As filed with the Securities and Exchange Commission on April 29, 1999.
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SAVOIR TECHNOLOGY GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2414428
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
--------------------
254 East Hacienda Avenue
Campbell, California 95008
(408) 379-0177
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------
P. SCOTT MUNRO
Chairman of the Board, President, Chief
Executive Officer and Secretary
SAVOIR TECHNOLOGY GROUP, INC.
254 East Hacienda Avenue
Campbell, California 95008
(408) 379-0177
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
KATHARINE A. MARTIN MARC C. KRANTZ
KENT E. SOULE KOHRMAN, JACKSON & KRANTZ P.L.L.
PILLSBURY MADISON & SUTRO LLP One Cleveland Center, 20th Floor
2550 Hanover Street 1375 East 9th Street
Palo Alto, California 94304 Cleveland, Ohio 44114
(650) 233-4500 (216) 736-7204
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
On a delayed or continuous basis pursuant to Rule 415.
--------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<PAGE>
--------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
===================================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share.... 1,764,914
shares(1) $8.97(2) $15,831,278.58(2) $4,401.10(1)
===================================================================================================================================
(1) The prospectus included in this registration statement also relates to
4,482,542 shares of Common Stock registered on registration statement No.
333-40599, 96,407 shares registered on registration statement No.
333-53225, and 1,558,004 shares registered on registration statement No.
333-61865. An aggregate filing fee of $18,159.62 has been paid previously
with respect to the registration of the 6,136,953 shares included in such
registration statements.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based upon the average of the high and low sale
prices of Savoir's Common Stock on the Nasdaq National Market on April 22,
1999.
</TABLE>
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
The prospectus included in this registration statement also relates to
registration statements Nos. 333-40599, 333-53225 and 333-61865.
================================================================================
<PAGE>
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+ The information in this prospectus is not complete and may be changed. +
+ The selling stockholders may not sell these securities until the +
+ registration statement filed with the Securities and Exchange +
+ Commission is effective. This prospectus is not an offer to sell these +
+ securities and it is not soliciting an offer to buy these securities +
+ in any state where the offer or sale is not permitted. +
+ +
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED APRIL 28, 1999
PROSPECTUS
7,901,867 SHARES
SAVOIR TECHNOLOGY GROUP, INC.
COMMON STOCK
This prospectus relates to the resale from time to time of 7,901,867 shares
of common stock, $.01 par value per share, of Savoir Technology Group, Inc. held
by Savoir stockholders. The offering is not being underwritten.
The shares being offered by the selling stockholders include:
o 2,637,317 shares of common stock issued or issuable upon conversion of
Savoir Series A Preferred Stock;
o 1,121,250 shares of common stock issued or issuable upon the exercise
of warrants issued in connection with the sale of the Series A
Preferred Stock;
o 112,125 shares of common stock issuable upon the exercise of warrants
issued to the placement agents in connection with the private placement
of the Series A Preferred Stock and the related common stock warrants;
o 828,001 shares of common stock issued as dividends on the Series A
Preferred Stock;
o 500,000 shares of common stock issuable upon the exercise of warrants
held by other Savoir securityholders; and
o 2,703,174 other shares of common stock held by Savoir stockholders.
The selling stockholders may offer and sell their shares in transactions on
the Nasdaq National Market, in negotiated transactions, or both. These sales may
occur at fixed prices that are subject to change, at prices that are determined
by prevailing market prices, or at negotiated prices.
The selling stockholders may sell shares to or through broker-dealers, who
may receive compensation in the form of discounts, concessions or commissions
from the selling stockholders, the purchasers of the shares, or both. Savoir
will not receive any of the proceeds from the sale of the shares.
Savoir common stock is traded on the Nasdaq National Market under the
symbol "SVTG." On April __, 1999, the last reported sale price of Savoir common
stock reported on the Nasdaq National Market was $_____ per share.
---------------
INVESTING IN SAVOIR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY READ AND CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 3.
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
April __, 1999
<PAGE>
We have not authorized anyone to provide you with information or to
represent anything not contained in this prospectus. You must not rely on any
unauthorized information or representations. The selling stockholders are
offering to sell, and seeking offers to buy, only the shares of common stock
covered by this prospectus, and only under circumstances and in jurisdictions
where it is lawful to do so. The information contained in this prospectus is
current only as of its date, regardless of the time of delivery of this
prospectus or of any sale of the shares.
YOU SHOULD READ CAREFULLY THIS ENTIRE PROSPECTUS, AS WELL AS THE DOCUMENTS
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, BEFORE MAKING AN INVESTMENT
DECISION. ALL REFERENCES TO "WE," "US," "OUR" OR "SAVOIR" IN THIS PROSPECTUS
MEAN SAVOIR TECHNOLOGY GROUP, INC. AND ITS SUBSIDIARIES, EXCEPT WHERE IT IS MADE
CLEAR THAT THE TERM MEANS ONLY THE PARENT COMPANY.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements regarding future events
and Savoir's plans and expectations that involve risks and uncertainties. When
used in this prospectus, the words "estimate," "project," "intend" and "expect"
and similar expressions are intended to identify such forward-looking
statements. Such statements are subject to risks and uncertainties, including
those discussed below, that could cause actual results to differ materially from
those projected. Factors that may cause or contribute to such differences
include, but are not limited to, those discussed below under "Risk Factors," as
well as those discussed elsewhere in this prospectus and in the documents
incorporated herein by reference. These forward-looking statements speak only as
of the date hereof.
--------------------
TABLE OF CONTENTS
Page
----
The Company................................................................. 3
Risk Factors................................................................ 3
Proceeds from the Offering.................................................. 14
Income Tax Considerations................................................... 14
Selling Stockholders........................................................ 15
Plan of Distribution........................................................ 18
Legal Matters............................................................... 19
Experts..................................................................... 19
Where You Can Find More Information......................................... 19
Documents Incorporated by Reference......................................... 19
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THE COMPANY
Savoir is a value-added wholesale distributor of commercial mid-range
servers, peripheral equipment (including wireless networking equipment, storage
products, printers and terminals) and software. Through our Mid-Range Systems
Division, we primarily distribute commercial mid-range servers and related
products to value-added resellers (known in the industry as "VARs") who
generally incorporate commercial applications or other software and sell
integrated computer systems to end-user customers. Through our Computer and
Peripherals Group, we integrate and configure personal computers, workstations
and departmental servers for original equipment manufacturers (also known as
"OEMs"). We have a national presence served through four warehouse, distribution
and integration centers, and maintain sales offices throughout the United States
and Canada.
Savoir was incorporated in California in 1975, and we changed our state of
incorporation to Delaware in August 1997. Previously known as Western Micro
Technology, Inc., we changed our name to Savoir Technology Group, Inc. in
November 1997. Our principal executive office is located at 254 East Hacienda
Avenue, Campbell, California 95008, and our telephone number is (408) 379-0177.
RISK FACTORS
INVESTING IN SAVOIR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
READ AND CONSIDER CAREFULLY THE FOLLOWING FACTORS BEFORE MAKING AN INVESTMENT
DECISION.
WE ARE DEPENDENT UPON IBM AND A FEW OTHER VENDORS
Our business, financial condition and results of operations are highly
dependent upon our relationship with International Business Machines Corporation
("IBM") and upon the continued market acceptance of IBM commercial mid-range
servers, storage products and other peripheral equipment. During the years ended
December 31, 1996, 1997 and 1998, approximately 50%, 65% and 80%, respectively,
of our net sales were generated from the sale of IBM products, and we expect the
percentage to increase in 1999. Our agreement with IBM is non-exclusive and may
be unilaterally modified by IBM upon 30 days' written notice, renews
automatically but may be terminated by IBM upon written notice given not less
than 90 days prior to the renewal date (January 1, 2001), provides no franchise
rights and may not be assigned by us. The continued consolidation of wholesale
distributors of commercial mid-range servers may also result in IBM raising the
sales volume threshold required to maintain most favorable volume discount
status. As part of our business strategy, and in order to maintain most
favorable volume discount status with IBM, we have recently completed several
acquisitions and we are actively engaged in an ongoing search for additional
acquisitions. We are also seeking to make minority equity investments in
potential large customers for similar purposes. However, we cannot assure you
that we will be successful in completing any future acquisitions or in making
any equity investments. If we are unable to complete other acquisitions or make
equity investments, or are otherwise unable to increase our sales volume through
internal growth, we could lose our most favorable volume discount status with
IBM, which would, in turn, have a material adverse effect on our relationship
with IBM and on our business, financial condition and results of operations. The
occurrence of any of the following events could have a material adverse effect
upon our business, financial condition and results of operations:
o any disruption, change or termination in our relationship with IBM or
in the manner in which IBM distributes its products;
o the failure of IBM to develop new products which are accepted by our
customers;
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o our failure to continue to achieve sufficient sales volumes of certain
IBM products, or to maintain the required infrastructure, in each case
as required to maintain most favorable volume discount status; and
o the addition of other wholesale distributors by IBM.
The balance of our net sales is derived from the sale of products that we
purchase from a limited number of other vendors. During the years ended December
31, 1996, 1997 and 1998, approximately 17%, 15% and 8%, respectively, of our net
sales was derived from the sale of products manufactured by NCR Corporation and
Unisys Corporation, collectively. To become an authorized distributor for these
vendors, we typically enter into a non-exclusive agreement that is cancelable by
either party upon 30 to 120 days' prior written notice. The occurrence of any of
the following vendor-related events would have a material adverse effect upon
our business, financial condition and results of operations:
o any disruption, change or termination in our relationship with any such
vendor or in the manner in which any such vendor distributes its
products;
o the failure of any such vendor to develop new products which are
accepted by our customers;
o our failure to continue to achieve sufficient sales volumes of certain
vendors' products as required to maintain most favorable volume
discount status; and
o the addition of other wholesale distributors by any such vendor.
As is typical in our industry, we receive volume discounts and market
development funds from most of our vendors. These volume discounts directly
affect our gross profit. In addition, we typically use market development funds
to offset a portion of our sales and marketing expenses. Any change in the
availability of these discounts or market development funds or our failure to
obtain vendor financing on satisfactory terms and conditions would have a
material adverse effect on our business, financial condition and results of
operations.
OUR OPERATING RESULTS MAY FLUCTUATE FROM QUARTER TO QUARTER
Our quarterly net sales and operating results may vary significantly as a
result of a variety of factors, including, but not limited to:
o changes in the supply and demand for commercial mid-range servers,
peripheral equipment, software and related services;
o the cost, timing and integration of acquisitions;
o the addition or loss of a key vendor or customer;
o the introduction of new technologies;
o changes in manufacturers' prices, price protection policies or stock
rotation (return) privileges;
o changes in market development or other promotional funds;
o product supply shortages;
o disruption of warehousing or shipping channels;
o inventory adjustments;
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<PAGE>
o increases in the amount of accounts receivable written off;
o price competition; and
o changes in the mix of products sold through distribution channels and
in the mix of products purchased by OEMs.
