in March 1993 over the composition
of the Board of Directors. Effective February 8, 1994, Mr. Cox resigned as the
Company's President and Chief Executive Officer. However, the Employment
Agreement contains a provision which provides for the payment to Mr. Cox of
$280,000 annually in the form of salary continuation. He is also entitled to
continue to participate in all insurance or similar plans maintained by the
Company that do not require vesting. In addition, the Company agreed to continue
to pay premiums on Mr. Cox's life insurance policy and to pay for Mr. Cox's use
of an automobile. During the continuation period, Mr. Cox is, as a condition to
receiving payments and benefits, to perform consulting services on an as-needed
basis to an extent not exceeding 20 hours in any calendar month. This
continuation period commenced October 1, 1993 and will expire September 30,
1995, unless Mr. Cox's consulting services are terminated for cause. The costs
associated with this were expensed in the fiscal year ended December 31, 1993.
-28-
<PAGE> 33
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Financial
Statements are based upon the consolidated historical financial statements of
the Company adjusted to give effect to the Transaction.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1995 gives effect to the elimination of the disposed business
assuming that the disposition had taken place on March 31, 1995 and the cash
proceeds had been received at that time. The Unaudited Pro Forma Condensed
Consolidated Statements of Operations for the year ended December 31, 1994 and
the three months ended March 31, 1995 give effect to the elimination of the
disposed business assuming the disposition of the business had taken place on
January 1, 1994.
The Company did not declare any cash dividends per common share during
the periods for which financial data is presented. The pro forma adjustments
are based upon available information and certain assumptions that management
believes are reasonable.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1995
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Computer
WMT, Inc. Systems
Consolidated Business
Balance Components Pro Forma
Sheet Group Balance Sheet
at March 31, Disposition at March 31,
1995 Adjustments 1995
------------- ----------- ------------
(1)
<S> <C> <C> <C>
Assets
Current assets:
Cash ............................................. $ 237 $ 1,688(a) $ 1,925
Escrow receivable ................................ 1,858(b) 1,858
Inventories, NET ................................. 19,208 (9,318)(c) 9,890
Trade accounts receivable, net ................... 17,076 (7,342) 9,734
Other current assets ............................. 1,107 -- 1,107
-------- -------- --------
Total current assets ......................... 37,628 (13,114) 24,514
Property and equipment, net ............................. 1,023 (467)(d) 556
Goodwill and other intangibles, net ..................... 1,371 (1,371)(f) --
Other Assets ............................................ 290 -- 290
-------- -------- --------
$ 40,312 $(14,952) $ 25,360
======== ======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Notes Payable .................................... $ 9,842 $ (9,842)(a) $ --
Current portion of capital leases ................ 112 -- 112
Accounts payable and accrued expenses ............ 16,194 (2,400)(e) 13,794
-------- -------- --------
Total current liabilities .................... 26,148 (12,242) 13,906
Capital lease obligations, less current portion ......... 111 (48) 63
Other ................................................... 378 -- 378
Shareholders' equity .................................... 13,675 (2,662)(f) 11,013
-------- -------- --------
$ 40,312 $(14,952) $ 25,360
======== ======== ========
Book value per common share ............................. $ 3.64 -- $ 2.93(2)
======== ========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
-29-
<PAGE> 34
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
WMT, Inc. Computer Systems
Consolidated Components Business
Quarter ended Group Pro Forma
March 31, Disposition Quarter ended
1995 Adjustments March 31, 1995
------------- ----------- ----------------
(3)
<S> <C> <C> <C>
Net sales $ 33,497 $ 16,184 $ 17,313
Cost of goods sold 29,454 14,015 15,439
-------- -------- --------
Gross profit 4,043 2,169 1,874
-------- -------- --------
Gross profit as % of net
sales 12.07% 13.4% 10.8%
Selling, general and
administrative expenses 4,550 2,639 1,911
-------- -------- --------
Operating (loss) income (507) (470) (37)
Interest expense (net) 275 275 --
Other income (expense) 31 14 17
-------- -------- --------
Loss from operations before
income taxes (751) (731) (20)
Provision for income taxes -- -- --
-------- -------- --------
Loss from continuing
operations $ (751) $ (731) $ (20)
======== ======== ========
Loss per common share from
continuing operations $ (0.20) $ (0.01)
======== ========
Number of shares used in per
share calculation 3,759 3,759
======== ========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
-30-
<PAGE> 35
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
YEAR ENDED DECEMBER 31, 1994
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
WMT, Inc. Computer Systems
Consolidated Business
Fiscal Year Components Pro Forma
Ended Group Year Ended
December 31, Disposition December 31,
1994 Adjustments 1995
------------ ----------- ----------------
(3) (4)
<S> <C> <C> <C>
Net sales $ 119,285 $ 59,351 $ 59,934
Cost of goods sold 102,662 49,423 53,239
--------- --------- ---------
Gross profit 16,623 9,928 6,695
--------- --------- ---------
Gross profit as % of net sales 13.9% 16.7% 11.2%
Selling, general and administrative
expenses 16,968 10,122 6,846
--------- --------- ---------
Operating (loss) income (345) (194) (151)
Interest expense (net) 884 884 --
Other income (expense) 10 5 5
--------- --------- ---------
Loss from operations before income
taxes (1,219) (1,073) (146)
(Benefit from)/Provision for income
taxes (217) (217) --
--------- --------- ---------
Loss from continuing operations $ (1,002) $ (856) $ (146)
========= ========= =========
Loss per common share from
continuing operations $ (0.27) $ (0.04)
========= =========
Number of shares used in per share
calculation 3,669 3,669
========= =========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
-31-
<PAGE> 36
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AT
MARCH 31, 1995 AND FOR THE YEAR ENDED DECEMBER 31, 1994 AND THE THREE MONTHS
ENDED MARCH 31, 1995
Balance Sheet Footnotes
NOTE 1:
(a) Cash proceeds of $11,530,000 assumed used to retire Note Payable of
$9,842,000.
(b) Estimated escrow receivable comprised of designated inventory and
accounts receivable of $1,635,000 and $223,000, respectively.
(c) Reptron expected to acquire $8,745,000 in semiconductor components
inventory. In addition, $573,000 added to inventory reserves to provide
for possible loss exposure related to the inventory to be placed into
escrow at the Transaction closing. Although the Purchaser will take such
inventory into escrow at book value, the Company believes the Purchaser,
due to its unfamiliarity with the product lines and other factors, will
not sell the inventory as effectively as would the Company over the same
time period.
(d) Book value of equipment expected to be acquired by Reptron.
(e) To reflect Reptron's assumption of $3,241,000 in components related trade
accounts payable net of an $841,000 increase in other liabilities to
provide for expected severance and other exit costs plus those associated
with office consolidation.
(f) Non-cash write-off of Goodwill and increase in inventory reserves
associated with the transaction of $1,371,000 and $573,000, respectively.
These charges are directly related to the Transaction and will be
recognized concurrently with the Transaction. Also includes $841,000 of
severance, relocation and other exit costs net of $100,000 cash proceeds
received above book value of assets and a $23,000 reduction in accounts
receivable reserves which will be included in income in the period
succeeding the close of the Transaction. Such charges and credits were
not considered in the pro forma income statements enclosed.
