<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AmeriQuest Technologies, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
$125.00
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
Preliminary Proxy Statement
-------------------------------------------------------------------------
(3) Filing Party:
AmeriQuest Technologies, Inc.
-------------------------------------------------------------------------
(4) Date Filed:
January 13, 1995
-------------------------------------------------------------------------
Notes:
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
2722 MICHELSON DRIVE
IRVINE, CALIFORNIA 92715
(714) 222-6000
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 20, 1995
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
AmeriQuest Technologies, Inc. ("AmeriQuest"), to be held at the offices of
AmeriQuest, 2722 Michelson Drive, Irvine, California 92715, on March 20, 1995,
at 10:00 a.m., local time.
Shareholders will be asked to consider and vote on (i) an increase in the
number of shares of Common Stock authorized for issuance by AmeriQuest from
30,000,000 shares to 65,000,000 shares and (ii) the issuance of shares of
AmeriQuest Common Stock and certain option rights to purchase additional shares
(the "Transaction"), pursuant to an Investment Agreement between AmeriQuest and
Computer 2000 AG, a company organized under the laws of the Federal Republic of
Germany ("Computer 2000"), the third largest distributor worldwide of computer
products ($2.6 billion in sales in fiscal 1994). The Investment Agreement
provides for, among other things, an investment of up to $50 million by Computer
2000 in consideration for shares of AmeriQuest Common Stock which when added to
the shares already held by Computer 2000 will result in Computer 2000 owning up
to 51% of the issued and outstanding capital stock of AmeriQuest. This is
effectively a world-wide alliance between AmeriQuest (U.S. based) and Computer
2000 (world-wide except in the U.S.), which should allow AmeriQuest to
participate in the world-wide competition for market share in its industry. If
Computer 2000 acquires 51% of AmeriQuest's capital stock, it will be in a
position to elect a majority of AmeriQuest's Board of Directors. Computer 2000
has not indicated that, in such event, it would change AmeriQuest's management.
Details of the proposed transaction are fully described in the accompanying
Notice of Meeting, Proxy Statement, and the documents attached thereto. You are
requested to give your prompt and careful consideration to the materials so
provided in order that you may make an informed decision concerning this matter.
In recommending the transaction with Computer 2000 to you, your Board of
Directors has considered the history of the industry, including the ever
decreasing profit margins and the resultant direction towards oligopoly in the
industry, the potential synergies that could exist between AmeriQuest and
Computer 2000, including, but not limited to (i) the possibility of a broader
representation of significant vendors, which could give rise to a high
incremental volume of business without an associated increment in costs of
distribution (ii) the possibility of improved margins through combined purchase
discounts and soft-dollar services, (iii) potential access to Computer 2000's
transnational customer base for AmeriQuest's value-added storage devices, (iv)
potential access to money markets worldwide, and (v) to provide AmeriQuest with
up to $50 million in financing. Your Board of Directors believes that the
Transaction and the increase in the authorized number of shares of Common Stock
are in the best interests of AmeriQuest and its shareholders and strongly
recommends a vote FOR the proposals. An affirmative vote of the majority of the
outstanding shares of AmeriQuest is required for approval of the proposals.
The Board of Directors has fixed the close of business on January 20, 1995
as the record date for determination of shareholders entitled to notice of and
to vote at the Meeting.
IN VIEW OF THE IMPORTANCE OF MATTERS TO BE ACTED UPON AT THE MEETING, YOU ARE
INVITED TO PERSONALLY ATTEND THE MEETING, BUT IF YOU DO NOT EXPECT TO BE PRESENT
IN PERSON, PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, WHETHER OR
NOT YOU INTEND TO BE PRESENT AT THE MEETING.
Sincerely yours,
Harold L. Clark,
Chief Executive Officer
Irvine, California
February __, 1995
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 20, 1995
TO THE SHAREHOLDERS OF AMERIQUEST TECHNOLOGIES, INC.:
Notice is hereby given that the Special Meeting of Shareholders of
AmeriQuest Technologies, Inc. will be held at the offices of AmeriQuest, 2722
Michelson Drive, Irvine, California 92715, on March 20, 1995, at 10:00 a.m.,
local time, for the following purposes:
1. To consider and vote upon a proposal to amend the Certificate of
Incorporation of AmeriQuest Technologies, Inc. ("AmeriQuest") to
increase the number of shares of Common Stock that is authorized for
issuance by AmeriQuest from 30,000,000 shares of Common Stock to
65,000,000 shares of Common Stock.
2. To consider and vote upon the approval of the issuance by AmeriQuest
of shares of AmeriQuest Common Stock and the granting of certain
option rights to Computer 2000 AG ("Computer 2000") pursuant to an
Investment Agreement dated as of November 14, 1994 by and between
AmeriQuest and Computer 2000, as it may be amended from time-to-time
(the "Investment Agreement") and the performance by AmeriQuest of all
transactions and acts contemplated by the Investment Agreement
(collectively, the "Transaction"). Pursuant to the Investment
Agreement, Computer 2000 has loaned $18 million to AmeriQuest and, if
the Transaction is approved by the AmeriQuest shareholders, may invest
up to $50 million in consideration for shares of AmeriQuest Common
Stock (including canceling AmeriQuest's obligations under the loan in
exchange for such shares), which shares when added to the shares
already held by Computer 2000, will result in Computer 2000 owning up
to 51% of the issued and outstanding capital stock of AmeriQuest. A
copy of the Investment Agreement is attached as Appendix I to the
accompanying Proxy Statement.
3. To transact such other business as may properly come before the
Meeting or any postponements or adjournments thereof.
The Board of Directors has fixed the close of business on January 20, 1995,
as the record date for the determination of shareholders entitled to notice of
and to vote at the Meeting.
By ORDER OF THE BOARD OF DIRECTORS
February __, 1995
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING OR IF YOU DO NOT PLAN TO
ATTEND BUT WISH TO VOTE BY PROXY, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION........................................................................... 1
PURPOSES OF THE MEETING................................................................ 1
VOTING AND PRINCIPAL SHAREHOLDERS...................................................... 1
COSTS OF SOLICITATION OF PROXIES....................................................... 3
CAPITALIZATION......................................................................... 4
PROPOSAL 1 - TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK......................................... 5
PROPOSAL 2 - APPROVAL OF THE INVESTMENT AGREEMENT...................................... 5
BACKGROUND TO AND REASONS FOR THE TRANSACTION
Background........................................................................ 5
Reasons for the Transaction....................................................... 8
Opinion of AmeriQuest's Financial Advisor......................................... 8
IMPACT OF THE TRANSACTION ON AMERIQUEST AND EXISTING SHAREHOLDERS.................... 9
Voting and Other Rights of Shareholders........................................... 10
Certain Tax Consequences.......................................................... 10
Shareholder's Derivative Action................................................... 10
THE INVESTMENT AGREEMENT............................................................. 11
Background for the $18 Million Loan............................................... 11
Computer 2000's Proposed Investment............................................... 11
$18 Million Secured Loan Exchangeable for Common Stock....................... 11
$32 Million Additional Equity Infusion....................................... 12
Stock Option A............................................................... 12
Stock Option B............................................................... 13
Other Negotiations........................................................... 13
Board Representation......................................................... 13
Registration Rights.......................................................... 13
Certain Legal Matters............................................................. 13
Antitrust.................................................................... 13
Stock Exchange Listing....................................................... 14
Appraisal Rights............................................................. 14
SHAREHOLDER PROPOSALS.................................................................. 12
OTHER MATTERS.......................................................................... 14
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE...................................... 14
AVAILABLE INFORMATION.................................................................. 15
APPENDIXES
Appendix I - Investment Agreement dated November 13, 1994 between AmeriQuest and
Computer 2000...................................................... I-1
Appendix II - Opinion of L.H. Friend, Weinress & Frankson, Inc.
dated December 14, 1994............................................ II-1
Appendix III - Proposed Amendment to the Certificate of Incorporation
of AmeriQuest...................................................... III-1
</TABLE>
i
<PAGE>
PROXY STATEMENT
FEBRUARY __, 1995.
AMERIQUEST TECHNOLOGIES, INC.