Our operating results could also be adversely affected by:
o general economic and other conditions affecting the timing of customer
orders and capital spending;
o a downturn in the market for commercial mid-range servers; and
o order cancellations or rescheduling.
In addition, historically a substantial portion of our net sales has been made
in the last few days of a quarter. Our quarterly operating results are therefore
difficult to predict and delays in the closing of sales near the end of a
quarter could cause quarterly net sales to fall substantially short of
anticipated levels and, to a greater degree, adversely affect profitability.
Thus, we believe that period-to-period comparisons of our operating results are
not necessarily meaningful and should not be relied upon as an indication of our
future performance. Our future operating results are expected to fluctuate as a
result of these and other factors, which could have a material adverse effect on
our business, financial condition and results of operations and on the price of
our common stock. It is possible that in future periods our operating results
may be below the expectations of securities analysts and investors. If this
happens, it is likely that the market price of our common stock would be
materially and adversely affected.
WE FACE SUBSTANTIAL COMPETITION
The markets in which we operate are highly competitive. Competition is
based primarily on:
o product availability;
o price;
o credit availability;
o speed of delivery;
o ability to tailor specific solutions to customer needs; and
o breadth and depth of product lines and services, technical expertise
and pre-sale and post-sale service and support.
Increased competition may result in further price reductions, reduced gross
profit margins and loss of market share, any of which could materially and
adversely affect our business, financial condition and results of operations.
Through our Mid-Range Systems Division, we compete with national, regional
and local distributors, including Gates/Arrow Commercial Systems, a division of
Arrow Electronics, Inc., Hamilton Hall-Mark Computer Products, a subsidiary of
Avnet, Inc., and Pioneer Standard Electronics, Inc. In some limited
circumstances, we also compete with our own vendors.
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<PAGE>
In the distribution of storage products, we compete with national, regional
and local distributors. Through our Computers and Peripherals Group, we compete
with contract manufacturers, systems integrators and assemblers of computer
products. We have experienced, and expect to continue to experience, increased
competition from current and potential competitors, many of which have
substantially greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and a larger customer base than
we do. Accordingly, present or future competitors may be able to respond more
quickly to new or emerging technologies and changes in customer requirements or
to devote greater resources to the development, promotion and sale of their
products than we can. Competitors that are larger than Savoir may be able to
obtain more favorable pricing and terms from vendors than we can. As a result,
we may be at a disadvantage when competing with these larger companies. If we
fail to compete effectively, our business, financial condition and results of
operations would be materially and adversely affected.
SIRIUS COMPUTER SOLUTIONS, LTD. ACCOUNTS FOR 18% OF OUR NET SALES
During the years ended December 31, 1997 and 1998, sales to Sirius Computer
Solutions, Ltd. accounted for approximately 11% and 18%, respectively, of our
net sales. Our sales to Sirius are made under the Industry Remarketer Affiliate
Agreement between Savoir and Sirius dated as of September 30, 1997, under which
we appointed Sirius as one of our industry remarketer affiliates for IBM
products. This agreement provides that Sirius may not enter into any similar
arrangement with any third party for the purpose of selling IBM products to its
end-user customers and also provides a favorable pricing structure to Sirius. As
a result, Sirius is expected to remain our largest customer for the duration of
this agreement and to account for approximately the same percentage of our net
sales in 1999 as it represented in 1998. The agreement with Sirius expires on
December 31, 2000, but may be terminated earlier upon the happening of specified
events. This agreement may not be unilaterally terminated by either Savoir or
Sirius. Any disruption, change or termination of our relationship with Sirius or
a reduction in Sirius's purchases from us could have a material adverse effect
upon our business, financial condition and results of operations.
INTEGRATION OF ACQUIRED COMPANIES AND OUR BUSINESS MAY NOT BE SUCCESSFUL
Since December 1994, we have completed ten acquisitions. The combination of
our business and acquired businesses requires, among other things:
o integration of the respective management teams and sales and other
personnel;
o coordination of sales and marketing efforts;
o conversion of computer systems (including inventory control, order
entry and financial reporting); and
o integration of the businesses' products and physical facilities.
The difficulties of such integration may be increased by the necessity of
coordinating geographically separate organizations. The integration of
operations will require the dedication of management resources which may
temporarily divert attention away from the day-to-day business of the combined
company. We cannot assure you that the required coordination and integration
will be accomplished smoothly or successfully. Our inability to integrate
successfully the operations of acquired businesses could have a material adverse
effect on our business, financial condition and results of operations. In
addition, during the integration phase, aggressive competitors may attempt to
attract our customers and recruit our key employees. We cannot assure you that
acquisitions will not materially and adversely affect the selling patterns of
vendors and the buying patterns of our present and potential customers, and that
any change in these patterns will not materially and adversely affect our
business, financial condition and results of operations.
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Our ability to achieve the anticipated benefits of our acquisitions depends
in part upon whether the integration of our business and any acquired business
is accomplished in an efficient and effective manner, and we cannot assure you
that this will occur. Our previous acquisitions and investments have placed and
will, together with future acquisitions, continue to place, substantial demands
on our management team and financial resources. The integration of the
operations of acquired companies has on occasion been slower, more complex and
more costly than we originally anticipated. We will encounter similar
uncertainties and risks in any future acquisitions and investments. Although we
expect to realize cost savings and sales enhancements as a result of the recent
and proposed acquisitions, we cannot assure you that these savings or
enhancements will be realized in full or when anticipated, or that any cost
savings will not be offset by increases in other expenses.
WE MAY NOT BE ABLE TO COMPLETE THE FUTURE ACQUISITIONS AND EXPANSION THAT WE
BELIEVE ARE IMPORTANT TO THE GROWTH OF OUR BUSINESS
Acquisitions have played an important role in the implementation of our
business strategy, and we believe that additional acquisitions are important to
our growth, development and continued ability to compete effectively in the
marketplace. We evaluate potential acquisitions and strategic investments on an
ongoing basis. We cannot assure you as to our ability to compete successfully
for available acquisition or investment candidates or to complete future
acquisitions and investments or as to the financial effect on us of any acquired
businesses or equity investments. Any future acquisitions and investments we
might make may involve significant cash expenditures and may result in increased
indebtedness, interest and amortization expense or decreased operating income,
any of which could have a material adverse effect on our business, financial
condition and results of operations. In addition, future growth will require
additional financing to fund the working capital requirements of our business
and to finance future acquisitions and strategic equity investments, if any. We
cannot assure you that we will be able to raise financing on satisfactory terms
and conditions, if at all. Should we be unable to implement successfully our
acquisition and investment strategy, our business, financial condition and
results of operations could be materially and adversely affected.
WE MAY HAVE DIFFICULTY IN MANAGING OUR GROWTH
Since 1997, we have experienced significant growth in the number of our
employees and in the scope of our operating and financial systems, resulting in
increased responsibilities for our management. To manage future growth
effectively, we will need to continue to improve our operational, financial and
management information systems, procedures and controls and expand, train,
motivate, retain and manage our employee base. We cannot assure you that we will
be successful in managing any future expansion or identifying, attracting and
retaining key personnel, and failure to do so could have a material adverse
effect on our business, financial condition and results of operations.
WE ARE DEPENDENT ON KEY PERSONNEL
Our future success depends in part on the continued service of our key
management, technical, sales and marketing personnel and our ability to identify
and hire additional personnel. Competition for qualified management, technical,
sales and marketing personnel is intense and we cannot assure you that we can
retain and recruit adequate personnel to operate our business. Our success is
largely dependent on the skills, experience and efforts of our key personnel,
particularly P. Scott Munro, Chairman of the Board, President, Chief Executive
Officer and Secretary, and Carlton Joseph Mertens, II, Chief Executive Officer
and President of our subsidiary, Business Partner Solutions, Inc., each of whom
has entered into an employment agreement with us. The loss of either of these
individuals or other key personnel could have a material adverse effect on our
business, financial condition and results of operations. We maintain life
insurance on Mr. Munro and Mr. Mertens in the amounts of $7.9 million and $10.0
million, respectively.
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WE HAVE SIGNIFICANT FUTURE CAPITAL NEEDS, AND THE AVAILABILITY OF ADDITIONAL
FINANCING IS UNCERTAIN
Our operations to date have required substantial amounts of working capital
to finance accounts receivable and product inventories. Although we believe that
we have sufficient funds, or alternate sources of funds, to carry on our
business as presently conducted through 1999, we will need to raise additional
amounts through public or private debt or equity financings in order to achieve
the growth contemplated by our business plan. We cannot assure you that
additional financing of any type will be available on acceptable terms, or at
all, and failure to obtain such financing could have a material adverse effect
upon our business, financial condition and results of operations.
WE ARE DEPENDENT UPON THE AVAILABILITY OF CREDIT AND OUR PRESENT CREDIT FACILITY
In order to obtain necessary working capital, we rely primarily on a line
of credit that is collateralized by substantially all of our assets. The amount
of credit available to us may be adversely affected by numerous factors beyond
our control, such as:
o delays in collection or deterioration in the quality of our accounts
receivable;
o economic trends in the technology industry;
o the obsolescence of our inventory;
o interest rate fluctuations; and
o the lending policies of our creditors.
Any decrease or material limitation on the amount of capital available to us
under our line of credit or other financing arrangements will limit our ability
to fill existing sales orders or expand our sales levels and, therefore, would
have a material adverse effect on our business, financial condition and results
of operations. In addition, any significant increase in interest rates will
increase our cost of financing and could have a material adverse effect on our
business, financial condition and results of operations. We are dependent on the
availability of accounts receivable financing on reasonable terms and at levels
that are high relative to our equity base in order to maintain and increase our
sales. We cannot assure you that such financing will continue to be available to
us or available under terms acceptable to us. Our inability to have continuous
access to such financing at reasonable costs would materially and adversely
impact our business, financial condition, results of operations and cash flows.
We have primarily funded our working capital requirements through a $125.0
million Inventory and Working Capital Agreement with IBM Credit Corporation.
Borrowings under this credit facility are collateralized by substantially all of
our assets, including accounts receivable, inventories and equipment. This
credit facility provides that the outstanding interest-bearing cash advance
balance is subject to interest at the annual rate of prime plus 1.875% (9.625%
at December 31, 1998) and expires on August 31, 2000. IBM Credit Corporation may
terminate this credit facility at any time upon the occurrence of, and
subsequent failure to cure, an "Event of Default" (as that term is defined in
the documentation for the credit facility). In the event of termination, the
outstanding borrowings under the credit facility become immediately due and
payable. The termination of this credit facility and our subsequent inability to
secure a replacement credit facility on terms and conditions no less favorable
than those contained in our present credit facility would have a material
adverse effect on our business, financial condition and results of operations.