NOTE 2:
The $.71 difference between the historical and pro forma per common share
book values indicated is attributable to the following:
(a) $.36 results from non-cash write-off of Goodwill;
(b) $.15 results from initial non-cash write-up of inventory reserves to
account for estimated escrow losses; and
(c) The remaining $.20 will be for severance and other exit costs.
Income Statement Footnotes
NOTE 3:
Eliminates the operating results of the Components Group included in
Western Micro Technology, Inc.'s consolidated statement of operations for the
quarter ended March 31,1995 and the fiscal year ended December 31, 1994.
Eliminates interest expense associated with Notes Payable assuming proceeds of
transaction used to retire all short term debt on January 1, 1994.
NOTE 4:
Includes $384,000 in non-recurring non-cash compensation expense related
to the acquisition of First Computer Corporation in December 1994.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE TRANSACTION AND
THE AGREEMENT.
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<PAGE> 37
OTHER MATTERS
Management knows of no business that will be presented for consideration
at the Special Meeting other than as stated in the Notice of Meeting. If,
however, other matters are properly brought before the meeting, it is the
intention of the persons named in the accompanying form of proxy to vote the
shares represented thereby on such matters in accordance with their best
judgment.
The expense of solicitation of proxies will be borne by the Company. In
addition to solicitation of proxies by mail, certain officers, directors and
Company employees who will receive no additional compensation for their services
may solicit proxies by telephone, telegraph or personal interview. The Company
may retain a proxy solicitation firm and, if it does so, would pay approximately
$45,000 in fees plus a reasonable amount to cover expenses. The Company is
required to request brokers and nominees who hold stock in their name to furnish
this proxy material to beneficial owners of the stock and will reimburse such
brokers and nominees for their reasonable out-of-pocket expenses in so doing.
The Company expects representatives of Coopers & Lybrand, the Company's
independent accountants, to be present at the Special Meeting with the
opportunity to make a statement if they so desire and to respond to pertinent
questions of Shareholders.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS ARE AVAILABLE WITHOUT
CHARGE UPON REQUEST FROM RONALD H. MABRY, SECRETARY, WESTERN MICRO TECHNOLOGY,
INC., 12900 SARATOGA AVENUE, SARATOGA, CALIFORNIA 95070 (TELEPHONE (408)
725-1660). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE
MEETING TO WHICH THIS PROXY STATEMENT RELATES, ANY REQUEST SHOULD BE MADE BY
JUNE 30, 1995.
The following periodic reports filed by the Company (File No. 0-11560)
with the Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934 (the "Exchange Act") are hereby incorporated by reference in this
Proxy Statement:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1994, as amended by the Company's Form 10-K/A Amendment No. 1 dated
April 28, 1995, copies of which have been delivered with this Proxy
Statement;
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, a
copy of which has been delivered with this Proxy Statement; and
3. Current Report on Form 8-K dated April 17, 1995.
All other reports and documents filed by the Company pursuant to section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Proxy Statement and prior to the date of the Special Meeting shall be deemed to
be incorporated by reference herein and shall be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that such
statement is modified or replaced by a statement contained herein or in any
subsequently filed document that also is or is deemed to be incorporated by
reference into this Proxy Statement. Any such statement so
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<PAGE> 38
modified or superseded shall not be deemed, except as so modified or replaced,
to constitute a part of this Proxy Statement.
By Order of the Board of Directors,
Ronald H. Mabry
Secretary
Saratoga, California
June 30, 1995
-34-
<PAGE> 39
APPENDIX A
ASSET PURCHASE AGREEMENT
<PAGE> 40
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Agreement to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purchase Price and Allocation Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Delivery of the Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Payment of the Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Escrow Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Representations and Warranties of the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Corporate Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . . . . 6
(c) Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(e) Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) Location of Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(g) Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(h) No Third Party Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(i) Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(j) Completeness of Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(k) Pending, Threatened or Potential Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(l) Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(m) Warranty Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(n) Non-Competition, Confidentiality and Indemnification Agreements . . . . . . . . . . . . . . . . 9
(o) Broker's and Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Representations and Warranties of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) Corporate Power and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Validity of Contemplated Transactions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Broker's and Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1 Indemnification by the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Indemnification by the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Notice and Defense of Third-Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Survival of Covenants and Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV FURTHER COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1 Seller's Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE V CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 Conditions Precedent to the Purchaser's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Conditions Precedent to the Seller's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS AND FURTHER ASSURANCES . . . . . . . . . . . . . . . . 16
6.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Items to be Delivered at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.3 Post Closing Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.4 Contents of Agreement: Parties in Interest. etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.5 Assignment and Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.8 California Law to Govern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.9 No Benefit to Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.10 Headings, Gender and Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.11 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE
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<S> <C>
Preliminary Schedule 1.1(a) Accounts Receivable
Final Schedule 1.1(a) Accounts Receivable (To be delivered at Closing)
Preliminary Schedule 1.1(b) Inventory
Final Schedule 1.1(b) Inventory (To be delivered at Closing)
Schedule 1.1(d) Machinery, Equipment, Furniture and Fixtures (To be delivered
at Closing)
Schedule 1.1(f) Real Estate and Personal Property Leases
Preliminary Schedule 1.1(g) Backlog
Final Schedule 1.1(g) Backlog (To be delivered at Closing)
Schedule 1.1(h) Request for Quotations (To be delivered at Closing)
Preliminary Schedule 1.4(c) Accounts Payable
</TABLE>
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<TABLE>
<S> <C>
Final Schedule 1.4(c) Accounts Payable (To be delivered at Closing)
Preliminary Schedule 1.6(a) Designated Accounts Receivable
Final Schedule 1.6(a) Designated Accounts Receivable (To be delivered at Closing)
Preliminary Schedule 1.6(b) Designated Inventory
Final Schedule 1.6(b) Designated Inventory (To be delivered at Closing)
Schedule 2.1(k) Litigation
Schedule 2.1(l)(iii) Volume Discounts
Schedule 5.1(j) Franchise Product Lines
</TABLE>
EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Non-Competition/Royalty/No-Solicitation Agreement
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into on this 5th day of May 1995 by and among WESTERN MICRO TECHNOLOGY, INC. a
California corporation (the "Seller"), and REPTRON ELECTRONICS, INC., a Florida
corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, a portion of the Seller's business is the wholesale
distribution of electronic semiconductor components (the "Electronic Component
Distribution Business" or the "ECDB.") The Seller desires to sell to the
Purchaser and the Purchaser desires to buy from the Seller all of the operating
assets, properties and rights of the Seller comprising the ECDB for the
purchase price and upon and subject to the other terms and conditions
hereinafter set forth;
NOW THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Agreement to Sell. At the Closing, as defined in Article VI
hereof, the Seller will grant, sell, convey and assign to the Purchaser, upon,