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 20, 1995
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of AmeriQuest Technologies, Inc., a Delaware corporation
("AmeriQuest"), of proxies to be voted at the Special Meeting of Shareholders of
AmeriQuest to be held on March 20, 1995, and at any postponement or adjournments
thereof.
THIS PROXY STATEMENT AND THE ACCOMPANYING NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS AND PROXY WERE FIRST MAILED TO SHAREHOLDERS ON FEBRUARY __, 1995.
PURPOSES OF THE MEETING
The shareholders of AmeriQuest will be asked to vote on and approve (i) an
increase in the number of authorized shares of AmeriQuest Common Stock and (ii)
the issuance of shares of AmeriQuest Common Stock and certain option rights to
Computer 2000 AG, a company organized under the laws of the Federal Republic of
Germany ("Computer 2000") upon the terms and conditions set forth in the
Investment Agreement dated as of November 14, 1995 between AmeriQuest and
Computer 2000 (the "Investment Agreement").
VOTING AND PRINCIPAL SHAREHOLDERS
Unless a shareholder specifies otherwise, a Proxy in the accompanying form
which is properly executed and duly returned by a shareholder of AmeriQuest will
be voted (i) in favor of amending the Certificate of Incorporation of AmeriQuest
to increase the number of shares of Common Stock that is authorized for issuance
by AmeriQuest from 30,000,000 shares of Common Stock to 65,000,000 shares of
Common Stock and (ii) for the approval of the issuance of shares of AmeriQuest
Common Stock and certain option rights pursuant to the Investment Agreement
(collectively, the "Transaction"), and (iii) on such other matters as may
properly come before the Meeting in the discretion of the persons named in the
Proxy. In each case where the shareholder has appropriately specified how the
Proxy is to be voted, it will be voted in accordance with the specifications so
made. Any shareholder has the power to revoke his Proxy at any time before it
is voted by giving written notice to the Secretary of AmeriQuest, by
substitution of a new Proxy bearing a later date, or by request for return of
the Proxy at the Meeting. A shareholder who votes in favor of the Proposals may
later be estopped from challenging the Transaction before the courts. The
address of AmeriQuest is 2722 Michelson Drive, Irvine, California 92715.
On January 20, 1995, the record date for the determination of shareholders
entitled to notice of and to vote at the AmeriQuest Meeting, AmeriQuest had
outstanding 20,907,099 shares of Common Stock of $.01 par value, each share
being entitled to one vote. An affirmative vote of the holders of at least a
majority of the quorum present in person or by proxy at the meeting is necessary
to approve the increase in the number of authorized shares; and pursuant to the
rules of the New York Stock Exchange ("NYSE"), the affirmative vote of a
majority of the shares of Common Stock represented in person or by proxy and
entitled to vote at the Meeting is required to approve the Transaction, provided
that the total vote cast on the proposal
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<PAGE>
represents a majority of the issued and outstanding shares of Common Stock of
AmeriQuest. Abstentions and broker non-votes are counted for purposes of
determining the presence of a quorum for the transaction of business.
Abstentions may be specified on the proposal with respect to the Transaction and
will be counted as present for purposes of the item on which the abstention is
noted, and therefore counted in the tabulation of the votes cast on the proposal
with the effect of a negative vote. Under applicable Delaware law, broker non-
votes are not counted for purposes of determining the votes cast on a proposal.
The following table sets forth, as of January 20, 1995, information relating
to the beneficial ownership of AmeriQuest's Common Stock by (i) each person
known to AmeriQuest to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock of AmeriQuest, (ii) each director, (iii) each
of the named executive officers for which executive compensation information is
provided in AmeriQuest's Annual Report on Form 10-K/A for the fiscal year ended
June 30, 1994, and (iv) all directors and executive officers as a group.
AmeriQuest knows of no agreements among its shareholders which relate to voting
or investment power over its Common Stock.
<TABLE>
<CAPTION>
Beneficial Ownership as of January 20, 1995
-------------------------------------------
Number of Shares Percent of Class(13)
---------------- --------------------
<S> <C> <C>
Name and Address of Beneficial Owner
- ------------------------------------
DIRECTORS AND OFFICERS(11)(12)
- ------------------------------
Marc L. Werner 1,233,473(1) 5.86%
Eric J. Werner 1,159,473(1) 5.51%
Terren S. Peizer 996,000(2) 4.67%
William N. Silvis 15,000(3) *
William T. Walker, Jr. 35,000(4) *
Harold L. Clark 262,500(5) 1.25%
Robert H. Beckett 900,656 4.31%
Gregory A. White 882,302(6) 4.20%
Stephen G. Holmes 81,667(7) *
Carol L. Miltner 35,000(8) *
Peter D. Lytle 10,000(9) *
All officers and directors as
a group (25 persons)(11) 4,923,514(10) 22.52%
</TABLE>
- --------------
* Denotes less than 1%
(1) The Board of Directors of Manufacturers Indemnity and Insurance Company of
America is vested with the voting and investment powers relating to the
shares of AmeriQuest's Common Stock held by Manufacturers Indemnity and
Insurance Company of America. Messrs. Marc L. Werner and Eric J. Werner are
also directors of Manufacturers Indemnity and Insurance Company of America,
and may accordingly be deemed to have shared voting and investment powers
over the 1,003,473 shares of AmeriQuest Common Stock held by Manufacturers
Indemnity and Insurance Company of America. In addition, Manufacturers
Indemnity and Insurance Company of America holds a stock option that is
currently exercisable to acquire 150,000 shares of Common Stock at $4.50
per share through March 3, 1999. Such shares are reflected in both of
their names individually, but are not duplicated in the caption relating to
"All Officers and Directors as a Group."
(2) Mr. Terren S. Peizer is the sole shareholder of the corporate general
partner of Wendover Financial Company L.P., and may be deemed to have sole
voting and investment powers over the 596,000 shares of AmeriQuest Common
Stock held by Wendover Financial Company L.P. In addition, Mr. Peizer
personally holds a stock option that is currently exercisable to acquire
400,000 shares of Common Stock at $4.50 per share through March 3, 1999.
All such shares are included in the foregoing table.
2
<PAGE>
(3) All of the shares reflected in the name of Mr. Silvis are issuable upon
exercise of currently exercisable options to purchase Common Stock at
$3.375 per share granted to Mr. Silvis on October 14, 1994.
(4) Of the shares reflected in the name of Mr. Walker, 20,000 shares are
issuable upon exercise of currently exercisable options to purchase Common
Stock at $1.50 per share granted to Walker Associates, of which Mr. Walker
is the President and Chairman. The shares subject to that option were
increased on December 3, 1993 from 10,000 shares to 20,000 shares, and were
afforded immediate vesting. The remaining 15,000 shares are issuable upon
exercise of currently exercisable options to purchase Common Stock at
$3.375 per share granted to Mr. Walker on October 14, 1994.
(5) Includes 200,000 shares issued to Mr. Clark on October 14, 1994 for which
Mr. Clark paid $2,000 in cash and tendered to AmeriQuest a one-year
Promissory Note in the amount of $498,000. The balance of the shares are
subject to currently exercisable stock options, exercisable at $1.75 per
share.
(6) Includes 82,500 shares of Common Stock subject to currently exercisable
stock options exercisable at $.05 per share through December 31, 1995.
(7) Includes 50,000 shares issued to Mr. Holmes on October 14, 1994 for which
Mr. Holmes paid $500 in cash and tendered to AmeriQuest a one-year
Promissory Note in the amount of $124,500. The balance of the shares are
subject to currently exercisable stock options, exercisable at $1.75 per
share.
(8) Includes 25,000 shares subject to currently exercisable stock options,
exercisable at $1.75 per share.
(9) Includes 10,000 shares subject to currently exercisable stock options,
exercisable at $1.75 per share.
(10) Includes 958,767 shares subject to stock options and warrants currently
vested and issuable upon exercise of such options and warrants.
(11) The address for the executive officers and directors and proposed directors
is: 2722 Michelson Drive, Irvine, California 92715.
(12) Each executive officer and director has sole voting and investment power
with respect to the shares listed, unless otherwise indicated.