OUR PRESENT CREDIT FACILITY LIMITS OUR ABILITY TO INCUR ADDITIONAL INDEBTEDNESS
The terms of our credit facility with IBM Credit Corporation require that
we obtain the consent of IBM Credit Corporation prior to incurring some types of
additional indebtedness, including any additional senior or
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subordinated debt. We may incur additional indebtedness without IBM's consent
through capital leases and general business commitments if the terms are
commercially reasonable and consistent with our prior business practices. Our
present credit facility and our anticipated cash flows may not provide funding
sufficient to achieve the growth contemplated by our business plan. We may
therefore need to obtain the consent of IBM Credit Corporation to incur
additional indebtedness. While we have no reason to believe that IBM will not so
consent, we cannot assure you that IBM Credit Corporation will give its consent.
Failure to obtain IBM's consent or to obtain an alternate credit facility could
have a material adverse effect on our business, financial condition and results
of operations.
OUR BUSINESS IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE, PRICE REDUCTIONS AND
INVENTORY RISK
Since we acquire inventory in advance of product orders and shipments,
there is a risk that we will forecast incorrectly and stock excessive or
insufficient inventory of particular products. The markets for products that we
sell are extremely competitive and are characterized by declining selling prices
over the life of a particular product and rapid technological change. Therefore,
our business, like that of other wholesale distributors, is subject to the risk
that the value of our inventory will decline as a result of price reductions by
manufacturers or due to technological changes affecting the usefulness or
desirability of our product inventory. It is the policy of many manufacturers of
technology products to protect wholesale distributors such as Savoir from the
loss in value of inventory due to technological change or reductions in the
manufacturers' prices. Under the terms of most of our distribution agreements,
vendors will generally credit us for inventory losses resulting from the
vendor's price reductions if we comply with the conditions set forth in those
agreements. In addition, generally under such agreements, we have the right to
return for credit or exchange for other products a portion of our slow moving or
obsolete inventory items within designated periods of time. We cannot assure you
that, in every instance, we will be able to comply with all necessary conditions
or manage successfully our price protection or stock rotation opportunities, if
available. Also, a manufacturer that elects to terminate a distribution
agreement generally will repurchase its products carried in a wholesale
distributor's inventory. These industry practices are sometimes not included in
written agreements and do not protect us in all cases from declines in inventory
value, excess inventory or product obsolescence. We cannot assure you that
manufacturers will continue these protective practices or that we will be able
to manage successfully our existing and future inventories. Historically, we
have not experienced losses due to obsolete inventory in excess of established
inventory reserves. Significant declines in inventory value in excess of
established inventory reserves or dramatic changes in prevailing technology
could have a material adverse effect on our business, financial condition and
results of operations.
IBM and some of the other major systems vendors have developed programs
that allow us to assemble systems from components provided by the vendors. While
we have developed the ability to integrate and configure computer products, the
process of assembling large volumes of systems from components will require us
to implement new business practices. It is uncertain how the vendors will apply
policies related to price protection, stock rotation and other protections
against the decline in inventory value of system components acquired for a
system assembly program. We cannot assure you that we will be successful in the
integration and configuration of computer products or that our vendors will
apply price protection and stock rotation policies to our component inventories
devoted to these programs.
OUR BUSINESS HAS LOW PROFIT MARGINS
As a result of price competition, we have low gross profit and operating
income margins. These low margins magnify the impact on operating results of
variations in net sales and operating costs. We have partially offset the
effects of our low gross profit margins by increasing net sales, availing
ourself of large volume purchase discount opportunities and reducing selling,
general and administrative expenses as a percentage of net sales. However, we
cannot assure you that we will maintain or increase net sales, continue to avail
ourselves of large volume purchase discount opportunities or further reduce
selling, general and administrative expenses as a percentage of net sales.
Future gross profit margins may be materially and adversely affected by changes
in product mix, vendor pricing actions and competitive and economic pressures.
9
<PAGE>
WE MAY EXPERIENCE PRODUCT SUPPLY SHORTAGES
We are dependent upon the supply of products available from our vendors.
From time to time, the industry has experienced shortages of some of the
products that we distribute due to vendors' difficulty in projecting demand.
When product shortages occur, we typically receive an allocation of product from
the vendor. We cannot assure you that our vendors will be able to maintain an
adequate supply of products to fulfill all of our orders on a timely basis. If
we fail to obtain adequate product supplies, or if product supplies are
available to competitors but not to us, it would have a material adverse effect
on our business, financial condition and results of operations.
WE EXTEND CREDIT TO CUSTOMERS WITHOUT REQUIRING COLLATERAL
We sell products to a broad geographic and demographic base of customers
and offer unsecured credit terms to our customers. Sirius accounted for
approximately 22% of our outstanding accounts receivable at December 31, 1998.
No other single customer accounted for more than 5% of our outstanding accounts
receivable at December 31, 1998. To reduce our credit risk, we perform ongoing
credit evaluations of our customers, maintain an allowance for doubtful accounts
and have credit insurance. Historically, we have not experienced losses from
write-offs in excess of established reserves. Should our customers increase the
rate at which they default on payments due to us, and should we be unable to
collect our accounts receivable at a rate consistent with our present
experience, it could have a material adverse effect on our business, financial
condition and results of operations.
OUR BUSINESS IS SEASONAL
The computer distribution industry experiences seasonal trends and, within
each quarter, a substantial amount of product is generally sold in the last few
days of the quarter. Our largest vendor, IBM, sells 35-40% of its products in
the last calendar quarter, and the continuation of this pattern could have an
effect on our quarterly net sales. Historically, a substantial portion of our
net sales has been made in the last few days of a quarter. Due to our recent
significant growth through acquisitions and our increased dependence on the sale
of IBM products, sales variations may be magnified in the future and could have
a material adverse effect on our business, financial condition and results of
operations.
OUR ABILITY TO EXPAND OUR SERVICE CAPABILITIES IS UNCERTAIN
We are expanding the nature and scope of our value-added services. We
cannot assure you that new value-added services will be integrated successfully
with our commercial mid-range server and related products distribution business.
If we are unable to provide value-added services effectively, we may be unable
to compete for the business of customers that demand services as a condition to
purchasing products from us. In addition, we will be subject to risks commonly
associated with a value-added services business, including dependence on
reputation, fluctuations in workload and dependence on the ability to identify,
recruit and retain qualified technical personnel. The expansion of our
value-added services is expected to require a significant capital investment,
including an increase in the number of technical employees. We cannot assure you
that difficulties encountered in connection with the expansion of our
value-added services will not have a material adverse effect on our business,
financial condition and results of operations.
WE ARE DEPENDENT ON THIRD-PARTY SHIPPERS
We presently ship a majority of our products from our warehouses via
Federal Express Corporation, but we also ship via United Parcel Service of
America, Inc. and other common carriers. In addition, we sometimes drop-ship
products from our vendors directly to our customers via these carriers. Changes
in shipping terms or the inability of Federal Express, United Parcel Service or
any other third-party shipper to perform effectively (whether as a result of
mechanical failure, casualty loss, labor stoppage, other disruption or any other
reason) could have a material adverse effect on our business, financial
condition and results of operations. We cannot
10
<PAGE>
assure you that we can maintain favorable shipping terms or replace our present
shipping services on a timely or cost-effective basis.
OUR PLANNED INTERNATIONAL EXPANSION MAY NOT BE SUCCESSFUL
One of the elements of our business strategy is to expand internationally.
We have recently begun to distribute IBM's AS/400 products in Canada. We cannot
assure you that we will be able to expand our international business
successfully. Risks inherent in doing business on an international level
include:
o management of remote operations;
o unexpected changes in regulatory requirements;
o export restrictions;
o tariffs and other trade barriers;
o difficulties in staffing and managing foreign operations;
o longer payment cycles;
o problems in collecting accounts receivable;
o political instability;
o fluctuations in currency exchange rates; and
o potentially adverse tax consequences.
Any of these risks could adversely impact the success of our international
operations. We cannot assure you that difficulties encountered with one or more
of these factors will not have a material adverse effect on our future
international operations and, consequently, on our business, financial condition
and results of operations.
WE ARE SUBJECT TO YEAR 2000 UNCERTAINTIES
Many presently-installed computer systems and software products are coded
to accept only two-digit entries in the date code year field. This date code
field will need to distinguish 21st century dates from 20th century dates.
Systems that do not properly recognize date information could generate erroneous
data or cause a system to fail. We are in the process of conducting a Year 2000
compliance audit and developing and implementing a company-wide Year 2000
compliance project. The Year 2000 issue creates risks for us from problems in
our own computer and embedded systems and from third parties, such as vendors
and customers, with whom we deal on financial and other transactions. Failure of
our and/or third parties' computer systems could have a material adverse effect
upon our ability to conduct our business.
We believe that our enterprise-wide business software system, which handles
our most critical functions, including finance, inventory control, warehousing,
shipping and receiving, logistics, purchasing, sales and order taking, is not
subject to the Year 2000 problem. We are aware of a need to upgrade the
associated database and hardware systems on which the software system runs. If
the system as a whole fails to work on January 1, 2000 it could prevent us from
controlling our inventory, taking orders, buying inventory and billing our
customers. We are presently also inventorying and analyzing our remaining
centralized computer and embedded systems, as well as our network data services,
network hardware, networking equipment, voice-mail equipment and access and
alarm systems, to identify any potential Year 2000 issues. We currently expect
to complete substantially remediation and validation of our internal systems, as
well as to develop contingency plans, by mid-1999.
11
<PAGE>
As part of our Year 2000 project, we are developing a plan for contacting
our critical suppliers, manufacturers, distributors and other vendors to
determine if their operations and the products and services that they provide to
us are Year 2000 compliant. However, we cannot assure you that we will identify
all Year 2000 problems in the products or computer systems of our vendors in
advance of their occurrence or that our vendors will be able to successfully
rectify any problems that are discovered. Absent written assurances of Year 2000
compliance by these third parties, we will assume non-compliance and will
attempt to mitigate our risks with respect to these third parties by developing
contingency plans. However, we cannot assure you that we can implement
contingency plans in all instances or that our contingency plans will adequately
serve the needs of our customers and other constituents.
The estimated total cash expenditures required for the Year 2000 project
are approximately $1.5 million, although it is possible that as we continue our
audit and detect problems that are not currently known to us, additional
expenditures may be incurred, which could be substantial. The total expense
associated with our Year 2000 audit and required modifications to become Year
2000 compliant is not presently expected to be material to our business,
financial condition and results of operations.