and subject to the terms and conditions of this Agreement, all of the Seller's
right, title and interest in and to the following, which comprise the ECDB
(collectively the "Assets"):
(a) all accounts receivable relating to the ECDB as of the close of
business on the last business day immediately preceding the Date of Closing
(the "Accounts Receivable") (for reference purposes only all accounts
receivable relating to the ECDB as of the date hereof are set forth on Schedule
1.1(a) attached hereto (the "Preliminary Schedule 1.1(a)"), which will be
updated on the close of business on the last business day immediately preceding
the Date of Closing to identify the Accounts Receivable and such updated
Schedule will constitute the Accounts Receivable (the "Final Schedule 1.1(a)");
(b) all inventories relating to the ECDB existing as of the close of
business on the last business day immediately preceding the Date of Closing
(the "Inventory") (for reference purposes only all inventory relating to the
ECDB as of the date
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hereof is set forth on Schedule 1.1(b) attached hereto (the "Preliminary
Schedule 1.1(b)"), which will be updated on the close of business on the last
business day immediately preceding the Date of Closing to identify the
Inventory and such updated Schedule will constitute the Inventory (the "Final
Schedule 1.1(b)");
(c) all documents and materials, whether stored in electronic memory
or otherwise, possessed by the Seller representing or relating to ECDB customer
and supplier lists and leads to prospective ECDB customers and credit files of
current and former ECDB customers;
(d) all machinery, equipment, furniture and fixtures listed on
Schedule 1.1(d) to be delivered on the Date of Closing;
(e) all product and technical information possessed by the Seller of
every nature relating to the design, manufacture and distribution of the
products presently or formerly sold by the ECDB, including all sales and
promotional literature, product warranties, marketing data, technical
literature and data, engineering drawings, manufacturing drawings, prototypes,
plans, manufacturing process sheets, computer programs and software, test data,
production data, purchasing data, parts lists, instruction manuals, and other
data and material, whether in written form or in other reproducible form, which
is as of the date hereof and at the Date of Closing used or useful or
contemplated to be used or useful at a future date in the ECDB;
(f) all real estate and personal property leases listed on Schedule
1.1(f) attached hereto;
(g) all purchase or sales orders as of the close of business on the
last business day immediately preceding the Date of Closing (the "Backlog")
(for reference purposes only all backlog relating to the ECDB as of May 4, 1995
is set forth on Schedule 1.1(g) attached hereto (the "Preliminary Schedule
1.1(g)"), which will be updated on the close of business on the last business
day immediately preceding the Date of Closing and such updated Schedule will
constitute the Backlog (the "Final Schedule 1.1(g)");
(h) all requests for quotation relating to the ECDB as of the close
of business on the last business day immediately preceding the Date of Closing
(the "Request for Quotations") set forth on Schedule 1.1(h) to be delivered on
the Date of Closing);
(i) all insurance contracts which are assignable and cover property
or liabilities of the ECDB;
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(j) only with each such employee's prior written consent, copies of
the personnel records of those consenting employees of Seller who are hired by
Purchaser as of or subsequent to the Date of Closing;
(k) the interests of Seller in any and all claims of Seller attendant
to the ECDB against any other person, whether now or hereafter accrued,
contingent or otherwise, known or unknown, including, but not limited to claims
for collection or indemnity, claims in bankruptcy, claims for contribution and
choses in action; and
(l) all documents, records and files possessed by the Seller relating
to the Assets or the ECDB, which are necessary to conduct the business of the
ECDB.
1.2 Purchase Price and Allocation Thereof.
(a) The purchase price (the "Purchase Price") for the Assets shall be
the sum of:
(i) One Hundred Thousand ($100,000) dollars, and
(ii) the sum of the net book value (determined under GAAP) of
the following:
(A) The Accounts Receivable;
(B) The Inventory; and
(C) All machinery, equipment, furniture and fixtures
listed on Schedule 1.1(d).
(b) At Closing, the parties shall execute a schedule allocating the
Purchase Price among the Assets. The Purchase Price allocation shall be
utilized by each of the Seller and Purchaser for Federal Income Tax reporting
purposes.
1.3 Delivery of the Assets. At Closing, the Seller shall transfer
and deliver to Purchaser possession of and title to the Assets along with such
instruments of transfer and title as are required by Purchaser.
1.4 Assumption of Liabilities. Except as specifically set forth
below, Purchaser shall not assume and does not agree to pay, perform or
discharge any debt, expense or liability of the Seller of any nature
whatsoever, whether fixed or contingent, known or unknown, on the Date of
Closing;
(a) Purchaser agrees to complete and deliver such product or service
as is required by the Backlog, unless such Backlog is canceled by the customer;
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(b) Purchaser assumes and agrees to perform all of Seller's
obligations accruing on and after the Date of Closing under all real estate and
personal property leases described in Schedule 1.1(f) attached hereto;
(c) Purchaser assumes and agrees to pay, as and when due, Seller's
accounts payable and liabilities of the ECDB accrued as of the close of
business on the last business day immediately preceding the Date of Closing
(the "Accounts Payable") (for reference purposes only Seller's accounts payable
and liabilities of the ECDB accrued as of the date hereof are set forth on
Schedule 1.4(c) attached hereto (the "Preliminary Schedule 1.4(c)"), which will
be updated on the close of business on the last business day on the Date of
Closing to identify the Accounts Payable, the sum of which shall not exceed the
Purchase Price, and such updated Schedule will constitute the Accounts Payable
(the "Final Schedule 1.4(c)");
(d) Purchaser assumes and agrees to pay Seller's obligations under
Seller's open purchase orders for ECDB inventory purchases identified on
Schedule 1.4(d) attached hereto provided that such inventory is not of a
character wherein: (i) Seller is not a franchisee of the manufacturer thereof,
(ii) is not subject to price protection or stock rotation rights, (iii) is
nonreturnable or noncancellable or, (iv) was manufactured by Mitsubishi;
1.5 Payment of the Purchase Price.
(a) On the Date of Closing, Purchaser shall:
(i) Wire transfer to Seller an amount equal to the difference
between:
(A) The Purchase Price, and
(B) The sum of:
(1) The amount deposited in escrow as described in
Paragraph 1.6 below; and
(2) The Accounts Payable.
1.6 Escrow Deposit. On the Date of Closing, Purchaser shall deposit
in escrow with an escrow agent mutually acceptable to both parties, and
pursuant to the Escrow Agreement in substantially the form attached hereto as
Exhibit A, an amount equal to the greater of $1,000,000 or the sum of:
(a) all accounts receivable included on the Final Schedule 1.1(a) to
be delivered at Closing of any customer account any portion of which is aged
over ninety days as of the Date of
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Closing (the "Designated Accounts Receivable") (for reference purposes only all
such designated accounts receivable relating to the ECDB as of the date hereof
are set forth on Schedule 1.6(a) attached hereto (the "Preliminary Schedule
1.6(a)"), which will be updated on the close of business on the last business
day immediately preceding the Date of Closing, and such updated schedule will
constitute the Designated Accounts Receivable (the "Final Schedule 1.6(a)");
and
(b) all Inventory included on the Final Schedule 1.1(b) to be
delivered at Closing:
(i) for which Seller does not have in effect a franchise
agreement as of the Date of Closing (except product manufactured by Fujitsu
unless covered by paragraph (ii) or (iii) of this Section 1.6(b)); or
(ii) for which Seller has no price or stock rotation
protection rights; or
(iii) which is nonreturnable or noncancellable; or
(iv) which represents products manufactured by Mitsubishi;
(the "Designated Inventory") (for reference purposes only all such designated
inventory as of the date hereof is set forth on Schedule 1.6(b) attached hereto
(the "Preliminary Schedule 1.6(b)"), which will be updated on the close of
business on the last business day immediately preceding the Date of Closing and
such updated schedule will constitute the Designated Inventory (the "Final
Schedule 1.6(b)").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Seller. The Seller hereby
represents and warrants to Purchaser as follows:
(a) Corporate Existence. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California. The Seller has all requisite power and authority to carry on the
ECDB as it has been and is now being conducted and to own, lease and operate
the properties used in connection therewith. The Seller is duly qualified to
do business and is in good standing in each jurisdiction where the ECDB
requires it to be so qualified.