(13) For purposes of determining the percentage of outstanding Common Stock held
by each person or group set forth in the table, the number of shares held
by a person or group is divided by the sum of the number of shares of
AmeriQuest's Common Stock outstanding on January 20, 1995 (20,907,099
shares) plus the number of shares of Common Stock subject to outstanding
stock options and warrants exercisable currently or within 60 days of
January 20, 1995 by such person or group, in accordance with Rule 13d-
3(d)(1) under the Securities Exchange Act of 1934, as amended. Percentages
of less than 1% are represented by an asterisk.
It is the intention of all officers and directors of AmeriQuest, expressed
orally but not in any legally binding document or otherwise, to vote or cause to
be voted the shares over which they have beneficial ownership set forth in the
above table in favor of the Proposals.
COSTS OF SOLICITATION OF PROXIES
This solicitation of Proxies is made by the Board of Directors of
AmeriQuest, and AmeriQuest will bear the costs of this solicitation, including
the expense of preparing, assembling, printing and mailing this Proxy Statement
and the material used in this solicitation of Proxies. It is contemplated that
Proxies will be solicited principally through the mails, but directors, officers
and regular employees of AmeriQuest may solicit Proxies personally or by
telephone. Although there is no formal agreement to do so, AmeriQuest may
reimburse banks, brokerage houses and other custodians, nominees and fiduciaries
for their reasonable expenses in forwarding these proxy materials to their
principals. AmeriQuest may also pay for and use the
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<PAGE>
services of other companies or individuals not regularly employed by AmeriQuest
in connection with the solicitation of Proxies if the Board of Directors of
AmeriQuest determines that it is advisable.
CAPITALIZATION
The following table sets forth the capitalization of AmeriQuest as of
December 30, 1994, and as adjusted to give effect to the Computer 2000 loan of
$18 million to AmeriQuest in November 1994 and all acquisitions prior thereto.
<TABLE>
<CAPTION>
Historical Pro Forma
------------- -------------------------
AmeriQuest(A) Adjustments Combined
------------- ----------- --------
<S> <C> <C> <C>
Short-term debt, including current maturities........... $ 90.7 $(18.0) $72.7
Shareholders' equity:
Common Stock......................................... 0.2 0.1 0.3
Additional paid-in capital........................... 48.1 17.9 66.0
Retained earnings (deficit).......................... (20.6) (20.6)
Receivables from affiliates.......................... (1.1) (1.1)
------ ------ ------
Total shareholders' equity....................... 26.6 18.0 44.6
------ ------ ------
Total capitalization.................................... $117.3 $ -- $117.3
====== ====== ======
</TABLE>
- -------------
(A) Includes the effect of the initial $18 million advance from Computer
2000 AG as equity.
4
<PAGE>
PROPOSAL 1
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
On November 11, 1994, the Board of Directors unanimously approved the
Investment Agreement and Transaction with Computer 2000, recognizing that it
would be necessary to amend AmeriQuest's Certificate of Incorporation to
increase the number of shares of Common Stock that AmeriQuest is authorized to
issue. That same date, the Board of Directors of AmeriQuest resolved that the
increase should be from 30,000,000 shares to 65,000,000 shares in order to have
a sufficient number of shares authorized to consummate the Transaction and so
that AmeriQuest might have the flexibility to effect additional acquisitions in
the future, perhaps commencing in late 1995. The proposed Amendment to the
Certificate of Incorporation is attached as Appendix III and incorporated herein
by this reference.
AMERIQUEST'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF AMERIQUEST VOTE THEIR SHARES IN FAVOR OF THE PROPOSAL TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK THAT AMERIQUEST IS AUTHORIZED TO
ISSUE FROM 30,000,000 TO 65,000,000.
Pursuant to the terms and provisions of the Investment Agreement Computer
2000 loaned $18 million to AmeriQuest in November and December 1994. It is a
condition to the obligation of Computer 2000 to convert its $18 million loan
into equity (as well as a condition, among others, to its contemplated
investment of an additional $32 million in Common Stock of AmeriQuest) that this
proposal be approved by the shareholders of AmeriQuest. Absent approval of this
proposal, this condition will not be satisfied and AmeriQuest may be obligated
to repay the $18 million loan together with a "break-up fee" of $1.3 million or
forfeit its holdings in AmeriQuest/Kenfil Inc., Robec, Inc. and AmeriQuest/NCD,
Inc., the shares of which have been pledged to Computer 2000 to secure the $18
million loan. Additionally, it would not be possible for AmeriQuest to pursue
other acquisition candidates, which is an announced policy of the Board of
Directors, nor would AmeriQuest be able to issue additional shares of its Common
Stock beyond the 30,000,000 shares currently authorized to secure additional
financing.
PROPOSAL 2
APPROVAL OF THE TRANSACTION
BACKGROUND TO AND REASONS FOR THE TRANSACTION
BACKGROUND
The computer hardware and software distribution industry in which
AmeriQuest competes has been dominated by Merisel and Ingram Micro, and certain
other significant competitors, all with sales and resources greater than those
available to AmeriQuest. Additionally, this industry has reflected trends in
the computer industry generally in that AmeriQuest has had a history of
decreasing profit margins. These conditions portend that the distribution
industry of which AmeriQuest is a part is becoming an oligopoly where only the
largest and best financed companies will survive. AmeriQuest must achieve a
sales level that will allow it to attain a profitable level of operations and
secure access to capital resources sufficient to adequately fund its ability to
successfully compete in such a market place.
In response to these factors, the Board of Directors of AmeriQuest decided
on December 3, 1993 to embark on a program of growth-by-acquisition coupled with
internal sales growth. The Board estimated that it would be necessary to reach
at least $500 million in yearly sales just to reach a break-even level of
operations, and at least $800 million in yearly sales to achieve a reasonable
level of profit to materially benefit shareholders. At the time that the
Directors decided to embark on this strategy, AmeriQuest's sales were
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<PAGE>
averaging approximately $80 million per year, and AmeriQuest was without cash
resources to effect any acquisitions for cash consideration.
From December 3, 1993 to September 26, 1994, in pursuing and responding to
rapidly occurring opportunities, AmeriQuest caused its wholly-owned subsidiary,
CDS Distribution, Inc., to merge with Romel Technology, Inc. d/b/a Management
Systems Group ("MSG") and Rhino Distribution Corporation. Further, it acquired
by exchange and merger with other subsidiaries the business and assets of Kenfil
Inc. ("Kenfil") [100%] and Robec, Inc. ("Robec") [50.1%]. [The acquisition of
the balance of the outstanding shares of Robec, Inc. is pending a vote by
Robec's shareholders scheduled for mid May 1995.] Further AmeriQuest had
contracted for the acquisition of Ross White Enterprises, Inc. d/b/a National
Computer Distributors ("NCD"). The total aggregate sales of all such entities
is running at approximately $750 million on an annualized basis, of which NCD
accounts for approximately $300 million.
Mr. Harold L. Clark was first contacted by Mr. Stephen DeWindt, a Co-
President of Computer 2000, on or about June 7, 1994. Mr. DeWindt had earlier
been acquainted personally with Mr. Clark when Mr. Clark served as President of
Ingram Micro ("Micro D"). Mr. DeWindt explained that Computer 2000 was looking
to purchase or invest in a U.S. company that would give it a presence in the
U.S. market. Mr. Clark took the opportunity to explain to Mr. DeWindt his view
of the industry and the goals of AmeriQuest, including the acquisition strategy
adopted by the Board of Directors. This meeting was followed-up with a meeting
on June 16, 1994 where Mr. DeWindt was introduced to the other members of
management and certain members of the Board of Directors of AmeriQuest.
On July 21-23, 1994, a delegation from the Board of Directors of AmeriQuest
including Messrs. Clark, Marc L. Werner, Stephen G. Holmes and select legal
counsel with experience in dealing with German investors, visited with Computer
2000 in Germany to explain to Computer 2000 the opportunity represented by
AmeriQuest and to explore the synergies which might exist between the two
companies. It appeared that an investment from Computer 2000 would secure
AmeriQuest's position in the industry as a result of a world-wide alliance
between AmeriQuest and Computer 2000, and that the potential synergies could
include the following: (i) the possibility of a broader representation of
significant vendors, which could give rise to a high incremental volume of
business without an associated increment in costs of distribution (ii) the
possibility of improved margins through combined purchase discounts and soft-
dollar services, (iii) potential access to Computer 2000's transnational
customer base for AmeriQuest's value-added storage devices, (iv) potential
access to money markets worldwide, and (v) the impact on AmeriQuest of receiving
an infusion of funds as a result of Computer 2000's investment in AmeriQuest.