The failure to correct a material Year 2000 problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Any failure could materially and adversely affect our business,
financial condition and results of operations. Due to the uncertainty inherent
in the Year 2000 problem, resulting in part from the unknown state of Year 2000
readiness of third-party suppliers and customers, we are presently unable to
determine whether we will be affected by any Year 2000 failures or whether any
failure we experience will have a material adverse effect on our business,
financial condition and results of operations.
WE HAVE NOT PAID AND DO NOT PRESENTLY INTEND TO PAY CASH DIVIDENDS ON SAVOIR
COMMON STOCK
We have never declared or paid a cash dividend on our common stock. We
currently anticipate that we will retain all available funds for use in the
operation of our business, including possible acquisitions, and we do not intend
to pay any cash dividends in the foreseeable future. The payment of any future
dividends will be at the discretion of our Board of Directors and will depend
upon, among other factors:
o future earnings and cash flow;
o operations;
o capital requirements;
o acquisitions and strategic investment opportunities;
o our general financial condition; and
o general business conditions.
Further, our ability to pay cash dividends is currently restricted by the terms
of our credit facility with IBM Credit Corporation and the terms of the
agreement by which we acquired Business Partner Solutions. The terms of future
credit facilities or other agreements may also contain similar restrictions. In
addition, our Certificate of Designation with respect to the Series A Preferred
Stock prohibits the payment of dividends on our common stock unless and until
dividends are paid on the Series A Preferred Stock in accordance with its terms.
IF WE ISSUE STOCK IN CONNECTION WITH FUTURE ACQUISITIONS, IT MAY RESULT IN
DILUTION TO EXISTING STOCKHOLDERS
In connection with acquisitions that we have completed, we expect to issue
up to approximately 340,000 additional shares of our common stock based on the
attainment of performance goals by the acquired businesses. In addition, we may
issue additional shares of our common stock or other equity or convertible debt
securities to
12
<PAGE>
effect future acquisitions or for other corporate purposes. Upon the issuance of
additional capital stock, the percentage ownership of our stockholders will be
reduced and stockholders may experience additional dilution.
OUR STOCK PRICE HAS BEEN VOLATILE HISTORICALLY
The market price of our common stock has been and is likely to continue to
be highly volatile and may be significantly affected by factors such as:
o Actual or anticipated fluctuations in our quarterly operating results;
o Announcements of technological innovations;
o Industry conditions and trends;
o Changes in or our failure to meet the expectations of securities
analysts and investors; and
o General market conditions and other factors.
It is possible that in some future quarter, our operating results may be below
the expectations of securities analysts and investors. If this occurs, the price
of our common stock would likely decline, perhaps substantially. In addition,
the stock market has from time to time experienced significant price and volume
fluctuations that have particularly affected the market prices of the stocks of
technology companies. These broad market fluctuations may adversely affect the
market price of our common stock. In the past, following periods of volatility
in the market price of a particular company's securities, securities class
action litigation has often been brought. We cannot assure you that similar
litigation will not occur in the future with respect to us and our securities.
Any litigation relating to our securities could result in substantial costs and
a diversion of management's attention and resources, which could have a material
adverse effect upon our business, financial condition and results of operations.
PROVISIONS OF OUR CHARTER AND BYLAWS AND DELAWARE LAW MAY MAKE SAVOIR A LESS
ATTRACTIVE ACQUISITION CANDIDATE
Provisions of our Certificate of Incorporation and of our Bylaws may make
it more difficult for a third party to acquire, or may discourage a third party
from attempting to acquire, control of Savoir. These provisions could limit the
price that investors may be willing to pay for shares of our common stock. We
presently have 1,986,500 shares of Series A Preferred Stock and 10 shares of
Series B Preferred Stock outstanding and, without any further vote or action by
the stockholders, have the authority to issue up to an additional 8,013,490
shares of preferred stock and to determine the price, rights, preferences,
qualifications, limitations and restrictions, including voting rights, of this
additional preferred stock. The issuance of additional preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could delay or prevent a third party from acquiring a
majority of our outstanding voting stock. Further, Section 203 of the General
Corporation Law of Delaware prohibits us from engaging in various types of
business combinations with interested stockholders. These provisions may delay
or prevent a change in control of Savoir without action by the stockholders, and
therefore could adversely affect the market price of our common stock.
13
<PAGE>
PROCEEDS FROM THE OFFERING
Savoir will not receive any proceeds from the sale of the shares by the
selling stockholders. All proceeds from the sale of the shares will be for the
account of the selling stockholders.
INCOME TAX CONSIDERATIONS
Each prospective purchaser should consult his or her own tax advisor with
respect to the income tax issues and consequences of holding and disposing of
Savoir common stock.
14
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information as of April 1, 1999
regarding the beneficial ownership of Savoir common stock by each of the selling
stockholders and the shares offered by this prospectus by those persons.
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Beneficially Owned
Prior to Offering(1) Number of After Offering(1)
-------------------------- Shares Being -------------------------
Number Percent(2) Offered Number Percent(2)
--------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Hymie Akst................................. 1,268 * 1,268 -- *
Joan F. Albrecht........................... 1,352 * 1,352 -- *
Neil T. Anderson........................... 106,742 * 106,742 -- *
Chaim I. Anfang............................ 1,352 * 1,352 -- *
Argonaut Investors Fund Ltd................ 6,440 * 6,440 -- *
Argonaut Partnership, L.P.................. 11,952 * 11,952 -- *
Astoria Capital Partners L.P.(3)........... 1,207,522 10.08 441,922 765,600 6.39
Ballina Trading Services Limited........... 2,818 * 2,818 -- *
Daniel M. Bogard Revocable Trust........... 3,793 * 3,793 -- *
Richard M. Brooks.......................... 2,818 * 2,818 -- *
Michael E. Bushey and Martha L. Bushey..... 1,303 * 1,303 -- *
Canpartners Investments IV, LLC(4)......... 534,917 4.39 534,917 -- *
Central Fill Pharmacy, Inc................. 2,438 * 2,438 -- *
Brian M. Chait............................. 1,303 * 1,303 -- *
Phyllis J. Cohen........................... 1,689 * 1,689 -- *
Commonwealth Life Ins. Co.
(Teamsters - Cambden).................... 149,440 1.25 149,440 -- *
Irving Davies.............................. 1,352 * 1,352 -- *
Abraham Debbi.............................. 2,818 * 2,818 -- *
Jack Diener Living Trust................... 1,689 * 1,689 -- *
Duck Partners, L.P.(5)..................... 18,035 * 18,035 -- *
Burton I. Epstein and Elaine G. Epstein.... 3,414 * 3,414 -- *
Fahnestock & Co. Inc....................... 90,453 * 90,453 -- *
Dr. Edward R. Falkner Inc. Profit Sharing
TR DTD 2-1970............................ 1,307 * 1,307 -- *
S. Marcus Finkle........................... 10,000 * 10,000 -- *
Fleming American Investment Trust.......... 277,058 2.31 231,838 45,220 *
Gerstenhaber Investors L.P................. 2,559 * 2,559 -- *
Dennis A. Gleicher......................... 3,414 * 3,414 -- *
Gruber & McBaine International............. 84,157 * 24,157 60,000 *
Michael N. Gunnells (6).................... 1,106,587 9.32 1,106,587 -- *
John M. Harkins (6)........................ 1,121,587 9.44 1,121,587 -- *
Larry Horn................................. 7,697 * 7,697 -- *
J.M. Hull Associates, L.P.(5).............. 35,731 * 35,731 -- *
Hull Overseas, Ltd.(5)..................... 35,550 * 35,550 -- *
IBM Credit Corporation..................... 100,000 * 100,000 -- *
JMG Capital Partners L.P................... 218,210 1.83 218,210 -- *
KA Investments LDC......................... 91,199 * 91,199 -- *
David J. Katz.............................. 1,352 * 1,352 -- *
Ivan Kaufman............................... 32,020 * 32,020 -- *
Kodiak Opportunity, L.P.(7)................ 86,191 * 86,191 -- *
Kodiak Opportunity Offshore, Ltd.(7)....... 71,145 * 71,145 -- *
Marvin Kogod & Muriel Kogod................ 1,307 * 1,307 -- *
Lagunitas Partners, L.P.................... 239,123 2.01 81,123 158,000 1.33
Avy Lahav and Vered S. Lahav............... 1,303 * 1,303 -- *
Janet Lehr................................. 5,121 * 5,121 -- *
Moshe Levy................................. 42,983 * 42,983 -- *
Hanka Lew.................................. 4,510 * 4,510 -- *
Lew Lieberbaum & Co., Inc.................. 21,672 * 21,672 -- *
Sheldon Lieberbaum......................... 2,818 * 2,818 -- *
Richard A. Lippe........................... 23,018 * 23,018 -- *
William Lippe.............................. 10,671 * 10,671 -- *
Marc Loveman, IRA.......................... 1,303 * 1,303 -- *
Michael G. Lucci........................... 1,393 * 1,393 -- *
Arthur Luxenberg........................... 8,683 * 8,683 -- *
Irwin Luxemberg and Michael Luxemberg...... 1,352 * 1,352 -- *
15
<PAGE>
MDA Financial, Inc......................... 2,172 * 2,172 -- *
Virginia Meade Trust....................... 1,122 * 1,122 -- *
Carlton Joseph Mertens, II(8).............. 460,000 3.87 460,000 -- *
Beno Michel, M.D. Trust.................... 1,200 * 1,200 -- *
Microcap Partners, L.P.(9)................. 60,520 * 32,020 28,500 *
Microcap Partners Limited Partnership
(Astoria)(3)............................. 314,891 2.64 219,891 95,000 *
Millennium Trading Co., LP................. 1,120 * 1,120 -- *
Gee Gee Morgan............................. 1,085 * 1,085 -- *
NAV LLC(9)................................. 67,346 * 21,346 46,000 *
James M. Persky............................ 1,159 * 1,159 -- *
Pleiades Investment Partners, L.P.(9)...... 91,120 * 32,020 59,100 *
Puck Trading Limited....................... 2,715 * 2,715 -- *
R Capital II, Ltd.(10)..................... 130 * 130 -- *
R&J Trust Dtd 7-1-93....................... 1,348 * 1,348 -- *
Gerald Richter IRA......................... 29 * 29 -- *
Robert Fleming & Co........................ 532,931 4.42 457,971 74,960 *
Robert Fleming Inc......................... 111,164 * 87,524 23,640 *
Francine Rodin............................. 1,125 * 1,125 -- *
ROI Offshore Fund Ltd.(9).................. 231,002 1.94 120,802 110,200 *
ROI Partners, L.P.(9)...................... 452,988 3.80 213,488 239,500 2.01
Robert Rosin............................... 1,204 * 1,204 -- *
Corey K. Ruth.............................. 5,121 * 5,121 -- *
Jay Salomon and Bernice Salomon............ 268 * 268 -- *
Esther Schachner TTEE U/A DTD: 11/2/95..... 1,303 * 1,303 -- *
Harry Schwartz............................. 8,963 * 8,963 -- *
Mark Schwartz IRA.......................... 6,829 * 6,829 -- *
Scott's Cove Special Credits Fund I L.P.... 82,581 * 32,081 50,500 *
Scott's Cove Special Credits Master Fund Inc. 167,117 1.40 92,137 74,980 *
Beverly Segal.............................. 2,500 * 2,500 -- *
Seneca Capital International Ltd........... 1,417 * 1,417 -- *
Seneca Capital L.P......................... 2,126 * 2,126 -- *
E. Donald Shapiro.......................... 2,745 * 2,745 -- *
Sidelmar Partnership(11)................... 1,348 * 1,348 -- *
Irwin Simon................................ 1,307 * 1,307 -- *
SoundShore Partners L.P.................... 21,346 * 21,346 -- *
Strome Hedgecap Limited(12)................ 74,404 * 62,313 12,091 *
Strome Offshore Limited(12)................ 309,445 2.59 252,760 56,685 *
Strome Partners, L.P.(12).................. 220,574 1.85 215,949 4,625 *
Strome, Susskind Hedgecap Fund, L.P.(12)... 347,685 2.91 264,969 82,716 *
Bruce Toll................................. 21,346 * 21,346 -- *
Triton Capital Investments Ltd............. 26,520 * 26,520 -- *
Wesley T. Wood............................. 1,303 * 1,303 -- *
- -------------
* Less than 1%.