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<PAGE> 48
(b) Corporate Power; Authorization; Enforceable Obligations.
(i) The Seller has the corporate power, authority and legal
right to execute, deliver and perform this Agreement. This Agreement
has been, and the instruments of conveyance, assignment, transfer and
all other documents delivered as required herein will be, duly
executed and delivered by a duly authorized officer of the Seller, and
this Agreement constitutes, and such instruments when executed and
delivered will constitute, legal and binding obligations of the Seller
enforceable against the Seller in accordance with their respective
terms except as may be limited by bankruptcy, insolvency and other
similar laws affecting creditor's rights generally and by general
equity principles.
(ii) The execution, delivery and performance of this
Agreement by Seller does not and will not contravene, violate or
breach (with or without the giving of notice or lapse of time, or
both): (A) any law, rule, regulation, license or permit to which the
Seller is subject, (B) any judgment, order, writ, injunction, decree
or award or any court, arbitrator or governmental or regulatory
official, body or authority which is applicable to the Seller, (C) the
charter documents or Bylaws of the Seller; (D) with the consent of
CoastFed Business Credit Corporation of any term, condition or
provision of, or any indenture, agreement, contract, commitment, lease
or understanding, oral or written, to which the Seller is a party, or
by which any of the Assets may be bound or affected, or which give any
party with rights thereunder the right to terminate, modify,
accelerate or otherwise change the existing rights or obligations of
the Seller thereunder, or (E) require the consent of any other party
except for Seller's shareholders, CoastFed Business Credit
Corporation, Seller's landlords to its premises, lessors to its
equipment leases, and governmental agency approval or regulatory
requirement having jurisdiction thereof.
(c) Accounts Receivable. The Accounts Receivable set forth on the
Final Schedule 1.1(a) to be delivered at Closing will be the result of sales of
electronic semiconductor components made in the ordinary course of business and
will not be subject to defenses, rights of set off or counterclaims and for
which Seller has not received by the Date of Closing notice of rejection or
revocation of acceptance, and to the best of Seller's knowledge, will
constitute on the Date of Closing the total amount due Seller on account of
goods sold or services
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delivered in the ECDB as of the close of business immediately preceding the
Date of Closing.
(d) Inventory. Since March 31, 1995, the Seller has not changed its
method of accounting for, or valuing, its inventory, and the Inventory listed
on the Final Schedule 1.1(b) to be delivered at Closing to the best of Seller's
knowledge will represent on the Date of Closing all inventory of the Seller in
the ECDB as of the close of business on the last business day immediately
preceding the Date of Closing.
(e) Title to Properties. The Seller has good and valid title to the
Assets, which on the Date of Closing will be free and clear of all liens,
pledges, security interests, charges, claims, restrictions and other
encumbrance or defects of title of any nature. Subject to satisfaction or
waiver of the conditions precedent described in Article V, on the Date of
Closing, the Seller will have the unrestricted right to sell the Assets as
herein provided. The Seller does not know of any liabilities or obligations,
whether accrued, absolute, contingent or otherwise, existing or arising out of
any transaction entered into, or state of facts existing, on or prior to the
date of this Agreement, which might give rise to a lien or claim against the
Assets.
(f) Location of Tangible Assets. The machinery, equipment, furniture
and fixtures to be set forth on Schedule 1.1(d) to be delivered at Closing will
be located at the Seller's leased premises identified on such Schedule.
(g) Compliance with Law. The Seller has complied with or, following
notice, has timely complied under such notice, with each law, rule or
regulation to which the Assets or the ECDB business is subject, and has not
failed to obtain or to adhere to, or following notice, then timely adhered to,
the requirements of any license, permit or authorization necessary to the
ownership of the Assets or to the conduct of the ECDB. On the Date of Closing,
Seller shall be in compliance with such laws, rules, regulations, licenses,
permits or authorizations necessary to the ownership and operation of Seller's
Assets and the conduct of Seller's ECDB.
(h) No Third Party Options. Except as contemplated by this
Agreement, there are no existing agreements, options, commitments or rights
with, to, or in any person or entity to acquire any of the Assets or any
interest therein, except for those contracts entered into in the ordinary
course of business consistent with past practice.
(i) Third Party Claims. The Seller has no knowledge of any liability
on account of product warranty or personal injury arising out of the sales of
the ECDB.
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(j) Completeness of Disclosure. Neither this Agreement, or any
schedule or exhibit attached hereto or to be delivered at Closing contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact required to be stated herein or therein necessary to make
any statement herein or therein contained not misleading.
(k) Pending, Threatened or Potential Litigation. Except as disclosed
on Schedule 2.1(k) attached hereto, there is no litigation, arbitration,
investigation or other proceeding before any court, arbitrator or governmental
or regulatory official, pending or threatened against the Seller which relates
to any of the Assets or the ECDB or the transactions contemplated by this
Agreement, nor is there any basis for any such litigation, arbitration,
investigation or other proceeding. The Seller is not a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or award of the
court, arbitrator or governmental or regulatory official body or authority
which affects the Assets or the business of the Seller or the transactions
contemplated by this Agreement.
(l) Contracts and Commitments.
(i) The Seller is not a party to any written or oral
agreement, contract or commitment to sell or supply products or to
perform services from the ECDB, excepting the Backlog listed on the
Preliminary Schedule 1.1(g), and to be listed on the Final Schedule
1.1(g).
(ii) To the best of Seller's knowledge, all Backlog listed on
the Preliminary Schedule 1.1(g) represent, and to be listed on the
Final Schedule 1.1(g) will represent, orders made in the ordinary
course of business of the ECDB and Seller has not received any
prepayments or credits with respect thereto. Seller has no knowledge
of a default in the performance, of any material obligation, covenant
or condition contained therein or to be contained therein, and no
event has occurred which, with or without the giving of notice or
lapse of time, or both, would constitute a default thereunder.
(iii) Except as disclosed on Schedule 2.1(l)(iii), Seller is
not a party to any volume price discount or rebate arrangements with
any customer.
(m) Warranty Claims. There are no known facts which would cause
post-Closing warranty claim experience to be greater than historical levels
experienced by Seller pre-Closing.
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(n) Non-Competition, Confidentiality and Indemnification
Agreements. The Seller has no material non- competition, confidentiality or
indemnification agreements or covenants running to the benefit of Seller
relating to the ECDB.
(o) Broker's and Finder's Fees. Seller has retained only Von Gehr
International as its agent in the negotiation relative to the Agreement and
that no other person will be entitled to any brokerage or finder's fee or other
commission in respect of the Agreement or the consummation of the transaction
contemplated hereby.