They also discussed with Computer 2000 AmeriQuest's need for financing to meet
its obligations and to implement its planned growth by acquisition. In light of
these considerations, it was decided to move forward with discussions and
negotiations with Computer 2000 while continuing to implement the Board of
Directors' growth-by-acquisition business plan.
From August 9, 1994 to August 16, 1994, Holger Heims, Computer 2000's Head
of Investments, visited AmeriQuest's offices. The Computer 2000 representatives
discussed further with AmeriQuest the possibility of Computer 2000 investing in
AmeriQuest, and they began their due diligence investigation of AmeriQuest,
Kenfil, Robec and NCD. On August 31, 1994, Computer 2000 purchased from
AmeriQuest 532,000 shares of newly issued AmeriQuest Series C Preferred Stock
for $1,330,000 ($2.50 per share), which shares were later converted into shares
of Common Stock.
During September 1994, Mr. Heims continued to visit AmeriQuest's offices.
On September 2, 1994, Computer 2000's lawyers contacted legal counsel for
AmeriQuest to begin Computer 2000's legal due diligence investigation. From
September 12, 1994 to September 16, 1994, Klaus Laufer and Steve DeWindt, two of
Computer 2000's Co-Presidents, joined Mr. Heims at AmeriQuest's offices in due
diligence discussions with representatives of AmeriQuest. On September 14,
1994, Messrs. Clark, Werner and Holmes of AmeriQuest, and AmeriQuest's legal
counsel, met with Messrs. Heims, DeWindt and Laufer of Computer 2000, together
with Computer 2000's legal counsel, and discussed in broad terms Computer 2000's
possible investment. On September 23, 1994, Mr. Heims of Computer 2000 sent Mr.
Clark of AmeriQuest a proposed letter of intent outlining terms on which
Computer 2000 might be prepared to invest up to $45 million in AmeriQuest, 75%
6
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initially and with the right to invest the balance over a period of up to two
years, in return for 51% of AmeriQuest's voting stock. The proposal was subject
to further due diligence and was conditioned upon the parties negotiating and
closing a definitive agreement. Computer 2000's proposal was not accepted by
AmeriQuest, but discussions as to a possible investment by Computer 2000
continued.
On September 26, 1994, AmeriQuest executed a definitive Agreement and Plan
of Reorganization for the acquisition of NCD which required that the transaction
be closed on or before October 14, 1994. This accelerated closing date was
prompted by the need of NCD to secure an infusion of approximately $1.5 million
to comply with the provisions of its credit facility by October 30, 1994.
AmeriQuest then arranged on September 30, 1994 for a private placement of $11
million to fund its obligation to acquire NCD and certain other operational
requirements.
On October 3, 1994, the AmeriQuest Board of Directors resolved to reduce
the size of the private placement to approximately $3.9 million. In the
placement, AmeriQuest agreed to issue approximately 1,640,000 shares of Common
Stock at $2.40 per share and to issue warrants to purchase a like number of
shares of Common Stock at $3.50 per share. Jochen Tschunke, the Chairman of the
Board of Computer 2000, agreed to invest in the placement separately from and
not as representative of Computer 2000. (He made the investment on October 27,
1994 at the closing of the placement, as indicated below.) AmeriQuest's Board of
Directors reduced the aggregate amount of the placement from $11 million to $3.9
million because it believed that by reducing the number of shares to be issued
in the placement, AmeriQuest would increase Computer 2000's interest in
investing a much larger sum in AmeriQuest, and because the Board determined that
AmeriQuest would need an infusion of substantially more than $11 million in
order to meet its financial needs. The Board also believed that this action was
in the best interests of the shareholders of AmeriQuest because it would have
reduced the number of shares that AmeriQuest needed to issue in order to acquire
NCD if Computer 2000 could be persuaded to pay more than the private placement
investors were paying. The Board also believed there was a possibility that a
loan from Computer 2000 would be effected in sufficient time to allow for the
NCD closing. However, as time elapsed, it became clear that the Computer 2000
investment could not be negotiated and closed before the October 14, 1994
deadline for the NCD acquisition. This then placed the NCD closing in jeopardy.
The Board of Directors believed that the acquisition of NCD was critical to
AmeriQuest's business strategy. AmeriQuest ultimately negotiated an extension of
the NCD closing from October 14, 1994 to November 10, 1994 (later extended to
November 14, 1994) in return for AmeriQuest's payment of $2 million, which would
be lost to AmeriQuest should it fail to close the NCD transaction by that date.
AmeriQuest procured such $2 million from the proceeds of the private placement
referred to above, which closed on October 17, 1994; then at that time the
private placement was changed from an equity placement to a short-term (30 days)
convertible debt placement, convertible to equity upon the consummation of the
acquisition of NCD.
Messrs. DeWindt and Heims met with all of AmeriQuest's Board of Directors
in an all-day meeting on October 21, 1994, held for the purpose of gathering
information and conducting negotiations. Computer 2000 indicated that it was
prepared to pay $50 million for additional shares, which when added to its then
current holdings, would total 51% of AmeriQuest's issued and outstanding shares.
AmeriQuest's Board of Directors expressed interest in Computer 2000's proposal,
but resolved to continue to seek additional financing to fund the NCD
acquisition rather than relying solely on the prospect of closing a definitive
agreement with Computer 2000 before the deadline for the NCD closing. After a
search for alternative financing sources, it became apparent to AmeriQuest that
such financing would not be available within the time frame necessary to close
the NCD acquisition. AmeriQuest was able to identify only one alternative
financing source, but the terms of the proposed financing ($.25 per share) were
unacceptable.
Discussions between Computer 2000 and AmeriQuest proceeded on a daily basis
from October 21, 1994 through November 14, 1994, the date of the definitive
Investment Agreement . During this period, Mr. Heims of Computer 2000 worked
out of AmeriQuest's offices, conducting negotiations with AmeriQuest on behalf
of Computer 2000 and making arrangements for the proposed investment. Legal
counsel for Computer 2000 began preparing drafts of the Investment Agreement and
related documents on October 27, 1994. From October 28, 1994 through November
14, 1994, counsel for Computer 2000, Mr. Heims and Computer 2000's
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financial advisor (joined by Mr. DeWindt from November 8, 1994 to November 14,
1994) negotiated the terms of the proposed agreements with AmeriQuest's legal
counsel and representatives. During this period, numerous drafts of the proposed
agreements were prepared and exchanged.
AmeriQuest's Board of Directors was kept informed of the progress of the
negotiations. On November 11, 1994, AmeriQuest's Board met and approved the
proposed transactions with Computer 2000, and authorized AmeriQuest's management
to enter into the Investment Agreement and the related agreements with such
changes as might subsequently be negotiated. On November 14, 1994, those
agreements were signed, and Computer 2000 loaned $13 million to AmeriQuest
pursuant to the agreements. Computer 2000 loaned an additional $5 million at
the end of November and in early December 1994.
REASONS FOR THE TRANSACTION
In reaching its decision, the Board analyzed the potential synergies
described above that could result from an alliance with Computer 2000 and
AmeriQuest's future prospects absent such an alliance. The Board also
considered the critically important nature of the NCD acquisition and that a
failure to close the NCD acquisition would have left AmeriQuest short of its
annual sales goal by approximately $300 million and lost to it the $2 million
paid to secure an extension of the NCD closing date. The Computer 2000
transaction also provided a source of payment of the 30-day private placement
described above and a source of funds necessary to retire the loan facility for
Kenfil, Inc. In reaching its decision, the Board considered the fact that the
Investment Agreement contains a "fiduciary out" proviso to the "no shop" clause,
which enables the Board of Directors to consider alternative transactions if
required to do so by applicable fiduciary duties. The Board of Directors also
considered the fact that the Investment Agreement provides for a $1.3 million
"break up" fee, but does not contain other material "lock-up" provisions.