(1) Information with respect to beneficial ownership is based upon
information obtained from the selling stockholders and from our transfer
agent. Unless otherwise indicated, the persons and entities named in the
table have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws, where
applicable. Shares of our common stock receivable upon conversion of
Series A Preferred Stock or upon exercise of warrants that are currently
exercisable or exercisable within 60 days of April 1, 1999 are deemed to
be outstanding and to be beneficially owned by the person presently
entitled to exercise the right of conversion or exercise for the purpose
of computing the percentage ownership of such person but are not treated
as outstanding for the purpose of computing the percentage ownership of
any other person.
(2) Based on 11,877,315 shares of our common stock outstanding as of April 1,
1999.
(3) A limited partnership controlled by Richard Koe. Mr. Koe disclaims
beneficial ownership of these shares.
(4) These shares are beneficially owned by Joshua S. Friedman, Mitchell R.
Julis and R. Christian B. Evensen.
16
<PAGE>
(5) These shares are beneficially owned by J. Mitchell Hull.
(6) Mr. Gunnells is Vice President of S-390 Sales and Marketing of Savoir.
Mr. Gunnells and Mr. Harkins received their respective shares as partial
consideration for the sale of MCBA Systems, Inc., of which they were the
sole shareholders, to Savoir in June 1998.
(7) These shares are beneficially owned by Lee E. Mickles and Mark R. Miller.
(8) Mr. Mertens is a director of Savoir, and is President of Business Partner
Solutions, Inc., a wholly-owned subsidiary of Savoir. Savoir acquired
Business Partner Solutions, Inc. (then named Star Management Services,
Inc.) in September 1997 and Mr. Mertens received these shares in partial
consideration for the sale to Savoir of his equity in Star Management
Services, Inc. Prior to its acquisition, Mr. Mertens was Executive Vice
President of Star Management Services, Inc.
(9) A limited partnership controlled by Mitchell Soboleski and Mark Boyer.
Messrs. Soboleski and Boyer disclaim beneficial ownership of these
shares.
(10) A limited partnership controlled by Robert P. Saccogna. Mr. Saccogna
disclaims beneficial ownership of these shares.
(11) A partnership controlled by Sidney Dworkin, who is the beneficial owner
of these shares.
(12) A limited partnership controlled by Strome Susskind Investment
Management, L.P., of which SSCO, Inc. is the sole general partner. The
Mark E. Strome Living Trust is the controlling shareholder of SSCO, and
Mark E. Strome is the settlor and a trustee of the Trust.
</TABLE>
Because a selling stockholder may offer by this prospectus all or some part
of the common stock which he or she holds, no estimate can be given as of the
date hereof as to the amount of common stock actually to be offered for sale by
a selling stockholder or as to the amount of common stock that will be held by a
selling stockholder upon the termination of such offering.
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<PAGE>
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time to
time by the selling stockholders. As used in this prospectus, the term "selling
stockholders" includes donees, pledgees, transferees or other
successors-in-interest selling shares received from a named selling stockholder
as a gift, partnership distribution, or other non-sale-related transfer after
the date of this prospectus. The selling stockholders will act independently of
Savoir in making decisions with respect to the timing, manner and size of each
sale. Sales of the shares may be effected by or for the account of the selling
stockholders in transactions on the Nasdaq National Market, the over-the-counter
market, or otherwise, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices,
or in negotiated transactions. The shares may be sold by means of one or more of
the following methods:
o a block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by that
broker-dealer for its account pursuant to this prospectus;
o ordinary brokerage transactions in which the broker solicits
purchasers;
o in connection with short sales, in which the shares are redelivered to
close out short positions;
o in connection with the loan or pledge of shares covered by this
prospectus to a broker-dealer, and the sale of the shares so loaned or
the sale of the shares so pledged upon a default;
o in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions
in standardized or over-the-counter options;
o privately negotiated transactions; or
o in a combination of any of the above methods.
In effecting sales, broker-dealers engaged by the selling stockholders may
arrange for other broker-dealers to participate in resales. Broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholders or from the purchasers of the shares or from both. This
compensation may exceed customary commissions.
The selling stockholders and any broker-dealers, agents or underwriters
that participate with the selling stockholders in the distribution of the shares
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933. Any commissions paid or any discounts or concessions allowed to any of
those persons, and any profits received on the resale of the shares purchased by
them, may be deemed to be underwriting commissions or discounts under the
Securities Act of 1933.
Savoir has agreed to bear all expenses of registration of the shares (other
than fees and expenses, if any, of counsel or other advisors to the selling
stockholders). Any commissions, discounts, concessions or other fees, if any,
payable to broker-dealers in connection with any sale of the shares will be
borne by the selling stockholders selling those shares.
18
<PAGE>
LEGAL MATTERS
Certain matters with respect to the legality of the securities offered by
this prospectus will be passed upon for Savoir by Pillsbury Madison & Sutro LLP,
2550 Hanover Street, Palo Alto, California.
EXPERTS
The consolidated balance sheets of Savoir as of December 31, 1997 and 1998,
and the consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1998,
incorporated by reference in this prospectus, have been incorporated herein in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and other
information with the Securities and Exchange Commission. You may read and copy
any materials we file with the Commission at the Commission's public reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
Commission at 1-800-SEC-0330 for more information on its public reference rooms.
The Commission also maintains an Internet website at WWW.SEC.GOV that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the Commission.
We have filed with the Commission four registration statements (which
contain this prospectus) on Form S-3 under the Securities Act of 1933. The
registration statements relate to the common stock offered by the selling
stockholders. This prospectus does not contain all of the information set forth
in the registration statements and the exhibits and schedules to the
registration statements. Please refer to the registration statements and their
exhibits and schedules for further information with respect to Savoir and the
common stock. Statements contained in this prospectus as to the contents of any
contract or other document are not necessarily complete and, in each instance,
we refer you to the copy of that contract or document filed as an exhibit to the
registration statements. You may read and obtain a copy of the registration
statements and their exhibits and schedules from the Commission, as described in
the preceding paragraph.
DOCUMENTS INCORPORATED BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and later information that we file
with the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
make with the Commission under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act or 1934 until this offering is completed. The documents
we incorporate by reference are:
o Our Annual Report on Form 10-K, as amended, for the fiscal year ended
December 31, 1998; and
o The description of the our capital stock contained in our registration
statement on Form S-2 (Registration Statement No. 333-47965), including
any amendments and reports filed for the purpose of updating such
description.
19
<PAGE>
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address and number:
Savoir Technology Group, Inc.
254 East Hacienda Avenue
Campbell, California 95008
Attn: Secretary
Telephone: (408) 379-0177
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by Savoir in connection
with the sale and distribution of the securities being registered hereby. The
selling stockholders will not share in the payment of any portion of these
expenses. The table omits any applicable selling commissions or discounts, which
are payable solely by the selling stockholders. All the amounts shown are
estimates, except for the SEC registration fee.
SEC registration fee................................... $ 4,401.10
Printing expenses...................................... 1,000.00
Legal fees and expenses................................ 10,000.00
Accounting fees and expenses........................... 5,000.00
Transfer agent and registrar fees...................... 1,000.00
Miscellaneous.......................................... 1,000.00
------------------
Total................................... $ 22,401.10
==================
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "Delaware GCL")
permits Savoir's board of directors to indemnify any person against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with any
threatened, pending or completed action, suit or proceeding in which such person
is made a party by reason of his or her being or having been a director,
officer, employee or agent of Savoir, in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). The Delaware GCL provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors, or otherwise.
Savoir's Certificate of Incorporation and Bylaws provide for
indemnification of Savoir's directors, officers, employees and other agents to
the maximum extent permitted by law.
As permitted by Sections 102 and 145 of the Delaware GCL, Savoir's
Certificate of Incorporation eliminates a director's personal liability for
monetary damages to Savoir and its stockholders arising from a breach or alleged
breach of such director's fiduciary duty, except for liability under Section 174
of the Delaware GCL or liability for any breach of the director's duty of
loyalty to Savoir or its stockholders, for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law or for any
transaction from which the director derived an improper personal benefit.
In addition, Savoir has entered into separate indemnification agreements
with its directors and officers that will require Savoir, among other things, to
indemnify them against certain liabilities that may arise by reason of their
status or service as directors or officers to the fullest extent not prohibited
by law. The directors and officers of Savoir have a policy of insurance under
which they are insured, within limits and subject to limitations, against
certain expenses in connection with the defense of actions, suits or
proceedings, and certain liabilities which might be imposed as a result of such
actions, suits or proceedings, in which they are parties by reason of their
being or having been directors or officers.
II-1
<PAGE>
ITEM 16. EXHIBITS
Exhibit
Number Description of Document
------ -----------------------
3.1(a) Restated Certificate of Incorporation of Savoir Technology
Group, Inc., a Delaware corporation, filed as Exhibit 3(ii) to
Savoir's Current Report on Form 8-K dated July 23, 1997, filed
on August 14, 1997, and incorporated herein by this reference.
3.1(b) Certificate of Amendment of the Certificate of Designation,
Preferences and Rights of Savoir's Series A Preferred Stock.
3.1(c) Certificate of Designation, Preferences and Rights of the
Savoir's Series B Preferred Stock, filed as Exhibit 3.1 to
Savoir's Current Report on Form 8-K dated October 10, 1997,
and incorporated herein by this reference.