2.2 Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Seller as follows:
(a) Corporate Existence. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida.
(b) Corporate Power and Authorization. The Purchaser has the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement by the
Purchaser have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered and constitutes the legal, valid
and binding obligation of the Purchaser enforceable against it in accordance
with its terms, except as may be limited by bankruptcy, insolvency and other
similar laws affecting creditor's rights generally and by general equity
principles.
(c) Validity of Contemplated Transactions, etc. The execution,
delivery and performance of this Agreement by Purchaser does not and will not
contravene, violate or breach (with or without the giving of notice or lapse of
time, or both): (i) to Purchaser's knowledge any law, rule, regulation,
license or permit to which the Purchaser is subject, (ii) any judgment, order,
writ, injunction, decree or award or any court, arbitrator or governmental or
regulatory official, body or authority which is applicable to the Purchaser,
(iii) the charter documents or Bylaws of the Purchaser, (iv) with the consent
of NationsBank, any term, condition or provision of any indenture, agreement,
contract, commitment, or understanding, oral or written, to which the Purchaser
is a party, or (v) require the consent of any other party except for approval
by NationsBank by way of waiver of various loan covenants, Seller's
shareholders, Seller's landlords to its premises, lessors to its equipment
leases, and governmental agency approval having jurisdiction thereof.
(d) Broker's and Finder's Fees. All negotiations relative to this
Agreement have been carried on by Purchaser directly
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without the intervention of any person who may be entitled to any brokerage and
finder's fees or other commission in respect to this Agreement or the
consummation of the transaction contemplated hereby.
ARTICLE III
INDEMNIFICATION
3.1 Indemnification by the Seller.
(a) Except as otherwise expressly provided in this Article III,
Seller shall defend, indemnify and hold harmless Purchaser, and shall reimburse
Purchaser, for, from and against each and every claim, loss (which shall
include any diminution in value), liability, judgment, damage, cost and expense
(including, without limitation, interest, penalties, costs of preparation and
investigation, and the reasonable fees, disbursements and expenses of
attorneys, accountants and other professional advisors) (collectively, "Loss"
or "Losses") imposed on or incurred by Purchaser resulting from or arising out
of (including without limitation, resulting from or arising out of any claim
made by any third party): (A) a breach or inaccuracy of Seller's
representations, warranties or covenants in this Agreement or in any
certificate, instrument of transfer or other document or agreement executed in
connection with this Agreement; (B) any claim by any employee or former
employee of the Seller relating to discrimination, sexual harassment or other
failure by Seller to comply with the federal and state equal opportunity and
fair employment laws; and (C) any claim regarding an injury sustained by any
person as a result of the purchase or use of any product, either directly or
indirectly, sold by Seller prior to the Date of Closing; PROVIDED, HOWEVER,
THAT SELLER'S MAXIMUM LIABILITY FOR INDEMNIFICATION UNDER SUBPARAGRAPH (A) OF
THIS SECTION 3.1(A) (OTHER THAN CLAIMS BROUGHT FOR A BREACH OR INACCURACY OF A
REPRESENTATION CONTAINED IN SECTION 2.1(A), (B) OR (E)) SHALL BE LIMITED TO THE
AMOUNT SET ASIDE IN THE ESCROW ESTABLISHED PURSUANT TO SECTION 1.6 OF THIS
AGREEMENT, ALL SUCH CLAIMS MUST BE MADE WITHIN SIX MONTHS OF THE DATE OF
CLOSING AND WITH RESPECT TO SUCH CLAIMS THE ESCROW IS THE SOLE REMEDY;
PROVIDED, FURTHER ANY CLAIMS UNDER SUBPARAGRAPHS (B) OR (C) OF THIS SECTION
3.1(A) MUST BE MADE WITHIN TWO (2) YEARS OF THE DATE HEREOF.
3.2 Indemnification by the Purchaser. Except as otherwise expressly
provided in this Article III, Purchaser shall defend, indemnify and hold
harmless Seller, and shall reimburse Seller, for, from and against each and
every Loss imposed on or incurred by Seller resulting from or arising out of
(including without limitation, resulting from or arising out of any claim made
by any third party) a breach or inaccuracy of Purchaser's represen-
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tations, warranties or covenants in this Agreement or in any certificate,
instrument of transfer or other document or agreement executed in connection
with this Agreement.
3.3 Notice and Defense of Third-Party Claims. If any action, claim
or proceeding shall be brought or asserted against the Purchaser in respect of
any claim by a third party for which indemnity may be sought under Section
3.1(a) or if any action, claim or proceeding shall be brought or asserted
against the Seller in respect of any claim by a third party for which indemnity
may be sought under Section 3.2 (each an "Indemnified Person") from an
indemnifying person or any successor thereto (the "Indemnifying Person"), the
Indemnified Person shall give prompt written notice of such action or claim to
the Indemnifying Person who shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Person and the
payment of all expenses; except that any delay or failure so to notify the
Indemnifying Person shall relieve the Indemnifying Person of its obligations
hereunder only to the extent, if at all, that (A) it is prejudiced by reason of
such delay or failure, or (B) the Indemnified Person fails to give notice of
its claim. The Indemnified Person shall have the right to employ separate
counsel in any of the foregoing actions, claims or proceedings and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Indemnified Person unless both the Indemnified
Person and the Indemnifying Person are named as parties and the Indemnified
Person shall in good faith determine that representation by the same counsel is
inappropriate, in which case the reasonable costs of the separate counsel for
the Indemnified Party shall be paid by the Indemnifying Party. In the event
that the Indemnifying Person, within thirty (30) days after notice of any such
action or claim or such shorter period as is necessary to timely respond, fails
to assume the defense thereof, the Indemnified Person shall have the right to
undertake the good faith defense of such action, claim or proceeding for the
account of and at the expense of the Indemnifying Person, subject to the right
of the Indemnifying Person to assume the defense of such action, claim or
proceeding at any time prior to the settlement, compromise or final
determination thereof. Anything in this Article III to the contrary
notwithstanding, (a) the Indemnifying Person shall not, without the Indemnified
Person's prior written consent, settle or compromise any action or claim or
consent to the entry of any judgment with respect to any action, claim or
proceeding for anything other than money damages paid by the Indemnifying
Person, and (b) the Indemnified Party shall not settle or compromise any action
or claim or consent to the entry of any judgment, except, where the
Indemnifying Person has failed to assume the defense of such action or claim,
and then only with the prior consent of the Indemnifying Party, which shall not
be unreasonably withheld. The Indemnifying Person may, without the Indemnified
Person's
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prior consent, settle or compromise any such action, claim or proceeding or
consent to entry of any judgment with respect to any such action or claim that
requires solely the payment of money damages by the Indemnifying Person.
3.4 Remedy. Except as described in Section 3.1(a), the rights of
indemnification provided in this Article III shall be in addition to all other
remedies for all matters arising out of this Agreement.