THE BOARD OF DIRECTORS BELIEVES THAT THE TRANSACTION IS FAIR TO, AND IN THE
BEST INTERESTS OF, AMERIQUEST AND ITS SHAREHOLDERS AND HAS UNANIMOUSLY APPROVED
THE TRANSACTION AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF AMERIQUEST
VOTE "FOR" APPROVAL OF THE TRANSACTION.
IF THE TRANSACTION IS NOT APPROVED BY THE SHAREHOLDERS OF AMERIQUEST,
COMPUTER 2000 WILL HAVE THE RIGHT TO TERMINATE THE INVESTMENT AGREEMENT, AND
AMERIQUEST WILL BE OBLIGATED TO PAY COMPUTER 2000 ON MARCH 30, 1995, THE FULL
AMOUNT OF COMPUTER 2000'S $18 MILLION LOAN, TOGETHER WITH INTEREST, AND THE $1.3
MILLION BREAK-UP FEE. COMPUTER 2000 WILL HAVE THE RIGHT, BUT NOT THE
OBLIGATION, TO APPLY A PORTION OF AMERIQUEST'S INDEBTEDNESS TO PURCHASE FROM
AMERIQUEST, FOR $2.00 PER SHARE, A NUMBER OF SHARES OF AMERIQUEST COMMON STOCK
EQUAL TO 19.9% OF ALL OF AMERIQUEST'S THEN OUTSTANDING SHARES OF AMERIQUEST
COMMON STOCK. AMERIQUEST WOULD BE OBLIGATED TO PAY IN EXCESS OF $12 MILLION TO
COMPUTER 2000, AND AMERIQUEST DOES NOT CURRENTLY HAVE THE FINANCIAL RESOURCES TO
MEET THIS OBLIGATION. AMERIQUEST WOULD NEED TO SEEK ADDITIONAL FINANCING TO
RAISE THE NECESSARY FUNDS BY MARCH 30, 1995 OR THE COMPUTER 2000 LOAN WOULD BE
IN DEFAULT. IF SUCH A DEFAULT OCCURS, COMPUTER 2000 COULD, IN ADDITION TO ITS
OTHER REMEDIES, EXERCISE ITS SECURITY INTEREST TO ACQUIRE AMERIQUEST'S OWNERSHIP
OF KENFIL, ROBEC AND NCD. IN ADDITION, THE DEFAULT MAY CONSTITUTE AN EVENT OF
DEFAULT UNDER AMERIQUEST'S OTHER INDEBTEDNESS THEREBY CAUSING THAT INDEBTEDNESS
TO BECOME IMMEDIATELY DUE AND PAYABLE.
THE FUNDS ADVANCED AND WHICH MAY BE ADVANCED TO AMERIQUEST FROM COMPUTER
2000 ARE DERIVED FROM ITS INTERNALLY GENERATED FUNDS AND EXISTING CREDIT
FACILITIES. NO SPECIAL LOAN FACILITY WAS CREATED TO FUND ITS INVESTMENT IN
AMERIQUEST.
OPINION OF AMERIQUEST'S FINANCIAL ADVISOR
L.H. Friend, Weinress & Frankson, Inc. ("L.H. Friend") has delivered a
written opinion to the Board of Directors of AmeriQuest that, as of December 14,
1994, the Investment Agreement and the Transaction with Computer 2000 was fair
to AmeriQuest and its shareholders, from a financial point of view. No
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limitations were imposed by the Board of Directors of AmeriQuest upon L.H.
Friend with respect to the investigations made or procedures followed by L.H.
Friend in rendering its opinion.
THE FULL TEXT OF THE OPINION OF L.H. FRIEND, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, IS
ATTACHED AS APPENDIX II TO THIS PROXY STATEMENT. AMERIQUEST SHAREHOLDERS ARE
URGED TO READ THIS OPINION IN ITS ENTIRETY FOR INFORMATION WITH RESPECT TO THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE AND MATTERS CONSIDERED BY L.H. FRIEND IN
RENDERING SUCH OPINION. THE SUMMARY OF THE OPINION OF L.H. FRIEND SET FORTH IN
THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
In rendering its opinion, L.H. Friend, among other things, reviewed the
Investment Agreement and related documents, reviewed certain reports filed by
AmeriQuest with the SEC, examined certain operating information, financial
information and projections provided by the management of AmeriQuest, reviewed
the historical market prices and trading volume of AmeriQuest Common Stock,
analyzed publicly available financial and market data regarding certain
companies in the computer peripherals and software distribution industry and
compared them to AmeriQuest's financial and market data, conducted limited
interviews with certain members of AmeriQuest management and performed such
other studies, analyses, inquiries and investigations as it deemed appropriate.
In performing its analyses, L.H. Friend assumed that AmeriQuest was
receiving up to $50 million of cash from Computer 2000 in a two stage investment
that will result, assuming certain conditions are met, in Computer 2000
purchasing newly issued AmeriQuest Common Stock, at a per share price of
approximately $2.22.
L.H. Friend obtained and relied upon certain financial data on eight
companies, Arrow Electronics, Avnet Inc., GBC Technologies Inc., Liuski
International Inc., Merisel Inc., Southern Electronics Corp., Tech Data Corp.,
and Western Micro Technology Inc., which, because of their line of business or
financial and operating statistics, were considered generally comparable to
AmeriQuest, although no company was considered directly comparable in all
respects. All such information was obtained by L.H. Friend from public data,
including, with respect to future earnings projections, Wall Street securities
analysts' research reports. L.H. Friend derived certain valuation multiples for
these comparable companies, including multiples of revenue, earnings before
taxes, interest, depreciation, and amortization ("EBITDA"), earnings, future
earnings and book value. L.H. Friend determined that the range of multiples for
the comparable companies was 0.08 to 0.61 times revenue, 2.6 to 78.6 times
EBITDA, 4.2 to 17.8 times earnings (for the seven companies that produced
positive earnings), 5.2 to 12.1 times projected 1995 earnings (for the seven
companies for which earnings projections were available), and 0.7 to 2.6 times
book value. L.H. Friend calculated median multiples for the comparable companies
of 0.3 times revenue, 7.8 times EBITDA, 7.8 times earnings, 6.1 times projected
1995 earnings and 1.8 times book value, and indicated that the most likely range
of valuation multiples for AmeriQuest, based on this comparable company analysis
and the fact that AmeriQuest did not produce positive EBITDA or net income, was
0.2 to 0.4 times revenue, and 1.6 to 2.0 times book value. L.H. Friend
determined a valuation range for AmeriQuest by this range of valuation
multiples, to be $24 million to $58 million. L.H. Friend noted the assumed value
of approximately $50 million for the Transaction to be within the valuation
range.
L.H. Friend also identified a group of eight acquisitions of companies in
the computer peripherals and software distribution industry with which to
compare AmeriQuest, the acquisition of Hall-Mark Electronics Corp. by Avnet,
Inc. in April 1993; the acquisition of Corporate Software, Inc. by CS
Acquisition Group in October 1993; the acquisition of Egghead, Inc. by Investor
Group, Inc. in January 1994; the pending acquisition of Autronica AS by Whessoe
PLC in March 1994; the acquisition of MFP Technical Services Ltd. by Commoncorp
Financial Services in April 1994; the acquisition of Transmark Corp. Ltd. by
Siegen Investments in May 1994; the acquisition of Gates/FA Distributing, Inc.
by Arrow Electronics, Inc. in June 1994; and the acquisition of Anthem
Electronics, Inc. by Arrow Electronics, Inc. in September 1994; and reviewed
certain financial data with respect to those transactions. All of such
information was obtained by L.H. Friend from public data. L.H. Friend derived
certain valuation multiples for these comparable companies, including multiples
of revenue, EBITDA, earnings, and book value. L.H. Friend determined that the
range of multiples for the comparable companies was 0.2 to 1.7 times revenue,
2.5 to 31.7 times EBITDA (for the seven companies for which EBITDA figures were
available), 8.1 to 25.3 times earnings, and 1.1 to 3.5 times book value. L.H.