3.1(d) Certificate of Ownership and Merger dated as of November 21,
1997, filed as Exhibit 2.1 to the Savoir's Current Report on
Form 8-K dated November 21, 1997, and incorporated herein by
this reference.
3.2(a) Amended and Restated Bylaws of Savoir Technology Group, Inc.,
a Delaware corporation, filed as Exhibit 3.2 to Savoir's
Annual Report on Form 10-K for the year ended December 31,
1997, and incorporated herein by this reference.
5.1 Opinion of Pillsbury Madison & Sutro LLP.
23.1 Consent of Pillsbury Madison & Sutro LLP (included in Exhibit
5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney (contained on page II-4).
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
II-2
<PAGE>
(b) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in this Registration Statement; and
(c) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (1)(a) and (1)(b) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), that are incorporated by reference
in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Campbell, State of California on April 20, 1999.
SAVOIR TECHNOLOGY GROUP, INC.
By /s/ P. SCOTT MUNRO
------------------------------------------
P. Scott Munro
Chairman of the Board, President,
Chief Executive Officer and Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints P. Scott Munro and James W. Dorst, and each of
them, his true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments, including post-effective
amendments, to this Registration Statement, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ P. SCOTT MUNRO Chairman of the Board, President, April 20, 1999
- -------------------------------- Chief Executive Officer
P. Scott Munro and Secretary
(Principal Executive Officer)
/s/ JAMES W. DORST Chief Financial Officer April 20, 1999
- -------------------------------- (Principal Financial Officer)
James W. Dorst
/s/ DENNIS J. POLK Vice President Finance April 20, 1999
- -------------------------------- (Principal Accounting Officer)
Dennis J. Polk
/s/ ANGELO GUADAGNO Director April 20, 1999
- --------------------------------
Angelo Guadagno
II-4
<PAGE>
/s/ JAMES J. HEFFERNAN Director April 20, 1999
- --------------------------------
James J. Heffernan
/s/ GUY M. LAMMLE Director April 20, 1999
- --------------------------------
Guy M. Lammle
/s/ CARLTON JOSEPH MERTENS, II Director April 20, 1999
- --------------------------------
Carlton Joseph Mertens, II
/s/ K. WILLIAM SICKLER Director April 20, 1999
- --------------------------------
K. William Sickler
/s/ J. LARRY SMART Director April 20, 1999
- --------------------------------
J. Larry Smart
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Document
------ -----------------------
3.1(a) Restated Certificate of Incorporation of Savoir Technology
Group, Inc., a Delaware corporation, filed as Exhibit 3(ii) to
Savoir's Current Report on Form 8-K dated July 23, 1997, filed
on August 14, 1997, and incorporated herein by this reference.
3.1(b) Certificate of Amendment of the Certificate of Designation,
Preferences and Rights of Savoir's Series A Preferred Stock.
3.1(c) Certificate of Designation, Preferences and Rights of Savoir's
Series B Preferred Stock, filed as Exhibit 3.1 to Savoir's
Current Report on Form 8-K dated October 10, 1997, and
incorporated herein by this reference.
3.1(d) Certificate of Ownership and Merger dated as of November 21,
1997, filed as Exhibit 2.1 to Savoir's Current Report on Form
8-K dated November 21, 1997, and incorporated herein by this
reference.
3.2(a) Amended and Restated Bylaws of Savoir Technology Group, Inc.,
a Delaware corporation, filed as Exhibit 3.2 to Savoir's
Annual Report on Form 10-K for the year ended December 31,
1997, and incorporated herein by this reference.
5.1 Opinion of Pillsbury Madison & Sutro LLP.
23.1 Consent of Pillsbury Madison & Sutro LLP (included in Exhibit
5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney (contained on page II-4).
CERTIFICATE OF AMENDMENT
OF
SAVOIR TECHNOLOGY GROUP, INC.
SAVOIR TECHNOLOGY GROUP, INC., a Delaware corporation (the
"Corporation"), hereby certifies as follows:
The name of the corporation is Savoir Technology Group, Inc.
The name of the Corporation was changed from Western Micro Technology,
Inc. on November 21, 1997. The Certificate of Designation, Preferences
and Rights of Series A Preferred Stock of Western Micro Technology,
Inc. was filed with the Secretary of State of the State of Delaware on
September 19, 1997.
An amendment to the Corporation's Certificate of Designation,
Preferences and Rights of Series A Preferred Stock was duly adopted at
a special meeting of the stockholders of said corporation duly called
and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the
necessary shares of Series A Preferred Stock and Common Stock were
voted in favor of the amendment.
Said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State
of Delaware.
Pursuant to Section 242 of the General Corporation Law of the
State of Delaware, the Certificate of Designation, Preferences and
Rights of Series A Preferred Stock is hereby amended to read in its
entirety as follows:
1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Preferred Stock" (the "SERIES A PREFERRED STOCK"), and
the number of shares constituting such series shall be Two Million Two Hundred
Forty-Two Thousand Five Hundred (2,242,500).
2. DEFINITIONS. The following capitalized terms shall have the meanings
set forth below:
(a) "CHANGE OF CONTROL" shall have the meaning set forth in Section
4(b) hereof.
(b) The "CLOSING PRICE" for each day shall be the last reported sale
price regular way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in either case
on the principal national securities exchange or The
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<PAGE>
Nasdaq Stock Market's National Market on which the security is listed or
admitted to trading, or if not so listed or admitted to trading, the average of
the highest reported bid and lowest reported asked prices as furnished by The
Nasdaq Stock Market's SmallCap Market, or the nearest comparable system, or, in
the absence of either, as determined by the Board of Directors in its good faith
discretion.
(c) "COMMISSION" shall mean the Securities and Exchange Commission.
(d) "COMMON STOCK" shall mean the common stock, par value $0.01 per
share, of the Corporation.
(e) "CONVERSION DATE" shall have the meaning set forth in Section 5(b)
hereof.
(f) "CONVERSION PRICE" shall have the meaning set forth in Section 5(f)
hereof.
(g) "CONVERTIBLE SECURITIES" shall have the meaning set forth in
Section 5(f)(ii)(B) hereof.
(h) The "CURRENT MARKET PRICE" at the date of determination for any
security (including, without limitation, Common Stock), shall be deemed to be
the average of the daily Closing Prices for the five (5) business days before
the day in question.
(i) "DIVIDEND RATE" shall have the meaning set forth in Section 3(a)
hereof.
(j) "JUNIOR STOCK" shall mean the Common Stock and all other equity
securities of the Corporation ranking junior to the Series A Preferred Stock in
respect of the payment of dividends, liquidation preference, voting or
otherwise, as applicable.
(k) "LIQUIDATION PREFERENCE" shall have the meaning set forth in
Section 4(a) hereof.
(l) "RECORD DATE" shall mean each January 1, April 1, July 1 and
October 1 prior to the applicable dividend payment date.
(m) "REDEMPTION DATE" shall mean the date of the redemption of the
Series A Preferred Stock pursuant to Section 6 hereof.
(n) "REDEMPTION PRICE" shall have the meaning set forth in Section 6(a)
hereof.
(o) "RELATED RIGHTS" shall have the meaning set forth in Section
5(f)(ii)(B) hereof.
(p) "RIGHTS" shall have the meaning set forth in Section 5(f)(ii)(A)
hereof.
(q) "SECURITIES" shall have the meaning set forth in Section 5(f)(i)
hereof.
(r) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
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<PAGE>
(s) "SERIES A PREFERRED STOCK" shall mean the Series A Preferred Stock,
par value $0.01 per share, of the Corporation.
(t) "UNRESTRICTED COMMON STOCK" shall mean shares of Common Stock which
may be sold by the holder thereof without any applicable restrictions on sale or
resale under the Securities Act and the rules promulgated thereunder.
3. DIVIDENDS.
(a) The holders of Series A Preferred Stock shall be entitled to
receive, out of funds legally available therefor, cumulative dividends at a rate
per annum equal to eight percent (8%) of the Liquidation Preference (subject to
appropriate adjustments in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares (as so
adjusted, the "DIVIDEND RATE")), payable in equal quarterly installments on
January 15, April 15, July 15 and October 15 of each year to holders of record
of the Series A Preferred Stock at the close of business on each Record Date
prior to the respective dividend payment date, payable in preference and
priority to any payment of any dividend on shares of Junior Stock when and as
declared by the Board of Directors. If dividends are not paid in full on the
Series A Preferred Stock and on any other series of Preferred Stock ranking on a
parity as to dividends with the Series A Preferred Stock, all dividends paid
upon shares of Series A Preferred Stock and on such other series of Preferred
Stock will be paid pro rata so that in all cases the amount of dividends paid
per share on the Series A Preferred Stock and on such other series of Preferred
Stock bear to each other the same ratio that accrued and unpaid dividends per
share on the shares of the Series A Preferred Stock and on such other series of
Preferred Stock bear to each other. Unless and until full cumulative dividends
are paid on the Series A Preferred Stock, no dividend (other than stock
dividends) may be paid on any shares of stock which are junior to the Series A
Preferred Stock as to payment of dividends.
(b) At the election of the Corporation, each dividend payable pursuant
to this Section shall be paid either in cash or by the issuance of shares of
Unrestricted Common Stock having
a Current Market Price as of the applicable Record Date equal to the dividend;
PROVIDED, HOWEVER, that in the event that the Corporation elects to pay a
dividend by issuing shares of Unrestricted Common Stock, no fractional shares of
Unrestricted Common Stock shall be issued and the Corporation shall pay cash in
lieu of any fractional share to which the holder would otherwise be entitled.
4. LIQUIDATION RIGHTS.
(a) Upon the dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, the holders of the shares of Series A
Preferred Stock shall be entitled to receive out of the assets of the
Corporation, before any payment or distribution shall be made with respect to
any Junior Stock, securities, property or cash, or any combination thereof,
valued as to (i) securities, at the Current Market Price thereof, (ii) property,
as determined in the good faith discretion of the Board of Directors, and (iii)
cash at the face value thereof, in an amount equal to (x) $9.5625 per share (or,
in the event of a Change of Control (as hereinafter defined),
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<PAGE>
$9.6581 per share) for each share of Series A Preferred Stock then outstanding
(subject to appropriate adjustments in the event of any stock dividend, stock
split, combination or other similar recapitalization affecting such shares),
plus (y) any and all dividends accrued and unpaid thereon, if any, to the date
of final distribution (the "LIQUIDATION PREFERENCE"). If the assets of the
Corporation available for distribution to the holders of the Series A Preferred
Stock and any other securities ranking on a parity with the Series A Preferred
Stock shall be insufficient to permit the payment of the full preferential
amount set forth in this Section 4, then all of the assets of the Corporation
available for distribution shall be distributed to the holders of Series A
Preferred Stock and any other securities ranking on a parity with the Series A
Preferred Stock in proportion to the preferential amount each such holder is
otherwise entitled to receive.