3.5 Survival of Covenants and Representations and Warranties. All
covenants and representations and warranties made herein or in any certificate,
schedule, statement, document or instrument furnished pursuant to this
Agreement shall be true at the Date of Closing and except for Sections 2.1(a),
(b) and (e), 2.2(a) and (b), 6.3, and 7.3 which shall survive the Closing, all
covenants and representations and warranties made herein or in any certificate,
schedule, statement, document or instrument furnished pursuant to this
Agreement shall survive for a period of six months. Notwithstanding any
investigation or audit conducted before or after the Date of Closing or the
decision of any party to complete the Closing, each party shall be entitled to
rely upon the representations, warranties, covenants and agreements set forth
herein.
ARTICLE IV
FURTHER COVENANTS
4.1 Seller's Covenants. The Seller covenants and agrees that after
the date hereof until the Date of Closing and in connection with the ECDB that
it shall:
(a) carry on that business in a manner consistent with prior practice
in the usual and ordinary course, and will use its best efforts to preserve its
business organization and conserve the good will and relationships of its
customers, suppliers, employees and others having business relations with it;
(b) maintain its corporate existence in good standing in its
jurisdiction of incorporation and in each jurisdiction in which it is qualified
or required to be qualified to do business, and it will not amend its Articles
or Bylaws from the forms delivered to Purchaser in a manner which would prevent
or adversely affect the consummation of the transaction contemplated herein,
and the continued operation by Purchaser of the ECDB from and after the Date of
Closing;
(c) not waive any material right or cancel any material contract,
debt or claim, nor assume or enter into any contract,
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lease, license, obligation, indebtedness, commitment, purchase or sale except
in the usual and ordinary course of business;
(d) duly and timely file all reports and returns required to be filed
with governmental agencies and promptly pay when due all taxes, assessments and
governmental charges including interest and penalties levied or assessed,
unless: (i) diligently contested in good faith by appropriate proceedings; or
(ii) the same constitutes a liability assumed by Purchaser as provided in
Paragraph 1.4 above;
(e) maintain and keep in good order, consistent with past practice,
all buildings, offices, and other structures, and keep all machinery, tools,
equipment, furniture, fixtures and other property in good condition, repair and
working order, excepting therefrom normal wear from regular use;
(f) maintain in full force and effect all policies of insurance now
in effect;
(g) not merge or consolidate with any other corporation, business or
other entity or acquire any assets of any other corporation, business or other
person, except in the ordinary course of business;
(h) not intentionally do any act or omit to do any act or permit any
omission to act which will cause a breach or default in any of its contracts,
commitments or obligations;
(i) from the date hereof, afford the Purchaser, its counsel,
accountants, and other agents and representatives full access during normal
business to all of its offices, properties and records attendant to the ECDB,
including such access as may be necessary to allow the Purchaser to make an
audit or otherwise satisfy itself of the accuracy of the representations and
warranties contained in this Agreement and that the conditions contained in
this Agreement have been complied with, and Seller will furnish documents and
all such other information, and access to the Seller and the Seller's officers
and employees for interviews, concerning its properties and business as the
Purchaser may reasonably request; provided, however, that any investigation or
inquiry made by the Purchaser shall not in any way affect the representations
and warranties contained in this Agreement or their survival of the Closing;
(j) not take any action or omit to take any action within its control
to the extent such action or omission might result in any of the
representations or warranties of the Seller set forth in this Agreement being
inaccurate or incorrect on and as of the Closing Date;
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(k) not directly or indirectly, through any director, officer, agent,
financial advisor or otherwise, solicit, initiate, consider, entertain or
encourage submissions of proposals, offers, or letters of intent from any
person or entity related to:
(i) any acquisition or purchase of all or any portion of the
Assets, out of the ordinary course of business; or
(ii) to the extent approval is required by Seller, the
purchase from Seller, by way of merger or otherwise, of voting shares
or instruments through which voting shares may be acquired, other than
through employee or director stock options;
(l) will not knowingly fail to comply with all laws, rules,
regulations licenses, permits or authorizations applicable to the ECDB and
material to the operation thereof;
(m) not enter into any transaction other than in the ordinary course
of business consistent with past practice;
(n) from and after the date hereof Seller will sell, if at all, the
Designated Inventory only upon receipt of a written acknowledgement by the
customer that the products sold are noncancellable and nonreturnable;
(o) from and after the date hereof Seller agrees to use its best
efforts to sell products manufactured by Fujitsu in its inventory and prior to
returning the same to Fujitsu will advise Purchaser of Seller's plans regarding
returns to Fujitsu of such inventory. If Purchaser so requests, Seller will
not return the same and in such event, Purchaser will indemnify Seller for the
credit Seller would have received had it returned the product in the event the
transactions contemplated hereby are not consummated and Seller delivers said
inventory to Purchaser in return for such indemnification; and
(p) from and after the date hereof, Seller agrees to use its best
efforts to prepare and file with the Securities and Exchange Commission within
10 business days of the date hereof and to distribute to its shareholders, a
proxy statement requesting the shareholders to approve the transactions
contemplated hereby.
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ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent to the Purchaser's Obligations. All
obligations of the Purchaser to perform under this Agreement are subject to the
fulfillment or satisfaction, or written waiver by Purchaser on or before the
Date of Closing of each of the following conditions precedent. Purchaser
covenants to use reasonable effort in satisfying those conditions precedent the
fulfillment of which are within the control of Purchaser.
(a) Any security interest shall be discharged with respect to any
property comprising the Assets or the Seller's name.
(b) Seller's representations and warranties shall remain valid and
Seller shall have fully performed its covenants as herein contained.
(c) Receipt of the consent from each governmental agency having
jurisdiction over the transaction contemplated by the Agreement, or expiration
of the applicable statutory or regulatory waiting period, and approval or
consent from each third party which is necessary or required in order for
Purchaser to acquire the Assets and conduct the ECDB as currently conducted by
Seller.
(d) Purchaser shall receive assignments of the real and personal
property leases set forth on Schedule 1.1(f) as signed by the Seller and the
landlords or lessors for which consent is required.
(e) Purchaser shall have received fully executed and delivered by
Seller the Non-Competition/Royalty/No- Solicitation Agreement in substantially
the form attached hereto as Exhibit B.
(f) Purchaser shall have received the written waiver by NationsBank
of applicable covenants contained in agreements as between that bank and
Purchaser.
(g) Approval of the shareholders of Seller, as required by the
California General Corporation Law.
(h) Purchaser shall have received fully executed and delivered by
Ronald Mabry an Employment Agreement with terms and conditions in substantially
the form set forth in a letter agreement between Purchaser and Mr. Mabry.
(i) No litigation shall have been commenced or threatened, the effect
of which could restrain or prevent the carrying out of the transaction
contemplated in the Agreement, or in which an
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unfavorable result could have a material adverse affect on the ECDB.
5.2 Conditions Precedent to the Seller's Obligations. All
obligations of the Seller to perform under this Agreement are subject to the
fulfillment or satisfaction, or written waiver by Seller on or before the Date
of Closing, of each of the following conditions precedent. Seller covenants to
use reasonable effort in satisfying those conditions precedent the fulfillment
of which are within the control of Seller.
(a) Purchaser's representations and warranties shall remain valid and
Purchaser shall have fully performed its covenants as herein contained.