Friend calculated median multiples for the comparable transactions of 0.5 times
revenue, 8.1 times EBITDA, 17.1 times earnings, 2.0 times book value, and
indicated that the most likely range of valuation multiples for AmeriQuest,
based on this comparable transaction analysis and the fact that AmeriQuest did
not produce positive EBITDA or net income, was 0.4 to 0.6 times revenue and 1.8
to 2.2 times book value. L.H. Friend determined the transaction range for
AmeriQuest based on this range of transaction multiples, to be $40 million to
$70 million. L.H. Friend noted the assumed value of approximately $50 million
for the Transaction to be within the valuation range.
The preparation of a fairness opinion is complex. L.H. Friend believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all factors
and analyses could create an incomplete view of the processes underlying its
opinion. Estimates of values of companies do not purport to be appraisals and do
not necessarily reflect the prices at which companies may actually be sold. The
estimates of value were prepared solely for use in determining whether the sale
of AmeriQuest Common Stock to Computer 2000 is fair to AmeriQuest and its
shareholders from a financial point of view.
L.H. Friend relied upon and assumed, without independent verification, the
accuracy and completeness of the financial and other information provided to it
by the management of AmeriQuest and, including financial projections for
AmeriQuest. These financial projections were based on assumptions AmeriQuest
believes are reasonable. Some assumptions inevitably will not materialize, and
unanticipated events and circumstances may occur subsequent to the date of such
projections. Accordingly, the actual results achieved during the period covered
by these projections may vary from the projections and the variations may be
material and adverse.
In the course of its review, L.H. Friend relied, without independent
verification, upon the accuracy and completeness of all the financial and other
information reviewed by it for purposes of the opinion.
L.H. Friend was not requested to, and did not, solicit any indications of
interest from third parties with respect to the sale of AmeriQuest, but
discussed with AmeriQuest its history of raising capital and its prospects for
additional capital infusions. In addition, L.H. Friend did not participate in
the discussion or negotiations leading to execution of the Investment Agreement,
and its opinion is limited to the fairness from a financial point of view of the
consideration to be received for the shares of AmeriQuest and does not address
AmeriQuest's underlying business decision to effect the Transaction. L.H.
Friend assumed that Computer 2000 will have the financial capability to perform,
and will perform, its obligations under the Investment Agreement.
L.H. Friend is a firm specializing in institutional research and investment
banking services for middle market companies. The firm's focus is on all
aspects of traditional corporate finance transactions, including initial and
secondary public offering, institutional private placements, mergers and
acquisitions, evaluation and fairness opinions and related corporate advisory
services. The Kenfil Board of Directors selected L.H. Friend to provide the
fairness opinion as a result of the firm's familiarity and expertise with public
technology companies and its experience in analyzing such companies.
AmeriQuest paid L.H. Friend a fee of $96,000.00. AmeriQuest has also
agreed to indemnify L.H. Friend and certain related persons against certain
liabilities relating to or arising out of its engagement, including certain
liabilities under federal securities laws.
IMPACT OF THE TRANSACTION ON AMERIQUEST AND EXISTING SHAREHOLDERS
While the Board of Directors is of the opinion that the Transaction is fair
to, and its approval is advisable and in the best interests of AmeriQuest and
its shareholders, shareholders should consider the following possible effects in
evaluating the Transaction.
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VOTING AND OTHER RIGHTS OF SHAREHOLDERS
The number of shares of Common Stock that could be issued to Computer 2000
in the Transaction could vest voting control of AmeriQuest under Computer 2000.
In such an event, Computer 2000 could effectively elect all directors and
appoint all officers of Ameriquest, and only furnish existing shareholders with
Information Statements pursuant to Section 14 of the Securities Exchange Act of
1934, as amended, regarding such actions. Additionally, Computer 2000 would in
that event have the voting power necessary to take AmeriQuest "private" or merge
it with another entity without having to consult with the other shareholders; or
prevent the sale of AmeriQuest to other interested parties at a point in time
that minority shareholders might deem a sale to be advantageous to their
interests.
Although the foregoing represents possible actions that could be taken by
any shareholder having control of AmeriQuest, Computer 2000 has represented to
AmeriQuest that it has not historically interfered with the management of
companies that it has acquired; however, there can be no assurance that there
will be no changes in AmeriQuest management in the future. In addition, it may
be advantageous for Computer 2000 to maintain AmeriQuest as a public company so
as to obtain access to U.S. securities markets for additional funding of
AmeriQuest's future operations and growth, but is not obligated to do so.
CERTAIN TAX CONSEQUENCES
Under Section 382 of the Internal Revenue Code ("IRC"), the benefit of
AmeriQuest's net operating losses ("NOLs") can be reduced or eliminated if
AmeriQuest undergoes an "ownership change," as defined in Section 382.
Generally, an "ownership change" occurs if one or more shareholders, each of
whom owns five percent (5%) or more of a company's capital stock, and certain
"public groups" increase their aggregate ownership of the company by more than
50 percentage points over the lowest percentage of stock owned by such
shareholders or groups over the preceding three-year period (based on value).
The amount of taxable income in any year thereafter (or portion of a year) that
could be offset by NOLs or other carryovers existing (or "built-in") prior to
such ownership change could not exceed the product obtained by multiplying (i)
the aggregate value of AmeriQuest's stock immediately prior to the ownership
change (with certain adjustments) by (ii) the federal long-term rate (currently
__%).
In an earlier acquisition of Kenfil Inc. (June 1994) by AmeriQuest, an
"ownership change" occurred for purposes of Section 382. Another "ownership
change" will potentially occur upon the contemplated infusion of $32 million by
Computer 2000 in the third quarter of 1995.
The exact date of ownership changes and the value of AmeriQuest on those
dates is currently being determined. The impact of the successive ownership
changes and the amount of the pre-change NOLs are also being calculated.
AmeriQuest would incur a corporate-level tax (current maximum federal rate
of 35 percent) on any taxable income during a given year in excess of such
limitation. While the NOLs not used as a result of this limitation would remain
available to offset taxable income in future years, the effect of an ownership
change, under certain circumstances, would be to significantly defer the
utilization of the NOLs, accelerate the payment of the federal income tax, cause
a portion of the NOLs to expire prior to their use and reduce stockholders'
equity.
SHAREHOLDER'S DERIVATIVE ACTION
On November 17, 1994, three days after the announcement of the proposed
investment by Computer 2000 pursuant to the Investment Agreement, an action was
filed against the Board of Directors of AmeriQuest, Computer 2000 and AmeriQuest
styled Erica Hartman vs. Marc L. Werner, Harold L. Clark, Stephen G. Holmes,
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Eric J. Werner, Terren S. Peizer, William N. Silvis, William T. Walker, Jr. and
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Computer 2000 AG, Defendants and AmeriQuest Technologies, Inc., Nominal
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Defendant, Court of Chancery of the State of Delaware, New Castle County, C.A.
- ---------
No. 13883. The Complaint seeks to have the Court either (i) enjoin
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the consummation of the Investment Agreement or (ii) enter a monetary judgment
for damages in an unspecified amount against the Directors of AmeriQuest for an
alleged failure of the Board of Directors to discharge their fiduciary duties in
causing AmeriQuest to enter into the Investment Agreement. The director
Defendants filed a motion to dismiss the Complaint on January 15, 1995. Pending
resolution of that motion, discovery has been stayed. The Plaintiff has not
responded to the motion or taken any other action concerning the same. The
general allegations of the Complaint relate solely to a comparison of the
proposed sale price with market value and book value and the sale of control
without extracting a premium and an allegation that the consideration to be paid
by Computer 2000 is inadequate. It is the opinion of the Board of Directors that
the Plaintiff fails to understand AmeriQuest's growth-by-acquisition strategy
or the synergies examined by the Board of Directors and the value to AmeriQuest
of a world-wide alliance with Computer 2000. In the opinion of the Board of
Directors, the proposed transaction with Computer 2000 is fair to and in the
best interests of AmeriQuest and its shareholders for the reasons set forth
above. The Board of Directors and AmeriQuest intend to vigorously defend against
such litigation, and do not expect the litigation to have a material adverse
impact on AmeriQuest's financial condition or results of operations, since
AmeriQuest is only a nominal defendant.