(b) A "CHANGE OF CONTROL" shall mean: (i) a sale, conveyance, exchange
or transfer of all or substantially all of the property and assets of the
Corporation, (ii) the sale of all or substantially all of the capital stock of
the Corporation or the merger or consolidation of the Corporation into or with
any other corporation or an affiliate thereof (except if such merger or
consolidation does not result in the transfer of more than fifty percent (50%)
of the voting securities of the Corporation or if such merger or consolidation
is effected solely to change the Corporation's jurisdiction of incorporation);
or (iii) any sale or transfer of any capital stock of the Corporation, following
which more than fifty percent (50%) of the combined voting power of the
Corporation becomes beneficially owned by one person or group acting together.
For purposes of this definition, "group" shall have the meaning as such term is
used in section 13(d)(1) of the Securities Exchange Act of 1934, as amended.
5. CONVERSION. The holders of the Series A Preferred Stock shall have
conversion rights as follows:
(a) Each share of Series A Preferred Stock shall be convertible, at the
option of the holder thereof, at any time and from time to time into the number
of fully paid and non-assessable shares of Common Stock of the Corporation as is
determined by dividing $9.5625 by the Conversion Price (as defined in Section
(f) below).
(b) In order for a holder of Series A Preferred Stock to convert shares
of Series A Preferred Stock into shares of Common Stock, such holder shall
surrender the certificate or certificates representing such shares of Series A
Preferred Stock, at the office of the transfer agent for the Series A Preferred
Stock, together with written notice that such holder elects to convert all or
any number of the shares of the Series A Preferred Stock represented by such
certificate or certificates. Such notice shall state such holder's name or the
names of the nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. If required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
reasonably satisfactory to the Corporation, duly executed by the registered
holder or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent is referred to herein as the
"CONVERSION DATE." The Corporation shall, as soon as practicable after the
Conversion Date but no later than ten (10) days thereafter, issue and deliver to
such holder, or to its nominee, at such holder's address as shown in the records
of the Corporation or
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<PAGE>
as otherwise instructed in writing by the holder, a certificate or certificates
for the number of whole shares of Common Stock (and any shares of Series A
Preferred Stock represented by the certificate delivered to the transfer agent
by the holder thereof which are not converted into Common Stock) issuable upon
such conversion in accordance with the provisions hereof, together with cash in
lieu of fractional shares calculated in accordance with paragraph (c) of this
Section 5. If less than all of the shares of Series A Preferred Stock
represented by any certificate are converted into shares of Common Stock, the
Corporation shall issue a new Series A Preferred Stock certificate in the amount
of the shares not so converted.
(c) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series A Preferred Stock and the Corporation shall pay
cash in lieu of any fractional share to which the holder would otherwise be
entitled.
(d) The Corporation shall at all times when the Series A Preferred
Stock shall be outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of the Series A
Preferred Stock, such number of its duly authorized shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series A Preferred Stock.
(e) All shares of Series A Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding, and all rights with respect to such shares shall immediately cease
and terminate on the Conversion Date, except only the right of the holders
thereof to receive shares of Common Stock in exchange therefor and payment of
any declared and unpaid dividends thereon. On the Conversion Date, the shares of
Common Stock issuable upon such conversion shall be deemed to be outstanding,
and the holder thereof shall be entitled to exercise and enjoy all rights with
respect to such shares of Common Stock. All shares of Series A Preferred Stock
tendered for conversion shall, from and after the Conversion Date, be deemed to
have been retired and canceled and shall not be reissued as Series A Preferred
Stock, and the Corporation may thereafter take such appropriate action as may be
necessary to reduce accordingly the authorized number of shares of Series A
Preferred Stock.
(f) The Conversion Price at which shares of Common Stock shall be
deliverable upon conversion of the Series A Preferred Stock shall be $8.00 per
share, subject to adjustment from time to time, and such conversion price as
adjusted shall likewise be subject to further adjustment, all as hereinafter set
forth. The term "CONVERSION PRICE" shall mean, as of any time, the conversion
price of the Series A Preferred Stock at that time, as specified in the first
sentence of this paragraph in case no adjustment shall have been required, or
such conversion price as adjusted pursuant to this paragraph (f) of this Section
5, as the case may be:
(i) If at any time the Corporation shall issue any shares of
Common Stock or any Convertible Securities, Rights or Related Rights
(as herein defined) (such Convertible Securities, Rights or Related
Rights being hereinafter referred to collectively as "SECURITIES")
(other than a dividend or other distribution payable in Common Stock or
such Securities) for a consideration per share of Common Stock (the
consideration in each case to be determined in the manner provided in
(E) and (F) below) less than the
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<PAGE>
Conversion Price in effect immediately prior to the issuance of such
Common Stock or Securities, then the Conversion Price in effect
immediately prior to each such issuance shall forthwith be decreased to
a Conversion Price, calculated to the nearest cent, obtained by
dividing:
(A) an amount equal to the sum of
(1) the total number of shares of Common Stock
outstanding plus the number of shares of Common Stock
which would be issued upon the exercise or conversion
of all outstanding Securities (including the number
of shares of Common Stock into which the outstanding
shares of Series A Preferred Stock are then
convertible) immediately prior to such issuance
multiplied by the Conversion Price in effect
immediately prior to such issuance, plus
(2) the consideration received by the Corporation upon
such issuance,
by
(B) the total number of shares of Common Stock outstanding
plus the number of shares of Common Stock which would be
issued upon the exercise or conversion of all outstanding
Securities (including the number of shares of Common
Stock into which the outstanding shares of Series A
Preferred Stock are then convertible) immediately after
such issuance (including the number of shares of Common
Stock into which such newly issued Securities are then
convertible).
(ii) For the purpose of any adjustment of the Conversion Price
pursuant to this paragraph (f) of this Section 5, the following
provisions shall be applicable:
(A) In the case of the issuance of options or warrants to
purchase or rights to subscribe for Common Stock
(collectively, such "RIGHTS"), the aggregate ------
maximum number of shares of Common Stock deliverable upon
exercise of such Rights shall be deemed to have been
issued at the time such Rights were issued, for a
consideration equal to the consideration (determined in
the manner provided in (E) and (F) below), if any,
received by the Corporation upon the issuance of such
Rights, plus the minimum purchase price provided in such
Rights for the Common Stock covered thereby.
(B) In the case of the issuance of securities by their terms
convertible into or exchangeable for Common Stock
(collectively, such "CONVERTIBLE SECURITIES"), or options
or warrants to purchase or rights to subscribe for
securities by their terms convertible into or
exchangeable for Common Stock (collectively, such
"RELATED RIGHTS"), the aggregate maximum
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<PAGE>
number of shares of Common Stock deliverable upon
conversion, exchange or exercise of any such Convertible
Securities or such Related Rights shall be deemed to have
been issued at the time such Convertible Securities or
such Related Rights were issued and for a consideration
equal to the consideration received by the Corporation
upon issuance of such Convertible Securities or such
Related Rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the
additional minimum consideration, if any, to be received
by the Corporation upon the conversion, exchange or
exercise of such Convertible Securities or Related Rights
(the consideration in each case to be determined in the
manner provided in (E) and (F) below).
(C) Upon any change in the number of shares of Common Stock
deliverable upon the exercise of such Rights or Related
Rights or upon the conversion, exchange or exercise of
such Convertible Securities or on any change in the
minimum purchase price of such Rights, Related Rights or
Convertible Securities other than any change resulting
from the anti-dilution provisions of such Rights, Related
Rights or Convertible Securities, the Conversion Price
shall forthwith be readjusted to such Conversion Price as
would have been in effect had the adjustment that was
made upon the issuance of such Rights, Related Rights or
Convertible Securities not converted, exchanged or
exercised prior to such change been made on the basis of
such change, but no further adjustment shall be made for
the actual issuance of Common Stock upon the exercise or
conversion of any such Right, Related Right or
Convertible Security.
(D) Upon the expiration of any such Rights, Related Rights or
Convertible Securities, the Conversion Price shall
forthwith be readjusted to such Conversion Price as would
have been obtained had the adjustment made upon the
issuance of such Rights or Related Rights or the issuance
of any such Convertible Securities been made upon the
basis of the issuance of only the number of shares of
Common Stock actually issued upon the exercise of such
Rights or Related Rights or the conversion, exchange or
exercise of any such Convertible Securities.
(E) In the case of the issuance of such Common Stock or
Securities for cash, the consideration shall be deemed to
be the amount of cash paid therefor.
(F) In the case of the issuance of such Common Stock or
Securities for a consideration in whole or in part other
than cash, the consideration other than cash shall be
deemed to be the fair value thereof as determined in good
faith by the Board of Directors of the Corporation.
(G) In the event of any adjustment to the Conversion Price
resulting from the issuance of any Securities, no further
adjustment shall be made for the
-7-
<PAGE>
actual issuance of Common Stock upon the exercise or
conversion of any such Securities.
(iii) Anything to the contrary contained in this paragraph (f)
of Section 5 notwithstanding, no adjustment shall be made in the
Conversion Price as a result of or pursuant to (1) the granting of any
Right or Related Right, or the issuance of Common Stock to, officers,
employees or directors of, or consultants to, the Corporation, pursuant
to any agreement, plan or arrangement approved by the Board of
Directors of the Corporation, (2) a provision in any existing agreement
between the Corporation and any third party in respect of an
acquisition by the Corporation in which all or a portion of the
consideration in connection with such acquisition is payable by the
issuance of shares of Common Stock or Securities, (3) the issuance of
warrants in connection with any subordinated debt or other financing or
refinancing undertaken in connection with the acquisition of Star
Management Services, Inc., (4) the conversion of shares of Series A
Preferred Stock or (5) the exercise of any option or warrant currently
outstanding.
(g) In case the Corporation shall effect a reorganization, shall merge
with or consolidate into another corporation, or shall sell, transfer or
otherwise dispose of all or substantially all of its property, assets or
business and, pursuant to the terms of such reorganization, merger,
consolidation or disposition of assets, shares of stock or other securities,
property or assets of the Corporation, successor or transferee or an affiliate
thereof are to be received by or distributed to the holders of Common Stock,
then each holder of Series A Preferred Stock shall be provided with written
notice from the Corporation informing each holder of Series A Preferred Stock of
the terms of such reorganization, merger, consolidation or disposition of assets
and of the record date thereof for any distribution pursuant thereto, at least
thirty (30) days in advance of such record date, and each holder of Series A
Preferred Stock shall have, in addition to the rights provided for herein, the
right to receive, at the holder's election, either (i) upon conversion of such
Series A Preferred Stock, the number of shares of stock or other securities,
property or assets of the Corporation, successor or transferee or affiliate
thereof or cash receivable by the holders of the Common Stock upon or as a
result of such reorganization, merger, consolidation or disposition of assets or
(ii) the securities into which the shares of Series A Preferred Stock are
converted, upon, or as a result of such reorganization, merger, consolidation or
disposition of assets. The provisions of this paragraph (g) of this Section 5
shall similarly apply to successive reorganizations, mergers, consolidations or
dispositions of assets.