(b) Seller shall have received fully executed and delivered by
Purchaser the Non-Competition/Royalty/No- Solicitation Agreement in
substantially the form attached hereto as Exhibit B.
(c) No litigation shall have been commenced or threatened, the effect
of which could restrain or prevent the carrying out of the transaction
contemplated in the Agreement, or in which an unfavorable result could have a
material adverse affect on the ECDB.
(d) Receipt of the consent from each governmental agency having
jurisdiction over the transaction contemplated by the Agreement, or expiration
of the applicable statutory or regulatory waiting period, and approval or
consent from each third party which is necessary or required in order for
Seller to sell or Purchaser to acquire the Assets and conduct the ECDB.
(e) Approval of the shareholders of Seller, as required by the
California General Corporation Law.
(f) Seller shall have obtained the consent of CoastFed Business
Credit Corporation.
ARTICLE VI
CLOSING, ITEMS TO BE DELIVERED,
THIRD PARTY CONSENTS AND FURTHER ASSURANCES
6.1 Closing. The closing ("Closing") of the sale and purchase of the
Assets shall take place after satisfaction or written waiver of all conditions
precedent described in Article V and within ten business days of the last of
said conditions precedent being so satisfied or waived or as soon thereafter as
may be mutually designated (the "Date of Closing"), and shall take place at the
offices of Pillsbury
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Madison & Sutro, 2700 Sand Hill Road, Menlo Park, California, 94025.
6.2 Items to be Delivered at Closing. At Closing and subject to the
terms and conditions herein contained:
(a) The Seller will deliver, or cause to be delivered, to the
Purchaser in form acceptable to Purchaser the following:
(i) a general instrument of sale, conveyance, assignment,
transfer and delivery with respect to all of the Assets, such
instrument to be in a form mutually acceptable to the parties;
(ii) such specific instruments of sale, conveyance,
assignment, transfer and delivery with respect to any of the Assets as
the Purchaser shall reasonably request;
(iii) an opinion of counsel for the Seller dated the Closing
Date in a form mutually acceptable to the parties;
(iv) a good standing certificate for the Seller, dated not
more than thirty (30) business days prior to the Date of Closing
issued by the States of California, Washington, Oregon and
Massachusetts;
(v) a certificate of the Secretary of the Seller, in in a
form mutually acceptable to the parties;
(vi) Delivery of all or adequate arrangement therefore of the
Assets;
(vii) Such consents which will permit Purchaser to use the
name "Reptron/Western" and further designate that Purchaser is in part
the "successor to the electronic component division of Western Micro
Technology, Inc." or language of similar effect for a period of six
months following the Date of Closing in those jurisdictions in which
Seller currently conducts the ECDB;
(viii) Fully executed Non-Competition/Royalty/No-Solicitation
Agreement attached hereto as Exhibit B;
(ix) Written acknowledgment by Von Gehr International of full
payment and satisfaction of all amounts due it for the services
rendered by it on behalf of Seller in connection with the transaction.
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(b) The Purchaser shall deliver the following:
(i) wire transferred funds to the Seller in the amount
identified in subparagraph 1.5(a)(i);
(ii) wire transferred funds to the Escrow Agent in the amount
identified in paragraph 1.6;
(iii) An opinion of counsel for the Purchaser dated the Date
of Closing Date in a form mutually acceptable to the parties;
(iv) Certificate of the Secretary of the Purchaser in a form
mutually acceptable to the parties.
(c) Purchaser and Seller shall execute and exchange:
(i) a Closing Statement;
(ii) Escrow Agreement in substantially the form of Exhibit A;
(iii) a written statement allocating the Purchase Price among
the Assets shall include the information necessary for the Purchaser
and Seller to complete IRS Form 8594, "Asset Acquisition Statement
Under Section 1060," with respect to the sale and purchase of the
Assets hereunder;
(iv) copies of all federal or state agency approvals required
for the consummation of the transaction contemplated herein.
6.3 Other Documents. The Seller, from time to time after the Date of
Closing, at the Purchaser's request, will execute, acknowledge and deliver to
the Purchaser such other instruments of conveyance and transfer, and will
execute and deliver such other documents and certifications as the Purchaser
may reasonably request in order to vest more effectively in the Purchaser, or
to put the Purchaser more fully in possession of any of the Assets, or to
better enable the Purchaser to complete, perform or discharge any of the
obligations with respect to Purchase and Sales Orders at the sole cost and
expense of Purchaser.
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ARTICLE VII
MISCELLANEOUS
7.1 Termination.
(a) Anything herein or elsewhere to the contrary notwithstanding,
this Agreement may be terminated by written notice of termination at any time
on or before the Date of Closing only as follows:
(i) by the Purchaser for the failure of the fulfillment or
satisfaction of any condition precedent described in Paragraph 5.1
unless waived by Purchaser in writing of each condition precedent so
unfulfilled or unsatisfied;
(ii) by the Seller for the failure of the fulfillment or
satisfaction of any condition precedent described in Paragraph 5.2
unless waived by Seller in writing of each condition precedent so
unfulfilled or unsatisfied;
7.2 Expenses. The parties hereto shall pay their own expenses,
including without limitation, their legal fees, incidental to the preparation
of this Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby.
7.3 Post Closing Administration.
(a) The Seller agrees that after the Date of Closing, it will hold in
trust and will promptly transfer and deliver to the Purchaser, from time to
time as and when received by it, any cash, checks (without converting such
checks into cash) or other property that it may receive on or after the Date of
Closing in respect of the Assets purchased hereunder or to post-Closing
invoices issued by Purchaser. On or about the Date of Closing, the Seller and
Purchaser will prepare and mail or deliver to customers, suppliers, creditors
and such other third parties as is reasonably appropriate, a joint notification
of the sale of the Assets to the Purchaser and such further direction as is
required.
(b) The Purchaser agrees that after the Date of Closing, it will hold
in trust and will promptly transfer and deliver to the Seller, from time to
time as and when received by it, any cash, checks (without converting such
checks into cash) or other property that it may receive on or after the Date of
Closing in respect of any of Seller's assets not purchased hereunder.
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(c) The Seller agrees that after the Date of Closing, it will
promptly pay all invoices for product or services delivered pre-Closing for
which the liability of which is not being assumed by Purchaser or is not set
forth on the Final Schedule 1.4(c).
7.4 Contents of Agreement: Parties in Interest. etc. This Agreement
sets forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. It shall not be amended or modified except
by written instrument duly executed by each of the parties hereto. Any and all
previous agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral, are superseded by this
Agreement.
7.5 Assignment and Binding Effect. All of the terms and provisions
of this Agreement to the extent applicable to the parties hereto shall be
binding upon and inure to the benefit of and are enforceable by the Seller and
Purchaser, and their respective personal representatives, successors and
assigns.
7.6 Waiver. Any term or provision of this Agreement may be waived at
any time by the party or parties entitled to the benefit thereof by a written
instrument duly executed by such party or parties. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right or remedy on
any further occasion. All rights and remedies of the parties hereto shall be
cumulative and may be exercised separately or concurrently.