THE INVESTMENT AGREEMENT
The following description of the Investment Agreement does not purport to
be complete and is qualified in its entirety by reference to the Investment
Agreement, a copy of which is attached hereto as Appendix I and incorporated
herein by reference. Shareholders of AmeriQuest are urged to read the
Investment Agreement in its entirety.
BACKGROUND FOR THE $18 MILLION LOAN
Rule 312.00 of the New York Stock Exchange ("NYSE") requires shareholder
approval of any issuance of Common Stock or securities convertible into Common
Stock if the resulting voting power will be equal to or in excess of 20% of the
voting power outstanding before the issuance of such securities. As indicated
above, the maximum number of shares that AmeriQuest will be obligated to issue
to Computer 2000 under the Investment Agreement will represent well in excess of
20% of AmeriQuest's outstanding voting power. Thus, under Rule 312.00, the vote
of AmeriQuest's shareholders is necessary to approve such issuance. The parties
recognized that preparing and processing the necessary paperwork for seeking
shareholder approval, together with the necessary notice periods, would take
several months. Since AmeriQuest's need for Computer 2000's initial investment
of $18 million was immediate, the parties decided to structure Computer 2000's
initial investment as a secured loan that will be exchanged for shares of
AmeriQuest Common Stock upon shareholder approval (and the fulfillment of
certain other conditions).
COMPUTER 2000'S PROPOSED INVESTMENT
Computer 2000 desires to secure, subject to the terms and conditions set
forth in the Investment Agreement, 51% ownership of AmeriQuest in exchange for
$50 million plus the $1,330,000 that it paid earlier for 532,000 shares of
AmeriQuest Series C Preferred Stock on August 31, 1994 (which shares were later
converted into the same number of shares of Common Stock). Computer 2000
believes that the alliance with AmeriQuest will afford it an interest in the
U.S. marketplace on a favorable economic basis if the synergies of the
alliance can be realized.
$18 Million Secured Loan Exchangeable for Common Stock. The first tier of
-------------------------------------------------------
the proposed investment was structured as an $18 million secured loan to
AmeriQuest. The loan bears interest at the rate of 6.5% per annum (increasing
to 8.5% after the Meeting if the AmeriQuest shareholders do not approve the
Transaction and the other conditions for exchanging the loan for AmeriQuest
Common Stock are not met). The loan is due on the earlier of March 30, 1995 or
20 days after termination of the Investment Agreement. AmeriQuest pledged all
of its ownership of Kenfil, Robec and NCD as security for repayment of the loan.
The loan will be exchanged for 8,108,108 shares of AmeriQuest Common Stock
(subject to adjustment for changes in capitalization) if (i) the AmeriQuest
shareholders approve at the Meeting the Transaction and the increase in the
authorized number of shares of AmeriQuest Common Stock from 30,000,000 shares to
65,000,000 shares as proposed herein, and (ii) certain other conditions are met
(the "General Conditions"), including the
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conditions that the representations made by AmeriQuest in the Investment
Agreement and the related agreements will be true at the time of the exchange;
that AmeriQuest will have performed its obligations under the Investment
Agreement and the related agreements; that there be no adverse change in
AmeriQuest's business, operations, financial condition or prospects; and that
the shares issued to Computer 2000 be approved for listing on the New York Stock
Exchange. If any of the General Conditions are not met, Computer 2000 will not
be required to exchange the loan for shares of AmeriQuest Common Stock, although
Computer 2000 might, in its discretion, elect to waive the condition(s) and
cause the loan to be exchanged. In addition, AmeriQuest will be required,
before exchange, to increase the number of its directors from 9 to 11 and
appoint as directors two persons designated by Computer 2000.
Upon receipt of shareholder approval of the proposals referred to herein
and satisfaction (or waiver) of the other closing conditions, the $18 million
loan will be exchanged for 8,108,108 shares of AmeriQuest Common Stock (subject
to certain adjustments). Based on the number of shares of AmeriQuest Common
Stock currently outstanding (and assuming the completion of the acquisition of
Robec), Computer 2000 would receive in the exchange shares representing
approximately 26.5% of the then outstanding shares of AmeriQuest Common Stock,
so that Computer 2000 would then own beneficially approximately __% of such
outstanding shares (including the 532,000 shares of Common Stock previously
purchased by it and not including the shares owned by or subject to warrants
granted to Computer 2000's Chairman).
$32 Million Additional Equity Infusion. Computer 2000 is obligated to
---------------------------------------
purchase an additional $32 million of Common Stock at approximately $2.22 per
share on the later of September 1, 1995 or 30 days after its receipt from
AmeriQuest of certain financial information for the period ended June 30, 1995,
subject to the following conditions, among others:
(a) The Transaction and the increase in the number of authorized shares
proposed herein shall have been approved by the shareholders of
AmeriQuest and the $18 million loan exchanged for shares of AmeriQuest
Common Stock; and
(b) AmeriQuest shall have earned an Adjusted Profit After Taxes ( as
defined in Section 2.2(b) of the Investment Agreement) for each of the
months of February through June 1995; and
(c) AmeriQuest's Adjusted Profit After Taxes for the six month period
ended June 30, 1995 shall be at least $3.3 million; and
(d) Computer 2000 shall not have delivered any Notice of Objection as
defined in Section 2.2 of the Investment Agreement regarding the
calculation of profits which has not been satisfactorily resolved.
(Any Notice of Objection shall be resolved by arbitration in
accordance with the commercial arbitration rules of the American
Arbitration Association.)
(e) The General Conditions (referred to above) shall have been satisfied.
Should Computer 2000 not be obligated to invest $32 million as described
above, Computer 2000 still would have the option, exercisable in whole or in
part, of investing up to $32 million pursuant to an option exercisable at the
same price that it would have paid had it been obligated to make such an
investment. Such an option would be exercisable for a period of 30 days
commencing on the later of (i) October 31, 1995 or (ii) 60 days following its
receipt from AmeriQuest of the financial information for the period ended June
30, 1995.
If Computer 2000 invests the full $50 million referred to above (the
initial 18 million plus the additional $32 million), it will own a total of
approximately 23,000,000 shares of AmeriQuest Common Stock, representing
approximately 51% of the shares then outstanding.
Stock Option A. The number of shares issuable under either of the
---------------
aforedescribed scenarios is subject to a Maintenance Option which assures
Computer 2000 that, should AmeriQuest issue additional shares pursuant to
outstanding options, warrants or otherwise, Computer 2000 would have the right
to acquire
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additional shares at any time prior to November 1, 1999 in order to preserve its
51% ownership once it has acquired ownership of that magnitude.
Stock Option B. Computer 2000 would also have the right to acquire an
---------------
additional 4,000,000 shares of Common Stock at $10.00 per share at any time
between June 30, 1996 and June 30, 1998; and at a price of $20.00 per share at
any time between July 1, 1998 and November 30, 1999. Notwithstanding the
foregoing, the investment of Computer 2000 under this option would be capped at
55% of the issued and outstanding Common Stock of AmeriQuest.
Other Negotiations. The Investment Agreement prohibits AmeriQuest until
-------------------
March 30, 1995 from directly or indirectly soliciting, encouraging, initiating
or participating in any discussions or negotiations reasonably likely to
facilitate the efforts of any person other than Computer 2000 relating to the
possible acquisition of AmeriQuest or any of its subsidiaries. AmeriQuest is
also prohibited from providing non-public information to such a party without
providing the same information to Computer 2000. Notwithstanding the foregoing,
however, should the Board of Directors determine in good faith, after
consultation with legal counsel and its financial advisors, that any such action
is required by the fiduciary duties imposed upon the directors by Delaware law
and is likely to result in a more favorable transaction to the stockholders of
AmeriQuest than the terms of the Investment Agreement and provides for repayment
in full of Computer 2000's $18 million loan and payment to Computer 2000 of a
$1.3 million break-up fee, then AmeriQuest is free to pursue such a transaction,
subject to AmeriQuest's obligation to keep Computer 2000 informed as to any
offer or request for information regarding such transaction. If AmeriQuest's
Board of Directors accepts any such offer or recommends it to AmeriQuest's
shareholders, or fails to recommend the Transaction to the shareholders, either
Computer 2000 or AmeriQuest may terminate the Investment Agreement, in which
event the $18 million loan will become due and AmeriQuest will be required to
pay the $1.3 million break-up fee.