(h) If the Corporation shall effect a subdivision of the outstanding
shares of Common Stock, the Conversion Price then in effect immediately before
such subdivision shall be proportionately decreased. If the Corporation shall
combine the outstanding shares of Common Stock, the Conversion Price then in
effect immediately before the combination shall be proportionately increased. If
the Corporation shall make or issue a dividend or other distribution payable in
securities, then and in each such event provision shall be made so that the
holders of shares of the Series A Preferred Stock shall receive upon conversion
thereof in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities that they would have received had their
Series A Preferred Stock been converted into Common Stock on the date of such
event and had they thereafter during the period from the date of such event to
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and including the Conversion Date, retained such securities receivable by them
as aforesaid during such period giving effect to all adjustments called for
during such period under this paragraph, with respect to the rights of the
holders of the Series A Preferred Stock.
(i) In case the Corporation shall distribute to the holders of Common
Stock evidences of indebtedness issued by the Corporation or assets (excluding
cash dividends) then, in each such case, immediately following the record date
fixed for the determination of the holders of Common Stock entitled to receive
such distribution, the Conversion Price in effect thereafter shall be determined
by multiplying the Conversion Price in effect immediately prior to such record
date by a fraction (i) the numerator of which shall be an amount equal to (A)
the Current Market Price of one share of Common Stock immediately prior to the
record date less (B) the difference between the Current Market Price of one
share of Common Stock immediately prior to such record date and the Current
Market Price of one share of Common Stock five days after such record date and
(ii) the denominator of which shall be the Current Market Price of one share of
Common Stock immediately prior to such record date; provided, however, that the
Conversion Price shall not be increased as a result of this paragraph (i) of
Section 5. Such adjustment shall become effective as of the opening of business
on the business day following the record date for the determination of
stockholders entitled to such distribution.
(j) Whenever the Conversion Price shall be adjusted as provided in this
Section 5, the Corporation shall forthwith file, at the office of the transfer
agent for the Series A Preferred Stock, at the principal office of the
Corporation or at such other place as may be designated by the Corporation, a
statement, certified by the chief financial officer of the Corporation, showing
in detail the facts requiring such adjustment and the Conversion Price that
shall be in effect after such adjustment. The Corporation shall also cause a
copy of such statement to be sent by first class mail, postage prepaid, to each
holder of record of Series A Preferred Stock at such holder's address as shown
in the records of the Corporation.
(k) If a state of facts shall occur which, without being specifically
controlled by the provisions of this Section 5, would not fairly protect the
conversion rights of the holders of the Series A Preferred Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors of the Corporation shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such conversion rights.
6. REDEMPTION.
(a) The Corporation may, at its option, redeem the Series A Preferred
Stock, in whole or in part, (i) at any time or from time to time after September
19, 1998 and prior to September 19, 2001 in the event that the Current Market
Price of the Common Stock as determined on each of the thirty (30) trading days
prior to the date notice of the redemption is first given is at least $13.96875
AND the daily trading volume of the Common Stock for at least twenty-five (25)
of the thirty (30) trading days prior to the date notice of redemption is first
given is at least 125,000 shares, or (ii) at any time or from time to time on or
after September 19, 2001, and in either such case to the extent funds are
legally available therefor, at a redemption price equal to, in the case
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of (i) above, the Liquidation Preference then in effect or, in the case of (ii)
above, at the Liquidation Preference plus an eight percent (8%) redemption
premium (the "REDEMPTION PRICE") together with any accrued and unpaid dividends
thereon to the date fixed for redemption. To the extent that a redemption is
effected by the Corporation with respect to a portion of the outstanding Series
A Preferred Stock, such redemption shall be effected PRO RATA on the basis of
the outstanding shares of Series A Preferred Stock.
(b) No redemption shall be made pursuant to this Section 6 and no sum
shall be set aside for any such redemption when the terms or provisions of any
indenture or agreement of the Corporation, including any agreement relating to
its indebtedness, specifically prohibits such redemption or setting aside for
redemption or when such redemption or setting aside for redemption would
constitute (after notice or lapse of time or otherwise) a breach of or a default
under any such indenture or agreement.
7. PROCEDURE FOR REDEMPTION.
(a) In the event the Corporation shall redeem shares of Series A
Preferred Stock, notice of such redemption shall be given by first class mail,
postage prepaid, mailed not less than sixty (60) days prior to the Redemption
Date, to each holder of record of the shares to be redeemed at such holder's
address as the same appears on the share register of the Corporation. Each such
notice shall include (i) the Redemption Date, (ii) the Redemption Price, (iii)
the place or places where certificates for such shares are to be surrendered for
payment of the Redemption Price, (iv) a statement that dividends on the shares
to be redeemed will cease to accrue on the Redemption Date and (v) if the
redemption is pursuant to clause (i) of Section 6(a) hereof, a certificate of
the chief financial officer of the Corporation to the effect that the Current
Market Price of the Common Stock as determined on each of the thirty (30)
trading days prior to the date notice of the redemption is first given was at
least $13.96875 AND the daily trading volume of the Common Stock for at least
twenty-five (25) of the thirty (30) trading days prior to the date notice of
redemption is first given was at least 125,000 shares.
(b) Notice having been mailed as aforesaid, from and after the
Redemption Date (unless default shall be made by the Corporation in providing
money for the payment of the Redemption Price of the shares called for
redemption), dividends on the shares of Series A Preferred Stock so called for
redemption shall cease to accrue, and said shares shall no longer be deemed to
be outstanding and shall have the status of authorized but unissued shares of
Preferred Stock, and shall not be reissued as shares of Series A Preferred Stock
and all rights of the holders thereof as stockholders of the Corporation with
respect to said shares (except the right to receive from the Corporation the
Redemption Price and accrued but unpaid dividends) shall cease. Upon surrender
in accordance with said notice of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of Directors of the
Corporation shall so require and the notice shall so state), such shares shall
be redeemed by the Corporation at the Redemption Price as aforesaid.
(c) Anything in this Section 7 to the contrary notwithstanding, the
holder of shares of Series A Preferred Stock to be redeemed in accordance with
this Section shall have the right,
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exercisable at any time up to the close of business on the Redemption Date
(unless the Corporation is legally prohibited from redeeming such shares on such
date, in which event such right shall be exercisable until the removal of such
legal disability), to convert all or any part of such shares to be redeemed as
herein provided into shares of Common Stock pursuant to Section 5 hereof.
8. VOTING.
(a) In addition to any rights provided by applicable law, the holders
of the Series A Preferred Stock shall be entitled to vote on all matters as to
which holders of Common Stock shall be entitled to vote, in the same manner and
with the same effect as such holders of Common Stock, voting together with the
holders of the Common Stock as a single class. A holder of shares of Series A
Preferred Stock shall be entitled to such number of votes as shall equal the
aggregate number of shares of Common Stock which such holder would receive upon
the deemed conversion of all shares of Series A Preferred Stock held by such
holder; provided that voting rights shall not extend to a fractional share
resulting from the deemed conversion of all shares of Series A Preferred Stock
held by such holder of Series A Preferred Stock.
(b) The Corporation shall not, without the affirmative consent or
approval of the holders representing at least sixty-six and two-thirds percent
(66-2/3%) of the outstanding shares of Series A Preferred Stock, acting
separately as one class:
(i) in any manner authorize, create or issue any class or
series of capital stock or any securities convertible into or
exchangeable for, or having optional rights to purchase, any class or
series of capital stock, in any such case ranking, as to payment of
dividends, liquidation preference, voting or otherwise, senior to the
Series A Preferred Stock;
(ii) in any manner alter or change the designation, powers,
preferences or rights of, or the qualifications, limitations or
restrictions upon, the Series A Preferred Stock; or
(iii) reclassify the shares of Common Stock or any other
shares of Junior Stock hereafter created into shares of any class or
series of capital stock ranking, as to payment
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of dividends, liquidation preference, voting or otherwise, senior to
the Series A Preferred Stock.
IN WITNESS WHEREOF, Savoir Technology Group, Inc. has caused this
Certificate to be duly executed by James W. Dorst, its authorized officer, on
this 6th day of April, 1999.
SAVOIR TECHNOLOGY GROUP, INC.
By /s/ JAMES W. DORST
----------------------------------
James W. Dorst
Chief Financial Officer
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EXHIBIT 5.1
PILLSBURY MADISON & SUTRO LLP
2550 Hanover Street
Palo Alto, California 94304
April 26, 1999
Savoir Technology Group, Inc.
254 East Hacienda Avenue
Campbell, California 95008
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We are acting as counsel for Savoir Technology Group, Inc., a Delaware
corporation (the "Company"), in connection with the registration by the Company
of the offer and sale under the Securities Act of 1933, as amended (the
"Securities Act"), of 1,764,914 shares (the "Shares") of Common Stock, par value
$.01 per share (the "Common Stock"), of the Company, pursuant to the Company's
registration statement on Form S-3 (the "Registration Statement"), on behalf of
those certain selling stockholders named therein (the "Selling Stockholders").
The Shares being offered by the Selling Stockholders represent 39,935 shares of
Common Stock issued upon payment of a regular quarterly dividend on the
Company's Series A Preferred Stock (the "Regular Dividend Shares"), 334,659
additional shares of Common Stock issuable upon conversion of the Company's
Series A Preferred Stock (the "Conversion Shares") and 1,390,320 other shares of
Common Stock held by stockholders of the Company (the "Stockholders' Shares").
In this regard we have participated in the preparation of the Registration
Statement.
We are of the opinion that the Regular Dividend Shares and the
Stockholders' Shares have been duly authorized and legally issued, and are fully
paid and nonassessable, and the Conversion Shares have been duly authorized and,
when issued in accordance with the terms of the Company's Certificate of
Incorporation, will be legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Registration Statement and in the Prospectus included therein.
Very truly yours,
/s/ PILLSBURY MADISON & SUTRO LLP
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement on Form S-3, and in the registration statement on Form S-3 -- File No.
333-40599, of our reports dated January 27, 1999 on our audits of the
consolidated financial statements and financial statement schedule of Savoir
Technology Group, Inc. and subsidiaries as of December 31, 1997 and 1998 and for
each of the three years in the period ended December 31, 1998, which reports are
included in the Annual Report on Form 10-K. We also consent to the reference to
our firm under the caption "Experts."
PricewaterhouseCoopers LLP
/s/ PricewaterhouseCoopers LLP
San Jose, California
April 26, 1999