7.7 Notices. Any notice, request, demand, waiver, consent, approval
or other communication which is required or permitted hereunder shall be in
writing and shall be deemed given only if delivered personally or sent by
facsimile or by registered, certified mail, postage prepaid, or federal express
or other reputable third-party overnight courier, as follows:
If to the Purchaser to: With a required copy to:
Reptron Electronics, Inc. William L. Elson
14401 McCormick Drive 3000 Town Center
Tampa, Florida 33626 Suite 2690
Attn: Paul J. Plante, Southfield, Michigan 48075
Vice-President of Finance Fax No.: (810) 358-4425
Fax No.: (813) 855-1697
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If to the Seller, to: With a required copy to:
Western Micro Technology, Inc. Katharine A. Martin
12900 Saratoga Avenue Pillsbury Madison & Sutro
Saratoga, California 95070 2700 Sand Hill Road
Attn: James W. Dorst Menlo Park, CA 94025
Chief Financial Officer Fax No.: (415) 233-4545
Fax No.: (408) 255-5066
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as
of the date so delivered, telegraphed or mailed.
7.8 California Law to Govern. This Agreement shall be governed by
and interpreted and enforced in accordance with the laws of the State of
California.
7.9 No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their successors and assigns, and they shall not be
construed as conferring any rights on any other person whether or not any such
third person is specifically identified herein.
7.10 Headings, Gender and "Person." All section headings contained in
this Agreement are for convenience of reference only, do not form a part of
this Agreement and shall not affect in any way the meaning or interpretation of
this Agreement. Words used herein, regardless of the number or gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires. Any reference to a "person" herein shall include an
individual, firm, corporation, partnership, trust, governmental authority or
body, association, unincorporated organization or any other entity.
7.11 Exhibits and Schedules. All exhibits referred to herein are
intended to be and hereby are specifically made a part of this Agreement.
7.12 Severability. Any provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
7.13 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be
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deemed to be an original and all of which counterparts taken together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written above.
WESTERN MICRO TECHNOLOGY, INC.
By /s/ P. Scott Munro
Its President
REPTRON ELECTRONICS, INC.
By /s/ Paul Plante
Its Chief Financial Officer
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APPENDIX B
[VON GEHR INTERNATIONAL LETTERHEAD]
May 5, 1995
Board of Directors
Western Micro Technology, Inc.
12900 Saratoga Avenue
Saratoga, CA 95070
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of Western Micro Technology, Inc. ("Western" or the
"Company") of the consideration to be paid by Reptron Electronics, Inc.
("Reptron") for Western's electronic semiconductor components distribution
business (the "Business") in the sale transaction between Western and Reptron
as set forth in the Purchase Agreement dated May 5, 1995 (the "Agreement").
This transaction, as described in the Agreement, consists of the purchase of
assets and the assumption of selected liabilities, having a cash value to
Western of $13.315 million, subject to closing adjustments.
Von Gehr International, as part of its investment banking business, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and corporate partnering transactions.
In arriving at our opinion, we have reviewed the Agreement, the form of the
Escrow Agreement attached as Exhibit A thereto, the form of the
Non-Competition/Royalty/No-Solicitation Agreement attached as Exhibit B
thereto, and have reviewed financial, product and other information that was
furnished to us by Western. We also have held discussions with members of the
senior management of Western regarding the historic and current business
operations and future risks and prospects of the Company including their
expectation for certain strategic benefits of the transaction. As part of
these discussions, we also reviewed other sale transactions contemplated by
<PAGE> 66
Western Micro Technology, Inc. Page 2
Board of Directors May 5, 1995
the Company over the last twenty-four months and we independently pursued
potential alternatives without success. In addition, we have compared certain
financial and securities data, both historic and projected, of Western with
those of various other companies engaged in businesses we considered comparable
with securities which are traded in public markets, analyzed prices paid in
certain other similar business combinations, and conducted such other financial
studies, analyses and investigations as we deemed appropriate for purposes of
this opinion.
We have assumed, without independent verification, the accuracy, completeness
and fairness of all of the financial statements, product information, marketing
strategies and other information regarding Western which has been provided to
us by the Company and its representatives. We did not make any independent
evaluation of Western's assets or intellectual property nor did we review any
of the Company's corporate records.
Based on the foregoing and such other factors as we deem relevant, we are of
the opinion, as of the date hereof, that the payment in cash by Reptron to
Western of the sum of (i) $100,000 plus (ii) the aggregate net book value of
the assets of the Business and Reptron's assumption of selected liabilities, as
set forth in the Agreement is fair, from a financial point of view, to
Western's shareholders.
Sincerely Yours,
/s/ VON GEHR INTERNATIONAL
- ----------------------------
Von Gehr International
<PAGE> 67
WESTERN MICRO TECHNOLOGY, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF SHAREHOLDERS--JULY 21, 1995
The undersigned Shareholder of Western Micro Technology, Inc.
(the "Company") acknowledges receipt of a copy of the Notice of
Special Meeting of Shareholders of the Company and the accompanying
Proxy Statement dated June 30, 1995 and, revoking any Proxy heretofore
given, hereby constitutes and appoints James W. Dorst and P. Scott
Munro, each of them, with full power of substitution, as attorneys,
P agents and proxies of the undersigned to appear and vote all of the
R shares of common stock of the Company standing in the name of the
O undersigned which the undersigned could vote if personally present at
X the Special Meeting of Shareholders of the Company to be held at 12900
Y Saratoga Avenue, Saratoga, California, on Friday, July 21, 1995, at
10:00 a.m., local time, and at any adjournments or postponements
thereof, upon the following item as set forth in the Notice of Annual
Meeting and Proxy Statement and to vote according to their discretion
on all other matters which may be properly presented for action at the
meeting or any adjournments or postponements thereof.
- --------------------------------------------------------------------------
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on other side)
<PAGE> 68
Please mark
/x/ your votes
as in this
example
--------------
COMMON
FOR AGAINST ABSTAIN
To approve the sale of certain of the assets / / / / / /
of the Company, comprised of all of the
operating assets of the Company's electronic
semiconductor components distribution business,
to Reptron Electronics, Inc., pursuant to
the terms and conditions of the Asset Purchase
Agreement dated as of May 5, 1995 in the form
attached as Appendix A to the Proxy Statement.
ALL SHARES WILL BE VOTED AS SPECIFIED. IF NO CHOICE IS SPECIFIED, THE
SHARES WILL BE VOTED FOR THE PROPOSAL SET FORTH IN THE PROXY STATEMENT.
A majority of said attorneys or their substitutes who shall be present
and act, or if only one shall attend, then that one, shall have and may
exercise all the powers of said attorneys hereunder.
I PLAN TO ATTEND THE MEETING / /
COMMENTS/ADDRESS CHANGE / /
Please mark this box if you
have written comments/address
change on the reverse side.
[Signature(s) should agree with stenciled
name(s).] When signing as attorney, guardian,
executor, administrator or trustee, please
give title. If the signer is a corporation,
please give the full corporate name and
sign by a duly authorized officer, showing
the officer's title. EACH joint owner is
requested to sign.
Signature Date
------------------------------------------------- ---------------
Joint Owner's Signature Date
---------------------------------- ---------------
PLEASE EXECUTE AND RETURN THIS PROXY PROMPTLY. YOUR COOPERATION WILL BE
APPRECIATED.