Board Representation. Computer 2000 has the right to have an observer
---------------------
present at any meeting of the Board of Directors until the obligations of
AmeriQuest underlying the $18 million loan are extinguished. Such an observer
also has the right to address the Board with any concerns that Computer 2000 may
have, and to visit and inspect AmeriQuest facilities and examine its books and
records.
Upon the exchange of the $18 million loan for shares of AmeriQuest Common
Stock, AmeriQuest is obligated to appoint two new directors to the Board of
Directors as may be selected by Computer 2000; and Computer 2000 has the right
to require that the composition of the Board of Directors reflect its percentage
ownership of the issued and outstanding shares of AmeriQuest.
If Computer 2000 makes the $32 million investment in AmeriQuest referred to
above, it will hold a majority of AmeriQuest's voting stock and will be in a
position to elect all or a majority of AmeriQuest's directors.
Registration Rights. AmeriQuest is obligated to file a registration
--------------------
statement covering the shares of Common Stock to be issued to Computer 2000 upon
the receipt of requests for registration from persons holding 25% or more of
such shares. Additionally, should AmeriQuest proceed with a further public
offering of its shares for the benefit of AmeriQuest, Computer 2000 has the
right to "piggy-back" its shares on any such registration statement. All
expenses, other than underwriting discounts and commissions incurred in
connection with such registrations, are to be borne by AmeriQuest except for
expenses incurred in connection with a demand right which is subsequently
aborted or withdrawn.
CERTAIN LEGAL MATTERS
Antitrust. Pursuant to the requirements of the Hart-Scott-Rodino Antitrust
----------
Improvements Act of 1976, as amended (the "HSR Act"), on January 30, 1995,
Computer 2000 and AmeriQuest each filed a Notification and Report Form for
review under the HSR Act with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division"). The
waiting period under the HSR Act with respect to such filing was terminated by
governmental action on February 10, 1995. Even
13
<PAGE>
though the HSR Act waiting period has expired, the FTC or the Antitrust Division
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking divestiture of substantial
assets of AmeriQuest. AmeriQuest does not believe that consummation of the
Merger will result in a violation of any applicable antitrust laws. However,
there can be no assurance that a challenge to the Merger on antitrust grounds
will not be made or, if such a challenge is made, of the result.
Stock Exchange Listing. It is a condition to the issuance of shares to
-----------------------
Computer 2000 under the Investment Agreement that the shares of AmeriQuest
Common Stock to be issued in connection with the Investment Agreement be
authorized for listing on the NYSE.
Appraisal Rights. Under the General Corporation Law of the State of
-----------------
Delaware, the holders of AmeriQuest Common Stock are not entitled to any
appraisal rights with respect to the Transaction.
SHAREHOLDER PROPOSALS
Any AmeriQuest shareholder who wishes to submit a proposal for presentation
to AmeriQuest's 1995 Annual Meeting of Shareholders must submit the proposal to
AmeriQuest, 2722 Michelson Drive, Irvine, California 92715, Attention: Mr.
Stephen G. Holmes, Secretary, not later than February __, 1995 for inclusion, if
appropriate, in AmeriQuest's proxy statement and form of proxy relating to its
1995 Annual Meeting.
OTHER MATTERS
The accompanying form of Proxy is solicited by and on behalf of the
management of AmeriQuest whose Notice of Special Meeting is attached to this
Proxy Statement. AmeriQuest will bear the expenses of this solicitation of
Proxies. In addition to the use of the mails, Proxies may be solicited by
personal interview, telephone and by directors and officers and employees of
AmeriQuest. Arrangements may also be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation material
to the beneficial owners of stock held of record by such persons, and AmeriQuest
may reimburse them for reasonable out-of-pocket expenses incurred by them in
connection therewith.
The management of AmeriQuest has no information that other matters will be
brought before the Meeting. If, however, other matters are presented, the
accompanying Proxy will be voted in accordance with the best judgment of the
proxy holders.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by this reference to
satisfy the requirements of Item 13(a) of Schedule 14A under the Securities
Exchange Act of 1934, as amended:
(1) AmeriQuest's Annual Report on Form 10-K/A for the fiscal year ended
June 30, 1994.
(2) AmeriQuest's Quarterly Report on Form 10-Q/A for the six months ended
December 30, 1994.
(3) AmeriQuest's Current Report on Form 10-K/A dated November 12, 1994.
(4) AmeriQuest's Current Report on Form 10-K/A dated September 12, 1994.
(5) Robec, Inc.'s Annual Report on Form 10-K for the year ended December
31, 1993 (SEC File No. 0-18115)
(6) Kenfil Inc.'s Annual Report on Form 10-K for the year ended June 30,
1993 (SEC File No. 0-19905)
14
<PAGE>
AVAILABLE INFORMATION
AmeriQuest is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"). Reports, proxy statements and
other information filed by AmeriQuest can be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street N.W., Washington,
D.C. 20549, and at the following Regional Offices of the SEC: New York Regional
Office, 7 World Trade Center, New York, New York 10048 and Chicago Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can also be obtained from the Public Reference Section of the SEC,
450 Fifth Street N.W., Washington, D.C. 20549, at the SEC's prescribed rates.
Such material can also be inspected and copied at the offices of the New York
Stock Exchange, on which AmeriQuest's Common Stock is listed.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT IN CONNECTION WITH THE
MATTERS SUBJECT HEREOF, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY AMERIQUEST. THIS PROXY
STATEMENT DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES. THE DELIVERY OF THIS
PROXY STATEMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
By Order of the Board of Directors
AmeriQuest Technologies, Inc.
Stephen G. Holmes,
Chief Financial Officer,
Secretary and Treasurer
Irvine, California
February __, 1995
15
<PAGE>
PROXY
YOUR PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AMERIQUEST TECHNOLOGIES, INC.
The undersigned hereby appoints Harold L. Clark and Stephen G. Holmes, and each
of them, the attorney and proxy of the undersigned, with full power of
substitution, to vote all the shares of Common Stock of AmeriQuest Technologies,
Inc. ("AmeriQuest"), which the undersigned is entitled to vote at the Special
Meeting of Shareholders of AmeriQuest to be held at the offices of AmeriQuest on
March 20, 1995, at 10:00 a.m., local time, and at any and all adjournments
thereof, with all of the powers the undersigned would possess if personally
present, as follows:
<TABLE>
<CAPTION>
For Against Abstain
---- ------- -------
<C> <C> <C> <S>
[_] [_] [_] In favor of the proposal to amend the Certificate of Incorporation of AmeriQuest
Technologies, Inc. to increase the number of shares of Common Stock that is authorized for
issuance by AmeriQuest from 30,000,000 shares of Common Stock to 65,000,000 shares of
Common Stock.
[_] [_] [_] In favor of the proposal to approve the issuance by AmeriQuest to Computer 2000 AG of
shares and option rights (the "Transaction") pursuant to an Investment Agreement dated
November 13, 1994 by and between AmeriQuest and Computer 2000 AG, as it may be amended
from time-to-time (the "Investment Agreement") and the performance by AmeriQuest of its
obligations under the Investment Agreement with respect to the Transaction. Pursuant to
the Transaction Computer 2000 may invest up to $50 million in consideration for shares of
AmeriQuest Common Stock which when added to the shares already held by Computer 2000 will
result in Computer 2000 owning up to 51% of the outstanding shares of AmeriQuest.
</TABLE>
TO VOTE IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS, JUST
SIGN AND DATE THIS PROXY FORM.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS (i) TO
AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK AND (ii) TO APPROVE THE TRANSACTION WITH COMPUTER 2000.
If you expect to attend the Meeting, please check this box [ ].
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY. When shares are held by
joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
Dated: , 1995
----------------
____________________________________
Signature
____________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY USING THE ENCLOSED
- ------------------------------------------------------------------------------
ENVELOPE.
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